0000950123-11-045923.txt : 20110506 0000950123-11-045923.hdr.sgml : 20110506 20110505204121 ACCESSION NUMBER: 0000950123-11-045923 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20110331 FILED AS OF DATE: 20110506 DATE AS OF CHANGE: 20110505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BMC SOFTWARE INC CENTRAL INDEX KEY: 0000835729 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 742126120 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16393 FILM NUMBER: 11816457 BUSINESS ADDRESS: STREET 1: 2101 CITYWEST BLVD CITY: HOUSTON STATE: TX ZIP: 77042-2827 BUSINESS PHONE: 7139188800 MAIL ADDRESS: STREET 1: 2101 CITYWEST BLVD CITY: HOUSTON STATE: TX ZIP: 77042-2827 10-K 1 c15046e10vk.htm FORM 10-K Form 10-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(Mark One)
     
þ   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
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-16393
BMC Software, Inc.
(Exact name of registrant as specified in its charter)
 
     
Delaware   74-2126120
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
2101 CityWest Boulevard   77042-2827
Houston, Texas   (Zip Code)
(Address of principal executive offices)    
Registrant’s telephone number, including area code (713) 918-8800
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 $.01 per share   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. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (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 Act). Yes o No þ
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $7,189,940,000 at September 30, 2010 based upon the closing sale price of the Common Stock on the NASDAQ Stock Market reported on such date.
As of May 2, 2011, there were 176,858,000 outstanding shares of Common Stock, par value $.01, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s Proxy Statement relating to its 2011 Annual Stockholders Meeting, to be filed subsequently, are incorporated by reference into Part III.
 
 

 

 


 

TABLE OF CONTENTS
         
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PART I
 
       
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PART II
 
       
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PART III
 
       
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PART IV
 
       
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 Exhibit 21.1
 Exhibit 23.1
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT
This Annual Report on Form 10-K (Report) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are identified by the use of the words “believe,” “expect,” “anticipate,” “estimate,” “will,” “contemplate,” “would” and similar expressions that contemplate future events. Such forward-looking statements are based on management’s reasonable current assumptions and expectations. Numerous important factors, risks and uncertainties affect our operating results, including, without limitation, those contained in this Report, and could cause our actual results, levels of activity, performance or achievement to differ materially from the results expressed or implied by these or any other forward-looking statements made by us or on our behalf. There can be no assurance that future results will meet expectations. You should pay particular attention to the important risk factors and cautionary statements described in the section of this Report entitled Risk Factors. You should also carefully review the cautionary statements described in the other documents we file from time to time with the Securities and Exchange Commission (SEC), specifically our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. We undertake no obligation to update any forward-looking statements. Information contained on our website is not part of this Report.
BMC, BMC Software and the BMC Software logo are the exclusive properties of BMC Software, Inc., are registered with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other BMC trademarks, service marks, and logos may be registered or pending registration in the U.S. or in other countries. All other trademarks or registered trademarks are the property of their respective owners.
BladeLogic and the BladeLogic logo are the exclusive properties of BladeLogic, Inc. The BladeLogic trademark is registered with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other BladeLogic trademarks, service marks, and logos may be registered or pending registration in the U.S. or in other countries. All other trademarks or registered trademarks are the property of their respective owners.
ITIL® is a registered trademark, and a registered community trademark of the Office of Government Commerce (OGC), and is registered in the U.S. Patent and Trademark Office, and is used here by BMC Software, Inc., under license from and with the permission of OGC.

 

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IT Infrastructure Library® is a registered trademark of the Office of Government Commerce and is used here by BMC Software, Inc., under license from and with the permission of OGC.
DB2, IMS and IBM are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both.
Java is the trademark or registered trademark of Sun Microsystems, Inc. in the U.S. and other countries.

 

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PART I
ITEM 1.  
Business
Overview
BMC Software, Inc. (collectively, we, us, our, the Company or BMC) is one of the world’s largest software companies. We provide IT management solutions primarily for large enterprises. Our extensive portfolio of IT management software solutions simplifies and automates the management of IT processes, mainframe, distributed, virtualized and cloud computing environments, as well as applications and databases. We also provide our customers with maintenance and support services for our products and assist customers with software implementation, integration, IT process and organizational transformation, and education services. We were organized as a Texas corporation in 1980 and were reincorporated in Delaware in July 1988. Our principal corporate offices are located at 2101 CityWest Boulevard, Houston, Texas 77042-2827. Our main telephone number is (713) 918-8800, and our primary internet address is http://www.bmc.com. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings and all related amendments are available free of charge at http://investors.bmc.com. We post all of our SEC documents to our website as soon as reasonably practical after such material is electronically filed with, or furnished to, the SEC. Our corporate governance guidelines and the charters of the Board of Directors committees are also available at http://www.bmc.com, as is our Professional Conduct Policy and Code of Ethics, as amended from time to time. Printed copies of each of these documents are available to stockholders upon request by contacting our investor relations department at (800) 841-2031 ext. 4525 or via email at investor@bmc.com.
Strategy
Our strategy is to be the leader in providing a unified IT management platform that simplifies and automates complex IT functions and processes in order to improve IT efficiency and value. We believe “Business runs on IT” and that by helping our customers run their IT organizations smarter, faster and stronger, their businesses will thrive. Our solutions and services help businesses address key initiatives, such as cloud computing, IT service management, proactive operations, data center automation, mainframe cost optimization and IT costs.
Responding to the needs of IT executives to optimize costs, increase business competitive advantage, improve service quality, manage risk and provide greater transparency, we provide solutions that enable Business Service Management (BSM), which we define as a unified platform for simplifying and automating the management of IT. Our BSM approach resonates powerfully with customers and results in substantial savings and value created through improved IT operational efficiency, consistent service delivery and the ability to rapidly address changing business needs. We have developed our BSM platform so that it can be adopted both universally and incrementally. To accomplish this, we provide integrated products and solutions (see the Solutions and Products section below). Our current BSM offering represents continued innovation from internal development, strategic acquisitions and by partnering with leading technology providers. We are committed to further enhancing our BSM platform in order to help our customers better manage IT complexity across diverse infrastructures and processes. We are also committed to providing customer choice by delivering our products and solutions through a combination of on-premise delivery, managed services and software-as-a-service (SaaS).
Helping to enable our unified BSM platform, we provide a family of shared foundational technologies called BMC Atrium that unifies information and processes from disparate management tools and also discovers, models, visualizes and assigns priorities to business services. One of the key components of BMC Atrium is the BMC Atrium Configuration Management Database (CMDB). The BMC Atrium CMDB is an open-architected, federated, intelligent data repository that simplifies the management of IT configurations and delivers accurate visibility into the dependencies between business services, users and IT infrastructure across cloud, virtual, mainframe and distributed environments. Along with other components of BMC Atrium, the BMC Atrium CMDB enables a Configuration Management System that ensures a consistent approach to managing IT processes such as incident management, problem management, change management, configuration management, asset management and event management.
To help clients, we offer education and consulting services that include both industry best practices and our own best practices and deliver them through a comprehensive methodology that is focused on customer value realization. We provide services that assist our customers in defining, implementing and operating our BSM solutions, including technology, process and organizational assessment, design and transformation services. Our BSM solutions support best practices, including those found in IT Infrastructure Library (ITIL), the most widely adopted IT-related best practices framework, and we have broadly trained our customer-facing organizations on ITIL best practices and provide ITIL education and certification to customers and partners through our professional services organization.

 

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As part of our BSM strategy, we also differentiate our approach by supporting mainframe environments. A substantial portion of the world’s most valuable computer data resides on mainframes. Our ability to integrate the mainframe into BSM offers significant benefits to financial services, telecommunications, transportation and other industries. Mainframes remain important to our larger enterprise customers as they continue to be one of the most cost effective and scalable platforms for IT service delivery.
In recent years, we have been expanding our offerings to provide Dynamic BSM solutions that enable the on-demand provisioning and management of services using new computing platforms, such as cloud computing, in addition to traditional IT environments. In addition to our own efforts, we are working closely with other leading technology providers in the hardware, networking, managed services and SaaS markets to enable the industry’s most comprehensive and robust Dynamic BSM platform.
Solutions and Products
We are organized into two software business segments: Enterprise Service Management (ESM) and Mainframe Service Management (MSM). This structure provides the focus required to align our resources and product development efforts to meet the demands of the markets we serve. Our leadership reviews the results of our business using these segments. For financial information related to these two segments, see Note 13 to the accompanying consolidated financial statements.
Our ESM segment consists of our solutions and related professional services in the following IT management areas:
 
Service Assurance — Our service assurance offerings manage IT functions and processes such as availability and performance management, event management, service impact management and capacity management and provide proactive analytics to help IT identify issues before end users are affected by performance problems. Our solutions prioritize IT events based on business impact and help determine and initiate corrective actions to quickly restore services to the business. We were one of the first IT management leaders to bring business relevance to IT component events in this important market segment for our business. The capacity optimization solution from our October 2010 acquisition of the software business of Neptuny S.r.l. is included in this solution area.
 
 
Service Automation — Our service automation offerings manage IT functions and processes such as provisioning, configuration change and compliance automation for servers, networks, applications and databases. Our solutions in this area help IT manage increasing complexity to support rapidly changing business needs, and include our Cloud Lifecycle Management solutions which are generating significant interest and early adoption among enterprises, service providers and public sector agencies. This market segment continues to attract significant customer interest due to the pervasive need for organizations to automate manually-intensive and time-consuming processes in order to achieve greater operational efficiency. The database configuration change and compliance automation solution from our November 2010 acquisition of GridApp Systems, Inc. (GridApp Systems) is included in this solution area.
 
 
Service Support — Our service support offerings manage IT functions and processes such as the service desk, incident management, service request management, problem management, asset management, service level management, change and release management and identity management. These solutions, built around the industry leading service desk, manage and improve IT service as perceived by business end users. They drive improvements in efficiency through application of best practices (such as ITIL) and drive down costs by helping end users solve their own problems, reduce the number of calls to the service desk and track the status of IT requests. We also offer solutions to manage various business functions in IT such as financial planning and budgeting, demand and resource management, supplier management, service cost management and IT controls. In fiscal 2011, we broadened our solutions in this area by offering our industry-leading BMC Remedy IT Service Management Suite via a SaaS model and further expanding our strategic alliance with Salesforce.com by offering an expanded SaaS solution called RemedyForce.
 
 
BMC Atrium — Our BMC Atrium offering provides a family of shared foundational technologies that unifies information and processes from disparate management tools and also discovers, models, visualizes and assigns priorities to business services. It includes our BMC Atrium CMDB, a widely implemented and industry-leading CMDB. Our BMC Atrium solution also includes comprehensive discovery and dependency mapping, process and task workflow orchestration, service level management, dashboard and analytic reporting, and service catalog products and capabilities.
Our professional services organization consists of a worldwide team of experienced software and education consultants who provide implementation, integration, IT process, organizational design, re-engineering and education services related to our products and the IT functions and processes they help to manage. By easing the implementation of our products, these services help our customers realize value more quickly and sustainably. By improving the overall customer experience, we believe that these services also drive future software license transactions with customers.

 

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Our MSM segment addresses IT requirements for mainframe data and performance management, middleware management and enterprise workload automation. These solutions, tightly integrated with the BMC Atrium CMDB, help our customers consistently meet service objectives while lowering the cost of mainframe, middleware and workload operations by: (i) increasing the availability of their critical business applications; (ii) reducing their hardware resource requirements; (iii) managing ever increasing data, transaction and task volumes with the same or reduced staff; and (iv) mitigating the risk and cost associated with regulatory compliance issues facing mainframe, middleware and workload automation organizations. Our MSM solutions are organized into two areas:
 
Data and Performance Management — Our mainframe data and performance management solutions ensure the availability and reliability of the business critical data, applications and systems that support the bottom line for many of the largest companies worldwide. These solutions help customers optimize the performance, facilitate the administration and enhance the recoverability of the corporate data housed in IBM’s DB2® and IMS™ databases. Our MainView product line delivers business-centric systems management, intelligent optimization and capacity management for an extensive array of mainframe infrastructure components. Our MainView AutoOperator products enable automation of comprehensive monitoring, problem diagnosis and resolution through real-time execution of pre-defined tasks. The MainView architecture facilitates seamless integration of the entire product line for faster problem resolution. BMC Middleware Management helps our customers improve the management of the application middleware layer and related application transactions. Tight integration of these offerings with BMC Atrium ensures the mainframe is managed in accordance with business service priorities.
 
 
Enterprise Workload Automation — Our Control-M product line provides a comprehensive set of features which enable data centers to automate their increasingly complex workloads and critical business processes. Our solution orchestrates and optimizes dispersed and disparate management processes across multiple locations, platforms and applications, and provides the facilities to centrally monitor and manage workload elements required to support the batch portion of the organization’s business services across physical, virtual and cloud computing environments. Our Control-M Output Management solution automates the difficult task of managing the life cycle of mainframe output reports with facilities which include report decollation, distribution, bundling, viewing, archival and deletion. In fiscal 2011, we expanded our workload automation reach through BMC Control-M Cloud Extensions which extended dynamic workload management with the power and flexibility of virtualization and cloud computing. Additionally, we released BMC Control-M Self Service to improve IT and business productivity by reducing IT service requests and empowering IT and business users with direct visibility and access to their workload automation services through a service view and a catalog of orderable workload automation services.
Sales and Marketing
We market and sell our products in most major world markets directly through our sales force and indirectly through channel partners including: distributors, resellers, original equipment manufacturers (OEMs), alliance partners and systems integrators. Our sales force includes an inside sales division which provides a channel for additional sales to existing customers and the expansion of our customer base.
International Operations
We are a global company that conducts sales, sales support, professional services, product development and support, marketing and product distribution services from numerous international offices. In addition to our sales offices located in major economic centers around the world, we also conduct development activities in the United States, India and Israel, as well as in small offices in other locations. Our product manufacturing and distribution operations are based in Houston, Texas, and Dublin, Ireland. We plan to continue to look for opportunities to efficiently expand our operations in international locations that offer highly talented resources as a way to maximize our global competitiveness.
Software Licenses
We license our software under both perpetual and term license models for customer on-premise use. Under perpetual license arrangements, our customers receive the perpetual license right to use our software, and related maintenance and support services are generally purchased on an annual basis. Under term license arrangements, our customers receive license rights to use our software along with bundled maintenance and support services for the term of the contract. The majority of our contracts provide customers with the right to use one or more of our products up to a specific license capacity. Capacity can be measured in many ways, including mainframe computing capacity, number of servers, number of users or number of gigabytes, among others. Certain of our enterprise license agreements stipulate that customers can exceed pre-determined base capacity levels, in which case additional fees are specified in the license agreement. Such fees are typically paid on an annual basis in the form of an incremental “true-up” payment. In the absence of such an arrangement, customers are not entitled to exceed the capacity levels in the original license rights.

 

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For qualifying transactions we offer extended payment terms for our solutions under a financing program. We believe that by offering such financing we allow our customers to better manage their IT expenditures and cash flows. Our financing program is discussed in further detail below under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.
Our license revenue comprised 41.9%, 39.7% and 37.9% of our total revenue in fiscal 2011, 2010 and 2009, respectively. For a discussion of our revenue recognition policies and the impact of our licensing models on revenue, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Revenue Recognition and Note 1 to the accompanying consolidated financial statements.
Software-as-a-Service
We provide on-demand SaaS offerings within our ESM segment. These offerings, the first of which we introduced to the market in late fiscal 2010, provide management solutions through a hosted service rather than a traditional on-premise license model and allow our customers to obtain the benefits of these solutions with reduced infrastructure and setup requirements, leading to faster deployment and lower total cost of ownership. These offerings are sold as either annual or multi-year subscriptions with pricing generally based on the number of users. We also offer customer on-boarding and other related services for these offerings. Through fiscal 2011, SaaS revenue has not been significant to our consolidated financial results.
Maintenance and Support Services
Maintenance and support enrollment entitles software license customers to technical support services, including telephone and internet support and problem resolution services, and the right to receive unspecified product upgrades, maintenance releases and patches released during the term of the support period on a when-and-if-available basis. Maintenance and support service fees are an important source of recurring revenue, and we invest significant resources in providing maintenance and support services. Revenue from maintenance and support services comprised 49.6%, 53.6% and 54.4% of our total revenue in fiscal 2011, 2010 and 2009, respectively.
Professional Services
Our professional services group consists of a worldwide team of experienced software and education consultants who provide implementation, integration, IT process, organizational design, re-engineering and education services related to our products. By easing the implementation of our products, these services help our customers accelerate the time to value. By improving the overall customer experience, we believe that these services also drive future software license transactions with customers. Revenue from professional services comprised 8.6%, 6.8% and 7.7% of our total revenue in fiscal 2011, 2010 and 2009, respectively.
Research and Development
We conduct research and development activities in various locations throughout the world. During fiscal 2011, 2010 and 2009, we incurred research and development expenses of $176.5 million, $195.6 million and $222.0 million, respectively. These costs relate primarily to personnel and related costs incurred to conduct product development activities. Although we develop many of our products internally, we may acquire technology through business combinations or through licensing from third parties when appropriate. Our expenditures on research and development activities during the last three fiscal years are further discussed under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Research and Development Expenses.
Seasonality
We tend to experience a higher volume of transactions and associated revenue in the quarter ended December 31, which is our third fiscal quarter, and the quarter ended March 31, which is our fourth fiscal quarter, as a result of our customers’ spending patterns and our annual sales quota incentives. As a result of this seasonality for license transactions and timing of related payments, we tend to have greater operating cash flow in our fourth fiscal quarter.
Competition
The enterprise management software business is highly competitive. Both our ESM and MSM businesses compete against a number of competitors, including large vendors who compete with us at a strategic solution level and across multiple product lines as well as smaller, niche competitors who compete against individual products of ours. Our largest competitors are International Business Machines Corporation (IBM), CA, Inc. (CA) and Hewlett-Packard Company (HP). Although we believe we are uniquely positioned to offer BSM solutions to customers, several of our major competitors also market BSM-like solutions and we anticipate continued competition in the BSM marketplace. There are currently between 50 and 100 companies we consider to be directly competitive with one or more of our software solutions. Some of these companies have substantially larger operations than ours in the specific markets in which we compete. In addition, the software industry is experiencing continued consolidation which may change both the number of and specific companies we compete with.

 

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Customers
Our solutions are used by some of the largest, most demanding IT organizations in the world including approximately 15,000 companies and 90% of the Fortune 100. Our software products are generally used in a broad range of industries, businesses and applications. Our most significant customers include banks and financial service providers, government agencies and other service providers. Our remaining customer base includes manufacturers, telecommunication companies, educational institutions, retailers, distributors, hospitals and other industries, as well as channel partners including resellers, distributors and systems integrators. Our ten largest customers comprised 15% or less of our total revenue in each of fiscal 2011, 2010 and 2009. No single customer accounted for a material portion of our revenue during any of the past three fiscal years.
Intellectual Property
We primarily distribute our products in object code form and rely upon contract, trade secret, copyright and patent laws to protect our intellectual property. The license agreements under which customers use our products restrict the customer’s use to its own operations and prohibit disclosure to third parties. We distribute certain of our products on a shrink-wrap basis and the enforceability of such restrictions in a shrink-wrap license is unproven in certain jurisdictions. Also, notwithstanding these restrictions, it is possible for other persons to obtain copies of our products in object code form. We expect that obtaining such copies would have limited value without access to the product’s source code, which we keep highly confidential. In addition, for certain of our solutions, we employ protective measures such as CPU-dependent passwords, expiring passwords and time-based software trials.
Employees
At March 31, 2011, we had approximately 6,200 full-time employees. We expect that our continued success will depend in part on our ability to attract and retain highly skilled personnel, including technical, sales and management resources.
ITEM 1A.  
Risk Factors
We operate in a dynamic environment that involves numerous risks and uncertainties. The following section describes some of the risks that may adversely affect our business, financial condition, operating results and cash flows; these are not necessarily listed in terms of their importance or level of risk.
Weakened economic conditions and uncertainty could adversely affect our operating results.
Our overall performance depends in part on worldwide economic conditions. As a result of the recent major global recession and government responses to such recession, the United States and other key international economies continue to experience significant uncertainty, stock market volatility, tightened credit markets, significant unemployment, volatility in commodity prices and concerns about inflation. The severity or length of time these economic and financial market conditions may persist is unknown, and the rate and pace of recovery in individual economies is also uncertain. During challenging and uncertain economic times and in tight credit markets, many customers may delay or reduce technology purchases. Contract negotiations may become more protracted or difficult if customers institute additional internal approvals for software purchases or require more negotiation of contract terms and conditions. These economic conditions could result in reductions in sales of our products, longer sales cycles, difficulties in collection of accounts receivable or delayed payments, slower adoption of new technologies and increased price competition. In addition, continued deterioration of the global credit markets could adversely impact our ability to complete sales of our solutions and services, including maintenance and support renewals, or the value of our financial assets. Any of these events would likely harm our business, financial condition, operating results and cash flows.
We may announce lower than expected revenue, bookings, earnings or operating cash flows.
Our ability to accurately and consistently predict revenue, bookings, earnings and operating cash flows within narrow ranges is weakened by two principal factors:
   
first, a significant portion of our transactions close during the final days of each quarter; this pattern is evident across product lines and among all sales channels; and
   
second, even after contracts have been executed, extensive analysis is required before the timing of revenue recognition can be reliably determined; this timing reflects both the complexity of the revenue recognition rules applicable to software and the effect that the various license types and other terms and conditions can have when these rules are applied.

 

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Numerous other factors, some listed below, also have potential to adversely affect our financial results:
   
customers may defer or limit purchases as a result of reduced information technology budgets or reduced data processing capacity demand;
   
customers may require additional levels of internal approval prior to finalizing software purchases or renewals, which could lengthen the sales cycle and delay bookings and the resultant cash flows;
   
we may lose customers to our competitors or due to customer consolidation;
   
we may be required to defer more license revenue than we anticipate if our mix of complex transactions or contracts with terms and conditions requiring deferral of license revenue is greater than we plan for;
   
we may be unable to adapt our solutions to customers’ needs in a market space defined by constant technological change;
   
we may be unable to satisfy increased customer demands for our technical support services which may adversely affect our relationships with our customers;
   
the timing of orders and delivery of products to our customers and channel partners is uncertain;
   
we may experience losses on investments, foreign currency exchange contracts or other losses from financial instruments we hold that are exposed to market losses;
   
we may experience unexpected changes or significant fluctuations in foreign currency exchange rates;
   
tax rates in jurisdictions in which we operate may change;
   
we may experience higher than expected operating expenses;
   
weighted average shares outstanding may increase unexpectedly due to much higher than expected exercises of stock options or a sudden and significant increase in our stock price causing our fully diluted weighted average shares outstanding to increase, either of which could cause reported earnings per share to decline;
   
we may be affected by the timing of large, multi-product transactions or become dependent upon such transactions;
   
our pricing and distribution terms and/or those of our competitors may change; and
   
our business may be adversely affected as a result of the threat of significant external events that increase global economic uncertainty.
Investors should not rely on the results of prior periods as an indication of our future performance. Our operating expense levels are based, in significant part, on our expectations of future revenue. If we have a shortfall in revenue in any given quarter, we will not be able to proportionally reduce our operating expenses for that quarter in response to such a shortfall. Therefore, any significant shortfall in revenue will likely have an immediate adverse effect on our operating results for that quarter and could cause our stock price to decline. In addition, our ability to maintain or expand our operating margins may be limited given economic and competitive conditions, and we therefore could be reliant upon our ability to continually identify and implement operational improvements in order to maintain or reduce expense levels. There can be no assurance that we will be able to maintain or expand our current operating margins in the future.

 

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Our cloud offerings bring new business and operational risks.
We have introduced multiple new products and technology initiatives to provide systems management solutions in the emerging area of cloud computing. We include in this category our SaaS offerings. Our SaaS offerings provide our customers with existing and new software management through a hosted service as opposed to traditional software deployments. There can be no assurance that SaaS revenue will be significant in the future despite our levels of investment. There is a risk that our SaaS offerings may reduce demand for licenses and maintenance of our traditional software products which could impact our revenue and/or operating margins. There is also a risk that our internal development and customer support teams could find it difficult or costly to support both traditional software installed by customers and software delivered as a service. To the extent that our new SaaS offerings are defective or there are disruptions to our services, demand for our SaaS offerings could diminish and we could be subject to substantial liability. In addition, interruptions or delays in service from our third party service delivery hosts could impair the delivery of our services and harm our business. If we or our third party service delivery hosts experience security breaches and unauthorized access is obtained to a customer’s data or our data, our services may be perceived as not being secure, customers may curtail or stop using our services and we may incur significant legal and financial exposure and liabilities.
Our success in the emerging area of cloud computing depends on organizations and customers perceiving technological and operational benefits and cost savings associated with the increasing adoption of virtual infrastructure solutions for on-premise data centers as well as for cloud computing and end-user computing. Concerns about security, privacy, availability, data integrity, retention and ownership may negatively impact the rate of adoption of cloud computing. Cloud computing environments are complex and the deployment of our systems management solutions in the cloud may require additional professional services and implementation services for which we may not have the ability to provide at an appropriate margin. In the cloud, our products are dependent upon third party hardware, software and cloud hosting vendors, all of which must interoperate for end users to achieve their computing goals. Since the cloud computing market is in the early stages of development, we expect other companies to enter this market and to introduce their own initiatives that may compete with, or not be compatible with, our cloud solutions. Additionally, operating margins on our new initiatives may be lower than those we have achieved in our more mature product markets, and our new initiatives may not generate sufficient revenue to recoup our investments in them. If any of these events were to occur, it could adversely affect our business, results of operations and financial condition.
We may have difficulty achieving our cash flow from operations goals.
Our quarterly cash flow from operations is and has been volatile. If our cash generated from operations in some future period is materially less than the market expects, our stock price could decline. Factors that could adversely affect our cash flow from operations in the future include: lengthening sales cycles; a reduction in the size of transactions; the timing of transaction completion, billings and associated cash collections within a particular period; longer customer payment terms; an increase in late payments by customers; an increase in uncollectible accounts receivable; increased expenses; reduced net earnings; a significant shift from multi-year committed contracts to short-term contracts; a reduced ability to transfer finance receivables to third parties; an increase in contracts where internal costs such as sales commissions are paid upfront but payments from customers are collected over time; reduced renewal rates for maintenance; an increase in cash taxes; payments for legal actions, costs, fees or settlements; restructuring payments; the impact of changing foreign currency exchange rates; and reduced yields on investments and cash equivalents.
Maintenance revenue could decline.
Maintenance revenue is an important source of recurring revenue, and we invest significant resources to provide maintenance and support services to our customers. Maintenance fees generally increase as the licensed capacity increases; consequently, we generally receive higher absolute maintenance fees with new license and maintenance agreements and as existing customers license our products for additional processing capacity. Price competition on enterprise transactions can lead to increased discounting for higher levels of supplemental processing capacity; the maintenance fees on a per unit of capacity basis are typically reduced in enterprise license agreements. In addition, customers are generally entitled to reduced annual maintenance fees for entering into long-term maintenance contracts. Declines in our license bookings, increases in the proportion of long-term maintenance contracts and/or increased discounting could lead to declines in our maintenance revenue growth rates. Should customers migrate from systems and applications which our products support, utilize alternatives to our products, including maintenance-free solutions such as on demand, or become dissatisfied with our maintenance services, increased cancellations could lead to declines in our maintenance revenue. As maintenance revenue makes up a substantial portion of our total revenue, any decline in our maintenance revenue could have a material adverse effect on our business, financial condition, operating results and cash flows.

 

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Our professional services business is growing but could impact our overall margins.
Our professional services business has been growing as our overall bookings have grown and customers have contracted with us to provide implementation and other value-adding services. There are a number of risks associated with our professional services business which could impact our ability to deliver high quality services and which could impact our overall profit margin. These include the availability and our ability to engage quality labor resources, both as employees and as third party contractors, incremental costs associated with third party contractors, the complexity of services engagements, contractual risks, pricing and bidding risks and potential cost overruns. If we are not able to effectively manage the growth of our professional services business, it could have a material adverse effect on our reputation and our operating results, including our profit margin.
Competition from large, powerful multi-line and small, agile single-line competitors could have a negative impact on our business and financial results.
Some of our largest competitors, including IBM, CA and HP, have significant scale advantages. With scale comes a large installed base of customers in particular market niches, as well as the ability to develop and market software competitive with ours. Some of these competitors can also bundle hardware, software and services together, which is a disadvantage for us since we do not provide hardware and have fewer services offerings. Competitive products are also offered by numerous independent software companies that specialize in specific aspects of the highly fragmented software industry. Some, like Microsoft Corporation (Microsoft), Oracle Corporation (Oracle), and SAP AG (SAP) are the leading developers and vendors in their specialized markets. In addition, new companies enter the market on a frequent and regular basis, offering products that compete with some individual products offered by us. Market entrants utilizing alternative business models such as software-as-a-service, cloud computing or open source software also compete against us. As the use of open source software becomes more widespread, certain open source technology could become competitive with our proprietary technology, which could cause sales of our products to decline or force us to reduce the fees we charge for our products. Other data center vendors may expand into systems management to complement their existing offerings. Additionally, many customers historically have developed their own products that compete with those offered by us. Competition from any of these sources can result in price reductions or displacement of our products, which could have a material adverse effect on our business, financial condition, operating results and cash flows.
Industry consolidation could affect prices or demand for our products.
The IT industry and the market for our systems management products are very competitive due to a variety of factors. As the enterprise systems software market matures, it is consolidating. This trend could create opportunities for larger companies, such as IBM, HP, Microsoft, Oracle and other large enterprise software and hardware companies, to increase their market share through the acquisition of companies that dominate certain lucrative market niches or that have loyal installed customer bases. In doing so, these competitors may be able to reduce prices on software that competes with our solutions, in part by leveraging their larger economies of scale. Consolidation also may permit competitors to offer a broader suite of products and more comprehensive bundled solutions, including hardware, software and services. We expect this trend towards consolidation to continue as companies attempt to maintain or extend their market and competitive positions in the rapidly changing software industry and as companies are acquired or are unable to continue operations. This industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results due to lengthening of the customer evaluation process, increased pricing pressure and/or loss of business to these larger competitors, which may materially and adversely affect our business, financial condition, operating results and cash flows.
Our products must remain compatible with ever-changing operating and database environments.
IBM, HP, Microsoft and Oracle are by far the largest suppliers of systems and database software and, in some cases, are the manufacturers of the computer hardware systems used by most of our customers. Historically, operating and database system developers have modified or introduced new operating systems, database systems, systems software and computer hardware. Such new products could incorporate features which perform functions currently performed by our products or could require substantial modification of our products to maintain compatibility with these companies’ hardware or software. There can be no assurance that we will be able to adapt our products and our business to changes introduced by hardware manufacturers and operating and database system software developers. Operating and database system software developers have in the past provided us with early access to versions of their software, before making such software generally available, to have input into the functionality and to ensure that we can adapt our software to exploit new functionality in these systems. Some companies, however, may adopt more restrictive policies in the future or impose unfavorable terms and conditions for such access. These restrictions may 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. Failure to adapt our products in a timely manner to changes in operating and database systems, or any product quality and performance issues with the underlying databases or operating systems resulting in degradation of our products’ quality and performance, could influence customer decisions to forego the use of our products in favor of those with comparable functionality offered by competitors or within the operating system and database functionality itself which could result in a material adverse effect on our business, financial condition, operating results and cash flows.

 

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Future product development is dependent upon access to and reliability of third party software products and open source software.
Certain of our software products contain components developed and maintained by third party software vendors. We expect that we may have to incorporate software from third party vendors in our future products. We also incorporate open source software in certain of our software products. We may not be able to replace the functionality provided by the third party or open source software currently offered with our products if that software becomes obsolete, defective or incompatible with future versions of our products or is not adequately maintained or updated, or if our relationship with the third party vendor terminates. In addition, we must carefully monitor and manage our use of, and compliance with the licensing requirements of, open source software. Any significant interruption in the availability of these third party software products on commercially acceptable terms, defects in these products or our inability to comply with the licensing terms of either third party commercial software or open source software could delay development of future products or enhancement of future products and could have a material adverse effect on our business, financial condition, operating results and cash flows.
Future product development is dependent on adequate research and development resources.
In order to remain competitive, we must continue to develop new products and enhancements to our existing products. This is particularly true as we further expand our BSM capabilities. Maintaining adequate research and development resources to meet the demands of the market is essential. Failure to do so could present an advantage to our competitors. Furthermore, if we are unable to develop products internally due to certain constraints, such as high employee turnover, lack of management ability or a lack of other development resources, it may force us to expand into a certain market or strategy via an acquisition for which we could potentially pay too much or unsuccessfully integrate into our operations.
Discovery of errors in our software could adversely affect our earnings.
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 delivery. If new or existing customers have difficulty deploying our products or require significant amounts of customer support, our operating margins could be harmed. Moreover, we could face possible claims and higher development costs if our software contains undetected errors or if we fail to meet our customers’ expectations. With our BSM strategy, these risks increase because we are combining already complex products to create solutions that are even more complicated than the aggregation of their product components. Significant technical challenges could also arise with our products because our customers purchase 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; thus, 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; damage to our reputation; failure to achieve market acceptance; diversion of development resources; increased service and warranty costs; legal actions by customers against us which could, whether or not successful, increase costs and distract our management; and increased insurance costs.
We are subject to risks associated with our indirect distribution channels.
A portion of our revenue is derived from the sale of our products and services through indirect distribution channels such as resellers, systems integrators and strategic partners. In addition, we maintain strategic agreements with hardware vendors permitting them to sell our software solutions as part of their hardware systems. Conducting business through indirect distribution channels presents a number of risks, including:
   
our indirect channel partners typically can cease marketing our products and services with limited or no notice and with little or no penalty;

 

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we may not be able to replace existing or recruit additional indirect channel partners if we lose any of our existing ones;
   
our existing indirect channel partners may not be able to effectively sell new products and services that we may introduce;
   
we do not have direct control over the business practices, compliance programs and processes or risk management policies adopted by our indirect channel partners and they may engage in inappropriate practices without our knowledge which could result in penalties and/or reputational damage to us;
   
our indirect channel partners may not be able to deliver the same quality or standard of services that we do which may require us to engage with their customers at a direct cost to us to protect our product and services standards and reputation;
   
our indirect channel partners may also offer competitive products and services through acquisition or internal development and as such, may not give priority to the marketing of our products and services as compared to our competitors’ products;
   
we may face conflicts between the activities of our indirect channels and our direct sales and marketing activities;
   
our indirect channel partners may experience financial difficulties that may impact their ability to market our products and may lead to delays, or even default, in their payment obligations to us; and
   
we also depend on our indirect channel partners for accurate and timely reporting of our channel sales; any disruption, delay or under-reporting by our indirect channel partners could have an adverse effect on our bookings, revenues and cash flows.
Changes to our sales organization can be disruptive and may negatively impact our results of operations.
From time to time, we make significant changes in the organizational structure and compensation plans of our sales organizations. To the extent that we experience turnover within our direct sales force or sales management, there is a risk that the productivity of our sales force would be negatively impacted which could lead to revenue declines. Turnover within our sales force can require significant severance expense and cause disruption in sales cycles leading to delay or loss of business. In addition, it can take time to implement new sales management plans and to effectively recruit and train new sales representatives. We review and modify our compensation plans for the sales organization periodically. As in most years, we have made changes for fiscal 2012 that are intended to align with our business objectives. Changes to our sales compensation plans could make it difficult for us to attract and retain top sales talent.
We are subject to risks related to business combinations.
As part of our overall strategy, we have acquired or invested in, and likely will continue to acquire or invest in, complementary companies, products and technologies. Risks commonly encountered in such transactions include:
   
we may not retain and integrate key technical, sales and managerial personnel;
   
we may not assimilate the personnel, culture and operations of the combined companies, including back-office functions and systems, such as accounting, human resources and others, into our own back-office functions and systems;
   
we may not be able to integrate the acquired technologies or products with our current products and technologies;
   
our ongoing business could be disrupted, including management being distracted from other objectives, opportunities and risks;
   
we may not maximize our financial and strategic position through the successful integration of acquired businesses;
   
our policies, procedures and controls may not be applied to the acquired entity in a timely manner following the acquisition;
   
relationships with the acquired entity’s customers, partners or vendors might degrade, creating challenges for us to meet the objectives of the acquisition;

 

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our pre-acquisition due diligence may fail to identify technology issues, such as problems with software code, architecture or functionality, intellectual property ownership issues, employment or management issues, customer or partner issues, errors or irregularities in the accounting or financial reporting of the target, unknown liabilities of the target, legal contingencies, compliance failures or other issues;
   
revenue from acquired companies, products and technologies may not meet our expectations;
   
our use of cash to pay for acquisitions may limit other potential uses of our cash, including stock repurchases; similarly, existing stockholders could be diluted and earnings per share may decrease if we were to issue a significant amount of equity securities as full or partial consideration in future acquisitions; and
   
our chosen strategy leading to the acquisition may not be the appropriate strategy or our resources may be better utilized developing technology via internal product development.
In order for us to maximize the return on our investments in acquired companies, the products of these entities must be integrated with our existing products and strategies. These integrations can be difficult and unpredictable, especially given the complexity of software and that acquired technology is typically developed independently and may not have been designed to integrate with our products. The difficulties are compounded when the products involved are well-established because compatibility with the existing base of installed products must be preserved. Successful integration also requires coordination of different development and engineering teams. This too can be difficult and unpredictable because of possible cultural conflicts and different opinions on technical decisions and product roadmaps. There can be no assurance that we will be successful in our product integration efforts or that we will realize the expected benefits.
Changes in tax law, changes in our effective tax rate or exposure to additional income tax liabilities could affect our profitability and financial condition.
We carry out our business operations through entities in the United States and multiple foreign jurisdictions. As such, we are required to file corporate income tax returns that are subject to United States, state and foreign tax laws. The United States, state and foreign tax liabilities are determined, in part, by the amount of operating profit generated in these different taxing jurisdictions. Our effective tax rate, earnings and operating cash flows could be adversely affected by changes in the mix of operating profits generated in countries with higher statutory tax rates as well as by the positioning of our cash balances globally. Our effective tax rate is also impacted by the portion of our foreign earnings in jurisdictions having different corporate tax rates than the United States when we deem such earnings to be indefinitely reinvested in such jurisdictions. If we were to determine that these foreign earnings were not indefinitely reinvested, our effective tax rate and earnings could be adversely impacted. Similarly, if statutory tax rates or tax bases were to increase or if changes in tax laws, regulations or interpretations were made that impact us directly, our effective tax rate, earnings and operating cash flows could be adversely impacted. We are also required to evaluate the realizability of our deferred tax assets. This evaluation requires that our management assess the positive and negative evidence regarding sources of future taxable income. If management’s assessment regarding the realizability of our deferred tax assets changes, we will be required to increase our valuation allowance, which will negatively impact our effective tax rate and earnings. We are also subject to routine corporate income tax audits in multiple jurisdictions. Our provision for income taxes includes amounts intended to satisfy income tax assessments that may result from the examination of our corporate tax returns that have been filed in these jurisdictions. The amounts ultimately paid upon resolution of these examinations could be materially different from the amounts included in the provision for income taxes and result in additional tax expense and operating cash outflows.
We must protect our intellectual property rights.
We rely on a combination of copyrights, patents, trademarks, trade secrets, confidentiality procedures and contractual procedures to protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, it may be possible for unauthorized third parties to misappropriate, copy or pirate certain portions of our products or to reverse engineer or obtain and use technology or other information that we regard as proprietary. There can also be no assurance that our intellectual property rights would survive a legal challenge as to their validity or provide significant protection for us, and any such legal actions could become costly. In addition, the laws or practices of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. Accordingly, there can be no assurance that we will be able to protect our proprietary technology against unauthorized third party copying or use, which could adversely affect our competitive position and revenue.

 

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Third parties may claim that our software products or services infringe on their intellectual property rights, exposing us to litigation that, regardless of merit, may be costly to defend.
Our success and ability to compete are also dependent upon our ability to operate without infringing upon the proprietary rights of others. Third parties may claim that our current or future products or services infringe upon their intellectual property rights. Any such claim, with or without merit, could have a significant effect on our business and financial results. Any future third party claim could be time consuming, divert management’s attention from our business operations and result in substantial litigation costs, including any monetary damages and customer indemnification obligations, which may result from such claims. In addition, parties making these claims may be able to obtain injunctive or other equitable relief affecting our ability to license the products that incorporate the challenged intellectual property. As a result of such claims, we may be required to obtain licenses from third parties, develop alternative technology or redesign our products. We cannot be sure that such licenses would be available on terms acceptable to us, if at all. If a successful claim is made against us and we are unable to develop or license alternative technology, our business, financial condition, operating results and cash flows could be materially adversely affected.
We are subject to risks related to global operations.
We are a global company that conducts sales, sales support, professional services, product development and support, marketing and product distribution services from numerous offices throughout the world. We are subject to a variety of risks and challenges in managing an organization operating in various countries, including:
   
difficulties in staffing and managing international operations, including compliance with local labor and employment laws;
   
non-compliance with our professional conduct policy and code of ethics or other corporate policies;
   
longer payment cycles;
   
increased financial accounting and reporting burdens and complexities;
   
adverse tax consequences;
   
adverse impact of inflation;
   
changes in foreign currency exchange rates;
   
impact from volatile or sluggish local economies or global macroeconomic conditions;
   
loss of proprietary information, including intellectual property, due to piracy, misappropriation or weaker laws regarding intellectual property protection;
   
the need to localize our products;
   
lack of appropriate local infrastructure to carry out operations;
   
political unrest or terrorism, particularly in areas in which we have employees and facilities;
   
potential vulnerability to computer system, internet or other systemic attacks, such as denial of service, viruses or other malware which may be caused by criminals, terrorists or other sophisticated organizations;
   
compliance with a wide variety of complex laws, regulations and treaties including unexpected changes in (or new) legislative or regulatory requirements, early termination of contracts with government agencies, audits, investigations, sanctions or penalties;
   
licenses, tariffs and other trade barriers; and
   
natural disaster, disease or other extraordinary events impacting business continuity.

