UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9247

CA, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-2857434
(State or other jurisdiction of incorporation or organization)		(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.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     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		Shares Outstanding
Common Stock par value $0.10 per share		as of January 22, 2010 520,026,576

 

 

CA, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. Financial Information
Report of Independent Registered Public Accounting Firm			1
Item 1. Unaudited Condensed Consolidated Financial Statements			2
Condensed Consolidated Balance Sheets - December 31, 2009 and March 31, 2009			2
Condensed Consolidated Statements of Operations - Three and Nine Months Ended December 31, 2009 and 2008			3
Condensed Consolidated Statements of Cash Flows - Nine Months Ended December 31, 2009 and 2008			4
Notes to the Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Overview			26
Quarterly Update			27
Performance Indicators			28
Results of Operations			31
Liquidity and Capital Resources			36
Critical Accounting Policies and Business Practices			43
Item 3. Quantitative and Qualitative Disclosures About Market Risk			43
Item 4. Controls and Procedures			44
PART II. Other Information
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 3. Defaults Upon Senior Securities			46
Item 4. Submission of Matters to a Vote of Security Holders			46
Item 5. Other Information			46
Item 6. Exhibits			47
Signatures			49
EX-10.1
EX-10.2
EX-10.3
EX-12.1
EX-15
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

The Board of Directors and Stockholders
CA, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of CA, Inc. and subsidiaries as of December 31, 2009, the related condensed consolidated statements of operations for the three-month and nine-month periods ended December 31, 2009 and 2008, and the related condensed consolidated statements of cash flows for the nine-month periods ended December 31, 2009 and 2008. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by 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, 2009, 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 15, 2009, except for Note 1(e), as to which the date is November 9, 2009, 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, 2009, 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
January 29, 2010

Item 1.

CA, INC. AND SUBSIDIARIES

(unaudited)

(in millions, except share amounts)

		December 31,				March 31,
		2009				2009 (1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	2,624			$	2,712
Trade and installment accounts receivable, net			932				839
Deferred income taxes — current			518				513
Other current assets			144				105
TOTAL CURRENT ASSETS			4,218				4,169
Installment accounts receivable, due after one year, net			46				128
Property and equipment, net of accumulated depreciation of $1,112 and $1,015, respectively			454				442
Purchased software products, net			150				155
Goodwill			5,513				5,364
Deferred income taxes — noncurrent			234				268
Other noncurrent assets, net			779				715
TOTAL ASSETS		$	11,394			$	11,241
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt and loans payable		$	15			$	621
Accounts payable			79				120
Accrued salaries, wages and commissions			284				306
Accrued expenses and other current liabilities			342				340
Deferred revenue (billed or collected) — current			2,287				2,431
Taxes payable, other than income taxes payable — current			80				85
Federal, state and foreign income taxes payable — current			89				84
Deferred income taxes — current			50				40
TOTAL CURRENT LIABILITIES			3,226				4,027
Long-term debt, net of current portion			1,530				1,287
Federal, state and foreign income taxes payable — noncurrent			359				284
Deferred income taxes — noncurrent			121				136
Deferred revenue (billed or collected) — noncurrent			1,006				1,000
Other noncurrent liabilities			132				145
TOTAL LIABILITIES			6,374				6,879
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; 514,916,677 and 514,292,558 shares outstanding, respectively			59				59
Additional paid-in capital			3,630				3,686
Retained earnings			3,280				2,673
Accumulated other comprehensive loss			(111	)			(183	)
Treasury stock, at cost, 74,778,404 shares and 75,402,523 shares, respectively			(1,838	)			(1,873	)
TOTAL STOCKHOLDERS’ EQUITY			5,020				4,362
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	11,394			$	11,241

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

(unaudited)

(in millions, except per share amounts)

		For the Three								For the Nine
		Months Ended								Months Ended
		December 31,								December 31,
		2009				2008(1)				2009				2008(1)
REVENUE
Subscription and maintenance revenue		$	1,000			$	919			$	2,919			$	2,859
Professional services			74				87				216				274
Software fees and other			54				36				115				103
TOTAL REVENUE			1,128				1,042				3,250				3,236
EXPENSES
Costs of licensing and maintenance			73				70				212				225
Cost of professional services			67				76				193				239
Amortization of capitalized software costs			34				31				102				91
Selling and marketing			316				307				883				915
General and administrative			129				110				359				342
Product development and enhancements			119				115				353				358
Depreciation and amortization of other intangible assets			40				36				118				109
Other (gains) expenses, net			(3	)			(14	)			11				4
Restructuring and other			2				2				4				6
TOTAL EXPENSES BEFORE INTEREST AND INCOME TAXES			777				733				2,235				2,289
Income before interest and income taxes			351				309				1,015				947
Interest expense, net			23				16				62				40
Income before income taxes			328				293				953				907
Income tax expense			71				85				283				301
NET INCOME		$	257			$	208			$	670			$	606
BASIC INCOME PER COMMON SHARE		$	0.49			$	0.40			$	1.28			$	1.17
Basic weighted average shares used in computation			515				514				516				513
DILUTED INCOME PER COMMON SHARE		$	0.49			$	0.39			$	1.27			$	1.15
Diluted weighted average shares used in computation			535				538				539				537

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

(unaudited) (in millions)

		For the Nine Months
		Ended December 31,
		2009				2008 (1)
OPERATING ACTIVITIES:
Net income		$	670			$	606
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			220				200
Provision for deferred income taxes			52				55
Provision for bad debts			3				10
Share based compensation expense			75				68
Amortization of discount on convertible debt			29				26
Loss (gain) on sale and disposal of assets			3				(2	)
Foreign currency transaction (gains) losses, before taxes, net			(3	)			62
Changes in other operating assets and liabilities, net of effect of acquisitions:
Decrease in trade and installment accounts receivable, net			13				175
Decrease in deferred revenue (billed or collected)			(266	)			(414	)
Increase in taxes payable, net			14				7
Decrease in accounts payable, accrued expenses and other			(39	)			(77	)
Decrease in accrued salaries, wages and commissions			(2	)			(61	)
Decrease in accrued restructuring charges			(40	)			(79	)
Changes in other operating assets and liabilities			(5	)			(12	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			724				564
INVESTING ACTIVITIES:
Acquisitions, primarily goodwill, purchased software, and other intangible assets, net of cash acquired			(203	)			(54	)
Purchases of property and equipment			(57	)			(64	)
Capitalized software development costs			(133	)			(102	)
Other investing activities			(3	)			7
NET CASH USED IN INVESTING ACTIVITIES			(396	)			(213	)
FINANCING ACTIVITIES:
Dividends paid			(63	)			(62	)
Purchases of common stock			(90	)			(4	)
Debt repayments			(1,203	)			(501	)
Debt borrowings			744				—
Debt issuance costs			(6	)			—
Proceeds from call spread option			55				—
Exercise of common stock options and other			6				7
NET CASH USED IN FINANCING ACTIVITIES			(557	)			(560	)
DECREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH			(229	)			(209	)
Effect of exchange rate changes on cash			141				(217	)
DECREASE IN CASH AND CASH EQUIVALENTS			(88	)			(426	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			2,712				2,795
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,624			$	2,369

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

NOTE A — 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 for the fiscal year ended March 31, 2009 included in the Company’s Current Report on Form 8-K dated November 9, 2009 (2009 Annual Financial Statements).

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 nine months ended December 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2010.

Certain prior year balances have been reclassified to conform to the current period’s presentation.

