Computer Associates 2007 Annual Report Download

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Today

Table of contents

  • Page 1
    Today

  • Page 2

  • Page 3
    ...as it helps employees understand my thinking and vision for the company. As a company, we'd like to take a similar approach to communicating with our investors. We're determined to move from a one-way communications model of press releases and static annual reports, to a dynamic, continuous exchange...

  • Page 4
    ... run CA's business. In the second quarter of Fiscal 2007 we re-oriented and resized our sales force, moving it from one that was product- and transaction-oriented to one with a focus on building customer relationships. In the process, we went from 18 to almost 800 Account Directors and Managers...

  • Page 5
    ...report and is looking forward to closing this chapter of its past. As I said to our customers at our CA World® conference in Las Vegas in April, CA is not the same company it was five years ago, or even 18 months ago. We have changed most of our major processes, many members of the leadership team...

  • Page 6
    ... sales teams the tools they need to engage customers around EITM. With more than 200 new releases and upgrades of our products in the last year and our Capability Solutions, there was a lot to talk about at CA World. It became clear that EITM is making a difference in the way people govern, manage...

  • Page 7
    ... IT support and improve service levels at its Xinjiang branch, CCB rolled out a Business Service Management solution from CA that automates security, incident, problem, identity and access management as well as workload automation, and improves service availability. The solution also prevents...

  • Page 8
    ... Concord - adding hundreds "We feel very of new CA customers and seeing the synergies of these acquisitions with good about our our existing products. In Fiscal 2007, we expanded the portfolio with the addition of records management products, and have begun to offer customers a way to integrate all...

  • Page 9
    ... team, creating almost 800 Account Manager and Account Director positions. Our customers tell us that with these highly qualified sales people dedicated to their accounts, we learn about new opportunities faster and are able to deliver a better, more relevant solution. 2. PARTNERING FOR GROWTH CA...

  • Page 10
    We invite you to visit our full annual report, CA Today, at ca.com/catoday/2007ar. CA Today has been designed as a dynamic investor experience that will help you to understand our company - our strengths, potential and the people who truly define us. 8

  • Page 11
    ... (I.R.S. Employer Identification Number) One CA Plaza, Islandia, New York (Address of Principal Executive Offices) 11749 (Zip Code) (631) 342-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: (Title of Each Class) Common stock...

  • Page 12
    ...Schedule 64 70 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services...

  • Page 13
    ... New York Stock Exchange under the symbol "CA". We are considered an Independent Software Vendor (ISV). ISVs develop and license software products that can increase the efficiency of computer hardware platforms or operating systems sold by other vendors. Our software helps our customers dynamically...

  • Page 14
    ... 2006, we announced a new release of Unicenter Network and Systems Management (Unicenter NSM) that offers a management database built on Microsoft SQL Server and eases integration of CA and third-party management solutions - enabling customers to optimize service availability while protecting their...

  • Page 15
    ... regardless of the hardware or software they are using. To help customers improve IT management, we deliver solutions that effectively govern, manage and secure IT. CA Capability Solutions are the building blocks of EITM.These solutions are modular and integrated so customers can address their needs...

  • Page 16
    ... Concord Communications, Inc. (Concord) with some of our other CA products like CA Unicenter Service Desk, CA Unicenter Network and Systems Management, CA Unicenter Asset Management and the security products. • We have approximately 5,800 engineers globally who design and support CA software and...

  • Page 17
    ...networks, applications and databases from a Web service to the mainframe - while gaining the benefits of integration throughout the enterprise. CA Capability Solutions are grouped according to the main focus of what they enable customers to do - govern, manage and secure. All CA Capability Solutions...

  • Page 18
    ...consolidate, log, track, manage, escalate and resolve incidents and problems. Assures service quality by accelerating detection and resolution. • CA Application Performance Management - Manages the performance and availability of packaged and custom-built applications, portals and service oriented...

  • Page 19
    ...assets and resources. • Identity - Integration with our security solutions enables our customers to manage the identity and entitlements of users from a services perspective. In other words, customers can ensure that any technology asset or IT staffer involved in supporting a given service and any...

  • Page 20
    ... of technologies and services shared by a number of our products and solutions. These include a federated management repository, licensing technologies, messaging technologies, workflow technologies and user interface technologies. These technologies and services enable our products to work together...

  • Page 21
    ... City, California; San Diego, California; Lisle, Illinois; Framingham, Massachusetts; Mount Laurel, New Jersey; Islandia, New York; Plano, Texas; and Herndon, Virginia. For the fiscal years ended March 31, 2007, 2006 and 2005, the costs of product development and enhancements, including related...

