CA Technologies
CA, INC. (Form: 10-Q/A, Received: 10/28/2011 17:27:14)
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 1-9247
CA, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware
(State or other jurisdiction of
incorporation or organization)
  13-2857434
(I.R.S. Employer Identification Number)
     
One CA Plaza
Islandia, New York

(Address of principal executive offices)
  11749
(Zip Code)
1-800-225-5224
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting company o
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
     
Title of Class
Common Stock
par value $0.10 per share
  Shares Outstanding
as of October 20, 2011
493,391,769
 
 

 


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Explanatory Note
CA, Inc. (the “Company”) is filing this Amendment No. 1 to Form 10-Q for the fiscal quarter ended September 30, 2011, which was filed with the Securities and Exchange Commission on October 27, 2011 (the “Form 10-Q”). The certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the “906 Certification”) filed as Exhibit 32 to the Form 10-Q incorrectly referred to the quarter ended June 30, 2011 rather than the quarter ended September 30, 2011. At the time of the filing of the Form 10-Q with the Securities and Exchange Commission, the Company was in possession of a manually-signed 906 Certification that correctly referred to the quarter ended September 30, 2011. The sole purpose of this amendment is to correct the error in the 906 Certification.
Except for the updated certifications of our Chief Executive Officer and Chief Financial Officer, this Amendment No. 1 to Form 10-Q does not modify or update other disclosures in, or exhibits to, the Form 10-Q.

 


 

CA, INC. AND SUBSIDIARIES
INDEX
                 
                  Page
PART I.          
       
 
       
            1  
       
 
       
Item 1.       2  
       
 
       
            2  
       
 
       
            3  
       
 
       
            4  
       
 
       
            5  
       
 
       
Item 2.       27  
       
 
       
            27  
       
 
       
            29  
       
 
       
            31  
       
 
       
            32  
       
 
       
            35  
       
 
       
            46  
       
 
       
            51  
       
 
       
Item 3.       52  
       
 
       
Item 4.       52  
       
 
       
PART II.          
       
 
       
Item 1.       53  
       
 
       
Item 1A.       53  
       
 
       
Item 2.       53  
       
 
       
Item 3.       54  
       
 
       
Item 4.       54  
       
 
       
Item 5.       54  
       
 
       
Item 6.       55  
       
 
       
            57  
  EX-10.1
  EX-10.2
  EX-10.4
  EX-10.5
  EX-10.6
  EX-10.7
  EX-12.1
  EX-15
  EX-31.1
  EX-31.2
  EX-32

 


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PART I. FINANCIAL INFORMATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
CA, Inc.:
We have reviewed the condensed consolidated balance sheet of CA, Inc. and subsidiaries as of September 30, 2011, the related condensed consolidated statements of operations for the three-month and six-month periods ended September 30, 2011 and 2010, and the related condensed consolidated statements of cash flows for the six-month periods ended September 30, 2011 and 2010. These condensed consolidated financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of CA, Inc. and subsidiaries as of March 31, 2011, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 16, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2011, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
New York, New York
October 27, 2011

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Item 1.
CA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
                 
    September 30,     March 31,  
    2011     2011  
    (unaudited)        
ASSETS
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 2,203     $ 3,049  
Marketable securities — current
    89       75  
Trade accounts receivable, net
    601       849  
Deferred income taxes — current
    132       246  
Other current assets
    189       152  
 
           
TOTAL CURRENT ASSETS
    3,214       4,371  
Marketable securities — noncurrent
    90       104  
Property and equipment, net of accumulated depreciation of $671 and $632, respectively
    398       437  
Goodwill
    5,885       5,688  
Capitalized software and other intangible assets, net
    1,407       1,284  
Deferred income taxes — noncurrent
    197       284  
Other noncurrent assets, net
    271       246  
 
           
TOTAL ASSETS
  $ 11,462     $ 12,414  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
Current portion of long-term debt and loans payable
  $ 18     $ 269  
Accounts payable
    95       100  
Accrued salaries, wages and commissions
    272       293  
Accrued expenses and other current liabilities
    377       395  
Deferred revenue (billed or collected) — current
    2,175       2,600  
Taxes payable, other than income taxes payable — current
    44       75  
Federal, state and foreign income taxes payable — current
          124  
Deferred income taxes — current
    64       68  
 
           
TOTAL CURRENT LIABILITIES
    3,045       3,924  
Long-term debt, net of current portion
    1,292       1,282  
Federal, state and foreign income taxes payable — noncurrent
    407       414  
Deferred income taxes — noncurrent
    63       64  
Deferred revenue (billed or collected) — noncurrent
    863       969  
Other noncurrent liabilities
    125       141  
 
           
TOTAL LIABILITIES
    5,795       6,794  
 
           
STOCKHOLDERS’ EQUITY
               
Preferred stock, no par value, 10,000,000 shares authorized; No shares issued and outstanding
           
Common stock, $0.10 par value, 1,100,000,000 shares authorized; 589,695,081 and 589,695,081 shares issued; 489,413,910 and 502,299,607 shares outstanding, respectively
    59       59  
Additional paid-in capital
    3,575       3,615  
Retained earnings
    4,532       4,106  
Accumulated other comprehensive loss
    (133 )     (65 )
Treasury stock, at cost, 100,281,171 shares and 87,395,474 shares, respectively
    (2,366 )     (2,095 )
 
           
TOTAL STOCKHOLDERS’ EQUITY
    5,667       5,620  
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 11,462     $ 12,414  
 
           
See accompanying Notes to the Condensed Consolidated Financial Statements.

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CA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)
                                 
    For the Three     For the Six  
    Months Ended     Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
REVENUE
                               
 
                               
Subscription and maintenance revenue
  $ 1,022     $ 939     $ 2,029     $ 1,878  
Professional services
    96       79       186       157  
Software fees and other
    82       70       148       122  
 
                       
TOTAL REVENUE
    1,200       1,088       2,363       2,157  
 
                       
 
                               
EXPENSES
                               
 
                               
Costs of licensing and maintenance
    71       66       138       133  
Cost of professional services
    91       75       179       146  
Amortization of capitalized software costs
    55       47       105       92  
Selling and marketing
    370       300       696       590  
General and administrative
    104       113       218       230  
Product development and enhancements
    140       125       258       253  
Depreciation and amortization of other intangible assets
    43       45       90       89  
Other (gains) expenses, net
    (7 )     15       4       1  
 
                       
TOTAL EXPENSES BEFORE INTEREST AND INCOME TAXES
    867       786       1,688       1,534  
 
                       
 
                               
Income from continuing operations before interest and income taxes
    333       302       675       623  
Interest expense, net
    6       12       15       25  
 
                       
 
                               
Income from continuing operations before income taxes
    327       290       660       598  
Income tax expense
    91       71       196       158  
 
                       
 
                               
INCOME FROM CONTINUING OPERATIONS
    236       219       464       440  
 
                               
Income (loss) from discontinued operations, net of income taxes
          3       13       (1 )
 
                       
NET INCOME
  $ 236     $ 222     $ 477     $ 439  
 
                       
 
                               
BASIC INCOME PER SHARE
                               
 
                               
Income from continuing operations
  $ 0.47     $ 0.43     $ 0.92     $ 0.85  
Income from discontinued operations
                .03        
 
                       
Net income
  $ 0.47     $ 0.43     $ 0.95     $ 0.85  
 
                       
 
Basic weighted average shares used in computation
    493       507       497       508  
 
                               
DILUTED INCOME PER SHARE
                               
 
                               
Income from continuing operations
  $ 0.47     $ 0.43     $ 0.92     $ 0.85  
Income from discontinued operations
                .03        
 
                       
Net income
  $ 0.47     $ 0.43     $ 0.95     $ 0.85  
 
                       
 
Diluted weighted average shares used in computation
    494       508       498       509  
See accompanying Notes to the Condensed Consolidated Financial Statements.

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CA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)
                 
    For the Six Months  
    Ended September 30,  
    2011     2010  
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS:
               
Net income
  $ 477     $ 439  
(Income) loss from discontinued operations
    (13 )     1  
 
           
Income from continuing operations
    464       440  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
               
Depreciation and amortization
    195       181  
Provision for deferred income taxes
    123       187  
Provision for bad debts
          5  
Share-based compensation expense
    41       40  
Asset impairments and other non-cash items
    9       (1 )
Foreign currency transaction gains
    (1 )      
Changes in other operating assets and liabilities, net of effect of acquisitions:
               
Decrease in trade and current installment accounts receivable, net
    255       273  
Decrease in deferred revenue
    (483 )     (513 )
Decrease in taxes payable, net
    (215 )     (224 )
Increase (decrease) in accounts payable, accrued expenses and other
    10       (2 )
Decrease in accrued salaries, wages and commissions
    (21 )     (109 )
Changes in other operating assets and liabilities
    (44 )     (26 )
 
           
NET CASH PROVIDED BY OPERATING ACTIVITIES — CONTINUING OPERATIONS
    333       251  
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:
               
Acquisitions of businesses, net of cash acquired, and purchased software
    (369 )     (28 )
Purchases of property and equipment
    (40 )     (47 )
Cash proceeds from divestiture of assets
    7       10  
Capitalized software development costs
    (96 )     (73 )
Purchases of marketable securities
    (71 )      
Proceeds from the sale of marketable securities
    27        
Maturities of marketable securities
    43        
Other investing activities
    (1 )     (16 )
 
           
NET CASH USED IN INVESTING ACTIVITIES — CONTINUING OPERATIONS
    (500 )     (154 )
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:
               
Dividends paid
    (50 )     (41 )
Purchases of common stock
    (353 )     (155 )
Debt borrowings
    164        
Debt repayments
    (353 )     (7 )
Exercise of common stock options and other
    11       4  
 
           
NET CASH USED IN FINANCING ACTIVITIES — CONTINUING OPERATIONS
    (581 )     (199 )
Effect of exchange rate changes on cash
    (85 )     32  
 
           
NET CHANGE IN CASH AND CASH EQUIVALENTS — CONTINUING OPERATIONS
    (833 )     (70 )
CASH USED IN OPERATING ACTIVITIES — DISCONTINUED OPERATIONS
    (17 )     (4 )
CASH PROVIDED BY INVESTING ACTIVITIES — DISCONTINUED OPERATIONS
    4       16  
 
           
NET EFFECT OF DISCONTINUED OPERATIONS ON CASH AND CASH EQUIVALENTS
    (13 )     12  
DECREASE IN CASH AND CASH EQUIVALENTS
    (846 )     (58 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    3,049       2,583  
 
           
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 2,203     $ 2,525  
 
           
See accompanying Notes to the Condensed Consolidated Financial Statements.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
NOTE A — ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited Condensed Consolidated Financial Statements of CA, Inc. (the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 270, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011 (2011 Form 10-K).
In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual results.
Operating results for the three and six months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2012.
Divestitures: In June 2011, the Company sold its Internet Security business and in June 2010, the Company sold its Information Governance business. The results of operations for these businesses, and the related gain (loss) on disposal have been presented as discontinued operations in the accompanying Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. The effects of the discontinued components were immaterial to the Company’s Condensed Consolidated Balance Sheet at March 31, 2011. See Note C, “Divestitures,” for additional information.
In September 2010, the Company sold an equity investment and recognized a gain of approximately $10 million, which is included in “Other (gains) expenses, net” in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2010.
Cash and Cash Equivalents: The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 66% being held by the Company’s foreign subsidiaries outside the United States at September 30, 2011.
Fair Value Measurements: Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. The Company is required to classify certain assets and liabilities based on the following fair value hierarchy:
  Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
 
  Level 2: Quoted prices for identical assets and liabilities in markets that are not active, or quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
 
  Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
See Note K, “Fair Value Measurements,” for additional information.
Deferred Revenue (Billed or Collected): The Company accounts for unearned revenue on billed amounts due from customers on a gross basis. Unearned revenue on billed installments (collected or uncollected) is reported as deferred revenue in the liability section of the Company’s Condensed Consolidated Balance Sheets. Deferred revenue (billed or collected) excludes unbilled contractual commitments executed under license and maintenance agreements that will be billed in future periods.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
Statements of Cash Flows: For the six months ended September 30, 2011 and 2010, interest payments, net were approximately $30 million and $42 million, respectively, and income taxes paid were approximately $221 million and $134 million, respectively.
The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either cash deposit or borrowing positions through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because the bank maintains a security interest in the cash deposits, and has the right to offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both cash deposits and borrowings. At September 30, 2011 while the overall pool was positive, there was approximately $61 million of borrowing positions outstanding under this cash pooling arrangement which is included in the “Accrued expenses and other current liabilities” line item on the Company’s Condensed Consolidated Balance Sheet. Borrowings and repayments were approximately $164 million and $97 million, respectively, for the six months ended September 30, 2011. At March 31, 2011, there were no borrowings outstanding under the cash pooling arrangement.
Non-cash financing activities for the six months ended September 30, 2011 and 2010 consisted of treasury shares issued in connection with the following: share-based incentive awards granted under the Company’s equity compensation plans of approximately $53 million (net of approximately $26 million of taxes withheld) and $63 million (net of approximately $26 million of taxes withheld), respectively; and discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $13 million and $25 million, respectively.
NOTE B — ACQUISITIONS
Acquisitions of businesses are accounted for as purchases and, accordingly, their results of operations have been included in the Company’s Condensed Consolidated Financial Statements since the respective dates of the acquisitions. The purchase price for each of the Company’s acquisitions is allocated to the assets acquired and liabilities assumed from the acquired entity.
In August 2011, the Company acquired 100% of the voting equity interest of Interactive TKO, Inc. (ITKO), a privately held provider of service simulation solutions for developing applications in composite and cloud environments. The acquisition expands solutions the Company offers enterprises and service providers for using and providing cloud computing to deliver business services. The total purchase price of the acquisition was approximately $317 million.
The pro forma effects of the Company’s fiscal year 2012 acquisitions to the Company’s revenues and results of operations during fiscal year 2011 and 2012 were considered immaterial. The purchase price allocation of the Company’s fiscal year 2012 acquisitions is as follows:
                         
    ITKO             Estimated  
(dollars in millions)   Acquisition (2)     Other Acquisitions     Useful Life  
 
Finite-lived intangible assets (1)
  $ 6     $ 11     3-15 years
Purchased software
    148       8     5-7 years
Goodwill
    192       20     Indefinite
Deferred tax assets/(liabilities)
    (50 )     (3 )      
Other assets net of other liabilities assumed (3)
    21       3        
 
 
                       
Purchase Price
  $ 317     $ 39          
 
     
(1)   Includes customer relationships and trade names.
 
(2)   Purchase price allocation is preliminary due to ongoing analysis to determine the fair value of acquired intangibles and the tax basis of acquired assets and liabilities.
 
(3)   Includes approximately $20 million of cash acquired relating to ITKO.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
Transaction costs for acquisitions were immaterial. The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded to goodwill. The preliminary allocation of a significant portion of the purchase price to goodwill was predominantly due to the intangible assets that are not separable, such as assembled workforce and going concern. The goodwill relating to the ITKO acquisition is not expected to be deductible for tax purposes. Goodwill relating to the other fiscal year 2012 acquisitions is expected to be deductible for tax purposes.
The Company’s acquisitions during the first half of fiscal year 2011 were considered immaterial, both individually and in the aggregate, compared with the results of the Company’s operations. Therefore, purchase accounting information and pro forma disclosure are not presented.
During the third quarter of fiscal year 2011, the Company acquired 100% of the voting equity interests of Arcot Systems, Inc. (Arcot), a privately held provider of authentication and fraud prevention solutions through on-premises software or cloud services. The purchase price allocation was finalized in the second quarter of fiscal 2012 and no material adjustments were made to amounts previously reported. The following represents the allocation of the purchase price and estimated useful lives to the acquired net assets of Arcot:
                 
            Estimated  
(dollars in millions)   Arcot     Useful Life  
 
Finite-lived intangible assets (1)
  $ 39     2-5 years
Purchased software
    86     10 years
Goodwill
    60     Indefinite
Deferred tax assets/(liabilities)
    (1 )      
Other assets net of other liabilities assumed
    13        
 
 
Purchase Price
  $ 197          
 
     
(1)   Includes customer relationships and trade names.
The Company had approximately $44 million and $77 million of accrued acquisition-related costs at September 30, 2011 and March 31, 2011, respectively, all of which related to purchase price amounts withheld subject to indemnification protections.
NOTE C — DIVESTITURES
In June 2011, the Company sold its Internet Security business for approximately $14 million and recognized a gain on disposal of approximately $23 million, including tax expense of approximately $18 million. In June 2010, the Company sold its Information Governance business for approximately $19 million and recognized a loss on disposal of approximately $5 million, including tax expense of approximately $4 million.
The income (loss) from discontinued components for the sale of the Company’s Internet Security business, which occurred during the first quarter of fiscal 2012, consists of the following:
         
    Six Months Ended  
    September 30, 2011  
    ( in millions )  
Subscription and maintenance revenue
  $ 15  
 
     
Total revenue
  $ 15  
 
     
 
       
Loss from operations of discontinued components, net of tax benefit of $6 million
  $ (10 )
Gain on disposal of discontinued components, net of taxes
    23  
 
     
Income from discontinued operations, net of taxes
  $ 13  
 
     

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
The income (loss) from discontinued components, relating to both the Internet Security business and the sale of the Company’s Information Governance business for the three and six months ended September 30, 2010 consists of the following:
                 
    Three Months Ended     Six Months Ended  
    September 30, 2010     September 30, 2010  
    ( in millions )  
Subscription and maintenance revenue
  $ 22     $ 46  
Professional services
          1  
 
           
Total revenue
  $ 22     $ 47  
 
           
 
               
Income from operations of discontinued components, net of tax expense of $2 million and $3 million, respectively
  $ 3     $ 4  
Gain (loss) on disposal of discontinued components, net of taxes
          (5 )
 
           
Income (loss) from discontinued operations, net of taxes
  $ 3     $ (1 )
 
           
NOTE D — SEVERANCE AND EXIT COSTS
Fiscal 2012 workforce reduction : The Fiscal 2012 workforce reduction plan (Fiscal 2012 Plan) was announced in July 2011 and consisted of a workforce reduction of approximately 400 positions.
This action is part of our efforts to reallocate resources and divest nonstrategic parts of the business. The total amounts incurred with respect to severance under the Fiscal 2012 Plan were $44 million, of which approximately $27 million is included in “Selling and marketing,” $9 million is included in “Product development and enhancements,” $5 million is included in “General and administrative,” $2 million is included in “Costs of licensing and maintenance” and $1 million is included in “Cost of professional services” on the Condensed Consolidated Statements of Operations. Actions under the Fiscal 2012 Plan are expected to be substantially completed by the end of fiscal year 2012.
Fiscal 2010 restructuring plan : The Fiscal 2010 restructuring plan (Fiscal 2010 Plan) was announced in March 2010 and is composed of a workforce reduction of approximately 1,000 positions and global facilities consolidations. These actions were intended to better align the Company’s cost structure with the skills and resources required to more effectively pursue opportunities in the marketplace and execute the Company’s long-term growth strategy. The total amounts incurred with respect to severance and facilities abandonment under the Fiscal 2010 Plan were $44 million and $2 million, respectively. Actions under the Fiscal 2010 Plan were substantially completed by the end of fiscal year 2011.
Fiscal 2007 restructuring plan: In August 2006, the Company announced the Fiscal 2007 restructuring plan (Fiscal 2007 Plan) to significantly improve the Company’s expense structure and increase its competitiveness. The Fiscal 2007 Plan’s objectives included a workforce reduction of approximately 3,100 employees, global facilities consolidations and other cost reductions. The total amounts incurred with respect to severance and facilities abandonment under the Fiscal 2007 Plan were $220 million and $119 million, respectively. Actions under the Fiscal 2007 Plan were substantially completed by the end of fiscal year 2010.
Accrued severance and exit costs at September 30, 2011 and changes in the accruals during the six months ended September 30, 2011 and 2010 associated with the Fiscal 2012, Fiscal 2010 and Fiscal 2007 Plans were as follows:

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
         
Fiscal 2012 Plan   Severance  
    (in millions)  
Accrued balance at March 31, 2011
  $  
Activity for the period ended September 30, 2011
       
Expense
    44  
Payments
    (12 )
Accretion and other
     
 
     
Accrued balance at September 30, 2011
  $ 32  
 
     
                 
            Facilities  
Fiscal 2010 Plan   Severance     Abandonment  
    (in millions)  
Accrued balance at March 31, 2010
  $ 46     $ 2  
Activity for the period ended September 30, 2010
               
Change in estimate
    (3 )      
Payments
    (30 )      
Accretion and other
    (1 )      
 
           
Accrued balance at September 30, 2010
  $ 12     $ 2  
 
           
 
               
Accrued balance at March 31, 2011
  $ 4     $ 1  
Activity for the period ended September 30, 2011
               
