##### Table of Contents



UNITED STATES
  SECURITIES AND EXCHANGE
    COMMISSION
  Washington, D.C.
    20549
    FORM 10-K
  þANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934For the Fiscal Year Ended
    June 30, 2006ORoTRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934For the transition period from
    
    to
    .     Commission File Number
    000-26934
  Hyperion Solutions
    Corporation
  (Exact name of registrant as
    specified in its charter)
  Delaware

77-0277772(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification No.)5450 Great America Parkway,
    Santa Clara, California(Address of principal
    executive offices)

95054(zip code)   Registrants telephone number,
    including area code:
    (408) 744-9500
  Securities registered pursuant to
    Section 12(b) of the Act: None
  Securities registered pursuant to
    Section 12(g) of the Act:
  Common Stock, Par Value $0.001
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer þ
         Accelerated
    filer o     Non-accelerated
    filer o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



HYPERION
    SOLUTIONS CORPORATION
  FORM 10-K
  
  PAGEPART I.Item 1.


Business


3Item 1A.


Risk
    Factors


10Item 1B.


Unresolved Staff
    Comments


18Item 2.


Properties


18Item 3.


Legal
    Proceedings


19Item 4.


Submission of
    Matters to a Vote of Security Holders


19PART II.Item 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of
      Equity Securities


20Item 6.


Selected Financial
    Data


21Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


22Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


36Item 8.


Financial Statements
    and Supplementary Data


38Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


73Item 9A.


Controls and
    Procedures


73Item 9B.


Other
    Information


73PART III.Item 10.


Directors and
    Executive Officers of the Registrant


74Item 11.


Executive
    Compensation


74Item 12.


Security Ownership
    of Certain Beneficial Owners and Management


74Item 13.


Certain
    Relationships and Related Transactions


75Item 14.


Principal Accounting
    Fees and Services


75PART IV.Item 15.


Exhibits and
    Financial Statement Schedules


76Signatures


77Schedule II


78Exhibit Index


79Exhibit 10.11Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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CAUTIONARY
    NOTE ON FORWARD-LOOKING STATEMENTS
  Form 10-K
 PART I  ITEM 1.
    BUSINESS  OVERVIEW
           3




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BUSINESS
    PERFORMANCE MANAGEMENT DEMAND DRIVERS
    
    Globalization  Our customers are competing in
    a world of increasing global competition and uncertainty. This
    has given rise to increasingly complex issues, including risk
    management, sustainable development reporting, new measures of
    profitability management, and strategic modeling.
    Transparency  Increased regulatory scrutiny
    and reporting on non-financial value drivers that account for
    much of the value in corporations are heightening the need for
    greater transparency so customers and stakeholders can truly
    understand their businesses.
    Alignment  Increasingly, business users and IT
    need to align tools and technology with business objectives.
    Organizations also must align goals and strategies across the
    entire enterprise.      STRATEGY
    
    Be the Management System for the global
    enterprise  The tools customers use to managetheir businesses need to be different from the single-source
    and process-rigid transaction systems that they use to
    run their businesses. Their management system needs to be
    easy to deploy and use and flexible to meet the needs of the
    ever-changing competitive environment. Increasingly, our
    customers deploy Hyperion as their management system, giving
    them actionable insight into the enormous amounts of information
    created by their many transaction systems.
    Maintain our leadership in Finance with System 9 and leverage
    that strength to further penetrate operational
    BI  According to market analysis firm IDC,
    Hyperion is the market share leader for enterprise planning and
    financial reporting and consolidation applications, with more
    than twice the market share of our nearest competitor.
    Furthermore, according to market analysis firm Gartner, Hyperion
    is in the Leader Quadrant in the Corporate Performance
    Management Magic Quadrant (as of October 2005) and in the
    Visionary Quadrant in the Business Intelligence Platforms Magic
    Quadrant (as of December 2005.) We believe that our customers
    will benefit from our strategy to connect financial analytics
    with operational BI.
    Drive continued product innovation  We are
    investing in ongoing product innovation within the System 9
    architecture to maintain, if not increase, our technology lead
    over our competition.
    Drive growth through additional acquisitions 
    In addition to our initiatives focused on organic growth, we
    will continue to expand our intellectual property, market reach,
    and momentum through appropriate mergers and acquisitions
    (M&A) activities.
    Expand strategic partner relationships  We
    will continue to leverage our network of more than 600 partners,
    who deliver complementary products and services and enhance our
    market reach. Partners offerings include packaged BPM
    applications, unique data and application integration
    technologies, tools, and training services.  PRODUCTS
   4




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step-by-step
  Hyperion System 9
    Applications+
    Hyperion System 9 Planning
  Hyperion System 9 Workforce Planning
  Hyperion System 9 Strategic Finance
  Hyperion System 9 Financial Management Sarbanes-Oxley Act.
  Hyperion System 9
    BI+
  easy-to-deploy
  Hyperion System 9 BI+ Interactive Reporting
  Hyperion System 9 BI+ Financial Reporting
  Hyperion System 9 BI+ Production Reporting
 5




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Hyperion System 9 BI+ Enterprise Analytics
  Hyperion System 9 BI+ Essbase Analytics
  Hyperion System 9
    Foundation Services
    Hyperion Master Data Management Server (MDM
    Server) point-and-sync
  Hyperion System 9 Financial Data Quality Management
    (Hyperion FDM)
  SALES AND
    MARKETING
  and/or
     6




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PARTNER
    ECOSYSTEM
              SERVICES AND
    SUPPORT
      RESEARCH AND
    DEVELOPMENT
     7




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COMPETITION
      2.
    Vendors of enterprise software applications that deliver
    transaction processes and front/back-office automation;              PROPRIETARY
    RIGHTS AND LICENSES
     8




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EMPLOYEES
    Name

Age

PositionJeffrey R. Rodek


53


Executive ChairmanGodfrey R. Sullivan


53


President and Chief Executive
    OfficerMark D. Cochran


47


Vice President, General Counsel and
    SecretaryHeidi M. Melin


41


Chief Marketing OfficerRobin L. Washington


43


Chief Financial Officer   one-to-one
   9




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AVAILABLE
    INFORMATION
  Form 10-K, Form 10-Q, Form 8-K,
  ITEM 1A.
    RISK
    FACTORS  FACTORS THAT MAY
    AFFECT FUTURE RESULTS
    Product
    enhancement and new product introductions involve inherent
    risks.
    
    Product quality, including the possibility of software defects;
    Delays in releasing new products;
    Customers delaying purchase decisions in anticipation of new
    products to be released;
    Customer confusion and extended evaluation and negotiation time;
    The fit of the new products and features with the
    customers needs; 10




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
    The successful adaptation of third-party technology into
    Hyperions products;
    Educating Hyperions sales, marketing, and consulting
    personnel to work with the new products and features;
    Competition from earlier and more established entrants;
    Market acceptance of initial product releases;
    Technological challenges involved in integrating Hyperion
    products into cohesive business performance management systems
    offerings;
    Marketing effectiveness, including challenges in
    distribution; and
    The accuracy of assumptions about the nature of customer demand.  and/or ease-of-implementation ease-of-use.
  Fluctuations
    in our quarterly operating results may not be predictable and
    may result in significant volatility in our stock
    price.
    Hyperion
    operates in a very competitive environment.
   11




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If Hyperion is
    unable to develop or acquire new and enhanced products that
    achieve widespread market acceptance, we may be unable to recoup
    product development costs, and our earnings and revenue may
    decline.
    Failure to
    support older products will adversely affect
    sales.
    Hyperion
    typically has back-ended quarters which may cause actual
    revenues in a quarter to vary from sales
    forecasts.
   12




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and/or
  A change in
    pricing or marketing could adversely affect Hyperions
    business.
    Employee
    turnover could adversely impact revenue, costs, and
    productivity.
    Exchange rate
    fluctuations may adversely affect results.
    Hyperion may
    not be able to continue our operational
    improvements.
   13




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Reorganizations
    may adversely affect productivity.
  and/or
  We are
    required to evaluate our internal control over financial
    reporting under Section 404 of the Sarbanes-Oxley Act of
    2002 and are exposed to future risks of
    non-compliance.
        Hyperions
    international operations are subject to significant
    risks.
    
