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These excerpts taken from the CVGI 10-K filed Mar 16, 2009. Interest
Rate Risk
We are exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. Market risk
is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest
rates. We do not enter into derivatives or other financial
instruments for trading or speculative purposes. We do enter
into financial instruments, from time to time, to manage and
reduce the impact of changes in foreign currency exchange rates
and interest rates and to hedge a portion of future anticipated
currency transactions. The counterparties are primarily major
financial institutions.
We manage our interest rate risk by balancing the amount of our
fixed rate and variable rate debt. For fixed rate debt, interest
rate changes affect the fair market value of such debt but do
not impact earnings or cash flows. Conversely for variable rate
debt, interest rate changes generally do not affect the fair
market value of such debt, but do impact future earnings and
cash flows, assuming other factors are held constant.
Approximately $14.8 million and $9.5 million of our
debt was variable rate debt at December 31, 2008 and 2007,
respectively. Holding other variables constant (such as foreign
exchange rates and debt levels), a one percentage point change
in interest rates would be expected to have an impact on pre-tax
earnings and cash flows for the next year of approximately
$0.1 million and $0.1 million, respectively. The
estimated fair value of our 8% senior notes at
December 31, 2008, per quoted market sources, was
approximately $72.0 million with a carrying value of
approximately $150.0 million.
Foreign
Currency Risk
Foreign currency risk is the risk that we will incur economic
losses due to adverse changes in foreign currency exchange
rates. We use forward exchange contracts to hedge certain of the
foreign currency transaction exposures primarily related to our
United Kingdom operations. We estimate our projected revenues
and purchases in certain foreign currencies or locations, and
will hedge a portion or all of the anticipated long or short
position. The contracts typically run from three months up to
three years. All previously existing forward foreign exchange
contracts have been marked-to-market and the fair value of
contracts recorded in the consolidated balance sheets with the
offsetting non-cash gain or loss recorded in our consolidated
statements of operations. We have designated that future forward
contracts will be accounted for as cash flow hedges in
accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. We do not
hold or issue foreign exchange options or forward contracts for
trading purposes.
Outstanding foreign currency forward exchange contracts at
December 31, 2008 are more fully described in the notes to
our consolidated financial statements in Item 8 of this
Annual Report on
Form 10-K.
The fair value of our contracts at December 31, 2008
amounted to a liability of $15.3 million, which includes
$10.1 million in accrued liabilities and $5.2 million
in other long-term liabilities in our consolidated balance
sheets. The fair value of our contracts at December 31,
2007 amounted to a $1.5 million liability, which is
reflected in other long-term liabilities in our consolidated
balance sheets. None of these contracts have been designated as
cash flow hedges; thus, the change in fair value at each
reporting date is reflected as a noncash charge (income) in our
consolidated statement of operations.
Our primary exposures to foreign currency exchange fluctuations
are pound sterling, Eurodollar and Japanese yen. At
December 31, 2008, the potential reduction in earnings from
a hypothetical instantaneous 10% adverse change in quoted
foreign currency spot rates applied to foreign currency
sensitive instruments is limited by the assumption that all of
the foreign currencies to which we are exposed would
simultaneously decrease by 10% because such synchronized changes
are unlikely to occur. The effects of the forward exchange
contracts have been included in the above analysis; however, the
sensitivity model does not include the inherent risks associated
with the anticipated future transactions denominated in foreign
currency.
Foreign
Currency Transactions
A portion of our revenues during the year ended
December 31, 2008 were derived from manufacturing
operations outside of the United States. The results of
operations and the financial position of our operations in these
other countries are primarily measured in their respective
currency and translated into U.S. dollars. A portion of the
Table of Contents
expenses generated in these countries is in currencies different
from which revenue is generated. As discussed above, from time
to time, we enter into forward exchange contracts to mitigate a
portion of this currency risk. The reported income of these
operations will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective
foreign currency.
A portion of our assets at December 31, 2008 are based in
our foreign operations and are translated into U.S. dollars
at foreign currency exchange rates in effect as of the end of
each period, with the effect of such translation reflected as a
separate component of stockholders’ investment.
