##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED MARCH 31, 2009
 Commission File Number: 000-20900
 COMPUWARE CORPORATION
  Michigan
    
    38-2007430(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 One Campus Martius, Detroit, MI 48226-5099
   Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share
    
    Nasdaq Stock MarketPreferred Stock Purchase Rights
    
    Nasdaq Stock Market
 None
 þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



COMPUWARE CORPORATION AND SUBSIDIARIES
FORM 10-K
Table of Contents
 ItemNumber
    
    
    
    PagePART I1.
    
    Business
    
    
    31A.
    
    Risk Factors
    
    
    161B.
    
    Unresolved Staff Comments
    
    
    232.
    
    Properties
    
    
    233.
    
    Legal Proceedings
    
    
    234.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23PART II5.
    
    Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    246.
    
    Selected Financial Data
    
    
    277.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    287A.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    488.
    
    Financial Statements and Supplementary Data
    
    
    509.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    859A.
    
    Controls and Procedures
    
    
    859B.
    
    Other Information
    
    
    87PART III10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    8811.
    
    Executive Compensation
    
    
    8812.
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    8813.
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    8914.
    
    Principal Accountant Fees and Services
    
    
    89PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    
    90EX-21.1EX-23.1EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
   
    
    Develop and deliver high quality, high performance enterprise business applications in a
timely and cost-effective manner.
    
    Measure, manage and communicate application service in business terms, and maintain
consistent, high levels of service delivery.
    
    Provide executive visibility, decision support and process automation across the entire IT
organization to enable all available resources to be harnessed in alignment with business
priorities.
      3




---



##### Table of Contents



OUR BUSINESS STRATEGY
     4




---



##### Table of Contents



PRODUCTS
  Year Ended March 31,
    
    
    Percentage of Total RevenuesProduct Revenue
    
    2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Mainframe ProductsFile-AID
    
    $
    148,134
    
    
    $
    157,207
    
    
    $
    157,730
    
    
    
    13.6
    %
    
    
    12.8
    %
    
    
    13.0
    %Xpediter
    
    
    88,863
    
    
    
    98,507
    
    
    
    98,949
    
    
    
    8.1
    
    
    
    8.0
    
    
    
    8.2Hiperstation
    
    
    17,147
    
    
    
    18,787
    
    
    
    18,002
    
    
    
    1.6
    
    
    
    1.5
    
    
    
    1.5Abend-AID
    
    
    118,309
    
    
    
    125,942
    
    
    
    127,538
    
    
    
    10.9
    
    
    
    10.3
    
    
    
    10.5Strobe
    
    
    77,948
    
    
    
    86,244
    
    
    
    82,588
    
    
    
    7.1
    
    
    
    7.0
    
    
    
    6.8Total Mainframe Products Revenue
    
    
    450,401
    
    
    
    486,687
    
    
    
    484,807
    
    
    
    41.3
    
    
    
    39.6
    
    
    
    40.0Distributed ProductsVantage
    
    
    114,568
    
    
    
    130,064
    
    
    
    107,993
    
    
    
    10.5
    
    
    
    10.6
    
    
    
    8.9Changepoint
    
    
    24,982
    
    
    
    28,479
    
    
    
    22,481
    
    
    
    2.3
    
    
    
    2.3
    
    
    
    1.8Uniface
    
    
    44,730
    
    
    
    48,493
    
    
    
    46,137
    
    
    
    4.1
    
    
    
    3.9
    
    
    
    3.8Quality
    
    
    47,730
    
    
    
    56,169
    
    
    
    53,019
    
    
    
    4.4
    
    
    
    4.6
    
    
    
    4.4DevPartner
    
    
    16,703
    
    
    
    23,988
    
    
    
    26,569
    
    
    
    1.5
    
    
    
    1.9
    
    
    
    2.2Total Distributed Products Revenue
    
    
    248,713
    
    
    
    287,193
    
    
    
    256,199
    
    
    
    22.8
    
    
    
    23.3
    
    
    
    21.1Total Product Revenue
    
    $
    699,114
    
    
    $
    773,880
    
    
    $
    741,006
    
    
    
    64.1
    %
    
    
    62.9
    %
    
    
    61.1
    %
 COMPUWARE SOFTWARE PRODUCTS
  MAINFRAME
 VANTAGE
 CHANGEPOINT
 UNIFACE
 QUALITY
 DEVPARTNER
 5




---



##### Table of Contents



MAINFRAME MARKET
   Mainframe Software Products
    File-AID
  Xpediter
  6




---



##### Table of Contents



Hiperstation
  Abend-AID
  Strobe
  DISTRIBUTED MARKET
  Distributed Software Products
   7




---



##### Table of Contents



Vantage
     Changepoint
     8




---



##### Table of Contents



Uniface
  
    
    Component based development, to develop individual components that will eventually
become uniquely designated business services. This is mostly done in web-based
environments.
    
    Process-driven design and development to create, orchestrate, monitor and tune the
business flows needed to activate and execute the services.
    
    Legacy integration facilities to preserve as many legacy assets as possible,
maximizing the return on investment and eliminating redevelopment risks.
  Quality
    DevPartner
   9




---



##### Table of Contents



SEASONALITY
  SOFTWARE LICENSING, PRODUCT MAINTENANCE AND CUSTOMER SUPPORT
      TECHNOLOGY DEVELOPMENT AND SUPPORT
   10




---



##### Table of Contents



PROFESSIONAL SERVICES
      APPLICATION SERVICES
    11




---



##### Table of Contents




    
    Covisint provides a portal framework for web-based communications across an
organizations extended enterprise and business communities.
    
    Covisint provides a robust business to business messaging engine that is capable of
receiving and distributing both structured and unstructured data.
    
    Covisint enables organizations and communities to implement a unified and leveraged
approach to managing digital identities and information security across a wide variety of
technologies and organizations. This leveraged approach results in reduced complexity with
increased consistency and policy enforcement when sharing information across multiple
participants.
 CUSTOMERS
   SALES AND MARKETING
  COMPETITION
   12




---



##### Table of Contents



PROPRIETARY RIGHTS
   13




---



##### Table of Contents



EMPLOYEES
  Executive Officers of the Registrant
  Name
    
    Age
    
    PositionPeter Karmanos, Jr.
    
    
    66
    
    
    Chairman of the Board and Chief Executive OfficerRobert C. Paul
    
    
    46
    
    
    President and Chief Operating OfficerLaura L. Fournier
    
    
    56
    
    
    Executive Vice President and Chief Financial OfficerPaul A. Czarnik
    
    
    53
    
    
    Chief Technology OfficerDenise A. Knobblock Starr
    
    
    54
    
    
    Executive Vice President and Chief Administrative OfficerDaniel S. Follis, Jr.
    
    
    43
    
    
    Vice President, General Counsel and Secretary
     14




---



##### Table of Contents



SEGMENT INFORMATION, PAYMENT TERMS AND FOREIGN REVENUES
  15




---



##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
  The majority of our software products revenue is dependent on our customers continued use of IBM
and IBM-compatible products.
  Our software product revenue is dependent on the acceptance of our pricing structure for software
licenses and maintenance.
  Our strategy of packaging distributed products and services as a single offering may not be
accepted by our customers, negatively impacting our revenue.
  We may fail to achieve our forecasted financial results due to inaccurate sales forecasts or other
factors. If we fail to meet the expectations of analysts or investors, our stock price could
decline substantially.
   Our quarterly financial results vary and may be adversely affected by a number of unpredictable
factors.
   16




---



##### Table of Contents



The continuing weakening in the United States and global economies may reduce demand for our
software products, professional services and application services, which may negatively affect our
revenues and operating results.
  If we are not successful in implementing our professional services strategy, our operating margins
may decline.
  The continuation of the decline in the U.S. domestic automotive manufacturing business could
adversely affect our professional services and application services businesses.
   If the fair value of our long-lived assets deteriorated below their carrying value, recognition of
an impairment loss would be required, which would adversely affect our financial results.
  Our software and technology may infringe the proprietary rights of others.
   17




---



##### Table of Contents



Our results could be adversely affected if our operating margin or operating margin percentage
decline.
  Our results could be adversely affected by increased competition, pricing pressures and
technological changes.
    18




---



##### Table of Contents



The market for professional services is highly competitive, fragmented and characterized by low
barriers to entry.
  The market for application services is in its early stages with emerging competitors. As the market
matures, competition may increase and could have a negative impact on our results of operations.
  We must develop or acquire product enhancements and new products to succeed.
  Acquisitions may be difficult to integrate, disrupt our business or divert the attention of our
management and may result in financial results that are different than expected.
   19




---



##### Table of Contents



The divestiture of our Quality and DevPartner product families may cause a reduction in customer
satisfaction, which could adversely affect our revenues and results of operations.
  We are exposed to exchange rate risks on foreign currencies and to other international risks that
may adversely affect our business and results of operations.
  Current laws may not adequately protect our proprietary rights.
  The loss of certain key employees and technical personnel or our inability to hire additional
qualified personnel could have a material adverse effect on our business.
  20




---



##### Table of Contents



Maintenance revenue could decline.
  Unanticipated changes in our operating results or effective tax rates, or exposure to additional
income tax liabilities, could affect our profitability.
    Our stock repurchase plan may be suspended or terminated at any time, which may result in a
decrease in our stock price.
  Acts of terrorism, acts of war and other unforeseen events may cause damage or disruption to us or
our customers, which could adversely affect our business, financial condition and operating
results.
  21




---



##### Table of Contents



Our articles of incorporation, bylaws and rights agreement as well as certain provisions of
Michigan law may have an anti-takeover effect.
  22




---



##### Table of Contents



ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
   
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  23




---



##### Table of Contents



PART II
 
 ITEM 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Fiscal Year Ended March 31, 2009
    
    High
    
    LowFourth quarter
    
    $
    7.35
    
    
    $
    5.18Third quarter
    
    
    9.69
    
    
    
    5.08Second quarter
    
    
    11.91
    
    
    
    9.08First quarter
    
    
    10.42
    
    
    
    6.97
 Fiscal Year Ended March 31, 2008
    
    High
    
    LowFourth quarter
    
    $
    8.91
    
    
    $
    6.10Third quarter
    
    
    10.44
    
    
    
    7.96Second quarter
    
    
    12.22
    
    
    
    7.32First quarter
    
    
    12.56
    
    
    
    9.44
 Common Share Repurchases
  Approximate dollarTotal number of
    
    
    value of sharesshares purchased as
    
    
    that may yet beTotal number of
    
    
    Average price paid
    
    
    part of publicly
    
    
    purchased under thePeriod
    
    shares purchased
    
    
    per share
    
    
    announced plans
    
    
    plan or program (1)For the month ended January 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    565,708,000For the month ended February 28, 2009
    
    
    1,938,000
    
    
    $
    5.90
    
    
    
    1,938,000
    
    
    
    554,267,000For the month ended March 31, 2009
    
    
    3,000,000
    
    
    
    5.80
    
    
    
    3,000,000
    
    
    
