MSCS » Topics » Foreign Currency Risk

This excerpt taken from the MSCS 10-Q filed May 8, 2009.

Foreign Currency Risk

International revenue represented 70% and 68 % of our total revenue for the three months ended March 31, 2008 and 2009, respectively. International sales are made mostly from our foreign subsidiaries in Europe and Asia and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the three months ended March 31, 2009, a 5% change in both the Euro and Yen would have impacted our total revenue by approximately $1.8 million and our income from continuing operations by approximately $0.6 million. Since March 31, 2009, there has been significant volatility in the world’s financial markets and forecasts of a global economic recession. A prolonged economic downturn could adversely impact our customers and ultimately reduce our sales. In addition, the U.S. dollar has significantly strengthened against many currencies, including the Euro. This has the effect of decreasing our revenue, expenses and net income when translated into U.S. dollars.

We do not currently hedge any of our foreign currencies.

 

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These excerpts taken from the MSCS 10-K filed Mar 16, 2009.

Foreign Currency Risk

International revenue represented approximately 71%, 70% and 68%, of our total revenue for 2006, 2007 and 2008, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2008, a 5% change in both the Euro and the Yen would have impacted our revenue by approximately $8.3 million and our income from continuing operations by approximately $1.7 million. Since September 30, 2008, there has been a significant downturn in worldwide economic conditions. A prolonged economic downturn could adversely impact our customers and ultimately reduce our sales. In addition, the U.S. dollar has significantly strengthened against many currencies, including the Euro and the Yen. This has the effect of decreasing our revenue, expenses and net income when translated into U.S. dollars.

We do not currently hedge any of our foreign currencies.

Foreign Currency Risk

International revenue represented approximately 71%, 70% and 68%, of our total revenue for 2006, 2007 and 2008, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2008, a 5% change in both the Euro and the Yen would have impacted our revenue by approximately $8.3 million and our income from continuing operations by approximately $1.7 million. Since September 30, 2008, there has been a significant downturn in worldwide economic conditions. A prolonged economic downturn could adversely impact our customers and ultimately reduce our sales. In addition, the U.S. dollar has significantly strengthened against many currencies, including the Euro and the Yen. This has the effect of decreasing our revenue, expenses and net income when translated into U.S. dollars.

We do not currently hedge any of our foreign currencies.

Foreign Currency Risk

International revenue represented approximately 71%, 70% and 68%, of our total revenue for 2006, 2007 and 2008, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2008, a 5% change in both the Euro and the Yen would have impacted our revenue by approximately $8.3 million and our income from continuing operations by approximately $1.7 million. Since September 30, 2008, there has been a significant downturn in worldwide economic conditions. A prolonged economic downturn could adversely impact our customers and ultimately reduce our sales. In addition, the U.S. dollar has significantly strengthened against many currencies, including the Euro and the Yen. This has the effect of decreasing our revenue, expenses and net income when translated into U.S. dollars.

We do not currently hedge any of our foreign currencies.

Foreign Currency Risk

International revenue represented approximately 71%, 70% and 68%, of our total revenue for 2006, 2007 and 2008, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2008, a 5% change in both the Euro and the Yen would have impacted our revenue by approximately $8.3 million and our income from continuing operations by approximately $1.7 million. Since September 30, 2008, there has been a significant downturn in worldwide economic conditions. A prolonged economic downturn could adversely impact our customers and ultimately reduce our sales. In addition, the U.S. dollar has significantly strengthened against many currencies, including the Euro and the Yen. This has the effect of decreasing our revenue, expenses and net income when translated into U.S. dollars.

We do not currently hedge any of our foreign currencies.

Foreign Currency Risk

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">International revenue represented approximately 71%, 70% and 68%, of our total revenue for 2006, 2007 and 2008, respectively. International sales are made
mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign
subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from
intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize
foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange
rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2008, a 5% change in both the Euro and the Yen would have impacted our revenue by approximately $8.3 million and our income from
continuing operations by approximately $1.7 million. Since September 30, 2008, there has been a significant downturn in worldwide economic conditions. A prolonged economic downturn could adversely impact our customers and ultimately reduce our
sales. In addition, the U.S. dollar has significantly strengthened against many currencies, including the Euro and the Yen. This has the effect of decreasing our revenue, expenses and net income when translated into U.S. dollars.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We do not currently hedge any of our foreign currencies.

SIZE="2">Interest Rate Risk

We do not have any variable interest rate borrowings and, accordingly, our exposure to market
rate risks for changes in interest rates is limited. Refer to Note 1 in the accompanying Notes to Consolidated Financial Statements discussing fair value of financial instruments.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">We have not used derivative financial instruments in our investment portfolio. We invest our excess cash primarily in debt instruments of U.S.
municipalities and other high-quality issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk.