  • Page 22
    ... receive support. We believe that our flexible business model allows us to maintain our customer base while allowing us the opportunity to cross-sell new software products and services to them. CA Service and Education Our CA Technology ServicesTM team and global systems integration partners strive...

  • Page 23
    ... service addresses the needs of customers who require additional time to migrate or upgrade to new CA releases, products or solutions. This service provides technical support for a specific CA solution, product or release that has reached its End-of-Service or End-of-Life date. CA Technical Support...

  • Page 24
    ... CA's Incentive Compensation Plan and related process changes, is threefold: (i) to enable the Company to increase its sales of new products and solutions to new and existing customers while protecting the Company's installed base; (ii) to reduce costs and increase productivity; and (iii) to address...

  • Page 25
    ... in CA securities by directors and executive officers. These documents can also be obtained in print by writing to our Executive Vice President, Global Risk & Compliance, and Corporate Secretary, Kenneth V. Handal, at the Company's world headquarters in Islandia, New York, at the address listed on...

  • Page 26
    ... for hardware, software and services; • Ability to develop and introduce new or enhanced versions of our products; • Changes in foreign currency exchange rates; • Ability to control costs; • The number and terms and conditions of licensing transactions; • Reorganizations of the sales and...

  • Page 27
    ... need to continue to improve existing and implement new operational and financial systems, procedures and controls to manage our business effectively in the future. As a result, we have licensed enterprise resource planning (ERP) software from SAP AG and have begun a process to expand and upgrade...

  • Page 28
    ...: provide quotes; take customer orders; ship products; provide services and support to our customers; bill and track our customers; fulfill contractual obligations; and otherwise run our business. Failure to properly or adequately address these issues could result in the diversion of management...

  • Page 29
    ... rather than purchase our products. In addition, the software industry is currently undergoing consolidation as software companies seek to offer more extensive suites and broader arrays of software products and services, as well as integrated software and hardware solutions. This consolidation...

  • Page 30
    ... errors or if we fail to meet our customers' expectations. Significant technical challenges also arise with our products because our customers purchase and deploy our products across a variety of computer platforms and integrate them with a number of third-party software applications and databases...

  • Page 31
    .... Our sales to government clients subject us to risks, including early termination, audits, investigations, sanctions and penalties. Approximately 11% of our total deferred subscription value at March 31, 2007 is associated with multi-year contracts signed with the U.S. Federal Government and other...

  • Page 32
    ... makes the operating system understandable to programmers; and/or "object code", which directly controls the hardware; and other technical documentation. Since the availability of source code facilitated the development of systems and applications software, which must interface with the operating...

  • Page 33
    ... related to accounting issues, announcements of technological innovations or new products by us or our competitors, changes in domestic and international economic and business conditions, general conditions in the software and computer industries and other events or factors. In addition, the stock...

  • Page 34
    ... Chief Marketing Officer Executive Vice President, Worldwide Human Resources Executive Vice President, Global Risk & Compliance, and Corporate Secretary Executive Vice President and Chief Technology Officer Executive Vice President and General Counsel Senior Vice President and Corporate Controller...

  • Page 35
    ... eTrust Solutions. Mr. Artzt received a bachelor's degree in mathematics from Queens College and a master's degree in computer science from New York University. James Bryant is Executive Vice President and Chief Administrative Officer at CA. He is responsible for the Company's information technology...

  • Page 36
    ... Marketing Officer of the Company since April 2005. From September 2001 to April 2005, he provided management and marketing consulting services to technology companies. Previously, Mr. Friedman served as Chief Executive Officer for International Flex Technologies and Sheldahl, and was acting CEO of...

  • Page 37
    ... for CA's technology vision and strategy. Mr. Nugent's teams are delivering common technology services to CA's business units, ensuring architectural compliance and integration of the Company's solutions and products. He is also focused on creating an integrated software engineering methodology...

  • Page 38
    ..., RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the New York Stock Exchange. The following table sets forth, for the fiscal quarters indicated, the quarterly high and low closing sales prices on the New York Stock Exchange: FISCAL YEAR 2007 HIGH...

  • Page 39
    ... acquisitions. In fiscal year 2005, we incurred an after-tax charge of approximately $144 million related to the shareholder litigation and government investigation settlements, a tax expense charge of $55 million related to the planned repatriation of $500 million in cash under the American Jobs...

  • Page 40
    ... 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 this Form 10-K, we license our software products directly...

