Hypercom Corporation Annual Report - CiteSeer

(e) In September 2006, we completed the sale of our real property in Hong Kong for $5.2 million. We recorded a gain of
approximately $3.0 million on the sale in the third quarter of 2006.
(f) In the fourth quarter of 2005, we sold our U.K. lease portfolio (the “U.K. Lease Business”) as this leasing business did not
align with our core business. As of December 31, 2005, the U.K. Lease Business’ operating results have been classified as
discontinued operations in the statements of operations for all periods presented. We recognized a $6.6 million loss on the
write-down of the U.K. Lease Business to its estimated fair value based on purchase offers received from potential buyers.
See Note 6 to our consolidated financial statements included herein.
(g) In 2005, we performed a comprehensive review of our financial performance; market strategy; products; product development
and life cycle management; and employee, customer and vendor relationships. The objective of the business review was to
create a plan to improve profitability and customer relations, transition more rapidly to 32-bit technology products, rationalize
operations and reorganize our corporate structure. As a result of this business review, we recorded charges of $16.3 million to
costs of revenue and $2.7 million to operating expenses during 2005.
See Note 24 to our consolidated financial statements included herein for a presentation of certain of the above information on a
quarterly basis for each of the four quarters in the years ended December 31, 2009 and 2008.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following sets forth a discussion and analysis of our financial condition and results of operations for the three years ended
December 31, 2009. This discussion and analysis should be read in conjunction with our consolidated financial statements appearing
elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Our actual results may
differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in “Item 1A — Risk Factors” of this Annual Report on Form 10-K.
There are numerous references to the impact of foreign currency translation in the discussion of our results of operations. Over the
past several years, the exchange rates between the U.S. Dollar and many foreign currencies, especially the Euro, have fluctuated
significantly. When stronger U.S. Dollar exchange rates of the current year are used to translate the results of operations of the
subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results as compared with
the prior period. When the US Dollar weakens, the resulting impact is an increase in U.S. Dollars of reported results as compared with
the prior period.
During 2009 we committed to a plan to divest a European leasing and service operation and are currently marketing it for sale.
The results of this operation have been excluded from all continuing operating results included in our consolidated financial
statements for all periods presented.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates,
including those related to bad debts, product returns, long-term contracts, inventories, goodwill and other intangible assets, income
taxes, financing operations, foreign currency, and contingencies and litigation. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation
of our consolidated financial statements.
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