STYLE="margin-top:18px;margin-bottom:0px">Investment Risk

After the May 2008 sale of
our remaining marketable equity securities consisting entirely of stock in GSSL, we had no investments in marketable equity securities as of December 31, 2008.

FACE="Times New Roman" SIZE="2">Prior to such sale, we periodically evaluated whether any declines in fair value of our investments were other-than-temporary, which could have resulted in an impairment of such assets. This evaluation consisted of a
review of qualitative and quantitative factors. We had no such impairments during 2006, 2007 or 2008.

 


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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SIZE="2">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 




































   Page

Consolidated Balance Sheets as of December 31, 2007 and 2008

  42

Consolidated Statements of Operations for the Years Ended December 31, 2006, 2007 and 2008

  43

Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the Years 
Ended December 31, 2006, 2007 and 2008

  44

Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2007 and 2008

  45

Notes to Consolidated Financial Statements

  47

Report of Independent Registered Public Accounting Firm

  78

 


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MSC.SOFTWARE CORPORATION

STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center">CONSOLIDATED BALANCE SHEETS

This excerpt taken from the MSCS 10-Q filed Nov 10, 2008.

Foreign Currency Risk

International revenue represented 69.7% and 68.9% of our total revenue for the nine months ended September 30, 2007 and 2008, respectively. International sales are made mostly from our foreign subsidiaries in Europe and Asia and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the nine months ended September 30, 2008, a 5% change in both the EURO and Yen would have impacted our total revenue by approximately $6.2 million and our income from continuing operations by approximately $1.6 million. Since September 30, 2008, there has been significant volatility in the world’s financial markets and forecasts of a global economic recession. A prolonged economic downturn could adversely impact our customers and ultimately reduce our sales. In addition, the US dollar has

 

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significantly strengthened against many currencies, including the Euro. This has the effect of decreasing our revenue, expenses and net income when translated into US dollars.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Aug 8, 2008.

Foreign Currency Risk

International revenue represented 69.9% and 69.2% of our total revenue for the six months ended June 30, 2007 and 2008, respectively. International sales are made mostly from our foreign subsidiaries in Europe and Asia and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the six months ended June 30, 2008, a 5% change in both the EURO and Yen would have impacted our total revenue by approximately $4.1 million and our income from continuing operations by approximately $1.1 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed May 12, 2008.

Foreign Currency Risk

International revenue represented 68.0% and 69.7% of our total revenue for the three months ended March 31, 2007 and 2008, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the three months ended March 31, 2008, a 5% change in both the EURO and Yen would have impacted our total revenue by approximately $2.0 million and our income from continuing operations by approximately $0.6 million.

We do not currently hedge any of our foreign currencies.

These excerpts taken from the MSCS 10-K filed Mar 10, 2008.

Foreign Currency Risk

International revenue represented 70.4%, 70.8% and 69.5%, of our total revenue for 2005, 2006 and 2007, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2007, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $8.2 million and our income from continuing operations by approximately $2.8 million.

We do not currently hedge any of our foreign currencies.

Foreign Currency Risk

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">International revenue represented 70.4%, 70.8% and 69.5%, of our total revenue for 2005, 2006 and 2007, respectively. International sales are made mostly
from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use
the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany
accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign
exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates
vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2007, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $8.2 million and our income from continuing
operations by approximately $2.8 million.

We do not currently hedge any of our foreign currencies.

STYLE="margin-top:18px;margin-bottom:0px">Interest Rate Risk

We do not have any
variable interest rate borrowings and, accordingly, our exposure to market rate risks for changes in interest rates is limited. Refer to Note 1 in the accompanying Notes to Consolidated Financial Statements discussing fair value of financial
instruments.

We have not used derivative financial instruments in our investment portfolio. We invest our excess cash primarily in debt
instruments of U.S. municipalities and other high-quality issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk.

STYLE="margin-top:18px;margin-bottom:0px">Investment Risk

As of December 31, 2007
our investments included only marketable equity securities. We periodically evaluate whether any declines in fair value of our investments are other-than-temporary, which may result in an impairment of such assets. This evaluation consists of a
review of qualitative and quantitative factors. We had no such impairments during 2005, 2006 or 2007. Refer to Note 1 in the accompanying Notes to Consolidated Financial Statement, discussing fair value of financial instruments.

