NTAP » Topics » We have credit exposure to our hedging counterparties.

These excerpts taken from the NTAP 10-K filed Jun 17, 2009.
We have credit exposure to our hedging counterparties.
 
In order to minimize volatility in earnings associated with fluctuations in the value of foreign currency relative to the U.S. Dollar, we utilize forward and option contracts to hedge our exposure to foreign currencies. As a result of entering into these hedging contracts with major financial institutions, we may be subject to counterparty nonperformance risk. Should there be a counterparty default, we could be exposed to the net losses on the original hedge contracts or be unable to recover anticipated net gains from the transactions.
 
A significant portion of our cash and cash equivalents balances is held overseas. If we are not able to generate sufficient cash domestically in order to fund our U.S. operations and strategic opportunities and service our debt, we may incur a significant tax liability in order to repatriate the overseas cash balances, or we may need to raise additional capital in the future.
 
A portion of our earnings which is generated from our international operations is held and invested by certain of our foreign subsidiaries. These amounts are not freely available for dividend repatriation to the United States without triggering significant adverse tax consequences, which could adversely affect our financial results. As a result, unless the cash generated by our domestic operations is sufficient to fund our domestic operations, our broader corporate initiatives such as stock repurchases, acquisitions, and other strategic opportunities, and to service our outstanding indebtedness, we may need to raise additional funds through public or private debt or equity financings, or we may need to expand our existing credit facility to the extent we choose not to repatriate our overseas cash. Such additional financing may not be available on terms favorable to us, or at all, and any new equity financings or offerings would dilute our current stockholders’ ownership. Furthermore, lenders, particularly in light of the current challenges in the credit markets, may not agree to extend us new, additional or continuing credit. If adequate funds are not available, or are not available on acceptable terms, we may be forced to repatriate our foreign cash and incur a significant tax expense or we may not be able to take advantage of strategic opportunities, develop new products, respond to competitive pressures or repay our outstanding indebtedness. In any such case, our business, operating results or financial condition could be materially adversely affected.


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We
have credit exposure to our hedging
counterparties.



 



In order to minimize volatility in earnings associated with
fluctuations in the value of foreign currency relative to the
U.S. Dollar, we utilize forward and option contracts to
hedge our exposure to foreign currencies. As a result of
entering into these hedging contracts with major financial
institutions, we may be subject to counterparty nonperformance
risk. Should there be a counterparty default, we could be
exposed to the net losses on the original hedge contracts or be
unable to recover anticipated net gains from the transactions.


 




A
significant portion of our cash and cash equivalents balances is
held overseas. If we are not able to generate sufficient cash
domestically in order to fund our U.S. operations and strategic
opportunities and service our debt, we may incur a significant
tax liability in order to repatriate the overseas cash balances,
or we may need to raise additional capital in the
future.



 



A portion of our earnings which is generated from our
international operations is held and invested by certain of our
foreign subsidiaries. These amounts are not freely available for
dividend repatriation to the United States without triggering
significant adverse tax consequences, which could adversely
affect our financial results. As a result, unless the cash
generated by our domestic operations is sufficient to fund our
domestic operations, our broader corporate initiatives such as
stock repurchases, acquisitions, and other strategic
opportunities, and to service our outstanding indebtedness, we
may need to raise additional funds through public or private
debt or equity financings, or we may need to expand our existing
credit facility to the extent we choose not to repatriate our
overseas cash. Such additional financing may not be available on
terms favorable to us, or at all, and any new equity financings
or offerings would dilute our current stockholders’
ownership. Furthermore, lenders, particularly in light of the
current challenges in the credit markets, may not agree to
extend us new, additional or continuing credit. If adequate
funds are not available, or are not available on acceptable
terms, we may be forced to repatriate our foreign cash and incur
a significant tax expense or we may not be able to take
advantage of strategic opportunities, develop new products,
respond to competitive pressures or repay our outstanding
indebtedness. In any such case, our business, operating results
or financial condition could be materially adversely affected.





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EXCERPTS ON THIS PAGE:

10-K (2 sections)
Jun 17, 2009
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