 

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U.S. and international laws and regulations that apply to our global operations are complex and increase our cost of doing business. U.S. laws and regulations applicable to our international operations include the Foreign Corrupt Practices Act and export control laws. International laws and regulations include local laws which also prohibit bribery (including the anticipated UK Bribery Act), including commercial bribery, and corrupt payments to governmental officials, data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions and export requirements. We have adopted and implemented policies and procedures designed to promote compliance with U.S. laws and the laws of the jurisdictions in which we operate. Violations of these laws and regulations could result in criminal or civil fines against us, our officers or our employees; restrictions on the conduct of our business; harm to our brand or reputation; and delays in potential acquisitions. Such violations could result in penalties and other restrictions that may, under certain circumstances, materially and adversely impact our operating results and financial condition.
The unique risks of operating in a particular country may require us to adopt a different business approach or strategy in that particular country which could increase our cost of doing business or limit the type of business activities we can perform in such country. In addition, if we suffer a business disruption due to any of the risks listed above and do not have in place or are not able to implement adequate response plans, our ability to support customers and maintain normal business operations for a significant length of time could be hindered such that our competitive position could be significantly impacted. Furthermore, our financial condition could be adversely impacted if our costs to recover escalate due to such recovery occurring over a protracted period.
We maintain a significant presence in India, Israel and other emerging market countries, conducting substantial software development and support, marketing operations, IT operations and certain financial operations in those locations. Accordingly, we are directly affected by economic, political, physical and electrical infrastructure and military conditions in these countries. Any major hostilities or the interruption or curtailment of trade between these countries and their present trading partners could materially adversely affect our business, financial condition, operating results and cash flows. We maintain contingency and business continuity plans for all significant locations, and to date, various regional conflicts or other local economic or political issues have not caused any major adverse impact on our operations in these countries. Should we be unable to conduct operations in these regions in the future, and our contingency and business continuity plans are unsuccessful, our business could be adversely affected. Furthermore, as the software and technology labor market in these countries has developed at a rapid pace, with many multi-national companies competing for talent, there is a risk that wage and attrition rates will rise faster than we have anticipated which could lead to operational issues.
We face exposure to foreign currency exchange rates.
We conduct significant transactions, including intercompany transactions, in currencies other than the United States dollar or the functional operating currency of the transactional entities, and our global subsidiaries maintain significant net assets that are denominated in currencies other than the functional operating currencies of these entities. Accordingly, changes in the value of foreign currencies relative to the United States dollar can significantly affect our revenues and operating results due to transactional and translational remeasurement that is reflected in our earnings. While we maintain a hedging program to hedge certain transactional exposures in foreign currencies in an attempt to mitigate foreign currency exchange rate risks, this program may not fully mitigate all such risk. We may also experience foreign currency exchange rate gains and losses where it is not cost effective to hedge foreign currencies in part or in full. Additionally, our efforts under this program may not be successful if we were to fail to properly detect or manage foreign currency exchange rate exposures, which could also adversely impact our operating results.
We may lose key personnel, may not be able to hire enough qualified personnel or may fail to integrate replacement personnel.
Much of our future success depends on the continued service and availability of skilled personnel, including sales, technical and management resources and the availability of skilled contract labor. Experienced personnel in the information technology industry are in high demand and competition for their talents is intense. Changing demographics and labor work force trends may result in a loss of knowledge and skills as experienced workers retire. Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. In addition, acquisitions could cause us to lose key personnel of the acquired companies or our personnel. With rare exceptions, we do not have long-term employment agreements with our employees. Further, certain of our key personnel receive a total compensation package that includes equity awards. New regulations, volatility in the stock market and other factors could diminish our use, and/or the value, of our equity awards, putting us at a competitive disadvantage or forcing us to use more cash compensation.
In addition, we continually focus on improving our cost structure. We have been hiring personnel in countries where advanced technical expertise is available at lower costs and we frequently utilize contract labor for short-term needs. When we make adjustments to our workforce, we may incur expenses associated with workforce reductions that delay the benefit of a more efficient workforce structure. We may also experience increased competition for employees in these countries as the trend toward globalization continues which may affect our employee retention efforts, increase our dependence on contract labor and/or increase our expenses in an effort to offer a competitive compensation program for full-time employees.

 

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We have also undertaken restructuring actions over the past several years to improve our cost structure involving significant reductions in our workforce, relocation of job functions to overseas locations and changes to our organizational structure. We will continue to make organizational changes aimed at improving our operating margins and driving operating efficiencies. Some of these changes may result in future workforce reductions or rebalancing actions. These efforts place a strain on our management, administrative, technical, operational and financial infrastructure.
If we fail to manage these changes effectively, it could adversely affect our ability to manage our business and our operating results.
Our business and products are dependent on the use of IT systems.
Our IT systems and related software applications are integral to our business. We rely on controls and systems to ensure data integrity of critical business information. Lack of data integrity could create inaccuracies and hinder our ability to perform meaningful business analysis and make informed business decisions. Computer programmers and hackers may be able to penetrate our network security and misappropriate, copy or pirate our confidential information or that of third parties, create system disruptions or cause interruptions or shutdowns of our internal systems and services. A number of websites have been subject to denial of service attacks, where a website is bombarded with information requests eventually causing the website to overload, resulting in a delay or disruption of service. Also, there is a growing trend of advanced persistent threats being launched by organized and coordinated groups against corporate networks to breach security for malicious purposes. If successful, any of these events could damage our computer systems or those of our customers and could disrupt or prevent us from providing timely maintenance and support for our products. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. The costs to us to eliminate or alleviate security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and the efforts to address these problems could result in interruptions, delays, cessation of service and loss of existing or potential customers and may impede our sales, manufacturing, distribution and other critical functions.
In the course of our regular business operations and providing maintenance support services to our customers, we process and transmit proprietary information and sensitive or confidential data, including personal information of employees, customers and others. Breaches in security could expose us, our customers or the individuals affected to a risk of loss or misuse of this information, resulting in potential regulatory actions, litigation and potential liability for us, as well as the loss of existing or potential customers and damage to our brand and reputation.
Despite network security, disaster recovery and systems management measures in place, we may encounter unexpected general systems outages or failures that may affect our ability to conduct research and development, provide maintenance and support of our products, manage our contractual arrangements, accurately and efficiently maintain our books and records, record our transactions, provide critical information to our management and prepare our financial statements. Additionally, these unexpected systems outages or failures may require additional personnel and financial resources, disrupt our business or cause delays in the reporting of our financial results. We may also be required to modify, enhance, upgrade or implement new systems, procedures and controls to reflect changes in our business or technological advancements, which could cause us to incur additional costs and require additional management attention, placing burdens on our internal resources. We also outsource certain IT-related functions to third parties that are responsible for maintaining their own network security, disaster recovery and systems management procedures. If we, or our third party IT vendors, fail to manage our IT systems and related software applications effectively, it could adversely affect our business operations, operating results and cash flows.
ITEM 1B.  
Unresolved Staff Comments
None.

 

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ITEM 2.  
Properties
Our headquarters are located in Houston, Texas, where we lease approximately 570,000 square feet of office space. We also maintain software development and sales organizations in various locations around the world where we lease the necessary facilities. A summary of our principal leased properties currently in use is as follows:
             
    Approximate      
Location   Area (sq. ft.)     Lease Expiration
Houston, Texas
    570,000     June 30, 2021
Pune, India
    162,000     September 30, 2014
Austin, Texas
    106,000     December 31, 2013
Tel Aviv, Israel
    69,000     July 10, 2012
San Jose, California
    62,000     May 31, 2019
Egham, United Kingdom
    47,000     April 26, 2019
Milan, Italy
    34,000     January 31, 2012
Lexington, Massachusetts
    32,000     February 28, 2013
Tel Hai, Israel
    30,000     October 31, 2014
McLean, Virginia
    28,000     November 30, 2013
ITEM 3.  
Legal Proceedings
In December 2010, a lawsuit was filed against a number of software companies, including us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United States District Court for the Eastern District of Texas, Tyler Division. The complaint seeks monetary damages in unspecified amounts and permanent injunction based upon claims for alleged patent infringement. While we intend to vigorously defend this matter, we cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter.
On July 15, 2004, we acquired Marimba, Inc., and Marimba is now a wholly-owned subsidiary of BMC. In 2001, a class action complaint alleging violations of the federal securities laws was filed in the United States District Court for the Southern District of New York (the Court) naming as defendants Marimba, certain of Marimba’s officers and directors, and certain underwriters of Marimba’s initial public offering. An amended complaint was filed on April 19, 2002. Marimba and certain of its officers and directors are named in the suit pursuant to Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 on the basis of an alleged failure to disclose the underwriters’ alleged compensation and manipulative practices in connection with Marimba’s initial public offering. Similar complaints have been filed against over 300 other issuers that have had initial public offerings since 1998. The individual officer and director defendants entered into tolling agreements and, pursuant to a Court Order dated October 9, 2002, were dismissed from the litigation without prejudice. On February 19, 2003, the Court granted a Motion to Dismiss the Rule 10b-5 claims against 116 defendants, including Marimba. On June 30, 2003, the Marimba Board of Directors approved a proposed partial settlement with the plaintiffs in this matter. The settlement would have provided, among other things, a release of Marimba and of the individual officer and director defendants for the alleged wrongful conduct in the Amended Complaint in exchange for a guarantee from Marimba’s insurers regarding recovery from the underwriter defendants and other non-monetary consideration. While the partial settlement was pending approval, the plaintiffs continued to litigate against the underwriter defendants. The Court directed that the litigation proceed within a number of “focus cases” rather than in all of the 310 cases that have been consolidated. The Marimba case is not one of these focus cases. On October 13, 2004, the Court certified the focus cases as class actions. The underwriter defendants appealed that ruling, and on December 5, 2006, the Court of Appeals for the Second Circuit (the Second Circuit) reversed the Court’s class certification decision. On April 6, 2007, the Second Circuit denied plaintiffs’ petition for rehearing. In light of the Second Circuit opinion, liaison counsel for all issuer defendants, including Marimba, informed the Court that the settlement could not be approved, because the defined settlement class, like the litigation class, could not be certified. On June 25, 2007, the Court entered an order terminating the settlement agreement. On August 14, 2007, the plaintiffs filed their second consolidated amended class action complaints against the focus cases and on

 

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September 27, 2007, again moved for class certification. On November 12, 2007, certain of the defendants in the focus cases moved to dismiss the second consolidated amended class action complaints. On March 26, 2008, the Court denied the motions to dismiss except as to Section 11 claims raised by those plaintiffs who sold their securities for a price in excess of the initial offering price and those who purchased outside the previously certified class period. On October 3, 2008, plaintiffs submitted a proposed order withdrawing the class certification motion without prejudice. On April 2, 2009, a stipulation and agreement of settlement between the plaintiffs, issuer defendants and underwriter defendants was submitted to the Court for preliminary approval. This settlement requires no financial contribution from Marimba or us. The Court granted the plaintiffs’ motion for preliminary approval and preliminarily certified the settlement classes on June 10, 2009. The settlement “fairness” hearing was held on September 10, 2009. The Court granted the plaintiffs’ motion for final approval of the settlement and certified the settlement classes on October 5, 2009. The Court determined that the settlement is fair to the class members, approved the settlement and dismissed, with prejudice, the case against Marimba and its individual defendants. Two appeals to the settlement are pending in the Second Circuit, and motions to dismiss these appeals have been filed with the Court. The timing of resolution of these appeals is uncertain. Due to the inherent uncertainties of litigation and because the settlement remains subject to pending appeals, the ultimate outcome of the matter is uncertain.
We are subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. We do not believe that the outcome of any of these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
ITEM 4.  
(Removed and Reserved)

 

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PART II
ITEM 5.  
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the NASDAQ Stock Market and trades under the symbol BMC. On May 2, 2011, there were 603 holders of record of our common stock.
The following table sets forth the high and low intra-day sales prices per share of our common stock for the periods indicated:
                 
    Price Range of  
    Common Stock  
    High     Low  
FISCAL 2011
               
Fourth Quarter
  $ 51.03     $ 46.31  
Third Quarter
  $ 49.11     $ 38.95  
Second Quarter
  $ 41.51     $ 34.24  
First Quarter
  $ 41.27     $ 34.58  
 
               
FISCAL 2010
               
Fourth Quarter
  $ 40.87     $ 35.55  
Third Quarter
  $ 40.73     $ 35.65  
Second Quarter
  $ 39.00     $ 31.00  
First Quarter
  $ 35.76     $ 31.18  
We have never declared or paid dividends to BMC Software stockholders. We do not intend to pay any cash dividends in the foreseeable future. We currently intend to retain any future earnings otherwise available for cash dividends on our common stock for use in our operations, for acquisitions and for common stock repurchases. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.
The graph below shows the relative investment performance of our common stock, the S&P 500 Index and the S&P Systems Software Index for the last five years, assuming reinvestment of dividends at date of payment into the common stock of the indices. The following graph is presented pursuant to SEC rules and is not meant to be an indication of our future performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among BMC Software, Inc., the S&P 500 Index
and the S&P Systems Software Index
(PERFORMANCE GRAPH)
 
     
*  
$100 invested on March 31, 2006 in stock or index, including reinvestment of dividends.

 

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ISSUER PURCHASES OF EQUITY SECURITIES
                                         
                            Total Dollar Value     Approximate Dollar  
                    Total Number of Shares     of Shares Purchased     Value of Shares that  
    Total Number of     Average Price     Purchased as Part of a     as Part of a     may yet be  
    Shares     Paid per     Publicly Announced     Publicly Announced     Purchased Under  
Period   Purchased (1)     Share     Program (2)     Program (2)     the Program (2)  
January 1 - 31, 2011
    459,484     $ 47.81       453,257     $ 21,670,256     $ 749,050,118  
February 1 - 28, 2011
    1,516,579     $ 49.39       1,406,410       69,467,547     $ 679,582,571  
March 1 - 31, 2011
    1,009,924     $ 48.64       1,004,604       48,861,468     $ 630,721,103  
 
                                 
 
                                       
Quarterly Total
    2,985,987     $ 48.88       2,864,271     $ 139,999,271     $ 630,721,103  
 
                                 
 
                                       
Fiscal 2011 Total
    11,163,384     $ 41.59       10,555,470     $ 439,043,180     $ 630,721,103  
 
                                 
 
     
(1)  
Includes 121,716 and 607,914 shares of our common stock withheld by us to satisfy employee tax withholding obligations during the quarter and year ended March 31, 2011, respectively.
 
(2)  
Our Board of Directors has authorized a total of $4.0 billion to repurchase common stock. At March 31, 2011, approximately $630.7 million remains authorized in this stock repurchase program and the program does not have an expiration date.
Information regarding our equity compensation plans at March 31, 2011 is incorporated by reference into Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

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ITEM 6.  
Selected Financial Data
The following selected consolidated financial data presented for, and at the end of, each of the years in the five-year period ended March 31, 2011, are derived from our consolidated financial statements. The following business combinations during the five-year period ended March 31, 2011 were accounted for under the acquisition method of accounting, and, accordingly, the financial results of these acquired businesses have been included in our financial results below from the indicated acquisition dates: GridApp Systems in November 2010, the software business of Neptuny S.r.l. in October 2010, Phurnace Software, Inc. (Phurnace Software) in December 2009, Tideway Systems Limited (Tideway Systems) in October 2009, MQSoftware, Inc. (MQSoftware) in August 2009, BladeLogic, Inc. (BladeLogic) in April 2008, Emprisa Networks, Inc. in October 2007, RealOps, Inc. in July 2007, ProactiveNet, Inc. in June 2007 and Identify Software Ltd. in May 2006.
The operating results for fiscal 2011, 2010, 2009, 2008 and 2007 below include severance, exit costs and related charges of $14.3 million, $3.0 million, $33.5 million, $14.7 million and $44.6 million, respectively. During fiscal 2011 and 2010, we recorded net tax benefits of approximately $57.2 million and $30.0 million, respectively, associated with tax authority settlements related to prior years’ tax matters. During fiscal 2009, we wrote off acquired in-process research and development (IPR&D) of $50.3 million in connection with our acquisition of BladeLogic, and we recorded $6.8 million of tax expense associated with an intercompany transfer of the IPR&D.
The selected consolidated financial data should be read in conjunction with the consolidated financial statements at March 31, 2011 and 2010, and for each of the three years in the period ended March 31, 2011, the accompanying notes and the report of the independent registered public accounting firm thereon, which are included elsewhere in this Annual Report on Form 10-K.
                                         
    Year Ended March 31,  
    2011     2010     2009     2008     2007  
    (In millions, except per share data)  
Statement of Operations Data:
                                       
Total revenue
  $ 2,065.3     $ 1,911.2     $ 1,871.9     $ 1,731.6     $ 1,580.4  
Operating income
  $ 532.8     $ 506.1     $ 367.8     $ 357.5     $ 207.3  
Net earnings
  $ 456.2     $ 406.1     $ 238.1     $ 313.6     $ 215.9  
 
                             
 
                                       
Basic earnings per share
  $ 2.55     $ 2.21     $ 1.27     $ 1.59     $ 1.05  
 
                             
 
                                       
Diluted earnings per share
  $ 2.50     $ 2.17     $ 1.25     $ 1.56     $ 1.02  
 
                             
 
                                       
Shares used in computing basic earnings per share
    178.7       183.1       187.1       194.8       204.2  
 
                             
 
                                       
Shares used in computing diluted earnings per share
    182.4       186.8       190.2       199.6       210.1  
 
                             
                                         
    At March 31,  
    2011     2010     2009     2008     2007  
    (In millions)  
Balance Sheet Data:
                                       
Cash and cash equivalents
  $ 1,660.9     $ 1,368.6     $ 1,023.3     $ 1,288.3     $ 883.5  
Investments
    95.6       127.9       145.9       186.9       623.6  
Working capital
    877.1       561.2       239.4       532.7       578.0  
Total assets
    4,485.4       4,137.6       3,697.5       3,345.5       3,260.0  
Long-term borrowings
    335.6       340.9       313.6       9.2       3.3  
Deferred revenue
    1,955.5       1,823.1       1,787.9       1,779.4       1,729.0  
Stockholders’ equity
    1,662.9       1,387.7       1,048.5       994.5       1,049.1  

 

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ITEM 7.  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
It is important that this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) be read in conjunction with our consolidated financial statements and notes thereto which appear elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled Risk Factors and elsewhere in this Annual Report on Form 10-K.
Unless indicated otherwise, results of operations data in this MD&A are presented in accordance with United States generally accepted accounting principles (GAAP). Additionally, in an effort to provide investors with additional information regarding our results of operations, certain non-GAAP financial measures including non-GAAP operating income, non-GAAP net earnings and non-GAAP diluted earnings per share are provided in this MD&A. See Non-GAAP Financial Measures and Reconciliations below for an explanation of our use of non-GAAP financial measures and reconciliations to their corresponding measures calculated in accordance with GAAP.
Overview
Our fiscal 2011 financial performance in terms of revenue, operating income, diluted earnings per share and operating cash flows was in line with our annual expectations. Select operating metrics for fiscal 2011 included:
   
Total bookings, which represent the contract value of new transactions that we closed and recorded, were $2,197.7 million, representing an increase of $251.3 million, or 12.9%, over fiscal 2010. Within our ESM segment, where we believe performance is best evaluated on the basis of license bookings, total license bookings increased by $100.4 million, or 21.3%, over fiscal 2010. Within our MSM segment, where we believe performance is best evaluated based on total and annualized bookings on a trailing twelve months basis, total bookings for the trailing twelve months ended March 31, 2011 increased by $29.8 million, or 3.7%, and on an annualized basis, after normalizing for contract length, increased by $12.1 million, or 4.4%, as compared to the prior year period.
   
Total revenue was $2,065.3 million, representing an increase of $154.1 million, or 8.1%, over fiscal 2010. This increase was reflective of license and professional services revenue increases of $106.1 million, or 14.0%, and $47.5 million, or 36.8%, respectively, while maintenance revenue remained relatively flat with a $0.5 million increase. On a segment basis, total ESM revenue increased by $136.8 million, or 12.0%, and total MSM revenue increased by $17.3 million, or 2.2%, over fiscal 2010.
   
Operating income was $532.8 million, representing an increase of $26.7 million, or 5.3%, over fiscal 2010. Non-GAAP operating income was $732.7 million, representing an increase of $58.2 million, or 8.6%, over fiscal 2010.
   
Net earnings were $456.2 million, representing an increase of $50.1 million, or 12.3%, over fiscal 2010. Non-GAAP net earnings were $546.2 million, representing an increase of $50.2 million, or 10.1%, over fiscal 2010.
   
Diluted earnings per share was $2.50, representing an increase of $0.33, or 15.2%, over fiscal 2010. Non-GAAP diluted earnings per share was $2.99, representing an increase of $0.33, or 12.4%, over fiscal 2010.
   
Cash flows from operations were $765.2 million, representing an increase of $129.8 million, or 20.4%, over fiscal 2010. We closed out the year with a strong balance sheet at March 31, 2011, including $1.8 billion in cash, cash equivalents and investments and $2.0 billion in deferred revenue.
We continue to invest in our technology leadership, including in the areas of cloud computing, virtualization and software-as-a-service. In addition to our ongoing product development efforts, we consummated two strategic acquisitions within our ESM segment during fiscal 2011, by acquiring GridApp Systems and the software business of Neptuny S.r.l. The former expands our ESM offerings to include advanced database automation for physical, virtual and cloud environments while the latter expands our capabilities in capacity management, enhancing our ESM portfolio and cloud management capabilities.
We also continue to enhance shareholder value by returning cash to shareholders through our stock repurchase program. During fiscal 2011, we repurchased approximately 10.6 million shares for a total value of $439.0 million.

 

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It is important for our investors to understand that a significant portion of our operating expenses is fixed in the short-term and we plan a portion of our expense run-rate based on our expectations of future revenue. In addition, a significant amount of our license transactions are completed during the final weeks and days of each quarter, and therefore, we generally do not know whether revenue has met our expectations until after the end of the quarter. If a shortfall in revenue were to occur in any given quarter, there would be an immediate, and possibly significant, impact to our overall earnings and, most likely, our stock price.
Because our software solutions are designed for and marketed to companies looking to improve the management of their IT infrastructure and processes, demand for our products, and therefore our financial results, are dependent upon corporations continuing to value such solutions and to invest in such technology. There are a number of trends that have historically influenced demand for IT management software, including, among others, business demands placed on IT, computing capacity within IT departments, complexity of IT systems and IT operational costs. Our financial results are also influenced by many economic and industry conditions, including, but not limited to, general economic and market conditions in the United States and other economies in which we market products, changes in foreign currency exchange rates, general levels of corporate spending, IT budgets, the competitiveness of the IT management software and solutions industry, the adoption rate for BSM and the stability of the mainframe market.
Acquisitions
We have consummated multiple acquisitions of businesses in recent years. Each of these acquisitions has been accounted for using the acquisition method of accounting. Accordingly, the financial results for these entities have been included in our consolidated financial results since the applicable acquisition dates.
Fiscal 2011 Acquisitions
During fiscal 2011, we completed the acquisition of the software business of Neptuny S.r.l., a leading provider of continuous capacity optimization software, and the acquisition of GridApp Systems, a leading provider of comprehensive database provisioning, patching and administration software, for combined purchase consideration of $51.5 million.
Fiscal 2010 Acquisitions
During fiscal 2010, we completed the acquisitions of MQSoftware, a leading provider of middleware and enterprise application transaction management software, Tideway Systems, a leading provider of IT discovery solutions, and Phurnace Software, a leading developer of software that automates the deployment and configuration of business-critical Java™ EE applications, for combined purchase consideration of $94.3 million.
Fiscal 2009 Acquisition
In April 2008, we acquired BladeLogic, a leading provider of data center automation software, through the successful completion of a tender offer for approximately $834 million in cash, excluding acquisition costs. The BladeLogic acquisition expands our offerings for server provisioning, application release management, as well as configuration automation and compliance.
Historical Information
Historical performance should not be viewed as indicative of future performance, as there can be no assurance that operating income or net earnings will be sustained at these levels. For a discussion of factors affecting operating results, see the Risk Factors section above.

 

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Results of Operations
The following table sets forth, for the fiscal years indicated, the percentages that selected items in the accompanying consolidated statements of operations represent of total revenue. These financial results are not necessarily indicative of future results.
                         
    Percentage of Total Revenue  
    for the Year Ended March 31,  
    2011     2010     2009  
 
                       
Revenue:
                       
License
    41.9 %     39.7 %     37.9 %
Maintenance
    49.6 %     53.6 %     54.4 %
Professional services
    8.6 %     6.8 %     7.7 %
Total revenue
    100.0 %     100.0 %     100.0 %
Operating expenses:
                       
Cost of license revenue
    6.3 %     6.0 %     6.3 %
Cost of maintenance revenue
    8.2 %     8.3 %     8.9 %
Cost of professional services revenue
    8.9 %     7.2 %     7.6 %
Selling and marketing expenses
    29.4 %     29.1 %     28.9 %
Research and development expenses
    8.5 %     10.2 %     11.9 %
General and administrative expenses
    10.5 %     10.8 %     10.6 %
In-process research and development
                2.7 %
Amortization of intangible assets
    1.6 %     1.7 %     1.8 %
Severance, exit costs and related charges
    0.7 %     0.2 %     1.8 %
Total operating expenses
    74.2 %     73.5 %     80.4 %
Operating income
    25.8 %     26.5 %     19.6 %
Other loss, net
    (0.1 )%     (0.1 )%     (0.2 )%
Earnings before income taxes
    25.7 %     26.4 %     19.4 %
Provision for income taxes
    3.6 %     5.1 %     6.7 %
Net earnings
    22.1 %     21.2 %     12.7 %

 

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Revenue
The following table provides information regarding software license and software maintenance revenue for fiscal 2011, 2010 and 2009.
                                         
                            Percentage Change  
                            2011     2010  
    Year Ended March 31,     Compared to     Compared to  
Software License Revenue   2011     2010     2009     2010     2009  
    (In millions)                  
Enterprise Service Management
  $ 550.9     $ 462.2     $ 434.9       19.2 %     6.3 %
Mainframe Service Management
    313.6       296.2       274.8       5.9 %     7.8 %
 
                                 
Total software license revenue
  $ 864.5     $ 758.4     $ 709.7       14.0 %     6.9 %
 
                                 
                                         
                            Percentage Change  
                            2011     2010  
    Year Ended March 31,     Compared to     Compared to  
Software Maintenance Revenue   2011     2010     2009     2010     2009  
    (In millions)                  
Enterprise Service Management
  $ 551.5     $ 550.9     $ 547.3       0.1 %     0.7 %
Mainframe Service Management
    472.7       472.8       470.5       (0.0 )%     0.5 %
 
                                 
Total software maintenance revenue
  $ 1,024.2     $ 1,023.7     $ 1,017.8       0.0 %     0.6 %
 
                                 
                                         
                            Percentage Change  
                            2011     2010  
    Year Ended March 31,     Compared to     Compared to  
Total Software Revenue   2011     2010     2009     2010     2009  
    (In millions)                  
Enterprise Service Management
  $ 1,102.4     $ 1,013.1     $ 982.2       8.8 %     3.1 %
Mainframe Service Management
    786.3       769.0       745.3       2.2 %     3.2 %
 
                                 
Total software revenue
  $ 1,888.7     $ 1,782.1     $ 1,727.5       6.0 %     3.2 %
 
                                 
Software License Revenue
License revenue was $864.5 million, $758.4 million and $709.7 million for fiscal 2011, 2010 and 2009, respectively.
License revenue in fiscal 2011 increased by $106.1 million, or 14.0%, over fiscal 2010. This increase was attributable to license revenue increases in both our MSM and ESM segments, as further discussed below. Recognition of license revenue in fiscal 2011 that was deferred in prior periods increased by $4.3 million over fiscal 2010. Of the license revenue transactions recorded, the percentage of license revenue recognized upfront increased to 51% for fiscal 2011 as compared to 48% in fiscal 2010. During fiscal 2011, we closed 162 transactions with license values over $1 million, with a total license value of $498.1 million, compared with 129 transactions with license values over $1 million, with a total license value of $358.6 million, in fiscal 2010.
License revenue in fiscal 2010 increased by $48.7 million, or 6.9%, over fiscal 2009. This increase was attributable to license revenue increases in both our MSM and ESM segments, as further discussed below. Recognition of license revenue in fiscal 2010 that was deferred in prior periods increased by $66.3 million over fiscal 2009. Of the license revenue transactions recorded, the percentage of license revenue recognized upfront declined slightly to 48% for fiscal 2010 as compared to 50% in fiscal 2009. During fiscal 2010, we closed 129 transactions with license values over $1 million, with a total license value of $358.6 million, compared with 135 transactions with license values over $1 million, with a total license value of $364.3 million, in fiscal 2009.
ESM license revenue was $550.9 million, or 63.7%, $462.2 million, or 60.9%, and $434.9 million, or 61.3%, of our total license revenue for fiscal 2011, 2010 and 2009, respectively. ESM license revenue in fiscal 2011 increased by $88.7 million, or 19.2%, over fiscal 2010, primarily due to an increase in the amount of upfront license revenue recognized in connection with new transactions and an increase in the recognition of previously deferred license revenue. The increase in upfront license revenue recognized was attributable to an increase in ESM license transaction bookings, due primarily to increased demand for our BSM solutions and increased sales productivity, and a lower percentage of license transaction bookings that were recognized ratably over the underlying contractual maintenance terms rather than as upfront revenue. ESM license revenue in fiscal 2010 increased by $27.3 million, or 6.3%, over fiscal 2009, primarily due to an increase in the recognition of previously deferred license revenue, partially offset by a decrease in the amount of upfront license revenue recognized in connection with new transactions. The decrease in upfront license revenue recognized in fiscal 2010 was attributable to a decrease in ESM license transaction bookings and a slightly higher percentage of license transaction bookings that were recognized ratably over the underlying contractual maintenance terms rather than as upfront revenue.

 

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MSM license revenue was $313.6 million, or 36.3%, $296.2 million, or 39.1%, and $274.8 million, or 38.7%, of our total license revenue for fiscal 2011, 2010 and 2009, respectively. MSM license revenue in fiscal 2011 increased by $17.4 million, or 5.9%, over fiscal 2010, primarily due to an increase in the amount of upfront license revenue recognized in connection with new transactions, partially offset by a decrease in the recognition of previously deferred license revenue. MSM license revenue in fiscal 2010 increased by $21.4 million, or 7.8%, over fiscal 2009, primarily due to an increase in the recognition of previously deferred license revenue and an increase in the amount of upfront license revenue recognized in connection with new transactions.
For fiscal 2011, 2010 and 2009, our recognized license revenue was impacted by the changes in our deferred license revenue balance as follows:
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Deferrals of license revenue
  $ 454.1     $ 398.9     $ 383.2  
Recognition from deferred license revenue
    (394.8 )     (390.5 )     (324.2 )
Impact of foreign currency exchange rate changes
    2.6       4.9       (3.5 )
 
                 
Net increase in deferred license revenue
  $ 61.9     $ 13.3     $ 55.5  
 
                 
 
                       
Deferred license revenue balance at end of period
  $ 686.1     $ 624.2     $ 610.9  
The primary reasons for license revenue deferrals include, but are not limited to, customer transactions that include products for which the maintenance pricing is based on a combination of undiscounted license list prices, net license fees or discounted license list prices, certain arrangements that include unlimited licensing rights, time-based licenses that are recognized over the term of the arrangement, customer transactions that include products with differing maintenance periods and other transactions for which we do not have or are not able to determine vendor-specific objective evidence of the fair value of the maintenance and/or professional services. The contract terms and conditions that result in deferral of revenue recognition for a given transaction result from arm’s length negotiations between us and our customers. We anticipate our transactions will continue to include such contract terms that result in deferral of the related license revenue as we expand our offerings to meet customers’ product, pricing and licensing needs.
Once it is determined that license revenue for a particular contract must be deferred, based on the contractual terms and application of revenue recognition policies to those terms, we recognize such license revenue either ratably over the term of the contract or when the revenue recognition criteria are met. Because of this, we generally know the timing of the subsequent recognition of license revenue at the time of deferral. Therefore, the amount of license revenue to be recognized out of the deferred revenue balance in each future quarter is generally predictable. At March 31, 2011, the deferred license revenue balance was $686.1 million. Estimated future recognition from deferred license revenue at March 31, 2011 is (in millions):
         
Fiscal 2012
  $ 338.8  
Fiscal 2013
    174.2  
Fiscal 2014 and thereafter
    173.1  
 
     
 
  $ 686.1  
 
     
Software Maintenance Revenue
Maintenance revenue was $1,024.2 million, $1,023.7 million and $1,017.8 million for fiscal 2011, 2010 and 2009, respectively. Maintenance revenue in fiscal 2011 increased by $0.5 million, essentially flat as compared to fiscal 2010 for both ESM and MSM, as further discussed below.
Maintenance revenue in fiscal 2010 increased by $5.9 million, or 0.6%, over fiscal 2009 due to increases in both ESM and MSM maintenance revenue, as discussed below.

 

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ESM maintenance revenue was $551.5 million, or 53.8%, $550.9 million, or 53.8%, and $547.3 million, or 53.8%, of our total maintenance revenue for fiscal 2011, 2010 and 2009, respectively. ESM maintenance revenue in fiscal 2011 increased by $0.6 million, or 0.1%, over fiscal 2010, and in fiscal 2010 increased by $3.6 million, or 0.7%, over fiscal 2009. These year over year increases were attributable primarily to the expansion of our installed ESM customer license base.
MSM maintenance revenue was $472.7 million, or 46.2%, $472.8 million, or 46.2%, and $470.5 million, or 46.2%, of our total maintenance revenue for fiscal 2011, 2010 and 2009, respectively. MSM maintenance revenue remained relatively flat in fiscal 2011 as compared to fiscal 2010, and in fiscal 2010 increased by $2.3 million, or 0.5%, over fiscal 2009 due to the expansion of our installed MSM customer license base and increasing capacities of the current installed base.
At March 31, 2011, the deferred maintenance revenue balance was $1,234.4 million. Estimated future recognition from deferred maintenance revenue at March 31, 2011 is (in millions):
         
Fiscal 2012
  $ 653.1  
Fiscal 2013
    312.1  
Fiscal 2014 and thereafter
    269.2  
 
     
 
  $ 1,234.4  
 
     
Domestic vs. International Revenue
                                         
                            Percentage Change  
                            2011     2010  
    Year Ended March 31,     Compared to     Compared to  
    2011     2010     2009     2010     2009  
    (In millions)                  
License:
                                       
Domestic
  $ 420.4     $ 390.3     $ 361.7       7.7 %     7.9 %
International
    444.1       368.1       348.0       20.6 %     5.8 %
 
                                 
Total license revenue
    864.5       758.4       709.7       14.0 %     6.9 %
 
                                 
Maintenance:
                                       
Domestic
    556.8       561.4       555.5       (0.8 )%     1.1 %
International
    467.4       462.3       462.3       1.1 %      
 
                                 
Total maintenance revenue
    1,024.2       1,023.7       1,017.8       0.0 %     0.6 %
 
                                 
Professional services:
                                       
Domestic
    85.9       59.8       62.8       43.6 %     (4.8 )%
International
    90.7       69.3       81.6       30.9 %     (15.1 )%
 
                                 
Total professional services revenue
    176.6       129.1       144.4       36.8 %     (10.6 )%
 
                                 
 
                                       
Total domestic revenue
    1,063.1       1,011.5       980.0       5.1 %     3.2 %
Total international revenue
    1,002.2       899.7       891.9       11.4 %     0.9 %
 
                                 
Total revenue
  $ 2,065.3     $ 1,911.2     $ 1,871.9       8.1 %     2.1 %
 
                                 
We estimate that the effect of foreign currency exchange rate fluctuations on our international revenue resulted in an approximate $4.2 million increase in total fiscal 2011 revenue as compared to fiscal 2010 and an approximate $3.3 million increase in total fiscal 2010 revenue as compared to fiscal 2009, on a constant currency basis.
Domestic License Revenue
Domestic license revenue was $420.4 million, or 48.6%, $390.3 million, or 51.5%, and $361.7 million, or 51.0%, of our total license revenue for fiscal 2011, 2010 and 2009, respectively.
Domestic license revenue in fiscal 2011 increased by $30.1 million, or 7.7%, over fiscal 2010, due to a $35.6 million increase in ESM license revenue, offset by a $5.5 million decrease in MSM license revenue.
Domestic license revenue in fiscal 2010 increased by $28.6 million, or 7.9%, over fiscal 2009, due to a $15.8 million increase in MSM license revenue and a $12.8 million increase in ESM license revenue.

 

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International License Revenue
International license revenue was $444.1 million, or 51.4%, $368.1 million, or 48.5%, and $348.0 million, or 49.0%, of our total license revenue for fiscal 2011, 2010 and 2009, respectively.
International license revenue in fiscal 2011 increased by $76.0 million, or 20.6%, over fiscal 2010, due to a $53.1 million increase in ESM license revenue and a $22.9 million increase in MSM license revenue. The ESM license revenue increase was attributable to increases of $33.0 million and $12.3 million in our Europe, Middle East and Africa (EMEA) and Asia Pacific markets, respectively, and a combined $7.8 million net increase in our other international markets. The MSM license revenue increase was attributable to increases of $13.1 million and $9.8 million in our Canada and EMEA markets, respectively.
International license revenue in fiscal 2010 increased by $20.1 million, or 5.8%, over fiscal 2009, due to a $14.6 million increase in ESM license revenue and a $5.5 million increase in MSM license revenue. The ESM license revenue increase was attributable to a $10.4 million increase in our Asia Pacific market and a $6.5 million increase in our Canada market, offset by a combined $2.3 million net decrease in our other international markets. The MSM license revenue increase was attributable primarily to increases of $4.5 million and $1.3 million in our Latin America and Canada markets, respectively.
Domestic Maintenance Revenue
Domestic maintenance revenue was $556.8 million, or 54.4%, $561.4 million, or 54.8%, and $555.5 million, or 54.6%, of our total maintenance revenue for fiscal 2011, 2010 and 2009, respectively.
Domestic maintenance revenue in fiscal 2011 decreased by $4.6 million, or 0.8%, from fiscal 2010, due to a $5.2 million decrease in ESM maintenance revenue offset by a $0.6 million increase in MSM maintenance revenue.
Domestic maintenance revenue in fiscal 2010 increased by $5.9 million, or 1.1%, over fiscal 2009, due primarily to a $5.7 million increase in MSM maintenance revenue.
International Maintenance Revenue
International maintenance revenue was $467.4 million, or 45.6%, $462.3 million, or 45.2%, and $462.3 million, or 45.4%, of our total maintenance revenue for fiscal 2011, 2010 and 2009, respectively.
International maintenance revenue in fiscal 2011 increased by $5.1 million, or 1.1%, over fiscal 2010, due to a $5.8 million increase in ESM maintenance revenue, offset by a $0.7 million decrease in MSM maintenance revenue. The ESM maintenance revenue increase was attributable primarily to increases of $4.4 million and $1.7 million in our Asia Pacific and Canada markets, respectively. The MSM maintenance revenue decrease was attributable to decreases of $5.3 million and $1.4 million in our EMEA and Latin America markets, respectively, offset by increases of $4.2 million and $1.8 million in our Asia Pacific and Canada markets, respectively.
International maintenance revenue in fiscal 2010 was flat as compared to fiscal 2009, reflective of a $3.5 million increase in ESM maintenance revenue, offset by a $3.5 million decrease in MSM maintenance revenue. The ESM maintenance revenue increase was attributable to increases of $2.2 million and $1.3 million in our Asia Pacific and Canada markets, respectively. The MSM maintenance revenue decrease was attributable to a $9.1 million decrease in our EMEA market, offset by an increase of $3.2 million in our Latin America market and a $2.4 million combined net increase in our other international markets.
Professional Services Revenue
Professional services revenue in fiscal 2011 increased by $47.5 million, or 36.8%, over fiscal 2010, which is reflective of a $26.1 million, or 43.6%, increase in domestic professional services revenue and a $21.4 million, or 30.9%, increase in international professional services revenue. These increases were attributable to increases in implementation, consulting and education services revenue period over period, principally due to the expansion of our ESM business, including that related to our Dynamic BSM solutions.
Professional services revenue in fiscal 2010 decreased by $15.3 million, or 10.6%, from fiscal 2009, which is reflective of a $3.0 million, or 4.8%, decrease in domestic professional services revenue and a $12.3 million, or 15.1%, decrease in international professional services revenue. These decreases were attributable to decreases in implementation, consulting and education services revenue period over period.

