Company: CA, INC.
CIK: 356028
SIC: 7372
Filing Date: 2011-05-16 00:00:00

ITEM 1 - BUSINESS
Item 1. “Business,” this strategy is designed to build on our portfolio of software and services to meet next-generation market opportunities. The success of this growth strategy could be affected by many of the risk factors discussed in this Form 10-K and also by our ability to:
•
Increase sales in new and emerging enterprises and markets where we currently may not have a strong presence and where we may have a dependence on unfamiliar distribution partners and routes;
•
Enable our sales force to sell new products, including instances where our offerings are of a type not previously provided by us;
•
Improve the CA Technologies brand in the marketplace, including as it relates to our ability to sell new products and penetrate new or emerging markets; and
•
Ensure our set of cloud computing, SaaS and other new offerings address the needs of a rapidly changing market, while not adversely affecting the demand for our traditional products or our profitability.
Failure to achieve success with this strategy while maintaining our core business could materially adversely affect our business, financial condition, operating results and cash flow.
Given the global nature of our business, economic factors or political events beyond our control and other business risks associated with non-U.S. operations can affect our business in unpredictable ways.
International revenue has historically represented a significant percentage of our total worldwide revenue. Success in selling and developing our products outside the United States will depend on a variety of factors in various non-U.S. locations, including:
•
Foreign exchange currency rates;
•
Local economic conditions;
•
Political stability and acts of terrorism;
•
Workforce reorganizations in various locations, including global reorganizations of sales, research and development, technical services, finance, human resources and facilities functions;
•
Effectively staffing key managerial and technical positions;
•
Successfully localizing software products for a significant number of international markets;
•
More restrictive employment regulation;
•
Trade restrictions such as tariffs, duties, taxes or other controls;
•
International intellectual property laws, which may be more restrictive or may offer lower levels of protection than U.S. law;
•
Complying with differing and changing local laws and regulations in multiple international locations as well as complying with U.S. laws and regulations where applicable in these international locations; and
•
Developing and executing an effective go-to-market strategy in various locations.
Any of the foregoing factors could materially adversely affect our business, financial condition, operating results and cash flow.
General economic conditions and credit constraints, or unfavorable economic conditions in a particular region, business or industry sector, may lead our customers to delay or forgo technology investments and could have other impacts, any of which could materially adversely affect our business, financial condition, operating results and cash flow.
Our products are designed to improve the productivity and efficiency of our customers’ information processing resources. However, a general slowdown in the global economy, or in a particular region, or business or industry sector (such as the financial services sector), or tightening of credit markets, could cause customers to: have difficulty accessing credit sources; delay contractual payments; or delay or forgo decisions to (i) license new products (particularly with respect to discretionary spending for software), (ii) upgrade their existing environments or (iii) purchase services. Any such impacts could materially adversely affect our business, financial condition, operating results and cash flow.
Such a general slowdown in the global economy may also materially affect the global banking system, including individual institutions as well as a particular business or industry sector, which could cause further consolidations or failures in such a sector. Approximately one third of our revenue is derived from arrangements with financial institutions (i.e., banking, brokerage and insurance companies). The majority of these arrangements are for the renewal of mainframe capacity and maintenance associated with transactions processed by our financial institution customers. While we cannot predict what impact there may be on our business from further consolidation of the financial industry sector, or the impact from the economy in general on our business, to date the impact has not been material to our balance sheet, results of operations or cash flows. The vast majority of our subscription and maintenance revenue in any particular reporting period comes from contracts signed in prior periods, generally pursuant to contracts ranging in duration from three to five years.
Any of these events could affect the manner in which we are able to conduct business, including within a particular industry sector or market and could materially adversely affect our business, financial condition, operating results and cash flow.
Failure to expand our partner programs related to the sale of CA solutions may result in lost sales opportunities, increases in expenses and a weakening in our competitive position.
We sell CA solutions through global systems integrators, technology partners, managed service providers, solution providers, distributors of volume partners and exclusive representatives in partner programs that require training and expertise to sell these solutions, and global penetration to grow these aspects of our business. The failure to expand these partner programs and penetrate these markets could materially adversely affect our success with partners, resulting in lost sales opportunities and an increase in expenses, as well as weaken our competitive position.
If we do not adequately manage and evolve our financial reporting and managerial systems and processes, including the successful implementation of our enterprise resource planning software, our ability to manage and grow our business may be harmed.
Our ability to successfully implement our business plan and comply with regulations requires effective planning and management systems and processes. We need to continue to improve and implement existing and new operational and financial systems, procedures and controls to manage our business effectively in the future. As a result, we have licensed enterprise resource planning software, consolidated certain finance functions into regional locations, and are in the process of expanding and upgrading our operational and financial systems. Any delay in the implementation of, or disruption in the transition to, our new or enhanced systems, procedures or internal controls, could adversely affect our ability to accurately forecast sales demand, manage our supply chain, achieve accuracy in the conversion of electronic data and records, and report financial and management information, including the filing of our quarterly or annual reports with the SEC, on a timely and accurate basis. Failure to properly or adequately address these issues could result in the diversion of management’s attention and resources, adversely affect our ability to manage our business and materially adversely affect our business, financial condition, results of operations and cash flow. Refer to Item 9A, “Controls and Procedures,” for additional information.
We may encounter difficulties in successfully integrating companies and products that we have acquired or may acquire into our existing business, and any failed integration could materially adversely affect our infrastructure, market presence, business, financial condition, operating results and cash flow.
In the past we have acquired, and in the future we expect to acquire, complementary companies, products, services and technologies (including through mergers, asset acquisitions, joint ventures, partnerships, strategic alliances, and equity
investments). Additionally, we expect to acquire technology and software that are consistent with our growth strategy. The risks we may encounter include:
•
We may find that the acquired company or assets do not further improve our financial and strategic position as planned;
•
We may have difficulty integrating the operations, facilities, personnel and commission plans of the acquired business;
•
We may have difficulty forecasting or reporting results subsequent to acquisitions;
•
We may have difficulty retaining the skills needed to further market, sell or provide services on the acquired products in a manner that will be accepted by the market;
•
We may have difficulty incorporating the acquired technologies or products into our existing product lines;
•
We may have product liability, customer liability or intellectual property liability associated with the sale of the acquired company’s products;
•
Our ongoing business may be disrupted by transition or integration issues and our management’s attention may be diverted from other business initiatives;
•
We may be unable to obtain timely approvals from governmental authorities under applicable competition and antitrust laws;
•
We may have difficulty maintaining uniform standards, controls, procedures and policies;
•
Our relationships with current and new employees, customers and distributors could be impaired;
•
An acquisition may result in increased litigation risk, including litigation from terminated employees or third parties; and
•
Our due diligence process may fail to identify significant issues with the acquired company’s product quality, financial disclosures, accounting practices, internal control deficiencies, including material weaknesses, product architecture, legal and tax contingencies and other matters.
These factors could materially adversely affect our business, results of operations, financial condition and cash flow, particularly in the case of a large acquisition or number of acquisitions. To the extent we issue shares of stock or other rights to purchase stock, including options, to pay for acquisitions or to retain employees, existing stockholders’ interests may be diluted and income per share may decrease.
We are subject to intense competition in product and service offerings and pricing, and we expect to face increased competition in the future, which could either diminish demand for or inhibit growth of our products and, therefore, reduce our sales, revenue and market presence.
The markets for our products are intensely competitive, and we expect product and service offerings and pricing competition to increase. Some of our competitors have longer operating histories, greater name recognition, a larger installed base of customers in any particular market niche, larger technical staffs, established relationships with hardware vendors, or greater financial, technical and marketing resources. Furthermore, our growth strategy is predicated upon our ability to develop and acquire products and services that address customer needs and are accepted by the market better than those of our competitors.
We also face competition from numerous smaller companies that specialize in specific aspects of the highly fragmented software industry, and from shareware authors that may develop competing products. In addition, new companies enter the market on a frequent and regular basis, offering products that compete with those offered by us. Moreover, certain customers historically have developed their own products that compete with those offered by us. The competition may affect our ability to attract and retain the technical skills needed to provide services to our customers, forcing us to become more reliant on delivery of services through third parties. This, in turn, could increase operating costs and decrease our revenue, profitability and cash flow. Additionally, competition from any of these sources could result in price reductions or displacement of our products, which could materially adversely affect our business, financial condition, operating results and cash flow.
Our competitors include large vendors of hardware and operating system software and service providers. The widespread inclusion of products that perform the same or similar functions as our products bundled within computer hardware or other companies’ software products, or services similar to those provided by us, could reduce the perceived need for our products
and services, or render our products obsolete and unmarketable. Furthermore, even if these incorporated products are inferior or more limited than our products, customers may elect to accept the incorporated products rather than purchase our products. In addition, the software industry is currently undergoing consolidation as software companies seek to offer more extensive suites and broader arrays of software products and services, as well as integrated software and hardware solutions. This consolidation may adversely affect our competitive position, which could materially adversely affect our business, financial condition, operating results and cash flow. Refer to Part I, Item 1, “Business - (c) Narrative Description of the Business - Competition,” for additional information.
Our business may suffer if we are not able to retain and attract adequate qualified personnel, including key managerial, technical, marketing and sales personnel.
We operate in a business where there is intense competition for experienced personnel in all of our global markets. We depend on our ability to identify, recruit, hire, train, develop and retain qualified and effective personnel and to attract and retain talent needed to execute our growth strategy. Our ability to do so depends on numerous factors, including factors that we cannot control, such as competition and conditions in the local employment markets in which we operate. Our future success depends in large part on the continued contribution of our senior management and other key employees. A loss of a significant number of skilled managerial or other personnel could have a negative effect on the quality of our products. A loss of a significant number of experienced and effective sales personnel could result in fewer sales of our products. Our failure to retain qualified employees in these categories could materially adversely affect our business, financial condition, operating results and cash flow.
Failure to adapt to technological changes and introduce new software products and services in a timely manner could materially adversely affect our business.
If we fail to keep pace with, or in certain cases lead, technological change in our industry, that failure could materially adversely affect our business. We operate in a highly competitive industry characterized by rapid technological change, evolving industry standards, and changes in customer requirements and delivery methods. During the past several years, many new technological advancements and competing products entered the marketplace. The distributed systems and application management markets in which we operate are far more crowded and competitive than our traditional mainframe systems management markets.
Our ability to compete effectively and our growth prospects for all of our products, including those associated with our growth strategy, depend upon many factors, including the success of our existing distributed systems products, the timely introduction and success of future software products and related delivery methods, and the ability of our products to perform well with existing and future leading databases and other platforms supported by our products that address customer needs and are accepted by the market. We have experienced long development cycles and product delays in the past, particularly with some of our distributed systems products, and may experience delays in the future. In addition, we have incurred, and expect to continue to incur, significant research and development costs, as we introduce new products. If there are delays in new product introductions or there is less-than-anticipated market acceptance of these new products, we will have invested substantial resources without realizing adequate revenues in return, which could materially adversely affect our business, financial condition, operating results and cash flow.
If our products do not remain compatible with ever-changing operating environments we could lose customers and the demand for our products and services could decrease, which could materially adversely affect our business, financial condition, operating results and cash flow.
The largest suppliers of systems and computing software are, in most cases, the manufacturers of the computer hardware systems used by most of our customers. Historically, these companies have from time to time modified or introduced new operating systems, systems software and computer hardware. In the future, such new products from these companies could incorporate features that perform functions currently performed by our products, or could require substantial modification of our products to maintain compatibility with these companies’ hardware or software. Although we have to date been able to adapt our products and our business to changes introduced by hardware manufacturers and system software developers, there can be no assurance that we will be able to do so in the future. Failure to adapt our products in a timely manner to such changes or customer decisions to forgo the use of our products in favor of those with comparable functionality contained either in their hardware or operating system could materially adversely affect our business, financial condition, operating results and cash flow.
Certain software that we use in our products is licensed from third parties and thus may not be available to us in the future, which has the potential to delay product development and production and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow.
Some of our solutions contain software licensed from third parties. Some of these licenses may not be available to us in the future on terms that are acceptable to us or allow our products to remain competitive. The loss of these licenses or the inability to maintain any of them on commercially acceptable terms could delay development of future products or the enhancement of existing products. We may also choose to pay a premium price for such a license in certain circumstances where continuity of the licensed product would outweigh the premium cost of the license. The unavailability of these licenses or the necessity of agreeing to commercially unreasonable terms for such licenses could materially adversely affect our business, financial condition, operating results and cash flow.
Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow.
Some of our products contain software from open source code sources. The use of such open source code may subject us to certain conditions, including the obligation to offer our products that use open source code for no cost. We monitor our use of such open source code to avoid subjecting our products to conditions we do not intend. However, the use of such open source code may ultimately subject some of our products to unintended conditions, which could require us to take remedial action that may divert resources away from our development efforts and therefore could materially adversely affect our business, financial condition, operating results and cash flow.
Discovery of errors in our software could materially adversely affect our revenue and earnings and subject us to costly and time consuming product liability claims.