    536,861,000Total
    
    
    4,938,000
    
    
    
    5.84
    
    
    
    4,938,000
 
 (1)
    
    Our purchases of common stock may occur on the open market or in negotiated or
block transactions based upon market and business conditions. Unless terminated
earlier by resolution of our Board of Directors, the discretionary share repurchase
plan will expire when we have repurchased all shares authorized for repurchase
thereunder. The maximum amount of repurchase activity under the discretionary
program continues to be
limited on a daily basis to 25% of the average trading volume of our common stock for the 24




---



##### Table of Contents



previous four week period. In addition, no purchases are made during our
self-imposed trading black-out periods in which the Company and our insiders are
prohibited from trading in our common shares. Comparison of Cumulative Five Year Total Return
   
 25




---



##### Table of Contents



Total Return To Shareholders
 Base
    
    Indexed ReturnsPeriod
    
    Years EndingMarch 31,
    
    March 31,Company / Index
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009COMPUWARE CORP
    
    $
    100
    
    
    $
    97.17
    
    
    $
    105.67
    
    
    $
    128.07
    
    
    $
    99.06
    
    
    $
    88.93S&P 500 INDEX
    
    
    100
    
    
    
    106.69
    
    
    
    119.20
    
    
    
    133.31
    
    
    
    126.54
    
    
    
    78.34NASDAQ MARKET INDEX
    
    
    100
    
    
    
    100.44
    
    
    
    118.41
    
    
    
    122.81
    
    
    
    115.02
    
    
    
    76.35NASDAQ COMPUTER & DATA PROCESSING INDEX
    
    
    100
    
    
    
    106.72
    
    
    
    129.83
    
    
    
    143.09
    
    
    
    137.12
    
    
    
    98.37
  26




---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  Year Ended March 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except earnings per share data)Statement of Operations Data:Revenues:Software license fees
    
    $
    219,634
    
    
    $
    297,506
    
    
    $
    283,412
    
    
    $
    296,650
    
    
    $
    305,189Maintenance fees
    
    
    479,480
    
    
    
    476,374
    
    
    
    457,594
    
    
    
    433,596
    
    
    
    425,310Professional services fees
    
    
    391,341
    
    
    
    455,731
    
    
    
    471,996
    
    
    
    475,115
    
    
    
    501,340Total revenues
    
    
    1,090,455
    
    
    
    1,229,611
    
    
    
    1,213,002
    
    
    
    1,205,361
    
    
    
    1,231,839Operating expenses:Cost of software license fees
    
    
    24,491
    
    
    
    30,475
    
    
    
    28,581
    
    
    
    23,262
    
    
    
    27,293Cost of maintenance fees
    
    
    41,877
    
    
    
    46,300
    
    
    
    41,533
    
    
    
    41,687
    
    
    
    42,128Cost of professional services
    
    
    368,030
    
    
    
    413,921
    
    
    
    420,729
    
    
    
    417,485
    
    
    
    444,996Technology development and support
    
    
    86,453
    
    
    
    101,132
    
    
    
    114,071
    
    
    
    96,858
    
    
    
    111,258Sales and marketing
    
    
    226,408
    
    
    
    267,800
    
    
    
    281,730
    
    
    
    288,162
    
    
    
    319,940Administrative and general
    
    
    148,019
    
    
    
    182,488
    
    
    
    193,578
    
    
    
    190,538
    
    
    
    199,628Restructuring costs (1)
    
    
    10,037
    
    
    
    42,645Total operating expenses
    
    
    905,315
    
    
    
    1,084,761
    
    
    
    1,080,222
    
    
    
    1,057,992
    
    
    
    1,145,243Income from operations
    
    
    185,140
    
    
    
    144,850
    
    
    
    132,780
    
    
    
    147,369
    
    
    
    86,596Other income, net
    
    
    27,581
    
    
    
    35,542
    
    
    
    60,277
    
    
    
    44,091
    
    
    
    19,629Income before income taxes
    
    
    212,721
    
    
    
    180,392
    
    
    
    193,057
    
    
    
    191,460
    
    
    
    106,225Income tax provision
    
    
    73,074
    
    
    
    45,998
    
    
    
    34,965
    
    
    
    48,500
    
    
    
    29,743Net income
    
    $
    139,647
    
    
    $
    134,394
    
    
    $
    158,092
    
    
    $
    142,960
    
    
    $
    76,482Basic earnings per share (2)
    
    $
    0.56
    
    
    $
    0.47
    
    
    $
    0.45
    
    
    $
    0.37
    
    
    $
    0.20Diluted earnings per share (2)
    
    
    0.55
    
    
    
    0.47
    
    
    
    0.45
    
    
    
    0.37
    
    
    
    0.20Shares used in computing net income per share:Basic earnings computation
    
    
    250,916
    
    
    
    286,402
    
    
    
    350,213
    
    
    
    385,147
    
    
    
    386,701Diluted earnings computation
    
    
    252,402
    
    
    
    287,628
    
    
    
    350,967
    
    
    
    387,569
    
    
    
    388,501Balance Sheet Data (at period end):Working capital
    
    $
    297,237
    
    
    $
    274,036
    
    
    $
    391,823
    
    
    $
    899,773
    
    
    $
    780,223Total assets
    
    
    1,874,850
    
    
    
    2,018,557
    
    
    
    2,029,412
    
    
    
    2,510,968
    
    
    
    2,478,218Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareholders equity (3)
    
    
    880,648
    
    
    
    927,031
    
    
    
    1,132,148
    
    
    
    1,579,499
    
    
    
    1,516,155
 
 (1)
    
    During fiscal 2009 and 2008 the Company undertook various restructuring activities to improve
the effectiveness and efficiency of a number of the Companys critical business processes,
primarily within the products and professional services segments. These activities resulted in
a restructuring charge of $10.0 million and $42.6 million during fiscal 2009 and 2008,
respectively. See Note 7 of the Notes to Consolidated Financial Statements, included in Item
8 of this report, for more details regarding our restructuring plan.(2)
    
    See Notes 1 and 11 of the Notes to Consolidated Financial Statements, included in Item 8 of
this report, for the basis of computing earnings per share.(3)
    
    No dividends were paid or declared during the periods presented. 27




---



##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  OVERVIEW
    
    
    Develop and deliver high quality, high performance enterprise business applications in a
timely and cost-effective manner.
    
    Measure, manage and communicate application service in business terms, and maintain
consistent, high levels of service delivery.
    
    Provide executive visibility, decision support and process automation across the entire IT
organization to enable all available resources to be harnessed in alignment with business
priorities.
  28




---



##### Table of Contents



Annual Update
  
    
    Achieved an increase in product contribution margin to 45.8% in fiscal 2009 from
42.4% in fiscal 2008.
    
    Experienced a decrease in professional services segment contribution margin to 7.1%
in fiscal 2009 from 10.5% in fiscal 2008.
    
    Repurchased approximately 20.3 million shares of our common stock during fiscal 2009
at an average price of $9.49 per share.
    
    Initiated restructuring actions that resulted in a charge of $10 million, described
below under Restructuring Charges and in Note 7 of the Notes to Consolidated
Financial Statements, included in Item 8 of this report.
    
    Released 17 mainframe and 29 distributed product enhancements.
  
    
    Refined our software business strategy to focus on delivering superior end-to-end
application performance, which we call Business Service Delivery.
    
    Entered into a Letter of Intent to sell our Quality and DevPartner distributed
product families to an affiliate of Micro Focus International PLC (Micro Focus), and
executed the related asset purchase agreement in May 2009. The sale price in the
transaction is $80 million, less certain adjustments relating to cash collected or
invoiced for certain deferred maintenance obligations assumed by Micro Focus. We expect
to record a gain of approximately $50 million when this transaction closes which is
anticipated to be in the first quarter of fiscal 2010 (see Note 3 of the Notes to
Consolidated Financial Statements, included in Item 8 of this report).
    
    Advanced our application services segment business strategy with a focus on the
healthcare market while maintaining customer satisfaction in the automotive industry.
    
    Implemented a strategy and began executing a plan to have a smaller, more profitable
professional services segment.
 29




---



##### Table of Contents



RESULTS OF OPERATIONS
  Percentage of
    
    
    Period-to-PeriodTotal Revenues
    
    
    ChangeFiscal Year Ended
    
    
    2008
    
    
    2007March 31,
    
    
    to
    
    
    to2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008REVENUE:Software license fees
    
    
    20.1
    %
    
    
    24.2
    %
    
    
    23.4
    %
    
    
    (26.2
    )%
    
    
    5.0
    %Maintenance fees
    
    
    44.0
    
    
    
    38.7
    
    
    
    37.7
    
    
    
    0.7
    
    
    
    4.1Professional services segment revenue
    
    
    32.7
    
    
    
    34.1
    
    
    
    36.4
    
    
    
    (14.9
    )
    
    
    (5.3
    )Application services segment revenue
    
    
    3.2
    
    
    
    3.0
    
    
    
    2.5
    
    
    
    (5.2
    )
    
    
    24.3Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    (11.3
    )
    
    
    1.4OPERATING EXPENSES:Cost of software license fees
    
    
    2.2
    
    
    
    2.5
    
    
    
    2.4
    
    
    
    (19.6
    )
    
    
    6.6Cost of maintenance fees
    
    
    3.8
    
    
    
    3.7
    
    
    
    3.4
    
    
    
    (9.6
    )
    
    
    11.5Professional services segment expenses
    
    
    30.4
    
    
    
    30.5
    
    
    
    31.7
    
    
    
    (11.6
    )
    
    
    (2.5
    )Application services segment expenses
    
    
    3.4
    
    
    
    3.2
    
    
    
    3.0
    
    
    
    (5.8
    )
    
    
    7.5Technology development and support
    
    
    7.9
    
    
    
    8.2
    
    
    
    9.4
    
    
    
    (14.5
    )
    
    
    (11.3
    )Sales and marketing
    
    
    20.8
    
    
    
    21.8
    
    
    
    23.2
    
    
    
    (15.5
    )
    
    
    (4.9
    )Administrative and general
    
    
    13.6
    
    
    
    14.8
    
    
    
    16.0
    
    
    
    (18.9
    )
    
    
    (5.7
    )Restructuring costs
    
    
    0.9
    
    
    
    3.5
    
    
    
    
    
    
    
    (76.5
    )
    
    
    n/aTotal operating expenses
    
    
    83.0
    
    
    
    88.2
    
    
    
    89.1
    
    
    
    (16.5
    )
    
    
    0.4Income from operations
    
    
    17.0
    
    
    
    11.8
    
    
    
    10.9
    
    
    
    27.8
    
    
    
    9.1Other income, net
    
    
    2.5
    
    
    
    2.9
    
    
    
    5.0
    
    
    
    (22.4
    )
    
    
    (41.0
    )Income before income taxes
    
    
    19.5
    
    
    
    14.7
    
    
    
    15.9
    
    
    
    17.9
    
    
    
    (6.6
    )Income tax provision
    
    
    6.7
    
    
    
    3.8
    
    
    
    2.9
    
    
    