Change in estimate
           
Payments
    (2 )      
 
           
Accrued balance at September 30, 2011
  $ 2     $ 1  
 
           
                 
            Facilities  
Fiscal 2007 Plan   Severance     Abandonment  
    (in millions)  
Accrued balance at March 31, 2010
  $ 8     $ 60  
Activity for the period ended September 30, 2010
               
Change in estimate
    1        
Payments
    (3 )     (9 )
 
           
Accrued balance at September 30, 2010
  $ 6     $ 51  
 
           
 
               
Accrued balance at March 31, 2011
  $ 4     $ 46  
Activity for the period ended September 30, 2011
               
Change in estimate
           
Payments
    (1 )     (6 )
Accretion and other
          1  
 
           
Accrued balance at September 30, 2011
  $ 3     $ 41  
 
           

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
The severance liability is included in the “Accrued salaries, wages and commissions” line item on the Condensed Consolidated Balance Sheet. The facilities abandonment liability is included in the “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” line items on the Condensed Consolidated Balance Sheet. The Fiscal 2010 Plan and Fiscal 2007 Plan costs are included in the “Other (gains) expenses, net” line item on the Condensed Consolidated Statements of Operations.
Accretion and other includes accretion of the Company’s lease obligations related to facilities abandonment as well as changes in the assumptions related to future sublease income. These costs are included in the “General and administrative” expense line item on the Condensed Consolidated Statements of Operations.
NOTE E — MARKETABLE SECURITIES
At September 30, 2011, available-for-sale securities consisted of the following:
                                 
    September 30, 2011  
    (in millions)  
    Aggregate     Gross     Gross        
    Cost     Unrealized     Unrealized     Aggregate  
    Basis     Gains     Losses     Fair Value  
U.S. Treasury and agency securities
  $ 68     $     $     $ 68  
Municipal securities
    1                   1  
Corporate debt securities
    110                   110  
 
                       
 
  $ 179     $     $     $ 179  
 
                       
At September 30, 2011, the Company did not have any debt securities that were in a continuous unrealized loss position for greater than 12 months. Proceeds from the sale of marketable securities and realized gains and realized losses were approximately $27 million and less than $1 million, respectively. At September 30, 2011, $89 million of marketable securities had scheduled maturities of less than one year, and approximately $90 million had maturities of greater than one year but not exceeding three years.
At March 31, 2011, available-for-sale securities consisted of the following:
                                 
    March 31, 2011  
    (in millions)  
    Aggregate     Gross     Gross        
    Cost     Unrealized     Unrealized     Aggregate  
    Basis     Gains     Losses     Fair Value  
U.S. Treasury and agency securities
  $ 60     $     $     $ 60  
Municipal securities
    2                   2  
Corporate debt securities
    117                   117  
 
                       
 
  $ 179     $     $     $ 179  
 
                       
At March 31, 2011, the Company did not have any debt securities that were in a continuous unrealized loss position for greater than 12 months. At March 31, 2011, $75 million of marketable securities had scheduled maturities of less than one year, and approximately $104 million had scheduled maturities of greater than one year but not exceeding three years.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
NOTE F — TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, net represents amounts due from the Company’s customers and is presented net of allowance for doubtful accounts. These balances include revenue recognized in advance of customer billings but do not include unbilled contractual commitments executed under license agreements. The components of “Trade accounts receivable, net” were as follows:
                 
    September 30,     March 31,  
    2011     2011  
    (in millions)  
Accounts receivable — billed
  $ 510     $ 758  
Accounts receivable — unbilled
    84       86  
Other receivables
    25       27  
Less: Allowance for doubtful accounts
    (18 )     (22 )
 
           
Trade accounts receivable, net
  $ 601     $ 849  
 
           
NOTE G — GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS
The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at September 30, 2011 were approximately $7,670 million and $6,263 million, respectively. These amounts include fully amortized intangible assets of approximately $5,635 million, which was composed of purchased software of approximately $4,693 million, internally developed software of approximately $539 million and other identified intangible assets subject to amortization of approximately $403 million. The gross carrying amounts and accumulated amortization for identified intangible assets that were not fully amortized were as follows:
                         
    At September 30, 2011  
    Gross              
    Amortizable     Accumulated     Net  
    Assets     Amortization     Assets  
            (in millions)          
Purchased software products
  $ 892     $ 213     $ 679  
Capitalized development cost and other intangibles:
                       
Internally developed software products
    744       224       520  
Other identified intangible assets subject to amortization
    399       191       208  
 
                 
Total capitalized software and other intangible assets
  $ 2,035     $ 628     $ 1,407  
 
                 
The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2011 were approximately $7,417 million and $6,133 million, respectively. These amounts included fully amortized assets of approximately $5,290 million, which was composed of purchased software of approximately $4,662 million, internally developed software products of approximately $508 million and other intangible assets subject to amortization of approximately $120 million. The gross carrying amounts and accumulated amortization for identified intangible assets that were not fully amortized were as follows:

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
                         
    At March 31, 2011  
    Gross              
    Amortizable     Accumulated     Net  
    Assets     Amortization     Assets  
            (in millions)          
Purchased software products
  $ 768     $ 198     $ 570  
Capitalized development cost and other intangibles:
                       
Internally developed software products
    693       205       488  
Other intangible assets subject to amortization
    652       440       212  
Other intangible assets not subject to amortization
    14             14  
 
                 
Total capitalized software costs and other intangible assets
  $ 2,127     $ 843     $ 1,284  
 
                 
Based on the capitalized software and other intangible assets recorded through September 30, 2011, the annual amortization expense over the next five fiscal years is expected to be as follows:
                                         
    Year Ended March 31,  
    2012     2013     2014     2015     2016  
                    (in millions)                    
Capitalized software:
                                       
Purchased
  $ 102     $ 109     $ 101     $ 90     $ 88  
Internally developed
    115       137       121       95       64  
Other identified intangible assets subject to amortization
    64       53       47       38       24  
 
                             
Total
  $ 281     $ 299     $ 269     $ 223     $ 176  
 
                             
Goodwill activity for the six months ended September 30, 2011 was as follows:
         
    Amounts  
    (in millions)  
Balance at March 31, 2011
  $ 5,688  
Revisions to purchase price allocation of prior year acquisitions
    (6 )
 
     
Balance at March 31, 2011 as revised
    5,682  
Amounts allocated to loss on discontinued operations
    (7 )
Acquisitions
    212  
Foreign currency translation adjustment
    (2 )
 
     
Balance at September 30, 2011
  $ 5,885  
 
     

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
NOTE H — DEFERRED REVENUE
The components of “Deferred revenue (billed or collected) — current” and “Deferred revenue (billed or collected) — noncurrent” at September 30, 2011 and March 31, 2011 were as follows:
                 
    September 30,     March 31,  
    2011     2011  
    (in millions)  
Current:
               
Subscription and maintenance
  $ 2,020     $ 2,444  
Professional services
    142       145  
Financing obligations and other
    13       11  
 
           
Total deferred revenue (billed or collected) — current
    2,175       2,600  
 
           
 
               
Noncurrent:
               
Subscription and maintenance
    831       940  
Professional services
    30       27  
Financing obligations and other
    2       2  
 
           
Total deferred revenue (billed or collected) — noncurrent
    863       969  
 
           
 
               
Total deferred revenue (billed or collected)
  $ 3,038     $ 3,569  
 
           
NOTE I — DEBT
Revolving Credit Facility: In April 2011, the Company repaid the outstanding balance of $250 million on the revolving credit facility that was due August 2012. In August 2011, the Company replaced the revolving credit facility due August 2012 with a new revolving credit facility due August 2016.
The maximum committed amount available under the revolving credit facility due August 2016 is $1 billion. The facility also provides the Company with an option to increase the available credit by an amount up to $500 million. This option is subject to certain conditions and the agreement of the facility lenders.
Advances under the revolving credit facility bear interest at a rate dependent on the Company’s credit ratings at the time of such borrowings and are calculated according to a Base Rate or a Eurocurrency Rate, as the case may be, plus an applicable margin. The Company must also pay facility commitment fees quarterly on the full revolving credit commitment and at rates dependent on the Company’s credit ratings.
At September 30, 2011, there were no outstanding borrowings under the revolving credit facility due August 2016 and, based on the Company’s current credit ratings, the rates applicable to the facility at September 30, 2011 were as follows:
         
Applicable margin on Base borrowing
    0.25 %
Applicable margin on Eurocurrency borrowing
    1.10 %
Facility commitment fee
    0.15 %
The interest rate that would have applied at September 30, 2011 to a borrowing under the revolving credit facility due August 2016 would have been 3.50% for Base Rate borrowings and 1.34% for Eurocurrency Rate borrowings. The Company capitalized the transaction fees associated with the revolving credit facility due August 2016 of approximately $2 million. These fees are being amortized to “Interest expense, net” in the Condensed Consolidated Statements of Operations.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
The revolving credit facility due August 2016 contains customary covenants for borrowings of this type, including two financial covenants: (i) for the 12 months ending each quarter-end, the ratio of consolidated debt for borrowed money to consolidated cash flow, each as defined in the facility Credit Agreement, must not exceed 4.00 to 1.00; and (ii) for the 12 months ending at any date, the ratio of consolidated cash flow to the sum of interest payable on, and amortization of debt discount in respect of, all consolidated debt for borrowed money, as defined in the facility Credit Agreement, must not be less than 3.50 to 1.00. At September 30, 2011, the Company was in compliance with all covenants.
In addition, future borrowings under the revolving credit facility require, at the date of such borrowing, that (i) no event of default shall have occurred and be continuing and (ii) the Company reaffirm the representations and warranties it made in the facility Credit Agreement.
NOTE J — DERIVATIVES
The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into derivative contracts with the intent of mitigating a portion of these risks.
Interest rate swaps: The Company has interest rate swaps with a total notional value of $500 million, that swap a total of $500 million of its 6.125% Senior Notes due December 2014 into floating interest rate debt through December 1, 2014. These swaps are designated as fair value hedges.
At September 30, 2011, the fair value of these derivatives was an asset of approximately $30 million, of which approximately $11 million is included in “Other current assets” and approximately $19 million is included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheets.
At March 31, 2011, the fair value of these derivatives was an asset of approximately $15 million, of which approximately $11 million is included in “Other current assets” and approximately $4 million is included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheets.
During fiscal year 2009, the Company entered into interest rate swaps with a total notional value of $250 million to hedge a portion of its variable interest rate payments on its revolving credit facility. The amount of loss reclassified from “Accumulated other comprehensive income” into “Interest expense, net” in the Company’s Condensed Consolidated Statements of Operations was approximately $1 million and $3 million for the three and six months ended September 30, 2010, respectively. These derivatives were designated as cash flow hedges and matured in October 2010.
Foreign currency contracts: The Company enters into foreign currency option and forward contracts to manage foreign currency risks. The Company has not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other (gains) expenses, net” in the Company’s Condensed Consolidated Statements of Operations. At September 30, 2011, foreign currency contracts outstanding consisted of purchase and sales contracts with a total notional value of approximately $574 million and durations of less than six months. The net fair value of these contracts at September 30, 2011 was approximately $10 million, of which approximately $22 million is included in “Other current assets” and approximately $12 million is included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheet. The net fair value of these contracts at March 31, 2011 was approximately $6 million, of which approximately $7 million is included in “Other current assets” and approximately $1 million is included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheet.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
A summary of the effect of the interest rate and foreign exchange derivatives on the Company’s Condensed Consolidated Statements of Operations is as follows:
                 
    Amount of Net (Gain)/Loss Recognized in the  
    Condensed Consolidated Statements of Operations  
    (in millions)  
    Three Months Ended     Three Months Ended  
Location of Amounts Recognized   September 30, 2011     September 30, 2010  
 
Interest expense, net — interest rate swaps designated as cash flow hedges
  $     $ 1  
Interest expense, net — interest rate swaps designated as fair value hedges
  $ (3 )   $ (3 )
Other (gains) expenses, net — foreign currency contracts
  $ (6 )   $ 21  
                 
    Amount of Net (Gain)/Loss Recognized in the  
    Condensed Consolidated Statements of Operations  
    (in millions)  
    Six Months Ended     Six Months Ended  
Location of Amounts Recognized   September 30, 2011     September 30, 2010  
 
Interest expense, net — interest rate swaps designated as cash flows hedges
  $     $ 3  
Interest expense, net — interest rate swaps designated as fair value hedges
  $ (6 )   $ (6 )
Other (gains) expenses, net — foreign currency contracts
  $ 1     $ 8  
The Company is subject to collateral security arrangements with most of its major counterparties. These arrangements require the Company to hold or post collateral when the derivative fair values exceed contractually established thresholds. The aggregate fair values of all derivative instruments under these collateralized arrangements were in a net asset position at September 30, 2011 and March 31, 2011. The Company posted no collateral at September 30, 2011 or March 31, 2011. Under these agreements, if the Company’s credit ratings had been downgraded one rating level, the Company would still not have been required to post collateral.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
NOTE K — FAIR VALUE MEASUREMENTS
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2011 and March 31, 2011:
                                                 
    At September 30, 2011     At March 31, 2011  
    Fair Value     Estimated     Fair Value     Estimated  
    Measurement Using     Fair     Measurement Using     Fair  
    Input Types     Value     Input Types     Value  
(in millions)   Level 1     Level 2     Total     Level 1     Level 2     Total  
 
Assets:
                                               
Money market funds
  $ 795     $     $ 795 (1)   $ 2,009     $     $ 2,009 (2)
Marketable securities (3)
          179       179             179       179  
Foreign exchange derivatives (4)
          22       22             7       7  
Interest rate derivatives (4)
          30       30             15       15  
 
                                   
Total Assets
  $ 795     $ 231     $ 1,026     $ 2,009     $ 201     $ 2,210  
 
                                   
 
                                               
Liabilities:
                                               
Foreign exchange derivatives (4)
  $     $ 12     $ 12     $     $ 1     $ 1  
 
                                   
Total Liabilities
  $     $ 12     $ 12     $     $ 1     $ 1  
 
                                   
 
(1)   At September 30, 2011, the Company had approximately $745 million and $50 million of investments in money market funds classified as “Cash and cash equivalents” and “Other noncurrent assets, net” for restricted cash amounts, respectively, on its Condensed Consolidated Balance Sheet.
 
(2)   At March 31, 2011, the Company had approximately $1,959 million and $50 million of investments in money market funds classified as “Cash and cash equivalents” and “Other noncurrent assets, net” for restricted cash amounts, respectively, on its Condensed Consolidated Balance Sheet.
 
(3)   See Note E, “Marketable Securities” for additional information.
 
(4)   See Note J, “Derivatives” for additional information.
At September 30, 2011 and March 31, 2011, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis at September 30, 2011 and March 31, 2011:
                                 
    At September 30, 2011     At March 31, 2011  
    (in millions)     (in millions)  
    Carrying     Estimated     Carrying     Estimated  
    Value     Fair Value     Value     Fair Value  
Liabilities:
                               
Total debt (1)
  $ 1,310     $ 1,416     $ 1,551     $ 1,619  
Facilities abandonment reserve (2)
  $ 45     $ 52     $ 52     $ 59  
 
(1)   Estimated fair value of total debt was based on quoted prices for similar liabilities for which significant inputs are observable except for certain long-term lease obligations, for which fair value approximates carrying value.
 
(2)   Estimated fair value for the facilities abandonment reserve was determined using the Company’s current incremental borrowing rate. At September 30, 2011 and March 31, 2011, the facilities abandonment reserve included approximately $12 million and $15 million, respectively, in “Accrued expenses and other current liabilities” and approximately $33 million and $37 million, respectively, in “Other noncurrent liabilities” on the Company’s Condensed Consolidated Balance Sheets.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
The carrying values of financial instruments classified as current assets and current liabilities, such as cash and cash equivalents, accounts payable, accrued expenses, and short-term debt, approximate fair value due to the short-term maturity of the instruments. The fair values of total debt, including current maturities, have been based on quoted market prices.
NOTE L — COMMITMENTS AND CONTINGENCIES
In September 2010, a lawsuit captioned Uniloc USA, Inc. et ano. v. National Instruments Corp., et al. was filed in the United States District Court for the Eastern District of Texas against the Company and 10 other defendants. The complaint alleges, among other things, that Company technology, including Internet Security Suite Plus 2010 (ISS), infringes a patent licensed to plaintiff Uniloc USA, Inc., entitled “System for Software Registration,” U.S. Patent No. 5,490,216 (‘216 Patent). The complaint seeks monetary damages and interest in an undisclosed amount, a temporary, preliminary and permanent injunction against alleged acts of infringement, and attorneys’ fees and costs, based upon the plaintiffs’ patent infringement claims. In November 2010, the Company filed an answer that, among other things, disputes the plaintiffs’ claims and seeks a declaratory judgment that the Company does not infringe the ‘216 Patent and that the ‘216 Patent is invalid. After pre-trial motion practice, in August 2011, the parties entered into a settlement agreement, the terms of which are confidential and not material to the Company’s financial condition, operating results or cash flow. As part of this settlement, the case against the Company was dismissed with prejudice in its entirety.
Based on the Company’s experience, the Company believes that the damages amounts claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases.
The Company, various subsidiaries, and certain current and former officers have been named as defendants in various other lawsuits and claims arising in the normal course of business. The Company believes that it has meritorious defenses in connection with these other lawsuits and claims, and intends to vigorously contest each of them.
In the opinion of the Company’s management based upon information currently available to the Company, while the outcome of these other lawsuits and claims is uncertain, the likely results of these other lawsuits and claims against the Company, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows, although the effect could be material to the Company’s results of operations or cash flows for any interim reporting period.
The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted by Delaware law. As a part of that obligation, the Company has advanced and will continue to advance certain attorneys’ fees and expenses incurred by current and former officers and directors in various lawsuits and investigations.
NOTE M — STOCKHOLDERS’ EQUITY
Stock Repurchases: On May 12, 2011, the Company’s Board of Directors approved a stock repurchase program that authorized the Company to acquire up to an additional $500 million of its common stock. At September 30, 2011, the Company remained authorized to purchase up to approximately $432 million of additional shares of common stock under its stock repurchase programs. During the six months ended September 30, 2011, the Company repurchased approximately 16.1 million shares of its common stock for approximately $350 million.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
Comprehensive Income : Comprehensive income includes net income, unrealized gains on cash flow hedges, unrealized gains and losses on marketable securities and foreign currency translation adjustments. The components of comprehensive income for the three and six months ended September 30, 2011 and 2010 are as follows:
                                 
    Three Months     Six Months  
    Ended September 30,     Ended September 30,  
    2011     2010     2011     2010  
            (in millions)          
Net income
  $ 236     $ 222     $ 477     $ 439  
Net unrealized gain on cash flow hedges, net of tax
          1             2  
Foreign currency translation adjustments
    (85 )     74       (68 )     40  
 
                       
Total comprehensive income
  $ 151     $ 297     $ 409     $ 481  
 
                       
Cash Dividends: The Company’s Board of Directors declared the following dividends during the six months ended September 30, 2011 and 2010:
Six Months Ended September 30, 2011:
(in millions, except per share amounts)
                                 
Declaration Date   Dividend Per Share     Record Date     Total Amount     Payment Date  
May 12, 2011
  $ 0.05     May 23, 2011   $ 25     June 16, 2011
August 3, 2011
  $ 0.05     August 16, 2011   $ 25     September 14, 2011
Six Months Ended September 30, 2010:
(in millions, except per share amounts)
                                 
Declaration Date   Dividend Per Share     Record Date     Total Amount     Payment Date  
May 12, 2010
  $ 0.04     May 31, 2010   $ 21     June 16, 2010
July 28, 2010
  $ 0.04     August 9, 2010   $ 20     August 19, 2010
NOTE N — INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE
Basic net income per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted net income per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares at the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
The following table reconciles net income per common share for the three and six months ended September 30, 2011 and 2010.
                                 
