e10vk
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K
| |
|
|
|
(Mark One)
|
|
|
|
ü
|
|
Annual Report Pursuant To
Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
|
|
For the fiscal
year ended March 31, 2011
|
|
|
|
OR
|
|
|
|
Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
|
|
Commission file number
1-9247
|
CA, Inc.
(Exact name of registrant as
specified in its charter)
| |
|
|
|
Delaware
|
|
13-2857434
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer Identification
Number)
|
|
One CA Plaza,
Islandia, New York
|
|
11749
|
|
(Address of Principal Executive
Offices)
|
|
(Zip Code)
|
1-800-225-5224
(Registrant’s telephone
number, including area code)
Securities registered pursuant to
Section 12(b) of the Act:
| |
|
|
|
(Title of each class)
|
|
(Name of each exchange on which registered)
|
|
Common stock, par value $0.10 per share
Stock Purchase Rights Preferred Stock, Class A
|
|
The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC
|
Securities registered pursuant to
Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. ü Yes No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act. Yes ü No
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. ü Yes No
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). ü Yes No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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):
|
|
|
|
| ü Large
accelerated filer
|
Accelerated filer
|
Non-accelerated
filer
|
Smaller reporting
company
|
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes ü No
The aggregate market value of the common stock held by
non-affiliates of the registrant as of September 30, 2010
(the last business day of the registrant’s most recently
completed second fiscal quarter) was approximately
$8 billion based on the closing price of $21.12 on the
NASDAQ Stock Market LLC on that date.
The number of shares of each of the registrant’s classes of
common stock outstanding at May 6, 2011 was
506,108,276 shares of common stock, par value $0.10 per
share.
Documents Incorporated by Reference:
Part III: Portions of the Proxy Statement to be issued in
conjunction with the registrant’s 2011 Annual Meeting of
Stockholders.
CA, Inc.
Table of Contents
This Annual Report on
Form 10-K
(Form 10-K)
contains certain forward-looking information relating to CA,
Inc. (the “Company,” “Registrant,” “CA
Technologies,” “CA,” “we,”
“our,” or “us”), that is based on the
beliefs of, and assumptions made by, our management as well as
information currently available to management. When used in this
Form 10-K,
the words “anticipate,” “believe,”
“estimate,” “expect,” and similar
expressions are intended to identify forward-looking
information. Such information includes, for example, the
statements made under the caption “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” under Item 7, but also appears in other
parts of this
Form 10-K.
This forward-looking information reflects our current views with
respect to future events and is subject to certain risks,
uncertainties, and assumptions, some of which are described
under the caption “Risk Factors” in Part I
Item 1A and elsewhere in this
Form 10-K.
Should one or more of these risks or uncertainties occur, or
should our assumptions prove incorrect, actual results may vary
materially from those described in this
Form 10-K
as anticipated, believed, estimated, or expected. We do not
intend to update these forward-looking statements.
The product and services names mentioned in this
Form 10-K
are used for identification purposes only and may be protected
by trademarks, trade names, service marks
and/or other
intellectual property rights of the Company
and/or other
parties in the United States
and/or other
jurisdictions. The absence of a specific attribution in
connection with any such mark does not constitute a waiver of
any such right.
ITIL®
is a registered trademark of the Office of Government Commerce
in the United Kingdom and other countries. All other trademarks,
trade names, service marks and logos referenced herein, belong
to their respective companies.
References in this
Form 10-K
to fiscal 2011, fiscal 2010 and fiscal 2009, etc. are to our
fiscal years ended on March 31, 2011, 2010 and 2009, etc.,
respectively.
Part I
Item 1.
Business.
|
|
|
(a)
|
General
development of business
|
Overview
CA Technologies is the leading independent enterprise
information technology (IT) management software and solutions
company with expertise across IT environments — from
mainframe and physical to virtual and cloud. We develop and
deliver software and services that help organizations manage,
secure and automate their IT infrastructures and deliver more
flexible IT services. This allows companies to more effectively
and efficiently respond to business needs.
We address components of the computing environment, including
people, information, processes, systems, networks, applications
and databases, regardless of the hardware or software customers
are using. We have a broad portfolio of software solutions that
address customer needs, including mainframe; service assurance;
security (identity and access management); project and portfolio
management; service management; virtualization and service
automation; and cloud computing. We deliver our products
on-premises or, for certain products, using
Software-as-a-Service (SaaS).
Fiscal
2011 business developments and highlights
The following are significant developments and highlights
relating to our business since the beginning of fiscal 2011:
|
|
|
| |
•
|
In December 2010, we acquired Torokina Pty Ltd (Torokina), an
Australia-based provider of telecommunications management
solutions to 2G, 3G and next-generation networks,
Voice-Over-Internet
Protocol service providers and network operators worldwide. This
acquisition enables us to expand the support of our service
assurance portfolio for the advanced network devices and
equipment used by communications service providers for their
rapidly growing mobile voice and data environments.
|
| |
| |
•
|
In December 2010, we announced the availability of CA Mainframe
Chorus, an important innovation in our Mainframe 2.0 strategy.
It offers management capabilities that are designed to appeal to
the next-generation of mainframe professionals, while also
offering significant productivity improvements to today’s
mainframe experts.
|
| |
| |
•
|
In October 2010, we acquired Hyperformix, Inc. (Hyperformix), a
provider of capacity management software for dynamic physical,
virtual and cloud IT infrastructures.
|
1
|
|
|
| |
•
|
In October 2010, we announced the next-generation CA Automation
Suite to help customers migrate to a virtualized, dynamic cloud
computing infrastructure. CA Automation Suite is designed to
offer a comprehensive business service-centric approach to the
deployment and scaling of IT infrastructure and services.
|
| |
| |
•
|
In October 2010, we acquired Arcot Systems, Inc. (Arcot), a
provider of authentication and fraud prevention solutions
through on-premises software or cloud services. This acquisition
enhances our identity and access management offerings.
|
| |
| |
•
|
In October 2010, we released CA
3Tera®
AppLogic®,
our new turnkey cloud computing platform designed to help
organizations reduce risks associated with cloud deployments and
enter new markets more rapidly. These actions complement our
August 2010 acquisition of 4Base Technology, a virtualization
and cloud infrastructure consulting firm.
|
| |
| |
•
|
In July 2010, we announced five new products in our CA Virtual
Suite, which enables customers to provision, control, assure,
secure and optimize virtual environments. We also announced
enhancements to CA Identity Manager to allow customers to
automate provisioning to cloud applications, including Google
Apps and Salesforce.com’s enterprise cloud computing
platform.
|
| |
| |
•
|
In June 2010, we sold our non-strategic Information Governance
business, which consisted primarily of the CA Records Manager
and CA Message Manager software offerings, to Autonomy
Corporation plc.
|
| |
| |
•
|
In May 2010, we held CA World, our user conference, with more
than 7,000 attendees. During the conference, we announced the
change of our brand name to CA Technologies. We also introduced
the CA Cloud-Connected Management Suite to help customers manage
and secure IT in the cloud.
|
| |
| |
•
|
In May 2010, we announced a new stock repurchase program that
authorizes us to purchase up to $500 million of our common
stock. During fiscal 2011, we repurchased 10.5 million
shares of our common stock at a total cost of $218 million.
|
| |
| |
•
|
In April 2010, we attained the International Organization for
Standardization (ISO)/IEC
20000-1:2005
and ISO/IEC 27001:2005 certifications for our Global IT
Operations demonstrating leadership in IT service management and
information security.
|
We made the following changes to our executive management team
and Board of Directors:
|
|
|
| |
•
|
In April 2011, Rohit Kapoor was elected to our Board of
Directors. Mr. Kapoor is Chief Executive Officer of
ExlService Holdings, Inc.
|
| |
| |
•
|
In June 2010, we announced the appointment of David C. Dobson as
Executive Vice President and Group Executive, Customer Solutions
Group. During fiscal 2011, Mr. Dobson, along with George J.
Fischer as Executive Vice President and Group Executive,
Worldwide Sales and Operations, focused on driving collaboration
and accountability across the Company while providing us the
opportunity to deliver improved customer service and product
innovation.
|
| |
| |
•
|
In June 2010, we announced the appointment of Phillip J.
Harrington, Jr. to the position of Executive Vice
President, Risk, and Chief Administrative Officer.
|
| |
| |
•
|
In May 2010, our Board of Directors elected Arthur F. Weinbach
as non-executive chairman of the Board. In this capacity,
Mr. Weinbach succeeded William E. McCracken, who became our
Chief Executive Officer in January 2010.
|
|
|
|
(b)
|
Financial
information about segments
|
Our global business consists of a single operating
segment — the design, development, marketing,
licensing and support of IT management software products that
operate on a wide range of hardware platforms and operating
systems. Refer to Note 18 “Segment and Geographic
Information,” in the Notes to the Consolidated Financial
Statements for financial data pertaining to our segment and
geographic operations. We are in the process of reorganizing our
internal management reporting and will change our segment
reporting in the first quarter of fiscal 2012.
|
|
|
(c)
|
Narrative
description of the business
|
As the leading independent enterprise IT management software and
solutions company, we develop and deliver software and services
that help organizations manage, secure and automate their IT
infrastructures, adopt new technologies and deliver more
flexible IT services. Our products are designed to work in a
wide range of IT environments — from mainframe and
physical to virtual and cloud. This allows our customers to more
effectively and efficiently respond to business needs and
compete in the marketplace.
2
The ever-increasing role of IT in today’s businesses is
placing new demands on IT, moving our industry at a faster pace
than in the past. As a result, the IT landscape continues to
evolve rapidly with technologies like virtualization and cloud
computing, and the introduction of SaaS.
Many companies are using these emerging technologies to extend
their legacy physical environments to virtual and cloud
environments, with the goals of increasing speed, flexibility
and agility, and controlling costs. Companies use technology
like virtualization, which lets users run multiple virtual
machines on each physical machine, to improve the efficiency and
availability of their IT resources and applications. This
reduces operating costs tied to physical infrastructure.
Virtualization is essential to the evolution of cloud computing,
the on-demand access to a shared pool of computing resources
that can be configured and used as needed. At the same time, the
consumption of IT assets is evolving through the adoption of
SaaS, where customers can obtain software on a subscription,
“pay-as-you go” model. This move to
“just-in-time”
sourcing for IT enables customers to obtain IT services and
solutions when, where and how they need them.
As more companies begin to adopt virtualization and cloud
computing, data centers are becoming more complex, with
mainframe, physical servers, virtualized servers, and private,
public and hybrid (a combination of public and private) cloud
environments. As a result of this heightened complexity, we
believe it is essential for companies to manage and secure all
of their various computing environments.
To address these demands, we have built a broad portfolio of
mainframe and distributed software products with a focus on:
|
|
|
| |
•
|
Mainframe, where we are the leading independent software
vendor. We continue to innovate on this platform that runs many
of our largest customers’ most important applications. Our
mainframe strategy is to help customers and partners simplify
mainframe management, gain more value from existing technology
and extend mainframe capabilities. In December 2010, we
introduced CA Mainframe Chorus and CA Mainframe Chorus for DB2
Database Management to further help customers control costs and
increase mainframe productivity and agility. CA Mainframe Chorus
is an innovation in our Mainframe 2.0 strategy, which offers
management capabilities designed to appeal to the next
generation of mainframe staff while also offering productivity
improvements to today’s mainframe experts.
|
| |
| |
•
|
Service Assurance, where we are a leader in application
performance management and infrastructure management. We enable
customers to simplify IT management by linking applications,
real users, transactions and services with the underlying IT
infrastructure. This provides a comprehensive, unified
understanding of the real-time performance, risk and quality of
business services and end-users’ experience across
physical, virtual and cloud environments. As a result of our
fiscal 2010 acquisition of NetQoS, Inc. (NetQoS) we now have one
of the most complete service assurance technologies in the
industry. Service Assurance products include CA Application
Performance Management, CA
Introscope®
and CA Infrastructure Management.
|
| |
| |
•
|
Security (Identity and Access Management), where we make
IT more secure across physical, virtual and cloud environments.
Our solution, Content Aware Identity and Access Management,
helps manage identities, control access and manage how
information is used to minimize risk, boost compliance and
enable organizations to safely and confidently adopt
next-generation technologies. Our fiscal 2011 acquisition of
Arcot added products to our portfolio that we believe will
accelerate our cloud security strategy and the delivery of
identity and access management solutions. Our security solutions
include CA
SiteMinder®,
CA Access Control, CA Identity Manager, CA Arcot
RiskForttm
and CA Arcot
WebFort®.
|
| |
| |
•
|
Project and Portfolio Management (PPM), where our CA
Claritytm
PPM product is designed to help customers improve IT investment
decision-making, enhance productivity and execute projects at a
higher value and lower cost. Our PPM products also include CA
Idea
Visiontm,
CA Product
Visiontm
and CA Agile
Visiontm.
|
| |
| |
•
|
Service Management, where we offer service desk
management and IT asset management. We enable our customers to
implement repeatable, measurable processes for defining,
transitioning, delivering and supporting services and assets
throughout their lifecycles. This allows our customers to
improve service quality, user satisfaction and staff efficiency
while maximizing the business value of their resources. Our
solutions include CA Service Desk Manager, CA IT Asset Manager
and CA Service Catalog.
|
| |
| |
•
|
Virtualization and Service Automation, where we enable
customers to manage multiple virtual and underlying physical
platforms to increase efficiency and reliability at a reduced
cost. We manage virtualization centrally through real-time
visibility and control, helping to improve quality and
efficiency and reduce risk. In July 2010 we introduced five
products in the CA Technologies virtual portfolio, and in
September 2010 we added capacity management software for dynamic
|
3
|
|
|
| |
|
physical, virtual and cloud IT infrastructures with our
acquisition of Hyperformix. Our solutions include CA Automation
Suite for Data Centers, CA Client Automation and CA Workload
Automation.
|
|
|
|
| |
•
|
Cloud Computing, where we provide large enterprises with
solutions to design, automate, secure and assure services to
transform data centers into private clouds and leverage public
cloud services. Cloud computing also creates opportunities to
expand our reach to new markets. Our offerings such as those
from our Arcot acquisition and our fiscal 2010 Nimsoft AS
(Nimsoft) acquisition, as well as 3Tera AppLogic, enable new
revenue streams and business models for managed service
providers. These offerings also provide emerging enterprises,
which we view as companies with annual revenue between
$300 million and $2 billion, with subscription-based
cloud services that help IT professionals of all skill levels
quickly adopt best practices. Our solutions cover turnkey cloud
platforms, automated capacity management, cloud vendor
management services and cloud service quality assurance.
|
We offer our software products and solutions directly to our
customers through our sales force and indirectly through global
systems integrators, technology partners, managed service
providers, solution providers, distributors and volume partners,
and exclusive representatives. We deliver all of our products
on-premises or, for certain products, using SaaS.
We license our products worldwide. We service companies across
most major industries around the world, including banks,
insurance companies, other financial services providers,
government agencies, manufacturers, technology companies,
retailers, educational organizations and health care
institutions. The majority of the Global Fortune 500 uses our
software to manage evolving IT environments.
Some of our business results are seasonal, including software
license transactions and cash flows from operations. These
business results typically increase during each consecutive
quarter of our fiscal year, with the fourth quarter typically
having the highest results.
Business
strategy
Our industry is experiencing high levels of change as
innovations in virtualization, cloud computing and SaaS offer
new, high-value solutions to our customers’ business and IT
needs. Our strategy is to help our customers manage, secure and
automate IT and to make us their strategic partner as they
deploy new technologies and maximize their investments in
current systems and applications. Our strategy is intended to
build on our core strengths in IT management and to position us
to drive sales in next-generation markets, including
virtualization, cloud and SaaS. We have continued our ongoing
efforts to shift our product portfolio to higher growth areas
and modified our routes to market to match customer preferences.
We are focused on making additional progress in these areas. We
are executing our strategy through a combination of internal
development and targeted acquisitions that are intended to add
key technologies to our portfolio and extend our reach into new
markets and segments. We believe the continuing evolution of IT
opens the door for us to cross-sell and up-sell solutions to
existing customers and attract new customers, all of which
should help us drive new sales of products. This strategy is
providing opportunities to develop new addressable markets and
revenue streams for us.
We serve a core set of large enterprise customers who have
highly complex and heterogeneous computing environments. Many of
our customers run critical applications on a mainframe, have
sizeable physical systems and are adopting virtualization and
cloud computing technologies. We believe they need to leverage
their existing IT investments while taking advantage of new
technologies and the on-demand delivery made possible by SaaS.
We are focused on strengthening our relationships with these
core customers through improved account management and
reinvigorating our
end-to-end
customer experience. Simultaneously, we have refreshed our
product and services portfolio, introducing or acquiring more
than 40 new products within the last 12 months. This
enables us to offer new products and support the value of our
maintenance renewal stream, while at the same time adding new
enterprise customers to CA Technologies.
In addition to investing in technologies to serve our core
enterprise market, we also are extending our reach to emerging
enterprises and emerging geographies (which we also refer to as
our growth geographies), such as Asia, Eastern Europe and Latin
America. These markets are generally experiencing rapid economic
growth and accelerating demand for IT products and services. For
us, emerging markets also includes Japan, where we are expanding
our presence. In addition, new technologies are key to business
development in Brazil, China, India, Mexico and southeast Asia.
During fiscal 2011, we enhanced our ability to address these
markets with the introduction of new SaaS, virtualization, cloud
and security solutions.
Customers rely on various types of service providers to help
them select, deploy and use IT services and products. We are
increasing the number of our relationships and expanding
existing relationships with these providers, particularly global
outsourcers, regional managed service providers and
communication network operators. At the same time, we are
improving
4
the capabilities of our products and services to meet the unique
needs of service providers. For example, our acquisition of
Torokina enhances our ability to meet the performance management
needs for both internal IT and network operations within the
communications service provider market. The acquisition of Arcot
added technology for fraud prevention and authentication to
address the needs of both enterprise users and financial service
providers. We also introduced new versions of our CA Service
Desk Manager product targeting the largest providers of help
desk services.
We believe that emerging enterprises are early adopters of cloud
services and seek the increased flexibility, convenience and
reduced costs that cloud computing can offer. To realize the
benefits of cloud computing, these emerging enterprises need
effective solutions for management and security. We believe that
there are more than 14,000 emerging enterprises worldwide, which
significantly expands our addressable market. We are delivering
a suite of capabilities designed to meet the specific needs of
this market. For example, following our acquisition of Nimsoft
in fiscal 2010, we introduced Nimsoft Unified Monitoring for
enterprises and service providers to centrally monitor their
entire IT infrastructures, from the data center to the cloud.
Nimsoft is offered as both an on-premises solution and SaaS, and
offers the simple,
quick-to-deploy
functionality this market segment requires. We also have
introduced CA Clarity PPM On Demand and CA Service Desk Manager
On Demand to expand our SaaS offerings. Managed service
providers who predominantly serve emerging enterprises are
adopting our new suite, which creates an important new route to
market for us. These product introductions represent our initial
steps to capitalize on this market, and we are continuing to
expand our capabilities to address the needs of emerging
enterprises.
Customers
We have a large and broad base of customers, including the
majority of the Global Fortune 500. Most of our revenue is
generated from enterprise customers who have the ability to make
substantial commitments to software and hardware
implementations. While we continue to focus on solutions to
offer to these customers, our strategy is also aimed at
expanding our reach in emerging markets. This includes expanding
in new geographies and segments such as managed service
providers and emerging enterprises. Our software products are
used in a broad range of industries, businesses and
applications. We currently serve customers across most major
industries worldwide, including banks, insurance companies,
other financial services providers, government agencies,
manufacturers, technology companies, retailers, educational
organizations and health care institutions.
When customers enter into software license agreements with us,
they often pay for the right to use our software for a specified
period of time. When the terms of these agreements expire,
customers may either renew the license agreements or pay usage
and maintenance fees, if applicable, for the right to continue
to use our software, receive support,
and/or
receive future upgrades. Our customers’ satisfaction is
important to us and we believe that our enhanced product
portfolio allows us to maintain our customer base, cross-sell
new software products and services to them, and attract new
customers.
No single customer accounted for 10% or more of total revenue
for fiscal 2011, 2010 and 2009. Approximately 9% of our total
revenue backlog at March 31, 2011 is associated with
multi-year contracts signed with the U.S. federal
government and other U.S. state and local government
agencies which are generally subject to any or all of the
following: annual fiscal funding approval, renegotiation or
termination at the discretion of the government.
Partners
Strategic partners are an important component of how we do
business. We go to market with partners to increase sales in new
market segments, complement our technology and services, provide
more comprehensive offerings, and help build brand awareness. We
continue to build strategic alliances to increase our share of
currently served markets and penetrate additional markets. We
are expanding our alliance partnerships globally, enhancing our
network of regional “lead solution providers” who can
extend our cloud technologies beyond our current customer base,
and growing our next-generation offerings for service providers.
We work with several types of partners:
|
|
|
| |
•
|
Global Systems Integrators (GSIs) offer our products and
solutions in their business practices and leverage their process
design, planning and vertical expertise to ensure that holistic
solutions and services are enabled to benefit our customers.
|
| |
| |
•
|
Technology Partners enable strong product integration and
technical collaboration of our products with their products to
deliver comprehensive solutions for our customers’ IT
environments. In addition to ensuring that our software remains
compatible with complementary hardware and software, these
partners help us adapt and respond to the emergence of
|
5
|
|
|
| |
|
new technologies and trends, such as virtualization and cloud
computing, which is intended to ensure that our release of new
IT solutions is coupled with management tools that support those
installations.
|
|
|
|
| |
•
|
Managed Service Providers use our software products and
solutions to deliver IT services to organizations that prefer to
outsource their IT operations or enable specific services
provided by these partners. Products such as Spectrum and
eHealth, as well as other products we have acquired through
NetQoS, Nimsoft and 3Tera, are being selected as core elements
of service provider platforms.
|
| |
| |
•
|
Solution Providers combine our software products with
specialized consulting and professional services to provide
enhanced, user-specific solutions to a particular market or
sector. Their expertise in best practices, project management,
implementation, training and other services adds value to our
offerings as they target the needs of specialized customers.
|
| |
| |
•
|
Distributors and Volume Partners enable us to broaden our reach
to the small and medium business market segment, as well as
cover market segments with our catalog of SaaS services and
hosting capabilities. These partners provide efficient and
personalized local delivery, service and support to our
customers.
|
| |
| |
•
|
Exclusive Representatives represent our interests in an emerging
geography on an exclusive basis. These partners have been chosen
for their deep understanding of the applicable territory and
have an established business within the region.
|
Sales
and marketing
We offer our solutions through our direct sales force and
indirectly through our strategic partners. Our sales and
marketing process includes carefully managing the customer
lifecycle by continually improving the customer experience from
purchase to deployment and beyond.
We are focused on reaching a broader range of customers and
deepening existing relationships, which opens the door for us to
cross-sell and up-sell additional solutions. Our maintenance
renewal process provides opportunities for us to maintain our
working relationship with customers as they continue to use and
upgrade their environments with our technology. It also gives us
the opportunity to offer our customers new solutions that
address their needs. We rely on market analysis and customer
insight to help us identify new market opportunities and provide
fact-based insight on industry and customer trends, and we rely
on our marketing organization to build awareness and demand for
our products worldwide to help drive sales.
Our sales organization operates globally. We operate through
branches, subsidiaries and partners around the world.
Approximately 43% of our revenue in fiscal 2011 was from
operations outside of the United States. At March 31, 2011,
and March 31, 2010, we had approximately 3,500 and 3,400
sales and sales support personnel, respectively. In certain
non-U.S. geographic
locations, including in the Asia Pacific and Japan region, our
primary routes to market are distributors and volume partners.
In other
non-U.S. geographic
locations, principally in southern Eastern Europe, the Middle
East and Africa, we utilize a franchise model with exclusive
representatives as our primary route to market.
Customer
lifecycle management
Our goal is to stay proactive and attuned to our customers’
needs. We have a coordinated process to guide customers and
partners through installing, employing and leveraging IT
management software. In fiscal 2011, we announced Go Live with
CA Technologies to further enhance the customer and partner
experience and value after the sale. This program integrates
professional, educational and support services to enable our
customers and partners to rapidly and successfully deploy their
IT management software. Go Live with CA Technologies manages a
customer’s post-sale lifecycle through four key phases. We
provide personalized support (1) during the
pre-implementation phase of the project, (2) at the outset
of implementation, (3) during the critical first
90 days of implementation, and (4) over the longer
term, by presenting value programs to customers to show them how
to maximize the business value of our technology. These
activities are proactive and allow us the opportunity to stay in
touch with our customers and drive customer value at each phase
of service.
Research
and development
We invest in product development and enhancements to bring
innovative solutions to market and ensure that our products are
compatible with hardware and operating system changes and our
customers’ evolving needs. We focus our development efforts
for new and updated products by investing in areas we believe
are important to our customers: mainframe; service assurance;
security (identity and access management); project and portfolio
management; service management; virtualization and service
automation and cloud computing.
6
Our 5,600 engineers are primarly in Beijing, China; Prague, the
Czech Republic; Hyderabad, India; Herzliya, Israel; and the
United States. In the United States, product development is
primarily performed at our facilities in Redwood City and
San Francisco, California; Lisle, Illinois; Framingham,
Massachusetts; Ewing, New Jersey; Islandia, New York;
Pittsburgh, Pennsylvania; Plano and Austin, Texas; and Herndon,
Virginia. Our engineers work collaboratively in both physical
and virtual labs, increasingly using an agile development
methodology. Among other things, agile development is intended
to enable the incorporation of new customer insights throughout
the development process, which in turn strengthens our ability
to bring to market leading-edge innovations that deliver real
business value to our customers.
Our research and development activities also include a number of
efforts to support our technical community in its pursuit of
leading solutions for customers. We continue to use CA
Technologies Labs on Demand to strengthen our relationships with
research communities by working with academia, professional
associations, industry standards bodies, customers and partners
to explore novel products and emerging technologies. Our CA
Council for Technical Excellence leads innovative projects
designed to promote communication, collaboration and synergy
throughout our global technical community. The CA Architecture
Board helps us ensure a strong central architecture that
supports our growth strategy and our Distinguished Engineer
Board encourages and recognizes excellence in engineering.
To keep us on top of major technological advances and to ensure
our products continue to work well with those of other vendors,
we are active in most major industry standards organizations and
take the lead on many issues. Our professionals are certified
across key standards, including
ITIL®,
PMI and CISPP, and possess knowledge and expertise in key
vertical markets, such as financial services, government,
telecommunications, insurance, health care, manufacturing and
retail. Further, we were the first major software company to
earn the ISO’s 9001:2000 Global Certification. In addition,
our Global IT Operations have attained ISO/IEC
20000-1:2005
and ISO/IEC 27001:2005 certifications. These certifications
demonstrate our leadership in IT service management and
information security.
We have charged to operations $471 million,
$468 million and $479 million in fiscal 2011, 2010 and
2009, respectively, for product development and enhancements. In
fiscal 2011, 2010 and 2009, we capitalized costs of
$170 million, $188 million and $129 million,
respectively, for internally developed software.
Intellectual
property
Certain aspects of our products and technology are proprietary.
We rely on U.S. and foreign intellectual property laws,
including patent, copyright, trademark and trade secret laws to
protect our proprietary rights. However, the extent and duration
of protection given to different types of intellectual property
rights vary under different countries’ legal systems. In
some countries, full-scale intellectual property protection for
our products and technology may be unavailable, or the laws of
other jurisdictions may not protect our proprietary technology
rights to the same extent as the laws of the United States. We
also maintain contractual restrictions in our agreements with
customers, employees and others to protect our intellectual
property rights. In addition, we occasionally license software
and technology from third parties, including some competitors,
and incorporate them into our own software products.
Our patent portfolio includes more than 500 issued patents and
700 pending applications in the United States and the European
Union. The patents generally expire at various times over the
next 20 years. Although the durations and geographic
coverage for our patents may vary, we believe our patent
portfolio adequately protects our interests.
The source code for our products is protected both as trade
secrets and as copyrighted works. Some of our customers are
beneficiaries of a source code escrow arrangement that enables
them to obtain a contingent, limited right to access our source
code.
Although we have a number of patents and pending applications
that may be of value to various aspects of our products and
technology, we are not aware of any single patent that is
essential to us or to any of our principal business product
areas.
Product
licensing
Our licensing model offers customers a wide range of purchasing
and payment options. Under our flexible licensing terms,
customers can license our software products under multi-year
licenses or on a
month-to-month
basis, with most customers choosing terms of
one-to-three
years, although longer terms are sometimes negotiated by
customers in order to obtain greater cost certainty. We also
help customers reduce uncertainty by providing a standard
pricing schedule based on simple usage tiers. With respect to
licenses sold for our mainframe products, we offer our customers
the right to receive unspecified future software products for no
additional fee, and we include maintenance during the term of
the license. With respect to
7
licenses sold for most of our distributed products, we do not
offer our customers unspecified future software products and do
not always include maintenance with the license sale. For a
description of our revenue recognition policies, refer to
Note 1, “Significant Accounting Policies,” in the
Notes to the Consolidated Financial Statements.
Competition
Our industry is highly competitive. We believe that the
enterprise IT management software and solutions business is
marked by rapid technological change, the steady emergence of
new companies and products, evolving industry standards and
changing customer needs. We compete with many established
companies in the markets we serve. Some of these companies have
substantially greater financial, marketing and technological
resources; broader distribution capabilities; earlier access to
customers; and a greater opportunity to address customers’
various information technology requirements than we do. These
factors may, at times, provide some of our competitors with an
advantage in penetrating markets with their products. Our
primary competitors include BMC Software, Compuware Corporation,
Hewlett-Packard Company, International Business Machines, Oracle
Corporation, and VMware, Inc.
We also compete with many smaller, less established companies
that may be able to focus more effectively on specific product
areas or markets. Because of the breadth of our product
portfolio, we have competitors who may only compete with us in
one product area and other competitors who compete across most
or all of our product portfolios.
We believe our competitive differentiators include: our
independence (since our products are not linked to a proprietary
hardware, software or operating system platform); industry
vision; expertise; product quality, functionality, performance,
integration and manageability, and breadth of product offerings;
customer support; frequency of upgrades and updates; pricing,
brand name recognition; and reputation.
Employees
The table below sets forth the approximate number of employees
by location and functional area at March 31, 2011:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
EMPLOYEES
|
|
|
|
|
EMPLOYEES
|
|
|
LOCATION
|
|
AT MARCH 31, 2011
|
|
|
FUNCTIONAL AREA
|
|
AT MARCH 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
|
1,600
|
|
|
Professional services
|
|
|
1,200
|
|
|
|
|
|
|
|
|
Support services
|
|
|
1,600
|
|
|
Other U.S. offices
|
|
|
5,400
|
|
|
Selling and marketing
|
|
|
4,000
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,200
|
|
|
International offices
|
|
|
6,400
|
|
|
Product development
|
|
|
4,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,400
|
|
|
Total
|
|
|
13,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2011, and 2010, we had approximately 13,400
and 13,800 employees, respectively.
|
|
|
(d)
|
Financial
information about geographic areas
|
Refer to Note 18, “Segment and Geographic
Information” in the Notes to the Consolidated Financial
Statements for financial data pertaining to our segment and
geographic operations.
|
|
|
(e)
|
Corporate
information
|
The Company was incorporated in Delaware in 1974, began
operations in 1976 and completed an initial public offering of
common stock in December 1981. Prior to April 28, 2008, our
common stock was traded on the New York Stock Exchange under the
symbol “CA.” On April 28, 2008, we commenced
trading on The NASDAQ Global Select Market tier of The NASDAQ
Stock Market LLC under the same symbol.
Our corporate website address is www.ca.com. All filings we make
with the Securities and Exchange Commission (SEC), including our
Annual Report on
Form 10-K,
our Quarterly Reports on
Form 10-Q,
our Current Reports on
Form 8-K,
and any amendments thereto filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, are available for free in the investor
relations section of our website (www.ca.com/investor) as soon
as reasonably practicable after they are filed with or furnished
to the SEC. Our SEC filings are available to be read or copied
at the SEC’s Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Information about the operation of the Public Reference Room can
be obtained by calling the SEC at
1-800-SEC-0330.
Our filings can also be obtained for free on the SEC’s
website at www.sec.gov. The reference to our website address
does not constitute inclusion or incorporation by reference of
the
8
information contained on our website in this
Form 10-K
or other filings with the SEC, and the information contained on
our website is not part of this document.
The investor relations section of our website
(www.ca.com/investor) also contains information about our
initiatives in corporate governance, including: our corporate
governance principles; information about our Board of Directors
(including specific procedures for communicating with them);
information concerning our Board Committees, including the
charters of the Audit Committee, the Compensation and Human
Resources Committee, the Corporate Governance Committee, and the
Compliance and Risk Committee; and our Code of Conduct:
Information and Resource Guide (applicable to all of our
employees, including our Chief Executive Officer, Chief
Financial Officer, Principal Accounting Officer, and our
directors). These documents can also be obtained in print by
writing to our Corporate Secretary, CA, Inc., One CA Plaza,
Islandia, NY 11749.
9
Item 1A.
Risk factors.
Current and potential stockholders should consider carefully the
risk factors described below. Any of these factors, many of
which are beyond our control, could materially adversely affect
our business, financial condition, operating results, cash flow
and stock price.
Failure
to achieve success in our growth strategy could materially
adversely affect our business, financial condition, operating
results and cash flow.
Our current business strategy emphasizes accelerating our
growth. As more fully described in Part I,
Item 1. “Business,” this strategy is designed to
build on our portfolio of software and services to meet
next-generation market opportunities. The success of this growth
strategy could be affected by many of the risk factors discussed
in this
Form 10-K
and also by our ability to:
|
|
|
| |
•
|
Increase sales in new and emerging enterprises and markets where
we currently may not have a strong presence and where we may
have a dependence on unfamiliar distribution partners and routes;
|
| |
| |
•
|
Enable our sales force to sell new products, including instances
where our offerings are of a type not previously provided by us;
|
| |
| |
•
|
Improve the CA Technologies brand in the marketplace, including
as it relates to our ability to sell new products and penetrate
new or emerging markets; and
|
| |
| |
•
|
Ensure our set of cloud computing, SaaS and other new offerings
address the needs of a rapidly changing market, while not
adversely affecting the demand for our traditional products or
our profitability.
|
Failure to achieve success with this strategy while maintaining
our core business could materially adversely affect our
business, financial condition, operating results and cash flow.
Given
the global nature of our business, economic factors or political
events beyond our control and other business risks associated
with
non-U.S.
operations can affect our business in unpredictable
ways.
International revenue has historically represented a significant
percentage of our total worldwide revenue. Success in selling
and developing our products outside the United States will
depend on a variety of factors in various
non-U.S. locations,
including:
|
|
|
| |
•
|
Foreign exchange currency rates;
|
| |
| |
•
|
Local economic conditions;
|
| |
| |
•
|
Political stability and acts of terrorism;
|
| |
| |
•
|
Workforce reorganizations in various locations, including global
reorganizations of sales, research and development, technical
services, finance, human resources and facilities functions;
|
| |
| |
•
|
Effectively staffing key managerial and technical positions;
|
| |
| |
•
|
Successfully localizing software products for a significant
number of international markets;
|
| |
| |
•
|
More restrictive employment regulation;
|
| |
| |
•
|
Trade restrictions such as tariffs, duties, taxes or other
controls;
|
| |
| |
•
|
International intellectual property laws, which may be more
restrictive or may offer lower levels of protection than
U.S. law;
|
| |
| |
•
|
Complying with differing and changing local laws and regulations
in multiple international locations as well as complying with
U.S. laws and regulations where applicable in these
international locations; and
|
| |
| |
•
|
Developing and executing an effective
go-to-market
strategy in various locations.
|
Any of the foregoing factors could materially adversely affect
our business, financial condition, operating results and cash
flow.
10
General
economic conditions and credit constraints, or unfavorable
economic conditions in a particular region, business or industry
sector, may lead our customers to delay or forgo technology
investments and could have other impacts, any of which could
materially adversely affect our business, financial condition,
operating results and cash flow.
Our products are designed to improve the productivity and
efficiency of our customers’ information processing
resources. However, a general slowdown in the global economy, or
in a particular region, or business or industry sector (such as
the financial services sector), or tightening of credit markets,
could cause customers to: have difficulty accessing credit
sources; delay contractual payments; or delay or forgo decisions
to (i) license new products (particularly with respect to
discretionary spending for software), (ii) upgrade their
existing environments or (iii) purchase services. Any such
impacts could materially adversely affect our business,
financial condition, operating results and cash flow.
Such a general slowdown in the global economy may also
materially affect the global banking system, including
individual institutions as well as a particular business or
industry sector, which could cause further consolidations or
failures in such a sector. Approximately one third of our
revenue is derived from arrangements with financial institutions
(i.e., banking, brokerage and insurance companies). The
majority of these arrangements are for the renewal of mainframe
capacity and maintenance associated with transactions processed
by our financial institution customers. While we cannot predict
what impact there may be on our business from further
consolidation of the financial industry sector, or the impact
from the economy in general on our business, to date the impact
has not been material to our balance sheet, results of
operations or cash flows. The vast majority of our subscription
and maintenance revenue in any particular reporting period comes
from contracts signed in prior periods, generally pursuant to
contracts ranging in duration from three to five years.
