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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, 2010
 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  (Address of principal executive offices including zip code)
   Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share
    
    Nasdaq Global Select MarketPreferred Stock Purchase Rights
    
    Nasdaq Global Select Market
 None
 þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



COMPUWARE CORPORATION AND SUBSIDIARIES
FORM 10-K
Table of Contents
 ItemNumber
    
    PagePART I1. Business
    
    
    31A. Risk Factors
    
    
    181B. Unresolved Staff Comments
    
    
    242. Properties
    
    
    243. Legal Proceedings
    
    
    24PART II5. Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    256. Selected Financial Data
    
    
    287. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    297A. Quantitative and Qualitative Disclosure about Market Risk
    
    
    508. Financial Statements and Supplementary Data
    
    
    529. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    929A. Controls and Procedures
    
    
    929B. Other Information
    
    
    94PART III10. Directors, Executive Officers and Corporate Governance
    
    
    9511. Executive Compensation
    
    
    9512. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    9513. Certain Relationships and Related Transactions, and Director Independence
    
    
    9614. Principal Accountant Fees and Services
    
    
    96PART IV15. Exhibits and Financial Statement Schedules
    
    
    97EX-21.1EX-23.1EX-31.1EX-31.2EX-32
  2




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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 IT service delivery in business terms, and maintain
consistent, high levels of service delivery.
 
    
    Optimize the performance, availability and quality of web and mobile applications.
 
    
    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




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OUR BUSINESS STRATEGY
      4




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SOFTWARE PRODUCTS
  Year Ended March 31,
    
    
    Percentage of Total RevenuesProducts Segment Revenue
    
    2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009
    
    
    2008Mainframe ProductsFile-AID
    
    $
    140,490
    
    
    $
    148,134
    
    
    $
    157,207
    
    
    
    15.7
    %
    
    
    13.6
    %
    
    
    12.8
    %Xpediter
    
    
    84,102
    
    
    
    88,863
    
    
    
    98,507
    
    
    
    9.4
    
    
    
    8.1
    
    
    
    8.0Hiperstation
    
    
    15,309
    
    
    
    17,147
    
    
    
    18,787
    
    
    
    1.7
    
    
    
    1.6
    
    
    
    1.5Abend-AID
    
    
    118,317
    
    
    
    118,309
    
    
    
    125,942
    
    
    
    13.3
    
    
    
    10.9
    
    
    
    10.3Strobe
    
    
    77,262
    
    
    
    77,948
    
    
    
    86,244
    
    
    
    8.7
    
    
    
    7.1
    
    
    
    7.0Total Mainframe Products Revenue
    
    
    435,480
    
    
    
    450,401
    
    
    
    486,687
    
    
    
    48.8
    
    
    
    41.3
    
    
    
    39.6Distributed ProductsVantage
    
    
    119,342
    
    
    
    114,568
    
    
    
    130,064
    
    
    
    13.4
    
    
    
    10.5
    
    
    
    10.6Changepoint
    
    
    22,642
    
    
    
    24,982
    
    
    
    28,479
    
    
    
    2.5
    
    
    
    2.3
    
    
    
    2.3Uniface
    
    
    39,281
    
    
    
    44,730
    
    
    
    48,493
    
    
    
    4.4
    
    
    
    4.1
    
    
    
    3.9File-AID/EX
    
    
    3,687
    
    
    
    4,191
    
    
    
    5,536
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.4Total Distributed Products Revenue
    
    
    184,952
    
    
    
    188,471
    
    
    
    212,572
    
    
    
    20.7
    
    
    
    17.3
    
    
    
    17.2Divested Products Revenue *
    
    
    13,563
    
    
    
    60,242
    
    
    
    74,621
    
    
    
    1.6
    
    
    
    5.5
    
    
    
    6.1Total Products Segment Revenue
    
    $
    633,995
    
    
    $
    699,114
    
    
    $
    773,880
    
    
    
    71.1
    %
    
    
    64.1
    %
    
    
    62.9
    %
 
 *
    
    Divested products relate to our Quality and DevPartner product lines that were sold during fiscal 2010. See
Note 3 of the notes to consolidated financial statements, included in Item 8 of this report, for more information on  this divestiture. COMPUWARE SOFTWARE PRODUCTS
   MAINFRAME MARKET
   5




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Mainframe Solutions
    File-AID
  Xpediter
  Hiperstation
  Abend-AID
  6




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Strobe
  DISTRIBUTED MARKET
  Distributed Software Products
   Application Performance Management
    7




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Business Portfolio Management
      8




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Enterprise Application Development
  
    
    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.
  Divested Products
  SEASONALITY
  SOFTWARE LICENSING, PRODUCT MAINTENANCE AND CUSTOMER SUPPORT
    9




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WEB PERFORMANCE SERVICES
       10




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PROFESSIONAL SERVICES
     APPLICATION SERVICES
    11




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CUSTOMERS
   RESEARCH AND DEVELOPMENT
    12




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TECHNOLOGY AND NETWORKS OPERATIONS
    
    
    over 150 backbone nodes located in more than 30 countries, and 11 mobile carriers in 3
countries;
    
    over 100,000 last mile measurement points located in more than 160 countries;
    
    our central data warehouse and three other third-party data center facilities; and
    
    our portal into our customer data warehouse.
     13




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SALES AND MARKETING
  COMPETITION
     14




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PROPRIETARY RIGHTS
    15




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EMPLOYEES
  Executive Officers of the Registrant
  Name
    
    Age
    
    PositionPeter Karmanos, Jr.
    
    
    67
    
    
    Chairman of the Board and Chief Executive OfficerRobert C. Paul
    
    
    47
    
    
    President, Chief Operating Officer and member of the Board
of DirectorsLaura L. Fournier
    
    
    57
    
    
    Executive Vice President and Chief Financial OfficerPaul A. Czarnik
    
    
    54
    
    
    Chief Technology OfficerDenise A. Knobblock Starr
    
    
    55
    
    
    Executive Vice President and Chief Administrative OfficerDaniel S. Follis, Jr.
    
    
    44
    
    
    Vice President, General Counsel and Secretary
     16




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SEGMENT INFORMATION, PAYMENT TERMS AND FOREIGN REVENUES
  17




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ITEM 1A. RISK FACTORS
  The majority of our products segment revenue is dependent on our customers continued use of
International Business Machines Corporation and IBM-compatible products.
 Our product revenue is dependent on the acceptance of our pricing structure for software licenses,
maintenance services and web performance services.
 Maintenance revenue could continue to decline.
 The markets for web performance services are at an early stage of development with emerging
competitors. If these markets do  not develop or develop more slowly than we expect, or if there is
an increase in competition, our revenue may decline or fail to grow.
 18




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The market for application services is in its early stages of development with emerging
competitors. As the market matures, competition may increase and could have a material negative
impact on our results of operations.
 If we are not successful in implementing our professional services strategy, our operating margins
may decline materially.
 We may fail to achieve our forecasted financial results due to inaccurate sales forecasts or other
unpredictable factors. If we fail to meet the expectations of analysts or investors, our stock
price could decline substantially.
   19




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Future changes in the United States and global economies may reduce demand for our products and
services, which may have a material adverse effect on our revenues and operating results.
 Defects or disruptions in our web performance services or application services networks or
interruptions or delays in service would impair the delivery of our on-demand service and could
diminish demand for our services and subject us to substantial liability.
 Future changes in the U.S. domestic automotive manufacturing business could reduce demand for our
professional services and application services, which may have a material negative effect on our
revenues and operating results.
  If the fair value of our long-lived assets deteriorated below the carrying value of these assets,
recognition of an impairment loss would be required, which could materially and adversely affect
our financial results.
 Our software technology may infringe the proprietary rights of others.
  20




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Our results could be adversely affected by increased competition, pricing pressures and
technological changes within the software products market.
   The market for professional services is highly competitive, fragmented and characterized by low
barriers to entry.
 21




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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.
   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.
 22




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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.
 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.
 23




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Acts of terrorism, acts of war and other unforeseen events may cause damage or disruption to us or
our customers, which could materially and adversely affect our business, financial condition and
operating results.
 Our articles of incorporation, bylaws and rights agreement as well as certain provisions of
Michigan law may have an anti-takeover effect.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
   
 ITEM 3. LEGAL PROCEEDINGS
  24




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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, 2010
    
    High
    
    LowFourth quarter
    
    $
    8.80
    
    
    $
    7.00Third quarter
    
    
    8.95
    
    
    
    6.79Second quarter
    
    
    7.82
    
    
    
    6.30First quarter
    
    
    8.18
    
    
    
    6.49
 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
 Common Share Repurchases
  Approximate dollarvalue of sharesTotal number of
    
    
    that may yet beAverage
    
    
    shares purchased
    
    
    purchased underTotal number of
    
    
    price paid
    
    
    as part of publicly
    
    
    the plan orPeriod
    
    shares purchased
    
    
    per share
    
    
    announced plans
    
    
    program (1)For the month ended January 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    425,705,000For the month ended February 28, 2010
    
    
    1,869,900
    
    
    
    7.27
    
    
    
    1,869,900
    
    
    
    412,113,000For the month ended March 31, 2010
    
    
    1,004,059
    
    
    
    8.16
    
    
    
    1,004,059
    
    
    
    403,920,000Total
    
    
    2,873,959
    
    
    
    7.58
    
    
    