Basis of Revenue Recognition:

The Company generates revenue from the following primary sources: (1) licensing software products; (2) providing customer technical support (referred to as “maintenance”); and (3) providing professional services, such as product implementation, consulting and education. Revenue is recorded net of applicable sales taxes.

The Company begins to recognize revenue from licensing and maintenance when all of the following criteria are met: (1) the Company has evidence of an arrangement with a customer; (2) the Company delivers the products; (3) license agreement terms are fixed or determinable and free of contingencies or uncertainties that may alter the agreement such that it may not be complete and final; and (4) collection is probable.

The Company’s software licenses generally do not include acceptance provisions. An acceptance provision allows a customer to test the software for a defined period of time before committing to license the software. If a license agreement includes an acceptance provision, the Company does not recognize revenue until the earlier of the receipt of a written customer acceptance or, if not notified by the customer to cancel the license agreement, the expiration of the acceptance period.

Under the Company’s subscription model, implemented in October 2000, software license agreements typically combine the right to use specified software products, the right to maintenance, and the right to receive unspecified future software products for no additional fee during the term of the agreement. Under these subscription licenses, once all four of the above-noted revenue recognition criteria are met, the Company is required under GAAP to recognize revenue ratably over the term of the license agreement.

For license agreements signed prior to October 2000, once all four of the above-noted revenue recognition criteria were met, software license fees were recognized as revenue generally when the software was delivered to the customer, or “up-front” (as the contracts did not include a right to unspecified future software products), and the maintenance fees were deferred and subsequently recognized as revenue over the term of the license. Currently, a relatively small amount of the Company’s revenue from software licenses is recognized on an up-front basis, subject to meeting the same revenue recognition criteria as described above. Software fees from such licenses are recognized up-front and are reported in the “Software fees and other” line item in the Condensed Consolidated Statements of Operations. Maintenance fees from such licenses are recognized ratably over the term of the license and are recorded on the “Subscription and maintenance revenue” line item in the Condensed Consolidated Statements of Operations. License agreements with software fees that are recognized up-front do not include the right to receive unspecified future software

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

products. However, in the event such license agreements are executed within close proximity to or in contemplation of other license agreements, for which we do not have vendor specific objective evidence (VSOE) of fair value and are accounted for under the Company’s subscription model, with the same customer, the licenses together may be considered a single multi-element agreement, and all such revenue is required to be recognized ratably and is recorded as “Subscription and maintenance revenue” in the Condensed Consolidated Statements of Operations.

Since the Company implemented its subscription model in October 2000, the Company’s practice with respect to products of newly acquired businesses with established VSOE has been to record revenue initially on the acquired company’s systems, generally under an up-front model. As the newly acquired products are sold as part of our integrated customer solutions or sold with the right to receive unspecified future software products, licenses for such products are recorded under the Company’s subscription model, under which revenue is recognized ratably and recorded as “Subscription and maintenance revenue.” In some instances, when newly developed and recently acquired products are sold on a stand-alone basis and without the right to receive unspecified future software products, the Company sells these products on an up-front model. The software license fees from these contracts are presented as “Software fees and other.” Selling such licenses under an up-front model may result in higher total revenue in a current reporting period than if such licenses were based on the Company’s subscription model and the associated revenue recognized ratably.

Revenue from professional service arrangements is generally recognized as the services are performed. Revenue from committed professional services that are sold as part of a subscription license agreement is deferred and recognized on a ratable basis over the term of the related software license. If it is not probable that a project will be completed or the payment will be received, revenue recognition is deferred until the uncertainty is removed.

Revenue from sales to distributors, resellers, and value-added resellers commences when all four revenue recognition criteria noted above are met and when these entities sell the software product to their customers. This is commonly referred to as the sell-through method. Revenue from the sales of products to distributors, resellers and value-added resellers that include licensing terms providing the right for the end-users to receive certain unspecified future software products is recognized on a ratable basis.

The Company has an established business practice of offering installment payment options to customers and has a history of successfully collecting substantially all amounts due under such agreements. The Company assesses collectability based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If, in the Company’s judgment, collection of a fee is not probable, revenue will not be recognized until the uncertainty is removed, which is generally through the receipt of cash payment.

For further information, refer to the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s 2009 Annual Financial Statements.

Cash Dividends:

In November 2009, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share. The dividend totaled approximately $21 million and was paid on November 30, 2009 to stockholders of record at the close of business on November 17, 2009. In July 2009, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share. The dividend totaled approximately $21 million and was paid on August 19, 2009 to stockholders of record at the close of business on August 10, 2009. In May 2009, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share. The dividend totaled approximately $21 million and was paid on June 16, 2009 to stockholders of record at the close of business on May 31, 2009.

In November 2008, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share. The dividend totaled approximately $21 million and was paid on December 16, 2008 to stockholders of record at the close of business on December 2, 2008. In September 2008, the Company’s Board of Directors

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

declared a quarterly cash dividend of $0.04 per share. The dividend totaled approximately $20 million and was paid on September 30, 2008 to stockholders of record at the close of business on September 22, 2008. In June 2008, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share. The dividend totaled approximately $21 million and was paid on June 27, 2008 to stockholders of record at the close of business on June 17, 2008.

Cash and Cash Equivalents:

The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 52% and 50% held by the Company’s foreign subsidiaries outside the United States as of December 31, 2009 and March 31, 2009, respectively.

Restricted Cash:

The Company’s insurance subsidiary is required to maintain a minimum restricted cash balance of $50 million. In addition, the Company has other restricted cash balances, including cash collateral for letters of credit. The total amount of restricted cash was approximately $56 million as of December 31, 2009 and March 31, 2009 and is included in the “Other noncurrent assets, net” line item in the Condensed Consolidated Balance Sheets. These amounts consist of $50 million in money market funds with the remainder predominantly in cash.

Deferred Revenue (Billed or Collected):

The Company accounts for unearned revenue on billed amounts due from customers on a “gross method” of presentation. Under the gross method, unearned revenue on billed installments (collected or uncollected) is reported as deferred revenue in the liability section of the Condensed Consolidated Balance Sheet. The components of “Deferred revenue (billed or collected) — current” and “Deferred revenue (billed or collected) — noncurrent” as of December 31, 2009 and March 31, 2009 are as follows:

		December 31,				March 31,
		2009				2009
		(in millions)
Current:
Subscription and maintenance		$	2,112			$	2,272
Professional services			162				150
Financing obligations and other			13				9
Total deferred revenue (billed or collected) — current			2,287				2,431
Noncurrent:
Subscription and maintenance			1,002				987
Professional services			1				10
Financing obligations and other			3				3
Total deferred revenue (billed or collected) - noncurrent			1,006				1,000
Total deferred revenue (billed or collected)		$	3,293			$	3,431

Deferred revenue (billed or collected) excludes unrealized revenue from contractual obligations that will be billed by the Company in future periods.

Concentration of Credit Risk:

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash equivalents, derivatives and accounts receivable. The Company holds cash and cash equivalents in major financial institutions and related money market funds. The Company has not historically experienced any losses in its cash and cash equivalent portfolios.

Amounts included in accounts receivable expected to be collected from customers, as disclosed in Note E, “Trade and Installment Accounts Receivable,” have limited exposure to concentration of credit risk due to the

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

diverse customer base and geographic areas covered by operations. Unbilled amounts due under the Company’s prior business model that are expected to be collected from customers include one large IT outsourcer with a license arrangement that extends through fiscal year 2012 with a net unbilled receivable balance of approximately $139 million at December 31, 2009.