Any of these events could affect the manner in which we are able
to conduct business, including within a particular industry
sector or market and could materially adversely affect our
business, financial condition, operating results and cash flow.
Failure
to expand our partner programs related to the sale of CA
solutions may result in lost sales opportunities, increases in
expenses and a weakening in our competitive position.
We sell CA solutions through global systems integrators,
technology partners, managed service providers, solution
providers, distributors of volume partners and exclusive
representatives in partner programs that require training and
expertise to sell these solutions, and global penetration to
grow these aspects of our business. The failure to expand these
partner programs and penetrate these markets could materially
adversely affect our success with partners, resulting in lost
sales opportunities and an increase in expenses, as well as
weaken our competitive position.
If
we do not adequately manage and evolve our financial reporting
and managerial systems and processes, including the successful
implementation of our enterprise resource planning software, our
ability to manage and grow our business may be harmed.
Our ability to successfully implement our business plan and
comply with regulations requires effective planning and
management systems and processes. We need to continue to improve
and implement existing and new operational and financial
systems, procedures and controls to manage our business
effectively in the future. As a result, we have licensed
enterprise resource planning software, consolidated certain
finance functions into regional locations, and are in the
process of expanding and upgrading our operational and financial
systems. Any delay in the implementation of, or disruption in
the transition to, our new or enhanced systems, procedures or
internal controls, could adversely affect our ability to
accurately forecast sales demand, manage our supply chain,
achieve accuracy in the conversion of electronic data and
records, and report financial and management information,
including the filing of our quarterly or annual reports with the
SEC, on a timely and accurate basis. Failure to properly or
adequately address these issues could result in the diversion of
management’s attention and resources, adversely affect our
ability to manage our business and materially adversely affect
our business, financial condition, results of operations and
cash flow. Refer to Item 9A, “Controls and
Procedures,” for additional information.
We
may encounter difficulties in successfully integrating companies
and products that we have acquired or may acquire into our
existing business, and any failed integration could materially
adversely affect our infrastructure, market presence, business,
financial condition, operating results and cash flow.
In the past we have acquired, and in the future we expect to
acquire, complementary companies, products, services and
technologies (including through mergers, asset acquisitions,
joint ventures, partnerships, strategic alliances, and equity
11
investments). Additionally, we expect to acquire technology and
software that are consistent with our growth strategy. The risks
we may encounter include:
|
|
|
| |
•
|
We may find that the acquired company or assets do not further
improve our financial and strategic position as planned;
|
| |
| |
•
|
We may have difficulty integrating the operations, facilities,
personnel and commission plans of the acquired business;
|
| |
| |
•
|
We may have difficulty forecasting or reporting results
subsequent to acquisitions;
|
| |
| |
•
|
We may have difficulty retaining the skills needed to further
market, sell or provide services on the acquired products in a
manner that will be accepted by the market;
|
| |
| |
•
|
We may have difficulty incorporating the acquired technologies
or products into our existing product lines;
|
| |
| |
•
|
We may have product liability, customer liability or
intellectual property liability associated with the sale of the
acquired company’s products;
|
| |
| |
•
|
Our ongoing business may be disrupted by transition or
integration issues and our management’s attention may be
diverted from other business initiatives;
|
| |
| |
•
|
We may be unable to obtain timely approvals from governmental
authorities under applicable competition and antitrust laws;
|
| |
| |
•
|
We may have difficulty maintaining uniform standards, controls,
procedures and policies;
|
| |
| |
•
|
Our relationships with current and new employees, customers and
distributors could be impaired;
|
| |
| |
•
|
An acquisition may result in increased litigation risk,
including litigation from terminated employees or third
parties; and
|
| |
| |
•
|
Our due diligence process may fail to identify significant
issues with the acquired company’s product quality,
financial disclosures, accounting practices, internal control
deficiencies, including material weaknesses, product
architecture, legal and tax contingencies and other matters.
|
These factors could materially adversely affect our business,
results of operations, financial condition and cash flow,
particularly in the case of a large acquisition or number of
acquisitions. To the extent we issue shares of stock or other
rights to purchase stock, including options, to pay for
acquisitions or to retain employees, existing stockholders’
interests may be diluted and income per share may decrease.
We
are subject to intense competition in product and service
offerings and pricing, and we expect to face increased
competition in the future, which could either diminish demand
for or inhibit growth of our products and, therefore, reduce our
sales, revenue and market presence.
The markets for our products are intensely competitive, and we
expect product and service offerings and pricing competition to
increase. Some of our competitors have longer operating
histories, greater name recognition, a larger installed base of
customers in any particular market niche, larger technical
staffs, established relationships with hardware vendors, or
greater financial, technical and marketing resources.
Furthermore, our growth strategy is predicated upon our ability
to develop and acquire products and services that address
customer needs and are accepted by the market better than those
of our competitors.
We also face competition from numerous smaller companies that
specialize in specific aspects of the highly fragmented software
industry, and from shareware authors that may develop competing
products. In addition, new companies enter the market on a
frequent and regular basis, offering products that compete with
those offered by us. Moreover, certain customers historically
have developed their own products that compete with those
offered by us. The competition may affect our ability to attract
and retain the technical skills needed to provide services to
our customers, forcing us to become more reliant on delivery of
services through third parties. This, in turn, could increase
operating costs and decrease our revenue, profitability and cash
flow. Additionally, competition from any of these sources could
result in price reductions or displacement of our products,
which could materially adversely affect our business, financial
condition, operating results and cash flow.
Our competitors include large vendors of hardware and operating
system software and service providers. The widespread inclusion
of products that perform the same or similar functions as our
products bundled within computer hardware or other
companies’ software products, or services similar to those
provided by us, could reduce the perceived need for our products
12
and services, or render our products obsolete and unmarketable.
Furthermore, even if these incorporated products are inferior or
more limited than our products, customers may elect to accept
the incorporated products rather than purchase our products. In
addition, the software industry is currently undergoing
consolidation as software companies seek to offer more extensive
suites and broader arrays of software products and services, as
well as integrated software and hardware solutions. This
consolidation may adversely affect our competitive position,
which could materially adversely affect our business, financial
condition, operating results and cash flow. Refer to
Part I, Item 1, “Business —
(c) Narrative Description of the Business —
Competition,” for additional information.
Our
business may suffer if we are not able to retain and attract
adequate qualified personnel, including key managerial,
technical, marketing and sales personnel.
We operate in a business where there is intense competition for
experienced personnel in all of our global markets. We depend on
our ability to identify, recruit, hire, train, develop and
retain qualified and effective personnel and to attract and
retain talent needed to execute our growth strategy. Our ability
to do so depends on numerous factors, including factors that we
cannot control, such as competition and conditions in the local
employment markets in which we operate. Our future success
depends in large part on the continued contribution of our
senior management and other key employees. A loss of a
significant number of skilled managerial or other personnel
could have a negative effect on the quality of our products. A
loss of a significant number of experienced and effective sales
personnel could result in fewer sales of our products. Our
failure to retain qualified employees in these categories could
materially adversely affect our business, financial condition,
operating results and cash flow.
Failure
to adapt to technological changes and introduce new software
products and services in a timely manner could materially
adversely affect our business.
If we fail to keep pace with, or in certain cases lead,
technological change in our industry, that failure could
materially adversely affect our business. We operate in a highly
competitive industry characterized by rapid technological
change, evolving industry standards, and changes in customer
requirements and delivery methods. During the past several
years, many new technological advancements and competing
products entered the marketplace. The distributed systems and
application management markets in which we operate are far more
crowded and competitive than our traditional mainframe systems
management markets.
Our ability to compete effectively and our growth prospects for
all of our products, including those associated with our growth
strategy, depend upon many factors, including the success of our
existing distributed systems products, the timely introduction
and success of future software products and related delivery
methods, and the ability of our products to perform well with
existing and future leading databases and other platforms
supported by our products that address customer needs and are
accepted by the market. We have experienced long development
cycles and product delays in the past, particularly with some of
our distributed systems products, and may experience delays in
the future. In addition, we have incurred, and expect to
continue to incur, significant research and development costs,
as we introduce new products. If there are delays in new product
introductions or there is
less-than-anticipated
market acceptance of these new products, we will have invested
substantial resources without realizing adequate revenues in
return, which could materially adversely affect our business,
financial condition, operating results and cash flow.
If
our products do not remain compatible with ever-changing
operating environments we could lose customers and the demand
for our products and services could decrease, which could
materially adversely affect our business, financial condition,
operating results and cash flow.
The largest suppliers of systems and computing software are, in
most cases, the manufacturers of the computer hardware systems
used by most of our customers. Historically, these companies
have from time to time modified or introduced new operating
systems, systems software and computer hardware. In the future,
such new products from these companies could incorporate
features that perform functions currently performed by our
products, or could require substantial modification of our
products to maintain compatibility with these companies’
hardware or software. Although we have to date been able to
adapt our products and our business to changes introduced by
hardware manufacturers and system software developers, there can
be no assurance that we will be able to do so in the future.
Failure to adapt our products in a timely manner to such changes
or customer decisions to forgo the use of our products in favor
of those with comparable functionality contained either in their
hardware or operating system could materially adversely affect
our business, financial condition, operating results and cash
flow.
13
Certain
software that we use in our products is licensed from third
parties and thus may not be available to us in the future, which
has the potential to delay product development and production
and, therefore, could materially adversely affect our business,
financial condition, operating results and cash flow.
Some of our solutions contain software licensed from third
parties. Some of these licenses may not be available to us in
the future on terms that are acceptable to us or allow our
products to remain competitive. The loss of these licenses or
the inability to maintain any of them on commercially acceptable
terms could delay development of future products or the
enhancement of existing products. We may also choose to pay a
premium price for such a license in certain circumstances where
continuity of the licensed product would outweigh the premium
cost of the license. The unavailability of these licenses or the
necessity of agreeing to commercially unreasonable terms for
such licenses could materially adversely affect our business,
financial condition, operating results and cash flow.
Certain
software we use is from open source code sources, which, under
certain circumstances, may lead to unintended consequences and,
therefore, could materially adversely affect our business,
financial condition, operating results and cash flow.
Some of our products contain software from open source code
sources. The use of such open source code may subject us to
certain conditions, including the obligation to offer our
products that use open source code for no cost. We monitor our
use of such open source code to avoid subjecting our products to
conditions we do not intend. However, the use of such open
source code may ultimately subject some of our products to
unintended conditions, which could require us to take remedial
action that may divert resources away from our development
efforts and therefore could materially adversely affect our
business, financial condition, operating results and cash flow.
Discovery
of errors in our software could materially adversely affect our
revenue and earnings and subject us to costly and time consuming
product liability claims.
The software products we offer are inherently complex. Despite
testing and quality control, we cannot be certain that errors
will not be found in current versions, new versions or
enhancements of our products after commencement of commercial
shipments. If new or existing customers have difficulty
deploying our products or require significant amounts of
customer support, our operating margins could be adversely
affected. Moreover, we could face possible claims and higher
development costs if our software contains errors that we have
not detected or if our software otherwise fails to meet our
customers’ expectations. Significant technical challenges
also arise with our products because our customers license and
deploy our products across a variety of computer platforms and
integrate them with a number of third-party software
applications and databases. These combinations increase our risk
further because, in the event of a system-wide failure, it may
be difficult to determine which product is at fault. As a
result, we may be harmed by the failure of another
supplier’s products. As a result of the foregoing, we could
experience:
|
|
|
| |
•
|
Loss of or delay in revenue and loss of market share;
|
| |
| |
•
|
Loss of customers, including the inability to obtain repeat
business with existing key customers;
|
| |
| |
•
|
Damage to our reputation;
|
| |
| |
•
|
Failure to achieve market acceptance;
|
| |
| |
•
|
Diversion of development resources;
|
| |
| |
•
|
Increased service and warranty costs;
|
| |
| |
•
|
Legal actions by customers against us that could, whether or not
successful, be costly, distracting and time-consuming;
|
| |
| |
•
|
Increased insurance costs; and
|
| |
| |
•
|
Failure to successfully complete service engagements for product
installations and implementations.
|
Consequently, the discovery of errors in our products after
delivery could materially adversely affect our business,
financial condition, operating results and cash flow.
14
We
have a significant amount of debt. Changes in market conditions
or our ratings could increase our interest costs and adversely
affect the cost of refinancing our debt and our ability to
refinance our debt, which could materially adversely affect our
business, financial condition, operating results and cash
flow.
At March 31, 2011, we had $1,551 million of debt
outstanding, consisting mostly of unsecured fixed-rate senior
note obligations and credit facility borrowings. Refer to
Note 9, “Debt,” in the Notes to the Consolidated
Financial Statements for the payment schedule of our long-term
debt obligations. Our senior unsecured notes are rated by
Moody’s Investors Service, Fitch Ratings, and Standard and
Poor’s. These agencies or any other credit rating agency
could downgrade or take other negative action with respect to
our credit ratings in the future. If our credit ratings were
downgraded or other negative action is taken, we could be
required to, among other things, pay additional interest on
outstanding borrowings under our principal revolving credit
agreement. Any downgrades could affect our ability to obtain
additional financing in the future and may affect the terms of
any such financing.
We expect that existing cash, cash equivalents, marketable
securities, cash provided from operations and our bank credit
facilities will be sufficient to meet ongoing cash requirements.
However, our failure to generate sufficient cash as our debt
becomes due or to renew credit lines prior to their expiration
could materially adversely affect our business, financial
condition, operating results and cash flow.
Failure
to protect our intellectual property rights and source code
would weaken our competitive position.
Our future success is highly dependent upon our proprietary
technology, including our software and our source code for that
software. Failure to protect such technology could lead to the
loss of valuable assets and our competitive advantage. We
protect our proprietary information through the use of patents,
copyrights, trademarks, trade secret laws, confidentiality
procedures and contractual provisions. Notwithstanding our
efforts to protect our proprietary rights, policing unauthorized
use or copying of our proprietary information is difficult.
Unauthorized use or copying occurs from time to time and
litigation to enforce intellectual property rights could result
in significant costs and diversion of resources. Moreover, the
laws of some foreign jurisdictions do not afford the same degree
of protection to our proprietary rights as do the laws of the
United States. For example, for some of our products, we rely on
“shrink-wrap” or “click-on” licenses, which
may be unenforceable in whole or in part in some jurisdictions
in which we operate. In addition, patents we have obtained may
be circumvented, challenged, invalidated or designed around by
other companies. If we do not adequately protect our
intellectual property for these or other reasons, our business,
financial condition, operating results and cash flow could be
materially adversely affected. Refer to Part I ,
Item 1, “Business — (c) Narrative
Description of the Business — Intellectual
Property,” for additional information.
The
number, terms and duration of our license agreements as well as
the timing of orders from our customers and channel partners,
may cause fluctuations in some of our key financial metrics,
which may affect our quarterly financial results.
Historically, a substantial portion of our license agreements
are executed in the last month of a quarter and the number of
contracts executed during a given quarter can vary
substantially. In addition, we experience a historically long
sales cycle, which is driven in part by the varying terms and
conditions of our software contracts. These factors can make it
difficult for us to predict sales and cash flow on a quarterly
basis. Any failure or delay in executing new or renewed license
agreements in a given quarter could cause declines in some of
our key financial metrics (e.g., revenue or cash flow),
and, accordingly, increases the risk of unanticipated variations
in our quarterly results and financial condition.
We
may become dependent upon large transactions, and the failure to
close such transactions on a satisfactory basis could materially
adversely affect our business, financial condition, operating
results and cash flow.
In the past, we have been dependent upon large-dollar enterprise
transactions with individual customers. There can be no
assurances that we will not be reliant on large-dollar
enterprise transactions in the future, and the failure to close
those transactions on terms that are commercially attractive to
us could materially adversely affect our business, financial
condition, operating results and cash flow.
Our
sales to government clients subject us to risks, including early
termination, renegotiation, audits, investigations, sanctions
and penalties.
Approximately 9% of our total revenue backlog at March 31,
2011 is associated with multi-year contracts signed with the
U.S. federal government and other U.S. state and local
government agencies. These contracts are generally subject to
annual fiscal funding approval, may be renegotiated or
terminated at the discretion of the government, or all of these.
Termination, renegotiation or funding for a contract could
adversely affect our sales, revenue and reputation.
Additionally, our government
15
contracts are generally subject to audits and investigations,
which could result in various civil and criminal penalties and
administrative sanctions, including termination of contracts,
refund of a portion of fees received, forfeiture of profits,
suspension of payments, fines and suspensions or debarment from
doing business with the government, which could materially
adversely affect our business, financial condition, operating
results and cash flow.
Our
customers’ data centers and IT environments may be subject
to hacking or other breaches, harming customer relationships and
the market perception of the effectiveness of our
products.
An actual or perceived breach of our customers’ network
security allowing access to our customers’ data centers or
other parts of their IT environments, regardless of whether the
breach is attributable to our products, may cause contractual
disputes and may negatively affect the market perception of the
effectiveness of our products. Because the techniques used by
computer hackers to access or sabotage networks change
frequently and may not be recognized until launched against a
target, we may be unable to anticipate these techniques.
Alleviating any of these problems could require significant
expenditures of our capital and diversion of our resources from
development efforts. Additionally, these efforts could cause
interruptions, delays or cessation of our product licensing, or
modification of our software, which could cause us to lose
existing or potential customers, which could materially
adversely affect our business, financial condition, operating
results and cash flow.
Our
software products, data centers and IT environments may be
subject to hacking or other breaches, resulting in a loss or
misuse of proprietary and/or confidential information and harm
to the market perception of the effectiveness of our
products.
We expect to be an ongoing target of attacks specifically
designed to impede the performance of our products. Similarly,
experienced computer programmers or hackers may attempt to
penetrate our network security or the security of our data
centers and IT environments and misappropriate proprietary
and/or
confidential information of the Company, its employees or other
individuals or cause interruptions of our services. Although we
believe we have sufficient controls in place to prevent
significant external disruptions, if these intentionally
disruptive efforts are successful, our activities could be
adversely affected, our reputation and future sales could be
harmed and our business, financial condition, operating results
and cash flow could be materially adversely affected.
We
may lose access to third-party code and specifications for the
development of code, which could materially adversely affect our
ability to develop software compatible with third-party software
products in the future.
In the past, we have either directly licensed from third
parties, or used within the scope of our customer’s
license, code and information for third-party software and
hardware that enables us to develop compatible products and
interfaces. Such code and information includes: “source
code,” which is human-readable and makes the software
understandable to programmers; “object code,” which is
machine-readable and can be directly executed by a computer;
beta and evaluation software; microcode and firmware that
implement machine instructions on hardware; and technical
documentation. Since the availability of this code and
information facilitated the development of systems and
applications software that interfaces with the third-party
software and hardware, independent software vendors, such as us,
were able to develop and market compatible software. Some
software providers and hardware manufacturers, including some of
the largest vendors, have a policy of restricting the use or
availability of their code or technical documentation for some
of their operating systems, applications, or hardware. To date,
this policy has not had a material effect on us. Some companies,
however, may adopt more restrictive policies in the future or
impose unfavorable terms and conditions for such access. These
restrictions may, in the future, result in higher research and
development costs for us in connection with the enhancement and
modification of our existing products and the development of new
products. There can be no assurance that any additional
restrictions would not materially adversely affect our business,
financial condition, operating results and cash flow.
Third
parties could claim that our products infringe their
intellectual property rights or that we owe royalty payments to
them, which could result in significant litigation expense or
settlement with unfavorable terms, which could materially
adversely affect our business, financial condition, operating
results and cash flow.
From time to time, third parties have claimed and may claim that
our products infringe various forms of their intellectual
property or that we owe royalty payments to them. Investigation
of these claims can be expensive and could affect development,
marketing or shipment of our products. As the number of software
patents issued increases, it is likely that additional claims
will be asserted. Defending against such claims is time
consuming and could result in significant litigation
16
expense or settlement on unfavorable terms, which could
materially adversely affect our business, financial condition,
operating results and cash flow.
Fluctuations
in foreign currencies could result in translation
losses.
Our consolidated financial results are reported in
U.S. dollars. Most of the revenue and expenses of our
foreign subsidiaries are denominated in local currencies. Given
that cash is typically received over an extended period of time
for many of our license agreements and given that a substantial
portion of our revenue is generated outside of the U.S.,
fluctuations in foreign currency exchange rates against the
U.S. dollar could result in substantial changes in reported
revenues and operating results due to the foreign currency
impact upon translation of these transactions into
U.S. dollars.
In the normal course of business, we employ various strategies
to manage these risks, including the use of derivative
instruments. These strategies may not be effective in protecting
us against the effects of fluctuations from movements in foreign
exchange rates. Fluctuations of the foreign currency exchange
rates could materially adversely affect our business, financial
condition, operating results and cash flow.
We
have outsourced various functions to third parties and these
arrangements may not be successful, thereby resulting in
increased costs, or may adversely affect service levels and our
public reporting.
We have outsourced various functions to third parties, including
certain development and other administrative functions, and may
outsource additional functions to third-party providers in the
future. We rely on those third parties to provide services on a
timely and effective basis. Although we periodically monitor the
performance of these third parties and maintain contingency
plans in case the third parties are unable to perform as agreed,
we do not ultimately control the performance of our outsourcing
partners. The failure of third-party outsourcing partners to
perform as expected or as contractually required could result in
significant disruptions and costs to our operations, which could
materially adversely affect our business, financial condition,
operating results and cash flow and our ability to file our
financial statements with the SEC timely or accurately.
Potential
tax liabilities may materially adversely affect our
results.
We are subject to income taxes in the United States and in
numerous foreign jurisdictions. Significant judgment is required
in determining our worldwide provision for income taxes. In the
ordinary course of our business, we engage in many transactions
and calculations where the ultimate tax determination is
uncertain.
We are regularly under audit by tax authorities. Although we
believe our tax estimates are reasonable, the final
determination of tax audits and any related litigation could be
materially different from that which is reflected in our income
tax provisions and accruals. Additional tax assessments
resulting from audit, litigation, or changes in tax laws may
result in increased tax provisions or payments which could
materially adversely affect our business, financial condition,
operating results and cash flow in the period or periods in
which that determination is made.
Item 1B.
Unresolved staff comments.
None.
Item 2.
Properties.
Our principal real estate properties are located in areas
necessary to meet sales and operating requirements. All of the
properties are considered to be both suitable and adequate to
meet current and anticipated operating requirements.
At March 31, 2011, we leased 61 facilities throughout the
United States, including our corporate headquarters located in
Islandia, New York, and 98 facilities outside the United States.
Our lease obligations expire on various dates with the longest
commitment extending to 2023. We believe that substantially all
of our leases will be renewable at market terms at our option as
they become due.
We own one facility in Germany totaling approximately
100,000 square feet, two facilities in Italy totaling
approximately 140,000 square feet, two facilities in India
totaling approximately 455,000 square feet and one facility
in the United Kingdom totaling approximately 215,000 square
feet.
We utilize our leased and owned facilities for sales, technical
support, research and development and administrative functions.
17
Item 3.
Legal proceedings.
Refer to Note 12, “Commitments and
Contingencies,” in the Notes to the Consolidated Financial
Statements for information regarding certain legal proceedings,
the contents of which are herein incorporated by reference.
Item 4.
Removed and reserved.
* * *
Executive
Officers of the Registrant.
The name, age, present position, and business experience for at
least the past five years of our executive officers at
May 13, 2011 are listed below:
William E. McCracken, 68, has been Chief Executive
Officer of the Company since January 2010 and a director of the
Company since 2005. He was non-executive Chairman of the Board
from June 2007 to September 2009 and interim Executive Chairman
of the Board from September 2009 to January 2010, and he served
as executive Chairman of the Board from January 2010 to May
2010. He was President of Executive Consulting Group, LLC from
2002 to January 2010. During a
36-year
tenure at International Business Machines Corporation (IBM), a
manufacturer of information processing products and a
technology, software and networking systems manufacturer and
developer, Mr. McCracken held several executive positions,
including General Manager of the IBM Printing Systems Division
and General Manager of Worldwide Marketing of IBM PC Company.
From 1995 to 2001, he served on IBM’s Worldwide Management
Council, a group of the top 30 executives at IBM.
Nancy E. Cooper, 57, has been Executive Vice President
and Chief Financial Officer of the Company since she joined the
Company in August 2006. From December 2001 to August 2006, she
served as Senior Vice President and Chief Financial Officer of
IMS Health Incorporated (IMS Health), a leading provider of
information solutions to the pharmaceutical and healthcare
industries. Ms. Cooper began her career at IBM, where she
held positions of increasing responsibility over a
22-year
period, including Chief Financial Officer of the Global
Industries Division, Assistant Corporate Controller, and
Controller and Treasurer of IBM Credit Corporation.
David C. Dobson, 48, has been the Company’s
Executive Vice President and Group Executive, Customer Solutions
Group since July 2010. He is responsible for managing the
Company’s broad portfolio of products and solutions for
mainframe, distributed and cloud computing environments. Prior
to joining the Company, Mr. Dobson served as Executive Vice
President and Chief Strategy and Innovation Officer of Pitney
Bowes Inc. (Pitney Bowes), a manufacturer of software and
hardware and a provider of services related to documents,
packaging, mailing and shipping, where he was responsible for
leading the development of the company’s long-term strategy
from June 2008 to July 2009. In addition, he also served as
President of Pitney Bowes Management Services, Inc., a wholly
owned subsidiary of Pitney Bowes Inc., from August 2009 to July
2010. Prior to joining Pitney Bowes, he was Chief Executive
Officer of Corel Corporation, a computer software company
specializing in graphics processing, from 2005 to 2008. Before
joining Corel Corporation, Mr. Dobson spent 19 years
at IBM, where he held a number of senior management positions.
George J. Fischer, 48, has been the Company’s
Executive Vice President and Group Executive, Worldwide Sales
and Operations since June 2010. He is responsible for all sales
for the Company. In addition to worldwide sales and marketing,
he leads a wide-range of customer facing activities globally,
including professional services, support and ensuring overall
customer success. Since joining the Company in 1999,
Mr. Fischer has held a number of senior management
positions, including Executive Vice President, Global Sales and
Marketing from 2009 to July 2010, Executive Vice President and
General Manager, Worldwide Sales from 2007 to 2009, and Senior
Vice President and General Manager of North America Sales from
2004 to 2007. Before joining the Company, Mr. Fischer held
a number of leadership positions at Platinum Technology Inc., a
provider of software products and IT consulting services.
Amy Fliegelman Olli, 47, has been Executive Vice
President and General Counsel of the Company since February
2007. She is responsible for all of the Company’s legal,
compliance and internal audit functions worldwide.
Ms. Fliegelman Olli joined the Company in September 2006.
From September 2006 to February 2007, she served as Executive
Vice President and Co-General Counsel of the Company. Before
September 2006, Ms. Fliegelman Olli spent nearly
20 years in various senior-level legal positions with
divisions of IBM, most recently as General Counsel —
Americas and Global Coordinator for Sales and
18
Distribution, where she was responsible for a team of more than
200 lawyers in the U.S., Europe, Latin America and Canada and
for coordination of all of IBM’s sales and distribution
lawyers on a global basis.
Phillip J. Harrington, Jr., 54, has been the
Company’s Executive Vice President, Risk, and Chief
Administrative Officer since June 2010. He is responsible for
the Company’s human resources, education, administrative
services, risk management, information services and government
relations operations globally. Previously, Mr. Harrington
served as a director at Deloitte & Touche LLP, a
provider of audit, tax, consulting, enterprise risk and
financial advisory services, where he served clients in the
areas of general management consulting, operational risk
management and regulation. Prior to joining Deloitte &
Touche in 2008, he spent 20 years at Prudential Financial,
Inc., a provider of insurance, investment management, and other
financial products and services, where he held a number of
senior management positions.
William L. Hughes, 51, has been Chief Communications
Officer of the Company since June 2010. He is responsible for
media relations, employee and executive communications and
corporate philanthropy, working closely with the Company’s
government affairs, marketing and investor relations
departments. Mr. Hughes joined the Company in 2006, serving
as Corporate Senior Vice President, Global Communications until
July 2010. Before joining the Company, Mr. Hughes was
Senior Vice President, Global Communications and Public Affairs
at IMS Health from 2004 to 2006. Previously, he spent eight
years at IBM, where he held a number of senior executive
positions, including Vice President, Media, and Vice President,
Communications — APAC, based in Tokyo.
Jacob Lamm, 46, has been the Company’s Executive
Vice President, Strategy and Corporate Development since
February 2009. He is responsible for directing the
Company’s overall business strategy, as well as the
Company’s strategy for acquisitions. Mr. Lamm has held
various management positions since joining the Company in 1998.
He served as the Company’s Executive Vice President,
Governance Group from January 2008 to February 2009, as
Executive Vice President and General Manager, Business Service
Optimization Business Unit from March 2007 to January 2008, as
Senior Vice President, General Manager and Business Unit
Executive from April 2005 to March 2007, and as Senior Vice
President, Development from October 2003 to April 2005.
19
Part II
Item 5.
Market for registrant’s common equity, related stockholder
matters and issuer purchases of equity securities.
Our common stock is traded on The NASDAQ Global Select Market
tier of The NASDAQ Stock Market LLC (“NASDAQ”) under
the symbol “CA.” The following table sets forth, for
the fiscal quarters indicated, the quarterly high and low
closing sales prices on NASDAQ:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2011
|
|
|
FISCAL 2010
|
|
|
|
|
HIGH
|
|
|
LOW
|
|
|
HIGH
|
|
|
LOW
|
|
|
|
|
|
Fourth Quarter
|
|
$
|
25.57
|
|
|
$
|
22.43
|
|
|
$
|
23.80
|
|
|
$
|
21.52
|
|
|
Third Quarter
|
|
$
|
24.89
|
|
|
$
|
21.18
|
|
|
$
|
23.91
|
|
|
$
|
20.68
|
|
|
Second Quarter
|
|
$
|
21.24
|
|
|
$
|
17.96
|
|
|
$
|
22.99
|
|
|
$
|
16.44
|
|
|
First Quarter
|
|
$
|
23.85
|
|
|
$
|
18.40
|
|
|
$
|
18.27
|
|
|
$
|
16.75
|
|
On March 31, 2011, the closing price for our common stock
on NASDAQ was $24.18. At March 31, 2011, we had
approximately 7,200 stockholders of record.
We have paid cash dividends each year since July 1990. For
fiscal 2011, 2010 and 2009, we paid annual cash dividends of
$0.16 per share, which have been paid out in quarterly
installments of $0.04 per share as and when declared by the
Board of Directors.
On May 12, 2011, we announced an increase of the
Company’s regular quarterly dividend to $0.05 per share as
and when declared by the Board of Directors.
Purchases
of equity securities by the issuer
The following table sets forth, for the months indicated, our
purchases of common stock in the fourth quarter of fiscal 2011:
Issuer
purchases of equity securities
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APPROXIMATE
|
|
|
|
|
|
|
|
|
|
|
TOTAL NUMBER
|
|
|
DOLLAR VALUE OF
|
|
|
|
|
|
|
|
|
|
|
OF SHARES
|
|
|
SHARES THAT
|
|
|
|
|
|
|
|
|
|
|
PURCHASED AS
|
|
|
MAY YET BE
|
|
|
|
|
TOTAL NUMBER
|
|
|
AVERAGE
|
|
|
PART OF PUBLICLY
|
|
|
PURCHASED UNDER
|
|
PERIOD
|
|
OF SHARES
|
|
|
PRICE PAID
|
|
|
ANNOUNCED PLANS
|
|
|
THE PLANS
|
|
|
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE PRICE PAID PER SHARE)
|
|
PURCHASED
|
|
|
PER SHARE
|
|
|
OR PROGRAMS
|
|
|
OR PROGRAMS
|
|
|
|
|
|
January 1, 2011 — January 31, 2011
|
|
|
483,700
|
|
|
$
|
24.72
|
|
|
|
483,700
|
|
|
$
|
317,794
|
|
|
February 1, 2011 — February 28, 2011
|
|
|
583,700
|
|
|
$
|
24.75
|
|
|
|
583,700
|
|
|
$
|
303,350
|
|
|
March 1, 2011 — March 31, 2011
|
|
|
914,630
|
|
|
$
|
23.55
|
|
|
|
914,630
|
|
|
$
|
281,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,982,030
|
|
|
|
|
|
|
|
1,982,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During April 2010, we completed the $250 million stock
repurchase program authorized by our Board of Directors on
October 29, 2008, by repurchasing approximately
0.8 million shares of our common stock for approximately
$20 million.
On May 12, 2010, our Board of Directors approved a stock
repurchase program that authorizes us to acquire up to
$500 million of our common stock. We will fund the amount
remaining under this program with available cash on hand and
repurchase shares on the open market from time to time based on
market conditions and other factors.
Under this program, we have repurchased approximately
10.5 million shares of our common stock for approximately
$218 million at March 31, 2011.
On May 12, 2011, our Board of Directors approved a stock
repurchase program that authorized us to acquire up an to an
additional $500 million of our common stock, in addition to
the previous program approved on May 12, 2010. We will fund
the program with available cash on hand and repurchase shares on
the open market from time to time based on market conditions and
other factors.
20
Item 6.
Selected financial data.
The information set forth below should be read in conjunction
with the “Results of Operations” section included in
Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
Statement
of operations data
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
|
|
2011(1)
|
|
|
2010(1)
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,429
|
|
|
$
|
4,227
|
|
|
$
|
4,138
|
|
|
$
|
4,179
|
|
|
$
|
3,842
|
|
|
Income from continuing
operations(2)
|
|
|
823
|
|
|
|
759
|
|
|
|
661
|
|
|
|
472
|
|
|
|
85
|
|
|
Basic income from continuing operations per share
|
|
|
1.60
|
|
|
|
1.46
|
|
|
|
1.27
|
|
|
|
0.91
|
|
|
|
0.16
|
|
|
Diluted income from continuing operations per share
|
|
|
1.60
|
|
|
|
1.45
|
|
|
|
1.27
|
|
|
|
0.91
|
|
|
|
0.16
|
|
|
Dividends declared per common share
|
|
|
0.16
|
|
|
|
0.16
|
|
|
|
0.16
|
|
|
|
0.16
|
|
|
|
0.16
|
|
Balance
sheet and other data
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by continuing operating activities
|
|
$
|
1,377
|
|
|
$
|
1,336
|
|
|
$
|
1,184
|
|
|
$
|
1,062
|
|
|
$
|
1,027
|
|
|
Working capital surplus (deficit)
|
|
|
447
|
|
|
|
409
|
|
|
|
147
|
|
|
|
213
|
|
|
|
(34
|
)
|
|
Working capital, excluding deferred
revenue(3)
|
|
|
3,047
|
|
|
|
2,913
|
|
|
|
2,553
|
|
|
|
2,860
|
|
|
|
2,343
|
|
|
Total assets
|
|
|
12,414
|
|
|
|
11,888
|
|
|
|
11,241
|
|
|
|
11,731
|
|
|
|
11,479
|
|
|
Long-term debt (less current maturities)
|
|
|
1,282
|
|
|
|
1,530
|
|
|
|
1,287
|
|
|
|
2,155
|
|
|
|
2,472
|
|
|
Stockholders’ equity
|
|
|
5,620
|
|
|
|
4,987
|
|
|
|
4,362
|
|
|
|
3,750
|
|
|
|
3,716
|
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations.
|
| |
|
(2)
|
|
In fiscal 2010, 2009 and 2008, we
incurred after-tax charges of $33 million, $64 million
and $74 million, respectively, for restructuring and other
costs.
|
| |
|
|
|
In fiscal 2007, we also incurred
after-tax charges of $6 million for write-offs of
in-process research and development costs due to acquisitions.
|
| |
|
(3)
|
|
Deferred revenue includes amounts
billed or collected in advance of revenue recognition, including
subscription license agreements, maintenance, and professional
services. It does not include unearned revenue on future
installments not yet billed at the respective balance sheet
dates.
|
21
ITEM 7.
Management’s discussion and analysis of financial condition
and results of operations.
Introduction
This “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” (MD&A)
is intended to provide an understanding of our financial
condition, changes in financial condition, cash flow, liquidity
and results of operations. This MD&A should be read in
conjunction with our Consolidated Financial Statements and the
accompanying Notes to Consolidated Financial Statements
appearing elsewhere in this
Form 10-K
and the Risk Factors included in Part I, Item 1A of
this
Form 10-K
as well as other cautionary statements and risks described
elsewhere in this
Form 10-K.
Business
overview
We are the leading independent enterprise information technology
(IT) management software and solutions company with expertise
across IT environments — from mainframe and physical
to virtual and cloud. We develop and deliver software and
services that help organizations manage, secure and automate
their IT infrastructures and deliver more flexible IT services.
This allows companies to more effectively and efficiently
respond to business needs.