    Fluctuations in currency exchange rates and economic instability
    such as higher interest rates and inflation, which could reduce
    Hyperions customers ability to obtain financing for
    software products or which could make Hyperions products
    more expensive in those countries;
    Difficulties in hedging foreign currency transaction exposures;
    Potential loss of proprietary information due to piracy,
    misappropriation, or weaker laws regarding intellectual property
    protection;
    Imposition of foreign laws and other governmental controls,
    including trade and employment restrictions;
    Longer payment cycles for sales in foreign countries and
    difficulties in collecting accounts receivable;
    Difficulties in staffing and managing our international
    operations, including increased turnover as economic
    opportunities increase in countries such as India and
    difficulties related to administering Hyperions stock
    option plan in some foreign countries; 14




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
    Difficulties in coordinating the activities of Hyperions
    geographically dispersed and culturally diverse operations;
    Competition from local suppliers;
    Costs and delays associated with developing software in multiple
    languages; and
    Political unrest, war, or terrorism, particularly in areas in
    which Hyperion has facilities.    Hyperion faces
    significant challenges and risks associated with
    compliance.
    There are
    significant risks related to any business combination and
    investment.
    
    The possibility that Hyperion pays more than the value derived
    from the acquisition;
    The difficulty of integrating the products, operations, and
    personnel of the acquired business;
    The possibility that all aspects of the integration are not
    completed or that all of the anticipated synergies of the
    acquisition are not realized;
    Difficulties in managing software development activities to
    define a combined product roadmap, ensuring timely development
    of new products, timely release of new products to market, and
    the development of efficient integration and migration processes
    and tools;
    The difficulty of retaining key alliances on attractive terms
    with partners and suppliers;
    The difficulty of retaining customers and protecting maintenance
    revenues;
    The difficulty of retaining and recruiting key personnel and
    maintaining employee morale;
    The potential product liability associated with selling the
    acquired companys products;
    The potential that we do not detect a significant liability of
    the acquired business during the pre-acquisition due diligence
    process;
    The possibility that businesses in which Hyperion invests
    ultimately fail, rendering our investment worthless;
    The potential disruption of Hyperions ongoing business and
    the distraction of management from Hyperions
    business; and
    The potential write-down of impaired goodwill, intangible
    assets, fixed assets, and other assets. As of June 30,
    2006, Hyperion has recorded $157.2 million of goodwill
    related to a number of acquisitions 15




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that will not be amortized in the ordinary course of business.
    We are required under generally accepted accounting principles
    to review our goodwill for impairment at least annually or when
    events or changes in circumstances indicate the carrying value
    may not be recoverable. We may be required to record a
    significant change to earnings in our consolidated financial
    statements during the period in which any impairment of our
    goodwill or amortizable intangible assets is determined. This
    may adversely impact our results of operations.    Hyperion is
    subject to the possibility of infringement claims.
        Enforcement of
    Hyperions intellectual property rights may be
    difficult.
       16




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Hyperions
    stock price is volatile.
    Hyperion is
    dependent upon indirect channel partners.
    
    Hyperions lack of control over the delivery of
    Hyperions products to end-users;
    Hyperions resellers and distributors may terminate their
    relationship with Hyperion on short notice; and
    Hyperions resellers and distributors may market and
    distribute competing products.    Hyperion is
    exposed to product liability claims.
    Defects in
    Hyperions products could increase our costs, adversely
    affect our reputation, diminish demand for our products, and
    hurt our operating results.
   17




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Some
    provisions in Hyperions charter documents and our
    stockholder rights plan may prevent or deter an acquisition of
    Hyperion.
    
    Hyperions Board of Directors is authorized to issue
    preferred stock with any rights it may determine. Consequently,
    without shareholder approval, Hyperions Board of Directors
    may issue preferred stock that has rights superior to the
    outstanding Hyperion common stock;
    Hyperions Board of Directors is classified into three
    groups, with each group of directors holding office for three
    years. The effect of this classified board is that two annual
    meetings, not one, are required to replace a majority of the
    Board of Directors;
    Hyperion stockholders are not entitled to cumulate votes for
    directors; and
    Special meetings of Hyperion stockholders may not be called by
    Hyperions stockholders.      The accounting
    treatment for employee stock options changed and impacted
    Hyperions earnings for fiscal 2006.
    We are
    incurring substantial costs and devoting more management
    resources to comply with increasing regulation of corporate
    governance and disclosure.
    ITEM 1B.
    UNRESOLVED STAFF
    COMMENTS    ITEM 2.
    PROPERTIES   18




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ITEM 3.
    LEGAL
    PROCEEDINGS      ITEM 4.
    SUBMISSION OF
    MATTERS TO A VOTE OF SECURITY HOLDERS   19




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PART II  ITEM 5.
    MARKET FOR
    REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
    ISSUER PURCHASES OF EQUITY SECURITIES  three-for-two
  Fiscal
    2006

High


LowFirst quarter

$
32.43


$
28.27Second quarter

$
36.15


$
30.68Third quarter

$
36.88


$
32.29Fourth quarter

$
33.74


$
26.85   Fiscal
    2005

High


LowFirst quarter

$
28.39


$
21.29Second quarter

$
31.08


$
23.37Third quarter

$
34.07


$
29.41Fourth quarter

$
31.83


$
25.25     Dividend
    Policy
  three-for-two
    Issuer
    Purchases of Equity Securities
    Total Number
    of


ApproximateTotal Number





Shares
    Purchased


Dollar Value
    ofof Shares





as Part of
    Publicly


Shares That
    MayPurchased


Average Price


Announced
    Plans


Yet be
    PurchasedPeriod

[1]


Paid
    per Share


[2]


Under
    the Plans(In thousands,
    except per share data)April 1, 2006 - April 30,
    2006


114


$
31.72



114


$
96,842May 1, 2006 - May 31, 2006


1,023


$
31.12



1,023


$
65,003June 1, 2006 - June 30,
    2006


-


$
-



-


$
65,003   [1]
    
    All stock repurchases during the three months ended
    June 30, 2006, were made in open-market transactions as
    part of our publicly announced plans.[2]
    
    On May 16, 2005, we announced that our Board of Directors
    had authorized a plan to repurchase up to $125.0 million of
    our common stock. In the fourth quarter of fiscal 2006, the
    remaining 13,700 shares were purchased under this plan. On
    April 20, 2006, upon completion of the repurchase plan
    authorized in May 2005, we announced that our Board of Directors
    had authorized an additional plan to repurchase up to
    $100.0 million of our common stock. In the fourth quarter
    of fiscal 2006, a total of 1.1 million shares were 20




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purchased under this plan. As of June 30, 2006, the
    remaining authorized amount for stock repurchases under the
    program was $65.0 million.  ITEM 6.
    SELECTED
    FINANCIAL DATA  Year Ended
    June 30,(In
    thousands, except per share data)

2006


2005

2004

2003

2002Consolidated Statement of Income
    Data:Revenues:Software licenses

$
295,117



$
273,408


$
240,096


$
201,766


$
196,066Maintenance and services


470,115




429,185



382,104



308,692



295,952Total revenues


765,232




702,593



622,200



510,458



492,018Costs and expenses:Cost of software license


17,802




16,136



13,362



15,419



15,430Cost of maintenance and services


174,868




158,272



147,816



132,510



137,047Sales and marketing


294,670




255,182



225,951



190,025



182,311Research and development


116,309




104,108



96,240



73,776



72,206General and administrative


70,245




68,056



63,621



47,207



64,843Restructuring and other charges


4,319




6,048



4,202



764



107In-process research and development


-




-



2,300



-



-Total costs and expenses


678,213

[1]


607,802



553,492



459,701



471,944Operating income


87,019




94,791



68,708



50,757



20,074Interest and other income


13,063




7,844



4,283



5,848



7,027Interest and other expense


(1,298
)



(53
)


(1,230
)


(2,940
)


(4,635
)Gain (loss) on redemption of debt


-




-



(936
)


478



941Income before income taxes


98,784




102,582



70,825



54,143



23,407Income tax provision


35,692




35,903



27,055



20,033



8,426Net income

$
63,092



$
66,679


$
43,770


$
34,110


$
14,981Basic net income per share

$
1.07



$
1.12


$
0.77


$
0.66


$
0.30Diluted net income per share

$
1.04



$
1.08


$
0.73


$
0.64


$
0.30Shares used in computing basic net
    income per share


58,901




59,534



56,982



51,677



49,254Shares used in computing diluted
    net income


60,484

[1]


61,886



59,631



53,541



50,237Consolidated Balance Sheet
    Data:Cash, cash equivalents, and
    short-term
    investments

$
437,283



$
440,748


$
368,175


$
416,554


$
330,258Working capital


292,390




330,220



273,983



350,649



281,501Total assets


982,320




899,436



813,606



656,543



588,069Deferred revenue


171,142




140,772



136,286



104,868



94,910Long-term debt


-




-



-



50,040



80,802Long-term restructuring liabilities
    and other


21,384




24,830



26,619



11,326



11,743Stockholders equity


589,585




583,900



519,571



397,325



299,657   [1]
    