Prior to fiscal year 2001, the Company sold individual accounts receivable from certain financial institutions to a third party subject to certain recourse provisions. The outstanding principal balances subject to recourse of these receivables were approximately $20 million and $38 million as of December 31 and March 31, 2009, respectively.

Stock Repurchases:

During the second and third quarters of fiscal year 2010, the Company entered into brokerage arrangements with a third-party financial institution to purchase the Company’s common stock in the open market on the Company’s behalf. The Company acquired approximately 1.8 million and 4.1 million of its common shares for approximately $40 million and $90 million under these arrangements during the third quarter and first nine months of fiscal year 2010, respectively. As of December 31, 2009, the Company remained authorized to purchase an aggregate amount of up to approximately $156 million of additional common shares under its current stock repurchase program.

Debt Transactions:

During the third quarter of fiscal year 2010, the Company paid $500 million to reduce a portion of the amount due on the 2008 Revolving Credit Facility, which expires in August 2012, $176 million to repay the outstanding principal amount of its 4.750% Senior Notes due December 2009, and $520 million to repay its 1.625% Convertible Senior Notes (1.625% Notes) due December 2009, of which $460 million was for the outstanding principal amount of the 1.625% Notes and approximately $60 million was for the in-the-money conversion feature. The $60 million was recorded in “Additional paid-in capital” in the Condensed Consolidated Balance Sheet as of December 31, 2009. These repayments are included in “Net cash used in financing activities” in the Condensed Consolidated Statement of Cash Flows for the nine months ended December 31, 2009.

As of December 31, 2009, approximately $250 million was outstanding under the 2008 Revolving Credit Facility and is included in the “Long-term debt, net of current portion” line item in the Condensed Consolidated Balance Sheet.

During the third quarter of fiscal year 2010, the Company issued approximately $750 million principal amount of 5.375% Senior Notes due 2019 (the 5.375% Senior Notes). The 5.375% Senior Notes were issued in an underwritten offering at a price equal to 99.162% of the principal amount. The net proceeds of the offering were approximately $738 million, after being issued at a discount of $6 million and deducting expenses, underwriting discounts and commissions of $6 million, which will be amortized over the term of the 5.375% Senior Notes. As of December 31, 2009, the principal amount of the 5.375% Senior Notes of $744 million is included in the “Long-term debt, net of current portion” line item in the Condensed Consolidated Balance Sheet. The 5.375% Senior Notes are senior unsecured obligations and will rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness. The 5.375% Senior Notes are effectively subordinated to any future secured indebtedness to the extent of the assets securing that indebtedness and structurally subordinated to any indebtedness of the Company’s subsidiaries.

The Company has the option to redeem the 5.375% Senior Notes at any time, at redemption prices equal to the greater of (i) the principal amount of the 5.375% Senior Notes to be redeemed or (ii) the sum of the present value of the remaining scheduled payments of the 5.375% Senior Notes to be redeemed, discounted to the date of redemption on a semi-annual basis plus 30 basis points. The Company must repurchase the 5.375% Senior Notes in the event of a change in control.

Concurrent with the original issuance of the 1.625% Notes in 2002, the Company entered into call spread repurchase option transactions (1.625% Notes Call Spread) to partially mitigate potential dilution from

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

the conversion of the 1.625% Notes. The 1.625% Notes Call Spread was exercised by the Company in December 2009, resulting in option proceeds of approximately $60 million, which was recorded in “Additional paid-in capital” in the Condensed Consolidated Balance Sheet at December 31, 2009. Approximately $55 million of the cash proceeds from the 1.625% Notes Call Spread were received in the third quarter of fiscal year 2010 and is included in “Net cash used in financing activities” in the Condensed Consolidated Statement of Cash Flows for the nine months ended December 31, 2009. The remaining cash proceeds from the 1.625% Notes Call Spread of approximately $5 million were received during the fourth quarter of fiscal year 2010.

Statement of Cash Flows:

For the nine-month periods ended December 31, 2009 and 2008, interest payments were $60 million and $95 million, respectively, and income taxes paid were $197 million and $180 million, respectively.

Non-cash financing activities for the nine-month periods ended December 31, 2009 and 2008 consisted of treasury shares issued in connection with the following: share-based incentive awards issued under the Company’s equity compensation plans of approximately $63 million (net of approximately $22 million of withholding taxes) and $53 million (net of approximately $24 million of withholding taxes), respectively; the Company’s Employee Stock Purchase Plan of approximately $21 million and $36 million, respectively; and discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $33 million and $19 million, respectively.

Adoption of new accounting standards:

Effective September 15, 2009, the Company adopted the requirements of FASB ASC 105 (previously Statement of Financial Accounting Standards (SFAS) FAS No. 168, “FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”). FASB ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and establishes the ASC as the source of authoritative GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (SEC), which are sources of authoritative GAAP for SEC registrants. The adoption of the ASC was not intended to change or alter existing GAAP and therefore did not have any impact on the Company’s consolidated financial statements. References to the relevant ASC section and the previously existing GAAP standard have been provided for accounting standards adopted in fiscal year 2010 but prior to the effective date of the ASC.

Effective April 1, 2009, the Company adopted the fair value measurement and disclosure requirements of FASB ASC 820 (previously SFAS No. 157, “Fair Value Measurements”) for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), for which the requirements were adopted on April 1, 2008. The April 1, 2009 adoption did not have an impact on the Condensed Consolidated Financial Statements.

Effective April 1, 2009, the Company adopted the requirements of FASB ASC 260-10-45 (previously FASB Staff Position (FSP) Emerging Issues Task Force (EITF) No. 03-6-1 (FSP EITF 03-6-1), “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities”) for unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid). These awards are treated as participating securities and are included in the computation of earnings per share under the two-class method. This adoption required all prior-period earnings per share data to be adjusted retrospectively. The adoption did not have a material impact on the Company’s previously reported earnings per share. See Note C, “Income Per Common Share” for additional information regarding the Company’s earnings per share calculation.

Effective April 1, 2009, the Company adopted the requirements of FASB ASC 470-20 (previously FASB Staff Position (FSP) Accounting Principles Board Opinion (APB) No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement))” for convertible debt instruments that have cash settlement features. These requirements included separation of the liability and equity components of the instruments. The debt is recognized at the present value of its

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

cash flows discounted using the issuer’s nonconvertible debt borrowing rate at the time of issuance with the resulting debt discount being amortized over the expected life of the debt. The equity component is recognized as the difference between the proceeds from the issuance of the convertible debt instrument and the fair value of the liability. The adoption required retrospective application to all periods presented, and did not grandfather existing instruments. Accordingly, the accompanying Condensed Consolidated Balance Sheet as of March 31, 2009 and the Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2008 have been revised.

The Company estimated a borrowing rate of 11% for a similar non-convertible instrument at the time the 1.625% Notes were issued. The fair value at issuance of the liability component of the 1.625% Notes assuming an interest rate of 11% was $251 million, reflecting a discount of $209 million. This discount was amortized to interest expense over a seven-year period ending December 2009, the date on which holders of the 1.625% Notes could first require the Company to repurchase all or a portion of their 1.625% Notes at a price of $20.04 per share.

The Condensed Consolidated Balance Sheet as of March 31, 2009 has been revised to reflect a reduction in current debt of $29 million for the remaining unamortized discount, an increase in additional paid-in capital of $129 million for the equity component (net of deferred taxes of $80 million), a decrease in retained earnings of $111 million for the cumulative expense from amortization of the discount, and a decrease to deferred tax assets of $11 million.