 

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Operating Expenses
                                         
                            Percentage Change  
                            2011     2010  
    Year Ended March 31,     Compared     Compared  
    2011     2010     2009     to 2010     to 2009  
    (In millions)                  
Cost of license revenue
  $ 129.8     $ 115.5     $ 117.1       12.4 %     (1.4 )%
Cost of maintenance revenue
    169.4       158.3       166.3       7.0 %     (4.8 )%
Cost of professional services revenue
    184.4       137.4       141.6       34.2 %     (3.0 )%
Selling and marketing expenses
    608.1       556.2       541.5       9.3 %     2.7 %
Research and development expenses
    176.5       195.6       222.0       (9.8 )%     (11.9 )%
General and administrative expenses
    216.4       206.4       197.7       4.8 %     4.4 %
In-process research and development
                50.3             (100.0 )%
Amortization of intangible assets
    33.6       32.7       34.1       2.8 %     (4.1 )%
Severance, exit costs and related charges
    14.3       3.0       33.5       376.7 %     (91.0 )%
 
                                 
Total operating expenses
  $ 1,532.5     $ 1,405.1     $ 1,504.1       9.1 %     (6.6 )%
 
                                 
We estimate that the effect of foreign currency exchange rate fluctuations on our international operating expenses resulted in an approximate $1.8 million reduction in fiscal 2011 operating expenses as compared to fiscal 2010 and an approximate $5.4 million reduction in fiscal 2010 operating expenses as compared to fiscal 2009, on a constant currency basis.
Cost of License Revenue
Cost of license revenue consists primarily of the amortization of capitalized software costs for internally developed products, the amortization of acquired technology for products acquired through business combinations, license-based royalties to third parties and production and distribution costs for initial product licenses. For fiscal 2011, 2010 and 2009, cost of license revenue was $129.8 million, or 6.3%, $115.5 million, or 6.0%, and $117.1 million, or 6.3%, of total revenue, respectively, and 15.0%, 15.2% and 16.5% of license revenue, respectively.
Cost of license revenue in fiscal 2011 increased by $14.3 million, or 12.4%, over fiscal 2010. This increase was attributable primarily to an $11.9 million increase in the amortization of capitalized software development costs and a $1.7 million increase in the amortization of acquired technology associated with fiscal 2010 and fiscal 2011 acquisitions.
Cost of license revenue in fiscal 2010 decreased by $1.6 million, or 1.4%, from fiscal 2009. This decrease was attributable primarily to the reduction in the amortization of acquired technology associated with past acquisitions that became fully amortized, partially offset by an increase in the amortization of acquired technology associated with fiscal 2009 and fiscal 2010 acquisitions.
Cost of Maintenance Revenue
Cost of maintenance revenue consists primarily of the costs associated with customer support and research and development personnel that provide maintenance, enhancement and support services to our customers. For fiscal 2011, 2010 and 2009, cost of maintenance revenue was $169.4 million, or 8.2%, $158.3 million, or 8.3%, and $166.3 million, or 8.9%, of total revenue, respectively, and 16.5%, 15.5% and 16.3% of maintenance revenue, respectively.
Cost of maintenance revenue in fiscal 2011 increased by $11.1 million, or 7.0%, over fiscal 2010. This increase was attributable to a $6.4 million increase in personnel and related costs, including third party subcontracting fees, a $1.8 million increase in share-based compensation expense and a net $2.9 million increase in other expenses.
Cost of maintenance revenue in fiscal 2010 decreased by $8.0 million, or 4.8%, from fiscal 2009. This decrease was attributable to a $2.9 million reduction in personnel and related costs, including third party subcontracting fees, and a $1.3 million decrease in facility cost allocations, both associated with a decrease in resources dedicated to maintenance projects and a year over year decrease in customer support headcount, a $1.4 million decrease in share-based compensation expense and a net $2.4 million decrease in other expenses.

 

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Cost of Professional Services Revenue
Cost of professional services revenue consists primarily of salaries, related personnel costs and third party fees associated with implementation, consulting and education services that we provide to our customers and the related infrastructure to support this business. For fiscal 2011, 2010 and 2009, cost of professional services revenue was $184.4 million, or 8.9%, $137.4 million, or 7.2%, and $141.6 million, or 7.6%, of total revenue, respectively, and 104.4%, 106.4% and 98.1% of professional services revenue, respectively.
Cost of professional services revenue in fiscal 2011 increased by $47.0 million, or 34.2%, over fiscal 2010. This increase was attributable to a $31.2 million increase in third party subcontracting fees, a $9.1 million increase in professional services enablement personnel costs and a $6.7 million net increase in other expenses, commensurate with increases in professional services revenue.
Cost of professional services revenue in fiscal 2010 decreased by $4.2 million, or 3.0%, from fiscal 2009. This decrease was attributable primarily to a $9.8 million decrease in third party subcontracting fees, offset by a $5.8 million increase in professional services enablement personnel costs.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries, related personnel costs, sales commissions and costs associated with advertising, marketing, industry trade shows and sales seminars. For fiscal 2011, 2010 and 2009, selling and marketing expenses were $608.1 million, or 29.4%, $556.2 million, or 29.1%, and $541.5 million, or 28.9%, of total revenue, respectively.
Selling and marketing expenses in fiscal 2011 increased by $51.9 million, or 9.3%, over fiscal 2010. This increase was attributable to a $41.0 million increase in sales personnel costs, principally due to an increase in variable compensation expense attributable to increased revenue as well as an increase in sales personnel headcount, a $3.5 million increase in share-based compensation expense, a $4.3 million increase in marketing campaign expenditures and a $3.1 million net increase in other expenses.
Selling and marketing expenses in fiscal 2010 increased by $14.7 million, or 2.7%, over fiscal 2009. This increase was attributable primarily to a $17.8 million increase in sales personnel costs, principally due to an increase in variable compensation expense attributable to increased revenue as well as an increase in sales personnel headcount, and a $2.8 million increase in share-based compensation expense, offset by a $5.0 million decrease in marketing campaign expenditures.
Research and Development Expenses
Research and development expenses consist primarily of salaries and personnel costs related to software developers and development support personnel, including product management, software programmers, testing and quality assurance personnel and writers of technical documentation, such as product manuals and installation guides. These expenses also include computer hardware and software costs, telecommunications costs and personnel costs associated with our development and production labs. For fiscal 2011, 2010 and 2009, research and development expenses were $176.5 million, or 8.5%, $195.6 million, or 10.2%, and $222.0 million, or 11.9%, of total revenue, respectively.
Research and development expenses in fiscal 2011 decreased by $19.1 million, or 9.8%, from fiscal 2010. This decrease was attributable to a $37.4 million increase in capitalized research and development costs resulting from additional internal investments made in new products, including the expansion of our BSM solution offerings, offset by a $14.5 million increase in research and development personnel and related costs, including third party subcontracting fees, and a $3.8 million net increase in other expenses.
Research and development expenses in fiscal 2010 decreased by $26.4 million, or 11.9%, from fiscal 2009. This decrease was attributable to a $13.4 million increase in capitalized research and development costs, a $6.3 million decrease in research and development personnel and related costs, including third party subcontracting fees, and a $5.2 million decrease in facility cost allocations, both associated primarily with lower average headcount levels and a higher percentage of headcount in lower cost regions, and a $2.8 million decrease in share-based compensation expense, offset by a net increase of $1.3 million in other expenses.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related personnel costs of executive management, finance and accounting, facilities management, legal and human resources. Other costs included in general and administrative expenses include fees paid for outside accounting and legal services, consulting projects and insurance. During fiscal 2011, 2010 and 2009, general and administrative expenses were $216.4 million, or 10.5%, $206.4 million, or 10.8%, and $197.7 million, or 10.6%, of total revenue, respectively.

 

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General and administrative expenses in fiscal 2011 increased by $10.0 million, or 4.8%, over fiscal 2010. This increase was attributable primarily to a $9.8 million increase in share-based compensation expense.
General and administrative expenses in fiscal 2010 increased by $8.7 million, or 4.4%, over fiscal 2009. This increase was attributable to a $6.7 million increase in share-based compensation expense and a $2.0 million net increase in other expenses.
In-Process Research and Development
The amounts allocated to in-process research and development represent the estimated fair values, based on risk-adjusted cash flows and historical costs expended, related to acquired core research and development projects that were incomplete and had neither reached technological feasibility nor been determined to have an alternative future use pending achievement of technological feasibility at the date of acquisition. During fiscal 2009, we expensed acquired IPR&D totaling $50.3 million in connection with our acquisition of BladeLogic. Beginning in fiscal 2010, under the new accounting guidance for business combinations, acquired IPR&D is no longer immediately expensed upon acquisition, but rather is capitalized as an indefinite-lived intangible asset and evaluated for impairment during the development period.
Amortization of Intangible Assets
Amortization of intangible assets consists primarily of the amortization of finite-lived acquired technology and customer relationships recorded in connection with our business combinations. During fiscal 2011, 2010 and 2009, amortization of intangible assets was $33.6 million, $32.7 million and $34.1 million, respectively. Amortization of intangible assets in fiscal 2011 increased by $0.9 million, or 2.8%, over fiscal 2010. This increase was attributable to $12.5 million in additional amortization associated with intangible assets acquired in connection with our fiscal 2011 and 2010 acquisitions, offset by an $11.6 million reduction in amortization associated with intangible assets acquired in connection with past acquisitions that became fully amortized. Amortization of intangible assets in fiscal 2010 decreased by $1.4 million, or 4.1%, from fiscal 2009. This decrease was attributable to a $4.5 million reduction in amortization associated with intangible assets acquired in connection with past acquisitions that became fully amortized, offset by $3.1 million in additional amortization associated with intangible assets acquired in connection with our fiscal 2010 and 2009 acquisitions.
Severance, Exit Costs and Related Charges
We have undertaken various restructuring and process improvement initiatives in recent years through the realignment of resources to focus on growth areas and the simplification, standardization and automation of key business processes and through general workforce reductions as a result of macroeconomic conditions. Related to these collective actions, we recorded charges of $14.3 million, $3.0 million and $33.5 million in fiscal 2011, 2010 and 2009, respectively. These expenses were attributable primarily to identified workforce reductions and associated cash separation packages paid or accrued by us. While we will reduce future operating expenses as a result of these actions, we anticipate that these reductions will be substantially offset by incremental personnel-related expenses due to headcount growth in strategic areas. We will continue to evaluate additional actions that may be necessary in the future to achieve our business goals.
Other Income (Loss), Net
Other income (loss), net, consists primarily of interest earned, realized gains and losses on investments and interest expense on our senior unsecured notes due 2018 (Senior Notes) and capital leases.
Other income (loss), net, for fiscal 2011 and 2010 remained relatively flat, with losses of $1.5 million and $1.9 million, respectively.
Other income (loss), net, for fiscal 2010 and 2009 were losses of $1.9 million and $3.9 million, respectively. This change was attributable primarily to an increase of $9.8 million related to gains on investments in our deferred compensation program and the non-recurrence of $8.4 million in charges related to the write-down of certain non-marketable equity investments in the prior year period, principally offset by a $15.0 million decrease in interest income resulting from lower average investment yields on a slightly higher average investment balance.
Provision for Income Taxes
We recorded income tax expense of $75.1 million, $98.1 million and $125.8 million in fiscal 2011, 2010 and 2009, respectively, resulting in effective tax rates of 14.1%, 19.5% and 34.6%, respectively. The effective tax rate is impacted primarily by the worldwide mix of consolidated earnings before taxes and our policy of indefinitely re-investing earnings from certain low tax jurisdictions, additional accruals, changes in estimates, releases and settlements with taxing authorities related to our uncertain tax positions, benefits associated with income attributable to both domestic production activities and the extraterritorial income exclusion, a favorable impact in fiscal 2011 related to international business and operational structural changes and for fiscal 2009, the non-deductible write-off of IPR&D expense associated with an acquisition. Additionally, during fiscal 2011 and 2010, we recorded net tax benefits of approximately $57.2 million and $30.0 million associated with tax authority settlements related to prior years’ tax matters, resulting in decreases in the effective tax rates in those years.

 

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Non-GAAP Financial Measures and Reconciliations
In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The primary non-GAAP financial measures we focus on are: (i) non-GAAP operating income, (ii) non-GAAP net earnings, and (iii) non-GAAP diluted earnings per share. Each of these financial measures excludes the impact of certain items and therefore has not been calculated in accordance with GAAP. These non-GAAP financial measures exclude share-based compensation expense; the amortization of intangible assets; charges related to IPR&D; severance, exit costs and related charges; as well as the related tax impacts of these items; and certain discrete tax items. Each of the non-GAAP adjustments is described in more detail below. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is also included below.
We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our operating results because they exclude amounts that BMC management and the Board of Directors do not consider part of core operating results when assessing the performance of the organization. In addition, we have historically reported similar non-GAAP financial measures, and we believe that inclusion of these non-GAAP financial measures provides consistency and comparability with past reports of financial results. Accordingly, we believe these non-GAAP financial measures are useful to investors in allowing for greater transparency of supplemental information used by management.
While we believe that these non-GAAP financial measures provide useful supplemental information, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Items such as share-based compensation expense; the amortization of intangible assets; charges related to IPR&D; severance, exit costs and related charges; as well as the related tax impacts of these items; and certain discrete tax items that are excluded from our non-GAAP financial measures can have a material impact on net earnings. As a result, these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, net earnings, cash flow from operations or other measures of performance prepared in accordance with GAAP. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reconciling the non-GAAP financial measures to their most comparable GAAP financial measure. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures below.

 

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For a detailed explanation of the adjustments made to comparable GAAP financial measures, the reasons why management uses these measures and the usefulness of these measures, see items (1) — (6) below.
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Operating income:
                       
GAAP operating income
  $ 532.8     $ 506.1     $ 367.8  
Share-based compensation expense (1)
    106.5       88.9       82.0  
Amortization of intangible assets (2)
    79.1       76.5       78.7  
Severance, exit costs and related charges (3)
    14.3       3.0       33.5  
In-process research and development (4)
                50.3  
 
                 
Non-GAAP operating income
  $ 732.7     $ 674.5     $ 612.3  
 
                 
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Net earnings:
                       
GAAP net earnings
  $ 456.2     $ 406.1     $ 238.1  
Share-based compensation expense (1)
    106.5       88.9       82.0  
Amortization of intangible assets (2)
    79.1       76.5       78.7  
Severance, exit costs and related charges (3)
    14.3       3.0       33.5  
In-process research and development (4)
                50.3  
Provision for income taxes on above pre-tax non-GAAP adjustments (5)
    (52.7 )     (48.5 )     (58.2 )
Certain discrete tax items (6)
    (57.2 )     (30.0 )     6.8  
 
                 
Non-GAAP net earnings
  $ 546.2     $ 496.0     $ 431.2  
 
                 
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Diluted earnings per share*:
                       
GAAP diluted earnings per share
  $ 2.50     $ 2.17     $ 1.25  
Share-based compensation expense (1)
    0.58       0.48       0.43  
Amortization of intangible assets (2)
    0.43       0.41       0.41  
Severance, exit costs and related charges (3)
    0.08       0.02       0.18  
In-process research and development (4)
                0.26  
Provision for income taxes on above pre-tax non-GAAP adjustments (5)
    (0.29 )     (0.26 )     (0.31 )
Certain discrete tax items (6)
    (0.31 )     (0.16 )     0.04  
 
                 
Non-GAAP diluted earnings per share*
  $ 2.99     $ 2.66     $ 2.27  
 
                 
     
*  
Non-GAAP diluted earnings per share is computed independently for each period presented. The sum of GAAP diluted earnings per share and non-GAAP adjustments per share may not equal non-GAAP diluted earnings per share due to rounding differences.
 
(1)  
Share-based compensation expense. Our non-GAAP financial measures exclude the compensation expenses required to be recorded by GAAP for equity awards to employees and directors. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding expenses related to share-based compensation, because these costs are generally fixed at the time an award is granted, are then expensed over several years and generally cannot be changed or influenced by management once granted.
 
(2)  
Amortization of intangible assets. Our non-GAAP financial measures exclude costs associated with the amortization of intangible assets, which are included in cost of license revenue and amortization of intangible assets in our consolidated statements of operations. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding amortization of intangible assets, because these costs are fixed at the time of an acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition.

 

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(3)  
Severance, exit costs and related charges. Our non-GAAP financial measures exclude severance, exit costs and related charges, and any subsequent changes in estimates, as they relate to our corporate restructuring activities. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding severance, exit costs and related charges, in order to provide comparability and consistency with historical operating results.
 
(4)  
In-process research and development. Our non-GAAP financial measures for fiscal 2009 exclude IPR&D charges of $50.3 million associated with our acquisition of BladeLogic. This amount represents the estimated fair value of core research and development projects that were incomplete as of the date of acquisition and had neither reached technological feasibility nor been determined to have alternative future uses pending achievement of technological feasibility upon further development. The amount was required to be expensed by us as of the date of the acquisition under the accounting rules in place in prior years. Management and the Board of Directors believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding IPR&D charges, because these costs were fixed at the time of the acquisition and are not subject to management influence.
 
(5)  
Provision for income taxes on above pre-tax non-GAAP adjustments. Our non-GAAP financial measures exclude the tax impact of the above pre-tax non-GAAP adjustments. This amount is calculated using the tax rates of each country to which these pre-tax non-GAAP adjustments relate. Management excludes the non-GAAP adjustments on a net-of-tax basis in evaluating our performance. Therefore, we exclude the tax impact of these charges when presenting non-GAAP financial measures.
 
(6)  
Certain discrete tax items. Our non-GAAP financial measures exclude: (i) in fiscal 2011, a $57.2 million net tax benefit associated with tax authority settlements related to prior years’ tax matters, (ii) in fiscal 2010, a $30.0 million net tax benefit associated with an IRS settlement related to prior years’ tax matters and (iii) in fiscal 2009, $6.8 million of tax expense associated with an intercompany transfer of IPR&D in connection with the acquisition of BladeLogic. Management excludes the impact of these items in evaluating our performance. Therefore, we exclude these items when presenting non-GAAP financial measures.
Liquidity and Capital Resources
At March 31, 2011, we had $1.8 billion in cash, cash equivalents and investments, approximately 46% of which was held by our international subsidiaries and was largely generated from our international operations. Our international operations have generated $479.3 million of earnings that we have determined will be invested indefinitely in those operations. Were such earnings to be repatriated, we would incur a United States federal income tax liability that is not currently accrued in our financial statements. We also had outstanding letters of credit, performance bonds and similar instruments at March 31, 2011 of approximately $44.2 million primarily in support of performance obligations to various customers, but also related to facilities and other obligations.
At March 31, 2011 and 2010, we held auction rate securities with a par value of $29.8 million and $50.7 million, respectively, which were classified as available-for-sale, and at March 31, 2010, we also held auction rate securities with a par value of $16.6 million which were classified as trading. The total estimated fair value of our auction rate securities was $27.2 million and $60.5 million at March 31, 2011 and 2010, respectively. Our auction rate securities consist entirely of bonds issued by public agencies that are backed by student loans with at least a 97% guarantee by the federal government under the United States Department of Education’s Federal Family Education Loan Program. All of these bonds are currently rated investment grade by Moody’s or Standard and Poor’s. Auctions for these securities began failing in early 2008 and have continued to fail, resulting in our continuing to hold such securities and the issuers paying interest at the maximum contractual rates. We do not believe that any of the underlying issuers of these auction rate securities are presently at risk of default or that the underlying credit quality of the assets backing the auction rate security investments has been impacted by the reduced liquidity of these investments. Based on our current ability to access cash and other short-term investments, our expected operating cash flows, our available credit under our Credit Facility (discussed below) and other sources of cash that we expect to be available, we do not anticipate that the lack of liquidity of these investments will have a material impact on our business strategy, financial condition, results of operations or cash flows. Periodically, the issuers of certain of our auction rate securities have redeemed portions of our holdings at par value plus accrued interest. During the years ended March 31, 2011 and 2010, issuers redeemed available-for-sale holdings of $20.9 million par value and $3.7 million par value, respectively, and trading holdings of $5.4 million par value and $1.2 million par value, respectively.
Additionally, in November 2008, we entered into a put agreement with a bank from which we acquired certain auction rate securities. On July 1, 2010, we exercised our right under this agreement to put the remaining securities subject to this agreement, with $11.2 million par value, to the bank.

 

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In November 2010, we entered into a credit agreement with certain institutional lenders providing for an unsecured revolving credit facility in an amount up to $400.0 million which is scheduled to expire on November 30, 2014 (the Credit Facility). Subject to certain conditions, at any time prior to maturity, we may invite existing and new lenders to increase the size of the Credit Facility up to a maximum of $600.0 million. The Credit Facility includes provisions for swing line loans of up to $25.0 million and standby letters of credit of up to $50.0 million. Revolving loans under the Credit Facility bear interest, at the Company’s option, at a rate equal to either (i) the base rate (as defined) plus a margin based on the credit ratings of BMC’s Senior Notes, or (ii) the LIBOR rate (as defined) plus a margin based on the credit ratings of BMC’s Senior Notes, for interest periods of one, two, three or six months. As of March 31, 2011 and through May 5, 2011, we have not borrowed any funds under the Credit Facility.
We believe that our existing cash and investment balances, funds generated from operating activities and available credit under the Credit Facility will be sufficient to meet our working and other capital requirements for the foreseeable future. In the normal course of business, we evaluate the merits of acquiring technology or businesses, or establishing strategic relationships with or investing in these businesses. We may elect to use available cash and investments to fund such activities in the future. In the event additional needs for cash arise, we might find it advantageous to utilize third party financing sources based on factors such as our then available cash and its source (i.e., cash held in the United States versus international locations), the cost of financing and our internal cost of capital.
We may from time to time seek to repurchase or retire securities, including outstanding borrowings and equity securities, in open market repurchases, unsolicited or solicited privately negotiated transactions or in such other manner as will comply with the provisions of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations thereunder. Such repurchases or exchanges, if any, will depend on a number of factors, including, but not limited to, prevailing market conditions, our liquidity requirements and contractual restrictions, if applicable. The amount of repurchases, which is subject to management discretion, may be material and may change from period to period.
Our cash flows during fiscal 2011, 2010 and 2009 were:
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Net cash provided by operating activities
  $ 765.2     $ 635.4     $ 579.7  
Net cash used in investing activities
    (147.6 )     (159.3 )     (851.9 )
Net cash provided by (used in) financing activities
    (340.9 )     (158.7 )     57.4  
Effect of exchange rate changes on cash and cash equivalents
    15.6       27.9       (50.2 )
 
                 
Net increase (decrease) in cash and cash equivalents
  $ 292.3     $ 345.3     $ (265.0 )
 
                 
Cash Flows from Operating Activities
Our primary method for funding operations and growth has been through cash flows generated from operating activities. Net cash provided by operating activities in fiscal 2011 increased by $129.8 million over fiscal 2010, attributable primarily to an increase in net earnings before non-cash expenses (principally depreciation, amortization and share-based compensation expense) as well as the net impact of working capital changes. Net cash provided by operating activities in fiscal 2010 increased by $55.7 million over fiscal 2009, attributable primarily to an increase in net earnings before non-cash expenses (principally depreciation, amortization, share-based compensation expense and IPR&D), partially offset by the net impact of working capital changes.
Cash Flows from Investing Activities
Net cash used in investing activities in fiscal 2011 decreased by $11.7 million from fiscal 2010. This decrease was attributable primarily to a decrease in investment purchases and in cash expended for acquisitions, offset by a decrease in proceeds from the maturities of investments and an increase in capitalization of software development costs. Net cash used in investing activities in fiscal 2010 decreased by $692.6 million from fiscal 2009. This decrease was attributable primarily to cash expended in the prior year period for our acquisition of BladeLogic and a year over year increase in proceeds from maturities and sales of investments, partially offset by a year over year increase in investment purchases.
Cash Flows from Financing Activities
Net cash used in financing activities in fiscal 2011 increased by $182.2 million over fiscal 2010. This increase was attributable primarily to an increase in treasury stock acquired and a decrease in proceeds from borrowings, offset by an increase in proceeds from stock option exercises. Net cash used in financing activities in fiscal 2010 was $158.7 million as compared to net cash provided by financing activities of $57.4 million in fiscal 2009. This difference was attributable primarily to a net decrease in proceeds from borrowings related primarily to the issuance of our Senior Notes in fiscal 2009, partially offset by a year over year decrease in treasury stock purchases.

 

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Trade Finance Receivables
We provide financing on a portion of our sales transactions to customers that meet our specified standards of creditworthiness. Our practice of providing financing at reasonable market interest rates enhances our competitive position. We participate in established programs with third party financial institutions and sell a significant portion of our finance receivables to such institutions on a non-recourse basis, enabling us to collect cash on a timely basis while fully transferring credit risk of customer default to third party financial institutions. We record transfers of finance receivables to third party financial institutions as sales of such finance receivables when we have surrendered control of such receivables (including determining that such assets have been isolated beyond our reach and the reach of our creditors) and when we do not have significant continuing involvement in the generation of cash flows due the financial institutions. During fiscal 2011, 2010 and 2009, we transferred $172.3 million, $208.8 million and $149.7 million, respectively, of such receivables through these programs.
Treasury Stock Purchases
Our Board of Directors has authorized a total of $4.0 billion to repurchase common stock. During fiscal 2011, we repurchased 10.6 million shares for $439.0 million. From the inception of the stock repurchase authorization through March 31, 2011, we have purchased 132.8 million shares for $3.4 billion. At March 31, 2011, there was $630.7 million remaining in the stock repurchase program, which does not have an expiration date. In addition, during fiscal 2011 we repurchased 0.6 million shares for $25.1 million to satisfy employee tax withholding obligations upon the vesting of share-based awards. The repurchase of stock will continue to be funded primarily with cash generated from domestic operations, and therefore, affects our overall domestic versus international liquidity balances.
See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities above for a monthly detail of treasury stock purchases for the quarter ended March 31, 2011.
Contractual Obligations
The following is a summary of our contractual obligations at March 31, 2011:
                                         
    Less Than                     After        
    1 Year     1-3 Years     3-5 Years     5 Years     Total  
    (In millions)  
Senior unsecured notes (1)
  $ 21.8     $ 43.5     $ 43.5     $ 347.1     $ 455.9  
Capital lease obligations (1)
    8.0       13.1       1.3             22.4  
Operating lease obligations
    40.6       59.5       21.0       9.1       130.2  
Purchase obligations (2)
    6.8       4.2                   11.0  
Other long-term liabilities reflected on the balance sheet (1)
    13.5       25.3                   38.8  
 
                             
Total contractual obligations (3)(4)
  $ 90.7     $ 145.6     $ 65.8     $ 356.2     $ 658.3  
 
                             
 
     
(1)  
Represents contractual amounts due, including interest.
 
(2)  
Represents obligations under agreements with non-cancelable terms to purchase goods or services. The agreements are enforceable and legally binding, and contain specific terms, including quantities to be purchased and the timing of the purchase.
 
(3)  
Total does not include contractual obligations recorded on the balance sheet as current liabilities, other than capital lease obligations and other long-term liabilities above.
 
(4)  
We are unable to make a reasonably reliable estimate as to when cash settlement with taxing authorities will occur for our unrecognized tax benefits due to the uncertainties related to these tax matters. Therefore, our liability for unrecognized tax benefits of $86.8 million, including interest and penalties, is not included in the table above.

 

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Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an on-going basis, we make and evaluate estimates and judgments, including those related to revenue recognition, capitalized software development costs, share-based compensation, goodwill and intangible assets, valuation of investments and accounting for income taxes. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances; the results of which form the basis for making judgments about amounts and timing of revenue and expenses, the carrying values of assets and the recorded amounts of liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. We have discussed the development and selection of the critical accounting policies with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed the related disclosures below.
Revenue Recognition
Software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-specific objective evidence (VSOE) of the fair value of undelivered elements exists. As substantially all of our software licenses are sold in multiple-element arrangements that include either maintenance or both maintenance and professional services, we use 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 the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as license revenue. We have established VSOE of the fair value of maintenance through independent maintenance renewals. These demonstrate a consistent relationship of pricing maintenance as a percentage of either the net license fee or the discounted or undiscounted license list price. VSOE of the fair value of professional services is established based on daily rates when sold on a stand-alone basis, as well as management approved pricing for certain new professional services offerings.
We are unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include multiple software products for which the associated maintenance pricing is based on a combination of undiscounted license list prices, net license fees or discounted license list prices. We are also unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include unlimited licensing rights and certain arrangements that contain rights to future unspecified software products as part of the maintenance offering. If VSOE of fair value of one or more undelivered elements does not exist, license revenue is deferred and recognized upon delivery of those elements or when VSOE of fair value exists for all remaining undelivered elements, or if the deferral is due to the factors described above, license revenue is recognized ratably over the longest expected delivery period of undelivered elements in the arrangement, which is typically the longest maintenance term.
In our time-based license agreements, we are unable to establish VSOE of fair value for undelivered maintenance elements because the contractual maintenance terms in these arrangements are the same duration as the license terms and VSOE of fair value of maintenance cannot be established. Accordingly, license fees in time-based license arrangements are recognized ratably over the term of the arrangements.
Maintenance revenue is recognized ratably over the terms of the maintenance arrangements, which primarily range from one to three years.
Professional services revenue, which principally relates to implementation, integration and training services associated with our products, is derived under both time-and-material and fixed fee arrangements and in most instances is recognized on a proportional performance basis based on hours. If no discernable customer deliverable exists until the completion of the professional services, we apply the completed performance method and defer the recognition of professional services revenue until completion of the services, which is typically evidenced by a signed completion letter from the customer. Services that are sold in connection with software license arrangements generally qualify for separate accounting from the license elements because they do not involve significant production, modification or customization of our products and are not otherwise considered to be essential to the functionality of such products. In arrangements where the professional services do not qualify for separate accounting from the license elements, the combined software license and professional services revenue are recognized based on contract accounting using either the percentage-of-completion or completed-contract method.
We also execute arrangements through resellers, distributors and systems integrators (collectively, channel partners) in which the channel partners act as the principals in the transactions with the end users of our products and services. In license arrangements with channel partners, title and risk of loss pass to the channel partners upon execution of our arrangements with them and the delivery of our products to the channel partner. We recognize revenue from transactions with channel partners on a net basis (the amount actually received by us from the channel partners) when all other revenue recognition criteria are satisfied. We do not offer right of return, product rotation or price protection to any of our channel partners.
Revenue from license and maintenance transactions that are financed are generally recognized in the same manner as those requiring current payment, as we have a history of offering installment contracts to customers and successfully enforcing original payment terms without making concessions. In arrangements where the fees are not considered to be fixed or determinable, we recognize revenue when payments become due under the arrangement. If we determine that a transaction is not probable of collection or a risk of concession exists, we do not recognize revenue in excess of the amount of cash received.

 

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We are required to charge certain taxes on our revenue transactions. These amounts are not included in revenue. Instead, we record a liability when the amounts are collected and relieve the liability when payments are made to the applicable government agency.
In our consolidated statements of operations, revenue is categorized as license, maintenance and professional services revenue. We allocate revenue from arrangements containing multiple elements to each of these categories based on the VSOE of fair value for elements in each revenue arrangement and the application of the residual method for arrangements in which we have established VSOE of fair value for all undelivered elements. In arrangements where we are not able to establish VSOE of fair value for all undelivered elements, we first allocate revenue to any undelivered elements for which VSOE of fair value has been established, then allocate revenue to any undelivered elements for which VSOE of fair value has not been established based upon management’s best estimate of fair value of those undelivered elements and apply a residual method to determine the license fee. Management’s best estimate of fair value of undelivered elements for which VSOE of fair value has not been established is based upon the VSOE of similar offerings and other objective criteria.
Capitalized Software Development Costs
Costs of internally developed software are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs are capitalized until the product is generally available to customers in accordance with relevant accounting standards. Judgment is involved in determining the point at which technological feasibility is reached. If different judgments were made, they could result in a different amount of costs that are capitalized. Capitalized software development costs are then amortized over the product’s estimated economic life beginning at the date of general availability of the product to our customers. We evaluate our capitalized software development costs at each balance sheet date to determine if the unamortized balance related to any given product exceeds the estimated net realizable value of that product. Any such excess is written off through accelerated amortization in the quarter in which it is identified. Determining net realizable value requires that we make estimates and use judgment in quantifying the appropriate amount to write off, if any. Actual amounts realized from the sales of software products could differ from our estimates. Also, any future changes to our product portfolio could result in significant increases to our cost of license revenue as a result of the write-off of capitalized software development costs.
Share-Based Compensation
Share-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.
We estimate the fair value of stock options and employee stock purchase plan shares using the Black-Scholes option pricing model. We use the intrinsic value at the date of grant as an estimate of fair value for nonvested stock units, and we utilize Monte Carlo simulation models to estimate the fair value of certain market-based nonvested stock units. The fair values of share-based awards determined on the date of grant using a fair value model are impacted by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility, the risk-free interest rate over the expected term of the awards and expected stock price volatilities of the NASDAQ-100 Index or a set of peer companies used in our Monte Carlo simulation models.
We estimate the volatility of our common stock by using a combination of historical volatility and implied volatility derived from market traded options for our stock, as we believe that the combined volatility is more representative of future stock price trends than either historical or implied volatility alone. We estimate the expected term of options granted using the simplified method allowed by relevant accounting standards, due to changes in vesting terms and contractual lives of our current options compared to our historical grants. We base the risk-free interest rate on zero-coupon yields implied from United States Treasury issues with maturities similar to the expected term of the options. We do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate prevesting option forfeitures and record share-based compensation expense for those awards that are expected to vest.
In addition, we estimate expected achievement of performance measures in determining the expected timing of vesting of our performance-based nonvested stock units.
We record deferred tax assets for share-based awards that we believe will result in deductions on our income tax returns, based on the amount of share-based compensation expense recognized and the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, such shortfalls reduce our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense.

 

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If we use different assumptions for estimating share-based compensation expense in future periods or if actual forfeitures differ materially from our estimated forfeitures, the amount of such expense recorded in future periods may differ significantly from what we have recorded in the current period.
Goodwill and Intangible Assets
When we acquire a business, a portion of the purchase price is typically allocated to acquired technology and other identifiable intangible assets, such as customer relationships. The excess of our cost over the fair value of the net tangible and identifiable intangible assets acquired is recorded as goodwill. The amounts allocated to acquired technology and other intangible assets represent our estimates of their fair values at the acquisition date. The fair values are primarily estimated using the expected present value of future cash flows method of applying the income approach, which requires us to project the related future revenue and expenses and apply an appropriate discount rate. We amortize the acquired technology and other intangible assets with finite lives over their estimated useful lives. All goodwill is tested for impairment annually or when events or changes in circumstances indicate that the fair value has been reduced below carrying value. When conducting impairment assessments, we are required to estimate future cash flows.
The estimates used in valuing all intangible assets are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. Accordingly, actual results may differ from the projected results used to determine fair value and to estimate useful lives. Incorrect estimates of fair value and/or useful lives could result in future impairment charges and those charges could be material to our results of operations.
Valuation of Investments
Our investments consist of debt and equity securities. We classify our investments in equity securities that have readily determinable fair values and all debt securities as held-to-maturity, available-for-sale or trading at acquisition and reevaluate such classification at each subsequent balance sheet date. We do not have any investments classified as held-to-maturity at March 31, 2011 or 2010. Our available-for-sale and trading securities are recorded at fair value in the consolidated balance sheets. Unrealized gains or losses on available-for-sale securities are recorded, net of tax, as a component of accumulated other comprehensive income (loss), unless an impairment is considered to be other-than-temporary. Other-than-temporary unrealized losses on available-for-sale securities are generally recorded in gain (loss) on investments, net, in the consolidated statements of operations unless certain criteria are met. In addition, unrealized gains and losses on trading securities and all realized gains and losses are recorded in gain (loss) on investments, net, in the consolidated statements of operations. We account for our investments in non-marketable equity securities where we do not have significant influence and that do not have a readily determinable fair value under the cost method of accounting. We regularly analyze our portfolio of available-for-sale and cost method investments for other-than-temporary declines in fair value. This analysis requires significant judgment as well as the use of estimates and assumptions. The primary factors considered when determining if a charge must be recorded because a decline in the fair value of an investment is other-than-temporary include whether: (i) the fair value of the investment is significantly below our cost basis; (ii) the financial condition of the issuer of the security has deteriorated; (iii) if a debt security, it is probable that we will be unable to collect all amounts due according to the contractual terms of the security; (iv) the decline in fair value has existed for an extended period of time; (v) if a debt security, such security has been downgraded by a rating agency; and (vi) whether we have the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. We have investment policies which are designed to ensure that our assets are invested in capital-preserving securities. However, from time to time, issuer-specific and market-specific events could warrant a write down for an other-than-temporary decline in fair value.
At March 31, 2011, we held auction rate securities with a par value of $29.8 million and an estimated fair value of $27.2 million. Our auction rate securities consist entirely of bonds issued by public agencies that are backed by student loans with at least a 97% guarantee by the federal government under the United States Department of Education’s Federal Family Education Loan Program. All of these bonds are currently rated investment grade by Moody’s or Standard and Poor’s. Auctions for these securities began failing in early 2008 and have continued to fail, resulting in our continuing to hold such securities and the issuers paying interest at the maximum contractual rates. We do not believe that any of the underlying issuers of these auction rate securities are presently at risk of default or that the underlying credit quality of the assets backing the auction rate security investments has been impacted by the reduced liquidity of these investments. Due to the illiquidity in the auction rate securities market caused by failed auctions, we estimated the fair value of these securities using internally developed models of the expected cash flows of the securities which incorporate assumptions about the cash flows of the underlying student loans and estimates of the rate of return required by investors, which includes an adjustment to reflect a lack of liquidity in the market for these securities.

 

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As the vast majority of our investments are investment-grade securities, we anticipate that any future impairment charges related to these investments will not have a material adverse effect on our financial position or results of operations. Investments in debt and equity securities with a fair value below our cost at March 31, 2011 are discussed in greater detail in Note 3 to the accompanying consolidated financial statements.
Accounting for Income Taxes
Income tax expense or benefit is recognized for the amount of taxes payable or refundable for the current year’s results and for deferred tax assets and liabilities related to the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities and the process of identifying items of revenue and expense that qualify for preferential tax treatment. We are subject to corporate income tax audits in multiple jurisdictions and our income tax expense includes amounts intended to satisfy income tax assessments that may result from the examination of our tax returns that have been filed in these jurisdictions. Although we believe that our estimates are reasonable, the final tax outcome of these matters could be different from that which is reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and net earnings in the period in which such determination is made.
Our effective tax rate includes the impact of certain undistributed foreign earnings for which no United States taxes have been provided because such earnings are planned to be indefinitely reinvested outside the United States. Remittances of foreign earnings to the United States are planned based on projected cash flow, working capital and investment needs of foreign and domestic operations. Based on these assumptions, we estimate the amount that will be distributed to the United States and provide United States federal taxes on these amounts. Material changes in our estimates could impact our effective tax rate.
In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income in those jurisdictions where the deferred tax assets are located. We consider future market growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period in which we make such determination.
Recently Adopted Accounting Pronouncements
In July 2010, the Financial Accounting Standards Board (FASB) issued new disclosure guidance related to finance receivables and the related allowances for credit losses. This guidance introduces a greater level of disaggregation based on the underlying characteristics of the finance receivables. The disclosure requirements include, based on the related disaggregation criteria, a rollforward of the allowance for credit losses and the related balance of the finance receivables, significant purchases and sales of finance receivables, and various qualitative disclosures including credit quality, aging, nonaccrual status and impairments. The new guidance was effective for us in the third quarter of fiscal 2011, and the applicable disclosures have been included in our consolidated financial statements, where material.
New Accounting Pronouncements Not Yet Adopted
In December 2010, the FASB issued updated guidance for intangible assets, specifically related to the goodwill impairment test. This guidance requires entities to perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired in situations where reporting units have a carrying value that is zero or negative. If the qualitative evaluation determines it is more likely than not that goodwill is impaired, step two of the goodwill impairment test is required to be performed to measure the amount of impairment, if any. The new guidance is effective for us beginning in fiscal 2012 and is not expected to have a material effect on our financial position, results of operations or cash flows.
In October 2009, the FASB issued new revenue recognition guidance for arrangements that include both software and non-software related deliverables. This guidance requires entities to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of VSOE or other third party evidence of the selling price. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us beginning in the first quarter of fiscal 2012 interim financial statements and is not expected to have a material effect on our financial position, results of operations or cash flows.

 

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ITEM 7A.  
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to a variety of risks, including foreign currency exchange rate fluctuations, the impact of changes in interest rates on our investments and long-term borrowings and changes in market prices of our debt and equity securities. In the normal course of business, we employ established policies and procedures to manage these risks including the use of derivative instruments.
The hypothetical changes noted in the sections immediately below are based on sensitivity analyses performed at March 31, 2011. Actual results could differ materially.
Foreign Currency Exchange Rate Risk
We use derivatives to hedge those current net assets and liabilities that, when re-measured in accordance with United States generally accepted accounting principles, impact our consolidated statement of operations. Foreign currency forward contracts are utilized in these hedging programs. All foreign currency forward contracts entered into by us are components of hedging programs and are entered into for the sole purpose of hedging an existing exposure, not for speculation or trading purposes. Gains and losses on these foreign currency forward contracts would generally be offset by corresponding gains and losses on the net foreign currency assets and liabilities that they hedge, with the goal of minimizing the net gains or losses overall on the hedged exposures. When hedging balance sheet exposures, all gains and losses on foreign currency forward contracts are recognized in other income (loss) in the same period as when the gains and losses on re-measurement of the foreign currency denominated assets and liabilities occur. All settlements of gains and losses related to foreign currency forward contracts are included in cash flows from operating activities in the consolidated statements of cash flows. Our hedging programs reduce, but do not always entirely eliminate, the impact of foreign currency exchange rate movements. If we did not hedge against foreign currency exchange rate movement, a hypothetical increase or decrease of 10% in exchange rates would result in a corresponding increase or decrease in earnings before taxes of approximately $4.1 million. This amount represents the impact of foreign currency exchange rate fluctuations on exposures at March 31, 2011 related to balance sheet re-measurement only and assumes that all currencies move in the same direction at the same time relative to the United States dollar.
We do not currently hedge currency risk related to anticipated revenue or expenses denominated in foreign currencies.

