Computer Associates 2006 Annual Report Download - page 49

government investigation settlements, a tax expense charge of $55 million related to the planned repatriation of $500 million in cash under
the American Jobs Creation Act of 2004, and an after-tax charge of approximately $17 million for severance and other expenses in
connection with a restructuring plan. Refer to “Shareholder Litigation and Government Investigation Settlement,” “Income Taxes,” and
“Restructuring Charge” within Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for
additional information.
Our adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” had the effect of prospectively eliminating the amortization of
goodwill and certain other intangible assets beginning on April 1, 2002. Refer to Note 1, “Significant Accounting Policies — Goodwill”,
in the Notes to the Consolidated Financial Statements for additional information. We amortized goodwill and assembled workforce for
fiscal year 2002 of $458 million.
(3) Current liabilities include deferred subscription revenue (collected) — current of approximately $1.52 billion, $1.41 billion, $1.21 billion,
$0.92 billion and $0.58 billion for the fiscal years ended March 31, 2006, 2005, 2004, 2003 and 2002, respectively. Also included in current
liabilities is deferred maintenance revenue of approximately $0.25 billion, $0.27 billion, $0.29 billion, $0.32 billion, and $0.46 billion for
the fiscal years ended March 31, 2006, 2005, 2004, 2003 and 2002, respectively.
(4) Certain prior year balances have been reclassified to conform to the current year’s presentation. Refer to Note 1, “Significant Accounting
Policies — Reclassifications”, in the Notes to the Consolidated Financial Statements for additional information.
(5) See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, for details.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) is
intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity,
and results of operations. The information below has been adjusted to reflect the restatement of the Company’s
financial results which is more fully described in the “Explanatory Note — Restatements” immediately preceding
Part I of this Form 10-K and in Note 12, “Restatements”, in the Notes to the Consolidated Financial Statements.
Business Overview
We are one of the world’s largest providers of IT management software. Our software and expertise enables
customers to better manage their complex IT infrastructures across systems and networks, security and storage
solutions.
Our technology solutions are comprehensive, integrated, real-time and open. They are not tied to any one platform,
but instead make it possible for customers to manage all of the computers, networks and other technologies that
comprise their computing environments. In turn, this helps customers better manage the investments they have
made in IT rather than having to “rip and replace” them. As a result, customers gain flexibility. They can manage
risk, manage cost, increase service and better align their IT investments with the needs of their organization.
We pursue a number of high-growth areas with our products, including network and systems management, security
and storage. Our solutions are designed for both mainframe and distributed environments, each of which comprise
about half of our revenue.
The CA Business Model
As described in greater detail in Item 1, “Business,” of the Company’s Form 10-K, we license our software products
directly to customers as well as through distributors, resellers, and VARs. We generate revenue from the following
sources: license fees — licensing our products on a right-to-use basis; maintenance fees — providing customer
technical support and product enhancements; and service fees — providing professional services such as product
implementation, consulting, and education services. The timing and amount of fees recognized as revenue during a
reporting period are determined individually by license agreement, based on its duration and specific terms.
Under our business model, we provide customers with the flexibility to license software under month-to-month
licenses or to fix their costs by committing to longer-term agreements. We also permit customers to change their
software mix as their business and technology needs change, which includes the right to receive software in the
future within defined product lines for no additional fee, commonly referred to as unspecified future upgrades. As a
result of the right our customers have to receive unspecified future upgrades, as well as maintenance included
during the term of the license, we are required under generally accepted accounting principles in the United States
29