The Condensed Consolidated Statement of Operations for the three months ended December 31, 2008 has been revised to reflect an increase in interest expense of approximately $8 million, a decrease in income tax expense of approximately $3 million, a decrease in net income of approximately $5 million and a decrease in basic earnings per share of $0.01. The Condensed Consolidated Statement of Operations for the nine months ended December 31, 2008 has been revised to reflect an increase in interest expense of approximately $26 million, a decrease in income tax expense of approximately $10 million, a decrease in net income of approximately $16 million and a decrease in basic earnings per share of approximately $0.04. Diluted earnings per common share for the three and nine months ended December 31, 2008 was not affected. The recognition of interest expense at 11% decreased the Company’s reported net income for fiscal year 2009 by approximately $23 million as compared with the stated interest rate of 1.625%.

Including the effect of the new accounting pronouncement, total interest expense associated with the 1.625% Notes was approximately $10 million and $34 million for the three and nine months ended December 31, 2009, respectively, and approximately $9 million and $31 million for the three and nine months ended December 31, 2008, respectively.

Effective April 1, 2009, the Company adopted the disclosure requirements of FASB ASC 820-10-50 (previously FSP Financial Accounting Standards (FAS) 107-1 and APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments”). These disclosures have been provided in Note G, “Derivatives and Fair Value Measurements.”

Effective April 1, 2009, the Company adopted the requirements of FASB ASC 855 (previously FASB SFAS No. 165, “Subsequent Events”) for subsequent events, which established standards for the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are available to be issued (subsequent events). These standards are largely the same guidance on subsequent events which previously existed only in auditing literature. The requirements include disclosure of the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued.

For purposes of this interim financial information, January 29, 2010 is the date through which subsequent events have been evaluated and represents the date the financial statements were issued.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

NOTE B — COMPREHENSIVE INCOME

Comprehensive income includes net income, unrealized gains on cash flow hedges and foreign currency translation adjustments. The components of comprehensive income for the three and nine months ended December 31, 2009 and 2008 are as follows:

		Three Months								Nine Months
		Ended December 31,								Ended December 31,
		2009				2008(1)				2009				2008(1)
		(in millions)
Net income		$	257			$	208			$	670			$	606
Net unrealized gain (loss) on cash flow hedges, net of tax			1				(5	)			2				(5	)
Foreign currency translation adjustments			(3	)			(21	)			70				(68	)
Total comprehensive income		$	255			$	182			$	742			$	533

NOTE C — INCOME PER COMMON SHARE

Effective April 1, 2009, the Company adopted the requirements of FASB ASC 260-10-45 (previously FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities”) for unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid). These awards are treated as participating securities and are included in the computation of earnings per share under the two-class method. This adoption required all prior-period earnings per share data to be adjusted retrospectively. The implementation of this accounting standard and the adoption of FASB ASC 470-20 (previously FSP APB 14-1) resulted in a reduction of $0.01 and $0.04 in basic earnings per common share as reported in the Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2008, respectively. Diluted earnings per common share for the three and nine months ended December 31, 2008 was decreased by $0.01 for both periods.

Under the two-class method, net earnings are allocated to common stock and participating securities. Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating share-based awards and convertible notes. The following table reconciles earnings per common share under the new methodology for the three and nine months ended December 31, 2009 and 2008.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

		Three								Nine
		Months Ended								Months Ended
		December 31,								December 31,
		2009				2008(1)				2009				2008(1)
		(in millions, except per share amounts)
Basic earnings per common share:
Net income		$	257			$	208			$	670			$	606
Less: Net income allocable to participating securities			(3	)			(2	)			(7	)			(7	)
Net income allocable to common shares		$	254			$	206			$	663			$	599
Weighted-average common shares outstanding			515				514				516				513
Basic earnings per common share		$	0.49			$	0.40			$	1.28			$	1.17
Diluted earnings per common share:
Net income		$	257			$	208			$	670			$	606
Add: Interest expense associated with Convertible Senior Notes, net of tax			7				6				22				19
Less: Net income allocable to participating securities			(3	)			(2	)			(7	)			(7	)
Net income allocable to common shares		$	261			$	212			$	685			$	618
Weighted-average shares outstanding and common share equivalents
Weighted-average common shares outstanding			515				514				516				513
Weighted-average shares outstanding upon conversion of Convertible Senior Notes			18				23				21				23
Weighted-average effect of share-based payment awards			2				1				2				1
Denominator in calculation of diluted income per share			535				538				539				537
Diluted income per share		$	0.49			$	0.39			$	1.27			$	1.15

For the three months ended December 31, 2009 and 2008, approximately 8 million and 15 million of restricted stock awards and options to purchase common stock, respectively, were excluded from the calculation, as their effect on earnings per share was anti-dilutive during the respective periods. For the nine months ended December 31, 2009 and 2008, approximately 12 million and 14 million of restricted stock awards and options to purchase common stock, respectively, were excluded from the calculation, as their effect on earnings per share was anti-dilutive during the respective periods.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

NOTE D — 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								Nine Months
		Ended December 31,								Ended December 31,
		2009				2008				2009				2008
		(in millions)
Costs of licensing and maintenance		$	—	(1)		$	—	(1)		$	2			$	2
Cost of professional services			1				1				2				3
Selling and marketing			8				7				25				21
General and administrative			7				7				29				23
Product development and enhancements			6				5				17				19
Share-based compensation expense before tax			22				20				75				68
Income tax benefit			8				6				26				22
Net share-based compensation expense		$	14			$	14			$	49			$	46

There were no capitalized share-based compensation costs at December 31, 2009 or 2008.

The following table summarizes information about unrecognized share-based compensation costs as of December 31, 2009:

						Weighted
		Unrecognized				Average Period
		Compensation				Expected to be
		Costs				Recognized
		(in millions)				(in years)
Restricted stock units		$	10				2.2
Restricted stock awards			63				2.0
Performance share units			48				2.6
Stock option awards			—	(1)			0.5
Total unrecognized share-based compensation costs		$	121				2.3

The value of performance share unit (PSU) awards are marked to 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 has discretion to reduce any award for any reason).

For the three months ended December 31, 2009 and 2008 and the nine months ended December 31, 2008, the Company did not issue stock options. For the nine months ended December 31, 2009, the Company issued options covering 0.1 million shares of its common stock. The weighted average fair value and assumptions used for options granted in the nine months ended December 31, 2009 were: fair value, $6.81; dividend yield, 0.77%; expected volatility factor, 0.33; risk-free interest rate, 2.3%; and expected term, 6 years.