 

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The notional amounts at contract exchange rates of our foreign currency forward contracts outstanding were:
                 
    Notional Amount  
    March 31,  
    2011     2010  
    (In millions)  
 
               
Foreign Currency Forward Contracts (receive United States dollar/pay foreign currency)
               
Euro
  $ 158.5     $ 98.2  
Australian dollar
    13.9       15.4  
Chinese yuan renminbi
    7.6       4.6  
Brazilian real
    5.6       24.9  
British pound
    5.0        
South Korean won
    4.6       6.0  
Canadian dollar
    4.2       3.9  
New Zealand dollar
    2.9       4.5  
Swedish krona
    2.4       5.7  
Other
    8.3       7.7  
 
           
Total
  $ 213.0     $ 170.9  
 
           
 
               
Foreign Currency Forward Contracts (pay United States dollar/receive foreign currency)
               
 
               
Israeli shekel
  $ 151.6     $ 78.0  
Mexican peso
    9.3       1.5  
Indian rupee
    9.1       11.5  
Other
    2.2       4.5  
 
           
Total
  $ 172.2     $ 95.5  
 
           
Interest Rate Risk
We adhere to a conservative investment policy, whereby our principal concern is the preservation of liquid funds. Cash, cash equivalents and investments were approximately $1.8 billion at March 31, 2011, which consisted of $1.7 billion in cash and cash equivalents and the remaining balance consisted primarily of different types of investment-grade debt securities. Although our portfolio is subject to fluctuations in interest rates and market conditions, we classify most of our investments as “available-for-sale,” which provides that no gain or loss on any security would actually be recognized in earnings unless the instrument was sold or any loss in value was deemed to be other-than-temporary. Due to the current interest rate environment and the liquidity of our overall portfolio, any hypothetical decrease in annual interest rates would have an immaterial impact on earnings before taxes.
Market Risk
The carrying value and fair value of our Senior Notes at March 31, 2011, were $298.7 million and $348.9 million, respectively. The fair value was based upon market prices of our Senior Notes. If market interest rates increased by 100 basis points and assuming all other variables were held constant, we estimate the fair value of our Senior Notes would decrease by approximately $18.7 million.
At March 31, 2011, we held auction rate securities with a par value of $29.8 million and an estimated fair value of $27.2 million. For further information, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources. We may incur additional temporary unrealized losses or other-than-temporary impairments in the future if current market conditions were to persist and we no longer had the intent and ability to retain the auction rate securities for a period of time sufficient to allow for any recovery in fair value.

 

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ITEM 8.  
Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this Report. See Item 15. Exhibits and Financial Statement Schedules.
ITEM 9.  
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A.  
Controls and Procedures
Disclosure Controls and Procedures
Based on management’s evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act), are effective.
Changes in Internal Control over Financial Reporting
There was no change to our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 and Rule 15d-15 under the Exchange Act that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.
Management assessed our internal control over financial reporting as of March 31, 2011, the end of our fiscal year. Management based its assessment on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies and our overall control environment.
Based on our assessment, management has concluded that our internal control over financial reporting was effective as of March 31, 2011, the end of our fiscal year. We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
The effectiveness of our internal control over financial reporting at March 31, 2011 has been audited by Ernst & Young LLP, the independent registered public accounting firm who has also audited our consolidated financial statements. Ernst & Young LLP’s report on our internal control over financial reporting is included below.

 

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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of BMC Software, Inc.
We have audited the internal control over financial reporting of BMC Software, Inc. (the “Company”) 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 (the “COSO criteria”). The Company’s management is responsible 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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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 Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of March 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows of the Company for each of the three years in the period ended March 31, 2011, and our report dated May 5, 2011 expressed an unqualified opinion thereon.
     
/s/ Ernst & Young LLP
Houston, Texas
May 5, 2011

 

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ITEM 9B.  
Other Information
None.
PART III
ITEM 10.  
Directors, Executive Officers and Corporate Governance
The information required by this item will be included in our definitive Proxy Statement in connection with our 2011 Annual Meeting of Stockholders (the 2011 Proxy Statement), which will be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2011, under the headings “Proposal One: Election of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.
ITEM 11.  
Executive Compensation
The information required by this item will be set forth in the 2011 Proxy Statement under the headings “Compensation of Directors,” “Compensation Discussion and Analysis,” “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” and is incorporated herein by reference.
ITEM 12.  
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in the 2011 Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management” and “Equity Compensation Plans” and is incorporated herein by reference.
ITEM 13.  
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in the 2011 Proxy Statement under the headings “Independence of Directors” and “Related Person Transactions and Procedures” and is incorporated herein by reference.
ITEM 14.  
Principal Accountant Fees and Services
The information required by this item will be set forth in the 2011 Proxy Statement under the heading “Fees Paid to Ernst & Young” and is incorporated herein by reference.

 

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PART IV
ITEM 15.  
Exhibits and Financial Statement Schedules
Documents filed as a part of this Report
1. The following consolidated financial statements of BMC Software, Inc. and subsidiaries and the related reports of the independent registered public accounting firm are filed herewith:
2. All schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or notes thereto.
3. The following Exhibits are filed with this Report or incorporated by reference as set forth below:
             
Exhibit        
Number        
           
 
  3.1      
Restated Certificate of Incorporation, as amended, of the Company; incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
           
 
  3.2      
Amended and Restated Bylaws of the Company; incorporated by reference to Exhibit 3.4 to our Current Report on Form 8-K filed November 12, 2010.
           
 
  4.1      
Indenture, dated at June 4, 2008, between BMC Software, Inc. and Wells Fargo Bank, N.A., as trustee; incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed June 4, 2008.
           
 
  4.2      
Supplemental Indenture, dated at June 4, 2008, between BMC Software, Inc. and Wells Fargo Bank, N.A., as trustee, including the form of the 7.25% Note due 2018; incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed June 4, 2008.
           
 
  10.1 (a)    
BMC Software, Inc. 1994 Employee Incentive Plan (conformed version inclusive of amendments); incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
           
 
  10.1 (b)    
Second Amendment to the BMC Software, Inc. 1994 Employee Incentive Plan; incorporated by reference to Exhibit 10.1(b) to our Annual Report on Form 10-K for the year ended March 31, 2009 (the 2009 10-K).

 

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Exhibit        
Number        
           
 
  10.2 (a)    
BMC Software, Inc. 1994 Non-employee Directors’ Stock Option Plan; incorporated by reference to Exhibit 10.8(a) to our Annual Report on Form 10-K for the year ended March 31, 1995 (the 1995 10-K).
           
 
  10.2 (b)    
Form of Stock Option Agreement employed under BMC Software, Inc. 1994 Non-employee Directors’ Stock Option Plan; incorporated by reference to Exhibit 10.8(b) to the 1995 10-K.
           
 
  10.3      
Form of Indemnification Agreement among the Company and its directors and executive officers; incorporated by reference to Exhibit 10.11 to the 1995 10-K.
           
 
  10.4      
BMC Software, Inc. 2000 Employee Stock Incentive Plan (conformed version inclusive of amendments); incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
           
 
  10.5      
Amended and Restated BMC Software, Inc. Executive Deferred Compensation Plan; incorporated by reference to Exhibit 10.5(d) to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
           
 
  10.6      
Executive Employment Agreement between BMC Software, Inc. and Robert E. Beauchamp; incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed November 24, 2008.
           
 
  10.7      
BMC Software, Inc. 2002 Nonemployee Director Stock Option Plan; incorporated by reference to Appendix B to our 2002 Proxy Statement filed with the SEC on Schedule 14A.
           
 
  10.8      
BMC Software, Inc. 2002 Employee Incentive Plan (conformed version inclusive of amendments); incorporated by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
           
 
  10.9      
BMC Software, Inc. Short-term Incentive Performance Award Program (as amended and restated); incorporated by reference to Exhibit 10.10 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
           
 
  10.10      
BMC Software, Inc. Long-term Incentive Performance Award Program (as amended and restated); incorporated by reference to Exhibit 10.11 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
           
 
  10.11      
Executive Employment Agreement between BMC Software, Inc. and Stephen B. Solcher; incorporated by reference to Exhibit 10.12 to our Current Report on Form 8-K filed November 24, 2008.
           
 
  10.12      
BladeLogic, Inc. 2007 Stock Option and Incentive Plan; incorporated by reference to Exhibit 10.5 to the BladeLogic, Inc. Registration Statement on Form S-1 (Registration No. 333-141915).
           
 
  10.13      
First Amendment to BladeLogic, Inc. 2007 Stock Option and Incentive Plan; incorporated by reference to Exhibit 10.34(b) to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
           
 
  10.14      
Executive Employment Agreement between BMC Software, Inc. and Denise M. Clolery; incorporated by reference to Exhibit 10.16 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.

 

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Exhibit        
Number        
           
 
  10.15      
Form of Stock Option Award Agreement employed under BladeLogic, Inc. 2007 Stock Option and Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.19 to the 2009 10-K.
           
 
  10.16      
Form of Performance-Based Restricted Stock Award Agreement employed under BMC Software, Inc. 1994 Employee Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.20 to our Current Report on Form 8-K filed on June 12, 2006.
           
 
  10.17      
Form of Restricted Stock Unit Award Agreement employed under BladeLogic, Inc. 2007 Stock Option and Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.21 to the 2009 10-K.
           
 
  10.18      
Executive Employment Agreement between BMC Software, Inc. and William Miller; incorporated by reference to Exhibit 10.22 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
           
 
  10.19      
Form of Stock Option Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007.
           
 
  10.20      
Form of Performance-Based Restricted Stock Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.24 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2007.
           
 
  10.21      
Form of Time-Based Restricted Stock Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.25 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2007.
           
 
  10.22      
Executive Employment Agreement between BMC Software, Inc. and Hollie S. Castro; incorporated by reference to Exhibit 10.17 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
           
 
  10.23      
Form of Performance-Based Restricted Stock Unit Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.28 to our Current Report on Form 8-K filed June 12, 2008.
           
 
  10.24      
Form of Time-Based Restricted Stock Unit Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.29 to our Current Report on Form 8-K filed June 12, 2008.
           
 
  10.25      
Performance-Based Restricted Stock Unit Award Agreement for Robert E. Beauchamp; incorporated by reference to Exhibit 10.30 to our Current Report on Form 8-K filed August 20, 2008.
           
 
  10.26      
BMC Software, Inc. 2007 Incentive Plan (as amended); incorporated by reference to Annex A to our Definitive Proxy Statement on Schedule 14A dated June 24, 2009.

 

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Exhibit        
Number        
           
 
  10.27      
Amendment to Executive Employment Agreement between BMC Software, Inc. and Robert E. Beauchamp; incorporated by reference to Exhibit 10.34 to our Current Report on Form 8-K filed May 3, 2010.
           
 
  10.28      
Amendment to Executive Employment Agreement between BMC Software, Inc. and Stephen B. Solcher; incorporated by reference to Exhibit 10.35 to our Current Report on Form 8-K filed May 3, 2010.
           
 
  10.29      
Amendment to Executive Employment Agreement between BMC Software, Inc. and William D. Miller; incorporated by reference to Exhibit 10.38 to our Current Report on Form 8-K filed May 3, 2010.
           
 
  10.30      
Form of Performance-based market stock unit award agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.41 to our Current Report on Form 8-K filed December 9, 2010.
           
 
  10.31      
Credit Agreement Dated as of November 30, 2010; incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2010.
           
 
  *21.1      
Subsidiaries of the Company.
           
 
  *23.1      
Consent of Independent Registered Public Accounting Firm.
           
 
  *31.1      
Certification of Chief Executive Officer of BMC Software, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
           
 
  *31.2      
Certification of Chief Financial Officer of BMC Software, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
           
 
  *32.1      
Certification of Chief Executive Officer of BMC Software, Inc. pursuant to 18 U.S.C. Section 1350.
           
 
  *32.2      
Certification of Chief Financial Officer of BMC Software, Inc. pursuant to 18 U.S.C. Section 1350.
           
 
  *101.INS    
XBRL Instance Document.
           
 
  *101.SCH    
XBRL Taxonomy Extension Schema Document.
           
 
  *101.CAL    
XBRL Taxonomy Extension Calculation Linkbase Document.
           
 
  *101.LAB    
XBRL Taxonomy Extension Label Linkbase Document.
           
 
  *101.PRE    
XBRL Taxonomy Extension Presentation Linkbase Document.
           
 
  *101.DEF    
XBRL Taxonomy Extension Definition Linkbase Document.
 
     
*  
Filed herewith

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of BMC Software, Inc.
We have audited the accompanying consolidated balance sheets of BMC Software, Inc. (the “Company”) as of March 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended March 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at March 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2011, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’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, and our report dated May 5, 2011 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Houston, Texas
May 5, 2011

 

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BMC SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value data)
                 
    March 31,  
    2011     2010  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 1,660.9     $ 1,368.6  
Short-term investments
    27.8       65.5  
Trade accounts receivable, net
    284.1       212.3  
Trade finance receivables, net
    112.6       117.7  
Deferred tax assets
    65.1       53.7  
Other current assets
    116.9       87.2  
 
           
Total current assets
    2,267.4       1,905.0  
Property and equipment, net
    94.2       95.0  
Software development costs, net
    193.8       145.5  
Long-term investments
    67.8       62.4  
Long-term trade finance receivables, net
    110.8       122.6  
Intangible assets, net
    100.9       158.8  
Goodwill
    1,407.0       1,365.6  
Other long-term assets
    243.5       282.7  
 
           
Total assets
  $ 4,485.4     $ 4,137.6  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Trade accounts payable
  $ 30.8     $ 37.5  
Finance payables
    16.6       23.0  
Accrued liabilities
    316.0       307.4  
Deferred revenue
    1,026.9       975.9  
 
           
Total current liabilities
    1,390.3       1,343.8  
Long-term deferred revenue
    928.6       847.2  
Long-term borrowings
    335.6       340.9  
Other long-term liabilities
    168.0       218.0  
 
           
Total liabilities
    2,822.5       2,749.9  
 
           
Commitments and contingencies (Note 12)
               
Stockholders’ equity
               
Preferred stock, $.01 par value, 1.0 shares authorized, none issued and outstanding
           
Common stock, $.01 par value, 600.0 shares authorized, 249.1 shares issued
    2.5       2.5  
Additional paid-in capital
    1,077.4       965.4  
Retained earnings
    2,845.2       2,389.3  
Accumulated other comprehensive income
    32.0       5.4  
 
           
 
    3,957.1       3,362.6  
Treasury stock, at cost (71.9 and 67.2 shares)
    (2,294.2 )     (1,974.9 )
 
           
Total stockholders’ equity
    1,662.9       1,387.7  
 
           
Total liabilities and stockholders’ equity
  $ 4,485.4     $ 4,137.6  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

 

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BMC SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
                         
    Year Ended March 31,  
    2011     2010     2009  
Revenue:
                       
License
  $ 864.5     $ 758.4     $ 709.7  
Maintenance
    1,024.2       1,023.7       1,017.8  
Professional services
    176.6       129.1       144.4  
 
                 
Total revenue
    2,065.3       1,911.2       1,871.9  
 
                 
Operating expenses:
                       
Cost of license revenue
    129.8       115.5       117.1  
Cost of maintenance revenue
    169.4       158.3       166.3  
Cost of professional services revenue
    184.4       137.4       141.6  
Selling and marketing expenses
    608.1       556.2       541.5  
Research and development expenses
    176.5       195.6       222.0  
General and administrative expenses
    216.4       206.4       197.7  
In-process research and development
                50.3  
Amortization of intangible assets
    33.6       32.7       34.1  
Severance, exit costs and related charges
    14.3       3.0       33.5  
 
                 
Total operating expenses
    1,532.5       1,405.1       1,504.1  
 
                 
Operating income
    532.8       506.1       367.8  
 
                 
Other income (loss), net:
                       
Interest and other income, net
    15.5       15.9       26.5  
Interest expense
    (19.8 )     (21.3 )     (17.0 )
Gain (loss) on investments, net
    2.8       3.5       (13.4 )
 
                 
Total other income (loss), net
    (1.5 )     (1.9 )     (3.9 )
 
                 
Earnings before income taxes
    531.3       504.2       363.9  
Provision for income taxes
    75.1       98.1       125.8  
 
                 
Net earnings
  $ 456.2     $ 406.1     $ 238.1  
 
                 
Basic earnings per share
  $ 2.55     $ 2.21     $ 1.27  
 
                 
Diluted earnings per share
  $ 2.50     $ 2.17     $ 1.25  
 
                 
Shares used in computing basic earnings per share
    178.7       183.1       187.1  
 
                 
Shares used in computing diluted earnings per share
    182.4       186.8       190.2  
 
                 
The accompanying notes are an integral part of these consolidated financial statements.

 

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BMC SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
Years Ended March 31, 2011, 2010 and 2009
(In millions)
                                                                 
                                    Accumulated Other              
                                    Comprehensive Income (Loss)              
                                            Unrealized              
                                            Gain (Loss)              
                                    Foreign     on Securities              
    Common             Additional             Currency     Available for     Treasury     Total  
    Stock             Paid-in     Retained     Translation     Sale, Net of     Stock, at     Stockholders’  
    Shares     Amount     Capital     Earnings     Adjustment     Taxes     Cost     Equity  
Balance, March 31, 2008
    249.1     $ 2.5     $ 786.7     $ 1,753.1     $ 22.5     $ (2.8 )   $ (1,567.5 )   $ 994.5  
 
                                               
Comprehensive income:
                                                               
Net earnings
                      238.1                         238.1  
Foreign currency translation adjustment, net of taxes of $9.5
                            (39.9 )                 (39.9 )
Unrealized loss on securities available for sale, net of taxes of $4.2
                                  (10.7 )           (10.7 )
Realized gain on securities available for sale, net of taxes of $0.3
                                  5.4             5.4  
 
                                                             
Total comprehensive income
                                                    .       192.9  
 
                                                             
Treasury stock purchases
                                        (346.2 )     (346.2 )
Shares issued/forfeited for share-based compensation
                (9.8 )     (5.8 )                 118.6       103.0  
Share-based compensation expense
                81.0                               81.0  
Tax benefit of share-based compensation expense
                23.3                               23.3  
 
                                               
Balance, March 31, 2009
    249.1     $ 2.5     $ 881.2     $ 1,985.4     $ (17.4 )   $ (8.1 )   $ (1,795.1 )   $ 1,048.5  
 
                                               
Comprehensive income:
                                                               
Net earnings
                      406.1                         406.1  
Foreign currency translation adjustment, net of taxes of $8.4
                            27.8                   27.8  
Unrealized gain on securities available for sale, net of taxes of $1.4
                                  3.1             3.1  
 
                                                             
Total comprehensive income
                                                            437.0  
 
                                                             
Treasury stock purchases
                                        (288.1 )     (288.1 )
Shares issued/forfeited for share-based compensation
                (16.9 )     (2.2 )                 108.3       89.2  
Share-based compensation expense
                89.3                               89.3  
Tax benefit of share-based compensation expense
                11.8                               11.8  
 
                                               
Balance, March 31, 2010
    249.1     $ 2.5     $ 965.4     $ 2,389.3     $ 10.4     $ (5.0 )   $ (1,974.9 )   $ 1,387.7  
 
                                               
Comprehensive income:
                                                               
Net earnings
                      456.2                         456.2  
Foreign currency translation adjustment, net of taxes of $9.7
                            24.1                   24.1  
Unrealized gain on securities available for sale, net of taxes of $0.6
                                  2.5             2.5  
 
                                                             
Total comprehensive income
                                                            482.8  
 
                                                             
Treasury stock purchases
                                        (464.1 )     (464.1 )
Shares issued/forfeited for share-based compensation
                (14.4 )     (0.3 )                 144.8       130.1  
Share-based compensation expense
                109.2                               109.2  
Tax benefit of share-based compensation expense
                17.2                               17.2  
 
                                               
Balance, March 31, 2011
    249.1     $ 2.5     $ 1,077.4     $ 2,845.2     $ 34.5     $ (2.5 )   $ (2,294.2 )   $ 1,662.9  
 
                                               
The accompanying notes are an integral part of these consolidated financial statements.

 

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BMC SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
                         
    Year Ended March 31,  
    2011     2010     2009  
Cash flows from operating activities:
                       
Net earnings
  $ 456.2     $ 406.1     $ 238.1  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                       
In-process research and development
                50.3  
Depreciation and amortization
    190.0       175.8       182.8  
Deferred income tax provision
    40.9       28.2       3.1  
Share-based compensation expense
    106.5       88.9       82.0  
Loss (gain) on investments, net
    (2.8 )     (3.5 )     13.4  
Changes in operating assets and liabilities, net of acquisitions:
                       
Trade accounts receivable
    (70.5 )     7.9       17.3  
Trade finance receivables
    22.9       (47.8 )     (46.2 )
Prepaid and other current assets
    (19.9 )     (1.2 )     5.2  
Other long-term assets
    (6.5 )     (3.8 )     5.2  
Accrued and other current liabilities
    (30.2 )     (7.0 )     28.8  
Deferred revenue
    132.0       30.5       0.8  
Other long-term liabilities
    (33.6 )     9.0       (15.2 )
Other operating assets and liabilities
    (19.8 )     (47.7 )     14.1  
 
                 
Net cash provided by operating activities
    765.2       635.4       579.7  
 
                 
Cash flows from investing activities:
                       
Proceeds from maturities of investments
    50.0       360.8       79.8  
Proceeds from sales of investments
    47.8       9.2       114.4  
Purchases of investments
    (57.6 )     (333.8 )     (173.5 )
Cash paid for acquisitions, net of cash acquired, and other investments
    (51.0 )     (92.3 )     (783.7 )
Capitalization of software development costs
    (115.8 )     (81.0 )     (67.3 )
Purchases of property and equipment
    (22.0 )     (22.1 )     (28.0 )
Other investing activities
    1.0       (0.1 )     6.4  
 
                 
Net cash used in investing activities
    (147.6 )     (159.3 )     (851.9 )
 
                 
Cash flows from financing activities:
                       
Treasury stock acquired
    (439.0 )     (275.1 )     (330.0 )
Repurchases of stock to satisfy employee tax withholding obligations
    (25.1 )     (13.0 )     (16.2 )
Proceeds from stock options exercised and other
    130.2       89.2       101.8  
Excess tax benefit from share-based compensation expense
    18.6       13.7       24.1  
Repayments of borrowings and capital lease obligations
    (23.7 )     (15.5 )     (17.9 )
Payments of debt issuance costs
    (1.9 )            
Proceeds from borrowings
          42.0       295.6  
 
                 
Net cash provided by (used in) financing activities
    (340.9 )     (158.7 )     57.4  
 
                 
Effect of exchange rate changes on cash and cash equivalents
    15.6       27.9       (50.2 )
 
                 
Net change in cash and cash equivalents
    292.3       345.3       (265.0 )
Cash and cash equivalents, beginning of period
    1,368.6       1,023.3       1,288.3  
 
                 
Cash and cash equivalents, end of period
  $ 1,660.9     $ 1,368.6     $ 1,023.3  
 
                 
Supplemental disclosure of cash flow information:
                       
Cash paid for interest
  $ 23.0     $ 23.0     $ 11.7  
Cash paid for income taxes, net of amounts refunded
  $ 107.4     $ 89.8     $ 69.3  
The accompanying notes are an integral part of these consolidated financial statements.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Nature of Operations
BMC Software, Inc. (collectively, we, us, our, the Company or BMC) develops software that provides system and service management solutions primarily for large enterprises. We market and sell our products in most major world markets directly through our sales force and indirectly through channel partners, including resellers, distributors and systems integrators. We also provide maintenance and support for our products and perform software implementation, integration and education services for our customers.
Basis of Presentation
The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have evaluated subsequent events through the date the financial statements were issued. Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
We consider investments with an original maturity of ninety days or less when purchased to be cash equivalents. At March 31, 2011 and 2010, our cash equivalents were comprised primarily of money-market funds and United States Treasury securities. Our cash equivalents are subject to potential credit risk. Our cash management and investment policies restrict investments to investment grade, highly liquid securities. The carrying value of cash and cash equivalents approximates fair value.
Investments
We classify our investments in equity securities that have readily determinable fair values and all debt securities as held-to-maturity, available-for-sale or trading at acquisition and reevaluate such classification at each subsequent balance sheet date. We do not have any investments classified as held-to-maturity at March 31, 2011 or 2010. Our available-for-sale and trading securities are recorded at fair value in the consolidated balance sheets. Unrealized gains and losses on available-for-sale securities are recorded, net of tax, as a component of accumulated other comprehensive income (loss), unless impairment is considered to be other-than-temporary. Other-than-temporary unrealized losses on available-for-sale securities are generally recorded in gain (loss) on investments, net, in the consolidated statements of operations unless certain criteria are met. The primary factors considered when determining if a charge must be recorded because a decline in the fair value of an investment is other-than-temporary include whether: (i) the fair value of the investment is significantly below our cost basis; (ii) the financial condition of the issuer of the security has deteriorated; (iii) if a debt security, it is probable that we will be unable to collect all amounts due according to the contractual terms of the security; (iv) the decline in fair value has existed for an extended period of time; (v) if a debt security, such security has been downgraded by a rating agency; and (vi) whether we have the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. In addition, unrealized gains and losses on trading securities and all realized gains and losses are recorded in gain (loss) on investments, net, in the consolidated statements of operations. Realized and unrealized gains and losses are calculated using the specific identification method. Investments with maturities of twelve months or less are classified as short-term investments. Investments with maturities of more than twelve months are classified as long-term investments.
We account for investments in non-marketable equity securities in which we do not have significant influence and that do not have a readily determinable fair value under the cost method of accounting. These investments are included in other long-term assets. In fiscal 2009, we recorded an $8.4 million impairment charge in connection with the write-down of certain non-marketable equity investments to their estimated fair values.
Refer to Note 3 for further information regarding auction rate securities held by us.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Receivables
In the ordinary course of business, we extend credit to our customers on both trade and financed terms. Trade and finance receivables are recorded at their outstanding principal balances, adjusted for interest receivable to date, if applicable, and adjusted by the allowance for doubtful accounts. Interest income on finance receivables is recognized using the effective interest method and is presented as interest and other income, net, in the consolidated statements of operations. Interest income on these finance receivables was $10.4 million, $11.4 million and $9.6 million in fiscal 2011, 2010 and 2009, respectively. In estimating the allowance for doubtful accounts, we consider the length of time receivable balances have been outstanding, historical collection experience, current economic conditions and customer-specific information. When we ultimately conclude that a receivable is uncollectible, the balance is charged against the allowance for doubtful accounts. At March 31, 2011 and 2010, the allowance for doubtful trade accounts receivable was $3.6 million and $2.2 million and the allowance for doubtful trade finance receivables was $0.5 million and $0.4 million, respectively. During fiscal 2011, 2010 and 2009, the provision (recovery) for bad debts was $1.7 million, $(0.3) million and $3.8 million and the amounts charged against the allowance for doubtful accounts were $0.2 million, $1.3 million and $2.9 million, respectively.
Long-Lived Assets
Property and Equipment
Property and equipment are stated at cost. Depreciation on property and equipment, with the exception of leasehold improvements, is recorded using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are depreciated using the straight-line method over the shorter of the lease term or the estimated respective useful lives of the assets, which range from three to ten years.
Costs incurred to develop internal-use software during the application development stage are capitalized, stated at cost, and amortized using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized, whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred.
Software Development Costs
Costs of software developed internally for licensing to third parties are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs incurred through the general release of the software products are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized software development costs are amortized on a straight-line basis over the products’ respective estimated economic lives, which are typically three years. The amortization of capitalized software development costs, including any amounts accelerated for products that are not expected to generate sufficient future revenue to realize their carrying values, is included in cost of license revenue in the consolidated statements of operations. During fiscal 2011, 2010 and 2009, amounts capitalized were $124.0 million, $85.9 million and $72.5 million, respectively, and amounts amortized were $75.7 million, $63.1 million and $62.9 million, respectively. The change in foreign currency exchange rates had no impact during fiscal 2011 but increased (decreased) capitalized software development costs by $0.1 million and $(0.4) million, during fiscal 2010 and 2009, respectively. Amounts capitalized during fiscal 2011, 2010 and 2009 included $4.4 million, $2.3 million and $1.7 million, respectively, of capitalized interest; and approximately $8.2 million, $4.9 million and $5.2 million, respectively, of share-based compensation costs.
Intangible Assets
Intangible assets consist principally of acquired technology and customer relationships recorded in connection with our business combinations. The amounts allocated to these intangible assets represent our estimates of their fair values at the acquisition date. The fair values are primarily estimated using the expected present value of future cash flows method of applying the income approach. Intangible assets are stated at cost and amortized on a straight-line basis over their respective estimated economic lives ranging from one to four years.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including identifiable intangible assets, in connection with our business combinations. Upon acquisition, goodwill is assigned to the reporting unit that is expected to benefit from the synergies of the business combination, which is the reporting unit to which the related acquired technology is assigned. A reporting unit is the operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. Each of our business segments is considered a reporting unit. We test goodwill for impairment as of January 1 of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our impairment test is based on a comparison of the estimated fair value of the reporting units, determined using a combination of the income and market approaches on an invested capital basis, to their respective carrying values (including goodwill) as of the date of the impairment test.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment
In addition to our goodwill impairment testing, as noted above, we also review our other long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its estimated fair value.
Foreign Currency Translation and Risk Management
We operate globally and transact business in various foreign currencies. The functional currency for many of our foreign subsidiaries is the respective local currency. Financial statements of these foreign operations are translated into United States dollars using the currency exchange rates in effect at the balance sheet dates. Revenue and expenses of these subsidiaries are translated using rates that approximate those in effect during the period. Translation adjustments are included in accumulated other comprehensive income (loss) within stockholders’ equity. The substantial majority of our revenue derived from customers outside of the United States is billed in local currencies from regional headquarters, for which the functional currency is the United States dollar. Foreign currency transaction gains or losses are included in interest and other income, net.
To minimize the risk from changes in foreign currency exchange rates, we have established a program that utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Gains or losses on our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts entered into under this program. Our foreign currency exposures relate primarily to certain foreign currency denominated assets and liabilities. Our foreign currency forward contracts generally have terms of one month or less and are entered into at the prevailing market exchange rate at the end of each month. We do not use foreign currency forward contracts for speculative purposes. While these foreign currency forward contracts are utilized to hedge foreign currency exposures, they are not formally designated as hedges for accounting purposes, and therefore, the changes in the fair values of these contracts are recognized currently in earnings. We record these foreign currency forward contracts at fair value as either assets or liabilities depending on the net settlement position of the foreign currency forward contracts with each respective counterparty at the balance sheet date. All settlements of gains and losses related to the foreign currency forward contracts are included in cash flow from operating activities in the consolidated statements of cash flows.
Revenue Recognition
Software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-specific objective evidence (VSOE) of the fair value of undelivered elements exists. As substantially all of our software licenses are sold in multiple-element arrangements that include either maintenance or both maintenance and professional services, we use 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 the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as license revenue. We have established VSOE of the fair value of maintenance through independent maintenance renewals. These demonstrate a consistent relationship of pricing maintenance as a percentage of either the net license fee or the discounted or undiscounted license list price. VSOE of the fair value of professional services is established based on daily rates when sold on a stand-alone basis, as well as management approved pricing for certain new professional services offerings.
We are unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include multiple software products for which the associated maintenance pricing is based on a combination of undiscounted license list prices, net license fees or discounted license list prices. We are also unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include unlimited licensing rights and certain arrangements that contain rights to future unspecified software products as part of the maintenance offering. If VSOE of fair value of one or more undelivered elements does not exist, license revenue is deferred and recognized upon delivery of those elements or when VSOE of fair value exists for all remaining undelivered elements, or if the deferral is due to the factors described above, license revenue is recognized ratably over the longest expected delivery period of undelivered elements in the arrangement, which is typically the longest maintenance term.
In our time-based license agreements, we are unable to establish VSOE of fair value for undelivered maintenance elements because the contractual maintenance terms in these arrangements are the same duration as the license terms, and VSOE of fair value of maintenance cannot be established. Accordingly, license fees in time-based license arrangements are recognized ratably over the term of the arrangements.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maintenance revenue is recognized ratably over the terms of the maintenance arrangements, which primarily range from one to three years.
Professional services revenue, which principally relates to implementation, integration and education services associated with our products, is derived under both time-and-material and fixed fee arrangements and in most instances is recognized on a proportional performance basis based on hours. If no discernable customer deliverable exists until the completion of the professional services, we apply the completed performance method and defer the recognition of professional services revenue until completion of the services, which is typically evidenced by a signed completion letter from the customer. Services that are sold in connection with software license arrangements generally qualify for separate accounting from the license elements because they do not involve significant production, modification or customization of our products and are not otherwise considered to be essential to the functionality of such products. In arrangements where the professional services do not qualify for separate accounting from the license elements, the combined software license and professional services revenue are recognized based on contract accounting using either the percentage-of-completion or completed-contract method.
We also execute arrangements through resellers, distributors and systems integrators (collectively, channel partners) in which the channel partners act as the principals in the transactions with the end users of our products and services. In license arrangements with channel partners, title and risk of loss pass to the channel partners upon execution of our arrangements with them and the delivery of our products to the channel partner. We recognize revenue from transactions with channel partners when all other revenue recognition criteria are satisfied. We do not offer right of return, product rotation or price protection to any of our channel partners.
Revenue from license and maintenance transactions that are financed are generally recognized in the same manner as those requiring current payment, as we have a history of offering installment contracts to customers and successfully enforcing original payment terms without making concessions. In arrangements where the fees are not considered to be fixed or determinable, we recognize revenue when payments become due under the arrangement. If we determine that a transaction is not probable of collection or a risk of concession exists, we do not recognize revenue in excess of the amount of cash received.
We are required to charge certain taxes on our revenue transactions. These amounts are not included in revenue. Instead, we record a liability when the amounts are collected and relieve the liability when payments are made to the applicable government agency.
In our consolidated statements of operations, revenue is categorized as license, maintenance and professional services revenue. We allocate revenue from arrangements containing multiple elements to each of these categories based on the VSOE of fair value for elements in each revenue arrangement and the application of the residual method for arrangements in which we have established VSOE of fair value for all undelivered elements. In arrangements where we are not able to establish VSOE of fair value for all undelivered elements, we first allocate revenue to any undelivered elements for which VSOE of fair value has been established, then allocate revenue to any undelivered elements for which VSOE of fair value has not been established based upon management’s best estimate of fair value of those undelivered elements and apply a residual method to determine the license fee. Management’s best estimate of fair value of undelivered elements for which VSOE of fair value has not been established is based upon the VSOE of similar offerings and other objective criteria.
Cost of License and Maintenance Revenue
Cost of license revenue is primarily comprised of the amortization of capitalized software development costs for internally developed products, the amortization of acquired technology for products acquired through business combinations, license-based royalties to third parties and production and distribution costs for initial product licenses.
Cost of maintenance revenue is primarily comprised of the costs associated with the customer support and research and development personnel that provide maintenance, enhancement and support services to our customers.
Sales Commissions
We pay commissions, including sales bonuses, to our direct sales force related to revenue transactions under sales compensation plans established annually. We defer the portion of commissions that are direct and incremental costs of the license and maintenance revenue arrangements and recognize them as selling and marketing expenses in the consolidated statements of operations over the terms of the related customer contracts, in proportion to the recognition of the associated revenue. The commission payments are typically paid in full in the month following execution of the customer contracts. Deferred commissions as of March 31, 2011 and 2010 were $78.7 million and $61.6 million, respectively.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Share-Based Compensation
Share-based compensation expense for share-based awards is recognized only for those awards that are expected to vest. We use the straight-line attribution method to allocate share-based compensation expense over the requisite service period of the award.
Refer to Note 9 for further information regarding share-based compensation.
Recently Adopted Accounting Pronouncements
In July 2010, the Financial Accounting Standards Board (FASB) issued new disclosure guidance related to finance receivables and the related allowances for credit losses. This guidance introduces a greater level of disaggregation based on the underlying characteristics of the finance receivables. The disclosure requirements include, based on the related disaggregation criteria, a rollforward of the allowance for credit losses and the related balance of the finance receivables, significant purchases and sales of finance receivables, and various qualitative disclosures including credit quality, aging, nonaccrual status and impairments. The new guidance was effective for us in the third quarter of fiscal 2011, and the applicable disclosures have been included in our consolidated financial statements, where material.
(2) Business Combinations
Fiscal 2011 Acquisitions
During fiscal 2011, we completed the acquisition of the software business of Neptuny S.r.l., a provider of continuous capacity optimization software, and the acquisition of GridApp Systems, Inc., a provider of comprehensive database provisioning, patching and administration software, for combined purchase consideration of $51.5 million. The purchase consideration was allocated to acquired assets and assumed liabilities consisting primarily of $20.7 million of acquired technology, with weighted average economic lives of approximately three years, in addition to other tangible assets and liabilities. These acquisitions resulted in a preliminary allocation of $34.2 million to goodwill assigned to our Enterprise Service Management (ESM) segment. The operating results of the acquired companies have been included in our consolidated financial statements since the respective acquisition dates. Pro forma information is not included because the acquired companies’ operations would not have materially impacted our consolidated operating results.
Fiscal 2010 Acquisitions
During fiscal 2010, we completed the acquisitions of MQSoftware, Inc., a provider of middleware and enterprise application transaction management software, Tideway Systems Limited, a provider of IT discovery solutions, and Phurnace Software, Inc., a developer of software that automates the deployment and configuration of business-critical Java EE applications, for combined purchase consideration of $94.3 million. The purchase consideration was allocated to acquired assets and assumed liabilities under the current accounting requirements for business combinations adopted April 1, 2009, consisting primarily of approximately $36.3 million of acquired technology and $9.4 million of customer relationships, with weighted average economic lives of approximately three years, in addition to other tangible assets and liabilities. These acquisitions resulted in an allocation of $61.3 million to goodwill, of which $12.8 million was assigned to the Mainframe Service Management (MSM) segment and $48.5 million was assigned to the ESM segment. The operating results of the acquired companies have been included in our consolidated financial statements since the respective acquisition dates. Pro forma information is not included because the acquired companies’ operations would not have materially impacted our consolidated operating results.
Fiscal 2009 Acquisition
In April 2008, we completed the acquisition of all of the outstanding common shares of BladeLogic, Inc. (BladeLogic), a provider of data center automation software, for $28 per share. In addition, outstanding and unvested options to acquire the common stock of BladeLogic and other share-based awards were converted pursuant to the terms of the transaction into options to purchase our common stock and other share-based awards, respectively. BladeLogic’s operating results have been included in our consolidated financial statements since the acquisition date as part of our ESM segment. This acquisition expanded our offerings for server provisioning, application release management, automation and compliance.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The acquisition of BladeLogic’s outstanding common stock and other equity instruments resulted in total purchase consideration of $854.0 million, including approximately $19.9 million of direct acquisition costs. The estimated fair values of the acquired assets and assumed liabilities at the date of acquisition were:
         
    April 18,  
    2008  
    (In millions)  
Cash and cash equivalents
  $ 73.3  
Trade accounts receivable
    27.0  
Deferred tax assets
    36.5  
Other current assets
    1.5  
Property and equipment
    1.4  
Intangible assets
    214.8  
In-process research and development
    50.3  
Goodwill
    557.3  
 
     
 
       
Total assets
    962.1  
 
     
 
       
Current liabilities
  $ (14.3 )
Deferred tax liabilities
    (86.8 )
Deferred revenue
    (7.0 )
 
     
 
       
Total liabilities
    (108.1 )
 
     
 
       
Net assets acquired
  $ 854.0  
 
     
Factors that contributed to a purchase price that resulted in goodwill include, but are not limited to, the retention of research and development personnel with the skills to develop future BladeLogic technology, support personnel to provide maintenance services related to BladeLogic products and a trained sales force capable of selling current and future BladeLogic products and the opportunity to cross-sell our products and BladeLogic products to existing customers. We believe that this acquisition will help us remain competitive in the Business Service Management market and improve the results of operations for our ESM segment. The goodwill resulting from the transaction was assigned to the ESM segment and is not deductible for tax purposes.
The acquired identifiable intangible assets consisted of:
                 
            Useful Life  
    Fair Value     in Years  
    (In millions)        
Customer contracts and relationships
  $ 113.9       4  
Developed product technology
    100.7       4  
Trademarks and tradenames
    0.2       1  
 
             
 
               
Total identifiable intangible assets
  $ 214.8          
 
             
Approximately $50.3 million of the purchase price was allocated to purchased IPR&D and was expensed at the acquisition date. The amounts allocated to IPR&D represent the estimated fair values, based on risk-adjusted cash flows and historical costs expended, related to core research and development projects that were incomplete and had neither reached technological feasibility nor been determined to have an alternative future use pending achievement of technological feasibility at the date of acquisition. The IPR&D relates primarily to the development of a major new release to an existing core product that was released in the fourth quarter of fiscal 2009.
The results of operations of BladeLogic are included in our consolidated statements of operations prospectively from April 18, 2008.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) Financial Instruments
We measure certain financial instruments at fair value on a recurring basis using the following valuation techniques:
(A) Market approach — Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
(B) Income approach — Uses valuation techniques to convert future estimated cash flows to a single present amount based on current market expectations about those future amounts, using present value techniques.
The fair values of our financial instruments were determined using the following input levels and valuation techniques:
                                     