The software products we offer are inherently complex. Despite testing and quality control, we cannot be certain that errors will not be found in current versions, new versions or enhancements of our products after commencement of commercial shipments. If new or existing customers have difficulty deploying our products or require significant amounts of customer support, our operating margins could be adversely affected. Moreover, we could face possible claims and higher development costs if our software contains errors that we have not detected or if our software otherwise fails to meet our customers’ expectations. Significant technical challenges also arise with our products because our customers license and deploy our products across a variety of computer platforms and integrate them with a number of third-party software applications and databases. These combinations increase our risk further because, in the event of a system-wide failure, it may be difficult to determine which product is at fault. As a result, we may be harmed by the failure of another supplier’s products. As a result of the foregoing, we could experience:
•
Loss of or delay in revenue and loss of market share;
•
Loss of customers, including the inability to obtain repeat business with existing key customers;
•
Damage to our reputation;
•
Failure to achieve market acceptance;
•
Diversion of development resources;
•
Increased service and warranty costs;
•
Legal actions by customers against us that could, whether or not successful, be costly, distracting and time-consuming;
•
Increased insurance costs; and
•
Failure to successfully complete service engagements for product installations and implementations.
Consequently, the discovery of errors in our products after delivery could materially adversely affect our business, financial condition, operating results and cash flow.
We have a significant amount of debt. Changes in market conditions or our ratings could increase our interest costs and adversely affect the cost of refinancing our debt and our ability to refinance our debt, which could materially adversely affect our business, financial condition, operating results and cash flow.
At March 31, 2011, we had $1,551 million of debt outstanding, consisting mostly of unsecured fixed-rate senior note obligations and credit facility borrowings. Refer to Note 9, “Debt,” in the Notes to the Consolidated Financial Statements for the payment schedule of our long-term debt obligations. Our senior unsecured notes are rated by Moody’s Investors Service, Fitch Ratings, and Standard and Poor’s. These agencies or any other credit rating agency could downgrade or take other negative action with respect to our credit ratings in the future. If our credit ratings were downgraded or other negative action is taken, we could be required to, among other things, pay additional interest on outstanding borrowings under our principal revolving credit agreement. Any downgrades could affect our ability to obtain additional financing in the future and may affect the terms of any such financing.
We expect that existing cash, cash equivalents, marketable securities, cash provided from operations and our bank credit facilities will be sufficient to meet ongoing cash requirements. However, our failure to generate sufficient cash as our debt becomes due or to renew credit lines prior to their expiration could materially adversely affect our business, financial condition, operating results and cash flow.
Failure to protect our intellectual property rights and source code would weaken our competitive position.
Our future success is highly dependent upon our proprietary technology, including our software and our source code for that software. Failure to protect such technology could lead to the loss of valuable assets and our competitive advantage. We protect our proprietary information through the use of patents, copyrights, trademarks, trade secret laws, confidentiality procedures and contractual provisions. Notwithstanding our efforts to protect our proprietary rights, policing unauthorized use or copying of our proprietary information is difficult. Unauthorized use or copying occurs from time to time and litigation to enforce intellectual property rights could result in significant costs and diversion of resources. Moreover, the laws of some foreign jurisdictions do not afford the same degree of protection to our proprietary rights as do the laws of the United States. For example, for some of our products, we rely on “shrink-wrap” or “click-on” licenses, which may be unenforceable in whole or in part in some jurisdictions in which we operate. In addition, patents we have obtained may be circumvented, challenged, invalidated or designed around by other companies. If we do not adequately protect our intellectual property for these or other reasons, our business, financial condition, operating results and cash flow could be materially adversely affected. Refer to Part I , Item 1, “Business - (c) Narrative Description of the Business - Intellectual Property,” for additional information.
The number, terms and duration of our license agreements as well as the timing of orders from our customers and channel partners, may cause fluctuations in some of our key financial metrics, which may affect our quarterly financial results.
Historically, a substantial portion of our license agreements are executed in the last month of a quarter and the number of contracts executed during a given quarter can vary substantially. In addition, we experience a historically long sales cycle, which is driven in part by the varying terms and conditions of our software contracts. These factors can make it difficult for us to predict sales and cash flow on a quarterly basis. Any failure or delay in executing new or renewed license agreements in a given quarter could cause declines in some of our key financial metrics (e.g., revenue or cash flow), and, accordingly, increases the risk of unanticipated variations in our quarterly results and financial condition.
We may become dependent upon large transactions, and the failure to close such transactions on a satisfactory basis could materially adversely affect our business, financial condition, operating results and cash flow.
In the past, we have been dependent upon large-dollar enterprise transactions with individual customers. There can be no assurances that we will not be reliant on large-dollar enterprise transactions in the future, and the failure to close those transactions on terms that are commercially attractive to us could materially adversely affect our business, financial condition, operating results and cash flow.
Our sales to government clients subject us to risks, including early termination, renegotiation, audits, investigations, sanctions and penalties.
Approximately 9% of our total revenue backlog at March 31, 2011 is associated with multi-year contracts signed with the U.S. federal government and other U.S. state and local government agencies. These contracts are generally subject to annual fiscal funding approval, may be renegotiated or terminated at the discretion of the government, or all of these. Termination, renegotiation or funding for a contract could adversely affect our sales, revenue and reputation. Additionally, our government
contracts are generally subject to audits and investigations, which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the government, which could materially adversely affect our business, financial condition, operating results and cash flow.
Our customers’ data centers and IT environments may be subject to hacking or other breaches, harming customer relationships and the market perception of the effectiveness of our products.
An actual or perceived breach of our customers’ network security allowing access to our customers’ data centers or other parts of their IT environments, regardless of whether the breach is attributable to our products, may cause contractual disputes and may negatively affect the market perception of the effectiveness of our products. Because the techniques used by computer hackers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. Alleviating any of these problems could require significant expenditures of our capital and diversion of our resources from development efforts. Additionally, these efforts could cause interruptions, delays or cessation of our product licensing, or modification of our software, which could cause us to lose existing or potential customers, which could materially adversely affect our business, financial condition, operating results and cash flow.
Our software products, data centers and IT environments may be subject to hacking or other breaches, resulting in a loss or misuse of proprietary and/or confidential information and harm to the market perception of the effectiveness of our products.
We expect to be an ongoing target of attacks specifically designed to impede the performance of our products. Similarly, experienced computer programmers or hackers may attempt to penetrate our network security or the security of our data centers and IT environments and misappropriate proprietary and/or confidential information of the Company, its employees or other individuals or cause interruptions of our services. Although we believe we have sufficient controls in place to prevent significant external disruptions, if these intentionally disruptive efforts are successful, our activities could be adversely affected, our reputation and future sales could be harmed and our business, financial condition, operating results and cash flow could be materially adversely affected.
We may lose access to third-party code and specifications for the development of code, which could materially adversely affect our ability to develop software compatible with third-party software products in the future.
In the past, we have either directly licensed from third parties, or used within the scope of our customer’s license, code and information for third-party software and hardware that enables us to develop compatible products and interfaces. Such code and information includes: “source code,” which is human-readable and makes the software understandable to programmers; “object code,” which is machine-readable and can be directly executed by a computer; beta and evaluation software; microcode and firmware that implement machine instructions on hardware; and technical documentation. Since the availability of this code and information facilitated the development of systems and applications software that interfaces with the third-party software and hardware, independent software vendors, such as us, were able to develop and market compatible software. Some software providers and hardware manufacturers, including some of the largest vendors, have a policy of restricting the use or availability of their code or technical documentation for some of their operating systems, applications, or hardware. To date, this policy has not had a material effect on us. Some companies, however, may adopt more restrictive policies in the future or impose unfavorable terms and conditions for such access. These restrictions may, in the future, result in higher research and development costs for us in connection with the enhancement and modification of our existing products and the development of new products. There can be no assurance that any additional restrictions would not materially adversely affect our business, financial condition, operating results and cash flow.
Third parties could claim that our products infringe their intellectual property rights or that we owe royalty payments to them, which could result in significant litigation expense or settlement with unfavorable terms, which could materially adversely affect our business, financial condition, operating results and cash flow.
From time to time, third parties have claimed and may claim that our products infringe various forms of their intellectual property or that we owe royalty payments to them. Investigation of these claims can be expensive and could affect development, marketing or shipment of our products. As the number of software patents issued increases, it is likely that additional claims will be asserted. Defending against such claims is time consuming and could result in significant litigation
expense or settlement on unfavorable terms, which could materially adversely affect our business, financial condition, operating results and cash flow.
Fluctuations in foreign currencies could result in translation losses.
Our consolidated financial results are reported in U.S. dollars. Most of the revenue and expenses of our foreign subsidiaries are denominated in local currencies. Given that cash is typically received over an extended period of time for many of our license agreements and given that a substantial portion of our revenue is generated outside of the U.S., fluctuations in foreign currency exchange rates against the U.S. dollar could result in substantial changes in reported revenues and operating results due to the foreign currency impact upon translation of these transactions into U.S. dollars.
In the normal course of business, we employ various strategies to manage these risks, including the use of derivative instruments. These strategies may not be effective in protecting us against the effects of fluctuations from movements in foreign exchange rates. Fluctuations of the foreign currency exchange rates could materially adversely affect our business, financial condition, operating results and cash flow.
We have outsourced various functions to third parties and these arrangements may not be successful, thereby resulting in increased costs, or may adversely affect service levels and our public reporting.
We have outsourced various functions to third parties, including certain development and other administrative functions, and may outsource additional functions to third-party providers in the future. We rely on those third parties to provide services on a timely and effective basis. Although we periodically monitor the performance of these third parties and maintain contingency plans in case the third parties are unable to perform as agreed, we do not ultimately control the performance of our outsourcing partners. The failure of third-party outsourcing partners to perform as expected or as contractually required could result in significant disruptions and costs to our operations, which could materially adversely affect our business, financial condition, operating results and cash flow and our ability to file our financial statements with the SEC timely or accurately.
Potential tax liabilities may materially adversely affect our results.
We are subject to income taxes in the United States and in numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, we engage in many transactions and calculations where the ultimate tax determination is uncertain.
We are regularly under audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from that which is reflected in our income tax provisions and accruals. Additional tax assessments resulting from audit, litigation, or changes in tax laws may result in increased tax provisions or payments which could materially adversely affect our business, financial condition, operating results and cash flow in the period or periods in which that determination is made.
Item 1B. Unresolved staff comments.
None.
Item 2. Properties.
Our principal real estate properties are located in areas necessary to meet sales and operating requirements. All of the properties are considered to be both suitable and adequate to meet current and anticipated operating requirements.
At March 31, 2011, we leased 61 facilities throughout the United States, including our corporate headquarters located in Islandia, New York, and 98 facilities outside the United States. Our lease obligations expire on various dates with the longest commitment extending to 2023. We believe that substantially all of our leases will be renewable at market terms at our option as they become due.
We own one facility in Germany totaling approximately 100,000 square feet, two facilities in Italy totaling approximately 140,000 square feet, two facilities in India totaling approximately 455,000 square feet and one facility in the United Kingdom totaling approximately 215,000 square feet.
We utilize our leased and owned facilities for sales, technical support, research and development and administrative functions.
Item 3. Legal proceedings.
Refer to Note 12, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements for information regarding certain legal proceedings, the contents of which are herein incorporated by reference.
Item 4. Removed and reserved.
* * *
Executive Officers of the Registrant.
The name, age, present position, and business experience for at least the past five years of our executive officers at May 13, 2011 are listed below:
William E. McCracken, 68, has been Chief Executive Officer of the Company since January 2010 and a director of the Company since 2005. He was non-executive Chairman of the Board from June 2007 to September 2009 and interim Executive Chairman of the Board from September 2009 to January 2010, and he served as executive Chairman of the Board from January 2010 to May 2010. He was President of Executive Consulting Group, LLC from 2002 to January 2010. During a 36-year tenure at International Business Machines Corporation (IBM), a manufacturer of information processing products and a technology, software and networking systems manufacturer and developer, Mr. McCracken held several executive positions, including General Manager of the IBM Printing Systems Division and General Manager of Worldwide Marketing of IBM PC Company. From 1995 to 2001, he served on IBM’s Worldwide Management Council, a group of the top 30 executives at IBM.
Nancy E. Cooper, 57, has been Executive Vice President and Chief Financial Officer of the Company since she joined the Company in August 2006. From December 2001 to August 2006, she served as Senior Vice President and Chief Financial Officer of IMS Health Incorporated (IMS Health), a leading provider of information solutions to the pharmaceutical and healthcare industries. Ms. Cooper began her career at IBM, where she held positions of increasing responsibility over a 22-year period, including Chief Financial Officer of the Global Industries Division, Assistant Corporate Controller, and Controller and Treasurer of IBM Credit Corporation.
David C. Dobson, 48, has been the Company’s Executive Vice President and Group Executive, Customer Solutions Group since July 2010. He is responsible for managing the Company’s broad portfolio of products and solutions for mainframe, distributed and cloud computing environments. Prior to joining the Company, Mr. Dobson served as Executive Vice President and Chief Strategy and Innovation Officer of Pitney Bowes Inc. (Pitney Bowes), a manufacturer of software and hardware and a provider of services related to documents, packaging, mailing and shipping, where he was responsible for leading the development of the company’s long-term strategy from June 2008 to July 2009. In addition, he also served as President of Pitney Bowes Management Services, Inc., a wholly owned subsidiary of Pitney Bowes Inc., from August 2009 to July 2010. Prior to joining Pitney Bowes, he was Chief Executive Officer of Corel Corporation, a computer software company specializing in graphics processing, from 2005 to 2008. Before joining Corel Corporation, Mr. Dobson spent 19 years at IBM, where he held a number of senior management positions.