    As discussed in Note 2 to the consolidated financial
    statements, Hyperion changed the manner in which it accounts for
    stock-based compensation for the year ended June 30, 2006. 21




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  OVERVIEW
            CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
    Revenue
    Recognition
    No. 97-2, (SOP 97-2). No. 98-9, SOP 97-2
 22




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SOP 97-2. percentage-of-completion No. 81-1,
    Stock-Based
    Compensation
     23




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##### Table of Contents



Stock-BasedCompensationStock-Based
    Compensation Expensed under

Expensed underSFAS 123(R)

APB 25Year Ended


Percent of

Year Ended


Percent

Year Ended


PercentJune 30,


Total

June 30,


of Total

June 30,


of Total(In
    thousands)

2006


Expense

2005


Expense

2004


ExpenseCost of revenues:Software licenses

$
32



-


$
-



-


$
-



-Maintenance and services


3,579



12
%


140



5
%


151



4
%Sales and marketing


14,105



45
%


1,257



45
%


1,299



30
%Research and development


6,935



22
%


394



14
%


453



10
%General and administrative


6,452



21
%


1,019



36
%


2,448



56
%Total stock-based compensation

$
31,103



100
%

$
2,810



100
%

$
4,351



100
%   Accounts
    Receivable Allowances
      Income
    Taxes
     24




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Valuation of
    Goodwill, Intangibles, and Long-Lived Assets
     25




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RESULTS OF
    OPERATIONS
    Year Ended
    June 30,Percent of



Percent of



Percent ofTotal



Total



Total(In
    thousands)

2006

Revenue

2005

Revenue

2004

RevenueREVENUESSoftware licenses

$
295,117



39
%

$
273,408



39
%

$
240,096



39
%Maintenance and services:Maintenance


328,818



43
%


299,093



42
%


264,866



42
%Consulting and training


141,297



18
%


130,092



19
%


117,238



19
%470,115



61
%


429,185



61
%


382,104



61
%TOTAL REVENUES


765,232



100
%


702,593



100
%


622,200



100
%COSTS AND EXPENSESCost of revenues:Software licenses


17,802



2
%


16,136



2
%


13,362



2
%Maintenance and services


174,868



23
%


158,272



23
%


147,816



24
%Sales and marketing


294,670



39
%


255,182



36
%


225,951



36
%Research and development


116,309



15
%


104,108



15
%


96,240



16
%General and administrative


70,245



9
%


68,056



10
%


63,621



10
%Restructuring charges


4,319



1
%


6,048



1
%


4,202



1
%In-process research and development


-



-



-



-



2,300



0
%TOTAL COSTS AND
    EXPENSES


678,213



89
%


607,802



87
%


553,492



89
%OPERATING INCOME


87,019



11
%


94,791



13
%


68,708



11
%Interest and other income


13,063



2
%


7,844



1
%


4,283



0
%Interest and other expense


(1,298
)


0
%


(53
)


0
%


(1,230
)


0
%Loss on redemption of debt


-



-



-



-



(936
)


0
%INCOME BEFORE INCOME
    TAXES


98,784



13
%


102,582



14
%


70,825



11
%Income tax provision


35,692



5
%


35,903



5
%


27,055



4
%NET INCOME

$
63,092



8
%

$
66,679



9
%

$
43,770



7
%   26




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##### Table of Contents



Year Ended
    June 30,2006-

2006-

2005-

2005-2005

2005

2004

2004(In
    thousands)

2006

2005

2004

Change

%

Change

%REVENUESSoftware licenses

$
295,117


$
273,408


$
240,096


$
21,709



8%


$
33,312



14
%Maintenance and services:Maintenance


328,818



299,093



264,866



29,725



10%



34,227



13
%Consulting and training


141,297



130,092



117,238



11,205



9%



12,854



11
%470,115



429,185



382,104



40,930



10%



47,081



12
%TOTAL REVENUES


765,232



702,593



622,200



62,639



9%



80,393



13
%COSTS AND EXPENSESCost of revenues:Software licenses


17,802



16,136



13,362



1,666



10%



2,774



21
%Maintenance and services


174,868



158,272



147,816



16,596



10%



10,456



7
%Sales and marketing


294,670



255,182



225,951



39,488



15%



29,231



13
%Research and development


116,309



104,108



96,240



12,201



12%



7,868



8
%General and administrative


70,245



68,056



63,621



2,189



3%



4,435



7
%Restructuring charges


4,319



6,048



4,202



(1,729
)


(29)%



1,846



44
%In-process research and development


-



-



2,300



-




-


(2,300
)


(100
)%TOTAL COSTS AND
    EXPENSES


678,213



607,802



553,492



70,411



12%



54,310



10
%OPERATING INCOME


87,019



94,791



68,708



(7,772
)


(8)%



26,083



38
%Interest and other income


13,063



7,844



4,283



5,219



67%



3,561



83
%Interest and other expense


(1,298
)


(53
)


(1,230
)


1,245



2,349%



1,177



96
%Loss on redemption of debt


-



-



(936
)


-




-


936



100
%INCOME BEFORE INCOME
    TAXES


98,784



102,582



70,825



(3,798
)


(4)%



31,757



45
%Income tax provision


35,692



35,903



27,055



(211
)


(1)%



8,848



33
%NET INCOME

$
63,092


$
66,679


$
43,770


$
(3,587
)


(5)%


$
22,909



52
%   REVENUES
      Software license revenue.
 27




---



##### Table of Contents



Maintenance and services revenue.
    year-over-year
  COST OF
    REVENUES
  Cost of software license revenue. year-over-year.
        Cost of maintenance and services
    revenue.
 28




---



##### Table of Contents



year-over-year.
    OPERATING
    EXPENSES
  Sales and marketing.
    Research and development.
   29




---



##### Table of Contents



General and administrative.
    RESTRUCTURING AND
    OTHER CHARGES
       30




---



##### Table of Contents



U.S.-based
  No. 95-3,
  No. 94-3, (EITF 94-3),
  EITF 94-3,
  AssetSeverance

Facilities

Impairments

Other

TotalAccrual balance at June 30,
    2003

$
-


$
13,358


$
-


$
1,850


$
15,208Restructuring charges


3,410



792



-



-



4,202Cash payments


(3,299
)


(2,073
)


-



(91
)


(5,463
)Accrual balance at June 30,
    2004


111



12,077



-



1,759



13,947Restructuring charges


1,029



4,850



646



-



6,525Non-cash items


(5
)


(241
)


(646
)


(9
)


(901
)Cash payments


(1,040
)


(7,447
)


-



-



(8,487
)Accrual balance at June 30,
    2005


95



9,239



-



1,750



11,084Restructuring charges


666



3,717



-



-



4,383Non-cash items


(1
)


(104
)


-



(1,619
)


(1,724
)Cash payments


(493
)


(2,304
)


-



-



(2,797
)Accrual balance at June 30,
    2006

$
267


$
10,548


$
-


$
131


$
10,946  31




---



##### Table of Contents



AssetSeverance

Facilities

Impairments

TotalBalance at June 30, 2003

$
-


$
-


$
-


$
-Restructuring charges


4,767



26,588



4,719



36,074Non-cash items


-



-



(4,719
)


(4,719
)Cash payments


(3,263
)


(4,181
)


-



(7,444
)Balance at June 30, 2004


1,504



22,407



-



23,911Restructuring credits


-



(477
)


-



(477
)Non-cash items


(29
)


(103
)


-



(132
)Cash payments


(1,114
)


(6,479
)


-



(7,593
)Balance at June 30, 2005


361



15,348



-



15,709Restructuring charges (credits)


(66
)


2



-



(64
)Non-cash items


196



(16
)


-



180Cash payments


(474
)


(3,482
)


-



(3,956
)Balance at June 30, 2006

$
17


$
11,852


$
-


$
11,869     IN-PROCESS
    RESEARCH AND DEVELOPMENT
    INTEREST AND
    OTHER INCOME
  1.7-acre
  INTEREST AND
    OTHER EXPENSE
   32




---



##### Table of Contents



LOSS ON
    REDEMPTION OF DEBT
    INCOME TAX
    PROVISION
    NET
    INCOME
      LIQUIDITY AND
    CAPITAL RESOURCES
  June 30,(In
    thousands)

2006

2005

2004Cash and cash equivalents

$
166,055

$
170,740

$
172,261Short-term investments


271,228


270,008


195,914Working capital


292,390


330,220


273,983   Year Ended
    June 30,(In
    thousands)