    Three     Six  
    Months Ended     Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
    (in millions, except per share amounts)  
Basic income from continuing operations per common share:
                               
Income from continuing operations
  $ 236     $ 219     $ 464     $ 440  
Less: Income from continuing operations allocable to participating securities
    (3 )     (3 )     (6 )     (5 )
 
                       
Income from continuing operations allocable to common shares
  $ 233     $ 216     $ 458     $ 435  
 
                       
Weighted-average common shares outstanding
    493       507       497       508  
 
                               
Basic income from continuing operations per common share
  $ 0.47     $ 0.43     $ 0.92     $ 0.85  
 
                               
Diluted income from continuing operations per common share:
                               
Income from continuing operations
  $ 236     $ 219     $ 464     $ 440  
Less: Income from continuing operations allocable to participating securities
    (3 )     (3 )     (6 )     (5 )
 
                       
Income from continuing operations allocable to common shares
  $ 233     $ 216     $ 458     $ 435  
 
                       
 
                               
Weighted average shares outstanding and common share equivalents
                               
Weighted average common shares outstanding
    493       507       497       508  
Weighted average effect of share-based payment awards
    1       1       1       1  
 
                       
Denominator in calculation of diluted income per share
    494       508       498       509  
 
                       
 
                               
Diluted income from continuing operations per common share
  $ 0.47     $ 0.43     $ 0.92     $ 0.85  
For the three months ended September 30, 2011 and 2010, respectively, approximately 9 million and 8 million shares of Company common stock underlying restricted stock awards and options to purchase common stock were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods.
For the six months ended September 30, 2011 and 2010, respectively, approximately 5 million and 9 million restricted stock awards and options to purchase common stock were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods.
Weighted average restricted stock awards of approximately 6 million and 6 million for the three and six months ended September 30, 2011 and 2010, respectively, were considered participating securities in the calculation of net income available to common shareholders.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
NOTE O — ACCOUNTING FOR SHARE-BASED COMPENSATION
The Company recognized share-based compensation in the following line items on the Condensed Consolidated Statements of Operations for the periods indicated:
                                 
    Three Months     Six Months  
    Ended September 30,     Ended September 30,  
    2011     2010     2011     2010  
            (in millions)          
Costs of licensing and maintenance
  $ 1     $ 1     $ 2     $ 2  
Cost of professional services
    1       1       2       2  
Selling and marketing
    6       8       16       15  
General and administrative
    4       6       12       10  
Product development and enhancements
    4       5       9       11  
 
                       
Share-based compensation expense before tax
    16       21       41       40  
Income tax benefit
    (6 )     (7 )     (14 )     (13 )
 
                       
Net share-based compensation expense
  $ 10     $ 14     $ 27     $ 27  
 
                       
The following table summarizes information about unrecognized share-based compensation costs at September 30, 2011:
                 
            Weighted  
    Unrecognized     Average Period  
    Compensation     Expected to be  
    Costs     Recognized  
    (in millions)     (in years)  
Stock option awards
  $ 5       2.3  
Restricted stock units
    18       2.2  
Restricted stock awards
    75       2.1  
Performance share units
    31       2.8  
 
             
Total unrecognized share-based compensation costs
  $ 129       2.3  
 
             
There were no capitalized share-based compensation costs for the three and six months ended September 30, 2011 or 2010.
Under the Company’s long-term incentive plans, the value of performance share unit (PSU) awards is determined using the closing price of the Company’s common stock on the last trading day of the quarter until the PSUs are granted. Compensation costs for the PSUs are amortized over the requisite service periods based on the expected level of achievement of the performance targets. At the conclusion of the performance periods for the PSUs, the applicable number of shares of restricted stock awards (RSAs), restricted stock units (RSUs) or unrestricted shares granted may vary based upon the level of achievement of the performance targets and the approval of the Company’s Compensation and Human Resources Committee (which may reduce any award for any reason in its discretion).

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
For the six months ended September 30, 2011 and 2010, the Company issued options for approximately 0.6 million shares and 1.2 million shares, respectively. The weighted average fair values and assumptions used for the options granted were as follows:
                 
    Six Months  
    Ended September 30,  
    2011     2010  
Weighted average fair value
  $ 5.99     $ 5.55  
Dividend yield
    0.91 %     0.83 %
Expected volatility factor (1)
    33 %     34 %
Risk-free interest rate (2)
    1.7 %     1.8 %
Expected life (in years) (3)
    4.5       4.5  
 
(1)   Expected volatility is measured using historical daily price changes of the Company’s stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded options.
 
(2)   The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant.
 
(3)   The Company’s computation of expected life was determined based on the simplified method (the average of the vesting period and option term), due to changes in the vesting terms, the contractual lives and the population of employees granted options compared with the Company’s historical grants.
The table below summarizes all of the RSUs and RSAs, including grants made pursuant to the long-term incentive plans discussed above, granted during the three and six months ended September 30, 2011 and 2010:
                                 
    Three Months     Six Months  
    Ended September 30,     Ended September 30,  
    2011     2010     2011     2010  
            (shares in millions)          
RSUs
                               
Shares
          (1)     0.7       0.5  
Weighted Avg. Grant Date Fair Value (2)
        $ 18.08     $ 24.08     $ 21.23  
RSAs
                               
Shares
    (1)     0.1       3.6       4.7  
Weighted Avg. Grant Date Fair Value (3)
  $ 22.47     $ 18.66     $ 24.65     $ 21.39  
 
(1)   Less than 0.1 million.
 
(2)   The fair value is based on the quoted market value of the Company’s common stock on the grant date reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting of the RSUs, which is calculated using a risk free interest rate.
 
(3)   The fair value is based on the quoted market value of the Company’s common stock on the grant date.
Employee Stock Purchase Plan
At the Company’s August 3, 2011 Annual Meeting of Stockholders, the Company’s 2012 Employee Stock Purchase Plan (the ESPP) was approved. The ESPP offer period is semi-annual and allows participants to purchase the Company’s common stock at 95% of the closing price of the stock on the last day of the plan period. A total of 30,000,000 shares may be issued under the ESPP. Shares will not be issued until the end of the first offer period, which occurs at the end of the first quarter of fiscal year 2013.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
NOTE P — INCOME TAXES
Income tax expense for the three and six months ended September 30, 2011 was $91 million and $196 million, respectively, compared with the three and six months ended September 30, 2010 of $71 million and $158 million, respectively.
For the three and six months ended September 30, 2011, the Company recognized a net tax benefit of $15 million and $18 million, respectively, resulting primarily from the recognition of tax benefits related to an investment in a foreign subsidiary. For the three and six months ended September 30, 2010, the Company recognized a net tax benefit of $23 million and $36 million, respectively, resulting primarily from refinements of tax positions taken in prior periods, assertion of affirmative claims in the context of tax audits and the resolutions and accruals of uncertain tax positions relating to non-U.S. jurisdictions.
In April 2011, the U.S. Internal Revenue Service (IRS) completed its examination of the Company’s federal income tax returns for the tax years ended March 31, 2005, March 31, 2006 and March 31, 2007 and issued a report of its findings in connection with the examination. The Company disagrees with certain proposed adjustments in the report and intends to vigorously dispute these matters through applicable IRS and judicial procedures, as appropriate. While the Company believes that it has recorded reserves sufficient to cover exposures related to these issues, such that the ultimate disposition of this matter will not have a material adverse effect on the Company’s consolidated financial position or results of operations, the resolution of such matters involves uncertainties and there are no assurances that the ultimate resolution will not exceed the amounts recorded. The Company does not believe it is reasonably possible that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company’s effective income tax rate, excluding the impact of discrete items, for the six months ended September 30, 2011 and September 30, 2010 was 32.4% and 32.5%, respectively. Changes in the anticipated results of the Company’s international operations, the outcome of tax audits and any other changes in potential tax liabilities may result in additional tax expense or benefit in future periods, which are not considered in the Company’s estimated annual effective tax rate. While the Company does not currently view any such items as individually material to the results of the Company’s consolidated financial position or results of operations, the impact of such items may yield additional tax expense or benefit in the remaining quarters of fiscal year 2012 and future periods and the Company is anticipating a fiscal year 2012 effective tax rate of approximately 31% to 32%.
NOTE Q — SEGMENT INFORMATION
In the first quarter of fiscal year 2012, the Company completed its implementation of changing the internal reporting used by its Chief Executive Officer for evaluating segment performance and allocating resources. The new reporting disaggregates the Company’s operations into Mainframe Solutions, Enterprise Solutions and Services segments, and represented a change in the Company’s operating segments under ASC 280, “Segment Reporting.” Prior to fiscal year 2012, the Company reported and managed its business based on a single operating segment under ASC 280.
The Company’s Mainframe Solutions and Enterprise Solutions operating segments comprise its software business organized by the nature of the Company’s software offerings and the product hierarchy in which the platform operates on. The Services operating segment comprises implementation, consulting, education and training services, including those directly related to the mainframe and distributed software that the Company sells to its customers.
The Company regularly enters into a single arrangement with a customer that includes Mainframe Solutions segment software products, Enterprise Solutions segment software products and Services. The amount of contract revenue assigned to segments is generally based on the manner in which the proposal is made to the customer. The software product revenue is assigned to the Mainframe Solutions and Enterprise Solutions segments based on either: (1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the list price of the products); (2) allocations included within internal contract approval documents; or

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
(3) the value for individual software products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately stated in the contract and these amounts of contract revenue are assigned to the Services segment. The contract value assigned to each segment is then recognized in a manner consistent with the revenue recognition policies the Company applies to the customer contract for purposes of preparing the Condensed Consolidated Financial Statements.
Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of the Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs). Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product development costs, general and administrative costs and amortization of the cost of internally developed software. Allocated segment costs primarily include indirect selling and marketing costs and general and administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs between the Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated and is either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for the Services segment consist only of direct costs and there are no allocated or indirect costs for the Services segment.
During the second quarter of fiscal 2012, the Company incurred severance costs associated with the Fiscal 2012 Plan, of which $23 million, $20 million and $1 million were assigned to the Mainframe Solutions, Enterprise Solutions and Services segments, respectively. Refer to Note D, “Severance and Exit Costs,” in the Notes to the Condensed Consolidated Financial Statements for additional information.
Unallocated segment expenses include the following: share-based compensation expense; amortization of purchased software; amortization of other intangible assets; derivative hedging gains and losses; and severance, exit costs and related charges associated with the Company’s Fiscal 2007 Plan.
A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not been disclosed. Also, goodwill by segment has not been disclosed because the Company has not yet completed its allocation of goodwill among the segments.
The Company’s segment information for the three and six months ended September 30, 2011 and 2010 is as follows:
                                 
Three Months Ended September 30, 2011   Mainframe     Enterprise              
(in millions)   Solutions     Solutions     Services     Total  
Revenue
  $ 655     $ 449     $ 96     $ 1,200  
Expenses
    308       422       92       822  
 
                       
Segment profit
  $ 347     $ 27     $ 4     $ 378  
 
                       
Segment operating margin
    53 %     6 %     4 %     32 %
 
                               
Depreciation and amortization
  $ 25     $ 32     $     $ 57  

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2011:
         
Segment profit
  $ 378  
Less:
       
Amortization of purchased software
    26  
Amortization of other intangible assets
    15  
Share-based compensation expense
    16  
Other unallocated operating (gains) expenses, net (1)
    (12 )
Interest expense, net
    6  
 
     
Income from continuing operations before income taxes
  $ 327  
 
     
 
(1)   Other unallocated operating expenses, net consists of restructuring costs associated with the Company’s Fiscal 2007 Plan, hedging (gains) losses, and other miscellaneous costs.
                                 
Six Months Ended September 30, 2011   Mainframe     Enterprise              
(in millions)   Solutions     Solutions     Services     Total  
Revenue
  $ 1,301     $ 876     $ 186     $ 2,363  
Expenses
    584       804       180       1,568  
 
                       
Segment profit
  $ 717     $ 72     $ 6     $ 795  
 
                       
Segment operating margin
    55 %     8 %     3 %     34 %
 
                               
Depreciation and amortization
  $ 49     $ 63     $       112  
Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2011:
         
Segment profit
  $ 795  
Less:
       
Amortization of purchased software
    49  
Amortization of other intangible assets
    34  
Share-based compensation expense
    41  
Other unallocated operating (gains) expenses, net (1)
    (4 )
Interest expense, net
    15  
 
     
Income from continuing operations before income taxes
  $ 660  
 
     
 
(1)   Other unallocated operating expenses, net consists of restructuring costs associated with the Company’s Fiscal 2007 Plan, hedging (gains) losses, and other miscellaneous costs.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
                                 
Three Months Ended September 30, 2010   Mainframe     Enterprise              
(in millions)   Solutions     Solutions     Services     Total  
Revenue
  $ 615     $ 394     $ 79     $ 1,088  
Expenses
    265       362       77       704  
 
                       
Segment profit
  $ 350     $ 32     $ 2     $ 384  
 
                       
Segment operating margin
    57 %     8 %     3 %     35 %
 
                               
Depreciation and amortization
  $ 25     $ 28     $     $ 53  
Reconciliation of segment profit to income from continuing operations before income taxes for the three months ended September 30, 2010:
         
Segment profit
  $ 384  
Less:
       
Amortization of purchased software
    22  
Amortization of other intangible assets
    17  
Share-based compensation expense
    21  
Other unallocated operating (gains) expenses, net (1)
    22  
Interest expense, net
    12  
 
     
Income from continuing operations before income taxes
  $ 290  
 
     
 
(1)   Other unallocated operating gains, net consists of restructuring costs associated with the Company’s Fiscal 2007 Plan, hedging (gains) losses, and other miscellaneous costs.
                                 
Six Months Ended September 30, 2010   Mainframe     Enterprise              
(in millions)   Solutions     Solutions     Services     Total  
Revenue
  $ 1,230     $ 770     $ 157     $ 2,157  
Expenses
    545       713       151       1,409  
 
                       
Segment profit
  $ 685     $ 57     $ 6     $ 748  
 
                       
Segment operating margin
    56 %     7 %     4 %     35 %
 
                               
Depreciation and amortization
  $ 51     $ 53     $     $ 104  
Reconciliation of segment profit to income from continuing operations before income taxes for the six months ended September 30, 2010:
         
Segment profit
  $ 748  
Less:
       
Amortization of purchased software
    44  
Amortization of other intangible assets
    33  
Share-based compensation expense
    40  
Other unallocated operating (gains) expense, net (1)
    8  
Interest expense, net
    25  
 
     
Income from continuing operations before income taxes
  $ 598  
 
     
 
(1)   Other unallocated operating gains, net consists of restructuring costs associated with the Company’s Fiscal 2007 Plan, hedging (gains) losses, and other miscellaneous costs.

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CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011

(unaudited)
The table below summarizes the Company’s revenue from the United States and from international (i.e., non-U.S.) locations:
                                 
    Three Months Ended     Six Months Ended     Three Months Ended     Six Months Ended  
(in millions)   September 30, 2011     September 30, 2011     September 30, 2010     September 30, 2010  
United States
  $ 690     $ 1,362     $ 622     $ 1,235  
International
    510       1,001       466       922  
 
                       
Total revenue
  $ 1,200     $ 2,363     $ 1,088     $ 2,157  
 
                       

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Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statement
This Quarterly Report on Form 10-Q (Form 10-Q) contains certain forward-looking information relating to CA, Inc. (the “Company,” “Registrant,” “CA Technologies,” “CA,” “we,” “our” or “us”), 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-Q, the words “anticipate,” “believe,” “estimate,” “expect” and similar expressions are intended to identify forward-looking information. Such information includes, for example, the statements made in this Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A), but also appears in other parts of this Form 10-Q. This forward-looking information reflects our current views with respect to future events and is subject to certain risks, uncertainties, and assumptions.
A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company’s strategy by, among other things, increasing sales in new and emerging enterprises and markets, enabling the sales force to sell new products, improving the Company’s brand in the marketplace and ensuring the Company’s set of cloud computing, Software-as-a-Service and other new offerings address the needs of a rapidly changing market, while not adversely affecting the demand for the Company’s traditional products or its profitability; global economic factors or political events beyond the Company’s control; general economic conditions and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; failure to expand partner programs; the ability to adequately manage and evolve financial reporting and managerial systems and processes; the ability to integrate acquired companies and products into existing businesses; competition in product and service offerings and pricing; the ability to retain and attract qualified key personnel; the ability to adapt to rapid technological and market changes; the ability of the Company’s products to remain compatible with ever-changing operating environments; access to software licensed from third parties; use of software from open source code sources; discovery of errors in the Company’s software and potential product liability claims; significant amounts of debt and possible future credit rating changes; the failure to protect the Company’s intellectual property rights and source code; fluctuations in the number, terms and duration of our license agreements as well as the timing of orders from customers and channel partners; reliance upon large transactions with customers; risks associated with sales to government customers; breaches of the Company’s software products and the Company’s and customers’ data centers and IT environments; third-party claims of intellectual property infringement or royalty payments; fluctuations in foreign currencies; failure to effectively execute the Company’s workforce reductions; successful outsourcing of various functions to third parties; potential tax liabilities; and other factors described more fully in this Form 10-Q and the Company’s other filings with the Securities and Exchange Commission. 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-Q as anticipated, believed, estimated, or expected. We do not intend to update these forward-looking statements, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. This MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements. References in this Form 10-Q to fiscal 2012 and fiscal 2011 are to our fiscal years ending on March 31, 2012 and 2011, respectively.
OVERVIEW
We are the leading independent enterprise information technology (IT) management software and solutions company with expertise across IT environments — from mainframe and physical to virtual and cloud. We develop and deliver software and services that help organizations manage, secure and automate their IT infrastructures and deliver more flexible IT services. This allows companies to more effectively and efficiently respond to business needs.
We address components of the computing environment, including people, information, processes, systems, networks, applications and databases, regardless of the hardware or software customers are using. We license our products worldwide.

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We service companies across most major industries worldwide, including banks, insurance companies, other financial services providers, government agencies, manufacturers, technology companies, retailers, educational organizations and health care institutions. These customers typically maintain IT infrastructures that are both complex and central to their objectives for operational excellence.
We are the leading independent software vendor in the mainframe space, and we continue to innovate on the mainframe platform, which runs many of our largest customers’ most important applications. As the IT landscape continues to evolve, more companies are seeking to improve the efficiency and availability of their IT resources and applications through virtualization, which enables users to run multiple virtual machines on each physical machine and thereby reduce operating costs associated with physical infrastructure. Virtualization is essential to the evolution of cloud computing, the on-demand access to a shared pool of computing resources that can be configured and used as needed. At the same time, the consumption of IT assets is evolving through the adoption of Software-as-a-Service (SaaS), where customers can obtain software on a subscription, “pay-as-you go” model.
As more companies begin to adopt virtualization and cloud computing, data centers are becoming more complex, with mainframes, physical servers, virtualized servers and private, public and hybrid (a combination of public and private) cloud environments. We believe it is essential for companies to effectively manage and secure all of their various computing environments. We expect this evolution will allow business models to change more rapidly than in the past. While these technologies increase flexibility, they can also introduce significant management complexity. We believe that our years of experience and core strength in traditional IT management and security combined with our significant investments will position us as a leader in this portion of the IT industry.
We have a broad portfolio of software solutions that address customer needs, including mainframe; service assurance; security (identity and access management); project and portfolio management; service management; virtualization and service automation; and cloud computing. We deliver our products on-premises or, for certain products, using SaaS.
Our strategy is to help our customers manage, secure and automate IT and to make us their strategic partner as they deploy new technologies and maximize their investments in current systems and applications. This strategy emphasizes accelerating our growth by continuing to build on our portfolio of software and services to address customer needs in the above-mentioned areas of focus through a combination of internal development and acquired technologies. We believe this strategy builds on our core strengths in IT management while also positioning us to compete in high-growth markets, including virtualization, cloud and SaaS. We are also seeking to expand our business beyond our traditional core customers, generally consisting of large enterprises, to reach what we refer to as “emerging enterprises” or “growth accounts” (which we define as companies with annual revenue of $300 million to $2 billion) and customers in “emerging geographies” or “growth geographies.” We are increasing the number of our relationships and expanding existing relationships with various types of service providers, particularly global outsourcers, regional managed service providers and communication network operators.
Beginning in the third quarter of fiscal 2012, we are rebalancing our sales force to add new quota carrying sales representatives in order to increase our focus on selling new products to new customers. Their compensation structure is designed to reward new business with new customers to the Company — some of these in new geographies, driving new product sales and improving penetration of our acquisition products, particularly in markets outside the United States.
As our growth strategy has evolved, our management also looks within bookings at total new product and capacity sales, which we define as sales of products or capacity that are new or in addition to products or capacity previously contracted for by a customer. The amount of new product and capacity sales for a period, as currently tracked by us, requires estimation by management and has not been historically reported. Within a given period, the amount of new product and capacity sales may not be material to the change in our total bookings or revenue compared with prior periods. New product and capacity sales can be reflected as subscription and maintenance bookings in the period (for which revenue would be recognized ratably over the term of the contract) or in software fees and other bookings (which are recognized as software fees and other revenue in the current period).

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In the first quarter of fiscal 2012, we completed our implementation of changing our internal reporting used by our Chief Executive Officer for evaluating segment performance and allocating resources. The new reporting disaggregates our operations into three segments, two software segments and one service segment, which are described as follows:
    Mainframe Solutions — Our Mainframe Solutions segment addresses the mainframe market and is focused on making significant investments in order to be innovative in key management disciplines across our broad portfolio of products. Ongoing development is guided by customer needs, our cross-enterprise management philosophy and our Mainframe 2.0 strategy, which offers management capabilities designed to appeal to the next generation of mainframe staff while also offering productivity improvements to today’s mainframe experts. Our mainframe business assists customers by addressing three major challenges: lowering costs, providing high service levels by sustaining critical workforce skills and increasing agility to help deliver on business goals.
 