George J. Fischer, 48, has been the Company’s Executive Vice President and Group Executive, Worldwide Sales and Operations since June 2010. He is responsible for all sales for the Company. In addition to worldwide sales and marketing, he leads a wide-range of customer facing activities globally, including professional services, support and ensuring overall customer success. Since joining the Company in 1999, Mr. Fischer has held a number of senior management positions, including Executive Vice President, Global Sales and Marketing from 2009 to July 2010, Executive Vice President and General Manager, Worldwide Sales from 2007 to 2009, and Senior Vice President and General Manager of North America Sales from 2004 to 2007. Before joining the Company, Mr. Fischer held a number of leadership positions at Platinum Technology Inc., a provider of software products and IT consulting services.
Amy Fliegelman Olli, 47, has been Executive Vice President and General Counsel of the Company since February 2007. She is responsible for all of the Company’s legal, compliance and internal audit functions worldwide. Ms. Fliegelman Olli joined the Company in September 2006. From September 2006 to February 2007, she served as Executive Vice President and Co-General Counsel of the Company. Before September 2006, Ms. Fliegelman Olli spent nearly 20 years in various senior-level legal positions with divisions of IBM, most recently as General Counsel - Americas and Global Coordinator for Sales and
Distribution, where she was responsible for a team of more than 200 lawyers in the U.S., Europe, Latin America and Canada and for coordination of all of IBM’s sales and distribution lawyers on a global basis.
Phillip J. Harrington, Jr., 54, has been the Company’s Executive Vice President, Risk, and Chief Administrative Officer since June 2010. He is responsible for the Company’s human resources, education, administrative services, risk management, information services and government relations operations globally. Previously, Mr. Harrington served as a director at Deloitte & Touche LLP, a provider of audit, tax, consulting, enterprise risk and financial advisory services, where he served clients in the areas of general management consulting, operational risk management and regulation. Prior to joining Deloitte & Touche in 2008, he spent 20 years at Prudential Financial, Inc., a provider of insurance, investment management, and other financial products and services, where he held a number of senior management positions.
William L. Hughes, 51, has been Chief Communications Officer of the Company since June 2010. He is responsible for media relations, employee and executive communications and corporate philanthropy, working closely with the Company’s government affairs, marketing and investor relations departments. Mr. Hughes joined the Company in 2006, serving as Corporate Senior Vice President, Global Communications until July 2010. Before joining the Company, Mr. Hughes was Senior Vice President, Global Communications and Public Affairs at IMS Health from 2004 to 2006. Previously, he spent eight years at IBM, where he held a number of senior executive positions, including Vice President, Media, and Vice President, Communications - APAC, based in Tokyo.
Jacob Lamm, 46, has been the Company’s Executive Vice President, Strategy and Corporate Development since February 2009. He is responsible for directing the Company’s overall business strategy, as well as the Company’s strategy for acquisitions. Mr. Lamm has held various management positions since joining the Company in 1998. He served as the Company’s Executive Vice President, Governance Group from January 2008 to February 2009, as Executive Vice President and General Manager, Business Service Optimization Business Unit from March 2007 to January 2008, as Senior Vice President, General Manager and Business Unit Executive from April 2005 to March 2007, and as Senior Vice President, Development from October 2003 to April 2005.
Part II
Item 5. Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities.
Our common stock is traded on The NASDAQ Global Select Market tier of The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “CA.” The following table sets forth, for the fiscal quarters indicated, the quarterly high and low closing sales prices on NASDAQ:
On March 31, 2011, the closing price for our common stock on NASDAQ was $24.18. At March 31, 2011, we had approximately 7,200 stockholders of record.
We have paid cash dividends each year since July 1990. For fiscal 2011, 2010 and 2009, we paid annual cash dividends of $0.16 per share, which have been paid out in quarterly installments of $0.04 per share as and when declared by the Board of Directors.
On May 12, 2011, we announced an increase of the Company’s regular quarterly dividend to $0.05 per share as and when declared by the Board of Directors.
Purchases of equity securities by the issuer
The following table sets forth, for the months indicated, our purchases of common stock in the fourth quarter of fiscal 2011:
Issuer purchases of equity securities
During April 2010, we completed the $250 million stock repurchase program authorized by our Board of Directors on October 29, 2008, by repurchasing approximately 0.8 million shares of our common stock for approximately $20 million.
On May 12, 2010, our Board of Directors approved a stock repurchase program that authorizes us to acquire up to $500 million of our common stock. We will fund the amount remaining under this program with available cash on hand and repurchase shares on the open market from time to time based on market conditions and other factors.
Under this program, we have repurchased approximately 10.5 million shares of our common stock for approximately $218 million at March 31, 2011.
On May 12, 2011, our Board of Directors approved a stock repurchase program that authorized us to acquire up an to an additional $500 million of our common stock, in addition to the previous program approved on May 12, 2010. We will fund the program with available cash on hand and repurchase shares on the open market from time to time based on market conditions and other factors.
Item 6. Selected financial data.
The information set forth below should be read in conjunction with the “Results of Operations” section included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Statement of operations data
Balance sheet and other data
(1)
Information presented excludes the results of our discontinued operations.
(2)
In fiscal 2010, 2009 and 2008, we incurred after-tax charges of $33 million, $64 million and $74 million, respectively, for restructuring and other costs.
In fiscal 2007, we also incurred after-tax charges of $6 million for write-offs of in-process research and development costs due to acquisitions.
(3)
Deferred revenue includes amounts billed or collected in advance of revenue recognition, including subscription license agreements, maintenance, and professional services. It does not include unearned revenue on future installments not yet billed at the respective balance sheet dates.
ITEM 7. Management’s discussion and analysis of financial condition and results of operations.
Introduction
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) is intended to provide an understanding of our financial condition, changes in financial condition, cash flow, liquidity and results of operations. This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements appearing elsewhere in this Form 10-K and the Risk Factors included in Part I,

ITEM 1A - RISK FACTORS

ITEM 1B - UNRESOLVED STAFF COMMENTS

ITEM 2 - PROPERTIES

ITEM 3 - LEGAL PROCEEDINGS

ITEM 4 - RESERVED

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY

ITEM 6 - SELECTED FINANCIAL DATA

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and qualitative disclosures about market risk.
Interest rate risk
Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio, debt and installment accounts receivable. We have a prescribed methodology whereby we invest our excess cash in investments that are composed of money market funds, debt instruments of government agencies and investment grade corporate issuers (Standard and Poor’s single “BBB+” rating and higher). To mitigate risk, the current weighted average duration is less than one year, and the holdings of any one non-government issuer does not exceed 5% of the portfolio.
At March 31, 2011, our outstanding debt was $1,551 million, all of which was in fixed rate obligations except for our 2008 Revolving Credit Facility which had a $250 million balance at March 31, 2011. Refer to Note 9, “Debt,” in the Notes to the Consolidated Financial Statements for additional information.
At March 31, 2011, we had interest rate swaps with a total notional value of $500 million, $200 million of which were entered into during fiscal year 2011, that swap a total of $500 million of our 6.125% Senior Notes due December 2014 into floating interest rate debt through December 1, 2014. These swaps are designated as fair value hedges and are being accounted for in accordance with the shortcut method of FASB ASC Topic 815. Under the terms of the swaps, we will pay quarterly interest at a rate at an average of 2.88%, plus the three-month LIBOR rate, and will receive payment at 5.625%. The LIBOR-based rate is set quarterly three months prior to date of the interest payment.
At March 31, 2011, the fair value of these derivatives was approximately $15 million, of which approximately $11 million is included in “Other current assets” and approximately $4 million is included in “Other noncurrent assets, net” in our Consolidated Balance Sheet. At March 31, 2010, the fair value of these derivatives was approximately $1 million and is included in “Other current assets” in our Consolidated Balance Sheet.
Each 25 basis point increase or decrease in interest rates would have a corresponding effect on the annual interest expense related to our interest rates swaps that relate to the 6.125% Notes of approximately $1 million at March 31, 2011.
During fiscal year 2009, we entered into interest rate swaps with a total notional value of $250 million to hedge a portion of our variable interest rate payments on the Revolving Credit Facility. These derivatives were designated as cash flow hedges and matured in October 2010. During fiscal 2011, under the terms of the interest rate swaps, we paid interest at an average annualized rate of 2.83% and received interest payment at the one-month LIBOR rate.
Foreign currency exchange risk
We conduct business on a worldwide basis through subsidiaries in 47 countries and, as such, a portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing expected local currency revenues in relation to local currency costs and local currency assets in relation to local currency liabilities. In October 2005, our Board of Directors adopted our Risk Management Policy and Procedures, which authorize us to manage, based on management’s assessment, our risks and exposures to foreign currency exchange rates through the use of derivative financial instruments (e.g., forward contracts, options and swaps) or other means. We only use derivative financial instruments in the context of hedging and do not use them for speculative purposes.
During fiscal 2011 and 2010, we did not designate our foreign exchange derivatives as hedges. Accordingly, all foreign exchange derivatives are recognized on our Consolidated Balance Sheets at fair value and unrealized or realized changes in fair value from these contracts are recorded as “Other expenses (gains), net” in our Consolidated Statements of Operations. Refer to Note 10, “Derivatives” for additional information regarding our derivative activities.
If foreign currency exchange rates affecting our business weakened by 10% on an overall basis in comparison to the U.S. dollar, the amount of cash and cash equivalents we would report in U.S. dollars would decrease by approximately $145 million.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial statements and supplementary data.
Our Consolidated Financial Statements are included in Part IV, Item 15 of this Form 10-K and are incorporated herein by reference.
The supplementary data specified by Item 302 of Regulation S-K as it relates to selected quarterly data is included in the “Selected Quarterly Information” section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Information on the effects of changing prices is not required.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and disagreements with accountants on accounting and financial disclosure.
Not applicable.

ITEM 9A - CONTROLS AND PROCEDURES
Item 9A. Controls and procedures.
(a) Evaluation of disclosure controls and procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective at the end of the period covered by this Form 10-K.
(b) Management’s report on internal control over financial reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted its evaluation of the effectiveness of internal control over financial reporting at March 31, 2011 based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s evaluation included the design of the Company’s internal control over financial reporting and the operating effectiveness of the Company’s internal control over financial reporting. Based on that evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of the end of the period covered by this Form 10-K.
The Company’s independent registered public accounting firm, KPMG LLP, has audited the effectiveness of the Company’s internal control over financial reporting as stated in their report which appears on page 55 of this Form 10-K.
(c) Changes in internal control over financial reporting
There were no changes in the Company’s internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B - OTHER INFORMATION
Item 9B. Other information.
Not applicable
Part III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS
Item 10. Directors, executive officers and corporate governance.
Information required by this Item that will appear under the headings “Election of Directors,” “Litigation Involving Directors and Executive Officers,” “Nominating Procedures,” “Board Committees and Meetings” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive proxy statement to be filed with the SEC relating to our 2011 Annual Meeting of Stockholders is incorporated herein by reference. Also, refer to Part I under the heading “Executive Officers of the Registrant” for information concerning our executive officers.
We maintain a “code of ethics” (within the meaning of Item 406 of the SEC’s Regulation S-K) entitled “CA Code of Conduct: Information and Resource Guide” (Code of Conduct). Our Code of Conduct is applicable to all employees and directors, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. Our Code of Conduct is available on our website at www.ca.com/investor. Any amendment or waiver to the “code of ethics” provisions of our Code of Conduct that applies to our directors or executive officers will be included in a report filed with the SEC on Form 8-K or will be otherwise disclosed to the extent required and as permitted by law or regulation. The Code of Conduct is available without charge in print to any stockholder who requests a copy by writing to our Corporate Secretary, at CA, Inc., One CA Plaza, Islandia, New York 11749.

ITEM 11 - EXECUTIVE COMPENSATION
Item 11. Executive compensation.
Information required by this Item that will appear under the headings “Compensation and Other Information Concerning Executive Officers,” “Compensation Discussion and Analysis,” “Compensation of Directors,” “Compensation Committee Interlocks and Insider Participation” and “Compensation and Human Resources Committee Report on Executive Compensation” in the definitive proxy statement to be filed with the SEC relating to our 2011 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP
Item 12. Security ownership of certain beneficial owners and management and related stockholder matters.
Information required by this Item that will appear under the headings “Information Regarding Beneficial Ownership of Principal Stockholders, the Board and Management” and “Securities Authorized for Issuance under Equity Compensation Plans” in the definitive proxy statement to be filed with the SEC relating to our 2011 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain relationships and related transactions, and director independence.
Information required by this Item that will appear under the headings “Related Person Transactions,” “Election of Directors,” “Board Committees and Meetings” and “Corporate Governance” in the definitive proxy statement to be filed with the SEC relating to our 2011 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
Item 14. Principal accountant fees and services.
Information required by this Item that will appear under the heading “Ratification of Appointment of Independent Registered Public Accountants” in the definitive proxy statement to be filed with the SEC relating to our 2011 Annual Meeting of Stockholders is incorporated herein by reference.
Part IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, financial statement schedules.
(a) (1)
The Registrant’s financial statements together with a separate table of contents are annexed hereto.
(2)
Financial Statement Schedules are listed in the separate table of contents annexed hereto.
(3)
Exhibits.
Regulation S-K
Exhibit Number
.1
Restated Certificate of Incorporation.
Filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K dated March 6, 2006.**
.2
By-Laws of the Company, as amended.
Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 23, 2007.**
.1
Restated Certificate of Designation of Series One Junior Participating Preferred Stock, Class A of the Company.
Filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K dated March 6, 2006.**
.2
Stockholder Protection Rights Agreement, dated as of November 5, 2009, between the Company and Mellon Investor Services LLC, as Rights Agent, including as Exhibit A the forms of Rights Certificate and of Election to Exercise and as Exhibit B the form of Certificate of Designation and Terms of the Participating Preferred Stock of the Company.
Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 5, 2009.**
.3
Indenture with respect to the Company’s 4.75% Senior Notes due 2009 and 5.625% Senior Notes due 2014, dated November 18, 2004, between the Company and The Bank of New York, as Trustee.
Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated November 15, 2004.**
.4
Purchase Agreement dated November 15, 2004, among the Initial Purchasers of the 4.75% Senior Notes due 2009 and 5.625% Senior Notes due 2014, and the Company.
Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 15, 2004.**
.5
First Supplemental Indenture, dated as of November 30, 2007, to the Indenture, dated as of November 18, 2004, between the Company and The Bank of New York, as trustee.
Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated January 3, 2008.**
.6
Indenture dated as of June 1, 2008 between the Company and U.S. Bank National Association, as trustee, relating to the senior debt securities, the senior subordinated debt securities and the junior subordinated debt securities, as applicable.
Filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3, Registration Number 333-151619, dated June 12, 2008.**
.7
Officers’ Certificates dated November 13, 2009 establishing the terms of the Company’s 5.375% Senior Notes due 2019 pursuant to the Indenture dated as of June 1, 2008.
Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated November 13, 2009.**
.8
Addendum to Registration Rights Agreement, dated as of November 30, 2007, relating to $500,000,000 5.625% Senior Notes Due 2014.
Filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K dated January 3, 2008.**
.1*
CA, Inc. 1991 Stock Incentive Plan, as amended.
Filed as Exhibit 1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997.**
Regulation S-K
Exhibit Number
.2*
1993 Stock Option Plan for Non-Employee Directors.
Filed as Annex 1 to the Company’s definitive Proxy Statement dated July 7, 1993.**
.3*
Amendment No. 1 to the 1993 Stock Option Plan for Non-Employee Directors dated October 20, 1993.
Filed as Exhibit E to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994.**
.4*
1996 Deferred Stock Plan for Non-Employee Directors.
Filed as Exhibit A to the Company’s Proxy Statement dated July 8, 1996.**
.5*
Amendment No. 1 to the 1996 Deferred Stock Plan for Non-Employee Directors.
Filed as Exhibit A to the Company’s Proxy Statement dated July 6, 1998.**
.6*
2001 Stock Option Plan.
Filed as Exhibit B to the Company’s Proxy Statement dated July 18, 2001.**
.7*
CA, Inc. 2002 Incentive Plan (Amended and Restated Effective as of April 27, 2007).
Filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007.**
.8*
CA, Inc. 2002 Compensation Plan for Non-Employee Directors.
Filed as Exhibit C to the Company’s Proxy Statement dated July 26, 2002.**
.9*
Relocation Polices including Form of Moving and Relocation Expense Agreement.
Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K dated February 1, 2005.**
.10*
Restricted Stock Unit Agreement for John A. Swainson.
Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K dated November 18, 2004.**
.11
Deferred Prosecution Agreement, including the related information and Stipulation of Facts.
Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 22, 2004.**
.12
Final Consent Judgment of Permanent Injunction and Other Relief, including SEC complaint.
Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 22, 2004.**
.13*
Form of Restricted Stock Unit Certificate.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004.**
.14*
Form of Non-Qualified Stock Option Certificate.
Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004.**
.15*
Form of Non-Qualified Stock Option Award Certificate.
Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K dated June 2, 2006.**
.16*
Form of Non-Qualified Stock Option Award Certificate (Employment Agreement).
Filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K dated June 2, 2006.**
.17*
Form of Incentive Stock Option Award Certificate.
Filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K dated June 2, 2006.**
.18*
Form of Incentive Stock Option Award Certificate (Employment Agreement).
Filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K dated June 2, 2006.**
.19*
CA, Inc. Deferred Compensation Plan for John A. Swainson, dated April 29, 2005.
Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 29, 2005.**
.20
Trust Agreement between Computer Associates International, Inc. and Fidelity Management Trust Company, dated as of April 29, 2005.
Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated April 29, 2005.**
.21*
Program whereby certain designated employees, including the Company’s named executive officers, are provided with certain covered medical services, effective August 1, 2005.
Filed as Item 1.01 and Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 1, 2005.**
.22*
Amended and Restated CA, Inc. Executive Deferred Compensation Plan, effective November 20, 2006.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2006.**
Regulation S-K
Exhibit Number
.23*
Form of Deferral Election.
Filed as Exhibit 10.52 to the Company’s Annual Report on Form 10-K for the fiscal year 2006.**
.24
Lease, dated as of August 15, 2006, among the Company, Island Headquarters Operators LLC and Islandia Operators LLC.
Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 15, 2006.**
.25*
CA, Inc. 2007 Incentive Plan.
Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 21, 2007.**
.26*
Form of Award Agreement - Restricted Stock Units.
Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 21, 2007.**
.27*
Form of Award Agreement - Restricted Stock Awards.
Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated August 21, 2007.**
.28*
Form of Award Agreement - Nonqualified Stock Awards.
Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K dated August 21, 2007.**
.29
Credit Agreement dated as of August 29, 2007.
Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 29, 2007.**
.30
Settlement Agreement, dated as of December 21, 2007, between the Company and the Bank of New York, as trustee, Linden Capital L.P. and Swiss Re Financial Products Corporation.
Filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K dated January 3, 2008.**
.31*
First Amendment to CA, Inc. Executive Deferred Compensation Plan, effective February 25, 2008.
Filed as Exhibit 10.68 to the Company Annual Report on Form 10-K for the fiscal year ended March 31, 2008.**
.32*
First Amendment to Adoption Agreement for CA, Inc. Executive Deferred Compensation Plan, effective February 25, 2008.
Filed as Exhibit 10.69 to the Company Annual Report on Form 10-K for the fiscal year ended March 31, 2008.**
.33*
CA, Inc. Change in Control Severance Policy.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008.**
.34*
Amended and Restated Employment Agreement, dated December 8, 2008, between the Company and John Swainson.
Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008.**
.35*
Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Michael Christenson.
Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008.**
.36*
Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and James Bryant.
Filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008.**
.37*
Letter dated July 21, 2006 from the Company to Ajei S. Gopal regarding terms of employment.
Filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008.**
.38*
Amendment dated December 12, 2008 to letter dated July 21, 2006 from the Company to Ajei S. Gopal regarding terms of employment.
Filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008.**
.39*
Amended and Restated Employment Agreement, dated as of September 30, 2009, between the Company and Nancy E. Cooper.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.40*
Amended and Restated Employment Agreement, dated as of September 30, 2009, between the Company and Amy Fliegelman Olli.
Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.41*
Retention Letter Agreement dated as of October 1, 2009, between the Company and Michael J. Christenson.
Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2009.**
Regulation S-K
Exhibit Number
.42*
Retention Letter Agreement dated as of October 1, 2009, between the Company and Nancy E. Cooper.
Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.43*
Retention Letter Agreement dated as of October 1, 2009, between the Company and Ajei S. Gopal.
Filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.44*
Retention Letter Agreement dated as of October 1, 2009, between the Company and Amy Fliegelman Olli.
Filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.45*
Summary description of special retirement vesting provisions available to certain Senior Management.
Filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.46*
Director Retirement Donation Policy.
Filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.47*
Non-Qualified Stock Option Certificate for William E. McCracken.
Filed as Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.**
.48*
Summary description of financial planning benefit available to certain executives.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2009.**
.49*
Form of Restricted Stock Unit Award Agreement for certain named executive officers.
Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2009.**
.50*
Homeowners Relocation Policy for Senior Executives.
Filed as Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.**
.51*
Renters Relocation Policy for Senior Executives.
Filed as Exhibit 10.58 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.**
.52*
Separation Agreement and General Claims Release between the Company and John A. Swainson, dated March 15, 2010.
Filed as Exhibit 10.59 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.**
.53*
Employment Agreement dated as of May 6, 2010 between the Company and William E. McCracken.
Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 6, 2010.**
.54*
Employment Agreement, dated as of June 23, 2010, between the Company and David C. Dobson.
Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010.**
.55*
Summary description of Director compensation.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.**
.56*
Schedules A, B, and C (as amended) to CA, Inc. Change in Control Severance Policy.
Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.**
.57*
CA, Inc. Special Retirement Vesting Benefit Policy.
Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2010.**
.58*
CA, Inc. 2003 Compensation Plan for Non-Employee Directors (amended and restated dated December 31, 2010).
Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2010.**
.1
Statement of Ratios of Earnings to Fixed Charges.
Filed herewith.
Subsidiaries of the Registrant.
Filed herewith.
Consent of Independent Registered Public Accounting Firm.
Filed herewith.
Regulation S-K
Exhibit Number
.1
Certification of the CEO pursuant to §302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
.2
Certification of the CFO pursuant to §302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
The following financial statements from CA, Inc.’s Annual Report on Form 10-K for the year ended March 31, 2011, formatted in XBRL (eXtensible Business Reporting Language):
Furnished herewith.
(i) Consolidated Statements of Operations - Years Ended March 31, 2011, 2010 and 2009.
(ii) Consolidated Balance Sheets - March 31, 2011 and March 31, 2010.
(iii) Consolidated Statements of Stockholders’ Equity - Years Ended March 31, 2011, 2010 and 2009.
(iv) Consolidated Statements of Cash Flows - Years Ended March 31, 2011, 2010 and 2009.
(v) Notes to Consolidated Financial Statements - March 31, 2011.
** Incorporated herein by reference.
* Management contract or compensatory plan or arrangement.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report report to be signed on its behalf by the undersigned, thereunto duly authorized.
CA, INC.
By:
William E. McCracken
Chief Executive Officer (Principal Executive Officer)
Dated: May 16, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
By:
Nancy E. Cooper
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By:
Richard J. Beckert
Corporate Controller (Principal Accounting Officer)
Dated: May 16, 2011
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Raymond J. Bromark
Director
Gary J. Fernandes
Director
Rohit Kapoor
Director
Kay Koplovitz
Director
Christopher B. Lofgren
Director
William E. McCracken
Director
Richard Sulpizio
Director
Laura S. Unger
Director
Arthur F. Weinbach
Director
Renato (Ron) Zambonini
Director
Dated: May 16, 2011
CA, Inc. and Subsidiaries
Islandia, New York
Annual report on form 10-k
Item 8, Item 9A, Item 15(a)(1) and (2), and ITEM 15(c)
List of consolidated financial statements
and financial statement schedule
Consolidated financial statements and
financial statement schedule
For the Fiscal
Year ended March 31, 2011
PAGE
The following Consolidated Financial Statements of CA, Inc.
and subsidiaries are included in Items 8 and 9A:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations - Years Ended March 31, 2011, 2010, and 2009
Consolidated Balance Sheets - March 31, 2011 and 2010
Consolidated Statements of Stockholders’ Equity - Years Ended March 31, 2011, 2010, and
Consolidated Statements of Cash Flows - Years Ended March 31, 2011, 2010, and 2009
Notes to the Consolidated Financial Statements
The following Consolidated Financial Statement Schedule of CA, Inc.
and subsidiaries is included in Item 15(c):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
Report of independent registered public accounting firm
The Board of Directors and Stockholders
CA, Inc.:
We have audited the accompanying consolidated balance sheets of CA, Inc. and subsidiaries as of March 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended March 31, 2011. In connection with our audits of the consolidated financial statements, we also have audited the consolidated financial statement schedule listed in Item 15(a)(2). We also have audited CA, Inc.’s internal control over financial reporting as of March 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). CA, Inc.’s management is responsible for these consolidated financial statements and the consolidated financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting under Item 9A(b). Our responsibility is to express an opinion on these consolidated financial statements and the consolidated financial statement schedule, and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CA, Inc. and subsidiaries as of March 31, 2011 and 2010, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended March 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
Also, in our opinion, CA, Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by COSO.
/s/ KPMG LLP
New York, New York
May 16, 2011
CA, Inc. and subsidiaries
consolidated statements of operations
See accompanying Notes to the Consolidated Financial Statements
CA, Inc. and subsidiaries
consolidated balance sheets
See accompanying Notes to the Consolidated Financial Statements
CA, Inc. and subsidiaries
consolidated statements of stockholders’ equity
See accompanying Notes to the Consolidated Financial Statements
CA, Inc. and subsidiaries
consolidated statements of cash flows
See accompanying Notes to the Consolidated Financial Statements
Notes to the consolidated financial statements
Note 1 - Significant Accounting Policies
(a) Description of business: CA, Inc. and subsidiaries (the Company) develops, markets, delivers and licenses software products and services.
(b) Presentation of financial statements: The accompanying audited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 205. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual results. Significant items subject to such estimates and assumptions include: (i) the useful lives of long-lived assets, (ii) allowances for doubtful accounts, (iii) the valuation of derivatives, deferred tax assets, and long-lived assets, (iv) share-based compensation, (v) reserves for employee severance benefit obligations, (vi) income tax uncertainties and (vii) legal contingencies.
Certain prior year balances have been reclassified to conform to the current period’s presentation.