We address components of the computing environment, including
people, information, processes, systems, networks, applications
and databases, regardless of the hardware or software customers
are using. We license our products worldwide. We service
companies across most major industries worldwide, including
banks, insurance companies, other financial services providers,
government agencies, manufacturers, technology companies,
retailers, educational organizations and health care
institutions. These customers typically maintain IT
infrastructures that are both complex and central to their
objectives for operational excellence.
We are the leading independent software vendor in the mainframe
space, and we continue to innovate on the mainframe platform,
which runs many of our largest customers’ most important
applications. As the IT landscape continues to evolve, more
companies are seeking to improve the efficiency and availability
of their IT resources and applications through virtualization,
which enables users to run multiple virtual machines on each
physical machine and thereby reduce operating costs associated
with physical infrastructure. Virtualization is essential to the
evolution of cloud computing, the on-demand access to a shared
pool of computing resources that can be configured and used as
needed. At the same time, the consumption of IT assets is
evolving through the adoption of Software-as-a-Service (SaaS),
where customers can obtain software on a subscription,
“pay-as-you go” model.
As more companies begin to adopt virtualization and cloud
computing, data centers are becoming more complex, with
mainframes, physical servers, virtualized servers and private,
public and hybrid (a combination of public and private) cloud
environments. As a result of this heightened complexity, we
believe it is essential for companies to effectively manage and
secure all of their various computing environments.
We have a broad portfolio of software solutions that address
customer needs, including mainframe; service assurance; security
(identity and access management); project and portfolio
management; service management; virtualization and service
automation; and cloud computing. We deliver our products
on-premises or, for certain products, using SaaS.
Our strategy is to help our customers manage, secure and
automate IT and to make us their strategic partner as they
deploy new technologies and maximize their investments in
current systems and applications. This strategy emphasizes
accelerating our growth by continuing to build on our portfolio
of software and services to address customer needs in the
above-mentioned areas of focus through a combination of internal
development and acquired technologies. We believe this strategy
builds on our core strengths in IT management while also
positioning us to compete in high-growth markets, including
virtualization, cloud and SaaS. We are also seeking to expand
our business beyond our traditional core customers, generally
consisting of large enterprises, to reach what we refer to as
“emerging enterprises” or “growth accounts”
(which we define as companies with revenue of $300 million
to $2 billion) and customers in “emerging
geographies” or “growth geographies”. We are
increasing the number of our relationships and expanding
existing relationships with various types of service providers,
particularly global outsourcers, regional managed service
providers and communication network operators.
To enable us to execute our growth strategy more effectively, we
have:
|
|
|
| |
•
|
Completed several key acquisitions during fiscal 2011 in an
effort to expand our product portfolio, including Arcot Systems,
Inc. (Arcot), Torokina Pty Ltd, and Hyperformix, Inc.;
|
22
|
|
|
| |
•
|
Announced the availability of several innovations, including CA
Mainframe Chorus, CA Automation Suite, CA
3Tera®
AppLogic®,
and five new products in our CA Virtual Suite;
|
| |
| |
•
|
Enhanced our abilities to address both our growth accounts and
growth geographies with the introduction of new SaaS,
virtualization, cloud computing and security solutions,
including technologies from our fiscal 2010 acquisition of
Nimsoft AS (Nimsoft) and our fiscal 2011 acquisition of Arcot;
|
| |
| |
•
|
Aligned our organization to be more responsive to customer needs
and emerging trends through the combination of the assets we
have developed and those that we have acquired;
|
| |
| |
•
|
Re-branded our company; and
|
| |
| |
•
|
Increased the number of product and capacity sales, both outside
of and in connection with renewals.
|
As our growth strategy has evolved, our management also looks
within bookings at total new product and capacity sales, which
we define as sales of products or capacity that are new or in
addition to products or capacity previously contracted for by a
customer. The amount of new product and capacity sales for a
period, as currently tracked by us, requires estimation by
management and has not been historically reported. Within a
given period, the amount of new product and capacity sales may
not be material to the change in our total bookings or revenue
compared with prior periods. New product and capacity sales can
be reflected as subscription and maintenance bookings in the
period (for which revenue would be recognized ratably over the
term of the contract) or in software fees and other bookings
(which are recognized as software fees and other revenue in the
current period).
CA
Technologies business model
We generate revenue from the following sources: license
fees — licensing our products on a
right-to-use
basis; maintenance fees — providing customer technical
support and product enhancements; and service fees —
providing professional services such as product implementation,
consulting and education. The timing and amount of fees
recognized as revenue during a reporting period are determined
in accordance with generally accepted accounting principles in
the United States of America (GAAP). Revenue is reported net of
applicable sales taxes.
Under our business model, we offer customers a wide range of
licensing options, including the flexibility to license software
under
month-to-month
licenses or to fix their costs by committing to longer-term
agreements. Licenses sold for most of our software products
permit customers to change their software product mix as their
business and technology needs change and include the right to
receive software products in the future within defined product
lines for no additional fee, commonly referred to as unspecified
future software products, as well as maintenance included during
the term of each license. In some instances, we sell certain
products without the right to receive unspecified future
software products.
Executive
summary
The following is a summary of the analysis of our results
contained in our MD&A.
During the first quarter of fiscal 2011, we sold our Information
Governance business, consisting primarily of the CA Records
Manager and CA Message Manager software offerings and related
professional services. At the end of fiscal 2011, we identified
our Internet Security business as available for sale, and on
April 28, 2011 signed an agreement for the sale of this
business. The results of these business operations are presented
in income from discontinued operations for all periods.
Total revenue backlog at March 31, 2011 of
$8,763 million increased 8% compared with
$8,125 million at March 31, 2010. The current portion
of revenue backlog represents revenue to be recognized within
the next 12 months. The current portion of revenue backlog
at March 31, 2011 of $3,727 million increased by 7%
compared with the balance of $3,469 million at
March 31, 2010. Generally, we believe that an increase in
the current portion of revenue backlog is a positive indicator
of future revenue growth.
Total bookings in fiscal 2011 increased 1% to
$4,888 million compared with $4,843 million from the
prior period, due primarily to favorable results for new product
sales in connection with software fees and other bookings
(recognized as software fees and other revenue in the current
period), which was partially offset by a decrease in
subscription and maintenance bookings for fiscal 2011. Total new
product sales and mainframe capacity grew in the low single
digits for the fiscal year. Within new product and capacity
sales in fiscal 2011, the increase in new distributed products
was partially offset by a decrease in mainframe capacity and new
mainframe product sales. Generally, total new product and
capacity sales consist of new sales of distributed products,
mainframe products and mainframe capacity. Renewal bookings
increased
23
sequentially during fiscal 2011, which was consistent with our
expectation that our renewal portfolio would increase in the
second half of fiscal 2011. Our fiscal 2011 bookings included a
license agreement renewal with one large IT outsourcer for
approximately $500 million, which was signed during the
fourth quarter of fiscal 2011. Excluding this one agreement,
renewal bookings increased sequentially from the third quarter
to the fourth quarter. However, without this agreement, renewal
bookings would have been down approximately 15% for fiscal 2011.
This was partially due to the timing of certain license
agreement renewals that are now expected to occur during fiscal
2012, such as one renewal for approximately $100 million
that was executed in April 2011. For the fourth quarter of
fiscal 2011, renewal yield did not differ materially from its
recent percentage range of the high 80’s to low 90’s.
We currently expect our fiscal 2012 renewal portfolio to be
approximately 20 percent lower than fiscal 2011.
Total revenue for fiscal 2011 grew 5% to $4,429 million
compared with $4,227 million in the prior period, primarily
due to growth in U.S. revenue of $182 million, or 8%.
Lower revenue in Europe, Middle East and Africa was offset by
revenue growth in the Asia-Pacific-Japan and Latin America
regions. Our revenue growth was evenly split between revenue
from existing products and services and revenue from acquired
technologies (which we define as technology acquired within the
prior 12 months). Revenue from software fees and other for
fiscal 2011 increased by $106 million, or 61%, compared
with the prior period, primarily due to revenue from the
successful integration of service assurance technologies
associated with one of our fiscal 2010 acquisitions into our
existing product portfolio. Subscription and maintenance revenue
for fiscal 2011 increased primarily due to revenue associated
with our fiscal 2010 acquisitions and professional services
revenues for fiscal 2011 increased by 14% compared with the
prior period.
Total expense before interest and income taxes of
$3,175 million grew 6%, compared with $2,999 million
in the prior period. The increase was primarily due to costs
associated with our fiscal 2011 and 2010 acquisitions and an
increase in selling and marketing costs, partially offset by the
decrease in general and administrative costs. We may experience
similar additional costs associated with any future
acquisitions. In fiscal 2010, we incurred restructuring costs of
$50 million associated with our fiscal 2010 restructuring
plan, which did not occur in the current period.
Income before interest and income taxes increased
$26 million, or 2%, in fiscal 2011. Tax expense decreased
$7 million compared with the prior period, primarily as a
result of nonrecurring discrete items. Diluted income from
continuing operations per share for fiscal 2011 was $1.60,
compared with $1.45 in the prior period, primarily reflecting an
increase in operating income, continued improvements in our
income tax rate and the Company’s repurchase of its common
shares.
For fiscal 2011, cash flow from continuing operating activities
was $1,377 million and grew 3%, compared with
$1,336 million in the prior period. This growth reflects
both a
year-over-year
increase of $58 million in up-front cash collections from
single installment payments and an increase in collections on
trade receivables of $63 million and a decrease in income
tax payments of $107 million. This was partially offset by
an increase in disbursements of $187 million, primarily
attributable to acquisitions.
Performance
indicators
Management uses several quantitative and qualitative performance
indicators to assess our financial results and condition. Each
provides a measurement of the performance of our business and
how well we are executing our plan.
Our predominantly subscription-based business model is less
common among our competitors in the software industry and it may
be difficult to compare the results for many of our performance
indicators with those of our competitors. The following is a
summary of the principal performance indicators that management
uses to review performance:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
|
|
|
PERCENT
|
|
|
(DOLLARS IN MILLIONS)
|
|
2011(1)
|
|
|
2010(1)
|
|
|
CHANGE
|
|
|
CHANGE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
4,429
|
|
|
$
|
4,227
|
|
|
$
|
202
|
|
|
|
5
|
%
|
|
Subscription and maintenance revenue
|
|
$
|
3,822
|
|
|
$
|
3,765
|
|
|
$
|
57
|
|
|
|
2
|
%
|
|
Net income
|
|
$
|
827
|
|
|
$
|
771
|
|
|
$
|
56
|
|
|
|
7
|
%
|
|
Cash provided by operating activities — continuing
operations
|
|
$
|
1,377
|
|
|
$
|
1,336
|
|
|
$
|
41
|
|
|
|
3
|
%
|
|
Total bookings
|
|
$
|
4,888
|
|
|
$
|
4,843
|
|
|
$
|
45
|
|
|
|
1
|
%
|
|
Subscription and maintenance bookings
|
|
$
|
4,256
|
|
|
$
|
4,322
|
|
|
$
|
(66
|
)
|
|
|
(2
|
)%
|
|
Weighted average subscription and maintenance license agreement
duration in years
|
|
|
3.46
|
|
|
|
3.54
|
|
|
|
(0.08
|
)
|
|
|
(2
|
)%
|
|
Annualized subscription and maintenance bookings
|
|
$
|
1,230
|
|
|
$
|
1,221
|
|
|
$
|
9
|
|
|
|
1
|
%
|
24
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
|
|
|
PERCENT
|
|
|
(DOLLARS IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
CHANGE
|
|
|
CHANGE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable
securities(2)
|
|
$
|
3,228
|
|
|
$
|
2,583
|
|
|
$
|
645
|
|
|
|
25
|
%
|
|
Total debt
|
|
$
|
1,551
|
|
|
$
|
1,545
|
|
|
$
|
6
|
|
|
|
—
|
|
|
Total expected future cash collections from committed
contracts(1)(3)
|
|
$
|
6,043
|
|
|
$
|
5,546
|
|
|
$
|
497
|
|
|
|
9
|
%
|
|
Total revenue
backlog(1)(3)
|
|
$
|
8,763
|
|
|
$
|
8,125
|
|
|
$
|
638
|
|
|
|
8
|
%
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations.
|
| |
|
(2)
|
|
At March 31, 2011, marketable
securities were $179 million. At March 31, 2010,
marketable securities were less than $1 million.
|
| |
|
(3)
|
|
Refer to the discussion in the
“Liquidity and Capital Resources” section of this
MD&A for additional information about expected future cash
collections from committed contracts, billing backlog and
revenue backlog.
|
Analyses of our performance indicators, including general
trends, can be found in the “Results of Operations”
and “Liquidity and Capital Resources” sections of this
MD&A.
Total
revenue — Total revenue is the amount
of revenue recognized during the reporting period from the sale
of license, maintenance and professional services agreements.
Amounts recognized as subscription and maintenance revenue are
recognized ratably over the underlying term of the agreement.
Professional services revenue is generally recognized as the
services are performed or recognized on a ratable basis over the
term of the related software license. Software fees and other
revenue generally represents revenue recognized at the inception
of a license agreement (upfront basis).
Subscription and maintenance
revenue — Subscription and maintenance
revenue is the amount of revenue recognized ratably during the
reporting period from: (i) subscription license agreements
that were in effect during the period, generally including
maintenance that is bundled with and not separately identifiable
from software usage fees or product sales, (ii) maintenance
agreements associated with providing customer technical support
and access to software fixes and upgrades that are separately
identifiable from software usage fees or product sales, and
(iii) license agreements bundled with additional products,
maintenance or professional services for which Vendor Specific
Objective Evidence (VSOE) has not been established. These
amounts include the sale of products directly by us, as well as
by distributors and volume partners, value-added resellers and
exclusive representatives to end-users, where the contracts
incorporate the right for end-users to receive unspecified
future software products, and other contracts entered into in
close proximity or contemplation of such agreements.
Total
bookings — Total bookings includes the
incremental value of all subscription, maintenance and
professional services contracts and software fees and other
contracts entered into during the reporting period and is
generally reflective of the amount of products and services
during the period that our customers have agreed to purchase
from us. Revenue for bookings attributed to sales of software
products for which revenue is recognized on an up-front basis is
reflected in the “software fees and other” line item
of our Consolidated Statements of Operations.
Subscription and maintenance
bookings — Subscription and maintenance
bookings is the aggregate incremental amount we expect to
collect from our customers over the terms of the underlying
subscription and maintenance agreements entered into during a
reporting period. These amounts include the sale of products
directly by us and may include additional products, services or
other fees for which we have not established VSOE of fair value.
Subscription and maintenance bookings also includes indirect
sales by distributors and volume partners, value-added resellers
and exclusive representatives to end-users, where the contracts
incorporate the right for end-users to receive unspecified
future software products, and other contracts without these
rights entered into in close proximity or contemplation of such
agreements. These amounts are expected to be recognized ratably
as subscription and maintenance revenue over the applicable term
of the agreements. Subscription and maintenance bookings exclude
the value associated with certain perpetual licenses,
license-only indirect sales and professional services
arrangements.
The license and maintenance agreements that contribute to
subscription and maintenance bookings represent binding payment
commitments by customers over periods that range generally from
three-to-
five years on a weighted average basis, although in certain
cases customer commitments can be for longer or shorter periods.
These current period bookings are often renewals of prior
contracts that also had various durations, usually from three to
five years. The amount of new subscription and maintenance
bookings in a period is affected by the volume, duration and
value of contracts renewed during that period. Our subscription
and maintenance bookings typically increase in each consecutive
quarter during a fiscal year, with the first quarter having the
least bookings and the fourth quarter having the most bookings.
However, subscription and maintenance
25
bookings may not always follow the pattern of increasing in
consecutive quarters during a fiscal year, and the
quarter-to-quarter
differences in subscription and maintenance bookings may vary.
Given the varying durations of the contracts being renewed,
year-over-year
comparisons of bookings are not always indicative of any overall
bookings or revenue trend.
Generally, we believe that an increase in the current portion of
revenue backlog is a positive indicator of future revenue growth
due to the high percentage of our revenue that is recognized
from license agreements that are already committed and being
recognized ratably. Within bookings, we also consider the yield
on our renewal portfolio. We define “renewal yield” as
the percentage of prior contract value realized from renewals
during the period. The baseline for calculating renewal yield is
an estimate affected by various factors including contractual
renewal terms and other conditions. We estimate the yield based
on a review of material transactions representing a substantial
majority of the dollar value of renewals during the current
period. Changes in renewal yield may not be material to changes
in bookings compared with prior periods.
Period-to-period
changes in subscription and maintenance bookings do not
necessarily correlate to changes in cash receipts. The
contribution to current period revenue from subscription and
maintenance bookings from any single license or maintenance
agreement is relatively small, since revenue is recognized
ratably over the applicable term for these agreements.
Weighted average subscription
and maintenance license agreement duration in
years — The weighted average
subscription and maintenance license agreement duration in years
reflects the duration of all subscription and maintenance
agreements executed during a period, weighted by the total
contract value of each individual agreement. Weighted average
subscription and maintenance license agreement duration in years
can fluctuate from period-to-period depending on the mix of
license agreements entered into during a period. Weighted
average duration information is disclosed in order to provide
additional understanding of the volume of our bookings.
Annualized subscription and
maintenance bookings — Annualized
subscription and maintenance bookings is an indicator that
normalizes the bookings recorded in the current period to
account for contract length. It is calculated by dividing the
total value of all new subscription and maintenance license
agreements entered into during a period by the weighted average
subscription and license agreement duration in years for all
such subscription and maintenance license agreements recorded
during the same period.
Total revenue
backlog — Total revenue backlog
represents the aggregate amount we expect to recognize as
revenue in the future as either subscription and maintenance
revenue, professional services revenue or software fees and
other revenue associated with contractually committed amounts
billed or to be billed at the balance sheet date. Total revenue
backlog is composed of amounts recognized as liabilities in our
Consolidated Balance Sheets as deferred revenue (billed or
collected) as well as unearned amounts yet to be billed under
subscription and maintenance and software fees and other
agreements. Classification of amounts as current and non-current
depends on when such amounts are expected to be earned and
therefore recognized as revenue. Amounts that are expected to be
earned and therefore recognized as revenue in 12 months or
less are classified as current, while amounts expected to be
earned in more than 12 months are classified as noncurrent.
The portion of total revenue backlog that relates to
subscription and maintenance agreements is recognized as revenue
evenly on a monthly basis over the duration of the underlying
agreements and is reported as subscription and maintenance
revenue in our Consolidated Statements of Operations. Generally,
we believe that an increase in the current portion of revenue
backlog is a positive indicator of future revenue growth.
Deferred revenue (billed or collected) is composed of:
(i) amounts received from customers in advance of revenue
recognition, (ii) amounts billed but not collected for
which revenue has not yet been earned and (iii) amounts
received in advance of revenue recognition from financial
institutions where we have transferred our interest in committed
installments (referred to as “Financing obligations and
other” in Note 8, “Deferred Revenue” in the
Notes to our Consolidated Financial Statements).
26
Results
of operations
The following table presents revenue and expense line items
reported in our Consolidated Statements of Operations for fiscal
2011, 2010 and 2009 and the
period-over-period
dollar and percentage changes for those line items.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOLLAR
|
|
|
PERCENT
|
|
|
DOLLAR
|
|
|
PERCENT
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
CHANGE
|
|
|
CHANGE
|
|
|
CHANGE
|
|
|
CHANGE
|
|
|
(DOLLARS IN MILLIONS)
|
|
2011(1)
|
|
|
2010(1)
|
|
|
2009(1)
|
|
|
2011/2010
|
|
|
2011/2010
|
|
|
2010/2009
|
|
|
2010/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription and maintenance revenue
|
|
$
|
3,822
|
|
|
$
|
3,765
|
|
|
$
|
3,644
|
|
|
$
|
57
|
|
|
|
2
|
%
|
|
$
|
121
|
|
|
|
3
|
%
|
|
Professional services
|
|
|
327
|
|
|
|
288
|
|
|
|
353
|
|
|
|
39
|
|
|
|
14
|
%
|
|
|
(65
|
)
|
|
|
(18
|
)%
|
|
Software fees and other
|
|
|
280
|
|
|
|
174
|
|
|
|
141
|
|
|
|
106
|
|
|
|
61
|
%
|
|
|
33
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
4,429
|
|
|
|
4,227
|
|
|
|
4,138
|
|
|
|
202
|
|
|
|
5
|
%
|
|
|
89
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of licensing and maintenance
|
|
|
278
|
|
|
|
250
|
|
|
|
242
|
|
|
|
28
|
|
|
|
11
|
%
|
|
|
8
|
|
|
|
3
|
%
|
|
Cost of professional services
|
|
|
303
|
|
|
|
259
|
|
|
|
305
|
|
|
|
44
|
|
|
|
17
|
%
|
|
|
(46
|
)
|
|
|
(15
|
)%
|
|
Amortization of capitalized software costs
|
|
|
192
|
|
|
|
133
|
|
|
|
112
|
|
|
|
59
|
|
|
|
44
|
%
|
|
|
21
|
|
|
|
19
|
%
|
|
Selling and marketing
|
|
|
1,286
|
|
|
|
1,186
|
|
|
|
1,178
|
|
|
|
100
|
|
|
|
8
|
%
|
|
|
8
|
|
|
|
1
|
%
|
|
General and administrative
|
|
|
451
|
|
|
|
478
|
|
|
|
463
|
|
|
|
(27
|
)
|
|
|
(6
|
)%
|
|
|
15
|
|
|
|
3
|
%
|
|
Product development and enhancements
|
|
|
471
|
|
|
|
468
|
|
|
|
479
|
|
|
|
3
|
|
|
|
1
|
%
|
|
|
(11
|
)
|
|
|
(2
|
)%
|
|
Depreciation and amortization of other intangible assets
|
|
|
187
|
|
|
|
159
|
|
|
|
147
|
|
|
|
28
|
|
|
|
18
|
%
|
|
|
12
|
|
|
|
8
|
%
|
|
Other expenses (gains), net
|
|
|
16
|
|
|
|
14
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
14
|
%
|
|
|
15
|
|
|
|
NM
|
|
|
Restructuring and other
|
|
|
(9
|
)
|
|
|
52
|
|
|
|
102
|
|
|
|
(61
|
)
|
|
|
NM
|
|
|
|
(50
|
)
|
|
|
(49
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense before interest and income taxes
|
|
|
3,175
|
|
|
|
2,999
|
|
|
|
3,027
|
|
|
|
176
|
|
|
|
6
|
%
|
|
|
(28
|
)
|
|
|
(1
|
)%
|
|
Income before interest and income taxes
|
|
|
1,254
|
|
|
|
1,228
|
|
|
|
1,111
|
|
|
|
26
|
|
|
|
2
|
%
|
|
|
117
|
|
|
|
11
|
%
|
|
Interest expense, net
|
|
|
45
|
|
|
|
76
|
|
|
|
62
|
|
|
|
(31
|
)
|
|
|
(41
|
)%
|
|
|
14
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,209
|
|
|
|
1,152
|
|
|
|
1,049
|
|
|
|
57
|
|
|
|
5
|
%
|
|
|
103
|
|
|
|
10
|
%
|
|
Income tax expense
|
|
|
386
|
|
|
|
393
|
|
|
|
388
|
|
|
|
(7
|
)
|
|
|
(2
|
)%
|
|
|
5
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
823
|
|
|
|
759
|
|
|
|
661
|
|
|
|
64
|
|
|
|
8
|
%
|
|
|
98
|
|
|
|
15
|
%
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations
|
27
The following table sets forth, for the fiscal years indicated,
the percentage that the items in the accompanying Consolidated
Statements of Operations bear to total revenue.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERCENTAGE OF
|
|
|
|
|
TOTAL REVENUE FOR THE
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription and maintenance revenue
|
|
|
86
|
%
|
|
|
89
|
%
|
|
|
88
|
%
|
|
Professional services
|
|
|
7
|
|
|
|
7
|
|
|
|
9
|
|
|
Software fees and other
|
|
|
7
|
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of licensing and maintenance
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
|
Cost of professional services
|
|
|
7
|
|
|
|
6
|
|
|
|
7
|
|
|
Amortization of capitalized software costs
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
Selling and marketing
|
|
|
29
|
|
|
|
28
|
|
|
|
28
|
|
|
General and administrative
|
|
|
10
|
|
|
|
11
|
|
|
|
11
|
|
|
Product development and enhancements
|
|
|
11
|
|
|
|
11
|
|
|
|
12
|
|
|
Depreciation and amortization of other intangible assets
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
Other expenses (gains), net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Restructuring and other
|
|
|
—
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses before interest and income taxes
|
|
|
72
|
|
|
|
71
|
|
|
|
73
|
|
|
Income before interest and income taxes
|
|
|
28
|
|
|
|
29
|
|
|
|
27
|
|
|
Interest expense, net
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
Income before income taxes
|
|
|
27
|
|
|
|
27
|
|
|
|
25
|
|
|
Income tax expense
|
|
|
9
|
|
|
|
9
|
|
|
|
9
|
|
|
Income from continuing operations
|
|
|
19
|
%
|
|
|
18
|
%
|
|
|
16
|
%
|
Note — amounts may not
add to their respective totals due to rounding.
Bookings
For fiscal 2011 and 2010, total bookings were
$4,888 million and $4,843 million, respectively. Total
fiscal 2011 bookings included a license agreement with one large
IT outsourcer for approximately $500 million signed during
the fourth quarter of fiscal 2011. The increase in bookings
reflected favorable results for new product sales in connection
with software fees and other bookings (recognized as software
fees and other revenue in the current period), which was
partially offset by a decrease in subscription and maintenance
bookings for fiscal 2011, as described below. Total new product
sales and mainframe capacity grew in the low single digits for
the fiscal year. Within new product and capacity sales in fiscal
2011, the increase in new distributed products was partially
offset by a decrease in mainframe capacity and new mainframe
product sales. Bookings in Europe, Middle East and Africa (EMEA)
region declined due to the lower number of scheduled renewals
and new product sales during fiscal 2011. This decline was
mostly offset by growth in the United States. We expect the
fiscal 2012 renewal portfolio in EMEA to be lower compared to
fiscal 2011 and it will take a number of quarters to improve
performance in this region.
For fiscal 2010 and 2009, total bookings were
$4,843 million and $5,113 million, respectively. The
decrease in bookings was primarily due to the decrease in
subscription and maintenance bookings for fiscal 2010, as
described below.
Subscription
and maintenance bookings
For the fiscal 2011 and 2010, we added subscription and
maintenance bookings of $4,256 million and
$4,322 million, respectively. The decrease in subscription
and maintenance bookings was primarily attributable to a
decrease in mainframe new product and capacity sales.
During fiscal 2011, we renewed a total of 56 license agreements
with incremental contract values in excess of $10 million
each, for an aggregate contract value of $1,994 million.
This includes a license agreement with one large IT outsourcer
for
28
approximately $500 million signed during the fourth quarter
of fiscal 2011. This license agreement extends through fiscal
year 2016. During fiscal 2010, we renewed a total of 68 license
agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of
$2,146 million.
Generally, quarters with smaller renewal inventories result in a
lower level of bookings because renewal bookings will be less
and renewals remain an important selling opportunity for new
products. Renewal bookings for the year, which generally does
not include new product and capacity sales and professional
services arrangements, ended flat compared to the prior year.
Excluding one large IT outsourcer for approximately
$500 million, the renewals would have been down
approximately 15%, primarily due to the timing of certain deals
that were expected to be renewed in fiscal 2011 and are now
expected to be renewed during fiscal 2012, including one
contract for approximately $100 million that was executed
in April 2011. We currently expect our fiscal 2012 renewal
portfolio to be lower by approximately 20 percent compared
to fiscal 2011.
For fiscal 2011, annualized subscription and maintenance
bookings increased from $1,221 million in the prior year
period to $1,230 million. The weighted average subscription
and maintenance license agreement duration in years decreased
slightly from 3.54 in fiscal 2010 to 3.46 in fiscal 2011.
Although each contract is subject to terms negotiated by the
respective parties, we do not currently expect the weighted
average duration of contracts to change materially from current
levels for end-user contracts.
For fiscal 2010 and 2009, our subscription and maintenance
bookings were $4,322 million and $4,657 million,
respectively. The decrease in subscription and maintenance
bookings for fiscal 2010 as compared with fiscal 2009 was
primarily due to several large contract extensions with terms of
approximately five years entered into during the second quarter
of fiscal 2009, two of which had a combined contract value of
approximately $550 million. During fiscal 2010, we renewed
a total of 68 license agreements with incremental contract
values in excess of $10 million each, for an aggregate
contract value of $2,146 million. During fiscal 2009, we
renewed a total of 68 license agreements with incremental
contract values in excess of $10 million each, for an
aggregate contract value of $2,471 million. For fiscal
2010, annualized subscription and maintenance bookings decreased
$69 million from the prior year period to
$1,221 million. The weighted average subscription and
maintenance license agreement duration in years decreased
slightly from fiscal 2009 to fiscal 2010, from 3.61 to 3.54,
respectively.
Revenue
As more fully described below, the increase in total revenue in
fiscal 2011 compared with fiscal 2010 was primarily attributable
to an increase in our software fees and other revenue and to a
lesser extent an increase in subscription and maintenance
revenue and professional services revenue. During fiscal 2011,
revenue reflected a favorable foreign exchange effect of
$4 million compared with fiscal 2010.
The $89 million increase in total revenue for fiscal 2010
compared with fiscal 2009 was primarily due to a higher
annualized value of customer contracts contributing to revenue
during fiscal 2010 compared with fiscal 2009, partially offset
by an unfavorable foreign exchange effect of $32 million
and a decrease in professional services revenue.
Subscription
and maintenance revenue
The increase in subscription and maintenance revenue for fiscal
2011 compared with fiscal 2010 was primarily due to revenue
associated with our fiscal 2010 acquisitions of NetQoS, Inc. and
Nimsoft AS (both of which occurred during the second half of
fiscal 2010). For fiscal 2011, revenue reflected a favorable
foreign exchange effect of less than $1 million.
The increase in subscription and maintenance revenue for fiscal
2010 compared with fiscal 2009 was primarily due to a higher
annualized value of customer contracts contributing to revenue
during fiscal 2010 as compared with fiscal 2009, partially
offset by a $32 million negative effect from foreign
exchange.
Professional
services
Professional services revenue primarily includes product
implementation, customer training and customer education.
Professional services revenue increased in fiscal 2011 compared
with fiscal 2010, primarily due to the increased number of
engagements under service contracts.
The professional services revenue decrease for fiscal 2010
compared with fiscal 2009 was primarily a result of our
customers’ reduced discretionary spending due to the
difficult economic environment.
29
Software
fees and other
Software fees and other revenue primarily consists of revenue
that is recognized on an up-front basis. This includes revenue
associated with distributed products sold on an up-front basis
directly by our sales force or through transactions with
distributors and volume partners, value-added resellers and
exclusive representatives (sometimes referred to as our
“indirect” or “channel” revenue). Software
fees and other revenue increased for fiscal 2011 compared with
fiscal 2010 primarily due to $48 million in revenue from
service assurance technologies associated with the NetQoS
acquisition (which occurred during the second half of fiscal
2010) that were successfully integrated into our existing
product portfolio, $36 million from existing application
management products sold on an up-front basis and
$27 million from our SaaS offerings from a recent
acquisition and other organic technologies sold as SaaS.
Software fees and other revenue increased for fiscal 2010
compared with fiscal 2009 primarily due to a $39 million
increase in revenue associated with acquired new products and
existing application management products sold on an up-front
basis. Approximately $18 million of these revenues were
from products of NetQoS, which was acquired during the second
half of fiscal 2010. In fiscal 2009 we recorded $5 million
under the license agreement we entered into in connection with a
litigation settlement with Rocket Software, Inc. that expires in
fiscal 2014. In fiscal 2010 we recorded $6 million from a
renegotiated payment schedule under this agreement.
Total
revenue by geography
The following table presents the amount of revenue earned from
sales to unaffiliated customers in the United States and
international regions and corresponding percentage changes for
fiscal 2011, 2010 and 2009.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2011 COMPARED WITH FISCAL 2010
|
|
|
FISCAL 2010 COMPARED WITH FISCAL 2009
|
|
|
(DOLLARS IN MILLIONS)
|
|
2011(1)
|
|
|
% of Total
|
|
|
2010(1)
|
|
|
% of Total
|
|
|
% Change
|
|
|
2010(1)
|
|
|
% of Total
|
|
|
2009(1)
|
|
|
% of Total
|
|
|
% Change
|
|
|
United States
|
|
$
|
2,519
|
|
|
|
57
|
%
|
|
$
|
2,337
|
|
|
|
55
|
%
|
|
|
8
|
%
|
|
$
|
2,337
|
|
|
|
55
|
%
|
|
$
|
2,208
|
|
|
|
53
|
%
|
|
|
6
|
%
|
|
International
|
|
|
1,910
|
|
|
|
43
|
%
|
|
|
1,890
|
|
|
|
45
|
%
|
|
|
1
|
%
|
|
|
1,890
|
|
|
|
45
|
%
|
|
|
1,930
|
|
|
|
47
|
%
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,429
|
|
|
|
100
|
%
|
|
$
|
4,227
|
|
|
|
100
|
%
|
|
|
5
|
%
|
|
$
|
4,227
|
|
|
|
100
|
%
|
|
$
|
4,138
|
|
|
|
100
|
%
|
|
|
2
|
%
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations
|
Revenue in the United States increased by $182 million, or
8%, for fiscal 2011 primarily due to higher software fees and
other revenue, as described above. International revenue
increased by $20 million, or 1% for fiscal 2011 compared
with fiscal 2010. Lower revenue in Europe, Middle East and
Africa was offset by revenue growth in the Asia-Pacific-Japan
and Latin America regions. Excluding a favorable foreign
exchange effect of $4 million, international revenue would
have increased by $16 million, or 1%.
Revenue in the United States increased by 6% for fiscal 2010
compared with fiscal 2009 primarily due to a higher annual value
of customer subscription and maintenance contracts. For fiscal
2010, international revenue decreased by approximately 2%
compared with the prior period primarily due to the unfavorable
effect from foreign exchange of $32 million.
Price changes do not have a material effect on revenue in a
given period as a result of our ratable subscription model.
Expenses
The overall increase in operating expenses for fiscal 2011
compared with fiscal 2010 was primarily due to costs associated
with our fiscal 2011 and 2010 acquisitions and an increase in
selling and marketing costs attributable to CA World, our user
conference, partially offset by the decrease in general and
administrative costs. In fiscal 2010, we incurred restructuring
costs of $50 million associated with our fiscal 2010
restructuring plan, which did not occur in the current period.
The overall decrease in operating expenses for fiscal 2010
compared with fiscal 2009 was primarily due to lower
restructuring costs partially offset by increased selling and
marketing, general and administrative and other costs.
Costs
of licensing and maintenance
Costs of licensing and maintenance includes technical support,
royalties, and other manufacturing and distribution costs. The
increase in costs of licensing and maintenance for fiscal 2011
compared with fiscal 2010 was primarily due to an increase in
cost of goods sold expense of $21 million from the acquired
technologies related to the NetQoS acquisition.
Costs of licensing and maintenance for fiscal 2010 as compared
with fiscal 2009 decreased $8 million due to lower royalty
fees offset by increases in product support expenses and other
costs.
30
Cost
of professional services
Cost of professional services consist primarily of our
personnel-related costs associated with providing professional
services. For fiscal 2011, the costs of professional services
increased compared with fiscal 2010 primarily due to an increase
in services projects, as reflected by the $39 million
increase in revenue. These costs increased at a higher rate than
revenue primarily as a result of a higher mix of engagements
that required additional effort to meet customer requirements
during the second quarter of fiscal 2011. These engagements
resulted in lower margins and as a result gross margins on
professional services decreased to 7% for fiscal 2011, compared
with 10% for fiscal 2010.
For fiscal 2010, cost of professional services decreased
compared with fiscal 2009 primarily due to a $36 million
decrease in consulting and personnel costs primarily due to
lower sales volumes. Professional services gross margin for
fiscal 2010 was 10% as compared with 14% for fiscal 2009 mostly
due to lower utilization rates resulting from the decrease in
sales.
Amortization
of capitalized software costs
Amortization of capitalized software costs consists of the
amortization of both purchased software and internally generated
capitalized software development costs. Internally generated
capitalized software development costs relate to new products
and significant enhancements to existing software products that
have reached the technological feasibility stage.
For fiscal 2011, amortization of capitalized software costs
increased compared with fiscal 2010, primarily due to the
increase in amortization expense associated with our fiscal 2011
and 2010 acquisitions and the increase in activities relating to
projects that have reached technological feasibility in recent
periods.
For fiscal 2010, amortization of capitalized software costs
increased compared with fiscal 2009, principally due to the
capitalizable value of projects that have reached technological
feasibility in prior periods.