    Enterprise Solutions — Our Enterprise Solutions segment includes products that operate on non-mainframe platforms, such as service assurance, security (identity and access management), project and portfolio management, service management, virtualization and service automation, SaaS, and cloud offerings. Our offerings help customers address their regulatory compliance demands, privacy needs, and internal security policies. Enterprise Solutions also focuses on delivering growth to the Company in the form of new customer acquisitions and revenue, while leveraging non-traditional routes-to-market and delivery models.
 
    Services — Our Services segment offers implementation, consulting, education and training services to customers, which is intended to promote a seamless customer experience and to increase the value that customers realize from our solutions.
The Company’s performance is evaluated by our Chief Executive Officer based on a review of revenue and operating income for each of our operating segments. While our Chief Executive Officer evaluates results in a number of different ways, the operating segments are the primary basis on which resources are allocated and financial results are assessed.
EXECUTIVE SUMMARY
The following is a summary of the analysis of our results contained in our MD&A.
During the first quarter of fiscal 2012, we sold our Internet Security business and during the first quarter of fiscal 2011, we sold our Information Governance business. The results of these business operations are presented in income from discontinued operations.
Total revenue for the second quarter of fiscal 2012 increased 10% to $1,200 million compared with $1,088 million in the year-ago period, primarily due to growth in U.S. revenue of $68 million, which includes revenue relating to a license agreement with one large IT outsourcer that was executed in the fourth quarter of fiscal 2011, increased professional services revenue, and an increase in software fees and other revenue relating to our SaaS offerings. The increases in professional services revenue and software fees and other revenue were both primarily attributable to our acquisitions within the last 12 months. During the second quarter of fiscal 2012, revenue reflected a favorable foreign exchange effect of $50 million compared with the second quarter of fiscal 2011. Our revenue growth was 8% from existing products and services and 2% from acquired technologies (which we define as technology acquired within the prior 12 months). Excluding the favorable foreign currency effect, our revenue growth was 5% with slightly more than 3% for existing products and services and slightly less than 2% for acquired technologies.
Total bookings in the second quarter of fiscal 2012 decreased 3% from the year-ago period to $972 million primarily due to a decrease in bookings relating to subscription and maintenance bookings, offset by an increase in professional services and an increase in bookings that are recognized as software fees and other revenue in the current period. We previously had expected that renewal bookings for the second

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quarter would be approximately 35% lower than the year-ago period. Renewal bookings for the second quarter of fiscal 2012, which generally do not include new product and capacity sales and professional services arrangements, decreased 5% for the second quarter of fiscal 2012. This was primarily due to the timing of renewals, including a large government contract that renewed in the second quarter of fiscal 2012, which was a quarter earlier than expected. Total new product and capacity sales declined by a high single digit percentage from the year-ago period. The decrease in new product sales within the Mainframe Solutions and Enterprise Solutions segments was partially offset by the increase in capacity sales within the Mainframe Solutions segment. These sales are reflected in subscription and maintenance bookings.
For the second quarter of fiscal 2012, there was an increase in duration due to several transactions that were renewed during the quarter with contract terms greater than five years. We now expect our fiscal 2012 renewal portfolio to be lower by approximately 15% compared with fiscal 2011. For the second quarter of fiscal 2012, renewal yield was in the low 90% range.
Total expense before interest and income taxes of $867 million for the second quarter of fiscal 2012 grew 10%, compared with $786 million in the year-ago period. The increase was primarily due to the planned workforce reduction (Fiscal 2012 Plan) which was announced in July 2011. The total amount incurred in the second quarter of fiscal 2012 in connection with Fiscal 2012 Plan was $44 million, of which $27 million is included in “Selling and marketing,” $9 million is included in “Product development and enhancements,” $5 million is included in “General and administrative,” $2 million is included in “Costs of licensing and maintenance” and $1 million is included in “Cost of professional services” on the Condensed Consolidated Statements of Operations. In addition, increases in selling and marketing costs and cost of professional services were partially offset against gains relating to our foreign exchange derivative contracts. During the second quarter of fiscal 2012, total expense reflected an unfavorable foreign exchange effect of $27 million compared with the second quarter of fiscal 2011.
Income before interest and income taxes increased $31 million, or 10%, in the second quarter of fiscal 2012 compared with the year-ago period, which is consistent with the growth rates in revenue and expenses over the same period.
Tax expense increased $20 million for the second quarter of fiscal 2012 compared with the year-ago period, primarily as a result of an increase in income before taxes in the second quarter of fiscal 2012.
Diluted income from continuing operations per share for the second quarter of fiscal 2012 was $0.47, compared with $0.43 in the year-ago period, primarily reflecting an increase in operating income, and our repurchase of common shares.
For the second quarter of fiscal 2012, our segment performance results were as follows:
Mainframe Solutions revenue increased $40 million from the year-ago period primarily due to revenue associated with a license agreement with one large IT outsourcer executed in the fourth quarter of fiscal 2011. For the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011, the decrease in Mainframe Solutions profit from $350 million to $347 million and the decrease in operating margin of 57% to 53% was primarily attributable to a severance charge of $23 million relating to our Fiscal 2012 Plan within the quarter.
Enterprise Solutions revenue increased $55 million from the year-ago period primarily due to growth in subscription and maintenance revenue within our Service Assurance and Security products. For the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011, the decrease in Enterprise Solutions profit from $32 million to $27 million and the decrease in operating margin of 8% to 6% was primarily attributable to a severance charge of $20 million relating to our Fiscal 2012 Plan within the quarter, as well as increased investments in our Enterprise Solutions segment.
Services revenue and expenses increased $17 million and $15 million, respectively, from the year-ago period primarily due to our fiscal 2012 acquisition of Base Technologies. For the second quarter of fiscal 2012, margins on professional services remained consistent with the comparable prior year period.

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Total revenue backlog at September 30, 2011 of $8,067 million increased 4% compared with $7,773 million at September 30, 2010. The current portion of revenue backlog at September 30, 2011 of $3,546 million increased by 4% compared with the balance of $3,418 million at September 30, 2010. The current portion of revenue backlog represents revenue to be recognized within the next 12 months. Generally, we believe that an increase in the current portion of revenue backlog on a year-over-year basis is a positive indicator of future subscription and maintenance revenue growth.
For the second quarter of fiscal 2012, cash flows from continuing operating activities was $190 million and grew 47% compared with the year-ago period. This growth reflects an increase in cash collections on trade receivables of $75 million and a decrease in income tax payments of $24 million, offset by an increase in disbursements of $38 million.
QUARTERLY UPDATE
    In September 2011, we announced the appointment of Jens Alder to our Board of Directors. Mr. Alder currently serves as chairman of Sanitas Krankenversicherung, one of Switzerland’s largest health insurers, and RTX Telecom A/S, a telecommunications component and handset producer based in Denmark.
 
    In September 2011, we announced the appointment of Marco Comastri as president, Europe, Middle East and Africa. Mr. Comastri joins the Company from Poste Italiane, Italy’s largest communications service provider, where he was chief executive officer of the technology services division. He also held management positions at Microsoft Corporation and International Business Machines Corporation.
 
    In August 2011, we acquired Interactive TKO, Inc., a leading provider of service simulation solutions for developing applications in composite and cloud environments.

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PERFORMANCE INDICATORS
Management uses several quantitative performance indicators to assess our financial results and condition. Following is a summary of the principal quantitative performance indicators that management uses to review performance:
                                 
    Second Quarter            
    Comparison            
    Fiscal Year 2012 versus            
    Fiscal Year 2011            
                            Percent
    2012   2011 (1)   Change   Change
    (dollars in millions)
Total revenue
  $ 1,200     $ 1,088     $ 112       10 %
Income from continuing operations
  $ 236     $ 219     $ 17       8 %
Cash provided by operating activities — continuing operations
  $ 190     $ 129     $ 61       47 %
Total bookings
  $ 972     $ 1,001     $ (29 )     (3 )%
Subscription and maintenance bookings
  $ 761     $ 848     $ (87 )     (10 )%
Weighted average subscription and maintenance license agreement duration in years
    3.59       3.47       0.12       3 %
                                 
    First Half Comparison            
    Fiscal Year 2012 versus            
    Fiscal Year 2011            
                            Percent
    2012   2011 (1)   Change   Change
    (dollars in millions)
Total revenue
  $ 2,363     $ 2,157     $ 206       10 %
Income from continuing operations
  $ 464     $ 440     $ 24       5 %
Cash provided by operating activities — continuing operations
  $ 333     $ 251     $ 82       33 %
Total bookings
  $ 1,837     $ 1,733     $ 104       6 %
Subscription and maintenance bookings
  $ 1,449     $ 1,467     $ (18 )     (1 )%
Weighted average subscription and maintenance license agreement duration in years
    3.44       3.24       0.20       6 %
                                         
                    Change           Change
    Sept. 30,   March 31,   From   Sept. 30,   From Prior
    2011   2011 (1)   Year End   2010 (1)   Year Quarter
    (dollars in millions)
Cash, cash equivalents and marketable securities (2)
  $ 2,382     $ 3,228     $ (846 )   $ 2,525     $ (143 )
Total debt
  $ 1,310     $ 1,551     $ (241 )   $ 1,567     $ (257 )
Total expected future cash collections from committed contracts (3)
  $ 5,630     $ 6,043     $ (413 )   $ 5,396     $ 234  
Total revenue backlog (3)
  $ 8,067     $ 8,763     $ (696 )   $ 7,773     $ 294  
Total current revenue backlog (3)
  $ 3,546     $ 3,727     $ (181 )   $ 3,418     $ 128  
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
 
(2)   At September 30, 2011, marketable securities was $179 million. At March 31, 2011, marketable securities were $179 million. At September 30, 2010, marketable securities were less than $1 million.
 
(3)   Refer to the discussion in the “Liquidity and Capital Resources” section of this MD&A for additional information on expected future cash collections from committed contracts, billings backlog and revenue backlog.

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Analyses of our performance indicators shown above and Segment performance, including general trends, can be found in the “Results of Operations” and “Liquidity and Capital Resources” sections of this MD&A.
Total Revenue — Total revenue is the amount of revenue recognized during the reporting period from the sale of license, maintenance and professional services agreements. Amounts recognized as subscription and maintenance revenue are recognized ratably over the term of the agreement. Professional services revenue is generally recognized as the services are performed or recognized on a ratable basis over the term of the related software license. Software fees and other revenue generally represents revenue recognized at the inception of a license agreement (up-front basis) and also includes our SaaS revenue, which is recognized as services are provided.
Total Bookings — Total bookings or sales includes the incremental value of all subscription, maintenance and professional service contracts and software fees and other contracts entered into during the reporting period and is generally reflective of the amount of products and services during the period that our customers have agreed to purchase from us. Revenue for bookings attributed to sales of software products for which revenue is recognized on an up-front basis is reflected in the “Software fees and other” line item of our Condensed Consolidated Statements of Operations.
Subscription and Maintenance Bookings — Subscription and maintenance bookings is the aggregate incremental amount we expect to collect from our customers over the terms of the underlying subscription and maintenance agreements entered into during a reporting period. These amounts include the sale of products directly by us and may include additional products, services or other fees for which we have not established vendor specific objective evidence (VSOE). Subscription and maintenance bookings also includes indirect sales by distributors and volume partners, value-added resellers and exclusive representatives to end-users, where the contracts incorporate the right for end-users to receive unspecified future software products, and other contracts without these rights entered into in close proximity or contemplation of such agreements. These amounts are expected to be recognized ratably as subscription and maintenance revenue over the applicable term of the agreements. Subscription and maintenance bookings excludes the value associated with certain perpetual licenses, license-only indirect sales, SaaS offerings and professional services arrangements.
The license and maintenance agreements that contribute to subscription and maintenance bookings represent binding payment commitments by customers over periods that range generally from three to five years on a weighted average basis, although in certain cases customer commitments can be for longer or shorter periods. These current period bookings are often renewals of prior contracts that also had various durations, usually from three to five years. The amount of new subscription and maintenance bookings recorded in a period is affected by the volume, duration and value of contracts renewed during that period. Subscription and maintenance bookings typically increases in each consecutive quarter during a fiscal year, with the first quarter having the least bookings and the fourth quarter having the most bookings. However, subscription and maintenance bookings may not always follow the pattern of increasing in consecutive quarters during a fiscal year, and the quarter-to-quarter differences in subscription and maintenance bookings may vary. Given the varying durations of the contracts being renewed, year-over-year comparisons of bookings are not always indicative of the overall bookings trend.
Generally, we believe that an increase in the current portion of revenue backlog on a year-over-year basis is a positive indicator of future subscription and maintenance revenue growth due to the high percentage of our revenue that is recognized from license agreements that are already committed and being recognized ratably. Within bookings, we also consider the yield on our renewal portfolio. We define “renewal yield” as the percentage of prior contract value realized from renewals during the period. The baseline for calculating renewal yield is an estimate affected by various factors including contractual renewal terms and other conditions. We estimate the yield based on a review of material transactions representing a substantial majority of the dollar value of renewals during the current period. Year-over-year changes in renewal yield may not be material to year-over-year changes in bookings.
Additionally, period-to-period changes in subscription and maintenance bookings do not necessarily correlate to changes in cash receipts. The contribution to current period revenue from subscription and maintenance bookings from any single license or maintenance agreement is relatively small, since revenue is recognized ratably over the applicable term for these agreements.

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Weighted Average Subscription and Maintenance License Agreement Duration in Years — The weighted average subscription and maintenance license agreement duration in years reflects the duration of all subscription and maintenance agreements executed during a period, weighted by the total contract value of each individual agreement. Weighted average subscription and maintenance license agreement duration in years can fluctuate from period to period depending on the mix of license agreements entered into during a period. Weighted average duration information is disclosed in order to provide additional understanding of the volume of our bookings.
Total Revenue Backlog — Total revenue backlog represents the aggregate amount we expect to recognize as revenue in the future as either subscription and maintenance revenue, professional services revenue or software fees and other revenue associated with contractually committed amounts billed or to be billed as of the balance sheet date. Total revenue backlog is composed of amounts recognized as liabilities in our Condensed Consolidated Balance Sheets as deferred revenue (billed or collected) as well as unearned amounts yet to be billed under subscription and maintenance and software fees and other agreements. Classification of amounts as current and non-current depends on when such amounts are expected to be earned and therefore recognized as revenue. Amounts that are expected to be earned and therefore recognized as revenue in 12 months or less are classified as current, while amounts expected to be earned in greater than 12 months are classified as non-current. The portion of the total revenue backlog that relates to subscription and maintenance agreements is recognized as revenue evenly on a monthly basis over the duration of the underlying agreements and is reported as subscription and maintenance revenue in our Condensed Consolidated Statements of Operations.
“Deferred revenue (billed or collected)” is composed of: (i) amounts received from customers in advance of revenue recognition, (ii) amounts billed but not collected for which revenue has not yet been earned, and (iii) amounts received in advance of revenue recognition from financial institutions where we have transferred our interest in committed installments (referred to as “Financing obligations and other” in Note H, “Deferred Revenue” in the Notes to our Condensed Consolidated Financial Statements).

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RESULTS OF OPERATIONS
The following table presents revenue and expense line items reported in our Condensed Consolidated Statements of Operations for the first quarter of fiscal 2012 and fiscal 2011 and the period-over-period dollar and percentage changes for those line items. These comparisons of past financial results are not necessarily indicative of future results.
                                                 
    Second Quarter Comparison - Fiscal Year 2012 versus Fiscal Year 2011
                            Percentage    
                        of   Percentage of
                    Dollar   Dollar   Total
                    Change   Change   Revenue
    2012   2011 (1)   2012/2011   2012/2011   2012   2011
    (dollars in millions)                        
Revenue
                                               
Subscription and maintenance revenue
  $ 1,022     $ 939     $ 83       9 %     85 %     87 %
Professional services
    96       79       17       22       8       7  
Software fees and other
    82       70       12       17       7       6  
     
Total revenue
    1,200       1,088       112       10       100       100  
     
Expenses
                                               
Costs of licensing and maintenance
    71       66       5       8       6       6  
Cost of professional services
    91       75       16       21       8       7  
Amortization of capitalized software costs
    55       47       8       17       5       4  
Selling and marketing
    370       300       70       23       31       28  
General and administrative
    104       113       (9 )     (8 )     9       10  
Product development and enhancements
    140       125       15       12       12       11  
Depreciation and amortization of other intangible assets
    43       45       (2 )     (4 )     4       4  
Other (gains) expenses, net
    (7 )     15       (22 )     NM       (1 )     1  
     
Total expenses before interest and income taxes
    867       786       81       10       72       72  
     
Income before interest and income taxes
    333       302       31       10       28       28  
Interest expense, net
    6       12       (6 )     (50 )     1       1  
     
Income before income taxes
    327       290       37       13       27       27  
Income tax expense
    91       71       20       28       8       7  
     
Income from continuing operations
  $ 236     $ 219     $ 17       8 %     20 %     20 %
     
 
Note   — Amounts may not add to their respective totals due to rounding.
 
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.

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    First Half Comparison - Fiscal Year 2012 versus Fiscal Year 2011
                            Percentage    
                        of   Percentage of
                    Dollar   Dollar   Total
                    Change   Change   Revenue
    2012   2011 (1)   2012/2011   2012/2011   2012   2011
    (dollars in millions)                        
Revenue
                                               
Subscription and maintenance revenue
  $ 2,029     $ 1,878     $ 151       8 %     86 %     87 %
Professional services
    186       157       29       18       8       7  
Software fees and other
    148       122       26       21       6       6  
     
Total revenue
    2,363       2,157       206       10       100       100  
     
Expenses
                                               
Costs of licensing and maintenance
    138       133       5       4       6       6  
Cost of professional services
    179       146       33       23       8       7  
Amortization of capitalized software costs
    105       92       13       14       4       4  
Selling and marketing
    696       590       106       18       29       27  
General and administrative
    218       230       (12 )     (5 )     9       11  
Product development and enhancements
    258       253       5       2       11       12  
Depreciation and amortization of other intangible assets
    90       89       1       1       4       4  
Other expenses, net
    4       1       3     NM            
     
Total expenses before interest and income taxes
    1,688       1,534       154       10       71       71  
     
Income before interest and income taxes
    675       623       52       8       29       29  
Interest expense, net
    15       25       (10 )     (40 )     1       1  
     
Income before income taxes
    660       598       62       10       28       28  
Income tax expense
    196       158       38       24       8       7  
     
Income from continuing operations
  $ 464     $ 440     $ 24       5 %     20 %     20 %
     
     
Note   — Amounts may not add to their respective totals due to rounding.
 
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
Revenue
Total Revenue
As more fully described below, the increase in total revenue in the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 was primarily attributable to an increase in subscription and maintenance revenue and to a lesser extent an increase in our software fees and other revenue and professional services revenue. During the second quarter and first half of fiscal 2012, revenue reflected a favorable foreign exchange effect of $50 million and $95 million, respectively, compared with the second quarter and first half of fiscal 2011.
Subscription and Maintenance Revenue
Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from: (i) subscription license agreements that were in effect during the period, generally including maintenance that is bundled with and not separately identifiable from software usage fees or product sales, (ii) maintenance agreements associated with providing customer technical support and access to software fixes and upgrades that are separately identifiable from software usage fees or product sales, and (iii) license agreements bundled with additional products, maintenance or professional services for which VSOE has not been established. These amounts include the sale of products directly by us, as well as by distributors and volume partners, value-added resellers and exclusive representatives to end-users, where

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the contracts incorporate the right for end-users to receive unspecified future software products, and other contracts entered into in close proximity or contemplation of such agreements. The increase in subscription and maintenance revenue for the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 was primarily due to revenue associated with a license agreement with one large IT outsourcer for approximately $500 million that was executed in the fourth quarter of fiscal 2011 and to a lesser extent increased revenue in the United States that was recognized in the current period, but was attributable to prior period sales. In addition, for the second quarter and first half of fiscal 2012, there was a favorable foreign exchange effect of $44 million and $84 million, respectively, compared with the comparable prior year periods.
Professional Services
Professional services revenue primarily includes product implementation, consulting, customer training and customer education. Professional services revenue increased in the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011, primarily due to our fiscal 2012 acquisition of Base Technologies.
Software Fees and Other
Software fees and other revenue primarily consists of revenue that is recognized on an up-front basis. This includes revenue associated with Enterprise Solutions segment products sold on an up-front basis directly by our sales force or through transactions with distributors and volume partners, value-added resellers and exclusive representatives (sometimes referred to as our “indirect” or “channel” revenue). It also includes our SaaS revenue, which is recognized as the services are provided rather than up-front. Software fees and other revenue increased in the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 primarily due to increases of $11 million and $22 million, respectively, in revenue from our SaaS offerings, the majority of which was associated with one of our fiscal 2011 acquisitions that was completed during the second half of fiscal 2011.