STYLE="margin-top:0px;margin-bottom:0px"> 


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Our marketable equity securities consist entirely of stock in Geometric Software Solutions Co. Ltd.
(“GSSL”), a public company headquartered in India, which we use for certain software development projects. All unrealized gains and losses related to our investment in the stock of GSSL are recorded as a component of other comprehensive
income. In the event we decide to sell all or any part of the stock of GSSL, amounts realized from such sale, and any resulting gains or losses, would be dependent upon the market price of the stock at the time of sale. In December 2007, the Company
sold 3,100,000 million shares of our marketable equity securities resulting in a realized gain of $6.8 million which is included in other income of our Income Statements. As of December 31, 2007, we owned 2,100,000 shares of GSSL stock
with an original cost of $27,000.

 





ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This excerpt taken from the MSCS 10-Q filed Nov 14, 2007.

Foreign Currency Risk

International revenue represented 70.0% and 69.7% of our total revenue for the nine months ended September 30, 2006 and 2007, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the nine months ended September 30, 2007, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $5.8 million and our net income from continuing operations by approximately $1.7 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Aug 8, 2007.

Foreign Currency Risk

International revenue represented 69.7% and 69.9% of our total revenue for the six months ended June 30, 2006 and 2007, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the six months ended June 30, 2007, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $3.9 million and our net income from continuing operations by approximately $0.9 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed May 10, 2007.

Foreign Currency Risk

International revenue represented 66.5% and 68.0% of our total revenue for the three months ended March 31, 2006 and 2007, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the three months ended March 31, 2007, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $1.9 million and our income from continuing operations by approximately $0.4 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-K filed Mar 1, 2007.

Foreign Currency Risk

International revenue represented 66.6%, 70.4% and 70.8%, of our total revenue for 2004, 2005 and 2006, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2006, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $8.8 million and our income from continuing operations by approximately $1.7 million.

We do not currently hedge any of our foreign currencies.

 

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This excerpt taken from the MSCS 10-Q filed Dec 11, 2006.

FOREIGN CURRENCY RISK

International revenue represented 70.0% and 70.7% of our total revenue for the nine months ended September 30, 2006 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the nine months ended September 30, 2006, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $6.5 million and our income from continuing operations by approximately $2.5 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Nov 13, 2006.

FOREIGN CURRENCY RISK

International revenue represented 70.0% and 70.7% of our total revenue for the nine months ended September 30, 2006 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the nine months ended September 30, 2006, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $6.5 million and our income from continuing operations by approximately $2.5 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Aug 10, 2006.

FOREIGN CURRENCY RISK

International revenue represented 69.7% and 69.3% of our total revenue for the six months ended June 30, 2006 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the six months ended June 30, 2006, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $4.5 million and our income from continuing operations by approximately $1.6 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Jul 10, 2006.

Foreign Currency Risk

International revenue represented 66.5% and 70.6% of our total revenue for the three months ended March 31, 2006 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the three months ended March 31, 2006, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $2.1 million and our income from continuing operations by approximately $0.5 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Jun 12, 2006.

Foreign Currency Risk

International revenue represented 67.5% and 71.6% of our total revenue for the nine months ended September 30, 2004 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the nine months ended September 30, 2005, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $7.4 million and our net income by approximately $1.6 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Jun 12, 2006.

Foreign Currency Risk

International revenue represented 71.8% and 69.3% of our total revenue for the three months ended March 31, 2005 and 2004, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the three months ended March 31, 2005, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $2.4 million and our net income by approximately $0.5 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-Q filed Jun 12, 2006.

Foreign Currency Risk

International revenue represented 69.0% and 70.3% of our total revenue for the six months ended June 30, 2004 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. For the six months ended June 30, 2005, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $4.7 million and our net income by approximately $0.9 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-K filed Jun 12, 2006.

Foreign Currency Risk

International revenue represented 64.3%, 66.6% and 70.4% of our total revenue for 2003, 2004 and 2005, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2005, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $9.9 million and our income from continuing operations by approximately $2.2 million.

We do not currently hedge any of our foreign currencies.

This excerpt taken from the MSCS 10-K filed Apr 17, 2006.

Foreign Currency Risk

International revenue represented 60.4%, 65.4%, and 67.8% of our total revenue for 2002, 2003 and 2004, respectively. International sales are made mostly from our foreign sales subsidiaries in Europe and Asia Pacific and are typically denominated in the local currency of each country. These subsidiaries also

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incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency.

Our exposure to foreign exchange rate fluctuations arises in part from intercompany accounts in which cash from sales of our foreign subsidiaries are transferred back to the United States. These intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk with the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into United States Dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and impact overall expected profitability. In 2004, a 5% change in both the EURO and Yen would have impacted our revenue by approximately $8.9 million and our income from continuing operations by approximately $2.2 million.

We do not currently hedge any of our foreign currencies.

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