e10vq
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from                      to                     
Commission File Number 1-11689
Fair Isaac Corporation
(Exact name of registrant as specified in its charter)
     
Delaware   94-1499887
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
901 Marquette Avenue, Suite 3200   55402-3232
Minneapolis, Minnesota   (Zip Code)
(Address of principal executive offices)    
Registrant’s telephone number, including area code:
612-758-5200
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ    Accelerated filer o    Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o 
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
     The number of shares of common stock outstanding on July 31, 2009 was 48,855,019 (excluding 40,001,764 shares held by the Company as treasury stock).
 
 

 


 

TABLE OF CONTENTS
             
 
  PART I -- FINANCIAL INFORMATION        
 
           
  Financial Statements     1  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     15  
  Quantitative and Qualitative Disclosures About Market Risk     31  
  Controls and Procedures     32  
 
           
 
  PART II -- OTHER INFORMATION        
 
           
  Legal Proceedings     32  
  Risk Factors     33  
  Unregistered Sales of Equity Securities and Use of Proceeds     42  
  Defaults Upon Senior Securities     42  
  Submission of Matters to a Vote of Security Holders     42  
  Other Information     43  
  Exhibits     43  
Signatures     44  
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 i 

 


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PART I — FINANCIAL INFORMATION
Item 1.   Financial Statements
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data)
(Unaudited)
                 
    June 30,     September 30,  
    2009     2008  
Assets
Current assets:
               
Cash and cash equivalents
  $ 240,346     $ 129,678  
Marketable securities available for sale, current portion
    75,743       57,049  
Accounts receivable, net
    98,604       141,571  
Prepaid expenses and other current assets
    25,477       23,404  
 
           
Total current assets
    440,170       351,702  
Marketable securities available for sale, less current portion
    55,467       72,101  
Other investments
    11,074       12,374  
Property and equipment, net
    38,269       46,360  
Goodwill
    671,061       686,082  
Intangible assets, net
    41,734       52,468  
Deferred income taxes
    45,050       45,786  
Other assets
    10,100       8,380  
 
           
 
  $ 1,312,925     $ 1,275,253  
 
           
Liabilities and Stockholders’ Equity
Current liabilities:
               
Accounts payable
  $ 10,698     $ 11,172  
Accrued compensation and employee benefits
    28,485       29,551  
Other accrued liabilities
    40,526       43,665  
Deferred revenue
    40,166       38,243  
 
           
Total current liabilities
    119,875       122,631  
Revolving line of credit
    295,000       295,000  
Senior notes
    275,000       275,000  
Other liabilities
    18,802       20,681  
 
           
Total liabilities
    708,677       713,312  
 
           
 
               
Commitments and contingencies
               
 
               
Stockholders’ equity:
               
Preferred stock ($0.01 par value; 1,000 shares authorized; none issued and outstanding)
           
Common stock ($0.01 par value; 200,000 shares authorized; 88,857 shares issued and 48,855 and 48,473 shares outstanding at June 30, 2009 and September 30, 2008, respectively)
    489       485  
Paid-in-capital
    1,107,984       1,110,165  
Treasury stock, at cost (40,002 and 40,384 shares at June 30, 2009 and September 30, 2008, respectively)
    (1,361,411 )     (1,374,455 )
Retained earnings
    870,180       825,109  
Accumulated other comprehensive income (loss)
    (12,994 )     637  
 
           
Total stockholders’ equity
    604,248       561,941  
 
           
 
  $ 1,312,925     $ 1,275,253  
 
           
See accompanying notes to condensed consolidated financial statements.

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FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
                                 
    Quarter Ended     Nine Months Ended  
    June 30,     June 30,  
    2009     2008     2009     2008  
Revenues
  $ 156,018     $ 183,315     $ 478,813     $ 566,655  
 
                       
 
                               
Operating expenses:
                               
Cost of revenues (1)
    48,160       68,709       160,655       208,627  
Research and development
    18,364       18,779       55,409       58,910  
Selling, general and administrative (1)
    50,290       59,734       157,519       187,858  
Amortization of intangible assets (1)
    3,219       3,797       9,622       10,481  
Restructuring
    (237 )     2,176       8,711       7,855  
Loss on sale of product line assets
    2,993             2,993        
 
                       
Total operating expenses
    122,789       153,195       394,909       473,731  
 
                       
Operating income
    33,229       30,120       83,904       92,924  
Interest income
    936       1,707       3,836       5,942  
Interest expense
    (6,086 )     (5,203 )     (19,771 )     (13,461 )
Other income, net
    503       1,478       1,651       2,095  
 
                       
Income from continuing operations before income taxes
    28,582       28,102       69,620       87,500  
Provision for income taxes
    10,443       9,304       21,263       30,092  
 
                       
Income from continuing operations
    18,139       18,798       48,357       57,408  
Income (loss) from discontinued operations
          7,703       (363 )     2,766  
 
                       
Net income
  $ 18,139     $ 26,501     $ 47,994     $ 60,174  
 
                       
 
                               
Basic earnings per share:
                               
Continuing operations
  $ 0.37     $ 0.39     $ 0.99     $ 1.17  
Discontinued operations
          0.16             0.06  
 
                       
Total
  $ 0.37     $ 0.55     $ 0.99     $ 1.23  
 
                       
 
                               
Diluted earnings (loss) per share:
                               
Continuing operations
  $ 0.37     $ 0.38     $ 0.99     $ 1.16  
Discontinued operations
          0.16       (0.01 )     0.05  
 
                       
Total
  $ 0.37     $ 0.54     $ 0.98     $ 1.21  
 
                       
 
                               
Shares used in computing earnings (loss) per share:
                               
Basic
    48,835       48,521       48,707       49,111  
 
                       
Diluted
    48,986       48,727       48,777       49,633  
 
                       
 
(1)   Cost of revenues and selling, general and administrative expenses exclude the amortization of intangible assets. See Note 2 to the accompanying condensed consolidated financial statements.
See accompanying notes to condensed consolidated financial statements.

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FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
                                                                 
                                            Accumulated              
    Common Stock                             Other     Total        
            Par     Paid-In-     Treasury     Retained     Comprehensive     Stockholders’     Comprehensive  
    Shares     Value     Capital     Stock     Earnings     Income (Loss)     Equity     Income (Loss)  
Balance at September 30, 2008
    48,473     $ 485     $ 1,110,165     $ (1,374,455 )   $ 825,109     $ 637     $ 561,941          
Share-based compensation
                15,342                         15,342          
Exercise of stock options
    82       1       (1,887 )     2,779                   893          
Tax effect from share-based payment arrangements
                (7,297 )                       (7,297 )        
Issuance of ESPP shares from treasury
    195       2       (3,841 )     6,628                   2,789          
Forfeitures of restricted stock
    (2 )           64       (64 )                          
Issuance of stock to employees from treasury
    107       1       (4,562 )     3,701                   (860 )        
Dividends paid
                            (2,923 )           (2,923 )        
Net income
                            47,994             47,994     $ 47,994  
Unrealized gains on investments
                                  456       456       456  
Cumulative translation adjustments
                                  (14,087 )     (14,087 )     (14,087 )
 
                                               
Balance at June 30, 2009
    48,855     $ 489     $ 1,107,984     $ (1,361,411 )   $ 870,180     $ (12.994 )   $ 604,248     $ 34,363  
 
                                               
See accompanying notes to condensed consolidated financial statements.

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FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                 
    Nine Months Ended  
    June 30,  
    2009     2008  
Cash flows from operating activities:
               
Net income
  $ 47,994     $ 60,174  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    29,052       29,753  
Share-based compensation
    15,342       21,713  
Deferred income taxes
    3,660       948  
Tax effect from share-based payment arrangements
    (7,297 )     (1,874 )
Excess tax benefits from share-based payment arrangements
    (121 )     (1,301 )
Gain on repurchase of senior convertible notes
          (896 )
Net amortization of premium on marketable securities
    601       370  
Provision for doubtful accounts
    499       2,867  
Loss on sale of product line assets
    2,993        
Loss on sale of discontinued operations
          6,952  
Net loss (gain) on sales of property and equipment
    103       (37 )
Changes in operating assets and liabilities, net of acquisition and disposition effects:
               
Accounts receivable
    35,251       13,576  
Prepaid expenses and other assets
    925       2,353  
Accounts payable
    (864 )     (3,159 )
Accrued compensation and employee benefits
    (624 )     (12,120 )
Other liabilities
    (10,390 )     (3,827 )
Deferred revenue
    7,222       (1,649 )
 
           
Net cash provided by operating activities
    124,346       113,843  
 
           
 
               
Cash flows from investing activities:
               
Purchases of property and equipment
    (11,283 )     (17,613 )
Cash proceeds from sales of property and equipment
          1,552  
Cash paid for acquisition, net of cash acquired
          (33,336 )
Cash proceeds from sale of business unit
          14,200  
Cash proceeds from sale of product line assets
    1,000        
Purchases of marketable securities
    (110,723 )     (153,483 )
Proceeds from sales of marketable securities
          2,008  
Proceeds from maturities of marketable securities
    107,495       160,085  
Distribution from cost-method investees
    1,300        
 
           
Net cash used in investing activities
    (12,211 )     (26,587 )
 
           
 
               
Cash flows from financing activities:
               
Repayments made on revolving line of credit
          (132,000 )
Repurchases of senior convertible notes
          (122,808 )
Proceeds from issuance of senior notes
          275,000  
Debt issuance costs
          (1,477 )
Proceeds from issuances of common stock under employee stock option and purchase plans
    2,822       19,592  
Dividends paid
    (2,923 )     (2,928 )
Repurchases of common stock
          (116,642 )
Excess tax benefits from share-based payment arrangements
    121       1,301  
 
           
Net cash provided by (used in) financing activities
    20       (79,962 )
 
           
Effect of exchange rate changes on cash
    (1,487 )     298  
 
           
Increase in cash and cash equivalents
    110,668       7,592  
Cash and cash equivalents, beginning of period
    129,678       95,284  
 
           
Cash and cash equivalents, end of period
  $ 240,346     $ 102,876  
 
           
 
               
Supplemental disclosures of cash flow information:
               
Cash paid for income taxes, net
  $ 20,910     $ 13,971  
Cash paid for interest
  $ 24,861     $ 10,513  
See accompanying notes to condensed consolidated financial statements.

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FAIR ISAAC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business
Fair Isaac Corporation
     Incorporated under the laws of the State of Delaware, Fair Isaac Corporation is a provider of analytic, software and data management products and services that enable businesses to automate, improve and connect decisions. Fair Isaac Corporation (doing business under the name “FICO”) provides a range of analytical solutions, credit scoring and credit account management products and services to banks, credit reporting agencies, credit card processing agencies, insurers, retailers, healthcare organizations and government agencies.
     In these consolidated financial statements, Fair Isaac Corporation is referred to as “we,” “us,” “our,” “FICO”, “Fair Isaac,” and “the Company.”
Principles of Consolidation and Basis of Presentation
     We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the standards of accounting measurement set forth in Accounting Principles Board (“APB”) Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board (“FASB”). Consequently, we have not necessarily included in this Form 10-Q all information and footnotes required for audited financial statements. In our opinion, the accompanying unaudited interim condensed consolidated financial statements in this Form 10-Q reflect all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our financial position and results of operations. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with our audited consolidated financial statements and notes thereto presented in our Annual Report on Form 10-K for the year ended September 30, 2008. The interim financial information contained in this report is not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year.
     The condensed consolidated financial statements include the accounts of FICO and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates
     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include, but are not limited to, assessing the following: the recoverability of accounts receivable, goodwill and other intangible assets, software development costs and deferred tax assets; estimated losses associated with contingencies and litigation; the ability to estimate hours in connection with fixed-fee service contracts, the ability to estimate transactional-based revenues for which actual transaction volumes have not yet been received, the determination of whether fees are fixed or determinable and collection is probable or reasonably assured; and the development of assumptions for use in the Black-Scholes model that estimates the fair value of our share-based awards and assessing forfeiture rates of share-based awards.
Adoption of Recent Accounting Pronouncements
     In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 165, “Subsequent Events” (“SFAS 165”), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company adopted SFAS 165 in the third quarter of fiscal 2009. We have evaluated subsequent events through the time of filing these financial statements on August 6, 2009.
     In April 2009, the FASB issued FASB Staff Position (“FSP”) No. FAS 107-1 and APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments” (“FSP No. 107-1 and APB 28-1”). FSP No. FAS 107-1 and APB 28-1 requires fair value disclosures of financial instruments on a quarterly basis, as well as new disclosures regarding the methodology and significant assumptions underlying the fair value measures and any changes to the methodology and assumptions during the reporting period. The additional disclosures required by this standard are included in Note 12. The adoption of FSP No. 107-1 and APB 28-1 did not affect our consolidated financial statements.

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     In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. 157-4”). FSP No. FAS 157-4 amends SFAS 157 to provide additional guidance on estimating fair value when the volume and level of activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. The adoption of FSP No. FAS 157-4 did not affect our consolidated financial statements.
     In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP No. FAS 115-2 and FAS 124-2”). FSP No. FAS 115-2 and FAS 124-2 provides new criteria for determining whether an impairment of a debt security is temporary and recorded in other comprehensive income in the equity section of the balance sheet or other-than-temporary and recorded as a loss on the statement of operations. The adoption of FSP No. FAS 115-2 and FAS 124-2 did not affect our consolidated financial statements.
     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement No. 133 (“SFAS 161”). SFAS 161 expands the disclosure requirements about an entity’s derivative instruments and hedging activities. We adopted SFAS 161 as of January 1, 2009 on a prospective basis. Since SFAS 161 requires only additional disclosures of our derivative and hedging activities, the adoption of SFAS 161 did not affect our consolidated financial statements.
     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This standard does not expand the use of fair value in any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position (“FSP”) No. 157-2, Effective Date of FASB Statement No. 157, which defers the effective date of SFAS 157 for one year for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually). In October 2008, the FASB issued FSP No. 157—3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active”, which clarifies the application of SFAS 157 in a market that is not active. As described in Note 8, we have adopted Statement 157 and the related FASB staff positions. Consistent with the provisions of FSP 157—2, we elected to defer the adoption of SFAS 157 for non—financial assets and liabilities measured at fair value on a non—recurring basis until October 1, 2009. We are currently evaluating the impact of the full adoption of SFAS 157 on our consolidated financial statements.
     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a company’s choice to use fair value on its earnings. It also requires companies to display the fair value of those assets and liabilities for which a company has chosen to use fair value on the face of the balance sheet. The new standard does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFAS 107, Disclosures about Fair Value of Financial Instruments. On October 1, 2008 we adopted SFAS 159 but did not elect the fair value option for any additional financial assets or liabilities that we held at that date.
2. Amortization of Intangible Assets
     Amortization expense associated with our intangible assets, which has been reflected as a separate operating expense caption within the accompanying condensed consolidated statements of income, consisted of the following:
                                 
    Quarter Ended     Nine Months Ended  
    June 30,     June 30,  
    2009     2008     2009     2008  
    (In thousands)  
Cost of revenues
  $ 1,704     $ 2,043     $ 5,090     $ 5,464  
Selling, general and administrative
    1,515       1,754       4,532       5,017  
 
                       
 
  $ 3,219     $ 3,797     $ 9,622     $ 10,481  
 
                       

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     Cost of revenues reflects our amortization of completed technology, and selling, general and administrative expenses reflect our amortization of other intangible assets. Intangible assets were $41.7 million and $52.5 million, net of accumulated amortization of $110.1 million and $101.7 million, as of June 30, 2009 and September 30, 2008, respectively.
3. Restructuring and Acquisition-Related Expenses
     The following table summarizes our restructuring and acquisition-related accruals associated with acquisitions and certain facility closures. The current portion and non-current portion is recorded in other accrued current liabilities and other long-term liabilities, respectively, within the accompanying condensed consolidated balance sheets. These balances are expected to be paid by fiscal 2018.
                                         
    Accrual at                             Accrual at  
    September 30,     Expense     Cash     Expense     June 30,  
    2008     Additions     Payments     Reversal     2009  
    (In thousands)  
Facilities charges
  $ 9,688     $ 3,877     $ (3,467 )   $ (650 )   $ 9,448  
Employee separation
    930       5,860       (6,348 )     (376 )     66  
 
                             
 
    10,618     $ 9,737     $ (9,815 )   $ (1,026 )     9,514  
 
                                 
Less: current portion
    (4,224 )                             (6,974 )
 