Selling
and marketing
Selling and marketing expenses include the costs relating to our
sales force, channel partners, corporate and business marketing
and customer training programs. The increase in selling and
marketing expenses for fiscal 2011 compared with fiscal 2010 was
primarily due to an increase in personnel-related costs of
$46 million, of which $22 million primarily related to
costs associated with our fiscal 2011 and 2010 acquisitions.
Promotional and travel costs increased by $39 million,
primarily due to $20 million of costs associated with CA
World, our user conference, and our re-branding initiative. CA
World occurred in the first quarter of fiscal 2011 and is our
largest periodic promotional and marketing event that takes
place approximately every 18 months. Included in the
promotional and travel cost increase is $10 million of
additional expenses that were associated with our fiscal 2011
and 2010 acquisitions. A portion of the increase in personnel
and promotion costs is associated with our continued investment
in emerging enterprises and emerging geographies.
The increase in selling and marketing expenses for fiscal 2010
as compared with fiscal 2009 was primarily due to increased
personnel costs of $20 million partially from acquired
companies and higher commission costs of $30 million
resulting from new product sales partially offset by reduced
promotion expenses of $21 million, principally attributable
to the timing of CA World, which took place in the third quarter
of fiscal 2009.
General
and administrative
General and administrative expenses include the costs of
corporate and support functions, including our executive
leadership and administration groups, finance, legal, human
resources, corporate communications and other costs such as
provisions for doubtful accounts.
The decrease in general and administrative expenses for fiscal
2011 compared with fiscal 2010 was primarily related to a
decrease in personnel-related and office costs of
$29 million and consulting costs of $15 million. The
decrease in personnel- related expense was primarily due to
lower financial performance attainment levels under our equity
and cash compensation plans for fiscal 2011. In fiscal 2010, we
incurred costs related to the departure of our Chief Executive
Officer and the transition to his successor. These decreases
were offset by increases in personnel costs of $20 million
associated with our fiscal 2011 and 2010 acquisitions.
General and administrative expenses for fiscal 2010 compared
with fiscal 2009 increased $15 million primarily due to the
aforementioned costs related to the departure of our Chief
Executive Officer. We also incurred a $12 million increase
in costs
31
attributable to acquisitions and other strategic initiatives
partially offset by a $7 million reduction in bad debt
expenses and other cost reductions.
Product
development and enhancements
For fiscal 2011 and 2010, product development and enhancements
expenses represented approximately 11% of total revenue. For
fiscal 2011, product development and enhancements expenses were
slightly higher primarily due additional costs incurred in our
investment in technologies to support our growth strategy, as
well as a broadening of our enterprise product offerings,
partially offset against lower personnel costs.
Product development and enhancements expenses for fiscal 2010
decreased from fiscal 2009 primarily due to an increase in
resources dedicated to internally developed software for
strategic investments in our security, mainframe and
infrastructure management products, which are capitalized and
reflected in the “Capitalized software and other intangible
assets, net” line item on the Consolidated Balance Sheets.
Mostly offsetting this decrease in expenses were increased
personnel costs, an increase in our investment in product
development and enhancements for emerging technologies, and a
broadening of our enterprise product offerings to build on our
portfolio of software and services to meet next-generation
market opportunities.
Depreciation
and amortization of other intangible assets
The increase in depreciation and amortization of other
intangible assets for fiscal 2011 compared with fiscal 2010 was
primarily due to the increase in depreciation and amortization
expenses for acquired assets and fixed assets placed into
service during fiscal 2011.
The increase in depreciation and amortization of other
intangible assets for fiscal 2010 as compared with fiscal 2009
was primarily due to the increased value of fixed assets placed
into service during fiscal 2010.
Other
expenses (gains), net
Other expenses (gains), net includes gains and losses
attributable to divested assets, foreign currency exchange rate
changes and certain other items.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Gains attributable to divestitures of assets
|
|
$
|
(11
|
)
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
Changes in foreign currency exchange rates
|
|
|
18
|
|
|
|
10
|
|
|
|
(11
|
)
|
|
Expenses attributable to litigation claims and settlements
|
|
|
9
|
|
|
|
5
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16
|
|
|
$
|
14
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For fiscal 2011, Other expenses (gains), net included
$14 million of losses relating to our foreign exchange
derivative contracts, which we use to mitigate our operating
risks and exposure to foreign currency exchange rates. These
losses were offset by foreign currency transaction gains due to
the weakening of the U.S. dollar against the currencies of
other countries in which we conduct our operations. During
fiscal 2011, we recognized $9 million of expenses in
connection with litigation claims, partially offset by a
$10 million gain associated with the sale of our interest
in an investment.
In fiscal 2010, we recorded net foreign exchange losses of
$10 million. The foreign exchange amounts recorded in
fiscal 2010 included net losses of $20 million associated
with derivative contracts. These losses were offset by foreign
currency transaction gains due to the weakening of the
U.S. dollar against the currencies of other countries in
which we conduct our operations.
In fiscal 2009, we recorded net foreign exchange gains of
$11 million. The foreign exchange amounts recorded in
fiscal 2009 included net gains of $77 million associated
with derivative foreign exchange contracts. These gains were
mostly offset by foreign exchange losses from other operating
activities due to the strengthening of the U.S. dollar
against the currencies of other countries in which we conduct
our operations. During the third quarter of fiscal 2009, we
recognized a gain of $5 million associated with our
repurchase of $148 million principal amount of our
4.750% Senior Notes.
Restructuring
and other
The Fiscal 2010 Restructuring Plan (Fiscal 2010 Plan) was
approved in March 2010. The Fiscal 2007 Restructuring Plan
(Fiscal 2007 Plan) was approved in August 2006.
32
For fiscal 2011, we recorded a benefit of $2 million
relating to adjustments to changes in estimated costs for our
Fiscal 2010 and Fiscal 2007 Plans. For fiscal 2010 and 2009, we
incurred expenses of $46 million and $96 million,
respectively, primarily related to severance and lease
abandonment and termination costs under the Fiscal 2010 and
Fiscal 2007 Plans. At March 31, 2011, $55 million
remained unpaid for both our Fiscal 2010 Plan and Fiscal 2007
Plan combined, which primarily consisted of accrued facilities
abandonment charges. The severance portion of the remaining
liability balance is included in the “Accrued salaries,
wages and commissions” line item on the Consolidated
Balance Sheets. The facilities abandonment portion of the
remaining liability balance is included in the “Accrued
expenses and other current liabilities” and “Other
noncurrent liabilities” line items on the Consolidated
Balance Sheets. Final payment of these amounts is dependent upon
settlement with the works councils in certain
non-U.S.
locations and our ability to negotiate lease terminations. Refer
to Note 4, “Restructuring,” in the Notes to the
Consolidated Financial Statements for additional information.
During fiscal year 2011, we received $10 million in
settlements of claims associated with previous stockholder
derivative actions following the substitution of us as plaintiff
in those actions.
During fiscal 2010 and fiscal 2009, we recorded impairment
charges of $3 million and $5 million, respectively,
for software that was capitalized for internal use but was
determined to be impaired.
Interest
expense, net
The decrease in interest expense, net, for fiscal 2011 compared
with fiscal 2010 was primarily due to the decrease in interest
expense resulting from our overall decrease in debt. During the
third quarter of fiscal 2010, we reduced our debt outstanding
and increased our weighted average maturity, enhancing our
capital structure and financial flexibility.
The increase in interest expense, net for fiscal 2010 compared
with fiscal 2009 was primarily due to a decline in short-term
interest rates which reduced interest income earned on cash
balances.
Refer to the “Liquidity and Capital Resources” section
of this MD&A and Note 9, “Debt,” in the
Notes to the Consolidated Financial Statements for additional
information.
Income
taxes
Our effective tax rate was 32%, 34% and 37%, for fiscal 2011,
2010 and 2009, respectively.
The reduction in the effective tax rate for fiscal 2011,
compared with fiscal 2010, resulted primarily from affirmative
claims in the context of tax audits, resolutions of uncertain
tax positions relating to
non-U.S. jurisdictions
and the retroactive reinstatement of the U.S. Research and
Development Tax Credit in December 2010, partially offset by
refinements of tax positions taken in prior periods. These items
taken together resulted in a net benefit of $33 million for
fiscal 2011 and we continue our efforts to improve our long-term
tax profile.
The reduction in the effective tax rate for fiscal 2010,
compared with fiscal 2009, resulted primarily from the net
charge incurred in fiscal 2009 that did not reoccur in fiscal
2010, in addition to fiscal 2010 reconciliations of tax returns
to tax provisions, resolutions of uncertain tax positions
relating to
non-U.S. jurisdictions
and refinements of estimates ascribed to tax positions taken in
prior periods relating to our international tax profile. These
items taken together resulted in a net benefit of
$10 million for fiscal 2010.
The income tax provision recorded for fiscal 2009 includes a net
charge of $22 million, which is primarily attributable to
adjustments to uncertain tax positions (including certain
refinements of amounts ascribed to tax positions taken in prior
periods), partially offset by the reinstatement of the
U.S. Research and Development Tax Credit and the settlement
of a U.S. federal income tax audit for fiscal 2001 through
2004. As a result of this settlement, during the first quarter
of fiscal year 2009, we recognized a tax benefit of
$11 million and a reduction of goodwill by $10 million.
No provision has been made for U.S. federal income taxes on
$1,198 million and $1,067 million at March 31,
2011 and 2010, respectively, of unremitted earnings of our
foreign subsidiaries since we plan to permanently reinvest all
such earnings outside the United States. It is not practicable
to determine the amount of tax associated with such unremitted
earnings.
Refer to Note 16, “Income Taxes,” in the Notes to
the Consolidated Financial Statements for additional information.
33
Discontinued
operations
During the first quarter of fiscal 2011, we sold our Information
Governance business, consisting primarily of the CA Records
Manager and CA Message Manager software offerings and related
professional services, for $19 million. The Information
Governance business results for fiscal years 2011, 2010 and 2009
included revenue of $3 million, $22 million and
$24 million, respectively, and a loss from operations of
$6 million, $1 million and less than $1 million,
respectively.
At the end of fiscal 2011, we identified our Internet Security
business as available for sale and on April 28, 2011, we
signed an agreement for the sale of the business. The Internet
Security business results for fiscal years 2011, 2010 and 2009
consisted of revenue of $83 million, $104 million and
$109 million, respectively, and income from operations of
$10 million, $13 million and $10 million,
respectively.
Refer to Note 3, “Discontinued Operations,” in
the Notes to the Consolidated Financial Statements for
additional information.
Selected
quarterly information
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2011 QUARTER
ENDED
|
|
|
(IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
|
|
JUNE 30(1)
|
|
|
SEPT. 30(1)
|
|
|
DEC. 31(1)
|
|
|
MAR. 31(1)
|
|
|
Total(1)
|
|
|
Revenue
|
|
$
|
1,069
|
|
|
$
|
1,088
|
|
|
$
|
1,144
|
|
|
$
|
1,128
|
|
|
$
|
4,429
|
|
|
Percentage of annual revenue
|
|
|
24
|
%
|
|
|
25
|
%
|
|
|
26
|
%
|
|
|
25
|
%
|
|
|
100
|
%
|
|
Costs of licensing and maintenance
|
|
$
|
67
|
|
|
$
|
66
|
|
|
$
|
74
|
|
|
$
|
71
|
|
|
$
|
278
|
|
|
Cost of professional services
|
|
$
|
71
|
|
|
$
|
75
|
|
|
$
|
77
|
|
|
$
|
80
|
|
|
$
|
303
|
|
|
Amortization of capitalized software costs
|
|
$
|
45
|
|
|
$
|
47
|
|
|
$
|
52
|
|
|
$
|
48
|
|
|
$
|
192
|
|
|
Income from continuing operations
|
|
$
|
221
|
|
|
$
|
219
|
|
|
$
|
196
|
|
|
$
|
187
|
|
|
$
|
823
|
|
|
Basic income from continuing operations per share
|
|
$
|
0.43
|
|
|
$
|
0.43
|
|
|
$
|
0.38
|
|
|
$
|
0.37
|
|
|
$
|
1.60
|
|
|
Diluted income from continuing operations per share
|
|
$
|
0.43
|
|
|
$
|
0.43
|
|
|
$
|
0.38
|
|
|
$
|
0.37
|
|
|
$
|
1.60
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2010 QUARTER ENDED
|
|
|
(IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
|
|
JUNE 30(1)
|
|
|
SEPT. 30(1)
|
|
|
DEC. 31(1)
|
|
|
MAR. 31(1)
|
|
|
TOTAL(1)
|
|
|
Revenue
|
|
$
|
1,015
|
|
|
$
|
1,040
|
|
|
$
|
1,097
|
|
|
$
|
1,075
|
|
|
$
|
4,227
|
|
|
Percentage of annual revenue
|
|
|
24
|
%
|
|
|
25
|
%
|
|
|
26
|
%
|
|
|
25
|
%
|
|
|
100
|
%
|
|
Costs of licensing and maintenance
|
|
$
|
54
|
|
|
$
|
62
|
|
|
$
|
60
|
|
|
$
|
74
|
|
|
$
|
250
|
|
|
Cost of professional services
|
|
$
|
66
|
|
|
$
|
59
|
|
|
$
|
66
|
|
|
$
|
68
|
|
|
$
|
259
|
|
|
Amortization of capitalized software costs
|
|
$
|
30
|
|
|
$
|
33
|
|
|
$
|
33
|
|
|
$
|
37
|
|
|
$
|
133
|
|
|
Income from continuing
operations(2)
|
|
$
|
192
|
|
|
$
|
211
|
|
|
$
|
256
|
|
|
$
|
100
|
|
|
$
|
759
|
|
|
Basic income from continuing operations per share
|
|
$
|
0.37
|
|
|
$
|
0.40
|
|
|
$
|
0.49
|
|
|
$
|
0.19
|
|
|
$
|
1.46
|
|
|
Diluted income from continuing operations per share
|
|
$
|
0.36
|
|
|
$
|
0.40
|
|
|
$
|
0.49
|
|
|
$
|
0.19
|
|
|
$
|
1.45
|
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations.
|
| |
|
(2)
|
|
Includes after-tax charges of
$29 million for severance and other expenses in connection
with restructuring plans for the quarter ended March 31,
2010. Refer to “Restructuring and Other” within the
Results of Operations section of this MD&A for additional
information. Also includes a net charge of $24 million from
certain tax items and $8 million attributable to tax rate
changes, recorded during the quarter ended March 31, 2010.
|
Liquidity
and capital resources
Our cash and cash equivalent balances are held in numerous
locations throughout the world, with 47% held in our
subsidiaries outside the United States at March 31, 2011.
Cash, cash equivalents and marketable securities totaled
$3,228 million at March 31, 2011, representing an
increase of $645 million from the March 31, 2010
balance of $2,583 million. The increase in cash was
primarily due to the decrease in cash used in investing and
financing activities for fiscal 2011, compared with fiscal 2010.
The decrease in cash used in investing activities was primarily
due to the reduction of cash paid for acquisitions, partially
offset by our investment in marketable securities in order to
enhance the yield of our investments while maintaining the
safety of our portfolio. The decrease in cash used in financing
activities was primarily due to the cash utilized during fiscal
2010 to repay our debt outstanding, which enhanced our capital
structure and financial flexibility. During fiscal 2011, there
was an $89 million favorable translation effect from
foreign currency exchange rates on cash held outside the United
States in currencies other than the U.S. dollar.
We expect that existing cash and cash equivalents, the
availability of borrowings under existing and renewable credit
lines, and cash expected to be provided from operations will be
sufficient to meet ongoing cash requirements.
We expect to use existing cash, cash equivalents and marketable
securities balances and future cash generated from operations to
fund capital spending, financing activities such as the
repayment of our debt balances as they mature, the
34
payment of dividends, and the potential repurchase of shares of
common stock in accordance with any plans approved by our Board
of Directors, as well as our continued investment in our
enterprise resource planning implementation and future
acquisitions.
Sources
and uses of cash
Under our subscription and maintenance agreements, customers
generally make installment payments over the term of the
agreement, often with at least one payment due at contract
execution, for the right to use our software products and
receive product support, software fixes and new products when
available. The timing and actual amounts of cash received from
committed customer installment payments under any specific
agreement can be affected by several factors, including the time
value of money and the customer’s credit rating. Often, the
amount received is the result of direct negotiations with the
customer when establishing pricing and payment terms. In certain
instances, the customer negotiates a price for a single up-front
installment payment and seeks its own internal or external
financing sources. In other instances, we may assist the
customer by arranging financing on their behalf through a
third-party financial institution. Alternatively, we may decide
to transfer our rights to the future committed installment
payments due under the license agreement to a third-party
financial institution in exchange for a cash payment. Once
transferred, the future committed installments are payable by
the customer to the third-party financial institution. Whether
the future committed installments have been financed directly by
the customer with our assistance or by the transfer of our
rights to future committed installments to a third party, such
financing agreements may contain limited recourse provisions
with respect to our continued performance under the license
agreements. Based on our historical experience, we believe that
any liability that we may incur as a result of these limited
recourse provisions will be immaterial.
Amounts billed or collected as a result of a single installment
for the entire contract value, or a substantial portion of the
contract value, rather than being invoiced and collected over
the life of the license agreement are reflected in the liability
section of our Consolidated Balance Sheets as “Deferred
revenue (billed or collected).” Amounts received from
either a customer or a third-party financial institution that
are attributable to later years of a license agreement have a
positive impact on billings and cash provided by operating
activities in the current period. Accordingly, to the extent
such collections are attributable to the later years of a
license agreement, billings and cash provided by operating
activities during the license’s later years will be lower
than if the payments were received over the license term. We are
unable to predict with certainty the amount of cash to be
collected from single installments for the entire contract
value, or a substantial portion of the contract value, under new
or renewed license agreements to be executed in future periods.
For fiscal 2011, gross receipts related to single installments
for the entire contract value, or a substantial portion of the
contract value, were $542 million compared with
$484 million in fiscal 2010. In any quarter, we may receive
payments in advance of the contractually committed date on which
the payments are otherwise due. In limited circumstances, we may
offer discounts to customers to ensure payment in the current
period of invoices that have been billed, but might not
otherwise be paid until a subsequent period because of payment
terms or other factors. Historically, any such discounts have
not been material.
Amounts due from customers under our business model are offset
by deferred revenue related to these license agreements, leaving
no or minimal net carrying value on the balance sheets for such
amounts. The fair value of such amounts may exceed or be less
than this carrying value but cannot be practically assessed
since there is no existing market for a pool of customer
receivables with contractual commitments similar to those owned
by us. The actual fair value may not be known until these
amounts are sold, securitized or collected. Although these
customer license agreements commit the customer to payment under
a fixed schedule, to the extent amounts are not yet due and
payable by the customer, the agreements are considered executory
in nature due to our ongoing commitment to provide maintenance
and unspecified future software products as part of the
agreement terms.
We can estimate the total amounts to be billed from committed
contracts, referred to as our “billings backlog,” and
the total amount to be recognized as revenue from committed
contracts, referred to as our “revenue backlog.” The
aggregate amounts
35
of our billings backlog and trade and installment receivables
already reflected on our Consolidated Balance Sheets represent
the amounts we expect to collect in the future from committed
contracts.
| |
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011(1)
|
|
|
2010(1)
|
|
|
|
|
|
Billings backlog:
|
|
|
|
|
|
|
|
|
|
Amounts to be billed — current
|
|
$
|
2,234
|
|
|
$
|
1,881
|
|
|
Amounts to be billed — noncurrent
|
|
|
2,960
|
|
|
|
2,688
|
|
|
|
|
|
|
|
|
|
|
|
|
Total billings backlog
|
|
$
|
5,194
|
|
|
$
|
4,569
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue backlog:
|
|
|
|
|
|
|
|
|
|
Revenue to be recognized within the next
12 months — current
|
|
$
|
3,727
|
|
|
$
|
3,469
|
|
|
Revenue to be recognized beyond the next
12 months — noncurrent
|
|
|
5,036
|
|
|
|
4,656
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue backlog
|
|
$
|
8,763
|
|
|
$
|
8,125
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue (billed or collected)
|
|
$
|
3,569
|
|
|
$
|
3,556
|
|
|
Total billings backlog
|
|
|
5,194
|
|
|
|
4,569
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue backlog
|
|
$
|
8,763
|
|
|
$
|
8,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations.
|
| |
|
|
|
Note: Revenue backlog includes
deferred subscription, maintenance and professional services
revenue.
|
We can also estimate the total cash to be collected in the
future from committed contracts, referred to as our
“Expected future cash collections,” by adding the
total billings backlog to the current and noncurrent Trade
Receivables, which represent amounts already billed but not
collected, from our Consolidated Balance Sheets.
| |
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Expected future cash collections:
|
|
|
|
|
|
|
|
|
|
Total billings
backlog(1)
|
|
$
|
5,194
|
|
|
$
|
4,569
|
|
|
Trade and installment accounts receivable — current,
net
|
|
|
849
|
|
|
|
931
|
|
|
Installment accounts receivable — noncurrent, net
|
|
|
—
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected future cash collections
|
|
$
|
6,043
|
|
|
$
|
5,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Information presented excludes the
results of our discontinued operations.
|
The increases in our current and non-current revenue and
billings backlogs as well as our expected future cash
collections were driven by the increased committed value
associated with customer contracts. Revenue to be recognized in
the next 12 months increased 7% at March 31, 2011
compared with March 31, 2010. This increase includes
revenue to be recognized in future periods attributable to a
license agreement with one large IT outsourcer for approximately
$500 million signed during the fourth quarter of fiscal
2011. This license agreement extends through fiscal year 2016.
Excluding the effect of foreign exchange, revenue to be
recognized in the next 12 months increased by 5% at
March 31, 2011 compared with March 31, 2010.
Unbilled amounts relating to subscription licenses are mostly
collectible over a period of
one-to-five
years. At March 31, 2011, on a cumulative basis, 53%, 85%,
96%, 99% and 100% of amounts due from customers recorded under
our business model come due within fiscal 2012 through 2016,
respectively.
36
Cash
Generated by operating activities
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
$ CHANGE
|
|
|
(IN MILLIONS)
|
|
2011(1)
|
|
|
2010(1)
|
|
|
2009(1)
|
|
|
2011 / 2010
|
|
|
2010 / 2009
|
|
|
|
|
|
Cash collections from
billings(2)
|
|
$
|
4,774
|
|
|
$
|
4,653
|
|
|
$
|
4,607
|
|
|
$
|
121
|
|
|
$
|
46
|
|
|
Vendor disbursements and
payroll(2)
|
|
|
(3,075
|
)
|
|
|
(2,896
|
)
|
|
|
(3,013
|
)
|
|
|
(179
|
)
|
|
|
117
|
|
|
Income tax payments
|
|
|
(222
|
)
|
|
|
(329
|
)
|
|
|
(351
|
)
|
|
|
107
|
|
|
|
22
|
|
|
Other disbursements,
net(3)
|
|
|
(100
|
)
|
|
|
(92
|
)
|
|
|
(59
|
)
|
|
|
(8
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash generated by operating Activities
|
|
$
|
1,377
|
|
|
$
|
1,336
|
|
|
$
|
1,184
|
|
|
$
|
41
|
|
|
$
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Information presented excludes the
results of our discontinued operations.
|
| |
|
(2)
|
|
Amounts include value added taxes
and sales taxes.
|
| |
|
(3)
|
|
Amounts include interest,
restructuring and miscellaneous receipts and disbursements.
|
Fiscal
2011 versus fiscal 2010
Operating
activities:
Cash generated by continuing operating activities for fiscal
2011 was $1,377 million, representing an increase of
$41 million compared with fiscal 2010. This growth reflects
a
year-over-year
increase of $58 million in up-front cash collections from
single installment payments, an increase in collections on trade
receivables of $63 million and a decrease in income tax
payments of $107 million. These favorable variances were
mostly offset by an increase in disbursements of
$187 million, primarily attributable to acquisitions.
Investing
activities:
Cash used in continuing investing activities for fiscal 2011 was
$700 million compared with $888 million for fiscal
2010. The decrease in cash used in investing activities was
primarily due to a decrease in acquisition related costs of
$365 million and a decrease in capitalized software costs
of $18 million. These decreases were offset by our net
investment in marketable securities of $181 million.
Financing
activities:
Cash used in financing activities for fiscal 2011 was
$320 million compared with $705 million in fiscal
2010. The changes in cash used in financing activities were
primarily due to the refinancing of our debt, which occurred
during the third quarter of fiscal 2010. At that time, we repaid
debt of $1,196 million and issued debt, net of debt
issuance costs, of $738 million and received proceeds of
$61 million from the exercise of a call spread option
associated with our 1.625% Convertible Senior Notes due
December 2009. During fiscal 2011, we purchased
$235 million of our common stock, compared with
$227 million in fiscal 2010.
Refer to the “Debt Arrangements” table below for
additional information about our debt balances at March 31,
2011.
Fiscal
2010 versus fiscal 2009
Operating
activities:
Cash generated by continuing operating activities for fiscal
2010 was $1,336 million, representing an increase of
$152 million compared with fiscal 2009. The increase was
driven primarily by lower vendor disbursements and payroll of
$117 million which was mostly due to decreased operating
costs.
Investing
activities:
Cash used in continuing investing activities for fiscal 2010 was
$888 million compared with $284 million for fiscal
2009. The increase in cash used in investing activities was
primarily due to the increase in acquisition-related costs of
$541 million and an increase in capitalized software
development costs of $59 million from the reallocation of
resources previously spent on maintenance of new development
projects and incremental development expenditures on acquired
products and other strategic investments.
Financing
activities:
Cash used in financing activities for fiscal 2010 was
$705 million compared with $759 million in fiscal
2009. The primary changes in cash used in financing activities
were an increase in debt repayments of $525 million and an
increase in repurchases of our common stock of
$223 million, offset by $744 million of debt
borrowings, net of debt issuance costs of
37
$6 million and proceeds of $61 million received from
the exercise of a call spread option associated with our
1.625% Convertible Senior Notes due December 2009.
During fiscal 2009, we repaid the remaining $350 million
principal amount of our 6.500% Senior Notes that was due
and we also repurchased $148 million principal amount of
our 4.750% Senior Notes due 2009 at a price of
$143 million in cash.
Refer to the “Debt Arrangements” table below for
additional information about our debt balances at March 31,
2010.
Debt
arrangements
Our debt arrangements consisted of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Revolving Credit Facility due August 2012
|
|
$
|
250
|
|
|
$
|
$250
|
|
|
5.375% Notes due November 2019
|
|
|
750
|
|
|
|
750
|
|
|
6.125% Notes due December 2014, net of unamortized premium
from fair value hedge of $15 and $1
|
|
|
515
|
|
|
|
501
|
|
|
Other indebtedness, primarily capital leases
|
|
|
42
|
|
|
|
51
|
|
|
Unamortized discount for Notes
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total debt outstanding
|
|
|
1,551
|
|
|
|
1,545
|
|
|
|
|
|
|
|
|
|
|
|
|
Less the current portion
|
|
|
(269
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt portion
|
|
$
|
1,282
|
|
|
$
|
1,530
|
|
|
|
|
|
|
|
|
|
|
|
We have entered into interest rate swaps to convert
$500 million of our 6.125% Notes into floating
interest rate payments through December 1, 2014. Under the
terms of the swaps, we will pay quarterly interest at an average
rate of 2.88% plus the three-month LIBOR rate, and will receive
payment at 5.625%. The LIBOR based rate is set quarterly three
months prior to the date of the interest payment. At
March 31, 2011, the fair value of these derivatives was
$15 million, of which $11 million is included in
“Other current assets” and $4 million is included
in “Other noncurrent assets, net” in the Consolidated
Balance Sheet. The carrying value of the 6.125% Notes was
adjusted by an amount that is equal and offsetting to the fair
value of the swaps.
At March 31, 2011, $250 million of our Revolving
Credit Facility due August 2012, was reclassified from long-term
debt to current debt and was repaid in April 2011.
At March 31, 2011, our senior unsecured notes were rated
Baa2 (stable) by Moody’s Investor Services, BBB (positive)
by Standard and Poor’s, and BBB+ (stable) by Fitch Ratings.
At April 11, 2011 Standard and Poor’s upgraded our
credit rating to BBB+ (stable), resulting in a decrease in the
interest rate applicable to incremental borrowings from 0.66% to
0.58%.
For further information on our debt balances, refer to
Note 9, “Debt,” in the Notes to the Consolidated
Financial Statements.
Stock
repurchases
On May 12, 2010, our Board of Directors approved a stock
repurchase program that authorizes us to acquire up to
$500 million of our common stock. During fiscal 2011, we
entered into brokerage arrangements with third-party financial
institutions to purchase our common stock in the open market on
our behalf. We acquired 10.5 million shares of our common
stock for $218 million under these arrangements during
fiscal 2011. At March 31, 2011, we were authorized to
purchase an aggregate amount of up to $282 million of
additional shares of common stock under our current stock
repurchase program.
On May 12, 2011, our Board of Directors approved a stock
repurchase program that authorized us to acquire up to an
additional $500 million of our common stock, in addition to
the previous program approved on May 12, 2010. We will fund
the program with available cash on hand and repurchase shares on
the open market from time to time based on market conditions and
other factors.
Dividends
We have paid cash dividends each year since July 1990. For
fiscal 2011, 2010 and 2009, we paid annual cash dividends of
$0.16 per share, which have been paid out in quarterly
installments of $0.04 per share as and when declared by our
Board of
38
Directors. Total cash dividends paid was $82 million,
$83 million and $83 million for fiscal 2011, 2010 and
2009, respectively.
On May 12, 2011, we announced an increase of the
Company’s regular quarterly dividend to $0.05 per share as
and when declared by the Board of Directors.
Effect
of exchange rate changes
There was an $89 million favorable effect to our cash
balances in fiscal 2011 predominantly due to the weakening of
the U.S. dollar against the euro, Brazilian real,
Australian dollar, Canadian dollar, Swedish krona and Swiss
franc of 5%, 10%, 13%, 5%, 14% and 15%, respectively. There was
a $104 million favorable effect to our cash balances in
fiscal 2010 predominantly due to the weakening of the
U.S. dollar against the Australian dollar, Brazilian real
and Canadian dollar of 32%, 29% and 24%, respectively.
Off-balance
sheet arrangements
Prior to fiscal 2001, we sold individual accounts receivable to
a third party subject to certain recourse provisions. At
March 31, 2011 none of these receivables were outstanding.
The outstanding principal balance of these receivables subject
to recourse approximated $21 million at March 31, 2010.
Other than the commitments and recourse provisions described
above, we do not have any other off-balance sheet arrangements
with unconsolidated entities or related parties and,
accordingly, off-balance sheet risks to our liquidity and
capital resources from unconsolidated entities are limited.
Contractual
obligations and commitments
We have commitments under certain contractual arrangements to
make future payments for goods and services. These contractual
arrangements secure the rights to various assets and services to
be used in the future in the normal course of business. For
example, we are contractually committed to make certain minimum
lease payments for the use of property under operating lease
agreements. In accordance with current accounting rules, the
future rights and related obligations pertaining to such
contractual arrangements are not reported as assets or
liabilities on our Consolidated Balance Sheets. We expect to
fund these contractual arrangements with cash generated from
operations in the normal course of business.
The following table summarizes our contractual arrangements at
March 31, 2011 and the timing and effect that those
commitments are expected to have on our liquidity and cash flow
in future periods. In addition, the table summarizes the timing
of payments on our debt obligations as reported on our
Consolidated Balance Sheet at March 31, 2011.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAYMENTS DUE BY PERIOD
|
|
|
|
|
|
|
|
LESS THAN
|
|
|
1-3
|
|
|
3-5
|
|
|
MORE THAN
|
|
|
(IN MILLIONS)
|
|
TOTAL
|
|
|
1 YEAR
|
|
|
YEARS
|
|
|
YEARS
|
|
|
5 YEARS
|
|
|
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt obligations (inclusive of interest)
|
|
$
|
1,962
|
|
|
$
|
311
|
|
|
$
|
129
|
|
|
$
|
611
|
|
|
$
|
911
|
|
|
Operating lease
obligations(1)
|
|
|
529
|
|
|
|
101
|
|
|
|
152
|
|
|
|
105
|
|
|
|
171
|
|
|
Purchase obligations
|
|
|
108
|
|
|
|
44
|
|
|
|
30
|
|
|
|
33
|
|
|
|
1
|
|
|
Other
obligations(2)
|
|
|
139
|
|
|
|
72
|
|
|
|
41
|
|
|
|
16
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,738
|
|
|
$
|
528
|
|
|
$
|
352
|
|
|
$
|
765
|
|
|
$
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The contractual obligations for
noncurrent operating leases exclude sublease income totaling
$30 million expected to be received in the following
periods: $9 million (less than 1 year);
$11 million (1 — 3 years); $4 million
(3 — 5 years); and $6 million (more than
5 years).
|
| |
|
(2)
|
|
Includes $26 million of
estimated liabilities for uncertain tax positions under the
“less than 1 year” column for amounts that are
estimated to be settled within one year of the balance sheet
date. In addition, $542 million of estimated liabilities
for unrecognized tax benefits are excluded from the contractual
obligations table because a reasonable estimate of when those
amounts will become payable could not be made.
|
Critical
accounting policies and estimates
We review our financial reporting and disclosure practices and
accounting policies quarterly to help ensure that they provide
accurate and transparent information relative to the current
economic and business environment. Note 1,
“Significant Accounting Policies” in the Notes to the
Consolidated Financial Statements contains a summary of the
significant accounting policies that we use. Many of these
accounting policies involve complex situations and require a
high degree of judgment, either in the application and
interpretation of existing accounting literature or in the
development of estimates that affect our financial statements.
On an ongoing basis, we evaluate our estimates and judgments
based on historical experience as well
39
as other factors that we believe to be reasonable under the
circumstances. These estimates may change in the future if
underlying assumptions or factors change.
We consider the following significant accounting policies to be
critical because of their complexity and the high degree of
judgment involved in implementing them.
Revenue
recognition
We generate revenue from the following primary sources:
(1) licensing software products, including SaaS license
agreements; (2) providing customer technical support
(referred to as maintenance); and (3) providing
professional services, such as product implementation,
consulting and education.
Software license agreements under our subscription model include
the right to receive and use unspecified future software
products for no additional fee during the term of the agreement.
We are required under generally accepted accounting principles
(GAAP) to recognize revenue from these subscription licenses
ratably over the term of the agreement. These amounts are
recorded as subscription and maintenance revenue.
We also license our software products without the right to
unspecified future software products. Revenue from these
arrangements is either recognized at the inception of the
license agreement (upfront basis) or ratably over the term of
any maintenance agreement that is bundled with the license.
Revenue is recognized up-front only when we have established
VSOE for all of the undelivered elements of the agreement. We
use the residual method to determine the amount of license
revenue to be recognized up-front. The residual method allocates
arrangement consideration to the undelivered elements based upon
VSOE of the fair value of those elements, with the residual of
the arrangement consideration allocated to the license. The
portion allocated to the license is recognized
‘up-front’ once all four of the revenue recognition
criteria are met. We establish VSOE of the fair value of
maintenance from either contractually stated renewal rates or
using the bell-shaped curve method. VSOE of the fair value of
professional services is established based on hourly rates when
sold on a stand-alone basis. Up-front revenue is recorded as
Software Fees and Other. Revenue recognized on an up-front model
will result in higher total revenue in a reporting period than
if such revenue was recognized ratably.
If VSOE does not exist for all undelivered elements of an
arrangement, we recognize total revenue from the arrangement
ratably over the term of the maintenance agreement. Revenue
recognized ratably is recorded as “Subscription and
maintenance revenue.”
Revenue recognition does not commence until 1) we have
evidence of an arrangement with a customer; 2) we deliver
the specified products; 3) license agreement terms are
fixed or determinable and free of contingencies or uncertainties
that may alter the agreement such that it may not be complete
and final; and 4) collection is probable. Revenue from
sales to distributors and volume partners, value-added resellers
and exclusive representatives commences, either on an up-front
basis or ratably as described above, when these entities sell
the software product to their customers. This is commonly
referred to as the sell-through method.
Revenue from professional service arrangements is generally
recognized as the services are performed. Revenue and costs from
committed professional services that are sold as part of a
software license agreement are deferred and recognized on a
ratable basis over the life of the related software transaction.
In the event that agreements with our customers are executed in
close proximity of other license agreements with the same
customer, we evaluate whether the separate arrangements are
linked, and, if so, they are considered a single multi-element
arrangement for which revenue is recognized ratably as
“Subscription and maintenance revenue” in the
Consolidated Statements of Operations.
We have an established business practice of offering installment
payment options to customers and a history of successfully
collecting substantially all amounts due under such agreements.
We assess collectability based on a number of factors, including
past transaction history with the customer and the
creditworthiness of the customer. If, in our judgment,
collection of a fee is not probable, we will not recognize
revenue until the uncertainty is removed through the receipt of
cash payment. We do not typically offer installment payments for
perpetual license agreements that are recognized up-front,
within “Software fees and other.”
See Note 1, “Significant Accounting Policies” for
additional information on our revenue recognition policy.
