Bonnie Bear and others: Following is an excerpt from Seagate's latest 10Q on file with the SEC. The meat is in the second paragraph but the first sets the stage.
"FOREIGN CURRENCY RISK:
The Company transacts business in various foreign currencies, primarily in emerging market countries in Asia and in certain European countries. The Company has established a foreign currency hedging program utilizing foreign currency forward exchange contracts and purchased currency options to hedge local currency cash flows for payroll, inventory, other operating expenditures and fixed asset purchases in Singapore, Thailand and Malaysia. Under this program, increases or decreases in the Company's local currency operating expenses and other cash outflows are partially offset by realized gains and losses on the hedging instruments. The goal of this hedging program is to economically guarantee or lock in the exchange rates on the Company's foreign currency cash outflows rather than to eliminate the possibility of short-term earnings volatility. The Company does not use foreign currency forward exchange contracts or purchased currency options for trading purposes.
Gains and losses related to qualified hedges of firm commitments and anticipated transactions are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. All other forward exchange and option contracts are marked-to-market and unrealized gains and losses are included in current period net income. Because not all economic hedges qualify
as accounting hedges, unrealized gains and losses may be recognized in income in advance of the actual foreign currency cash flows. This mismatch of accounting gains and losses and foreign currency cash flows was especially pronounced during the first quarter of fiscal 1998 as a result of the declines in value of the Thai Baht and Malaysian Ringgit, relative to the U.S. Dollar. This resulted
in an unrealized pre-tax charge of $62,819,000 recorded in Other Income (Expense) for the quarter ended October 3, 1997."
There seems to be the potential for another $100,000,000 to be dealt with in the future. Check out the 10Q. |