                                   
Non-current
  $ 6,394                             $ 2,540  
 
                                   
     During the quarter ended December 31, 2008, in connection with our reengineering program, we incurred net charges totaling $8.1 million. The charges included $5.9 million for severance costs associated with the reduction of 255 positions throughout the Company. Cash payments for substantially all the severance costs were paid during the quarter ended March 31, 2009. We also recognized charges of $2.6 million associated with vacating excess leased space located in Georgia and California. The charge represents future cash lease payments, net of estimated sublease income, which will be paid out over the next nine years. In addition, we reversed $0.4 million of accrued expenses as a result of a favorable lease termination agreement that we entered into for office space that was vacated in the prior year. During the quarter ended March 31, 2009, we recognized a $1.2 million charge due to unfavorable sublease arrangements we entered into for office space previously vacated. The charge was offset by a $0.4 million reduction in other restructuring liabilities. During the quarter ended June 30, 2009 we reversed $0.2 million of accrued expenses as a result of a favorable lease termination agreement.
4. Sale of Product Line Assets
     In June 2009, we signed definitive agreements to sell the assets associated with our LiquidCredit® for Telecom (“LCT”) and RoamEx® product lines, which were acquired through our acquisition of HNC Software Inc. in 2002. LCT and RoamEx solutions were included in our Strategy Machine segment. The LCT sale, which closed on July 3, 2009 for $3.5 million, includes a $0.5 million receivable for post-closing working capital adjustments. In addition, we have an earnout agreement that allows for payment of up to $3.0 million if the acquired business achieves certain earnings before interest, tax, depreciation and amortization goals. The primary assets sold include accounts receivable and goodwill. Included in the results of operations for the quarter was the estimated $1.5 million pre-tax loss, and a $2.1 million after-tax loss on the sale as the goodwill associated with the LCT solution product line was not deductible for income tax purposes. Revenues attributable to the LCT solutions product line were $2.5 million and $3.3 million for the quarters ended June 30, 2009 and 2008, respectively and $8.5 million and $9.3 million for the nine months ended June 30, 2009 and 2008, respectively. The RoamEx sale, which closed on June 30, 2009 for $2.7 million, includes a $1.4 million escrow balance and a $0.3 million receivable for post-closing working capital adjustments. The primary assets sold include accounts receivable and goodwill. We recognized a $1.5 million pre-tax loss, and a $1.8 million after-tax loss on the sale as the goodwill associated with the RoamEx product line was not deductible for income tax purposes. Revenues attributable to the RoamEx product line were $2.3 million and $2.5 million for the quarters ended June 30, 2009 and 2008, respectively and $6.6 million and $8.9 million for the nine months ended June 30, 2009 and 2008, respectively.
5. Discontinued Operations
     In connection with the sale of our Insurance Bill Review business in April 2008, we recorded a charge of $0.4 million, net of tax, during the quarter ended March 31, 2009, resulting from the resolution of a final working capital adjustment in favor of the purchaser.

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6. Composition of Certain Financial Statement Captions
                 
    June 30,     September 30,  
    2009     2008  
    (In thousands)  
Property and equipment
  $ 204,021     $ 203,236  
Less accumulated depreciation and amortization
    (165,752 )     (156,876 )
 
           
 
  $ 38,269     $ 46,360  
 
           
7. Earnings Per Share
     The following reconciles the numerators and denominators of basic and diluted earnings per share (“EPS”):
                                 
    Quarter Ended     Nine Months Ended  
    June 30,     June 30,  
    2009     2008     2009     2008  
    (In thousands, except per share data)  
Numerator for basic earnings per share — income from continuing operations
  $ 18,139     $ 18,798     $ 48,357     $ 57,408  
Interest expense on senior convertible notes, net of tax
          1             3  
 
                       
Numerator for diluted earnings per share from continuing operations
  $ 18,139     $ 18,799     $ 48,357     $ 57,411  
 
                       
 
                               
Denominator — shares:
                               
Basic weighted-average shares
    48,835       48,521       48,707       49,111  
Effect of dilutive securities
    151       206       70       522  
 
                       
 
Diluted weighted-average shares
    48,986       48,727       48,777       49,633  
 
                       
 
                               
Earnings per share from continuing operations:
                               
 
Basic
  $ 0.37     $ 0.39     $ 0.99     $ 1.17  
 
                       
Diluted
  $ 0.37     $ 0.38     $ 0.99     $ 1.16  
 
                       
     The computation of diluted EPS for the quarters ended June 30, 2009 and 2008, excludes options to purchase approximately 6,579,000 and 8,697,000 shares of common stock, respectively, and for the nine months ended June 30, 2009 and 2008, excludes options to purchase approximately 7,597,000 and 7,722,000 shares of common stock, respectively, because the options’ exercise prices exceeded the average market price of our common stock in these periods and their inclusion would be antidilutive.
8. Segment Information
     We are organized into the following four reportable segments, to align with the internal management of our worldwide business operations based on product and service offerings:
    Strategy Machine Solutions. These are pre-configured Decision Management applications designed for a specific type of business problem or process, such as marketing, account origination, customer management, fraud, collections and recovery and insurance claims management. This segment also includes our myFICO solutions for consumers.
 
    Scoring Solutions. Our scoring solutions give our clients access to analytics that can be easily integrated into their transaction streams and decision-making processes. Our scoring solutions are distributed through major credit reporting agencies, as well as services through which we provide our scores to clients directly.
 
    Professional Services. Through our professional services, we tailor our Decision Management products to our clients’ environments, and we design more effective decisioning environments for our clients. This segment includes revenues from custom engagements, business solution and technical consulting services, systems integration services, and data management services.
 
    Analytic Software Tools. This segment is composed of software tools that clients can use to create their own custom Decision Management applications.

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     Our Chief Executive Officer evaluates segment financial performance based on segment revenues and operating income. Segment operating expenses consist of direct and indirect costs principally related to personnel, facilities, consulting, travel, depreciation and amortization. Indirect costs are allocated to the segments generally based on relative segment revenues, fixed rates established by management based upon estimated expense contribution levels and other assumptions that management considers reasonable. We do not allocate share-based compensation expense, restructuring expense and certain other income and expense measures to our segments. These income and expense items are not allocated because they are not considered in evaluating the segment’s operating performance. Our Chief Executive Officer does not evaluate the financial performance of each segment based on its respective assets or capital expenditures; rather, depreciation and amortization amounts are allocated to the segments from their internal cost centers as described above.
     The following tables summarize segment information for the quarters and nine months ended June 30, 2009 and 2008:
                                         
    Quarter Ended June 30, 2009  
    Strategy                     Analytic        
    Machine     Scoring     Professional     Software        
    Solutions     Solutions     Services     Tools     Total  
    (In thousands)  
Revenues
  $ 81,667     $ 34,569     $ 27,479     $ 12,303     $ 156,018  
Operating expenses
    (62,997 )     (14,049 )     (28,470 )     (9,823 )     (115,339 )
 
                             
Segment operating income (loss)
  $ 18,670     $ 20,520     $ (991 )   $ 2,480       40,679  
 
                               
Unallocated share-based compensation expense
                                    (4,694 )
Unallocated restructuring
                                    237  
Unallocated loss on sale of product line assets
                                    (2,993 )
 
                                     
Operating income
                                    33,229  
Unallocated interest income
                                    936  
Unallocated interest expense
                                    (6,086 )
Unallocated other expense, net
                                    503  
 
                                     
Income from continuing operations before income taxes
                                  $ 28,582  
 
                                     
Depreciation and amortization
  $ 6,407     $ 1,351     $ 1,173     $ 724     $ 9,655  
 
                             
                                         
    Quarter Ended June 30, 2008  
    Strategy                     Analytic        
    Machine     Scoring     Professional     Software        
    Solutions     Solutions     Services     Tools     Total  
    (In thousands)  
Revenues
  $ 94,855     $ 37,553     $ 39,132     $ 11,775     $ 183,315  
Operating expenses
    (80,549 )     (15,838 )     (37,533 )     (10,344 )     (144,264 )
 
                             
Segment operating income
  $ 14,306     $ 21,715     $ 1,599     $ 1,431       39,051  
 
                               
Unallocated share-based compensation expense
                                    (6,755 )
Unallocated restructuring
                                    (2,176 )
 
                                     
Operating income
                                    30,120  
Unallocated interest income
                                    1,707  
Unallocated interest expense
                                    (5,203 )
Unallocated other income, net
                                    1,478  
 
                                     
Income from continuing operations before income taxes
                                  $ 28,102  
 
                                     
Depreciation and amortization
  $ 6,435     $ 1,298     $ 1,449     $ 708     $ 9,890  
 
                             

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    Nine Months Ended June 30, 2009  
    Strategy                     Analytic        
    Machine     Scoring     Professional     Software        
    Solutions     Solutions     Services     Tools     Total  
    (In thousands)  
Revenues
  $ 255,874     $ 99,797     $ 86,188     $ 36,954     $ 478,813  
Operating expenses
    (202,578 )     (42,402 )     (92,131 )     (30,752 )     (367,863 )
 
                             
Segment operating income (loss)
  $ 53,296     $ 57,395     $ (5,943 )   $ 6,202       110,950  
 
                               
Unallocated share-based compensation expense
                                    (15,342 )
 
                                     
Unallocated restructuring
                                    (8,711 )
Unallocated loss on sale of product line assets
                                    (2,993 )
 
                                     
Operating income
                                    83,904  
Unallocated interest income
                                    3,836  
Unallocated interest expense
                                    (19,771 )
Unallocated other income, net
                                    1,651  
 
                                     
Income from continuing operations before income taxes
                                  $ 69,620  
 
                                     
Depreciation and amortization
  $ 19,607     $ 3,789     $ 3,611     $ 2,045     $ 29,052  
 
                             
                                         
    Nine Months Ended June 30, 2008  
    Strategy                     Analytic        
    Machine     Scoring     Professional     Software        
    Solutions     Solutions     Services     Tools     Total  
    (In thousands)  
Revenues
  $ 293,639     $ 119,556     $ 114,645     $ 38,815     $ 566,655  
Operating expenses
    (250,400 )     (49,719 )     (110,409 )     (33,892 )     (444,420 )
 
                             
Segment operating income
  $ 43,239     $ 69,837     $ 4,236     $ 4,923       122,235  
 
                               
Unallocated share-based compensation expense
                                    (21,456 )
Unallocated restructuring
                                    (7,855 )
 
                                     
Operating income
                                    92,924  
Unallocated interest income
                                    5,942  
Unallocated interest expense
                                    (13,461 )
Unallocated other income, net
                                    2,095  
 
                                     
Income from continuing operations before income taxes
                                  $ 87,500  
 
                                     
Depreciation and amortization
  $ 18,151     $ 4,116     $ 4,086     $ 2,047     $ 28,400  
 
                             
9. Fair Value Measurements
     As discussed in Note 1, “Adoption of Recent Accounting Pronouncements,” on October 1, 2008, we adopted SFAS 157 for financial assets and financial liabilities and for non-financial assets and non-financial liabilities that we recognize or disclose at fair value on a recurring basis (at least annually). As of the date of adoption, these included cash equivalents and available-for-sale marketable securities. Consistent with the provisions of FSP 157—2, we elected to defer the provisions of SFAS 157 that relate to non-financial assets and non-financial liabilities that we do not recognize or disclose at fair value on a recurring basis.
     SFAS 157 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.
     Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. Our Level 1 securities are predominantly comprised of money market funds.
     Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation

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with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data. Our Level 2 securities are predominantly comprised of U.S. government obligations that are generally held to maturity.
     Level 3 uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation. We do not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy.
     The following table represents financial assets that we measured at fair value on a recurring basis at June 30, 2009. We have classified these assets in accordance with the fair value hierarchy set forth in SFAS 157:
                         
    Active Markets     Significant Other     Fair Value  
    For Identical     Observable     As of  
    Instruments     Inputs     June 30,  
    (Level 1)     (Level 2)     2009  
Assets:
                       
Cash equivalents (1)
  $ 173,564     $     $ 173,564  
Corporate debt (2)
          2,373       2,373  
U.S. government obligations (2)
          125,466       125,466  
Marketable equity securities (3)
    3,371             3,371  
 
                 
Total
  $ 176,935     $ 127,839     $ 304,774  
 
                 
 
(1)   Included in cash and cash equivalents on our balance sheet at June 30, 2009. Not included in this table are $66,782 of cash deposit balances.
 
(2)   Included in marketable securities (short-term and long-term) on our balance sheet at June 30, 2009.
 
(3)   Represents securities held under a supplemental retirement and savings plan for certain officers and senior management employees, which are distributed upon termination or retirement of the employees. Included in long-term marketable securities on our balance sheet at June 30, 2009.
     The valuation techniques used to measure the fair values of our financial assets incorporate market inputs, which include reported trades, broker/dealer quotes, benchmark yields, issuer spreads, benchmark securities and other inputs derived from or corroborated by observable market data.
10. Income Taxes
     Effective Tax Rate
     Our effective tax rate was 36.5% and 33.1% during the quarters ended June 30, 2009 and 2008, respectively, and 30.5% and 34.4% during the nine months ended June 30, 2009 and 2008, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the respective full fiscal year.
     The effective tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The increase in our effective tax rate in the third quarter of 2009 was due to an increase in domestic earnings relative to our foreign jurisdictions and the sale of our RoamEx and LCT product lines. These product line sales included a write-off of goodwill that was not deductible for income tax purposes.
     The total unrecognized tax benefit for uncertain tax positions under FASB Interpretation No. 48 at June 30, 2009 is estimated to be approximately $29.1 million. We recognize interest expense related to unrecognized tax benefits and penalties as part of the provision for income taxes in our consolidated statements of income. We recognize interest earned as interest income in our consolidated statements of income. As of June 30, 2009, we have accrued interest of $3.7 million related to the unrecognized tax benefits.

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11. Credit Agreement
     We have a $600.0 million unsecured revolving credit facility with a syndicate of banks that expires in 2011. Proceeds from the credit facility can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. Interest on amounts borrowed under the credit facility is based on (i) a base rate, which is the greater of (a) the prime rate and (b) the Federal Funds rate plus 0.50% or (ii) LIBOR plus an applicable margin. The margin on LIBOR borrowings ranges from 0.30% to 0.55% and is determined based on our consolidated leverage ratio. In addition, we must pay utilization fees if borrowings and commitments under the credit facility exceed 50% of the total credit facility commitment, as well as facility fees. The credit facility contains certain restrictive covenants, including maintenance of consolidated leverage and fixed charge coverage ratios. The credit facility also contains covenants typical of unsecured facilities. As of June 30, 2009, we were in compliance with all covenants under this credit facility and we had $295.0 million of borrowings outstanding at an interest rate of 1.3%.
12. Senior Notes
     In May 2008, we issued $275.0 million of Senior Notes in a private placement to a group of institutional investors. The Senior Notes were issued in four series with maturities ranging from 5 to 10 years. The Senior Notes’ weighted average interest rate is 6.8%. The Senior Notes are subject to certain restrictive covenants that are substantially similar to those in the credit agreement for the revolving credit facility including maintenance of consolidated leverage and fixed charge coverage ratios. The purchase agreement for the Senior Notes also includes covenants typical of unsecured facilities.
     The fair value of the senior notes was determined based on quoted market prices and interest rate spreads of similar securities. The following table reflects the difference between the carrying value and fair value of the senior notes as of June 30, 2009 and September 30, 2008:
                                 
    June 30, 2009   September 30, 2008
    Carrying   Fair   Carrying   Fair
    Amount   Value   Amount   Value
    (In thousands)
Senior Notes
  $ 275,000     $ 272,598     $ 275,000     $ 239,153  
13. Derivative Instruments
     On January 1, 2009, we adopted SFAS 161 which requires expanded disclosures on derivative investments and hedging activities. We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary objective of our derivative instruments is to protect the value of foreign currency denominated accounts receivable and bank balances from the effects of volatility in foreign exchange rates that might occur prior to their conversion to their functional currency. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign currencies in the future at fixed exchange rates and economically offset changes in foreign currency exchange. We routinely enter into contracts to offset exposures denominated primarily in the British Pound, EURO and Japanese Yen.
     Foreign currency denominated accounts receivable and bank balances are re-measured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other income (expense), net. The forward contracts are not designated as hedges and are marked to market through Other income (expense), net. Fair value changes in the forward contracts help mitigate the changes in the value of the re-measured accounts receivable and bank balances attributable to changes in foreign currency exchange rates. The forward contracts are short-term in nature and typically have average maturities at inception of less than three months.
     The following table summarizes the fair value of our derivative instruments and their location in the consolidated balance sheet:
                         
June 30, 2009        
(in thousands)   Assets   Liabilities
Derivatives not designated as hedging instruments   Balance Sheet Location   Amount   Balance Sheet Location   Amount
Foreign currency forward contracts
  Other current assets   $     Other current liabilities   $  