Accordingly, our stockholders’ investment will fluctuate
depending upon the weakening or strengthening of the
U.S. dollar against the respective foreign currency.
Effects
of Inflation
Inflation potentially affects us in two principal ways. First, a
portion of our debt is tied to prevailing short-term interest
rates that may change as a result of inflation rates,
translating into changes in interest expense. Second, general
inflation can impact material purchases, labor and other costs.
In many cases, we have limited ability to pass through
inflation-related cost increases due to the competitive nature
of the markets that we serve. In the past few years, however,
inflation has not been a significant factor.
Interest
Rate Risk
We are exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. Market risk
is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest
rates. We do not enter into derivatives or other financial
instruments for trading or speculative purposes. We do enter
into financial instruments, from time to time, to manage and
reduce the impact of changes in foreign currency exchange rates
and interest rates and to hedge a portion of future anticipated
currency transactions. The counterparties are primarily major
financial institutions.
We manage our interest rate risk by balancing the amount of our
fixed rate and variable rate debt. For fixed rate debt, interest
rate changes affect the fair market value of such debt but do
not impact earnings or cash flows. Conversely for variable rate
debt, interest rate changes generally do not affect the fair
market value of such debt, but do impact future earnings and
cash flows, assuming other factors are held constant.
Approximately $14.8 million and $9.5 million of our
debt was variable rate debt at December 31, 2008 and 2007,
respectively. Holding other variables constant (such as foreign
exchange rates and debt levels), a one percentage point change
in interest rates would be expected to have an impact on pre-tax
earnings and cash flows for the next year of approximately
$0.1 million and $0.1 million, respectively. The
estimated fair value of our 8% senior notes at
December 31, 2008, per quoted market sources, was
approximately $72.0 million with a carrying value of
approximately $150.0 million.
Foreign
Currency Risk
Foreign currency risk is the risk that we will incur economic
losses due to adverse changes in foreign currency exchange
rates. We use forward exchange contracts to hedge certain of the
foreign currency transaction exposures primarily related to our
United Kingdom operations. We estimate our projected revenues
and purchases in certain foreign currencies or locations, and
will hedge a portion or all of the anticipated long or short
position. The contracts typically run from three months up to
three years. All previously existing forward foreign exchange
contracts have been marked-to-market and the fair value of
contracts recorded in the consolidated balance sheets with the
offsetting non-cash gain or loss recorded in our consolidated
statements of operations. We have designated that future forward
contracts will be accounted for as cash flow hedges in
accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. We do not
hold or issue foreign exchange options or forward contracts for
trading purposes.
Outstanding foreign currency forward exchange contracts at
December 31, 2008 are more fully described in the notes to
our consolidated financial statements in Item 8 of this
Annual Report on
Form 10-K.
The fair value of our contracts at December 31, 2008
amounted to a liability of $15.3 million, which includes
$10.1 million in accrued liabilities and $5.2 million
in other long-term liabilities in our consolidated balance
sheets. The fair value of our contracts at December 31,
2007 amounted to a $1.5 million liability, which is
reflected in other long-term liabilities in our consolidated
balance sheets. None of these contracts have been designated as
cash flow hedges; thus, the change in fair value at each
reporting date is reflected as a noncash charge (income) in our
consolidated statement of operations.
Our primary exposures to foreign currency exchange fluctuations
are pound sterling, Eurodollar and Japanese yen. At
December 31, 2008, the potential reduction in earnings from
a hypothetical instantaneous 10% adverse change in quoted
foreign currency spot rates applied to foreign currency
sensitive instruments is limited by the assumption that all of
the foreign currencies to which we are exposed would
simultaneously decrease by 10% because such synchronized changes
are unlikely to occur. The effects of the forward exchange
contracts have been included in the above analysis; however, the
sensitivity model does not include the inherent risks associated
with the anticipated future transactions denominated in foreign
currency.