(c) Principles of consolidation: The Consolidated Financial Statements include the accounts of the Company and its majority-owned and controlled subsidiaries. Investments in affiliates owned 50% or less are accounted for by the equity method. Intercompany balances and transactions have been eliminated in consolidation. Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period (for additional information, refer to Note 2, “Acquisitions”).
(d) Divestitures: In June 2010, the Company sold its Information Governance business to Autonomy Corporation plc (Autonomy). At March 31, 2011, the Company identified its Internet Security Business as available for sale and on April 28, 2011, the Company signed an agreement for the sale of the business. The results of operations associated with the sales of these businesses have been presented as discontinued operations in the accompanying Consolidated Statements of Operations and Consolidated Statement of Cash Flows for the fiscal years 2011, 2010 and 2009. The effects of the discontinued operations were immaterial to the Company’s Consolidated Balance Sheet at March 31, 2011 and 2010. See Note 3, “Discontinued Operations,” for additional information.
In September 2010, the Company recognized a gain of approximately $10 million from the sale of its interest in an investment accounted for using the equity method. The gain is included in “Other expenses (gains), net” in the Company’s Consolidated Statements of Operations for the fiscal year 2011.
(e) Foreign currencies: Assets and liabilities of the Company’s international subsidiaries are translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using average exchange rates. Adjustments arising from the translation of the foreign currency financial statements of the Company’s subsidiaries into U.S. dollars are reported as currency translation adjustments in the “Accumulated other comprehensive loss” line item in the Consolidated Balance Sheets.
Foreign currency transaction gains (losses) were approximately $(18) million, $(10) million and $11 million in the fiscal years 2011, 2010 and 2009, respectively, and are included in the “Other expenses (gains), net” line item in the Consolidated Statements of Operations in the period in which they occur.
(f) Revenue recognition: The Company begins to recognize revenue from software licensing and maintenance when all of the following criteria are met: (1) the Company has evidence of an arrangement with a customer; (2) the Company delivers the specified products; (3) license agreement terms are fixed or determinable and free of contingencies or uncertainties that may alter the agreement such that it may not be complete and final; and (4) collection is probable. Revenue is recorded net of applicable sales taxes.
The Company’s software licenses generally do not include acceptance provisions. An acceptance provision allows a customer to test the software for a defined period of time before committing to license the software. If a license agreement includes an acceptance provision, the Company does not recognize revenue until the earlier of the receipt of a written customer acceptance or, if not notified by the customer to cancel the license agreement, the expiration of the acceptance period. The
Company’s standard licensing agreements include a product warranty provision for all products. The likelihood that the Company will be required to make refunds to customers under such provisions is considered remote.
Subscription and maintenance revenue: Software licenses that include the right to receive unspecified future software products are considered subscription arrangements under GAAP and are recognized ratably over the term of the license agreement. Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from either: (i) subscription license agreements that were in effect during the period, which generally include maintenance that is bundled with and not separately identifiable from software usage fees or product sales; (ii) maintenance agreements associated with providing customer technical support and access to software fixes and upgrades which are separately identifiable from software usage fees or product sales; or (iii) software license agreements bundled with maintenance for which VSOE has not been established for maintenance. Revenue for these arrangements is recognized ratably over the term of the subscription or maintenance term.
Professional services: Revenue from professional service arrangements is generally recognized as the services are performed. Revenue and costs from committed professional services that are sold as part of a subscription license agreement are deferred and recognized on a ratable basis over the term of the related software license. VSOE of professional services is established based on daily rates when sold on a stand-alone basis. If it is not probable that a project will be completed or the payment will be received, revenue recognition is deferred until the uncertainty is removed.
Software fees and other: Software fees and other revenue primarily consists of revenue from the sale of perpetual software licenses that do not include the right to unspecified software products, on a stand-alone basis or in a bundled arrangement where VSOE exists for any undelivered elements. For bundled arrangements that include either maintenance or both maintenance and professional services, the Company uses the residual method to determine the amount of license revenue to be recognized. Under the residual method, consideration is allocated to undelivered elements based upon VSOE of those elements, with the residual of the arrangement fee allocated to and recognized as license revenue. The Company determines VSOE of maintenance, depending on the product, from either contractually stated renewal rates or the bell-shaped curve method.
In the event that agreements with the Company’s customers are executed in close proximity of the other license agreements with the same customer, the Company evaluates whether the separate arrangements are linked, and, if so, the agreements together are considered a single multi-element arrangement for which revenue is recognized ratably as subscription and maintenance revenue or, in the case of a linked professional services arrangement, as professional services revenue, in the Consolidated Statements of Operations.
(g) Sales commissions: Sales commissions are recognized in the period the commissions are earned by employees, which is typically upon signing of the contract. Under the Company’s sales commissions programs, the amount of sales commissions expense attributable to the license agreements signed in the period would be recognized fully, but the revenue from the license agreements may be recognized ratably over the subscription and maintenance term.
(h) Accounting for share-based compensation: Share-based awards exchanged for employee services are accounted for under the fair value method. Accordingly, share-based compensation cost is measured at the grant date, based on the fair value of the award. The expense for awards expected to vest is recognized over the employee’s requisite service period (generally the vesting period of the award). Awards expected to vest are estimated based on a combination of historical experience and future expectations.
The Company has elected to treat awards with only service conditions and with graded vesting as one award. Consequently, the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date.
The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of share-based awards in the form of options. The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected term of the option and risk-free interest rates.
In addition to stock options and restricted share awards (RSAs) with time-based vesting, the Company issues performance share units (PSUs). Compensation costs for the PSUs are amortized over the requisite service periods based on the expected level of achievement of the performance targets. At the conclusion of the performance periods, the applicable number of shares of RSAs, restricted stock units (RSUs) or unrestricted shares granted may vary based on the level of achievement of the
performance targets. Additionally, the grants are subject to the approval of the Company’s Compensation and Human Resources Committee of the Board of Directors (the Committee), which has discretion to reduce any award for any reason. The value of the PSU awards is remeasured each reporting period until the Committee approves attainment of the specified performance targets, at which time a grant date is deemed to have been achieved for accounting purposes, the value of the award is fixed and any remaining unrecognized compensation expense is recognized over the remaining time-based vesting period. See Note 15, “Stock Plans”, for additional information.
(i) Net income per share: Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of net income per share under the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities. The remaining undistributed income is then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic net income per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted net income per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding at the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards and convertible notes. See Note 14, “Income from Continuing Operations Per Common Share”, for additional information.
(j) Concentration of credit risk: Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash equivalents, derivatives and accounts receivable. The Company historically has not experienced any losses in its cash and cash equivalent portfolios.
Amounts included in accounts receivable expected to be collected from customers, as disclosed in Note 6, “Trade and Installment Accounts Receivable”, have limited exposure to concentration of credit risk due to the diverse customer base and geographic areas covered by operations.
(k) Cash and cash equivalents: All financial instruments purchased with an original maturity of three months or less at the time of purchase are considered cash equivalents. The Company’s cash and cash equivalents are held by its subsidiaries throughout the world, frequently in each subsidiary’s respective functional currency which may not be the U.S. dollar. Approximately 47% and 46% of cash and cash equivalents were maintained outside the United States at March 31, 2011 and 2010, respectively.
Total interest income, which primarily relates to the Company’s cash and cash equivalent balances and marketable securities, for fiscal year 2011, 2010 and 2009 was approximately $24 million, $26 million and $70 million, respectively, and is included in the “Interest expense, net” line item in the Consolidated Statements of Operations.
(l)Marketable securities: All marketable securities are classified as available-for-sale securities and are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive income until realized. Premiums and discounts on debt securities recorded at the date of purchase are recognized in “Interest expense, net” using the effective interest method. Realized gains and losses on sales of all such investments are reported in “Interest expense, net” and are computed using the specific identification cost method.
For marketable securities in an unrealized loss position, the Company is required to assess whether it intends to sell the security or will more likely than not be required to sell the security before the recovery of its amortized cost basis less any current-period credit loss. If either of these conditions is met, an other-than-temporary impairment on the security is recognized in “Interest expense, net” equal to the difference between its fair value and amortized cost basis. See Note 5, “Marketable Securities”, for additional information.
(m) Fair value measurements: Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. The Company is required to classify certain assets and liabilities based on the following fair value hierarchy:
-
Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
-
Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
-
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
See Note 11, “Fair Value Measurements,” for additional information.
(n) Long-lived assets:
Impairment of long-lived assets, excluding goodwill and other intangibles: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
Property and equipment: Property and equipment are stated at cost. Depreciation and amortization expense is calculated based on the estimated useful lives of the assets, and is recognized by using the straight-line method. Building and improvements are estimated to have 5 to 40 year lives, and the remaining property and equipment are estimated to have 3 to 7 year lives.
Capitalized development costs: Capitalized development costs in the accompanying Consolidated Balance Sheets include costs associated with the development of computer software to be sold, leased or otherwise marketed. Software development costs associated with new products and significant enhancements to existing software products are expensed as incurred until technological feasibility has been established. Annual amortization of capitalized software costs is the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method over the remaining estimated economic life of the software product, generally estimated to be 5 years from the date the product became available for general release to customers. The Company generally recognizes amortization expense for capitalized software costs using the straight-line method.
Impairment of goodwill and other intangible assets: Purchased software products and other intangible assets subject to amortization are reviewed for impairment quarterly and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Intangible assets with indefinite lives are not subject to amortization. Goodwill and indefinite-lived intangible assets are tested annually for impairment during the fourth quarter of the fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. The Company also evaluates indefinite-lived intangible assets for impairment whenever events or changes in business circumstances indicate that the indefinite useful lives assumption of these assets is no longer appropriate. The Company evaluates goodwill impairment based on a single reporting unit.
Purchased software products: Purchased software products primarily include the cost of software technology acquired in business combinations. The cost of such products is equal to the fair value of the acquired software technology at the acquisition date. The Company’s records straight-line amortization of purchased software costs over their remaining economic lives, estimated to be between 3 and 10 years from the date of acquisition.
Other intangible assets: Other intangible assets include both customer relationships and trademarks/trade names. The Company amortizes all other intangible assets over their remaining economic lives, estimated to be between 2 and 12 years from the date of acquisition.
Goodwill: Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and intangible assets, including in-process research and development, acquired by the Company in a purchase business combination. Goodwill is not amortized into results of operations but instead is reviewed for impairment.
See Note 7, “Long-Lived Assets,” for additional information.
(o) Restricted cash: The Company’s insurance subsidiary requires a minimum restricted cash balance of $50 million. In addition, the Company has other restricted cash balances, including cash collateral for letters of credit. The total amount of restricted cash at March 31, 2011 and 2010 was approximately $56 million and $55 million, respectively, and is included in the “Other noncurrent assets, net” line item in the Consolidated Balance Sheets.
(p) Income taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to uncertain tax positions in income tax expense. See Note 16, “Income Taxes,” for additional information.
(q) Deferred revenue (billed or collected): The Company accounts for unearned revenue on billed amounts due from customers on a gross basis. Unearned revenue on billed installments (collected or uncollected) is reported as deferred revenue in the liabilities section of the Consolidated Balance Sheets.
Deferred revenue (billed or collected) excludes contractual commitments executed under license and maintenance agreements that will be billed in future periods. See Note 8, “Deferred Revenue,” for additional information.
Note 2 - acquisitions
During fiscal year 2011, the Company acquired 100% of the voting equity interests of Arcot Systems, Inc. (Arcot), a privately held provider of authentication and fraud prevention solutions through on-premises software or cloud services. The acquisition of Arcot adds technology for fraud prevention and authentication to the Company’s Identity and Access Management offerings. The purchase price of the acquisition was approximately $197 million.
The purchase price was allocated to net tangible and intangible assets and liabilities based upon their estimated fair values at the October 4, 2010 acquisition date. The allocation of the purchase price to acquired assets, including intangible assets, is preliminary as the Company has not completed its analysis of the fair value of the acquired intangibles and the historical tax records of Arcot. The excess purchase price over the estimated value of the net tangible and intangible assets was recorded as goodwill. Goodwill recognized in the preliminary purchase price allocation includes synergies expected to be achieved through integration of the acquired technology with the Company’s existing product portfolio and the intangible assets that are not separable, such as assembled workforce and going concern.
The Company’s other acquisitions during fiscal year 2011 were individually immaterial.
The pro forma effects of the Company’s fiscal year 2011 acquisitions on revenues and results of operations for fiscal years 2011, 2010 and 2009 were considered immaterial, both individually and in the aggregate. The fiscal year 2011 acquisitions’ effects on revenue and results of operations since the dates of acquisition were also considered immaterial, both individually and in the aggregate.
The following represents the preliminary allocation of the purchase price and estimated useful lives to the acquired net assets of Arcot and the Company’s other fiscal year 2011 acquisitions:
(1)
Includes customer relationships and trade names.
Goodwill from Arcot and the Company’s other fiscal 2011 acquisitions that will be deductible for tax purposes is not expected to be material.
During fiscal year 2010, the Company acquired the following:
•
Nimsoft AS (Nimsoft) - the Company acquired 100% of the voting equity interests of Nimsoft, a privately held provider of IT performance and availability monitoring solutions for emerging enterprises and managed service providers. The acquisition of Nimsoft extends the Company’s ability to meet the needs of emerging enterprises and managed service providers. The total purchase price of the acquisition was approximately $353 million.