    2,873,959
 
 (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 repurchase plan continues to be limited on a daily
basis to 25% of the average trading volume of our common stock for the 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. 25




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Issuance Of Unregistered Shares
  26




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Comparison of Cumulative Five Year Total Return
   
 Total Return To Shareholders
 Base
    
    
    Indexed ReturnsPeriod
    
    
    Years EndingMarch 31,
    
    
    March 31,Company / Index
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010COMPUWARE CORP
    
    $
    100
    
    
    
    108.75
    
    
    
    131.81
    
    
    
    101.94
    
    
    
    91.53
    
    
    
    116.67S&P 500 INDEX
    
    
    100
    
    
    
    111.73
    
    
    
    124.94
    
    
    
    118.60
    
    
    
    73.43
    
    
    
    109.97NASDAQ MARKET INDEX
    
    
    100
    
    
    
    119.97
    
    
    
    134.27
    
    
    
    118.46
    
    
    
    85.30
    
    
    
    142.80NASDAQ COMPUTER & DATA PROCESSING INDEX
    
    
    100
    
    
    
    115.84
    
    
    
    127.08
    
    
    
    122.78
    
    
    
    88.71
    
    
    
    139.53
  27




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended March 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(In thousands, except earnings per share data)Statement of Operations Data:Revenues:Software license fees
    
    $
    194,504
    
    
    $
    219,634
    
    
    $
    297,506
    
    
    $
    283,412
    
    
    $
    296,650Maintenance and subscription fees
    
    
    456,343
    
    
    
    479,480
    
    
    
    476,374
    
    
    
    457,594
    
    
    
    433,596Professional services fees
    
    
    241,332
    
    
    
    391,341
    
    
    
    455,731
    
    
    
    471,996
    
    
    
    475,115Total revenues
    
    
    892,179
    
    
    
    1,090,455
    
    
    
    1,229,611
    
    
    
    1,213,002
    
    
    
    1,205,361Operating expenses:Cost of software license fees
    
    
    15,430
    
    
    
    24,491
    
    
    
    30,475
    
    
    
    28,581
    
    
    
    23,262Cost of maintenance and subscription fees
    
    
    42,555
    
    
    
    41,877
    
    
    
    46,300
    
    
    
    41,533
    
    
    
    41,687Cost of professional services
    
    
    216,861
    
    
    
    368,030
    
    
    
    413,921
    
    
    
    420,729
    
    
    
    417,485Technology development and support
    
    
    91,245
    
    
    
    86,453
    
    
    
    101,132
    
    
    
    114,071
    
    
    
    96,858Sales and marketing
    
    
    222,447
    
    
    
    226,408
    
    
    
    267,800
    
    
    
    281,730
    
    
    
    288,162Administrative and general
    
    
    164,633
    
    
    
    148,019
    
    
    
    182,488
    
    
    
    193,578
    
    
    
    190,538Restructuring costs (1)
    
    
    7,960
    
    
    
    10,037
    
    
    
    42,645Gain on divestiture of product lines
    
    
    (52,351
    )Total operating expenses
    
    
    708,780
    
    
    
    905,315
    
    
    
    1,084,761
    
    
    
    1,080,222
    
    
    
    1,057,992Income from operations
    
    
    183,399
    
    
    
    185,140
    
    
    
    144,850
    
    
    
    132,780
    
    
    
    147,369Other income, net
    
    
    25,721
    
    
    
    27,581
    
    
    
    35,542
    
    
    
    60,277
    
    
    
    44,091Income before income taxes
    
    
    209,120
    
    
    
    212,721
    
    
    
    180,392
    
    
    
    193,057
    
    
    
    191,460Income tax provision
    
    
    68,314
    
    
    
    73,074
    
    
    
    45,998
    
    
    
    34,965
    
    
    
    48,500Net income
    
    $
    140,806
    
    
    $
    139,647
    
    
    $
    134,394
    
    
    $
    158,092
    
    
    $
    142,960Basic earnings per share (2)
    
    $
    0.61
    
    
    $
    0.56
    
    
    $
    0.47
    
    
    $
    0.45
    
    
    $
    0.37Diluted earnings per share (2)
    
    
    0.60
    
    
    
    0.55
    
    
    
    0.47
    
    
    
    0.45
    
    
    
    0.37Shares used in computing net income per share:Basic earnings computation
    
    
    232,634
    
    
    
    250,916
    
    
    
    286,402
    
    
    
    350,213
    
    
    
    385,147Diluted earnings computation
    
    
    234,565
    
    
    
    252,402
    
    
    
    287,628
    
    
    
    350,967
    
    
    
    387,569Balance Sheet Data (at period end):Working capital
    
    $
    92,688
    
    
    $
    297,237
    
    
    $
    274,036
    
    
    $
    391,823
    
    
    $
    899,773Total assets
    
    
    2,013,325
    
    
    
    1,874,850
    
    
    
    2,018,557
    
    
    
    2,029,412
    
    
    
    2,510,968Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareholders equity (3)
    
    
    913,813
    
    
    
    880,648
    
    
    
    927,031
    
    
    
    1,132,148
    
    
    
    1,579,499
 
 (1)
    
    During fiscal 2010, 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 $8.0 million, $10.0 million and $42.6 million,
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 the 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. 28




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
  OVERVIEW
    
    
    Our products and web performance services are designed to enhance the effectiveness
of key disciplines throughout IT organizations including application development and
delivery, service management and IT portfolio management and the availability and
quality of web applications.
    
    Our application services use business-to-business applications to integrate vital
business information and processes between partners, customers and suppliers.
    
    Our IT professional services include IT portfolio management services, application
delivery management services, application outsourcing services and enterprise legacy
modernization services. Our professional services segment also provides implementation,
consulting and training services in tandem with the Companys product offerings which
are referred to as product related services.
 29




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Annual Update
  
    
    Achieved an increase in product software contribution margin to 50.9% in fiscal 2010
from 45.8% in fiscal 2009 as a result of the $52.4 million gain on divestiture during
fiscal 2010.
    
    Experienced an increase in professional services segment contribution margin to
10.9% in fiscal 2010 from 7.1% in fiscal 2009.
    
    Repurchased approximately 17.9 million shares of our common stock during fiscal 2010
at an average price of $7.41 per share.
    
    Released 14 mainframe and 15 distributed product enhancements.
  
    
    Acquired Gomez, a leading provider of web application performance
services, for $295 million in cash (see Note 2 of the notes to consolidated financial
statements, included in Item 8 of this report).
    
    Sold our Quality and DevPartner product lines (Product Divestiture) to
Micro Focus International PLC (Micro Focus) realizing a gain of $52.4 million to
operating income (see Note 3 of the notes to consolidated financial statements,
included in Item 8 of this report).
    
    Executed our plan to have a smaller, more profitable professional services segment
focused on engagements that allow us to achieve specified contribution margin targets.
    
    Advanced our application services segment business strategy with a focus on the
healthcare market while maintaining customer satisfaction in the automotive industry.
 30




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RESULTS OF OPERATIONS
  Percentage of
    
    
    Period-to-PeriodTotal Revenues
    
    
    ChangeFiscal Year Ended
    
    
    2009
    
    
    2008March 31,
    
    
    to
    
    
    to2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009REVENUE:Software license fees
    
    
    21.8
    %
    
    
    20.1
    %
    
    
    24.2
    %
    
    
    (11.4
    )%
    
    
    (26.2
    )%Maintenance and subscription fees *
    
    
    51.2
    
    
    
    44.0
    
    
    
    38.7
    
    
    
    (4.8
    )
    
    
    0.7Professional services segment revenue **
    
    
    22.5
    
    
    
    32.7
    
    
    
    34.1
    
    
    
    (43.6
    )
    
    
    (14.9
    )Application services segment revenue **
    
    
    4.5
    
    
    
    3.2
    
    
    
    3.0
    
    
    
    14.9
    
    
    
    (5.2
    )Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    (18.2
    )
    
    
    (11.3
    )OPERATING EXPENSES:Cost of software license fees
    
    
    1.7
    
    
    
    2.2
    
    
    
    2.5
    
    
    
    (37.0
    )
    
    
    (19.6
    )Cost of maintenance and subscription fees *
    
    
    4.8
    
    
    
    3.8
    
    
    
    3.7
    
    
    
    1.6
    
    
    
    (9.6
    )Professional services segment expenses **
    
    
    20.1
    
    
    
    30.4
    
    
    
    30.5
    
    
    
    (45.9
    )
    
    
    (11.6
    )Application services segment expenses **
    
    
    4.3
    
    
    
    3.4
    
    
    
    3.2
    
    
    
    2.4
    
    
    
    (5.8
    )Technology development and support
    
    
    10.2
    
    
    
    7.9
    
    
    
    8.2
    
    
    
    5.5
    
    
    
    (14.5
    )Sales and marketing
    
    
    24.9
    
    
    
    20.8
    
    
    
    21.8
    
    
    
    (1.7
    )
    
    
    (15.5
    )Administrative and general
    
    
    18.4
    
    
    
    13.6
    
    
    
    14.8
    
    
    
    11.2
    
    
    
    (18.9
    )Restructuring costs
    
    
    0.9
    
    
    
    0.9
    
    
    
    3.5
    
    
    
    (20.7
    )
    
    
    (76.5
    )Gain on sale of assets
    
    
    (5.9
    )
    
