Hypercom Corporation Annual Report - CiteSeer

Based on past performance and current expectations, we believe that our cash flows from operations and other sources of
liquidity, including borrowings available under our revolving credit facility or other financing options, will satisfy our working capital
needs, capital expenditures, commitments, and other liquidity requirements associated with our operations and our TeT acquisition
debt requirement through the next year. Should operating results prove unfavorable, we may need to obtain additional capital sources
to meet our short-term liquidity and capital resource requirements.
Contractual Obligations
The following table summarizes our significant contractual obligations at December 31, 2009, and the effect such obligations are
expected to have on our liquidity and cash flows in future periods (dollars in thousands):
Less than After
Total 1 Year 1-3 Years 3-5 Years 5 Years
Long-term debt $ - $ - $ 85,324 $ - $ -
Operating leases 16,128 3,986 4,458 2,800 4,884
Minimum purchase obligations(1) 33,234 33,234 - - -
Total $ 49,362 $ 37,220 $ 89,782 $ 2,800 $ 4,884
(1) Minimum purchase obligations include all outstanding obligations to purchase goods or services from our contract
manufacturers and other suppliers at December 31, 2009 including agreements that are cancelable without penalty and
agreements that are enforceable and legally binding. We estimate that approximately 98% of the outstanding purchase
obligations at December 31, 2009 are non-cancelable due to the customized nature of the order and the long lead time
requirements.
(2) Our long-term debt obligation includes principal and accrued interest through the maturity of the debt in 2012.
Off-Balance Sheet Arrangements
As of December 31, 2009, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC
Regulation S-K.
2010 Outlook
We believe that our 2009 initiatives will improve our financial performance in 2010. We expect revenues to grow while continuing
to control existing operating expenses. Beginning in the second quarter of 2010, we anticipate releasing our next generation products
using a joint development manufacturing model and over time we expect to increase product gross margin as revenue from these
products become meaningful to our overall revenue. We also expect our gross margin to improve as the overall economy improves
and our markets continue to recover. We are also in the process of restructuring our existing service businesses to increase service
gross margin and we also intend to expand our software solutions to grow revenue and increase service gross margin. In order to
increase the software-related resources to support higher software and solutions revenue while also controlling operating expenses,
beginning in the fourth quarter of 2009, we opened a new low-cost research and development center in the Philippines and we intend
to employ up to 100 developers there by the end of 2010.
We expect to continue to see competitive pressures on a global basis as we try to maintain and expand our market share. These
pressures will generally serve to decrease average selling prices for certain products within certain geographies We will continue to
manage our balance sheet and leverage our working capital to help achieve of our key initiatives and in response to the global
economic environment in 2010.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 2009, our cash equivalent investments are primarily in money market accounts and certificates of deposit and
are reflected as cash equivalents because all maturities are within 90 days from date of purchase. Our interest rate risk with respect to
existing investments is limited due to the short-term duration of these arrangements and the yields earned, which approximate current
interest rates for similar investments.
We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates in connection
with our international operations and markets. Nevertheless, the fair value of our investment portfolio or related income would not be
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