2006

2005

2004Net cash provided by operating
    activities

$
154,539


$
130,689


$
86,461Net cash provided by (used in)
    investing activities


(68,248
)


(114,970
)


35,558Net cash used in financing
    activities


(91,286
)


(16,467
)


(121,354
)      33




---



##### Table of Contents



34




---



##### Table of Contents



Payments Due
    inTotal







Fiscal 2012Payments



Fiscal 2008

Fiscal 2010

andDue

Fiscal
    2007

and
    2009

and
    2011

ThereafterOperating lease
    obligations [1]

$
109,931


$
24,905


$
38,605


$
19,498


$
26,923Capital lease
    obligations [2]


984



362



622



-



-Purchase obligations [3]


1,092



1,092



-



-



-$
112,007


$
26,359


$
39,227


$
19,498


$
26,923   [1]
    
    Excludes minimum sublease rentals aggregating approximately
    $12.2 million due in the future under non-cancelable
    subleases.[2]
    
    Represents remaining payments under capital leases of computer
    equipment, including $0.1 million of imputed interest.[3]
    
    Represents amounts associated with agreements that are
    enforceable, legally binding, and specify terms, including:
    fixed or minimum quantities to be purchased; fixed, minimum, or
    variable price provisions; and the approximate timing of the
    payment.      OFF-BALANCE SHEET
    ARRANGEMENTS
  Regulation S-K
  RECENT ACCOUNTING
    PRONOUNCEMENTS
   35




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign Currency Exchange Risk.
 36




---



##### Table of Contents



marked-to-market
      Interest Rate Risk.
 37




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of
    Independent Registered Public Accounting Firm


39Consolidated Financial Statements:Consolidated Balance
    Sheets as of June 30, 2006 and 2005


41Consolidated
    Statements of Operations for the years ended June 30, 2006,
    2005, and 2004


42Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    for the years ended June 30, 2006, 2005, and 2004


43Consolidated
    Statements of Cash Flows for the years ended June 30, 2006,
    2005, and 2004


44Notes to
    Consolidated Financial Statements


45Financial Statement Schedule:Schedule II 
    Valuation and Qualifying Accounts for the years ended
    June 30, 2006, 2005, and 2004


78    38




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and
    Stockholders of Hyperion Solutions Corporation:
    Consolidated
    financial statements and financial statement
    schedule
      Internal
    control over financial reporting
     39




---



##### Table of Contents



San Jose, California
 August 31, 2006
 40




---



##### Table of Contents



HYPERION
    SOLUTIONS CORPORATIONCONSOLIDATED BALANCE SHEETS
   June 30,

June 30,2006

2005ASSETSCurrent assets:Cash and cash equivalents

$
166,055


$
170,740Short-term investments


271,228



270,008Accounts receivable, net of
    allowances of $10,370 and $10,053


180,384



141,045Deferred tax assets


10,869



10,976Prepaid expenses and other current
    assets


35,205



28,157TOTAL CURRENT ASSETS


663,741



620,926Property and equipment, net


76,221



74,911Goodwill


157,208



137,898Other intangible assets, net


38,525



29,811Deferred tax assets


40,956



30,287Other assets


5,669



5,603TOTAL ASSETS

$
982,320


$
899,436LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued
    liabilities

$
78,014


$
56,657Accrued employee compensation and
    benefits


68,243



53,298Income taxes payable


47,009



32,703Deferred revenue


171,142



140,772Restructuring liabilities


6,943



7,276TOTAL CURRENT
    LIABILITIES


371,351



290,706Long-term restructuring liabilities
    and other


21,384



24,830TOTAL LIABILITIES


392,735



315,536Commitments and contingencies
    (Note 13)Stockholders equity:Preferred stock -
    $0.001 par value; 5,000 shares authorized; none issued


-



-Common stock - $0.001 par
    value; 300,000 shares authorized; 58,301 and
    60,153 shares issued and outstanding


58



60Additional paid-in capital


534,716



489,137Deferred stock-based compensation


-



(4,393
)Retained earnings


57,142



100,491Accumulated other comprehensive loss


(2,331
)


(1,395
)TOTAL STOCKHOLDERS
    EQUITY


589,585



583,900TOTAL LIABILITIES AND
    STOCKHOLDERS EQUITY

$
982,320


$
899,436   See accompanying notes to
    consolidated financial statements.
 41




---



##### Table of Contents



HYPERION
    SOLUTIONS CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS
   Year Ended
    June 30,2006

2005

2004REVENUESSoftware licenses

$
295,117


$
273,408


$
240,096Maintenance and services


470,115



429,185



382,104TOTAL REVENUES


765,232



702,593



622,200COSTS AND EXPENSESCost of revenues:Software licenses


17,802



16,136



13,362Maintenance and services


174,868



158,272



147,816Sales and marketing


294,670



255,182



225,951Research and development


116,309



104,108



96,240General and administrative


70,245



68,056



63,621Restructuring charges


4,319



6,048



4,202In-process research and development


-



-



2,300TOTAL COSTS AND
    EXPENSES


678,213



607,802



553,492OPERATING INCOME


87,019



94,791



68,708Interest and other income


13,063



7,844



4,283Interest and other expense


(1,298
)


(53
)


(1,230
)Loss on redemption of debt


-



-



(936
)INCOME BEFORE INCOME
    TAXES


98,784



102,582



70,825Income tax provision


35,692



35,903



27,055NET INCOME

$
63,092


$
66,679


$
43,770Basic net income per share

$
1.07


$
1.12


$
0.77Diluted net income per share

$
1.04


$
1.08


$
0.73Shares used in computing basic net
    income per share


58,901



59,534



56,982Shares used in computing diluted
    net income per share


60,484



61,886



59,631    42




---



##### Table of Contents



HYPERION
    SOLUTIONS CORPORATIONCONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY & COMPREHENSIVE INCOME
   Common











AccumulatedStock

Additional





Deferred



OtherPar

Paid-in

Treasury
    Stock

Stock-Based

Retained

ComprehensiveShares

Value

Capital

Shares

Cost

Compensation

Earnings

Gain
    (Loss)

TotalBalance at June 30,
    2003


54,981


$
55


$
278,321



823


$
(10,847
)

$
(2,893
)

$
137,582


$
(4,893
)

$
397,325Comprehensive income:Net income


























43,770







43,770Currency translation effect, net of
    tax






























3,510



3,510Unrealized losses on investments,
    net of tax






























(90
)


(90
)Total comprehensive income


































47,190Stock and options issued in
    connection with Brio acquisition


6,320



6



132,955











(7,113
)










125,848Stock issued under equity plans


3,721



4



51,656



(823
)


10,847



(1,839
)


(294
)






60,374Stock repurchased and retired


(5,910
)


(6
)


(43,896
)














(87,143
)






(131,045
)Amortization of deferred
    stock-based compensation






















4,351











4,351Income tax benefit from exercise of
    stock options










15,528























15,528Balance at June 30,
    2004


59,112



59



434,564



-



-



(7,494
)


93,915



(1,473
)


519,571Comprehensive income:Net income


























66,679







66,679Currency translation effect, net of
    tax






























(183
)


(183
)Unrealized gains on investments,
    net of tax






























261



261Total comprehensive income


































66,757Stock issued under equity plans


4,146



4



68,184











(392
)


(227
)






67,569Stock repurchased and retired


(3,105
)


(3
)


(24,157
)














(59,876
)






(84,036
)Amortization of deferred
    stock-based compensation






















2,810











2,810Reduction of deferred stock-based
    compensation due to stock option cancellations










(683
)










683











-Income tax benefit from exercise of
    stock options










11,229























11,229Balance at June 30,
    2005


60,153



60



489,137



-



-



(4,393
)


100,491



(1,395
)


583,900Comprehensive income:Net income


























63,092







63,092Currency translation effect, net of
    tax






























176



176Unrealized loss on investments, net
    of tax






























(1,112
)


(1,112
)Total comprehensive income


































62,156Stock issued under equity plans


2,746



3



48,865















(797
)






48,071Stock repurchased and retired


(4,598
)


(5
)


(39,207
)














(105,644
)






(144,856
)Stock-based compensation










31,080























31,080Income tax benefit from exercise of
    stock options










9,234























9,234Reclassification of deferred
    stock-based compensation










(4,393
)










4,393











-Balance at June 30,
    2006


58,301


$
58


$
534,716



-


$
-


$
-


$
57,142


$
(2,331
)

$
589,585    43




---



##### Table of Contents



HYPERION
    SOLUTIONS CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS
   Year Ended
    June 30,2006