The table below summarizes all of the RSUs and RSAs, including grants provided pursuant to the long-term incentive plans discussed above, granted during the three and nine months ended December 31, 2009 and 2008:

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

		Three Months								Nine Months
		Ended December 31,								Ended December 31,
		2009				2008				2009				2008
		(shares in millions)
RSUs
Shares			—	(1)			—				0.6				0.3
Weighted Avg. Grant Date Fair Value (2)		$	22.58				N/A			$	17.52			$	24.36
RSAs
Shares			0.1				—	(1)			4.3				3.8
Weighted Avg. Grant Date Fair Value (3)		$	21.82			$	16.34			$	18.43			$	25.28

NOTE E — TRADE AND INSTALLMENT ACCOUNTS RECEIVABLE

The Company uses installment license agreements as a standard business practice and has a history of successfully collecting substantially all amounts due under the original payment terms without making concessions on payments, software products, maintenance, or professional services. Trade and installment accounts receivable, net represent amounts due from the Company’s customers. These accounts receivable balances are presented net of allowances for doubtful accounts and unamortized discounts. Unamortized discounts reflect imputed interest for the time value of money for license agreements signed prior to October 2000 (prior business model). These balances include revenue recognized in advance of customer billings but do not include unbilled contractual commitments executed under license agreements implemented since October 2000. The components of Trade and installment accounts receivable, net are as follows:

		December 31,				March 31,
		2009				2009
		(in millions)
Current:
Accounts receivable — billed		$	773			$	658
Accounts receivable — unbilled			72				71
Other receivables			19				34
Unbilled amounts due within the next 12 months — prior business model			96				108
Less: Allowance for doubtful accounts			(24	)			(25	)
Less: Unamortized discounts			(4	)			(7	)
Trade and installment accounts receivable, net		$	932			$	839
Noncurrent:
Unbilled amounts due beyond the next 12 months — prior business model		$	47			$	132
Less: Unamortized discounts			(1	)			(4	)
Installment accounts receivable, due after one year, net		$	46			$	128

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

NOTE F — GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS

The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at December 31, 2009 were approximately $6,612 million and $5,826 million, respectively. These amounts include fully amortized intangible assets of approximately $5,121 million, which is composed of purchased software of approximately $4,589 million, internally developed software of approximately $412 million and other identified intangible assets subject to amortization of approximately $120 million. The remaining gross carrying amounts and accumulated amortization for capitalized software and other intangible assets that are not fully amortized are as follows:

		As of December 31, 2009
		Gross
		Amortizable				Accumulated				Net
		Assets				Amortization				Assets
		(in millions)
Capitalized software:
Purchased		$	317			$	167			$	150
Internally developed			577				175				402
Other identified intangible assets subject to amortization			583				363				220
Other identified intangible assets not subject to amortization			14				—				14
Total		$	1,491			$	705			$	786

Internally developed capitalized software costs and other identified intangible asset costs are included in “Other noncurrent assets, net” in the Condensed Consolidated Balance Sheets.

Based on the capitalized software and other intangible assets recorded through December 31, 2009, the annual amortization expense over the next five fiscal years is expected to be as follows:

		Year Ended March 31,
		2010				2011				2012				2013				2014
		(in millions)
Capitalized software:
Purchased		$	53			$	47			$	35			$	27			$	19
Internally developed			84				101				93				79				60
Other identified intangible assets subject to amortization			57				61				39				32				28
Total		$	194			$	209			$	167			$	138			$	107

The carrying value of goodwill was approximately $5,513 million and $5,364 million as of December 31, 2009 and March 31, 2009, respectively. During the nine months ended December 31, 2009, goodwill increased by approximately $149 million, primarily due to the acquisition of NetQoS, Inc. in November 2009. See Note K, “Acquisitions” for additional information regarding the Company’s acquisition of NetQoS, Inc.

NOTE G — DERIVATIVES AND FAIR VALUE MEASUREMENTS

The Company is exposed to certain financial market risks relating to its business operations, including changes in interest rates, which could impact the value of its financial assets and liabilities, and foreign exchange rate risks associated with the Company’s foreign operations, which could affect 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.

During the first nine months of fiscal years 2010 and 2009, the Company did not designate its foreign exchange derivatives as hedges. Accordingly, all foreign exchange derivatives are recognized in the Condensed Consolidated Balance Sheets at fair value and unrealized and realized changes in fair value

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

from these contracts are recorded as “Other (gains) expenses, net” in the Condensed Consolidated Statements of Operations.

During the third quarter of fiscal year 2010, the Company entered into two $100 million interest rate swap transactions to hedge a total of $200 million of its 6.125% Senior Notes due December 2014 through December 1, 2014. Under the terms of the swaps, the Company will pay quarterly interest at a rate of 2.915% and 2.779% on the first and second swap, respectively, plus the three-month LIBOR rate and will receive interest payments at 5.625%. The LIBOR based rate is set quarterly three months prior to the date of the interest payment. The Company designated these swaps as fair value hedges and is accounting for them in accordance with the shortcut method of FASB ASC 815 (previously SFAS No. 133). The change in the fair value of the interest rate swaps from inception to December 31, 2009 was approximately $2 million and is reflected in “Accrued expenses and other current liabilities” in the Condensed Consolidated Balance Sheet. The carrying value of the debt was adjusted by an equal and offsetting amount.

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. These derivatives are designated as cash flow hedges. The effective portion of these cash flow hedges are recorded as “Accumulated other comprehensive loss” in the Condensed Consolidated Balance Sheets and reclassified into “Interest expense, net,” in the Condensed Consolidated Statements of Operations in the same period during which the hedged transaction affects earnings. Any ineffective portions of the cash flow hedges are recorded immediately to “Interest expense, net.” No ineffectiveness existed at December 31, 2009 or at March 31, 2009.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2009 and March 31, 2009:

		Fair Value Measurement at Reporting Date Using
		(in millions)
										Significant
		Estimated Fair				Quoted Prices in				Other
		Value at				Active Markets for				Observable
		December 31,				Identical Assets				Inputs
Description		2009				(Level 1)(1)				(Level 2)(2)
Assets:
Money market funds		$	1,907			$	1,907			$	—
Foreign exchange derivatives not designated as hedges			1				—				1
Total Assets		$	1,908			$	1,907			$	1
Liabilities:
Foreign exchange derivatives not designated as hedge		$	1			$	—			$	1
Interest rate derivative designated as fair value hedge			2				—				2
Interest rate derivatives designated as cash flow hedge			5				—				5
Total Liabilities		$	8			$	—			$	8

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

		Fair Value Measurement at Reporting Date Using
		(in millions)
										Significant
						Quoted Prices in				Other
		Estimated Fair				Active Markets for				Observable
		Value at				Identical Assets				Inputs
Description		March 31, 2009				(Level 1)				(Level 2)
Assets:
Money market funds		$	1,617			$	1,617			$	—
Government securities			405				405				—
Total Assets		$	2,022			$	2,022			$	—
Liabilities:
Interest rate derivatives designated as cash flow hedges		$	7			$	—			$	7
Total Liabilities		$	7			$	—			$	7

At December 31 and March 31, 2009, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

At December 31 and March 31, 2009, the Company had approximately $1,857 million and $1,567 million, respectively, of investments in money market funds classified as “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. The Company also had approximately $405 million in treasury bills, classified as “Cash and cash equivalents” at March 31, 2009. The Company did not hold treasury bills at December 31, 2009. The Company had $50 million of money market funds in restricted cash amounts classified as “Other noncurrent assets, net” in the Condensed Consolidated Balance Sheets at December 31 and March 31, 2009.

At December 31, 2009, approximately $1 million of foreign exchange derivatives were included in “Accrued expenses and other current liabilities” in the Condensed Consolidated Balance Sheet. At December 31, 2009, approximately $1 million of foreign exchange derivatives were included in “Other current assets” in the Condensed Consolidated Balance Sheet. At March 31, 2009, the Company had no foreign exchange derivative contracts outstanding. At December 31 and March 31, 2009, approximately $7 million of the Company’s interest rate derivatives are included in “Accrued expenses and other current liabilities” for each respective period.

Accumulated other comprehensive loss includes approximately $5 million at December 31, 2009 related to the Company’s interest rate derivatives. The amount of loss reclassified from accumulated other comprehensive income into “Interest expense, net” was approximately $2 million and $5 million for the three and nine months ended December 31, 2009, respectively. In the next 12 months, approximately $5 million is expected to be reclassified from “Accumulated other comprehensive loss” to “Interest expense, net.”