  • Page 41
    ... Government Investigation - DPA Concluded In September 2004, the Company reached agreements with the United States Attorney's Office for the Eastern Division of New York (USAO) and the Northeast Region of the Securities and Exchange Commission (SEC) by entering into a Deferred Prosecution Agreement...

  • Page 42
    ... stock of Wily Technology, Inc. (Wily), a provider of enterprise application management solutions. In December 2005, we acquired Control F-1 Corporation (Control F-1) a privately held provider of support automation solutions that automatically prevent, detect and repair end-user computer problems...

  • Page 43
    ...always paid in equal annual installments over the life of a license agreement. 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. The amount collected from...

  • Page 44
    ... to the change in billings or cash receipts, relative to previous periods. The contribution to current period revenue from new deferred subscription value from any single license agreement is relatively small, since revenue is recognized ratably over the applicable license agreement term. Weighted...

  • Page 45
    ... business model, maintenance revenue was separately identified and was reported on the "Maintenance" line item in the Consolidated Statements of Operations. Under our business model, maintenance that is bundled with product sales is not separately identified in our customers' license agreements and...

  • Page 46
    ... 2007, we added new deferred subscription value related to our direct business of $3.11 billion as compared with $2.61 billion, for fiscal year 2006. The increase in new deferred subscription value in our direct business was primarily attributable to the growth in sales of new products and services...

  • Page 47
    ... unspecified future software products, revenue is recognized ratably as subscription revenue on a monthly basis over the term of the agreement. For fiscal year 2007, the Company recorded approximately $40 million of revenue on an up-front basis relating to acquisitions that occurred subsequent...

  • Page 48
    ...related unamortized discount is amortized over the life of the applicable license agreement and is reported as financing fee revenue. Under our business model, we have not recorded additional unamortized discounts since we generally do not recognize revenue on an up-front basis for sales of products...

  • Page 49
    ... an increase in purchased software associated with acquisitions consummated in fiscal years 2006 and 2005. Cost of Professional Services Cost of professional services consists primarily of the personnel-related costs associated with providing professional services and training to customers. Cost of...

  • Page 50
    ... contribution to the CA Savings Harvest Plan, a 401(k) plan that was not made in prior year, and costs associated with recent acquisitions. In fiscal year 2007, we recorded a charge of approximately $4 million to the provision for doubtful accounts as compared with a net credit of $24 million...

  • Page 51
    ... associated with recent acquisitions, royalties associated with the newly formed Ingres Corporation as well as higher sales of certain royalty bearing channel products. For further description of the changes to the Incentive Compensation Plan and related processes, refer to "- Critical Accounting...

  • Page 52
    ... the plan. Shareholder Litigation and Government Investigation Settlement In prior fiscal years, a number of stockholder class action lawsuits were initiated that alleged, among other things, that the Company made misleading statements of material fact or omitted to state material facts necessary...

  • Page 53
    ...Financial Statements for additional information. In September 2004, we reached agreements with the USAO and the SEC in connection with their investigations of improper recognition of revenue and related reporting practices during the period January 1, 1998 through September 30, 2000, and the actions...

  • Page 54
    ...recognition of certain foreign tax credits, $18 million arising from international stock based compensation deductions and $66 million arising from foreign export benefits and other international tax rate benefits. Partially offsetting these benefits was a charge of approximately $46 million related...

  • Page 55
    ... to the CA Savings Harvest Plan, a 401(k) plan, which was not pre-funded in fiscal year 2006, as well as an increase in the amount of cash paid for income taxes. Customers generally pay for the right to use our software products over the term of the associated software license agreement. We refer...

  • Page 56
    ... installment accounts receivable recorded under the prior business model approximates carrying value. Amounts due from customers under our business model are offset by deferred subscription value related to these license agreements, leaving no or minimal net carrying value on the balance sheet for...

  • Page 57
    ...subscription revenue - current, billed Deferred subscription value - current, uncollected Deferred subscription value - noncurrent, uncollected, related to current accounts receivable Trade and installment accounts receivable - current, net Non-Current: Amounts to be billed beyond the next 12 months...

  • Page 58
    ... were approximately $223 million for fiscal year 2007 which included proceeds on the sale of our corporate headquarters in Islandia, New York of approximately $201 million. Proceeds received from the sale of marketable securities in fiscal year 2007 declined approximately $354 million to $44 million...