40
Accounts
receivable
The allowance for doubtful accounts is a reserve for the
impairment of accounts receivable on the Consolidated Balance
Sheets. In developing the estimate for the allowance for
doubtful accounts, we rely on several factors, including:
|
|
|
| |
•
|
Historical information, such as general collection history of
multi-year software agreements;
|
| |
| |
•
|
Current customer information and events, such as extended
delinquency, requests for restructuring and filings for
bankruptcy;
|
| |
| |
•
|
Results of analyzing historical and current data; and
|
| |
| |
•
|
The overall macroeconomic environment.
|
The allowance includes two components: (1) specifically
identified receivables that are reviewed for impairment when,
based on current information, we do not expect to collect the
full amount due from the customer; and (2) an allowance for
losses inherent in the remaining receivable portfolio based on
historical activity.
Income
taxes
We account for income taxes under the asset and liability
method. We recognize deferred tax assets and liabilities for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, along with net
operating losses and tax credit carryforwards. We measure
deferred tax assets and liabilities using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
We recognize the effect on deferred tax assets and liabilities
of a change in tax rates on income in the period that includes
the enactment date.
We recognize the effect of income tax positions only if those
positions are more likely than not of being sustained. We
utilize a “more likely than not” threshold for the
recognition and derecognition of tax positions and measure
positions accordingly. We reflect changes in recognition or
measurement in a period in which the change in judgment occurs.
We record interest and penalties related to uncertain tax
positions in income tax expense.
Goodwill,
capitalized software products, and other intangible assets
GAAP requires an impairment-only approach to accounting for
goodwill and other intangibles with an indefinite life. Absent
any prior indicators of impairment, we perform an annual
impairment analysis during the fourth quarter of our fiscal
year. We have historically evaluated goodwill impairment based
on a single reporting unit. We are in the process of
reorganizing our internal management reporting and will change
our segment reporting in the first quarter of fiscal 2012, which
could give rise to changing how the Company tests for goodwill
impairment.
The goodwill impairment model is a two-step process. The first
step is used to identify potential impairment by comparing the
fair value of a reporting unit with its net book value (or
carrying amount), including goodwill. If the fair value exceeds
the carrying amount, goodwill of the reporting unit is not
considered to be impaired and the second step of the impairment
test is unnecessary. If the carrying amount of a reporting unit
exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment
loss, if any. The second step of the goodwill impairment test
compares the implied fair value of the reporting unit’s
goodwill with the carrying amount of that goodwill. If the
carrying amount of the reporting unit’s goodwill exceeds
the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The implied fair
value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination; that is, the
fair value of the reporting unit is allocated to all of the
assets and liabilities of that unit (including any unrecognized
intangible assets) as if the reporting unit had been acquired in
a business combination and the fair value of the reporting unit
was the purchase price paid to acquire the reporting unit.
The fair value of a reporting unit under the first step of the
goodwill impairment test is measured using the quoted market
price method. Determining the fair value of individual assets
and liabilities of a reporting unit (including unrecognized
intangible assets) under the second step of the goodwill
impairment test is judgmental in nature and often involves the
use of significant estimates and assumptions. These estimates
and assumptions could have a significant effect on whether an
impairment charge is recognized and the magnitude of any such
charge. These estimates are subject to review and approval by
senior management. This approach uses significant assumptions,
including projected future cash flow, the discount rate
41
reflecting the risk inherent in future cash flow and a terminal
growth rate. We performed our annual assessment of goodwill
during the fourth quarter of fiscal 2011 and concluded that no
impairment charge was required.
The carrying values of capitalized software products, for
purchased software, internally developed software and other
intangible assets are reviewed for recoverability on a quarterly
basis. The facts and circumstances considered include an
assessment of the net realizable value for capitalized software
products and the recoverability of the cost of other intangible
assets from future cash flows to be derived from the use of the
asset. It is not possible for us to predict the likelihood of
any possible future impairments or, if such an impairment were
to occur, the magnitude thereof.
Intangible assets with finite useful lives are subject to
amortization over the expected period of economic benefit to us.
We evaluate whether events or circumstances have occurred that
warrant a revision to the remaining useful lives of intangible
assets. In cases where a revision to the remaining amortization
period is deemed appropriate, the remaining carrying amounts of
the intangible assets are amortized over the revised remaining
useful life.
Accounting
for business combinations
The allocation of the purchase price for acquisitions requires
extensive use of accounting estimates and judgments to allocate
the purchase price to the identifiable tangible and intangible
assets acquired, including in-process research and development,
and liabilities assumed based on their respective fair values.
Product
development and enhancements
GAAP specifies that costs incurred internally in researching and
developing a computer software product should be charged to
expense until technological feasibility has been established for
the product. Once technological feasibility is established, all
software costs are capitalized until the product is available
for general release to customers. Judgment is required in
determining when technological feasibility of a product is
established and assumptions are used that reflect our best
estimates. If other assumptions had been used in the current
period to estimate technological feasibility, the reported
product development and enhancement expense could have been
affected. Annual amortization of capitalized software costs is
the greater of the amount computed using the ratio that current
gross revenues for a product bear to the total of current and
anticipated future gross revenues for that product or the
straight-line method over the remaining estimated economic life
of the software product, generally estimated to be five years
from the date the product became available for general release
to customers. We amortize capitalized software costs using the
straight-line method.
Accounting
for share-based compensation
We currently maintain several stock-based compensation plans. We
use the Black-Scholes option-pricing model to compute the
estimated fair value of certain share-based awards. The
Black-Scholes model includes assumptions regarding dividend
yields, expected volatility, expected lives, and risk-free
interest rates. These assumptions reflect our best estimates,
but these items involve uncertainties based on market and other
conditions outside of our control. As a result, if other
assumptions had been used, stock-based compensation expense
could have been materially affected. Furthermore, if different
assumptions are used in future periods, stock-based compensation
expense could be materially affected in future years.
As described in Note 15, “Stock Plans,” in the
Notes to the Consolidated Financial Statements, performance
share units (PSUs) are awards under the long-term incentive
programs for senior executives where the number of shares or
restricted shares, as applicable, ultimately received by the
senior executives depends on Company performance measured
against specified targets and will be determined at the
conclusion of the three-year or one-year period, as applicable.
The fair value of each award is estimated on the date that the
performance targets are established based on the fair value of
our stock and our estimate of the level of achievement of our
performance targets. We are required to recalculate the fair
value of issued PSUs each reporting period until the underlying
shares are granted. The adjustment is based on the quoted market
price of our stock on the reporting period date. Each quarter,
we compare the actual performance we expect to achieve with the
performance targets.
Fair
value of financial instrument
The measurement of fair value for our financial instruments is
based on the authoritative guidance which establishes a fair
value hierarchy that is based on three levels of inputs and
requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair
value. See Note 11, “Fair Value Measurements”,
for additional information.
42
We are exposed to financial market risks arising from changes in
interest rates and foreign exchange rates. Changes in interest
rates could affect our monetary assets and liabilities, and
foreign exchange rate changes could affect our foreign currency
denominated monetary assets and liabilities and forecasted
transactions. We enter into derivative contracts with the intent
of mitigating a portion of these risks. See Note 10,
“Derivatives”, for additional information.
All marketable securities are classified as
available-for-sale
securities and are recorded at fair value. Unrealized holding
gains and losses, net of the related tax effect, are excluded
from earnings and are reported as a separate component of
accumulated other comprehensive income until realized. Premiums
and discounts on debt securities recorded at the date of
purchase are recognized in “Interest expense, net”
using the effective interest method. Realized gains and losses
on sales of all such investments are reported as “Interest
expense, net” and are computed using the specific
identification cost method.
For marketable securities in an unrealized loss position, we are
required to assess whether we intend to sell the security or
will more likely than not be required to sell the security
before the recovery of its amortized cost basis less any
current-period credit loss. If either of these conditions is
met, an
other-than-temporary
impairment on the security is recognized in “Interest
expense, net” equal to the entire difference between its
fair value and amortized cost basis. See Note 5,
“Marketable Securities,” for additional information.
Legal
contingencies
We are currently involved in various legal proceedings and
claims. Periodically, we review the status of each significant
matter and assess our potential financial exposure. If the
potential loss from any legal proceeding or claim is considered
probable and the amount can be reasonably estimated, we accrue a
liability for the estimated loss. Significant judgment is
required in both the determination of the probability of a loss
and the determination as to whether the amount of loss is
reasonably estimable. Due to the uncertainties related to these
matters, the decision to record an accrual and the amount of
accruals recorded are based only on the information available at
the time. As additional information becomes available, we
reassess the potential liability related to our pending
litigation and claims, and may revise our estimates. Any
revisions could have a material effect on our results of
operations. Refer to Note 12, “Commitments and
Contingencies,” in the Notes to the Consolidated Financial
Statements for a description of our material legal proceedings.
Item 7A.
Quantitative and qualitative disclosures about market risk.
Interest
rate risk
Our exposure to market rate risk for changes in interest rates
relates primarily to our investment portfolio, debt and
installment accounts receivable. We have a prescribed
methodology whereby we invest our excess cash in investments
that are composed of money market funds, debt instruments of
government agencies and investment grade corporate issuers
(Standard and Poor’s single “BBB+” rating and
higher). To mitigate risk, the current weighted average duration
is less than one year, and the holdings of any one
non-government issuer does not exceed 5% of the portfolio.
At March 31, 2011, our outstanding debt was
$1,551 million, all of which was in fixed rate obligations
except for our 2008 Revolving Credit Facility which had a
$250 million balance at March 31, 2011. Refer to
Note 9, “Debt,” in the Notes to the Consolidated
Financial Statements for additional information.
At March 31, 2011, we had interest rate swaps with a total
notional value of $500 million, $200 million of which
were entered into during fiscal year 2011, that swap a total of
$500 million of our 6.125% Senior Notes due December
2014 into floating interest rate debt through December 1,
2014. These swaps are designated as fair value hedges and are
being accounted for in accordance with the shortcut method of
FASB ASC Topic 815. Under the terms of the swaps, we will pay
quarterly interest at a rate at an average of 2.88%, plus the
three-month LIBOR rate, and will receive payment at 5.625%. The
LIBOR-based rate is set quarterly three months prior to date of
the interest payment.
At March 31, 2011, the fair value of these derivatives was
approximately $15 million, of which approximately
$11 million is included in “Other current assets”
and approximately $4 million is included in “Other
noncurrent assets, net” in our Consolidated Balance Sheet.
At March 31, 2010, the fair value of these derivatives was
approximately $1 million and is included in “Other
current assets” in our Consolidated Balance Sheet.
Each 25 basis point increase or decrease in interest rates
would have a corresponding effect on the annual interest expense
related to our interest rates swaps that relate to the
6.125% Notes of approximately $1 million at
March 31, 2011.
43
During fiscal year 2009, we entered into interest rate swaps
with a total notional value of $250 million to hedge a
portion of our variable interest rate payments on the Revolving
Credit Facility. These derivatives were designated as cash flow
hedges and matured in October 2010. During fiscal 2011, under
the terms of the interest rate swaps, we paid interest at an
average annualized rate of 2.83% and received interest payment
at the one-month LIBOR rate.
Foreign
currency exchange risk
We conduct business on a worldwide basis through subsidiaries in
47 countries and, as such, a portion of our revenues, earnings
and net investments in foreign affiliates is exposed to changes
in foreign exchange rates. We seek to manage our foreign
exchange risk in part through operational means, including
managing expected local currency revenues in relation to local
currency costs and local currency assets in relation to local
currency liabilities. In October 2005, our Board of Directors
adopted our Risk Management Policy and Procedures, which
authorize us to manage, based on management’s assessment,
our risks and exposures to foreign currency exchange rates
through the use of derivative financial instruments (e.g.,
forward contracts, options and swaps) or other means. We only
use derivative financial instruments in the context of hedging
and do not use them for speculative purposes.
During fiscal 2011 and 2010, we did not designate our foreign
exchange derivatives as hedges. Accordingly, all foreign
exchange derivatives are recognized on our Consolidated Balance
Sheets at fair value and unrealized or realized changes in fair
value from these contracts are recorded as “Other expenses
(gains), net” in our Consolidated Statements of Operations.
Refer to Note 10, “Derivatives” for additional
information regarding our derivative activities.
If foreign currency exchange rates affecting our business
weakened by 10% on an overall basis in comparison to the
U.S. dollar, the amount of cash and cash equivalents we
would report in U.S. dollars would decrease by
approximately $145 million.
Item 8.
Financial statements and supplementary data.
Our Consolidated Financial Statements are included in
Part IV, Item 15 of this
Form 10-K
and are incorporated herein by reference.
The supplementary data specified by Item 302 of
Regulation S-K
as it relates to selected quarterly data is included in the
“Selected Quarterly Information” section of
Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” Information
on the effects of changing prices is not required.
Item 9.
Changes in and disagreements with accountants on accounting and
financial disclosure.
Not applicable.
Item 9A.
Controls and procedures.
(a) Evaluation
of disclosure controls and procedures
Under the supervision and with the participation of the
Company’s management, including the Chief Executive Officer
and Chief Financial Officer, the Company has evaluated the
effectiveness of its disclosure controls and procedures as such
term is defined in
Rules 13a-15(e)
or 15d-15(e)
under the Securities Exchange Act of 1934 (Exchange Act). Based
on that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that these disclosure controls
and procedures are effective at the end of the period covered by
this
Form 10-K.
(b)
Management’s report on internal control over financial
reporting
The Company’s management is responsible for establishing
and maintaining adequate internal control over financial
reporting as defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
The Company’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles.
The Company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company;
and
44
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a
material effect on the Company’s financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial
statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Management conducted its evaluation of the effectiveness of
internal control over financial reporting at March 31, 2011
based on the framework in Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
Management’s evaluation included the design of the
Company’s internal control over financial reporting and the
operating effectiveness of the Company’s internal control
over financial reporting. Based on that evaluation, the
Company’s management concluded that the Company’s
internal control over financial reporting was effective as of
the end of the period covered by this
Form 10-K.
The Company’s independent registered public accounting
firm, KPMG LLP, has audited the effectiveness of the
Company’s internal control over financial reporting as
stated in their report which appears on page 55 of this
Form 10-K.
(c)
Changes in internal control over financial reporting
There were no changes in the Company’s internal control
over financial reporting, as that term is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act, that occurred during the fourth fiscal
quarter that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over
financial reporting.
Item 9B.
Other information.
Not applicable
45
Part III
Item 10.
Directors, executive officers and corporate governance.
Information required by this Item that will appear under the
headings “Election of Directors,” “Litigation
Involving Directors and Executive Officers,”
“Nominating Procedures,” “Board Committees and
Meetings” and “Section 16(a) Beneficial Ownership
Reporting Compliance” in the definitive proxy statement to
be filed with the SEC relating to our 2011 Annual Meeting of
Stockholders is incorporated herein by reference. Also, refer to
Part I under the heading “Executive Officers of the
Registrant” for information concerning our executive
officers.
We maintain a “code of ethics” (within the meaning of
Item 406 of the SEC’s
Regulation S-K)
entitled “CA Code of Conduct: Information and Resource
Guide” (Code of Conduct). Our Code of Conduct is applicable
to all employees and directors, including our principal
executive officer, principal financial officer, principal
accounting officer and controller, or persons performing similar
functions. Our Code of Conduct is available on our website at
www.ca.com/investor. Any amendment or waiver to the
“code of ethics” provisions of our Code of Conduct
that applies to our directors or executive officers will be
included in a report filed with the SEC on
Form 8-K
or will be otherwise disclosed to the extent required and as
permitted by law or regulation. The Code of Conduct is available
without charge in print to any stockholder who requests a copy
by writing to our Corporate Secretary, at CA, Inc., One CA
Plaza, Islandia, New York 11749.
Item 11. Executive
compensation.
Information required by this Item that will appear under the
headings “Compensation and Other Information Concerning
Executive Officers,” “Compensation Discussion and
Analysis,” “Compensation of Directors,”
“Compensation Committee Interlocks and Insider
Participation” and “Compensation and Human Resources
Committee Report on Executive Compensation” in the
definitive proxy statement to be filed with the SEC relating to
our 2011 Annual Meeting of Stockholders is incorporated herein
by reference.
Item 12. Security
ownership of certain beneficial owners and management and
related stockholder matters.
Information required by this Item that will appear under the
headings “Information Regarding Beneficial Ownership of
Principal Stockholders, the Board and Management” and
“Securities Authorized for Issuance under Equity
Compensation Plans” in the definitive proxy statement to be
filed with the SEC relating to our 2011 Annual Meeting of
Stockholders is incorporated herein by reference.
Item 13. Certain
relationships and related transactions, and director
independence.
Information required by this Item that will appear under the
headings “Related Person Transactions,” “Election
of Directors,” “Board Committees and Meetings”
and “Corporate Governance” in the definitive proxy
statement to be filed with the SEC relating to our 2011 Annual
Meeting of Stockholders is incorporated herein by reference.
Item 14. Principal
accountant fees and services.
Information required by this Item that will appear under the
heading “Ratification of Appointment of Independent
Registered Public Accountants” in the definitive proxy
statement to be filed with the SEC relating to our 2011 Annual
Meeting of Stockholders is incorporated herein by reference.
46
Part IV
Item 15.
Exhibits, financial statement schedules.
|
|
| (a) (1) |
The Registrant’s financial statements together with a
separate table of contents are annexed hereto.
|
|
|
|
| |
(2)
|
Financial Statement Schedules are listed in the separate table
of contents annexed hereto.
|
| |
| |
(3)
|
Exhibits.
|
| |
|
|
|
|
|
|
Regulation
S-K
|
|
|
|
|
|
Exhibit Number
|
|
|
|
|
|
|
|
|
3
|
.1
|
|
Restated Certificate of Incorporation.
|
|
Filed as Exhibit 3.3 to the Company’s Current Report on
Form 8-K dated March 6, 2006.**
|
|
|
|
|
|
|
|
|
|
|
3
|
.2
|
|
By-Laws of the Company, as amended.
|
|
Filed as Exhibit 3.1 to the Company’s Current Report on
Form 8-K dated February 23, 2007.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.1
|
|
Restated Certificate of Designation of Series One Junior
Participating Preferred Stock, Class A of the Company.
|
|
Filed as Exhibit 3.2 to the Company’s Current Report on
Form 8-K dated March 6, 2006.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.2
|
|
Stockholder Protection Rights Agreement, dated as of
November 5, 2009, between the Company and Mellon Investor
Services LLC, as Rights Agent, including as Exhibit A the
forms of Rights Certificate and of Election to Exercise and as
Exhibit B the form of Certificate of Designation and Terms
of the Participating Preferred Stock of the Company.
|
|
Filed as Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated November 5, 2009.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.3
|
|
Indenture with respect to the Company’s 4.75% Senior
Notes due 2009 and 5.625% Senior Notes due 2014, dated
November 18, 2004, between the Company and The Bank of New
York, as Trustee.
|
|
Filed as Exhibit 4.2 to the Company’s Current Report on
Form 8-K dated November 15, 2004.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.4
|
|
Purchase Agreement dated November 15, 2004, among the
Initial Purchasers of the 4.75% Senior Notes due 2009 and
5.625% Senior Notes due 2014, and the Company.
|
|
Filed as Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated November 15, 2004.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.5
|
|
First Supplemental Indenture, dated as of November 30,
2007, to the Indenture, dated as of November 18, 2004,
between the Company and The Bank of New York, as trustee.
|
|
Filed as Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated January 3, 2008.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.6
|
|
Indenture dated as of June 1, 2008 between the Company and
U.S. Bank National Association, as trustee, relating to the
senior debt securities, the senior subordinated debt securities
and the junior subordinated debt securities, as applicable.
|
|
Filed as Exhibit 4.1 to the Company’s Registration
Statement on Form S-3, Registration Number 333-151619, dated
June 12, 2008.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.7
|
|
Officers’ Certificates dated November 13, 2009
establishing the terms of the Company’s 5.375% Senior
Notes due 2019 pursuant to the Indenture dated as of
June 1, 2008.
|
|
Filed as Exhibit 4.2 to the Company’s Current Report on
Form 8-K dated November 13, 2009.**
|
|
|
|
|
|
|
|
|
|
|
4
|
.8
|
|
Addendum to Registration Rights Agreement, dated as of
November 30, 2007, relating to $500,000,000
5.625% Senior Notes Due 2014.
|
|
Filed as Exhibit 99.3 to the Company’s Current Report on
Form 8-K
dated January 3, 2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.1*
|
|
CA, Inc. 1991 Stock Incentive Plan, as amended.
|
|
Filed as Exhibit 1 to the Company’s Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 1997.**
|
47
| |
|
|
|
|
|
|
Regulation
S-K
|
|
|
|
|
|
Exhibit Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.2*
|
|
1993 Stock Option Plan for Non-Employee Directors.
|
|
Filed as Annex 1 to the Company’s definitive Proxy
Statement dated July 7, 1993.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.3*
|
|
Amendment No. 1 to the 1993 Stock Option Plan for
Non-Employee Directors dated October 20, 1993.
|
|
Filed as Exhibit E to the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 1994.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.4*
|
|
1996 Deferred Stock Plan for Non-Employee Directors.
|
|
Filed as Exhibit A to the Company’s Proxy Statement dated
July 8, 1996.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.5*
|
|
Amendment No. 1 to the 1996 Deferred Stock Plan for
Non-Employee Directors.
|
|
Filed as Exhibit A to the Company’s Proxy Statement dated
July 6, 1998.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.6*
|
|
2001 Stock Option Plan.
|
|
Filed as Exhibit B to the Company’s Proxy Statement dated
July 18, 2001.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.7*
|
|
CA, Inc. 2002 Incentive Plan (Amended and Restated Effective as
of April 27, 2007).
|
|
Filed as Exhibit 10.9 to the Company’s Annual Report on
Form 10-K
for the fiscal year ended March 31, 2007.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.8*
|
|
CA, Inc. 2002 Compensation Plan for Non-Employee Directors.
|
|
Filed as Exhibit C to the Company’s Proxy Statement dated
July 26, 2002.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.9*
|
|
Relocation Polices including Form of Moving and Relocation
Expense Agreement.
|
|
Filed as Exhibit 10.4 to the Company’s Current Report on
Form 8-K
dated February 1, 2005.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.10*
|
|
Restricted Stock Unit Agreement for John A. Swainson.
|
|
Filed as Exhibit 10.5 to the Company’s Current Report on
Form 8-K
dated November 18, 2004.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.11
|
|
Deferred Prosecution Agreement, including the related
information and Stipulation of Facts.
|
|
Filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K
dated September 22, 2004.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.12
|
|
Final Consent Judgment of Permanent Injunction and Other Relief,
including SEC complaint.
|
|
Filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K
dated September 22, 2004.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.13*
|
|
Form of Restricted Stock Unit Certificate.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2004.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.14*
|
|
Form of Non-Qualified Stock Option Certificate.
|
|
Filed as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2004.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.15*
|
|
Form of Non-Qualified Stock Option Award Certificate.
|
|
Filed as Exhibit 10.5 to the Company’s Current Report on
Form 8-K
dated June 2, 2006.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.16*
|
|
Form of Non-Qualified Stock Option Award Certificate (Employment
Agreement).
|
|
Filed as Exhibit 10.6 to the Company’s Current Report on
Form 8-K
dated June 2, 2006.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.17*
|
|
Form of Incentive Stock Option Award Certificate.
|
|
Filed as Exhibit 10.7 to the Company’s Current Report on
Form 8-K
dated June 2, 2006.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.18*
|
|
Form of Incentive Stock Option Award Certificate (Employment
Agreement).
|
|
Filed as Exhibit 10.8 to the Company’s Current Report on
Form 8-K
dated June 2, 2006.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.19*
|
|
CA, Inc. Deferred Compensation Plan for John A. Swainson, dated
April 29, 2005.
|
|
Filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K
dated April 29, 2005.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.20
|
|
Trust Agreement between Computer Associates International,
Inc. and Fidelity Management Trust Company, dated as of
April 29, 2005.
|
|
Filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K
dated April 29, 2005.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.21*
|
|
Program whereby certain designated employees, including the
Company’s named executive officers, are provided with
certain covered medical services, effective August 1, 2005.
|
|
Filed as Item 1.01 and Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated August 1, 2005.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.22*
|
|
Amended and Restated CA, Inc. Executive Deferred Compensation
Plan, effective November 20, 2006.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q
for the quarterly period ended December 31, 2006.**
|
48
| |
|
|
|
|
|
|
Regulation
S-K
|
|
|
|
|
|
Exhibit Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.23*
|
|
Form of Deferral Election.
|
|
Filed as Exhibit 10.52 to the Company’s Annual Report on
Form 10-K for the fiscal year 2006.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.24
|
|
Lease, dated as of August 15, 2006, among the Company,
Island Headquarters Operators LLC and Islandia Operators LLC.
|
|
Filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K
dated August 15, 2006.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.25*
|
|
CA, Inc. 2007 Incentive Plan.
|
|
Filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K
dated August 21, 2007.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.26*
|
|
Form of Award Agreement — Restricted Stock Units.
|
|
Filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K
dated August 21, 2007.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.27*
|
|
Form of Award Agreement — Restricted Stock Awards.
|
|
Filed as Exhibit 10.3 to the Company’s Current Report on
Form 8-K
dated August 21, 2007.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.28*
|
|
Form of Award Agreement — Nonqualified Stock Awards.
|
|
Filed as Exhibit 10.4 to the Company’s Current Report on
Form 8-K
dated August 21, 2007.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.29
|
|
Credit Agreement dated as of August 29, 2007.
|
|
Filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K
dated August 29, 2007.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.30
|
|
Settlement Agreement, dated as of December 21, 2007,
between the Company and the Bank of New York, as trustee, Linden
Capital L.P. and Swiss Re Financial Products Corporation.
|
|
Filed as Exhibit 99.2 to the Company’s Current Report on
Form 8-K
dated January 3, 2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.31*
|
|
First Amendment to CA, Inc. Executive Deferred Compensation
Plan, effective February 25, 2008.
|
|
Filed as Exhibit 10.68 to the Company Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.32*
|
|
First Amendment to Adoption Agreement for CA, Inc. Executive
Deferred Compensation Plan, effective February 25, 2008.
|
|
Filed as Exhibit 10.69 to the Company Annual Report on
Form 10-K
for the fiscal year ended March 31, 2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.33*
|
|
CA, Inc. Change in Control Severance Policy.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.34*
|
|
Amended and Restated Employment Agreement, dated
December 8, 2008, between the Company and John Swainson.
|
|
Filed as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.35*
|
|
Amended and Restated Employment Agreement, dated
December 29, 2008, between the Company and Michael
Christenson.
|
|
Filed as Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.36*
|
|
Amended and Restated Employment Agreement, dated
December 29, 2008, between the Company and James Bryant.
|
|
Filed as Exhibit 10.6 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.37*
|
|
Letter dated July 21, 2006 from the Company to Ajei S.
Gopal regarding terms of employment.
|
|
Filed as Exhibit 10.7 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.38*
|
|
Amendment dated December 12, 2008 to letter dated
July 21, 2006 from the Company to Ajei S. Gopal regarding
terms of employment.
|
|
Filed as Exhibit 10.8 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2008.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.39*
|
|
Amended and Restated Employment Agreement, dated as of
September 30, 2009, between the Company and Nancy E. Cooper.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.40*
|
|
Amended and Restated Employment Agreement, dated as of
September 30, 2009, between the Company and Amy Fliegelman
Olli.
|
|
Filed as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.41*
|
|
Retention Letter Agreement dated as of October 1, 2009,
between the Company and Michael J. Christenson.
|
|
Filed as Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the period ended September 30, 2009.**
|
49
| |
|
|
|
|
|
|
Regulation
S-K
|
|
|
|
|
|
Exhibit Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.42*
|
|
Retention Letter Agreement dated as of October 1, 2009,
between the Company and Nancy E. Cooper.
|
|
Filed as Exhibit 10.4 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.43*
|
|
Retention Letter Agreement dated as of October 1, 2009,
between the Company and Ajei S. Gopal.
|
|
Filed as Exhibit 10.5 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.44*
|
|
Retention Letter Agreement dated as of October 1, 2009,
between the Company and Amy Fliegelman Olli.
|
|
Filed as Exhibit 10.6 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.45*
|
|
Summary description of special retirement vesting provisions
available to certain Senior Management.
|
|
Filed as Exhibit 10.7 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.46*
|
|
Director Retirement Donation Policy.
|
|
Filed as Exhibit 10.9 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.47*
|
|
Non-Qualified Stock Option Certificate for William E. McCracken.
|
|
Filed as Exhibit 10.10 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.48*
|
|
Summary description of financial planning benefit available to
certain executives.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.49*
|
|
Form of Restricted Stock Unit Award Agreement for certain named
executive officers.
|
|
Filed as Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2009.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.50*
|
|
Homeowners Relocation Policy for Senior Executives.
|
|
Filed as Exhibit 10.57 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2011.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.51*
|
|
Renters Relocation Policy for Senior Executives.
|
|
Filed as Exhibit 10.58 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2011.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.52*
|
|
Separation Agreement and General Claims Release between the
Company and John A. Swainson, dated March 15, 2010.
|
|
Filed as Exhibit 10.59 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2011.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.53*
|
|
Employment Agreement dated as of May 6, 2010 between the
Company and William E. McCracken.
|
|
Filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K
dated May 6, 2010.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.54*
|
|
Employment Agreement, dated as of June 23, 2010, between
the Company and David C. Dobson.
|
|
Filed as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2010.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.55*
|
|
Summary description of Director compensation.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2010.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.56*
|
|
Schedules A, B, and C (as amended) to CA, Inc. Change in Control
Severance Policy.
|
|
Filed as Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2010.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.57*
|
|
CA, Inc. Special Retirement Vesting Benefit Policy.
|
|
Filed as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2010.**
|
|
|
|
|
|
|
|
|
|
|
10
|
.58*
|
|
CA, Inc. 2003 Compensation Plan for Non-Employee Directors
(amended and restated dated December 31, 2010).
|
|
Filed as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 31,
2010.**
|
|
|
|
|
|
|
|
|
|
|
12
|
.1
|
|
Statement of Ratios of Earnings to Fixed Charges.
|
|
Filed herewith.
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
Subsidiaries of the Registrant.
|
|
Filed herewith.
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Filed herewith.
|
50
| |
|
|
|
|
|
|
Regulation
S-K
|
|
|
|
|
|
Exhibit Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
.1
|
|
Certification of the CEO pursuant to §302 of the
Sarbanes-Oxley Act of 2002.
|
|
Filed herewith.
|
|
|
|
|
|
|
|
|
|
|
31
|
.2
|
|
Certification of the CFO pursuant to §302 of the
Sarbanes-Oxley Act of 2002.
|
|
Filed herewith.
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
Certification pursuant to §906 of the Sarbanes-Oxley Act of
2002.
|
|
Filed herewith.
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
The following financial statements from CA, Inc.’s Annual
Report on
Form 10-K
for the year ended March 31, 2011, formatted in XBRL
(eXtensible Business Reporting Language):
|
|
Furnished herewith.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Consolidated Statements of Operations — Years
Ended March 31, 2011, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(ii) Consolidated Balance Sheets — March 31,
2011 and March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(iii) Consolidated Statements of Stockholders’
Equity — Years Ended March 31, 2011, 2010 and
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(iv) Consolidated Statements of Cash Flows —
Years Ended March 31, 2011, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(v) Notes to Consolidated Financial Statements —
March 31, 2011.
|
|
|
** Incorporated herein by
reference.
* Management contract or
compensatory plan or arrangement.
51
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report report to be signed on its behalf by the
undersigned, thereunto duly authorized.
| |
|
|
|
|
|
CA, INC.
By:
William
E. McCracken
Chief Executive Officer (Principal Executive Officer)
|
Dated: May 16, 2011
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
| |
|
|
|
|
|
By:
Nancy
E. Cooper
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
By:
Richard
J. Beckert
Corporate Controller (Principal Accounting Officer)
|
Dated: May 16, 2011
52
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated:
| |
|
|
|
|
|
|
|
|
|
Raymond
J. Bromark
|
|
Director
|
|
|
|
|
|
Gary
J. Fernandes
|
|
Director
|
|
|
|
|
|
Rohit
Kapoor
|
|
Director
|
|
|
|
|
|
Kay
Koplovitz
|
|
Director
|
|
|
|
|
|
Christopher
B. Lofgren
|
|
Director
|
|
|
|
|
|
William
E. McCracken
|
|
Director
|
|
|
|
|
|
Richard
Sulpizio
|
|
Director
|
|
|
|
|
|
Laura
S. Unger
|
|
Director
|
|
|
|
|
|
Arthur
F. Weinbach
|
|
Director
|
|
|
|
|
|
Renato
(Ron) Zambonini
|
|
Director
|
Dated: May 16, 2011
53
CA, Inc. and
Subsidiaries
Islandia, New York
Annual
report on
form 10-k
Item 8, Item 9A, Item 15(a)(1) and (2), and
ITEM 15(c)
List
of consolidated financial statements
and financial statement schedule
Consolidated
financial statements and
financial statement schedule
For the Fiscal
Year ended
March 31, 2011
| |
|
|
|
|
|
|
|
PAGE
|
|
|
|
|
|
|
The following Consolidated
Financial Statements of CA, Inc.
and subsidiaries are included in Items 8 and 9A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following Consolidated
Financial Statement Schedule of CA, Inc.
and subsidiaries is included in Item 15(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
54
The Board of Directors and
Stockholders
CA, Inc.:
We have audited the accompanying consolidated balance sheets of
CA, Inc. and subsidiaries as of March 31, 2011 and 2010,
and the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the fiscal
years in the three-year period ended March 31, 2011. In
connection with our audits of the consolidated financial
statements, we also have audited the consolidated financial
statement schedule listed in Item 15(a)(2). We also have
audited CA, Inc.’s internal control over financial
reporting as of March 31, 2011, based on criteria
established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). CA, Inc.’s
management is responsible for these consolidated financial
statements and the consolidated financial statement schedule,
for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over
Financial Reporting under Item 9A(b). Our responsibility is
to express an opinion on these consolidated financial statements
and the consolidated financial statement schedule, and an
opinion on the Company’s internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements
included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of CA, Inc. and subsidiaries as of March 31, 2011
and 2010, and the results of their operations and their cash
flows for each of the fiscal years in the three-year period
ended March 31, 2011, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related consolidated financial statement schedule,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
Also, in our opinion, CA, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of March 31, 2011, based on criteria established in
Internal Control — Integrated Framework issued
by COSO.