    
    0.0
    
    
    
    0.0Total operating expenses
    
    
    79.4
    
    
    
    83.0
    
    
    
    88.2
    
    
    
    (21.7
    )
    
    
    (16.5
    )Income from operations
    
    
    20.6
    
    
    
    17.0
    
    
    
    11.8
    
    
    
    (0.9
    )
    
    
    27.8Other income, net
    
    
    2.9
    
    
    
    2.5
    
    
    
    2.9
    
    
    
    (6.7
    )
    
    
    (22.4
    )Income before income taxes
    
    
    23.5
    
    
    
    19.5
    
    
    
    14.7
    
    
    
    (1.7
    )
    
    
    17.9Income tax provision
    
    
    7.7
    
    
    
    6.7
    
    
    
    3.8
    
    
    
    (6.5
    )
    
    
    58.9Net income
    
    
    15.8
    %
    
    
    12.8
    %
    
    
    10.9
    %
    
    
    0.8
    
    
    
    3.9
 
 *
    
    Web performance services segment revenue is referred to as subscription fees and combined
with maintenance
in the consolidated statements of operations, included in Item 8 of this report.**
    
    The professional services segment and the application services segment are combined and reported
as professional services in the consolidated statements of operations, included in Item 8 of this
report. 31




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##### Table of Contents



PRODUCT SOFTWARE
     Year Ended March 31,2010
    
    
    2009
    
    
    2008Revenue
    
    $
    650,847
    
    
    $
    699,114
    
    
    $
    773,880Expense
    
    
    319,326
    
    
    
    379,229
    
    
    
    445,707Product software contribution
    
    $
    331,521
    
    
    $
    319,885
    
    
    $
    328,173
    32




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##### Table of Contents



Product Software Revenue
  Period-to-Period ChangeYear Ended March 31,
    
    
    2009 to
    
    
    2008 to2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009Products segmentSoftware license feesMainframe
    
    $
    108,216
    
    
    $
    113,014
    
    
    $
    151,278
    
    
    
    (4.2
    )%
    
    
    (25.3
    )%Distributed excluding divested products
    
    
    77,564
    
    
    
    80,422
    
    
    
    109,498
    
    
    
    (3.6
    )
    
    
    (26.6
    )Total software license fees excluding
divested products
    
    
    185,780
    
    
    
    193,436
    
    
    
    260,776
    
    
    
    (4.0
    )
    
    
    (25.8
    )Software license fees  divested products *
    
    
    8,724
    
    
    
    26,198
    
    
    
    36,730
    
    
    
    (66.7
    )
    
    
    (28.7
    )Total software license fees
    
    
    194,504
    
    
    
    219,634
    
    
    
    297,506
    
    
    
    (11.4
    )
    
    
    (26.2
    )Maintenance feesMainframe
    
    
    327,264
    
    
    
    337,387
    
    
    
    335,409
    
    
    
    (3.0
    )
    
    
    0.6Distributed excluding divested products
    
    
    107,388
    
    
    
    108,049
    
    
    
    103,074
    
    
    
    (0.6
    )
    
    
    4.8Total maintenance fees excluding
divested products
    
    
    434,652
    
    
    
    445,436
    
    
    
    438,483
    
    
    
    (2.4
    )
    
    
    1.6Maintenance fees  divested products *
    
    
    4,839
    
    
    
    34,044
    
    
    
    37,891
    
    
    
    (85.8
    )
    
    
    (10.2
    )Total maintenance fees
    
    
    439,491
    
    
    
    479,480
    
    
    
    476,374
    
    
    
    (8.3
    )
    
    
    0.7Total products segment revenueMainframe
    
    
    435,480
    
    
    
    450,401
    
    
    
    486,687
    
    
    
    (3.3
    )
    
    
    (7.5
    )Distributed
    
    
    198,515
    
    
    
    248,713
    
    
    
    287,193
    
    
    
    (20.2
    )
    
    
    (13.4
    )Total products segment revenue
    
    $
    633,995
    
    
    $
    699,114
    
    
    $
    773,880
    
    
    
    (9.3
    )
    
    
    (9.7
    )Web performance services segmentSubscription fees
    
    $
    16,852
    
    
    
    
    
    
    
    
    
    
    
    n/a
    
    
    
    n/aTotal product software revenue
    
    $
    650,847
    
    
    $
    699,114
    
    
    $
    773,880
    
    
    
    (6.9
    )
    
    
    (9.7
    )
 
 *
    
    Divested products license and maintenance fees relate to our Quality and DevPartner
product lines that were
sold during fiscal 2010. See Note 3 of the notes to consolidated financial statements,
included in Item 8 of this report, for more information on this divestiture.  Year Ended March 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    348,882
    
    
    $
    361,354
    
    
    $
    395,029Europe and Africa
    
    
    209,697
    
    
    
    233,938
    
    
    
    258,467Other international operations
    
    
    92,268
    
    
    
    103,822
    
    
    
    120,384Total product software revenue
    
    $
    650,847
    
    
    $
    699,114
    
    
    $
    773,880
  33




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Software license fees
     Maintenance fees
    Subscription fees
   34




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##### Table of Contents



Product Software Expenses
  Cost of software license fees
    Cost of maintenance and subscription fees
    35




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##### Table of Contents



Technology development and support
  Year Ended March 31,2010
    
    
    2009
    
    
    2008Technology development and support costs incurred
    
    $
    97,726
    
    
    $
    98,829
    
    
    $
    113,693Capitalized internal software costs *
    
    
    (6,481
    )
    
    
    (12,376
    )
    
    
    (12,561
    )Technology development and support costs expensed
    
    $
    91,245
    
    
    $
    86,453
    
    
    $
    101,132
 
 *
    
    See Note 1 of the notes to consolidated financial statements, included in Item 8 of this
report,
for our policy on capitalized internal software costs.    Sales and marketing costs
    36




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Gain on divestiture of product lines
 PROFESSIONAL SERVICES SEGMENT
  Year Ended March 31, *2010
    
    
    2009
    
    
    2008Revenue
    
    $
    200,865
    
    
    $
    356,111
    
    
    $
    418,559Expenses
    
    
    178,938
    
    
    
    331,001
    
    
    
    374,626Professional services segment contribution
    
    $
    21,927
    
    
    $
    25,110
    
    
    $
    43,933
 
 *
    
    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 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    164,765
    
    
    $
    288,439
    
    
    $
    342,519Europe and Africa
    
    
    24,895
    
    
    
    58,419
    
    
    
    68,170Other international operations
    
    
    11,205
    
    
    
    9,253
    
    
    
    7,870Total professional services segment revenue
    
    $
    200,865
    
    
    $
    356,111
    
    
    $
    418,559
    Fiscal 2009 and Fiscal 2010 Restructuring
  37




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##### Table of Contents



Professional Services Segment Revenue
    Professional Services Segment Expenses
   APPLICATION SERVICES SEGMENT
   Year Ended March 31, *2010
    
    
    2009
    
    
    2008Revenue
    
    $
    40,467
    
    
    $
    35,230
    
    
    $
    37,172Expenses
    
    
    37,923
    
    
    
    37,029
    
    
    
    39,295Application services segment income contribution (loss)
    
    $
    2,544
    
    
    $
    (1,799
    )
    
    $
    (2,123
    )
 
 *
    
    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. 38




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Year Ended March 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    34,916
    
    
    $
    29,580
    
    
    $
    32,447Europe and Africa
    
    
    3,000
    
    
    
    3,264
    
    
    
    2,833Other international operations
    
    
    2,551
    
    
    
    2,386
    
    
    
    1,892Total application services segment revenue
    
    $
    40,467
    
    
    $
    35,230
    
    
    $
    37,172
   Application Services Segment Revenue
     Application Services Segment Expenses
    39




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##### Table of Contents



CORPORATE AND OTHER EXPENSES
 Administrative and general expenses
    Other income, net (other income)
   Income taxes
 40




---



##### Table of Contents



RESTRUCTURING CHARGE
 Fiscal 2009 and Fiscal 2010 Restructuring Actions
      Fiscal 2008 Restructuring Actions
  41




---



##### Table of Contents



MANAGEMENTS DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Revenue Recognition
  Product Revenue Recognition
   42




---



##### Table of Contents



Web Performance Services Fees
 Professional and Application Services Fees
   43




---



##### Table of Contents



Capitalized Software
 Impairment of Goodwill and Other Intangible Assets 
  Deferred Tax Assets Valuation Allowance and Tax Liabilities
   44




---



##### Table of Contents



Stock-Based Compensation
   Other 
 45




---



##### Table of Contents



Liquidity and Capital Resources
  Fiscal 2010 compared to Fiscal 2009
 Net cash provided by operating activities
       46




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##### Table of Contents



Net cash used in investing activities
      Net cash used in financing activities
       47




---



##### Table of Contents



Fiscal 2009 compared to Fiscal 2008
 Net cash provided by operating activities
     Net cash provided by investing activities:
    48




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##### Table of Contents



Net cash used in financing activities:
     Recently Issued Accounting Pronouncements
  Contractual Obligations
  Payment Due by Period as of March 31,2016 andTotal
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterContractual obligations:Operating leases
    
    $
    264,843
    
    
    $
    22,025
    
    
    $
    13,066
    
    
    $
    10,070
    
    
    $
    8,277
    
    
    $
    6,852
    
    
    $
    204,553Other
    
    
    16,183
    
    
    
