Salesforce.com 2013 Annual Report Download - page 60

The effects of dilutive securities were not included in the GAAP calculation of diluted earnings/loss per share
for the year ended January 31, 2013 because we had a net loss for the period and the effect would have been anti-
dilutive. The following table reflects the effect of the dilutive securities on the basic share count used in the GAAP
earnings/loss per share calculation to derive the share count used for the non-GAAP diluted earnings per share:
Fiscal Year Ended January 31,
Supplemental Diluted Sharecount Information (in thousands): 2013 2012 2011
Weighted-average shares outstanding for GAAP basic
earnings per share .............................. 141,224 135,302 130,222
Effect of dilutive securities:
Convertible senior notes ....................... 2,840 2,263 1,561
Warrants associated with the convertible senior note
hedges ................................... 1,283 553 0
Employee stock awards ....................... 3,723 4,177 4,815
Adjusted weighted-average shares outstanding and
assumed conversions for Non-GAAP diluted earnings
per share ..................................... 149,070 142,295 136,598
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency
exchange rates, particularly changes in the Euro, British Pound Sterling, Canadian dollar and Japanese Yen. We
seek to minimize the impact of certain foreign currency fluctuations by hedging certain balance sheet exposures
with foreign currency forward contracts. Any gain or loss from settling these contracts is offset by the loss or
gain derived from the underlying balance sheet exposures. In accordance with our policy, the hedging contracts
we enter into have maturities of less than three months. Additionally, by policy, we do not enter into any hedging
contracts for trading or speculative purposes.
Interest rate sensitivity
We had cash, cash equivalents and marketable securities totaling $1.8 billion at January 31, 2013. This
amount was invested primarily in money market funds, time deposits, corporate notes and bonds, government
securities and other debt securities with credit ratings of at least single A or better. The cash, cash equivalents
and short-term marketable securities are held for working capital purposes. Our investments are made for capital
preservation purposes. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in
interest rates. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest rates fall. Due in part to these
factors, our future investment income may fall short of expectation due to changes in interest rates or we may
suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest
rates. However because we classify our debt securities as “available for sale,” no gains or losses are recognized
due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are
determined to be other-than-temporary. Our fixed-income portfolio is subject to interest rate risk.
An immediate increase or decrease in interest rates of 100-basis points at January 31, 2013 could result in a
$16.7 million market value reduction or increase of the same amount. This estimate is based on a sensitivity
model that measures market value changes when changes in interest rates occur. Fluctuations in the value of our
investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in
other comprehensive income, and are realized only if we sell the underlying securities.
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