    Fair Value Measurements at Reporting Date Using
            Quoted Prices in Active             Significant      
            Markets for Identical     Significant Other     Unobservable      
            Assets     Observable Inputs     Inputs     Valuation
March 31, 2011   Total     (Level 1)     (Level 2)     (Level 3)     Technique
    (In millions)
Assets
                                   
Cash equivalents
                                   
Money-market funds
  $ 684.7     $ 684.7     $     $     A
United States Treasury securities
    525.0       525.0                 A
Certificates of deposit
    38.4       38.4                 A
Short-term and long-term investments
                                   
United States Treasury securities
    49.9       49.9                 A
Auction rate securities
    27.2                   27.2     B
Mutual funds
    18.5       18.5                 A
Foreign currency forward contracts
    5.8             5.8           A
 
                         
Total
  $ 1,349.5     $ 1,316.5     $ 5.8     $ 27.2      
 
                         
Liabilities
                                   
Foreign currency forward contracts
  $ (3.3 )   $     $ (3.3 )   $     A
 
                         
Total
  $ (3.3 )   $     $ (3.3 )   $      
 
                         
Level 1 classification is applied to any asset or liability that has a readily available quoted market price from an active market where there is significant transparency in the executed/quoted price.
Level 2 classification is applied to assets and liabilities that have evaluated prices where the data inputs to these valuations are observable either directly or indirectly, but do not represent quoted market prices from an active market.
Level 3 classification is applied to assets and liabilities when prices are not derived from existing market data and requires us to develop our own assumptions about how market participants would price the asset or liability.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in Level 3 financial instruments:
                                                 
    Year Ended March 31,  
    2011     2010  
    Auction                     Auction              
    Rate     Put             Rate     Put        
    Securities     Option     Total     Securities     Option     Total  
    (In millions)  
Balance at the beginning of the period
  $ 60.5     $ 1.1     $ 61.6     $ 60.0     $ 2.0     $ 62.0  
Redemptions and sales of auction rate securities
    (37.5 )           (37.5 )     (4.9 )           (4.9 )
Change in unrealized gain (loss) included in interest and other income, net
    1.1       (1.1 )           0.9       (0.9 )      
Change in unrealized gain (loss) included in other comprehensive income
    3.1             3.1       4.5             4.5  
 
                                   
Balance at the end of the period
  $ 27.2     $     $ 27.2     $ 60.5     $ 1.1     $ 61.6  
 
                                   
Investments
Our cash, cash equivalents and investments were comprised of the following:
                                                 
    March 31,  
    2011     2010  
    Cash and                     Cash and              
    Cash     Short-term     Long-term     Cash     Short-term     Long-term  
    Equivalents     Investments     Investments     Equivalents     Investments     Investments  
    (In millions)  
Measured at fair value:
                                               
Available-for-sale
                                               
United States Treasury securities
  $ 525.0     $ 27.8     $ 22.1     $ 200.0     $ 50.0     $  
Certificates of deposit
    38.4                   12.6              
Auction rate securities
                27.2                   45.0  
Trading
                                               
Mutual funds
                18.5                   17.4  
Auction rate securities
                            15.5        
 
                                   
Total debt and equity investments measured at fair value
    563.4       27.8       67.8       212.6       65.5       62.4  
 
                                   
 
                                               
Cash on hand
    412.8                   398.4              
Money-market funds
    684.7                   757.6              
 
                                   
Total cash, cash equivalents and investments
  $ 1,660.9     $ 27.8     $ 67.8     $ 1,368.6     $ 65.5     $ 62.4  
 
                                   
Amounts included in accumulated other comprehensive income from available- for-sale securities (pre-tax):
                                               
Unrealized losses*
  $     $     $ 2.6     $     $     $ 5.7  
 
                                   
*  
The unrealized losses on available-for-sale securities at March 31, 2011 and 2010 relate to the auction rate securities.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes the underlying contractual maturities of our available-for-sale investments in debt securities:
                                 
    Year Ended March 31,  
    2011     2010  
            Fair             Fair  
    Cost     Value     Cost     Value  
    (In millions)  
Due in one year or less
  $ 591.2     $ 591.2     $ 262.6     $ 262.6  
Due between one and two years
    22.1       22.1              
Due after ten years
    29.8       27.2       50.7       45.0  
 
                       
Total
  $ 643.1     $ 640.5     $ 313.3     $ 307.6  
 
                       
For fiscal 2009, proceeds from the sale of available-for-sale securities, gross realized gains and gross realized losses were $153.2 million, $1.6 million and $2.6 million, respectively. The amounts for fiscal 2010 and 2011 were not significant.
At March 31, 2011 and 2010, we held auction rate securities with a par value of $29.8 million and $50.7 million, respectively, which were classified as available-for-sale, and at March 31, 2010, we also held auction rate securities with a par value of $16.6 million which were classified as trading. The total estimated fair value of our auction rate securities was $27.2 million and $60.5 million at March 31, 2011 and 2010, respectively. Our auction rate securities consist entirely of bonds issued by public agencies that are backed by student loans with at least a 97% guarantee by the federal government under the United States Department of Education’s Federal Family Education Loan Program. All of these bonds are currently rated investment grade by Moody’s or Standard and Poor’s. Auctions for these securities began failing in early 2008 and have continued to fail, resulting in our continuing to hold such securities and the issuers paying interest at the maximum contractual rates. We do not believe that any of the underlying issuers of these auction rate securities are presently at risk of default or that the underlying credit quality of the assets backing the auction rate security investments has been impacted by the reduced liquidity of these investments. Due to the illiquidity in the auction rate securities market caused by failed auctions, we estimated the fair value of these securities and the put option discussed below using internally developed models of the expected cash flows of the securities which incorporate assumptions about the expected cash flows of the underlying student loans and estimates of the rate of return required by investors, which includes an adjustment to reflect a lack of liquidity in the market for these securities. Periodically, the issuers of certain of our auction rate securities have redeemed portions of our holdings at par value plus accrued interest. During the years ended March 31, 2011 and 2010, issuers redeemed available-for-sale holdings of $20.9 million par value and $3.7 million par value, respectively, and trading holdings of $5.4 million par value and $1.2 million par value, respectively.
In November 2008, we entered into a put agreement with a bank from which we acquired certain auction rate securities. On July 1, 2010, we exercised our right under this agreement to put the remaining securities subject to this agreement, with $11.2 million par value, to the bank. The auction rate securities subject to the put agreement were classified as short-term investments and trading securities and, accordingly, any changes in the fair value of these securities were recognized in earnings. In addition, we elected the option under GAAP to record the put option at fair value. The fair value adjustments to these auction rate securities and the related put option resulted in minimal net impact to the consolidated statements of operations for the years ended March 31, 2011, 2010 and 2009.
The unrealized loss on our available-for-sale auction rate securities, which have a fair value of $27.2 million at March 31, 2011, was $2.6 million and was recorded in accumulated other comprehensive income (loss) as we believe the decline in fair value of these auction rate securities is temporary. In making this determination, we primarily considered the financial condition and near-term prospects of the issuers, the probability scheduled cash flows will continue to be made and the likelihood we would be required to sell the investments before recovery of our cost basis. These available-for-sale auction rate securities have been in an unrealized loss position for greater than twelve months. Because of the uncertainty related to the timing of liquidity associated with these auction rate securities, these securities are classified as long-term investments at March 31, 2011 and 2010.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative Financial Instruments
The fair value of our outstanding foreign currency forward contracts that closed in a gain position at March 31, 2011 and 2010 was $5.8 million and $3.5 million, respectively, and was recorded within other current assets in our consolidated balance sheets. The fair value of our outstanding foreign currency forward contracts that closed in a loss position at March 31, 2011 and 2010 was $3.3 million and $1.0 million, respectively, and was recorded within accrued liabilities in our consolidated balance sheets. The notional amounts at contract exchange rates of our foreign currency forward contracts outstanding were:
                 
    Notional Amount  
    March 31,  
    2011     2010  
    (In millions)  
 
               
Foreign Currency Forward Contracts (receive United States dollar/pay foreign currency)
               
 
               
Euro
  $ 158.5     $ 98.2  
Australian dollar
    13.9       15.4  
Chinese yuan renminbi
    7.6       4.6  
Brazilian real
    5.6       24.9  
British pound
    5.0        
South Korean won
    4.6       6.0  
Canadian dollar
    4.2       3.9  
New Zealand dollar
    2.9       4.5  
Swedish krona
    2.4       5.7  
Other
    8.3       7.7  
 
           
Total
  $ 213.0     $ 170.9  
 
           
 
               
Foreign Currency Forward Contracts (pay United States dollar/receive foreign currency)
               
 
               
Israeli shekel
  $ 151.6     $ 78.0  
Mexican peso
    9.3       1.5  
Indian rupee
    9.1       11.5  
Other
    2.2       4.5  
 
           
Total
  $ 172.2     $ 95.5  
 
           
Our use of foreign currency forward exchange contracts is intended to principally offset gains and losses associated with foreign currency exposures. Therefore, the notional amounts and currencies underlying our foreign currency forward contracts will fluctuate period to period as they are principally dependent on the balances and currency denomination of monetary assets and liabilities maintained by our global entities. The effect of the foreign currency forward contracts for the years ended March 31, 2011, 2010 and 2009 was a gain of $3.3 million, a loss of $9.9 million and a gain of $26.4 million, respectively, which, after including gains and losses on our foreign currency exposures, resulted in net losses of $2.9 million, $2.2 million and $5.3 million, respectively, recorded in interest and other income, net.
We are exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but we do not expect any counterparties to fail to meet their obligations given their high credit ratings. In addition, we diversify this risk across several counterparties and utilize netting agreements to mitigate the counterparty credit risk.
Trade Finance Receivables
A substantial portion of our trade finance receivables are transferred to financial institutions on a non-recourse basis. We utilize wholly-owned finance subsidiaries in these finance receivables transfers. These entities are consolidated into our financial position and results of operations. We account for such transfers as sales in accordance with applicable accounting rules pertaining to the transfer of financial assets and the sale of future revenue when we have surrendered control of such receivables (including determining that such assets have been isolated beyond our reach and the reach of our creditors) and when we do not have significant continuing involvement in the generation of cash flows due the financial institutions. During fiscal 2011, 2010 and 2009, we transferred $172.3 million, $208.8 million and $149.7 million, respectively, of such receivables through these programs. Finance receivables are typically transferred within several months after origination and the outstanding principal balance at the time of transfer typically approximates fair value.
For those finance receivables not transferred, we evaluate the credit risk of finance receivables in our portfolio based on regional characteristics specific to the risk climate in each of our geographic operations as well as based on internal credit quality indicators for individual receivables. We evaluate the credit risk of finance receivables using an internal credit rating system based on whether an individual receivable meets specific internal criteria including counterparty credit rating and receivable maturity date and assign an internal credit rating of 1, 2 or 3, with a credit rating of 1 representing the best credit quality.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For all regions and credit categories, a finance receivable will be specifically reserved once deemed uncollectible. As of March 31, 2011, we held $223.4 million of finance receivables, net of $0.5 million of specific receivables which have been fully reserved.
At March 31, 2011, our finance receivables balance, net of allowance, by region and by class of internal credit rating is as follows:
                                         
    North America     EMEA     Asia Pacific     Latin America     Total  
    (In millions)  
Class 1
  $ 102.2     $ 41.0     $ 13.2     $ 2.0     $ 158.4  
Class 2
    31.0       23.8       3.1       1.6       59.5  
Class 3
    1.9       1.1       1.1       1.4       5.5  
 
                             
Balance at the end of the period
  $ 135.1     $ 65.9     $ 17.4     $ 5.0     $ 223.4  
 
                             
Other Financial Instruments
The fair value of our senior unsecured notes due 2018 at March 31, 2011 and 2010, based on market prices, was $348.9 million and $338.1 million, respectively, compared to the carrying value of $298.7 million and $298.5 million, respectively.
The carrying values of all other financial instruments, consisting primarily of trade and finance receivables, accounts payable and other borrowings, approximate their respective fair values.
(4) Property and Equipment
Property and equipment at March 31, 2011 and 2010 consisted of:
                 
    March 31,  
    2011     2010  
    (In millions)  
Computers, software, furniture and equipment
  $ 498.8     $ 493.8  
Leasehold improvements
    49.4       43.9  
Projects in progress
    5.7       4.8  
 
           
 
    553.9       542.5  
Less accumulated depreciation and amortization
    (459.7 )     (447.5 )
 
           
Property and equipment, net
  $ 94.2     $ 95.0  
 
           
Property and equipment includes computer equipment procured by us under capital lease arrangements with net book values of $19.3 million and $13.7 million (net of $11.4 million and $12.9 million in accumulated depreciation) at March 31, 2011 and 2010, respectively. Depreciation of capital lease equipment is included in depreciation expense. Depreciation expense recorded during fiscal 2011, 2010 and 2009 was $39.1 million, $38.2 million and $42.4 million, respectively.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Intangible Assets and Goodwill
Intangible assets at March 31, 2011 and 2010 consisted of:
                                 
    March 31,  
    2011     2010  
    Gross             Gross        
    Carrying     Net Book     Carrying     Net Book  
    Amount     Value     Amount     Value  
    (In millions)  
Acquired technology
  $ 572.4     $ 64.2     $ 548.4     $ 88.7  
Customer relationships
    255.6       36.7       254.3       70.1  
Tradenames and trademarks
    29.3             29.3        
 
                       
Total intangible assets
  $ 857.3     $ 100.9     $ 832.0     $ 158.8  
 
                       
Amortization of acquired technology totaling $45.5 million, $43.8 million and $44.6 million was included in cost of license revenue in the consolidated statements of operations for fiscal 2011, 2010 and 2009, respectively. Amortization of other intangible assets is included in amortization of intangible assets in the consolidated statements of operations. The weighted average remaining life of acquired technology and customer relationships is approximately 1.5 years at March 31, 2011.
Future amortization expense associated with our intangible assets existing at March 31, 2011 is expected to be:
         
    Year Ending  
    March 31,  
    (In millions)  
2012
  $ 78.5  
2013
    18.1  
2014
    4.3  
 
     
 
  $ 100.9  
 
     
The following table summarizes goodwill activity and ending goodwill balances by operating segment:
                         
    Enterprise     Mainframe        
    Service     Service        
    Management     Management     Total  
    (In millions)  
Balance at March 31, 2009
  $ 1,216.7     $ 72.0     $ 1,288.7  
Goodwill acquired/purchase accounting adjustments during the year
    48.5       13.8       62.3  
Effect of foreign currency exchange rate changes
    14.6             14.6  
 
                 
Balance at March 31, 2010
    1,279.8       85.8       1,365.6  
 
                 
Goodwill acquired/purchase accounting adjustments during the year
    32.6       (1.0 )     31.6  
Effect of foreign currency exchange rate changes
    9.8             9.8  
 
                 
Balance at March 31, 2011
  $ 1,322.2     $ 84.8     $ 1,407.0  
 
                 

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) Long-Term Borrowings
Long-term borrowings at March 31, 2011 and 2010 consisted of:
                 
    March 31,  
    2011     2010  
    (In millions)  
Senior unsecured notes due 2018 (net of $1.3 million and $1.5 million of unamortized discount at March 31, 2011 and 2010, respectively)
  $ 298.7     $ 298.5  
Capital leases and other obligations
    56.2       62.6  
 
           
Total
    354.9       361.1  
Less current maturities of capital leases and other obligations (included in accrued liabilities)
    (19.3 )     (20.2 )
 
           
Long-term borrowings
  $ 335.6     $ 340.9  
 
           
In November 2010, we entered into a credit agreement with certain institutional lenders providing for an unsecured revolving credit facility in an amount up to $400.0 million which is scheduled to expire on November 30, 2014 (the Credit Facility). Subject to certain conditions, at any time prior to maturity, we may invite existing and new lenders to increase the size of the Credit Facility up to a maximum of $600.0 million. The Credit Facility includes provisions for swing line loans of up to $25.0 million and standby letters of credit of up to $50.0 million. Revolving loans under the Credit Facility bear interest, at the Company’s option, at a rate equal to either (i) the base rate (as defined) plus a margin based on the credit ratings of BMC’s senior unsecured notes due 2018 (the Senior Notes), or (ii) the LIBOR rate (as defined) plus a margin based on the credit ratings of BMC’s Senior Notes, for interest periods of one, two, three or six months. As of March 31, 2011 and through May 5, 2011, we have not borrowed any funds under the Credit Facility.
In June 2008, we issued $300.0 million of Senior Notes. Net proceeds to us after original issuance discount and issuance costs amounted to $295.6 million, which were used for general corporate purposes. The Senior Notes were issued at an original issuance discount of $1.8 million. The Senior Notes bear interest at a rate of 7.25% per annum payable semi-annually in June and December of each year. The Senior Notes are redeemable at our option at any time in whole or, from time to time, in part at a redemption price equal to the greater of: (i) 100% of the principal amount of the Senior Notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest discounted at the applicable United States Treasury rate plus 50 basis points, plus accrued and unpaid interest. The Senior Notes are subject to the provisions of an indenture which includes covenants limiting, among other things, the creation of liens securing indebtedness and sale-leaseback transactions.
At March 31, 2011, we were in compliance with all debt covenants.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) Deferred Revenue
Deferred revenue is comprised of deferred maintenance, license and professional services revenue. Deferred maintenance revenue is not recorded on arrangements with trade payment terms until the related maintenance fees have been collected. The components of deferred revenue at March 31, 2011 and 2010 were:
                 
    March 31,  
    2011     2010  
    (In millions)  
Current:
               
Maintenance
  $ 653.1     $ 637.6  
License
    338.8       319.0  
Professional services
    35.0       19.3  
 
           
Total current deferred revenue
    1,026.9       975.9  
 
           
Long-term:
               
Maintenance
    581.3       542.0  
License
    347.3       305.2  
Professional services
           
 
           
Total long-term deferred revenue
    928.6       847.2  
 
           
Total deferred revenue
  $ 1,955.5     $ 1,823.1  
 
           
(8) Income Taxes
The income tax provision for fiscal 2011, 2010 and 2009 consists of:
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Current:
                       
Federal
  $ (14.4 )   $ 26.2     $ 62.8  
State
    7.7       (0.5 )     11.3  
Foreign
    40.9       44.2       48.6  
 
                 
Total current
    34.2       69.9       122.7  
 
                 
Deferred:
                       
Federal
    37.7       24.6       33.3  
State
    3.1       4.3       (4.0 )
Foreign
    0.1       (0.7 )     (26.2 )
 
                 
Total deferred
    40.9       28.2       3.1  
 
                 
Income tax provision
  $ 75.1     $ 98.1     $ 125.8  
 
                 
The foreign income tax provision was based on foreign pre-tax earnings of $240.1 million, $214.5 million and $173.0 million for fiscal 2011, 2010 and 2009, respectively. The federal income tax provision includes the United States tax effects of certain foreign entities that are treated as a branch of a United States entity for tax purposes and therefore their earnings are included in the United States consolidated income tax return.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of income tax computed at the United States federal statutory rate of 35% to reported income tax expense for fiscal 2011, 2010 and 2009 follows (dollars in millions):
                                                 
    Year Ended March 31,  
    2011     2010     2009  
    Amount     Percent     Amount     Percent     Amount     Percent  
Expense computed at United States statutory rate
  $ 186.0       35.0 %   $ 176.5       35.0 %   $ 127.4       35.0 %
Effect of foreign rate differentials
    (54.6 )     (10.3 )%     (29.7 )     (5.9 )%     (21.9 )     (6.0 )%
Extraterritorial income and production activities deductions
    (24.7 )     (4.6 )%     (21.5 )     (4.3 )%     (22.3 )     (6.1 )%
State income taxes, net of federal benefit
    8.7       1.6 %     3.1       0.6 %     4.7       1.3 %
Settlements with tax authorities
    (57.2 )     (10.8 )%     (30.0 )     (5.9 )%            
In-process research and development
                            24.1       6.6 %
Other, net
    16.9       3.2 %     (0.3 )     (0.0 )%     13.8       3.8 %
 
                                   
 
  $ 75.1       14.1 %   $ 98.1       19.5 %   $ 125.8       34.6 %
 
                                   

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the related amounts recognized for income tax purposes. The significant components of deferred tax assets and liabilities at March 31, 2011 and 2010 were:
                 
    March 31,  
    2011     2010  
    (In millions)  
Deferred tax assets:
               
Deferred revenue
  $ 53.7     $ 60.4  
Compensation plans
    46.5       49.2  
Property and equipment, net
    4.6       7.8  
Net operating loss carryforwards
    36.0       36.0  
Tax credit carryforwards
    6.2       2.4  
Other
    77.1       75.2  
 
           
Total gross deferred tax asset
    224.1       231.0  
Valuation allowance
    (10.1 )     (9.1 )
 
           
Total deferred tax asset
    214.0       221.9  
Deferred tax liabilities:
               
Software development costs
    (70.7 )     (54.0 )
Acquired intangible assets
    (13.5 )     (5.5 )
Other
    (59.4 )     (49.0 )
 
           
Total deferred tax liability
    (143.6 )     (108.5 )
 
           
Net deferred tax asset
  $ 70.4     $ 113.4  
 
           
 
               
As reported:
               
Deferred tax assets
  $ 65.1     $ 53.7  
 
           
Other long-term assets
  $ 29.3     $ 80.0  
 
           
Accrued liabilities
  $ (3.7 )   $ (5.0 )
 
           
Other long-term liabilities
  $ (20.3 )   $ (15.3 )
 
           
In evaluating our ability to realize our deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, reversals of existing temporary differences, tax planning strategies and forecasts of future taxable income. In considering these sources of taxable income, we must make certain assumptions and judgments that are based on the plans and estimates used to manage our underlying business. Changes in our assumptions, plans and estimates may materially impact income tax expense.
We maintain a valuation allowance against certain tax credits and net operating losses that we do not believe are more likely than not to be utilized in the future. The valuation allowance increased (decreased) by $1.0 million, $(12.1) million and $(10.3) million during fiscal 2011, 2010 and 2009, respectively. At March 31, 2011, we have federal net operating loss carryforwards of $68.0 million and foreign net operating loss carryforwards of $9.4 million, which expire between 2015 and 2030. These tax credits and net operating losses have arisen from various acquisitions as well as from net operating losses generated in certain foreign jurisdictions. Certain of the net operating loss carryforward assets are subject to an annual limitation under Internal Revenue Code Section 382, but are expected to be fully realized.
Aggregate unremitted earnings of certain foreign subsidiaries for which United States federal income taxes have not been provided are $479.3 million at March 31, 2011. Deferred income taxes have not been provided on these earnings because we consider them to be indefinitely re-invested. If these earnings were repatriated to the United States or they were no longer determined to be indefinitely re-invested, we would have to record a tax liability for these earnings of approximately $119.6 million, assuming full utilization of the foreign tax credits associated with these earnings.
We carry out our business operations through legal entities in the United States and multiple foreign jurisdictions. These jurisdictions require that we file corporate income tax returns that are subject to United States, state and foreign tax laws. We are subject to routine corporate income tax audits in these multiple jurisdictions.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total amount of unrecognized tax benefits at March 31, 2011, 2010 and 2009 was $55.8 million, $106.4 million and $106.3 million, respectively, of which $49.7 million, $95.1 million and $88.9 million, respectively, would impact our effective tax rate if recognized. We believe that it is reasonably possible that net tax benefits of up to approximately $8 million may be recorded during the next twelve months upon the closure of tax periods and effective settlements of prior years’ tax matters with various federal, state and foreign jurisdictions.
Activity related to our unrecognized tax benefits consists of:
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Beginning of year
  $ 106.4     $ 106.3     $ 111.6  
Increases related to current year tax positions
    6.6       6.0       7.4  
Decreases related to current year tax positions
                (0.5 )
Increases related to prior year tax positions
    20.8       21.0       23.4  
Decreases related to prior year tax positions
    (58.9 )     (22.7 )     (31.2 )
Decreases related to lapses of statutes of limitations
    (19.0 )     (3.9 )     (1.4 )
Impact of foreign currency exchange rate changes
    (0.1 )     (0.3 )     (3.0 )
 
                 
End of year
  $ 55.8     $ 106.4     $ 106.3  
 
                 
We recognize interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. We recognized $7.7 million, $2.4 million and $11.5 million of interest and penalties during fiscal 2011, 2010 and 2009, respectively. The total amount of accrued interest and penalties related to uncertain tax positions was $31.0 million and $37.7 million at March 31, 2011 and 2010, respectively.
We file a federal income tax return in the United States as well as income tax returns in various local, state and foreign jurisdictions. Our tax years are closed with the United States Internal Revenue Service (IRS) through the tax year ended March 31, 2005. During fiscal 2010 and early fiscal 2011, we settled all open issues with the IRS resulting from the audit of our tax years ended March 31, 2004 and 2005. During fiscal 2011, we settled all open issues but one with the IRS resulting from the audit of our tax years ended March 31, 2006 and 2007. As a result of these settlements, we recorded net tax benefits of $57.2 million and $30.0 million in fiscal 2011 and fiscal 2010, respectively. In April 2011, we received a Notice of Deficiency from the IRS on the one remaining disputed issue, relating to the tax year ended March 31, 2006, which we will litigate accordingly. In April 2011, the IRS issued its Revenue Agent Report (RAR) for its examination of our federal income tax return for the tax year ended March 31, 2008, and there are no unagreed issues arising from this RAR. In addition, certain tax years related to local, state, and foreign jurisdictions remain subject to examination. To provide for potential tax exposures, we maintain a liability for unrecognized tax benefits which we believe is adequate.
(9) Share-Based Compensation
We have various share-based compensation plans that authorize, among other types of awards, (i) the discretionary granting of stock options to purchase shares of our common stock, and (ii) the discretionary issuance of nonvested common stock awards directly in the form of time-based, market-based and performance-based nonvested stock units. Options granted to employees generally vest monthly over four years and have a term of six years. Options granted to non-employee board members become fully vested within one year from the date of grant and have terms of ten years with respect to grants through fiscal 2008 and six years for all subsequent grants. Time-based nonvested stock units vest in annual increments over one or three years; performance-based nonvested stock units vest in one year increments, contingent upon us meeting certain profitability targets; and market-based nonvested stock units vest in 50% increments over two- and three-year periods or in annual increments over three years upon achievement of certain targets related to our relative total shareholder return as compared to a set of peer companies or to the NASDAQ-100 Index over each performance period.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We did not grant any stock options during fiscal 2011 and granted 0.2 million and 5.1 million stock options during fiscal 2010 and 2009, respectively. We granted 3.3 million, 3.0 million and 3.5 million in nonvested stock units during fiscal 2011, 2010 and 2009, respectively. There were no significant modifications made to any share-based grants during these periods. At March 31, 2011, there were 9.6 million shares available for grant under our share-based compensation plans. However, for certain types of awards, some of our plans require us to reduce shares available for grant by a factor of 2.25 shares or 2.0 shares, depending on the plan from which the awards are issued.
We also sponsor an employee stock purchase plan that permits eligible employees to acquire shares of our stock at a 15% discount to the lower of the market price of our common stock at the beginning or end of six-month offering periods.
Share-based compensation costs for stock options are based on the fair value calculated from the Black-Scholes option-pricing model on the date of grant for stock options and on the first day of the offering period for the employee stock purchase plan. The fair value of nonvested stock equals the intrinsic value on the date of grant, except for certain market-based nonvested stock units, for which the fair value is calculated using a Monte Carlo simulation model on the date of grant. The fair values of share-based awards are recorded as compensation expense on a straight-line basis over the requisite service period of the grants. Compensation expense recognized is shown in the operating activities section in the consolidated statements of cash flows.
We estimate the volatility of our stock price by using a combination of both historical volatility and implied volatility derived from traded options on our common stock in the marketplace. We believe that the combination of historical volatility and implied volatility provides a better estimate of future stock price volatility. We base the estimate of the risk-free interest rate on the United States Treasury zero-coupon yield curve in effect at the time of grant. We have never paid cash dividends and do not currently intend to pay cash dividends; accordingly, we have assumed a dividend yield of zero.
We are required to estimate potential forfeitures of share-based awards and adjust compensation expense accordingly. The estimate of forfeitures is adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and thus impact the amount of share-based compensation expense to be recognized in future periods. There were no significant changes in estimated forfeitures in fiscal 2011, 2010 or 2009 as compared to estimates when the related expenses were originally recorded.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of share-based payments was estimated using the Black-Scholes option-pricing model and the Monte Carlo simulation model with the following weighted-average assumptions:
                         
    Year Ended March 31,  
    2011     2010     2009  
Expected volatility
    35 %     35 %     33 %
Risk-free interest rate %
    0.6 %     2.0 %     2.9 %
Expected term (in years)
    3       4       4  
Dividend yield
                 
A summary of our share-based compensation activity for fiscal 2011 follows:
                                 
                    Weighted-        
            Weighted-     Average        
            Average     Remaining        
            Exercise     Contractual     Aggregate  
Stock Options   Shares     Price     Term     Intrinsic Value  
    (In millions)             (In years)     (In millions)  
Outstanding at March 31, 2010
    12.1     $ 29       4     $ 114.9  
Granted
                           
Exercised
    (4.4 )     27                  
Cancelled or expired
    (0.5 )     38                  
 
                             
Outstanding at March 31, 2011
    7.2     $ 30       3     $ 144.9  
 
                             
Vested at March 31, 2011 and expected to vest
    7.1     $ 30       3     $ 143.7  
Exercisable at March 31, 2011
    5.8     $ 28       3     $ 125.5  
                         
            Weighted-     Weighted-  
            Average     Average  
            Grant Date     Remaining  
Nonvested Stock Units   Shares     Fair Value     Vesting Term  
    (In millions)             (In years)  
Outstanding at March 31, 2010
    5.3     $ 35       1  
Granted
    3.3       42          
Vested
    (1.9 )     35          
Cancelled or expired
    (0.4 )     35          
 
                     
Outstanding at March 31, 2011
    6.3     $ 39       1  
 
                     
Included in the table above were 0.2 million and 0.2 million performance-based nonvested stock units and market-based nonvested stock units, respectively, outstanding at March 31, 2011 granted to selected executives and other key employees. The performance-based nonvested stock units were valued based on the fair value of our common stock on the date of grant. The vesting of the market-based nonvested stock units is contingent on our relative total shareholder return as compared to a set of peer companies or to the NASDAQ-100 Index over each performance period.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes weighted average grant date fair value and additional intrinsic value and vesting information:
                         
    Year Ended March 31,  
    2011     2010     2009  
Weighted Average Fair Value
                       
Per grant of stock options
  $     $ 10     $ 11  
Per grant of nonvested stock units
  $ 42     $ 37     $ 33  
 
 
Share-Based Payment and Stock Option Values
                       
Intrinsic value of stock options exercised (millions)
  $ 75.5     $ 63.0     $ 70.4  
Fair value of nonvested stock units that vested (millions)
  $ 79.7     $ 38.9     $ 55.3  
Grant date fair value of nonvested stock units that vested
  $ 35     $ 32     $ 23  
Our outstanding options at March 31, 2011 were (shares in millions):
                                         
    Outstanding Options     Exercisable Options  
                    Weighted-                
                    Average                
            Weighted-     Remaining             Weighted-  
            Average     Contractual             Average  
Range of Exercise Prices   Shares     Exercise Price     Life     Shares     Exercise Price  
$0.00 – 17.40
    1.1     $ 15       3       1.1     $ 15  
$17.41 – 19.93
    0.8       19       3       0.8       19  
$19.94 – 25.41
    0.4       23       3       0.4       22  
$25.42 – 31.69
    0.5       28       4       0.5       28  
$31.70 – 32.15
    1.5       32       2       1.3       32  
$32.16 – 36.84
    0.6       36       3       0.4       36  
$36.85 – 39.30
    2.3       39       3       1.3       39  
We had approximately $205.2 million of total unrecognized compensation costs related to stock options, nonvested stock and nonvested stock units at March 31, 2011 that is expected to be recognized over a weighted-average period of 2 years.
We received cash of $119.6 million, $79.1 million and $92.2 million for the exercise of stock options during fiscal 2011, 2010 and 2009, respectively. Cash was not used to settle any equity instruments previously granted. We issue shares from treasury stock upon the exercise of stock options and upon the vesting of nonvested stock units.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Share-based compensation expense as recorded in our consolidated statements of operations is summarized as follows:
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions)  
Cost of license revenue
  $ 3.4     $ 2.5     $ 1.6  
Cost of maintenance revenue
    9.8       7.9       9.3  
Cost of professional services revenue
    5.1       3.9       3.2  
Selling and marketing expenses
    35.1       31.6       28.8  
Research and development expenses
    10.5       10.1       12.9  
General and administrative expenses
    42.6       32.9       26.2  
 
                 
Total share-based compensation expense
    106.5       88.9       82.0  
Income tax benefit
    (27.3 )     (27.2 )     (25.2 )
 
                 
Total share-based compensation expense after taxes
  $ 79.2     $ 61.7     $ 56.8  
 
                 
(10) Retirement Plans
We sponsor a 401(k) plan that is available to substantially all United States employees. The plan provides for an employer match element with annual per-employee limitations that we have changed and may change from time to time. The costs of our matching contributions amounted to $16.4 million, $14.5 million and $13.1 million during fiscal 2011, 2010 and 2009, respectively. Employees become 100% vested in the employer match contributions upon reaching two years of service from date of hire.
We also sponsor a non-qualified deferred compensation plan for certain eligible employees. At March 31, 2011 and 2010, $18.5 million and $17.4 million, respectively, is included in other long-term liabilities, with a corresponding amount included in long-term investments, related to obligations under this plan and related investments held by us. Employees participating in this plan receive distributions of their respective balances based on predetermined payout schedules or other events, as defined by the plan.
(11) Stockholders’ Equity
Earnings Per Share
The two-class method is utilized for the computation of earnings per share (EPS). The two-class method requires a portion of net income to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents, if declared. Income allocated to these participating securities is excluded from net earnings allocated to common shares, as shown in the table below.
Basic earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options and other dilutive securities using the treasury stock method.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes our basic and diluted EPS computations for fiscal 2011, 2010 and 2009:
                         
    Year Ended March 31,  
    2011     2010     2009  
    (In millions, except per share data)  
Basic earnings per share:
                       
Net earnings
  $ 456.2     $ 406.1     $ 238.1  
Less earnings allocated to participating securities
    (0.3 )     (0.8 )     (1.1 )
 
                 
Net earnings allocated to common shares
  $ 455.9     $ 405.3     $ 237.0  
 
                 
Weighted average number of common shares outstanding
    178.7       183.1       187.1  
 
                 
Basic earnings per share
  $ 2.55     $ 2.21     $ 1.27  
 
                 
 
                       
Diluted earnings per share:
                       
Net earnings
  $ 456.2     $ 406.1     $ 238.1  
Less earnings allocated to participating securities
    (0.3 )     (0.8 )     (1.1 )
 
                 
Net earnings allocated to common shares
  $ 455.9     $ 405.3     $ 237.0  
 
                 
Weighted average number of common shares outstanding
    178.7       183.1       187.1  
Incremental shares from assumed conversions of share-based awards
    3.7       3.7       3.1  
 
                 
Adjusted weighted average number of common shares outstanding
    182.4       186.8       190.2  
 
                 
Diluted earnings per share
  $ 2.50     $ 2.17     $ 1.25  
 
                 
For the years ended March 31, 2011, 2010 and 2009, 1.4 million, 5.2 million and 10.5 million weighted average potential common shares, respectively, have been excluded from the calculation of diluted EPS as they were anti-dilutive.
Treasury Stock
Our Board of Directors has authorized a total of $4.0 billion to repurchase common stock. During fiscal 2011, 2010 and 2009, we repurchased 10.6 million, 7.5 million and 10.7 million shares, respectively, for $439.0 million, $275.1 million and $330.0 million, respectively, under these authorizations. At March 31, 2011, approximately $630.7 million remains authorized in the stock repurchase program, which does not have an expiration date. In addition, during fiscal 2011, 2010 and 2009, we repurchased 0.6 million, 0.4 million shares and 0.4 million shares, respectively, for $25.1 million, $13.0 million and $16.2 million, respectively, to satisfy employee tax withholding obligations upon the vesting of share-based awards.
(12) Guarantees, Commitments and Contingencies
Guarantees
Under our standard software license agreements, we agree to indemnify, defend and hold harmless our licensees from and against certain losses, damages and costs arising from claims alleging the licensees’ use of our software infringes the intellectual property rights of a third party. Also, under these standard license agreements, we represent and warrant to licensees that our software products operate substantially in accordance with published specifications.
Other guarantees include promises to indemnify, defend and hold harmless each of our executive officers, non-employee directors and certain key employees from and against losses, damages and costs incurred by each such individual in administrative, legal or investigative proceedings arising from alleged wrongdoing by the individual while acting in good faith within the scope of his or her job duties on our behalf.
We also had outstanding letters of credit, performance bonds and similar instruments at March 31, 2011 of approximately $44.2 million primarily in support of performance obligations to various customers, but also related to facilities and other obligations.
Historically, we have not incurred significant costs related to such indemnifications, warranties and guarantees. As such, and based on other factors, no provision or accrual for these items has been made.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lease Commitments
We lease office space and equipment under various non-cancelable operating leases. Rent expense is recognized on a straight-line basis over the respective lease terms and amounted to $53.0 million, $48.1 million and $57.5 million during fiscal 2011, 2010 and 2009, respectively.
In fiscal 2007, we sold our headquarters campus and three surrounding undeveloped land parcels located in Houston, Texas for approximately $291.9 million in cash, net of closing costs. In connection with the sale of the buildings, we entered into a 15 year lease agreement for the occupied space which expires in June 2021, with the option to terminate the lease in June 2015 and options to renew the lease through June 2041 at market rates. Accordingly, we deferred and are amortizing the gain of approximately $24.2 million as a reduction to rent expense on a straight-line basis over the lease term. The lease agreement includes five scheduled rent increases over its term. Rent expense is being recognized on a straight-line basis over the lease term.
The following table summarizes future minimum lease payments to be made under non-cancelable operating leases and minimum sublease payments to be received under non-cancelable subleases at March 31, 2011:
         
    Year Ending  
    March 31,  
    (In millions)  
2012
  $ 40.6  
2013
    32.8  
2014
    26.7  
2015
    15.4  
2016
    5.6  
2017 and thereafter
    9.1  
 
     
Total minimum lease payments
    130.2  
Total minimum sublease payments
    (11.3 )
 
     
Total net minimum lease payments
  $ 118.9  
 
     
We have procured certain equipment under non-cancelable capital lease arrangements. The current and long-term portions of these capital lease obligations, which are included in accrued liabilities and long-term borrowings, respectively, in our consolidated balance sheets, were $7.4 million and $13.9 million, respectively, at March 31, 2011, and $7.2 million and $8.0 million, respectively, at March 31, 2010. At March 31, 2011, future minimum payments to be made under these capital leases are $8.0 million, $6.7 million, $6.4 million and $1.3 million in fiscal 2012, 2013, 2014 and 2015, respectively.
Contingencies
We are subject to intellectual property claims and legal proceedings, including claims of alleged infringement of patents asserted by third parties against us in the form of claim letters. These claims are in various stages, may result in formal legal proceedings against us, and may not be fully resolved in the near future. We cannot currently predict the timing or ultimate outcome, nor estimate a range of loss, if any, for such claims.
In December 2010, a lawsuit was filed against a number of software companies, including us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United States District Court for the Eastern District of Texas, Tyler Division. The complaint seeks monetary damages in unspecified amounts and permanent injunction based upon claims for alleged patent infringement. While we intend to vigorously defend this matter, we cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter.
We are party to various labor claims brought by certain former international employees alleging that amounts are due to such employees for unpaid commissions and other compensation. The claims are in various stages and are not expected to be fully resolved in the near future; however, we intend to vigorously contest all of the claims. Taking into account accruals recorded by us, we do not believe the resolution of these claims will have a material adverse effect on our financial position or results of operations. However, we cannot predict the timing or ultimate outcome of these matters.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We are currently litigating a matter in Brazilian courts as to whether a tax applies to the remittance of software payments from our Brazilian operations. In February 2007, a law was enacted that clarified that this particular tax did not apply to the remittance of software payments, retroactive to January 1, 2006. We continue to pursue a favorable resolution on this matter for years prior to January 1, 2006. While we believe we will ultimately prevail based on the merits of our position, if we do not, we could incur a charge of up to approximately $13 million; however, we cannot predict the timing or ultimate outcome of this matter.
We are subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. Taking into account accruals recorded by us, we do not believe that the outcome of any of these matters will have a material adverse effect on our financial position or results of operations.
(13) Segment Reporting
We are organized into two business segments, ESM and MSM. The ESM segment derives its revenue from our service support, service assurance and service automation solutions, along with professional services revenue derived from consulting, implementation, integration and educational services related to our software products. The MSM segment derives its revenue from products for mainframe database management, monitoring and automation, enterprise scheduling and output management solutions.
Segment performance is measured based on segment operating income, reflecting segment revenue less direct and allocated indirect segment operating expenses. Direct segment operating expenses primarily include cost of revenue, selling and marketing, research and development and general and administrative expenses that can be specifically identified to a particular segment and are directly controllable by segment management, while allocated indirect segment operating expenses primarily include indirect costs within these operating expense categories that are not specifically identified to a particular segment or controllable by segment management. The indirect operating expenses are allocated to the segments based on budgeted bookings, revenue and other allocation methods that management believes to be reasonable. Our measure of segment operating income does not include the effect of share-based compensation expenses, amortization of acquired technology and other intangible assets, the write-off of purchased IPR&D or the costs associated with severance, exit costs and related charges, which are collectively included in unallocated operating expenses below. Assets and liabilities are reviewed by management at the consolidated level only.
The following tables summarize segment performance for fiscal 2011, 2010 and 2009:
                         