Foreign
Currency Transactions
A portion of our revenues during the year ended
December 31, 2008 were derived from manufacturing
operations outside of the United States. The results of
operations and the financial position of our operations in these
other countries are primarily measured in their respective
currency and translated into U.S. dollars. A portion of the
Table of Contents
expenses generated in these countries is in currencies different
from which revenue is generated. As discussed above, from time
to time, we enter into forward exchange contracts to mitigate a
portion of this currency risk. The reported income of these
operations will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective
foreign currency.
A portion of our assets at December 31, 2008 are based in
our foreign operations and are translated into U.S. dollars
at foreign currency exchange rates in effect as of the end of
each period, with the effect of such translation reflected as a
separate component of stockholders’ investment.
Accordingly, our stockholders’ investment will fluctuate
depending upon the weakening or strengthening of the
U.S. dollar against the respective foreign currency.
Effects
of Inflation
Inflation potentially affects us in two principal ways. First, a
portion of our debt is tied to prevailing short-term interest
rates that may change as a result of inflation rates,
translating into changes in interest expense. Second, general
inflation can impact material purchases, labor and other costs.
In many cases, we have limited ability to pass through
inflation-related cost increases due to the competitive nature
of the markets that we serve. In the past few years, however,
inflation has not been a significant factor.
Interest Rate Risk We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We do enter into financial instruments, from time to time, to manage and reduce the impact of changes in foreign currency exchange rates and interest rates and to hedge a portion of future anticipated currency transactions. The counterparties are primarily major financial institutions. We manage our interest rate risk by balancing the amount of our fixed rate and variable rate debt. For fixed rate debt, interest rate changes affect the fair market value of such debt but do not impact earnings or cash flows. Conversely for variable rate debt, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant. Approximately $14.8 million and $9.5 million of our debt was variable rate debt at December 31, 2008 and 2007, respectively. Holding other variables constant (such as foreign exchange rates and debt levels), a one percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash flows for the next year of approximately $0.1 million and $0.1 million, respectively. The estimated fair value of our 8% senior notes at December 31, 2008, per quoted market sources, was approximately $72.0 million with a carrying value of approximately $150.0 million. Foreign Currency Risk Foreign currency risk is the risk that we will incur economic losses due to adverse changes in foreign currency exchange rates. We use forward exchange contracts to hedge certain of the foreign currency transaction exposures primarily related to our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign currencies or locations, and will hedge a portion or all of the anticipated long or short position. The contracts typically run from three months up to three years. All previously existing forward foreign exchange contracts have been marked-to-market and the fair value of contracts recorded in the consolidated balance sheets with the offsetting non-cash gain or loss recorded in our consolidated statements of operations. We have designated that future forward contracts will be accounted for as cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. We do not hold or issue foreign exchange options or forward contracts for trading purposes. Outstanding foreign currency forward exchange contracts at December 31, 2008 are more fully described in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. The fair value of our contracts at December 31, 2008 amounted to a liability of $15.3 million, which includes $10.1 million in accrued liabilities and $5.2 million in other long-term liabilities in our consolidated balance sheets. The fair value of our contracts at December 31, 2007 amounted to a $1.5 million liability, which is reflected in other long-term liabilities in our consolidated balance sheets. None of these contracts have been designated as cash flow hedges; thus, the change in fair value at each reporting date is reflected as a noncash charge (income) in our consolidated statement of operations. Our primary exposures to foreign currency exchange fluctuations are pound sterling, Eurodollar and Japanese yen. At December 31, 2008, the potential reduction in earnings from a hypothetical instantaneous 10% adverse change in quoted foreign currency spot rates applied to foreign currency sensitive instruments is limited by the assumption that all of the foreign currencies to which we are exposed would simultaneously decrease by 10% because such synchronized changes are unlikely to occur. The effects of the forward exchange contracts have been included in the above analysis; however, the sensitivity model does not include the inherent risks associated with the anticipated future transactions denominated in foreign currency. Foreign Currency Transactions A portion of our revenues during the year ended December 31, 2008 were derived from manufacturing operations outside of the United States. The results of operations and the financial position of our operations in these other countries are primarily measured in their respective currency and translated into U.S. dollars. A portion of the
Table of Contentsexpenses generated in these countries is in currencies different from which revenue is generated. As discussed above, from time to time, we enter into forward exchange contracts to mitigate a portion of this currency risk. The reported income of these operations will be higher or lower depending on a weakening or strengthening of the U.S. dollar against the respective foreign currency. A portion of our assets at December 31, 2008 are based in our foreign operations and are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each period, with the effect of such translation reflected as a separate component of stockholders’ investment. Accordingly, our stockholders’ investment will fluctuate depending upon the weakening or strengthening of the U.S. dollar against the respective foreign currency. Effects of Inflation Inflation potentially affects us in two principal ways. First, a portion of our debt is tied to prevailing short-term interest rates that may change as a result of inflation rates, translating into changes in interest expense. Second, general inflation can impact material purchases, labor and other costs. In many cases, we have limited ability to pass through inflation-related cost increases due to the competitive nature of the markets that we serve. In the past few years, however, inflation has not been a significant factor.