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Total Revenue by Geography
The following table presents the amount of revenue earned from sales to unaffiliated customers in the United States and international regions and corresponding percentage changes for the second quarter and first half of fiscal 2012 and the second quarter and first half of fiscal 2011.
                                                 
    Second Quarter Comparison — Fiscal Year 2012        
    versus Fiscal Year 2011        
                                    Dollar     Percentage  
    2012     %     2011 (1)     %     Change     Change  
                                    (dollars in millions)  
United States
  $ 690       58 %   $ 622       57 %   $ 68       11 %
International
    510       42 %     466       43 %     44       9 %
 
                                     
 
  $ 1,200       100 %   $ 1,088       100 %   $ 112       10 %
 
                                     
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
                                                 
    First Half Comparison — Fiscal Year 2012        
    versus Fiscal Year 2011        
                                    Dollar     Percentage  
    2012     %     2011 (1)     %     Change     Change  
                                    (dollars in millions)  
United States
  $ 1,362       58 %   $ 1,235       57 %   $ 127       10 %
International
    1,001       42 %     922       43 %     79       9 %
 
                                     
 
  $ 2,363       100 %   $ 2,157       100 %   $ 206       10 %
 
                                     
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
Revenue in the United States increased by $68 million, or 11%, for the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011 primarily due to higher subscription and maintenance revenue, as described above. International revenue increased by $44 million, or 9%, for the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011 due to a favorable foreign exchange effect of $50 million. Excluding the favorable foreign exchange effect, international revenue would have decreased by $6 million, or 1%, primarily as a result of the decline in Europe, Middle East and Africa subscription and maintenance revenue.
Revenue in the United States increased by $127 million, or 10%, for the first half of fiscal 2012 compared with the first half of fiscal 2011 primarily due to higher subscription and maintenance revenue, as described above. International revenue increased by $79 million, or 9%, for the first half of fiscal 2012 compared with the first half of fiscal 2011, due to a favorable foreign exchange effect of $95 million. Excluding the favorable foreign exchange effect, international revenue would have decreased by $16 million, or 2%, primarily as a result of the decline in Europe, Middle East and Africa subscription and maintenance revenue.
Price changes do not have a material effect on revenue in a given period as a result of our ratable subscription model.
Expenses
Operating expenses for the second quarter and first half of fiscal 2012 increased from the second quarter and first half of fiscal 2011 due to an increase in selling and marketing costs and cost of professional services. During the second quarter and first half of fiscal 2012, operating expenses reflected an unfavorable foreign exchange effect of $27 million and $50 million, respectively, compared with the prior comparable periods.
On July 20, 2011, we announced that we would incur a charge in the second quarter of fiscal 2012 in connection with a workforce reduction. The total amount incurred in the second quarter of fiscal 2012 in connection with the Fiscal 2012 Plan was $44 million, of which $27 million is included in “Selling and marketing,” $9 million is included in “Product development and enhancements,” $5 million is included in “General and administrative,” $2 million is included in “Costs of licensing and maintenance” and $1 million is included in “Cost of professional

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services” on the Condensed Consolidated Statements of Operations. This action is a continuation of the work we have been doing to optimize our business by reallocating resources in connection with our strategy. This workforce reduction is expected to be substantially completed by the end of fiscal 2012. Refer to Note D, “Severance and Exit Costs,” in the Notes to the Condensed Consolidated Financial Statements for additional information.
Costs of Licensing and Maintenance
Costs of licensing and maintenance include technical support, royalties, and other manufacturing and distribution costs. Costs of licensing and maintenance for the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 increased slightly as a result of an increase in support costs associated with our acquisitions completed within the last 12 months.
Cost of Professional Services
Cost of professional services consists primarily of our personnel-related costs associated with providing professional services and training to customers. For the second quarter of fiscal 2012 compared with the prior year period, cost of professional services increased primarily as a result of our fiscal 2012 acquisition of Base Technologies. For the second quarter of fiscal 2012, margins on professional services remained consistent with the prior comparable period.
For the first half of fiscal 2012 compared with the prior year period, cost of professional services increased primarily as a result of our fiscal 2012 acquisition of Base Technologies and due to an increase in the use of external consultants to expand our capacity and improve the response time to our customers in order to deliver a higher level of customer satisfaction. As a result of the increase in expenses, margins on professional services decreased to 4% in the first half of fiscal 2012 compared with 7% in the first half of fiscal 2011.
Amortization of Capitalized Software Costs
Amortization of capitalized software costs consists of the amortization of both purchased software and internally generated capitalized software development costs. Internally generated capitalized software development costs relate to new products and significant enhancements to existing software products that have reached the technological feasibility stage.
The increase in amortization of capitalized software costs for the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 was primarily due to the increase in projects that have reached general availability in recent periods and amortization associated with assets acquired from our recent acquisitions.
Selling and Marketing
Selling and marketing expenses include the costs relating to our sales force, channel partners, corporate and business marketing and customer training programs. For the second quarter of fiscal 2012, the increase in selling and marketing expenses was primarily attributable to an increase in personnel-related costs of $57 million, which includes an unfavorable foreign exchange effect of $9 million compared with the prior comparable period. This increase includes severance costs of $27 million associated with the Fiscal 2012 Plan.
For the first half of fiscal 2012, the increase in selling and marketing expenses was primarily attributable to an increase in personnel-related costs of $84 million, which includes an unfavorable foreign exchange effect of $16 million compared with the prior comparable period, and an increase in commission expense of $15 million. The increase in personnel costs includes severance costs of $27 million associated with the Fiscal 2012 Plan.

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General and Administrative
General and administrative expenses include the costs of corporate and support functions, including our executive leadership and administration groups, finance, legal, human resources, corporate communications and other costs such as provisions for doubtful accounts. The decrease in general and administrative expenses for the second quarter and first half of fiscal 2012 compared with the prior year period was primarily attributable to a decrease in consulting costs, which was partially offset by an increase in personnel expenses associated with our fiscal 2012 and fiscal 2011 acquisitions and severance costs of $5 million associated with the Fiscal 2012 Plan.
Product Development and Enhancements
For the second quarter of fiscal 2012 and fiscal 2011, product development and enhancements expenses represented approximately 12% and 11% of total revenue, respectively. For the first half of fiscal 2012 and fiscal 2011, product development and enhancements expenses represented approximately 11% and 12% of total revenue, respectively. The increase in product development and enhancements expenses for the second quarter and first half of fiscal 2012 was primarily due to an increase in personnel-related costs, which includes $9 million of severance costs associated with the Fiscal 2012 Plan.
Depreciation and Amortization of Other Intangible Assets
Depreciation and amortization of other intangible assets for the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 was relatively consistent between periods.
Other (Gains) Expenses, Net
Other (gains) expenses, net decreased $22 million for the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011. Other (gains) expenses, net includes gains and losses attributable to divested assets, foreign currency exchange rate fluctuations, and certain other items. For the second quarter of fiscal 2012, other (gains) expenses, net included a $6 million gain relating to our foreign exchange derivative contracts. For the second quarter of fiscal 2011, other (gains) expenses, net included a $21 million expense relating to our foreign exchange derivative contracts, partially offset by a $10 million gain associated with the sale of an equity investment.
Other (gains) expenses, net increased $3 million for the first half of fiscal 2012 compared with the first half of fiscal 2011. For the first half of fiscal 2012, other (gains) expenses, net included a $1 million expense relating to our foreign exchange derivative contracts and a $2 million expense in connection with litigation claims. For the first half of fiscal 2011, other (gains) expenses, net included an $8 million expense relating to our foreign exchange derivative contracts and a $6 million expense in connection with litigation claims. These expenses were partially offset by a $10 million gain associated with the aforementioned sale of an equity investment. For the first half of fiscal 2011, we recorded a credit of $2 million related to reductions in estimated severance costs related to the fiscal 2010 restructuring plan and the fiscal 2007 restructuring plan.
Interest Expense, Net
The decrease in interest expense, net, for the second quarter and first half of fiscal 2012 compared with the second quarter and first half of fiscal 2011 was primarily due to the decrease in interest expense resulting from our overall decrease in debt outstanding. During the first quarter of fiscal 2012, we repaid $250 million of our revolving credit facility.

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Income Taxes
Income tax expense for the second quarter of fiscal 2012 was $91 million compared with income tax expense of $71 million for the second quarter of fiscal 2011. Income tax expense for the first half of fiscal 2012 was $196 million compared with income tax expense of $158 million for the first half of fiscal 2011.
For the second quarter and first half of fiscal 2012, we recognized a net tax benefit of $15 million and $18 million, respectively, resulting primarily from the recognition of tax benefits related to an investment in a foreign subsidiary. For the second quarter and first half of fiscal 2011, we recognized a net tax benefit of $23 million and $36 million, respectively, resulting primarily from refinements of tax positions taken in prior periods, assertion of affirmative claims in the context of tax audits and the resolutions and accruals of uncertain tax positions relating to non-U.S. jurisdictions.
In April 2011, the U.S. Internal Revenue Service (IRS) completed its examination of our federal income tax returns for the tax years ended March 31, 2005, March 31, 2006 and March 31, 2007 and issued a report of its findings in connection with the examination. We disagree with certain proposed adjustments in the report and we intend to vigorously dispute these matters through applicable IRS and judicial procedures, as appropriate. While we believe that we have recorded reserves sufficient to cover exposures related to these issues, such that the ultimate disposition of this matter will not have a material adverse effect on our consolidated financial position or results of operations, the resolution of such matters involves uncertainties and there are no assurances that the ultimate resolution will not exceed the amounts recorded. We do not believe it is reasonably possible that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
Our effective income tax rate, excluding the impact of discrete items, for the first half of fiscal 2012 and 2011 was 32.4% and 32.5%, respectively. Changes in the anticipated results of our international operations, the outcome of tax audits and any other changes in potential tax liabilities may result in additional tax expense or benefit in future periods, which are not considered in our estimated annual effective tax rate. We do not currently view any such items as individually material to our consolidated financial position or results of operations, the impact of such items may yield additional tax expense or benefit in the remaining quarters of fiscal 2012 and future periods and we are anticipating a fiscal 2012 effective tax rate of approximately 31% to 32%.

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Performance of Segments
In the first quarter of fiscal 2012, we completed our implementation of a change to the internal reporting used by our Chief Executive Officer for evaluating segment performance and allocating resources. The new reporting disaggregates our operations into Mainframe Solutions, Enterprise Solutions and Services segments.
Our Mainframe Solutions and Enterprise Solutions operating segments comprise our software business organized by the nature of our software offerings and the product hierarchy in which the platform operates. The Mainframe Solutions segment products, including Mainframe 2.0, help customers and partners simplify mainframe management, gain more value from existing technology and extend mainframe capabilities. Our Enterprise Solutions segment consists of various product offerings, including service assurance, security (identity and access management), project and portfolio management, service management, virtualization and service automation, SaaS, and cloud offerings. These offerings are providing us with additional access to emerging enterprises, which we define as companies with annual revenue between $300 million and $2 billion. The Services segment comprises implementation, consulting, education and training services, including those directly related to the Mainframe Solutions and Enterprise Solutions software that we sell to our customers.
We regularly enter into a single arrangement with a customer that includes Mainframe Solutions segment software products, Enterprise Solutions segment software products and Services. The amount of contract revenue assigned to segments is generally based on the manner in which the proposal is made to the customer. The software product revenue is assigned to the Mainframe Solutions and Enterprise Solutions segments based on either: (1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the list price of the product); (2) allocations included within internal contract approval documents; or (3) the value for individual software products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately stated in the contract and these amounts of contract revenue are assigned to the Services segment. The contract value assigned to each segment is then recognized in a manner consistent with the revenue recognition policies we apply to the customer contract for purposes of preparing the Condensed Consolidated Financial Statements.
Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of the Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs). Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product development costs, general and administrative costs and amortization of the cost of internally developed software. Allocated segment costs primarily include indirect selling and marketing costs and general and administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs between the Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated and is either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for the Services segment consist only of direct costs and there are no allocated or indirect costs for the Services segment.
Segment expenses do not include the following: share-based compensation expense; amortization of purchased software; amortization of other intangible assets; derivative hedging gains and losses; and severance, exit costs and related charges associated with the fiscal 2007 restructuring plan.

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Segment information for the three and six months ended September 30, 2011 and 2010 is as follows:
                         
Three Months Ended September 30, 2011   Mainframe     Enterprise        
(in millions)   Solutions     Solutions     Services  
Revenue
  $ 655     $ 449     $ 96  
Expenses
    308       422       92  
 
                 
Segment profit
  $ 347     $ 27     $ 4  
 
                 
Segment operating margin
    53 %     6 %     4 %
                         
Six Months Ended September 30, 2011   Mainframe     Enterprise        
(in millions)   Solutions     Solutions     Services  
Revenue
  $ 1,301     $ 876     $ 186  
Expenses
    584       804       180  
 
                 
Segment profit
  $ 717     $ 72     $ 6  
 
                 
Segment operating margin
    55 %     8 %     3 %
                         
Three Months Ended September 30, 2010   Mainframe     Enterprise          
(in millions)   Solutions     Solutions     Services  
Revenue
  $ 615     $ 394     $ 79  
Expenses
    265       362       77  
 
                 
Segment profit
  $ 350     $ 32     $ 2  
 
                 
Segment operating margin
    57 %     8 %     3 %
                         
Six Months Ended September 30, 2010   Mainframe     Enterprise        
(in millions)   Solutions     Solutions `     Services  
Revenue
  $ 1,230     $ 770     $ 157  
Expenses
    545       713       151  
 
                 
Segment profit
  $ 685     $ 57     $ 6  
 
                 
Segment operating margin
    56 %     7 %     4 %
For the second quarter and first half of fiscal 2012, Mainframe Solutions revenue increased $40 million and $71 million, respectively, from the year-ago period primarily due to revenue associated with a license agreement with one large IT outsourcer executed in the fourth quarter of fiscal 2011. The increase for the second quarter and first half of fiscal 2012 was also attributable to revenue recognized from new capacity sales that were primarily sold in the second half of fiscal 2011. For the second quarter and first half of fiscal 2012, Mainframe Solutions revenue reflected a favorable foreign exchange effect of $28 million and $55 million, respectively, compared with the comparable prior year periods. For the second quarter of fiscal 2012, Mainframe Solutions operating margin was unfavorably affected by a $23 million severance charge relating to our Fiscal 2012 Plan. The impact of this charge was partially offset by the benefit of improved revenue performance for the second quarter and first half of fiscal 2012. Mainframe Solutions operating margin for the second quarter of fiscal 2012 was 53% compared with 57% in the second quarter of fiscal 2011. For the first half of fiscal 2012, Mainframe Solutions operating margin remained consistent with the prior comparable period.

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For the second quarter of fiscal 2012, Enterprise Solutions revenue increased $55 million from the year-ago period primarily due to growth in subscription and maintenance revenue within our Security and Service Assurance products and our SaaS offerings recognized as software fees and other revenue. For the second quarter of fiscal 2012 Enterprise Solutions revenue reflected a favorable foreign exchange effect of $18 million compared with the prior year period. For the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011, the decrease in Enterprise Solutions profit from $32 million to $27 million and the decrease in operating margin of 8% to 6% was primarily attributable to the Fiscal 2012 Plan charge of $20 million during the second quarter of fiscal 2012, as well as increased investments in our Enterprise Solutions segment.
For the first half of fiscal 2012, Enterprise Solutions revenue increased $106 million from the year-ago period primarily due to growth in subscription and maintenance revenue within our Service Assurance and Security products and our SaaS offerings recognized as software fees and other revenue. For the first half of fiscal 2012 Enterprise Solutions revenue reflected a favorable foreign exchange effect of $32 million compared with the prior year period. For the first half of fiscal 2012 compared with the first half of fiscal 2011, the increase in Enterprise Solutions profit from $57 million to $72 million and the increase in operating margin from 7% to 8% was primarily attributable to the increase in revenue for the first half of fiscal 2012, offset by the Fiscal 2012 Plan charge of $20 million during the second quarter, as well as increased investments in our Enterprise Solutions segment within the first half of fiscal 2012.
For the second quarter of fiscal 2012, Services revenue and expenses compared with the prior year period increased primarily as a result of our fiscal 2012 acquisition of Base Technologies. For the second quarter of fiscal 2012 Services revenue reflected a favorable foreign exchange effect of $4 million compared with the prior year period. For the second quarter of fiscal 2012, Services margins remained consistent with the prior comparable period.
For the first half of fiscal 2012, Services revenue and expenses compared with the prior year period increased as a result of our fiscal 2012 acquisition of Base Technologies and due to an increase in the use of external consultants to expand our capacity and improve the response time to our customers in order to deliver a higher level of customer satisfaction. For the second quarter of fiscal 2012 Services revenue reflected a favorable foreign exchange effect of $8 million compared with the prior year period. As a result of the increase in expenses, Services margins decreased to 3% in the first half of fiscal 2012 as compared with 4% in the first half of fiscal 2011.
Refer to Note Q, “Segment Information,” in the Notes to the Condensed Consolidated Financial Statements for additional information.
Bookings
Total Bookings
For the second quarter of fiscal 2012 and fiscal 2011, total bookings were $972 million and $1,001 million, respectively. The decrease in bookings reflected a decline in subscription and maintenance bookings that was partially offset by an increase in professional services bookings (primarily attributable to our fiscal 2012 acquisition of Base Technologies) and an increase in bookings that are recognized as software fees and other revenue in the current period. Total new product and capacity sales declined by a high single digit percentage from the year-ago period. The decrease in new product sales within the Mainframe and Enterprise Solutions segments was partially offset by the increase in capacity sales within the Mainframe Solutions segment. These sales are reflected in subscription and maintenance bookings. The decrease in Enterprise Solutions segment sales was primarily driven by a decrease in service assurance sales and was subject to a difficult comparison to strong new product sales in the year-ago period, which generally had longer maintenance duration periods.
Bookings in Europe, Middle East and Africa decreased for the second quarter of fiscal 2012 from the year-ago period primarily due to a decrease in renewals. This was partially offset by an increase in total bookings for the United States and Latin America, which was due to an increase in professional services bookings and mainframe capacity sales, offset by a decrease in new product sales.