    Enterprise     Mainframe        
    Service     Service        
Year Ended March 31, 2011   Management     Management     Consolidated  
            (In millions)          
Revenue:
                       
License
  $ 550.9     $ 313.6     $ 864.5  
Maintenance
    551.5       472.7       1,024.2  
Professional services
    176.6             176.6  
 
                 
Total revenue
    1,279.0       786.3       2,065.3  
Direct and allocated indirect segment operating expenses:
    998.8       333.8       1,332.6  
 
                 
Segment operating income
    280.2       452.5       732.7  
 
                 
Unallocated operating expenses
                    (199.9 )
Other loss, net
                    (1.5 )
 
                     
Earnings before income taxes
                  $ 531.3  
 
                     

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         
    Enterprise     Mainframe        
    Service     Service        
Year Ended March 31, 2010   Management     Management     Consolidated  
            (In millions)          
Revenue:
                       
License
  $ 462.2     $ 296.2     $ 758.4  
Maintenance
    550.9       472.8       1,023.7  
Professional services
    129.1             129.1  
 
                 
Total revenue
    1,142.2       769.0       1,911.2  
Direct and allocated indirect segment operating expenses:
    902.2       334.5       1,236.7  
 
                 
Segment operating income
    240.0       434.5       674.5  
 
                 
Unallocated operating expenses
                    (168.4 )
Other loss, net
                    (1.9 )
 
                     
Earnings before income taxes
                  $ 504.2  
 
                     
                         
    Enterprise     Mainframe        
    Service     Service        
Year Ended March 31, 2009   Management     Management     Consolidated  
            (In millions)          
Revenue:
                       
License
  $ 434.9     $ 274.8     $ 709.7  
Maintenance
    547.3       470.5       1,017.8  
Professional services
    144.4             144.4  
 
                 
Total revenue
    1,126.6       745.3       1,871.9  
Direct and allocated indirect segment operating expenses:
    938.0       321.6       1,259.6  
 
                 
Segment operating income
    188.6       423.7       612.3  
 
                 
Unallocated operating expenses
                    (244.5 )
Other loss, net
                    (3.9 )
 
                     
Earnings before income taxes
                  $ 363.9  
 
                     
Revenue from external customers and long-lived assets (excluding financial instruments and deferred tax assets) attributed to the United States, our corporate headquarters, and all other countries are:
                         
    Year Ended March 31,  
    2011     2010     2009  
            (In millions)          
Revenue:
                       
United States
  $ 1,063.1     $ 1,011.5     $ 980.0  
International
    1,002.2       899.7       891.9  
 
                 
 
  $ 2,065.3     $ 1,911.2     $ 1,871.9  
 
                 

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 
    At March 31,  
    2011     2010  
    (In millions)  
Long-lived assets:
               
United States
  $ 1,143.6     $ 1,125.3  
International
    725.7       701.0  
 
           
 
  $ 1,869.3     $ 1,826.3  
 
           
We do business with customers in a broad range of industries, including significant business with financial service providers, government agencies and service providers. Our ten largest customers comprised 15% or less of our total revenue in each of fiscal 2011, 2010 and 2009 and represented various industries. No single customer accounted for a material portion of our revenue during any of the past three fiscal years. At March 31, 2011 and 2010, approximately 46% and 42%, respectively, of our cash, cash equivalents and investments was held by our international subsidiaries.
(14) Severance, Exit Costs and Related Charges
We have undertaken various restructuring and process improvement initiatives in recent years through the realignment of resources to focus on growth areas and the simplification, standardization and automation of key business processes. These process and realignment initiatives include workforce reductions across all functions and geographies, and the affected employees were, or will be, provided cash separation packages. As part of these initiatives, we have also exited certain leases, reduced the square footage required to operate certain locations and relocated some operations to lower cost facilities. During fiscal 2009, as a result of these initiatives, we identified for termination approximately 140 employees.
Additionally, as a result of economic conditions, we undertook a general workforce reduction of approximately 80 and 380 employees during fiscal 2010 and 2009, respectively. This general reduction was across all functions and geographies, and the affected employees were provided cash separation packages.
Activity related to the above initiatives during fiscal 2011, 2010 and 2009 is summarized as follows:
                                                         
    Balance at     Charged     Adjustments     Foreign             Cash Payments,     Balance at  
    April 1,     to     to     Currency Exchange             Net of Sublease     March 31,  
    2010     Expense     Estimates     Adjustments     Accretion     Income     2011  
                            (In millions)                          
Facilities costs
  $ 1.3     $ 3.7     $ 0.2     $     $     $ (2.2 )   $ 3.0  
Severance and related costs
    0.9       10.4             0.2             (7.6 )     3.9  
 
                                         
Total accrued
  $ 2.2     $ 14.1     $ 0.2     $ 0.2     $     $ (9.8 )   $ 6.9  
 
                                         
                                                         
    Balance at     Charged     Adjustments     Foreign             Cash Payments,     Balance at  
    April 1,     to     to     Currency Exchange             Net of Sublease     March 31,  
    2009     Expense     Estimates     Adjustments     Accretion     Income     2010  
                            (In millions)                          
Process and realignment initiatives:
                                                       
Severance and related costs
  $ 1.2     $ 0.2     $ (0.6 )   $     $     $ (0.8 )   $  
Facilities costs
    7.7       0.5       (0.3 )     (0.1 )     0.1       (6.6 )     1.3  
 
                                         
 
    8.9       0.7       (0.9 )     (0.1 )     0.1       (7.4 )     1.3  
 
                                         
General workforce reduction:
                                                       
Severance and related costs
    7.6       4.9       (1.7 )     0.3             (10.2 )     0.9  
 
                                         
Total accrued
  $ 16.5     $ 5.6     $ (2.6 )   $ 0.2     $ 0.1     $ (17.6 )   $ 2.2  
 
                                         

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                         
    Balance at     Charged     Adjustments     Foreign             Cash Payments,     Balance at  
    April 1,     to     to     Currency Exchange             Net of Sublease     March 31,  
    2008     Expense     Estimates     Adjustments     Accretion     Income     2009  
                            (In millions)                          
Process and realignment initiatives:
                                                       
Severance and related costs
  $ 8.6     $ 12.3     $ (3.6 )   $ (0.6 )   $     $ (15.5 )   $ 1.2  
Facilities costs
    7.6       6.0       (0.4 )           0.3       (5.8 )     7.7  
 
                                         
 
    16.2       18.3       (4.0 )     (0.6 )     0.3       (21.3 )     8.9  
 
                                         
 
                                                       
General workforce reduction:
                                                       
Severance and related costs
          20.3       (1.1 )     0.1             (11.7 )     7.6  
 
                                         
Total accrued
  $ 16.2     $ 38.6     $ (5.1 )   $ (0.5 )   $ 0.3     $ (33.0 )   $ 16.5  
 
                                         
The accruals for severance and related costs at March 31, 2011 represent the amounts to be paid to employees that have been terminated or identified for termination as a result of the initiatives described above. These amounts are expected to be paid during fiscal 2012. We continue to review the impact of these actions and will determine if, based on future operating results, additional actions to reduce operating expenses are necessary. The amount of any potential future charges for such actions will depend upon the nature, timing and extent of those actions.
The accruals for facilities costs at March 31, 2011 represent the remaining fair value of lease obligations for exited locations, as determined at the cease-use dates or lease modification dates of those facilities, net of estimated sublease income that could be reasonably obtained in the future, and will be paid out over the remaining lease terms, the last of which ends in fiscal 2016. Projected sublease income is based on management’s estimates, which are subject to change. We may incur additional facilities charges subsequent to March 31, 2011 as a result of the initiatives described above. Accretion, representing the increase in the present value of facilities accruals over time, is included in our operating expenses.
(15) New Accounting Pronouncements Not Yet Adopted
In December 2010, the FASB issued updated guidance for intangible assets, specifically related to the goodwill impairment test. This guidance requires entities to perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired in situations where reporting units have a carrying value that is zero or negative. If the qualitative evaluation determines it is more likely than not that goodwill is impaired, step two of the goodwill impairment test is required to be performed to measure the amount of impairment, if any. The new guidance is effective for us beginning in fiscal 2012 and is not expected to have a material effect on our financial position, results of operations or cash flows.
In October 2009, the FASB issued new revenue recognition guidance for arrangements that include both software and non-software related deliverables, where certain of those deliverables are non-software related. This guidance requires entities to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of VSOE or other third party evidence of the selling price. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us in the first quarter of fiscal 2012 interim financial statements, and is not expected to have a material effect on our financial position, results of operations or cash flows.
(16) Quarterly Results (Unaudited)
The following table sets forth certain unaudited quarterly financial data for fiscal 2011 and 2010. This information has been prepared on the same basis as the accompanying consolidated financial statements and all necessary adjustments have been included in the amounts below to present fairly the selected quarterly information when read in conjunction with the accompanying consolidated financial statements and notes thereto.

 

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BMC SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                 
    Fiscal 2011     Fiscal 2010  
    Quarter Ended     Quarter Ended  
    June 30,     Sept. 30,     Dec. 31,     Mar. 31,     June 30,     Sept. 30,     Dec. 31,     Mar. 31,  
    2010     2010     2010     2011     2009     2009     2009     2010  
    (In millions, except per share data)  
Total revenue
  $ 460.9     $ 502.3     $ 539.9     $ 562.2     $ 450.0     $ 461.8     $ 508.1     $ 491.3  
Gross profit
  $ 352.6     $ 391.6     $ 409.0     $ 428.5     $ 351.4     $ 366.8     $ 403.7     $ 378.1  
Operating income
  $ 108.1     $ 143.5     $ 139.4     $ 141.8     $ 108.2     $ 134.8     $ 147.6     $ 115.5  
Net earnings
  $ 92.8     $ 131.8     $ 109.1     $ 122.5     $ 82.4     $ 94.2     $ 110.7     $ 118.8  
 
                                               
Basic EPS
  $ 0.51     $ 0.74     $ 0.61     $ 0.69     $ 0.45     $ 0.51     $ 0.60     $ 0.65  
 
                                               
Diluted EPS
  $ 0.50     $ 0.73     $ 0.60     $ 0.67     $ 0.44     $ 0.50     $ 0.59     $ 0.64  
 
                                               
Shares used in computing basic EPS
    180.3       178.3       178.2       178.1       184.3       183.5       182.8       182.0  
 
                                               
Shares used in computing diluted EPS
    183.8       181.4       182.3       182.3       187.9       187.0       186.5       185.7  
 
                                               
We recorded net tax benefits related to the settlement of certain tax matters of $14.0 million, $18.0 million and $25.2 million during the quarters ended June 30, 2010, September 30, 2010 and March 31, 2011, respectively, and $30.0 million during the quarter ended March 31, 2010 as further discussed in Note 8.
(17) Subsequent Event
In April 2011, we acquired all of the outstanding capital stock of Coradiant Inc., a provider of end-user experience and web application performance monitoring solutions, for cash consideration of approximately $125 million, net of cash acquired.

 

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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 to be signed on its behalf by the undersigned, thereunto duly authorized.
         
BMC SOFTWARE, INC.    
 
       
By:
  /s/ ROBERT E. BEAUCHAMP
 
Robert E. Beauchamp
   
 
  Chairman of the Board, President and    
 
  Chief Executive Officer    
Date: May 5, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
         
Signatures   Title   Date
 
       
/s/ ROBERT E. BEAUCHAMP
 
Robert E. Beauchamp
  Chairman of the Board, President and
Chief Executive Officer
  May 5, 2011
 
       
/s/ STEPHEN B. SOLCHER
 
Stephen B. Solcher
  Senior Vice President and
Chief Financial Officer
  May 5, 2011
 
       
/s/ T. CORY BLEUER
 
T. Cory Bleuer
  Vice President, Controller and
Chief Accounting Officer
  May 5, 2011
 
       
/s/ JON E. BARFIELD
 
Jon E. Barfield
  Director    May 5, 2011
 
       
/s/ GARY L. BLOOM
 
Gary L. Bloom
  Director    May 5, 2011
 
       
/s/ MELDON K. GAFNER
 
Meldon K. Gafner
  Director    May 5, 2011
 
       
/s/ MARK J. HAWKINS
 
Mark J. Hawkins
  Director    May 5, 2011
 
       
/s/ STEPHAN A. JAMES
 
Stephan A. James
  Director    May 5, 2011
 
       
/s/ P. THOMAS JENKINS
 
P. Thomas Jenkins
  Director    May 5, 2011
 
       
/s/ LOUIS J. LAVIGNE, JR.
 
Louis J. Lavigne, Jr.
  Director    May 5, 2011
 
       
/s/ KATHLEEN A. O’NEIL
 
Kathleen A. O’Neil
  Director    May 5, 2011
 
       
/s/ TOM C. TINSLEY
 
Tom C. Tinsley
  Director    May 5, 2011

 

84


Table of Contents

             
Exhibit        
Number        
       
 
   
  3.1    
  Restated Certificate of Incorporation, as amended, of the Company; incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
       
 
   
  3.2    
  Amended and Restated Bylaws of the Company; incorporated by reference to Exhibit 3.4 to our Current Report on Form 8-K filed November 12, 2010.
       
 
   
  4.1    
  Indenture, dated at June 4, 2008, between BMC Software, Inc. and Wells Fargo Bank, N.A., as trustee; incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed June 4, 2008.
       
 
   
  4.2    
  Supplemental Indenture, dated at June 4, 2008, between BMC Software, Inc. and Wells Fargo Bank, N.A., as trustee, including the form of the 7.25% Note due 2018; incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed June 4, 2008.
       
 
   
  10.1 (a)  
  BMC Software, Inc. 1994 Employee Incentive Plan (conformed version inclusive of amendments); incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
       
 
   
  10.1 (b)  
  Second Amendment to the BMC Software, Inc. 1994 Employee Incentive Plan; incorporated by reference to Exhibit 10.1(b) to our Annual Report on Form 10-K for the year ended March 31, 2009 (the 2009 10-K).

 

85


Table of Contents

             
Exhibit        
Number        
       
 
   
  10.2 (a)  
  BMC Software, Inc. 1994 Non-employee Directors’ Stock Option Plan; incorporated by reference to Exhibit 10.8(a) to our Annual Report on Form 10-K for the year ended March 31, 1995 (the 1995 10-K).
       
 
   
  10.2 (b)  
  Form of Stock Option Agreement employed under BMC Software, Inc. 1994 Non-employee Directors’ Stock Option Plan; incorporated by reference to Exhibit 10.8(b) to the 1995 10-K.
       
 
   
  10.3    
  Form of Indemnification Agreement among the Company and its directors and executive officers; incorporated by reference to Exhibit 10.11 to the 1995 10-K.
       
 
   
  10.4    
  BMC Software, Inc. 2000 Employee Stock Incentive Plan (conformed version inclusive of amendments); incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
       
 
   
  10.5    
  Amended and Restated BMC Software, Inc. Executive Deferred Compensation Plan; incorporated by reference to Exhibit 10.5(d) to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
       
 
   
  10.6    
  Executive Employment Agreement between BMC Software, Inc. and Robert E. Beauchamp; incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed November 24, 2008.
       
 
   
  10.7    
  BMC Software, Inc. 2002 Nonemployee Director Stock Option Plan; incorporated by reference to Appendix B to our 2002 Proxy Statement filed with the SEC on Schedule 14A.
       
 
   
  10.8    
  BMC Software, Inc. 2002 Employee Incentive Plan (conformed version inclusive of amendments); incorporated by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
       
 
   
  10.9    
  BMC Software, Inc. Short-term Incentive Performance Award Program (as amended and restated); incorporated by reference to Exhibit 10.10 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
       
 
   
  10.10    
  BMC Software, Inc. Long-term Incentive Performance Award Program (as amended and restated); incorporated by reference to Exhibit 10.11 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
       
 
   
  10.11    
  Executive Employment Agreement between BMC Software, Inc. and Stephen B. Solcher; incorporated by reference to Exhibit 10.12 to our Current Report on Form 8-K filed November 24, 2008.
       
 
   
  10.12    
  BladeLogic, Inc. 2007 Stock Option and Incentive Plan; incorporated by reference to Exhibit 10.5 to the BladeLogic, Inc. Registration Statement on Form S-1 (Registration No. 333-141915).
       
 
   
  10.13    
  First Amendment to BladeLogic, Inc. 2007 Stock Option and Incentive Plan; incorporated by reference to Exhibit 10.34(b) to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
       
 
   
  10.14    
  Executive Employment Agreement between BMC Software, Inc. and Denise M. Clolery; incorporated by reference to Exhibit 10.16 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.

 

86


Table of Contents

             
Exhibit        
Number        
       
 
   
  10.15    
  Form of Stock Option Award Agreement employed under BladeLogic, Inc. 2007 Stock Option and Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.19 to the 2009 10-K.
       
 
   
  10.16    
  Form of Performance-Based Restricted Stock Award Agreement employed under BMC Software, Inc. 1994 Employee Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.20 to our Current Report on Form 8-K filed on June 12, 2006.
       
 
   
  10.17    
  Form of Restricted Stock Unit Award Agreement employed under BladeLogic, Inc. 2007 Stock Option and Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.21 to the 2009 10-K.
       
 
   
  10.18    
  Executive Employment Agreement between BMC Software, Inc. and William Miller; incorporated by reference to Exhibit 10.22 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2008.
       
 
   
  10.19    
  Form of Stock Option Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2007.
       
 
   
  10.20    
  Form of Performance-Based Restricted Stock Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.24 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2007.
       
 
   
  10.21    
  Form of Time-Based Restricted Stock Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.25 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2007.
       
 
   
  10.22    
  Executive Employment Agreement between BMC Software, Inc. and Hollie S. Castro; incorporated by reference to Exhibit 10.17 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
       
 
   
  10.23    
  Form of Performance-Based Restricted Stock Unit Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.28 to our Current Report on Form 8-K filed June 12, 2008.
       
 
   
  10.24    
  Form of Time-Based Restricted Stock Unit Award Agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.29 to our Current Report on Form 8-K filed June 12, 2008.
       
 
   
  10.25    
  Performance-Based Restricted Stock Unit Award Agreement for Robert E. Beauchamp; incorporated by reference to Exhibit 10.30 to our Current Report on Form 8-K filed August 20, 2008.
       
 
   
  10.26    
  BMC Software, Inc. 2007 Incentive Plan (as amended); incorporated by reference to Annex A to our Definitive Proxy Statement on Schedule 14A dated June 24, 2009.

 

87


Table of Contents

             
Exhibit        
Number        
           
 
  10.27      
Amendment to Executive Employment Agreement between BMC Software, Inc. and Robert E. Beauchamp; incorporated by reference to Exhibit 10.34 to our Current Report on Form 8-K filed May 3, 2010.
           
 
  10.28      
Amendment to Executive Employment Agreement between BMC Software, Inc. and Stephen B. Solcher; incorporated by reference to Exhibit 10.35 to our Current Report on Form 8-K filed May 3, 2010.
           
 
  10.29      
Amendment to Executive Employment Agreement between BMC Software, Inc. and William D. Miller; incorporated by reference to Exhibit 10.38 to our Current Report on Form 8-K filed May 3, 2010.
           
 
  10.30      
Form of Performance-based market stock unit award agreement employed under BMC Software, Inc. 2007 Incentive Plan utilized for senior executive officers; incorporated by reference to Exhibit 10.41 to our Current Report on Form 8-K filed December 9, 2010.
           
 
  10.31      
Credit Agreement Dated as of November 30, 2010; incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2010.
           
 
  *21.1      
Subsidiaries of the Company.
           
 
  *23.1      
Consent of Independent Registered Public Accounting Firm.
           
 
  *31.1      
Certification of Chief Executive Officer of BMC Software, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
           
 
  *31.2      
Certification of Chief Financial Officer of BMC Software, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
           
 
  *32.1      
Certification of Chief Executive Officer of BMC Software, Inc. pursuant to 18 U.S.C. Section 1350.
           
 
  *32.2      
Certification of Chief Financial Officer of BMC Software, Inc. pursuant to 18 U.S.C. Section 1350.
           
 
  *101.INS    
XBRL Instance Document.
           
 
  *101.SCH    
XBRL Taxonomy Extension Schema Document.
           
 
  *101.CAL    
XBRL Taxonomy Extension Calculation Linkbase Document.
           
 
  *101.LAB    
XBRL Taxonomy Extension Label Linkbase Document.
           
 
  *101.PRE    
XBRL Taxonomy Extension Presentation Linkbase Document.
           
 
  *101.DEF    
XBRL Taxonomy Extension Definition Linkbase Document.
 
     
*  
Filed herewith

 

88

EX-21.1 2 c15046exv21w1.htm EXHIBIT 21.1 Exhibit 21.1
Exhibit 21.1
BMC Software, Inc.
Subsidiaries
As of March 31, 2011
     
Name   Jurisdiction
BladeLogic, Inc.
  Delaware
BladeLogic Deutschland GmbH
  Germany
BMC Software AS
  Norway
BMC Software (China) Limited
  China
BMC Software (Hong Kong) Limited
  Hong Kong
BMC Software (Thailand) Limited
  Thailand
BMC Software (Philippines) Inc.
  Philippines
BMC Software (New Zealand) Ltd.
  New Zealand
BMC Software A/S
  Denmark
BMC Software AB
  Sweden
BMC Software Asia Pacific Pte. Ltd.
  Singapore
BMC Software Asia Sdn Bhd
  Malaysia
BMC Software (Australia) Pty. Ltd.
  Australia
BMC Software Belgium N.V.
  Belgium
BMC Software Canada, Inc.
  Canada
BMC Software de Argentina S.A.
  Argentina
BMC Software de Mexico, S.A. de C.V.
  Mexico
BMC Software Development France SAS
  France
BMC Software Distribution B.V.
  The Netherlands
BMC Software Distribution de Mexico, S.A. de C.V.
  Mexico
BMC Software do Brasil Ltda.
  Brazil
BMC Software Europe
  Ireland/Cayman Islands
BMC Software European Holding
  Ireland/Cayman Islands
BMC Software France SAS
  France
BMC Software GmbH
  Austria
BMC Software GmbH
  Germany
BMC Software GmbH
  Switzerland
BMC Software Holding B.V.
  The Netherlands
BMC Software Holding II B.V.
  The Netherlands
BMC Software Holding France SAS
  France
BMC Software India Private Limited
  India
BMC Software Investment B.V.
  The Netherlands
BMC Software Investment, L.L.C.
  Delaware
BMC Software Ireland Limited
  Ireland
BMC Software Israel LTD
  Israel
BMC Software K.K. (Japan)
  Japan
BMC Software Korea, Ltd.
  Korea
BMC Software Limited
  United Kingdom
BMC Software Mauritius
  Mauritius
BMC Software Hellas MEPE
  Greece
BMC Software OY
  Finland
BMC Software S.A.
  Spain

 

 


 

     
Name   Jurisdiction
BMC Software Sales (Poland) Sp.o.o.
  Poland
BMC Software Yazilim Hlzmetleri Limited Sirketi
  Turkey
BMC Software S.r.l.
  Italy
Boole & Babbage Portugal Informatica Limitada
  Portugal
Caplan Software Development S.r.l.
  Italy
Identify Software LTD
  Israel
Identify Software, Inc.
  Delaware
Information Technology Masters International S.A.
  Luxembourg
Information Technology Masters Technologies S.A.
  Luxembourg
Marimba, Inc.
  Delaware
MQSoftware GmbH Middleware Solutions
  Germany
MQSoftware
  France
MQSoftware Limited
  United Kingdom
New Dimension Software, Inc.
  Delaware
Software Capital LLC
  Delaware
Software Credit LP
  Delaware
Simulus Limited
  United Kingdom
The European Software Company
  Ireland/Cayman Islands
Tideway Systems Inc.
  Delaware
Tideway Systems Limited
  United Kingdom
Tideway Systems Trustees Limited
  United Kingdom

 

 

EX-23.1 3 c15046exv23w1.htm EXHIBIT 23.1 Exhibit 23.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of BMC Software, Inc. and each related Prospectus of our reports dated May 5, 2011, with respect to the consolidated financial statements of BMC Software, Inc. and the effectiveness of internal control over financial reporting of BMC Software, Inc., included in the Annual Report (Form 10-K) of BMC Software, Inc. for the year ended March 31, 2011.
     
Form   Description
   
 
S-8  
1994 Employee Incentive Plan and 1994 Nonemployee Directors’ Stock Option Plan (No. 33-63411)
   
 
S-8  
Additional Shares to 1994 Employee Incentive Plan (No. 333-67269)
   
 
S-8  
Boole & Babbage acquired option plans (No. 333-75549)
   
 
S-8  
Evity, Inc. acquired option plans (No. 333-36476)
   
 
S-8  
2000 Employee Stock Incentive Plan (No. 333-44546)
   
 
S-8  
Additional Shares to 2000 Employee Stock Incentive Plan (No. 333-73388)
   
 
S-8  
2002 Nonemployee Director Stock Option Plan and 2002 Employee Incentive Plan (No. 333-100858)
   
 
S-8  
Marimba, Inc. acquired option plans (No. 333-117504)
   
 
S-8  
2006 Employee Stock Purchase Plan (No. 333-137711)
   
 
S-8  
2007 Incentive Plan (No. 333-147196)
   
 
S-8  
BladeLogic, Inc. acquired option plans (No. 333-150600)
   
 
S-8  
2007 Incentive Plan (No. 333-161045)
   
 
S-3  
Registration Statement for sales by certain Selling Security Holders related to the Integrity Solutions Inc. Acquisition (No. 33-42272)
   
 
S-3  
Registration Statement for sales by certain Selling Security Holders related to the TurnStone Software Acquisition (No. 33-63409)
   
 
S-3  
Registration Statement for sales by certain Selling Security Holders related to the HawkNet, Inc. Acquisition (No. 33-64123)
   
 
S-3  
Registration Statement for sales by certain Selling Security Holders related to the PEER Networks Acquisition (No. 33-64213)
   
 
S-3  
Registration Statement for sales by certain Selling Security Holders related to the Terlingua Software Acquisition (No. 333-47301)
   
 
S-3  
Registration Statement for sales by certain Selling Security Holders related to the Evity, Inc. Acquisition (No. 333-36474)
   
 
S-3 ASR  
Automatic Shelf Registration Statement Relating to the Company’s Debt Securities, Preferred Stock and Common Stock (No. 333-151231)
         
 
  /s/ Ernst & Young LLP    
Houston, Texas
May 5, 2011

 

 

EX-31.1 4 c15046exv31w1.htm EXHIBIT 31.1 Exhibit 31.1
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF BMC SOFTWARE, INC.
I, Robert E. Beauchamp, certify that:
  1.  
I have reviewed this Annual Report on Form 10-K of BMC Software, Inc. (the registrant);
 
  2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
  4.  
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
  c.  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d.  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5.  
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2011
         
By:
  /s/ ROBERT E. BEAUCHAMP
 
Robert E. Beauchamp
   
 
  (Chief Executive Officer)    

 

 

EX-31.2 5 c15046exv31w2.htm EXHIBIT 31.2 Exhibit 31.2
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF BMC SOFTWARE, INC.
I, Stephen B. Solcher, certify that:
  1.  
I have reviewed this Annual Report on Form 10-K of BMC Software, Inc. (the registrant);
 
  2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
  4.  
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
  c.  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d.  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5.  
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2011
         
By:
  /s/ STEPHEN B. SOLCHER
 
Stephen B. Solcher
   
 
  (Chief Financial Officer)    

 

 

EX-32.1 6 c15046exv32w1.htm EXHIBIT 32.1 Exhibit 32.1
Exhibit 32.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
OF BMC SOFTWARE, INC.
PURSUANT TO 18 U.S.C. § 1350
Based on my knowledge, I, Robert E. Beauchamp, Chief Executive Officer of BMC Software, Inc. (the Company), hereby certify that the accompanying report on Form 10-K for the period ending March 31, 2011 and filed with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the Report) by the Company fully complies with the requirements of that section.
Based on my knowledge, I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
     
/s/ ROBERT E. BEAUCHAMP
 
Robert E. Beauchamp
   
May 5, 2011
   

 

 

EX-32.2 7 c15046exv32w2.htm EXHIBIT 32.2 Exhibit 32.2
Exhibit 32.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
OF BMC SOFTWARE, INC.
PURSUANT TO 18 U.S.C. § 1350
Based on my knowledge, I, Stephen B. Solcher, Chief Financial Officer of BMC Software, Inc. (the Company), hereby certify that the accompanying report on Form 10-K for the period ending March 31, 2011 and filed with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the Report) by the Company fully complies with the requirements of that section.
Based on my knowledge, I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
     
/s/ STEPHEN B. SOLCHER
 
Stephen B. Solcher
   
May 5, 2011
   

 

 