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     The following table summarizes our outstanding forward foreign currency contracts, by currency at June 30, 2009:
                         
    Contract Amount    
    Foreign           Fair Value
    Currency   US $   US $
    (In thousands)
Sell foreign currency:
                       
EURO (EUR)
  EUR 6,300     $ 8,894     $  
Japanese Yen (YEN)
  YEN 94,100       978        
Canadian Dollar (CAD)
  CAD   1,300       1,126        
 
                       
Buy foreign currency:
                       
British Pound (GBP)
  GBP 3,541     $ 5,870     $  
     The forward foreign currency contracts were all entered into on June 30, 2009; therefore, the fair value was $0 on that date.
     The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows:
             
Quarter ended June 30, 2009    
(in thousands)   Loss on Derivative Recognized in Income
Derivatives not designated as hedging instruments   Location   Amount
Foreign currency forward contracts
  Other income (expense), net   $ (377 )
 
       
Nine Months ended June 30, 2009    
(in thousands)   Loss on Derivative Recognized in Income
Derivatives not designated as hedging instruments   Location   Amount
Foreign currency forward contracts
  Other income (expense), net   $ 588  
14. Contingencies
     We are in disputes with certain customers regarding amounts owed in connection with the sale of certain of our products and services. We also have had claims asserted by former employees relating to compensation and other employment matters. We are also involved in various other claims and legal actions arising in the ordinary course of business. We believe that none of these aforementioned claims or actions will result in a material adverse impact to our consolidated results of operations, liquidity or financial condition. However, the amount or range of any potential liabilities associated with these claims and actions, if any, cannot be determined with certainty. Set forth below are additional details concerning certain ongoing litigation.
Braun Consulting, Inc.
     Braun (which we acquired in November 2004) was a defendant in a lawsuit filed on November 26, 2001, in the United States District Court for the Southern District of New York (Case No. 01 CV 10629) that alleges violations of federal securities laws in connection with Braun’s initial public offering in August 1999. This lawsuit is among approximately 300 coordinated putative class actions against certain issuers, their officers and directors, and underwriters with respect to such issuers’ initial public offerings. As successor-in-interest to Braun, we entered into a Stipulation and Agreement of Settlement along with most of the other defendant issuers in this coordinated litigation, where such issuers and their officers and directors would be dismissed with prejudice, subject to the satisfaction of certain conditions, including approval of the Court. Under the terms of this Agreement, we would not pay any amount of the settlement. However, since December 2006, certain procedural matters concerning the class status have been decided in the district and appellate courts of the Second Circuit, ultimately determining that no class status exists for the plaintiffs. Since there is no class status, there could be no agreement, thus the District Court entered an order formally denying the motion for final approval of the settlement agreement.

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     The issuers and their insurers have recently reached a preliminary settlement agreement, which they believe to be consistent with the earlier court rulings and which has been presented to all parties for approval. The Company has given consent to the terms of the proposed settlement. Under the terms of this Agreement, we would not pay any amount of the settlement. We expect that the parties to the consolidated action will begin preparing formal settlement documents shortly. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter.
15. New Accounting Pronouncements Not Yet Adopted
     In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) states that business combinations will result in all assets and liabilities of an acquired business being recorded at their fair values. Certain forms of contingent consideration and acquired contingencies will be recorded at fair value at the acquisition date. SFAS 141(R) also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. This statement is effective for financial statement issued for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of SFAS 141(R) will have on our consolidated financial statements.
     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 160 clarifies that a noncontrolling or minority interest in a subsidiary is considered an ownership interest and, accordingly, requires all entities to report such interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of SFAS 160 will have on our consolidated financial statements.
     In April 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible Assets.” This new staff position is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), “Business Combinations.” FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of FSP SFAS 142-3 will have on our consolidated financial statements.
     In May 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The FSP requires that proceeds from the issuance of convertible debt instruments be allocated between debt (at a discount) and an equity component. The debt discount will be amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. This FSP is effective for fiscal years beginning after December 15, 2008, and will be applied retrospectively to prior periods. This FSP changes the accounting treatment for our Senior Convertible Notes, which were issued in August 2003. Even though we retired our Senior Convertible Notes during fiscal 2008, this new accounting treatment still requires us to retrospectively record a significant amount of non-cash interest expense in the periods when these notes were outstanding. We are in the process of determining what effect the adoption of this FSP will have on our consolidated financial statements.
     In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” (“SFAS 167”) which revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. We are currently evaluating the impact of SFAS 167 on our consolidated financial statements.
     In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162,” (“SFAS 168”) and approved the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative nongovernmental US GAAP. The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. We expect the implementation of SFAS 168 to have no impact on our consolidated financial statements.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
     Statements contained in this Report that are not statements of historical fact should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). In addition, certain statements in our future filings with the Securities and Exchange Commission (“SEC”), in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other statements concerning future financial performance; (ii) statements of our plans and objectives by our management or Board of Directors, including those relating to products or services; (iii) statements of assumptions underlying such statements; (iv) statements regarding business relationships with vendors, customers or collaborators; and (v) statements regarding products, their characteristics, performance, sales potential or effect in the hands of customers. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “should,” “potential,” “goals,” “strategy,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in Item 1A of Part II, Risk Factors, below. The performance of our business and our securities may be adversely affected by these factors and by other factors common to other businesses and investments, or to the general economy. Forward-looking statements are qualified by some or all of these risk factors. Therefore, you should consider these risk factors with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. Such forward-looking statements speak only as of the date on which statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events or circumstances. Readers should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our reports on Forms 10-Q and 8-K to be filed by the Company in fiscal 2009.
OVERVIEW
     We are a leader in Decision Management (“DM”) solutions that enable businesses to automate, improve and connect decisions to enhance business performance. Our predictive analytics and decision management systems power hundreds of billions of customer decisions each year. We help companies acquire customers more efficiently, increase customer value, reduce fraud and credit losses, lower operating expenses and enter new markets more profitably. Most leading banks and credit card issuers rely on our solutions, as do many insurers, retailers, healthcare organizations, pharmaceutical companies and government agencies. We also serve consumers through online services that enable people to purchase and understand their FICO® scores, the standard measure in the United States of credit risk, empowering them to manage their financial health.
     Most of our revenues are derived from the sale of products and services within the consumer credit, banking and insurance industries, and during the quarter ended June 30, 2009, 72% of our revenues were derived from within these industries. A significant portion of our remaining revenues is derived from the healthcare and retail industries. Our clients utilize our products and services to facilitate a variety of business processes, including customer marketing and acquisition, account origination, credit and underwriting risk management, fraud loss prevention and control, and client account and policyholder management. A significant portion of our revenues is derived from transactional or unit-based software license fees, annual license fees under long-term software license arrangements, transactional fees derived under scoring, network service or internal hosted software arrangements, and annual software maintenance fees. The recurrence of these revenues is, to a significant degree, dependent upon our clients’ continued usage of our products and services in their business activities. The more significant activities underlying the use of our products in these areas include: credit and debit card usage or active account levels; lending acquisition, origination and customer management activity; and customer acquisition, cross selling and retention programs. Approximately 78% and 73% of our revenues during the quarters ended June 30, 2009 and 2008, respectively, and 77% and 73% of our revenues for the nine months ended June 30, 2009 and 2008, respectively, were derived from arrangements with transactional or unit-based pricing. We also derive revenues from other sources which generally do not recur and include, but are not limited to, perpetual or time-based licenses with upfront payment terms, non-recurring professional service arrangements and gain-share arrangements where revenue is derived based on percentages of client revenue growth or cost reductions attributable to our products.
     One measure used by management as an indicator of our business performance is the volume of bookings achieved. We define a booking as estimated future contractual revenues, including agreements with perpetual, multi-year and annual terms. Bookings values

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may include: (i) estimates of variable fee components such as hours to be incurred under new professional services arrangements and customer account or transaction activity for agreements with transactional-based fee arrangements, (ii) additional or expanded business from renewals of contracts, and (iii) to a lesser extent, previous customers that have attrited and been re-sold only as a result of a significant sales effort. During the quarter ended June 30, 2009, we achieved bookings of $49.0 million, with one deal with a booking value of $3.0 million or more. In comparison, bookings in the prior year quarter ended June 30, 2008 were $64.2 million, including two deals with bookings values of $3.0 million or more.
     Management regards the volume of bookings achieved, among other factors, as an important indicator of future revenues, but they are not comparable to, nor should they be substituted for, an analysis of our revenues, and they are subject to a number of risks and uncertainties, including those described in Item 1A of Part II, “Risk Factors”, concerning timing and contingencies affecting product delivery and performance. Although many of our contracts have fixed noncancelable terms, some of our contracts are terminable by the client on short notice or without notice. Accordingly, we do not believe it is appropriate to characterize all of our bookings as backlog that will generate future revenue.
     Our revenues derived from clients outside the United States have generally grown, and may in the future grow more rapidly than our revenues from domestic clients. International revenues totaled $47.0 million and $57.7 million during the quarters ended June 30, 2009 and 2008, respectively, representing 30% and 31% of total consolidated revenues in each of these periods. International revenues totaled $149.4 million and $185.3 million during the nine months ended June 30, 2009 and 2008, respectively, representing 31% and 33% of total consolidated revenues in each of these periods. Revenues declined $4.7 million and $15.5 million for the quarter and nine-month period ended June 30, 2009, respectively, from prior-year periods, due to unfavorable currency translation. We expect that the percentage of our revenues derived from international clients will increase in the future, subject to the impact of foreign currency fluctuations.
Reengineering Plan
     In April 2008, we announced the details of a reengineering plan designed to grow revenues through strategic resource allocation and improve profitability through cost reduction. Key components of the plan include rationalizing the business portfolio, simplifying management hierarchy, eliminating low-priority positions, consolidating facilities and managing fixed and variable costs. Also in connection with the plan, we sold our Insurance Bill Review business unit and our LiquidCredit® Service for Telecom (“LCT”) and RoamEx product line assets, and we fully exited our Cortronics neural research product line, Fast Panel diagnostics product line and advertising services group.
     In January 2009, we announced additional actions under the reengineering plan. The additional actions were either completed or committed to by management prior to December 31, 2008 and were primarily aimed at reducing costs through headcount reductions and facility consolidations. With respect to the headcount reductions, we identified and eliminated 255 positions throughout the Company. We expect annual cost savings as a result of these additional actions of approximately $30 million. During the quarter ended March 31, 2009, we recognized a $1.2 million charge due to unfavorable sublease arrangements we entered into for office space previously vacated. We plan to achieve further cost savings by eliminating additional positions during fiscal 2009 through attrition of non-revenue producing positions and restricting discretionary expenditures.
Current Business Environment
     In 2008, the financial markets experienced significant volatility and general economic conditions deteriorated. These conditions have had a substantial impact on our customers, especially financial institutions. This has included an increased number of consolidations among our customers, a significant decline in new account acquisition activities and extension of credit by financial institutions and a general slowing of software purchases and related implementation services by our customers. These unfavorable conditions have affected our business in the quarter ended June 30, 2009 and are expected to continue to affect us during the remainder of fiscal 2009.
     As a result of this difficult business environment, we continue to aggressively manage our expenses in an effort to maintain solid earnings and cash flows. We also plan to continue to invest in our Decision Management solutions, as well as our core business operations.
Acquisition and Divestiture Activity
     In January 2008, we acquired Dash Optimization Ltd., a leading provider of decision modeling and optimization software, for an aggregate purchase price of $34.1 million in cash. Results of operations from this acquisition are included in our results prospectively

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from the date of acquisition.
     In April 2008, we completed the sale of our Insurance Bill Review business unit for $15.7 million in cash to Mitchell International, Inc. We recorded a $7.2 million pre-tax loss, but a $3.3 million after-tax gain on the sale, as the amount of goodwill disposed of for income tax purposes exceeded the amount determined for financial reporting purposes. Revenues from the business were $3.5 million and $22.9 million for the quarter and nine month period ended June 30, 2008, respectively. The Insurance Bill Review business unit is classified as discontinued operations in our consolidated condensed financial statements and in the following management discussion and analysis.
     In June 2009, we signed definitive agreements to sell the assets associated with our LCT and RoamEx product lines for $6.2 million in cash. We recognized a $3.0 million pre-tax loss, and a $3.9 million after-tax loss on the sale as the goodwill associated with the sale of these product lines was not deductible for income tax purposes.
Segment Information
     Our reportable segments are: Strategy Machine Solutions, Scoring Solutions, Professional Services and Analytic Software Tools. Although we sell solutions and services into a large number of end user product and industry markets, our reportable business segments reflect the primary method in which management organizes and evaluates internal financial information to make operating decisions and assess performance. Comparative segment revenues, operating income, and related financial information for the quarters ended June 30, 2009 and 2008 are set forth in Note 8 to the accompanying condensed consolidated financial statements.
RESULTS OF OPERATIONS
Revenues
     The following tables set forth certain summary information on a segment basis related to our revenues for the fiscal periods indicated.
                                                 
    Quarter Ended
June 30,
    Percentage of Revenues     Period-to-Period     Period-to-Period
Percentage
 
Segment   2009     2008     2009     2008     Change     Change  
    (In thousands)                     (In thousands)          
Strategy Machine Solutions
  $ 81,667     $ 94,855       52 %     52 %   $ (13,188 )     (14 )%
Scoring Solutions
    34,569       37,553       22 %     21 %     (2,984 )     (8 )%
Professional Services
    27,479       39,132       18 %     21 %     (11,653 )     (30 )%
Analytic Software Tools
    12,303       11,775       8 %     6 %     528       4 %
 
                                       
 
  $ 156,018     $ 183,315       100 %     100 %     (27,297 )     (15 )%
 
                                       
                                                 
    Nine Months Ended
June 30,
    Percentage of Revenues     Period-to-Period     Period-to-Period
Percentage
 
Segment   2009     2008     2009     2008     Change     Change  
    (In thousands)                     (In thousands)          
Strategy Machine Solutions
  $ 255,874     $ 293,639       53 %     52 %   $ (37,765 )     (13 )%
Scoring Solutions
    99,797       119,556       21 %     21 %     (19,759 )     (17 )%
Professional Services
    86,188       114,645       18 %     20 %     (28,457 )     (25 )%
Analytic Software Tools
    36,954       38,815       8 %     7 %     (1,861 )     (5 )%
 
                                       
 
  $ 478,813     $ 566,655       100 %     100 %     (87,842 )     (16 )%
 
                                       
     Quarter Ended June 30, 2009 Compared to Quarter Ended June 30, 2008 Revenues
     Strategy Machine Solutions segment revenues decreased $13.2 million due to a $3.6 million decrease in revenues from our collections and recovery solutions, a $3.6 million decrease in revenues from our consumer solutions, a $3.3 million decrease in revenues from our fraud solutions, a $1.7 million decrease in revenues from our originations solutions and a $1.0 million decrease in revenues from our other strategy machine solutions.