  • Page 59
    ... the "Other noncurrent assets" line item. In April 2005, we repaid, as scheduled, the $825 million 6.375% Senior Notes issued during the fiscal year ended March 31, 1999 using our available cash balances (see Fiscal Year 1999 Senior Notes for details). 2004 Revolving Credit Facility In December 2004...

  • Page 60
    ...). Based on our credit ratings as of May 2007, the facility fee is 0.225% of the $1 billion committed amount. The 2004 Revolving Credit Facility contains customary covenants for transactions of this type, including two financial covenants: (i) for the 12 months ending each quarter-end, the ratio of...

  • Page 61
    ...) the notes in full in July 2005. International Line of Credit An unsecured and uncommitted multi-currency line of credit is available to meet short-term working capital needs for our subsidiaries operating outside the United States. The line of credit is available on an offering basis, meaning that...

  • Page 62
    ... a weighted average interest rate of 5.4%. In March 2005, we pre-funded contributions to the CA Savings Harvest Plan, a 401(k) plan. We elected not to pre-fund our contribution as of March 31, 2007 or 2006 as a result of IRS Treasury Regulations eliminating the tax benefit associated with the pre...

  • Page 63
    ... software products; (2) providing customer technical support (referred to as maintenance); and (3) providing professional services, such as consulting and education. We recognize revenue pursuant to the requirements of Statement of Position 97-2 "Software Revenue Recognition" (SOP 97-2), issued...

  • Page 64
    ... of revenue related to certain products is recognized on an up-front or perpetual basis once all revenue recognition criteria are met in accordance with SOP 97-2 as described above, and is reported in the "Software fees and other" line of the Consolidated Statements of Operations. License agreements...

  • Page 65
    ..., at the end of fiscal year 2006, we had a material weakness in our internal control over financial reporting due to ineffective policies and procedures relating to controls over the accounting for sales commissions. We made changes to the Incentive Compensation Plan for fiscal year 2007 and related...

  • Page 66
    related to accounting for commissions. We simplified the Incentive Compensation Plan by, among other things, in April 2006, on a worldwide basis, reducing accelerators in the plan (under which sales employees are paid commissions at higher rates when they reach certain levels of quota achievement) ...

  • Page 67
    ...internally in researching and developing a computer software product should be charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release...

  • Page 68
    ...the straight-line method in fiscal year 2006 and fiscal year 2007, as anticipated future revenue is projected to increase for several years considering the Company is continuously integrating current software technology into new software products. Accounting for Stock-Based Compensation We currently...

  • Page 69
    ... terms in connection with our software license agreements. The aggregate amounts due from customers include an imputed interest element, which can vary with the interest rate environment. Each 25 basis point increase in interest rates would have an associated annual opportunity cost of approximately...

  • Page 70
    ... for sale securities are deferred as a component of stockholders' equity. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Our Consolidated Financial Statements are listed in the List of Consolidated Financial Statements and Financial Statement Schedules filed as part of this Annual Report on...

  • Page 71
    ... a material error in the recognition of taxes associated with the Company's cash repatriation, which occurred in the fourth quarter of fiscal year 2006. (iv) The Company's policies and procedures relating to the accounting for and disclosure of stock-based compensation relating to stock options were...

  • Page 72
    ... focused training, relating to ethics, the Company's Code of Conduct and its core values. (ii) During fiscal year 2007, the following actions were taken by management with respect to the remediation of our material weakness in internal control over financial reporting related to accounting for sales...

  • Page 73
    ...for stock options issued prior to fiscal year 2002. (v) During fiscal year 2007, the following actions were taken by management with respect to the remediation of our material weakness in internal control over financial reporting related to accounting for subscription revenue when license agreements...

  • Page 74
    ... services. Therefore, during the third and fourth quarters, the Company implemented additional manual procedures to address these financial reporting issues and will continue to monitor the effectiveness of its internal controls and procedures on an ongoing basis and will take further actions...

  • Page 75
    ... and Other Information Concerning Executive Officers", "Compensation Discussion and Analysis", "Compensation of Directors", and "Compensation and Human Resource Committee Report on Executive Compensation" in our definitive proxy statement to be filed with the SEC is incorporated herein by...

  • Page 76
    ... of contents are annexed hereto. Financial Statement Schedules are listed in the separate table of contents annexed hereto. Exhibits. Regulation S-K Exhibit Number 2.1 Announcement of Restructuring Plan. Previously filed as Exhibit 99.1 to the Company's Current Report on Form 8-K dated August 14...