2005

2004CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income

$
63,092


$
66,679


$
43,770Adjustments to reconcile net income
    to net cash provided by operating activities:Loss on redemption of debt


-



-



936(Gain) loss on sale of assets


(990
)


80



170Loss on impairment of investment


1,000



-



-Depreciation and amortization


33,878



34,460



32,507Stock-based compensation


31,103



2,810



4,351Provision for accounts receivable
    allowances


6,847



6,056



8,118Deferred tax assets


(7,062
)


841



(2,999
)Income tax benefit from exercise of
    stock options


3,735



11,229



15,528In-process research and development


-



-



2,300Changes in operating assets and
    liabilities, net of the effect of acquisitions:Accounts receivable


(43,659
)


(13,703
)


(20,030
)Prepaid expenses and other current
    assets


(5,717
)


(527
)


(10,816
)Other assets


(106
)


1,416



2,029Accounts payable and accrued
    liabilities


20,259



(8,213
)


(9,631
)Accrued employee compensation and
    benefits


14,352



1,840



(26
)Income taxes payable


14,431



15,346



22,676Deferred revenue


27,864



5,097



534Restructuring liabilities


(341
)


5,132



303Long-term restructuring liabilities
    and other


(4,147
)


2,146



(3,259
)Net cash provided by operating
    activities


154,539



130,689



86,461CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchases of
    available-for-sale
    investments


(343,120
)


(509,314
)


(164,886
)Proceeds from sales and maturities
    of investments


339,775



432,919



232,031Purchases of property and equipment


(21,208
)


(24,456
)


(22,465
)Purchases of other intangible assets


(6,724
)


(5,894
)


(2,224
)Payments for acquisitions, net of
    cash acquired


(36,971
)


(8,225
)


(6,898
)Net cash provided by (used in)
    investing activities


(68,248
)


(114,970
)


35,558CASH FLOWS FROM FINANCING
    ACTIVITIES:Redemption of debt


-



-



(50,683
)Purchases of common stock


(144,856
)


(84,036
)


(131,045
)Proceeds from issuance of common
    stock


48,071



67,569



60,374Income tax benefit from exercise of
    stock options


5,499



-



-Net cash used in financing
    activities


(91,286
)


(16,467
)


(121,354
)Effect of exchange rate on cash and
    cash equivalents


310



(773
)


4,234INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS


(4,685
)


(1,521
)


4,899Cash and cash equivalents at
    beginning of year


170,740



172,261



167,362CASH AND CASH EQUIVALENTS AT END
    OF YEAR

$
166,055


$
170,740


$
172,261SUPPLEMENTAL CASH FLOW
    INFORMATION:Cash paid for interest

$
211


$
31


$
2,568Cash paid for income taxes

$
16,875


$
8,733


$
5,424NON-CASH FINANCING
    ACTIVITIES:Value of stock issued for
    acquisitions

$
-


$
-


$
116,625Deferred stock-based compensation
    from restricted stock issuance

$
-


$
479


$
3,524    44




---



##### Table of Contents



HYPERION
    SOLUTIONS CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    BUSINESS      2.
    SUMMARY OF
    SIGNIFICANT ACCOUNTING POLICIES  Basis of
    Presentation and Principles of Consolidation
    three-for-two
  Use of
    Estimates
    Revenue
    Recognition
    No. 97-2, (SOP 97-2). No. 98-9, SOP 97-2
 45




---



##### Table of Contents



SOP 97-2. percentage-of-completion No. 81-1,
    Foreign
    Currency
      Stock-Based
    Compensation
   46




---



##### Table of Contents



fair-value-based
      Year Ended
    June 30,2005

2004Net income, as reported

$
66,679


$
43,770Add: stock-based compensation
    expense included in reported net income, net of tax


1,826



2,741Deduct: stock-based compensation
    expense determined under fair value method, net of tax


(16,879
)


(19,074
)Net income, pro forma

$
51,626


$
27,437Net income per share:Basic  as reported

$
1.12


$
0.77Basic  pro forma

$
0.87


$
0.48Diluted  as reported

$
1.08


$
0.73Diluted  pro forma

$
0.84


$
0.46    47




---



##### Table of Contents



paid-in-capital
    Year EndedJune 30,
    2006Stock-based compensation expense by
    type of award:Employee stock options

$
22,708Restricted stock awards and
    restricted stock units


4,480Employee stock purchase plan


3,915Total stock-based compensation


31,103Tax effect on stock-based
    compensation


(9,580
)Net effect on net income

$
21,523Tax effect on:Cash flow from operations

$
(5,499
)Cash flow from financing activities

$
5,499Effect on earnings per share:Basic

$
0.37Diluted

$
0.36   catch-up
 48




---



##### Table of Contents



Year Ended
    June 30,2006


2005


2004Stock option plans:Expected dividend yield


0%



0%



0%Expected stock price volatility


45%



43%



53%Risk free interest rate


4.48%



3.73%



2.29%Expected term (in years)


4.1



4.4



5.0Stock purchase plan:Expected dividend yield


0%



0%



0%Expected stock price volatility


35%



45%



52%Risk free interest rate


4.46%



2.59%



1.08%Expected term (in years)


0.5



0.5



0.5     Cash and Cash
    Equivalents
    Short-Term
    Investments
  available-for-sale available-for-sale available-for-sale
  available-for-sale available-for-sale
 49




---



##### Table of Contents



Accounts
    Receivable Allowances
      Fair Value of
    Financial Instruments
    Long-Lived
    Assets
    
    Significant underperformance relative to historical or projected
    future operating results;
    Significant changes in the manner of use of the assets or the
    strategy for our overall business;
    Significant decrease in the market value of the assets; and
    Significant negative industry or economic trends     50




---



##### Table of Contents



Goodwill
    Product
    Development Costs
    Advertising
    Costs
    Income
    Taxes
         51




---



##### Table of Contents



Concentration
    of Credit Risk
      Net Income Per
    Share
      Year Ended
    June 30,2006

2005

2004Net income

$
63,092


$
66,679


$
43,770Shares used in computing basic net
    income per share


58,901



59,534



56,982Effect of potentially dilutive
    securities


1,583



2,352



2,649Shares used in computing diluted
    net income per share


60,484



61,886



59,631Basic net income per share

$
1.07


$
1.12


$
0.77Diluted net income per share

$
1.04


$
1.08


$
0.73    52




---



##### Table of Contents



Accumulated
    Other Comprehensive Loss
    June 30,

June 30,

June 30,2006

2005

2004Unrealized gain (loss) on
    available-for-sale
    securities

$
(867
)

$
246


$
(15
)Cumulative translation adjustment


(1,464
)


(1,641
)


(1,458
)$
(2,331
)

$
(1,395
)

$
(1,473
)   Derivative
    Instruments and Hedging Activities
    marked-to-market
    Recent
    Accounting Pronouncements
     53




---



##### Table of Contents



3.
    BUSINESS
    COMBINATIONS  UpStream
    Software
       54




---



##### Table of Contents



Acquisitions
    in Fiscal Year 2005
    Brio Software,
    Inc.
           55




---



##### Table of Contents



Current assets

$
48,791Property and equipment


9,493Goodwill


117,663Intangible assets


30,000Deferred taxes


7,065In-process research and development


2,300Deferred compensation


7,113Current liabilities


(16,565)Deferred revenue


(28,717)Restructuring costs


(36,074)Total purchase price

$
141,069     Fair


Useful LifeIdentifiable
    Intangible Assets

Value


(In
    Years)Capitalized software

$
15,500



4Patents and core technology


4,000



6Maintenance agreements


4,400



5Customer contracts and related
    relationships


6,000



4Value added reseller relationships


100



1Total

$
30,000     Pro Forma
    Financial Information (Unaudited)
   56




---



##### Table of Contents



Revenues

$
653,049Net income


39,878Basic net income per share


1.02Diluted net income per share


0.97   The Alcar
    Group, Inc.
        4.
    INVESTMENTS    June 30,
    2006Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


ValueTax-exempt auction rate securities

$
33,900


$
-


$
-


$
33,900Tax-exempt variable rate demand
    notes


97,862



-



-



97,862State and municipal bonds


140,383



-



(917
)


139,466Total

$
272,145


$
-


$
(917
)

$
271,228   June 30,
    2005Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