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     Overall segment revenues were adversely impacted by difficult global economic conditions that caused our customers to restrict investments in large technology projects. In addition, revenues declined $2.0 million due to unfavorable currency translation related to the weakening of the British Pound versus the U.S. dollar. At the product group level, the decrease in collections and recovery solutions revenues resulted from a decline in license sales as the prior year quarter included several large license sales. The decrease in consumer solutions was primarily attributed to revenues lost from Experian terminating its relationship with myFICO.com. The decrease in fraud solutions revenues was attributable primarily to decreases in volumes associated with transactional-based agreements as well as the restructuring of one large customer contract. The decrease in originations solutions revenues was due a decrease in volumes associated with transactional-based agreements.
     Scoring Solutions segment revenues decreased $3.0 million due primarily to a $2.2 million reduction in revenues derived from the credit reporting agencies, which resulted from a decline in volumes. Volumes declined as financial institutions have significantly reduced new account acquisition activities and extension of credit. Revenues were also impacted by a reduction in revenues from our services sold directly to users, which resulted from increased pricing pressures and a decline in volumes due to a decrease in prescreening initiatives by our customers. We expect that competitive pricing pressures as well as reduced volumes due to weakness in the U.S. financial credit market will continue to adversely affect segment revenues in fiscal 2009.
     During the quarters ended June 30, 2009 and 2008, revenues generated from our agreements with Equifax, TransUnion and Experian collectively accounted for approximately 20% and 18%, respectively, of our total revenues, including revenues from these customers that are recorded in our other segments.
     Professional Services segment revenues decreased $11.7 million as difficult global economic conditions have caused customers to slow down contracted services, and as a result of the weakening of the British Pound versus the U.S. dollar, which accounts for $1.7 million of the decrease. The decline in revenues also reflects the overall decline in license sales, which results in a corresponding decline in implementation services. In addition, the decline in revenues is the result of our decision to stop pursuing certain lower margin consulting service engagements.
     Analytic Software Tools segment revenues increased $0.5 million due to an increase in sales of our Blaze Advisor and Model Builder products.
     Nine Months Ended June 30, 2009 Compared to Nine Months Ended June 30, 2008 Revenues
     Strategy Machine Solutions segment revenues decreased $37.8 million due to an $11.1 million decrease in revenues from our collections and recovery solutions, a $8.7 million decrease in revenues from our fraud solutions, a $7.9 million decrease in revenues from our customer management solutions, a $3.4 million decrease in revenues from our consumer solutions, a $2.1 million decrease in revenues from our marketing solutions, a $1.8 million decrease in revenues from our originations solutions, a $1.8 million decrease in revenues from our analytics solutions, and a $1.0 million decrease in revenues from our other strategy machine solutions.
     Overall segment revenues were adversely impacted by difficult global economic conditions that caused our customers to restrict investments in large technology projects. In addition, revenues declined $4.6 million due to unfavorable currency translation related to the weakening of the British Pound versus the U.S. dollar. At the product group level, the decrease in collections and recovery solutions revenues resulted from a decline in license sales as the prior year quarter included several large license sales and the loss of one large customer. The decrease in fraud solutions revenues was attributable primarily to decreases in volumes associated with transactional-based agreements. The decline was partially the result of a decrease in revenues associated with our solutions for telecommunication service providers, which we determined were not strategic and thus divested in June 2009. Revenues were also adversely impacted by the restructuring of a large customer contract. The decrease in customer management solutions revenues was attributable to a decline in license sales, as the prior year period included several large license sales. In addition, there was a decline in customer management solutions’ transactional revenues. The decrease in consumer solutions was primarily attributed to revenues lost from Experian terminating its relationship with myFICO.com. The decrease in marketing solutions revenues was attributable primarily to a decline in sales volumes resulting from the loss last year of several large customer accounts. The decrease in originations solutions revenues was attributable primarily to a decline in sales volumes associated with our LCT product, which was divested in June 2009. The decrease in analytics solutions revenues was attributable primarily to a decline in product sales.
     Scoring Solutions segment revenues decreased $19.8 million due primarily to a $15.8 million reduction in revenues derived from the credit reporting agencies, which resulted from a decline in volumes. Volumes declined as financial institutions have significantly reduced new account acquisition activities and extension of credit. Revenues were also impacted by a $3.1 million reduction in revenues from our services sold directly to users, which resulted from increased pricing pressures and a decline in volumes due to a

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decrease in prescreening initiatives by our customers. We expect that competitive pricing pressures as well as reduced volumes due to weakness in the U.S. financial credit market will continue to adversely affect segment revenues in fiscal 2009.
     During the nine months ended June 30, 2009 and 2008, revenues generated from our agreements with Equifax, TransUnion and Experian, collectively accounted for approximately 19% of our total revenues, including revenues from these customers that are recorded in our other segments.
     Professional Services segment revenues decreased $28.5 million as difficult global economic conditions have caused customers to slow down contracted services, and as a result of the weakening of the British Pound versus the U.S. dollar, which accounted for $5.4 million of the decrease. The decline in revenues also reflects the overall decline in license sales, which results in a corresponding decline in implementation services. In addition, the decline in revenues is the result of our decision to stop pursuing certain lower margin consulting service engagements.
     Analytic Software Tools segment revenues decreased $1.9 million due to a $5.6 million decline in sales of our Blaze Advisor®, Decision Optimizer and Model Builder products which was partially offset by $3.7 million increase from products acquired in our January 2008 acquisition of Dash Optimization Ltd.
Operating Expenses and Other Income (Expense)
     The following table sets forth certain summary information related to our statements of income for the fiscal periods indicated.
                                                 
                         
    Quarter Ended                 Period-to-Period  
    June 30,     Percentage of Revenues     Period-to-Period     Percentage  
    2009     2008     2009     2008     Change     Change  
    (In thousands)                     (In thousands)          
Revenues
  $ 156,018     $ 183,315       100 %     100 %   $ (27,297 )     (15 )%
 
                                       
Operating expenses:
                                               
Cost of revenues
    48,160       68,709       31 %     38 %     (20,549 )     (30 )%
Research and development
    18,364       18,779       12 %     10 %     (415 )     (2 )%
Selling, general and administrative
    50,290       59,734       32 %     33 %     (9,444 )     (16 )%
Amortization of intangible assets
    3,219       3,797       2 %     2 %     (578 )     (15 )%
Restructuring
    (237 )     2,176             1 %     (2,413 )     (111 )%
Loss on sale of product line assets
    2,993             2 %           2,993        
 
                                       
Total operating expenses
    122,789       153,195       79 %     84 %     (30,406 )     (20 )%
 
                                       
Operating income
    33,229       30,120       21 %     16 %     3,109       10 %
Interest income
    936       1,707       1 %     1 %     (771 )     (45 )%
Interest expense
    (6,086 )     (5,203 )     (4 )%     (3 )%     (883 )     17 %
Other income net
    503       1,478             1 %     (975 )     (66 )%
 
                                       
Income before income taxes
    28,582       28,102       18 %     15 %     480       2 %
Provision for income taxes
    10,443       9,304       6 %     5 %     1,139       12 %
 
                                       
Income from continuing operations
    18,139       18,798       12 %     10 %     (659 )     (4 )%
Income from discontinued operations
          7,703             4 %     (7,703 )     (100 )%
 
                                       
Net income
  $ 18,139     $ 26,501       12 %     14 %     (8,362 )     (32 )%
 
                                       
 
                                               
Number of employees at quarter end
    2,143       2,597                       (454 )     (17 )%

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    Nine Months Ended
June 30,
    Percentage of Revenues     Period-to-Period     Period-to-Period
Percentage
 
  2009     2008     2009     2008     Change     Change  
    (In thousands)                     (In thousands)          
Revenues
  $ 478,813     $ 566,655       100 %     100 %   $ (87,842 )     (16 )%
 
                                       
Operating expenses:
                                               
Cost of revenues
    160,655       208,627       33 %     37 %     (47,972 )     (23 )%
Research and development
    55,409       58,910       11 %     10 %     (3,501 )     (6 )%
Selling, general and administrative
    157,519       187,858       33 %     33 %     (30,339 )     (16 )%
Amortization of intangible assets
    9,622       10,481       2 %     2 %     (859 )     (8 )%
Restructuring
    8,711       7,855       2 %     2 %     856       11 %
Loss on sale of product line assets
    2,993             1 %           2,993        
 
                                       
Total operating expenses
    394,909       473,731       82 %     84 %     (78,822 )     (17 )%
Operating income
    83,904       92,924       18 %     16 %     (9,020 )     (10 )%
Interest income
    3,836       5,942       1 %     1 %     (2,106 )     (35 )%
Interest expense
    (19,771 )     (13,461 )     (4 )%     (2 )%     (6,310 )     47 %
Other income, net
    1,651       2,095                   (444 )     (21 )%
 
                                       
Income before income taxes
    69,620       87,500       15 %     15 %     (17,880 )     (20 )%
Provision for income taxes
    21,263       30,092       5 %     5 %     (8,829 )     (29 )%
 
                                       
Income from continuing operations
    48,357       57,408       10 %     10 %     (9,051 )     (16 )%
Income (loss) from discontinued operations
    (363 )     2,766             1 %     (3,129 )     (113 )%
 
                                       
Net income
  $ 47,994     $ 60,174       10 %     11 %     (12,180 )     (20 )%
 
                                       
     Cost of Revenues
     Cost of revenues consists primarily of employee salaries and benefits for personnel directly involved in creating, installing and supporting revenue products; travel and related overhead costs; costs of computer service bureaus; internal network hosting costs; amounts payable to credit reporting agencies for scores; software costs; and expenses related to our consumer score services through myFICO.com.
     Cost of revenues as a percentage of revenues was 31% for the quarter ended June 30, 2009, as compared to 38% for the quarter ended June 30, 2008. The quarter over quarter decrease of $20.5 million in cost of revenues resulted from a $12.8 million decrease in personnel and other labor-related costs, a $3.9 million decrease in facilities and infrastructure costs, a $1.8 million decrease in billable travel costs, a $1.5 million decrease in third party software and data, and a $0.5 million decrease in other costs. The decrease in personnel and other labor-related costs was attributable primarily to a decline in salary and related benefit costs resulting from staff reductions and from the decline in professional services activities. The decrease in facilities and infrastructure costs was attributable primarily to a decline in allocated costs resulting from a reduction in cost of revenue expenses. The decrease in third party software and data costs was due to decreased sales in our consumer solutions that required data acquisition. The decrease in travel costs was from the overall reduction in professional services activities.
     The year-to-date period over period decrease of $48.0 million in cost of revenues resulted from a $31.5 million decrease in personnel and other labor-related costs, a $6.2 million decrease in facilities and infrastructure costs, a $4.8 million decrease in third party software and data, a $3.8 million decrease in billable travel costs, and a $1.7 million decrease in other costs. The overall decrease in cost of revenues for the year-to-date period was attributable to the same factors that affected the quarter over quarter comparison.
     Over the next several quarters, we expect that cost of revenues as a percentage of revenues will be slightly higher than those incurred during the quarter ended June 30, 2009.
     Research and Development
     Research and development expenses include the personnel and related overhead costs incurred in the development of new products and services, including the research of mathematical and statistical models and the development of new versions of Strategy Machine Solutions and Analytic Software Tools.

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     The quarter over quarter decrease of $0.4 million in research and development expenditures was attributable primarily to a $0.6 million decrease in personnel and related costs and a $0.2 million increase in other expenses. The decrease in personnel and related costs was driven by a reductions associated with our reengineering program.
     The year-to-date period decrease of $3.5 million in research and development expenditures was attributable primarily to a $4.6 million decrease in personnel and related costs and a $1.4 million decrease in other expenses, partially offset by a $2.5 million increase in data related expenses. The decrease in personnel and related costs was driven by staff reductions associated with our reengineering program. The increase in data expenses was due to higher costs for data that is used for product development initiatives.
     Over the next several quarters, we expect that research and development expenditures as a percentage of revenues will be consistent with those incurred during the quarter ended June 30, 2009.
     Selling, General and Administrative
     Selling, general and administrative expenses consist principally of employee salaries and benefits, travel, overhead, advertising and other promotional expenses, corporate facilities expenses, legal expenses, business development expenses, and the cost of operating computer systems.
     The quarter over quarter decrease of $9.4 million in selling, general and administrative expenses was attributable to a $4.9 million decrease in personnel and other labor-related costs, a $1.1 million decrease in facilities and infrastructure costs, a $1.1 million decrease in bad debt expense, a $1.0 million decrease in travel costs and a $1.3 million net decrease in other expenses. The decrease in personnel and labor-related costs related primarily to a decline in salary and benefit costs resulting from staff reductions associated with our reengineering program. The decrease in facilities and infrastructure costs was attributable primarily to a decline in allocated costs resulting from staff reductions and exiting certain facilities. The decrease in bad debt expense is due to successful collection efforts and a decrease in revenues. The decrease in travel expenses was driven by management programs focused on reducing expenses.
     The year-to-date period over period decrease of $30.3 million in selling, general and administrative expenses was attributable to a $22.5 million decrease in personnel and other labor-related costs, a $4.1 million decrease in travel costs, a $2.3 million decrease in bad debt expense and a $1.4 million net decrease in other expenses. The decrease in personnel and labor-related costs related primarily to a decline in salary and benefit costs resulting from staff reductions associated with our reengineering program. The decline in travel expenses was driven by management programs focused on reducing expenses. The decrease in bad debt expense is due to successful collection efforts and a decrease in revenues.
     Over the next several quarters, we expect that selling, general and administrative expenses as a percentage of revenues will be consistent with those incurred during the quarter ended June 30, 2009.
     Amortization of Intangible Assets
     Amortization of intangible assets consists of amortization expense related to intangible assets recorded in connection with acquisitions accounted for by the purchase method of accounting. Our definite-lived intangible assets, consisting primarily of completed technology and customer contracts and relationships, are being amortized using the straight-line method or based on forecasted cash flows associated with the assets over periods ranging from two to fifteen years.
          In fiscal 2009, we expect that amortization expense will be consistent with the amortization expense we recorded in fiscal 2008.
     Restructuring
     During the quarter ended June 30, 2009, we recorded a $0.2 million expense reversal related to a lease termination.
     During the quarter ended March 31, 2009, we recognized a $1.2 million charge due to unfavorable sublease arrangements we entered into for office space previously vacated. The charge was offset by a $0.4 million reduction in other restructuring liabilities.
     During the quarter ended December 31, 2008, in connection with our reengineering program, we incurred net charges totaling $8.1 million. The charges included $5.9 million for severance costs associated with the reduction of 255 positions throughout the

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Company. Cash payments for substantially all the severance costs were paid during the quarter ended March 31, 2009. We also recognized charges of $2.6 million associated with vacating excess leased space located in Georgia and California. The charge represents future cash lease payments, net of estimated sublease income, which will be paid out over the next nine years.
     Loss on Sale of Product Line Assets
     In June 2009, we signed definitive agreements to sell the assets associated with our LCT and RoamEx product lines for $6.2 million in cash. We recognized a $3.0 million pre-tax loss, and a $3.9 million after-tax loss on the sale as the goodwill associated with the sale of these product lines was not deductible for income tax purposes.
     Interest Income
     Interest income is derived primarily from the investment of funds in excess of our immediate operating requirements. The quarter over quarter decrease in interest income of $0.8 million was attributable to a decline in interest rates and investment income yields due to market conditions.
     The year-to-date period decrease in interest income of $2.1 million was attributable to a decline in interest rates and investment income yields due to market conditions.
     Interest Expense
     Interest expense recorded during the quarter ended June 30, 2009 included interest on Senior Notes that were issued in May 2008 and interest associated with borrowings under our revolving credit facility. Interest expense recorded during the quarter ended June 30, 2008 related to our Senior Convertible Notes as well as interest associated with borrowing under our revolving credit facility. We repurchased all of the outstanding Senior Convertible Notes during fiscal 2008.
     The quarter over quarter increase in interest expense of $0.9 million was the result of higher average interest rates on outstanding borrowings. The increase in the average interest rate was due to the issuance of $275.0 million of Senior Notes in May 2008, which had a weighted average interest rate of 6.8%. In the prior year, we had $267.2 million of Senior Convertible Notes outstanding that had an interest rate of 1.5%.
     The year-to-date period increase in interest expense of $6.3 million was attributable to the same factors that affected the quarter over quarter comparison.
     Other Income, Net
     Other income, net consists primarily of realized investment gains/losses, exchange rate gains/losses resulting from re-measurement of foreign-denominated receivable and cash balances held by our U.S. reporting entities into the U.S. dollar functional currency at period-end market rates, net of the impact of offsetting forward exchange contracts, and other non-operating items.
     Other income, net in the quarter ended June 30, 2009, primarily consisted of $0.7 million of dividend income that we recognized in the quarter and foreign exchange currency losses of $0.4 million. In the quarter ended June 30, 2008, other income, net resulted from $0.8 million of dividend income that we recognized in the quarter and a $0.5 million gain on the redemption of $100.0 million of Senior Convertible Notes.
     Other income, net was $1.7 million for the nine months ended June 30, 2009 compared with other income, net of $2.1 million for the nine months ended June 30, 2008. The decrease in other income, net was primarily due to $0.9 million gain recognized in the nine months ended June 30, 2008 on the redemption of $123.7 million of Senior Convertible Notes partially offset by foreign exchange currency gains of $0.6 million that were recognized in the nine months ended June 30, 2009 compared to $0.3 million in the prior year period.
     Provision for Income Taxes
     Our effective tax rate was 36.5% and 33.1% during the quarters ended June 30, 2009 and 2008, respectively, and 30.5% and 34.4% during the nine months ended June 30, 2009 and 2008, respectively. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the respective full fiscal year.

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          The effective tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The increase in our effective tax rate in the third quarter of 2009 was due to an increase in domestic earnings relative to other foreign jurisdictions and the sale of our RoamEx and LCT product lines. These product line sales included a write-off of goodwill that was not deductible for income tax purposes.
     Operating Income
     The following table sets forth certain summary information on a segment basis related to our operating income for the fiscal periods indicated.
                                 