    58.9
    
    
    
    31.6Net income
    
    
    12.8
    %
    
    
    10.9
    %
    
    
    13.0
    %
    
    
    3.9
    
    
    
    (15.0
    )
 PRODUCTS SEGMENT
  Year Ended March 31,2009
    
    
    2008
    
    
    2007Revenue
    
    $
    699,114
    
    
    $
    773,880
    
    
    $
    741,006Expenses
    
    
    379,229
    
    
    
    445,707
    
    
    
    465,915Product segment contribution
    
    $
    319,885
    
    
    $
    328,173
    
    
    $
    275,091
   30




---



##### Table of Contents



Products Segment Revenue
  Fiscal Year Ended
    
    
    Period-to-Period ChangeMarch 31,
    
    
    2008 to
    
    
    2007 to2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008Software License FeesMainframe
    
    $
    113,014
    
    
    $
    151,278
    
    
    $
    146,612
    
    
    
    (25.3
    )%
    
    
    3.2
    %Distributed
    
    
    106,620
    
    
    
    146,228
    
    
    
    136,800
    
    
    
    (27.1
    )
    
    
    6.9Total Software
License Fees
    
    
    219,634
    
    
    
    297,506
    
    
    
    283,412
    
    
    
    (26.2
    )
    
    
    5.0Maintenance FeesMainframe
    
    
    337,387
    
    
    
    335,409
    
    
    
    338,195
    
    
    
    0.6
    
    
    
    (0.8
    )Distributed
    
    
    142,093
    
    
    
    140,965
    
    
    
    119,399
    
    
    
    0.8
    
    
    
    18.1Total Maintenance Fees
    
    
    479,480
    
    
    
    476,374
    
    
    
    457,594
    
    
    
    0.7
    
    
    
    4.1Total Product RevenueMainframe
    
    
    450,401
    
    
    
    486,687
    
    
    
    484,807
    
    
    
    (7.5
    )
    
    
    0.4Distributed
    
    
    248,713
    
    
    
    287,193
    
    
    
    256,199
    
    
    
    (13.4
    )
    
    
    12.1Total Product Revenue
    
    $
    699,114
    
    
    $
    773,880
    
    
    $
    741,006
    
    
    
    (9.7
    )
    
    
    4.4
  Year Ended March 31,2009
    
    
    2008
    
    
    2007United States
    
    $
    361,354
    
    
    $
    395,029
    
    
    $
    403,820Europe and Africa
    
    
    233,938
    
    
    
    258,467
    
    
    
    234,079Other international operations
    
    
    103,822
    
    
    
    120,384
    
    
    
    103,107Total product segment revenue
    
    $
    699,114
    
    
    $
    773,880
    
    
    $
    741,006
  Software license fees
   31




---



##### Table of Contents



Maintenance fees
    Product Segment Expenses
  Cost of software license fees
    Cost of maintenance fees
   32




---



##### Table of Contents



Technology development and support
  Year Ended March 31,2009
    
    
    2008
    
    
    2007Technology development and support costs incurred
    
    $
    98,829
    
    
    $
    113,693
    
    
    $
    135,455Capitalized technology development and support costs
    
    
    (12,376
    )
    
    
    (12,561
    )
    
    
    (21,384
    )Technology development and support costs expensed
    
    $
    86,453
    
    
    $
    101,132
    
    
    $
    114,071
   Sales and marketing costs
   Quality and DevPartner Divestiture
 33




---



##### Table of Contents



PROFESSIONAL SERVICES SEGMENT
  Year Ended March 31, *2009
    
    
    2008
    
    
    2007Revenue
    
    $
    356,111
    
    
    $
    418,559
    
    
    $
    442,082Expenses
    
    
    331,001
    
    
    
    374,626
    
    
    
    384,189Professional services segment contribution
    
    $
    25,110
    
    
    $
    43,933
    
    
    $
    57,893
 
 *
    
    The professional services segment and the application services segments are combined and reported as
professional services on the consolidated statement of operations, included in Item 8 of this report.  Year Ended March 31,2009
    
    
    2008
    
    
    2007United States
    
    $
    288,439
    
    
    $
    342,519
    
    
    $
    371,448Europe and Africa
    
    
    58,419
    
    
    
    68,170
    
    
    
    65,050Other international operations
    
    
    9,253
    
    
    
    7,870
    
    
    
    5,584Total professional services segment
revenue
    
    $
    356,111
    
    
    $
    418,559
    
    
    $
    442,082
    2009 Restructuring
    34




---



##### Table of Contents



Professional Services Segment Revenue
     Professional Services Segment Expenses
  Quality and DevPartner Divestiture
 35




---



##### Table of Contents



APPLICATION SERVICES SEGMENT
   Year Ended March 31, *2009
    
    
    2008
    
    
    2007Revenue
    
    $
    35,230
    
    
    $
    37,172
    
    
    $
    29,914Expenses
    
    
    37,029
    
    
    
    39,295
    
    
    
    36,540Application services segment loss
    
    $
    (1,799
    )
    
    $
    (2,123
    )
    
    $
    (6,626
    )
 
 *
    
    The professional services segment and the application services segments are combined and reported as
professional services on the consolidated statement of operations, included in Item 8 of this report.    Application Services Segment Revenue
    Year Ended March 31,2009
    
    
    2008
    
    
    2007United States
    
    $
    29,580
    
    
    $
    32,447
    
    
    $
    25,317Europe and Africa
    
    
    3,264
    
    
    
    2,833
    
    
    
    2,427Other international operations
    
    
    2,386
    
    
    
    1,892
    
    
    
    2,170Total application services segment revenue
    
    $
    35,230
    
    
    $
    37,172
    
    
    $
    29,914
 Application Services Segment Expenses
  36




---



##### Table of Contents



CORPORATE AND OTHER EXPENSES
 Administrative and general expenses
   Other income, net (other income)
   Income taxes
 37




---



##### Table of Contents



RESTRUCTURING CHARGE
 2009 Restructuring Initiative
    2008 Restructuring Initiative
   38




---



##### Table of Contents



MANAGEMENTS DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Product Revenue Recognition
    39




---



##### Table of Contents



Professional Services Fees
 Allowance for Doubtful Accounts
 Capitalized Software
 40




---



##### Table of Contents



Impairment of Goodwill and Other Intangible Assets 
     Deferred Tax Assets Valuation Allowance and Tax Liabilities
  41




---



##### Table of Contents



Stock-Based Compensation
   Other 
 42




---



##### Table of Contents



Liquidity and Capital Resources
  Fiscal 2009 compared to Fiscal 2008
       Net cash provided by investing activities:
  43




---



##### Table of Contents



Net cash used in financing activities:
       44




---



##### Table of Contents



Fiscal 2008 compared to Fiscal 2007
 Net cash provided by operating activities:
     Net cash provided by investing activities:
  Net cash used in financing activities:
   45




---



##### Table of Contents



Recently Issued Accounting Pronouncements
 Determination of the Useful Life of Intangible Assets
   
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  46




---



##### Table of Contents



Contractual Obligations
  Payment Due by Period as of March 31,2015 andTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterContractual obligations:Operating leases
    
    $
    268,815
    
    
    $
    23,888
    
    
    $
    14,948
    
    
    $
    9,471
    
    
    $
    6,308
    
    
    $
    1,676
    
    
    $
    212,524Other
    
    
    13,900
    
    
    
    5,600
    
    
    
    3,450
    
    
    
    3,450
    
    
    
    450
    
    
    
    450
    
    
    
    500Total
    
    $
    282,715
    
    
    $
    29,488
    
    
    $
    18,398
    
    
    $
    12,921
    
    
    $
    6,758
    
    
    $
    2,126
    
    
    $
    213,024
   Off-Balance Sheet Arrangements
  47




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Risk
    Foreign Currency Risk
   48




---



##### Table of Contents



Contract
    
    
    Maturity
    
    
    
    
    
    
    Forward
    
    
    Fairdate in
    
    
    date in
    
    
    Contract
    
    
    Position in
    
    
    Value at2009
    
    
    2009
    
    
    Rate
    
    
    U.S. Dollars
    
    
    March 31, 2009Forward SalesAustralian Dollar
    
    March 31
    
    April 30
    
    
    1.4726
    
    
    $
    679
    
    
    $
    695Euro Dollar
    
    March 31
    
    April 30
    
    
    0.7568
    
    
    
    1,236
    
    
    
    1,242Japanese Yen
    
    March 31
    
    April 30
    
    
    98.7170
    
    
    
    912
    
    
    
    910South African Rand
    
    March 31
    
    April 30
    
    
    9.6345
    
    
    
    2,232
    
    
    
    2,2685,059
    
    
    
    5,115Forward PurchasesCanadian Dollar
    
    March 31
    
    April 30
    
    
    1.2495
    
    
    
    1,120
    
    
    
    1,110Pounds Sterling
    
    March 31
    
    April 30
    
    
    0.7019
    
    
    
    1,710
    
    
    
    1,722Hong Kong Dollar
    
    March 31
    
    April 30
    
    
    7.7437
    
    
    
    1,324
    
    
    
    1,323Singapore Dollar
    
    March 31
    
    April 30
    
    
    1.5219
    
    
    
    1,413
    
    
    
    1,414$
    5,567
    
    
    $
    5,569
 49




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
 Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
 
 50




---



##### Table of Contents



COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2009 AND 2008
(In Thousands, Except Share Data)
 
 Notes
    
    
    2009
    
    
    2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    
    
    
    
    $
    278,112
    
    
    $
    215,943Investments
    
    
    
    
    
    
    
    
    
    
    70,474Accounts receivable, net
    
    
    
    
    
    
    472,011
    
    
    
    535,094Deferred tax asset, net
    
    
    12
    
    
    
    37,359
    
    
    
    44,374Income taxes refundable
    
    
    
    
    
    
    2,578
    
    
    
    3,746Prepaid expenses and other current assets
    
    
    
    
    
    
    41,350
    
    
    
    49,285Assets held for sale
    
    
    3
    
    
    
    27,354Total current assets
    
    
    
    
    
    
    858,764
    
    
    
    918,916PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION
    
    
    2,4
    
    
    
    353,182
    
    
    
    365,691CAPITALIZED SOFTWARE, LESS ACCUMULATED
AMORTIZATION
    
    
    2,8
    
    
    
    35,763
    
    
    
    61,653OTHER:Accounts receivable
    
    
    
    
    
    
    224,681
    
    
    
    244,388Goodwill
    
    
    2,8
    
    
    
    339,134
    
    
    
    356,267Deferred tax asset, net
    
    
    12
    
    
    
    30,851
    
    
    
    35,851Other assets
    
    
    5,8
    
    
    
    32,475
    
    
    
    35,791Total other assets
    
    
    
    
    
    
    627,141
    
    
    
    672,297TOTAL ASSETS
    
    
    
    
    
    $
    1,874,850
    
    
    $
    2,018,557
 Notes
    
    
    2009
    
    
    2008LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    
    
    
    
