Condensed Balance Sheets

12 Months Ended

Jan. 31, 2012

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheets

	January 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	171,046		$	197,840
Restricted cash	—			33,367
Auction rate securities	272			72,441
Prepaid expenses and other current assets	3,808			2,242
Total current assets	175,126			305,890
Property and equipment, net	1,564			1,815
Advances to and investments in subsidiaries	444,453			445,433
Other assets	800			1,662
Total assets	$	621,943		$	754,800
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other current liabilities	$	27,757		$	37,797
Convertible debt obligations	2,195			2,195
Litigation settlement	—			146,150
Total current liabilities	29,952			186,142
Other long-term liabilities	150,483			155,650
Total liabilities	180,435			341,792
Commitments and contingencies
Equity:
Common stock, $0.10 par value—authorized, 600,000,000 shares; issued, 219,708,779 and 204,937,882 shares, respectively; outstanding, 218,636,842 and 204,553,916, respectively	21,971			20,494
Treasury stock, at cost, 1,017,937 and 403,966 shares, respectively	(8,011		)	(3,484		)
Additional paid-in capital	2,198,086			2,088,717
Accumulated deficit	(1,766,364		)	(1,707,638		)
Accumulated other comprehensive income	(4,174		)	14,919
Total equity	441,508			413,008
Total liabilities and equity	$	621,943		$	754,800

See notes to condensed financial statements.

	Fiscal Years Ended January 31,
	2012			2011			2010
Management fees	$	—		$	—		$	60
Selling, general and administrative expenses	(73,753		)	(84,504		)	(49,291		)
Litigation settlement	(4,880		)	17,500			—
Loss from operations	(78,633		)	(67,004		)	(49,231		)
Interest income	1,758			1,922			3,271
Interest expense	(14		)	(10		)	(103		)
Other-than-temporary impairment of investments	—			(407		)	(6,914		)
Other income	29,587			17,184			92
Loss before income taxes	(47,302		)	(48,315		)	(52,885		)
Income tax benefit	5,675			4,445			47,617
Equity in losses of subsidiaries from continuing operations, net of tax	(17,099		)	(81,747		)	(225,162		)
Net loss from continuing operations	(58,726		)	(125,617		)	(230,430		)
Loss from discontinued operations, net of tax	—			(6,705		)	(41,605		)
Net loss	$	(58,726	)	$	(132,322	)	$	(272,035	)
Weighted average shares outstanding
Basic and diluted	208,301,686			205,162,720			204,513,420
Loss per share:
Basic
Continuing operations	$	(0.28	)	$	(0.61	)	$	(1.13	)
Discontinued operations	$	—		$	(0.03	)	$	(0.20	)
Basic loss per share	$	(0.28	)	$	(0.64	)	$	(1.33	)
Diluted
Continuing operations	$	(0.28	)	$	(0.62	)	$	(1.13	)
Discontinued operations	$	—		$	(0.03	)	$	(0.20	)
Diluted loss per share	$	(0.28	)	$	(0.65	)	$	(1.33	)

See notes to condensed financial statements.

	Fiscal Years Ended January 31,
	2012			2011			2010
Net cash used in operating activities	$	(139,642	)	$	(97,062	)	$	(23,045	)
Cash flows from investing activities:
Proceeds from sales and maturities of investments	74,950			57,218			26,370
Proceeds from sale of Verint Systems, Inc. shares of common stock	—			76,475			—
Proceeds from sale of Ulticom, Inc.	—			13,211			—
Purchase of property and equipment	(4		)	(84		)	(891		)
Payments from subsidiaries, net	6,949			68,247			6,150
Net change in restricted cash	33,367			(7,223		)	(26,144		)
Dividend received from discontinued operations	—			42,399			135,323
Net cash provided by investing activities	115,262			250,243			140,808
Cash flows from financing activities:
Repurchase of convertible debt obligations	—			—			(417,282		)
Repurchase of common stock	(4,527		)	(1,906		)	(359		)
Proceeds from exercise of stock options	2,113			—			—
Net cash used in financing activities	(2,414		)	(1,906		)	(417,641		)
Net increase (decrease) in cash and cash equivalents	(26,794		)	151,275			(299,878		)
Cash and cash equivalents, beginning of year	197,840			46,565			346,443
Cash and cash equivalents, end of year	$	171,046		$	197,840		$	46,565

See notes to condensed financial statements.

