EFJI » Topics » ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This excerpt taken from the EFJI 10-Q filed May 6, 2009.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without increasing risk.

 

Although a substantial majority of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic and political conditions could result in lower revenues for us. While most international sales are supported by letters of credit or cash in advance, the purchase of our products by international customers presents increased risks, which include:

 

·                  unexpected changes in regulatory requirements;

 

·                  tariffs and other trade barriers;

 

·                  political and economic instability in foreign markets;

 

·                  difficulties in establishing foreign distribution channels;

 

24



 

·                  longer payment cycles or uncertainty in the collection of accounts receivable;

 

·                  increased costs associated with maintaining international marketing efforts;

 

·                  cultural differences in the conduct of business;

 

·                  natural disasters or acts of terrorism;

 

·                  difficulties in protecting intellectual property; and

 

·                  susceptibility to orders being cancelled as a result of foreign currency fluctuations since a substantial majority our quotations and invoices are denominated in U.S. dollars.

 

Export of our products is subject to the U.S. Export Administration regulations and some of our secured communications products require a license or a license exception in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products, persons or countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

 

This excerpt taken from the EFJI 10-Q filed Oct 29, 2008.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without increasing risk.

 

As discussed in Note 5 to the unaudited condensed consolidated financial statements, the Company utilizes an interest rate swap arrangement to manage interest costs and risks associated with changing interest rates. This derivative instrument can expose the Company to credit loss in the event of nonperformance by the counterparty to the agreement.  To manage credit risk, the company periodically reviews the credit rating and stability of the counterparty. The Company does not expect the counterparty to fail to meet its obligations.

 

The uncertainty of financial markets and monetary exchange values has caused, and may in the future cause, some customers to delay new orders or delay payment for existing orders. The purchase of our products by customers presents increased risks, which include:

 

·                  unexpected changes in regulatory requirements;

 

·                  tariffs and other trade barriers;

 

·                  political and economic instability;

 

·                  financial market downturns and fluctuations;

 

·                  longer payment cycles or uncertainty in the collection of accounts receivable;

 

·                  increased costs associated with maintaining international marketing efforts;

 

·                  natural disasters or acts of terrorism;

 

·                  difficulties in protecting intellectual property; and

 

·                  susceptibility to orders being cancelled as a result of economic fluctuations since all our quotations and invoices are denominated in U.S. dollars.

 

Although most of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders.

 

Export of our products is subject to the U.S. Export Administration regulations and some of our secured communications products require a license or a license exception in order to ship internationally. We cannot assure that such

 

21



 

approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which may have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

 

This excerpt taken from the EFJI 10-Q filed Apr 30, 2008.

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without increasing risk.

 

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. While most international sales are supported by letters of credit or cash in advance, the purchase of our products by international customers presents increased risks, which include:

 

      unexpected changes in regulatory requirements;

 

      tariffs and other trade barriers;

 

      political and economic instability in foreign markets;

 

      difficulties in establishing foreign distribution channels;

 

      longer payment cycles or uncertainty in the collection of accounts receivable;

 

      increased costs associated with maintaining international marketing efforts;

 

      cultural differences in the conduct of business;

 

      natural disasters or acts of terrorism;

 

      difficulties in protecting intellectual property; and

 

      susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

 

Export of our products is subject to the U.S. Export Administration regulations and some of our products require a license or a license exception in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

 

19



 

This excerpt taken from the EFJI 10-Q filed Nov 6, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial instruments consist of cash, cash equivalents, short- and long-term investments, trade accounts receivable, accounts payable and long-term obligations. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without increasing risk. As of September 30, 2006, we had an investment portfolio of short-term investments in a variety of interest-bearing instruments, consisting of United States government and agency securities, high-grade United States corporate bonds, municipal bonds, mortgage-backed securities and money market accounts. Due to the short duration of our investment portfolio, a hypothetical 1% change in interest rates would not be material to our financial condition or results of operations.

