This excerpt taken from the MERX 10-K filed Aug 14, 2007.
Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our funds available for investment and interest expense on our debt obligations. We seek to mitigate our exposure by limiting default risk, market risk and reinvestment risk on our investment portfolio. We mitigate default risk by investing in high-credit quality securities. We do not believe that changes in interest rates would have a material effect on our liquidity, financial condition or results of operations.
We are exposed to interest rate risk relating to our domestic credit facility agreement, which bears interest at (a) either the prime rate or LIBOR, plus (b) an additional margin based on certain performance criteria. No amounts were outstanding under this credit facility at May, 26, 2007.
Foreign Currency Risk
We are exposed to foreign currency fluctuation as a result of our international operations. Our primary foreign currency exposure stems from operating costs relating to manufacturing operations in Hong Kong and the PRC. Substantially all of our consolidated net sales are denominated in U.S. Dollars. We do not currently engage in derivative activities to hedge against foreign currency risk. However, we regularly evaluate our risk management options. Net foreign currency transaction losses were $0.7 million during both fiscal 2007 and 2006 and were insignificant in fiscal 2005.
Fair Value of Fixed-Rate Debt
The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The book value of our fixed rate debt and the fair value, based upon open market trades, if available, or discounted cash flows, was as follows at May 26, 2007 (in thousands):
This excerpt taken from the MERX 10-Q filed Jan 4, 2007.
There have been no material changes in our reported market risks and risk management policies since the filing of our Annual Report on Form 10-K for the fiscal year ended May 27, 2006, which was filed with the Securities and Exchange Commission on August 24, 2006.