    6,433
    
    
    
    6,250
    
    
    
    2,550
    
    
    
    450
    
    
    
    250
    
    
    
    250Total
    
    $
    281,026
    
    
    $
    28,458
    
    
    $
    19,316
    
    
    $
    12,620
    
    
    $
    8,727
    
    
    $
    7,102
    
    
    $
    204,803
   Off-Balance Sheet Arrangements
  49




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Risk
    Foreign Currency Risk
   50




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##### Table of Contents



Contract
    
    Maturity
    
    
    
    
    
    Forward
    
    
    Fairdate in
    
    date in
    
    Contract
    
    
    Position in
    
    
    Value at2010
    
    2010
    
    Rate
    
    
    U.S. Dollars
    
    
    March 31, 2010Forward SalesSweden
    
    March 31
    
    April 1
    
    
    7.2303
    
    
    $
    830
    
    
    $
    831Forward PurchasesHong Kong Dollar
    
    March 31
    
    April 1
    
    
    7.6150
    
    
    $
    1,482
    
    
    $
    1,481Pounds Sterling
    
    March 31
    
    April 1
    
    
    0.6578
    
    
    
    1,140
    
    
    
    1,138Singapore Dollar
    
    March 31
    
    April 1
    
    
    1.4019
    
    
    
    1,498
    
    
    
    1,501$
    4,120
    
    
    $
    4,120
 51




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
 
 52




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##### Table of Contents



COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2010 AND 2009
(In Thousands, Except Share Data)
 Notes
    
    2010
    
    
    2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    
    
    $
    149,897
    
    
    $
    278,112Accounts receivable, net
    
    
    
    
    456,504
    
    
    
    472,011Deferred tax asset, net
    
    12
    
    
    46,286
    
    
    
    37,359Income taxes refundable
    
    
    
    
    6,160
    
    
    
    2,578Prepaid expenses and other current assets
    
    
    
    
    46,434
    
    
    
    41,350Assets held for sale
    
    3
    
    
    
    
    
    
    27,354Total current assets
    
    
    
    
    705,281
    
    
    
    858,764PROPERTY AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION AND AMORTIZATION
    
    2,4
    
    
    341,696
    
    
    
    353,182CAPITALIZED SOFTWARE, LESS ACCUMULATED
AMORTIZATION
    
    2,8
    
    
    41,952
    
    
    
    35,763OTHER:Accounts receivable
    
    
    
    
    222,344
    
    
    
    224,681Goodwill
    
    2,8
    
    
    591,870
    
    
    
    339,134Deferred tax asset, net
    
    12
    
    
    38,969
    
    
    
    30,851Other assets
    
    5,8
    
    
    71,213
    
    
    
    32,475Total other assets
    
    
    
    
    924,396
    
    
    
    627,141TOTAL ASSETS
    
    
    
    $
    2,013,325
    
    
    $
    1,874,850LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    
    
    $
    15,713
    
    
    $
    13,796Accrued expenses
    
    7
    
    
    68,497
    
    
    
    70,260Accrued bonuses and commissions
    
    
    
    
    42,235
    
    
    
    16,945Income taxes payable
    
    
    
    
    16,314
    
    
    
    24,646Deferred revenue
    
    
    
    
    469,834
    
    
    
    409,410Liabilities held for sale
    
    3
    
    
    
    
    
    
    26,470Total current liabilities
    
    
    
    
    612,593
    
    
    
    561,527DEFERRED REVENUE
    
    
    
    
    398,515
    
    
    
    378,094ACCRUED EXPENSES
    
    7
    
    
    33,193
    
    
    
    30,111DEFERRED TAX LIABILITY, NET
    
    12
    
    
    55,211
    
    
    
    24,470Total liabilities
    
    
    
    
    1,099,512
    
    
    
    994,202COMMITMENTS 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
224,982,171 and 241,798,493 shares in 2010
and 2009, respectively
    
    10,15
    
    
    2,250
    
    
    
    2,418Additional paid-in capital
    
    
    
    
    606,484
    
    
    
    628,955Retained earnings
    
    
    
    
    305,441
    
    
    
    249,897Accumulated other comprehensive loss
    
    
    
    
    (362
    )
    
    
    (622
    )Total shareholders equity
    
    
    
    
    913,813
    
    
    
    880,648TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    
    $
    2,013,325
    
    
    $
    1,874,850
 53
    Table of Contents   COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED MARCH 31, 2010, 2009 and 2008
(In Thousands, Except Per Share Data)
 Notes
    
    2010
    
    
    2009
    
    
    2008REVENUES:Software license fees
    
    
    
    $
    194,504
    
    
    $
    219,634
    
    
    $
    297,506Maintenance and subscription fees
    
    
    
    
    456,343
    
    
    
    479,480
    
    
    
    476,374Professional services fees
    
    
    
    
    241,332
    
    
    
    391,341
    
    
    
    455,731Total revenues
    
    
    
    
    892,179
    
    
    
    1,090,455
    
    
    
    1,229,611OPERATING EXPENSES:Cost of software license fees
    
    
    
    
    15,430
    
    
    
    24,491
    
    
    
    30,475Cost of maintenance and subscription fees
    
    
    
    
    42,555
    
    
    
    41,877
    
    
    
    46,300Cost of professional services
    
    
    
    
    216,861
    
    
    
    368,030
    
    
    
    413,921Technology development and support
    
    
    
    
    91,245
    
    
    
    86,453
    
    
    
    101,132Sales and marketing
    
    
    
    
    222,447
    
    
    
    226,408
    
    
    
    267,800Administrative and general
    
    
    
    
    164,633
    
    
    
    148,019
    
    
    
    182,488Restructuring costs
    
    7
    
    
    7,960
    
    
    
    10,037
    
    
    
    42,645Gain on divestiture of product lines
    
    
    
    
    (52,351
    )Total operating expenses
    
    
    
    
    708,780
    
    
    
    905,315
    
    
    
    1,084,761INCOME FROM OPERATIONS
    
    
    
    
    183,399
    
    
    
    185,140
    
    
    
    144,850OTHER INCOME (EXPENSE)Interest income
    
    
    
    
    4,970
    
    
    
    10,776
    
    
    
    19,910Settlement
    
    14
    
    
    20,734
    
    
    
    17,943
    
    
    
    16,160Other
    
    5
    
    
    17
    
    
    
    (1,138
    )
    
    
    (528
    )Other income, net
    
    
    
    
    25,721
    
    
    
    27,581
    
    
    
    35,542INCOME BEFORE INCOME TAXES
    
    
    
    
    209,120
    
    
    
    212,721
    
    
    
    180,392INCOME TAX PROVISION
    
    12
    
    
    68,314
    
    
    
    73,074
    
    
    
    45,998NET INCOME
    
    
    
    $
    140,806
    
    
    $
    139,647
    
    
    $
    134,394Basic earnings per share
    
    11
    
    $
    0.61
    
    
    $
    0.56
    
    
    $
    0.47Diluted earnings per share
    
    11
    
    $
    0.60
    
    
    $
    0.55
    
    
    $
    0.47
  54




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COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME

YEARS ENDED MARCH 31, 2010, 2009 and 2008
(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, 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
    )
    
    
    880,648Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,806
    
    
    
    
    
    
    
    140,806
    
    
    $
    140,806Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260
    
    
    
    260
    
    
    
    260Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    141,066Issuance of common stock and related tax benefit
    
    
    316,218
    
    
    
    3
    
    
    
    2,235
    
    
    
    
    
    
    
    
    
    
    
    2,238Repurchase of common stock
    
    
    (17,944,859
    )
    
    
    (179
    )
    
    
    (47,500
    )
    
    
    (85,262
    )
    
    
    
    
    
    
    (132,941
    )Acquisition tax benefits
    
    
    
    
    
    
    
    
    
    
    880
    
    
    
    
    
    
    
    
    
    
    
    880Exercise of employee stock options
and related tax benefit (Note 15)
    
    
    812,319
    
    
    
    8
    
    
    
    4,470
    
    
    
    
    
    
    
    
    
    
    
    4,478Stock awards compensation
    
    
    
    
    
    
    
    
    
    
    17,444
    
    
    
    
    
    
    
    
    
    
    
    17,444BALANCE AT MARCH 31, 2010
    
    
    224,982,171
    
    
    $
    2,250
    
    
    $
    606,484
    
    
    $
    305,441
    
    
    $
    (362
    )
    
    $
    913,813
  55




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COMPUWARE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED MARCH 31, 2010, 2009 and 2008
(In Thousands)
 2010
    
    
    2009
    
    
    2008CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:Net income
    
    $
    140,806
    
    
    $
    139,647
    
    
    $
    134,394Adjustments to reconcile net income to cash provided by
operations:Gain on divestiture of product lines
    
    
    (52,351
    )Depreciation and amortization
    
    
    44,997
    
    
    
    53,129
    
    
    
    55,167Asset impairments
    
    
    1,567
    
    
    
    662
    
    
    
    6,854Acquisition tax benefits
    
    
    880
    
    
    
    5,059
    
    
    
    5,090Stock award compensation
    
    
    17,444
    
    
    
    15,637
    
    
    
    11,553Deferred income taxes
    
    
    12,141
    
    
    
    4,986
    
    
    