    Quarter Ended             Period-to-Period  
    June 30,     Period-to-Period     Percentage  
    2009     2008     Change     Change  
Segment   (In thousands)        
Strategy Machine Solutions
  $ 18,670     $ 14,306     $ 4,364       31 %
Scoring Solutions
    20,520       21,715       (1,195 )     (6 )%
Professional Services
    (991 )     1,599       (2,590 )     (162 )%
Analytic Software Tools
    2,480       1,431       1,049       73 %
 
                           
Segment operating income
    40,679       39,051       1,628       4 %
Unallocated share-based compensation
    (4,694 )     (6,755 )     2,061       (31 )%
Unallocated restructuring
    237       (2,176 )     2,413       (111 )%
Unallocated loss on sale of product line assets
    (2,993 )           (2,993 )      
 
                           
Operating income
  $ 33,229     $ 30,120       3,109       10 %
 
                           
                                 
    Nine Months Ended             Period-to-Period  
    June 30,     Period-to-Period     Percentage  
    2009     2008     Change     Change  
Segment   (In thousands)        
Strategy Machine Solutions
  $ 53,296     $ 43,239     $ 10,057       23 %
Scoring Solutions
    57,395       69,837       (12,442 )     (18 )%
Professional Services
    (5,943 )     4,236       (10,179 )     (240 )%
Analytic Software Tools
    6,202       4,923       1,279       26 %
 
                           
Segment operating income
    110,950       122,235       (11,285 )     (9 )%
Unallocated share-based compensation
    (15,342 )     (21,456 )     6,114       (28 )%
Unallocated restructuring
    (8,711 )     (7,855 )     (856 )     11 %
Unallocated loss on sale of product line assets
    (2,993 )           (2,993 )      
 
                           
Operating income
  $ 83,904     $ 92,924       (9,020 )     (10 )%
 
                           
     The quarter over quarter increase of $3.1 million in operating income was attributable to a decline in segment operating expenses, restructuring charges and share-based compensation expenses partially offset by a loss on the sale of product line assets and a decrease in segment revenues. At the segment level, the increase in segment operating income was driven by a $4.3 million increase in our Strategy Machine Solutions operating income and a $1.0 million increase in our Analytical Software Tools segment income partially offset by a $2.6 million decrease in our Professional Services segment operating income and a $1.2 million decrease in our Scoring Solutions segment operating income. The increase in Strategy Machine Solutions segment operating income was attributable to a significant decline in operating expenses, which was driven by our reengineering program. Under the reengineering program, we have reduced operating costs through staff reductions, facility consolidations and restriction of discretionary expenditures. The increase in Strategy Machine Solutions operating income was partially offset by a decline in revenues. Segment revenues were adversely impacted by difficult global economic conditions that caused our customers to restrict investments in large technology projects. In our Analytic Software Tools segment, the increase in segment operating income was due to higher segment revenues and a decline in operating expenses. The decrease in Scoring Solutions segment operating income was attributable primarily to a decline in revenues derived from services to the credit reporting agencies and for services that we provided directly to users in financial services partially offset by reduced operating expenses. The decrease in Professional Services segment operating results was due to the decline in

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revenues partially offset by reduced operating expenses. Professional Services revenues decreased as difficult global economic conditions have caused customers to slow down contracted services. The decline in revenues also reflects the overall decline in license sales, which results in a corresponding decline in implementation services. We expect the difficult business environment to continue to adversely affect Professional Services segment results, and accordingly we are aggressively managing our expenses in order to offset the revenue declines.
     The year-to-date period over period decrease of $9.0 million in operating income was attributable to a decrease in segment revenues, a loss on the sale of product line assets and an increase in restructuring charges, partially offset by a decline in segment operating expenses and share-based compensation expenses. At the segment level, the decline in segment operating income was driven by a $12.4 million decrease in our Scoring Solutions segment operating income and a $10.2 million decrease in our Professional Services segment operating income. The decline was partially offset by a $10.0 million increase in our Strategy Machine Solutions segment operating income and a $1.3 million increase in our Analytical Software Tools segment operating income. The decrease in Scoring Solutions segment operating income was attributable primarily to a decline in revenues derived from services to the credit reporting agencies and for services that we provided directly to users in financial services partially offset by reduced operating expenses. The decrease in Professional Services segment operating income was due to the decline in revenues partially offset by reduced operating expenses. Professional Services revenues decreased as difficult global economic conditions have caused customers to slow down contracted services. The decline in revenues also reflects the overall decline in license sales, which resulted in a corresponding decline in implementation services. We expect the difficult business environment to continue to adversely affect Professional Services segment results, and accordingly we are aggressively managing our expenses in order to offset the revenue declines. The increase in Strategy Machine Solutions segment operating income was attributable to a significant decline in operating expenses, which was driven by our reengineering program. Under the reengineering program, we have reduced operating costs through staff reductions, facility consolidations and restriction of discretionary expenditures. The increase in Strategy Machine Solutions operating income was partially offset by a decline in revenues. Segment revenues were adversely impacted by difficult global economic conditions that caused our customers to restrict investments in large technology projects. In our Analytic Software Tools segment, the increase in segment operating income was due to lower operating expenses offset by lower revenues.
     Discontinued Operations
     In March 2009, we recorded a charge of $0.4 million, net of tax, resulting from the resolution of a final working capital adjustment in favor of the purchaser of our Insurance Bill Review business unit.
     In March 2008, we entered into a definitive agreement for the sale of our Insurance Bill Review business unit. On April 30, 2008, the Company completed the sale of the business unit for $14.2 million of cash, subject to the aforementioned final working capital adjustment as defined under the agreement.
Capital Resources and Liquidity
     Cash Flows from Operating Activities
     Our primary method for funding operations and growth has been through cash flows generated from operating activities. Net cash provided by operating activities increased from $113.8 million during the nine months ended June 30, 2008 to $124.3 million during the nine months ended June 30, 2009. Operating cash flows were positively impacted by a decrease in accounts receivable of $35.3 million, which resulted from the timing of cash receipts and an increase in deferred revenue. Operating cash flows were negatively impacted by a decrease in other liabilities and a decline in earnings during the nine months ended June 30, 2009.
     Cash Flows from Investing Activities
     Net cash used in investing activities totaled $12.2 million during the nine months ended June 30, 2009, compared to net cash used in investing activities of $26.6 million in the nine months ended June 30, 2008. The change in cash flows from investing activities was primarily due to $33.3 million paid for the acquisition of Dash Optimization Ltd. in January 2008, $14.2 million cash received in April 2008 from the sale of our Insurance Bill Review business unit, a $11.8 million decrease in proceeds from sales and maturities of marketable securities, net of purchases and a $6.3 million decrease in capital expenditures.
     Cash Flows from Financing Activities
     Net cash provided by financing activities totaled $20,000 during the nine months ended June 30, 2009, compared to net cash used by financing activities of $80.0 million during the nine months ended June 30, 2008. The change in cash flows from financing

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activities was primarily due to a $116.6 million decrease in common stock repurchased, partially offset by a $20.2 million decrease in cash proceeds from net borrowings under our revolving credit facility, senior notes and senior convertible notes and a $16.8 million decrease in proceeds from the issuance of common stock under employee stock plans.
     Repurchases of Common Stock
     From time to time, we repurchase our common stock in the open market pursuant to programs approved by our Board of Directors. During the nine months ended June 30, 2009, we did not repurchase any of our common stock. During the nine months ended June 30, 2008, we expended $116.6 million in connection with our repurchase of common stock under such programs.
     In November 2007, our Board of Directors approved a new common stock repurchase program that replaced a previous program. The new program allows us to purchase shares of our common stock up to an aggregate cost of $250.0 million. As of June 30, 2009, we had $148.2 million remaining under this authorization.
     Dividends
     During the quarter ended June 30, 2009, we paid a quarterly dividend of two cents per common share, which is representative of the eight cents per year dividend we have paid in recent years. Our dividend rate is set by the Board of Directors on a quarterly basis taking into account a variety of factors, including among others our operating results and cash flows, general economic and industry conditions, our obligations, changes in applicable tax laws and other factors deemed relevant by the Board. Although we expect to continue to pay dividends at the current rate, our dividend rate is subject to change from time to time based on the Board’s business judgment with respect to these and other relevant factors.
Credit Agreement
     We have a $600.0 million unsecured revolving credit facility with a syndicate of banks that expires in 2011. Proceeds from the credit facility can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions, and the repurchase of our common stock. Interest on amounts borrowed under the credit facility is based on (i) a base rate, which is the greater of (a) the prime rate and (b) the Federal Funds rate plus 0.50% or (ii) LIBOR plus an applicable margin. The margin on LIBOR borrowings ranges from 0.30% to 0.55% and is determined based on our consolidated leverage ratio. In addition, we must pay utilization fees if borrowings and commitments under the credit facility exceed 50% of the total credit facility commitment, as well as facility fees. The credit facility contains certain restrictive covenants, including maintenance of consolidated leverage and fixed charge coverage ratios. The credit facility also contains covenants typical of unsecured facilities. As of June 30, 2009, we were in compliance with all covenants under this credit facility and we had $295.0 million of borrowings outstanding at an interest rate of 1.3%.
Senior Notes
     In May 2008, we issued $275.0 million of Senior Notes in a private placement to a group of institutional investors. The Senior Notes were issued in four series with maturities ranging from 5 to 10 years. The Senior Notes’ weighted average interest rate is 6.8%. The Senior Notes are subject to certain restrictive covenants that are substantially similar to those in the credit agreement for the revolving credit facility including maintenance of consolidated leverage and fixed charge coverage ratios. The purchase agreement for the Senior Notes also includes covenants typical of unsecured facilities.
Capital Resources and Liquidity Outlook
     As of June 30, 2009, we had $371.6 million in cash, cash equivalents and marketable security investments. We believe that these balances, as well as borrowings available from our revolving credit facility and anticipated cash flows from operating activities, will be sufficient to fund our working and other capital requirements and any scheduled repayments of existing debt over the course of the next twelve months. Under our current financing arrangements we have no significant debt obligations maturing until fiscal 2012. In the normal course of business, we evaluate the merits of acquiring technology or businesses, or establishing strategic relationships with or investing in these businesses. We may elect to use available cash and cash equivalents and marketable security investments to fund such activities in the future. In the event additional needs for cash arise, we may raise additional funds from a combination of sources, including the potential issuance of debt or equity securities. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

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Off-Balance Sheet Arrangements
     We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies and Estimates
     We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. These accounting principles require management to make certain judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We periodically evaluate our estimates including those relating to revenue recognition, the allowance for doubtful accounts, goodwill and other intangible assets resulting from business acquisitions, income taxes and contingencies and litigation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable based on the specific circumstances, the results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
     We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements:
Revenue Recognition
     Software license fee revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred at our customer’s location, the fee is fixed or determinable and collection is probable. We use the residual method to recognize revenue when an arrangement includes one or more elements to be delivered at a future date and vendor-specific objective evidence (“VSOE”) of the fair value of all undelivered elements exists. VSOE of fair value is based on the normal pricing practices for those products and services when sold separately by us and customer renewal rates for post-contract customer support services. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of the fair value of one or more undelivered elements does not exist, the revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established. The determination of whether fees are fixed or determinable and collection is probable involves the use of assumptions. We evaluate contract terms and customer information to ensure that these criteria are met prior to our recognition of license fee revenue. Changes to the elements in a software arrangement, the ability to identify VSOE for those elements, the fair value of the respective elements, and change to a product’s estimated life cycle could materially impact the amount of earned and unearned revenue.
     When software licenses are sold together with implementation or consulting services, license fees are recognized upon delivery provided that the above criteria are met, payment of the license fees is not dependent upon the performance of the services, and the services do not provide significant customization or modification of the software products and are not essential to the functionality of the software that was delivered. For arrangements with services that are essential to the functionality of the software, the license and related service revenues are recognized using contract accounting as described below.
     If at the outset of an arrangement we determine that the arrangement fee is not fixed or determinable, revenue is deferred until the arrangement fee becomes fixed or determinable, assuming all other revenue recognition criteria have been met. If at the outset of an arrangement we determine that collectibility is not probable, revenue is deferred until the earlier of when collectibility becomes probable or the receipt of payment. If there is uncertainty as to the customer’s acceptance of our deliverables, revenue is not recognized until the earlier of receipt of customer acceptance, expiration of the acceptance period, or when we can demonstrate we meet the acceptance criteria.
     Revenues from post-contract customer support services, such as software maintenance, are recognized on a straight-line basis over the term of the support period. The majority of our software maintenance agreements provide technical support as well as unspecified software product upgrades and releases when and if made available by us during the term of the support period.
     Revenues recognized from our credit scoring, data processing, data management and internet delivery services are recognized as these services are performed, provided persuasive evidence of an arrangement exists, fees are fixed or determinable, and collection is reasonably assured. The determination of certain of our credit scoring and data processing revenues requires the use of estimates, principally related to transaction volumes in instances where these volumes are reported to us by our clients on a monthly or quarterly basis in arrears. In these instances, we estimate transaction volumes based on preliminary customer transaction information, if

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available, or based on average actual reported volumes for an immediate trailing period. Differences between our estimates and actual final volumes reported are recorded in the period in which actual volumes are reported. We have not experienced significant variances between our estimates and actual reported volumes in the past and anticipate that we will be able to continue to make reasonable estimates in the future. If for some reason we were unable to reasonably estimate transaction volumes in the future, revenue may be deferred until actual customer data was received, and this could have a material impact on our results of operations during the period of time that we changed accounting methods.
     Transactional or unit-based license fees under software license arrangements, network service and internally-hosted software agreements are recognized as revenue based on system usage or when fees based on system usage exceed monthly minimum license fees, provided persuasive evidence of an arrangement exists, fees are fixed or determinable and collection is probable. The determination of certain of our transactional or unit-based license fee revenues requires the use of estimates, principally related to transaction usage or active account volumes in instances where this information is reported to us by our clients on a monthly or quarterly basis in arrears. In these instances, we estimate transaction volumes based on preliminary customer transaction information, if available, or based on average actual reported volumes for an immediate trailing period. Differences between our estimates and actual final volumes reported are recorded in the period in which actual volumes are reported. We have not experienced significant variances between our estimates and actual reported volumes in the past and anticipate that we will be able to continue to make reasonable estimates in the future. If for some reason we were unable to reasonably estimate customer account or transaction volumes in the future, revenue would be deferred until actual customer data was received, and this could have a material impact on our consolidated results of operations.
     We provide consulting, training, model development and software integration services under both hourly-based time and materials and fixed-priced contracts. Revenues from these services are generally recognized as the services are performed. For fixed-price service contracts, we apply the percentage-of-completion method of contract accounting to determine progress towards completion, which requires the use of estimates. In such instances, management is required to estimate the input measures, generally based on hours incurred to date compared to total estimated hours of the project, with consideration also given to output measures, such as contract milestones, when applicable. Adjustments to estimates are made in the period in which the facts requiring such revisions become known and, accordingly, recognized revenues and profits are subject to revisions as the contract progresses to completion. Estimated losses, if any, are recorded in the period in which current estimates of total contract revenue and contract costs indicate a loss. If substantive uncertainty related to customer acceptance of services exists, we apply the completed contract method of accounting and defer the associated revenue until the contract is completed. If we are unable to accurately estimate the input measures used for percentage-of-completion accounting, revenue would be deferred until the contract is complete, and this could have a material impact on our consolidated results of operations.
     Revenue recognized under the percentage-of-completion method in excess of contract billings is recorded as an unbilled receivable. Such amounts are generally billable upon reaching certain performance milestones as defined by individual contracts. Billings collected in advance of performance and recognition of revenue under contracts are recorded as deferred revenue.
     In certain of our non-software arrangements, we enter into contracts that include the delivery of a combination of two or more of our service offerings. Typically, such multiple element arrangements incorporate the design and development of data management tools or systems and an ongoing obligation to manage, host or otherwise run solutions for our customer. Such arrangements are divided into separate units of accounting provided that the delivered item has stand-alone value and there is objective and reliable evidence of the fair value of the undelivered items. The total arrangement fee is allocated to the undelivered elements based on their fair values and to the initial delivered elements using the residual method. Revenue is recognized separately, and in accordance with our revenue recognition policy, for each element.
     As described above, sometimes our customer arrangements have multiple deliverables, including service elements. Generally, our multiple element arrangements fall within the scope of specific accounting standards that provide guidance regarding the separation of elements in multiple-deliverable arrangements and the allocation of consideration among those elements (e.g., American Institute of Certified Public Accountants Statement of Position (“SOP”) No. 97-2, Software Revenue Recognition, as amended). If not, we apply the separation provisions of Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. The provisions of EITF Issue No. 00-21 require us to unbundle multiple element arrangements into separate units of accounting when the delivered element(s) has stand-alone value and fair value of the undelivered element(s) exists. When we are able to unbundle the arrangement into separate units of accounting, we apply one of the accounting policies described above to each unit. If we are unable to unbundle the arrangement into separate units of accounting, we apply one of the accounting policies described above to the entire arrangement. Sometimes this results in recognizing the entire arrangement fee when delivery of the last element in a multiple element arrangement occurs. For example, if the last undelivered element is a service, we recognize revenue for the entire