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic and political conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While many of our international sales are supported by letters of credit or cash in advance, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;

 

    tariffs and other trade barriers;

 

    political and economic instability in foreign markets;

 

    difficulties in establishing foreign distribution channels;

 

    longer payment cycles or uncertainty in the collection of accounts receivable;

 

    increased costs associated with maintaining international marketing efforts;

 

    cultural differences in the conduct of business;

 

    natural disasters or acts of terrorism;

 

    difficulties in protecting intellectual property; and

 

    susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

Export of our products is subject to the U.S. Export Administration regulations and some of our secured communications products require a license or a license exception in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products, persons or countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

This excerpt taken from the EFJI 10-Q filed Aug 3, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic and political conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While most international sales are supported by letters of credit or cash in advance, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;

 

    tariffs and other trade barriers;

 

    political and economic instability in foreign markets;

 

    difficulties in establishing foreign distribution channels;

 

    longer payment cycles or uncertainty in the collection of accounts receivable;

 

    increased costs associated with maintaining international marketing efforts;

 

    cultural differences in the conduct of business;

 

    natural disasters or acts of terrorism;

 

    difficulties in protecting intellectual property; and

 

    susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

Export of our products is subject to the U.S. Export Administration regulations and some of our secured communications products require a license or a license exception in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

This excerpt taken from the EFJI 10-Q filed May 2, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While most international sales are supported by letters of credit or cash in advance, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;

 

    tariffs and other trade barriers;

 

    political and economic instability in foreign markets;

 

    difficulties in establishing foreign distribution channels;

 

    longer payment cycles or uncertainty in the collection of accounts receivable;

 

    increased costs associated with maintaining international marketing efforts;

 

    cultural differences in the conduct of business;

 

    natural disasters or acts of terrorism;

 

    difficulties in protecting intellectual property; and

 

    susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

Some of our secured communications products are subject to export controls under U.S. law, which in most cases requires the approval of the Department of Commerce in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

This excerpt taken from the EFJI 10-K filed Mar 9, 2006.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Although our sales have historically been denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While most international sales are supported by letters of credit, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;

 

    tariffs and other trade barriers;

 

    political and economic instability in foreign markets;

 

    difficulties in establishing foreign distribution channels;

 

    longer payment cycles or uncertainty in the collection of accounts receivable;

 

    increased costs associated with maintaining international marketing efforts;

 

    cultural differences in the conduct of business;

 

    difficulties in protecting intellectual property; and

 

    susceptibility to orders being cancelled as a result of foreign currency fluctuations since historically, our quotations and invoices are denominated in U.S. dollars.

Our secured communications products are subject to export controls under U.S. law, which in most cases requires the approval of the Department of Commerce in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products. See “—Government Regulation and Export Controls.”

 

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Recently Issued Accounting Standards

In May 2005, the Financial Accounting Standards Board, or FASB, issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle, as well as changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This pronouncement is not anticipated to have a material effect on our consolidated financial position, results of operations, or cash flows.

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143, Accounting for Asset Retirement Obligations. This Interpretation clarifies that the term “conditional asset retirement obligation,” as used in SFAS No. 143, refers to a legal obligation to perform an asset retirement activity in which the timing or method of settlement are conditional on a future event that may or may not be within the control of the entity. This pronouncement is not anticipated to have a material effect on our consolidated financial position, results of operations, or cash flows.

