Download 2011 Annual Report - Opnet

OPNET Technologies, Inc. 2011 Annual Report
QUantitatiVe anD QUalitatiVe DiSclOSUReS aBOUt maRKet RiSK
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents, and those with
maturities greater than three months are considered to be marketable securities. Our cash equivalents and short-term marketable securities
consist primarily of United States backed money market funds, United States Treasury bills, and United States Treasury notes with original
maturities greater than three months and less than one year. We currently do not hedge interest rate exposure, but do not believe that an
increase in interest rates would have a material effect on the value of our cash equivalents or marketable securities.
At March 31, 2011, we had $114.7 million in cash, cash equivalents, and marketable securities. As of March 31, 2010, we had $104.7 million
in cash and cash equivalents. We did not hold any short-term marketable securities at March 31, 2010. Based on our cash, cash equivalents,
and marketable securities as of March 31, 2011, a one percentage point increase or decrease in interest rates would increase or decrease our
annual interest income and cash flows by approximately $1.1 million.
At March 31, 2011, $49.0 million of our $83.3 million in cash and cash equivalents was held in money market funds. The money market funds
are predominately backed by United States government securities. The per-share net asset value of our money market funds has remained
at a constant amount of $1.00 per share. Also, as of March 31, 2011, there were no withdrawal limits on redemptions for any of the money
market funds that we hold.
Our consolidated financial statements are denominated in United States dollars and, accordingly, changes in the exchange rate between
foreign currencies and the United States dollar will affect the translation of our subsidiaries’ financial results into United States dollars for purposes
of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded as a separate component
of stockholder’s equity, was a loss of $649,000 and a loss of $999,000 at March 31, 2011 and 2010, respectively. A majority of our revenue
transactions outside the United States are denominated in local currencies and the majority of operating expenses associated with our foreign
subsidiaries are denominated in local currencies; therefore, our results of operations and financial condition are subject to fluctuations
due to changes in foreign currency exchange rates, particularly changes in the British pound and the European Union euro. We currently do
not hedge foreign exchange rate risk. Approximately 25.9%, 22.5%, and 21.1% of our total revenue for fiscal 2011, fiscal 2010, and fiscal 2009,
respectively, was generated from outside of the United States. Due to the limited nature of our foreign operations, we do not believe that a
10% change in exchange rates would have a material effect on our business, financial condition, or results of operations. Based on our revenue
and operating expenses denominated in foreign currencies during fiscal 2011, fiscal 2010, and fiscal 2009, a 10% increase or decrease in
exchange rates would increase or decrease our consolidated net income by approximately $43,000, $56,000, and $107,000, respectively.
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