BASIS OF PRESENTATION

Comverse Technology, Inc. (the “Parent Company”) is a holding company that conducts substantially all of its business operations through its subsidiaries. Under a parent-only presentation, the Parent Company’s investments in its consolidated subsidiaries are presented under the equity method of accounting. Losses of a subsidiary, if any, are applied against the investment in subsidiary balance and then to the balance of the advances to the subsidiary if the investment in subsidiary balance has been reduced to zero. Accordingly, non-trade advances to subsidiaries and investments in subsidiaries are presented together as “Advances to and investments in subsidiaries” on the condensed balance sheets. These parent-only condensed financial statements should be read in conjunction with Comverse Technology, Inc.’s audited consolidated financial statements included in Item 15 of this Annual Report.

Comverse Share Distribution

The Parent Company intends to distribute 100% of the shares of Comverse, Inc. to the Parent Company's shareholders on a pro rata basis (the "Comverse share distribution") . The Parent Company is currently exploring, and expects to finalize and announce, the structure that will result in the most efficient method of distribution. The Comverse share distribution is expected to occur in the second half of the fiscal year ending January 31, 2013. In addition, the Parent Company is exploring alternatives to eliminate its holding company structure either simultaneous with or shortly after the distribution of the Comverse, Inc. shares. The Comverse share distribution is subject to a number of conditions, including final approval of the transaction by the Parent Company's Board, filings with, and the completion of a review process by, the Securities and Exchange Commission (the "SEC"), the approval of the Parent Company shareholders and final approval of certain material agreements by the boards of each of the Parent Company and Comverse. The Comverse share distribution may also be conditioned upon receipt of a favorable ruling from the Internal Revenue Service regarding certain tax aspects of the distribution.

Upon completion of the proposed Comverse share distribution and prior to the effect of any transaction that would eliminate the Parent Company's holding company structure, Parent Company shareholders at the time of the distribution would continue to hold their equity in the Parent Company as well as own 100% of the equity of Comverse, Inc.

Verint Strategic Alternative Exploration

The Parent Company is exploring all options to maximize the value of its equity interests in Verint for the benefit of the shareholders of both the Parent Company and Verint. The ultimate execution of any alternative will take into account a number of considerations, including, without limitation, tax efficiency and, depending upon the circumstances, the separate recommendation of Verint's directors who are not directors or officers of the Parent Company.

Sale of Ulticom

On December 3, 2010, the Parent Company sold its subsidiary, Ulticom, Inc. to a third party (the “Ulticom Sale”) for an aggregate consideration of up to $17.2 million. As a result of the Ulticom Sale, the results of operations of Ulticom, including the gain on the Ulticom sale of $2.9 million, are reflected in discontinued operations, less applicable income taxes, as a separate component of net loss in the Parent Company’s statements of operations for the fiscal years ended January 31, 2011 and 2010, respectively.

Restrictions on Access to Subsidiary Cash

The Parent Company’s Verint subsidiary has long-term debt outstanding as of January 31, 2012 and 2011 under a credit agreement that contains certain restrictive covenants which, among other things, preclude Verint Systems from paying cash dividends and limit its ability to make asset distributions to its stockholders, including the Parent Company. As of January 31, 2012 and 2011, the Parent Company’s Comverse Ltd. subsidiary was required to maintain an aggregate of $28.0 million and $25.0 million, respectively, as compensating cash balances under the terms of lines of credit that Comverse Ltd. had with two banks, restricting Comverse Ltd.’s ability to use such funds. In addition, pursuant to its investment agreements, the Parent Company’s Starhome subsidiary is precluded from paying cash dividends to its shareholders without the approval of certain minority shareholders. As the restricted net assets represent a significant portion of the Company’s consolidated net assets, these condensed financial statements have been presented on a “parent-only” basis.