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which revises and replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R eliminates the alternative to use APB Opinion 25’s intrinsic value method of accounting and requires companies to measure the cost of employee services received in exchange for an award of equity instruments based upon the grant-date fair value of the award. The fair-value-based method is substantially similar to the method established in SFAS No. 123 and includes use of an option-pricing model, such as the Black-Scholes option-pricing model. Fair value will be recognized over the period during which the employee is required to provide service in exchange for the award, generally the option’s vesting period. SFAS No. 123R will be effective for us on January 1, 2006. Alternative phase-in methods are allowed under SFAS No. 123R, and we expect that we will use the modified-prospective phase-in method that requires entities to recognize compensation costs in financial statements issued after the date of adoption for all share based payments granted, modified or settled after the date of adoption as well as for any awards that were granted prior to the adoption date for which the required service has not yet been performed. We presently expect such adoption to increase our non-cash compensation expenses by approximately $1.4 million to approximately $2.0 million during 2006.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 eliminates APB No. 29’s exception to fair value for exchanges of similar productive assets and replaces it with a general exception for exchange transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This pronouncement is effective for us on January 1, 2006 and is not anticipated to have a material effect on our consolidated financial position, results of operations, or cash flows.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4, Inventory Pricing. The statement clarifies the FASB’s position that abnormal amounts of costs, such as idle freight, handling costs, or spoilage, should be recognized as current-period costs and requires that allocation of fixed production overheads to costs of conversion be based upon the normal capacity of the production facilities. We will adopt this pronouncement on January 1, 2006. Since, heretofore, we had already been accounting for inventory costs in accordance with the methodology required by SFAS No. 151, this pronouncement is not anticipated to have a material effect on our consolidated financial position, results of operations, or cash flows.

This excerpt taken from the EFJI 10-Q filed Nov 1, 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While most international sales are supported by letters of credit or cash in advance, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;
    tariffs and other trade barriers;
    political and economic instability in foreign markets;
    difficulties in establishing foreign distribution channels;
    longer payment cycles or uncertainty in the collection of accounts receivable;
    increased costs associated with maintaining international marketing efforts;
    cultural differences in the conduct of business;
    natural disasters or acts of terrorism;
    difficulties in protecting intellectual property; and
    susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

 

Some of our secured communications products are subject to export controls under U.S. law, which in most cases requires the approval of the Department of Commerce in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

 

This excerpt taken from the EFJI 10-Q filed Aug 2, 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While most international sales are supported by letters of credit, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;

 

    tariffs and other trade barriers;

 

    political and economic instability in foreign markets;

 

    difficulties in establishing foreign distribution channels;

 

    longer payment cycles or uncertainty in the collection of accounts receivable;

 

    increased costs associated with maintaining international marketing efforts;

 

    cultural differences in the conduct of business;

 

    natural disasters or acts of terrorism;

 

    difficulties in protecting intellectual property; and

 

    susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

 

Some of our secured communications products are subject to export controls under U.S. law, which in most cases requires the approval of the Department of Commerce in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

 

This excerpt taken from the EFJI 10-Q filed May 5, 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Although all of our sales are denominated in U.S. dollars, fluctuations in the value of international currencies relative to the U.S. dollar may affect the price, competitiveness and profitability of our products sold in international markets. Furthermore, the uncertainty of monetary exchange values has caused, and may in the future

 

Page 20


cause, some foreign customers to delay new orders or delay payment for existing orders. Additionally, troubled economic conditions, such as that recently experienced in Asia and in Latin America, could result in lower revenues for us. While most international sales are supported by letters of credit, the purchase of our products by international customers presents increased risks, which include:

 

    unexpected changes in regulatory requirements;

 

    tariffs and other trade barriers;

 

    political and economic instability in foreign markets;

 

    difficulties in establishing foreign distribution channels;

 

    longer payment cycles or uncertainty in the collection of accounts receivable;

 

    increased costs associated with maintaining international marketing efforts;

 

    cultural differences in the conduct of business;

 

    natural disasters or acts of terrorism;

 

    difficulties in protecting intellectual property; and

 

    susceptibility to orders being cancelled as a result of foreign currency fluctuations since all our quotations and invoices are denominated in U.S. dollars.

 

Some of our secured communications products are subject to export controls under U.S. law, which in most cases requires the approval of the Department of Commerce in order to ship internationally. We cannot assure that such approvals will be available to us or our products in the future in a timely manner or at all or that the federal government will not revise its export policies or the list of products and countries for which export approval is required. Our inability to obtain required export approvals would adversely affect our international sales, which would have a material adverse effect on us. In addition, foreign companies not subject to United States export restrictions may have a competitive advantage in the international secured communications market. We cannot predict the impact of these factors on the international market for our products.

 

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