Hypercom Corporation Annual Report - CiteSeer

The Company does not provide for federal income taxes on the undistributed earnings of its international subsidiaries because
earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely.
Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares
outstanding during the period. Diluted income (loss) per share reflects the potential dilution that could occur if the income were
divided by the weighted-average number of common shares outstanding and potentially dilutive common shares from outstanding
stock options and warrants. Potentially dilutive common shares are calculated using the treasury stock method and represent
incremental shares issuable upon exercise of the Company’s outstanding options and warrants. Due to losses in 2009, 2008 and 2007,
potentially dilutive securities are not included in the calculation of dilutive loss per share as their impact would be anti-dilutive.
Due to losses in 2009, 2008 and 2007, options and warrants that could potentially dilute loss per share in the future were not
included in the computation of basic loss per share because they were anti-dilutive. In those years, excluded options and warrants
amounted to 15,108,861, 14,988,718 and 2,974,536, respectively.
Derivative Financial Instruments
The Company does not acquire, hold or issue derivative financial instruments for trading purposes. Derivative financial
instruments are used to manage foreign exchange and interest rate risks that arise out of the Company’s core business activities.
Derivative financial instruments used to manage foreign exchange risk were designated as hedging instruments for hedges of
foreign currency exposure of the Company’s net investment in foreign operations. The primary objective of the Company’s hedging
strategy is to protect its net investments in foreign subsidiaries and certain accounts receivable that are exposed to volatility in foreign
currency exchange rates. In March 2009, the Company suspended hedging activities due to the cost of entering into forward contracts,
the possible short term cash requirements for forward contract payables, along with the inability to repatriate cash from foreign
countries on a short term basis to offset any hedge forward contract payable. Prior to the decision to suspend hedging in March 2009,
the Company hedged the translation of its net investment in foreign subsidiaries in an attempt to neutralize the effect of translation
gains or losses in the statement of operations. During 2008 and 2007, the Company had forward contracts in place to hedge its foreign
currency denominated net monetary assets in various foreign countries, including Brazil, the U.K., Chile, Australia, Thailand and
Sweden. The U.S. Dollar amount of the contracts at December 31, 2008 was $13.0 million. The total payable recorded under the
contracts is reflected in accrued liabilities and was $0.1 million as of December 31, 2008.
Comprehensive Income (Loss)
Comprehensive income (loss) represents net income (loss) for the year adjusted for changes in stockholders’ equity from nonstockholder
sources. Accumulated comprehensive income (loss) items typically include currency translation and the impact of the
Company’s pension liability adjustment, net of tax.
Reclassification
Certain amounts in the prior-year financial statements have been reclassified to conform to the current year presentation.
Impact of Recently Issued Accounting Pronouncements
In December 2008, Financial Accounting Standards Board (“FASB”) issued guidance on an employer’s disclosures about plan
assets of a defined benefit pension or other postretirement plan. The standard is effective for fiscal years ending after December 15,
2009. The implementation of this guidance did not have a material impact on the Company’s disclosures or its consolidated financial
position, results of operations or cash flows.
On January 1, 2009, the Company adopted a new accounting standard regarding the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The implementation
of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
On January 1, 2009, the Company adopted a new accounting standard that requires additional disclosures about transfers of
financial assets and involvement with variable interest entities. The implementation of this standard did not have a material impact on
the Company’s consolidated financial position, results of operations or cash flows.
- 59 -