    $
    13,796
    
    
    $
    18,772Accrued expenses
    
    
    7
    
    
    
    70,260
    
    
    
    105,152Accrued bonuses and commissions
    
    
    
    
    
    
    16,945
    
    
    
    43,116Income taxes payable
    
    
    
    
    
    
    24,646
    
    
    
    4,976Deferred revenue
    
    
    
    
    
    
    409,410
    
    
    
    472,864Liabilities held for sale
    
    
    3
    
    
    
    26,470Total current liabilities
    
    
    
    
    
    
    561,527
    
    
    
    644,880DEFERRED REVENUE
    
    
    
    
    
    
    378,094
    
    
    
    399,548ACCRUED EXPENSES
    
    
    7
    
    
    
    30,111
    
    
    
    19,513DEFERRED TAX LIABILITY, NET
    
    
    12
    
    
    
    24,470
    
    
    
    27,585Total liabilities
    
    
    
    
    
    
    994,202
    
    
    
    1,091,526COMMITMENTS AND CONTINGENCIES
    
    
    14SHAREHOLDERS EQUITY:Preferred stock, no par value   authorized
5,000,000 shares
    
    
    10Common stock, $.01 par value  authorized
1,600,000,000 shares; issued and outstanding
241,798,493 and 261,638,483 shares in 2009
and 2008, respectively
    
    
    10,15
    
    
    
    2,418
    
    
    
    2,616Additional paid-in capital
    
    
    
    
    
    
    628,955
    
    
    
    643,544Retained earnings
    
    
    
    
    
    
    249,897
    
    
    
    261,754Accumulated other comprehensive income (loss)
    
    
    
    
    
    
    (622
    )
    
    
    19,117Total shareholders equity
    
    
    
    
    
    
    880,648
    
    
    
    927,031TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    
    
    $
    1,874,850
    
    
    $
    2,018,557
  51




---



##### Table of Contents



COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2009, 2008 and 2007
(In Thousands, Except Per Share Data)
 
 Notes
    
    
    2009
    
    
    2008
    
    
    2007REVENUES:Software license fees
    
    
    
    
    
    $
    219,634
    
    
    $
    297,506
    
    
    $
    283,412Maintenance fees
    
    
    
    
    
    
    479,480
    
    
    
    476,374
    
    
    
    457,594Professional services fees
    
    
    
    
    
    
    391,341
    
    
    
    455,731
    
    
    
    471,996Total revenues
    
    
    
    
    
    
    1,090,455
    
    
    
    1,229,611
    
    
    
    1,213,002OPERATING EXPENSES:Cost of software license fees
    
    
    
    
    
    
    24,491
    
    
    
    30,475
    
    
    
    28,581Cost of maintenance fees
    
    
    
    
    
    
    41,877
    
    
    
    46,300
    
    
    
    41,533Cost of professional services
    
    
    
    
    
    
    368,030
    
    
    
    413,921
    
    
    
    420,729Technology development and support
    
    
    
    
    
    
    86,453
    
    
    
    101,132
    
    
    
    114,071Sales and marketing
    
    
    
    
    
    
    226,408
    
    
    
    267,800
    
    
    
    281,730Administrative and general
    
    
    
    
    
    
    148,019
    
    
    
    182,488
    
    
    
    193,578Restructuring costs
    
    
    7
    
    
    
    10,037
    
    
    
    42,645Total operating expenses
    
    
    
    
    
    
    905,315
    
    
    
    1,084,761
    
    
    
    1,080,222INCOME FROM OPERATIONS
    
    
    
    
    
    
    185,140
    
    
    
    144,850
    
    
    
    132,780OTHER INCOME (EXPENSE)Interest income
    
    
    
    
    
    
    10,776
    
    
    
    19,910
    
    
    
    39,427Settlement
    
    
    14
    
    
    
    17,943
    
    
    
    16,160
    
    
    
    10,598Gain on sale of investment in partially owned company
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    11,250Other
    
    
    5
    
    
    
    (1,138
    )
    
    
    (528
    )
    
    
    (998
    )Other income, net
    
    
    
    
    
    
    27,581
    
    
    
    35,542
    
    
    
    60,277INCOME BEFORE INCOME TAXES
    
    
    
    
    
    
    212,721
    
    
    
    180,392
    
    
    
    193,057INCOME TAX PROVISION
    
    
    12
    
    
    
    73,074
    
    
    
    45,998
    
    
    
    34,965NET INCOME
    
    
    
    
    
    $
    139,647
    
    
    $
    134,394
    
    
    $
    158,092Basic earnings per share
    
    
    11
    
    
    $
    0.56
    
    
    $
    0.47
    
    
    $
    0.45Diluted earnings per share
    
    
    11
    
    
    $
    0.55
    
    
    $
    0.47
    
    
    $
    0.45
  52




---



##### Table of Contents



COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
YEARS ENDED MARCH 31, 2009, 2008 and 2007
(In Thousands, Except Share Data)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income/(Loss)
    
    
    Equity
    
    
    IncomeBALANCE AT APRIL 1, 2006
    
    
    377,903,799
    
    
    $
    3,779
    
    
    $
    763,420
    
    
    $
    805,781
    
    
    $
    6,519
    
    
    $
    1,579,499Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,092
    
    
    
    
    
    
    
    158,092
    
    
    $
    158,092Unrealized gain on marketable securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    71
    
    
    
    71Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,709
    
    
    
    4,709
    
    
    
    4,709Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    162,872Issuance of common stock and related tax benefit
    
    
    599,442
    
    
    
    6
    
    
    
    4,737
    
    
    
    
    
    
    
    
    
    
    
    4,743Repurchase of common stock
    
    
    (82,301,156
    )
    
    
    (823
    )
    
    
    (171,878
    )
    
    
    (511,214
    )
    
    
    
    
    
    
    (683,915
    )Acquisition tax benefits
    
    
    
    
    
    
    
    
    
    
    5,257
    
    
    
    
    
    
    
    
    
    
    
    5,257Exercise of employee stock options
and related tax benefit (Note 15)
    
    
    6,829,702
    
    
    
    68
    
    
    
    62,692
    
    
    
    (8,500
    )
    
    
    
    
    
    
    54,260Stock option compensation
    
    
    
    
    
    
    
    
    
    
    9,432
    
    
    
    
    
    
    
    
    
    
    
    9,432BALANCE AT MARCH 31, 2007
    
    
    303,031,787
    
    
    
    3,030
    
    
    
    673,660
    
    
    
    444,159
    
    
    
    11,299
    
    
    
    1,132,148Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,394
    
    
    
    
    
    
    
    134,394
    
    
    $
    134,394Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,818
    
    
    
    7,818
    
    
    
    7,818Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    142,212Issuance of common stock and related tax benefit
    
    
    476,765
    
    
    
    5
    
    
    
    4,044
    
    
    
    
    
    
    
    
    
    
    
    4,049Repurchase of common stock
    
    
    (48,961,919
    )
    
    
    (490
    )
    
    
    (117,910
    )
    
    
    (315,430
    )
    
    
    
    
    
    
    (433,830
    )Acquisition tax benefits
    
    
    
    
    
    
    
    
    
    
    5,090
    
    
    
    
    
    
    
    
    
    
    
    5,090Exercise of employee stock options
and related tax benefit (Note 15)
    
    
    7,091,850
    
    
    
    71
    
    
    
    67,107
    
    
    
    
    
    
    
    
    
    
    
    67,178Stock option compensation
    
    
    
    
    
    
    
    
    
    
    11,553
    
    
    
    
    
    
    
    
    
    
    
    11,553Adjustment to initially adopt FIN 48 (Note 12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,369
    )
    
    
    
    
    
    
    (1,369
    )BALANCE AT MARCH 31, 2008
    
    
    261,638,483
    
    
    
    2,616
    
    
    
    643,544
    
    
    
    261,754
    
    
    
    19,117
    
    
    
    927,031Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,647
    
    
    
    
    
    
    
    139,647
    
    
    $
    139,647Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,739
    )
    
    
    (19,739
    )
    
    
    (19,739
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    119,908Issuance of common stock and related tax benefit
    
    
    404,567
    
    
    
    4
    
    
    
    3,092
    
    
    
    
    
    
    
    
    
    
    
    3,096Repurchase of common stock
    
    
    (21,586,560
    )
    
    
    (216
    )
    
    
    (54,322
    )
    
    
    (151,504
    )
    
    
    
    
    
    
    (206,042
    )Acquisition tax benefits
    
    
    
    
    
    
    
    
    
    
    5,059
    
    
    
    
    
    
    
    
    
    
    
    5,059Exercise of employee stock options
and related tax benefit (Note 15)
    
    
    1,342,003
    
    
    
    14
    
    
    
    11,114
    
    
    
    
    
    
    
    
    
    
    
    11,128Stock awards compensation
    
    
    
    
    
    
    
    
    
    
    15,637
    
    
    
    
    
    
    
    
    
    
    
    15,637Director phantom stock conversion (Note 14)
    
    
    
    
    
    
    
    
    
    
    4,831
    
    
    
    
    
    
    
    
    
    
    
    4,831BALANCE AT MARCH 31, 2009
    
    
    241,798,493
    
    
    $
    2,418
    
    
    $
    628,955
    
    
    $
    249,897
    
    
    $
    (622
    )
    
    $
    880,648
  53




---



##### Table of Contents



COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2009, 2008 and 2007
(In Thousands)
 2009
    
    
    2008
    
    
    2007CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:Net income
    
    $
    139,647
    
    
    $
    134,394
    
    
    $
    158,092Adjustments to reconcile net income to cash provided by
operations:Depreciation and amortization
    
    
    53,129
    
    
    
    55,167
    
    
    
    55,026Property and equipment impairment
    
    
    662
    
    
    
    2,981Capitalized software impairment
    
    
    
    
    
    
    3,873Gain on sale of investment in partially owned company
    
    
    
    
    
    
    
    
    
    
    (11,250
    )Issuance of common stock to Employee Stock Ownership Trust
    
    
    
    
    
    
    
    
    
    
    200Acquisition tax benefits
    
    
    5,059
    
    
    
    5,090
    
    
    
    5,257Stock award compensation
    
    
    15,637
    
    
    
    11,553
    
    
    
    9,432Deferred income taxes
    
    
    4,986
    
    
    
    (2,022
    )
    
    
    6,953Other
    
    
    413
    
    
    
    1,474
    
    
    
    (208
    )Net change in assets and liabilities, net of effects from
acquisitions and currency fluctuations:Accounts receivable
    
    
    17,853
    
    
    
    (64,019
    )
    
    
    61,202Prepaid expenses and other current assets
    
    
    3,555
    
    
    
    (7,120
    )
    
    
    (13,857
    )Other assets
    
    
    (3,641
    )
    
    
    640
    
    
    
    (1,211
    )Accounts payable and accrued expenses
    
    
    (29,623
    )
    
    
    (837
    )
    
    
    (46,483
    )Deferred revenue
    
    
    4,015
    
    
    
    64,875
    
    
    
    (38,448
    )Income taxes
    
    
    20,316
    
    
    