  • Page 77
    ... 1996 Deferred Stock Plan for Non-Employee Directors. 1998 Incentive Award Plan. CA, Inc. Year 2000 Employee Stock Purchase Plan. 2001 Stock Option Plan. CA, Inc. 2002 Incentive Plan (Amended and Restated Effective as of April 27, 2007). CA, Inc. 2002 Compensation Plan for NonEmployee Directors. CA...

  • Page 78
    ....22* CA, Inc. Change in Control Severance Policy. 10.23* Letter Agreement, dated August 26, 2004, between the Company and Sanjay Kumar. Notice of Revocation dated September 22, 2004. 10.24* 10.25 Deferred Prosecution Agreement, including the related Information and Stipulation of Facts. Final...

  • Page 79
    ... 10.41* 10.42* Form of Incentive Stock Option Award Certificate (Employment Agreement). CA, Inc. Deferred Compensation Plan for John A. Swainson, dated April 29, 2005. Trust Agreement between Computer Associates International, Inc. and Fidelity Management Trust Company, dated as of April 29, 2005...

  • Page 80
    ...10.2 to the Company's Current Report on Form 8-K dated August 15, 2006, and incorporated herein by reference. Filed herewith. 10.50* 10.51* 10.52* Amendment, dated August 24, 2005, to Employment Agreement between Computer Associates International, Inc. and John A. Swainson. Modified compensation...

  • Page 81
    .... Filed herewith. Filed herewith. Certification of the CEO pursuant to §302 of the Sarbanes-Oxley Act of 2002. Certification of the CFO pursuant to §302 of the Sarbanes-Oxley Act of 2002. Certification pursuant to §906 of the SarbanesOxley Act of 2002. * Management contract or compensatory plan...

  • Page 82
    ... Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CA, INC. By: /s/ JOHN A. SWAINSON John A. Swainson President and Chief Executive Officer Dated: May 30, 2007 Pursuant to the requirements of the Securities Exchange Act...

  • Page 83
    ...McCracken William E. McCracken /s/ Lewis S. Ranieri Lewis S. Ranieri /s/ Walter P. Schuetze Walter P. Schuetze /s/ John A. Swainson John A. Swainson /s/ Laura S. Unger Laura S. Unger /s/ Renato Zambonini Renato Zambonini Dated: May 30, 2007 Director Director Director Director Director Director...

  • Page 84
    CA, Inc. and Subsidiaries Islandia, New York ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 9A, ITEM 15(a)(1) AND (2), AND ITEM 15(c) LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE YEAR ENDED MARCH 31, 2007 PAGE...

  • Page 85
    ... standards of the Public Company Accounting Oversight Board (United States), the effectiveness of CA, Inc.'s internal control over financial reporting as of March 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of...

  • Page 86
    ...in Internal Control - Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of CA, Inc. and subsidiaries as of March 31, 2007 and 2006, and the related consolidated...

  • Page 87
    CA, Inc. and Subsidiaries Consolidated Statements of Operations YEAR ENDED MARCH 31, (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2007 2006 2005 Revenue: Subscription revenue Maintenance Software fees and other Financing fees Professional services Total Revenue Expenses: Amortization of capitalized ...

  • Page 88
    ... and amortization Total Property and Equipment, net Purchased software products, net accumulated amortization of $4,600 and $4,299, respectively Goodwill Federal and state income taxes receivable - non current Deferred income taxes Other noncurrent assets Total Assets See Accompanying Notes...

  • Page 89
    ... loans payable Accounts payable Salaries, wages, and commissions Accrued expenses and other current liabilities Deferred subscription revenue (collected) - current Financing obligations (collected) - current Deferred maintenance revenue Taxes payable, other than income taxes payable Federal, state...

  • Page 90
    ...net of taxes of $4 Comprehensive income Stock-based compensation Income tax effect - stock transactions Dividends declared ($0.08 per share) Shareholder litigation settlement Exercise of common stock options, ESPP, and other items, net of taxes of $19 Issuance of options related to acquisitions, net...

  • Page 91
    ... compensation Income tax effect - stock transactions Dividends declared ($0.16 per share) Exercise of common stock options, ESPP, and other items Issuance of options related to acquisitions, net of amortization Treasury stock purchased Common stock purchased and retired Balance as of March 31, 2007...

  • Page 92
    ... Provision for deferred income taxes Non-cash stock based compensation expense Non-cash charge for purchased in-process research and development Gain on sale of assets Charge for impairment of assets Foreign currency transaction (gain) loss - before taxes Shareholder litigation settlement Changes in...