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arrangement fee as the service is performed, or if no pattern of performance is discernable, we recognize revenue on a straight-line basis over the term of the arrangement.
     We record revenue on a net basis for those sales in which we have in substance acted as an agent or broker in the transaction.
Allowance for Doubtful Accounts
     We make estimates regarding the collectibility of our accounts receivable. When we evaluate the adequacy of our allowance for doubtful accounts, we analyze specific accounts receivable balances, historical bad debts, customer creditworthiness, current economic trends and changes in our customer payment cycles. Material differences may result in the amount and timing of expense for any period if we were to make different judgments or utilize different estimates. If the financial condition of our customers deteriorates resulting in an impairment of their ability to make payments, additional allowances might be required. We have not experienced significant variances in the past between our estimated and actual doubtful accounts and anticipate that we will be able to continue to make reasonable estimates in the future. If for some reason we did not reasonably estimate the amount of our doubtful accounts in the future, it could have a material impact on our consolidated results of operations.
Business Acquisitions; Valuation of Goodwill and Other Intangible Assets
     Our business acquisitions typically result in the recognition of goodwill and other intangible assets, and in certain cases non-recurring charges associated with the write-off of in-process research and development (“IPR&D”), which affect the amount of current and future period charges and amortization expense. Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including identified intangible assets, in connection with our business combinations accounted for by the purchase method of accounting. We amortize our definite-lived intangible assets using the straight-line method or based on forecasted cash flows associated with the assets over the estimated useful lives, while IPR&D is recorded as a non-recurring charge on the acquisition date. Goodwill is not amortized, but rather is periodically assessed for impairment.
     The determination of the value of these components of a business combination, as well as associated asset useful lives, requires management to make various estimates and assumptions. Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from product sales and services, maintenance agreements, consulting contracts, customer contracts, and acquired developed technologies and patents or trademarks; expected costs to develop the IPR&D into commercially viable products and estimating cash flows from the projects when completed; the acquired company’s brand awareness and market position, as well as assumptions about the period of time the acquired products and services will continue to be used in our product portfolio; and discount rates. Management’s estimates of fair value and useful lives are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Unanticipated events and circumstances may occur and assumptions may change. Estimates using different assumptions could also produce significantly different results.
     We continually review the events and circumstances related to our financial performance and economic environment for factors that would provide evidence of the impairment of our intangible assets. When impairment indicators are identified with respect to our previously recorded intangible assets, then we test for impairment using undiscounted cash flows. If such tests indicate impairment, then we measure the impairment as the difference between the carrying value of the asset and the fair value of the asset, which is measured using discounted cash flows. Significant management judgment is required in forecasting of future operating results, which are used in the preparation of the projected discounted cash flows and should different conditions prevail, material write downs of net intangible assets and other long-lived assets could occur. We periodically review the estimated remaining useful lives of our acquired intangible assets. A reduction in our estimate of remaining useful lives, if any, could result in increased amortization expense in future periods.
     We test goodwill for impairment at the reporting unit level at least annually during the fourth quarter of each fiscal year and more frequently if impairment indicators are identified. We have determined that our reporting units are the same as our reportable segments. The first step of the goodwill impairment test is a comparison of the fair value of a reporting unit to its carrying value. We estimate the fair values of our reporting units using discounted cash flow valuation models and by comparing our reporting units to guideline publicly-traded companies. These methods require estimates of our future revenues, profits, capital expenditures, working capital, and other relevant factors, as well as selecting appropriate guideline publicly-traded companies for each reporting unit. We estimate these amounts by evaluating historical trends, current budgets, operating plans, industry data, and other relevant factors. The estimated fair value of each of our reporting units exceeded its respective carrying value in fiscal 2008, indicating the underlying goodwill of each reporting unit was not impaired. Accordingly, we were not required to complete the second step of the goodwill impairment test. The timing and frequency of our goodwill impairment test is based on an ongoing assessment of events and circumstances that would more than likely reduce the fair value of a reporting unit below its carrying value. There are various

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assumptions and estimates underlying the determination of an impairment loss, and estimates using different, but each reasonable, assumptions could produce significantly different results and materially affect the determination of fair value and/or goodwill impairment for each reporting unit. We believe that the assumptions and estimates utilized were appropriate based on the information available to management. The timing and recognition of impairment losses by us in the future, if any, may be highly dependent upon our estimates and assumptions.
     During the quarter ended December 31, 2008, based on a combination of factors, including the current economic environment and a decline in our operating results and market capitalization, we concluded that there were sufficient indicators to require us to perform an interim goodwill impairment analysis as of December 1, 2008 (the interim testing date). Based on our analysis, we concluded that the estimated fair value of each of our reporting units exceeded its respective carrying value as of the interim testing date, indicating the underlying goodwill of each reporting unit was not impaired. During the quarter ended June 30, 2009, we determined that no additional indicators existed which would require an update from the analysis performed during the prior quarter. However, if difficult market and economic conditions continue over a sustained period, we may experience a further decline in the fair value of one or more of our reporting units as compared to the interim testing date levels. Such further declines in fair value may require us to record an impairment charge related to goodwill.
Share-Based Compensation
     We account for share-based compensation using the fair value recognition provisions of SFAS 123(R), Share-Based Payment. We estimate the fair value of options granted using the Black-Scholes option valuation model. We estimate the volatility of our common stock at the date of grant based on a combination of the implied volatility of publicly traded options on our common stock and our historical volatility rate, consistent with SFAS No. 123(R) and Securities and Exchange Commission Staff Accounting Bulletin No. 107 (“SAB 107”). Our decision to use implied volatility was based upon the availability of actively traded options on our common stock and our assessment that implied volatility is more representative of future stock price trends than historical volatility. Beginning in fiscal 2008, we estimated the expected term of options granted based on historical exercise patterns. In fiscal 2006 and 2007, we estimated the expected term consistent with the simplified method identified in SAB 107 for share-based awards. We elected to use the simplified method as we changed the contractual life for share-based awards from ten to seven years starting in fiscal 2006. The simplified method calculates the expected term as the average of the vesting and contractual terms of the award. Prior to fiscal 2006, we estimated expected term based on historical exercise patterns. The dividend yield assumption is based on historical dividend payouts. The risk-free interest rate assumption is based on observed interest rates appropriate for the term of our employee options. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. For options granted, we amortize the fair value on a straight-line basis. All options are amortized over the requisite service periods of the awards, which are generally the vesting periods. If factors change we may decide to use different assumptions under the Black-Scholes option valuation model in the future, which could materially affect our share-based compensation expense, net income and earnings per share.
     Income Taxes
     We use the asset and liability approach to account for income taxes. This methodology recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax base of assets and liabilities and operating loss and tax credit carryforwards. We then record a valuation allowance to reduce deferred tax assets to an amount that more likely than not will be realized. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, which requires the use of estimates. If we determine during any period that we could realize a larger net deferred tax asset than the recorded amount, we would adjust the deferred tax asset to increase income for the period or reduce goodwill if such deferred tax asset relates to an acquisition. Conversely, if we determine that we would be unable to realize a portion of our recorded deferred tax asset, we would adjust the deferred tax asset to record a charge to income for the period or increase goodwill if such deferred tax asset relates to an acquisition. Although we believe that our estimates are reasonable, there is no assurance that our the valuation allowance will not need to be increased to cover additional deferred tax assets that may not be realizable, and such an increase could have a material adverse impact on our income tax provision and results of operations in the period in which such determination is made. In addition, the calculation of tax liabilities also involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could also have a material impact on our income tax provision and results of operations in the period in which such determination is made.

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     We adopted the provisions of FASB Interpretation No. 48 (“FIN No. 48”), Accounting for Uncertainty in Income Taxes, on October 1, 2007. The cumulative effect of the change did not result in an adjustment to the beginning balance of retained earnings. Following implementation, the ongoing recognition of changes in measurement of uncertain tax positions will be reflected as a component of income tax expense.
Contingencies and Litigation
     We are subject to various proceedings, lawsuits and claims relating to products and services, technology, labor, shareholder and other matters. We are required to assess the likelihood of any adverse outcomes and the potential range of probable losses in these matters. If the potential loss is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. If the potential loss is considered less than probable or the amount cannot be reasonably estimated, disclosure of the matter is considered. The amount of loss accrual or disclosure, if any, is determined after analysis of each matter, and is subject to adjustment if warranted by new developments or revised strategies. Due to uncertainties related to these matters, accruals or disclosures are based on the best information available at the time. Significant judgment is required in both the assessment of likelihood and in the determination of a range of potential losses. Revisions in the estimates of the potential liabilities could have a material impact on our consolidated financial position or consolidated results of operations.
New Accounting Pronouncements Not Yet Adopted
     In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) states that business combinations will result in all assets and liabilities of an acquired business being recorded at their fair values. Certain forms of contingent consideration and acquired contingencies will be recorded at fair value at the acquisition date. SFAS 141(R) also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. This statement is effective for financial statement issued for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of SFAS 141(R) will have on our consolidated financial statements.
     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 160 clarifies that a noncontrolling or minority interest in a subsidiary is considered an ownership interest and, accordingly, requires all entities to report such interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of SFAS 160 will have on our consolidated financial statements.
     In April 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible Assets.” This new staff position is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), “Business Combinations.” FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008. We are in the process of determining what effect, if any, the adoption of FSP SFAS 142-3 will have on our consolidated financial statements.
     In May 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The FSP requires that proceeds from the issuance of convertible debt instruments be allocated between debt (at a discount) and an equity component. The debt discount will be amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. This FSP is effective for fiscal years beginning after December 15, 2008, and will be applied retrospectively to prior periods. This FSP changes the accounting treatment for our Senior Convertible Notes, which were issued in August 2003. Even though we retired our Senior Convertible Notes during fiscal 2008, this new accounting treatment still requires us to retrospectively record a significant amount of non-cash interest expense in the periods when these notes were outstanding. We are in the process of determining what effect the adoption of this FSP will have on our consolidated financial statements.
     In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” (“SFAS 167”) which revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. We are currently evaluating the impact of SFAS 167 on our consolidated financial statements.

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     In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162,” (“SFAS 168”) and approved the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative nongovernmental US GAAP. The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. We expect the implementation of SFAS 168 to have no impact on our consolidated financial statements.
     Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Disclosures
     We are exposed to market risk related to changes in interest rates, equity market prices, and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.
Interest Rate Risk
     We maintain an investment portfolio consisting mainly of income securities with an average maturity of three years or less. These available-for-sale securities are subject to interest rate risk and will fall in value if market interest rates increase. We have the ability to hold our fixed income investments until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our securities portfolio. The following table presents the principal amounts and related weighted-average yields for our investments with interest rate risk at June 30, 2009 and September 30, 2008:
                                                 
    June 30, 2009     September 30, 2008  
    Cost     Carrying     Average     Cost     Carrying     Average  
    Basis     Amount     Yield     Basis     Amount     Yield  
    (Dollars in thousands)  
Cash and cash equivalents
  $ 240,346     $ 240,346       0.21 %   $ 129,678     $ 129,678       2.56 %
Short-term investments
    75,408       75,743       1.82 %     57,065       57,049       3.42 %
Long-term investments
    51,572       52,096       2.18 %     67,274       67,397       3.55 %
 
                                       
 
  $ 367,326     $ 368,185       0.82 %   $ 254,017     $ 254,124       3.01 %
 
                                       
     In May 2008, we issued $275.0 million of Senior Notes to a group of institutional investors in a private placement. The fair value of our Senior Notes may increase or decrease due to various factors, including fluctuations in market interest rates and fluctuations in general economic conditions. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity, above, for additional information on the Senior Notes. The following table presents the principal amounts, carrying amounts, and fair values for our Senior Notes at June 30, 2009 and September 30, 2008:
                                                 
    June 30, 2009   September 30, 2008
            Carrying   Fair           Carrying   Fair
    Principal   Amount   Value   Principal   Amount   Value
    (In thousands)
Senior Notes
  $ 275,000     $ 275,000     $ 272,598     $ 275,000     $ 275,000     $ 239,153  
     We have interest rate risk with respect to our five-year $600 million unsecured revolving credit facility. Interest on amounts borrowed under the credit facility is based on (i) a base rate, which is the greater of (a) the prime rate and (b) the Federal Funds rate plus 0.50% or (ii) LIBOR plus an applicable margin. The margin on LIBOR borrowings ranges from 0.30% to 0.55% and is determined based on our consolidated leverage ratio. A change in interest rates on this variable rate debt impacts the interest incurred and cash flows, but does not impact the fair value of the instrument. We had $295.0 million of borrowings outstanding on this facility as of June 30, 2009 and September 30, 2008.
Forward Foreign Currency Contracts
     We maintain a program to manage our foreign currency exchange rate risk on existing foreign currency receivable and bank balances by entering into forward contracts to sell or buy foreign currency. At period end, foreign-denominated receivables and cash balances held by our U.S. reporting entities are re-measured into the U.S. dollar functional currency at current market rates. The

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change in value from this re-measurement is then reported as a foreign exchange gain or loss for that period in our accompanying consolidated statements of income and the resulting gain or loss on the forward contract mitigates the exchange rate risk of the associated assets. All of our forward foreign currency contracts have maturity periods of less than three months. Such derivative financial instruments are subject to market risk.
     The following table summarizes our outstanding forward foreign currency contracts, by currency at June 30, 2009:
                         
    Contract Amount    
    Foreign           Fair Value
    Currency   US $   US $
    (In thousands)
Sell foreign currency:
                       
EURO (EUR)
  EUR 6,300     $ 8,894     $  
Japanese Yen (YEN)
  YEN   94,100       978        
Canadian Dollar (CAD)
  CAD 1,300       1,126        
 
                       
Buy foreign currency:
                       
British Pound (GBP)
  GBP 3,541     $ 5,870     $  
     The forward foreign currency contracts were all entered into on June 30, 2009; therefore, the fair value was $0 on that date.
Item 4.   Controls and Procedures
     Evaluation of Disclosure Controls and Procedures
     An evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.
     Changes in Internal Control over Financial Reporting
     No change in our internal control over financial reporting was identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this quarterly report and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1.   Legal Proceedings
     On October 11, 2006, we filed a lawsuit in the U.S. District Court for the District of Minnesota captioned Fair Isaac Corporation and myFICO Consumer Services Inc. v. Equifax Inc., Equifax Information Services LLC, Experian Information Solutions, Inc., TransUnion LLC, VantageScore Solutions LLC, and Does I through X. The lawsuit related in part to the development, marketing, and distribution of VantageScore, a credit score product developed by VantageScore Solutions LLC, which is jointly owned by the three national credit reporting companies. We alleged in the lawsuit violations of antitrust laws, unfair competitive practices and false advertising, trademark infringement, and breach of contract. We have been seeking injunctive relief, and compensatory and punitive damages. On June 6, 2008, we entered into a settlement agreement with Equifax Inc. and Equifax Information Services LLC, and on June 13, 2008, Equifax Inc. and Equifax Information Services LLC were formally dismissed from this lawsuit. On February 9, 2009, the Court granted our motion to strike counterclaims the remaining defendants had attempted to bring against us in the case, allowing them to assert only a counterclaim for trademark cancellation. On July 24, 2009, the Court issued a summary judgment order, which limited the claims that will proceed to trial. The Court dismissed our antitrust claims, contract, and certain false advertising claims. The Court allowed our trademark infringement, unfair competition, and passing off claims to proceed to trial. We will continue to