•
3Tera, Inc. (3Tera) - the Company acquired 100% of the voting equity interests of 3Tera, a privately held provider of IT performance and availability monitoring solutions for emerging enterprises and managed software providers. The acquisition of 3Tera helps the Company expand its portfolio of technology management solutions. The total purchase price of the acquisition was approximately $100 million.
•
Oblicore, Inc. (Oblicore) - the Company acquired 100% of the voting equity interests of Oblicore, a privately held provider of service level management software for enterprises and service providers. The total purchase price of the acquisition was approximately $20 million.
•
NetQoS, Inc. (NetQoS) - the Company acquired 100% of the voting equity interests of NetQoS, a provider of network performance management and service delivery solutions. NetQoS solutions will extend the Company’s capabilities in the areas of application performance management and network and system management. The total purchase price of the acquisition was approximately $200 million.
The following represents the allocation of the purchase price and estimated useful lives to the acquired net assets of the Company’s fiscal year 2010 acquisitions at March 31, 2011:
(1)
Includes customer relationships and trade names.
The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded to goodwill. The allocation of a significant portion of the purchase price to goodwill was predominately due to the intangible assets that are not separable, such as assembled workforce and going concern. Approximately $45 million and $11 million of the goodwill is expected to be deductible for tax purposes for Nimsoft and Oblicore, respectively. None of the goodwill for 3Tera and NetQoS is expected to be deductible for tax purposes.
The pro forma effects of the Company’s fiscal 2010 acquisitions on the Company’s revenues and results of operations for fiscal years 2010 and 2009 were considered immaterial, both individually and in the aggregate.
The Company had approximately $73 million and $74 million of accrued acquisition-related costs at March 31, 2011 and 2010, respectively. Approximately $73 million and $64 million of the accrued acquisition-related costs at March 31, 2011 and 2010, respectively, related to purchase price amounts withheld subject to indemnification protections.
Note 3 - discontinued operations
In June 2010, the Company sold its Information Governance business, consisting primarily of the CA Records Manager and CA Message Manager software offerings and related professional services, for approximately $19 million to Autonomy. The loss from discontinued operations was approximately $6 million and consisted of a loss from operations of approximately $1 million, net of a tax benefit of approximately $1 million, and a loss upon disposal of approximately $5 million, inclusive of tax expense of approximately $4 million. The loss from discontinued operations is included in the Company’s Consolidated Statement of Operations for the fiscal year 2011.
The Information Governance business results for the fiscal years 2010 and 2009 included revenue of approximately $22 million and $24 million, respectively, and loss from operations was approximately $1 million and less than $1 million, respectively.
At March 31, 2011, the Company identified its Internet Security Business as available for sale and on April 28, 2011, the Company signed an agreement for the sale of the business. The income from the discontinued operations was approximately $10 million, net of tax expense of approximately $5 million, is included in the Company’s Consolidated Statement of Operations for the fiscal year 2011.
The business results for the fiscal years 2011, 2010 and 2009 consisted of revenue of approximately $83 million, $104 million and $109 million, respectively, and income from operations of approximately $10 million, $13 million and $10 million, respectively.
Note 4 - restructuring
Fiscal 2010 restructuring plan: The Fiscal 2010 restructuring plan (Fiscal 2010 Plan) was announced in March 2010 and is composed of a workforce reduction of approximately 1,000 positions and global facilities consolidations. These actions were intended to better align the Company’s cost structure with the skills and resources required to more effectively pursue opportunities in the marketplace and execute the Company’s long-term growth strategy. The total amounts expected to be incurred with respect to severance and facilities abandonment under the Fiscal 2010 Plan are $44 million and $2 million, respectively. The amounts incurred by period and cumulatively are as follows:
Actions under the Fiscal 2010 Plan were substantially completed by the end of fiscal year 2011.
Fiscal 2007 restructuring plan: In August 2006, the Company announced the Fiscal 2007 restructuring plan (Fiscal 2007 Plan) to significantly improve the Company’s expense structure and increase its competitiveness. The Fiscal 2007 Plan’s objectives included a workforce reduction of approximately 3,100 employees, global facilities consolidations and other cost reduction initiatives. The total amounts expected to be incurred with respect to severance and facilities abandonment under the Fiscal 2007 Plan are $220 million and $118 million, respectively. The amounts incurred by period and cumulatively are as follows:
Actions under the Fiscal 2007 Plan were substantially completed by the end of fiscal year 2010.
Accrued restructuring costs and changes in the accruals for fiscal years 2011, 2010 and 2009 associated with the Fiscal 2010 and Fiscal 2007 Plans were as follows:
The severance liability is included in the “Accrued salaries, wages, and commissions” line item on the Consolidated Balance Sheet. The facilities abandonment liability is included in the “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” line items on the Consolidated Balance Sheet. The costs are included in the “Restructuring and other” line item on the Consolidated Statements of Operations for the fiscal year ended March 31, 2011, 2010 and 2009.
Accretion and other includes accretion of the Company’s lease obligations related to facilities abandonment as well as changes in the assumptions related to future sublease income. These costs are included in the “General and administrative” expense line item of the Consolidated Statement of Operations.
Note 5 - marketable securities
At March 31, 2011, available-for-sale securities consisted of the following:
At March 31, 2011, the Company did not have any debt securities that were in a continuous unrealized loss position for greater than 12 months. At March 31, 2011, $75 million of marketable securities had scheduled maturities of less than one year, and approximately $104 million had maturities of greater than one year but do not exceed three years.
At March 31, 2011, proceeds from the sale of marketable securities and realized gains and realized losses were approximately $9 million and less than $1 million, respectively.
At March 31, 2010, the Company had less than $1 million of marketable securities.
Note 6 - trade and installment accounts receivable
The Company uses installment license agreements as a standard business practice and has a history of successfully collecting substantially all amounts due under the original payment terms without making concessions on payments, software products, maintenance, or professional services. Trade and installment accounts receivable, net represent amounts due from the Company’s customers. These accounts receivable balances are presented net of allowance for doubtful accounts and unamortized discounts. Unamortized discounts reflect imputed interest for the time value of money for license agreements signed prior to October 2000 (prior business model). These accounts receivable balances include revenue recognized in advance of customer billings but do not include unbilled contractual commitments executed under license agreements implemented since October 2000. The components of trade and installment accounts receivable, net are as follows:
Note 7 - long-lived assets
Property and equipment:
A summary of property and equipment is as follows:
No impairment charge was recorded during fiscal year 2011 for software that was capitalized for internal use. During fiscal years 2010 and 2009, the Company recorded impairment charges of approximately $3 million and $5 million, respectively, for software that was capitalized for internal use but was determined to be impaired.
Capitalized software and other intangible assets: The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2011 were approximately $7,417 million and $6,133 million, respectively. These amounts included fully amortized assets of approximately $5,290 million, which was composed of purchased software of approximately $4,662 million, internally developed software products of approximately $508 million and other intangible
assets subject to amortization of approximately $120 million. The gross carrying amounts and accumulated amortization for identified intangible assets that were not fully amortized were as follows:
The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2010 were approximately $7,098 million and $5,883 million, respectively. These amounts included fully amortized intangible assets of approximately $5,146 million, which was composed of purchased software of approximately $4,603 million, internally developed software products of approximately $423 million and other intangible assets subject to amortization of approximately $120 million. The gross carrying amounts and accumulated amortization for identified intangible assets that were not fully amortized were as follows:
Depreciation and amortization expense: A summary of depreciation and amortization expense is as follows:
Based on the intangible assets recognized at March 31, 2011, the annual amortization expense over the next five fiscal years is expected to be as follows:
Goodwill: The accumulated goodwill impairment losses previously recognized by the Company totaled approximately $111 million at March 31, 2011 and 2010. These losses were recognized in fiscal years 2003 and 2002.
Goodwill activity for fiscal years 2011 and 2010 was as follows:
The retrospective adjustments to goodwill recorded in fiscal year 2011 consist of reductions relating to fiscal year 2010 acquisitions of approximately $62 million. The adjustment is primarily attributable to finalization of the analysis of fair value of the acquired intangibles from Nimsoft and 3Tera.
Note 8 - deferred revenue
The components of deferred revenue at March 31, 2011 and 2010 are as follows:
Note 9 - debt
At March 31, 2011 and 2010, the Company’s debt obligations consisted of the following:
Interest expense for fiscal years 2011, 2010 and 2009 was $68 million, $102 million and $130 million, respectively.
The maturities of outstanding debt are as follows:
YEAR ENDED MARCH 31,
(IN MILLIONS)
THEREAFTER
Amount due
$
$
$
$
$
-
$
Revolving credit facility: The maximum committed amount available under the Revolving Credit Facility due August 2012 is $1 billion, exclusive of incremental credit increases of up to an additional $500 million, which are available subject to certain conditions and the agreement of its lenders.
Borrowings under the Revolving Credit Facility bear interest at a rate dependent on the Company’s credit ratings at the time of such borrowings and are calculated according to a base rate or a Eurocurrency rate, as the case may be, plus an applicable margin. In addition, depending on the Company’s credit rating at the time of the borrowing, the Company must pay a utilization fee for borrowings over 50% of the total commitment. The Company must also pay facility commitment fees quarterly on the final allocated amount of each Lender’s full revolving credit commitment (without taking into account any outstanding borrowings under such commitments) and at rates dependent on its credit ratings.
For incremental borrowings that are not subject to a utilization fee, the applicable interest rate at March 31, 2011, based on the Company’s credit rating, is approximately 0.66% (Eurocurrency rate plus the applicable margin).
Total interest expense relating to borrowings under the Revolving Credit Facility for fiscal years 2011, 2010 and 2009 was approximately $2 million, $5 million and $24 million, respectively. Interest rates applicable to the facility at March 31, 2011 and 2010 are as follows:
The Revolving Credit Facility contains financial and non-financial covenants and negative covenants. The financial covenants include: (i) for the 12 months ending each quarter-end, the ratio of consolidated debt for borrowed money to consolidated cash flow, each as defined in the Revolving Credit Facility, must not exceed 4.00 to 1.00; and (ii) for the 12 months ending each quarter-end, the ratio of consolidated cash flow to the sum of interest payable on, and amortization of debt discount in respect of, all consolidated debt for borrowed money, as defined in the Revolving Credit Facility, must not be less than 5.00 to 1.00. At March 31, 2011, the Company is in compliance with all covenants. In addition, as a condition precedent to each borrowing made under the Revolving Credit Facility, at the date of such borrowing, (i) no event of default shall have occurred and be continuing and (ii) the Company is to reaffirm the representations and warranties made by the Company in the Revolving Credit Facility other than those representations and warranties that referred to a specified date or period.
The Company repaid the outstanding Revolving Credit Facility balance of $250 million in April 2011.
Notes: The Company’s 5.375% Notes and 6.125% Senior Notes (collectively, the “Notes”) are senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness. The Notes are subordinated to any future secured indebtedness to the extent of the assets securing such future indebtedness and structurally subordinated to any indebtedness of the Company’s subsidiaries. The Company has the option to redeem the Notes at any time, at redemption prices equal to the greater of (i) the principal amount of the securities to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal thereof and interest thereon that would be due on the securities to be redeemed, discounted to the date of redemption on a semi-annual basis at the treasury rate plus 30 basis points and 20 basis points for the 5.375% Notes and the 6.125% Notes, respectively.
The maturity of the Notes may be accelerated by the holders upon certain events of default, including failure to make payments when due and failure to comply with covenants or agreements of the Company set forth in the Notes or the Indenture after notice and failure to cure.
5.375% notes due November 2019: During the third quarter fiscal year 2010, the Company issued approximately $750 million principal amount of 5.375% Notes due 2019 (the 5.375% Notes). The net proceeds of the offering were approximately $738 million, after being issued at a discount and deducting expenses, underwriting fees and commissions of approximately $6 million. The discount is being amortized over the term to maturity. In the event of a change of control, each noteholder will have the right to require the Company to repurchase all or any part of such holder’s 5.375% Notes in cash at a price equal to 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to the date of repurchase,
subject to the right of holders of record on the relevant interest payment date to receive interest due on the relevant interest payment date.
6.125% notes due December 2014: The Company has entered into interest rate swaps to convert $500 million of its 6.125% Notes into floating interest rate payments through December 1, 2014. Under the terms of the swaps, the Company will pay quarterly interest at an average rate of 2.88% plus the three-month London Interbank Offered Rate (LIBOR), and will receive payment at 5.625%. The LIBOR based rate is set quarterly three months prior to the date of the interest payment. The Company designated these swaps as fair value hedges and accounting for them in accordance with the shortcut method of FASB ASC Topic 815. The carrying value of the 6.125% Notes has been adjusted by an amount that is equal and offsetting to the fair value of the swaps.
Other indebtedness: The Company has available an unsecured and uncommitted multi-currency line of credit to meet short-term working capital needs for the Company’s subsidiaries operating outside the United States and uses guarantees and letters of credit issued by financial institutions to guarantee performance on certain contracts. At March 31, 2011, approximately $55 million was pledged in support of bank guarantees and other local credit lines and none of these arrangements had been drawn down by third parties.
The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either cash deposit or borrowing positions through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because it maintains a security interest in the cash deposits, and has the right to offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both. At March 31, 2011, there were no borrowings outstanding under this cash pooling arrangement. Borrowings and repayments were approximately $260 million for the year ended March 31, 2011. Borrowings outstanding during the period did not exceed $130 million.