EX-101.INS 8 bmc-20110331.xml EX-101 INSTANCE DOCUMENT 0000835729 bmc:TradingAuctionRateSecuritiesMember us-gaap:ShortTermInvestmentsMember 2011-03-31 0000835729 us-gaap:ShortTermInvestmentsMember bmc:MutualFundsAndOtherMember 2011-03-31 0000835729 us-gaap:CashAndCashEquivalentsMember bmc:MutualFundsAndOtherMember 2011-03-31 0000835729 bmc:TradingAuctionRateSecuritiesMember bmc:LongTermInvestmentsMember 2011-03-31 0000835729 bmc:LongTermInvestmentsMember bmc:MutualFundsAndOtherMember 2011-03-31 0000835729 bmc:TradingAuctionRateSecuritiesMember us-gaap:CashAndCashEquivalentsMember 2011-03-31 0000835729 us-gaap:CashAndCashEquivalentsMember bmc:TradingAuctionRateSecuritiesMember 2010-03-31 0000835729 us-gaap:ShortTermInvestmentsMember bmc:TradingAuctionRateSecuritiesMember 2010-03-31 0000835729 bmc:LongTermInvestmentsMember bmc:MutualFundsAndOtherMember 2010-03-31 0000835729 bmc:LongTermInvestmentsMember bmc:TradingAuctionRateSecuritiesMember 2010-03-31 0000835729 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Roman',Times,serif; margin-left: 0in; "> <!-- xbrl,ns --> <!-- xbrl,nx --> <div align="left"> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(1)&#160;Summary of Significant Accounting Policies</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Nature of Operations</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">BMC Software, Inc. (collectively, we, us, our, the Company or BMC) develops software that provides system and service management solutions primarily for large enterprises. We market and sell our products in most major world markets directly through our sales force and indirectly through channel partners, including resellers, distributors and systems integrators. We also provide maintenance and support for our products and perform software implementation, integration and education services for our customers. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Basis of Presentation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have evaluated subsequent events through the date the financial statements were issued. Certain reclassifications have been made to the prior years&#8217; financial statements to conform to the current year&#8217;s presentation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Use of Estimates</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in conformity with United States generally accepted accounting principles (GAAP)&#160;requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cash and Cash Equivalents</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We consider investments with an original maturity of ninety days or less when purchased to be cash equivalents. At March&#160;31, 2011 and 2010, our cash equivalents were comprised primarily of money-market funds and United States Treasury securities. Our cash equivalents are subject to potential credit risk. Our cash management and investment policies restrict investments to investment grade, highly liquid securities. The carrying value of cash and cash equivalents approximates fair value. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Investments</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We classify our investments in equity securities that have readily determinable fair values and all debt securities as held-to-maturity, available-for-sale or trading at acquisition and reevaluate such classification at each subsequent balance sheet date. We do not have any investments classified as held-to-maturity at March&#160;31, 2011 or 2010. Our available-for-sale and trading securities are recorded at fair value in the consolidated balance sheets. Unrealized gains and losses on available-for-sale securities are recorded, net of tax, as a component of accumulated other comprehensive income (loss), unless impairment is considered to be other-than-temporary. Other-than-temporary unrealized losses on available-for-sale securities are generally recorded in gain (loss)&#160;on investments, net, in the consolidated statements of operations unless certain criteria are met. The primary factors considered when determining if a charge must be recorded because a decline in the fair value of an investment is other-than-temporary include whether: (i) the fair value of the investment is significantly below our cost basis; (ii)&#160;the financial condition of the issuer of the security has deteriorated; (iii)&#160;if a debt security, it is probable that we will be unable to collect all amounts due according to the contractual terms of the security; (iv)&#160;the decline in fair value has existed for an extended period of time; (v)&#160;if a debt security, such security has been downgraded by a rating agency; and (vi)&#160;whether we have the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. In addition, unrealized gains and losses on trading securities and all realized gains and losses are recorded in gain (loss)&#160;on investments, net, in the consolidated statements of operations. Realized and unrealized gains and losses are calculated using the specific identification method. Investments with maturities of twelve months or less are classified as short-term investments. Investments with maturities of more than twelve months are classified as long-term investments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We account for investments in non-marketable equity securities in which we do not have significant influence and that do not have a readily determinable fair value under the cost method of accounting. These investments are included in other long-term assets. In fiscal 2009, we recorded an $8.4&#160;million impairment charge in connection with the write-down of certain non-marketable equity investments to their estimated fair values. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Refer to Note 3 for further information regarding auction rate securities held by us. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Receivables</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the ordinary course of business, we extend credit to our customers on both trade and financed terms. Trade and finance receivables are recorded at their outstanding principal balances, adjusted for interest receivable to date, if applicable, and adjusted by the allowance for doubtful accounts. Interest income on finance receivables is recognized using the effective interest method and is presented as interest and other income, net, in the consolidated statements of operations. Interest income on these finance receivables was $10.4&#160;million, $11.4&#160;million and $9.6&#160;million in fiscal 2011, 2010 and 2009, respectively. In estimating the allowance for doubtful accounts, we consider the length of time receivable balances have been outstanding, historical collection experience, current economic conditions and customer-specific information. When we ultimately conclude that a receivable is uncollectible, the balance is charged against the allowance for doubtful accounts. At March&#160;31, 2011 and 2010, the allowance for doubtful trade accounts receivable was $3.6&#160;million and $2.2&#160;million and the allowance for doubtful trade finance receivables was $0.5 million and $0.4&#160;million, respectively. During fiscal 2011, 2010 and 2009, the provision (recovery) for bad debts was $1.7&#160;million, $(0.3) million and $3.8&#160;million and the amounts charged against the allowance for doubtful accounts were $0.2&#160;million, $1.3&#160;million and $2.9&#160;million, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Long-Lived Assets</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Property and Equipment</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Property and equipment are stated at cost. Depreciation on property and equipment, with the exception of leasehold improvements, is recorded using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are depreciated using the straight-line method over the shorter of the lease term or the estimated respective useful lives of the assets, which range from three to ten years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs incurred to develop internal-use software during the application development stage are capitalized, stated at cost, and amortized using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized, whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Software Development Costs</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs of software developed internally for licensing to third parties are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs incurred through the general release of the software products are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized software development costs are amortized on a straight-line basis over the products&#8217; respective estimated economic lives, which are typically three years. The amortization of capitalized software development costs, including any amounts accelerated for products that are not expected to generate sufficient future revenue to realize their carrying values, is included in cost of license revenue in the consolidated statements of operations. During fiscal 2011, 2010 and 2009, amounts capitalized were $124.0&#160;million, $85.9&#160;million and $72.5&#160;million, respectively, and amounts amortized were $75.7&#160;million, $63.1&#160;million and $62.9&#160;million, respectively. The change in foreign currency exchange rates had no impact during fiscal 2011 but increased (decreased)&#160;capitalized software development costs by $0.1&#160;million and $(0.4) million, during fiscal 2010 and 2009, respectively. Amounts capitalized during fiscal 2011, 2010 and 2009 included $4.4&#160;million, $2.3 million and $1.7&#160;million, respectively, of capitalized interest; and approximately $8.2&#160;million, $4.9&#160;million and $5.2&#160;million, respectively, of share-based compensation costs. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Intangible Assets</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets consist principally of acquired technology and customer relationships recorded in connection with our business combinations. The amounts allocated to these intangible assets represent our estimates of their fair values at the acquisition date. The fair values are primarily estimated using the expected present value of future cash flows method of applying the income approach. Intangible assets are stated at cost and amortized on a straight-line basis over their respective estimated economic lives ranging from one to four years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Goodwill</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including identifiable intangible assets, in connection with our business combinations. Upon acquisition, goodwill is assigned to the reporting unit that is expected to benefit from the synergies of the business combination, which is the reporting unit to which the related acquired technology is assigned. A reporting unit is the operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. Each of our business segments is considered a reporting unit. We test goodwill for impairment as of January 1 of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our impairment test is based on a comparison of the estimated fair value of the reporting units, determined using a combination of the income and market approaches on an invested capital basis, to their respective carrying values (including goodwill) as of the date of the impairment test. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Impairment</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition to our goodwill impairment testing, as noted above, we also review our other long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its estimated fair value. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Foreign Currency Translation and Risk Management</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We operate globally and transact business in various foreign currencies. The functional currency for many of our foreign subsidiaries is the respective local currency. Financial statements of these foreign operations are translated into United States dollars using the currency exchange rates in effect at the balance sheet dates. Revenue and expenses of these subsidiaries are translated using rates that approximate those in effect during the period. Translation adjustments are included in accumulated other comprehensive income (loss)&#160;within stockholders&#8217; equity. The substantial majority of our revenue derived from customers outside of the United States is billed in local currencies from regional headquarters, for which the functional currency is the United States dollar. Foreign currency transaction gains or losses are included in interest and other income, net. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To minimize the risk from changes in foreign currency exchange rates, we have established a program that utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Gains or losses on our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts entered into under this program. Our foreign currency exposures relate primarily to certain foreign currency denominated assets and liabilities. Our foreign currency forward contracts generally have terms of one month or less and are entered into at the prevailing market exchange rate at the end of each month. We do not use foreign currency forward contracts for speculative purposes. While these foreign currency forward contracts are utilized to hedge foreign currency exposures, they are not formally designated as hedges for accounting purposes, and therefore, the changes in the fair values of these contracts are recognized currently in earnings. We record these foreign currency forward contracts at fair value as either assets or liabilities depending on the net settlement position of the foreign currency forward contracts with each respective counterparty at the balance sheet date. All settlements of gains and losses related to the foreign currency forward contracts are included in cash flow from operating activities in the consolidated statements of cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-specific objective evidence (VSOE)&#160;of the fair value of undelivered elements exists. As substantially all of our software licenses are sold in multiple-element arrangements that include either maintenance or both maintenance and professional services, we use 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 the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as license revenue. We have established VSOE of the fair value of maintenance through independent maintenance renewals. These demonstrate a consistent relationship of pricing maintenance as a percentage of either the net license fee or the discounted or undiscounted license list price. VSOE of the fair value of professional services is established based on daily rates when sold on a stand-alone basis, as well as management approved pricing for certain new professional services offerings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include multiple software products for which the associated maintenance pricing is based on a combination of undiscounted license list prices, net license fees or discounted license list prices. We are also unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include unlimited licensing rights and certain arrangements that contain rights to future unspecified software products as part of the maintenance offering. If VSOE of fair value of one or more undelivered elements does not exist, license revenue is deferred and recognized upon delivery of those elements or when VSOE of fair value exists for all remaining undelivered elements, or if the deferral is due to the factors described above, license revenue is recognized ratably over the longest expected delivery period of undelivered elements in the arrangement, which is typically the longest maintenance term. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In our time-based license agreements, we are unable to establish VSOE of fair value for undelivered maintenance elements because the contractual maintenance terms in these arrangements are the same duration as the license terms, and VSOE of fair value of maintenance cannot be established. Accordingly, license fees in time-based license arrangements are recognized ratably over the term of the arrangements. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Maintenance revenue is recognized ratably over the terms of the maintenance arrangements, which primarily range from one to three years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Professional services revenue, which principally relates to implementation, integration and education services associated with our products, is derived under both time-and-material and fixed fee arrangements and in most instances is recognized on a proportional performance basis based on hours. If no discernable customer deliverable exists until the completion of the professional services, we apply the completed performance method and defer the recognition of professional services revenue until completion of the services, which is typically evidenced by a signed completion letter from the customer. Services that are sold in connection with software license arrangements generally qualify for separate accounting from the license elements because they do not involve significant production, modification or customization of our products and are not otherwise considered to be essential to the functionality of such products. In arrangements where the professional services do not qualify for separate accounting from the license elements, the combined software license and professional services revenue are recognized based on contract accounting using either the percentage-of-completion or completed-contract method. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also execute arrangements through resellers, distributors and systems integrators (collectively, channel partners) in which the channel partners act as the principals in the transactions with the end users of our products and services. In license arrangements with channel partners, title and risk of loss pass to the channel partners upon execution of our arrangements with them and the delivery of our products to the channel partner. We recognize revenue from transactions with channel partners when all other revenue recognition criteria are satisfied. We do not offer right of return, product rotation or price protection to any of our channel partners. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Revenue from license and maintenance transactions that are financed are generally recognized in the same manner as those requiring current payment, as we have a history of offering installment contracts to customers and successfully enforcing original payment terms without making concessions. In arrangements where the fees are not considered to be fixed or determinable, we recognize revenue when payments become due under the arrangement. If we determine that a transaction is not probable of collection or a risk of concession exists, we do not recognize revenue in excess of the amount of cash received. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are required to charge certain taxes on our revenue transactions. These amounts are not included in revenue. Instead, we record a liability when the amounts are collected and relieve the liability when payments are made to the applicable government agency. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In our consolidated statements of operations, revenue is categorized as license, maintenance and professional services revenue. We allocate revenue from arrangements containing multiple elements to each of these categories based on the VSOE of fair value for elements in each revenue arrangement and the application of the residual method for arrangements in which we have established VSOE of fair value for all undelivered elements. In arrangements where we are not able to establish VSOE of fair value for all undelivered elements, we first allocate revenue to any undelivered elements for which VSOE of fair value has been established, then allocate revenue to any undelivered elements for which VSOE of fair value has not been established based upon management&#8217;s best estimate of fair value of those undelivered elements and apply a residual method to determine the license fee. Management&#8217;s best estimate of fair value of undelivered elements for which VSOE of fair value has not been established is based upon the VSOE of similar offerings and other objective criteria. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cost of License and Maintenance Revenue</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cost of license revenue is primarily comprised of the amortization of capitalized software development costs for internally developed products, the amortization of acquired technology for products acquired through business combinations, license-based royalties to third parties and production and distribution costs for initial product licenses. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cost of maintenance revenue is primarily comprised of the costs associated with the customer support and research and development personnel that provide maintenance, enhancement and support services to our customers. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Sales Commissions</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We pay commissions, including sales bonuses, to our direct sales force related to revenue transactions under sales compensation plans established annually. We defer the portion of commissions that are direct and incremental costs of the license and maintenance revenue arrangements and recognize them as selling and marketing expenses in the consolidated statements of operations over the terms of the related customer contracts, in proportion to the recognition of the associated revenue. The commission payments are typically paid in full in the month following execution of the customer contracts. Deferred commissions as of March&#160;31, 2011 and 2010 were $78.7 million and $61.6&#160;million, respectively. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Share-Based Compensation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Share-based compensation expense for share-based awards is recognized only for those awards that are expected to vest. We use the straight-line attribution method to allocate share-based compensation expense over the requisite service period of the award. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Refer to Note 9 for further information regarding share-based compensation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Recently Adopted Accounting Pronouncements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July&#160;2010, the Financial Accounting Standards Board (FASB)&#160;issued new disclosure guidance related to finance receivables and the related allowances for credit losses. This guidance introduces a greater level of disaggregation based on the underlying characteristics of the finance receivables. The disclosure requirements include, based on the related disaggregation criteria, a rollforward of the allowance for credit losses and the related balance of the finance receivables, significant purchases and sales of finance receivables, and various qualitative disclosures including credit quality, aging, nonaccrual status and impairments. The new guidance was effective for us in the third quarter of fiscal 2011, and the applicable disclosures have been included in our consolidated financial statements, where material. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 2 - us-gaap:BusinessCombinationDisclosureTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(2)&#160;Business Combinations</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Fiscal 2011 Acquisitions</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During fiscal 2011, we completed the acquisition of the software business of Neptuny S.r.l., a provider of continuous capacity optimization software, and the acquisition of GridApp Systems, Inc., a provider of comprehensive database provisioning, patching and administration software, for combined purchase consideration of $51.5&#160;million. The purchase consideration was allocated to acquired assets and assumed liabilities consisting primarily of $20.7&#160;million of acquired technology, with weighted average economic lives of approximately three years, in addition to other tangible assets and liabilities. These acquisitions resulted in a preliminary allocation of $34.2 million to goodwill assigned to our Enterprise Service Management (ESM)&#160;segment. The operating results of the acquired companies have been included in our consolidated financial statements since the respective acquisition dates. Pro forma information is not included because the acquired companies&#8217; operations would not have materially impacted our consolidated operating results. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Fiscal 2010 Acquisitions</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During fiscal 2010, we completed the acquisitions of MQSoftware, Inc., a provider of middleware and enterprise application transaction management software, Tideway Systems Limited, a provider of IT discovery solutions, and Phurnace Software, Inc., a developer of software that automates the deployment and configuration of business-critical Java EE applications, for combined purchase consideration of $94.3&#160;million. The purchase consideration was allocated to acquired assets and assumed liabilities under the current accounting requirements for business combinations adopted April&#160;1, 2009, consisting primarily of approximately $36.3&#160;million of acquired technology and $9.4&#160;million of customer relationships, with weighted average economic lives of approximately three years, in addition to other tangible assets and liabilities. These acquisitions resulted in an allocation of $61.3&#160;million to goodwill, of which $12.8&#160;million was assigned to the Mainframe Service Management (MSM)&#160;segment and $48.5&#160;million was assigned to the ESM segment. The operating results of the acquired companies have been included in our consolidated financial statements since the respective acquisition dates. Pro forma information is not included because the acquired companies&#8217; operations would not have materially impacted our consolidated operating results. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Fiscal 2009 Acquisition</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April&#160;2008, we completed the acquisition of all of the outstanding common shares of BladeLogic, Inc. (BladeLogic), a provider of data center automation software, for $28 per share. In addition, outstanding and unvested options to acquire the common stock of BladeLogic and other share-based awards were converted pursuant to the terms of the transaction into options to purchase our common stock and other share-based awards, respectively. BladeLogic&#8217;s operating results have been included in our consolidated financial statements since the acquisition date as part of our ESM segment. This acquisition expanded our offerings for server provisioning, application release management, automation and compliance. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The acquisition of BladeLogic&#8217;s outstanding common stock and other equity instruments resulted in total purchase consideration of $854.0&#160;million, including approximately $19.9&#160;million of direct acquisition costs. 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We believe that this acquisition will help us remain competitive in the Business Service Management market and improve the results of operations for our ESM segment. 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The amounts allocated to IPR&#038;D represent the estimated fair values, based on risk-adjusted cash flows and historical costs expended, related to core research and development projects that were incomplete and had neither reached technological feasibility nor been determined to have an alternative future use pending achievement of technological feasibility at the date of acquisition. 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The amounts for fiscal 2010 and 2011 were not significant. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At March&#160;31, 2011 and 2010, we held auction rate securities with a par value of $29.8&#160;million and $50.7&#160;million, respectively, which were classified as available-for-sale, and at March&#160;31, 2010, we also held auction rate securities with a par value of $16.6&#160;million which were classified as trading. The total estimated fair value of our auction rate securities was $27.2&#160;million and $60.5&#160;million at March&#160;31, 2011 and 2010, respectively. Our auction rate securities consist entirely of bonds issued by public agencies that are backed by student loans with at least a 97% guarantee by the federal government under the United States Department of Education&#8217;s Federal Family Education Loan Program. All of these bonds are currently rated investment grade by Moody&#8217;s or Standard and Poor&#8217;s. Auctions for these securities began failing in early 2008 and have continued to fail, resulting in our continuing to hold such securities and the issuers paying interest at the maximum contractual rates. We do not believe that any of the underlying issuers of these auction rate securities are presently at risk of default or that the underlying credit quality of the assets backing the auction rate security investments has been impacted by the reduced liquidity of these investments. Due to the illiquidity in the auction rate securities market caused by failed auctions, we estimated the fair value of these securities and the put option discussed below using internally developed models of the expected cash flows of the securities which incorporate assumptions about the expected cash flows of the underlying student loans and estimates of the rate of return required by investors, which includes an adjustment to reflect a lack of liquidity in the market for these securities. Periodically, the issuers of certain of our auction rate securities have redeemed portions of our holdings at par value plus accrued interest. During the years ended March&#160;31, 2011 and 2010, issuers redeemed available-for-sale holdings of $20.9&#160;million par value and $3.7&#160;million par value, respectively, and trading holdings of $5.4&#160;million par value and $1.2&#160;million par value, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In November&#160;2008, we entered into a put agreement with a bank from which we acquired certain auction rate securities. On July&#160;1, 2010, we exercised our right under this agreement to put the remaining securities subject to this agreement, with $11.2&#160;million par value, to the bank. The auction rate securities subject to the put agreement were classified as short-term investments and trading securities and, accordingly, any changes in the fair value of these securities were recognized in earnings. In addition, we elected the option under GAAP to record the put option at fair value. The fair value adjustments to these auction rate securities and the related put option resulted in minimal net impact to the consolidated statements of operations for the years ended March&#160;31, 2011, 2010 and 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The unrealized loss on our available-for-sale auction rate securities, which have a fair value of $27.2&#160;million at March&#160;31, 2011, was $2.6&#160;million and was recorded in accumulated other comprehensive income (loss)&#160;as we believe the decline in fair value of these auction rate securities is temporary. In making this determination, we primarily considered the financial condition and near-term prospects of the issuers, the probability scheduled cash flows will continue to be made and the likelihood we would be required to sell the investments before recovery of our cost basis. These available-for-sale auction rate securities have been in an unrealized loss position for greater than twelve months. Because of the uncertainty related to the timing of liquidity associated with these auction rate securities, these securities are classified as long-term investments at March&#160;31, 2011 and 2010. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Derivative Financial Instruments</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of our outstanding foreign currency forward contracts that closed in a gain position at March&#160;31, 2011 and 2010 was $5.8&#160;million and $3.5&#160;million, respectively, and was recorded within other current assets in our consolidated balance sheets. The fair value of our outstanding foreign currency forward contracts that closed in a loss position at March&#160;31, 2011 and 2010 was $3.3&#160;million and $1.0&#160;million, respectively, and was recorded within accrued liabilities in our consolidated balance sheets. 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During fiscal 2010 and early fiscal 2011, we settled all open issues with the IRS resulting from the audit of our tax years ended March&#160;31, 2004 and 2005. During fiscal 2011, we settled all open issues but one with the IRS resulting from the audit of our tax years ended March&#160;31, 2006 and 2007. As a result of these settlements, we recorded net tax benefits of $57.2&#160;million and $30.0 million in fiscal 2011 and fiscal 2010, respectively. In April 2011, we received a Notice of Deficiency from the IRS on the one remaining disputed issue, relating to the tax year ended March 31, 2006, which we will litigate accordingly. In April 2011, the IRS issued its Revenue Agent Report (RAR) for its examination of our federal income tax return for the tax year ended March&#160;31, 2008, and there are no unagreed issues arising from this RAR. In addition, certain tax years related to local, state, and foreign jurisdictions remain subject to examination. 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Options granted to employees generally vest monthly over four years and have a term of six years. Options granted to non-employee board members become fully vested within one year from the date of grant and have terms of ten years with respect to grants through fiscal 2008 and six years for all subsequent grants. Time-based nonvested stock units vest in annual increments over one or three years; performance-based nonvested stock units vest in one year increments, contingent upon us meeting certain profitability targets; and market-based nonvested stock units vest in 50% increments over two- and three-year periods or in annual increments over three years upon achievement of certain targets related to our relative total shareholder return as compared to a set of peer companies or to the NASDAQ-100 Index over each performance period. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We did not grant any stock options during fiscal 2011 and granted 0.2&#160;million and 5.1&#160;million stock options during fiscal 2010 and 2009, respectively. We granted 3.3&#160;million, 3.0&#160;million and 3.5&#160;million in nonvested stock units during fiscal 2011, 2010 and 2009, respectively. There were no significant modifications made to any share-based grants during these periods. At March&#160;31, 2011, there were 9.6&#160;million shares available for grant under our share-based compensation plans. However, for certain types of awards, some of our plans require us to reduce shares available for grant by a factor of 2.25 shares or 2.0 shares, depending on the plan from which the awards are issued. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also sponsor an employee stock purchase plan that permits eligible employees to acquire shares of our stock at a 15% discount to the lower of the market price of our common stock at the beginning or end of six-month offering periods. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Share-based compensation costs for stock options are based on the fair value calculated from the Black-Scholes option-pricing model on the date of grant for stock options and on the first day of the offering period for the employee stock purchase plan. The fair value of nonvested stock equals the intrinsic value on the date of grant, except for certain market-based nonvested stock units, for which the fair value is calculated using a Monte Carlo simulation model on the date of grant. The fair values of share-based awards are recorded as compensation expense on a straight-line basis over the requisite service period of the grants. Compensation expense recognized is shown in the operating activities section in the consolidated statements of cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We estimate the volatility of our stock price by using a combination of both historical volatility and implied volatility derived from traded options on our common stock in the marketplace. We believe that the combination of historical volatility and implied volatility provides a better estimate of future stock price volatility. We base the estimate of the risk-free interest rate on the United States Treasury zero-coupon yield curve in effect at the time of grant. We have never paid cash dividends and do not currently intend to pay cash dividends; accordingly, we have assumed a dividend yield of zero. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are required to estimate potential forfeitures of share-based awards and adjust compensation expense accordingly. The estimate of forfeitures is adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and thus impact the amount of share-based compensation expense to be recognized in future periods. There were no significant changes in estimated forfeitures in fiscal 2011, 2010 or 2009 as compared to estimates when the related expenses were originally recorded. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of share-based payments was estimated using the Black-Scholes option-pricing model and the Monte Carlo simulation model with the following weighted-average assumptions: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom"> <td width="58%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year Ended March 31,</b></td> <td>&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td>&#160;</td> </tr> <!-- End Table Head --> <!-- Begin Table Body --> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; 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The performance-based nonvested stock units were valued based on the fair value of our common stock on the date of grant. The vesting of the market-based nonvested stock units is contingent on our relative total shareholder return as compared to a set of peer companies or to the NASDAQ-100 Index over each performance period. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes weighted average grant date fair value and additional intrinsic value and vesting information: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom"> <td width="58%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year Ended March 31,</b></td> <td>&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td>&#160;</td> </tr> <!-- End Table Head --> <!-- Begin Table Body --> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; 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Also, under these standard license agreements, we represent and warrant to licensees that our software products operate substantially in accordance with published specifications. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Other guarantees include promises to indemnify, defend and hold harmless each of our executive officers, non-employee directors and certain key employees from and against losses, damages and costs incurred by each such individual in administrative, legal or investigative proceedings arising from alleged wrongdoing by the individual while acting in good faith within the scope of his or her job duties on our behalf. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also had outstanding letters of credit, performance bonds and similar instruments at March 31, 2011 of approximately $44.2&#160;million primarily in support of performance obligations to various customers, but also related to facilities and other obligations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Historically, we have not incurred significant costs related to such indemnifications, warranties and guarantees. As such, and based on other factors, no provision or accrual for these items has been made. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Lease Commitments</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We lease office space and equipment under various non-cancelable operating leases. 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These claims are in various stages, may result in formal legal proceedings against us, and may not be fully resolved in the near future. We cannot currently predict the timing or ultimate outcome, nor estimate a range of loss, if any, for such claims. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December&#160;2010, a lawsuit was filed against a number of software companies, including us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United States District Court for the Eastern District of Texas, Tyler Division. The complaint seeks monetary damages in unspecified amounts and permanent injunction based upon claims for alleged patent infringement. While we intend to vigorously defend this matter, we cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are party to various labor claims brought by certain former international employees alleging that amounts are due to such employees for unpaid commissions and other compensation. The claims are in various stages and are not expected to be fully resolved in the near future; however, we intend to vigorously contest all of the claims. Taking into account accruals recorded by us, we do not believe the resolution of these claims will have a material adverse effect on our financial position or results of operations. However, we cannot predict the timing or ultimate outcome of these matters. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are currently litigating a matter in Brazilian courts as to whether a tax applies to the remittance of software payments from our Brazilian operations. In February&#160;2007, a law was enacted that clarified that this particular tax did not apply to the remittance of software payments, retroactive to January&#160;1, 2006. We continue to pursue a favorable resolution on this matter for years prior to January&#160;1, 2006. 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Our ten largest customers comprised 15% or less of our total revenue in each of fiscal 2011, 2010 and 2009 and represented various industries. No single customer accounted for a material portion of our revenue during any of the past three fiscal years. 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These process and realignment initiatives include workforce reductions across all functions and geographies, and the affected employees were, or will be, provided cash separation packages. As part of these initiatives, we have also exited certain leases, reduced the square footage required to operate certain locations and relocated some operations to lower cost facilities. During fiscal 2009, as a result of these initiatives, we identified for termination approximately 140 employees. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Additionally, as a result of economic conditions, we undertook a general workforce reduction of approximately 80 and 380 employees during fiscal 2010 and 2009, respectively. 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This guidance requires entities to perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired in situations where reporting units have a carrying value that is zero or negative. If the qualitative evaluation determines it is more likely than not that goodwill is impaired, step two of the goodwill impairment test is required to be performed to measure the amount of impairment, if any. The new guidance is effective for us beginning in fiscal 2012 and is not expected to have a material effect on our financial position, results of operations or cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October&#160;2009, the FASB issued new revenue recognition guidance for arrangements that include both software and non-software related deliverables, where certain of those deliverables are non-software related. This guidance requires entities to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of VSOE or other third party evidence of the selling price. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. 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margin-top: 10pt; text-indent: 4%">We recorded net tax benefits related to the settlement of certain tax matters of $14.0 million, $18.0&#160;million and $25.2&#160;million during the quarters ended June&#160;30, 2010, September&#160;30, 2010 and March&#160;31, 2011, respectively, and $30.0&#160;million during the quarter ended March&#160;31, 2010 as further discussed in Note 8. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 17 - us-gaap:ScheduleOfSubsequentEventsTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(17)&#160;Subsequent Event</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April&#160;2011, we acquired all of the outstanding capital stock of Coradiant Inc., a provider of end-user experience and web application performance monitoring solutions, for cash consideration of approximately $125&#160;million, net of cash acquired. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table1 - bmc:NatureOfOperationsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; 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(collectively, we, us, our, the Company or BMC) develops software that provides system and service management solutions primarily for large enterprises. We market and sell our products in most major world markets directly through our sales force and indirectly through channel partners, including resellers, distributors and systems integrators. We also provide maintenance and support for our products and perform software implementation, integration and education services for our customers. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table2 - bmc:BasisOfPresentationPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have evaluated subsequent events through the date the financial statements were issued. Certain reclassifications have been made to the prior years&#8217; financial statements to conform to the current year&#8217;s presentation. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table3 - bmc:UseOfEstimatesPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in conformity with United States generally accepted accounting principles (GAAP)&#160;requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table4 - us-gaap:CashAndCashEquivalentsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We consider investments with an original maturity of ninety days or less when purchased to be cash equivalents. At March&#160;31, 2011 and 2010, our cash equivalents were comprised primarily of money-market funds and United States Treasury securities. Our cash equivalents are subject to potential credit risk. Our cash management and investment policies restrict investments to investment grade, highly liquid securities. The carrying value of cash and cash equivalents approximates fair value. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table5 - us-gaap:InvestmentPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We classify our investments in equity securities that have readily determinable fair values and all debt securities as held-to-maturity, available-for-sale or trading at acquisition and reevaluate such classification at each subsequent balance sheet date. We do not have any investments classified as held-to-maturity at March&#160;31, 2011 or 2010. Our available-for-sale and trading securities are recorded at fair value in the consolidated balance sheets. Unrealized gains and losses on available-for-sale securities are recorded, net of tax, as a component of accumulated other comprehensive income (loss), unless impairment is considered to be other-than-temporary. Other-than-temporary unrealized losses on available-for-sale securities are generally recorded in gain (loss)&#160;on investments, net, in the consolidated statements of operations unless certain criteria are met. The primary factors considered when determining if a charge must be recorded because a decline in the fair value of an investment is other-than-temporary include whether: (i) the fair value of the investment is significantly below our cost basis; (ii)&#160;the financial condition of the issuer of the security has deteriorated; (iii)&#160;if a debt security, it is probable that we will be unable to collect all amounts due according to the contractual terms of the security; (iv)&#160;the decline in fair value has existed for an extended period of time; (v)&#160;if a debt security, such security has been downgraded by a rating agency; and (vi)&#160;whether we have the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. In addition, unrealized gains and losses on trading securities and all realized gains and losses are recorded in gain (loss)&#160;on investments, net, in the consolidated statements of operations. Realized and unrealized gains and losses are calculated using the specific identification method. Investments with maturities of twelve months or less are classified as short-term investments. Investments with maturities of more than twelve months are classified as long-term investments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We account for investments in non-marketable equity securities in which we do not have significant influence and that do not have a readily determinable fair value under the cost method of accounting. These investments are included in other long-term assets. In fiscal 2009, we recorded an $8.4&#160;million impairment charge in connection with the write-down of certain non-marketable equity investments to their estimated fair values. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Refer to Note 3 for further information regarding auction rate securities held by us. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table6 - us-gaap:ReceivablesPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the ordinary course of business, we extend credit to our customers on both trade and financed terms. Trade and finance receivables are recorded at their outstanding principal balances, adjusted for interest receivable to date, if applicable, and adjusted by the allowance for doubtful accounts. Interest income on finance receivables is recognized using the effective interest method and is presented as interest and other income, net, in the consolidated statements of operations. Interest income on these finance receivables was $10.4&#160;million, $11.4&#160;million and $9.6&#160;million in fiscal 2011, 2010 and 2009, respectively. In estimating the allowance for doubtful accounts, we consider the length of time receivable balances have been outstanding, historical collection experience, current economic conditions and customer-specific information. When we ultimately conclude that a receivable is uncollectible, the balance is charged against the allowance for doubtful accounts. At March&#160;31, 2011 and 2010, the allowance for doubtful trade accounts receivable was $3.6&#160;million and $2.2&#160;million and the allowance for doubtful trade finance receivables was $0.5 million and $0.4&#160;million, respectively. During fiscal 2011, 2010 and 2009, the provision (recovery) for bad debts was $1.7&#160;million, $(0.3) million and $3.8&#160;million and the amounts charged against the allowance for doubtful accounts were $0.2&#160;million, $1.3&#160;million and $2.9&#160;million, respectively. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table7 - us-gaap:PropertyPlantAndEquipmentPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Property and equipment are stated at cost. Depreciation on property and equipment, with the exception of leasehold improvements, is recorded using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are depreciated using the straight-line method over the shorter of the lease term or the estimated respective useful lives of the assets, which range from three to ten years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs incurred to develop internal-use software during the application development stage are capitalized, stated at cost, and amortized using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized, whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table8 - us-gaap:ResearchDevelopmentAndComputerSoftwarePolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs of software developed internally for licensing to third parties are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs incurred through the general release of the software products are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized software development costs are amortized on a straight-line basis over the products&#8217; respective estimated economic lives, which are typically three years. The amortization of capitalized software development costs, including any amounts accelerated for products that are not expected to generate sufficient future revenue to realize their carrying values, is included in cost of license revenue in the consolidated statements of operations. During fiscal 2011, 2010 and 2009, amounts capitalized were $124.0&#160;million, $85.9&#160;million and $72.5&#160;million, respectively, and amounts amortized were $75.7&#160;million, $63.1&#160;million and $62.9&#160;million, respectively. The change in foreign currency exchange rates had no impact during fiscal 2011 but increased (decreased)&#160;capitalized software development costs by $0.1&#160;million and $(0.4) million, during fiscal 2010 and 2009, respectively. Amounts capitalized during fiscal 2011, 2010 and 2009 included $4.4&#160;million, $2.3 million and $1.7&#160;million, respectively, of capitalized interest; and approximately $8.2&#160;million, $4.9&#160;million and $5.2&#160;million, respectively, of share-based compensation costs. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table9 - bmc:IntangibleAssetsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets consist principally of acquired technology and customer relationships recorded in connection with our business combinations. The amounts allocated to these intangible assets represent our estimates of their fair values at the acquisition date. The fair values are primarily estimated using the expected present value of future cash flows method of applying the income approach. Intangible assets are stated at cost and amortized on a straight-line basis over their respective estimated economic lives ranging from one to four years. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table10 - bmc:GoodwillPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including identifiable intangible assets, in connection with our business combinations. Upon acquisition, goodwill is assigned to the reporting unit that is expected to benefit from the synergies of the business combination, which is the reporting unit to which the related acquired technology is assigned. A reporting unit is the operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. Each of our business segments is considered a reporting unit. We test goodwill for impairment as of January 1 of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our impairment test is based on a comparison of the estimated fair value of the reporting units, determined using a combination of the income and market approaches on an invested capital basis, to their respective carrying values (including goodwill) as of the date of the impairment test. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table11 - us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition to our goodwill impairment testing, as noted above, we also review our other long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its estimated fair value. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note15_accounting_policy_table1 - bmc:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December&#160;2010, the FASB issued updated guidance for intangible assets, specifically related to the goodwill impairment test. This guidance requires entities to perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired in situations where reporting units have a carrying value that is zero or negative. If the qualitative evaluation determines it is more likely than not that goodwill is impaired, step two of the goodwill impairment test is required to be performed to measure the amount of impairment, if any. The new guidance is effective for us beginning in fiscal 2012 and is not expected to have a material effect on our financial position, results of operations or cash flows. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table12 - bmc:ForeignCurrencyTranslationAndRiskManagementPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We operate globally and transact business in various foreign currencies. The functional currency for many of our foreign subsidiaries is the respective local currency. Financial statements of these foreign operations are translated into United States dollars using the currency exchange rates in effect at the balance sheet dates. Revenue and expenses of these subsidiaries are translated using rates that approximate those in effect during the period. Translation adjustments are included in accumulated other comprehensive income (loss)&#160;within stockholders&#8217; equity. The substantial majority of our revenue derived from customers outside of the United States is billed in local currencies from regional headquarters, for which the functional currency is the United States dollar. Foreign currency transaction gains or losses are included in interest and other income, net. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To minimize the risk from changes in foreign currency exchange rates, we have established a program that utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Gains or losses on our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts entered into under this program. Our foreign currency exposures relate primarily to certain foreign currency denominated assets and liabilities. Our foreign currency forward contracts generally have terms of one month or less and are entered into at the prevailing market exchange rate at the end of each month. We do not use foreign currency forward contracts for speculative purposes. While these foreign currency forward contracts are utilized to hedge foreign currency exposures, they are not formally designated as hedges for accounting purposes, and therefore, the changes in the fair values of these contracts are recognized currently in earnings. We record these foreign currency forward contracts at fair value as either assets or liabilities depending on the net settlement position of the foreign currency forward contracts with each respective counterparty at the balance sheet date. All settlements of gains and losses related to the foreign currency forward contracts are included in cash flow from operating activities in the consolidated statements of cash flows. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table13 - us-gaap:RevenueRecognitionPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-specific objective evidence (VSOE)&#160;of the fair value of undelivered elements exists. As substantially all of our software licenses are sold in multiple-element arrangements that include either maintenance or both maintenance and professional services, we use 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 the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as license revenue. We have established VSOE of the fair value of maintenance through independent maintenance renewals. These demonstrate a consistent relationship of pricing maintenance as a percentage of either the net license fee or the discounted or undiscounted license list price. VSOE of the fair value of professional services is established based on daily rates when sold on a stand-alone basis, as well as management approved pricing for certain new professional services offerings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include multiple software products for which the associated maintenance pricing is based on a combination of undiscounted license list prices, net license fees or discounted license list prices. We are also unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include unlimited licensing rights and certain arrangements that contain rights to future unspecified software products as part of the maintenance offering. If VSOE of fair value of one or more undelivered elements does not exist, license revenue is deferred and recognized upon delivery of those elements or when VSOE of fair value exists for all remaining undelivered elements, or if the deferral is due to the factors described above, license revenue is recognized ratably over the longest expected delivery period of undelivered elements in the arrangement, which is typically the longest maintenance term. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In our time-based license agreements, we are unable to establish VSOE of fair value for undelivered maintenance elements because the contractual maintenance terms in these arrangements are the same duration as the license terms, and VSOE of fair value of maintenance cannot be established. Accordingly, license fees in time-based license arrangements are recognized ratably over the term of the arrangements. </div> <!-- Folio --> <!-- /Folio --> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Maintenance revenue is recognized ratably over the terms of the maintenance arrangements, which primarily range from one to three years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Professional services revenue, which principally relates to implementation, integration and education services associated with our products, is derived under both time-and-material and fixed fee arrangements and in most instances is recognized on a proportional performance basis based on hours. If no discernable customer deliverable exists until the completion of the professional services, we apply the completed performance method and defer the recognition of professional services revenue until completion of the services, which is typically evidenced by a signed completion letter from the customer. Services that are sold in connection with software license arrangements generally qualify for separate accounting from the license elements because they do not involve significant production, modification or customization of our products and are not otherwise considered to be essential to the functionality of such products. In arrangements where the professional services do not qualify for separate accounting from the license elements, the combined software license and professional services revenue are recognized based on contract accounting using either the percentage-of-completion or completed-contract method. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also execute arrangements through resellers, distributors and systems integrators (collectively, channel partners) in which the channel partners act as the principals in the transactions with the end users of our products and services. In license arrangements with channel partners, title and risk of loss pass to the channel partners upon execution of our arrangements with them and the delivery of our products to the channel partner. We recognize revenue from transactions with channel partners when all other revenue recognition criteria are satisfied. We do not offer right of return, product rotation or price protection to any of our channel partners. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Revenue from license and maintenance transactions that are financed are generally recognized in the same manner as those requiring current payment, as we have a history of offering installment contracts to customers and successfully enforcing original payment terms without making concessions. In arrangements where the fees are not considered to be fixed or determinable, we recognize revenue when payments become due under the arrangement. If we determine that a transaction is not probable of collection or a risk of concession exists, we do not recognize revenue in excess of the amount of cash received. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are required to charge certain taxes on our revenue transactions. These amounts are not included in revenue. Instead, we record a liability when the amounts are collected and relieve the liability when payments are made to the applicable government agency. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In our consolidated statements of operations, revenue is categorized as license, maintenance and professional services revenue. We allocate revenue from arrangements containing multiple elements to each of these categories based on the VSOE of fair value for elements in each revenue arrangement and the application of the residual method for arrangements in which we have established VSOE of fair value for all undelivered elements. In arrangements where we are not able to establish VSOE of fair value for all undelivered elements, we first allocate revenue to any undelivered elements for which VSOE of fair value has been established, then allocate revenue to any undelivered elements for which VSOE of fair value has not been established based upon management&#8217;s best estimate of fair value of those undelivered elements and apply a residual method to determine the license fee. Management&#8217;s best estimate of fair value of undelivered elements for which VSOE of fair value has not been established is based upon the VSOE of similar offerings and other objective criteria. </div> </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note15_accounting_policy_table2 - bmc:RevenueRecognitionPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October&#160;2009, the FASB issued new revenue recognition guidance for arrangements that include both software and non-software related deliverables, where certain of those deliverables are non-software related. This guidance requires entities to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of VSOE or other third party evidence of the selling price. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us in the first quarter of fiscal 2012 interim financial statements, and is not expected to have a material effect on our financial position, results of operations or cash flows. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table14 - us-gaap:CostOfSalesPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cost of license revenue is primarily comprised of the amortization of capitalized software development costs for internally developed products, the amortization of acquired technology for products acquired through business combinations, license-based royalties to third parties and production and distribution costs for initial product licenses. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cost of maintenance revenue is primarily comprised of the costs associated with the customer support and research and development personnel that provide maintenance, enhancement and support services to our customers. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table15 - us-gaap:DeferredChargesPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We pay commissions, including sales bonuses, to our direct sales force related to revenue transactions under sales compensation plans established annually. We defer the portion of commissions that are direct and incremental costs of the license and maintenance revenue arrangements and recognize them as selling and marketing expenses in the consolidated statements of operations over the terms of the related customer contracts, in proportion to the recognition of the associated revenue. The commission payments are typically paid in full in the month following execution of the customer contracts. Deferred commissions as of March&#160;31, 2011 and 2010 were $78.7 million and $61.6&#160;million, respectively. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table16 - us-gaap:CompensationRelatedCostsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Share-based compensation expense for share-based awards is recognized only for those awards that are expected to vest. We use the straight-line attribution method to allocate share-based compensation expense over the requisite service period of the award. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Refer to Note 9 for further information regarding share-based compensation. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note1_accounting_policy_table17 - bmc:RecentlyAdoptedAccountingPronouncementsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July&#160;2010, the Financial Accounting Standards Board (FASB)&#160;issued new disclosure guidance related to finance receivables and the related allowances for credit losses. This guidance introduces a greater level of disaggregation based on the underlying characteristics of the finance receivables. The disclosure requirements include, based on the related disaggregation criteria, a rollforward of the allowance for credit losses and the related balance of the finance receivables, significant purchases and sales of finance receivables, and various qualitative disclosures including credit quality, aging, nonaccrual status and impairments. The new guidance was effective for us in the third quarter of fiscal 2011, and the applicable disclosures have been included in our consolidated financial statements, where material. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Accounting Policy: BMC-20110331_note3_accounting_policy_table1 - us-gaap:TransfersAndServicingOfFinancialAssetsPolicyTextBlock--> <div align="justify" style="font-size: 10pt; font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A substantial portion of our trade finance receivables are transferred to financial institutions on a non-recourse basis. We utilize wholly-owned finance subsidiaries in these finance receivables transfers. These entities are consolidated into our financial position and results of operations. We account for such transfers as sales in accordance with applicable accounting rules pertaining to the transfer of financial assets and the sale of future revenue when we have surrendered control of such receivables (including determining that such assets have been isolated beyond our reach and the reach of our creditors) and when we do not have significant continuing involvement in the generation of cash flows due the financial institutions. During fiscal 2011, 2010 and 2009, we transferred $172.3&#160;million, $208.8&#160;million and $149.7&#160;million, respectively, of such receivables through these programs. Finance receivables are typically transferred within several months after origination and the outstanding principal balance at the time of transfer typically approximates fair value. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For those finance receivables not transferred, we evaluate the credit risk of finance receivables in our portfolio based on regional characteristics specific to the risk climate in each of our geographic operations as well as based on internal credit quality indicators for individual receivables. We evaluate the credit risk of finance receivables using an internal credit rating system based on whether an individual receivable meets specific internal criteria including counterparty credit rating and receivable maturity date and assign an internal credit rating of 1, 2 or 3, with a credit rating of 1 representing the best credit quality. </div> <!-- Folio --> <!-- /Folio --> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For all regions and credit categories, a finance receivable will be specifically reserved once deemed uncollectible. 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Also, under these standard license agreements, we represent and warrant to licensees that our software products operate substantially in accordance with published specifications. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Other guarantees include promises to indemnify, defend and hold harmless each of our executive officers, non-employee directors and certain key employees from and against losses, damages and costs incurred by each such individual in administrative, legal or investigative proceedings arising from alleged wrongdoing by the individual while acting in good faith within the scope of his or her job duties on our behalf. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also had outstanding letters of credit, performance bonds and similar instruments at March 31, 2011 of approximately $44.2&#160;million primarily in support of performance obligations to various customers, but also related to facilities and other obligations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Historically, we have not incurred significant costs related to such indemnifications, warranties and guarantees. 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The current and long-term portions of these capital lease obligations, which are included in accrued liabilities and long-term borrowings, respectively, in our consolidated balance sheets, were $7.4 million and $13.9&#160;million, respectively, at March&#160;31, 2011, and $7.2&#160;million and $8.0&#160;million, respectively, at March&#160;31, 2010. At March&#160;31, 2011, future minimum payments to be made under these capital leases are $8.0&#160;million, $6.7&#160;million, $6.4&#160;million and $1.3&#160;million in fiscal 2012, 2013, 2014 and 2015, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Contingencies</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are subject to intellectual property claims and legal proceedings, including claims of alleged infringement of patents asserted by third parties against us in the form of claim letters. These claims are in various stages, may result in formal legal proceedings against us, and may not be fully resolved in the near future. We cannot currently predict the timing or ultimate outcome, nor estimate a range of loss, if any, for such claims. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December&#160;2010, a lawsuit was filed against a number of software companies, including us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United States District Court for the Eastern District of Texas, Tyler Division. The complaint seeks monetary damages in unspecified amounts and permanent injunction based upon claims for alleged patent infringement. While we intend to vigorously defend this matter, we cannot predict the timing or ultimate outcome, nor estimate a range of loss, if any, for this matter. