dollar and other major currencies. In that event, a strengthening of the RMB would benefit our reported revenue and prof- its and a weakening of the RMB would negatively impact reported revenue and profits. Given the uncertainty of exchange  rate fluctuations, we cannot estimate the effect of these fluctuations on our future business, product pricing and results of  operations or financial condition. We seek to reduce our exposure to fluctuations in foreign currency exchange rates through the use of foreign currency  exchange contracts, through intercompany loans of foreign currency, and through our Japanese yen denominated debt. We  do not use derivative financial instruments for trading or speculative purposes. We regularly monitor our foreign currency  risks and periodically take measures to reduce the impact of foreign exchange fluctuations on our operating results. Our foreign currency derivatives are comprised of over-the-counter forward contracts with major international finan- cial institutions. As of December  31 ,  2004 , we had $ 82 . 0  million of these contracts with expiration dates through Decem- ber  2005 . All of these contracts were denominated in Japanese yen. For the year ended December  31 ,  2004 , we recorded  losses of $ 5 . 0  million in operating income, and losses of $ 3 . 2  million, net of tax, in other comprehensive income related to  the fair market valuation of our outstanding forward contracts. Because of our foreign exchange contracts at December  31 ,  2004 , the impact of a  10 % appreciation or  10 % depreciation of the U.S. dollar against the Japanese yen would not represent  a material potential loss in fair value, earnings, or cash flows against these contracts. This potential loss does not consider  the underlying foreign currency transaction or translation exposures to which we are subject. Following are the weighted-average currency exchange rates of U.S. $ 1  into local currency for each of our interna- tional or foreign markets in which revenue exceeded U.S. $ 5 . 0  million for at least one of the quarters listed: With the exception of historical facts, the statements contained in Management’s Discussion and Analysis of Financial  Condition and Results of Operations, are “forward-looking statements” within the meaning of the Private Securities Liti- gation Reform Act of  1995  which reflect our current expectations and beliefs regarding our future results of operations,  performance and achievements.  These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may not mate- rialize. These forward-looking statements include, but are not limited to, statements concerning: 49 • our belief that the anticipated new direct selling regulations in China will positively impact our business there; • our belief that we will be able to obtain a direct selling license under the anticipated new direct selling regula- tions in China; • our anticipation that new direct selling regulations will be adopted in China in the next several months, and our  plans to add additional retail stores throughout the country in order to obtain a direct selling license under the  new regulations; • our plans to continue to promote certain distributor initiatives and tools, such as monthly product subscription  programs and the BioPhotonic Scanner program;  • the anticipation that we will continue to declare quarterly cash dividends and that cash flows from operations will  be sufficient to pay future dividends;  • our plans to manufacture more products in China for export; • the expectation that we will spend $ 40 . 0  million to $ 50 . 0  million for capital expenditures during  2005 ; • our belief that we have sufficient liquidity to be able to meet our obligations on both a short-and long-term basis,  and that existing cash together with cash flow from operations and existing lines of credit will be adequate to  fund cash needs; ( 1 ) As of February  28 ,  2005  the exchange rate of U.S. $ 1  into the Japanese yen was approximately  104 . 5 . NOTE REGARDING FORWARD-LOOKING STATEMENTS  2003 2004 Quarter  1 Quarter  2 Quarter  3 Quarter  4 Quarter  1 Quarter  2 Quarter  3 Quarter  4 Japan  ( 1 ) 118 . 9 118 . 5 117 . 3 108 . 7 107 . 3 109 . 6 109 . 9 105 . 6 Taiwan 34 . 6 34 . 7 34 . 2 34 . 0 33 . 3 33 . 3 33 . 9 32 . 9 Hong Kong 7 . 8 7 . 8 7 . 8 7 . 8 7 . 8 7 . 8 7 . 8 7 . 8 South Korea  1 , 200 . 2 1 , 208 . 7 1 , 174 . 6 1 , 182 . 1 1 , 171 . 7 1 , 162 . 0 1 , 154 . 8 1 , 091 . 6 Singapore  1 . 7 1 . 8 1 . 8 1 . 7 1 . 7 1 . 7 1 . 7 1 . 7 Malaysia  3 . 8 3 . 8 3 . 8 3 . 8 3 . 8 3 . 8 3 . 8 3 . 8 Thailand 42 . 8 42 . 2 41 . 3 39 . 8 39 . 2 39 . 8 41 . 3 40 . 2 China 8 . 3 8 . 3 8 . 3 8 . 3 8 . 3 8 . 3 8 . 3 8 . 3