ValueTax-exempt auction rate securities

$
115,875


$
-


$
-


$
115,875Tax-exempt variable rate demand
    notes


89,320



-



-



89,320State and municipal bonds


64,621



192



-



64,813Total

$
269,816


$
192


$
-


$
270,008  57




---



##### Table of Contents



available-for-sale
  June 30,


June 30,2006


2005Due within one year

$
59,848


$
23,099Due after one year through five
    years


72,861



45,950Due after five years through ten
    years


3,150



1,030Due after ten years


135,369



199,929Total

$
271,228


$
270,008   available-for-sale
    other-than-temporary other-than-temporary,
  available-for-sale other-than-temporarily
  June 30,
    2006Less than 12
    Months


12 Months or
    Greater


TotalGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Loss


Value


Loss


Value


LossMunicipal debt securities

$
133,145


$
(885
)

$
2,036


$
(32
)

$
135,181


$
(917
)Total

$
133,145


$
(885
)

$
2,036


$
(32
)

$
135,181


$
(917
)   other-than-temporary
 58




---



##### Table of Contents



5.
    PROPERTY AND
    EQUIPMENT      June 30,


June 30,


Useful Life2006


2005


(In
    years)Building and building improvements

$
35,205


$
35,214



15
- 39Leasehold improvements


14,413



14,537



2
- 15 [1]Furniture and fixtures


8,518



9,611




7Computer software


53,810



45,409



3
- 5Computer equipment


36,570



35,400




2Other equipment


4,135



4,663




3Gross property and equipment


152,651



144,834Accumulated depreciation and
    amortization


(80,057
)


(73,723
)Land


3,627



3,800



N
/ANet property and equipment

$
76,221


$
74,911   [1]
    
    Lesser of lease term or useful life    6.
    GOODWILL    June 30,


June 30,2006


2005Balance at beginning of year

$
137,898


$
139,952Acquisitions


22,478



3,116Tax benefit related to acquisition
    of Brio


(3,524
)


(5,484
)Effect of foreign currency
    translation


356



314Balance at end of year

$
157,208


$
137,898  59




---



##### Table of Contents



7.
    OTHER INTANGIBLE
    ASSETS    June 30,
    2006


June 30,
    2005Gross








GrossCarrying


Accumulated


Book


Carrying


Accumulated


BookAmount


Amortization


Value


Amount


Amortization


ValueProduct development costs

$
16,963


$
(6,912
)

$
10,051


$
12,471


$
(6,013
)

$
6,458Acquired technologies


46,390



(21,879
)


24,511



31,340



(14,348
)


16,992Other intangibles


10,564



(6,601
)


3,963



10,616



(4,255
)


6,361Total

$
73,917


$
(35,392
)

$
38,525


$
54,427


$
(24,616
)

$
29,811       EstimatedAmortizationFiscal
    Year

Expense2007

$
17,1182008


10,7362009


6,6652010


3,2372011 and thereafter


769Total

$
38,525   8.
    ACCOUNTS PAYABLE
    AND ACCRUED LIABILITIES    June 30,


June 30,2006


2005Accounts payable

$
19,462


$
12,180Other accrued taxes


17,730



15,671Other accrued liabilities


40,822



28,806Total

$
78,014


$
56,657  60




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##### Table of Contents



9.
    ACCRUED EMPLOYEE
    COMPENSATION AND BENEFITS    June 30,


June 30,2006


2005Accrued management bonuses

$
14,529


$
14,037Accrued sales commissions


25,509



13,507Accrued vacation


10,855



10,476Other accrued employee compensation
    and benefits


17,350



15,278Total

$
68,243


$
53,298   10.
    INCOME
    TAXES    Year Ended
    June 30,2006


2005


2004Income before income taxes:U.S.

$
79,836


$
75,292


$
46,106Non-U.S.


18,948



27,290



24,719Total income before income taxes

$
98,784


$
102,582


$
70,825Income tax provision:Current:Federal

$
35,041


$
22,601


$
19,416State


6,161



3,845



3,110Non-U.S.


5,052



10,975



8,923Total current


46,254



37,421



31,449Deferred:Federal


(10,112
)


(1,881
)


(3,846
)State


(704
)


1,221



(336
)Non-U.S.


254



(858
)


(212
)Total deferred


(10,562
)


(1,518
)


(4,394
)Total income tax provision

$
35,692


$
35,903


$
27,055  61




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##### Table of Contents



June 30,


June 30,2006


2005Deferred income tax assets:Net operating loss and credit
    carryforwards

$
26,138


$
26,071Accounts receivable


3,726



3,845Property and equipment


12,281



12,452Intangible assets


5,402



3,596Accrued expenses


7,532



7,131Stock-based compensation


7,959



1,088Gross deferred income tax assets


63,038



54,183Valuation allowance


(8,803
)


(10,424
)Realizable deferred income tax
    assets


54,235



43,759Deferred income tax liabilities:Product development costs


2,410



2,496Net deferred income tax assets

$
51,825


$
41,263     Year Ended
    June 30,2006


2005


2004Statutory U.S. tax rate


35.0
%


35.0
%


35.0
%State income taxes, net of
    U.S. tax benefit


4.0
%


4.2
%


4.0
%Tax-exempt interest


(3.7
)%


(1.8
)%


(1.2
)%Write-off of in-process R&D


-



-



1.2
%Stock-based compensation


3.1
%


-



-Non-U.S. operations,
    including export sales


(1.3
)%


(1.8
)%


(1.3
)%Net operating losses


(0.8
)%


(0.2
)%


0.3
%Other, net


(0.2
)%


(0.4
)%


0.2
%Effective income tax rate


36.1
%


35.0
%


38.2
%   non-U.S. net non-U.S. net
  11.
    LONG-TERM
    DEBT   62




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##### Table of Contents



12.
    RELATED PARTY
    TRANSACTIONS        13.
    COMMITMENTS AND
    CONTINGENCIES  Lease
    Commitments
      Payments Due
    inTotal







Fiscal 2012Payments



Fiscal 2008

Fiscal 2010

andDue

Fiscal
    2007

and
    2009

and
    2011

ThereafterOperating lease
    obligations [1]

$
109,931


$
24,905


$
38,605


$
19,498


$
26,923Capital lease
    obligations [2]


984



362



622



-



-Purchase obligations [3]


1,092



1,092



-



-



-Total

$
112,007


$
26,359


$
39,227


$
19,498


$
26,923   [1]
    Excludes minimum sublease rentals aggregating approximately
    $12.2 million due in the future under non-cancelable
    subleases. 63




---



##### Table of Contents



[2]
    Represents remaining payments under capital leases of computer
    equipment, including $0.1 million of imputed interest.[3]
    Represents amounts associated with agreements that are
    enforceable, legally binding, and specify terms, including:
    fixed or minimum quantities to be purchased; fixed, minimum, or
    variable price provisions; and the approximate timing of the
    payment.    Contingencies
      14.
    COMMON
    STOCK  Stock
    Repurchases
     64




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##### Table of Contents



15.
    SHARE-BASED
    PAYMENTS AND EMPLOYEE SAVINGS PLANS  Stock Option
    Plans
        2005


2004Weighted




WeightedAverage




AverageExercise




ExerciseShares

Price


Shares

PriceOutstanding at beginning of year


10,956


$
17.75



11,354


$
15.57Granted


3,021



29.29



2,968



22.25Assumed through acquisition of Brio


-



-



1,631



14.05Exercised


(3,627
)


15.47



(3,876
)


13.12Forfeited


(941
)


21.61



(1,121
)


18.19Outstanding at end of year


9,409


$
21.98



10,956


$
17.75Exercisable at end of year


4,160


$
18.28



5,487


$
16.87     WeightedAverageWeighted

Remaining


AggregateAverage

Contractual


Intrinsic
    ValueShares

Exercise
    Price

Term
    (Years)


($000s)Outstanding at June 30, 2005


9,409


$
21.98Granted


2,017



31.47Exercised


(2,089
)


17.29Forfeited


(1,022
)


25.74Outstanding at June 30, 2006


8,315


$
25.01



4.29


$
37,223Vested and expected to vest at
    June 30, 2006


7,853


$
24.71



4.25


$
36,882Exercisable at June 30, 2006


4,027


$
21.12



3.86


$
30,033  65




---



##### Table of Contents



Options
    Outstanding


Options
    ExercisableWeighted
    Average


Weighted




WeightedRange
    of


Number

Remaining
    Years of


Average


Number

AverageExercise
    Prices


Outstanding

Contractual
    Life


Exercise
    Price


Exercisable

Exercise
    Price$
5.83  15.99



1,154



4.62


$
12.14



1,098


$
12.14$
16.00  19.99



919



2.95


$
17.89



702


$
17.83$
20.00  29.99



3,383



3.89


$
24.77



1,694


$
24.20$
30.00  39.99



2,840



5.09


$
32.43



514


$
32.28$
40.00  231.00



19



3.31


$
84.87



19


$
84.878,315











4,027   (in-the-money
  three-for-two
    Restricted
    Stock Awards
   66




---



##### Table of Contents



WeightedAverageGrant-DateShares

Fair
    ValueNonvested shares at July 1,
    2003


188


$
16.83Granted


135



26.11Vested


(51
)