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are party to various labor claims brought by certain former international employees alleging that amounts are due to such employees for unpaid commissions and other compensation. The claims are in various stages and are not expected to be fully resolved in the near future; however, we intend to vigorously contest all of the claims. Taking into account accruals recorded by us, we do not believe the resolution of these claims will have a material adverse effect on our financial position or results of operations. However, we cannot predict the timing or ultimate outcome of these matters. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are currently litigating a matter in Brazilian courts as to whether a tax applies to the remittance of software payments from our Brazilian operations. In February&#160;2007, a law was enacted that clarified that this particular tax did not apply to the remittance of software payments, retroactive to January&#160;1, 2006. We continue to pursue a favorable resolution on this matter for years prior to January&#160;1, 2006. 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The amounts for fiscal 2010 and 2011 were not significant. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At March&#160;31, 2011 and 2010, we held auction rate securities with a par value of $29.8&#160;million and $50.7&#160;million, respectively, which were classified as available-for-sale, and at March&#160;31, 2010, we also held auction rate securities with a par value of $16.6&#160;million which were classified as trading. The total estimated fair value of our auction rate securities was $27.2&#160;million and $60.5&#160;million at March&#160;31, 2011 and 2010, respectively. Our auction rate securities consist entirely of bonds issued by public agencies that are backed by student loans with at least a 97% guarantee by the federal government under the United States Department of Education&#8217;s Federal Family Education Loan Program. All of these bonds are currently rated investment grade by Moody&#8217;s or Standard and Poor&#8217;s. Auctions for these securities began failing in early 2008 and have continued to fail, resulting in our continuing to hold such securities and the issuers paying interest at the maximum contractual rates. We do not believe that any of the underlying issuers of these auction rate securities are presently at risk of default or that the underlying credit quality of the assets backing the auction rate security investments has been impacted by the reduced liquidity of these investments. Due to the illiquidity in the auction rate securities market caused by failed auctions, we estimated the fair value of these securities and the put option discussed below using internally developed models of the expected cash flows of the securities which incorporate assumptions about the expected cash flows of the underlying student loans and estimates of the rate of return required by investors, which includes an adjustment to reflect a lack of liquidity in the market for these securities. Periodically, the issuers of certain of our auction rate securities have redeemed portions of our holdings at par value plus accrued interest. During the years ended March&#160;31, 2011 and 2010, issuers redeemed available-for-sale holdings of $20.9&#160;million par value and $3.7&#160;million par value, respectively, and trading holdings of $5.4&#160;million par value and $1.2&#160;million par value, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In November&#160;2008, we entered into a put agreement with a bank from which we acquired certain auction rate securities. On July&#160;1, 2010, we exercised our right under this agreement to put the remaining securities subject to this agreement, with $11.2&#160;million par value, to the bank. The auction rate securities subject to the put agreement were classified as short-term investments and trading securities and, accordingly, any changes in the fair value of these securities were recognized in earnings. In addition, we elected the option under GAAP to record the put option at fair value. The fair value adjustments to these auction rate securities and the related put option resulted in minimal net impact to the consolidated statements of operations for the years ended March&#160;31, 2011, 2010 and 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The unrealized loss on our available-for-sale auction rate securities, which have a fair value of $27.2&#160;million at March&#160;31, 2011, was $2.6&#160;million and was recorded in accumulated other comprehensive income (loss)&#160;as we believe the decline in fair value of these auction rate securities is temporary. In making this determination, we primarily considered the financial condition and near-term prospects of the issuers, the probability scheduled cash flows will continue to be made and the likelihood we would be required to sell the investments before recovery of our cost basis. These available-for-sale auction rate securities have been in an unrealized loss position for greater than twelve months. Because of the uncertainty related to the timing of liquidity associated with these auction rate securities, these securities are classified as long-term investments at March&#160;31, 2011 and 2010. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Derivative Financial Instruments</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of our outstanding foreign currency forward contracts that closed in a gain position at March&#160;31, 2011 and 2010 was $5.8&#160;million and $3.5&#160;million, respectively, and was recorded within other current assets in our consolidated balance sheets. The fair value of our outstanding foreign currency forward contracts that closed in a loss position at March&#160;31, 2011 and 2010 was $3.3&#160;million and $1.0&#160;million, respectively, and was recorded within accrued liabilities in our consolidated balance sheets. 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Therefore, the notional amounts and currencies underlying our foreign currency forward contracts will fluctuate period to period as they are principally dependent on the balances and currency denomination of monetary assets and liabilities maintained by our global entities. The effect of the foreign currency forward contracts for the years ended March&#160;31, 2011, 2010 and 2009 was a gain of $3.3&#160;million, a loss of $9.9&#160;million and a gain of $26.4&#160;million, respectively, which, after including gains and losses on our foreign currency exposures, resulted in net losses of $2.9&#160;million, $2.2&#160;million and $5.3&#160;million, respectively, recorded in interest and other income, net. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but we do not expect any counterparties to fail to meet their obligations given their high credit ratings. In addition, we diversify this risk across several counterparties and utilize netting agreements to mitigate the counterparty credit risk. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Trade Finance Receivables</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A substantial portion of our trade finance receivables are transferred to financial institutions on a non-recourse basis. We utilize wholly-owned finance subsidiaries in these finance receivables transfers. These entities are consolidated into our financial position and results of operations. We account for such transfers as sales in accordance with applicable accounting rules pertaining to the transfer of financial assets and the sale of future revenue when we have surrendered control of such receivables (including determining that such assets have been isolated beyond our reach and the reach of our creditors) and when we do not have significant continuing involvement in the generation of cash flows due the financial institutions. During fiscal 2011, 2010 and 2009, we transferred $172.3&#160;million, $208.8&#160;million and $149.7&#160;million, respectively, of such receivables through these programs. 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Realized and unrealized gains and losses are calculated using the specific identification method. Investments with maturities of twelve months or less are classified as short-term investments. Investments with maturities of more than twelve months are classified as long-term investments. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We account for investments in non-marketable equity securities in which we do not have significant influence and that do not have a readily determinable fair value under the cost method of accounting. These investments are included in other long-term assets. In fiscal 2009, we recorded an $8.4&#160;million impairment charge in connection with the write-down of certain non-marketable equity investments to their estimated fair values. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Refer to Note 3 for further information regarding auction rate securities held by us. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Receivables</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the ordinary course of business, we extend credit to our customers on both trade and financed terms. Trade and finance receivables are recorded at their outstanding principal balances, adjusted for interest receivable to date, if applicable, and adjusted by the allowance for doubtful accounts. Interest income on finance receivables is recognized using the effective interest method and is presented as interest and other income, net, in the consolidated statements of operations. Interest income on these finance receivables was $10.4&#160;million, $11.4&#160;million and $9.6&#160;million in fiscal 2011, 2010 and 2009, respectively. In estimating the allowance for doubtful accounts, we consider the length of time receivable balances have been outstanding, historical collection experience, current economic conditions and customer-specific information. When we ultimately conclude that a receivable is uncollectible, the balance is charged against the allowance for doubtful accounts. At March&#160;31, 2011 and 2010, the allowance for doubtful trade accounts receivable was $3.6&#160;million and $2.2&#160;million and the allowance for doubtful trade finance receivables was $0.5 million and $0.4&#160;million, respectively. During fiscal 2011, 2010 and 2009, the provision (recovery) for bad debts was $1.7&#160;million, $(0.3) million and $3.8&#160;million and the amounts charged against the allowance for doubtful accounts were $0.2&#160;million, $1.3&#160;million and $2.9&#160;million, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Long-Lived Assets</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Property and Equipment</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Property and equipment are stated at cost. Depreciation on property and equipment, with the exception of leasehold improvements, is recorded using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are depreciated using the straight-line method over the shorter of the lease term or the estimated respective useful lives of the assets, which range from three to ten years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs incurred to develop internal-use software during the application development stage are capitalized, stated at cost, and amortized using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Application development stage costs generally include costs associated with internal-use software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized, whereas costs incurred for maintenance and minor upgrades and enhancements are expensed as incurred. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Software Development Costs</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Costs of software developed internally for licensing to third parties are expensed until the technological feasibility of the software product has been established. Thereafter, software development costs incurred through the general release of the software products are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized software development costs are amortized on a straight-line basis over the products&#8217; respective estimated economic lives, which are typically three years. The amortization of capitalized software development costs, including any amounts accelerated for products that are not expected to generate sufficient future revenue to realize their carrying values, is included in cost of license revenue in the consolidated statements of operations. During fiscal 2011, 2010 and 2009, amounts capitalized were $124.0&#160;million, $85.9&#160;million and $72.5&#160;million, respectively, and amounts amortized were $75.7&#160;million, $63.1&#160;million and $62.9&#160;million, respectively. The change in foreign currency exchange rates had no impact during fiscal 2011 but increased (decreased)&#160;capitalized software development costs by $0.1&#160;million and $(0.4) million, during fiscal 2010 and 2009, respectively. Amounts capitalized during fiscal 2011, 2010 and 2009 included $4.4&#160;million, $2.3 million and $1.7&#160;million, respectively, of capitalized interest; and approximately $8.2&#160;million, $4.9&#160;million and $5.2&#160;million, respectively, of share-based compensation costs. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Intangible Assets</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets consist principally of acquired technology and customer relationships recorded in connection with our business combinations. The amounts allocated to these intangible assets represent our estimates of their fair values at the acquisition date. The fair values are primarily estimated using the expected present value of future cash flows method of applying the income approach. Intangible assets are stated at cost and amortized on a straight-line basis over their respective estimated economic lives ranging from one to four years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Goodwill</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including identifiable intangible assets, in connection with our business combinations. Upon acquisition, goodwill is assigned to the reporting unit that is expected to benefit from the synergies of the business combination, which is the reporting unit to which the related acquired technology is assigned. A reporting unit is the operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. Each of our business segments is considered a reporting unit. We test goodwill for impairment as of January 1 of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our impairment test is based on a comparison of the estimated fair value of the reporting units, determined using a combination of the income and market approaches on an invested capital basis, to their respective carrying values (including goodwill) as of the date of the impairment test. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Impairment</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition to our goodwill impairment testing, as noted above, we also review our other long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its estimated fair value. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Foreign Currency Translation and Risk Management</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We operate globally and transact business in various foreign currencies. The functional currency for many of our foreign subsidiaries is the respective local currency. Financial statements of these foreign operations are translated into United States dollars using the currency exchange rates in effect at the balance sheet dates. Revenue and expenses of these subsidiaries are translated using rates that approximate those in effect during the period. Translation adjustments are included in accumulated other comprehensive income (loss)&#160;within stockholders&#8217; equity. The substantial majority of our revenue derived from customers outside of the United States is billed in local currencies from regional headquarters, for which the functional currency is the United States dollar. Foreign currency transaction gains or losses are included in interest and other income, net. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To minimize the risk from changes in foreign currency exchange rates, we have established a program that utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Gains or losses on our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts entered into under this program. Our foreign currency exposures relate primarily to certain foreign currency denominated assets and liabilities. Our foreign currency forward contracts generally have terms of one month or less and are entered into at the prevailing market exchange rate at the end of each month. We do not use foreign currency forward contracts for speculative purposes. While these foreign currency forward contracts are utilized to hedge foreign currency exposures, they are not formally designated as hedges for accounting purposes, and therefore, the changes in the fair values of these contracts are recognized currently in earnings. We record these foreign currency forward contracts at fair value as either assets or liabilities depending on the net settlement position of the foreign currency forward contracts with each respective counterparty at the balance sheet date. All settlements of gains and losses related to the foreign currency forward contracts are included in cash flow from operating activities in the consolidated statements of cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-specific objective evidence (VSOE)&#160;of the fair value of undelivered elements exists. As substantially all of our software licenses are sold in multiple-element arrangements that include either maintenance or both maintenance and professional services, we use 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 the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as license revenue. We have established VSOE of the fair value of maintenance through independent maintenance renewals. These demonstrate a consistent relationship of pricing maintenance as a percentage of either the net license fee or the discounted or undiscounted license list price. VSOE of the fair value of professional services is established based on daily rates when sold on a stand-alone basis, as well as management approved pricing for certain new professional services offerings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include multiple software products for which the associated maintenance pricing is based on a combination of undiscounted license list prices, net license fees or discounted license list prices. We are also unable to establish VSOE of fair value for all undelivered elements in certain arrangements that include unlimited licensing rights and certain arrangements that contain rights to future unspecified software products as part of the maintenance offering. If VSOE of fair value of one or more undelivered elements does not exist, license revenue is deferred and recognized upon delivery of those elements or when VSOE of fair value exists for all remaining undelivered elements, or if the deferral is due to the factors described above, license revenue is recognized ratably over the longest expected delivery period of undelivered elements in the arrangement, which is typically the longest maintenance term. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In our time-based license agreements, we are unable to establish VSOE of fair value for undelivered maintenance elements because the contractual maintenance terms in these arrangements are the same duration as the license terms, and VSOE of fair value of maintenance cannot be established. Accordingly, license fees in time-based license arrangements are recognized ratably over the term of the arrangements. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Maintenance revenue is recognized ratably over the terms of the maintenance arrangements, which primarily range from one to three years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Professional services revenue, which principally relates to implementation, integration and education services associated with our products, is derived under both time-and-material and fixed fee arrangements and in most instances is recognized on a proportional performance basis based on hours. If no discernable customer deliverable exists until the completion of the professional services, we apply the completed performance method and defer the recognition of professional services revenue until completion of the services, which is typically evidenced by a signed completion letter from the customer. Services that are sold in connection with software license arrangements generally qualify for separate accounting from the license elements because they do not involve significant production, modification or customization of our products and are not otherwise considered to be essential to the functionality of such products. In arrangements where the professional services do not qualify for separate accounting from the license elements, the combined software license and professional services revenue are recognized based on contract accounting using either the percentage-of-completion or completed-contract method. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also execute arrangements through resellers, distributors and systems integrators (collectively, channel partners) in which the channel partners act as the principals in the transactions with the end users of our products and services. In license arrangements with channel partners, title and risk of loss pass to the channel partners upon execution of our arrangements with them and the delivery of our products to the channel partner. We recognize revenue from transactions with channel partners when all other revenue recognition criteria are satisfied. We do not offer right of return, product rotation or price protection to any of our channel partners. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Revenue from license and maintenance transactions that are financed are generally recognized in the same manner as those requiring current payment, as we have a history of offering installment contracts to customers and successfully enforcing original payment terms without making concessions. In arrangements where the fees are not considered to be fixed or determinable, we recognize revenue when payments become due under the arrangement. If we determine that a transaction is not probable of collection or a risk of concession exists, we do not recognize revenue in excess of the amount of cash received. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are required to charge certain taxes on our revenue transactions. These amounts are not included in revenue. Instead, we record a liability when the amounts are collected and relieve the liability when payments are made to the applicable government agency. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In our consolidated statements of operations, revenue is categorized as license, maintenance and professional services revenue. We allocate revenue from arrangements containing multiple elements to each of these categories based on the VSOE of fair value for elements in each revenue arrangement and the application of the residual method for arrangements in which we have established VSOE of fair value for all undelivered elements. In arrangements where we are not able to establish VSOE of fair value for all undelivered elements, we first allocate revenue to any undelivered elements for which VSOE of fair value has been established, then allocate revenue to any undelivered elements for which VSOE of fair value has not been established based upon management&#8217;s best estimate of fair value of those undelivered elements and apply a residual method to determine the license fee. Management&#8217;s best estimate of fair value of undelivered elements for which VSOE of fair value has not been established is based upon the VSOE of similar offerings and other objective criteria. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Cost of License and Maintenance Revenue</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cost of license revenue is primarily comprised of the amortization of capitalized software development costs for internally developed products, the amortization of acquired technology for products acquired through business combinations, license-based royalties to third parties and production and distribution costs for initial product licenses. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cost of maintenance revenue is primarily comprised of the costs associated with the customer support and research and development personnel that provide maintenance, enhancement and support services to our customers. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Sales Commissions</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We pay commissions, including sales bonuses, to our direct sales force related to revenue transactions under sales compensation plans established annually. We defer the portion of commissions that are direct and incremental costs of the license and maintenance revenue arrangements and recognize them as selling and marketing expenses in the consolidated statements of operations over the terms of the related customer contracts, in proportion to the recognition of the associated revenue. The commission payments are typically paid in full in the month following execution of the customer contracts. Deferred commissions as of March&#160;31, 2011 and 2010 were $78.7 million and $61.6&#160;million, respectively. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Share-Based Compensation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Share-based compensation expense for share-based awards is recognized only for those awards that are expected to vest. We use the straight-line attribution method to allocate share-based compensation expense over the requisite service period of the award. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Refer to Note 9 for further information regarding share-based compensation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Recently Adopted Accounting Pronouncements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July&#160;2010, the Financial Accounting Standards Board (FASB)&#160;issued new disclosure guidance related to finance receivables and the related allowances for credit losses. This guidance introduces a greater level of disaggregation based on the underlying characteristics of the finance receivables. The disclosure requirements include, based on the related disaggregation criteria, a rollforward of the allowance for credit losses and the related balance of the finance receivables, significant purchases and sales of finance receivables, and various qualitative disclosures including credit quality, aging, nonaccrual status and impairments. 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"-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 15 - us-gaap:ScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(15)&#160;New Accounting Pronouncements Not Yet Adopted</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December&#160;2010, the FASB issued updated guidance for intangible assets, specifically related to the goodwill impairment test. This guidance requires entities to perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired in situations where reporting units have a carrying value that is zero or negative. If the qualitative evaluation determines it is more likely than not that goodwill is impaired, step two of the goodwill impairment test is required to be performed to measure the amount of impairment, if any. The new guidance is effective for us beginning in fiscal 2012 and is not expected to have a material effect on our financial position, results of operations or cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October&#160;2009, the FASB issued new revenue recognition guidance for arrangements that include both software and non-software related deliverables, where certain of those deliverables are non-software related. This guidance requires entities to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of VSOE or other third party evidence of the selling price. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us in the first quarter of fiscal 2012 interim financial statements, and is not expected to have a material effect on our financial position, results of operations or cash flows. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringRepresents disclosure of any changes in an accounting principle, including a change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. 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margin-top: 10pt; text-indent: 4%">In evaluating our ability to realize our deferred tax assets, we consider all available evidence, both positive and negative, including our past operating results, reversals of existing temporary differences, tax planning strategies and forecasts of future taxable income. In considering these sources of taxable income, we must make certain assumptions and judgments that are based on the plans and estimates used to manage our underlying business. Changes in our assumptions, plans and estimates may materially impact income tax expense. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We maintain a valuation allowance against certain tax credits and net operating losses that we do not believe are more likely than not to be utilized in the future. The valuation allowance increased (decreased)&#160;by $1.0&#160;million, $(12.1) million and $(10.3) million during fiscal 2011, 2010 and 2009, respectively. At March&#160;31, 2011, we have federal net operating loss carryforwards of $68.0&#160;million and foreign net operating loss carryforwards of $9.4&#160;million, which expire between 2015 and 2030. These tax credits and net operating losses have arisen from various acquisitions as well as from net operating losses generated in certain foreign jurisdictions. Certain of the net operating loss carryforward assets are subject to an annual limitation under Internal Revenue Code Section&#160;382, but are expected to be fully realized. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Aggregate unremitted earnings of certain foreign subsidiaries for which United States federal income taxes have not been provided are $479.3&#160;million at March&#160;31, 2011. Deferred income taxes have not been provided on these earnings because we consider them to be indefinitely re-invested. If these earnings were repatriated to the United States or they were no longer determined to be indefinitely re-invested, we would have to record a tax liability for these earnings of approximately $119.6&#160;million, assuming full utilization of the foreign tax credits associated with these earnings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We carry out our business operations through legal entities in the United States and multiple foreign jurisdictions. These jurisdictions require that we file corporate income tax returns that are subject to United States, state and foreign tax laws. 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To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. We recognized $7.7&#160;million, $2.4&#160;million and $11.5&#160;million of interest and penalties during fiscal 2011, 2010 and 2009, respectively. The total amount of accrued interest and penalties related to uncertain tax positions was $31.0&#160;million and $37.7&#160;million at March&#160;31, 2011 and 2010, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"> We file a federal income tax return in the United States as well as income tax returns in various local, state and foreign jurisdictions. Our tax years are closed with the United States Internal Revenue Service (IRS)&#160;through the tax year ended March&#160;31, 2005. During fiscal 2010 and early fiscal 2011, we settled all open issues with the IRS resulting from the audit of our tax years ended March&#160;31, 2004 and 2005. During fiscal 2011, we settled all open issues but one with the IRS resulting from the audit of our tax years ended March&#160;31, 2006 and 2007. As a result of these settlements, we recorded net tax benefits of $57.2&#160;million and $30.0 million in fiscal 2011 and fiscal 2010, respectively. In April 2011, we received a Notice of Deficiency from the IRS on the one remaining disputed issue, relating to the tax year ended March 31, 2006, which we will litigate accordingly. In April 2011, the IRS issued its Revenue Agent Report (RAR) for its examination of our federal income tax return for the tax year ended March&#160;31, 2008, and there are no unagreed issues arising from this RAR. In addition, certain tax years related to local, state, and foreign jurisdictions remain subject to examination. To provide for potential tax exposures, we maintain a liability for unrecognized tax benefits which we believe is adequate. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDescription containing the entire income tax disclosure. Examples include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. 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Options granted to employees generally vest monthly over four years and have a term of six years. Options granted to non-employee board members become fully vested within one year from the date of grant and have terms of ten years with respect to grants through fiscal 2008 and six years for all subsequent grants. Time-based nonvested stock units vest in annual increments over one or three years; performance-based nonvested stock units vest in one year increments, contingent upon us meeting certain profitability targets; and market-based nonvested stock units vest in 50% increments over two- and three-year periods or in annual increments over three years upon achievement of certain targets related to our relative total shareholder return as compared to a set of peer companies or to the NASDAQ-100 Index over each performance period. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We did not grant any stock options during fiscal 2011 and granted 0.2&#160;million and 5.1&#160;million stock options during fiscal 2010 and 2009, respectively. We granted 3.3&#160;million, 3.0&#160;million and 3.5&#160;million in nonvested stock units during fiscal 2011, 2010 and 2009, respectively. There were no significant modifications made to any share-based grants during these periods. At March&#160;31, 2011, there were 9.6&#160;million shares available for grant under our share-based compensation plans. 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The fair value of nonvested stock equals the intrinsic value on the date of grant, except for certain market-based nonvested stock units, for which the fair value is calculated using a Monte Carlo simulation model on the date of grant. The fair values of share-based awards are recorded as compensation expense on a straight-line basis over the requisite service period of the grants. Compensation expense recognized is shown in the operating activities section in the consolidated statements of cash flows. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We estimate the volatility of our stock price by using a combination of both historical volatility and implied volatility derived from traded options on our common stock in the marketplace. We believe that the combination of historical volatility and implied volatility provides a better estimate of future stock price volatility. 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The performance-based nonvested stock units were valued based on the fair value of our common stock on the date of grant. The vesting of the market-based nonvested stock units is contingent on our relative total shareholder return as compared to a set of peer companies or to the NASDAQ-100 Index over each performance period. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes weighted average grant date fair value and additional intrinsic value and vesting information: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom"> <td width="58%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Year Ended March 31,</b></td> <td>&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td>&#160;</td> </tr> <!-- End Table Head --> <!-- Begin Table Body --> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; 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The amounts allocated to IPR&#038;D represent the estimated fair values, based on risk-adjusted cash flows and historical costs expended, related to core research and development projects that were incomplete and had neither reached technological feasibility nor been determined to have an alternative future use pending achievement of technological feasibility at the date of acquisition. 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The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A3 -Appendix A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 falsefalse2false0us-gaap_SharesIssuedus-gaaptruenainstantNo definition available.falsefalsefalsetruefalsefalsefalsetruefalsefalseperiodstartlabelinstant2008-04-01T00:00:000001-01-01T00:00:001truefalsefalse249100000249.1falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.No authoritative reference available.falsefalse3true0us-gaap_ComprehensiveIncomeNetOfTaxAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse4false0us-gaap_NetIncomeLossus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse238100000238.1falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse238100000238.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 19 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph d Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A7 -Appendix A Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph a Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph 20 -Article 9 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 10, 15 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 87-21 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28, 29, 30 falsefalse5false0us-gaap_OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentNetOfTaxPeriodIncreaseDecreaseus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4truefalsefalse-39900000-39.9falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse-39900000-39.9falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAdjustment that results from the process of translating subsidiary financial statements and foreign equity investments into functional currency of the reporting entity, net of tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 52 -Paragraph 13, 20, 31 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 14, 17, 19, 26 falsefalse6false0us-gaap_OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse-10700000-10.7falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse-10700000-10.7falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAppreciation or loss in value (before reclassification adjustment) of the total of unsold securities during the period being reported on, net of tax. Reclassification adjustments include: (1) the unrealized holding gain or loss, net of tax, at the date of the transfer for a debt security from the held-to-maturity category transferred into the available-for-sale category. Also includes the unrealized gain or loss at the date of transfer for a debt security from the available-for-sale category transferred into the held-to-maturity category; (2) the unrealized gains or losses realized upon the sale of securities, after tax; and (3) the unrealized gains or losses realized upon the write-down of securities, after tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 17, 22 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 115 -Paragraph 13 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b falsefalse7false0us-gaap_OtherComprehensiveIncomeReclassificationAdjustmentForSaleOfSecuritiesIncludedInNetIncomeNetOfTaxus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsetruenegated1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse54000005.4falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse54000005.4falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryReclassification adjustment for unrealized gains or losses realized upon the sale of securities, after tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 18, 19 falsefalse8false0us-gaap_ComprehensiveIncomeNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse192900000192.9falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A5 -Appendix A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 30 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 8, 9, 10, 11, 12, 13, 14 truefalse9false0us-gaap_TreasuryStockValueAcquiredCostMethodus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse-346200000-346.2falsefalsefalsetruefalse7truefalsefalse-346200000-346.2falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCost of common and preferred stock that were repurchased during the period. Recorded using the cost method.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 10 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Chapter 1 -Section B -Paragraph 7 -Subparagraph b falsefalse10false0us-gaap_StockIssuedDuringPeriodValueShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse-9800000-9.8falsefalsefalsetruefalse3truefalsefalse-5800000-5.8falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse118600000118.6falsefalsefalsetruefalse7truefalsefalse103000000103.0falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryValue of stock issued during the period as a result of any share-based compensation plan other than an employee stock ownership plan (ESOP).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 10 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64 falsefalse11false0us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValueus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse8100000081.0falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse8100000081.0falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the amount of recognized share-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 39 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64 -Subparagraph b Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph A91 falsefalse12false0us-gaap_AdjustmentsToAdditionalPaidInCapitalTaxEffectFromShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse2330000023.3falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse2330000023.3falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTax benefit associated with any share-based compensation plan other than an employee stock ownership plan (ESOP). The tax benefit results from the deduction by the entity on its tax return for an award of stock that exceeds the cumulative compensation cost for common stock or preferred stock recognized for financial reporting. Includes any resulting tax benefit that exceeds the previously recognized deferred tax asset (excess tax benefits).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 62 falsefalse13false0us-gaap_StockholdersEquityus-gaaptruecreditinstantNo definition available.falsefalsefalsetruefalsefalsefalsefalsetruefalseperiodendlabelinstant2009-03-31T00:00:000001-01-01T00:00:001truefalsefalse25000002.5falsefalsefalsetruefalse2truefalsefalse881200000881.2falsefalsefalsetruefalse3truefalsefalse19854000001985.4falsefalsefalsetruefalse4truefalsefalse-17400000-17.4falsefalsefalsetruefalse5truefalsefalse-8100000-8.1falsefalsefalsetruefalse6truefalsefalse-1795100000-1795.1falsefalsefalsetruefalse7truefalsefalse10485000001048.5falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTotal of all Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A3 -Appendix A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 falsefalse14false0us-gaap_SharesIssuedus-gaaptruenainstantNo definition available.falsefalsefalsetruefalsefalsefalsefalsetruefalseperiodendlabelinstant2009-03-31T00:00:000001-01-01T00:00:001truefalsefalse249100000249.1falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.No authoritative reference available.falsefalse15true0us-gaap_ComprehensiveIncomeNetOfTaxAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse16false0us-gaap_NetIncomeLossus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse406100000406.1falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse406100000406.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 19 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph d Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A7 -Appendix A Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph a Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph 20 -Article 9 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 10, 15 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 87-21 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28, 29, 30 falsefalse17false0us-gaap_OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentNetOfTaxPeriodIncreaseDecreaseus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4truefalsefalse2780000027.8falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse2780000027.8falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAdjustment that results from the process of translating subsidiary financial statements and foreign equity investments into functional currency of the reporting entity, net of tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 52 -Paragraph 13, 20, 31 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 14, 17, 19, 26 falsefalse18false0us-gaap_OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse31000003.1falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse31000003.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAppreciation or loss in value (before reclassification adjustment) of the total of unsold securities during the period being reported on, net of tax. Reclassification adjustments include: (1) the unrealized holding gain or loss, net of tax, at the date of the transfer for a debt security from the held-to-maturity category transferred into the available-for-sale category. Also includes the unrealized gain or loss at the date of transfer for a debt security from the available-for-sale category transferred into the held-to-maturity category; (2) the unrealized gains or losses realized upon the sale of securities, after tax; and (3) the unrealized gains or losses realized upon the write-down of securities, after tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 17, 22 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 115 -Paragraph 13 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b falsefalse19false0us-gaap_ComprehensiveIncomeNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse437000000437.0falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A5 -Appendix A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 30 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 8, 9, 10, 11, 12, 13, 14 truefalse20false0us-gaap_TreasuryStockValueAcquiredCostMethodus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse-288100000-288.1falsefalsefalsetruefalse7truefalsefalse-288100000-288.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCost of common and preferred stock that were repurchased during the period. Recorded using the cost method.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 10 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Chapter 1 -Section B -Paragraph 7 -Subparagraph b falsefalse21false0us-gaap_StockIssuedDuringPeriodValueShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse-16900000-16.9falsefalsefalsetruefalse3truefalsefalse-2200000-2.2falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse108300000108.3falsefalsefalsetruefalse7truefalsefalse8920000089.2falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryValue of stock issued during the period as a result of any share-based compensation plan other than an employee stock ownership plan (ESOP).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 10 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64 falsefalse22false0us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValueus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse8930000089.3falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse8930000089.3falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the amount of recognized share-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 39 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64 -Subparagraph b Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph A91 falsefalse23false0us-gaap_AdjustmentsToAdditionalPaidInCapitalTaxEffectFromShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse1180000011.8falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse1180000011.8falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTax benefit associated with any share-based compensation plan other than an employee stock ownership plan (ESOP). The tax benefit results from the deduction by the entity on its tax return for an award of stock that exceeds the cumulative compensation cost for common stock or preferred stock recognized for financial reporting. Includes any resulting tax benefit that exceeds the previously recognized deferred tax asset (excess tax benefits).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 62 falsefalse24false0us-gaap_StockholdersEquityus-gaaptruecreditinstantNo definition available.falsefalsefalsetruefalsefalsefalsefalsetruefalseperiodendlabelinstant2010-03-31T00:00:000001-01-01T00:00:001truefalsefalse25000002.5falsefalsefalsetruefalse2truefalsefalse965400000965.4falsefalsefalsetruefalse3truefalsefalse23893000002389.3falsefalsefalsetruefalse4truefalsefalse1040000010.4falsefalsefalsetruefalse5truefalsefalse-5000000-5.0falsefalsefalsetruefalse6truefalsefalse-1974900000-1974.9falsefalsefalsetruefalse7truefalsefalse13877000001387.7falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTotal of all Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A3 -Appendix A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 falsefalse25false0us-gaap_SharesIssuedus-gaaptruenainstantNo definition available.falsefalsefalsetruefalsefalsefalsefalsetruefalseperiodendlabelinstant2010-03-31T00:00:000001-01-01T00:00:001truefalsefalse249100000249.1falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsefalsefalseSharesxbrli:sharesItemTypesharesNumber of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.No authoritative reference available.falsefalse26true0us-gaap_ComprehensiveIncomeNetOfTaxAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse27false0us-gaap_NetIncomeLossus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3truefalsefalse456200000456.2falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse456200000456.2falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent. If the entity does not present consolidated financial statements, the amount of profit or loss for the period, net of income taxes.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 19 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph d Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A7 -Appendix A Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph a Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph 20 -Article 9 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 10, 15 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 87-21 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28, 29, 30 falsefalse28false0us-gaap_OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentNetOfTaxPeriodIncreaseDecreaseus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4truefalsefalse2410000024.1falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse2410000024.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAdjustment that results from the process of translating subsidiary financial statements and foreign equity investments into functional currency of the reporting entity, net of tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 52 -Paragraph 13, 20, 31 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 14, 17, 19, 26 falsefalse29false0us-gaap_OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5truefalsefalse25000002.5falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse25000002.5falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryAppreciation or loss in value (before reclassification adjustment) of the total of unsold securities during the period being reported on, net of tax. Reclassification adjustments include: (1) the unrealized holding gain or loss, net of tax, at the date of the transfer for a debt security from the held-to-maturity category transferred into the available-for-sale category. Also includes the unrealized gain or loss at the date of transfer for a debt security from the available-for-sale category transferred into the held-to-maturity category; (2) the unrealized gains or losses realized upon the sale of securities, after tax; and (3) the unrealized gains or losses realized upon the write-down of securities, after tax.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 17, 22 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 115 -Paragraph 13 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 130 -Paragraph 24 -Subparagraph b falsefalse30false0us-gaap_ComprehensiveIncomeNetOfTaxus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsetotallabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse482800000482.8falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThe change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph A5 -Appendix A Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 30 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -Subparagraph c(3) Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 8, 9, 10, 11, 12, 13, 14 truefalse31false0us-gaap_TreasuryStockValueAcquiredCostMethodus-gaaptruedebitdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00falsefalsefalsetruefalse2falsefalsefalse00falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse-464100000-464.1falsefalsefalsetruefalse7truefalsefalse-464100000-464.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryCost of common and preferred stock that were repurchased during the period. Recorded using the cost method.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 10 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Chapter 1 -Section B -Paragraph 7 -Subparagraph b falsefalse32false0us-gaap_StockIssuedDuringPeriodValueShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse-14400000-14.4falsefalsefalsetruefalse3truefalsefalse-300000-0.3falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6truefalsefalse144800000144.8falsefalsefalsetruefalse7truefalsefalse130100000130.1falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryValue of stock issued during the period as a result of any share-based compensation plan other than an employee stock ownership plan (ESOP).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 12 -Paragraph 10 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64 falsefalse33false0us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValueus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse109200000109.2falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse109200000109.2falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryThis element represents the amount of recognized share-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 39 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64 -Subparagraph b Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph A91 falsefalse34false0us-gaap_AdjustmentsToAdditionalPaidInCapitalTaxEffectFromShareBasedCompensationus-gaaptruecreditdurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00falsefalsefalsetruefalse2truefalsefalse1720000017.2falsefalsefalsetruefalse3falsefalsefalse00falsefalsefalsetruefalse4falsefalsefalse00falsefalsefalsetruefalse5falsefalsefalse00falsefalsefalsetruefalse6falsefalsefalse00falsefalsefalsetruefalse7truefalsefalse1720000017.2falsefalsefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTax benefit associated with any share-based compensation plan other than an employee stock ownership plan (ESOP). The tax benefit results from the deduction by the entity on its tax return for an award of stock that exceeds the cumulative compensation cost for common stock or preferred stock recognized for financial reporting. Includes any resulting tax benefit that exceeds the previously recognized deferred tax asset (excess tax benefits).Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 62 falsefalse35false0us-gaap_StockholdersEquityus-gaaptruecreditinstantNo definition available.falsefalsefalsetruefalsefalsefalsefalsetruefalseperiodendlabelinstant2011-03-31T00:00:000001-01-01T00:00:001truefalsefalse25000002.5falsetruefalsetruefalse2truefalsefalse10774000001077.4falsetruefalsetruefalse3truefalsefalse28452000002845.2falsetruefalsetruefalse4truefalsefalse3450000034.5falsetruefalsetruefalse5truefalsefalse-2500000-2.5falsetruefalsetruefalse6truefalsefalse-2294200000-2294.2falsetruefalsetruefalse7truefalsefalse16629000001662.9falsetruefalsefalsefalseMonetaryxbrli:monetaryItemTypemonetaryTotal of all Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity which are attributable to the parent. 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margin-top: 10pt; text-indent: 4%">We recorded net tax benefits related to the settlement of certain tax matters of $14.0 million, $18.0&#160;million and $25.2&#160;million during the quarters ended June&#160;30, 2010, September&#160;30, 2010 and March&#160;31, 2011, respectively, and $30.0&#160;million during the quarter ended March&#160;31, 2010 as further discussed in Note 8. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element can be used to disclose the entire quarterly financial data disclosure in the annual financial statements as a single block of text. The disclosure includes a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income (loss) before extraordinary items and cumulative effect of a change in accounting principle and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished. Alternatively, the details of this disclosure can be reported using the elements in this group, or by using other taxonomy elements and applying the appropriate quarterly date and period contexts when creating an instance document. For example, the element for "Interest and Dividend Income, Operating" may be used by financial institutions from the Statement of Income, applying the appropriate quarterly date and period context when creating an instance document.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 6 -Section G -Subsection 1 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 28 -Paragraph 23, 24 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 28 -Paragraph 30 -Subparagraph a-j Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 302 -Paragraph a falsefalse12Quarterly Results (Unaudited)UnKnownUnKnownUnKnownUnKnownfalsetrue XML 72 defnref.xml IDEA: XBRL DOCUMENT Repurchase of Shares to satisfy employee tax withholding obligations. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Business acquisition purchase price allocation current assets other. No authoritative reference available. Total net minimum lease payments. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Options. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Provision For Standby Letters Of Credit (Maximum). No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By ShareBased Payment Award Options Exercisable Intrinsic Value. No authoritative reference available. Deferred Tax Liabilities Acquired Intangible Assets. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. This item represents investment income derived from investments in debt and equity securities consisting of interest income earned from investments in debt securities and on cash and cash equivalents, dividend income from investments in equity securities, and income or expense derived from the amortization of investment related discounts or premiums, respectively, net of related investment expenses. This item also includes foreign currency transaction and derivative gains or losses and other non-operating items. No authoritative reference available. Net income after adjustments for cash allocation to participating securities. No authoritative reference available. No authoritative reference available. No authoritative reference available. Trade finance receivables transferred to financial institutions, non-recourse basis. No authoritative reference available. Finite lived intangible assets future amortization expense. No authoritative reference available. No authoritative reference available. No authoritative reference available. Maximum Estimated Charge From Litigation Of Foreign Tax Dispute. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Quarterly results. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Segment Reporting Information Long Lived Assets. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Describes an entity's accounting policy for goodwill. This accounting policy also may address how an entity assesses and measures impairment of goodwill, how reporting units are determined, how goodwill is allocated to such units, and how the fair values of the reporting units are determined. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Interest Periods For Revolving Loans Under Credit Facility. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Weighted Average Grant Date Fair Value And Additional Intrinsic Value And Vesting Information. No authoritative reference available. Long-Term Borrowings. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Guarantee for bonds issued by public agencies No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Amortization Period Of Capitalized Software Development Costs License To Third Party. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Summary of stock compensation. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Describes an entity's accounting policy for intangible assets. This accounting policy may address both intangible assets subject to amortization and those that are not. The following also may be disclosed: (1) a description of intangible assets (2) the estimated useful lives of those assets (3) the amortization method used (4) how the entity assesses and measures impairment of such assets (5) how future cash flows are estimated (6) how the fair values of such asset are determined. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. The sum of total indirect expenses that primarily includes operating expenses not specifically identified to a particular segment or controllable by segment management. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Option Vested And Expected To Vest Outstanding Weighted Average Remaining Contractual Term No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Maximum Amount Of Credit Facility. No authoritative reference available. Value of shares repurchased to satisfy employee tax holding obligations. No authoritative reference available. No authoritative reference available. No authoritative reference available. Employees Contribution Vesting Limit. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Original issuance discount. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Option Grants In Period Weighted Average Exercise Price. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Activity related to restructuring and process improvement initiatives. No authoritative reference available. Fair value measured on recurring basis investments. No authoritative reference available. Par value of available for sale auction rate securities. No authoritative reference available. Finance Receivables. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. The cash outflow to reacquire common stock to satisfy employee tax withholding obligations related to share-based compensation during the period. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Unrealized Loss Available For Sale Auction Rate Securities. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Other long term liabilities. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range Exercisable Option Weighted Average Exercise Price. No authoritative reference available. Direct segment operating expenses includes expenses that are directly allocated to particular segments and are controllable by segment management. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Description of risk management strategies, derivatives in hedging activities and nonhedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. This element also represents the disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Range of depreciation of leasehold improvements over the shorter of the lease term (minimum). No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Business acquisition purchase price allocation noncurrent liabilities deferred revenue. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Number of largest customers. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Performance Based Nonvested Stock Awards Granted To Selected Executives And Other Key Employees. No authoritative reference available. Nature of Operations Policy Text Block. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Amount authorized by Board Of Directors for Repurchase common stock. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Basis of Presentation policy Text Block. No authoritative reference available. Nonvested stock awards. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Specific Finance Receivables Fully Reserved. No authoritative reference available. Aggregated unremitted earning of foreign subsidiaries. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range Outstanding Option Weighted Average Exercise Price. No authoritative reference available. Net Tax Benefit Related To Settlement With Tax Authorities. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Deferred Tax Assets Deferred Revenue. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Amounts charged against allowance for doubtful account. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Deferred sales commission. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Option Vested In Period Fair Value. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Termination of employees due to restructuring. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Forfeiture In Period Weighted Average Grant Date Fair Value. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Treasury stock value acquired during period. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Earnings allocated to participating securities. No authoritative reference available. No authoritative reference available. No authoritative reference available. Business acquisition purchase price allocation noncurrent liabilities deferred tax liabilities. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Estimated fair values of the acquired assets and assumed liabilities at the date of acquisition. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Maximum term of the maintenance arrangements. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Capitalization of software development costs. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. ShareBasedCompensationArrangementByShareBased Payment Award Option Outstanding Weighted Average Remaining Contractual Term. No authoritative reference available. No authoritative reference available. No authoritative reference available. Business acquisition purchase price allocation in process research and development. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Also provides pertinent information about each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties. No authoritative reference available. Share Based Compensation Net of Tax. No authoritative reference available. No authoritative reference available. No authoritative reference available. Auction Rate Securities Total Estimated Fair Value. No authoritative reference available. No authoritative reference available. No authoritative reference available. Revenue by geographical units. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Cash and Cash equivalent held by international subsidiaries. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Fair Value Measured On Recurring Basis Liabilities. No authoritative reference available. Deferred Tax Assets Property And Equipment Net. No authoritative reference available. Market Performance Based Nonvested Stock Awards Granted To Selected Executives And Other Key Employees. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Net proceeds after original issuance discount and issuance costs. No authoritative reference available. Value of securities exercised under put option agreement. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Fair Value Of Share Based Payments Assumptions. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. The carrying amount of the liability for cash received and not yet paid to third party financial institutions related to servicing certain transferred finance receivables. No authoritative reference available. No authoritative reference available. No authoritative reference available. Other measurement basis. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Provision For Swing Line Loans Maximum. No authoritative reference available. Share Based Compensation Arrangement By ShareBased Payment Award Option Exercises In Period Weighted Average Exercise Price. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Long-lived assets by geographical units. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Range of depreciation of leasehold improvements over the shorter of the lease term (maximum). No authoritative reference available. Par value of auction rate securities subject to put agreement from bank. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Option Forfeitures In Period Weighted Average Exercise Price. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Cost of acquired entity, per share. No authoritative reference available. No authoritative reference available. No authoritative reference available. Increase Decrease In Valuation Allowance. No authoritative reference available. No authoritative reference available. No authoritative reference available. Remaining Authorized Amount In Stock Repurchase Program No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Percentage of revenue generated from largest customers. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Amortization period of capitalized (Internal use) software development costs (maximum). No authoritative reference available. Finance Receivables Balance by region and by class of internal credit rating. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Reconciliation Of Income Tax Computed At United States Federal Statutory Rate To Reported Tax Expense. No authoritative reference available. Intellectual Property Research And Development Purchase Price Allocation. No authoritative reference available. Business acquisition purchase price allocation current assets deferred tax assets. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Additional reduction in workforce. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Summary of future minimum lease and sublease payments. No authoritative reference available. No. of scheduled rent increases. No authoritative reference available. Operating Leases Future Minimum Payments Due Two Thousand Seventeen And Thereafter. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Unrecognized Tax Benefits Impact Of Foreign Currency Exchange Rate Changes. No authoritative reference available. Reduction in shares available for grant for each non vested Stock Award actually granted. No authoritative reference available. Use of Estimates Policy Text Block. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Capital leases and other obligations. No authoritative reference available. No authoritative reference available. No authoritative reference available. Significant Components Of Deferred Tax Assets And Liabilities. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Maximum term of stock options granted after fiscal year 2008. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Option Vested In Period Weighted Average Grant Date Fair Value. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Minimum term of the maintenance arrangements. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Amortization period of capitalized (Internal use) software development costs (minimum). No authoritative reference available. Increase (Decrease) in foreign currency rates on Capitalized software development costs. No authoritative reference available. No authoritative reference available. No authoritative reference available. Proceeds from sale of investments. No authoritative reference available. Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range Outstanding Options Weighted Average Remaining Contractual Term. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Redemption of Holdings By Issuers Of Auction Rate Securities. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Stockholders equity subtotal before treasury stock. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Income Tax Expense Benefit. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. Recently Adopted Accounting Pronouncements Policy Text Block. No authoritative reference available. No authoritative reference available. No authoritative reference available. Foreign Currency Translation and Risk Management Policy Text Block. No authoritative reference available. Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Option Nonvested. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. No authoritative reference available. 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Subject to certain conditions, at any time prior to maturity, we may invite existing and new lenders to increase the size of the Credit Facility up to a maximum of $600.0&#160;million. The Credit Facility includes provisions for swing line loans of up to $25.0&#160;million and standby letters of credit of up to $50.0&#160;million. Revolving loans under the Credit Facility bear interest, at the Company&#8217;s option, at a rate equal to either (i)&#160;the base rate (as defined) plus a margin based on the credit ratings of BMC&#8217;s senior unsecured notes due 2018 (the Senior Notes), or (ii)&#160;the LIBOR rate (as defined) plus a margin based on the credit ratings of BMC&#8217;s Senior Notes, for interest periods of one, two, three or six months. 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The Senior Notes are redeemable at our option at any time in whole or, from time to time, in part at a redemption price equal to the greater of: (i)&#160;100% of the principal amount of the Senior Notes to be redeemed, or (ii)&#160;the sum of the present values of the remaining scheduled payments of principal and interest discounted at the applicable United States Treasury rate plus 50 basis points, plus accrued and unpaid interest. 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