Note 10 - derivatives
The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into derivative contracts with the intent of mitigating a portion of these risks.
Interest rate swaps: The Company has interest rate swaps with a total notional value of $500 million, $200 million of which were entered into during fiscal year 2011, that swap a total of $500 million of its 6.125% Senior Notes due December 2014 into floating interest rate debt through December 1, 2014. These swaps are designated as fair value hedges.
At March 31, 2011, the fair value of these derivatives was an asset of approximately $15 million, of which approximately $11 million is included in “Other current assets” and approximately $4 million is included in “Other noncurrent assets, net” in the Company’s Consolidated Balance Sheet. At March 31, 2010, the fair value of these derivatives was approximately $1 million and is included in “Other current assets” in the Company’s Consolidated Balance Sheet.
During fiscal year 2009, the Company entered into interest rate swaps with a total notional value of $250 million to hedge a portion of its variable interest rate payments on the Revolving Credit Facility. These derivatives were designated as cash flow hedges and matured in October 2010. At March 31, 2010, the fair value of these derivatives was a liability of approximately $4 million and is included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.
The effective portion of these cash flow hedges is recorded as “Accumulated other comprehensive loss” in the Company’s Consolidated Balance Sheets and is reclassified into “Interest expense, net,” in the Company’s Consolidated Statements of Operations in the same period during which the hedged transaction affected earnings. Any ineffective portion of the cash flow hedges would have been recorded immediately to “Interest expense, net”; however, no ineffectiveness existed for fiscal years 2011, 2010 and 2009.
Foreign currency contracts: The Company enters into foreign currency option and forward contracts to manage foreign currency risks. The Company has not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other expenses (gains), net” in the Company’s Consolidated Statements of Operations. At March 31, 2011, foreign currency contracts outstanding consisted of purchase and sales contracts with a total notional
value of approximately $191 million, and durations of less than three months. The net fair value of these contracts at March 31, 2011 was approximately $6 million, of which approximately $7 million is included in “Other current assets” and approximately $1 million is included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet. At March 31, 2010, foreign currency contracts outstanding consisted of contracts with a total notional value of approximately $113 million and a tenure of less than two months. The fair value of these contracts was less than $1 million and is included in “Other current assets” in the Company’s Consolidated Balance Sheet at March 31, 2010.
A summary of the effect of the interest rate and foreign exchange derivatives on the Company’s Consolidated Statements of Operations is as follows:
The Company is subject to collateral security arrangements with most of its major counterparties. These arrangements require the Company to hold or post collateral when the derivative fair values exceed contractually established thresholds. The aggregate fair value of all derivative instruments under these collateralized arrangements were in a net asset position and a net liability position at March 31, 2011 and 2010, respectively. The Company posted no collateral at March 31, 2011 or 2010. Under these agreements, if the Company’s credit ratings had been downgraded one rating level, the Company would still not have been required to post collateral.
Note 11 - fair value measurements
The following table presents the placement in the fair value hierarchy of the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2011 and 2010.
(1)
At March 31, 2011, the Company had approximately $1,959 million and $50 million of investments in money market funds classified as “Cash and cash equivalents” and “Other noncurrent assets, net” for restricted cash amounts, respectively, in its Consolidated Balance Sheet.
(2)
At March 31, 2010, the Company had approximately $1,755 million and $50 million of investments in money market funds classified as “Cash and cash equivalents” and “Other noncurrent assets, net” for restricted cash amounts, respectively, in its Consolidated Balance Sheet.
(3)
See Note 5, “Marketable Securities” for additional information.
(4)
See Note 10, “Derivatives” for additional information. Interest rate derivatives fair value excludes accrued interest.
At March 31, 2011 and 2010, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis:
(1)
Estimated fair value of the noncurrent portion of installment accounts receivable approximates carrying value.
(2)
Estimated fair value of total debt is based on quoted prices for similar liabilities for which significant inputs are observable except for certain long-term lease obligations, for which fair value approximates carrying value.
(3)
Estimated fair value for the facilities abandonment reserve was determined using the Company’s incremental borrowing rate at March 31, 2010. The facilities abandonment reserve includes approximately $15 million and $22 million in “Accrued expenses and other current liabilities” and approximately $37 million and $47 million in “Other noncurrent liabilities” on the Company’s Consolidated Balance Sheets at March 31, 2011 and 2010, respectively.
Note 12 - commitments and contingencies
The Company leases real estate, data processing and other equipment with lease terms expiring through fiscal year 2023. Certain leases provide for renewal options and additional rentals based on escalations in operating expenses and real estate taxes.
Rental expense under operating leases for facilities and equipment was approximately $200 million, $163 million and $161 million for fiscal years 2011, 2010 and 2009, respectively. Rental expense for fiscal years 2011, 2010 and 2009 included sublease income of approximately $23 million, $18 million and $22 million, respectively.
Future minimum lease payments under non-cancelable operating leases as of March 31, 2011, were as follows:
The Company has additional commitments to purchase goods and services of approximately $247 million in future periods, approximately $236 million of which expires by fiscal year 2016.
Prior to fiscal year 2001, the Company sold individual accounts receivable under the prior business model to a third party subject to certain recourse provisions. At March 31, 2011, none of these receivables were outstanding. The outstanding principal balance of these receivables subject to recourse approximated $21 million at March 31, 2010.
Litigation: The Company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and proceedings are reviewed at least quarterly and provisions are taken or adjusted to reflect the impact and status of settlements, rulings, advice of counsel and other information pertinent to a particular matter.
In April 2010, a lawsuit captioned Stragent, LLC et ano. v. Amazon.com, Inc., et al. was filed in the United States District Court for the Eastern District of Texas against the Company and five other defendants. The complaint alleges, among other things, that Company technology infringes a patent assigned to plaintiff SeeSaw Foundation and licensed to plaintiff Stragent LLC, entitled “Method of Providing Data Dictionary-Driven Web-Based Database Applications,” U.S. Patent No. 6,832,226. The complaint seeks monetary damages and interest in an undisclosed amount, and costs, based upon plaintiffs’ patent infringement claims. In May 2010, the Company filed an answer and counterclaims that, among other things, dispute the
plaintiffs’ claims and seek a declaratory judgment that the Company does not infringe the patent-in-suit and that the patent is invalid. In May 2011, the parties entered into a settlement agreement, the terms of which are confidential but that is not material to the Company. The Company expects that the case against the Company will be dismissed with prejudice in its entirety.
In September 2010, a lawsuit captioned Uniloc USA, Inc. et ano. v. National Instruments Corp., et al. was filed in the United States District Court for the Eastern District of Texas against the Company and 10 other defendants. The complaint alleges, among other things, that Company technology, including Internet Security Suite Plus 2010, infringes a patent licensed to plaintiff Uniloc USA, Inc., entitled “System for Software Registration,” U.S. Patent No. 5,490,216. The complaint seeks monetary damages and interest in an undisclosed amount, a temporary, preliminary and permanent injunction against alleged acts of infringement, and attorneys’ fees and costs, based upon the plaintiffs’ patent infringement claims. In November 2010, the Company filed an answer that, among other things, disputes the plaintiffs’ claims and seeks a declaratory judgment that the Company does not infringe the patent-in-suit and that the patent is invalid. To date, no discovery has commenced in this action. Although the timing and ultimate outcome cannot be determined, the Company believes that the plaintiffs’ claims are unfounded and that the Company has meritorious defenses.
Based on its experience, the Company believes that the damages amounts claimed in the aforementioned cases are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of the aforementioned cases. Due to the nature and early stage of the Uniloc matter, the Company is unable to estimate a range of reasonably possible loss for this case.
The Company, various subsidiaries, and certain current and former officers have been named as defendants in various other lawsuits and claims arising in the normal course of business. The Company believes that it has meritorious defenses in connection with these other lawsuits and claims, and intends to vigorously contest each of them.
In the opinion of the Company’s management based upon information currently available to the Company, while the outcome of these other lawsuits and claims is uncertain, the likely results of these other lawsuits and claims against the Company, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows, although the effect could be material to the Company’s results of operations or cash flows for any interim reporting period.
The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted by Delaware law. As a part of that obligation, the Company has advanced and will continue to advance certain attorneys’ fees and expenses incurred by current and former officers and directors in various lawsuits and investigations.
During fiscal year 2011, the Company received approximately $10 million in settlements of claims associated with previous stockholder derivative actions following the substitution of the Company as plaintiff in those actions. The settlements received were recorded in the “Restructuring and other” line of the Consolidated Statements of Operations.
Note 13 - stockholders’ equity
Stock Repurchases: In April 2010, the Company completed the $250 million stock repurchase program authorized by its Board of Directors on October 29, 2008. On May 12, 2010, the Company’s Board of Directors approved a new stock repurchase program that authorizes the Company to acquire up to $500 million of its common stock. At March 31, 2011, the Company remained authorized to purchase up to approximately $282 million of additional shares of common stock under its current stock repurchase program.
Accumulated other comprehensive loss: The following table summarizes, at each of the balance sheet dates, the components of the Company’s accumulated other comprehensive loss, net of income taxes:
The amount of loss reclassified from “Accumulated other comprehensive loss” into “Interest expense, net” relating to the sale of marketable securities was less than $1 million for fiscal years 2011, 2010 and 2009, respectively.
For the Company’s cash flow hedges, the amount of loss reclassified from “Accumulated other comprehensive loss” into “Interest expense, net” in the Company’s Consolidated Statements of Operations was approximately $4 million, $6 million and $2 million for fiscal years 2011, 2010 and 2009, respectively.
For additional information on the Company’s marketable securities and derivatives, refer to Note 5, “Marketable Securities” and Note 10, “Derivatives.”
Dividends: The Company’s Board of Directors declared the following dividends during fiscal year 2011 and 2010:
Year Ended March 31, 2011:
Year Ended March 31, 2010:
Rights plan: Each outstanding share of the Company’s common stock carries a right (Right) issued under the Company’s Stockholder Protection Rights Agreement, dated November 5, 2009 (the Rights Agreement). The Rights will trade with the common stock until the Separation Time, which would occur on the next business day after: (i) the Company’s announcement that a person or group (an Acquiring Person) has become the beneficial owner of 20% or more of the Company’s outstanding common stock (other than Walter Haefner and his affiliates and associates, who are “grandfathered” under this provision so long as their aggregate ownership of common stock does not exceed the sum of 126,562,500 shares of common stock and that number of shares equal to 0.1% of the then outstanding shares of common stock); (ii) the date on which any Acquiring Person becomes the beneficial owner of more than 50% of the outstanding shares of common stock; or (iii) the tenth business day after the commencement of a tender offer or exchange offer (or such later date as the Board may from time to time determine prior to the Separation Time) that would result in an Acquiring Person owning 20% or more of the Company’s outstanding common stock. Following the Separation Time, each Right may be exercised to purchase 0.001 shares of the Company’s preferred stock at a purchase price of $100 per share. If the Separation Time occurs pursuant to an event described in (i) or (ii) above, however, each Right, other than rights held by an acquiring person, will entitle the holder to receive, for an exercise price of $100, that number of shares of the Company’s common stock (or, in certain circumstances, cash, property or other securities) having an aggregate Market Price (as determined under the Rights Agreement) equal to two times the exercise price. The Rights will not be triggered by a Qualifying Offer, as defined in the Rights Agreement, if holders of at least 10 percent of the outstanding shares of the Company’s common stock request pursuant to the terms of the Rights Agreement that a special meeting of stockholders be convened for the purpose of exempting such offer from the Rights Agreement, and thereafter the stockholders vote at such meeting to exempt such Qualifying Offer from the Rights Agreement. The Rights, which are redeemable by the Company at $0.001 per Right, expire November 30, 2012.
Note 14 - income from continuing operations per common share
The following table reconciles income per common share for fiscal years 2011, 2010 and 2009, respectively.
For fiscal years 2011, 2010 and 2009, approximately 6 million, 6 million and 14 million restricted stock units and options to purchase common stock, respectively, were excluded from the calculation of diluted earnings per share, as their effect on net income per share was anti-dilutive during the respective periods. Weighted average restricted stock awards of 6 million, 5 million and 5 million for fiscal years 2011, 2010 and 2009, respectively, were considered participating securities in the calculation of net income available to common shareholders.
Note 15 - stock plans
Share-based incentive awards are provided to employees under the terms of the Company’s equity incentive compensation plans (the Plans). The Plans are administered by the Compensation and Human Resources Committee of the Board of Directors (the Committee). Awards under the Plans may include at-the-money stock options, premium-priced stock options, restricted stock awards (RSAs), restricted stock units (RSUs), performance share units (PSUs) or any combination thereof. The non-employee members of the Company’s Board of Directors receive deferred stock units under a separate director compensation plan. The Company typically settles awards under employee and non-employee director compensation plans with stock held in treasury.
All Plans, with the exception of acquired companies’ stock plans, have been approved by the Company’s shareholders. The Company grants annual performance cash incentive bonuses, long-term performance bonuses, both qualified and non-statutory stock options, RSAs, RSUs and other equity-based awards under the 2007 Incentive Plan and long-term performance bonuses under the 2002 Incentive Plan, as amended and restated. These plans are collectively referred to as “the Incentive Plans.” Approximately 45 million and 30 million shares of common stock can be granted to select employees and consultants under the Company’s 2002 and 2007 Incentive Plans, respectively. Under the 2007 Incentive Plan, no more than 10 million incentive stock options may be granted. The Plans will continue until the earlier of (i) termination by the Board or (ii) the date on which all of the shares available for issuance under the respective plan have been issued and restrictions on issued shares have lapsed. Generally, options expire 10 years from the date of grant unless forfeited by the employee or otherwise terminated. Awards to the non-employee directors are granted under the 2003 Compensation Plan for Non-Employee Directors, as amended.
