Hypercom Corporation Annual Report - CiteSeer

1. Description of Business
HYPERCOM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
Hypercom Corporation (“Hypercom”) is one of the largest global providers of complete electronic payment and transaction
solutions and value-added services at the point-of-transaction. Hypercom designs and sells electronic transaction terminals, peripheral
devices, transaction networking devices, transaction management systems, application software, and information delivery services.
Additionally, Hypercom provides directly, or through qualified contractors, support and related services that complement and enhance
its hardware and software products. Hypercom’s customers include large domestic and international financial institutions, electronic
payment processors, large retailers, independent sales organizations (“ISOs”) and distributors as well as companies in the
transportation, healthcare, pre-paid card and quick service restaurant (“QSR”) industries. Hypercom operates in one business market—
electronic payment products and services.
Hypercom is headquartered in Scottsdale, Arizona, where its operations include corporate administration, product development,
sales and marketing, distribution, repairs management and customer service. Hypercom has sales and support offices in Australia,
Brazil, Belgium, Chile, China, France, Germany, Hong Kong, Hungary, Latvia, Mexico, the Philippines, Puerto Rico, Russia,
Scotland, Singapore, Spain, Sweden, Thailand, the United Arab Emirates and the United Kingdom (“U.K.”). These sales and support
offices perform sales, marketing, distribution, customer service and custom development functions. Hypercom’s primary
manufacturing is performed by third party contract manufacturing operations located in Malaysia, Germany, Brazil, Romania, and
Tunisia. Hypercom has global product development facilities primarily in the U.S., Germany, France, Philippines and Latvia.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Hypercom and its wholly-owned subsidiaries (collectively, the
“Company” or “Hypercom”). The Company, directly or indirectly, owns 100% of the outstanding stock of all of its subsidiaries with
the exception of one subsidiary in Thailand. The Company owns a controlling interest in the Thailand subsidiary and certain nominee
shareholders own the remaining nominal shares. All of the Company’s subsidiaries are included in the consolidated financial
statements, and all significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles
requires management to make numerous estimates and assumptions that affect the accounting, recognition and disclosure of assets,
liabilities, stockholders’ equity, revenue and expenses. The accounting estimates that require management’s most significant, difficult
and subjective judgments include collectability of accounts receivable; determination of inventory obsolescence; recoverability of
long-lived assets and goodwill; expected product warranty costs; recognition and measurement of current and deferred income tax
assets and liabilities; legal and tax contingency accruals; the recognition and measurement of contingent liabilities to the Company’s
third-party contract manufacturers, for component parts that the Company may not ultimately use, and restructuring reserves. The
actual results experienced by the Company may differ from management’s estimates.
Cash and Cash Equivalents
The Company considers all financial instruments, including money market accounts and certificates of deposits, with a
remaining maturity of three months or less when purchased, to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents approximate fair value due to the short maturity of those instruments. The
fair value of marketable securities is determined based on quoted market prices, which approximate fair value. The fair value of salestype
leases and long-term obligations is estimated by discounting the future cash flows required under the terms of each respective
lease or debt agreement by current market rates for the same or similar issues of leases or debt with similar remaining maturities. The
fair value of financial hedge instruments are based on quotes from brokers using market prices for those or similar instruments.
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