/s/ KPMG LLP
New York, New York
May 16, 2011
55
CA, Inc. and
subsidiaries
consolidated statements of operations
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription and maintenance revenue
|
|
$
|
3,822
|
|
|
$
|
3,765
|
|
|
$
|
3,644
|
|
|
Professional services
|
|
|
327
|
|
|
|
288
|
|
|
|
353
|
|
|
Software fees and other
|
|
|
280
|
|
|
|
174
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
4,429
|
|
|
|
4,227
|
|
|
|
4,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of licensing and maintenance
|
|
|
278
|
|
|
|
250
|
|
|
|
242
|
|
|
Cost of professional services
|
|
|
303
|
|
|
|
259
|
|
|
|
305
|
|
|
Amortization of capitalized software costs
|
|
|
192
|
|
|
|
133
|
|
|
|
112
|
|
|
Selling and marketing
|
|
|
1,286
|
|
|
|
1,186
|
|
|
|
1,178
|
|
|
General and administrative
|
|
|
451
|
|
|
|
478
|
|
|
|
463
|
|
|
Product development and enhancements
|
|
|
471
|
|
|
|
468
|
|
|
|
479
|
|
|
Depreciation and amortization of other intangible assets
|
|
|
187
|
|
|
|
159
|
|
|
|
147
|
|
|
Other expenses (gains), net
|
|
|
16
|
|
|
|
14
|
|
|
|
(1
|
)
|
|
Restructuring and other
|
|
|
(9
|
)
|
|
|
52
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses before interest and income taxes
|
|
|
3,175
|
|
|
|
2,999
|
|
|
|
3,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before interest and income taxes
|
|
|
1,254
|
|
|
|
1,228
|
|
|
|
1,111
|
|
|
Interest expense, net
|
|
|
45
|
|
|
|
76
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,209
|
|
|
|
1,152
|
|
|
|
1,049
|
|
|
Income tax expense
|
|
|
386
|
|
|
|
393
|
|
|
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
823
|
|
|
|
759
|
|
|
|
661
|
|
|
Income from discontinued operations, net of income tax
|
|
|
4
|
|
|
|
12
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
827
|
|
|
$
|
771
|
|
|
$
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.60
|
|
|
$
|
1.46
|
|
|
$
|
1.27
|
|
|
Income from discontinued operations
|
|
|
0.01
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.61
|
|
|
$
|
1.48
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares used in computation
|
|
|
506
|
|
|
|
515
|
|
|
|
513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.60
|
|
|
$
|
1.45
|
|
|
$
|
1.27
|
|
|
Income from discontinued operations
|
|
|
0.01
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.61
|
|
|
$
|
1.47
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares used in computation
|
|
|
507
|
|
|
|
533
|
|
|
|
537
|
|
See accompanying Notes to the
Consolidated Financial Statements
56
CA, Inc. and
subsidiaries
consolidated balance sheets
| |
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,049
|
|
|
$
|
2,583
|
|
|
Marketable securities — current
|
|
|
75
|
|
|
|
—
|
|
|
Trade and installment accounts receivable, net
|
|
|
849
|
|
|
|
931
|
|
|
Deferred income taxes — current
|
|
|
246
|
|
|
|
360
|
|
|
Other current assets
|
|
|
152
|
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
4,371
|
|
|
|
3,990
|
|
|
Marketable securities — noncurrent
|
|
|
104
|
|
|
|
—
|
|
|
Installment accounts receivable, due after one year, net
|
|
|
—
|
|
|
|
46
|
|
|
Property and equipment, net of accumulated depreciation of $632
and $538, respectively
|
|
|
437
|
|
|
|
452
|
|
|
Goodwill
|
|
|
5,688
|
|
|
|
5,605
|
|
|
Capitalized software and other intangible assets, net
|
|
|
1,284
|
|
|
|
1,215
|
|
|
Deferred income taxes — noncurrent
|
|
|
284
|
|
|
|
348
|
|
|
Other noncurrent assets, net
|
|
|
246
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,414
|
|
|
$
|
11,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and loans payable
|
|
$
|
269
|
|
|
$
|
15
|
|
|
Accounts payable
|
|
|
100
|
|
|
|
81
|
|
|
Accrued salaries, wages, and commissions
|
|
|
293
|
|
|
|
348
|
|
|
Accrued expenses and other current liabilities
|
|
|
395
|
|
|
|
469
|
|
|
Deferred revenue (billed or collected) — current
|
|
|
2,600
|
|
|
|
2,504
|
|
|
Taxes payable, other than income taxes payable —
current
|
|
|
75
|
|
|
|
82
|
|
|
Federal, state, and foreign income taxes payable —
current
|
|
|
124
|
|
|
|
31
|
|
|
Deferred income taxes — current
|
|
|
68
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,924
|
|
|
|
3,581
|
|
|
Long-term debt, net of current portion
|
|
|
1,282
|
|
|
|
1,530
|
|
|
Federal, state, and foreign income taxes payable —
noncurrent
|
|
|
414
|
|
|
|
450
|
|
|
Deferred income taxes — noncurrent
|
|
|
64
|
|
|
|
137
|
|
|
Deferred revenue (billed or collected) — noncurrent
|
|
|
969
|
|
|
|
1,052
|
|
|
Other noncurrent liabilities
|
|
|
141
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
6,794
|
|
|
|
6,901
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value, 10,000,000 shares
authorized; No shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.10 par value, 1,100,000,000 shares
authorized; 589,695,081 and 589,695,081 shares issued;
502,299,607 and 509,469,998 shares outstanding, respectively
|
|
|
59
|
|
|
|
59
|
|
|
Additional paid-in capital
|
|
|
3,615
|
|
|
|
3,657
|
|
|
Retained earnings
|
|
|
4,106
|
|
|
|
3,361
|
|
|
Accumulated other comprehensive loss
|
|
|
(65
|
)
|
|
|
(126
|
)
|
|
Treasury stock, at cost, 87,395,474 shares and
80,225,083 shares, respectively
|
|
|
(2,095
|
)
|
|
|
(1,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
5,620
|
|
|
|
4,987
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
12,414
|
|
|
$
|
11,888
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the
Consolidated Financial Statements
57
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
|
|
|
|
|
|
COMPREHENSIVE
|
|
|
|
|
|
TOTAL
|
|
|
|
|
COMMON
|
|
|
PAID-IN
|
|
|
RETAINED
|
|
|
(LOSS)
|
|
|
TREASURY
|
|
|
STOCKHOLDERS’
|
|
|
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
|
|
STOCK
|
|
|
CAPITAL
|
|
|
EARNINGS
|
|
|
INCOME
|
|
|
STOCK
|
|
|
EQUITY
|
|
|
|
|
|
Balance at March 31, 2008
|
|
$
|
59
|
|
|
$
|
3,695
|
|
|
$
|
2,085
|
|
|
$
|
(101
|
)
|
|
$
|
(1,988
|
)
|
|
$
|
3,750
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
671
|
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77
|
)
|
|
|
|
|
|
|
(77
|
)
|
|
Unrealized loss on derivatives, net of $3 million in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
589
|
|
|
Share-based compensation
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
|
|
|
Dividends declared ($0.16 per share)
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
Exercise of common stock options, ESPP, and other items
|
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
18
|
|
|
Treasury stock purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009
|
|
$
|
59
|
|
|
$
|
3,686
|
|
|
$
|
2,673
|
|
|
$
|
(183
|
)
|
|
$
|
(1,873
|
)
|
|
$
|
4,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
|
771
|
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
55
|
|
|
Unrealized gain on derivatives, net of $1 million in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
828
|
|
|
Share-based compensation
|
|
|
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
|
|
|
Dividends declared ($0.16 per share)
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
Exercise of common stock options, ESPP, and other items
|
|
|
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
5
|
|
|
Treasury stock purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(227
|
)
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
$
|
59
|
|
|
$
|
3,657
|
|
|
$
|
3,361
|
|
|
$
|
(126
|
)
|
|
$
|
(1,964
|
)
|
|
$
|
4,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
827
|
|
|
|
|
|
|
|
|
|
|
|
827
|
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
58
|
|
|
Realized loss on derivatives, net of $2 million in taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
888
|
|
|
Share-based compensation
|
|
|
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
|
Dividends declared ($0.16 per share)
|
|
|
|
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
(82
|
)
|
|
Exercise of common stock options and other items
|
|
|
|
|
|
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
107
|
|
|
|
(15
|
)
|
|
Treasury stock purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(238
|
)
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011
|
|
$
|
59
|
|
|
$
|
3,615
|
|
|
$
|
4,106
|
|
|
$
|
(65
|
)
|
|
$
|
(2,095
|
)
|
|
$
|
5,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the
Consolidated Financial Statements
58
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
827
|
|
|
$
|
771
|
|
|
$
|
671
|
|
|
Income from discontinued operations
|
|
|
(4
|
)
|
|
|
(12
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
823
|
|
|
|
759
|
|
|
|
661
|
|
|
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
379
|
|
|
|
292
|
|
|
|
259
|
|
|
Provision for deferred income taxes
|
|
|
140
|
|
|
|
68
|
|
|
|
(56
|
)
|
|
Provision for bad debts
|
|
|
6
|
|
|
|
6
|
|
|
|
15
|
|
|
Share based compensation expense
|
|
|
80
|
|
|
|
102
|
|
|
|
92
|
|
|
Amortization of discount on convertible debt
|
|
|
—
|
|
|
|
29
|
|
|
|
37
|
|
|
Asset impairments and other non-cash activities
|
|
|
2
|
|
|
|
13
|
|
|
|
2
|
|
|
Foreign currency transaction losses (gains)
|
|
|
4
|
|
|
|
(10
|
)
|
|
|
67
|
|
|
Changes in other operating assets and liabilities, net of effect
of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in trade and current installment accounts receivable,
net
|
|
|
140
|
|
|
|
8
|
|
|
|
195
|
|
|
(Decrease) increase in deferred revenue
|
|
|
(128
|
)
|
|
|
94
|
|
|
|
(49
|
)
|
|
Increase (decrease) in taxes payable, net
|
|
|
(8
|
)
|
|
|
(18
|
)
|
|
|
34
|
|
|
Increase (decrease) in accounts payable, accrued expenses and
other
|
|
|
23
|
|
|
|
(21
|
)
|
|
|
(73
|
)
|
|
(Decrease) increase in accrued salaries, wages, and commissions
|
|
|
(16
|
)
|
|
|
25
|
|
|
|
(29
|
)
|
|
Decrease in restructuring liabilities
|
|
|
(63
|
)
|
|
|
(12
|
)
|
|
|
(13
|
)
|
|
Changes in other operating assets and liabilities
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities —
continuing operations
|
|
|
1,377
|
|
|
|
1,336
|
|
|
|
1,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of businesses, net of cash acquired, and purchased
software
|
|
|
(252
|
)
|
|
|
(617
|
)
|
|
|
(76
|
)
|
|
Purchases of property and equipment
|
|
|
(92
|
)
|
|
|
(79
|
)
|
|
|
(83
|
)
|
|
Proceeds from sale and divestiture of assets
|
|
|
13
|
|
|
|
—
|
|
|
|
6
|
|
|
Capitalized software development costs
|
|
|
(170
|
)
|
|
|
(188
|
)
|
|
|
(129
|
)
|
|
Purchases of marketable securities
|
|
|
(209
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Proceeds from the sale of marketable securities
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
Maturities of marketable securities
|
|
|
19
|
|
|
|
—
|
|
|
|
—
|
|
|
Other investing activities
|
|
|
(18
|
)
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities — continuing
operations
|
|
|
(700
|
)
|
|
|
(888
|
)
|
|
|
(284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(82
|
)
|
|
|
(83
|
)
|
|
|
(83
|
)
|
|
Purchases of common stock
|
|
|
(235
|
)
|
|
|
(227
|
)
|
|
|
(4
|
)
|
|
Debt borrowings
|
|
|
260
|
|
|
|
744
|
|
|
|
1
|
|
|
Debt repayments
|
|
|
(273
|
)
|
|
|
(1,205
|
)
|
|
|
(680
|
)
|
|
Debt issuance costs
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
Proceeds from call spread option
|
|
|
—
|
|
|
|
61
|
|
|
|
—
|
|
|
Exercise of common stock options and other
|
|
|
10
|
|
|
|
11
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities — continuing
operations
|
|
|
(320
|
)
|
|
|
(705
|
)
|
|
|
(759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents before effect of
exchange rate changes on cash — continuing
operations
|
|
|
357
|
|
|
|
(257
|
)
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
89
|
|
|
|
104
|
|
|
|
(252
|
)
|
|
Cash provided by operating activities —
discontinued operations
|
|
|
4
|
|
|
|
24
|
|
|
|
28
|
|
|
Cash provided by investing activities —
discontinued operations
|
|
|
16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of discontinued operations on cash and cash
equivalents
|
|
|
20
|
|
|
|
24
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
466
|
|
|
|
(129
|
)
|
|
|
(83
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
2,583
|
|
|
|
2,712
|
|
|
|
2,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
3,049
|
|
|
$
|
2,583
|
|
|
$
|
2,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the
Consolidated Financial Statements
59
Note 1 —
Significant Accounting Policies
(a) Description of
business: CA, Inc. and subsidiaries (the Company)
develops, markets, delivers and licenses software products and
services.
(b) Presentation of
financial statements: The accompanying audited
consolidated financial statements of the Company have been
prepared in accordance with U.S. generally accepted
accounting principles (GAAP), as defined in the Financial
Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) Topic 205. The preparation of financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although these
estimates are based on management’s knowledge of current
events and actions it may undertake in the future, these
estimates may ultimately differ from actual results. Significant
items subject to such estimates and assumptions include:
(i) the useful lives of long-lived assets,
(ii) allowances for doubtful accounts, (iii) the
valuation of derivatives, deferred tax assets, and long-lived
assets, (iv) share-based compensation, (v) reserves
for employee severance benefit obligations, (vi) income tax
uncertainties and (vii) legal contingencies.
Certain prior year balances have been reclassified to conform to
the current period’s presentation.
(c) Principles of
consolidation: The Consolidated Financial Statements
include the accounts of the Company and its majority-owned and
controlled subsidiaries. Investments in affiliates owned 50% or
less are accounted for by the equity method. Intercompany
balances and transactions have been eliminated in consolidation.
Companies acquired during each reporting period are reflected in
the results of the Company effective from their respective dates
of acquisition through the end of the reporting period (for
additional information, refer to Note 2,
“Acquisitions”).
(d) Divestitures:
In June 2010, the Company sold its Information Governance
business to Autonomy Corporation plc (Autonomy). At
March 31, 2011, the Company identified its Internet
Security Business as available for sale and on April 28,
2011, the Company signed an agreement for the sale of the
business. The results of operations associated with the sales of
these businesses have been presented as discontinued operations
in the accompanying Consolidated Statements of Operations and
Consolidated Statement of Cash Flows for the fiscal years 2011,
2010 and 2009. The effects of the discontinued operations were
immaterial to the Company’s Consolidated Balance Sheet at
March 31, 2011 and 2010. See Note 3,
“Discontinued Operations,” for additional information.
In September 2010, the Company recognized a gain of
approximately $10 million from the sale of its interest in
an investment accounted for using the equity method. The gain is
included in “Other expenses (gains), net” in the
Company’s Consolidated Statements of Operations for the
fiscal year 2011.
(e) Foreign
currencies: Assets and liabilities of the
Company’s international subsidiaries are translated using
the exchange rates in effect at the balance sheet date. Results
of operations are translated using average exchange rates.
Adjustments arising from the translation of the foreign currency
financial statements of the Company’s subsidiaries into
U.S. dollars are reported as currency translation
adjustments in the “Accumulated other comprehensive
loss” line item in the Consolidated Balance Sheets.
Foreign currency transaction gains (losses) were approximately
$(18) million, $(10) million and $11 million in
the fiscal years 2011, 2010 and 2009, respectively, and are
included in the “Other expenses (gains), net” line
item in the Consolidated Statements of Operations in the period
in which they occur.
(f) Revenue
recognition: The Company begins to recognize revenue
from software licensing and maintenance when all of the
following criteria are met: (1) the Company has evidence of
an arrangement with a customer; (2) the Company delivers
the specified products; (3) license agreement terms are
fixed or determinable and free of contingencies or uncertainties
that may alter the agreement such that it may not be complete
and final; and (4) collection is probable. Revenue is
recorded net of applicable sales taxes.
The Company’s software licenses generally do not include
acceptance provisions. An acceptance provision allows a customer
to test the software for a defined period of time before
committing to license the software. If a license agreement
includes an acceptance provision, the Company does not recognize
revenue until the earlier of the receipt of a written customer
acceptance or, if not notified by the customer to cancel the
license agreement, the expiration of the acceptance period. The
60
Company’s standard licensing agreements include a product
warranty provision for all products. The likelihood that the
Company will be required to make refunds to customers under such
provisions is considered remote.
Subscription and maintenance
revenue: Software licenses that include the right to
receive unspecified future software products are considered
subscription arrangements under GAAP and are recognized ratably
over the term of the license agreement. Subscription and
maintenance revenue is the amount of revenue recognized ratably
during the reporting period from either: (i) subscription
license agreements that were in effect during the period, which
generally include maintenance that is bundled with and not
separately identifiable from software usage fees or product
sales; (ii) maintenance agreements associated with
providing customer technical support and access to software
fixes and upgrades which are separately identifiable from
software usage fees or product sales; or (iii) software
license agreements bundled with maintenance for which VSOE has
not been established for maintenance. Revenue for these
arrangements is recognized ratably over the term of the
subscription or maintenance term.
Professional
services: Revenue from professional service
arrangements is generally recognized as the services are
performed. Revenue and costs from committed professional
services that are sold as part of a subscription license
agreement are deferred and recognized on a ratable basis over
the term of the related software license. VSOE of professional
services is established based on daily rates when sold on a
stand-alone basis. If it is not probable that a project will be
completed or the payment will be received, revenue recognition
is deferred until the uncertainty is removed.
Software fees and
other: Software fees and other revenue primarily
consists of revenue from the sale of perpetual software licenses
that do not include the right to unspecified software products,
on a stand-alone basis or in a bundled arrangement where VSOE
exists for any undelivered elements. For bundled arrangements
that include either maintenance or both maintenance and
professional services, the Company uses the residual method to
determine the amount of license revenue to be recognized. Under
the residual method, consideration is allocated to undelivered
elements based upon VSOE of those elements, with the residual of
the arrangement fee allocated to and recognized as license
revenue. The Company determines VSOE of maintenance, depending
on the product, from either contractually stated renewal rates
or the bell-shaped curve method.
In the event that agreements with the Company’s customers
are executed in close proximity of the other license agreements
with the same customer, the Company evaluates whether the
separate arrangements are linked, and, if so, the agreements
together are considered a single multi-element arrangement for
which revenue is recognized ratably as subscription and
maintenance revenue or, in the case of a linked professional
services arrangement, as professional services revenue, in the
Consolidated Statements of Operations.
(g) Sales
commissions: Sales commissions are recognized in the
period the commissions are earned by employees, which is
typically upon signing of the contract. Under the Company’s
sales commissions programs, the amount of sales commissions
expense attributable to the license agreements signed in the
period would be recognized fully, but the revenue from the
license agreements may be recognized ratably over the
subscription and maintenance term.
(h) Accounting for
share-based compensation: Share-based awards
exchanged for employee services are accounted for under the fair
value method. Accordingly, share-based compensation cost is
measured at the grant date, based on the fair value of the
award. The expense for awards expected to vest is recognized
over the employee’s requisite service period (generally the
vesting period of the award). Awards expected to vest are
estimated based on a combination of historical experience and
future expectations.
The Company has elected to treat awards with only service
conditions and with graded vesting as one award. Consequently,
the total compensation expense is recognized straight-line over
the entire vesting period, so long as the compensation cost
recognized at any date at least equals the portion of the grant
date fair value of the award that is vested at that date.
The Company uses the Black-Scholes option-pricing model to
compute the estimated fair value of share-based awards in the
form of options. The Black-Scholes model includes assumptions
regarding dividend yields, expected volatility, expected term of
the option and risk-free interest rates.
In addition to stock options and restricted share awards (RSAs)
with time-based vesting, the Company issues performance share
units (PSUs). Compensation costs for the PSUs are amortized over
the requisite service periods based on the expected level of
achievement of the performance targets. At the conclusion of the
performance periods, the applicable number of shares of RSAs,
restricted stock units (RSUs) or unrestricted shares granted may
vary based on the level of achievement of the
61
performance targets. Additionally, the grants are subject to the
approval of the Company’s Compensation and Human Resources
Committee of the Board of Directors (the Committee), which has
discretion to reduce any award for any reason. The value of the
PSU awards is remeasured each reporting period until the
Committee approves attainment of the specified performance
targets, at which time a grant date is deemed to have been
achieved for accounting purposes, the value of the award is
fixed and any remaining unrecognized compensation expense is
recognized over the remaining time-based vesting period. See
Note 15, “Stock Plans”, for additional
information.
(i) Net income per
share: Unvested share-based payment awards that
contain non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating
securities and are included in the computation of net income per
share under the two-class method. Under the two-class method,
net income is reduced by the amount of dividends declared in the
period for each class of common stock and participating
securities. The remaining undistributed income is then allocated
to common stock and participating securities as if all of the
net income for the period had been distributed. Basic net income
per common share excludes dilution and is calculated by dividing
net income allocable to common shares by the weighted average
number of common shares outstanding for the period. Diluted net
income per common share is calculated by dividing net income
allocable to common shares by the weighted average number of
common shares outstanding at the balance sheet date, as adjusted
for the potential dilutive effect of non-participating
share-based awards and convertible notes. See Note 14,
“Income from Continuing Operations Per Common Share”,
for additional information.
(j) Concentration of credit
risk: Financial instruments that potentially subject
the Company to concentration of credit risk consist primarily of
cash equivalents, derivatives and accounts receivable. The
Company historically has not experienced any losses in its cash
and cash equivalent portfolios.
Amounts included in accounts receivable expected to be collected
from customers, as disclosed in Note 6, “Trade and
Installment Accounts Receivable”, have limited exposure to
concentration of credit risk due to the diverse customer base
and geographic areas covered by operations.
(k) Cash and cash
equivalents: All financial instruments purchased with
an original maturity of three months or less at the time of
purchase are considered cash equivalents. The Company’s
cash and cash equivalents are held by its subsidiaries
throughout the world, frequently in each subsidiary’s
respective functional currency which may not be the
U.S. dollar. Approximately 47% and 46% of cash and cash
equivalents were maintained outside the United States at
March 31, 2011 and 2010, respectively.
Total interest income, which primarily relates to the
Company’s cash and cash equivalent balances and marketable
securities, for fiscal year 2011, 2010 and 2009 was
approximately $24 million, $26 million and
$70 million, respectively, and is included in the
“Interest expense, net” line item in the Consolidated
Statements of Operations.
(l)Marketable
securities: All marketable securities are classified
as
available-for-sale
securities and are recorded at fair value. Unrealized holding
gains and losses, net of the related tax effect, are excluded
from earnings and are reported as a separate component of
accumulated other comprehensive income until realized. Premiums
and discounts on debt securities recorded at the date of
purchase are recognized in “Interest expense, net”
using the effective interest method. Realized gains and losses
on sales of all such investments are reported in “Interest
expense, net” and are computed using the specific
identification cost method.
For marketable securities in an unrealized loss position, the
Company is required to assess whether it intends to sell the
security or will more likely than not be required to sell the
security before the recovery of its amortized cost basis less
any current-period credit loss. If either of these conditions is
met, an
other-than-temporary
impairment on the security is recognized in “Interest
expense, net” equal to the difference between its fair
value and amortized cost basis. See Note 5,
“Marketable Securities”, for additional information.
(m) Fair value
measurements: Fair value is the price that would be
received for an asset or the amount paid to transfer a liability
in an orderly transaction between market participants. The
Company is required to classify certain assets and liabilities
based on the following fair value hierarchy:
|
|
| — |
Level 1: Quoted prices in active markets that are
unadjusted and accessible at the measurement date for identical,
unrestricted assets or liabilities;
|
62
|
|
| —
|
Level 2: Quoted prices for identical assets and liabilities
in markets that are not active, quoted prices for similar assets
and liabilities in active markets or financial instruments for
which significant inputs are observable, either directly or
indirectly; and
|
| |
| —
|
Level 3: Prices or valuations that require inputs that are
both significant to the fair value measurement and unobservable.
|
See Note 11, “Fair Value Measurements,” for
additional information.
(n) Long-lived
assets:
Impairment of long-lived assets,
excluding goodwill and other
intangibles:
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If circumstances require a
long-lived asset or asset group be tested for possible
impairment, the Company first compares undiscounted cash flows
expected to be generated by that asset or asset group to its
carrying value. If the carrying value of the long-lived asset or
asset group is not recoverable on an undiscounted cash flow
basis, an impairment is recognized to the extent that the
carrying value exceeds its fair value. Fair value is determined
through various valuation techniques including discounted cash
flow models, quoted market values and third-party independent
appraisals, as considered necessary.
Property and
equipment: Property and equipment are stated at cost.
Depreciation and amortization expense is calculated based on the
estimated useful lives of the assets, and is recognized by using
the straight-line method. Building and improvements are
estimated to have 5 to 40 year lives, and the remaining
property and equipment are estimated to have 3 to 7 year
lives.
Capitalized development
costs: Capitalized development costs in the
accompanying Consolidated Balance Sheets include costs
associated with the development of computer software to be sold,
leased or otherwise marketed. Software development costs
associated with new products and significant enhancements to
existing software products are expensed as incurred until
technological feasibility has been established. Annual
amortization of capitalized software costs is the greater of the
amount computed using the ratio that current gross revenues for
a product bear to the total of current and anticipated future
gross revenues for that product or the straight-line method over
the remaining estimated economic life of the software product,
generally estimated to be 5 years from the date the product
became available for general release to customers. The Company
generally recognizes amortization expense for capitalized
software costs using the straight-line method.
Impairment of goodwill and other
intangible assets: Purchased software products and
other intangible assets subject to amortization are reviewed for
impairment quarterly and whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable.
Intangible assets with indefinite lives are not subject to
amortization. Goodwill and indefinite-lived intangible assets
are tested annually for impairment during the fourth quarter of
the fiscal year, or whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be fully
recoverable. The Company also evaluates indefinite-lived
intangible assets for impairment whenever events or changes in
business circumstances indicate that the indefinite useful lives
assumption of these assets is no longer appropriate. The Company
evaluates goodwill impairment based on a single reporting unit.
Purchased software
products: Purchased software products primarily
include the cost of software technology acquired in business
combinations. The cost of such products is equal to the fair
value of the acquired software technology at the acquisition
date. The Company’s records straight-line amortization of
purchased software costs over their remaining economic lives,
estimated to be between 3 and 10 years from the date of
acquisition.
Other intangible
assets: Other intangible assets include both customer
relationships and trademarks/trade names. The Company amortizes
all other intangible assets over their remaining economic lives,
estimated to be between 2 and 12 years from the date of
acquisition.
Goodwill: Goodwill
represents the excess of the aggregate purchase price over the
fair value of the net tangible and intangible assets, including
in-process research and development, acquired by the Company in
a purchase business combination. Goodwill is not amortized into
results of operations but instead is reviewed for impairment.
See Note 7, “Long-Lived Assets,” for additional
information.
63
(o) Restricted
cash: The Company’s insurance subsidiary
requires a minimum restricted cash balance of $50 million.
In addition, the Company has other restricted cash balances,
including cash collateral for letters of credit. The total
amount of restricted cash at March 31, 2011 and 2010 was
approximately $56 million and $55 million,
respectively, and is included in the “Other noncurrent
assets, net” line item in the Consolidated Balance Sheets.
(p) Income
taxes: Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities from a change
in tax rates is recognized in income in the period that includes
the enactment date.
The Company recognizes the effect of income tax positions only
if those positions are more likely than not to be sustained.
Changes in recognition or measurement are reflected in the
period in which the change in judgment occurs. The Company
records interest and penalties related to uncertain tax
positions in income tax expense. See Note 16, “Income
Taxes,” for additional information.
(q) Deferred revenue
(billed or collected): The Company accounts for
unearned revenue on billed amounts due from customers on a gross
basis. Unearned revenue on billed installments (collected or
uncollected) is reported as deferred revenue in the liabilities
section of the Consolidated Balance Sheets.
Deferred revenue (billed or collected) excludes contractual
commitments executed under license and maintenance agreements
that will be billed in future periods. See Note 8,
“Deferred Revenue,” for additional information.
Note 2 —
acquisitions
During fiscal year 2011, the Company acquired 100% of the voting
equity interests of Arcot Systems, Inc. (Arcot), a privately
held provider of authentication and fraud prevention solutions
through on-premises software or cloud services. The acquisition
of Arcot adds technology for fraud prevention and authentication
to the Company’s Identity and Access Management offerings.
The purchase price of the acquisition was approximately
$197 million.
The purchase price was allocated to net tangible and intangible
assets and liabilities based upon their estimated fair values at
the October 4, 2010 acquisition date. The allocation of the
purchase price to acquired assets, including intangible assets,
is preliminary as the Company has not completed its analysis of
the fair value of the acquired intangibles and the historical
tax records of Arcot. The excess purchase price over the
estimated value of the net tangible and intangible assets was
recorded as goodwill. Goodwill recognized in the preliminary
purchase price allocation includes synergies expected to be
achieved through integration of the acquired technology with the
Company’s existing product portfolio and the intangible
assets that are not separable, such as assembled workforce and
going concern.
The Company’s other acquisitions during fiscal year 2011
were individually immaterial.
The pro forma effects of the Company’s fiscal year 2011
acquisitions on revenues and results of operations for fiscal
years 2011, 2010 and 2009 were considered immaterial, both
individually and in the aggregate. The fiscal year 2011
acquisitions’ effects on revenue and results of operations
since the dates of acquisition were also considered immaterial,
both individually and in the aggregate.
The following represents the preliminary allocation of the
purchase price and estimated useful lives to the acquired net
assets of Arcot and the Company’s other fiscal year 2011
acquisitions:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER FISCAL 2011
|
|
|
ESTIMATED
|
|
|
(DOLLARS IN MILLIONS)
|
|
ARCOT
|
|
|
ACQUISITIONS
|
|
|
USEFUL LIFE
|
|
|
|
|
|
Finite-lived intangible
assets(1)
|
|
$
|
38
|
|
|
$
|
12
|
|
|
|
2-8 years
|
|
|
Purchased software
|
|
|
86
|
|
|
|
41
|
|
|
|
10 years
|
|
|
Goodwill
|
|
|
61
|
|
|
|
19
|
|
|
|
Indefinite
|
|
|
Deferred tax assets/(liabilities)
|
|
|
1
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
Other assets net of other liabilities assumed
|
|
|
11
|
|
|
|
2
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price
|
|
$
|
197
|
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes customer relationships and
trade names.
|
64
Goodwill from Arcot and the Company’s other fiscal 2011
acquisitions that will be deductible for tax purposes is not
expected to be material.
During fiscal year 2010, the Company acquired the following:
|
|
|
| |
•
|
Nimsoft AS (Nimsoft) — the Company acquired 100% of
the voting equity interests of Nimsoft, a privately held
provider of IT performance and availability monitoring solutions
for emerging enterprises and managed service providers. The
acquisition of Nimsoft extends the Company’s ability to
meet the needs of emerging enterprises and managed service
providers. The total purchase price of the acquisition was
approximately $353 million.
|
| |
| |
•
|
3Tera, Inc. (3Tera) — the Company acquired 100% of the
voting equity interests of 3Tera, a privately held provider of
IT performance and availability monitoring solutions for
emerging enterprises and managed software providers. The
acquisition of 3Tera helps the Company expand its portfolio of
technology management solutions. The total purchase price of the
acquisition was approximately $100 million.
|
| |
| |
•
|
Oblicore, Inc. (Oblicore) — the Company acquired 100%
of the voting equity interests of Oblicore, a privately held
provider of service level management software for enterprises
and service providers. The total purchase price of the
acquisition was approximately $20 million.
|
| |
| |
•
|
NetQoS, Inc. (NetQoS) — the Company acquired 100% of
the voting equity interests of NetQoS, a provider of network
performance management and service delivery solutions. NetQoS
solutions will extend the Company’s capabilities in the
areas of application performance management and network and
system management. The total purchase price of the acquisition
was approximately $200 million.
|
The following represents the allocation of the purchase price
and estimated useful lives to the acquired net assets of the
Company’s fiscal year 2010 acquisitions at March 31,
2011:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REMAINING
|
|
|
|
|
|
|
|
|
|
|
OTHER FISCAL 2010
|
|
|
ESTIMATED
|
|
|
(DOLLARS IN MILLIONS)
|
|
NETQOS
|
|
|
NIMSOFT
|
|
|
ACQUISITIONS
|
|
|
USEFUL LIFE
|
|
|
|
|
|
Finite-lived intangible
assets(1)
|
|
$
|
27
|
|
|
$
|
38
|
|
|
$
|
8
|
|
|
|
2-6 years
|
|
|
Purchased software
|
|
|
104
|
|
|
|
229
|
|
|
|
90
|
|
|
|
5-10 years
|
|
|
Goodwill
|
|
|
106
|
|
|
|
85
|
|
|
|
47
|
|
|
|
Indefinite
|
|
|
Deferred tax liabilities
|
|
|
(39
|
)
|
|
|
(7
|
)
|
|
|
(23
|
)
|
|
|
—
|
|
|
Other assets net of other liabilities assumed
|
|
|
2
|
|
|
|
8
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price
|
|
$
|
200
|
|
|
$
|
353
|
|
|
$
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes customer relationships and
trade names.
|
The excess purchase price over the estimated value of the net
tangible and identifiable intangible assets was recorded to
goodwill. The allocation of a significant portion of the
purchase price to goodwill was predominately due to the
intangible assets that are not separable, such as assembled
workforce and going concern. Approximately $45 million and
$11 million of the goodwill is expected to be deductible
for tax purposes for Nimsoft and Oblicore, respectively. None of
the goodwill for 3Tera and NetQoS is expected to be deductible
for tax purposes.
The pro forma effects of the Company’s fiscal 2010
acquisitions on the Company’s revenues and results of
operations for fiscal years 2010 and 2009 were considered
immaterial, both individually and in the aggregate.
The Company had approximately $73 million and
$74 million of accrued acquisition-related costs at
March 31, 2011 and 2010, respectively. Approximately
$73 million and $64 million of the accrued
acquisition-related costs at March 31, 2011 and 2010,
respectively, related to purchase price amounts withheld subject
to indemnification protections.
Note 3 —
discontinued operations
In June 2010, the Company sold its Information Governance
business, consisting primarily of the CA Records Manager and
CA Message Manager software offerings and related
professional services, for approximately $19 million to
Autonomy. The loss from discontinued operations was
approximately $6 million and consisted of a loss from
operations of approximately $1 million, net of a tax
benefit of approximately $1 million, and a loss upon
disposal of approximately $5 million, inclusive of tax
expense of approximately $4 million. The loss from
discontinued operations is included in the Company’s
Consolidated Statement of Operations for the fiscal year 2011.
65
The Information Governance business results for the fiscal years
2010 and 2009 included revenue of approximately $22 million
and $24 million, respectively, and loss from operations was
approximately $1 million and less than $1 million,
respectively.
At March 31, 2011, the Company identified its Internet
Security Business as available for sale and on April 28,
2011, the Company signed an agreement for the sale of the
business. The income from the discontinued operations was
approximately $10 million, net of tax expense of
approximately $5 million, is included in the Company’s
Consolidated Statement of Operations for the fiscal year 2011.
The business results for the fiscal years 2011, 2010 and 2009
consisted of revenue of approximately $83 million,
$104 million and $109 million, respectively, and
income from operations of approximately $10 million,
$13 million and $10 million, respectively.
Note 4 —
restructuring
Fiscal 2010 restructuring
plan: The Fiscal 2010 restructuring
plan (Fiscal 2010 Plan) was announced in March 2010 and is
composed of a workforce reduction of approximately 1,000
positions and global facilities consolidations. These actions
were intended to better align the Company’s cost structure
with the skills and resources required to more effectively
pursue opportunities in the marketplace and execute the
Company’s long-term growth strategy. The total amounts
expected to be incurred with respect to severance and facilities
abandonment under the Fiscal 2010 Plan are $44 million and
$2 million, respectively. The amounts incurred by period
and cumulatively are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FACILITIES
|
|
|
(IN MILLIONS)
|
|
SEVERANCE
|
|
|
ABANDONMENT
|
|
|
|
|
|
Fiscal Year 2010:
|
|
|
|
|
|
|
|
|
|
Amount recognized in period
|
|
$
|
48
|
|
|
$
|
2
|
|
|
Fiscal Year 2011:
|
|
|
|
|
|
|
|
|
|
Amount recognized in period
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative amount recognized
|
|
$
|
44
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Actions under the Fiscal 2010 Plan were substantially completed
by the end of fiscal year 2011.
Fiscal 2007 restructuring
plan: In August 2006, the Company
announced the Fiscal 2007 restructuring plan (Fiscal 2007 Plan)
to significantly improve the Company’s expense structure
and increase its competitiveness. The Fiscal 2007 Plan’s
objectives included a workforce reduction of approximately
3,100 employees, global facilities consolidations and other
cost reduction initiatives. The total amounts expected to be
incurred with respect to severance and facilities abandonment
under the Fiscal 2007 Plan are $220 million and
$118 million, respectively. The amounts incurred by period
and cumulatively are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FACILITIES
|
|
|
(IN MILLIONS)
|
|
SEVERANCE
|
|
|
ABANDONMENT
|
|
|
|
|
|
Fiscal Year 2009:
|
|
|
|
|
|
|
|
|
|
Amount recognized in period
|
|
$
|
28
|
|
|
$
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative amounts recognized
|
|
|
223
|
|
|
|
117
|
|
|
Fiscal Year 2010:
|
|
|
|
|
|
|
|
|
|
Amount recognized in period
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative amount recognized
|
|
|
219
|
|
|
|
117
|
|
|
Fiscal Year 2011:
|
|
|
|
|
|
|
|
|
|
Amount recognized in period
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative amount recognized
|
|
$
|
220
|
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
Actions under the Fiscal 2007 Plan were substantially completed
by the end of fiscal year 2010.
66
Accrued restructuring costs and changes in the accruals for
fiscal years 2011, 2010 and 2009 associated with the Fiscal 2010
and Fiscal 2007 Plans were as follows:
| |
|
|
|
|
|
|
|
|
FISCAL 2010 PLAN
|
|
|
|
|
FACILITIES
|
|
|
(IN MILLIONS)
|
|
SEVERANCE
|
|
|
ABANDONMENT
|
|
|
|
|
|
Accrued balance at March 31, 2009
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Amounts charged to expense
|
|
|
48
|
|
|
|
2
|
|
|
Payments
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued balance at March 31, 2010
|
|
|
46
|
|
|
|
2
|
|
|
Changes in estimate
|
|
|
(4
|
)
|
|
|
—
|
|
|
Payments
|
|
|
(37
|
)
|
|
|
(1
|
)
|
|
Accretion and other
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued balance at March 31, 2011
|
|
$
|
4
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
FISCAL 2007 PLAN
|
|
|
|
|
FACILITIES
|
|
|
(IN MILLIONS)
|
|
SEVERANCE
|
|
|
ABANDONMENT
|
|
|
|
|
|
Accrued balance at March 31, 2008
|
|
$
|
93
|
|
|
$
|
27
|
|
|
Amounts charged to expense
|
|
|
28
|
|
|
|
68
|
|
|
Payments
|
|
|
(76
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Accrued balance at March 31, 2009
|
|
|
45
|
|
|
|
71
|
|
|
Changes in estimate
|
|
|
(4
|
)
|
|
|
—
|
|
|
Payments
|
|
|
(33
|
)
|
|
|
(19
|
)
|
|
Accretion and other
|
|
|
—
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued balance at March 31, 2010
|
|
|
8
|
|
|
|
60
|
|
|
Changes in estimate
|
|
|
1
|
|
|
|
1
|
|
|
Payments
|
|
|
(5
|
)
|
|
|
(18
|
)
|
|
Accretion and other
|
|
|
—
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued balance at March 31, 2011
|
|
$
|
4
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
|
|
The severance liability is included in the “Accrued
salaries, wages, and commissions” line item on the
Consolidated Balance Sheet. The facilities abandonment liability
is included in the “Accrued expenses and other current
liabilities” and “Other noncurrent liabilities”
line items on the Consolidated Balance Sheet. The costs are
included in the “Restructuring and other” line item on
the Consolidated Statements of Operations for the fiscal year
ended March 31, 2011, 2010 and 2009.