Interest Rate Risk We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We do enter into financial instruments, from time to time, to manage and reduce the impact of changes in foreign currency exchange rates and interest rates and to hedge a portion of future anticipated currency transactions. The counterparties are primarily major financial institutions. We manage our interest rate risk by balancing the amount of our fixed rate and variable rate debt. For fixed rate debt, interest rate changes affect the fair market value of such debt but do not impact earnings or cash flows. Conversely for variable rate debt, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant. Approximately $14.8 million and $9.5 million of our debt was variable rate debt at December 31, 2008 and 2007, respectively. Holding other variables constant (such as foreign exchange rates and debt levels), a one percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash flows for the next year of approximately $0.1 million and $0.1 million, respectively. The estimated fair value of our 8% senior notes at December 31, 2008, per quoted market sources, was approximately $72.0 million with a carrying value of approximately $150.0 million. Foreign Currency Risk Foreign currency risk is the risk that we will incur economic losses due to adverse changes in foreign currency exchange rates. We use forward exchange contracts to hedge certain of the foreign currency transaction exposures primarily related to our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign currencies or locations, and will hedge a portion or all of the anticipated long or short position. The contracts typically run from three months up to three years. All previously existing forward foreign exchange contracts have been marked-to-market and the fair value of contracts recorded in the consolidated balance sheets with the offsetting non-cash gain or loss recorded in our consolidated statements of operations. We have designated that future forward contracts will be accounted for as cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. We do not hold or issue foreign exchange options or forward contracts for trading purposes. Outstanding foreign currency forward exchange contracts at December 31, 2008 are more fully described in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. The fair value of our contracts at December 31, 2008 amounted to a liability of $15.3 million, which includes $10.1 million in accrued liabilities and $5.2 million in other long-term liabilities in our consolidated balance sheets. The fair value of our contracts at December 31, 2007 amounted to a $1.5 million liability, which is reflected in other long-term liabilities in our consolidated balance sheets. None of these contracts have been designated as cash flow hedges; thus, the change in fair value at each reporting date is reflected as a noncash charge (income) in our consolidated statement of operations. Our primary exposures to foreign currency exchange fluctuations are pound sterling, Eurodollar and Japanese yen. At December 31, 2008, the potential reduction in earnings from a hypothetical instantaneous 10% adverse change in quoted foreign currency spot rates applied to foreign currency sensitive instruments is limited by the assumption that all of the foreign currencies to which we are exposed would simultaneously decrease by 10% because such synchronized changes are unlikely to occur. The effects of the forward exchange contracts have been included in the above analysis; however, the sensitivity model does not include the inherent risks associated with the anticipated future transactions denominated in foreign currency. Foreign Currency Transactions A portion of our revenues during the year ended December 31, 2008 were derived from manufacturing operations outside of the United States. The results of operations and the financial position of our operations in these other countries are primarily measured in their respective currency and translated into U.S. dollars. A portion of the
Table of Contentsexpenses generated in these countries is in currencies different from which revenue is generated. As discussed above, from time to time, we enter into forward exchange contracts to mitigate a portion of this currency risk. The reported income of these operations will be higher or lower depending on a weakening or strengthening of the U.S. dollar against the respective foreign currency. A portion of our assets at December 31, 2008 are based in our foreign operations and are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each period, with the effect of such translation reflected as a separate component of stockholders’ investment. Accordingly, our stockholders’ investment will fluctuate depending upon the weakening or strengthening of the U.S. dollar against the respective foreign currency. Effects of Inflation Inflation potentially affects us in two principal ways. First, a portion of our debt is tied to prevailing short-term interest rates that may change as a result of inflation rates, translating into changes in interest expense. Second, general inflation can impact material purchases, labor and other costs. In many cases, we have limited ability to pass through inflation-related cost increases due to the competitive nature of the markets that we serve. In the past few years, however, inflation has not been a significant factor.
