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payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and are to be included in the computation of earnings per share under the two-class method
described in SFAS No. 128, “Earnings Per Share.” FSP EITF No. 03-6-1 is effective for fiscal years beginning after
December 15, 2008 and requires all presented prior-period earnings per share data to be adjusted retrospectively. FSP
EITF No. 03-6-1 will not have a material impact on our Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk
Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio, debt, and
installment accounts receivable. We have a prescribed methodology whereby we invest our excess cash in liquid
investments that are composed of money market funds and debt instruments of government agencies and high-quality
corporate issuers (S&P single “A” rating and higher). To mitigate risk, all of the securities have a maturity date within one
year, and holdings of any one issuer do not exceed 10% of the portfolio.
As of March 31, 2009, our outstanding debt was $1,937 million, most of which was in fixed rate obligations. Each
25 basis point increase or decrease in interest rates would have a corresponding effect on our variable rate debt of less
than $1 million as of March 31, 2009. If market rates were to decline, we could be required to make payments on the
fixed rate debt that would exceed those based on current market rates.
During fiscal 2009, we entered into interest rate swaps with a total notional value of $250 million to hedge a portion of
our variable interest rate payments. These derivatives are designated as cash flow hedges under SFAS No. 133. The
effective portion of these cash flow hedges are recorded as “Accumulated other comprehensive loss” in our
Consolidated Balance Sheet and reclassified into “Interest expense, net,” in our Consolidated Statements of Operations in
the same period during which the hedged transaction affects earnings. Any ineffective portion of the cash flow hedges
would be recorded immediately to “Interest expense, net;” however, no ineffectiveness existed at March 31, 2009. Refer
to Note 4, “Derivatives and Fair Value Measurements,” for additional information regarding our derivative activities.
We offer financing arrangements with installment payment terms in connection with our software license agreements.
The aggregate amounts due from customers include an imputed interest element, which can vary with the interest rate
environment. Each 25 basis point increase in interest rates would currently have an associated annual opportunity cost
of $10 million.
Foreign Currency Exchange Risk
We conduct business on a worldwide basis through subsidiaries in 46 countries and, as such, a portion of our revenues,
earnings, and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage
our foreign exchange risk in part through operational means, including managing expected local currency revenues in
relation to local currency costs and local currency assets in relation to local currency liabilities. In October 2005, the
Board of Directors adopted our Risk Management Policy and Procedures, which authorizes us to manage, based on
management’s assessment, our risks and exposures to foreign currency exchange rates through the use of derivative
financial instruments (e.g., forward contracts, options, swaps) or other means. We only use derivative financial
instruments in the context of hedging and do not use them for speculative purposes.
Derivatives are accounted for in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (SFAS No. 133). During fiscal 2009 and 2008, we did not designate our foreign exchange derivatives as
hedges under SFAS No. 133. Accordingly, all foreign exchange derivatives are recognized on the balance sheet at fair
value and unrealized or realized changes in fair value from these contracts are recorded as “Other (gains) expenses, net”
in our Consolidated Statements of Operations. Refer to Note 4, “Derivatives and Fair Value Measurements,” for
additional information regarding our derivative activities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our Consolidated Financial Statements are listed in the List of Consolidated Financial Statements and Financial
Statement Schedules filed as part of this Annual Report on Form 10-K and are incorporated herein by reference.
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