    (2,022
    )Other
    
    
    362
    
    
    
    413
    
    
    
    1,474Net change in assets and liabilities, net of effects from
acquisitions, divestiture and currency fluctuations:Accounts receivable
    
    
    64,487
    
    
    
    17,853
    
    
    
    (64,019
    )Prepaid expenses and other current assets
    
    
    (4,470
    )
    
    
    3,555
    
    
    
    (7,120
    )Other assets
    
    
    (2,666
    )
    
    
    (3,641
    )
    
    
    640Accounts payable and accrued expenses
    
    
    (1,040
    )
    
    
    (29,623
    )
    
    
    (837
    )Deferred revenue
    
    
    17,455
    
    
    
    4,015
    
    
    
    64,875Income taxes
    
    
    (13,300
    )
    
    
    20,316
    
    
    
    28,641Net cash provided by operating activities
    
    
    226,312
    
    
    
    232,008
    
    
    
    234,690CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:Purchase of:Businesses, net of cash acquired
    
    
    (284,393
    )
    
    
    
    
    
    
    (4,649
    )Property and equipment
    
    
    (9,576
    )
    
    
    (17,943
    )
    
    
    (10,498
    )Capitalized software
    
    
    (9,778
    )
    
    
    (15,072
    )
    
    
    (14,359
    )Net proceeds from divestiture of product lines
    
    
    64,992Investment proceeds
    
    
    
    
    
    
    70,212
    
    
    
    106,717Net cash provided by (used in) investing activities
    
    
    (238,755
    )
    
    
    37,197
    
    
    
    77,211CASH FLOWS USED IN FINANCING ACTIVITIES:Proceeds from borrowings on credit facility
    
    
    51,000Payment on credit facility
    
    
    (51,000
    )Net proceeds from exercise of stock options including excess tax
benefits
    
    
    5,475
    
    
    
    11,237
    
    
    
    67,178Employee contribution to common stock purchase plans
    
    
    2,215
    
    
    
    2,986
    
    
    
    4,066Repurchase of common stock
    
    
    (132,941
    )
    
    
    (206,042
    )
    
    
    (440,988
    )Net cash used in financing activities
    
    
    (125,251
    )
    
    
    (191,819
    )
    
    
    (369,744
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    9,479
    
    
    
    (15,217
    )
    
    
    13,105NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (128,215
    )
    
    
    62,169
    
    
    
    (44,738
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    278,112
    
    
    
    215,943
    
    
    
    260,681CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    149,897
    
    
    $
    278,112
    
    
    $
    215,943
  56




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COMPUWARE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2010, 2009 and 2008
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business
       Basis of Presentation
  57




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Revenue Recognition
    Software license fees
    58




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##### Table of Contents



Maintenance and subscription fees
   Professional services fees
    59




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##### Table of Contents



Deferred revenue
  Collection and remittance of taxes
  Cash and Cash Equivalents
  Concentration of Credit Risk
    Balance at April 1, 2007
    
    $
    8,930Increase in allowance charged against income
    
    
    1,412Accounts charged against the allowance (1)
    
    
    (3,913
    )Balance at March 31, 2008
    
    
    6,429Increase in allowance charged against income
    
    
    2,747Accounts charged against the allowance (1)
    
    
    (1,750
    )Balance at March 31, 2009
    
    
    7,426Increase in allowance primarily from acquisition
    
    
    1,034Accounts charged against the allowance (1)
    
    
    (2,462
    )Balance at March 31, 2010
    
    $
    5,998
 
 (1)
    
    Write-offs related primarily to accounts deemed uncollectible and maintenance and
subscription cancellations. 60




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Property and Equipment
  Capitalized Software
      Goodwill and Other Intangible Assets
  61




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##### Table of Contents



Fair Value of Assets and Liabilities
    As of March 31, 2010Quoted Prices in
    
    
    SignificantActive Markets for
    
    
    Other ObservableEstimated
    
    
    Identical Assets
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    (Level 2)Assets:Cash equivalents  money market funds
    
    $
    68,691
    
    
    $
    68,691Foreign exchange derivatives
    
    $
    1
    
    
    
    
    
    
    $
    1
 As of March 31, 2009Quoted Prices in
    
    
    SignificantActive Markets for
    
    
    Other ObservableEstimated
    
    
    Identical Assets
    
    
    InputsFair Value
    
    
    (Level 1)
    
    
    (Level 2)Assets:Cash equivalents  money market funds
    
    $
    201,952
    
    
    $
    201,952Liabilities:Foreign exchange derivatives
    
    $
    30
    
    
    
    
    
    
    $
    30
  62




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Income Taxes
    Foreign Currency Translation
  Foreign Currency Transactions and Derivatives
      63




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##### Table of Contents



Stock-Based Compensation
     Year Ended March 31,2010
    
    
    2009
    
    
    2008Expected volatility
    
    
    43.94
    %
    
    
    54.17
    %
    
    
    59.34
    %Risk-free interest rate
    
    
    2.85
    %
    
    
    3.23
    %
    
    
    4.15
    %Expected lives at date of grant (in years)
    
    
    6.3
    
    
    
    6.3
    
    
    
    6.8Weighted average fair value of the options granted
    
    $
    3.54
    
    
    $
    4.27
    
    
    $
    6.07
   Earnings Per Share (EPS)
  Recently Issued Accounting Pronouncements
   64




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65




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##### Table of Contents



2. ACQUISITIONS
  Gomez, Inc. acquisition
   Cash
    
    $
    10,543Accounts receivable
    
    
    19,132Other current assets
    
    
    7,712Property, plant and equipment
    
    
    4,565Long-term accounts receivable
    
    
    9,101Goodwill
    
    
    251,176Intangible assets
    
    
    50,800Other assets
    
    
    218Total assets acquired
    
    
    353,247Deferred revenue  current
    
    
    24,370Other current liabilities
    
    
    9,726Deferred revenue  non-current
    
    
    9,275Deferred tax liabilities
    
    
    12,636Other non-current liabilities
    
    
    2,304Total liabilities acquired
    
    
    58,311Purchase price
    
    $
    294,936
   66




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##### Table of Contents



Purchase
    
    
    UsefulPrice
    
    
    Life
    
    AmortizationAllocation
    
    
    (in Years)
    
    MethodDeveloped technology
    
    $
    11,600
    
    
    4
    
    Straight LineCustomer relationships
    
    
    34,800
    
    
    10
    
    Straight LinePatents
    
    
    2,400
    
    
    2
    
    Straight LineTrademarks
    
    
    2,000
    
    
    3
    
    Straight LineTotal intangible assets acquired
    
    $
    50,800
  Year Ended March 31,2010
    
    
    2009Pro forma revenue
    
    $
    924,835
    
    
    $
    1,140,689Pro forma net income
    
    
    140,346
    
    
    
    139,988
   Hilgraeve, Inc. acquisition
  67




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##### Table of Contents



3. DIVESTITURES
 Quality and DevPartner divestiture
     Sales price
    
    $
    80,000Credit issued to Micro Focus (1)
    
    
    (15,008
    )Net proceeds from divestiture of product lines
    
    
    64,992Assets and liabilities:Capitalized software
    
    
    (17,589
    )Goodwill (2)
    
    
    (9,733
    )Accounts receivable (1)
    
    
    (9,098
    )Deferred revenue (1)
    
    
    25,458Other
    
    
    (1,679
    )Gain on divestiture of product lines
    
    $
    52,351
 
 (1)
    
    As of the transaction date, deferred revenue associated with Quality and DevPartner
products was $25.5 million related to future maintenance and professional services that
became the obligation of Micro Focus. The Company issued a $15.0 million credit (net of an
administrative fee) to Micro Focus for the previously collected or invoiced portion of
deferred revenue at the date of close. The remaining $9.1 million in unbilled accounts
receivable will be either collected by the Company and remitted to Micro Focus, net of an
administrative fee, or assigned to Micro Focus. A liability for this $9.1 million was
recorded to accounts payable upon the closing date of the sale. As of March 31, 2010, the
uncollected accounts receivable and related payable balance was $1.7 million.(2)
    
    The goodwill adjustment of $9.7 million represents the fair value of the Quality and
DevPartner product lines in relation to the fair value of the products segment. 68




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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
  69




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##### Table of Contents



4. PROPERTY AND EQUIPMENT
  March 31,2010
    
    
    2009Buildings and improvements
    
    $
    372,276
    
    
    $
    371,841Leasehold improvements
    
    
    20,477
    
    
    
    18,452Furniture and fixtures
    
    
    76,507
    
    
    
    77,229Computer equipment and software
    
    
    68,987
    
    
    
    67,914538,247
    
    
    
    535,436Less accumulated depreciation and
amortization
    
    
    196,551
    
    
    
    182,254Net property and equipment
    
    $
    341,696
    
    
    $
    353,182
   5. INVESTMENTS IN PARTIALLY OWNED COMPANIES
      70




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6. RELATED PARTY TRANSACTIONS
    71




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##### Table of Contents



7. RESTRUCTURING CHARGES
  Employee
    
    
    Facilities Costs
    
    
    
    
    
    
    TotalTermination
    
    
    (Primarily Lease
    
    
    
    
    
    
    RestructuringBenefits
    
    
    Abandonments)
    
    
    Other
    
    
    ActivityAccrual at March 31, 2007
    
    $
    
    
    
    $
    2,419
    
    
    $
    
    
    