Accretion and other includes accretion of the Company’s
lease obligations related to facilities abandonment as well as
changes in the assumptions related to future sublease income.
These costs are included in the “General and
administrative” expense line item of the Consolidated
Statement of Operations.
Note 5 —
marketable securities
At March 31, 2011,
available-for-sale
securities consisted of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 31, 2011
|
|
|
|
|
AGGREGATE
|
|
|
GROSS
|
|
|
GROSS
|
|
|
|
|
|
|
|
COST
|
|
|
UNREALIZED
|
|
|
UNREALIZED
|
|
|
AGGREGATE
|
|
|
(IN MILLIONS)
|
|
BASIS
|
|
|
GAINS
|
|
|
LOSSES
|
|
|
FAIR VALUE
|
|
|
|
|
|
U.S. treasury and agency securities
|
|
$
|
60
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60
|
|
|
Municipal securities
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
Corporate debt securities
|
|
|
117
|
|
|
|
—
|
|
|
|
—
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
179
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2011, the Company did not have any debt
securities that were in a continuous unrealized loss position
for greater than 12 months. At March 31, 2011,
$75 million of marketable securities had scheduled
maturities of less than one year, and approximately
$104 million had maturities of greater than one year but do
not exceed three years.
At March 31, 2011, proceeds from the sale of marketable
securities and realized gains and realized losses were
approximately $9 million and less than $1 million,
respectively.
At March 31, 2010, the Company had less than
$1 million of marketable securities.
67
Note 6 —
trade and installment accounts receivable
The Company uses installment license agreements as a standard
business practice and has a history of successfully collecting
substantially all amounts due under the original payment terms
without making concessions on payments, software products,
maintenance, or professional services. Trade and installment
accounts receivable, net represent amounts due from the
Company’s customers. These accounts receivable balances are
presented net of allowance for doubtful accounts and unamortized
discounts. Unamortized discounts reflect imputed interest for
the time value of money for license agreements signed prior to
October 2000 (prior business model). These accounts receivable
balances include revenue recognized in advance of customer
billings but do not include unbilled contractual commitments
executed under license agreements implemented since October
2000. The components of trade and installment accounts
receivable, net are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Accounts receivable — billed
|
|
$
|
758
|
|
|
$
|
768
|
|
|
Accounts receivable — unbilled
|
|
|
86
|
|
|
|
72
|
|
|
Other receivables
|
|
|
27
|
|
|
|
26
|
|
|
Unbilled amounts due within the next 12 months —
prior business model
|
|
|
—
|
|
|
|
93
|
|
|
Less: Allowance for doubtful accounts
|
|
|
(22
|
)
|
|
|
(24
|
)
|
|
Less: Unamortized discounts
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Trade and installment accounts receivable, net
|
|
$
|
849
|
|
|
$
|
931
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
Unbilled amounts due beyond the next 12 months —
prior business model
|
|
|
—
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment accounts receivable, due after one year, net
|
|
$
|
—
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
|
|
Note 7 —
long-lived assets
Property and
equipment:
A summary of property and equipment is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
232
|
|
|
$
|
208
|
|
|
Equipment, software developed for internal use, furniture, and
leasehold improvements
|
|
|
837
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
990
|
|
|
Accumulated depreciation and amortization
|
|
|
(632
|
)
|
|
|
(538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
437
|
|
|
$
|
452
|
|
|
|
|
|
|
|
|
|
|
|
No impairment charge was recorded during fiscal year 2011 for
software that was capitalized for internal use. During fiscal
years 2010 and 2009, the Company recorded impairment charges of
approximately $3 million and $5 million, respectively,
for software that was capitalized for internal use but was
determined to be impaired.
Capitalized software and other
intangible assets: The gross carrying amounts and
accumulated amortization for capitalized software and other
intangible assets at March 31, 2011 were approximately
$7,417 million and $6,133 million, respectively. These
amounts included fully amortized assets of approximately
$5,290 million, which was composed of purchased software of
approximately $4,662 million, internally developed software
products of approximately $508 million and other intangible
68
assets subject to amortization of approximately
$120 million. The gross carrying amounts and accumulated
amortization for identified intangible assets that were not
fully amortized were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31, 2011
|
|
|
|
|
|
GROSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMORTIZABLE
|
|
|
|
ACCUMULATED
|
|
|
|
NET
|
|
|
(IN MILLIONS)
|
|
|
ASSETS
|
|
|
|
AMORTIZATION
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased software products
|
|
|
$
|
768
|
|
|
|
$
|
198
|
|
|
|
$
|
570
|
|
|
Capitalized development cost and other intangibles:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally developed software products
|
|
|
|
693
|
|
|
|
|
205
|
|
|
|
|
488
|
|
|
Other intangible assets subject to amortization
|
|
|
|
652
|
|
|
|
|
440
|
|
|
|
|
212
|
|
|
Other intangible assets not subject to amortization
|
|
|
|
14
|
|
|
|
|
—
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalized software costs and other intangible assets
|
|
|
$
|
2,127
|
|
|
|
$
|
843
|
|
|
|
$
|
1,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross carrying amounts and accumulated amortization for
capitalized software and other intangible assets at
March 31, 2010 were approximately $7,098 million and
$5,883 million, respectively. These amounts included fully
amortized intangible assets of approximately
$5,146 million, which was composed of purchased software of
approximately $4,603 million, internally developed software
products of approximately $423 million and other intangible
assets subject to amortization of approximately
$120 million. The gross carrying amounts and accumulated
amortization for identified intangible assets that were not
fully amortized were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31, 2010
|
|
|
|
|
|
GROSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMORTIZABLE
|
|
|
|
ACCUMULATED
|
|
|
|
NET
|
|
|
(IN MILLIONS)
|
|
|
ASSETS
|
|
|
|
AMORTIZATION
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased software products
|
|
|
$
|
695
|
|
|
|
$
|
171
|
|
|
|
$
|
524
|
|
|
Capitalized development costs and other intangibles:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally developed software products
|
|
|
|
620
|
|
|
|
|
187
|
|
|
|
|
433
|
|
|
Other intangible assets subject to amortization
|
|
|
|
623
|
|
|
|
|
379
|
|
|
|
|
244
|
|
|
Other intangible assets not subject to amortization
|
|
|
|
14
|
|
|
|
|
—
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalized development costs and other intangible assets
|
|
|
$
|
1,952
|
|
|
|
$
|
737
|
|
|
|
$
|
1,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense: A
summary of depreciation and amortization expense is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDING MARCH 31,
|
|
|
(IN MILLIONS)
|
|
|
2011
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
$
|
114
|
|
|
|
$
|
105
|
|
|
|
$
|
96
|
|
|
Amortization of purchased software
|
|
|
|
88
|
|
|
|
|
50
|
|
|
|
|
47
|
|
|
Amortization of internally developed software products
|
|
|
|
104
|
|
|
|
|
83
|
|
|
|
|
65
|
|
|
Amortization of other intangible assets
|
|
|
|
73
|
|
|
|
|
54
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
379
|
|
|
|
$
|
292
|
|
|
|
$
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on the intangible assets recognized at March 31,
2011, the annual amortization expense over the next five fiscal
years is expected to be as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
|
2012
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized software:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
$
|
85
|
|
|
|
$
|
78
|
|
|
|
$
|
70
|
|
|
|
$
|
59
|
|
|
|
$
|
57
|
|
|
Internally developed
|
|
|
|
121
|
|
|
|
|
120
|
|
|
|
|
103
|
|
|
|
|
78
|
|
|
|
|
46
|
|
|
Other intangible assets
|
|
|
|
59
|
|
|
|
|
47
|
|
|
|
|
41
|
|
|
|
|
36
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
265
|
|
|
|
$
|
245
|
|
|
|
$
|
214
|
|
|
|
$
|
173
|
|
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill: The
accumulated goodwill impairment losses previously recognized by
the Company totaled approximately $111 million at
March 31, 2011 and 2010. These losses were recognized in
fiscal years 2003 and 2002.
69
Goodwill activity for fiscal years 2011 and 2010 was as follows:
| |
|
|
|
|
|
(IN MILLIONS)
|
|
AMOUNTS
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009
|
|
$
|
5,364
|
|
|
Acquisitions, including reduction of $62 million for
retrospective adjustments in fiscal year 2011
|
|
|
241
|
|
|
|
|
|
|
|
|
Revised balance at March 31, 2010
|
|
$
|
5,605
|
|
|
Amounts allocated to loss on discontinued operations
|
|
|
(11
|
)
|
|
Acquisitions
|
|
|
84
|
|
|
Foreign currency translation adjustment
|
|
|
10
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011
|
|
$
|
5,688
|
|
|
|
|
|
|
|
The retrospective adjustments to goodwill recorded in fiscal
year 2011 consist of reductions relating to fiscal year 2010
acquisitions of approximately $62 million. The adjustment
is primarily attributable to finalization of the analysis of
fair value of the acquired intangibles from Nimsoft and 3Tera.
Note 8 —
deferred revenue
The components of deferred revenue at March 31, 2011 and
2010 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Subscription and maintenance
|
|
$
|
2,444
|
|
|
$
|
2,338
|
|
|
Professional services
|
|
|
145
|
|
|
|
151
|
|
|
Financing obligations and other
|
|
|
11
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred revenue (billed or collected) — current
|
|
|
2,600
|
|
|
|
2,504
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
Subscription and maintenance
|
|
|
940
|
|
|
|
1,026
|
|
|
Professional services
|
|
|
27
|
|
|
|
24
|
|
|
Financing obligations and other
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred revenue (billed or collected) —
noncurrent
|
|
|
969
|
|
|
|
1,052
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred revenue (billed or collected)
|
|
$
|
3,569
|
|
|
$
|
3,556
|
|
|
|
|
|
|
|
|
|
|
|
Note 9 —
debt
At March 31, 2011 and 2010, the Company’s debt
obligations consisted of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility due August 2012
|
|
$
|
250
|
|
|
$
|
250
|
|
|
5.375% Notes due November 2019
|
|
|
750
|
|
|
|
750
|
|
|
6.125% Notes due December 2014, net of unamortized premium
from fair value hedge of $15 and $1
|
|
|
515
|
|
|
|
501
|
|
|
Other indebtedness, primarily capital leases
|
|
|
42
|
|
|
|
51
|
|
|
Unamortized discount for Notes
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total debt outstanding
|
|
$
|
1,551
|
|
|
$
|
1,545
|
|
|
|
|
|
|
|
|
|
|
|
|
Less the current portion
|
|
|
(269
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt portion
|
|
$
|
1,282
|
|
|
$
|
1,530
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense for fiscal years 2011, 2010 and 2009 was
$68 million, $102 million and $130 million,
respectively.
The maturities of outstanding debt are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
THEREAFTER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due
|
|
$
|
269
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
516
|
|
|
$
|
—
|
|
|
$
|
745
|
|
70
Revolving credit
facility: The maximum committed amount available
under the Revolving Credit Facility due August 2012 is
$1 billion, exclusive of incremental credit increases of up
to an additional $500 million, which are available subject
to certain conditions and the agreement of its lenders.
Borrowings under the Revolving Credit Facility bear interest at
a rate dependent on the Company’s credit ratings at the
time of such borrowings and are calculated according to a base
rate or a Eurocurrency rate, as the case may be, plus an
applicable margin. In addition, depending on the Company’s
credit rating at the time of the borrowing, the Company must pay
a utilization fee for borrowings over 50% of the total
commitment. The Company must also pay facility commitment fees
quarterly on the final allocated amount of each Lender’s
full revolving credit commitment (without taking into account
any outstanding borrowings under such commitments) and at rates
dependent on its credit ratings.
For incremental borrowings that are not subject to a utilization
fee, the applicable interest rate at March 31, 2011, based
on the Company’s credit rating, is approximately 0.66%
(Eurocurrency rate plus the applicable margin).
Total interest expense relating to borrowings under the
Revolving Credit Facility for fiscal years 2011, 2010 and 2009
was approximately $2 million, $5 million and
$24 million, respectively. Interest rates applicable to the
facility at March 31, 2011 and 2010 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate on outstanding borrowings
|
|
|
0.65
|
%
|
|
|
3.18
|
%
|
|
Applicable margin on Eurocurrency borrowing
|
|
|
0.35
|
%
|
|
|
0.35
|
%
|
|
Utilization fee
|
|
|
0.10
|
%
|
|
|
0.10
|
%
|
|
Facility commitment fee
|
|
|
0.10
|
%
|
|
|
0.10
|
%
|
The Revolving Credit Facility contains financial and
non-financial covenants and negative covenants. The financial
covenants include: (i) for the 12 months ending each
quarter-end, the ratio of consolidated debt for borrowed money
to consolidated cash flow, each as defined in the Revolving
Credit Facility, must not exceed 4.00 to 1.00; and (ii) for
the 12 months ending each quarter-end, the ratio of
consolidated cash flow to the sum of interest payable on, and
amortization of debt discount in respect of, all consolidated
debt for borrowed money, as defined in the Revolving Credit
Facility, must not be less than 5.00 to 1.00. At March 31,
2011, the Company is in compliance with all covenants. In
addition, as a condition precedent to each borrowing made under
the Revolving Credit Facility, at the date of such borrowing,
(i) no event of default shall have occurred and be
continuing and (ii) the Company is to reaffirm the
representations and warranties made by the Company in the
Revolving Credit Facility other than those representations and
warranties that referred to a specified date or period.
The Company repaid the outstanding Revolving Credit Facility
balance of $250 million in April 2011.
Notes: The
Company’s 5.375% Notes and 6.125% Senior Notes
(collectively, the “Notes”) are senior unsecured
obligations and rank equally in right of payment with all of the
Company’s other existing and future senior unsecured
indebtedness. The Notes are subordinated to any future secured
indebtedness to the extent of the assets securing such future
indebtedness and structurally subordinated to any indebtedness
of the Company’s subsidiaries. The Company has the option
to redeem the Notes at any time, at redemption prices equal to
the greater of (i) the principal amount of the securities
to be redeemed or (ii) the sum of the present values of the
remaining scheduled payments of principal thereof and interest
thereon that would be due on the securities to be redeemed,
discounted to the date of redemption on a semi-annual basis at
the treasury rate plus 30 basis points and 20 basis
points for the 5.375% Notes and the 6.125% Notes,
respectively.
The maturity of the Notes may be accelerated by the holders upon
certain events of default, including failure to make payments
when due and failure to comply with covenants or agreements of
the Company set forth in the Notes or the Indenture after notice
and failure to cure.
5.375% notes due November
2019: During the third quarter fiscal year 2010, the
Company issued approximately $750 million principal amount
of 5.375% Notes due 2019 (the 5.375% Notes). The net
proceeds of the offering were approximately $738 million,
after being issued at a discount and deducting expenses,
underwriting fees and commissions of approximately
$6 million. The discount is being amortized over the term
to maturity. In the event of a change of control, each
noteholder will have the right to require the Company to
repurchase all or any part of such holder’s
5.375% Notes in cash at a price equal to 101% of the
principal amount of such Notes plus accrued and unpaid interest,
if any, to the date of repurchase,
71
subject to the right of holders of record on the relevant
interest payment date to receive interest due on the relevant
interest payment date.
6.125% notes due December
2014: The Company has entered into interest rate
swaps to convert $500 million of its 6.125% Notes into
floating interest rate payments through December 1, 2014.
Under the terms of the swaps, the Company will pay quarterly
interest at an average rate of 2.88% plus the three-month London
Interbank Offered Rate (LIBOR), and will receive payment at
5.625%. The LIBOR based rate is set quarterly three months prior
to the date of the interest payment. The Company designated
these swaps as fair value hedges and accounting for them in
accordance with the shortcut method of FASB ASC Topic 815. The
carrying value of the 6.125% Notes has been adjusted by an
amount that is equal and offsetting to the fair value of the
swaps.
Other indebtedness:
The Company has available an unsecured and uncommitted
multi-currency line of credit to meet short-term working capital
needs for the Company’s subsidiaries operating outside the
United States and uses guarantees and letters of credit issued
by financial institutions to guarantee performance on certain
contracts. At March 31, 2011, approximately
$55 million was pledged in support of bank guarantees and
other local credit lines and none of these arrangements had been
drawn down by third parties.
The Company uses a notional pooling arrangement with an
international bank to help manage global liquidity requirements.
Under this pooling arrangement, the Company and its
participating subsidiaries may maintain either cash deposit or
borrowing positions through local currency accounts with the
bank, so long as the aggregate position of the global pool is a
notionally calculated net cash deposit. Because it maintains a
security interest in the cash deposits, and has the right to
offset the cash deposits against the borrowings, the bank
provides the Company and its participating subsidiaries
favorable interest terms on both. At March 31, 2011, there
were no borrowings outstanding under this cash pooling
arrangement. Borrowings and repayments were approximately
$260 million for the year ended March 31, 2011.
Borrowings outstanding during the period did not exceed
$130 million.
Note 10 —
derivatives
The Company is exposed to financial market risks arising from
changes in interest rates and foreign exchange rates. Changes in
interest rates could affect the Company’s monetary assets
and liabilities, and foreign exchange rate changes could affect
the Company’s foreign currency denominated monetary assets
and liabilities and forecasted transactions. The Company enters
into derivative contracts with the intent of mitigating a
portion of these risks.
Interest rate swaps:
The Company has interest rate swaps with a total notional value
of $500 million, $200 million of which were entered
into during fiscal year 2011, that swap a total of
$500 million of its 6.125% Senior Notes due December
2014 into floating interest rate debt through December 1,
2014. These swaps are designated as fair value hedges.
At March 31, 2011, the fair value of these derivatives was
an asset of approximately $15 million, of which
approximately $11 million is included in “Other
current assets” and approximately $4 million is
included in “Other noncurrent assets, net” in the
Company’s Consolidated Balance Sheet. At March 31,
2010, the fair value of these derivatives was approximately
$1 million and is included in “Other current
assets” in the Company’s Consolidated Balance Sheet.
During fiscal year 2009, the Company entered into interest rate
swaps with a total notional value of $250 million to hedge
a portion of its variable interest rate payments on the
Revolving Credit Facility. These derivatives were designated as
cash flow hedges and matured in October 2010. At March 31,
2010, the fair value of these derivatives was a liability of
approximately $4 million and is included in “Accrued
expenses and other current liabilities” in the
Company’s Consolidated Balance Sheet.
The effective portion of these cash flow hedges is recorded as
“Accumulated other comprehensive loss” in the
Company’s Consolidated Balance Sheets and is reclassified
into “Interest expense, net,” in the Company’s
Consolidated Statements of Operations in the same period during
which the hedged transaction affected earnings. Any ineffective
portion of the cash flow hedges would have been recorded
immediately to “Interest expense, net”; however, no
ineffectiveness existed for fiscal years 2011, 2010 and 2009.
Foreign currency
contracts: The Company enters into foreign currency
option and forward contracts to manage foreign currency risks.
The Company has not designated its foreign exchange derivatives
as hedges. Accordingly, changes in fair value from these
contracts are recorded as “Other expenses (gains),
net” in the Company’s Consolidated Statements of
Operations. At March 31, 2011, foreign currency contracts
outstanding consisted of purchase and sales contracts with a
total notional
72
value of approximately $191 million, and durations of less
than three months. The net fair value of these contracts at
March 31, 2011 was approximately $6 million, of which
approximately $7 million is included in “Other current
assets” and approximately $1 million is included in
“Accrued expenses and other current liabilities” in
the Company’s Consolidated Balance Sheet. At March 31,
2010, foreign currency contracts outstanding consisted of
contracts with a total notional value of approximately
$113 million and a tenure of less than two months. The fair
value of these contracts was less than $1 million and is
included in “Other current assets” in the
Company’s Consolidated Balance Sheet at March 31, 2010.
A summary of the effect of the interest rate and foreign
exchange derivatives on the Company’s Consolidated
Statements of Operations is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMOUNT OF NET (GAIN)/LOSS RECOGNIZED IN THE
|
|
LOCATION OF AMOUNTS RECOGNIZED
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
(IN MILLIONS)
|
|
|
YEAR ENDED MARCH 31, 2011
|
|
|
|
YEAR ENDED MARCH 31, 2010
|
|
|
|
YEAR ENDED MARCH 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net — interest rate swaps designated
as cash flow hedges
|
|
|
$
|
4
|
|
|
|
$
|
6
|
|
|
|
$
|
2
|
|
|
Interest expense, net — interest rate swaps designated
as fair value hedges
|
|
|
$
|
(12
|
)
|
|
|
$
|
(1
|
)
|
|
|
$
|
—
|
|
|
Other expenses (gains), net — foreign currency
contracts
|
|
|
$
|
14
|
|
|
|
$
|
20
|
|
|
|
$
|
(77
|
)
|
The Company is subject to collateral security arrangements with
most of its major counterparties. These arrangements require the
Company to hold or post collateral when the derivative fair
values exceed contractually established thresholds. The
aggregate fair value of all derivative instruments under these
collateralized arrangements were in a net asset position and a
net liability position at March 31, 2011 and 2010,
respectively. The Company posted no collateral at March 31,
2011 or 2010. Under these agreements, if the Company’s
credit ratings had been downgraded one rating level, the Company
would still not have been required to post collateral.
Note 11 —
fair value measurements
The following table presents the placement in the fair value
hierarchy of the Company’s assets and liabilities that are
measured at fair value on a recurring basis at March 31,
2011 and 2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAIR VALUE
|
|
|
|
|
|
AT MARCH 31, 2010
|
|
|
|
|
MEASUREMENT USING
|
|
|
ESTIMATED
|
|
|
FAIR VALUE
|
|
|
ESTIMATED
|
|
|
|
|
INPUT TYPES
|
|
|
FAIR VALUE
|
|
|
MEASUREMENT USING INPUT TYPES
|
|
|
FAIR VALUE
|
|
|
(IN MILLIONS)
|
|
LEVEL 1
|
|
|
LEVEL 2
|
|
|
TOTAL
|
|
|
LEVEL 1
|
|
|
LEVEL 2
|
|
|
TOTAL
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
2,009
|
|
|
$
|
—
|
|
|
$
|
2,009
|
(1)
|
|
$
|
1,805
|
|
|
$
|
—
|
|
|
$
|
1,805
|
(2)
|
|
Marketable
securities(3)
|
|
|
—
|
|
|
|
179
|
|
|
|
179
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Foreign exchange
derivatives(4)
|
|
|
—
|
|
|
|
7
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest rate
derivatives(4)
|
|
|
—
|
|
|
|
15
|
|
|
|
15
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,009
|
|
|
$
|
201
|
|
|
$
|
2,210
|
|
|
$
|
1,805
|
|
|
$
|
1
|
|
|
$
|
1,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
derivatives(4)
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest rate
derivatives(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
At March 31, 2011, the Company
had approximately $1,959 million and $50 million of
investments in money market funds classified as “Cash and
cash equivalents” and “Other noncurrent assets,
net” for restricted cash amounts, respectively, in its
Consolidated Balance Sheet.
|
| |
| |
|
(2)
|
|
At March 31, 2010, the Company
had approximately $1,755 million and $50 million of
investments in money market funds classified as “Cash and
cash equivalents” and “Other noncurrent assets,
net” for restricted cash amounts, respectively, in its
Consolidated Balance Sheet.
|
| |
| |
|
(3)
|
|
See Note 5, “Marketable
Securities” for additional information.
|
| |
| |
|
(4)
|
|
See Note 10,
“Derivatives” for additional information. Interest
rate derivatives fair value excludes accrued interest.
|
At March 31, 2011 and 2010, the Company did not have any
assets or liabilities measured at fair value on a recurring
basis using significant unobservable inputs (Level 3).
73
The following table presents the carrying amounts and estimated
fair values of the Company’s financial instruments that are
not measured at fair value on a recurring basis:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT MARCH 31, 2011
|
|
|
AT MARCH 31, 2010
|
|
|
|
|
|
|
|
ESTIMATED
|
|
|
|
|
|
ESTIMATED
|
|
|
|
|
CARRYING
|
|
|
FAIR
|
|
|
CARRYING
|
|
|
FAIR
|
|
|
(IN MILLIONS)
|
|
VALUE
|
|
|
VALUE
|
|
|
VALUE
|
|
|
VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent portion of installment accounts
receivable(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
46
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt(2)
|
|
$
|
1,551
|
|
|
$
|
1,619
|
|
|
$
|
1,545
|
|
|
$
|
1,600
|
|
|
Facilities abandonment
reserve(3)
|
|
$
|
52
|
|
|
$
|
59
|
|
|
$
|
69
|
|
|
$
|
79
|
|
|
|
|
|
(1)
|
|
Estimated fair value of the
noncurrent portion of installment accounts receivable
approximates carrying value.
|
| |
| |
|
(2)
|
|
Estimated fair value of total debt
is based on quoted prices for similar liabilities for which
significant inputs are observable except for certain long-term
lease obligations, for which fair value approximates carrying
value.
|
| |
| |
|
(3)
|
|
Estimated fair value for the
facilities abandonment reserve was determined using the
Company’s incremental borrowing rate at March 31,
2010. The facilities abandonment reserve includes approximately
$15 million and $22 million in “Accrued expenses
and other current liabilities” and approximately
$37 million and $47 million in “Other noncurrent
liabilities” on the Company’s Consolidated Balance
Sheets at March 31, 2011 and 2010, respectively.
|
Note 12 —
commitments and contingencies
The Company leases real estate, data processing and other
equipment with lease terms expiring through fiscal year 2023.
Certain leases provide for renewal options and additional
rentals based on escalations in operating expenses and real
estate taxes.
Rental expense under operating leases for facilities and
equipment was approximately $200 million, $163 million
and $161 million for fiscal years 2011, 2010 and 2009,
respectively. Rental expense for fiscal years 2011, 2010 and
2009 included sublease income of approximately $23 million,
$18 million and $22 million, respectively.
Future minimum lease payments under non-cancelable operating
leases as of March 31, 2011, were as follows:
| |
|
|
|
|
|
FISCAL YEAR
|
|
(IN MILLIONS)
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
101
|
|
|
2013
|
|
|
87
|
|
|
2014
|
|
|
65
|
|
|
2015
|
|
|
55
|
|
|
2016
|
|
|
50
|
|
|
Thereafter
|
|
|
171
|
|
|
|
|
|
|
|
|
Total
|
|
|
529
|
|
|
|
|
|
|
|
|
Less income from sublease
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
Net minimum operating lease payments
|
|
$
|
499
|
|
|
|
|
|
|
|
The Company has additional commitments to purchase goods and
services of approximately $247 million in future periods,
approximately $236 million of which expires by fiscal year
2016.
Prior to fiscal year 2001, the Company sold individual accounts
receivable under the prior business model to a third party
subject to certain recourse provisions. At March 31, 2011,
none of these receivables were outstanding. The outstanding
principal balance of these receivables subject to recourse
approximated $21 million at March 31, 2010.
Litigation:
The Company records a provision with respect to a claim,
suit, investigation or proceeding when it is probable that a
liability has been incurred and the amount of the loss can be
reasonably estimated. Claims and proceedings are reviewed at
least quarterly and provisions are taken or adjusted to reflect
the impact and status of settlements, rulings, advice of counsel
and other information pertinent to a particular matter.
In April 2010, a lawsuit captioned Stragent, LLC et
ano. v. Amazon.com, Inc., et al. was filed in the
United States District Court for the Eastern District of Texas
against the Company and five other defendants. The complaint
alleges, among other things, that Company technology infringes a
patent assigned to plaintiff SeeSaw Foundation and licensed to
plaintiff Stragent LLC, entitled “Method of Providing Data
Dictionary-Driven Web-Based Database Applications,”
U.S. Patent No. 6,832,226. The complaint seeks
monetary damages and interest in an undisclosed amount, and
costs, based upon plaintiffs’ patent infringement claims.
In May 2010, the Company filed an answer and counterclaims that,
among other things, dispute the
74
plaintiffs’ claims and seek a declaratory judgment that the
Company does not infringe the
patent-in-suit
and that the patent is invalid. In May 2011, the parties entered
into a settlement agreement, the terms of which are confidential
but that is not material to the Company. The Company expects
that the case against the Company will be dismissed with
prejudice in its entirety.
In September 2010, a lawsuit captioned Uniloc USA, Inc. et
ano. v. National Instruments Corp., et al. was filed in
the United States District Court for the Eastern District of
Texas against the Company and 10 other defendants. The complaint
alleges, among other things, that Company technology, including
Internet Security Suite Plus 2010, infringes a patent
licensed to plaintiff Uniloc USA, Inc., entitled “System
for Software Registration,” U.S. Patent
No. 5,490,216. The complaint seeks monetary damages and
interest in an undisclosed amount, a temporary, preliminary and
permanent injunction against alleged acts of infringement, and
attorneys’ fees and costs, based upon the plaintiffs’
patent infringement claims. In November 2010, the Company filed
an answer that, among other things, disputes the
plaintiffs’ claims and seeks a declaratory judgment that
the Company does not infringe the
patent-in-suit
and that the patent is invalid. To date, no discovery has
commenced in this action. Although the timing and ultimate
outcome cannot be determined, the Company believes that the
plaintiffs’ claims are unfounded and that the Company has
meritorious defenses.
Based on its experience, the Company believes that the damages
amounts claimed in the aforementioned cases are not a meaningful
indicator of the potential liability. Claims, suits,
investigations and proceedings are inherently uncertain and it
is not possible to predict the ultimate outcome of the
aforementioned cases. Due to the nature and early stage of the
Uniloc matter, the Company is unable to estimate a range
of reasonably possible loss for this case.
The Company, various subsidiaries, and certain current and
former officers have been named as defendants in various other
lawsuits and claims arising in the normal course of business.
The Company believes that it has meritorious defenses in
connection with these other lawsuits and claims, and intends to
vigorously contest each of them.
In the opinion of the Company’s management based upon
information currently available to the Company, while the
outcome of these other lawsuits and claims is uncertain, the
likely results of these other lawsuits and claims against the
Company, either individually or in the aggregate, are not
expected to have a material adverse effect on the Company’s
financial position, results of operations, or cash flows,
although the effect could be material to the Company’s
results of operations or cash flows for any interim reporting
period.
The Company is obligated to indemnify its officers and directors
under certain circumstances to the fullest extent permitted by
Delaware law. As a part of that obligation, the Company has
advanced and will continue to advance certain attorneys’
fees and expenses incurred by current and former officers and
directors in various lawsuits and investigations.
During fiscal year 2011, the Company received approximately
$10 million in settlements of claims associated with
previous stockholder derivative actions following the
substitution of the Company as plaintiff in those actions. The
settlements received were recorded in the “Restructuring
and other” line of the Consolidated Statements of
Operations.
Note 13 —
stockholders’ equity
Stock Repurchases: In April 2010, the Company
completed the $250 million stock repurchase program
authorized by its Board of Directors on October 29, 2008.
On May 12, 2010, the Company’s Board of Directors
approved a new stock repurchase program that authorizes the
Company to acquire up to $500 million of its common stock.
At March 31, 2011, the Company remained authorized to
purchase up to approximately $282 million of additional
shares of common stock under its current stock repurchase
program.
Accumulated other comprehensive
loss: The
following table summarizes, at each of the balance sheet dates,
the components of the Company’s accumulated other
comprehensive loss, net of income taxes:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS)
|
|
|
2011
|
|
|
|
2010
|
|
|
|
2009
|
|
|
Foreign currency translation losses, net
|
|
|
$
|
(65
|
)
|
|
|
$
|
(123
|
)
|
|
|
$
|
(178
|
)
|
|
Unrealized losses on cash flow hedges, net of tax
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
|
$
|
(65
|
)
|
|
|
$
|
(126
|
)
|
|
|
$
|
(183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of loss reclassified from “Accumulated other
comprehensive loss” into “Interest expense, net”
relating to the sale of marketable securities was less than
$1 million for fiscal years 2011, 2010 and 2009,
respectively.
75
For the Company’s cash flow hedges, the amount of loss
reclassified from “Accumulated other comprehensive
loss” into “Interest expense, net” in the
Company’s Consolidated Statements of Operations was
approximately $4 million, $6 million and
$2 million for fiscal years 2011, 2010 and 2009,
respectively.
For additional information on the Company’s marketable
securities and derivatives, refer to Note 5,
“Marketable Securities” and Note 10,
“Derivatives.”
Dividends:
The Company’s Board of Directors declared the
following dividends during fiscal year 2011 and 2010:
Year Ended March 31, 2011:
| |
|
|
|
|
|
|
|
|
|
|
|
|
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
|
|
DIVIDEND
|
|
|
|
|
TOTAL
|
|
|
|
|
DECLARATION DATE
|
|
PER SHARE
|
|
|
RECORD DATE
|
|
AMOUNT
|
|
|
PAYMENT DATE
|
|
May 12, 2010
|
|
$
|
0.04
|
|
|
May 31, 2010
|
|
$
|
21
|
|
|
June 16, 2010
|
|
July 28, 2010
|
|
$
|
0.04
|
|
|
August 9, 2010
|
|
$
|
20
|
|
|
August 19, 2010
|
|
December 2, 2010
|
|
$
|
0.04
|
|
|
December 13, 2010
|
|
$
|
20
|
|
|
December 22, 2010
|
|
February 2, 2011
|
|
$
|
0.04
|
|
|
February 14, 2011
|
|
$
|
21
|
|
|
March 14, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2010:
| |
|
|
|
|
|
|
|
|
|
|
|
|
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
|
|
DIVIDEND
|
|
|
|
|
TOTAL
|
|
|
|
|
DECLARATION DATE
|
|
PER SHARE
|
|
|
RECORD DATE
|
|
AMOUNT
|
|
|
PAYMENT DATE
|
|
May 20, 2009
|
|
$
|
0.04
|
|
|
May 31, 2009
|
|
$
|
21
|
|
|
June 16, 2009
|
|
July 29, 2009
|
|
$
|
0.04
|
|
|
August 10, 2009
|
|
$
|
21
|
|
|
August 19, 2009
|
|
November 5, 2009
|
|
$
|
0.04
|
|
|
November 17, 2009
|
|
$
|
21
|
|
|
November 30, 2009
|
|
February 4, 2010
|
|
$
|
0.04
|
|
|
February 16, 2010
|
|
$
|
20
|
|
|
March 16, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rights plan: Each
outstanding share of the Company’s common stock carries a
right (Right) issued under the Company’s Stockholder
Protection Rights Agreement, dated November 5, 2009 (the
Rights Agreement). The Rights will trade with the common stock
until the Separation Time, which would occur on the next
business day after: (i) the Company’s announcement
that a person or group (an Acquiring Person) has become the
beneficial owner of 20% or more of the Company’s
outstanding common stock (other than Walter Haefner and his
affiliates and associates, who are “grandfathered”
under this provision so long as their aggregate ownership of
common stock does not exceed the sum of 126,562,500 shares
of common stock and that number of shares equal to 0.1% of the
then outstanding shares of common stock); (ii) the date on
which any Acquiring Person becomes the beneficial owner of more
than 50% of the outstanding shares of common stock; or
(iii) the tenth business day after the commencement of a
tender offer or exchange offer (or such later date as the Board
may from time to time determine prior to the Separation Time)
that would result in an Acquiring Person owning 20% or more of
the Company’s outstanding common stock. Following the
Separation Time, each Right may be exercised to purchase
0.001 shares of the Company’s preferred stock at a
purchase price of $100 per share. If the Separation Time occurs
pursuant to an event described in (i) or (ii) above,
however, each Right, other than rights held by an acquiring
person, will entitle the holder to receive, for an exercise
price of $100, that number of shares of the Company’s
common stock (or, in certain circumstances, cash, property or
other securities) having an aggregate Market Price (as
determined under the Rights Agreement) equal to two times the
exercise price. The Rights will not be triggered by a Qualifying
Offer, as defined in the Rights Agreement, if holders of at
least 10 percent of the outstanding shares of the
Company’s common stock request pursuant to the terms of the
Rights Agreement that a special meeting of stockholders be
convened for the purpose of exempting such offer from the Rights
Agreement, and thereafter the stockholders vote at such meeting
to exempt such Qualifying Offer from the Rights Agreement. The
Rights, which are redeemable by the Company at $0.001 per Right,
expire November 30, 2012.