These excerpts taken from the CVGI 10-K filed Mar 14, 2008. Interest
Rate Risk
We are exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. Market risk
is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest
rates. We do not enter into derivatives or other financial
instruments for trading or speculative purposes. We do enter
into financial instruments, from time to time, to manage and
reduce the impact of changes in foreign currency exchange rates
and interest rates and to hedge a portion of future anticipated
currency transactions. The counterparties are primarily major
financial institutions.
We manage our interest rate risk by balancing the amount of our
fixed rate and variable rate debt. For fixed rate debt, interest
rate changes affect the fair market value of such debt but do
not impact earnings or cash flows. Conversely for variable rate
debt, interest rate changes generally do not affect the fair
market value of such debt, but do impact future earnings and
cash flows, assuming other factors are held constant.
Approximately $9.5 million and $11.8 million of our
debt was variable rate debt at December 31, 2007 and 2006,
respectively. Holding other variables constant (such as foreign
exchange rates and debt levels), a one percentage point change
in interest rates would be expected to have an impact on pre-tax
earnings and cash flows for the next year of approximately
$0.1 million and $0.1 million, respectively. The
impact on the fair market value of our debt at December 31,
2007 and 2006 would have been insignificant.
Interest Rate Risk We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We do enter into financial instruments, from time to time, to manage and reduce the impact of changes in foreign currency exchange rates and interest rates and to hedge a portion of future anticipated currency transactions. The counterparties are primarily major financial institutions. We manage our interest rate risk by balancing the amount of our fixed rate and variable rate debt. For fixed rate debt, interest rate changes affect the fair market value of such debt but do not impact earnings or cash flows. Conversely for variable rate debt, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant. Approximately $9.5 million and $11.8 million of our debt was variable rate debt at December 31, 2007 and 2006, respectively. Holding other variables constant (such as foreign exchange rates and debt levels), a one percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash flows for the next year of approximately $0.1 million and $0.1 million, respectively. The impact on the fair market value of our debt at December 31, 2007 and 2006 would have been insignificant. This excerpt taken from the CVGI 10-K filed Mar 13, 2007. Interest
Rate Risk
We are exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. Market risk
is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest
rates. We do not enter into derivatives or other financial
instruments for trading or speculative purposes. We do enter
into financial instruments, from time to time, to manage and
reduce the impact of changes in foreign currency exchange rates
and interest rates and to hedge a portion of future anticipated
currency transactions. The counterparties are primarily major
financial institutions.
We manage our interest rate risk by balancing the amount of our
fixed rate and variable rate debt. For fixed rate debt, interest
rate changes affect the fair market value of such debt but do
not impact earnings or cash flows. Conversely for variable rate
debt, interest rate changes generally do not affect the fair
market value of such debt, but do impact future earnings and
cash flows, assuming other factors are held constant.
Approximately $11.8 million and $40.6 million of our
debt was variable rate debt at December 31, 2006 and 2005,
respectively. Holding other variables constant (such as foreign
exchange rates and debt levels), a one percentage point change
in interest rates would be expected to have an impact on pre-tax
earnings and cash flows for the next year of approximately
$0.1 million and $0.4 million, respectively. The
impact on the fair market value of our debt at December 31,
2006 and 2005 would have been insignificant.
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