    $
    2,419Restructuring charge
    
    
    33,295
    
    
    
    8,199
    
    
    
    1,151
    
    
    
    42,645Payments
    
    
    (25,881
    )
    
    
    (2,921
    )
    
    
    (1,066
    )
    
    
    (29,868
    )Non-cash charges
    
    
    (4,759
    )
    
    
    (2,981
    )
    
    
    
    
    
    
    (7,740
    )Accrual at March 31, 2008
    
    
    2,655
    
    
    
    4,716
    
    
    
    85
    
    
    
    7,456Restructuring charge
    
    
    8,352
    
    
    
    1,482
    
    
    
    203
    
    
    
    10,037Payments
    
    
    (8,757
    )
    
    
    (3,927
    )
    
    
    (275
    )
    
    
    (12,959
    )Non-cash charges
    
    
    (976
    )
    
    
    
    
    
    
    
    
    
    
    (976
    )Accrual at March 31, 2009
    
    
    1,274
    
    
    
    2,271
    
    
    
    13
    
    
    
    3,558Restructuring charge
    
    
    7,598
    
    
    
    164
    
    
    
    198
    
    
    
    7,960Payments
    
    
    (6,085
    )
    
    
    (1,457
    )
    
    
    (189
    )
    
    
    (7,731
    )Non-cash charges
    
    
    (977
    )
    
    
    
    
    
    
    
    
    
    
    (977
    )Accrual at March 31, 2010
    
    $
    1,810
    
    
    $
    978
    
    
    $
    22
    
    
    $
    2,810
 Fiscal 2009 and fiscal 2010 restructuring actions
     72




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Fiscal 2008 restructuring actions
  Restructuring accrual
    73




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##### Table of Contents



8. GOODWILL AND INTANGIBLE ASSETS
  March 31, 2010Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountUnamortized intangible assets:Trademarks
    
    $
    4,429
    
    
    
    
    
    
    $
    4,429Amortizable intangible assets:Capitalized software
    
    $
    312,509
    
    
    $
    (270,557
    )
    
    $
    41,952Customer relationship agreements
    
    
    46,772
    
    
    
    (12,051
    )
    
    
    34,721Other
    
    
    10,896
    
    
    
    (7,243
    )
    
    
    3,653Total amortized intangible assets
    
    $
    370,177
    
    
    $
    (289,851
    )
    
    $
    80,326
 March 31, 2009Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountUnamortized intangible assets:Trademarks
    
    $
    5,784
    
    
    
    
    
    
    $
    5,784Amortizable intangible assets:Capitalized software
    
    $
    317,569
    
    
    $
    (281,806
    )
    
    $
    35,763Customer relationship agreements
    
    
    13,218
    
    
    
    (10,751
    )
    
    
    2,467Non-compete agreements
    
    
    2,561
    
    
    
    (2,516
    )
    
    
    45Other
    
    
    6,849
    
    
    
    (6,684
    )
    
    
    165Total amortized intangible assets
    
    $
    340,197
    
    
    $
    (301,757
    )
    
    $
    38,440
 Unamortized Trademarks
  Capitalized Software
   74




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##### Table of Contents



Customer relationship agreements
  Other amortized intangible assets
  Amortization of intangible assets
   Year Ended March 31,2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterCapitalized software
    
    $
    14,701
    
    
    $
    12,046
    
    
    $
    8,697
    
    
    $
    5,360
    
    
    $
    1,128
    
    
    $
    20Customer relationships
    
    
    4,343
    
    
    
    3,884
    
    
    
    3,527
    
    
    
    3,480
    
    
    
    3,480
    
    
    
    16,007Non-compete agreements
    
    
    1,867
    
    
    
    1,386
    
    
    
    400Total
    
    $
    20,911
    
    
    $
    17,316
    
    
    $
    12,624
    
    
    $
    8,840
    
    
    $
    4,608
    
    
    $
    16,027
 75




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##### Table of Contents



Goodwill
  WebPerformance
    
    
    Professional
    
    
    ApplicationProducts
    
    
    Services
    
    
    Services
    
    
    Services
    
    
    TotalBalance at March 31, 2008, net
    
    $
    202,502
    
    
    $
    
    
    
    $
    142,294
    
    
    $
    11,471
    
    
    $
    356,267Assets held for sale reclassification (1)
    
    
    (9,733
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,733
    )Adjustments to previously recorded purchase price (2)
    
    
    (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
    
    
    
    339,134Acquisitions (3)
    
    
    32,653
    
    
    
    218,523
    
    
    
    
    
    
    
    
    
    
    
    251,176Effect of foreign currency translation
    
    
    570
    
    
    
    
    
    
    
    990
    
    
    
    
    
    
    
    1,560Balance at March 31, 2010, net
    
    $
    220,389
    
    
    $
    218,523
    
    
    $
    141,426
    
    
    $
    11,532
    
    
    $
    591,870
 
 (1)
    
    The assets held for sale reclassification from goodwill relates to the divestiture of
the Companys Quality and DevPartner product lines and is based on the fair value of these
product lines in relation to the fair value of the products segment. See Note 3 to the
consolidated financial statements for additional information regarding this divestiture.(2)
    
    The adjustment to goodwill in fiscal 2009 primarily relates to pre-acquisition tax
contingency adjustments.(3)
    
    The Company acquired Gomez in November 2009. See Note 2 to the consolidated financial
statements for additional information regarding this acquisition. Intangible impairment evaluation
    76




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9. DEBT
      77




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10. CAPITAL STOCK
 Preferred Stock Purchase Rights
  Stock Repurchase Plans
   Balance RemainingCommon Shares
    
    
    for FutureDate
    
    Amount
    
    
    Acquired During Fiscal
    
    
    Purchases atAuthorized
    
    Authorized
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    March 31, 2010December 2006
    
    $
    200,000
    
    
    
    11,673August 2007
    
    $
    200,000
    
    
    
    23,285February 2008
    
    $
    750,000
    
    
    
    2,687
    
    
    
    20,287
    
    
    
    17,945
    
    
    $
    403,920
  78




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##### Table of Contents



11. EARNINGS PER COMMON SHARE
  Year Ended March 31,2010
    
    2009
    
    2008Basic earnings per share:Numerator: Net income
    
    $
    140,806
    
    
    $
    139,647
    
    
    $
    134,394Denominator:Weighted-average common shares outstanding
    
    
    232,634
    
    
    
    250,916
    
    
    
    286,402Basic earnings per share
    
    $
    0.61
    
    
    $
    0.56
    
    
    $
    0.47Diluted earnings per share:Numerator: Net income
    
    $
    140,806
    
    
    $
    139,647
    
    
    $
    134,394Denominator:Weighted-average common shares outstanding
    
    
    232,634
    
    
    
    250,916
    
    
    
    286,402Dilutive effect of stock awards
    
    
    1,931
    
    
    
    1,486
    
    
    
    1,226Total shares
    
    
    234,565
    
    
    
    252,402
    
    
    
    287,628Diluted earnings per share
    
    $
    0.60
    
    
    $
    0.55
    
    
    $
    0.47
  79




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12. INCOME TAXES
  Year Ended March 31,2010
    
    
    2009
    
    
    2008Income before income taxes:U.S.
    
    $
    192,030
    
    
    $
    195,943
    
    
    $
    154,349Foreign
    
    
    17,090
    
    
    
    16,778
    
    
    
    26,043Total income before income taxes
    
    $
    209,120
    
    
    $
    212,721
    
    
    $
    180,392Income tax provisionCurrent:U.S. Federal
    
    $
    54,217
    
    
    $
    47,917
    
    
    $
    33,330Foreign
    
    
    11,521
    
    
    
    5,937
    
    
    
    19,118U.S. State
    
    
    2,957
    
    
    
    2,299
    
    
    
    2,829Total current tax provision
    
    
    68,695
    
    
    
    56,153
    
    
    
    55,277Deferred:U.S. Federal
    
    
    7,278
    
    
    
    7,213
    
    
    
    19,005Foreign
    
    
    (2,234
    )
    
    
    1,568
    
    
    
    (3,548
    )U.S. State
    
    
    (5,425
    )
    
    
    8,140
    
    
    
    (24,736
    )Total deferred tax provision (benefit)
    
    
    (381
    )
    
    
    16,921
    
    
    
    (9,279
    )Total income tax provision
    
    $
    68,314
    
    
    $
    73,074
    
    
    $
    45,998
  Year Ended March 31,2010
    
    
    2009
    
    
    2008Federal income tax at statutory rates
    
    $
    73,192
    
    
    $
    74,452
    
    
    $
    63,137Increase (decrease) in taxes:State income taxes, net
    
    
    2,747
    
    
    
    1,273
    
    
    
    1,718Settlement of prior year tax matters
    
    
    
    
    
    
    (1,024
    )Taxes relating to foreign operations
    
    
    1,361
    
    
    
    (3,446
    )
    
    
    891Tax credits (1)
    
    
    (1,662
    )
    
    
    (3,995
    )
    
    
    (21,507
    )Foreign reorganization (2)
    
    
    (32,319
    )Valuation allowance (3)
    
    
    28,360
    
    
    
    6,049
    
    
    
    2,859Other, net (4)
    
    
    (3,365
    )
    
    
    (235
    )
    