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pursue our claims, with trial expected later this year. We expect to appeal the dismissal of our antitrust, contract, and false advertising claims following trial.
Item 1A.   Risk Factors
Risks Related to Our Business
We have expanded the pursuit of our Decision Management strategy, and we may not be successful, which could cause our growth prospects and results of operations to suffer.
     We have focused the pursuit of our business objective to become a leader in helping businesses automate and improve decisions across their enterprises, an approach that we commonly refer to as Decision Management, or “DM.” Our DM strategy is designed to enable us to increase our business by selling multiple products to clients, as well as to enable the development of custom client solutions that may lead to opportunities to develop new proprietary scores or other new proprietary products. The market may be unreceptive to this general DM business approach, including being unreceptive to purchasing multiple products from us or unreceptive to our customized solutions. If our DM strategy is not successful, we may not be able to grow our business, growth may occur more slowly than we anticipate or our revenues and profits may decline.
Our reengineering plan may not be successful which could cause our growth prospects and profitability to suffer.
     We are implementing a reengineering plan designed to grow revenues through strategic resource allocation and improve profitability through cost reductions. Initially, implementation of the reengineering plan will reduce our revenues as a result of our exit from non-strategic product lines. Our reengineering plan may not be successful as a result of our failure to reduce expenses at the anticipated level, our inability to exit all non-strategic product lines included in the plan, a loss of more revenues than currently anticipated as a result of implementing the plan or a lower, or no, positive impact on revenues from strategic resource allocation. If our reengineering plan is not successful, our revenues, results of operations and business may suffer.
We derive a substantial portion of our revenues from a small number of products and services, and if the market does not continue to accept these products and services, our revenues will decline.
     As we implement our DM strategy, we expect that revenues derived from our scoring solutions, account management solutions, fraud solutions, originations, collections and recovery solutions products and services will continue to account for a substantial portion of our total revenues for the foreseeable future. Our revenues will decline if the market does not continue to accept these products and services. Factors that might affect the market acceptance of these products and services include the following:
    changes in the business analytics industry;
 
    changes in technology;
 
    our inability to obtain or use key data for our products;
 
    saturation or contraction of market demand;
 
    loss of key customers;
 
    industry consolidation;
 
    failure to execute our client-centric selling approach; and
 
    inability to successfully sell our products in new vertical markets.
If we are unable to access new markets or develop new distribution channels, our business and growth prospects could suffer.
     We expect that part of the growth that we seek to achieve through our DM strategy will be derived from the sale of DM products and service solutions in industries and markets we do not currently serve. We also expect to grow our business by delivering our DM solutions through additional distribution channels. If we fail to penetrate these industries and markets to the degree we anticipate utilizing our DM strategy, or if we fail to develop additional distribution channels, we may not be able to grow our business, growth may occur more slowly than we anticipate or our revenues and profits may decline.
If we are unable to develop successful new products or if we experience defects, failures and delays associated with the introduction of new products, our business could suffer serious harm.
     Our growth and the success of our DM strategy depend upon our ability to develop and sell new products or suites of products. If we are unable to develop new products, or if we are not successful in introducing new products, we may not be able to grow our

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business, or growth may occur more slowly than we anticipate. In addition, significant undetected errors or delays in new products or new versions of products may affect market acceptance of our products and could harm our business, financial condition or results of operations. In the past, we have experienced delays while developing and introducing new products and product enhancements, primarily due to difficulties developing models, acquiring data and adapting to particular operating environments. We have also experienced errors or “bugs” in our software products, despite testing prior to release of the products. Software errors in our products could affect the ability of our products to work with other hardware or software products, could delay the development or release of new products or new versions of products and could adversely affect market acceptance of our products. Errors or defects in our products that are significant, or are perceived to be significant, could result in rejection of our products, damage to our reputation, loss of revenues, diversion of development resources, an increase in product liability claims, and increases in service and support costs and warranty claims.
We rely on relatively few customers, as well as our contracts with the three major credit reporting agencies, for a significant portion of our revenues and profits. Certain of our large customers have been negatively impacted by the recent financial crisis. If these customers continue to be negatively impacted, or if the terms of these relationships otherwise change, our revenues and operating results could decline.
     Most of our customers are relatively large enterprises, such as banks, credit card processors, insurance companies, healthcare firms, retailers and telecommunications carriers. As a result, many of our customers and potential customers are significantly larger than we are and may have sufficient bargaining power to demand reduced prices and favorable nonstandard terms.
     In addition, since mid-2007, global financial markets have suffered substantial stress, volatility, illiquidity and disruption. These forces reached unprecedented levels in the fall of 2008, resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions which are customers of our Company. The potential for increased and continuing economic disruption presents considerable risks to our business, including potential bankruptcies or credit deterioration of financial institutions with which we have substantial relationships. Further deterioration or a continuation of the market conditions experienced since the fall of 2008 is likely to lead to a continued decline in the volume of transactions that we execute for our customers.
     We also derive a substantial portion of our revenues and operating income from our contracts with the three major credit reporting agencies, TransUnion, Equifax and Experian, and other parties that distribute our products to certain markets. We are also currently involved in litigation with TransUnion and Experian arising from their development and marketing of a credit scoring product competitive with our products. We have asserted various claims, including unfair competition, antitrust, and breach of contract against these credit reporting agencies and their collective joint venture entity, VantageScore, LLC. This litigation could have a material adverse effect on our relationship with one or more of the major credit reporting agencies, or with major customers.
     The loss of or a significant change in a relationship with a major customer, the loss of or a significant change in a relationship with one of the major credit reporting agencies with respect to their distribution of our products or with respect to our myFICO® offerings, the loss of or a significant change in a relationship with a significant third-party distributor or the delay of significant revenues from these sources, could have a material adverse effect on our revenues and results of operations.
We rely on relationships with third parties for marketing, distribution and certain services. If we experience difficulties in these relationships, our future revenues may be adversely affected.
     Our Scoring Solutions segment and Strategy Machine Solutions segment rely on distributors, and we intend to continue to market and distribute our products through existing and future distributor relationships. Our Scoring Solutions segment relies on, among others, TransUnion, Equifax and Experian. Failure of our existing and future distributors to generate significant revenues, demands by such distributors to change the terms on which they offer our products or our failure to establish additional distribution or sales and marketing alliances could have a material adverse effect on our business, operating results and financial condition. In addition, certain of our distributors presently compete with us and may compete with us in the future either by developing competitive products themselves or by distributing competitive offerings. For example, TransUnion, Equifax and Experian have developed a credit scoring product to compete directly with our products and are collectively attempting to sell the product. Competition from distributors or other sales and marketing partners could significantly harm sales of our products and services.
If we do not engage in acquisition activity to the extent we have in the past, we may be unable to increase our revenues at historical growth rates.

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     Our historical revenue growth has been augmented by numerous acquisitions, and we anticipate that acquisitions may continue to be an important part of our revenue growth. Our future revenue growth rate may decline if we do not make acquisitions of similar size and at a comparable rate as in the past.
If we engage in acquisitions, significant investments in new businesses, or divestitures of existing businesses, we will incur a variety of risks, any of which may adversely affect our business.
     We have made in the past, and may make in the future, acquisitions of, or significant investments in, businesses that offer complementary products, services and technologies. Any acquisitions or investments will be accompanied by the risks commonly encountered in acquisitions of businesses, which may include:
    failure to achieve the financial and strategic goals for the acquired and combined business;
 
    overpayment for the acquired companies or assets;
 
    difficulty assimilating the operations and personnel of the acquired businesses;
 
    product liability and other exposure associated with acquired businesses or the sale of their products;
 
    disruption of our ongoing business;
 
    dilution of our existing stockholders and earnings per share;
 
    unanticipated liabilities, legal risks and costs;
 
    retention of key personnel;
 
    distraction of management from our ongoing business; and
 
    impairment of relationships with employees and customers as a result of integration of new management personnel.
     We have also divested ourselves of businesses in the past and may do so again in the future. Any divestitures will be accompanied by the risks commonly encountered in the sale of businesses, which may include:
    disruption of our ongoing business;
 
    reductions of our revenues or earnings per share;
 
    unanticipated liabilities, legal risks and costs;
 
    the potential loss of key personnel;
 
    distraction of management from our ongoing business; and
 
    impairment of relationships with employees and customers as a result of migrating a business to new owners.
     These risks could harm our business, financial condition or results of operations, particularly if they occur in the context of a significant acquisition. Acquisitions of businesses having a significant presence outside the U.S. will increase our exposure to the risks of conducting operations in international markets.
The occurrence of certain negative events may cause fluctuations in our stock price.
     The market price of our common stock may be volatile and could be subject to wide fluctuations due to a number of factors, including variations in our revenues and operating results. We believe that you should not rely on period-to-period comparisons of financial results as an indication of future performance. Because many of our operating expenses are fixed and will not be affected by short-term fluctuations in revenues, short-term fluctuations in revenues may significantly impact operating results. Additional factors that may cause our stock price to fluctuate include the following:
    variability in demand from our existing customers;
 
    failure to meet the expectations of market analysts;
 
    changes in recommendations by market analysts;
 
    the lengthy and variable sales cycle of many products, combined with the relatively large size of orders for our products, increases the likelihood of short-term fluctuation in revenues;
 
    consumer dissatisfaction with, or problems caused by, the performance of our products;
 
    the timing of new product announcements and introductions in comparison with our competitors;
 
    the level of our operating expenses;
 
    changes in competitive and other conditions in the consumer credit, banking and insurance industries;
 
    fluctuations in domestic and international economic conditions, including a continuation of the substantial disruption currently being experienced by the global financial markets;
 
    our ability to complete large installations on schedule and within budget;
 
    acquisition-related expenses and charges; and

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    timing of orders for and deliveries of software systems.
     In addition, the financial markets have experienced significant price and volume fluctuations that have particularly affected the stock prices of many technology companies and financial services companies, and these fluctuations sometimes have been unrelated to the operating performance of these companies. Broad market fluctuations, as well as industry-specific and general economic conditions may adversely affect the market price of our common stock.
     Due to ongoing uncertainty in economic conditions and weakness in financial credit markets, the fair value of our businesses has recently declined. If difficult market and economic conditions continue over a sustained period, we may experience a further decline in the fair value of one or more of our businesses from current levels. Such further declines in fair value may require us to record an impairment charge related to goodwill, which could adversely affect our results of operations, stock price and business.
Our products have long and variable sales cycles. If we do not accurately predict these cycles, we may not forecast our financial results accurately, and our stock price could be adversely affected.
     We experience difficulty in forecasting our revenues accurately because the length of our sales cycles makes it difficult for us to predict the quarter in which sales will occur. In addition, our Integrated Client Networks, or “ICN,” selling approach is more complex than our prior sales approach because it emphasizes the sale of complete DM solutions involving multiple products or services across our customers’ organizations. This makes forecasting of revenues in any given period more difficult. As a result of our ICN approach and lengthening sales cycles, revenues and operating results may vary significantly from period to period. For example, the sales cycle for licensing our products typically ranges from 60 days to 18 months. Customers are often cautious in making decisions to acquire our products, because purchasing our products typically involves a significant commitment of capital, and may involve shifts by the customer to a new software and/or hardware platform or changes in the customer’s operational procedures. Since our DM strategy contemplates the sale of multiple decision solutions to a customer, expenditures by any given customer are expected to be larger than with our prior sales approach. This may cause customers, particularly those experiencing financial stress or budgetary constraints, to make purchasing decisions more cautiously. Delays in completing sales can arise while customers complete their internal procedures to approve large capital expenditures and test and accept our applications. Consequently, we face difficulty predicting the quarter in which sales to expected customers will occur and experience fluctuations in our revenues and operating results. If we are unable to accurately forecast our revenues, our stock price could be adversely affected.
We typically have revenue-generating transactions concentrated in the final weeks of a quarter, which may prevent accurate forecasting of our financial results and cause our stock price to decline.
     Large portions of our software license agreements are consummated in the weeks immediately preceding quarter end. Before these agreements are consummated, we create and rely on forecasted revenues for planning, modeling and earnings guidance. Forecasts, however, are only estimates and actual results may vary for a particular quarter or longer periods of time. Consequently, significant discrepancies between actual and forecasted results could limit our ability to plan, budget or provide accurate guidance, which could adversely affect our stock price. Any publicly-stated revenue or earnings projections are subject to this risk.
The failure to recruit and retain additional qualified personnel could hinder our ability to successfully manage our business.
     Our DM strategy and our future success will depend in large part on our ability to attract and retain experienced sales, consulting, research and development, marketing, technical support and management personnel. The complexity of our products requires highly trained customer service and technical support personnel to assist customers with product installation and deployment. The labor market for these individuals is very competitive due to the limited number of people available with the necessary technical skills and understanding and may become more competitive with general market and economic improvement. We cannot be certain that our compensation strategies will be perceived as competitive by current or prospective employees. This could impair our ability to recruit and retain personnel. We have experienced difficulty in recruiting qualified personnel, especially technical, sales and consulting personnel, and we may need additional staff to support new customers and/or increased customer needs. We may also recruit skilled technical professionals from other countries to work in the United States. Limitations imposed by immigration laws in the United States and abroad and the availability of visas in the countries where we do business could hinder our ability to attract necessary qualified personnel and harm our business and future operating results. There is a risk that even if we invest significant resources in attempting to attract, train and retain qualified personnel, we will not succeed in our efforts, and our business could be harmed. The failure of the value of our stock to appreciate may adversely affect our ability to use equity and equity based incentive plans to attract and retain personnel, and may require us to use alternative and more expensive forms of compensation for this purpose.

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The failure to obtain certain forms of model construction data from our customers or others could harm our business.
     We must develop or obtain a reliable source of sufficient amounts of current and statistically relevant data to analyze transactions and update our products. In most cases, these data must be periodically updated and refreshed to enable our products to continue to work effectively in a changing environment. We do not own or control much of the data that we require, most of which is collected privately and maintained in proprietary databases. Customers and key business alliances provide us with the data we require to analyze transactions, report results and build new models. Our DM strategy depends in part upon our ability to access new forms of data to develop custom and proprietary analytic tools. If we fail to maintain sufficient data sourcing relationships with our customers and business alliances, or if they decline to provide such data due to legal privacy concerns, competition concerns, prohibitions or a lack of permission from their customers, we could lose access to required data and our products, and the development of new products might become less effective. In addition, certain of our products use data from state workers’ compensation fee schedules adopted by state regulatory agencies. Third parties have asserted copyright interests in these data, and these assertions, if successful, could prevent us from using these data. Any interruption of our supply of data could seriously harm our business, financial condition or results of operations.
We will continue to rely upon proprietary technology rights, and if we are unable to protect them, our business could be harmed.
     Our success depends, in part, upon our proprietary technology and other intellectual property rights. To date, we have relied primarily on a combination of copyright, patent, trade secret, and trademark laws, and nondisclosure and other contractual restrictions on copying and distribution to protect our proprietary technology. This protection of our proprietary technology is limited, and our proprietary technology could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Any disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact our competitive position, and ultimately, our business. There can be no assurance that our protection of our intellectual property rights in the United States or abroad will be adequate or that others, including our competitors, will not use our proprietary technology without our consent. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of resources and could harm our business, financial condition or results of operations.
     Some of our technologies were developed under research projects conducted under agreements with various U.S. government agencies or subcontractors. Although we have commercial rights to these technologies, the U.S. government typically retains ownership of intellectual property rights and licenses in the technologies developed by us under these contracts, and in some cases can terminate our rights in these technologies if we fail to commercialize them on a timely basis. Under these contracts with the U.S. government, the results of research may be made public by the government, limiting our competitive advantage with respect to future products based on our research.
If we are subject to infringement claims, it could harm our business.
     We expect that products in the industry segments in which we compete, including software products, will increasingly be subject to claims of patent and other intellectual property infringement as the number of products and competitors in our industry segments grow. We may need to defend claims that our products infringe intellectual property rights, and as a result we may:
    incur significant defense costs or substantial damages;
 
    be required to cease the use or sale of infringing products;
 
    expend significant resources to develop or license a substitute non-infringing technology;
 
    discontinue the use of some technology; or
 
    be required to obtain a license under the intellectual property rights of the third party claiming infringement, which license may not be available or might require substantial royalties or license fees that would reduce our margins.
Breaches of security, or the perception that e-commerce is not secure, could harm our business.
     Our business requires the appropriate and secure utilization of consumer and other sensitive information. Internet-based electronic commerce requires the secure transmission of confidential information over public networks, and several of our products are accessed through the Internet, including our consumer services accessible through the www.myfico.com website. Security breaches in connection with the delivery of our products and services, including products and services utilizing the Internet, or well-publicized security breaches, and the trend toward broad consumer and general public notification of such incidents, could significantly harm our business, financial condition or results of operations. We cannot be certain that advances in criminal capabilities, discovery of new