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For the first half of fiscal 2012 and fiscal 2011, total bookings were $1,837 million and $1,733 million, respectively. The increase in bookings reflected an increase in professional services bookings (primarily attributable to our fiscal 2012 acquisition of Base Technologies) and an increase in bookings that are recognized as software fees and other revenue in the current period. This was partially offset by a decrease in subscription and maintenance bookings. Total new product and capacity sales declined by a low single digit percentage from the year-ago period. New product sales within the Enterprise Solutions segment which are reflected in subscription and maintenance bookings decreased and were mostly offset by an increase in capacity sales within the Mainframe Solutions segment. New product sales within the Mainframe Solutions segment were comparable to the year-ago period.
Total bookings in the United States for the first half of fiscal 2012 increased from the first half of fiscal 2011 primarily due to an increase in professional services bookings. Total bookings in Europe, Middle East and Africa for the first half of fiscal 2012 increased from the first half of fiscal 2011 primarily due to an increase in capacity sales within the Mainframe Solutions segment.
Subscription and Maintenance Bookings
For the second quarter of fiscal 2012 and fiscal 2011, subscription and maintenance bookings were $761 million and $848 million, respectively. The decrease in subscription and maintenance bookings was primarily attributable to a decrease in new product sales and renewals within the Mainframe Solutions and Enterprise Solutions segments, partially offset by an increase in capacity sales within the Mainframe Solutions segment. For the first half of fiscal 2012 and fiscal 2011, subscription and maintenance bookings were $1,449 million and $1,467 million, respectively. The decrease in subscription and maintenance bookings was primarily attributable to a decrease in new product sales within the Mainframe Solutions and Enterprise Solutions segments, mostly offset by an increase in capacity sales within the Mainframe Solutions segment.
During the second quarter of fiscal 2012, we renewed a total of 10 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $321 million. During the second quarter of fiscal 2011, we renewed a total of 14 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $361 million.
Generally, quarters with smaller renewal inventories result in a lower level of bookings both because renewal bookings will be reduced and, to a lesser extent, because renewals also remain an important selling opportunity for new products. We previously had expected that renewal bookings for the second quarter would be approximately 35% lower than the year-ago period. Renewal bookings for the second quarter of fiscal 2012, which generally do not include new product and capacity sales and professional services arrangements, decreased 5% primarily due to the timing of renewals, including a large government contract that was renewed in the second quarter of fiscal 2012, which was a quarter earlier than expected. In addition, there was an increase in duration for several transactions that were renewed during the second quarter of fiscal 2012. We now expect our fiscal 2012 renewal portfolio to be lower by approximately 15% compared with fiscal 2011, primarily due to a $500 million renewal contract with a large IT outsourcer, which was executed in the fourth quarter of fiscal 2011. For the second quarter of fiscal 2012, the estimated renewal yield was in the low 90% range.
During the second quarter of fiscal 2012, we continued taking steps to improve our performance in Europe, Middle East and Africa. Some of the steps include: (1) the appointment of a new regional executive with the intent to bring a more disciplined approach to our renewal process; and (2) the remapping of our sales coverage model to better align and focus on countries with the most resilient IT spending. Both these steps are designed to accelerate new product sales and improve account penetration. We believe that over time these steps will help improve performance in Europe, Middle East and Africa, although we also believe that the macro-economic climate will continue to be a challenge in this region.
Annualized subscription and maintenance bookings is an indicator that normalizes the bookings recorded in the current period to account for contract length. It is calculated by dividing the total value of all new subscription and maintenance license agreements entered into during

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a period by the weighted average subscription and license agreement duration in years for all such subscription and maintenance license agreements recorded during the same period. For the second quarter of fiscal 2012, annualized subscription and maintenance bookings decreased from $244 million in the prior year period to $212 million. The weighted average subscription and maintenance license agreement duration in years increased from 3.47 in the second quarter of fiscal 2011 to 3.59 in the second quarter of fiscal 2012. This increase was primarily attributable to the execution of several license agreement renewals with terms of five years or greater. Although each contract is subject to terms negotiated by the respective parties, we do not currently expect the weighted average subscription and maintenance agreement duration in years to change materially from current levels for end-user contracts.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalent balances are held in numerous locations throughout the world, with 66% held in our subsidiaries outside the United States at September 30, 2011. Cash, cash equivalents and marketable securities totaled $2,382 million at September 30, 2011, representing a decrease of $846 million from the March 31, 2011 balance of $3,228 million. The decrease in cash was primarily due to the utilization of cash to acquire our fiscal 2012 acquisitions, repurchases of our common stock and the repayment of our previous revolving credit facility. During the first half of fiscal 2012, there was an $85 million unfavorable translation effect from foreign currency exchange rates on cash held outside the United States in currencies other than the U.S. dollar.
We expect that existing cash and cash equivalents, the availability of borrowings under existing and renewable credit lines, and cash expected to be provided from operations will be sufficient to meet ongoing cash requirements.
We expect to use existing cash, cash equivalents and marketable securities balances and future cash generated from operations to fund capital spending, financing activities such as the repayment of our debt balances as they mature, the payment of dividends, and the potential repurchase of shares of common stock in accordance with any plans approved by our Board of Directors, as well as our continued investment in our enterprise resource planning implementation and future acquisitions.
Sources and Uses of Cash
Under our subscription and maintenance agreements, customers generally make installment payments over the term of the agreement, often with at least one payment due at contract execution, for the right to use our software products and receive product support, software fixes and new products when available. The timing and actual amounts of cash received from committed customer installment payments under any specific agreement can be affected by several factors, including the time value of money and the customer’s credit rating. Often, the amount received is the result of direct negotiations with the customer when establishing pricing and payment terms. In certain instances, the customer negotiates a price for a single up-front installment payment and seeks its own internal or external financing sources. In other instances, we may assist the customer by arranging financing on its behalf through a third party financial institution. Alternatively, we may decide to transfer our rights to the future committed installment payments due under the license agreement to a third-party financial institution in exchange for a cash payment. Once transferred, the future committed installments are payable by the customer to the third-party financial institution. Whether the future committed installments have been financed directly by the customer with our assistance or by the transfer of our rights to future committed installments to a third-party, such financing agreements may contain limited recourse provisions with respect to our continued performance under the license agreements. Based on our historical experience, we believe that any liability that we may incur as a result of these limited recourse provisions will be immaterial.
Amounts billed or collected as a result of a single installment for the entire contract value, or a substantial portion of the contract value, rather than being invoiced and collected over the life of the license agreement are reflected in the liability section of our Condensed Consolidated Balance Sheets as “Deferred revenue (billed or collected).” Amounts received from either a customer or a third-party financial institution that are attributable to later years of a license agreement have a positive impact on billings and cash provided by operating activities in the current period. Accordingly, to the extent such collections are attributable to the later years of a license agreement, billings and cash provided

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by operating activities during the license’s later years will be lower than if the payments were received over the license term. We are unable to predict with certainty the amount of cash to be collected from single installments for the entire contract value, or a substantial portion of the contract value, under new or renewed license agreements to be executed in future periods.
For the second quarter of fiscal 2012, gross receipts related to single installments for the entire contract value, or a substantial portion of the contract value, were $100 million compared with $124 million in the second quarter of fiscal 2011.
In any quarter, we may receive payments in advance of the contractually committed date on which the payments were otherwise due. In certain instances, the customer may elect to make such payments without any discounts offered by us.
Amounts due from customers are offset by deferred revenue related to these license agreements, leaving no or minimal net carrying value on the balance sheets for such amounts. The fair value of such amounts may exceed or be less than this carrying value but cannot be practically assessed since there is no existing market for a pool of customer receivables with contractual commitments similar to those owned by us. The actual fair value may not be known until these amounts are sold, securitized or collected. Although these customer license agreements commit the customer to payment under a fixed schedule, to the extent amounts are not yet due and payable by the customer, the agreements are considered executory in nature due to our ongoing commitment to provide maintenance and unspecified future software products as part of the agreement terms.

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We can estimate the total amounts to be billed from committed contracts, referred to as our “billings backlog,” and the total amount to be recognized as revenue from committed contracts, referred to as our “revenue backlog.” The aggregate amounts of our billings backlog and trade and installment receivables already reflected on our Condensed Consolidated Balance Sheets represent the amounts we expect to collect in the future from committed contracts.
                         
    Sept. 30,     March 31,     Sept. 30,  
(Amounts in millions)   2011     2011     2010 (1)  
     
Billings backlog:
                       
Amounts to be billed — current
  $ 2,171     $ 2,234     $ 1,963  
Amounts to be billed — noncurrent
    2,858       2,960       2,736  
 
                 
Total billings backlog
  $ 5,029     $ 5,194     $ 4,699  
 
                 
 
                       
Revenue backlog:
                       
Revenue to be recognized within the next 12 months — current
  $ 3,546     $ 3,727     $ 3,418  
Revenue to be recognized beyond the next 12 months — noncurrent
    4,521       5,036       4,355  
 
                 
Total revenue backlog
  $ 8,067     $ 8,763     $ 7,773  
 
                 
 
Deferred revenue (billed or collected)
  $ 3,038     $ 3,569     $ 3,074  
Unearned revenue yet to be billed
    5,029       5,194       4,699  
 
                 
Total revenue backlog
  $ 8,067     $ 8,763     $ 7,773  
 
                 
     
Note:   Revenue backlog includes deferred subscription and maintenance, professional services and software fees and other revenue.
 
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
We can also estimate the total cash to be collected in the future from committed contracts, referred to as our “Expected future cash collections,” by adding the total billings backlog to the trade accounts receivable, which represent amounts already billed but not collected, from our Condensed Consolidated Balance Sheets.
                         
    Sept. 30,     March 31,     Sept. 30,  
(Amounts in millions)   2011     2011     2010 (1)  
     
Expected future cash collections:
                       
Total billings backlog
  $ 5,029     $ 5,194     $ 4,699  
Trade accounts receivable, net
    601       849       697  
 
                 
Total expected future cash collections
  $ 5,630     $ 6,043     $ 5,396  
 
                 
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
The decreases in our total revenue and billings backlogs as well as our expected future cash collections at September 30, 2011 compared with March 31, 2011 were driven by the decrease in committed value associated with customer contracts, which are typically lower in the first half when compared to the second half of a fiscal year. Revenue to be recognized in the next 12 months decreased by 5% at September 30, 2011 compared with March 31, 2011.
The increases in our total revenue and billings backlogs as well as our expected future cash collections at September 30, 2011 compared with September 30, 2010 were driven by the increase in committed value associated with customer contracts. Total revenue backlog increased 4% at September 30, 2011 compared with September 30, 2010. Excluding the effect of foreign exchange total revenue backlog increased 4% at September 30, 2011 compared with September 30, 2010. Revenue to be recognized in the next 12 months increased by 4% at September 30, 2011 compared with September 30, 2010. This increase includes revenue to be recognized in future periods attributable to a license agreement with one large IT outsourcer for approximately $500 million that was executed in the fourth quarter of fiscal 2011. This license agreement

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extends through fiscal year 2016. Excluding the effect of foreign exchange, revenue to be recognized in the next 12 months increased by 3% at September 30, 2011 compared with September 30, 2010.
Generally, we believe that an increase in the current portion of revenue backlog on a year-over-year basis is a positive indicator of future subscription and maintenance revenue growth.
Cash Generated by Operating Activities
                         
    Second Quarter of Fiscal     Change  
    2012     2011 (1)     2012/ 2011  
            (in millions)          
Cash collections from billings (2)
  $ 978     $ 903     $ 75  
Vendor disbursements and payroll (2)
    (768 )     (709 )     (59 )
Income tax (payments) receipts, net
    (23 )     (47 )     24  
Other disbursements, net (3)
    3       (18 )     21  
 
                 
Cash generated by continuing operating activities
  $ 190     $ 129     $ 61  
 
                 
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
 
(2)   Amounts include VAT and sales taxes.
 
(3)   Amounts include interest, severance and exit costs and miscellaneous receipts and disbursements.
                         
    First Half of Fiscal     Change  
    2012     2011 (1)     2012/ 2011  
            (in millions)          
Cash collections from billings (2)
  $ 2,240     $ 2,015     $ 225  
Vendor disbursements and payroll (2)
    (1,655 )     (1,573 )     (82 )
Income tax (payments) receipts, net
    (221 )     (134 )     (87 )
Other disbursements, net (3)
    (31 )     (57 )     26  
 
                 
Cash generated by continuing operating activities
  $ 333     $ 251     $ 82  
 
                 
 
(1)   Previously reported information has been adjusted to exclude discontinued operations.
 
(2)   Amounts include VAT and sales taxes.
 
(3)   Amounts include interest, severance and exit costs and miscellaneous receipts and disbursements.
Second Quarter Comparison — Fiscal Year 2012 versus Fiscal Year 2011
Operating Activities:
Cash generated by continuing operating activities for the second quarter of fiscal 2012 was $190 million, representing an increase of $61 million compared with the second quarter of fiscal 2011. The increase was primarily due to an increase in cash collections on trade receivables and a decrease in cash paid for income taxes. These increases were offset by increases in other disbursements of $38 million.
Investing Activities:
Cash used in investing activities for the second quarter of fiscal 2012 was $393 million, compared with $62 million for the second quarter of fiscal 2011. The increase in cash used in investing activities was primarily due to the increase in cash paid for acquisitions of $321 million, which includes $37 million in payments of previously accrued acquisition related costs from prior period acquisitions, and an increase of $15 million in capitalized software development costs.

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Financing Activities:
Cash used in financing activities for the second quarter of fiscal 2012 was $228 million compared with $124 million in the second quarter of fiscal 2011. The increase in cash used in financing activities was primarily due to the increase of $100 million in common shares repurchased during the second quarter of fiscal 2012, compared with the second quarter of fiscal 2011.
First Half Comparison — Fiscal Year 2012 versus Fiscal Year 2011
Operating Activities:
Cash generated by continuing operating activities for the first half of fiscal 2012 was $333 million, representing an increase of $82 million compared with the first half of fiscal 2011. The increase was primarily due to an increase in cash collections on trade receivables, offset by an increase in income tax payments of $87 million and an increase in other disbursements of $56 million.
Investing Activities:
Cash used in investing activities for the first half of fiscal 2012 was $500 million compared with $154 million for the first half of fiscal 2011. The increase in cash used in investing activities was primarily due to the increase in cash paid for acquisitions of $341 million, which includes $43 million in payments of previously accrued acquisition related costs from prior period acquisitions, and an increase of $23 million in capitalized software development costs. Cash used in investing activities for the first half of fiscal 2011 included a $15 million equity investment in Watermark Medical, Inc., a privately-held medical products and services company.
Financing Activities:
Cash used in financing activities for the first half of fiscal 2012 was $581 million compared with $199 million in the first half of fiscal 2011. The increase in cash used in financing activities was primarily due to the repayment of $250 million under our revolving credit facility due August 2012 and an increase in common shares repurchased of $198 million, offset by an increase in borrowing positions outstanding of $61 million relating to our notional pooling arrangement.
Debt Obligations
As of September 30, 2011 and March 31, 2011, our debt obligations consisted of the following:
                 
    September 30,     March 31,  
    2011     2011  
    (in millions)  
Revolving credit facility due August 2012
  $     $ $250  
Revolving credit facility due August 2016
           
5.375% Senior Notes due November 2019
    750       750  
6.125% Senior Notes due December 2014, net of unamortized premium from fair value hedge of $30 and $15
    530       515  
Other indebtedness, primarily capital leases
    36       42  
Unamortized discount for Notes
    (6 )     (6 )
 
           
Total debt outstanding
    1,310       1,551  
 
           
Less the current portion
    (18 )     (269 )
 
           
Total long-term debt portion
  $ 1,292     $ 1,282  
 
           
Our debt obligations at September 30, 2011 decreased by $241 million compared with March 31, 2011. This decrease was primarily a result of our repayment of the outstanding revolving credit facility balance of $250 million, offset by the fair value adjustment of $15 million relating to our interest rates swaps on our 6.125% Senior Notes due December 2014.

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In August 2011, the Company terminated the revolving credit facility due August 2012 and entered into a new revolving credit facility due August 2016. The maximum committed amount available under the revolving credit facility due August 2016 is $1 billion. The facility also provides the Company with an option to increase the available credit by up to $500 million. This option is subject to certain conditions and the agreement of the facility lenders. There are no outstanding borrowings at September 30, 2011.
Refer to Note I, “Debt,” in the Notes to the Condensed Consolidated Financial Statements for additional information.
Other Indebtedness
We have available an unsecured and uncommitted multi-currency line of credit to meet short-term working capital needs for our subsidiaries operating outside the United States. We use guarantees and letters of credit issued by financial institutions to guarantee performance on certain contracts. At September 30, 2011 and March 31, 2011, approximately $53 million and $55 million, respectively, was pledged in support of bank guarantees and other local credit lines and none of these arrangements had been drawn down by third parties.
We use a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either cash deposit or borrowing positions through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because it maintains a security interest in the cash deposits, and has the right to offset the cash deposits against the borrowings, the bank provides us and our participating subsidiaries favorable interest terms on both. At September 30, 2011 and March 31, 2011, the borrowing positions outstanding under this cash pooling arrangement were as follows:
                 
    September 30,     March 31,  
    2011     2011  
    (in millions)  
Borrowings
  $ 164     $ $260  
Repayments
    (97 )     (260 )
Foreign currency exchange effect
    (6 )      
 
           
Total borrowing positions outstanding (1)
  $ 61     $  
 
           
 
(1)   Included in the “Accrued expenses and other current liabilities” line item on the Company’s Condensed Consolidated Balance Sheet.
For additional information concerning our debt obligations, refer to our Consolidated Financial Statements and Notes thereto included in our 2011 Form 10-K.
Effect of Exchange Rate Changes
There was an $85 million unfavorable impact to our cash balances in the first half of fiscal 2012 predominantly due to the strengthening of the U.S. dollar against the South African rand (20%), the Brazilian real (15%), the Swedish krona (9%), the Canadian dollar (8%), the Australian dollar (7%) and the euro (6%).
There was a $32 million favorable impact to our cash balances in the first half of fiscal 2011 predominantly due to the weakening of the U.S. dollar against the euro (1%), the Australian dollar (5%) and the Brazilian real (6%).
CRITICAL ACCOUNTING POLICIES AND BUSINESS PRACTICES
The preparation of financial statements in accordance with generally accepted accounting principles requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances. Our estimates form the basis for making judgments about amounts and timing of revenue and expenses, the carrying values of assets and the recorded amounts of liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and such estimates may change if the underlying conditions

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or assumptions change. Information with respect to our critical accounting policies that we believe could have the most significant effect on our reported results or require subjective or complex judgments by management is contained in our 2011 Form 10-K under Management’s Discussion and Analysis of Financial Condition and Results of Operations. At September 30, 2011, there has been no material change to this information.
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including foreign currency exchange rate fluctuations, interest rate changes and changes in the market value of our investments. In the normal course of business, we employ established policies and procedures to manage these risks including the use of derivative instruments. There have been no material changes in our financial risk management strategy or our portfolio management strategy, which is described in our 2011 Form 10-K, subsequent to March 31, 2011.
Item 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
Except as disclosed in the following paragraph, there were no changes in the Company’s internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
As disclosed above, in the first quarter of fiscal 2012, the Company changed its operating segments under ASC 280, “Segment Reporting.” This change in segments gave rise to changes in the Company’s internal control over financial reporting that included the implementation of control procedures to address the completeness, accuracy and consistency of the processing of our business transactions to derive the segment information disclosed in our financial statements. The Company expects that further changes to internal control over financial reporting associated with our segment reporting will continue through the fourth quarter of fiscal 2012 as these procedures are further improved and enhanced.

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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Refer to Note L, “Commitments and Contingencies,” in the Notes to the Condensed Consolidated Financial Statements for information regarding certain legal proceedings, the contents of which are herein incorporated by reference.
Item 1A. RISK FACTORS
Current and potential stockholders should consider carefully the risk factors described in more detail in our 2011 Form 10-K. We believe that as of September 30, 2011, there has been no material change to this information, except as noted below. Any of these factors, or others, many of which are beyond our control, could materially adversely affect our business, financial condition, operating results, cash flow and stock price.
Failure by us to effectively execute on our announced workforce reductions could result in total costs that are greater than expected or revenues that are less than anticipated.
We have announced workforce reductions and other cost reduction initiatives to reallocate resources to growth areas of our business as part of our strategy. We may have further workforce reductions in the future. Risks associated with these actions and other workforce management issues include delays in implementation, changes in plans that increase or decrease the number of employees affected, adverse effects on employee morale and the failure to meet operational targets due to the loss of employees, any of which may impair our ability to achieve anticipated cost reductions or may otherwise harm our business, which could materially adversely affect our financial condition, operating results and cash flow.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth, for the months indicated, our purchases of common stock in the second quarter of fiscal year 2012:
ISSUER PURCHASES OF EQUITY SECURITIES
                                 
                            Approximate
                    Total Number   Dollar Value of
                    of Shares   Shares that
                    Purchased as   May Yet Be
    Total Number   Average   Part of Publicly   Purchased Under
    of Shares   Price Paid   Announced Plans   the Plans
Period   Purchased   per Share   or Programs   or Programs
    (amounts in thousands, except average price paid per share)
July 1, 2011 - July 31, 2011
    1,808     $ 22.51       1,808     $ 591,100  
August 1, 2011 - August 31, 2011
    4,680     $ 19.91       4,680     $ 497,921  
September 1, 2011 - September 30, 2011
    3,258     $ 20.29       3,258     $ 431,807  
 
                               
Total
    9,746               9,746          
 
                               
On May 12, 2010, our Board of Directors approved a stock repurchase program that authorizes us to acquire up to $500 million of our common stock. On May 11, 2011, our Board of Directors approved a stock repurchase program that authorizes us to acquire up to an additional $500 million of our common stock, in addition to the previous program approved on May 12, 2010. We will fund both programs with available cash on hand and repurchase shares on the open market from time to time based on market conditions and other factors.

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Under these programs, we repurchased approximately 9.7 million shares of our common stock for approximately $200 million during the second quarter of fiscal 2012. At September 30, 2011 we remain authorized to repurchase approximately $432 million of common stock.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. REMOVED AND RESERVED
Item 5. OTHER INFORMATION
None.

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Item 6. EXHIBITS
             
Regulation S-K        
Exhibit Number        
  3.1    
Amended and Restated Certificate of Incorporation.
  Filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K dated March 6, 2006.*
       
 
   
  3.2    
By-Laws of the Company, as amended.
  Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated February 23, 2007.*
       
 
   
  10.1 **  
Letter dated April 26, 2011 from the Company to Peter Griffiths regarding terms of employment.
  Filed herewith.
       
 
   
  10.2 **  
Schedules A, B, and C (as amended) to CA, Inc. Change in Control Severance Policy.
  Filed herewith.
       
 
   
  10.3 **  
CA, Inc. 2011 Incentive Plan.
  Filed as Exhibit B to the Company’s definitive Proxy Statement filed June 10, 2011.*
       
 
   
  10.4 **  
Form of Award Agreement under the CA, Inc. 2011 Incentive Plan — Restricted Stock Units.
  Filed herewith.
       
