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QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK |
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SHORT-TERM INVESTMENT PORTFOLIO
We do not hold derivative financial instruments in our portfolio of short-term investments and funds held for payroll customers. Our short-term investments and funds held for payroll customers consist of instruments that meet quality standards consistent with our investment policy. This policy specifies that, except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market or cash management funds, we diversify our holdings by limiting our short-term investments and funds held for payroll customers with any individual issuer.
The following table presents our portfolio of cash equivalents and short-term investments at July 31, 2004 by stated maturity. The table is classified by
the original maturity date listed on the security and includes cash equivalents and short-term investments that are part of funds held for payroll customers
on our balance sheet. As of July 31, 2004 the interest rate earned on our money market accounts is 0.90% and the interest rate earned on our short-term investments is 1.22%.
| YEARS ENDING JULY 31, |
|
| (In thousands) |
2005 |
2006 |
2007 |
2008 |
2009 AND
THEREAFTER |
TOTAL |
|
Cash equivalents |
$ |
198,189 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
198,189 |
|
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Short-term investments |
|
280,417 |
|
|
255,788 |
|
|
15,186 |
|
|
15,757 |
|
|
516,127 |
|
|
1,083,275 |
|
|
|
$ |
478,606 |
|
$ |
255,788 |
|
$ |
15,186 |
|
$ |
15,757 |
|
$ |
516,127 |
|
$ |
1,281,464 |
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INTEREST RATE RISK
Our cash equivalents and our portfolio of short-term investments and funds held for payroll customers are subject to market risk due to changes in
interest rates. Interest rate movements affect the interest income we earn on cash equivalents, short-term investments and funds held for payroll
customers and the value of those investments. Should interest rates increase by 10% from the levels of July 31, 2004, the value of our short-term
investments and funds held for payroll customers would decline by approximately $0.9 million. Should interest rates increase by 100 basis points from the levels of July 31, 2004, the value of our short-term investments and funds held for payroll customers would decline by approximately $5.9 million.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
Since we translate foreign currencies (primarily Canadian dollars and British pounds) into U.S dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results. The historical impact of currency fluctuations has generally been immaterial. We believe that our exposure to currency exchange fluctuation risk is not significant primarily because our global subsidiaries invoice customers and satisfy their financial obligations almost exclusively in their local currencies. There was a nominal currency exchange impact from our intercompany transactions for fiscal 2002. Due primarily to the effect of the weakening U.S. dollar on intercompany balances with our Canadian subsidiary, we recorded foreign currency exchange gains of $5.4 million in fiscal 2003 and $3.1 million in fiscal 2004. Although the impact of currency fluctuations on our financial results has generally been immaterial in the past and we believe that for the reasons cited above currency fluctuations will not be significant in the future, there can be no guarantee that the impact of currency fluctuations will not be material in the future. As of July 31, 2004, we did not engage in foreign currency hedging activities.
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