1 unchanged sentence
Interest Rate Risk
−Removed: We had cash and cash equivalents of approximately $901.9 million as of December 31, 2021.
−Removed: We do not enter into investments for trading or speculative purposes.
−Removed: We have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates.
−Removed: A hypothetical 10% increase in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
−Removed: We are primarily potentially exposed to changes in short-term interest rates with respect to our cost of borrowing under our Credit Agreement, from which we have yet to draw on.
−Removed: Our debt obligations related to the Notes are long-term in nature with fixed interest rates.
+Added: Our exposure to changes in interest rates relates primarily to our investment portfolio and changes in short-term interest rates with respect to our cost of borrowing under our Credit Agreement, from which we have yet to draw on.
We monitor our cost of borrowing, taking into account our funding requirements, and our expectations for short-term rates in the future.
−Removed: A hypothetical 10% change in the interest rate on our Credit Agreement for all periods presented would not have a material impact on our consolidated financial statements.
+Added: While we are exposed to global interest rate fluctuations, we are most affected by fluctuations in U.S.
+Added: interest rates.
+Added: Changes in U.S.
+Added: interest rates affect the interest earned on our cash, cash equivalents and marketable securities and the fair value of those securities.
+Added: Our investment policy and strategy are focused on the preservation of capital and supporting our liquidity requirements.
+Added: We use a combination of internal and external management to execute our investment strategy and achieve our investment objectives.
+Added: We typically invest in highly rated securities, with the primary objective of minimizing the potential risk of principal loss.
+Added: Our investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer.
+Added: To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curve.
+Added: Based on investment positions as of December 31, 2022, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $5.1 million increase in the fair market value of the portfolio.
+Added: Our debt obligations related to the Notes are long-term in nature with fixed interest rates.
Foreign Currency Risk
−Removed: To date, all of our inventory purchases have been denominated in U.S.
−Removed: Our international sales are primarily denominated in foreign currencies and any unfavorable movement in the exchange rate between U.S.
−Removed: dollars and the currencies in which we conduct sales in foreign countries could have an adverse impact on our revenue.
−Removed: A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates.
+Added: Our reporting currency is the U.S.
+Added: Due to our international operations, we have foreign currency risks related to revenue and operating expenses denominated in currencies other than the U.S.
+Added: dollar, primarily the China Renminbi, British pound, EU Euro, and Australian dollar.
+Added: Our international sales contracts are primarily denominated in the local currency of the customer making the purchase.
+Added: In addition, a portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies.
+Added: Increases in the relative value of the U.S.
+Added: dollar to other currencies (e.g., unfavorable movement in the exchange rate between the U.S.
+Added: dollar and the currencies in which we conduct sales in foreign countries) will
+Added: negatively affect our revenue and net operating results as expressed in U.S.
+Added: For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced.
+Added: If an adverse 10% foreign currency exchange rate change was applied to total monetary assets, liabilities, and commitments denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in an adverse effect on income before income taxes of approximately $3.5 million and $0.1 million as of December 31, 2022 and 2021, respectively.
+Added: We have experienced and may continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasuring certain current asset and current liability balances denominated in currencies other than the functional currency of the entities in which they are recorded.
+Added: We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future.
While we are not currently contractually obligated to pay increased costs due to changes in exchange rates, to the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margins.
Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.
−Removed: However, we believe that the exposure to foreign currency fluctuation from operating expenses is relatively small at this time as the related costs do not constitute a significant portion of our total expenses.
−Removed: As of December 31, 2021, the effect of a hypothetical 10% change in foreign currency exchange rates would not have had a material impact to our consolidated results of operations.
Inflation Risk
−Removed: We do not believe that inflation has had a material effect on our business, financial condition, or results of operations.
−Removed: If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
−Removed: Our inability or failure to do so could harm our business, financial condition, and operating results.
−Removed: Table of Con tents
+Added: Inflation has the potential to adversely affect our liquidity, business, financial condition, and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
+Added: The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates, and other similar effects.
+Added: While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have experienced the effects of inflation during the periods covered by this Annual Report on Form 10-K on our results of operations and financial condition, and we expect to experience other effects, such as additional cost increases in the near future if inflation continues to persist.
+Added: Additionally, because we purchase materials from our suppliers, we may be adversely impacted by their inability to adequately mitigate inflationary, industry, or economic pressures.
+Added: Furthermore, although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations, and liquidity could be materially adversely affected.
+Added: Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.
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