RESTRICTED CASH AND AUCTION RATE SECURITIES

As of January 31, 2011, restricted cash includes proceeds received from sales and redemptions of auction rate securities (“ARS”) (including interest thereon) that were restricted under the terms of the consolidated shareholder class action settlement agreement. In addition, as of January 31, 2011, all ARS were restricted pursuant to such settlement agreement. See Note 3, Investments, and Note 26, Commitments and Contingencies, of the consolidated financial statements for disclosures relating to restrictions on ARS and cash proceeds from the sale and redemption of ARS. As of January 31, 2011, $33.4 million of sales proceeds (including interest thereon) were classified in “Restricted cash.”

During the fourth quarter of the fiscal year ended January 31, 2012, the Parent Company paid all remaining amounts under the settlement agreement using restricted cash received from sales and redemptions of ARS and shares of its common stock and, accordingly, all ARS and remaining cash proceeds received from sales and redemptions of ARS became unrestricted. Accordingly, as of January 31, 2012, there was no restricted cash balance on the Parent Company's condensed balance sheet.

DEBT

As of January 31, 2012 and 2011, the Parent Company had $2.2 million and aggregate principal amount of outstanding convertible debt obligations (the “Convertible Debt Obligations”). During the fiscal year ended January 31, 2010, the Parent Company commenced a tender offer, in accordance with the terms of the indenture, pursuant to which the Parent Company purchased $417.3 million in aggregate principal amount of its Convertible Debt Obligations. Refer to Note 12, Debt, of the consolidated financial statements for a description of the significant provisions of the Convertible Debt Obligations.

COMMITMENTS AND CONTINGENCIES

The Parent Company is a party to various actions. For a more comprehensive discussion, see Note 26, Commitments and Contingencies, of the consolidated financial statements.

Shareholder Class and Derivative Actions

In December, 2009, the Parent Company entered into agreements to settle a shareholder class action and consolidated shareholder derivative actions for an aggregate amount of $174.4 million, including legal fees and expenses of the plaintiffs of $9.4 million, which has been accrued for during the fiscal year ended January 31, 2007. The agreement to settle the consolidated shareholder class action was amended on June 19, 2010. Pursuant to the amendment, CTI agreed to waive certain rights to terminate the settlement in exchange for a deferral of the timing of scheduled payments of the settlement consideration and the right to a credit (the “Opt-out Credit”) in respect of a portion of the settlement funds that would have been payable to a class member that elected not to participate in and be bound by the settlement. Under the settlement agreement of the consolidated shareholder class action, the Parent Company paid the plaintiff class $160.2 million, of which $82.5 million was paid through the issuance of 12,462,236 shares of Parent Company common stock.

Opt-Out Plaintiffs' Action

On December 19, 2011, the Parent Company and the Opt-out plaintiff executed a settlement agreement, pursuant to which the Parent Company paid the plaintiffs approximately $9.5 million on December 28, 2011. On January 3, 2012, the parties filed a notice of dismissal, and on January 4, 2012, the Court dismissed the action.

In connection with this matter, the Parent Company recorded a pre-tax charge of $4.9 million for the fiscal year ended January 31, 2012, representing the amount by which the settlement amount exceeded the Opt-out Credit and certain other credits under the settlement agreement of the consolidated shareholder class action.

SEC Civil Actions

On July 13, 2011, the Parent Company entered into an agreement in principle with the SEC's Division of Enforcement regarding the terms of a settlement of the Section 12(j) administrative proceeding, which terms were subsequently reflected in an Offer of Settlement made on July 26, 2011 and which the SEC accepted on September 8, 2011. Under the terms of the settlement, the SEC's Division of Enforcement agreed to recommend that the SEC resolve the Section 12(j) administrative proceeding against the Parent Company if the Parent Company filed its Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30, 2010, July 31, 2010 and October 31, 2010 by 5:30 p.m. EDT on September 9, 2011 (which reports were filed on July 28, 2011) and its Quarterly Report for the fiscal quarter ended July 31, 2011 on a timely basis (which report was filed timely on September 8, 2011). On September 16, 2011, the SEC ordered termination of the Section 12(j) administrative proceeding and entry of final judgment without the imposition of a remedy under such section. With the entry of final judgment, the Section 12(j) administrative proceeding has been resolved.