    
    (1,100
    )Provision for income taxes
    
    $
    68,314
    
    
    $
    73,074
    
    
    $
    45,998
 
 (1)
    
    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 ASC 740 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 fiscal 2022. The Brownfield Redevelopment credits were previously available
to reduce the Companys 80




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##### Table of Contents



SBT liabilities. Prior to the MBT enactment, these credits were not
recorded as a deferred tax asset since the Company did not account for the SBT as an income
tax.(2)
    
    A deferred tax benefit of $32.3 million was recorded in fiscal 2010 due to capital loss
carryforwards generated from a foreign tax reorganization that occurred during fiscal 2010.
These capital loss carryforwards can only be offset by capital gains within the foreign
jurisdiction, which the Company believes is less than more likely than not to occur.
Therefore, the Company recorded a valuation allowance equal to the deferred tax benefit.(3)
    
    During fiscal 2010, the Company recorded a $32.3 million valuation allowance against the
capital gains carryforward deferred tax asset that was created from the tax reorganization as
noted above; partially offset by the release of valuation allowances related to Brownfield
Redevelopment tax credit carryforward deferred tax assets (Brownfield tax credit carryforward
asset) in the amount of $4.1 million. Due to certain events and circumstances that occurred
during these periods, including the acquisition of Gomez, the Company adjusted the carrying
value of the Brownfield tax credit carryforward asset to its more likely than not realizable
value.During fiscal 2009, the Company recorded a $6.0 million valuation allowance against its
Brownfield tax credit carryforward asset. 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 tax credit
carryforward assets before their expiration dates and adjusted the carrying value of the asset
to its 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 carrying value of
the deferred tax asset associated with these tax credit carryforwards to the more likely than
not realizable value.(4)
    
    During the fourth quarter of fiscal 2010, the Company identified a carryforward component of
an income tax receivable that existed at March 31, 2009 resulting in a $3.0 million benefit
which was corrected during the fourth quarter of fiscal 2010. The Company has considered both
the qualitative and quantitative effects of this error on the financial statements for the
fiscal year ended March 31, 2009, as well as the qualitative and quantitative effects of
including the error correction in the fourth quarter of fiscal 2010 and fiscal year ended
March 31, 2010 and has concluded that the effects on the financial statements are not
material. 81




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March 31,2010
    
    
    2009Deferred tax assets:Deferred revenue
    
    $
    35,030
    
    
    $
    31,232Amortization of intangible assets
    
    
    19,584
    
    
    
    25,497Accrued expenses
    
    
    29,540
    
    
    
    25,206Net operating loss carryforwards
    
    
    19,870
    
    
    
    10,544Other tax carryforwards
    
    
    51,445
    
    
    
    24,198Other
    
    
    14,028
    
    
    
    14,738169,497
    
    
    
    131,415Less valuation allowance
    
    
    40,793
    
    
    
    8,908Net deferred tax assets
    
    
    128,704
    
    
    
    122,507Current portion
    
    
    48,060
    
    
    
    39,099Long term portion
    
    $
    80,644
    
    
    $
    83,408Deferred tax liabilities:Amortization of intangible assets
    
    $
    53,643
    
    
    $
    32,732Capitalized research and
development costs
    
    
    12,811
    
    
    
    17,217Depreciation
    
    
    28,056
    
    
    
    27,803Other
    
    
    4,150
    
    
    
    1,015Total deferred tax liabilities
    
    
    98,660
    
    
    
    78,767Current portion
    
    
    1,774
    
    
    
    1,740Long term portion
    
    $
    96,886
    
    
    $
    77,027
  March 31,2010
    
    
    ExpirationU.S. federal net operating losses
    
    $
    8,563
    
    
    
    2012 - 2030Non-U.S. net operating losses
    
    
    11,231
    
    
    IndefiniteNon-U.S. net operating losses
    
    
    76
    
    
    
    2016 - 2018Non-U.S. capital loss carryforwards
    
    
    32,319
    
    
    IndefiniteNon-U.S. tax credit carryforwards
    
    
    12
    
    
    
    2011 - 2019U.S. state & local tax credit carryforwards
    
    
    729
    
    
    IndefiniteU.S. state & local tax credit carryforwards
    
    
    18,385
    
    
    
    2011 - 2022$
    71,315
  82




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March 31,2010
    
    
    2009
    
    
    2008Unrecognized tax benefit at April 1, 2009
    
    $
    16,184
    
    
    $
    14,956
    
    
    $
    12,757Gross increases to tax positions for prior periods
    
    
    2,717
    
    
    
    3,230
    
    
    
    337Gross increases to tax positions for prior periods
related to acquired entities during fiscal 2010
    
    
    1,260Gross decreases to tax positions for prior periods
    
    
    (2,805
    )
    
    
    (2,267
    )
    
    
    (203
    )Gross increases to tax positions for current
period
    
    
    5,258
    
    
    
    3,789
    
    
    
    2,389Foreign tax rate differential for prior period
    
    
    (7
    )
    
    
    (2
    )Settlements
    
    
    
    
    
    
    (3,060
    )
    
    
    (39
    )Lapse of statute of limitations
    
    
    (550
    )
    
    
    (462
    )
    
    
    (285
    )Unrecognized tax benefit at March 31, 2010
    
    $
    22,057
    
    
    $
    16,184
    
    
    $
    14,956
    83




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##### Table of Contents



13. SEGMENT INFORMATION
  
    
    Our products and web performance services are designed to enhance the effectiveness of
key disciplines throughout IT organizations including application development and delivery,
service management and IT portfolio management and the availability and quality of web
applications.
 
    
    Our application services use business-to-business applications to integrate vital
business information and processes between partners, customers and suppliers.
 
    
    Our IT professional services include IT portfolio management services, application
delivery management services, application outsourcing services and enterprise legacy
modernization services. Our professional services segment also provides implementation,
consulting and training services in tandem with the Companys product offerings which are
referred to as product related services.
  Year Ended March 31,2010
    
    
    2009
    
    
    2008Revenues:Products:Mainframe
    
    $
    435,480
    
    
    $
    450,401
    
    
    $
    486,687Distributed
    
    
    198,515
    
    
    
    248,713
    
    
    
    287,193Total product segment revenue
    
    
    633,995
    
    
    
    699,114
    
    
    
    773,880Web performance services segment
    
    
    16,852Professional services segment
    
    
    200,865
    
    
    
    356,111
    
    
    
    418,559Application services segment
    
    
    40,467
    
    
    
    35,230
    
    
    
    37,172Total revenues
    
    $
    892,179
    
    
    $
    1,090,455
    
    
    $
    1,229,611Income (loss) from operations:Product segment (1)
    
    $
    334,549
    
    
    $
    319,885
    
    
    $
    328,173Web performance services segment
    
    
    (3,028
    )Professional services segment
    
    
    21,927
    
    
    
    25,110
    
    
    
    43,933Application services segment
    
    
    2,544
    
    
    
    (1,799
    )
    
    
    (2,123
    )Subtotal
    
    
    355,992
    
    
    
    343,196
    
    
    
    369,983Administrative and general
    
    
    (164,633
    )
    
    
    (148,019
    )
    
    
    (182,488
    )Restructuring costs
    
    
    (7,960
    )
    
    
    (10,037
    )
    
    
    (42,645
    )Income from operations
    
    
    183,399
    
    
    
    185,140
    
    
    
    144,850Other income, net
    
    
    25,721
    
    
    
    27,581
    
    
    
    35,542Income before income taxes
    
    $
    209,120
    
    
    $
    212,721
    
    
    $
    180,392
 
 (1)
    
    For the year ended March 31, 2010, income from the products segment includes a
$52.4 million gain on divestiture of the Quality and DevPartner product lines (see
Note 2 to the consolidated financial statements for additional information). 84




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Year Ended March 31,2010
    
    
    2009
    
    
    2008Revenues:United States
    
    $
    548,562
    
    
    $
    679,373
    
    
    $
    769,995Europe and Africa
    
    
    237,593
    
    
    
    295,621
    
    
    
    329,470Other international operations
    
    
    106,024
    
    
    
    115,461
    
    
    
    130,146Total revenues
    
    $
    892,179
    
    
    $
    1,090,455
    
    
    $
    1,229,611
 March 31,2010
    
    
    2009Long-lived assets:United States
    
    $
    936,288
    
    
    $
    622,578Europe and Africa
    
    
    31,928
    
    
    
    29,802Other international operations
    
    
    7,302
    
    
    
    78,103Total long-lived assets
    
    $
    975,518
    
    
    $
    730,483
  85




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##### Table of Contents



14. COMMITMENTS AND CONTINGENCIES
 Contractual obligations
   Payment Due by Period as of March 31,2016 andTotal
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterContractual obligations:Operating leases
    
    $
    264,843
    
    
    $
    22,025
    
    
    $
    13,066
    
    
    $
    10,070
    
    
    $
    8,277
    
    
    $
    6,852
    
    
    $
    204,553Other
    
    
    16,183
    
    
    
    6,433
    
    
    
    6,250
    
    
    
    2,550
    
    
    
    450
    
    
    
    250
    
    
    
    250Total
    
    $
    281,026
    
    
    $
    28,458
    
    
    $
    19,316
    
    
    $
    12,620
    
    
    $
    8,727
    
    
    $
    7,102
    
    
    $
    204,803
   Payment Due by Period as of March 31,2016 andTotal
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterLease rental commitments
    