 
   
  10.5 **  
Form of Award Agreement under the CA, Inc. 2011 Incentive Plan — Restricted Stock Awards.
  Filed herewith.
       
 
   
  10.6 **  
Form of Award Agreement under the CA, Inc. 2011 Incentive Plan — Restricted Stock Awards (special retirement vesting).
  Filed herewith.
       
 
   
  10.7 **  
Form of Award Agreement under the CA, Inc. 2011 Incentive Plan — Nonqualified Stock Options.
  Filed herewith.
       
 
   
  10.8 **  
CA, Inc. 2012 Employee Stock Purchase Plan.
  Filed as Exhibit C to the Company’s definitive Proxy Statement filed June 10, 2011.*
       
 
   
  10.9    
Credit Agreement dated August 19, 2011.
  Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 19, 2011.*
       
 
   
  12.1    
Statement of Ratios of Earnings to Fixed Charges.
  Filed herewith.
       
 
   
  15    
Accountants’ acknowledgment letter.
  Filed herewith.
       
 
   
  31.1    
Certification of the Principal Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
  Filed herewith.
       
 
   
  31.2    
Certification of the Principal Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
  Filed herewith.
       
 
   
  32    
Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002.
  Furnished herewith.

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Regulation S-K        
Exhibit Number        
  101    
The following financial statements from CA, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended, September 30, 2011 formatted in XBRL (eXtensible Business Reporting Language):
  Filed herewith.
       
 
   
       
(i) Unaudited Condensed Consolidated Balance Sheets —September 30, 2011 and March 31, 2011.
   
       
 
   
       
(ii) Unaudited Condensed Consolidated Statements of Operations — Three and Six Months Ended September 30, 2011 and 2010.
   
       
 
   
       
(iii) Unaudited Condensed Consolidated Statements of Cash Flows — Six Months Ended September 30, 2011 and 2010.
   
       
 
   
       
(iv) Notes to Unaudited Condensed Consolidated Financial Statements — September 30, 2011.
   
 
*   Incorporated herein by reference.
 
**   Management contract or compensatory plan or arrangement.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange 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/ William E. McCracken    
    William E. McCracken   
    Chief Executive Officer   
 
     
  By:   /s/ Richard J. Beckert    
    Richard J. Beckert   
    Executive Vice President and Chief Financial Officer   
 
Dated: October 28, 2011

57

Exhibit 10.1
(CA LOGO)
April 26, 2011
Mr. Peter Griffiths
Dear Peter:
Congratulations! CA Canada Company (CA) is pleased to offer you the position of Executive Vice President, Technology and Development. Your employment start date will be May 26th, 2011(the “Start Date”) and you will report to the Company’s Chief Executive Officer (“CEO”).
The enclosed Schedule identifies certain important benefits, employment policies and agreements, which govern the relationship between CA and its employees. It also describes certain information you must bring with you on your first day of work. Please ensure that you read it carefully before accepting this offer. All amounts are in Canadian dollars.
1. Employment, Duties, Authority and Work Standards. The Company hereby agrees to employ you as of the Start Date as Executive Vice President, Technology and Development, with such duties and responsibilities to be determined by the Company from time to time. You hereby accept such position and agree to serve the Company in such capacity. You shall report directly to the Company’s CEO. Your duties, responsibilities and authority shall be such duties, responsibilities and authority as are consistent with the above job title and such other duties, responsibilities and authority as the CEO shall from time to time specify. You will (a) serve the Company (and such of its subsidiary companies as the Company may designate) faithfully, diligently and to the best of your ability under the direction of the CEO and (b) devote your full working time and best efforts, attention and energy to the performance of your duties to the Company.
2. Compensation.
(A) Annual Base Salary- Your annual salary shall be of $700,000 per annum (the “Base Salary”), payable semi-monthly concurrent with the Company’s normal payroll cycle, subject to annual review by the Compensation and Human Resources Committee of the Company’s Board of Directors (the “Compensation Committee”).

 


 

(B) Annual Performance Cash Incentive- You shall also have an opportunity to earn an annual performance cash incentive bonus (“Annual Bonus”) under the Company’s Annual Performance Bonus program in accordance with Section 4.4 of the Company’s 2007 Incentive Plan, as amended and restated, or any successor thereto (the “Incentive Plan”). Your Annual Bonus target for the fiscal year commencing on April 1, 2011 shall equal $700,000, to be pro-rated based on the number days you serve the Company during the fiscal year commencing on April 1, 2011. The terms of the Annual Bonus targeted amount and the other terms and conditions of such Annual Bonus shall be subject to determination and approval of the Compensation Committee. For each fiscal year thereafter your Annual Bonus target will be subject to the review and approval of the Compensation Committee.
(C) Long-Term Performance Share Award- In addition, you shall also be eligible to receive a targeted Long-Term Performance Share Award of $2,400,000 for the performance period commencing on April 1, 2011 under the Company’s Long-Term Performance Plan program as set forth in Section 4.5 of the Incentive Plan, provided that such targeted amount and the other terms and conditions of such Long-Term Performance Award shall be subject to determination and approval of the Compensation Committee in accordance with the terms of the Incentive Plan. For the fiscal year commencing on April 1, 2011 your Long Term Performance Share Award shall be pro-rated based on the number days you serve the Company during the fiscal year commencing on April 1, 2011. For each fiscal year thereafter your Long-Term Performance Share Award target will be subject to the review and approval of the Compensation Committee.
(D) All payments to you shall be subject to all applicable tax withholdings.
3. Cash Equalization Payment. You will receive a cash equalization payment equal to $250,000 (the “Cash Equalization Payment”) in lieu of forfeited benefits associated with your previous employment. The Cash Equalization Payment will be paid to you in two equal installments. The first installment will be paid to you on the first available payroll following the first month anniversary of your employment and the second installment will be paid to you on the first available payroll after the 6 month anniversary of your employment with the Company; provided, in both cases, that you remain employed by the Company on the applicable payment date.
4. Initial Equity Awards.
(A) Upon the commencement of your employment with CA, the Compensation Committee has approved a grant to you of 70,000 restricted shares of CA, Inc. common stock (the “Restricted Stock Award”) which shall vest in approximately three equal installments on the first, second and third anniversaries of the date of grant. The Restricted Stock Award is subject to the terms of the Incentive Plan.

 


 

(B) Upon the commencement of your employment with CA, the Compensation Committee has also approved a grant to you of 75,000 options to purchase shares of CA, Inc. common stock with an exercise price equal to fair market value of CA, Inc. common stock on the date of grant (the “Option Award”). The Option Award is an award of non-qualified options which shall vest in approximately three equal installments on the first, second and third anniversaries of the date of grant. The Option Award is subject to the terms of the Incentive Plan.
5. Term of Employment, Termination Payments.
(A) Term of Employment — You shall be employed for an indefinite term. Upon termination of the employment for any reason whatsoever, the Company shall have no further obligations to you other than those set forth in Section 5 of this Letter. The effective date of your employment termination shall be referred to herein as the “Termination Date.”
(B) Termination Payments — In the event that (i) you terminate your employment for Good Reason (as defined in Appendix A) or (ii) the Company terminates your employment without Cause (as defined in Appendix A), other than as a result of your death, subject to your execution, delivery and non-revocation, within fifty-five (55) days following the Termination Date, of a valid and effective release, waiver and non-competition agreement in a form acceptable to the Company, the Company shall pay you a lump sum cash amount equal to $1,400,000 (less required withholdings), such lump sum payment to be made no later than the sixtieth (60th) day (or the next following business day if the sixtieth day is not a business day) following the Termination Date. This lump sum payment is inclusive of any entitlement to termination and severance pay under the Employment Standards Act, 2000 (the “ESA”); however, should you decline to deliver a release, waiver and non-competition agreement, as required herein, you will, in any event, receive termination and severance pay if and as required under the ESA. Additionally, you will be eligible to receive a portion of any outstanding Annual Bonus, provided that such payment (i) shall be made only after the end of the applicable performance cycle, (ii) shall be based upon the actual performance of the Company as determined in the sole discretion of the Company (provided, however, that negative discretion shall only be applied if, and to the extent, it is applied generally to the executive management team) and (iii) shall be pro-rated for the portion of the performance period that you have completed through the Termination Date (provided, however, that nothing herein shall be construed to accelerate the vesting of any Performance Share Award). Your unvested Initial Equity Awards granted pursuant to Sections 4(A) and 4(B) of this Letter shall accelerate and vest immediately upon the Termination Date. Notwithstanding the foregoing, in accordance with the terms of the Incentive Plan, you will have ninety (90) days from the Termination Date to exercise any vested but unexercised Stock Option Awards as of such date.

 


 

(C) Except as expressly provided herein, upon the termination your employment for any reason, your rights with respect to any shares of restricted stock or options to purchase shares of CA, Inc. common stock held by you as of the Termination Date, shall be subject to the applicable rules of the plan or agreement under which such restricted stock or options were granted as they exist from time to time. In addition, upon the termination of your employment for any reason, the Company shall pay to you your Base Salary through the Termination Date. Any vested benefits and other amounts that you are otherwise entitled to receive under any employee benefit plan, policy, practice or program of the Company or any of its affiliates shall be payable in accordance with such employee benefit plan, policy, practice or program as the case may be, provided that you shall not be entitled to receive any other payments or benefits in the nature of severance or termination pay, except as expressly required under the ESA.
(D) In the event that you resign other than for Good Reason, are terminated for Cause or die) during your employment, no benefits shall be payable to you under Section 5(B) of this Letter, but the terms and conditions of Section 5(C) shall remain in effect.
(E) To the extent any severance reference in the Computer Associates Canada Company Employment Agreement conflicts with the terms of this Offer Letter, this Offer Letter shall prevail.
6. Other Benefits.
(A) Change in Control Policy- Upon the commencement of your employment, the Compensation Committee has approved your participation in the Company’s Change in Control Severance Policy (the “CIC Severance Policy”) provided, however, you will not be eligible for benefits provided pursuant to Section 4(g) of the CIC Severance Policy relating to any Excise Tax Gross-Up. We anticipate that the Compensation Committee will approve your participation in the CIC Severance Policy at a 2.99 multiple. Any payments and benefits provided in the CIC Severance Policy that you are eligible to receive will reduce (but not below zero) the corresponding severance payment or benefit provided under this Letter. It is the intent of this provision to pay or to provide you with the greater of the two payments or benefits but not to duplicate them.
(B) Retirement, Welfare and Benefit Plans and Perquisites- You shall be eligible to participate in all retirement, welfare and benefit plans and perquisites generally made available to other senior employees of the Company. The Company will provide you with Executive Health Benefits customary for someone at your level and generally consistent with the benefits you enjoy with your current employer.
7. Other Employment Terms. While we do not believe that your role at CA conflicts with any of your continuing obligations to a prior employer (as we understand such obligations), in the event that a

 


 

court of law determines that your employment with CA breaches a continuing obligation that you owe to a prior employer, and/or in the event that a prior employer takes that position, CA will:
(A) Either pay directly or reimburse you for the cost of reasonable legal fees and disbursements that you incur in responding to claims or defending yourself in any legal proceeding brought by a prior employer seeking to enforce the provisions of an agreement or alleging a breach of fiduciary duty arising out of the acceptance of employment with CA that would limit your ability to work for CA;
(B) Unless doing so is determined to be unreasonable as a means of addressing your prior employer’s claims, place you on paid leave with full compensation and benefits as provided for herein, including paragraphs 2, 3 and 4 hereof, for the duration of any court-imposed restrictions upon your ability to work for CA, or for such period as is determined by CA to be appropriate to address your prior employer’s claims;
(C) Indemnify you against any and all liability to a prior employer arising from the enforcement of an agreement or fiduciary obligation referenced and described in subparagraph (a) hereof.
(D) Indemnify you for losses you incur as a result of a prior employer seeking to “claw back” monies or benefits you have previously received from such employer, further to the enforcement of an agreement or fiduciary obligation referenced and described in subparagraph (a) hereof.
For the period of time prior to your relocation to New York, which we anticipate to be within the next 12 months, we will provide you a monthly cash allowance in the amount of USD $7,200 [less all applicable taxes] to be used to obtain housing in the New York area. All travel associated with your commute, including usage of the corporate jet will be in accordance with company policy.
Upon your relocation to the United States, your benefits will be modified to become consistent with the benefits offered to other Company executives at your level.
At CA, we’re in the business of IT management software, and our employees have always been the foundation upon which we have built our success. CA is one of the world’s largest IT management software providers. Our software and expertise unify and simplify complex IT environments in a secure way across the enterprise for greater business results, through the talent and dedication of our many loyal employees.
We look forward to having you join us and we expect that our relationship will be mutually rewarding.
We realize that this is an important decision and want to be certain you have all of the information that you require. Should you have questions or require information beyond what we have already discussed or what is contained in this letter, please call Guy Di Lella at 1-650-534-9888.

 


 

Please also plan to contact your Human Resources Representative, Catherine Hughes at 1- 905-695-7213 three days prior to your start date, to arrange and/or confirm your scheduled orientation time.
Sincerely,
(SIGNATURE)
Guy A. Di Lella
Chief Human Resources Officer
/s/ Peter Griffiths
Peter Griffiths
Agreed and Accepted on this 28th day of April, 2011:

 


 

Appendix A
For purposes of this Agreement, “Cause” means any of the following:
(1) The Employee’s continued failure, either due to willful action or as a result of gross neglect, to substantially perform his duties and responsibilities to the Company and its affiliates (the “Group”) under this Agreement (other than any such failure resulting from the Employee’s incapacity due to physical or mental illness) that, if capable of being cured, has not been cured within thirty (30) days after written notice is delivered to the Employee, which notice specifies in reasonable detail the manner in which the Company believes the Employee has not substantially performed his duties and responsibilities.
(2) The Employee’s engagement in conduct which is demonstrably and materially injurious to the Group, or that materially harms the reputation or financial position of the Group, unless the conduct in question was undertaken in good faith on an informed basis with due care and with a rational business purpose and based upon the honest belief that such conduct was in the best interest of the Group.
(3) The Employee’s indictment or conviction of, or plea of guilty or nolo contendere to, a felony [or Canadian equivalent] or any other crime involving dishonesty, fraud or moral turpitude.
(4) The Employee’s being found liable in any SEC or other civil or criminal securities law action or entering any cease and desist order with respect to such action (regardless of whether or not he admits or denies liability).
(5) The Employee’s breach of his fiduciary duties to the Group which may reasonably be expected to have a material adverse effect on the Group. However, to the extent the breach is curable, the Company must give the Employee notice and a reasonable opportunity to cure.
(6) The Employee’s (i) obstructing or impeding, (ii) endeavoring to influence, obstruct or impede or (iii) failing to materially cooperate with, any investigation authorized by the Board or any governmental or self-regulatory entity (an “Investigation”). However, the Employee’s failure to waive attorney-client privilege relating to communications with his own attorney in connection with an Investigation shall not constitute “Cause”.
(7) The Employee’s purposely withholding, removing, concealing, destroying, altering or by any other means falsifying any material which is requested in connection with an Investigation.
(8) The Employee’s disqualification or bar by any governmental or self-regulatory authority from serving in the capacity contemplated by this Agreement or his loss of any governmental or self-regulatory license that is reasonably necessary for him to perform his responsibilities to the Group under this Agreement, if (a) the disqualification, bar or loss continues for more than 30 days and (b)

 


 

during that period the Group uses its good faith efforts to cause the disqualification or bar to be lifted or the license replaced. While any disqualification, bar or loss continues during the Employee’s employment, he will serve in the capacity contemplated by this Agreement to whatever extent legally permissible and, if his employment is not permissible, he will be placed on leave (which will be paid to the extent legally permissible).
(9) The Employee’s unauthorized use or disclosure of confidential or proprietary information, or related materials, or the violation of any of the terms of the Employment and Confidentiality Agreement executed by the Employee or any Company standard confidentiality policies and procedures, which may reasonably be expected to have a material adverse effect on the Group and that, if capable of being cured, has not been cured within thirty (30) days after written notice is delivered to the Employee by the Company, which notice specifies in reasonable detail the alleged unauthorized use or disclosure or violation.
(10) The Employee’s violation of the Group’s (i) Workplace Violence Policy or (ii) policies on discrimination, unlawful harassment or substance abuse.
For this definition, no act or omission by the Employee will be “willful” unless it is made by the Employee in bad faith or without a reasonable belief that his act or omission was in the best interests of the Group.
For purposes of this Agreement, “Good Reason” shall mean any of the following :
(1) Any material and adverse reduction in the Employee’s authorities or responsibilities other than any isolated, insubstantial and inadvertent failure by the Company that is not in bad faith and is cured promptly on the Employee’s giving the Company notice (and for purposes of clarification, a change in the number of direct reports will not constitute a material and adverse reduction in the Employee’s authorities or responsibilities);
(2) Any material reduction by the Company in the Employee’s Base Salary or target level of Annual Bonus as set forth in Sections 2 (A) and (B), respectively, other than any such reduction that is (i) part of a broad-based salary reduction program for executive officers of the Company that does not exceed 10% or (ii) agreed to by the Employee in writing;
(3) Any action that would be deemed “constructive dismissal” under Canadian Law; or,
(4) The Company’s material breach of the terms of this Letter;
provided that (A) no alleged action, reduction or breach set forth in (1) through (4) above shall be deemed to constitute “Good Reason” unless such action, reduction or breach remains uncured, as the case may be, after the expiration of thirty (30) days following delivery to the Company from the Employee of a written notice, setting forth such course of conduct deemed by the Employee to constitute “Good Reason”; (B) such written notice must be delivered to the Company within ninety (90) days after the Employee obtains knowledge of such breach constituting “Good Reason”; and (C) the Employee must terminate employment within two years after the Employee obtains knowledge of such

 


 

breach constituting “Good Reason”. The Company’s placing the Employee on paid leave for up to ninety (90) consecutive days while it is determining whether there is a basis to terminate the Employee’s employment for Cause will not constitute “Good Reason”.
CA 2011 Benefits At A Glance — Canada Only
The information contained in this document provides an overview of CA’s Benefit Programs. For full benefit details reference the applicable Benefits Booklet or contact Human Resources.
     
Health Care
  Healthcare and prescription drug coverage is available effective on the first day of employment for employees and their eligible dependents. Employee only (Single) and family coverage levels are available. The Healthcare benefit supplements the Provincial Health Insurance Plan for most medical related costs.
 
   
Dental Plan
  Dental coverage is available effective on the first day of employment for employees and their eligible dependents.
 
   
Basic Life Insurance & Accidental Death and Dismemberment (AD&D)
  CA provides Basic Life and Accidental Death and Dismemberment in the amounts of $50,000 each. Coverage is effective on the employee’s date of hire.
 
   
Optional Life Insurance
   
• Employee
  Optional life insurance is available from 1x to 5x the employee’s annual base salary to a maximum of $960,000. Evidence of insurability may be required in other circumstances.
 
   
• Spouse
  Spouse (or common law spouse — subject to eligibility requirements) Optional life insurance is available in increments of $10,000 up to $250,000. Evidence of insurability may be required in other circumstances.
 
   
Child(ren)
  Child(ren) Optional life insurance coverage is available in amounts of either $10,000 or $15,000 per child. Evidence of insurability may be required in other circumstances.

 


 

     
Short Term Disability (STD)
  The STD plan has an elimination period of 5 days. Once approved CA will pay the first 6 weeks at 100% of base salary followed by 10 weeks at 60% of base salary for a total of 16 weeks.
 
   
Long Term Disability (LTD)
Mandatory benefit
  The LTD plan offers a benefit equal to 60% of the 1st $3,000 of an employee’s monthly base salary and 45% of the next $14,889 of an employee’s monthly base salary. There is an overall benefit limit under the LTD plan of $8,500 per month of which the non-evidence limit is $7,500 per month
 
   
Auto and Home Insurance
  Group discounted auto and insurance policies are available to employees and their dependents through Aon Group Advantage.
 
   
Pet Insurance
  Pet insurance coverage is available to employees and their dependents through Petsecure Pet Health Insurance.
 
   
Tuition Assistance Program
  CA covers tuition up to 2 courses per “traditional” semester (Fall, Spring, Summer) if the employee achieves a B minus or better. Courses must be approved by two levels of management and HR. The maximum tuition reimbursement is $5250 per person per calendar year.
 
   
Adoption Assistance Program
  After one year of employment, eligible adoption related expenses are reimbursed up to $5,000. A maximum of $10,000 will be payable to any one family within a 24-month period.
 
   
Employee Assistance and Work Life Balance Program
  Available to employees seeking confidential counseling, work life programs assisting you in finding the providers, information and resources on a wide variety of personal and professional issues. Please visit www.lifebalance.net for more information about this Program.
 