Investigation of Alleged Unlawful Payments

On April 7, 2011, the Parent Company entered into a non-prosecution agreement with the DOJ and the SEC submitted a settlement agreement with the Parent Company to the United States District Court for the Eastern District of New York for its approval, which was obtained on April 12, 2011. These agreements resolved allegations that the Parent Company and certain of its foreign subsidiaries violated the books and records and internal controls provisions of the U.S. Foreign Corrupt Practices Act (the "FCPA").

Under the non-prosecution agreement with the DOJ, the Parent Company paid a fine of $1.2 million to the DOJ and agreed to continue to implement improvements in its internal controls and anti-corruption practices and policies. Under its settlement agreement with the SEC, the Parent Company paid approximately $1.6 million in disgorgement and pre-judgment interest and is required under a conduct-based injunction to comply with the books and records and internal controls provisions of the FCPA. The Parent Company recorded charges associated with this matter during the fiscal year ended January 31, 2009.

SALE OF SHARES OF VERINT SYSTEMS’ COMMON STOCK

Effective July 15, 2010, the Parent Company made a demand pursuant to the Original Registration Rights Agreement to have up to 2.8 million shares of Verint Systems’ common stock registered in a registration statement on Form S-1. On January 14, 2011, CTI completed the sale of 2.3 million shares of Verint Systems’ common stock in a secondary public offering for aggregate proceeds net of underwriting discounts and commissions of $76.5 million. The sale of shares of Verint Systems’ common stock was accounted for as an equity transaction. As a result, for the fiscal year ended January 31, 2011 the Parent Company increased “Additional paid-in capital” by $52.2 million, increased “Accumulated other comprehensive income” by $2.6 million and reduced investments in subsidiaries by $4.5 million. See Note 25, Related Party Transactions, Sale of Shares of Verint Systems’ Common Stock, of the consolidated financial statements for a more detailed discussion.

PERPETUAL PREFERRED STOCK OF SUBSIDIARY

On May 25, 2007, the Parent Company entered into an agreement with its subsidiary, Verint Systems, to purchase an aggregate of 293,000 shares of Verint Systems’ Series A Convertible Perpetual Preferred Stock (the “preferred stock”) for an aggregate purchase price of $293.0 million. See Note 25, Related Party Transactions, Verint’s Series A Convertible Perpetual Preferred Stock, of the consolidated financial statements for a more comprehensive discussion, including the terms of the preferred stock.

ULTICOM’S SPECIAL CASH DIVIDENDS

In December 2010, Ulticom, Inc. paid a special cash dividend in the aggregate amount of $64.1 million to its shareholders of which the Parent Company received $42.4 million and the remaining amount was paid to Ulticom, Inc.’s minority shareholders. The special cash dividend was paid immediately prior to the Ulticom Sale.

In April 2009, Ulticom, Inc. paid a special cash dividend of $199.6 million to its shareholders, of which the Parent Company received $135.3 million and the remaining amount was paid to Ulticom, Inc.’s minority shareholders.

See Note 25, Related Party Transactions, Ulticom’s 2010 Special Cash Dividend and Ulticom’s 2009 Special Cash Dividend and Stock Option Modification, of the consolidated financial statements for further disclosure relating to Ulticom’s special cash dividends.

DISCONTINUED OPERATIONS

Ulticom, Inc. was a majority-owned publicly-traded subsidiary of the Parent Company prior to its sale on December 3, 2010. For a more comprehensive discussion of the Ulticom Sale, see Note 19, Discontinued Operations, of the consolidated financial statements.

The equity in losses of Ulticom, net of tax, and the gain on the sale of Ulticom, net of tax of $2.9 million, are reflected in discontinued operations, less applicable income taxes, as a separate component of net loss in the Parent Company’s statements of operations for the fiscal years ended January 31, 2011 and 2010, respectively.

The amounts included in discontinued operations were as follows:

	Fiscal Years Ended January 31,
	2011			2010
	(in thousands)
Equity in losses of discontinued operations, net of tax	$	(9,632	)	$	(41,605	)
Gain on sale of discontinued operation, net of tax	2,927			—
Loss from discontinued operation, net of tax	$	(6,705	)	$	(41,605	)