76
Note 14 —
income from continuing operations per common share
The following table reconciles income per common share for
fiscal years 2011, 2010 and 2009, respectively.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income from continuing operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
823
|
|
|
$
|
759
|
|
|
$
|
661
|
|
|
Less: Income from continuing operations allocable to
participating securities
|
|
|
(11
|
)
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations allocable to common shares
|
|
$
|
812
|
|
|
$
|
751
|
|
|
$
|
653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
506
|
|
|
|
515
|
|
|
|
513
|
|
|
Basic income from continuing operations allocable per common
share
|
|
$
|
1.60
|
|
|
$
|
1.46
|
|
|
$
|
1.27
|
|
|
Diluted income from continuing operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
823
|
|
|
$
|
759
|
|
|
$
|
661
|
|
|
Add: Interest expense associated with Convertible Senior Notes,
net of tax
|
|
|
—
|
|
|
|
21
|
|
|
|
28
|
|
|
Less: Income from continuing operations allocable to
participating securities
|
|
|
(11
|
)
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations allocable to common shares
|
|
|
812
|
|
|
|
772
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding and common share equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
506
|
|
|
|
515
|
|
|
|
513
|
|
|
Weighted average shares outstanding upon conversion of
Convertible Senior Notes
|
|
|
—
|
|
|
|
16
|
|
|
|
23
|
|
|
Weighted average effect of share-based payment awards
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator in calculation of diluted income per share
|
|
|
507
|
|
|
|
533
|
|
|
|
537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income from continuing operations per common share
|
|
$
|
1.60
|
|
|
$
|
1.45
|
|
|
$
|
1.27
|
|
For fiscal years 2011, 2010 and 2009, approximately
6 million, 6 million and 14 million restricted
stock units and options to purchase common stock, respectively,
were excluded from the calculation of diluted earnings per
share, as their effect on net income per share was anti-dilutive
during the respective periods. Weighted average restricted stock
awards of 6 million, 5 million and 5 million for
fiscal years 2011, 2010 and 2009, respectively, were considered
participating securities in the calculation of net income
available to common shareholders.
Note 15 —
stock plans
Share-based incentive awards are provided to employees under the
terms of the Company’s equity incentive compensation plans
(the Plans). The Plans are administered by the Compensation and
Human Resources Committee of the Board of Directors (the
Committee). Awards under the Plans may include
at-the-money
stock options, premium-priced stock options, restricted stock
awards (RSAs), restricted stock units (RSUs), performance share
units (PSUs) or any combination thereof. The non-employee
members of the Company’s Board of Directors receive
deferred stock units under a separate director compensation
plan. The Company typically settles awards under employee and
non-employee director compensation plans with stock held in
treasury.
All Plans, with the exception of acquired companies’ stock
plans, have been approved by the Company’s shareholders.
The Company grants annual performance cash incentive bonuses,
long-term performance bonuses, both qualified and non-statutory
stock options, RSAs, RSUs and other equity-based awards under
the 2007 Incentive Plan and long-term performance bonuses under
the 2002 Incentive Plan, as amended and restated. These plans
are collectively referred to as “the Incentive Plans.”
Approximately 45 million and 30 million shares of
common stock can be granted to select employees and consultants
under the Company’s 2002 and 2007 Incentive Plans,
respectively. Under the 2007 Incentive Plan, no more than
10 million incentive stock options may be granted. The
Plans will continue until the earlier of (i) termination by
the Board or (ii) the date on which all of the shares
available for issuance under the respective plan have been
issued and restrictions on issued shares have lapsed. Generally,
options expire 10 years from the date of grant unless
forfeited by the employee or otherwise terminated. Awards to the
non-employee directors are granted under the 2003 Compensation
Plan for Non-Employee Directors, as amended.
77
Share-based
compensation: The
Company recognized share-based compensation in the following
line items in the Consolidated Statements of Operations for the
periods indicated:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of licensing and maintenance
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Costs of professional services
|
|
|
3
|
|
|
|
2
|
|
|
|
4
|
|
|
Selling and marketing
|
|
|
30
|
|
|
|
34
|
|
|
|
30
|
|
|
General and administrative
|
|
|
24
|
|
|
|
41
|
|
|
|
30
|
|
|
Product development and enhancements
|
|
|
20
|
|
|
|
22
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense before tax
|
|
|
80
|
|
|
|
102
|
|
|
|
92
|
|
|
Income tax benefit
|
|
|
(26
|
)
|
|
|
(34
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net compensation expense
|
|
$
|
54
|
|
|
$
|
68
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax benefit from share-based incentive awards provided to
employees that was recorded for book purposes exceeded that
which was deductible for tax purposes by $24 million,
$23 million and $18 million for fiscal years 2011,
2010 and 2009, respectively. The tax effect of this temporary
difference in tax expense was recorded to “Additional paid-
in capital” on the Consolidated Balance Sheet and did not
affect the Company’s income statement.
The following table summarizes information about unrecognized
share-based compensation costs at March 31, 2011:
| |
|
|
|
|
|
|
|
|
|
|
|
UNRECOGNIZED
|
|
|
WEIGHTED AVERAGE
|
|
|
|
|
COMPENSATION
|
|
|
PERIOD EXPECTED TO BE
|
|
|
|
|
COSTS
|
|
|
RECOGNIZED
|
|
|
|
|
(IN MILLIONS)
|
|
|
(IN YEARS)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
$
|
11
|
|
|
|
2.0
|
|
|
Restricted stock awards
|
|
|
51
|
|
|
|
1.7
|
|
|
Performance share units
|
|
|
23
|
|
|
|
2.4
|
|
|
Stock option awards
|
|
|
4
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized share-based compensation costs
|
|
$
|
89
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
There were no capitalized share-based compensation costs at
March 31, 2011, 2010 or 2009.
Stock option
awards: Stock
options are awards issued to employees that entitle the holder
to purchase shares of the Company’s stock at a fixed price.
Stock option awards are generally granted at an exercise price
equal to or greater than the Company’s closing quoted
market value on the date of grant and with a contractual term of
10 years. Stock option awards generally vest one-third per
year and become fully vested three years from the grant date.
At March 31, 2011, options outstanding that have vested and
are expected to vest are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
|
|
|
AVERAGE
|
|
|
AGGREGATE
|
|
|
|
|
|
|
|
AVERAGE
|
|
|
REMAINING
|
|
|
INTRINSIC
|
|
|
|
|
NUMBER OF SHARES
|
|
|
EXERCISE PRICE
|
|
|
CONTRACTUAL LIFE
|
|
|
VALUE(1)
|
|
|
|
|
(IN MILLIONS)
|
|
|
|
|
|
(IN YEARS)
|
|
|
(IN MILLIONS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
6.8
|
|
|
$
|
23.66
|
|
|
|
2.7
|
|
|
$
|
15.7
|
|
|
Expected to
vest(2)
|
|
|
1.1
|
|
|
|
19.42
|
|
|
|
6.2
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7.9
|
|
|
$
|
23.07
|
|
|
|
3.2
|
|
|
$
|
20.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These amounts represent the
difference between the exercise price and $24.18, the closing
price of the Company’s common stock on March 31, 2011,
the last trading day of the Company’s fiscal year as
reported on the NASDAQ Stock Market for all in the money options.
|
| |
| |
|
(2)
|
|
Outstanding options expected to
vest are net of estimated future forfeitures.
|
78
Additional information with respect to stock option plan
activity is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
NUMBER
|
|
|
WEIGHTED AVERAGE
|
|
|
(IN MILLIONS)
|
|
OF SHARES
|
|
|
EXERCISE PRICE
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
16.8
|
|
|
$
|
27.70
|
|
|
Exercised
|
|
|
(0.4
|
)
|
|
|
18.85
|
|
|
Expired or terminated
|
|
|
(2.3
|
)
|
|
|
32.09
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009
|
|
|
14.1
|
|
|
$
|
27.21
|
|
|
Granted
|
|
|
0.1
|
|
|
|
20.87
|
|
|
Exercised
|
|
|
(0.6
|
)
|
|
|
18.96
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired or terminated
|
|
|
(2.3
|
)
|
|
|
41.94
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2010
|
|
|
11.3
|
|
|
$
|
24.65
|
|
|
Granted
|
|
|
1.2
|
|
|
|
19.34
|
|
|
Exercised
|
|
|
(0.5
|
)
|
|
|
18.81
|
|
|
Expired or terminated
|
|
|
(4.0
|
)
|
|
|
27.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2011
|
|
|
8.0
|
|
|
$
|
23.03
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
NUMBER
|
|
|
WEIGHTED AVERAGE
|
|
|
(IN MILLIONS)
|
|
OF SHARES
|
|
|
EXERCISE PRICE
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
13.5
|
|
|
$
|
27.46
|
|
|
March 31, 2010
|
|
|
11.2
|
|
|
$
|
24.67
|
|
|
March 31, 2011
|
|
|
6.8
|
|
|
$
|
23.66
|
|
The following table summarizes stock option information at
March 31, 2011:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTIONS OUTSTANDING
|
|
|
OPTIONS EXERCISABLE
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE
|
|
|
WEIGHTED
|
|
|
|
|
|
|
|
|
AVERAGE
|
|
|
WEIGHTED
|
|
|
|
|
|
|
|
AGGREGATE
|
|
|
REMAINING
|
|
|
AVERAGE
|
|
|
|
|
|
AGGREGATE
|
|
|
REMAINING
|
|
|
AVERAGE
|
|
|
|
|
|
|
|
INTRINSIC
|
|
|
CONTRACTUAL
|
|
|
EXERCISE
|
|
|
|
|
|
INTRINSIC
|
|
|
CONTRACTUAL
|
|
|
EXERCISE
|
|
|
RANGE OF EXERCISE PRICES
|
|
SHARES
|
|
|
VALUE
|
|
|
LIFE
|
|
|
PRICE
|
|
|
SHARES
|
|
|
VALUE
|
|
|
LIFE
|
|
|
PRICE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(SHARES AND AGGREGATE INTRINSIC
VALUE IN MILLIONS; WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE
IN YEARS)
|
|
|
|
|
|
$ 1.37 — $ 20.00
|
|
|
2.1
|
|
|
$
|
15.9
|
|
|
|
4.3
|
|
|
$
|
16.74
|
|
|
|
1.0
|
|
|
$
|
10.4
|
|
|
|
2.0
|
|
|
$
|
13.77
|
|
|
$ 20.01 — $ 25.00
|
|
|
2.6
|
|
|
|
5.5
|
|
|
|
2.4
|
|
|
|
22.02
|
|
|
|
2.5
|
|
|
|
5.3
|
|
|
|
2.4
|
|
|
|
22.04
|
|
|
$ 25.01 — $ 30.00
|
|
|
3.0
|
|
|
|
—
|
|
|
|
3.1
|
|
|
|
27.42
|
|
|
|
3.0
|
|
|
|
—
|
|
|
|
3.1
|
|
|
|
27.42
|
|
|
$ 30.01 — over
|
|
|
0.3
|
|
|
|
—
|
|
|
|
3.3
|
|
|
|
31.89
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
3.3
|
|
|
|
31.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.0
|
|
|
$
|
21.4
|
|
|
|
3.2
|
|
|
$
|
23.03
|
|
|
|
6.8
|
|
|
$
|
15.7
|
|
|
|
2.7
|
|
|
$
|
23.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of each option is estimated on the date of grant
using the Black-Scholes option pricing model. The Company
believes that the valuation technique and the approach utilized
to develop the underlying assumptions are appropriate in
calculating the fair value of the Company’s stock options.
Estimates of fair value are not intended to predict actual
future events or the value ultimately realized by employees who
receive equity awards.
No options were granted in fiscal year 2009. The weighted
average estimated values of employee stock option grants, as
well as the weighted average assumptions that were used in
calculating such values during fiscal year 2011 and 2010 were
based on estimates at the date of grant as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value
|
|
$
|
5.55
|
|
|
$
|
6.81
|
|
|
Dividend yield
|
|
|
0.83
|
%
|
|
|
0.77
|
%
|
|
Expected volatility
factor(1)
|
|
|
34
|
%
|
|
|
33
|
%
|
|
Risk-free interest
rate(2)
|
|
|
1.8
|
%
|
|
|
2.3
|
%
|
|
Expected life (in
years)(3)
|
|
|
4.5
|
|
|
|
6.0
|
|
|
|
|
|
(1)
|
|
Expected volatility is measured
using historical daily price changes of the Company’s stock
over the respective expected term of the options and the implied
volatility derived from the market prices of the Company’s
traded options.
|
| |
|
(2)
|
|
The risk-free rate for periods
within the contractual term of the stock options is based on the
U.S. Treasury yield curve in effect at the time of grant.
|
| |
|
(3)
|
|
The expected life is the number of
years the Company estimates, based primarily on historical
experience, that options will be outstanding prior to exercise.
For stock options granted in fiscal year 2011, the
Company’s computation of expected life was determined based
on the simplified method (the average of the vesting period and
option term), due to changes in the vesting terms, the
contractual lives and the population of employees granted
options compared with the Company’s historical grants.
|
79
The following table summarizes information on shares exercised
for the periods indicated:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received from options exercised
|
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
7
|
|
|
Intrinsic value of options exercised
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
Excess tax benefits from options exercised
|
|
|
—(1
|
)
|
|
|
—(1
|
)
|
|
|
—(1
|
)
|
|
|
|
|
(1)
|
|
Less than $1 million.
|
Restricted stock and restricted
stock unit awards: Restricted Stock Awards (RSAs) are
stock awards issued to employees that are subject to specified
restrictions and a risk of forfeiture, RSAs entitle holders to
dividends. The restrictions typically lapse over a two- or
three-year period. The fair value of the awards is determined
and fixed based on the closing quoted market value of the
Company’s stock on the grant date.
Restricted Stock Units (RSUs) are stock awards issued to
employees that entitle the holder to receive shares of common
stock as the awards vest, typically over a two- or
three-year period. RSUs do not entitle holders to dividends. The
fair value of the awards is determined and fixed based on the
quoted market value of the Company’s stock on the grant
date reduced by the present value of dividends expected to be
paid on the Company’s stock prior to vesting of the RSUs
which is calculated using a risk-free interest rate.
The following table summarizes the activity of RSAs under the
Plans:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
|
|
|
|
|
NUMBER
|
|
|
GRANT DATE
|
|
|
(IN MILLIONS)
|
|
OF SHARES
|
|
|
FAIR VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
3.7
|
|
|
$
|
24.38
|
|
|
RSA granted
|
|
|
3.9
|
|
|
|
25.16
|
|
|
RSA released
|
|
|
(2.6
|
)
|
|
|
24.82
|
|
|
RSA forfeitures
|
|
|
(0.4
|
)
|
|
|
24.97
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009
|
|
|
4.6
|
|
|
$
|
24.73
|
|
|
RSA granted
|
|
|
4.3
|
|
|
|
18.45
|
|
|
RSA released
|
|
|
(3.3
|
)
|
|
|
23.11
|
|
|
RSA forfeitures
|
|
|
(0.3
|
)
|
|
|
22.23
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2010
|
|
|
5.3
|
|
|
$
|
20.73
|
|
|
RSA granted
|
|
|
4.7
|
|
|
|
21.41
|
|
|
RSA released
|
|
|
(3.3
|
)
|
|
|
22.00
|
|
|
RSA forfeitures
|
|
|
(0.9
|
)
|
|
|
20.72
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2011
|
|
|
5.8
|
|
|
$
|
20.56
|
|
|
|
|
|
|
|
|
|
|
|
80
The following table summarizes the activity of RSUs under the
Plans:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
|
|
|
|
|
NUMBER
|
|
|
GRANT DATE
|
|
|
(IN MILLIONS)
|
|
OF SHARES
|
|
|
FAIR VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
0.9
|
|
|
$
|
27.20
|
|
|
RSU granted
|
|
|
0.4
|
|
|
|
24.02
|
|
|
RSU released
|
|
|
(0.6
|
)
|
|
|
27.91
|
|
|
RSU forfeitures
|
|
|
(0.1
|
)
|
|
|
24.11
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009
|
|
|
0.6
|
|
|
$
|
24.99
|
|
|
RSU granted
|
|
|
0.6
|
|
|
|
17.52
|
|
|
RSU released
|
|
|
(0.2
|
)
|
|
|
23.13
|
|
|
RSU forfeitures
|
|
|
(0.1
|
)
|
|
|
20.95
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2010
|
|
|
0.9
|
|
|
$
|
20.51
|
|
|
RSU granted
|
|
|
0.6
|
|
|
|
21.30
|
|
|
RSU released
|
|
|
(0.4
|
)
|
|
|
23.47
|
|
|
RSU forfeitures
|
|
|
(0.1
|
)
|
|
|
19.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2011
|
|
|
1.0
|
|
|
$
|
20.03
|
|
|
|
|
|
|
|
|
|
|
|
The total vesting date fair value of RSAs and RSUs released
during fiscal years 2011, 2010 and 2009 was approximately
$82 million, $64 million and $78 million,
respectively.
Performance awards:
The Company rewards certain senior executives with performance
awards under its long-term incentive plans. These Performance
Share Units (PSUs) include
1-year and
3-year
performance periods for senior executives and a
1-year
performance period for members of the sales team. These PSUs are
granted at the conclusion of the performance period and after
approval by the Committee.
The 1-year
PSUs for the fiscal 2010, 2009 and 2008 incentive plan years
were granted in the first quarter of fiscal years 2011, 2010 and
2009, respectively. One third of these awards vest upon granting
with the second third and final third vesting on the first and
second anniversary of the grant, respectively. The table below
summarizes the RSAs and RSUs granted under these PSUs:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSAs
|
|
|
RSUs
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
|
|
|
|
|
|
WEIGHTED AVERAGE
|
|
INCENTIVE PLANS
|
|
PERFORMANCE
|
|
|
SHARES
|
|
|
AVERAGE GRANT
|
|
|
SHARES
|
|
|
GRANT DATE
|
|
|
FOR FISCAL YEARS
|
|
PERIOD
|
|
|
(MILLIONS)
|
|
|
DATE FAIR VALUE
|
|
|
(MILLIONS)
|
|
|
FAIR VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
1-year
|
|
|
|
2.2
|
|
|
$
|
21.47
|
|
|
|
—
|
(1)
|
|
$
|
21.38
|
|
|
2009
|
|
|
1-year
|
|
|
|
0.9
|
|
|
$
|
18.05
|
|
|
|
—
|
(1)
|
|
$
|
17.96
|
|
|
2008
|
|
|
1-year
|
|
|
|
1.8
|
|
|
$
|
26.04
|
|
|
|
—
|
(1)
|
|
$
|
25.96
|
|
|
|
|
|
(1)
|
|
Shares granted amounted to less
than 0.1 million.
|
The 3-year
PSUs for the fiscal 2008 and 2007 incentive plan years were
granted in the first quarter of fiscal years 2011 and 2010,
respectively. These awards vest immediately upon grant.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
|
|
INCENTIVE PLANS FOR
|
|
PERFORMANCE
|
|
|
UNRESTRICTED SHARES
|
|
|
GRANT DATE
|
|
|
FISCAL YEARS
|
|
PERIOD
|
|
|
(MILLIONS)
|
|
|
FAIR VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
3-year
|
|
|
|
0.3
|
|
|
$
|
21.47
|
|
|
2007
|
|
|
3-year
|
|
|
|
0.4
|
|
|
$
|
18.05
|
|
81
Awards were granted under the Fiscal Year 2010 and 2009 Sales
Retention Equity Programs in the first quarter of fiscal years
2011 and 2010, respectively. These awards cliff vest at the end
of a three year period beginning on the first anniversary of the
grant date. The table below summarizes the RSAs and RSUs granted
under this program:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSAs
|
|
|
RSUs
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
|
|
|
|
|
|
WEIGHTED AVERAGE
|
|
INCENTIVE PLANS
|
|
PERFORMANCE
|
|
|
SHARES
|
|
|
AVERAGE GRANT
|
|
|
SHARES
|
|
|
GRANT DATE
|
|
|
FOR FISCAL YEARS
|
|
PERIOD
|
|
|
(MILLIONS)
|
|
|
DATE FAIR VALUE
|
|
|
(MILLIONS)
|
|
|
FAIR VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
1-year
|
|
|
|
0.4
|
|
|
$
|
21.47
|
|
|
|
0.1
|
|
|
$
|
21.36
|
|
|
2009
|
|
|
1-year
|
|
|
|
0.5
|
|
|
$
|
18.05
|
|
|
|
0.2
|
|
|
$
|
17.84
|
|
Stock Purchase Plan:
The Company discontinued the Year 2000 Employee Stock Purchase
Plan ( the Purchase Plan) effective with the close of the
purchase period on June 30, 2009. The Purchase Plan was
considered compensatory. Under the terms of the Purchase Plan,
employees were able to elect a withholding between 1% and 25% of
their base pay through regular payroll deductions, subject to
Internal Revenue Code of 1986 (the Code) limitations. Shares of
the Company’s common stock were purchased at six-month
intervals at 85% of the lower of the fair market value of the
Company’s common stock on the first or last day of each
six-month period. During fiscal years 2010 and 2009, employees
purchased approximately 0.9 million and 1.5 million
shares, respectively, at average prices of $14.82 and $17.56 per
share, respectively.
The fair value was estimated on the first date of the offering
period using the Black-Scholes option pricing model. No offer
periods commenced in fiscal year 2010. The fair value and the
weighted average assumption for the Purchase Plan offer period
commencing in fiscal year 2009 were as follows:
| |
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
Weighted average fair value
|
|
$
|
5.89
|
|
|
Dividend yield
|
|
|
0.78
|
%
|
|
Expected volatility
factor(1)
|
|
|
50
|
%
|
|
Risk-free interest
rate(2)
|
|
|
1.1
|
%
|
|
Expected life (in
years)(3)
|
|
|
0.5
|
|
|
|
|
|
(1)
|
|
Expected volatility is measured
using historical daily price changes of the Company’s stock
over the respective term of the offer period and the implied
volatility is derived from the market prices of the
Company’s traded options.
|
| |
|
(2)
|
|
The risk-free rate for periods
within the contractual term of the offer period is based on the
U.S. Treasury yield curve in effect at the beginning of the
offer period.
|
| |
|
(3)
|
|
The expected life is the six-month
offer period.
|
Note 16 —
income taxes
The amounts of income (loss) from continuing operations before
taxes attributable to domestic and foreign operations are as
follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
751
|
|
|
$
|
699
|
|
|
$
|
633
|
|
|
Foreign
|
|
|
458
|
|
|
|
453
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,209
|
|
|
$
|
1,152
|
|
|
$
|
1,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
Income tax expense (benefit) from continuing operations consists
of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
110
|
|
|
$
|
198
|
|
|
$
|
312
|
|
|
State
|
|
|
48
|
|
|
|
15
|
|
|
|
14
|
|
|
Foreign
|
|
|
88
|
|
|
|
112
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246
|
|
|
|
325
|
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
65
|
|
|
|
28
|
|
|
|
(89
|
)
|
|
State
|
|
|
5
|
|
|
|
13
|
|
|
|
(11
|
)
|
|
Foreign
|
|
|
70
|
|
|
|
27
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140
|
|
|
|
68
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
175
|
|
|
$
|
226
|
|
|
$
|
223
|
|
|
State
|
|
|
53
|
|
|
|
28
|
|
|
|
3
|
|
|
Foreign
|
|
|
158
|
|
|
|
139
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
386
|
|
|
$
|
393
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax expense from continuing operations is reconciled to the
tax expense computed at the federal statutory tax rate as
follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense at U.S. federal statutory tax rate
|
|
$
|
423
|
|
|
$
|
403
|
|
|
$
|
367
|
|
|
Effect of international operations
|
|
|
(129
|
)
|
|
|
(55
|
)
|
|
|
(30
|
)
|
|
US federal and state tax contingencies
|
|
|
61
|
|
|
|
14
|
|
|
|
24
|
|
|
State taxes, net of federal tax benefit
|
|
|
13
|
|
|
|
7
|
|
|
|
1
|
|
|
Valuation allowance
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
7
|
|
|
Other, net
|
|
|
20
|
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense
|
|
$
|
386
|
|
|
$
|
393
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
Deferred income taxes reflect the effect of temporary
differences between the carrying amounts of assets and
liabilities recognized for financial reporting purposes and the
amounts recognized for tax purposes. The tax effects of the
temporary differences from continuing operations are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Modified accrual basis accounting for revenue
|
|
$
|
445
|
|
|
$
|
442
|
|
|
Share-based compensation
|
|
|
50
|
|
|
|
76
|
|
|
Accrued expenses
|
|
|
53
|
|
|
|
76
|
|
|
Net operating losses
|
|
|
154
|
|
|
|
157
|
|
|
Intangible assets amortizable for tax purposes
|
|
|
16
|
|
|
|
17
|
|
|
Deductible state tax and interest benefits
|
|
|
43
|
|
|
|
37
|
|
|
Other
|
|
|
51
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
812
|
|
|
|
888
|
|
|
Valuation allowances
|
|
|
(63
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets, net of valuation allowances
|
|
|
749
|
|
|
|
815
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Purchased software
|
|
|
73
|
|
|
|
41
|
|
|
Depreciation
|
|
|
17
|
|
|
|
1
|
|
|
Other intangible assets
|
|
|
70
|
|
|
|
81
|
|
|
Capitalized development costs
|
|
|
191
|
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
351
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
398
|
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
|
|
In management’s judgment, it is more likely than not that
the total deferred tax assets, net of valuation allowance, of
approximately $749 million will be realized as reductions
to future taxable income or by utilizing available tax planning
strategies. Worldwide net operating loss carryforwards (NOLs)
totaled approximately $586 million and $574 million at
March 31, 2011 and 2010, respectively. The NOLs will expire
as follows: $434 million between 2012 and 2032 and
$152 million may be carried forward indefinitely.
A valuation allowance has been provided for deferred tax assets
related to NOLs that are not expected to be realized. The
valuation allowance decreased approximately $10 million and
$3 million at March 31, 2011 and 2010, respectively.
The decrease in the valuation allowance at March 31, 2011
and March 31, 2010 primarily relates to the likelihood of
utilization of NOLs.
No provision has been made for U.S. federal income taxes on
approximately $1,198 million and $1,067 million at
March 31, 2011 and 2010, respectively, of unremitted
earnings of the Company’s foreign subsidiaries since the
Company plans to permanently reinvest all such earnings outside
the U.S. It is not practicable to determine the amount of
tax associated with such unremitted earnings.
A number of years may elapse before a particular uncertain tax
position for which the Company has not recorded a financial
statement benefit is audited and finally resolved. The number of
years with open tax audits varies depending on the tax
jurisdiction. The Company is subject to tax audits in the
following major taxing jurisdictions:
|
|
|
| |
•
|
United States — federal tax years are open for years
2005 and forward;
|
| |
| |
•
|
Germany — tax years are open for years 2007 and
forward;
|
| |
| |
•
|
Italy — tax years are open for years 2006 and forward;
|
| |
| |
•
|
Japan — tax years are open for years 2005 and
forward; and
|
| |
| |
•
|
United Kingdom — tax years are open for years 2008 and
forward.
|
84
While it is difficult to predict the final outcome or the timing
of resolution of any particular tax matter, the Company believes
that its financial statements reflect the probable outcome of
uncertain tax positions. The Company may adjust these reserves,
as well as any related interest or penalties, in light of
changing facts and circumstances including the settlement of
income tax audits and the expiration of statutes of limitations.
To the extent a settlement differs from the amounts previously
reserved, such difference would be generally recognized as a
component of income tax expense in the period of resolution.
As of March 31, 2011, the gross liability for income taxes
associated with uncertain tax positions, including interest and
penalties, is approximately $568 million (of which
approximately $26 million is classified as current). In
addition, as of March 31, 2011, the Company has recorded
approximately $43 million of deferred tax assets for future
deductions of interest and state income taxes related to these
uncertain tax positions. As of March 31, 2010, the gross
liability for income taxes associated with uncertain tax
positions, including interest and penalties, was approximately
$451 million (of which approximately $3 million was
classified as current). In addition, as of March 31, 2010,
the Company had recorded approximately $37 million of
deferred tax assets for future deductions of interest and state
income taxes related to these uncertain tax positions.
As of March 31, 2011, the total gross amount of reserves
for income taxes, reported in other liabilities, is
$470 million. Any prospective adjustments to these reserves
will be recorded as an increase or decrease to the
Company’s provision for income taxes and would affect its
effective tax rate. As of March 31, 2010, the total gross
amount of reserves for income taxes, reported in other
liabilities, was $369 million. The gross amount of interest
and penalties accrued, reported in total liabilities was
approximately $98 million, $82 million and
$70 million for fiscal years 2011, 2010 and 2009,
respectively. The amount of interest and penalties recognized
was approximately $16 million, $12 million and
$10 million for the fiscal years ended March 31, 2011,
2010 and 2009, respectively.
A roll-forward of the Company’s uncertain tax positions for
all federal, state and foreign tax jurisdictions is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
MARCH 31,
|
|
|
(IN MILLIONS)
|
|
2011
|
|
|
2010
|
|
|
Balance, beginning of year
|
|
$
|
369
|
|
|
$
|
281
|
|
|
Additions for tax positions related to the current year
|
|
|
45
|
|
|
|
77
|
|
|
Additions for tax positions from prior years
|
|
|
127
|
|
|
|
24
|
|
|
Reductions for tax positions from prior years
|
|
|
(33
|
)
|
|
|
(1
|
)
|
|
Settlement payments
|
|
|
(32
|
)
|
|
|
(16
|
)
|
|
Statute of limitations expiration
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
Translation and other
|
|
|
2
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
470
|
|
|
$
|
369
|
|
|
|
|
|
|
|
|
|
|
|
The amount of unrecognized tax benefits that, if recognized,
would affect the effective tax rate is $401 million and
$309 million as of March 31, 2011 and 2010,
respectively.
Note 17 —
supplemental statement of cash flows information
Interest payments for fiscal years 2011, 2010 and 2009 were
approximately $72 million, $64 million and
$103 million, respectively. Income taxes paid for these
fiscal years were approximately $222 million,
$329 million and $351 million, respectively.
Non-cash financing activities for fiscal years 2011, 2010 and
2009 consisted of treasury shares issued in connection with the
following: share-based incentive awards issued under the
Company’s equity compensation plans of approximately
$64 million (net of approximately $27 million of
income taxes withheld), $65 million (net of approximately
$24 million of income taxes withheld) and $53 million
(net of approximately $25 million of income taxes
withheld), respectively; and discretionary stock contributions
to the CA, Inc. Savings Harvest Plan of approximately
$25 million, $24 million and $18 million,
respectively.
85
Non-cash financing activities for fiscal years 2010 and 2009
included approximately $13 million and $26 million,
respectively, in treasury common shares issued in connection
with the Company’s Employee Stock Purchase Plan.
Note 18 —
segment and geographic information
The Company’s chief operating decision maker reviews
financial information presented on a consolidated basis,
accompanied by disaggregated information about revenue by
geographic region, for purposes of assessing financial
performance and making operating decisions. Accordingly, at
March 31, 2011, the Company considers itself to operate in
a single segment.
In addition to its U.S. operations, the Company operates
through branches and wholly-owned subsidiaries in 47 foreign
countries located in North America (4), Europe (21),
Asia/Pacific (14), South America (7), and Africa (1). Revenue is
allocated to a geographic area based on the location of the
sale, which is generally the customer’s country of
domicile. The following table presents information about the
Company by geographic area for fiscal years 2011, 2010 and 2009:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(IN MILLIONS)
|
|
STATES
|
|
|
EUROPE
|
|
|
OTHER
|
|
|
ELIMINATIONS
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To unaffiliated customers
|
|
$
|
2,519
|
|
|
$
|
1,139
|
|
|
$
|
771
|
|
|
$
|
—
|
|
|
$
|
4,429
|
|
|
Between geographic
areas(1)
|
|
|
453
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(453
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
2,972
|
|
|
|
1,139
|
|
|
|
771
|
|
|
|
(453
|
)
|
|
|
4,429
|
|
|
Property and equipment, net
|
|
|
211
|
|
|
|
132
|
|
|
|
94
|
|
|
|
—
|
|
|
|
437
|
|
|
Total assets
|
|
|
9,644
|
|
|
|
1,789
|
|
|
|
981
|
|
|
|
—
|
|
|
|
12,414
|
|
|
Total liabilities
|
|
|
4,999
|
|
|
|
1,163
|
|
|
|
632
|
|
|
|
—
|
|
|
|
6,794
|
|
|
Year Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To unaffiliated customers
|
|
$
|
2,337
|
|
|
$
|
1,177
|
|
|
$
|
713
|
|
|
$
|
—
|
|
|
$
|
4,227
|
|
|
Between geographic
areas(1)
|
|
|
528
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(528
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
2,865
|
|
|
|
1,177
|
|
|
|
713
|
|
|
|
(528
|
)
|
|
|
4,227
|
|
|
Property and equipment, net
|
|
|
239
|
|
|
|
127
|
|
|
|
86
|
|
|
|
—
|
|
|
|
452
|
|
|
Total assets
|
|
|
9,159
|
|
|
|
1,831
|
|
|
|
898
|
|
|
|
—
|
|
|
|
11,888
|
|
|
Total liabilities
|
|
|
5,195
|
|
|
|
1,092
|
|
|
|
614
|
|
|
|
—
|
|
|
|
6,901
|
|
|
Year Ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To unaffiliated customers
|
|
$
|
2,208
|
|
|
$
|
1,239
|
|
|
$
|
691
|
|
|
$
|
—
|
|
|
$
|
4,138
|
|
|
Between geographic
areas(1)
|
|
|
522
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(522
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
2,730
|
|
|
|
1,239
|
|
|
|
691
|
|
|
|
(522
|
)
|
|
|
4,138
|
|
|
Property and equipment, net
|
|
|
254
|
|
|
|
129
|
|
|
|
59
|
|
|
|
—
|
|
|
|
442
|
|
|
Total assets
|
|
|
8,824
|
|
|
|
1,726
|
|
|
|
691
|
|
|
|
—
|
|
|
|
11,241
|
|
|
Total liabilities
|
|
|
5,298
|
|
|
|
1,038
|
|
|
|
543
|
|
|
|
—
|
|
|
|
6,879
|
|
|
|
|
|
(1)
|
|
Represents royalties from foreign
subsidiaries determined as a percentage of certain amounts
invoiced to customer.
|
No single customer accounted for 10% or more of total revenue
for fiscal years 2011, 2010 or 2009.
Note 19 —
profit sharing plan
The Company maintains a defined contribution plan for the
benefit of its U.S. employees. The plan is intended to be a
tax qualified plan under Section 401(a) of the Code, and
contains a qualified cash or deferred arrangement as described
under Section 401(k) of the Code. Eligible participants may
elect to contribute a percentage of their base compensation and
the Company may make matching contributions.
The Company recognized costs associated with this plan of
$28 million, $39 million and $38 million for
fiscal years 2011, 2010 and 2009, respectively. Included in
these amounts were discretionary contributions of stock of
$13 million, $25 million and $24 million for
fiscal years 2011, 2010 and 2009, respectively.
86
Note 20 —
subsequent events
On May 12, 2011, the Company’s Board of Directors
approved a stock repurchase program that authorized the Company
to acquire up to an additional $500 million of its common
stock, in addition to the previous program approved on
May 12, 2010. The Company will fund the program with
available cash on hand and repurchase shares on the open market
from time to time based on market conditions and other factors.
On May 12, 2011, the Company announced an increase of its
regular quarterly dividend to $0.05 per share as and when
declared by the Board.
87
Schedule
Schedule Of Valuation And Qualifying Accounts Disclosure
CA,
Inc. and subsidiaries
valuation and qualifying accounts
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONS/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(DEDUCTIONS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARGED/
|
|
|
|
|
|
|
|
|
|
|
BALANCE AT
|
|
|
(CREDITED) TO
|
|
|
|
|
|
BALANCE
|
|
|
|
|
BEGINNING
|
|
|
COSTS AND
|
|
|
|
|
|
AT END
|
|
|
DESCRIPTION
|
|
OF PERIOD
|
|
|
EXPENSES
|
|
|
DEDUCTIONS(1)
|
|
|
OF PERIOD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
2011
|
|
$
|
24
|
|
|
$
|
6
|
|
|
$
|
(8
|
)
|
|
$
|
22
|
|
|
Year ended March 31, 2010
|
|
$
|
25
|
|
|
$
|
6
|
|
|
$
|
(7
|
)
|
|
$
|
24
|
|
|
Year ended March 31, 2009
|
|
$
|
31
|
|
|
$
|
9
|
|
|
$
|
(15
|
)
|
|
$
|
25
|
|
|
|
|
|
(1)
|
|
Write-offs of amounts against
allowance provided.
|
88