    28,641
    
    
    
    20,027Net cash provided by operating activities
    
    
    232,008
    
    
    
    234,690
    
    
    
    204,732CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:Purchase of:Businesses, net of cash acquired
    
    
    
    
    
    
    (4,649
    )
    
    
    (51,818
    )Property and equipment
    
    
    (17,943
    )
    
    
    (10,498
    )
    
    
    (18,590
    )Capitalized software
    
    
    (15,072
    )
    
    
    (14,359
    )
    
    
    (21,457
    )Proceeds from sale of property
    
    
    
    
    
    
    
    
    
    
    15,466Proceeds from sale of investment in partially owned company
    
    
    
    
    
    
    
    
    
    
    11,250Investments:Proceeds
    
    
    70,212
    
    
    
    106,717
    
    
    
    495,371Purchases
    
    
    
    
    
    
    
    
    
    
    (376,387
    )Net cash provided by investing activities
    
    
    37,197
    
    
    
    77,211
    
    
    
    53,835CASH FLOWS USED IN FINANCING ACTIVITIES:Net proceeds from exercise of stock options including excess tax benefits
    
    
    11,237
    
    
    
    67,178
    
    
    
    54,364Employee contribution to common stock purchase plans
    
    
    2,986
    
    
    
    4,066
    
    
    
    4,635Repurchase of common stock
    
    
    (206,042
    )
    
    
    (440,988
    )
    
    
    (676,757
    )Net cash used in financing activities
    
    
    (191,819
    )
    
    
    (369,744
    )
    
    
    (617,758
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (15,217
    )
    
    
    13,105
    
    
    
    7,810NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    62,169
    
    
    
    (44,738
    )
    
    
    (351,381
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    215,943
    
    
    
    260,681
    
    
    
    612,062CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    278,112
    
    
    $
    215,943
    
    
    $
    260,681
  54




---



##### Table of Contents



COMPUWARE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2009, 2008 and 2007
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business
  Basis of Presentation
  Revenue Recognition
  Software license fees
  55




---



##### Table of Contents



Maintenance fees
 Professional services fees
 Deferred revenue
 56




---



##### Table of Contents



Collection and remittance of taxes
 Cash and Cash Equivalents
  Investments
    Allowance for Doubtful Accounts
   Increase in allowance
    
    AccountsBalance at
    
    charged
    
    resulting
    
    charged
    
    Balance atbeginning
    
    against
    
    from
    
    against the
    
    end ofAllowance for doubtful accounts:
    
    of period
    
    income
    
    acquisitions
    
    allowance (1)
    
    periodYear ended March
31, 2009
    
    $
    6,429
    
    
    $
    2,747
    
    
    
    
    
    
    $
    (1,750
    )
    
    $
    7,426Year ended March
31, 2008
    
    
    8,930
    
    
    
    1,412
    
    
    
    
    
    
    
    (3,913
    )
    
    
    6,429Year ended March
31, 2007
    
    
    12,263
    
    
    
    1,168
    
    
    $
    15
    
    
    
    (4,516
    )
    
    
    8,930
 
 (1)
    
    Write-off of uncollectible accounts and product maintenance cancellations. Concentration of Credit Risk
  57




---



##### Table of Contents



Property and Equipment
  Capitalized Software
    Year Ended March 31,2009
    
    
    2008
    
    
    2007Technology development and support costs incurred
    
    $
    98,829
    
    
    $
    113,693
    
    
    $
    135,455Capitalized technology development and support costs
    
    
    (12,376
    )
    
    
    (12,561
    )
    
    
    (21,384
    )Technology development and support costs expensed
    
    $
    86,453
    
    
    $
    101,132
    
    
    $
    114,071
    58




---



##### Table of Contents



Goodwill and Other Intangible Assets
  Fair Value of Financial Instruments
  Income Taxes
    Foreign Currency Translation
  59




---



##### Table of Contents



Foreign Currency Transactions and Derivatives
   Stock-Based Compensation
   Year Ended March 31,2009
    
    2008
    
    2007Expected volatility
    
    
    54.17
    %
    
    
    59.34
    %
    
    
    68.75
    %Risk-free interest rate
    
    
    3.23
    %
    
    
    4.15
    %
    
    
    4.82
    %Expected lives at date of grant (in years)
    
    
    6.3
    
    
    
    6.8
    
    
    
    6.9Weighted average fair value of the options granted
    
    $
    4.27
    
    
    $
    6.07
    
    
    $
    5.04
    Earnings Per Share (EPS)
  60




---



##### Table of Contents



Recently Issued Accounting Pronouncements
 Determination of the Useful Life of Intangible Assets
   
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  61




---



##### Table of Contents



2. ACQUISITIONS
     62




---



##### Table of Contents



3. HELD FOR SALE AND OTHER DIVESTITURES
 Quality and DevPartner Divestiture
     Assets:Prepaid expenses and other current assets
    
    $
    215Property and equipment, less accumulated
depreciation and amortization
    
    
    345Capitalized software, less accumulated amortization
    
    
    17,061Goodwill
    
    
    9,733Total assets held for sale
    
    $
    27,354Liabilities:Current deferred revenue
    
    $
    20,008Non-current deferred revenue
    
    
    6,462Total liabilities held for sale
    
    $
    26,470
  Employee Transition Agreement
  63




---



##### Table of Contents



4. PROPERTY AND EQUIPMENT
  March 31,2009
    
    
    2008Buildings and improvements
    
    $
    371,841
    
    
    $
    370,924Leasehold improvements
    
    
    18,452
    
    
    
    24,135Furniture and fixtures
    
    
    77,229
    
    
    
    78,317Computer equipment and software
    
    
    67,914
    
    
    
    80,346535,436
    
    
    
    553,722Less accumulated depreciation and
amortization
    
    
    182,254
    
    
    
    188,031Net property and equipment
    
    $
    353,182
    
    
    $
    365,691
    64




---



##### Table of Contents



5. INVESTMENTS IN PARTIALLY OWNED COMPANIES
        65




---



##### Table of Contents



6. RELATED PARTY TRANSACTIONS
    66




---



##### Table of Contents



7. RESTRUCTURING CHARGES
 Fiscal 2009 Restructuring Plan
      Fiscal 2008 Restructuring Plan
  67




---



##### Table of Contents



Restructuring Summary
  Employee
    
    
    Facilities Costs
    
    
    
    
    
    
    TotalTermination
    
    
    (Primarily Lease
    
    
    
    
    
    
    RestructuringBenefits
    
    
    Abandonments)
    
    
    Other
    
    
    ChargeAccrual at March 31, 2006
    
    
    
    
    
    $
    5,950
    
    
    
    
    
    
    $
    5,950Paid during fiscal 2007
    
    
    
    
    
    
    (1,748
    )
    
    
    
    
    
    
    (1,748
    )Adjustments during fiscal 2007 (1)
    
    
    
    
    
    
    (1,783
    )
    
    
    
    
    
    
    (1,783
    )Accrual at March 31, 2007
    
    
    
    
    
    
    2,419
    
    
    
    
    
    
    
    2,419Expenses incurred during
fiscal 2008
    
    $
    33,295
    
    
    
    8,199
    
    
    $
    1,151
    
    
    
    42,645Paid during fiscal 2008
    
    
    (25,881
    )
    
    
    (2,921
    )
    
    
    (1,066
    )
    
    
    (29,868
    )Non-cash charges during
fiscal 2008
    
    
    (4,759
    )
    
    
    (2,981
    )
    
    
    
    
    
    
    (7,740
    )Accrual at March 31, 2008
    
    
    2,655
    
    
    
    4,716
    
    
    
    85
    
    
    
    7,456Expenses incurred during
fiscal 2009
    
    
    8,352
    
    
    
    1,482
    
    
    
    203
    
    
    
    10,037Paid during fiscal 2009
    
    
    (8,757
    )
    
    
    (3,927
    )
    
    
    (275
    )
    
    
    (12,959
    )Non-cash charges during
fiscal 2009
    
    
    (976
    )
    
    
    
    
    
    
    
    
    
    
    (976
    )Accrual at March 31, 2009 (2)
    
    $
    1,274
    
    
    $
    2,271
    
    
    $
    13
    
    
    $
    3,558
 
 (1)
    
    During fiscal 2007, the Company recorded a reduction of $1.8 million in the
restructuring accrual primarily related to income from subleases of abandoned lease space
in excess of what was originally anticipated. These adjustments were included in
administrative and general in the consolidated statements of operations.(2)
    
    As of March 31, 2009, $2.3 million of the restructuring accrual is recorded in
current accrued expenses with the remaining balance of $1.3 million recorded in
long-term accrued expenses in the consolidated balance sheets.The accruals for employee termination benefits at March 31, 2009 primarily represent the
amounts to be paid to employees that have been terminated as a result of initiatives
described above.The accruals for facilities costs at March 31, 2009 represent the remaining fair value of
lease obligations for exited and demised locations, as determined at the cease-use dates of
those facilities, net of estimated sublease income that could be reasonably obtained in the
future,
and will be paid out over the remaining lease terms, the last of which ends in fiscal 2013.
Projected sublease income is based on managements estimates, which are subject to change. 68




---



##### Table of Contents



8. GOODWILL AND INTANGIBLE ASSETS
  March 31, 2009Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountUnamortized intangible assets:Trademarks (1)
    
    $
    5,784
    
    
    
    
    
    
    $
    5,784Amortized intangible assets:Capitalized software (2, 5)
    
    $
    317,569
    
    
    $
    (281,806
    )
    
    $
    35,763Customer relationship agreements (3)
    
    
    13,218
    
    
    
    (10,751
    )
    
    
    2,467Non-compete agreements (3)
    
    
    2,561
    
    
    
    (2,516
    )
    
    
    45Other (4)
    
    
    6,849
    
    
    
    (6,684
    )
    
    
    165Total amortized intangible assets
    
    $
    340,197
    
    
    $
    (301,757
    )
    
    $
    38,440
 March 31, 2008Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountUnamortized intangible assets:Trademarks (1)
    
    $
    5,984
    
    
    
    
    
    
    $
    5,984Amortized intangible assets:Capitalized software (2)
    
    $
    341,127
    
    
    $
    (279,474
    )
    
    $
    61,653Customer relationship agreements (3)
    
    
    14,270
    
    
    
    (8,482
    )
    
    
    5,788Non-compete agreements (3)
    
    
    2,948
    
    
    
    (2,660
    )
    
    
    288Other (4)
    
    
    6,891
    
    
    
    (6,396
    )
    
    
    495Total amortized intangible assets
    
    $
    365,236
    
    
    $
    (297,012
    )
    
    $
    68,224
 
 (1)
    
    Certain trademarks were acquired as part of the Covisint and Changepoint acquisitions in
fiscal 2004 and 2005. These trademarks are deemed to have an indefinite life and therefore are
not being amortized.(2)
    
    During fiscal 2008, the Company recorded a capitalized software impairment charge of $3.9
million associated with certain of its DevPartner and OptimalJ products due to declining
demand for this technology.(3)
    