16.83Nonvested shares at June 30,
    2004


272



21.46Granted


17



29.04Vested


(53
)


20.09Forfeited


(7
)


16.83Nonvested shares at June 30,
    2005


229



22.47Granted


209



30.30Vested


(84
)


18.38Forfeited


(42
)


26.47Nonvested shares at June 30,
    2006


312


$
27.94     Restricted
    Stock Units
      WeightedAverageGrant-DateShares

Fair
    ValueOutstanding at July 1, 2005


-


$
-Granted


522



31.91Cancelled


(11
)


32.32Outstanding at June 30, 2006


511


$
31.90Exercisable at June 30, 2006


-


$
-    67




---



##### Table of Contents



Employee Stock
    Purchase Plan
    Employee
    Savings Plans
  non-U.S. employees.
  16.
    STOCKHOLDER
    RIGHTS PLAN         68




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##### Table of Contents



17.
    RESTRUCTURING AND
    OTHER CHARGES        U.S.-based
  No. 95-3,
  No. 94-3, (EITF 94-3),
 69




---



##### Table of Contents



EITF 94- 3,
  AssetSeverance

Facilities

Impairments

Other

TotalAccrual balance at June 30,
    2003

$
-


$
13,358


$
-


$
1,850


$
15,208Restructuring charges


3,410



792



-



-



4,202Cash payments


(3,299
)


(2,073
)


-



(91
)


(5,463
)Accrual balance at June 30,
    2004


111



12,077



-



1,759



13,947Restructuring charges


1,029



4,850



646



-



6,525Non-cash items


(5
)


(241
)


(646
)


(9
)


(901
)Cash payments


(1,040
)


(7,447
)


-



-



(8,487
)Accrual balance at June 30,
    2005


95



9,239



-



1,750



11,084Restructuring charges


666



3,717



-



-



4,383Non-cash items


(1
)


(104
)


-



(1,619
)


(1,724
)Cash payments


(493
)


(2,304
)


-



-



(2,797
)Accrual balance at June 30,
    2006

$
267


$
10,548


$
-


$
131


$
10,946     AssetSeverance

Facilities

Impairments

TotalBalance at June 30, 2003

$
-


$
-


$
-


$
-Restructuring charges


4,767



26,588



4,719



36,074Non-cash items


-



-



(4,719
)


(4,719
)Cash payments


(3,263
)


(4,181
)


-



(7,444
)Balance at June 30, 2004


1,504



22,407



-



23,911Restructuring credits


-



(477
)


-



(477
)Non-cash items


(29
)


(103
)


-



(132
)Cash payments


(1,114
)


(6,479
)


-



(7,593
)Balance at June 30, 2005


361



15,348



-



15,709Restructuring charges (credits)


(66
)


2



-



(64
)Non-cash items


196



(16
)


-



180Cash payments


(474
)


(3,482
)


-



(3,956
)Balance at June 30, 2006

$
17


$
11,852


$
-


$
11,869     18.
    SEGMENT AND
    GEOGRAPHIC INFORMATION   70




---



##### Table of Contents



Year Ended
    June 30,2006

2005

2004Revenues:Americas

$
476,503


$
428,600


$
380,894EMEA


233,368



226,382



199,780APAC


55,361



47,611



41,526Total revenues

$
765,232


$
702,593


$
622,200   non-U.S. revenues
  June 30,

June 30,2006

2005Long-lived assets:Americas

$
70,583


$
68,041EMEA


4,241



5,046APAC


1,397



1,824Total long-lived assets

$
76,221


$
74,911   non-U.S. long-lived
    Year Ended
    June 30,2006

2005

2004Software licenses

$
295,117


$
273,408


$
240,096Maintenance and services:Maintenance


328,818



299,093



264,866Consulting and training


141,297



130,092



117,238470,115



429,185



382,104Total revenues

$
765,232


$
702,593


$
622,200  71




---



##### Table of Contents



19.
    QUARTERLY RESULTS
    OF OPERATIONS (UNAUDITED)  three-for-two
  Fiscal
    2006

Sep.
    30


Dec.
    31


Mar.
    31


Jun.
    30Revenues

$
170,225


$
185,494


$
185,643


$
223,870Gross profit


128,432



138,023



137,945



168,162Net income [1]


13,292



15,522



16,000



18,278Net income per share 
    basic


0.22



0.26



0.27



0.31Net income per share 
    diluted


0.22



0.25



0.26



0.31   Fiscal
    2005

Sep.
    30


Dec.
    31


Mar.
    31


Jun.
    30Revenues

$
159,538


$
176,978


$
177,107


$
188,970Gross profit


118,905



133,038



132,474



143,768Net income [2]


11,613



15,550



18,811



20,705Net income per share 
    basic


0.20



0.26



0.31



0.34Net income per share 
    diluted


0.19



0.25



0.30



0.33   [1]
    Includes stock-based compensation expense of $7.8 million,
    $7.0 million, $7.1 million, and $9.2 million
    under SFAS 123(R) for the quarters ended September 30,
    December 31, March 31, and June 30, 2006,
    respectively.  [2]
    Includes stock-based compensation expense of $0.9 million,
    $0.4 million, $0.5 million, and $1.0 million
    under APB 25 for the quarters ended September 30,
    December 31, March 31, and June 30, 2005,
    respectively. 72




---



##### Table of Contents



ITEM 9.
    CHANGES IN AND
    DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE    ITEM 9A.
    CONTROLS AND
    PROCEDURES  EVALUATION OF DISCLOSURE CONTROLS AND
    PROCEDURES. Rules 13a-15(e) 15d-15(e)
  MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
    REPORTING. Rules 13a-15(f) 15d-15(f). Internal
    Control  Integrated Framework Internal Control  Integrated Framework 10-K.
  CHANGE IN INTERNAL CONTROL OVER FINANCIAL
    REPORTING. Rules 13a-15(f) 15d-15(f)
  ITEM 9B.
    OTHER
    INFORMATION   73




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS AND
    EXECUTIVE OFFICERS OF THE REGISTRANT  Regulation S-K Form 10-K. Regulation S-K Regulation S-K Regulation S-K
  http://www.hyperion.com,
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT    Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Number of


Weighted-


Number of
    SecuritiesSecurities to
    be


Average
    Exercise


Remaining
    AvailableIssued Upon
    Exercise


Price of


for Future
    Issuanceof Outstanding


Outstanding


under EquityOptions,
    Warrants


Options,
    Warrants


Compensation
    Plansand
    Rights


and
    RightsEquity compensation plans approved
    by security holders [1]


8,195,876



$
23.96



2,153,149

[4]Equity compensation plans not
    approved by security holders [2]


630,080

[3]

$
18.43



116,231Total


8,825,956



$
23.57



2,269,380   [1]
    
    Equity compensation plans approved by security holders are the
    (i) 1995 Stock Option/Stock Issuance Plan, (ii) Arbor
    Software 1992 Stock Option Plan, (iii) Hyperion Software
    Corporation 1991 Stock Plan, (iv) 1995 Employee Stock
    Purchase Plan, and (v) the 2004 Equity Incentive Plan.[2]
    
    Equity compensation plans not approved by security holders are
    the (i) 1999 Stock Option Plan and (ii) an individual
    compensation arrangement between the Company and Jeffrey Rodek,
    each as described below:In September 1999, the Company adopted the Hyperion Solutions
    Corporation 1999 Stock Option Plan (the 1999 Plan),
    which has not been approved by the Companys stockholders,
    and approved the issuance of up to 2,925,000 shares of
    common stock under the 1999 Plan. The terms under which options
    can be and 74




---



##### Table of Contents



have been issued under the 1999 Plan are the same as the terms
    of options that can be and have been issued under the
    Discretionary Option Grant section of the 1995 Stock
    Option/Stock Issuance Plan approved by the stockholders, except
    that executive officers of the Company may not receive grants
    under the 1999 Plan. Since 1999, the Company has not approved
    any additional shares for issuance under the 1999 Plan. The 1999
    Plan will expire in 2009.In October 1999, the Company entered into an employment
    agreement with Jeffrey Rodek, its Chief Executive Officer at
    that time, pursuant to which the Company issued options to
    purchase 900,000 shares of the Companys common stock
    with an exercise price of $12.71 and with the Companys
    standard vesting provisions. These options were not granted
    under a plan approved by the Companys stockholders.[3]
    
