Indemnification Risk. Our contracts, including our agreements with respect to divestitures, include various indemnification
obligations. If we are required to satisfy an indemnification obligation, that may have a material adverse effect on our
business, profitability and cash flow.
Other Risks. We have attempted to identify material risk factors currently affecting our business and company. However,
additional risks that we do not yet know of, or that we currently think are immaterial, may occur or become material. These
risks could impair our business operations or adversely affect revenues, cash flow or profitability.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We have fixed rate and variable rate debt instruments. Our variable rate debt instruments are subject to market risk from
changes in interest rates. During the first half of fiscal year 2002, in order to manage interest costs and exposure to changing
interest rates related to our then existing $450 million revolving line of credit, we held two interest rate hedges initiated in
December 1998. Each hedge was designated a cash flow hedge and was structured such that we paid a fixed rate of interest
of 4.54% on amounts owed under the revolving line of credit up to the notional amount, and received a floating rate of
interest based on one month LIBOR. The notional amount of the two hedges totaled $100 million and expired in December
2001. Changes in the fair value of the interest rate hedges, net of tax effect, is reflected in accumulated other comprehensive
We held a single investment in a marketable security during fiscal year 2002. To protect ourselves from the volatility of the
value of this marketable security investment, we entered into a no cost collar agreement in June 2001, which matured in June
2002. The collar, a fair value hedge, was structured so that all fluctuations in the price of the marketable security above or
below 100% or 102.5% of its value on the date the collar was entered into are hedged. This marketable security investment
was liquidated as of June 30, 2002, and the related collar was terminated. We do not hold or issue derivative financial
instruments for trading purposes and are not a party to any leveraged derivative transactions.
Sensitivity analysis is one technique used to measure the impact of changes in the interest rates on the value of market risk
sensitive financial instruments. A hypothetical 10% movement in interest rates would not have a material impact on our future
earnings, fair value, or cash flows.