    Customer relationship agreements and non-compete agreements were acquired as part of recent
acquisitions. The customer relationship agreements are being amortized over periods up to five
years. The non-compete agreements are being amortized over periods up to three years.(4)
    
    Other amortized intangible assets include trademarks associated with product acquisitions and
are being amortized over periods up to ten years.(5)
    
    As of March 31, 2009, the gross carrying amount, accumulated amortization and net carrying
amount for capitalized software reflects the reclassification of $35.3 million, $(18.2)
million and $17.1 million, respectively, to assets held for sale due to the divestiture of the
Quality and
DevPartner product lines. See Note 3 to the consolidated financial statements for additional
details. 69




---



##### Table of Contents



Year Ended March 31,2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterCapitalized software
    
    $
    12,846
    
    
    $
    9,885
    
    
    $
    7,174
    
    
    $
    3,814
    
    
    $
    1,945
    
    
    $
    99Customer relationships
    
    
    1,198
    
    
    
    838
    
    
    
    385
    
    
    
    46Non-compete agreements
    
    
    45Other
    
    
    165Total
    
    $
    14,254
    
    
    $
    10,723
    
    
    $
    7,559
    
    
    $
    3,860
    
    
    $
    1,945
    
    
    $
    99
  Professional
    
    
    ApplicationProducts
    
    
    Services
    
    
    Services
    
    
    TotalGoodwill:Balance at March 31, 2007, net
    
    $
    203,748
    
    
    $
    141,735
    
    
    $
    8,199
    
    
    $
    353,682Acquisitions
    
    
    
    
    
    
    
    
    
    
    3,272
    
    
    
    3,272Adjustments to previously recorded
purchase price (1)
    
    
    (1,270
    )
    
    
    59
    
    
    
    
    
    
    
    (1,211
    )Effect of foreign currency translation
    
    
    24
    
    
    
    500
    
    
    
    
    
    
    
    524Balance at March 31, 2008, net
    
    
    202,502
    
    
    
    142,294
    
    
    
    11,471
    
    
    
    356,267Assets held for sale reclassification (2)
    
    
    (9,733
    )
    
    
    
    
    
    
    
    
    
    
    (9,733
    )Adjustments to previously recorded
purchase price (1)
    
    
    (373
    )
    
    
    
    
    
    
    61
    
    
    
    (312
    )Effect of foreign currency translation
    
    
    (5,230
    )
    
    
    (1,858
    )
    
    
    
    
    
    
    (7,088
    )Balance at March 31, 2009, net
    
    $
    187,166
    
    
    $
    140,436
    
    
    $
    11,532
    
    
    $
    339,134
 
 (1)
    
    The adjustment to goodwill in fiscal 2009 and 2008 primarily relates to pre-acquisition
tax contingency adjustments.(2)
    
    The assets held for sale reclassification from goodwill relates to the divestiture of
the Companys Quality and DevPartner product lines (see Note 3 to the consolidated
financial statements for more details) and is based on the fair value of these product
lines in relation to the fair value of the product segment.   70




---



##### Table of Contents



9. DEBT
      10. CAPITAL STOCK
 Preferred Stock Purchase Rights
  71




---



##### Table of Contents



Stock Repurchase Plans
   Balance RemainingCommon Shares
    
    for FutureDate
    
    Amount
    
    Acquired During Fiscal

    
    Purchases atAuthorized
    
    Authorized
    
    2007
    
    2008
    
    2009
    
    March 31, 2009April 2006
    
    $
    125,000
    
    
    
    17,631August 2006
    
    $
    300,000
    
    
    
    36,169December 2006
    
    $
    200,000
    
    
    
    10,504
    
    
    
    11,673August 2007
    
    $
    200,000
    
    
    
    
    
    
    
    23,285February 2008
    
    $
    750,000
    
    
    
    
    
    
    
    2,687
    
    
    
    20,287
    
    
    $
    536,861
  72




---



##### Table of Contents



11. EARNINGS PER COMMON SHARE
  Year Ended March 31,2009
    
    
    2008
    
    
    2007Basic earnings per share:Numerator: Net income
    
    $
    139,647
    
    
    $
    134,394
    
    
    $
    158,092Denominator:Weighted-average common shares outstanding
    
    
    250,916
    
    
    
    286,402
    
    
    
    350,213Basic earnings per share
    
    $
    0.56
    
    
    $
    0.47
    
    
    $
    0.45Diluted earnings per share:Numerator: Net income
    
    $
    139,647
    
    
    $
    134,394
    
    
    $
    158,092Denominator:Weighted-average common shares outstanding
    
    
    250,916
    
    
    
    286,402
    
    
    
    350,213Dilutive effect of stock awards
    
    
    1,486
    
    
    
    1,226
    
    
    
    754Total shares
    
    
    252,402
    
    
    
    287,628
    
    
    
    350,967Diluted earnings per share
    
    $
    0.55
    
    
    $
    0.47
    
    
    $
    0.45
  73




---



##### Table of Contents



12. INCOME TAXES
  Year Ended March 31,2009
    
    
    2008
    
    
    2007Income before income taxes:U.S.
    
    $
    195,943
    
    
    $
    154,349
    
    
    $
    172,819Foreign
    
    
    16,778
    
    
    
    26,043
    
    
    
    20,238Total income before income taxes
    
    $
    212,721
    
    
    $
    180,392
    
    
    $
    193,057Income tax provisionCurrent:U.S. Federal
    
    $
    47,917
    
    
    $
    33,330
    
    
    $
    16,967Foreign
    
    
    5,937
    
    
    
    19,118
    
    
    
    11,265U.S. State
    
    
    2,299
    
    
    
    2,829
    
    
    
    2,434Total current tax provision
    
    
    56,153
    
    
    
    55,277
    
    
    
    30,666Deferred:U.S. Federal
    
    
    7,213
    
    
    
    19,005
    
    
    
    6,165Foreign
    
    
    1,568
    
    
    
    (3,548
    )
    
    
    (3,024
    )U.S. State
    
    
    8,140
    
    
    
    (24,736
    )
    
    
    1,158Total deferred tax provision (benefit)
    
    
    16,921
    
    
    
    (9,279
    )
    
    
    4,299Total income tax provision
    
    $
    73,074
    
    
    $
    45,998
    
    
    $
    34,965
  Year Ended March 31,2009
    
    
    2008
    
    
    2007Federal income tax at
statutory rates
    
    $
    74,452
    
    
    $
    63,137
    
    
    $
    67,570Increase (decrease) in taxes:State income taxes, net
    
    
    1,273
    
    
    
    1,718
    
    
    
    2,215Export sales benefit
    
    
    
    
    
    
    
    
    
    
    (2,954
    )Settlement of prior year tax matters (1)
    
    
    (1,024
    )
    
    
    
    
    
    
    (26,550
    )Taxes relating to foreign operations
    
    
    (3,446
    )
    
    
    891
    
    
    
    992Tax credits (2)
    
    
    (3,995
    )
    
    
    (21,507
    )
    
    
    (5,060
    )Valuation allowance (3)
    
    
    6,049
    
    
    
    2,859
    
    
    
    (3,768
    )Other, net
    
    
    (235
    )
    
    
    (1,100
    )
    
    
    2,520Provision for income taxes
    
    $
    73,074
    
    
    $
    45,998
    
    
    $
    34,965
 
 (1)
    
    During fiscal 2007, the Company reduced its income tax provision by $26.6 million for certain
items related to settlements of prior year tax matters with the Internal Revenue Service
(IRS). The benefit consisted of the following: (1) settlement of special deductions
associated with foreign
sales commissions under the former foreign sales corporation rules and the extraterritorial
income exclusion rules of $8.7 million; (2) settlement of credits afforded to U.S. based
taxpayers that generate income from sales to foreign customers of $10.2 million; (3) settlement
of the proper character and timing of certain deductions of $3.3 million and (4) the remaining
items consist primarily of interest income and reduction in state taxes totaling $4.4 million. 74




---



##### Table of Contents



(2)
    
    On July 12, 2007, the State of Michigan enacted the Michigan Business Tax (MBT) as a
replacement for the Single Business Tax (SBT), which expired at December 31, 2007. The MBT
took effect on January 1, 2008 and is comprised of two components: an income tax and a
modified gross receipts tax. The two components of the MBT are considered income taxes subject
to the accounting provisions of FASB Statement No. 109, Accounting for Income Taxes.As a result of the MBT enactment, the Company recorded an income tax benefit of approximately
$15.0 million during fiscal 2008. This benefit related primarily to the recognition of a
deferred tax asset for Brownfield Redevelopment credits that are available to offset MBT
liabilities through the Companys fiscal year 2022. The Brownfield Redevelopment credits were
previously available to reduce the Companys SBT liabilities. These credits were not
historically recorded as a deferred tax asset since the Company did not account for the SBT as
an income tax.(3)
    
    On January 9, 2009, the State of Michigan amended the MBT with an effective date of January
1, 2008. The amendment impacts future taxable income under MBT, therefore the Company
evaluated its ability to realize the Brownfield Redevelopment credits before their expiration
dates. This review resulted in the Company recording a $6.0 million valuation allowance during
the fourth quarter of fiscal 2009 to reduce the deferred tax asset associated with these
credits to the more likely than not realizable value.During fiscal 2008, the Company assessed the ability to utilize its tax credits prior to
expiration and recorded a valuation allowance of $2.9 million to reduce the deferred tax asset
associated with these credits to the more likely than not realizable value.During fiscal 2007, the Company released a valuation allowance related to the potential
expiration of capital loss carryforwards in the amount of $2.9 million as a result of the sale
of the Companys investment in ForeSee. In addition, the Company recognized approximately
$900,000 related to operating losses in Brazil, which the Company believed were more likely
than not to be realized. 75




---



##### Table of Contents



March 31,2009
    
    
    2008Deferred tax assets:Deferred revenue
    
    $
    31,232
    
    
    $
    20,883Amortization of intangible assets
    
    
    25,497
    
    
    
    35,403Accrued expenses
    
    
    25,206
    
    
    
    25,810Tax credit carryforwards
    
    
    24,198
    
    
    
    28,918Net operating loss carryforwards
    
    
    10,544
    
    
    
    10,804Other
    
    
    14,738
    
    
    
    15,520131,415
    
    
    
    137,338Less valuation allowance
    
    
    8,908
    
    
    
    2,859Net deferred tax assets
    
    
    122,507
    
    
    
    134,479Current portion
    
    
    39,099
    
    
    
    48,247Long term portion
    
    $
    83,408
    
    
    $
    86,232Deferred tax liabilities:Amortization of intangible assets
    
    $
    32,732
    
    
    $
    27,657Capitalized research and development costs
    
    
    17,217
    
    
    
    16,846Depreciation
    
    
    27,803
    
    
    
    28,635Other
    
    
    1,015
    
    
    
    8,701Total deferred tax liabilities
    
    
    78,767
    
    
    
    81,839Current portion
    
    
    1,740
    
    
    