    Includes 629,542 shares of the Companys common stock
    issuable upon exercise of outstanding options granted under the
    Brio plans assumed by the Company in connection with its
    acquisition of Brio Software, Inc. in October 2003. The weighted
    average exercise price of these options is $18.43. No additional
    options may be granted under those assumed plans.[4]
    
    Includes 1,544,281 shares of the Companys common
    stock available for issuance under the 1995 ESPP as of
    June 30, 2006.  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   75




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)
    Documents filed
    as part of this report    PageReport of Independent Registered
    Public Accounting Firm


39Consolidated Balance Sheets as of
    June 30, 2006 and 2005


41Consolidated Statements of
    Operations for the years ended June 30, 2006, 2005, and 2004


42Consolidated Statements of
    Stockholders Equity and Comprehensive Income for the years
    ended June 30, 2006, 2005, and 2004


43Consolidated Statements of Cash
    Flows for the years ended June 30, 2006, 2005, and 2004


44Notes to Consolidated Financial
    Statements


45     PageSchedule II 
    Valuation and Qualifying Accounts


78     (3)
    The exhibits listed in the accompanying
    Exhibit Index are filed or incorporated by
    reference as part of this annual report.  (b)
    Exhibits    (c)
    Financial
    Statement Schedule   76




---



##### Table of Contents



SIGNATURES     Date: August 31, 2006

Hyperion Solutions Corporation
    (Registrant)By:

/s/  ROBIN
    L. WASHINGTONRobin
    L. Washington 
    Chief Financial Officer and 
    Principal Accounting OfficerBy:

/s/  GODFREY
    R. SULLIVANGodfrey
    R. Sullivan
    Chief Executive Officer      Signature

Title

Date/s/  Godfrey
    R. SullivanGodfrey
    R. Sullivan

Director, President and Chief
    Executive Officer (Principal Executive Officer)

August 31,
    2006/s/  Jeffrey
    R. RodekJeffrey
    R. Rodek

Executive Chairman

August 31, 2006/s/  Henry
    R. AutryHenry
    R. Autry

Director

August 31, 2006/s/  Nanci
    CaldwellNanci
    Caldwell

Director

August 31, 2006/s/  Terry
    CarlitzTerry
    Carlitz

Director

August 31, 2006/s/  Yorgen
    EdholmYorgen
    Edholm

Director

August 31, 2006/s/  Gary
    G. GreenfieldGary
    G. Greenfield

Director

August 31, 2006/s/  John
    RiccitielloJohn
    Riccitiello

Director

August 31, 2006/s/  Maynard
    WebbMaynard
    Webb

Director

August 31, 2006  77




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##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS

(In thousands) AdditionsCharged toCosts andBalance at


Expenses /


Charged to





BalanceBeginning


(Benefit to


Other





at Endof
    Period


Income)


Accounts


Deductions


of
    PeriodYear Ended June 30,
    2006:Allowance for doubtful accounts

$
10,053


$
73


$
6,773



[1]


$
6,529



[2]


$
10,370Valuation allowance for deferred
    tax assets


10,424



(427)



-







1,194



[3]



8,803Year Ended June 30,
    2005:Allowance for doubtful accounts

$
8,758



43


$
6,013



[1]


$
4,761



[2]


$
10,053Valuation allowance for deferred
    tax assets


16,364



(250)



-







5,690



[4]



10,424Year Ended June 30,
    2004:Allowance for doubtful accounts

$
8,231



1,364


$
6,754



[1]


$
7,591



[2]


$
8,758Valuation allowance for deferred
    tax assets


6,926



-



10,372



[3]



934







16,364   [1]  [2]  [3]  [4]
 78




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##### Table of Contents



EXHIBIT
    INDEX  ExhibitNumber

Description3
.1

Restated Certificate of
    Incorporation (filed as Exhibit 3.2 to the Companys
    Current Report on Form 8-K filed on October 13, 1998 and
    incorporated herein by reference).3
.2

Amended and Restated Bylaws of
    Hyperion Solutions Corporation (filed as Exhibit 3.1 to the
    Companys Current Report on Form 8-K filed on November 21,
    2005 and incorporated herein by reference).4
.1

Specimen Certificate of the
    Registrants Common Stock (filed as Exhibit 4.1 to the
    Companys Registration Statement on Form S-1, File No.
    33-97098, as amended, and incorporated herein by reference).10
.1

2004 Equity Incentive Plan of
    Hyperion Solutions Corporation, as amended (filed as Exhibit
    10.1 to the Companys Current Report on Form 8-K filed on
    November 21, 2005 and incorporated herein by reference).10
.2

1992 Stock Option Plan (filed as
    Exhibit 10.3 to the Companys Registration Statement on
    Form S-1, File No. 33-97098, as amended, and incorporated herein
    by reference).10
.3

1995 Stock Option/Stock Issuance
    Plan, as amended and restated through November 14, 2002 (filed
    as Exhibit 99.1 to the Companys Registration Statement on
    Form S-8 filed on December 20, 2002 and incorporated herein by
    reference).10
.4

1999 Stock Option Plan (filed as
    Exhibit 10.19 to the Companys Annual Report on Form 10-K
    filed on September 28, 2000 and incorporated herein by
    reference).10
.5

2005 Employee Stock Purchase Plan
    of Hyperion Solutions Corporation (filed as Exhibit 10.2 to the
    Companys Current Report on Form 8-K filed on November 21,
    2005 and incorporated herein by reference).10
.6

Hyperion Software Corporation 1991
    Stock Plan (filed as an exhibit to the Companys
    Registration Statement on Form S-1, File No. 33-97098, as
    amended, and incorporated herein by reference).10
.7

Hyperion Software Corporation 1991
    Non-Employee Director Stock Option Plan (filed as an exhibit to
    the Companys Registration Statement on Form S-1, File No.
    33-97098, as amended, and incorporated herein by reference).10
.8

Form of Indemnification Agreement
    (filed as Exhibit 10.6 to the Companys Registration
    Statement on Form S-1, as amended, filed on November 6, 1995 and
    incorporated herein by reference).10
.9

Lease Agreement between the
    Registrant and SBC&D Co., Inc., dated July 16, 1996 (filed
    as Exhibit 10.17 to the Companys Annual Report on Form
    10-K filed on June 27, 1997 and incorporated herein by
    reference).10
.10

Lease Agreement between the
    Registrant and Prentiss Properties Acquisition Partners, L.P.,
    dated June 16, 2004 (filed as Exhibit 10.9 to the Companys
    Annual Report on Form 10-K filed on August 31, 2005 and
    incorporated herein by reference).10
.11*

Form of Executive Employment
    Agreement (filed as Exhibit 10.2 to the Companys Current
    Report on Form 8-K filed on July 22, 2005 and incorporated
    herein by reference) and Summary Sheet (filed herewith).10
.12*

Form of Restricted Stock Unit
    Agreement under the 2004 Equity Incentive Plan (filed as Exhibit
    10.1 to the Companys Current Report on Form 8-K filed on
    March 27, 2006 and incorporated herein by reference). 79




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##### Table of Contents



ExhibitNumber

Description10
.13*

Form of International Restricted
    Stock Unit Agreement under the 2004 Equity Incentive Plan (filed
    as Exhibit 10.2 to the Companys Current Report on Form 8-K
    filed on March 27, 2006 and incorporated herein by reference).10
.14*

Form of International Notice of
    Grant of Stock Options under the 2004 Equity Incentive Plan
    (filed as Exhibit 10.3 to the Companys Current Report on
    Form 8-K filed on March 27, 2006 and incorporated herein by
    reference).10
.15*

Standard form of Hyperion
    Restricted Stock Purchase Agreement under the 2004 Equity
    Incentive Plan, as amended and restated (filed as Exhibit 10.1
    to the Companys Current Report on Form 8-K filed on August
    24, 2006 and incorporated herein by reference).21
.1

List of subsidiaries of the
    Registrant (filed herewith).23
.1

Consent of PricewaterhouseCoopers
    LLP, independent registered public accounting firm (filed
    herewith).31
.1

Certification of Godfrey R.
    Sullivan pursuant to Rule 13a-14(a) (filed herewith).31
.2

Certification of Robin L.
    Washington pursuant to Rule 13a-14(a) (filed herewith).32
.1

Certification of Godfrey R.
    Sullivan pursuant to 18 U.S.C. Section 1350 (filed herewith).32
.2

Certification of Robin L.
    Washington pursuant to 18 U.S.C. Section 1350 (filed herewith).   *
    Indicates management contract or compensatory plan or arrangement 80