  • Page 93
    CA, Inc. and Subsidiaries Consolidated Statements of Cash Flows (IN MILLIONS) (Continued) YEAR ENDED MARCH 31, 2007 2006 2005 Financing Activities: Dividends paid Purchases of common stock Debt borrowings Debt repayments Debt issuance costs Exercise of call spread option Exercise of common stock ...

  • Page 94
    ... ended March 31, 2007, 2006, and 2005, respectively. (f) Basis of Revenue Recognition: The Company generates revenue from the following primary sources: (1) licensing software products; (2) providing customer technical support (referred to as maintenance); and (3) providing professional services...

  • Page 95
    ... unspecified software products) and the maintenance fees were deferred and subsequently recognized as revenue over the term of the license. Revenue from acquisitions is initially recorded on the acquired company's systems, generally under a perpetual or up-front software license agreement model, and...

  • Page 96
    ...have been impacted for that period. Under the Company's current sales compensation model, during periods of high growth and sales of new products relative to revenue in that period, the amount of sales commission expense attributable to the license agreement would be recognized fully in the year and...

  • Page 97
    provisions of SFAS No. 123(R), stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee requisite service period (generally the vesting period of the equity grant). (i) Net Income From Continuing ...

  • Page 98
    ... fiscal years ended March 31, 2007, 2006, and 2005 was approximately $92 million, $83 million, and $89 million, respectively. On August 15, 2006, the Company entered into a purchase and sale agreement, pursuant to which the Company sold its corporate headquarters located in Islandia, New York with...

  • Page 99
    ...economic life of the software product, generally estimated to be five years from the date the product became available for general release to customers. The Company amortized capitalized software costs using the straight-line method in fiscal years 2007, 2006, and 2005, as anticipated future revenue...

  • Page 100
    ... of purchased software products, other intangible assets, and other longlived assets, including investments, are reviewed on a regular basis for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If an impairment is deemed to exist, any related...

  • Page 101
    ... to deferred tax assets and liabilities associated with acquired businesses from prior periods. Goodwill was also reduced by approximately $31 million due to the divesture of Benit. Refer to Note 2, "Acquisitions and Divestitures," for additional information relating to the Company's sale of...

  • Page 102
    ... presentation. Subsequent to the filing of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2006, the Company determined in the second quarter of fiscal year 2007 that deferred tax assets associated with certain outstanding stock options were understated by approximately...

  • Page 103
    ... therefore pro-forma information for both fiscal years 2007 and 2006 was not presented. During the fourth quarter of fiscal year 2006, the Company completed its acquisition of Wily. Wily was a provider of enterprise application management software solutions that enable companies to manage their web...

  • Page 104
    .... iLumin was a privately held provider of enterprise message management and archiving software. iLumin's Assentor product line has been added to the Company's storage management solutions. The acquisition of iLumin has been accounted for as a purchase and accordingly, its results of operations have...

  • Page 105
    ..., 2007, primarily due to the recognition of deferred tax assets associated with acquired net operating losses. This adjustment has been included in the allocation presented above. The following unaudited pro-forma financial information presents the combined results of operations of the Company, Wily...

  • Page 106
    ... was a provider of network service management software solutions, and the Company has integrated Concord's network management products into the Company's Unicenter Enterprise Systems Management suite. The acquisition of Concord has been accounted for as a purchase and, accordingly, its results...

  • Page 107
    ... Consolidated Statements of Cash Flow. Benit offered a wide range of corporate solution services, such as IT outsourcing, business integration services, enterprise solutions and IT service management in Korea. The sale was part of the Company's fiscal year 2007 cost reduction and restructuring plan...

  • Page 108
    ... of support automation solutions that automatically prevent, detect, and repair end-user computer problems before they disrupt critical IT services. In November 2005, the Company announced an agreement with Garnett & Helfrich Capital, a private equity firm, to create an independent corporate entity...

  • Page 109
    ... years ended March 31, 2007 and March 31, 2006, respectively. The Company has recognized substantially all of the severance related costs associated with the fiscal 2006 plan. Final payment of these amounts is dependent upon settlement with the works councils in certain international locations. 97

  • Page 110
    ...Prosecution Agreement entered into with the United States Attorney's Office for the Eastern District of New York (see also Note 8, "Commitments and Contingencies", in the Notes to the Consolidated Financial Statements). During fiscal year 2007, the Company incurred approximately $15 million in legal...

  • Page 111
    ... Consolidated Statement of Operations for the fiscal year ended March 31, 2007. The Company reviewed its investment portfolio for impairment and determined that, as of March 31, 2007 and 2006, the total unrealized loss for investments impaired for both greater and less than 12 months was immaterial...