    3,873Long term portion
    
    $
    77,027
    
    
    $
    77,966
  March 31,2009
    
    
    ExpirationUS Federal net operating losses
    
    $
    1,229
    
    
    
    2010 - 2026Non-US net operating losses
    
    
    7,384
    
    
    IndefiniteNon-US net operating losses
    
    
    1,931
    
    
    
    2014 - 2018US Federal tax credit carryforwards
    
    
    4,524
    
    
    
    2014 - 2015US State & Local tax credit carryforwards
    
    
    922
    
    
    IndefiniteUS State & Local tax credit carryforwards
    
    
    18,752
    
    
    
    2010 - 2022$
    34,742
  76




---



##### Table of Contents



March 31,2009
    
    
    2008Unrecognized tax benefit at beginning of period
    
    $
    14,956
    
    
    $
    12,757Gross increases to tax positions for prior periods
    
    
    3,230
    
    
    
    337Gross decreases to tax positions for prior periods
    
    
    (2,267
    )
    
    
    (203
    )Gross increases to tax positions for current period
    
    
    3,789
    
    
    
    2,389Foreign tax rate differential for prior period
    
    
    (2
    )Settlements
    
    
    (3,060
    )
    
    
    (39
    )Lapse of statute of limitations
    
    
    (462
    )
    
    
    (285
    )Unrecognized tax benefit at end of period
    
    $
    16,184
    
    
    $
    14,956
    77




---



##### Table of Contents



13. SEGMENT INFORMATION
     Year Ended March 31,2009
    
    
    2008
    
    
    2007Revenues:Products:Mainframe
    
    $
    450,401
    
    
    $
    486,687
    
    
    $
    484,807Distributed
    
    
    248,713
    
    
    
    287,193
    
    
    
    256,199Total products revenue
    
    
    699,114
    
    
    
    773,880
    
    
    
    741,006Professional services
    
    
    356,111
    
    
    
    418,559
    
    
    
    442,082Application services
    
    
    35,230
    
    
    
    37,172
    
    
    
    29,914Total revenues
    
    $
    1,090,455
    
    
    $
    1,229,611
    
    
    $
    1,213,002Income (loss) from operations:Products
    
    $
    319,885
    
    
    $
    328,173
    
    
    $
    275,091Professional services
    
    
    25,110
    
    
    
    43,933
    
    
    
    57,893Application services
    
    
    (1,799
    )
    
    
    (2,123
    )
    
    
    (6,626
    )Subtotal
    
    
    343,196
    
    
    
    369,983
    
    
    
    326,358Administrative and general
    
    
    (148,019
    )
    
    
    (182,488
    )
    
    
    (193,578
    )Restructuring costs
    
    
    (10,037
    )
    
    
    (42,645
    )Income from operations
    
    
    185,140
    
    
    
    144,850
    
    
    
    132,780Other income, net
    
    
    27,581
    
    
    
    35,542
    
    
    
    60,277Income before income taxes
    
    $
    212,721
    
    
    $
    180,392
    
    
    $
    193,057
  78




---



##### Table of Contents



Year Ended March 31,2009
    
    
    2008
    
    
    2007Revenues:United States
    
    $
    679,373
    
    
    $
    769,995
    
    
    $
    800,585Europe and Africa
    
    
    295,621
    
    
    
    329,470
    
    
    
    301,556Other international operations
    
    
    115,461
    
    
    
    130,146
    
    
    
    110,861Total revenues
    
    $
    1,090,455
    
    
    $
    1,229,611
    
    
    $
    1,213,002
 March 31,2009
    
    
    2008Long-lived assets:United States
    
    $
    622,578
    
    
    $
    661,356Europe and Africa
    
    
    29,802
    
    
    
    38,601Other international operations
    
    
    78,103
    
    
    
    83,654Total long-lived assets
    
    $
    730,483
    
    
    $
    783,611
  14. COMMITMENTS AND CONTINGENCIES
  Payment Due by Period as of March 31,2015 andTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterContractual obligations:Operating leases
    
    $
    268,815
    
    
    $
    23,888
    
    
    $
    14,948
    
    
    $
    9,471
    
    
    $
    6,308
    
    
    $
    1,676
    
    
    $
    212,524Other
    
    
    13,900
    
    
    
    5,600
    
    
    
    3,450
    
    
    
    3,450
    
    
    
    450
    
    
    
    450
    
    
    
    500Total
    
    $
    282,715
    
    
    $
    29,488
    
    
    $
    18,398
    
    
    $
    12,921
    
    
    $
    6,758
    
    
    $
    2,126
    
    
    $
    213,024
 79




---



##### Table of Contents



Payment Due by Period as of March 31,2015 andTotal
    
    2010
    
    2011
    
    2012
    
    2013
    
    2014
    
    ThereafterLease income
commitments
    
    $
    6,654
    
    
    $
    990
    
    
    $
    793
    
    
    $
    760
    
    
    $
    740
    
    
    $
    754
    
    
    $
    2,617
 Director Compensation
     Settlement
  Legal Matters
  80




---



##### Table of Contents



15. BENEFIT PLANS
 Employee Stock Ownership Plan
  Employee Stock Purchase Plan
  Employee Equity Incentive Plans
   81




---



##### Table of Contents



Stock Options
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding as of April 1, 2008
    
    
    34,289
    
    
    $
    12.69Granted
    
    
    9,989
    
    
    
    7.71Exercised
    
    
    (1,342
    )
    
    
    7.85Forfeited
    
    
    (1,843
    )
    
    
    7.65Cancelled/expired
    
    
    (6,848
    )
    
    
    23.49Outstanding as of March 31, 2009
    
    
    34,245
    
    
    $
    9.59
    
    
    
    4.36
    
    
    $
    1,608Ending vested and expected to vest
    
    
    32,435
    
    
    $
    9.68
    
    
    
    4.09
    
    
    $
    1,601Exercisable as of March 31, 2009
    
    
    21,693
    
    
    $
    10.58
    
    
    
    1.98
    
    
    $
    1,507
   Options granted
    
    Vesting Schedule (1)in fiscal 2009
    
    Year 1
    
    Year 2
    
    Year 3
    
    Year 4
    
    Year 54,925
    
    
    30
    %
    
    
    30
    %
    
    
    40
    %4,000
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %564
    
    
    
    
    
    
    
    
    
    
    50
    %
    
    
    25
    %
    
    
    25
    %500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    %
 
 (1)
    
    Vesting occurs on the grant date anniversary of each year.   Year Ended March 31,2009
    
    2008
    
    2007Fair value of shares vested
    
    $
    3.90
    
    
    $
    5.11
    
    
    $
    5.58Intrinsic value of options exercised
    
    
    3,923
    
    
    
    16,713
    
    
    
    9,986
 Restricted Stock Units
  82




---



##### Table of Contents



Year EndedMarch 31, 2009WeightedAverageGrant-DateShares
    
    
    Fair ValueNonvested restricted stock units as of April 1, 2008Granted
    
    
    950
    
    
    $
    6.58VestedForfeitedNonvested restricted stock units as of March 31, 2009
    
    
    950
    
    
    $
    6.58
 Stock Awards Compensation
  Year Ended March 31,2009
    
    
    2008
    
    
    2007Stock awards compensation classified as:Cost of software license fees
    
    $
    1
    
    
    $
    1
    
    
    $
    4Cost of maintenance fees
    
    
    846
    
    
    
    303
    
    
    
    283Cost of professional services
    
    
    2,380
    
    
    
    1,320
    
    
    
    1,508Technology development and support
    
    
    1,746
    
    
    
    663
    
    
    
    777Sales and marketing
    
    
    4,890
    
    
    
    2,203
    
    
    
    3,910Administrative and general
    
    
    4,798
    
    
    
    1,705
    
    
    
    2,950Restructuring Costs
    
    
    976
    
    
    
    5,358Total stock awards compensation expense
before income taxes
    
    
    15,637
    
    
    
    11,553
    
    
    
    9,432Income tax benefit
    
    
    (5,653
    )
    
    
    (4,047
    )
    
    
    (3,270
    )Total stock awards compensation expense
after income taxes
    
    $
    9,984
    
    
    $
    7,506
    
    
    $
    6,162
  83




---



##### Table of Contents



16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearFiscal 2009:Revenues
    
    $
    298,588
    
    
    $
    269,845
    
    
    $
    268,667
    
    
    $
    253,355
    
    
    $
    1,090,455Gross profit
    
    
    176,682
    
    
    
    153,287
    
    
    
    166,175
    
    
    
    159,913
    
    
    
    656,057Operating income (loss)
    
    
    50,959
    
    
    
    27,291
    
    
    
    49,209
    
    
    
    57,681
    
    
    
    185,140Pre-tax income
    
    
    54,180
    
    
    
    30,337
    
    
    
    51,500
    
    
    
    76,704
    
    
    
    212,721Net income
    
    
    34,732
    
    
    
    21,582
    
    
    
    34,952
    
    
    
    48,381
    
    
    
    139,647Basic earnings per share
    
    
    0.13
    
    
    
    0.08
    
    
    
    0.14
    
    
    
    0.20
    
    
    
    0.56Diluted earnings per share
    
    
    0.13
    
    
    
    0.08
    
    
    
    0.14
    
    
    
    0.20
    
    
    
    0.55Fiscal 2008:Revenues
    
    $
    279,389
    
    
    $
    301,971
    
    
    $
    309,335
    
    
    $
    338,916
    
    
    $
    1,229,611Gross profit
    
    
    153,494
    
    
    
    183,186
    
    
    
    187,493
    
    
    
    214,742
    
    
    
    738,915Operating income
    
    
    (1,966
    )
    
    
    31,955
    
    
    
    46,413
    
    
    
    68,448
    
    
    
    144,850Pre-tax income
    
    
    3,693
    
    
    
    37,382
    
    
    
    51,063
    
    
    
    88,254
    
    
    
    180,392Net income
    
    
    189
    
    
    
    37,416
    
    
    
    35,614
    
    
    
    61,175
    
    
    
    134,394Basic and diluted earnings per share
    
    
    0.00
    
    
    
    0.13
    
    
    
    0.13
    
    
    
    0.23
    
    
    
    0.47
 84




---



##### 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
   Managements Report on Internal Control over Financial Reporting
  
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U. S. 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
    
    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.
 85




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  Report of Independent Registered Public Accounting Firm
 
 Internal
Control  Integrated Framework
  86




---



##### Table of Contents



Internal Control 
Integrated Framework
 Accounting for Uncertainty in Income Taxes
 an Interpretation of FASB Statement No. 109.
 DELOITTE & TOUCHE LLP
 
 
 ITEM 9B.
    
    OTHER INFORMATION
  87




---



##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
     88




---



##### Table of Contents



Number of securitiesNumber of securities
    
    
    
    
    
    remaining availableto be issued
    
    Weighted-average
    
    for future issuanceupon exercise of
    
    exercise price of
    
    under equityoutstanding options
    
    outstanding options
    
    compensation plansEquity compensation plans
approved by security holders
    
    
    19,499
    
    
    $
    10.22
    
    
    
    17,119Equity compensation plans not
approved by security holders
    
    
    14,746
    
    
    $
    8.76
 
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  89




---



##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Documents filed as part of this report.1.
    