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

A summary of the effect of the interest rate and foreign exchange derivatives on the Condensed Consolidated Statement of Operations is as follows:

		Derivative Loss (Gain) Recognized in Earnings
		(in millions)
Location in Statement of Operations		Three Months Ended				Three Months Ended
of Derivative Loss (Gain)		December 31, 2009				December 31, 2008
Interest expenses, net (1)		$	2			$	—
Other (gains) expenses, net (2)		$	—			$	(31	)

		Derivative Loss (Gain) Recognized in Earnings
		(in millions)
Location in Statement of Operations of		Nine Months Ended				Nine Months Ended
Derivative Loss (Gain)		December 31, 2009				December 31, 2008
Interest expenses, net (1)		$	5			$	—
Other (gains) expenses, net (2)		$	25			$	(64	)

The following table presents the carrying amounts and estimated fair values of the Company’s instruments that are not measured at fair value on a recurring basis:

		At December 31, 2009
		(in millions)
		Carrying Value				Estimated Fair Value
Assets:
Noncurrent portion of installment accounts receivable (1)		$	46			$	46
Liabilities:
Long- term debt (2)		$	1,545			$	1,595
Facilities abandonment reserve (3)		$	69			$	77

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

NOTE H — RESTRUCTURING

Fiscal 2007 Plan: In August 2006, the Company announced the 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, global facilities consolidations and other cost reduction initiatives. The Company has recognized substantially all of the costs associated with the Fiscal 2007 plan.

The workforce reduction included approximately 3,100 individuals under the Fiscal 2007 plan. Most of these actions have been completed; however, final payment of the severance amounts is dependent upon settlement with the works councils in certain international locations. The Company has also recognized substantially all of the facilities abandonment costs associated with the Fiscal 2007 plan.

For the nine months ended December 31, 2009, restructuring activity under the Fiscal 2007 plan was as follows:

						Facilities
		Severance				Abandonment
		(in millions)
Accrued balance as of March 31, 2009		$	45			$	71
Payments			(29	)			(14	)
Accretion and other adjustments			—				5
Accrued balance as of December 31, 2009		$	16			$	62

The “Accretion and other adjustments” line item 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 in the Condensed Consolidated Statement of Operations.

The liability balance for the severance portion of the remaining reserve is included in the “Accrued salaries, wages and commissions” line in the Condensed Consolidated Balance Sheets. The liability for the facilities abandonment portion of the remaining reserve is included in the “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” line items in the Condensed Consolidated Balance Sheets.

NOTE I — INCOME TAXES

Income tax expense for the three and nine months ended December 31, 2009 was $71 million and $283 million, respectively, compared with the three and nine months ended December 31, 2008 of $85 million and $301 million, respectively.

For the three and nine months ended December 31, 2009, the Company’s income tax provision included net benefits of approximately $23 million and $30 million, respectively, resulting from reconciliations of tax returns to tax provisions, the resolution of uncertain tax positions relating to non-U.S. jurisdictions, and refinements of estimates ascribed to tax positions taken in prior periods relating to the Company’s international tax profile.

For the three and nine months ended December 31, 2008, the Company’s income tax provision included a net benefit of approximately $12 million, primarily arising from the resolution of uncertain tax provisions and the reinstatement of the U.S. Research and Development Tax Credit. For the nine months ended December 31, 2008, the Company’s income tax provision included a benefit from the settlement of a U.S. federal income tax audit for the fiscal years 2001 through 2004, which resulted in a decrease in the liability for uncertain tax positions of $55 million. As a result of this settlement, during the first quarter of fiscal year 2009, the Company recognized a tax benefit of $11 million and a reduction of goodwill by $10 million, with the remainder offset against existing tax refund claims and deferred tax assets previously recorded.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

NOTE J — COMMITMENTS AND CONTINGENCIES

Certain legal proceedings in which the Company is involved are discussed in Note 8, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements included in the Company’s 2009 Annual Financial Statements. The following discussion should be read in conjunction with the 2009 Annual Financial Statements.

Stockholder Derivative Litigation — Background

In June and July 2004, three purported derivative actions were filed in the Federal Court by Ranger Governance, Ltd. (Ranger), Bert Vladimir and Irving Rosenzweig against certain current or former employees and/or directors of the Company. In November 2004, the Federal Court issued an order consolidating the three actions into Computer Associates International, Inc., Derivative Litigation, No. 04 Civ. 2697 (E.D.N.Y.) (the Derivative Action). The derivative plaintiffs filed a consolidated amended complaint (the Consolidated Complaint) on January 7, 2005. The Consolidated Complaint names as defendants Messrs. Wang, Kumar, Zar, McWade, Schwartz, de Vogel, Grasso, Pieper, Artzt, D’Amato, and Ranieri, Stephen Richards, Steven Woghin, David Kaplan, David Rivard, Lloyd Silverstein, Michael A. McElroy, Gary Fernandes, Robert E. La Blanc, Jay W. Lorsch, Kenneth Cron, Walter P. Schuetze, KPMG LLP, and Ernst & Young LLP. The Company is named as a nominal defendant. The Consolidated Complaint seeks from one or more of the defendants (1) contribution towards the consideration the Company had previously agreed to provide then current and former stockholders in settlement of certain class action litigation commenced against the Company and certain officers and directors in 1998 and 2002, (2) compensatory and consequential damages in an amount not less than $500 million in connection with the investigations giving rise to the Deferred Prosecution Agreement (DPA) entered into between the Company and the United States Attorney’s Office (USAO) in 2004 and a consent to enter into a final judgment (Consent Judgment) in a parallel proceeding brought by the SEC regarding certain of the Company’s past accounting practices, including its revenue recognition policies and procedures during certain periods prior to the adoption of the Company’s new business model in October 2000. (In May 2007, based upon the Company’s compliance with the terms of the DPA, the Federal Court ordered dismissal of the charges that had been filed against the Company in connection with the DPA, and the DPA expired. The injunctive provisions of the Consent Judgment permanently enjoining the Company from violating certain provisions of the federal securities laws remain in effect.), (3) unspecified relief for violations of Section 14(a) of the Exchange Act for alleged false and material misstatements made in the Company’s proxy statements issued in 2002 and 2003, (4) relief for alleged breach of fiduciary duty, (5) unspecified compensatory, consequential and punitive damages based upon allegations of corporate waste and fraud, (6) unspecified damages for breach of duty of reasonable care, (7) restitution and rescission of the compensation earned under the Company’s executive compensation plan and (8) pursuant to Section 304 of the Sarbanes-Oxley Act, reimbursement of bonus or other incentive-based equity compensation and alleged profits realized from sales of securities issued by the Company. Although no relief is sought from the Company, the Consolidated Complaint seeks monetary damages, both compensatory and consequential, from the other defendants, including current or former employees and/or directors of the Company, Ernst & Young LLP and KPMG LLP in an amount totaling not less than $500 million.

On February 1, 2005, the Company established a Special Litigation Committee of independent members of its Board of Directors to, among other things, control and determine the Company’s response to the Derivative Action. On April 13, 2007, the Special Litigation Committee issued its reports, which announced the Special Litigation Committee’s conclusions, determinations, recommendations and actions with respect to the claims asserted in the Derivative Action. The Special Litigation Committee also served a motion which seeks to dismiss and realign the claims and parties in accordance with the Special Litigation Committee’s recommendations. As summarized below, the Special Litigation Committee concluded as follows:

• The Special Litigation Committee has concluded that it would be in the best interests of the Company to pursue certain of the claims against Messrs. Wang and Schwartz.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

• The Special Litigation Committee has concluded that it would be in the best interests of the Company to pursue certain of the claims against the former Company executives who have pled guilty to various charges of securities fraud and/or obstruction of justice — including Messrs. Kaplan, Richards, Rivard, Silverstein, Woghin and Zar. The Special Litigation Committee has determined and directed that these claims be pursued by the Company using counsel retained by the Company, unless the Special Litigation Committee is able to successfully conclude its ongoing settlement negotiations with these individuals.