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vulnerabilities, attempts to exploit vulnerabilities in our systems, data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology protecting the networks that access our net-sourced products, consumer services and proprietary database information.
Protection from system interruptions is important to our business. If we experience a sustained interruption of our telecommunication systems, it could harm our business.
     Systems or network interruptions could delay and disrupt our ability to develop, deliver or maintain our products and services, causing harm to our business and reputation and resulting in loss of customers or revenue. These interruptions can include fires, floods, earthquakes, power losses, equipment failures and other events beyond our control.
Risks Related to Our Industry
Our ability to increase our revenues will depend to some extent upon introducing new products and services. If the marketplace does not accept these new products and services, our revenues may decline.
     We have a significant share of the available market in portions of our Scoring Solutions segment and for certain services in our Strategy Machine Solutions segment, specifically, the markets for account management services at credit card processors and credit card fraud detection software. To increase our revenues, we must enhance and improve existing products and continue to introduce new products and new versions of existing products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. We believe much of the future growth of our business and the success of our DM strategy will rest on our ability to continue to expand into newer markets for our products and services. Such areas are relatively new to our product development and sales and marketing personnel. Products that we plan to market in the future are in various stages of development. We cannot assure you that the marketplace will accept these products. If our current or potential customers are not willing to switch to or adopt our new products and services, either as a result of the quality of these products and services or due to other factors, such as economic conditions, our revenues will decrease.
If we fail to keep up with rapidly changing technologies, our products could become less competitive or obsolete.
     In our markets, technology changes rapidly, and there are continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems, database technology and the use of the Internet. If we fail to enhance our current products and develop new products in response to changes in technology or industry standards, or if we fail to bring product enhancements or new product developments to market quickly enough, our products could rapidly become less competitive or obsolete. For example, the rapid growth of the Internet environment creates new opportunities, risks and uncertainties for businesses, such as ours, which develop software that must also be designed to operate in Internet, intranet and other online environments. Our future success will depend, in part, upon our ability to:
    innovate by internally developing new and competitive technologies;
 
    use leading third-party technologies effectively;
 
    continue to develop our technical expertise;
 
    anticipate and effectively respond to changing customer needs;
 
    initiate new product introductions in a way that minimizes the impact of customers delaying purchases of existing products in anticipation of new product releases; and
 
    influence and respond to emerging industry standards and other technological changes.
If our competitors introduce new products and pricing strategies, it could decrease our product sales and market share, or could pressure us to reduce our product prices in a manner that reduces our margins.
     We may not be able to compete successfully against our competitors, and this inability could impair our capacity to sell our products. The market for business analytics is new, rapidly evolving and highly competitive, and we expect competition in this market to persist and intensify. Our regional and global competitors vary in size and in the scope of the products and services they offer, and include:
    in-house analytic and systems developers;
 
    scoring model builders;
 
    enterprise resource planning (ERP) and customer relationship management (CRM) packaged solutions providers;
 
    business intelligence solutions providers;

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    credit report and credit score providers;
    business process management solution providers;
 
    process modeling tools providers;
 
    automated application processing services providers;
 
    data vendors;
 
    neural network developers and artificial intelligence system builders;
 
    third-party professional services and consulting organizations;
 
    account/workflow management software providers; and
 
    software tools companies supplying modeling, rules, or analytic development tools.
     We expect to experience additional competition from other established and emerging companies, as well as from other technologies. For example, certain of our fraud solutions products compete against other methods of preventing credit card fraud, such as credit cards that contain the cardholder’s photograph, smart cards, cardholder verification and authentication solutions and other card authorization techniques. Many of our anticipated competitors have greater financial, technical, marketing, professional services and other resources than we do, and industry consolidation is creating even larger competitors in many of our markets. As a result, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources than we can to develop, promote and sell their products. Many of these companies have extensive customer relationships, including relationships with many of our current and potential customers. Furthermore, new competitors or alliances among competitors may emerge and rapidly gain significant market share. For example, TransUnion, Equifax and Experian have formed an alliance that has developed a credit scoring product competitive with our products. If we are unable to respond as quickly or effectively to changes in customer requirements as our competition, our ability to expand our business and sell our products will be negatively affected.
     Our competitors may be able to sell products competitive to ours at lower prices individually or as part of integrated suites of several related products. This ability may cause our customers to purchase products that directly compete with our products from our competitors. Price reductions by our competitors could negatively impact our margins, and could also harm our ability to obtain new long-term contracts and renewals of existing long-term contracts on favorable terms.
Legislation that is enacted by the U.S. Congress, the states, Canadian provinces, and other countries, and government regulations that apply to us or to our customers may expose us to liability, affect our ability to compete in certain markets, limit the profitability of or demand for our products, or render our products obsolete. If these laws and regulations require us to change our current products and services, it could adversely affect our business and results of operations.
     Legislation and governmental regulation affect how our business is conducted and, in some cases, subject us to the possibility of future lawsuits arising from our products and services. Globally, legislation and governmental regulation also influence our current and prospective customers’ activities, as well as their expectations and needs in relation to our products and services. Both our core businesses and our newer initiatives are affected globally by federal, regional, provincial, state and other jurisdictional regulations, including those in the following significant regulatory areas:
    Use of data by creditors and consumer reporting agencies. Examples in the U.S. include the Fair Credit Reporting Act (“FCRA”), the Fair and Accurate Credit Transactions Act (“FACTA”), which amends FCRA, and certain proposed regulations and studies mandated by FACTA, under consideration;
 
    Laws and regulations that limit the use of credit scoring models such as state “mortgage trigger” laws, state “inquiries” laws, state insurance restrictions on the use of credit based insurance scores, and the Consumer Credit Directive in the European Union.
 
    Fair lending practices, such as the Equal Credit Opportunity Act (“ECOA”) and Regulation B.
 
    Privacy and security laws and regulations that limit the use and disclosure of personally identifiable information or require security procedures, including but not limited to the provisions of the Financial Services Modernization Act of 1999, also known as the Gramm Leach Bliley Act (“GLBA”); FACTA; the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”); identity theft, file freezing, security breach notification and similar state privacy laws;
 
    Extension of credit to consumers through the Electronic Fund Transfers Act, as well as nongovernmental VISA and MasterCard electronic payment standards;
 
    Regulations applicable to secondary market participants such as Fannie Mae and Freddie Mac that could have an impact on our products;
 
    Insurance laws and regulations applicable to our insurance clients and their use of our insurance products and services;

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    The application or extension of consumer protection laws, including, laws governing the use of the Internet and telemarketing, and credit repair;
 
    Laws and regulations applicable to operations in other countries, for example, the European Union’s Privacy Directive and the Foreign Corrupt Practices Act; and
 
    Sarbanes-Oxley Act (“SOX”) requirements to maintain and verify internal process controls, including controls for material event awareness and notification.
 
    The implementation of the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 by federal regulators to manage the recent financial crisis in the United States;
 
    Laws and regulations regarding export controls as they apply to FICO products delivered in non-US countries.
     In making credit evaluations of consumers, or in performing fraud screening or user authentication, our customers are subject to requirements of multiple jurisdictions, which may impose onerous and contradictory requirements. Privacy legislation such as GLBA or the European Union’s Privacy Directive may also affect the nature and extent of the products or services that we can provide to customers, as well as our ability to collect, monitor and disseminate information subject to privacy protection. In addition to existing regulation, changes in legislative, judicial, regulatory or consumer environments could harm our business, financial condition or results of operations. These regulations and amendments to them could affect the demand for or profitability of some of our products, including scoring and consumer products. New regulations pertaining to financial institutions could cause them to pursue new strategies, reducing the demand for our products.
     In response to recent market disruptions, legislators and financial regulators implemented a number of mechanisms designed to add stability to the financial markets, including the provision of direct and indirect assistance to distressed financial institutions, assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers, and implementation of programs by the Federal Reserve to provide liquidity to the commercial paper markets. The overall effects of these and other legislative and regulatory efforts on the financial markets are uncertain, and they may not have the intended stabilization effects. Should these or other legislative or regulatory initiatives fail to stabilize and add liquidity to the financial markets, our business, financial condition, results of operations and prospects could be materially and adversely affected. Whether or not legislative or regulatory initiatives or other efforts designed to address recent economic conditions successfully stabilize and add liquidity to the financial markets, we may need to modify our strategies, businesses or operations, and we may incur additional costs in order to compete in a changed business environment.
Our revenues depend, to a great extent, upon conditions in the consumer credit, banking and insurance industries. If our clients’ industries continue to experience a downturn, it will likely harm our business, financial condition or results of operations.
     During fiscal 2008, 71% of our revenues were derived from sales of products and services to the consumer credit, banking and insurance industries. Since mid-2007, global credit and other financial markets have suffered substantial stress, volatility, illiquidity and disruption. These forces reached unprecedented levels in the fall of 2008, resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions. The recent market developments and the potential for increased and continuing disruptions present considerable risks to our businesses and operations. These risks include potential bankruptcies or credit deterioration of financial institutions, many of which are our customers. Further deterioration or a continuation of recent market conditions is likely to lead to a continued decline in the revenue we receive from financial and other institutions.
     While the rate of account growth in the U.S. bankcard industry has been slowing and many of our large institutional customers have consolidated in recent years, we have generated most of our revenue growth from our bankcard-related scoring and account management businesses by selling and cross-selling our products and services to large banks and other credit issuers. As the banking industry continues to experience contraction in the number of participating institutions, we may have fewer opportunities for revenue growth due to reduced or changing demand for our products and services that support customer acquisition programs of our customers. In addition, industry contraction could affect the base of recurring revenues derived from contracts in which we are paid on a per-transaction basis as formerly separate customers combine their operations under one contract. There can be no assurance that we will be able to prevent future revenue contraction or effectively promote future revenue growth in our businesses.
     While we are attempting to expand our sales of consumer credit, banking and insurance products and services into international markets, the risks are greater as these markets are also experiencing substantial disruption and we are less well-known in them.

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Risk Related to External Conditions
Continuing material adverse developments in global economic conditions, or the occurrence of certain other world events, could affect demand for our products and services and harm our business.
     Purchases of technology products and services and decisioning solutions are subject to adverse economic conditions. When an economy is struggling, companies in many industries delay or reduce technology purchases, and we experience softened demand for our decisioning solutions and other products and services. Since mid-2007, global credit and other financial markets have suffered substantial stress, volatility, illiquidity and disruption. These forces reached unprecedented levels in the fall of 2008, resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions. The widespread economic downturn has also negatively affected the businesses and purchasing decisions of companies in the other industries we serve. These recent market developments and the potential for increased and continuing disruptions present considerable risks to our businesses and operations. If global economic conditions continue to experience stress and negative volatility, or if there is an escalation in regional or global conflicts or terrorism, we will likely experience reductions in the number of available customers and in capital expenditures by our remaining customers, longer sales cycles, deferral or delay of purchase commitments for our products and increased price competition, which may adversely affect our business, results of operations and liquidity.
     Whether or not legislative or regulatory initiatives or other efforts successfully stabilize and add liquidity to the financial markets, we may need to modify our strategies, businesses or operations, and we may incur additional costs in order to compete in a changed business environment. Given the volatile nature of the current economic downturn and the uncertainties underlying efforts to mitigate or reverse the downturn, we may not timely anticipate or manage existing, new or additional risks, as well as contingencies or developments, which may include regulatory developments and trends in new products and services. Our failure to do so could materially and adversely affect our business, financial condition, results of operations and prospects.
In operations outside the United States, we are subject to unique risks that may harm our business, financial condition or results of operations.
     A growing portion of our revenues is derived from international sales. During fiscal 2008, 33% of our revenues were derived from business outside the United States. As part of our growth strategy, we plan to continue to pursue opportunities outside the United States, including opportunities in countries with economic systems that are in early stages of development and that may not mature sufficiently to result in growth for our business. Accordingly, our future operating results could be negatively affected by a variety of factors arising out of international commerce, some of which are beyond our control. These factors include:
    general economic and political conditions in countries where we sell our products and services;
 
    difficulty in staffing and efficiently managing our operations in multiple geographic locations and in various countries;
 
    effects of a variety of foreign laws and regulations, including restrictions on access to personal information;
 
    import and export licensing requirements;
 
    longer payment cycles;
 
    reduced protection for intellectual property rights;
 
    currency fluctuations;
 
    changes in tariffs and other trade barriers; and
 
    difficulties and delays in translating products and related documentation into foreign languages.
     There can be no assurance that we will be able to successfully address each of these challenges in the near term. Additionally, some of our business will be conducted in currencies other than the U.S. dollar. Foreign currency transaction gains and losses are not currently material to our cash flows, financial position or results of operations. However, an increase in our foreign revenues could subject us to increased foreign currency transaction risks in the future.
     In addition to the risk of depending on international sales, we have risks incurred in having research and development personnel located in various international locations. We currently have a substantial portion of our product development staff in international locations, some of which have political and developmental risks. If such risks materialize, our business could be damaged.

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Our anti-takeover defenses could make it difficult for another company to acquire control of FICO, thereby limiting the demand for our securities by certain types of purchasers or the price investors are willing to pay for our stock.
     Certain provisions of our Restated Certificate of Incorporation, as amended, could make a merger, tender offer or proxy contest involving us difficult, even if such events would be beneficial to the interests of our stockholders. These provisions include adopting a Shareholder Rights Agreement, commonly known as a “poison pill,” and giving our board the ability to issue preferred stock and determine the rights and designations of the preferred stock at any time without stockholder approval. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or discouraging a third party from acquiring, a majority of our outstanding voting stock. These factors and certain provisions of the Delaware General Corporation Law may have the effect of deterring hostile takeovers or otherwise delaying or preventing changes in control or changes in our management, including transactions in which our stockholders might otherwise receive a premium over the fair market value of our common stock.
If we experience changes in tax laws or adverse outcomes resulting from examination of our income tax returns, it could adversely affect our results of operations.
     We are subject to federal and state income taxes in the United States and in certain foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. Our future effective tax rates could be adversely affected by changes in tax laws, by our ability to generate taxable income in foreign jurisdictions in order to utilize foreign tax losses, and by the valuation of our deferred tax assets. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from such examinations will not have an adverse effect on our operating results and financial condition.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (1)
                                 
                    Total Number of    
                    Shares Purchased as   Maximum Dollar Value
                    Part of Publicly   of Shares that May
    Total Number of   Average Price   Announced Plans   Yet Be Purchased Under
Period   Shares Purchased (2)   Paid per Share   or Programs   the Plans or Programs
April 1, 2009 through April 30, 2009
    3,568     $ 16.82           $ 148,161,062  
May 1, 2009 through May 31 , 2009
    3,416     $ 16.88           $ 148,161,062  
June 1, 2009 through June 30, 2009
    2,681     $ 17.06           $ 148,161,062  
 
                               
 
    9,665     $ 16.91           $ 148,161,062  
 
                               
 
(1)   In November 2007, our Board of Directors approved a common stock repurchase program that allows us to purchase shares of our common stock up to an aggregate cost of $250.0 million in the open market or through negotiated transactions. The November 2007 program does not have a fixed expiration date.
 
(2)   Includes 9,665 shares delivered in satisfaction of the tax withholding obligations resulting from the vesting of restricted stock units and non-vested shares held by employees during the quarter ended June 30, 2009.
Item 3.   Defaults Upon Senior Securities
     Not applicable.
Item 4.   Submission of Matters to a Vote of Security Holders
     Not applicable.

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Item 5.   Other Information
     Not applicable.
Item 6.   Exhibits
         
Exhibit    
Number   Description
       
 
  4.1    
Amendment No. 1, dated as of May 21, 2009, to the Rights Agreement, dated as of August 9, 2001, by and between the Company and Mellon Investor Services LLC. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 26, 2009.)
       
 
  10.1    
Voting Agreement, dated as of May 21, 2009, by and between the Company and Southeastern Asset Management, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 26, 2009.)
       
 
  31.1    
Rule 13a-14(a)/15d-14(a) Certifications of CEO.
       
 
  31.2    
Rule 13a-14(a)/15d-14(a) Certifications of CFO.
       
 
  32.1    
Section 1350 Certification of CEO.
       
 
  32.2    
Section 1350 Certification of CFO.

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SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  FAIR ISAAC CORPORATION
 
 
DATE: August 6, 2009  By /s/ THOMAS A. BRADLEY    
  Thomas A. Bradley   
  Executive Vice President and Chief Financial Officer (for Registrant as duly authorized officer and as Principal Financial Officer)   
 
DATE: August 6, 2009
         
     
  By /s/ MICHAEL J. PUNG    
  Michael J. Pung   
  Vice President, Finance
(Principal Accounting Officer)
 
 
 

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EXHIBIT INDEX
To Fair Isaac Corporation Report On Form 10-Q
For The Quarterly Period Ended June 30, 2009
             
Exhibit        
Number   Description   Method of Filing
       
 
   
  4.1    
Amendment No. 1, dated as of May 21, 2009, to the Rights Agreement, dated as of August 9, 2001, by and between the Company and Mellon Investor Services LLC.
  Incorporated by Reference
       
 
   
  10.1    
Voting Agreement, dated as of May 21, 2009, by and between the Company and Southeastern Asset Management, Inc.
  Incorporated by Reference
       
 
   
  31.1    
Rule 13a-14(a)/15d-14(a) Certifications of CEO.
  Filed Electronically
       
 
   
  31.2    
Rule 13a-14(a)/15d-14(a) Certifications of CFO.
  Filed Electronically
       
 
   
  32.1    
Section 1350 Certification of CEO.
  Filed Electronically
       
 
   
  32.2    
Section 1350 Certification of CFO.
  Filed Electronically

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