    Consolidated Financial Statements
 The following consolidated financial statements of the Company and its subsidiaries are
filed herewith:
 PageReport of Independent Registered Public Accounting Firm
    
    50Consolidated Balance Sheets as of March 31, 2009 and 2008
    
    51Consolidated Statements of Operations for each of the years
ended March 31, 2009, 2008, and 2007
    
    52Consolidated Statements of Shareholders Equity for each of
the years ended March 31, 2009, 2008, and 2007
    
    53Consolidated Statements of Cash Flows for each of the years
ended March 31, 2009, 2008, and 2007
    
    54Notes to Consolidated Financial Statements
    
    55-84
 2.
    
    Financial Statement Schedules
 All financial statement schedules are omitted as the required information is not
applicable or the information is presented in the consolidated financial statements or
related notes.
 3.
    
    EXHIBITS
 The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit
Index attached to this report. The Exhibit Index is incorporated herein by reference.
 90




---



##### Table of Contents



SIGNATURES
  COMPUWARE CORPORATIONBy:
    /S/ PETER KARMANOS, JR.Peter Karmanos, Jr.Chairman of the Board, Chief Executive Officer
(Principal Executive Officer)  Signature
    
    Title
    
    Date/S/ PETER KARMANOS, JR.

Peter Karmanos, Jr.
    
    Chairman of the Board, Chief Executive Officer And
Director (Principal Executive Officer)
    
    May 27, 2009/S/ LAURA L. FOURNIER

Laura L. Fournier
    
    Executive Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer)
    
    May 27, 2009/S/ DENNIS W. ARCHER

Dennis W. Archer
    
    Director
    
    May 27, 2009/S/ GURMINDER S. BEDI

Gurminder S. Bedi
    
    Director
    
    May 27, 2009/S/ WILLIAM O. GRABE

William O. Grabe
    
    Director
    
    May 27, 2009/S/ WILLIAM R. HALLING

William R. Halling
    
    Director
    
    May 27, 2009/S/ FAYE A. NELSON

Faye A. Nelson
    
    Director
    
    May 27, 2009/S/ GLENDA D. PRICE

Glenda D. Price
    
    Director
    
    May 27, 2009/S/ W. JAMES PROWSE

W. James Prowse
    
    Director
    
    May 27, 2009/S/ G. SCOTT ROMNEY

G. Scott Romney
    
    Director
    
    May 27, 2009
 91




---



##### Table of Contents



EXHIBITS
  ExhibitNumber
    
    Description of Document2.6
    
    Agreement and Plan of Merger dated May 6, 2005 by and among Compuware Corporation,
Compuware Acquisition Corp., Adlex, Inc., and with respect to Article VIII, Tad
Witkowicz, as Shareholder Representative (Companys Form 8-K filed on May 9, 2005)2.7
    
    Stock Purchase Agreement by and among Compuware Corporation, Proxima Technology
Group, Inc., and each of the shareholders of Proxima Technology Group, Inc. dated as of
January 2, 2007 (Companys Form 8-K filed on January 8, 2007)2.8
    
    Asset Purchase Agreement between Compuware Corporation and Micro Focus Holdings
Limited, dated as of May 5, 2009 (Companys Form 8-K filed on May 11, 2009)3.1
    
    Restated Articles of Incorporation of Compuware Corporation, as amended, as of
October 25, 2000 (Companys Form 10-K for fiscal 2001 )3.2
    
    Amendment to Bylaws of Compuware Corporation, as of November 6, 2008 (Companys
Form 8-K filed on November 25, 2008)4.0
    
    Rights Agreement dated as of October 25, 2000 between Compuware Corporation and
Equiserve Trust Company, N.A., as Rights Agent (Companys Registration Statement on Form
8-A filed October 26, 2000)4.6
    
    Amendment To Rights Agreement, dated as of October 29, 2001 (Companys first Form
8-K filed on May 11, 2006)4.7
    
    Amendment No. 2 To Rights Agreement, dated as of May 9, 2006 (Companys first Form
8-K filed on May 11, 2006)4.8
    
    Amended and Restated Credit Agreement dated May 2, 2003 as of July 27, 2006
(Companys Form 10-Q for the quarterly period ended June 30, 2006)4.9
    
    Amendment No. 1, dated as of July 26, 2007, to the Amended and Restated Credit
Agreement dated May 2, 2003 as of July 27, 2006 (Companys Form 10-Q for the quarterly
period ended on June 30, 2007)4.10
    
    Compuware Corporation Revolving Credit Agreement dated as of November 1, 2007
(Companys Form 10-Q for the quarterly period ended on September 30, 2007)4.11
    
    Amendment No. 3 to Rights Agreement, dated as of February 2, 2009 (Companys Form
8-K filed on February 3, 2009)10.24
    
    Promotion Agreement, dated September 8, 1992, between Compuware Sports Corporation
and the Company (Companys Registration Statement on Form S-1, as amended (Registration
No. 33-53652))*10.37
    
    Fiscal 1998 Stock Option Plan (Companys Registration Statement on Form S-8 (Registration
Statement No. 333-37873))*10.51
    
    Fiscal 1996 Stock Option Plan (Companys Form 10-K for fiscal 2000)10.52
    
    Advertising Agreement, dated December 1, 1996, between Arena Management Company and
the Company (Companys Form 10-K for fiscal 2000)*10.83
    
    Fiscal 1999 Stock Option Plan (Companys Form 10-Q for the quarterly period ended
December 31, 2000)*10.85
    
    2001 Broad Based Stock Option Plan (Companys Registration Statement on Form S-8
(Registration Statement No. 333-57984))*10.88
    
    First Amendment to 1996 Stock Option Plan (Companys Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997)*10.90
    
    Phantom Stock Plan (Companys Form 10-K for fiscal 2003)*10.91
    
    Nonqualified Stock Option Agreement for Executive Officers (Companys Form 10-Q for the
quarterly period ended September 30, 2004)




---



##### Table of Contents



ExhibitNumber
    
    Description of Document*10.92
    
    Nonqualified Stock Option Agreement for Outside Directors (Companys Form 10-Q for the
quarterly period ended September 30, 2004)*10.93
    
    Phantom Share Award Agreement (Companys Form 10-Q for the quarterly period ended
September 30, 2004)*10.95
    
    Settlement Agreement dated March 21, 2005 by and among Compuware Corporation and
International Business Machines Corporation (Companys Form 8-K filed on March 21, 2005)*10.96
    
    First Amendment to the Compuware Corporation 2002 Directors Phantom Stock Plan (Companys
Form 8-K/A filed on May 17, 2005)*10.97
    
    Amendment Number 1 to Settlement Agreement dated November 29, 2005 by and among Compuware
Corporation and International Business Machines Corporation (Companys Form 8-K filed on
November 29, 2005)*10.98
    
    2005 Non-Employee Directors Deferred Compensation Plan (Companys second Form 8-K filed
on May 11, 2006)*10.99
    
    Executive Incentive Plan  Corporate (Companys Form 8-K filed on June 6, 2006)*10.100
    
    Parallel Nonqualified Stock Purchase Plan Arrangement (Companys Form 10-K for fiscal
2006)*10.101
    
    Fifth Amendment to the Compuware Corporation ESOP/401(k) Plan (Companys Form 10-Q for
the quarterly period ended June 30, 2006)*10.102
    
    Post-Retirement Consulting Agreement, dated March 1, 2007, between Compuware Corporation
and Peter Karmanos, Jr. (Companys Form 8-K filed on March 2, 2007)*10.103
    
    Settlement Agreement, dated July 18, 2007, by and between Compuware Corporation and Hank
Jallos (Companys Form 10-Q for the quarterly period ended on June 30, 2007)*10.104
    
    Amendment No. 1, dated August 7, 2007, to the Settlement Agreement dated July 18, 2007
by and between Compuware Corporation and Hank Jallos (Companys Form 10-Q for the quarterly
period ended on June 30, 2007)*10.105
    
    2007 Long Term Incentive Plan (Appendix A to Companys definitive proxy statement for
2007 annual shareholders meeting filed on July 24, 2007)*10.106
    
    Form of Stock Option Agreement (5-Year Version) (Companys Form 8-K filed on April 25,
2008)*10.107
    
    Form of Stock Option Agreement (3-Year Version) (Companys Form 8-K filed on April 25,
2008)*10.108
    
    Agreement, dated March 7, 2008, by and between Compuware Corporation and Thomas M.
Costello (Companys Form 10-K for Fiscal 2008)*10.109
    
    Form of Compuware Executive Incentive Plan  Corporate as of April 30, 2008 (Companys
Form 10-Q for the quarterly period ended on June 30, 2008)*10.110
    
    Employee Restricted Stock Unit Award Agreement (Companys Form 10-Q for the quarterly
period ended on September 30, 2008)*10.111
    
    Amendment to the Consulting/Employment Letter with Peter Karmanos, Jr. (Companys Form
10-Q for the quarterly period ended on December 31, 2008)*10.112
    
    W. James Prowse Consulting Agreement dated as of November 17, 2008 (Companys Form 10-Q
for the quarterly period ended on December 31, 2008)*10.113
    
    Amendment No. 1 to the 2007 Long Term Incentive Plan (Companys Form 10-Q for the
quarterly period ended on December 31, 2008)*10.114
    
    Amendment No. 2 to the 2002 Directors Phantom Stock Plan (Companys Form 10-Q for the
quarterly period ended on December 31, 2008)*10.115
    
    Amended and Restated 2005 Non-Employee Directors Compensation Plan (Companys Form 10-Q
for the quarterly period ended on December 31, 2008)*10.116
    
    Form of 2002 Directors Phantom Stock Plan Forfeiture And Replacement Agreement
(Companys Form 10-Q for the quarterly period ended on December 31, 2008)*10.117
    
    Form of Amended And Restated 2005 Non-Employee Directors Deferred Compensation Plan
Forfeiture And Replacement Agreement (Companys Form 10-Q for the quarterly period ended on
December 31, 2008)*10.118
    
    Form of Director Restricted Stock Unit Grant Agreement (Replacing Directors Phantom
Stock Units) (Companys Form 10-Q for the quarterly period ended on December 31, 2008)*10.119
    
    Form of Director Restricted Stock Unit Grant Agreement (Replacing Deferred Compensation
Units) (Companys Form 10-Q for the quarterly period ended on December 31, 2008)*10.120
    
    Form of Director Annual Restricted Stock Unit Award Agreement (Companys Form 10-Q for
the quarterly period ended on December 31, 2008)




---



##### Table of Contents



ExhibitNumber
    
    Description of Document*10.121
    
    Form of Director Restricted Stock Unit Agreement for Deferred Compensation (Companys
Form 10-Q for the quarterly period ended on December 31, 2008)21.1
    
    Subsidiaries of the Registrant23.1
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Certification of Chief Executive Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002