Share-based compensation: The Company recognized share-based compensation in the following line items in the Consolidated Statements of Operations for the periods indicated:
The tax benefit from share-based incentive awards provided to employees that was recorded for book purposes exceeded that which was deductible for tax purposes by $24 million, $23 million and $18 million for fiscal years 2011, 2010 and 2009, respectively. The tax effect of this temporary difference in tax expense was recorded to “Additional paid- in capital” on the Consolidated Balance Sheet and did not affect the Company’s income statement.
The following table summarizes information about unrecognized share-based compensation costs at March 31, 2011:
There were no capitalized share-based compensation costs at March 31, 2011, 2010 or 2009.
Stock option awards: Stock options are awards issued to employees that entitle the holder to purchase shares of the Company’s stock at a fixed price. Stock option awards are generally granted at an exercise price equal to or greater than the Company’s closing quoted market value on the date of grant and with a contractual term of 10 years. Stock option awards generally vest one-third per year and become fully vested three years from the grant date.
At March 31, 2011, options outstanding that have vested and are expected to vest are as follows:
(1)
These amounts represent the difference between the exercise price and $24.18, the closing price of the Company’s common stock on March 31, 2011, the last trading day of the Company’s fiscal year as reported on the NASDAQ Stock Market for all in the money options.
(2)
Outstanding options expected to vest are net of estimated future forfeitures.
Additional information with respect to stock option plan activity is as follows:
The following table summarizes stock option information at March 31, 2011:
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair value of the Company’s stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards.
No options were granted in fiscal year 2009. The weighted average estimated values of employee stock option grants, as well as the weighted average assumptions that were used in calculating such values during fiscal year 2011 and 2010 were based on estimates at the date of grant as follows:
(1)
Expected volatility is measured using historical daily price changes of the Company’s stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded options.
(2)
The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant.
(3)
The expected life is the number of years the Company estimates, based primarily on historical experience, that options will be outstanding prior to exercise. For stock options granted in fiscal year 2011, the Company’s computation of expected life was determined based on the simplified method (the average of the vesting period and option term), due to changes in the vesting terms, the contractual lives and the population of employees granted options compared with the Company’s historical grants.
The following table summarizes information on shares exercised for the periods indicated:
(1)
Less than $1 million.
Restricted stock and restricted stock unit awards: Restricted Stock Awards (RSAs) are stock awards issued to employees that are subject to specified restrictions and a risk of forfeiture, RSAs entitle holders to dividends. The restrictions typically lapse over a two- or three-year period. The fair value of the awards is determined and fixed based on the closing quoted market value of the Company’s stock on the grant date.
Restricted Stock Units (RSUs) are stock awards issued to employees that entitle the holder to receive shares of common stock as the awards vest, typically over a two- or three-year period. RSUs do not entitle holders to dividends. The fair value of the awards is determined and fixed based on the quoted market value of the Company’s stock on the grant date reduced by the present value of dividends expected to be paid on the Company’s stock prior to vesting of the RSUs which is calculated using a risk-free interest rate.
The following table summarizes the activity of RSAs under the Plans:
The following table summarizes the activity of RSUs under the Plans:
The total vesting date fair value of RSAs and RSUs released during fiscal years 2011, 2010 and 2009 was approximately $82 million, $64 million and $78 million, respectively.
Performance awards: The Company rewards certain senior executives with performance awards under its long-term incentive plans. These Performance Share Units (PSUs) include 1-year and 3-year performance periods for senior executives and a 1-year performance period for members of the sales team. These PSUs are granted at the conclusion of the performance period and after approval by the Committee.
The 1-year PSUs for the fiscal 2010, 2009 and 2008 incentive plan years were granted in the first quarter of fiscal years 2011, 2010 and 2009, respectively. One third of these awards vest upon granting with the second third and final third vesting on the first and second anniversary of the grant, respectively. The table below summarizes the RSAs and RSUs granted under these PSUs:
(1)
Shares granted amounted to less than 0.1 million.
The 3-year PSUs for the fiscal 2008 and 2007 incentive plan years were granted in the first quarter of fiscal years 2011 and 2010, respectively. These awards vest immediately upon grant.
WEIGHTED AVERAGE
INCENTIVE PLANS FOR
PERFORMANCE
UNRESTRICTED SHARES
GRANT DATE
FISCAL YEARS
PERIOD
(MILLIONS)
FAIR VALUE
3-year
0.3
$
21.47
3-year
0.4
$
18.05
Awards were granted under the Fiscal Year 2010 and 2009 Sales Retention Equity Programs in the first quarter of fiscal years 2011 and 2010, respectively. These awards cliff vest at the end of a three year period beginning on the first anniversary of the grant date. The table below summarizes the RSAs and RSUs granted under this program:
RSAs
RSUs
WEIGHTED
WEIGHTED AVERAGE
INCENTIVE PLANS
PERFORMANCE
SHARES
AVERAGE GRANT
SHARES
GRANT DATE
FOR FISCAL YEARS
PERIOD
(MILLIONS)
DATE FAIR VALUE
(MILLIONS)
FAIR VALUE
1-year
0.4
$
21.47
0.1
$
21.36
1-year
0.5
$
18.05
0.2
$
17.84
Stock Purchase Plan: The Company discontinued the Year 2000 Employee Stock Purchase Plan ( the Purchase Plan) effective with the close of the purchase period on June 30, 2009. The Purchase Plan was considered compensatory. Under the terms of the Purchase Plan, employees were able to elect a withholding between 1% and 25% of their base pay through regular payroll deductions, subject to Internal Revenue Code of 1986 (the Code) limitations. Shares of the Company’s common stock were purchased at six-month intervals at 85% of the lower of the fair market value of the Company’s common stock on the first or last day of each six-month period. During fiscal years 2010 and 2009, employees purchased approximately 0.9 million and 1.5 million shares, respectively, at average prices of $14.82 and $17.56 per share, respectively.
The fair value was estimated on the first date of the offering period using the Black-Scholes option pricing model. No offer periods commenced in fiscal year 2010. The fair value and the weighted average assumption for the Purchase Plan offer period commencing in fiscal year 2009 were as follows:
(1)
Expected volatility is measured using historical daily price changes of the Company’s stock over the respective term of the offer period and the implied volatility is derived from the market prices of the Company’s traded options.
(2)
The risk-free rate for periods within the contractual term of the offer period is based on the U.S. Treasury yield curve in effect at the beginning of the offer period.
(3)
The expected life is the six-month offer period.
Note 16 - income taxes
The amounts of income (loss) from continuing operations before taxes attributable to domestic and foreign operations are as follows:
Income tax expense (benefit) from continuing operations consists of the following:
The tax expense from continuing operations is reconciled to the tax expense computed at the federal statutory tax rate as follows:
Deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The tax effects of the temporary differences from continuing operations are as follows:
In management’s judgment, it is more likely than not that the total deferred tax assets, net of valuation allowance, of approximately $749 million will be realized as reductions to future taxable income or by utilizing available tax planning strategies. Worldwide net operating loss carryforwards (NOLs) totaled approximately $586 million and $574 million at March 31, 2011 and 2010, respectively. The NOLs will expire as follows: $434 million between 2012 and 2032 and $152 million may be carried forward indefinitely.
A valuation allowance has been provided for deferred tax assets related to NOLs that are not expected to be realized. The valuation allowance decreased approximately $10 million and $3 million at March 31, 2011 and 2010, respectively. The decrease in the valuation allowance at March 31, 2011 and March 31, 2010 primarily relates to the likelihood of utilization of NOLs.
No provision has been made for U.S. federal income taxes on approximately $1,198 million and $1,067 million at March 31, 2011 and 2010, respectively, of unremitted earnings of the Company’s foreign subsidiaries since the Company plans to permanently reinvest all such earnings outside the U.S. It is not practicable to determine the amount of tax associated with such unremitted earnings.
A number of years may elapse before a particular uncertain tax position for which the Company has not recorded a financial statement benefit is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. The Company is subject to tax audits in the following major taxing jurisdictions:
•
United States - federal tax years are open for years 2005 and forward;
•
Germany - tax years are open for years 2007 and forward;
•
Italy - tax years are open for years 2006 and forward;
•
Japan - tax years are open for years 2005 and forward; and
•
United Kingdom - tax years are open for years 2008 and forward.
While it is difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes that its financial statements reflect the probable outcome of uncertain tax positions. The Company may adjust these reserves, as well as any related interest or penalties, in light of changing facts and circumstances including the settlement of income tax audits and the expiration of statutes of limitations. To the extent a settlement differs from the amounts previously reserved, such difference would be generally recognized as a component of income tax expense in the period of resolution.
As of March 31, 2011, the gross liability for income taxes associated with uncertain tax positions, including interest and penalties, is approximately $568 million (of which approximately $26 million is classified as current). In addition, as of March 31, 2011, the Company has recorded approximately $43 million of deferred tax assets for future deductions of interest and state income taxes related to these uncertain tax positions. As of March 31, 2010, the gross liability for income taxes associated with uncertain tax positions, including interest and penalties, was approximately $451 million (of which approximately $3 million was classified as current). In addition, as of March 31, 2010, the Company had recorded approximately $37 million of deferred tax assets for future deductions of interest and state income taxes related to these uncertain tax positions.
As of March 31, 2011, the total gross amount of reserves for income taxes, reported in other liabilities, is $470 million. Any prospective adjustments to these reserves will be recorded as an increase or decrease to the Company’s provision for income taxes and would affect its effective tax rate. As of March 31, 2010, the total gross amount of reserves for income taxes, reported in other liabilities, was $369 million. The gross amount of interest and penalties accrued, reported in total liabilities was approximately $98 million, $82 million and $70 million for fiscal years 2011, 2010 and 2009, respectively. The amount of interest and penalties recognized was approximately $16 million, $12 million and $10 million for the fiscal years ended March 31, 2011, 2010 and 2009, respectively.
A roll-forward of the Company’s uncertain tax positions for all federal, state and foreign tax jurisdictions is as follows:
The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $401 million and $309 million as of March 31, 2011 and 2010, respectively.
Note 17 - supplemental statement of cash flows information
Interest payments for fiscal years 2011, 2010 and 2009 were approximately $72 million, $64 million and $103 million, respectively. Income taxes paid for these fiscal years were approximately $222 million, $329 million and $351 million, respectively.
Non-cash financing activities for fiscal years 2011, 2010 and 2009 consisted of treasury shares issued in connection with the following: share-based incentive awards issued under the Company’s equity compensation plans of approximately $64 million (net of approximately $27 million of income taxes withheld), $65 million (net of approximately $24 million of income taxes withheld) and $53 million (net of approximately $25 million of income taxes withheld), respectively; and discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $25 million, $24 million and $18 million, respectively.
Non-cash financing activities for fiscal years 2010 and 2009 included approximately $13 million and $26 million, respectively, in treasury common shares issued in connection with the Company’s Employee Stock Purchase Plan.
Note 18 - segment and geographic information
The Company’s chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue by geographic region, for purposes of assessing financial performance and making operating decisions. Accordingly, at March 31, 2011, the Company considers itself to operate in a single segment.
In addition to its U.S. operations, the Company operates through branches and wholly-owned subsidiaries in 47 foreign countries located in North America (4), Europe (21), Asia/Pacific (14), South America (7), and Africa (1). Revenue is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile. The following table presents information about the Company by geographic area for fiscal years 2011, 2010 and 2009:
(1)
Represents royalties from foreign subsidiaries determined as a percentage of certain amounts invoiced to customer.
No single customer accounted for 10% or more of total revenue for fiscal years 2011, 2010 or 2009.
Note 19 - profit sharing plan
The Company maintains a defined contribution plan for the benefit of its U.S. employees. The plan is intended to be a tax qualified plan under Section 401(a) of the Code, and contains a qualified cash or deferred arrangement as described under Section 401(k) of the Code. Eligible participants may elect to contribute a percentage of their base compensation and the Company may make matching contributions.
The Company recognized costs associated with this plan of $28 million, $39 million and $38 million for fiscal years 2011, 2010 and 2009, respectively. Included in these amounts were discretionary contributions of stock of $13 million, $25 million and $24 million for fiscal years 2011, 2010 and 2009, respectively.
Note 20 - subsequent events
On May 12, 2011, the Company’s Board of Directors approved a stock repurchase program that authorized the Company to acquire up to an additional $500 million of its common stock, in addition to the previous program approved on May 12, 2010. The Company will fund the program with available cash on hand and repurchase shares on the open market from time to time based on market conditions and other factors.
On May 12, 2011, the Company announced an increase of its regular quarterly dividend to $0.05 per share as and when declared by the Board.
Schedule
Schedule Of Valuation And Qualifying Accounts Disclosure
SCHEDULE II
CA, Inc. and subsidiaries
valuation and qualifying accounts
(1)
Write-offs of amounts against allowance provided.

Market Capitalization: 11599995.398612976
1-Year Return: 0.0008733824361115694
252-Day Return: $252_day_return