    $
    28,039
    
    
    $
    2,164
    
    
    $
    4,765
    
    
    $
    4,949
    
    
    $
    5,155
    
    
    $
    5,300
    
    
    $
    5,706
  Settlement
   86




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##### Table of Contents



Legal Matters
  15. BENEFIT PLANS
 Employee Stock Ownership Plan
  Employee Stock Purchase Plan
  Director Phantom Stock Plan
    87




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##### Table of Contents



Employee Equity Incentive Plans
   Stock Options Activity
  Twelve Months EndedMarch 31, 2010WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term in Years
    
    
    ValueOptions outstanding as of April 1, 2009
    
    
    34,245
    
    
    $
    9.59Granted
    
    
    1,510
    
    
    
    7.54Exercised
    
    
    (812
    )
    
    
    6.80
    
    
    
    
    
    
    $
    799Forfeited
    
    
    (323
    )
    
    
    8.78Cancelled/expired
    
    
    (5,492
    )
    
    
    15.96Options outstanding as of March 31, 2010
    
    
    29,128
    
    
    $
    8.37
    
    
    
    4.39
    
    
    $
    16,504Options vested and expected to vest, net of
estimated forfeitures, as of March 31, 2010
    
    
    27,856
    
    
    $
    8.39
    
    
    
    4.21
    
    
    $
    15,522Options exercisable as of March 31, 2010
    
    
    18,999
    
    
    $
    8.59
    
    
    
    2.45
    
    
    $
    9,029
    88




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##### Table of Contents



Restricted Stock Units and Performance-Based Stock Awards Activity
  Twelve Months EndedMarch 31, 2010WeightedAverageGrant-DateShares
    
    
    Fair ValueNon-vested RSU outstanding at April 1, 2009
    
    
    950
    
    
    $
    6.58Granted
    
    
    2,177
    
    
    
    7.28Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested RSU outstanding at March 31, 2010
    
    
    3,127
    
    
    $
    7.07
    Covisint Corporation 2009 Long-Term Incentive Plan
     89




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##### Table of Contents



Stock Awards Compensation
  Year Ended March 31,2010
    
    
    2009
    
    
    2008Stock awards compensation classified as:Cost of software license fees
    
    $
    
    
    
    $
    1
    
    
    $
    1Cost of maintenance fees
    
    
    402
    
    
    
    846
    
    
    
    303Cost of professional services
    
    
    1,035
    
    
    
    2,380
    
    
    
    1,320Technology development and support
    
    
    1,104
    
    
    
    1,746
    
    
    
    663Sales and marketing
    
    
    6,054
    
    
    
    4,890
    
    
    
    2,203Administrative and general
    
    
    7,872
    
    
    
    4,798
    
    
    
    1,705Restructuring Costs
    
    
    977
    
    
    
    976
    
    
    
    5,358Total stock awards compensation expense
before income taxes
    
    
    17,444
    
    
    
    15,637
    
    
    
    11,553
  90




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##### Table of Contents



16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
  Fiscal 2010First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearRevenues
    
    $
    214,388
    
    
    $
    217,929
    
    
    $
    229,864
    
    
    $
    229,998
    
    
    $
    892,179Gross profit
    
    
    142,582
    
    
    
    153,917
    
    
    
    161,446
    
    
    
    159,388
    
    
    
    617,333Operating income (1)
    
    
    77,683
    
    
    
    41,433
    
    
    
    36,130
    
    
    
    28,153
    
    
    
    183,399Pre-tax income
    
    
    79,103
    
    
    
    42,766
    
    
    
    37,206
    
    
    
    50,045
    
    
    
    209,120Net income
    
    
    51,047
    
    
    
    27,986
    
    
    
    24,412
    
    
    
    37,361
    
    
    
    140,806Basic earnings per share
    
    
    0.21
    
    
    
    0.12
    
    
    
    0.11
    
    
    
    0.17
    
    
    
    0.61Diluted earnings per share
    
    
    0.21
    
    
    
    0.12
    
    
    
    0.11
    
    
    
    0.16
    
    
    
    0.60
 Fiscal 2009First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    YearRevenues
    
    $
    298,588
    
    
    $
    269,845
    
    
    $
    268,667
    
    
    $
    253,355
    
    
    $
    1,090,455Gross profit
    
    
    176,682
    
    
    
    153,287
    
    
    
    166,175
    
    
    
    159,913
    
    
    
    656,057Operating income
    
    
    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
    
    
    
    0.55
 
 (1)
    
    During the first quarter of fiscal 2010, the Company divested the Quality and DevPartner
product lines resulting in a gain on divestiture of $52.4 million which was reported within
operating expenses in the consolidated statements of operations. 91




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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
 92




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##### Table of Contents




    
    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.
    Changes in Internal Control Over Financial Reporting
  Report of Independent Registered Public Accounting Firm
 
 Internal
Control  Integrated Framework
  93




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##### Table of Contents



Internal Control 
Integrated Framework
 .
 DELOITTE & TOUCHE LLP
 
 
 ITEM 9B. OTHER INFORMATION
  94




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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
     95




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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
    
    
    16,254
    
    
    $
    8.00
    
    
    
    13,857Equity compensation plans not
approved by security holders
    
    
    12,874
    
    
    $
    8.85
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  96




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) Documents filed as part of this report.
 1. Consolidated Financial Statements
  PageReport of Independent Registered Public Accounting Firm
    
    
    52Consolidated Balance Sheets as of March 31, 2010 and 2009
    
    
    53Consolidated Statements of Operations for each of the years ended March 31, 2010, 2009 and 2008
    
    
    54Consolidated Statements of Shareholders Equity and Comprehensive Income for each of the years ended March 31, 2010, 2009 and 2008
    
    
    55Consolidated Statements of Cash Flows for each of the years ended March 31, 2010, 2009 and 2008
    
    
    56Notes to Consolidated Financial Statements
    
    
    57-91
 2. Financial Statement Schedules
  3. EXHIBITS
  97




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##### 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.
    
    Chairman of the Board, Chief Executive Officer
    
    May 27, 2010Peter Karmanos, Jr.
    
    And Director (Principal Executive Officer)/S/ LAURA L. FOURNIER
    
    Executive Vice President, Chief Financial Officer
    
    May 27, 2010Laura L. Fournier
    
    and Treasurer (Principal Financial Officer)/S/ ROBERT C. PAUL
    
    Director, President and Chief Operating Officer
    
    May 27, 2010Robert C. Paul/S/ DENNIS W. ARCHER
    
    Director
    
    May 27, 2010Dennis W. Archer/S/ GURMINDER S. BEDI
    
    Director
    
    May 27, 2010Gurminder S. Bedi/S/ WILLIAM O. GRABE
    
    Director
    
    May 27, 2010William O. Grabe/S/ WILLIAM R. HALLING
    
    Director
    
    May 27, 2010William R. Halling/S/ FAYE A. NELSON
    
    Director
    
    May 27, 2010Faye A. Nelson/S/ GLENDA D. PRICE
    
    Director
    
    May 27, 2010Glenda D. Price/S/ W. JAMES PROWSE
    
    Director
    
    May 27, 2010W. James Prowse/S/ G. SCOTT ROMNEY
    
    Director
    
    May 27, 2010G. Scott Romney/S/ RALPH J. SZYGENDA
    
    Director
    
    May 27, 2010Ralph J. Szygenda
 98




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##### 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)2.9
    
    Agreement and Plan of Merger by and among Compuware Corporation, Compuware
Acquisition Corp., Gomez, Inc. and the Securityholder Committee named therein, dated as
of October 6, 2009 (Companys Form 8-K filed on October 8, 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)




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##### Table of Contents



ExhibitNumber
    
    Description of Document*10.91
    
    Nonqualified Stock Option Agreement for Executive Officers (Companys
Form 10-Q for the quarterly period ended September 30, 2004)*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)*10.105
    
    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)*10.109
    
    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)*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)*10.122
    
    Executive Incentive Plan  Corporate, as of June 10, 2009 (Companys Form 8-K filed on
June 12, 2009)




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##### Table of Contents



ExhibitNumber
    
    Description of Document*10.123
    
    Form of Restricted Stock Unit Award Agreement, as of June 10, 2009 (Companys Form 8-K
filed on June 12, 2009)*10.124
    
    Form of Performance Unit Award Agreement for Peter Karmanos and Laura Fournier (Revenue
Condition) dated December 7, 2009 (Companys Form 10-Q for the quarterly period ended on
December 31, 2009)*10.125
    
    Performance Unit Award Agreement for Peter Karmanos (Revenue Condition, subject to
Section 162(m)) dated December 7, 2009 (Companys Form 10-Q for the quarterly period ended
on December 31, 2009)*10.126
    
    Form of Performance Unit Award Agreement for Peter Karmanos and Laura Fournier (IPO
Condition) dated December 7, 2009 (Companys Form 10-Q for the quarterly period ended on
December 31, 2009)*10.127
    
    Performance Unit Award Agreement for Robert Paul dated December 7, 2009 (Companys Form
10-Q for the quarterly period ended on December 31, 2009)*10.128
    
    2009 Covisint Corporation Long Term Incentive Plan (Companys Form 10-Q for the
quarterly period ended on December 31, 2009)*10.129
    
    Form of Covisint Option Agreement (Companys Form 10-Q for the quarterly period ended on
December 31, 2009)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