  • Page 112
    ... based on the location of the sale. The following table presents information about the Company by geographic area for the fiscal years ended March 31, 2007, 2006 and 2005: (IN MILLIONS) UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL March 31, 2007 Revenue To unaffiliated customers Between geographic...

  • Page 113
    ... the license agreement. When the payment is due from the customer to the third party, the Company relieves its liability to the financing institution and recognizes the previously financed amount as "Deferred subscription revenue (collected)" in the Consolidated Balance Sheets. As of March 31, 2007...

  • Page 114
    ..., which is further described in the "Stock repurchase" section of Note 1 - "Significant Accounting Policies" in this Annual Report on Form 10-K. Borrowings under the 2004 Revolving Credit Facility bear interest at a rate dependent on the Company's credit ratings at the time of such borrowings and...

  • Page 115
    ...a transaction pursuant to Rule 144A. The Company issued $500 million of 4.75%, 5-year notes due December 2009 and $500 million of 5.625%, 10-year notes due December 2014. The Company used the net proceeds from this issuance to repay debt. The Company has the option to redeem the 2005 Senior Notes at...

  • Page 116
    ... other $ 20 - $ - 23 $ 5 - $ - 6 International Line of Credit An unsecured and uncommitted multi-currency line of credit is available to meet short-term working capital needs for the Company's subsidiaries operating outside the United States. The line of credit is available on an offering basis...

  • Page 117
    ...CEO Sanjay Kumar, its former Chief Financial Officer Ira Zar, and its Executive Vice President Russell M. Artzt were defendants in one or more stockholder class action lawsuits, filed in July 1998, February 2002, and March 2002 in the United States District Court for the Eastern District of New York...

  • Page 118
    ... Government Investigation - DPA Concluded In September 2004, the Company reached agreements with the United States Attorney's Office for the Eastern Division of New York (USAO) and the Northeast Region of the Securities and Exchange Commission (SEC) by entering into a Deferred Prosecution Agreement...

  • Page 119
    ... General Counsel. Stephen Richards, the Company's former Executive Vice President of Sales, resigned from his position and was relieved of all duties in April 2004, and left the Company at the end of June 2004. Additionally, on April 21, 2004, Sanjay Kumar resigned as Chairman, director and Chief...

  • Page 120
    ... On April 26, 2007, the Board of Directors elected Raymond J. Bromark to serve as a new independent director. Under the Agreements, the Company also agreed to the appointment of an Independent Examiner to examine the Company's practices for the recognition of software license revenue, its ethics and...

  • Page 121
    ... securities fraud and wire fraud, committing securities fraud, filing false SEC filings, conspiracy to obstruct justice and obstruction of justice. Additionally, Mr. Kumar was charged with one count of making false statements to an agent of the Federal Bureau of Investigation and Mr. Richards was...

  • Page 122
    Title 18, United States Code, Section 371. On June 21, 2006, Mr. Bennett pled guilty to one count of conspiracy to obstruct justice. On December 6, 2006, Mr. Bennett was sentenced to a term of home confinement for ten months, three years of supervised release, 100 hours of community service, and a ...

  • Page 123
    ... claims against Charles Wang (CA's former Chairman and CEO) including filing a motion to set aside releases granted to Mr. Wang in 2000 and 2003. The Special Litigation Committee has determined and directed that these claims be pursued vigorously by CA using counsel retained by the Company. Certain...

  • Page 124
    ... Litigation Employee Option Action". On January 31, 2007, plaintiffs filed a consolidated amended complaint naming as defendants the following current or former directors of the Company: Messrs. Artzt, Cron, D'Amato, de Vogel, Fernandes, Goldstein, Grasso, Kumar, La Blanc, Lofgren, Lorsch, McCracken...

  • Page 125
    ... Company's motion to transfer the action to the Federal Court. Since the transfer, there have been no significant activities or developments. Other Civil Actions In June 2004, a lawsuit captioned Scienton Technologies, Inc. et al. v. Computer Associates International, Inc., was filed in the Federal...

  • Page 126
    On May 23, 2007, a lawsuit captioned The Bank of New York v. CA, Inc. et al., Index No. 07/601738, was filed in the Supreme Court of the State of New York, New York County. The complaint seeks unspecified damages and other relief, including acceleration of principal, based upon a claim for breach of...

  • Page 127
    ... action settlement and litigation charge Federal tax cost of repatriation under the American Jobs Creation Act U.S. share-based compensation Effect of international operations, including foreign export benefit and nondeductible share-based compensation Tax credits Foreign export benefit refund State...

