Computer Associates 2006 Annual Report Download - page 53

an adjustment to the gain of $2 million, net of tax, reducing the net gain to $58 million. The sale completed our
multi-year effort to exit the business applications market.
Performance Indicators
Management uses several quantitative performance indicators to assess our financial results and condition. Each
provides a measurement of the performance of our business model and how well we are executing our plan.
Our subscription-based business model is unique among our competitors in the software industry and particularly
during the Transition Period it is difficult to compare our results for many of our performance indicators with those
of our competitors. The following is a summary of the principal quantitative performance indicators that
management uses to review performance:
For the Year Ended March 31, 2006 2005 Change
Percent
Change
(restated)
(in millions)
Subscription revenue . . . ................................ $2,838 $2,587 $ 251 10 %
Total revenue ......................................... $3,796 $3,603 $ 193 5 %
Subscription revenue as a percent of total revenue .............. 75% 72% 3% N/A
Deferred subscription value............................... $5,415 $5,486 $ (71) (1)%
New deferred subscription value (direct) ..................... $2,610 $3,493 $(883) (25)%
New deferred subscription value (indirect) .................... $ 195 $ 144 $ 51 35%
Weighted average license agreement duration in years (direct) ..... 3.03 3.10 (.07) (2)%
Cash from continuing operating activities .................... 1,380 1,527 $(147) (10)%
Income from continuing operations ......................... 156 26 $130 500%
As of March 31, 2006 2005 Change
Percent
Change
(in millions)
Total cash, cash equivalents, and marketable securities .......... $1,865 $3,125 $(1,260) (40)%
Total debt ........................................... $1,811 $2,636 $ (825) (31)%
Analyses of our performance indicators, including general trends, can be found in the “Results of Operations” and
“Liquidity and Capital Resources” sections of this MD&A. The performance indicators discussed below are those
that we believe are unique because of our subscription-based business model.
Subscription Revenue — Subscription revenue is the ratable revenue recognized in a period from amounts
previously recorded as deferred subscription value. If the weighted average life of our license agreements
remains constant, an increase in deferred subscription value will result in an increase in subscription revenue.
Deferred Subscription Value — Under our business model, the portion of the license contract value that has not yet
been earned creates what we refer to as deferred subscription value. As revenue is ratably recognized (evenly on a
monthly basis), it is reported as “Subscription Revenue” on our Consolidated Statements of Operations, and the
deferred subscription value attributable to that contract is correspondingly reduced. When recognized as revenue,
the amount is reported on the “Subscription revenue” line item in our Consolidated Statements of Operations. If a
customer pays for software prior to the recognition of revenue, the amount is reported as a liability entitled
“Deferred subscription revenue (collected)” on our Consolidated Balance Sheets. Customers do not always pay for
software in equal annual installments over the life of a license agreement. The amount collected under a license
agreement for the next twelve months but not yet recognized as revenue is reported as a liability entitled “Deferred
subscription revenue (collected) — current” on our Consolidated Balance Sheets. The amount paid under a license
agreement for periods subsequent to the next twelve months, which will be recognized as revenue on a monthly
basis only in those future years, is reported as a liability entitled “Deferred subscription revenue (collected) —
noncurrent” on our Consolidated Balance Sheets. The increase or decrease in current payments attributable to
periods subsequent to the next twelve months is reported as an operating activity entitled “Deferred subscription
revenue (collected) — noncurrent” in our Consolidated Statements of Cash Flows.
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