   
RRSP / DPSP (“Cash Plan”)
  Regular, full-time employees of CA Canada Company are eligible to participate and may enroll on the first day of the month following their date of hire. CA will begin matching employee contributions to the plan on the first of the month following the completion of 1 full year of service at the rate of 50% of the first 5% of the employee’s base salary that he/she contributes to the Plan. Company Contributions become fully vested after two (2) full years of service.
 
   
Payroll
  Payroll dates are the 15 th and last business day of each month. Direct Deposit is encouraged.
 
   
Vacation Days
  You will be eligible to take five weeks of vacation per year. All vacations should be taken at times that are consistent with the business interests of the Corporation, and in accordance with CA Technologies vacation policies.

 


 

     
Sick Days
  Sick days to be used for medical related absences and earned at a rate of 8 paid sick days per year. Unused sick days may be “banked” up to a maximum of 30 days. A pro-rated allotment will occur based on date of hire.
 
   
Personal Time Off
(PTO)
  Personal days to be used for paid time off for any reason with manager’s approval are earned at a rate of 3 days per calendar year. A pro-rated allotment will occur in the initial year of employment based on date of hire.
 
   
Holidays
  Standard Canadian Statutory Holidays varies by province. See HR for more details.
 
   
Charitable Gift Program
  Regular full time employees of CA, and their spouses, are eligible to participate in the Matching Gifts program. All institutions, organizations, associations, and funds must be non-profit, qualified either as 501 (C) (3) tax exempt by the Internal Revenue Service of the U.S. Treasury Department or in accordance with sections 118 and 149.1 of the Canadian Income Tax Act of Revenue Canada and or meet local statutory requirements. Contributions to non-CA sponsored private foundations are subject to review and approval by Community Relations Department in Islandia.
 
   
Employee Referral Program
  Monies paid out for individuals hired by CA. Referral must be entered into system and credited to you as a person referring the candidate. Details available through employee self service portal.
/s/ Peter Griffiths
Peter Griffiths

 

Exhibit 10.2
CA, Inc. Change in Control Severance Policy
(Amended and Restated Effective September 10, 2008)
(Schedules as of August 17, 2011)
Schedule A
(2.99 Multiple)
Chief Executive Officer (William E. McCracken)
Executive Vice President and Chief Financial Officer (Richard Beckert)*
Executive Vice President and Group Executive, Customer Solutions Group
(David C. Dobson)
Executive Vice President and Group Executive, Worldwide Sales and Operations
(George J. Fischer)
Executive Vice President, Technology and Development
(Peter Griffiths)*
[Employees may be added or eliminated from time to time]
Schedule B
(2.00 Multiple)
Executive Vice President, Risk, and Chief Administrative Officer (Phillip J.
Harrington)
Executive Vice President and General Counsel (Amy Fliegelman Olli)
Executive Vice President, Global Business Operations and Business
Transformation (Adam Elster)*
[Employees may be added or eliminated from time to time]
Schedule C
(1.00 Multiple)
Executive Vice President, Corporate Strategy (Jacob Lamm)
[Employees may be added or eliminated from time to time]
 
*   Denotes participants not eligible for the excise tax-gross-up pursuant to section 4(g) of the Policy.

Exhibit 10.4
(CA LOGO)
CA, Inc.
Restricted Stock Unit Agreement
     
[Participant Name]
   
 
Name of Participant
   
     
Total Number of Restricted Stock Units Granted
  [Number of Shares Granted]
Grant Date
  [Grant Date]
This Agreement confirms the grant under the CA, Inc. 2011 Incentive Plan (the “Plan”) to the above-named participant of the number of Restricted Stock Units set forth above. This Agreement does not constitute ownership of any shares of Common Stock of CA, Inc. (the “Company”) or confer any rights associated with the ownership of shares, except as expressly set forth herein. This grant is subject in all respects to the applicable terms of the Plan. This Agreement incorporates by reference the terms of the Plan (including without limitation, Section 7.5 of the Plan, such that the participant may be subject to the forfeiture of the unvested portion of this Restricted Stock Unit Award and must return any vested shares already delivered pursuant to this Agreement in certain circumstances described in that Section), and is subject to the provisions thereof. A copy of the Plan or related Prospectus may be obtained at no cost by contacting the HR Service Center at 1-866-514-4772 or opening an issue via the web at http://caportal.ca.com (via Employee Self-Service — ESS). If you are located outside of North America, please contact your local Human Resources Representative.
This Restricted Stock Unit Award will vest with respect to 34% of the underlying shares on the first anniversary of the grant date and with respect to an additional 33% of the underlying shares on each of the second and third anniversaries of the grant date of the award. No shares of Common Stock shall be issued to the participant prior to the date on which the Restricted Stock Units vest, and shall be forfeited by the participant upon the participant’s Termination of Employment, as defined in the Plan, prior to vesting for any reason other than death or Disability, as defined in the Plan.
Where required pursuant to the terms of the Plan, the Company will satisfy any federal or local income tax or social tax withholding obligations that arise in connection with the vesting of the Restricted Stock Units by withholding shares of Common Stock that would otherwise be available for delivery upon the vesting of this award having a Fair Market Value, as defined in the Plan, on the date the shares of Restricted Stock Units first become taxable equal to the minimum statutory withholding obligation or such other withholding obligation as required by applicable law with respect to such taxable shares. In other cases, as a condition to the delivery of Shares or the lapse of restrictions related to this Restricted Stock Unit, or in connection with any other event that gives rise to a tax withholding obligation, the Company (i) may deduct or withhold from any payment or distribution to the Participant (whether or not pursuant to the Plan), (ii) will be entitled to require that the Participant remit cash to the Company (through payroll


 

deduction or otherwise) or (iii) may enter into any other suitable arrangements to withhold, in each case, in an amount sufficient to satisfy such withholding obligation.
         
   
By:    (-S- SIGNATURES)    
  William McCracken    
  CEO    
 

 

Exhibit 10.5
(CA LOGO)
CA, Inc.
Restricted Stock Award Agreement
     
[Participant Name]
   
 
Name of Participant
   
 
   
Total Number of Restricted Stock Awards Granted
  [Number of Shares Granted]
Grant Date
  [Grant Date]
This Agreement confirms the grant under the CA, Inc. 2011 Incentive Plan (the “Plan”) to the above-named participant of the number of Restricted Stock set forth above. This Agreement merely evidences such grant, and does not constitute property of any nature or type or confer any additional rights. This grant is subject in all respects to the applicable terms of the Plan. This Agreement incorporates by reference the terms of the Plan (including without limitation, Section 7.5 of the Plan, such that the participant may be subject to the forfeiture of the unvested portion of this Restricted Stock Award and must return any vested shares already delivered pursuant to this Agreement in certain circumstances described in that Section), and is subject to the provisions thereof. A copy of the Plan or related Prospectus may be obtained at no cost by contacting the HR Service Center at 1-866-514-4772 or opening an issue via the web at http://caportal.ca.com (via Employee Self-Service — ESS). If you are located outside of North America, please contact your local Human Resources Representative.
This Restricted Stock Award will vest with respect to 34% of the underlying shares on the first anniversary of the grant date and with respect to an additional 33% of the underlying shares on each of the second and third anniversaries of the grant date of the award. Shares of Restricted Stock that are included in this award may not be transferred by the participant prior to vesting and shall be forfeited by the participant upon the participant’s Termination of Employment, as defined in the Plan, prior to vesting for any reason other than death or Disability, as defined in the Plan.
Where required pursuant to the terms of the Plan, the Company will satisfy any federal or local income tax or social tax withholding obligations that arise in connection with the vesting of the Restricted Stock by withholding shares of Common Stock that would otherwise be available for delivery upon the vesting of this award having a Fair Market Value, as defined in the Plan, on the date the shares of Restricted Stock first become taxable equal to the minimum statutory withholding obligation or such other withholding obligation as required by applicable law with respect to such taxable shares. In other cases, as a condition to the delivery of Shares or the lapse of restrictions related to this Restricted Stock Award, or in connection with any other event that gives rise to a tax withholding obligation, the Company (i) may deduct or withhold from any payment or distribution to the

 


 

Participant (whether or not pursuant to the Plan), (ii) will be entitled to require that the Participant remit cash to the Company (through payroll deduction or otherwise) or (iii) may enter into any other suitable arrangements to withhold, in each case, in an amount sufficient to satisfy such withholding obligation.
         
   
By:    (-S- SIGNATURES)    
  William McCracken    
  CEO    
 

 

Exhibit 10.6
(CA LOGO)
CA, Inc.
Restricted Stock Award Agreement
     
[Participant Name]
   
 
Name of Participant
   
 
   
Total Number of Restricted Stock Awards Granted
  [Number of Shares Granted]
Grant Date
  [Grant Date]
This Agreement confirms the grant under the CA, Inc. 2011 Incentive Plan (the “Plan”) to the above-named participant of the number of Restricted Stock set forth above. This Agreement merely evidences such grant, and does not constitute property of any nature or type or confer any additional rights. This grant is subject in all respects to the applicable terms of the Plan. This Agreement incorporates by reference the terms of the Plan (including without limitation, Section 7.5 of the Plan, such that the participant may be subject to the forfeiture of the unvested portion of this Restricted Stock Award and must return any vested shares already delivered pursuant to this Agreement in certain circumstances described in that Section), and is subject to the provisions thereof. A copy of the Plan or related Prospectus may be obtained at no cost by contacting the HR Service Center at 1-866-514-4772 or opening an issue via the web at http://caportal.ca.com (via Employee Self-Service — ESS). If you are located outside of North America, please contact your local Human Resources Representative.
This Restricted Stock Award will vest with respect to 70% of the underlying shares on the grant date and with respect to an additional 20% of the underlying shares on the first anniversary and 10% on the second anniversary of the grant date of the award. No shares of Common Stock shall be issued to the participant prior to the date on which the Restricted Stock vest, and shall be forfeited by the participant upon the participant’s Termination of Employment, as defined in the Plan, prior to vesting for any reason other than death or Disability, as defined in the Plan.
Where required pursuant to the terms of the Plan, the Company will satisfy any federal or local income tax or social tax withholding obligations that arise in connection with the vesting of the Restricted Stock Units by withholding shares of Common Stock that would otherwise be available for delivery upon the vesting of this award having a Fair Market Value, as defined in the Plan, on the date the shares of Restricted Stock Units first become taxable equal to the minimum statutory withholding obligation or such other withholding obligation as required by applicable law with respect to such taxable shares. In other cases, as a condition to the delivery of Shares or the lapse of restrictions related to this Restricted Stock Award, or in connection with any other event that gives rise to a tax withholding obligation, the Company (i) may deduct or withhold from any payment or distribution to the Participant (whether or not pursuant to the Plan), (ii) will be entitled to require that the Participant remit cash to the Company

 


 

(through payroll deduction or otherwise) or (iii) may enter into any other suitable arrangements to withhold, in each case, in an amount sufficient to satisfy such withholding obligation.
         
   
By:    (-S- SIGNATURES )    
  William McCracken    
  CEO    

 

Exhibit 10.7
(CA LOGO)
CA, Inc.
Non-Qualified Stock Option Certificate
     
[Participant Name]
   
 
Name of Participant
   
 
   
Total Number of Stock Options Granted
  [Number of Shares Granted]
Grant Date
  [Grant Date]
    Non-Qualified Stock Option granted by CA, Inc., a Delaware corporation, (the “Company”) to the above-named option holder (the “Optionee”), an employee or consultant of the Company or one of its subsidiaries, pursuant to the CA, Inc. 2011 Incentive Plan (the “Plan”). This Agreement incorporates by reference the terms of the Plan (including without limitation, Section 7.5 of the Plan, such that the participant may be subject to the forfeiture of the unvested portion of this Stock Option Award and must return any vested shares already delivered pursuant to this Agreement in certain circumstances described in that Section), and is subject to the provisions thereof. The terms of the Plan are incorporated herein by reference and which, in the event of any conflict, shall control over the terms contained herein.
1.   Grant and Vesting Option
    The Company hereby grants to the Optionee an option to purchase on the terms herein provided a total of the number of shares of Common Stock, $.10 par value, of the Company set forth above, at an exercise price per share equal to the Fair Market Value on the date the Options are granted.
    This option will vest with respect to 34% of the underlying shares on the first anniversary of the grant date and with respect to an additional 33% of the underlying shares on each of the second and third anniversaries of the option grant date. Except as provided in Section 8, below, this option shall expire and shall not be exercisable after seven (7) years from the Option Date (the “Expiration Date”).
2.   Stock to be Delivered
    Stock to be delivered upon the exercise of this option may constitute an original issue of authorized stock or may consist of treasury stock.
3.   Exercise of Option
    Each election to exercise this option shall be made, by delivering to the Company or its agent a properly executed exercise notice, together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds with respect to the portion of shares to be acquired upon exercise. Exercise of this option will not be permitted if the Company determines, in its sole and absolute discretion, that issuance of shares at that time could violate any law or regulation.
    In the event an option is exercised by the executor or administrator of a deceased Optionee, or by the person or persons to whom the option has been transferred by the Optionee’s will or the applicable laws of descent and distribution, the Company shall be under no obligation to deliver stock there under unless and until the Company

 


 

    is satisfied that the person or persons exercising the option is or are the duly appointed executor(s) or administrator(s) of the deceased Optionee or the person to whom the option has been transferred by the Optionee’s will or by the applicable laws of descent and distribution.
4.   Payment for and Delivery of Stock
    Payment in full by cash, certified check, bank draft, wire transfer or postal or express money order shall be made for all shares for which this option is exercised at the time of such exercise, and no shares shall be delivered until such payment is made.
    Alternatively, payment may be made by (i) delivering to the Company a properly executed exercise notice, together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds with respect to the portion of the shares to be acquired upon exercise having a Fair Market Value on the date of exercise equal to the sum of the applicable portion of the exercise price being so paid, (ii) tendering to the Company (by physical delivery or by attestation) certificates representing shares of outstanding Common Stock, par value $.10, of the Company that have been held by the Optionee for at least six months prior to exercise, having a Fair Market Value on the day prior to the date of exercise equal to the applicable portion of the exercise price being so paid, together with stock powers duly executed and with signature guaranteed; or (iii) any combination of the foregoing. Notwithstanding the foregoing, a form of payment will not be available if the Company determines, in its sole and absolute discretion, that such form of payment could violate any law or regulation.
    The Company shall not be obligated to deliver any stock unless and until (i) satisfactory arrangements have been made with the Company for the payment of any applicable tax withholding obligations, (ii) all applicable federal and state laws and regulations have been complied with, (iii) in the event the outstanding Common Stock is at the time listed upon any stock exchange, the shares to be delivered have been listed, or authorized to be listed upon official notice of issuance upon the exchanges where it is listed, and (iv) all legal matters in connection with the issuance and delivery of the shares have been approved by counsel of the Company. The Optionee shall have no rights of a stockholder until the stock is actually delivered to him.
5.   Recovery and Reimbursement of Option Gain
    The Company shall have the right to recover, or receive reimbursement for, any compensation or profit realized by the exercise of this option or by the disposition of any option shares to the extent that the Company has such a right of recovery or reimbursement under applicable securities laws.
6.   Transferability of Options
    Except as provided below, this option may not be transferred by the Optionee otherwise than by will or the laws of descent and distribution and during the Optionee’s lifetime this option may be exercised only by the Optionee. Notwithstanding the foregoing, this option may be transferred by the Optionee to members of his or her immediate family or to one or more trusts for the benefit of such family members or to one or more partnerships in which such family members are the only partners provided that (i) the optionee does not receive any consideration for such transfer, (ii) written notice of any proposed transfer and the details thereof shall have been furnished to the Compensation and Human Resources Committee at least three (3) days in advance of such transfer, and (iii) the Compensation and Human Resources Committee consents to the transfer in writing. Options transferred pursuant to this provision will continue to be subject to the same terms and conditions that were applicable to such options immediately prior to transfer and the option may be exercised by the transferee only to the same extent that the option could have been exercised by the Optionee had no transfer been made. For this purpose, the Optionee’s “family members” shall include the Optionee’s spouse, children, grandchildren, parents, grandparents (whether natural, step, adopted or in-laws) siblings, nieces, nephews and grandnieces and grand nephews.

 


 

7.   Death
    If the Optionee dies while employed by the Company, any unexercised portion of this option held by the Optionee at his date of death will become exercisable in full and will remain exercisable by the estate of the deceased Optionee or the person given authority to exercise his options by his will or by operation of law for a period of one (1) year, but not later than the expiration date of the Option, provided, however, that if the Optionee’s death occurs within six (6) months prior to the expiration date of the option the option shall remain exercisable up until six (6) months from the Optionee’s death.
8.   Changes In Stock
    In the event of any stock split, reverse stock split, dividend or other distribution (whether in the form of cash, shares, other securities or other property), extraordinary cash dividend, recapitalization, merger, consolidation, split-up, spin-off, reorganization, combination, repurchase or exchange of shares or other securities, the issuance of warrants or other rights to purchase shares or other securities, or other similar corporate transaction or event, the number and kind of shares of stock of the Company covered by this option, the option price and other relevant provisions shall be appropriately adjusted by the Compensation and Human Resource Committee, in its discretion, to the extent necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be provided by this option.
9.   Continuance of Employment
    This option shall not be deemed to obligate the Company or any subsidiary to retain the Optionee in its employ for any period.
         
CA, Inc.
 
 
By:    (SIGNATURE)    
  William McCracken    
  CEO    
 

 

Exhibit 12.1
CA, Inc.
STATEMENT OF RATIOS OF EARNINGS TO FIXED CHARGES
(in millions, except ratios)
                                                 
    Fiscal Year     Six Months Ended  
    2007     2008     2009     2010     2011     September 30, 2011  
     
Earnings available for fixed charges:
                                               
 
                                               
Earnings from continuing operations before income taxes, minority interest and discontinued operations
  $ 95     $ 762     $ 1,049     $ 1,152     $ 1,209     $ 660  
 
                                               
Add: Fixed charges
    229       248       191       162       142       49  
 
                                               
     
Total earnings available for fixed charges
  $ 324     $ 1,010     $ 1,240     $ 1,314     $ 1,351     $ 709  
     
 
                                               
Fixed charges:
                                               
 
                                               
Interest expense(1)
  $ 153     $ 169     $ 130     $ 102     $ 68     $ 32  
Interest portion of rental expense
    76       79       61       60       74       17  
 
                                               
     
Total fixed charges
  $ 229     $ 248     $ 191     $ 162     $ 142     $ 49  
     
 
                                               
RATIOS OF EARNINGS TO FIXED CHARGES
    1.41       4.07       6.49       8.11       9.51       14.47  
 
                                               
Deficiency of earnings to fixed charges
    n/a       n/a       n/a       n/a       n/a       n/a  
 
(1)   Includes amortization of discount related to indebtedness

Exhibit 15
October 27, 2011
CA, Inc.
One CA Plaza
Islandia, New York 11749
Re: Registration Statement No. 333-174849 on Form S-3 and Registration Statement Nos. 333-176166, 333-146173, 333-120849, 333-108665, 333-100896, 333-88916, 333-32942, 333-31284, 333-83147, 333-80883, 333-79727, 333-62055, 333-19071, 333-04801, 333-127602, 333-127601, 333-126273, 33-64377, 33-53915, 33-53572, 33-34607, 33-18322, 33-20797, 2-92355, 2-87495 and 2-79751 on Form S-8.
With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated October 27, 2011 related to our review of interim financial information.
Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.
/s/ KPMG LLP
New York, New York

 

Exhibit 31.1
CEO CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William E. McCracken, certify that:
1.   I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of CA, Inc. for its most recent fiscal quarter;
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
    (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
    (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
    (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
    (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
    (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
     
Date: October 28, 2011  /s/ William E. McCracken    
  William E. McCracken   
  Chief Executive Officer
CA, Inc. 
 

 

         
Exhibit 31.2
CFO CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard J. Beckert, certify that:
1.   I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of CA, Inc. for its most recent fiscal quarter;
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
    (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
    (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
    (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
    (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
    (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
     
Date: October 28, 2011   /s/ Richard J. Beckert    
  Richard J. Beckert   
  Executive Vice President and Chief Financial Officer
CA, Inc. 
 

 

         
Exhibit 32
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with Amendment No. 1 to the Quarterly Report on Form 10-Q of CA, Inc., a Delaware corporation (the “Company”), for the fiscal quarter ended September 30, 2011 as filed with the Securities and Exchange Commission (the “Report”), each of William E. McCracken, Chief Executive Officer of the Company, and Richard J. Beckert, Executive Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to §906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), that to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
  /s/ William E. McCracken    
  William E. McCracken   
  Chief Executive Officer   
  October 28, 2011   
     
  /s/ Richard J. Beckert    
  Richard J. Beckert   
  Executive Vice President and Chief Financial Officer   
  October 28, 2011   
 
The foregoing certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that Section. The foregoing certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.