• The Special Litigation Committee has reached a settlement (subject to court approval) with Messrs. Kumar, McWade and Artzt.

• The Special Litigation Committee believes that the claims against current and former Company directors Messrs. Cron, D’Amato, de Vogel, Fernandes, Grasso, La Blanc, Lorsch, Pieper, Ranieri, Schuetze, et. al. should be dismissed. The Special Litigation Committee has concluded that these directors did not breach their fiduciary duties and the claims against them lack merit.

• The Special Litigation Committee has concluded that it would be in the best interests of the Company to seek dismissal of the claims against Ernst & Young LLP, KPMG LLP and Mr. McElroy.

By letter dated July 19, 2007, counsel for the Special Litigation Committee advised the Federal Court that the Special Litigation Committee had reached a settlement of the Derivative Action with two of the three derivative plaintiffs — Bert Vladimir and Irving Rosenzweig. In connection with the settlement, both of these plaintiffs have agreed to support the Special Litigation Committee’s motion to dismiss and to realign. The Company has agreed to pay the attorney’s fees of Messrs. Vladimir and Rosenzweig in an amount up to $525,000 each. If finalized, this settlement would require approval of the Federal Court. On July 23, 2007, Ranger filed a letter with the Federal Court objecting to the proposed settlement. On October 29, 2007, the Federal Court denied the Special Litigation Committee’s motion to dismiss and realign, without prejudice to renewing following a decision by the United States Court of Appeals for the Second Circuit on an appeal brought by Ranger in other derivative litigation.

On December 14, 2009, the Company and the Special Litigation Committee renewed the motion to dismiss and realign. That motion is pending.

Texas Litigation

On August 9, 2004, a petition was filed by Sam Wyly and Ranger against the Company in the District Court of Dallas County, Texas, seeking to obtain a declaratory judgment that plaintiffs did not breach two separation agreements they entered into with the Company in 2002 (the 2002 Agreements). On February 18, 2005, Mr. Wyly filed a separate lawsuit in the United States District Court for the Northern District of Texas alleging that he is entitled to attorneys’ fees in connection with the original litigation filed in the District Court of Dallas County, Texas. The two actions have been consolidated and transferred to the Federal Court. On March 31, 2005, the plaintiffs amended their complaint to allege a claim that they were defrauded into entering the 2002 Agreements and to seek rescission of those agreements and damages. On September 29, 2009, the Federal Court entered an order granting the Company’s motion for summary judgment, and dismissing the action in its entirety. That order was appealed to the Second Circuit on October 28, 2009.

Other Civil Actions

In 2004, the Company entered a voluntary disclosure agreement (VDA) with the State of Delaware, by which the Company agreed to disclose information about its failure to comply with certain abandoned property (“escheatment”) procedures and, in return, the State agreed, among other things, not to impose interest or conduct an audit. The Company engaged an independent consultant to review its records and provide an estimate of its liability to the State. The State refused to accept that estimate. In October 2008, the Company commenced an action entitled CA, Inc. v. Cordrey, et al, Civil Action No. 4111-CC in the Delaware Chancery Court (the Delaware Court) seeking, among other things, to compel the State to abide by its obligations under the VDA. In November 2008, the State filed a suit in the Delaware Court entitled Cordrey, et al v. CA, Inc. et al , Civil Action No. 4195-CC, that seeks to enforce a request for payment of

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

abandoned property liability, compel an audit and impose interest. By an amended complaint, dated March 2, 2009, the State alleged, among other things, that the Company made material misrepresentations in and unreasonably delayed the VDA process and the state added causes of action for fraud and/or negligent misrepresentation. Although the ultimate outcome cannot be determined, the Company believes that the State’s claims are unfounded and that the Company has meritorious defenses. In the opinion of management, the resolution of this lawsuit is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

In December 2008, a lawsuit captioned Information Protection and Authentication of Texas LLC v. Symantec Corp., et al. was filed in the United States District Court for the Eastern District of Texas. The complaint seeks monetary damages in an undisclosed amount against 22 separate defendants including the Company based upon claims for direct and contributory infringement of two separate patents. The complaint does not disclose which of the Company’s products allegedly infringe the claimed patents. In discovery, plaintiff has asserted that three of the Company’s security products containing firewall technology are at issue in this suit. In March 2009, the Company both answered the complaint and filed a cross-complaint seeking a declaratory judgment that the Company does not infringe the claimed patents and that such patents are invalid. Although the ultimate outcome cannot be determined, the Company believes that the claims are unfounded and that the Company has meritorious defenses. In the opinion of management, the resolution of this lawsuit is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

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 such lawsuits and claims, and intends to vigorously contest each of them. In the opinion of the Company’s management, the results of these other lawsuits and claims, 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 impact could be material to any individual 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 litigations and investigations arising out of similar allegations, including the litigation described above.

NOTE K — ACQUISITIONS

On November 19, 2009, the Company completed the acquisition of 100% of the voting equity interests of NetQoS, Inc. (NetQoS). NetQoS is a provider of network performance management and service delivery solutions. NetQoS solutions will extend the Company’s capabilities in the areas of Application Performance Management and Network and System Management.

The total purchase price of the acquisition was approximately $200 million. The acquisition of NetQoS has been accounted for as a purchase and, accordingly, its results of operations have been included in the Consolidated Financial Statements since the date of its acquisition. Inclusion of NetQoS activities on a pro-forma basis as of the beginning of the current or prior year would not have a material impact on the Company’s reported revenues or net earnings.

The total purchase price was allocated to the net tangible and intangible assets and liabilities based upon their estimated fair values as of November 19, 2009. The Company is utilizing a valuation specialist to assist in the valuation of the acquired intangible assets. The allocation of purchase price to acquired identifiable assets, including intangible assets, is preliminary because the Company has not completed its analysis of the final fair value report of the specialist and historical tax records of NetQoS. The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded as goodwill. The preliminary allocation of a significant portion of the purchase price to goodwill was

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(unaudited)

predominantly due to the relatively short useful lives of the acquired technology assets, whereby a substantial amount of the purchase price was based on anticipated cash flows occurring beyond the estimated useful lives of the acquired identifiable intangible assets. None of the goodwill is expected to be deductible for tax purposes. Transaction costs for the acquisition were immaterial.