  • Page 128
    ... of income tax credits for a given audit cycle. The Company has established a liability of $245 million related to these matters which is included in the "Federal, state, and foreign income taxes payable" line on the Consolidated Balance Sheet. Should any issues addressed in the Company's tax audits...

  • Page 129
    ... to employees under the terms of the Company's equity compensation plans (the Plans). The Plans are administered by the Compensation and Human Resource Committee of the Board of Directors (the Committee). Awards under the Plans may include at-the-money stock options, premium-priced stock options...

  • Page 130
    ... fiscal years 2007 and 2006, respectively. The 2002 Compensation Plan for Non-Employee Directors (the 2002 Director Plan) provided for each eligible director to receive annual fees in the form of deferred shares and automatic option grants to purchase 6,750 shares of common stock of the Company, up...

  • Page 131
    ... receives an additional fee for his work as the lead director. As of March 31, 2007, approximately 137,000 deferred shares are outstanding in connection with annual director fees. As of March 31, 2007, options related to acquired companies' stock plans covering 1.0 million shares are outstanding, of...

  • Page 132
    ...amounts represent the difference between the exercise price and $25.91, the closing price of the Company's stock on March 30, 2007, the last trading day of the Company's fiscal year as reported on the New York Stock Exchange. Options outstanding that are expected to vest are net of estimated future...

  • Page 133
    ... and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company's stock options granted in the fiscal years ended March 31, 2007, 2006, and 2005. Estimates of fair value are not intended to predict actual future events or the value...

  • Page 134
    ... Company settles employee stock option exercises with stock held in treasury. Employee Option Exchange Offer Under Section 409A of the U.S. Internal Revenue Code of 1986, as amended (Section 409A), as interpreted in the then proposed regulations issued by the U.S. Internal Revenue Service, options...

  • Page 135
    ... the grant amount per annum, was contingent upon attainment of specific criteria, including an annual Target Closing Price (Price) for the Company's common stock and the participant's continued employment. The Price was based on the average closing price of the Company's common stock on the New York...

  • Page 136
    ... award for any reason). The related compensation cost recognized will be based on the number of shares granted. Stock Purchase Plan The Company maintains the Year 2000 Employee Stock Purchase Plan (the Purchase Plan) for all eligible employees. The Purchase Plan is considered compensatory. Under the...

  • Page 137
    ... the Internal Revenue Code of 1986 (the Code), and contains a qualified cash or deferred arrangement as described under Section 401(k) of the Code. Pursuant to the CASH Plan, eligible participants may elect to contribute a percentage of their base compensation. The matching contributions of CA Stock...

  • Page 138
    Schedule II CA, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS DESCRIPTION (IN MILLIONS) BALANCE AT BEGINNING OF PERIOD ADDITIONS/ (DEDUCTIONS) CHARGED/ (CREDITED) TO COSTS AND EXPENSES CHARGED/ (CREDITED) TO OTHER ACCOUNTS1 BALANCE AT END... the Form 10-K portion of the Annual Report. 126

  • Page 139
    ... Inc., Microsoft Corporation, Novell, Inc., Oracle Corporation and Symantec Corporation. *$100 invested on 3/31/02 in stock or index - including reinvestment of dividends. Fiscal year ending March 31. 3/31/02 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 CA, Inc. S&P 500 S&P Systems Software 100.00 100...

  • Page 140
    ... the dilutive impact of the Company's 1.625% Convertible Senior Notes and stock awards outstanding. FISCAL YEAR ENDED MARCH 31, (UNAUDITED) 2007 2006 Basic income per share Non-GAAP adjustments, net of taxes Acquisition amortization Restructuring and other charges Acquisition IPR&D Interest on...

  • Page 141
    ... Louis Kirstein Professor of Human Relations Harvard Business School William E. McCracken Chairman CA, Inc. Lewis S. Ranieri Chairman Hyperion@ Walter P. Schuetze Former Chief Accountant Securities and Exchange Commission John A. Swainson President and Chief Executive Officer CA, Inc. Laura S. Unger...

  • Page 142
    ... the New York Stock Exchange for the quarters indicated. HIGH LOW Stockholder Information A copy of the Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available without charge upon written request addressed to: Investor Relations CA, Inc. One CA Plaza Islandia, NY...

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    Copyright © 2007 CA. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. ITIL® is a Registered Trade Mark, and a Registered Community Trade Mark of the Office of Government Commerce, and is Registered in the U.S. Patent...