Computer Associates 2006 Annual Report Download - page 23

This Annual Report on Form 10-K (Form 10-K) contains certain forward-looking information relating to CA, Inc.
(the “Company,” “Registrant,” “CA,” “we,” “our,” or “us”), formerly known as Computer Associates International
Inc., that is based on the beliefs of, and assumptions made by, our management as well as information currently
available to management. When used in this Form 10-K, the words “anticipate,” “believe,” “estimate,” “expect,” and
similar expressions are intended to identify forward-looking information. Such information includes, for example,
the statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” under Item 7, but also appears in other parts of this Form 10-K. This forward-looking information
reflects our current views with respect to future events and is subject to certain risks, uncertainties, and assumptions,
some of which are described under the caption “Risk Factors” in Part 1 Item 1A and elsewhere in this Form 10-K.
Should one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results
may vary materially from those described in this Form 10-K as anticipated, believed, estimated, or expected. We do
not intend to update these forward-looking statements.
The products and services mentioned in this Form 10-K are used for identification purposes only and may be
protected by trademarks, trade names, services marks and/or other intellectual property rights of the Company
and/or other parties in the United States and/or other jurisdictions. The absence of a specific attribution in
connection with any such mark does not constitute a waiver of any such right.
This Form 10-K also contains references to other company, brand, and product names. These company, brand, and
product names are used herein for identification purposes only and may be the trademarks of their respective
owners. We disclaim any responsibility for specifying which marks are owned by which companies or which
organizations.
EXPLANATORY NOTE — RESTATEMENTS
In this Form 10-K, we are restating prior fiscal periods principally to reflect additional (a) non-cash stock-based
compensation expense relating to employee stock option grants prior to fiscal year 2002, (b) subscription revenue
relating to the early renewal of certain contracts, and (c) sales commission expense that should have been recorded
in the third quarter of fiscal year 2006, as described below. As a result of these restatements and the issues discussed
below, the Company delayed the filing of the Form 10-K for fiscal year 2006 beyond its extended due date of
June 29, 2006.
The effects of these restatements are reflected in the financial statements and other financial data, including
quarterly data, included in this Form 10-K. None of the restatements have any impact on cash flows provided by
continuing operating activities. Refer to Note 12, “Restatements”, in the Notes to the Consolidated Financial
Statements for additional information. Additionally, we have also included under Item 6, “Selected Financial Data,”
restated financial information for the fiscal years ended March 31, 2005 through 2002, and, under Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Selected Quarterly
Information,” restated quarterly financial information for each interim period during fiscal years ended March 31,
2006 and 2005. Selected quarterly financial information is also presented in Note 12, “Restatements”, in the Notes
to the Consolidated Financial Statements for fiscal years 2006 and 2005. Other disclosures contained in the
quarterly reports on Form 10-Q for fiscal years 2006 and prior have not been amended, should no longer be relied
upon and should be read in conjunction with the information contained in this Form 10-K.
The Company also reported material weaknesses in its financial controls as they relate to the determination of a
grant date for stock options prior to fiscal year 2002, revenue recognition for early renewal of certain license
agreements, and the estimation, recording and monitoring of sales commissions. Refer to Part 1, Item 9A, “Controls
and Procedures”, for additional information concerning the evaluation of the Company’s internal control processes.
Stock Options:
Given the stock option issues facing public companies, particularly in the technology sector, the Company
conducted an internal review, with the assistance of outside consultants, into its historical policies and procedures
with respect to the granting of stock options, principally from fiscal year 1996 to the present under its stock option
plans in effect during this period. Based upon the results of our review, we determined that in years prior to fiscal
year 2002, we did not communicate stock option grants to individual employees in a timely manner. In fiscal years
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