The following represents the preliminary allocation of the purchase price and estimated useful lives to the acquired net assets of NetQoS:

						Estimated
(in millions)		Amount				Useful Life
Finite-lived intangible assets(1)		$	33				5 to 6 years
Purchased software			35			5 years
Goodwill			146			Indefinite
Deferred tax liabilities			(16	)			—
Other assets net of other liabilities assumed			2				—
Purchase Price		$	200

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,” “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: given the global nature of our business, economic factors or political events beyond our control and other business risks associated with non-U.S. operations can affect our business in unpredictable ways; general economic conditions, including concerns regarding a global recession and credit constraints, or unfavorable economic conditions in a particular region, business or industry sector, may lead our customers to delay or forgo technology investments and could have other impacts, any of which could adversely affect our business, financial condition, operating results and cash flow; changes to the compensation of our sales organization could materially adversely affect our business, financial condition, operating results and cash flow; failure to expand our channel partner programs related to the sale of CA solutions may result in lost sales opportunities, increases in expenses and weakening in our competitive position; if we do not adequately manage and evolve our financial reporting and managerial systems and processes, including the successful implementation of our enterprise resource planning software, our ability to manage and grow our business may be harmed; we may encounter difficulties in successfully integrating companies and products that we have acquired or may acquire into our existing business and, therefore, such failed integration could materially adversely affect our infrastructure, market presence, or results of operations; we are subject to intense competition in product and service offerings and pricing, and we expect to face increased competition in the future, which could either diminish demand for or inhibit growth of our products and, therefore, reduce our sales, revenue and market presence; our business may suffer if we are not able to retain and attract qualified personnel, including key managerial, technical, marketing and sales personnel; failure to adapt to technological change in a timely manner could materially adversely affect our business; if our products do not remain compatible with ever-changing operating environments we could lose customers and the demand for our products and services could decrease, which could materially adversely affect our business, financial condition, operating results and cash flow; certain software that we use in our products is licensed from third parties and thus may not be available to us in the future, which has the potential to delay product development and production and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow; certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow; discovery of errors in our software could materially adversely affect our revenue and earnings and subject us to product liability claims, which may be costly and time consuming; we have a significant amount of debt; changes in market conditions or our ratings could increase our interest costs and adversely affect the cost of refinancing our debt and our ability to refinance our debt, which could materially adversely affect our business, financial condition, operating results and cash flow; failure to protect our intellectual property rights and source code would weaken our competitive position; the number, terms and duration of our license agreements as well as the timing of orders from our customers and channel partners, may cause fluctuations in some of our key financial metrics, which may affect our quarterly financial results; we may become dependent upon large transactions, and the failure to close such transactions on a satisfactory basis could materially adversely affect our business, financial condition, operating results and cash flow; our sales to government clients subject us to risks, including early termination, audits, investigations, sanctions and penalties; our customers’ data centers and

Item 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

IT environments may be subject to hacking or other breaches, harming the market perception of the effectiveness of our product; our software products, data centers and IT environments may be subject to hacking or other breaches, harming the market perception of the effectiveness of our products; the use of third party microcode could negatively affect our product development; we may lose access to third-party operating systems, which could materially adversely affect future product development; third parties could claim that our products infringe their intellectual property rights or that we owe royalty payments, which could result in significant litigation expense or settlement with unfavorable terms, which could materially adversely affect our business, financial condition, operating results and cash flow; fluctuations in foreign currencies could result in translation losses; any failure by us to execute our restructuring plans and related sales model changes successfully could result in total costs that are greater than expected or revenues that are less than anticipated; we have outsourced various functions to third parties and these arrangements may not be successful, thereby resulting in increased costs, or may adversely affect service levels and our public reporting; potential tax liabilities may materially adversely affect our results; and these factors and the other factors described more fully in our 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 that 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 2010 and fiscal 2009 are to our fiscal years ended on March 31, 2010 and 2009, respectively.

OVERVIEW

CA, Inc. is the world’s leading independent information technology (IT) management software company. We help organizations manage IT to become more efficient and more productive, which can help them better compete, innovate and grow. We develop and deliver software that makes it easier for organizations to manage IT throughout complex computing environments. With our expertise, organizations can more effectively govern, manage and secure the services IT delivers to their businesses to reduce costs and risks, improve service and ensure IT is integrated with their businesses.

We address the entire computing environment, which includes all of the people, information, processes, systems, networks, applications and databases from a Web service to the mainframe to a virtualized “cloud,” regardless of the hardware or software customers are using. We serve the majority of the Forbes Global 2000 companies, who rely on our software, in part, to manage mission-critical aspects of their businesses. We have a broad portfolio of software products and services that address our customers’ needs for mainframe and distributed environments, spanning IT governance, IT management and IT security. Key focus areas include: infrastructure management, project and portfolio management, security management, service management, application performance management, and data center automation and virtualization.

For further discussion of our business and business model, see our Form 8-K for the fiscal year ended March 31, 2009 (2009 Annual Financial Statements). For further discussion of our Critical Accounting Policies and Business Practices, see “Critical Accounting Policies and Business Practices.”

Item 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

QUARTERLY UPDATE

	•		During the third quarter, the Company reduced the amount of debt outstanding and increased its duration, enhancing its capital structure and financial flexibility. Total debt decreased from $1,908 million as of March 31, 2009 to $1,545 million as of December 31, 2009 and the weighted average maturity of the debt increased from 3.2 years as of March 31, 2009 to 7.1 years as of December 31, 2009. The Company issued $750 million in 10-year 5.375% Senior Notes in November and utilized the proceeds of the $750 million Senior Notes to pay down $500 million of the $750 million drawn on the Company’s $1 billion Credit Facility.
	•		In November 2009, Richard Sulpizio was elected to the Company’s Board of Directors. Mr. Sulpizio also has been named to both the Board’s Compensation and Human Resources Committee and Corporate Governance Committee.
	•		In November 2009, the Company announced that its Board unanimously adopted a Stockholder Protection Rights Plan to replace the Company’s existing Rights Plan, which expired on November 30, 2009.
	•		In November 2009, the Company completed its $200 million acquisition of NetQoS, Inc., a leading provider of network performance management and service delivery management solutions.
	•		Effective January 28, 2010, the Company’s Board of Directors elected William E. McCracken as the Executive Chairman of the Board and Chief Executive Officer of the Company. Mr. McCracken has been a director of the Company since 2005. He was non-executive Chairman of the Board from June 2007 to September 2009 and had been interim Executive Chairman of the Board since September 2009.

Item 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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:

		Three Months
		Ended December 31,												Percent
		2009				2008				Change				Change
						(dollars in millions)
Total revenue		$	1,128			$	1,042			$	86				8	%
Subscription and maintenance revenue		$	1,000			$	919			$	81				9	%
Net income (1)		$	257			$	208			$	49				24	%
Cash provided by operating activities		$	342			$	292			$	50				17	%
Total bookings		$	1,371			$	1,248			$	123				10	%
Subscription and maintenance bookings		$	1,206			$	1,113			$	93				8	%
Weighted average subscription and maintenance license agreement duration in years			3.23				3.10				0.13				4	%
Annualized subscription and maintenance bookings		$	373			$	359			$	14				4	%

		Nine Months
		Ended December 31,												Percent
		2009				2008				Change				Change
						(dollars in millions)
Total revenue		$	3,250			$	3,236			$	14				—	%
Subscription and maintenance revenue		$	2,919			$	2,859			$	60				2	%
Net income (1)		$	670			$	606			$	64				11	%
Cash provided by operating activities		$	724			$	564			$	160				28	%
Total bookings		$	3,516			$	3,780			$	(264	)			(7	)%
Subscription and maintenance bookings		$	3,150			$	3,424			$	(274	)			(8	)%
Weighted average subscription and maintenance license agreement duration in years			3.58				3.60				(0.02	)			(1	)%
Annualized subscription and maintenance bookings		$	880			$	951			$	(71	)			(7	)%

										Change
										From								Change
		Dec. 31,				March 31,				Fiscal				Dec. 31,				From Prior
		2009				2009				Year End				2008				Year Quarter
		(in millions)
Cash and cash equivalents		$	2,624			$	2,712			$	(88	)		$	2,369			$	255
Total debt (1)		$	1,545			$	1,908			$	(363	)		$	2,077			$	(532	)
Total expected future cash collections from committed contracts(2)		$	5,601			$	4,914			$	687			$	4,937			$	664
Total revenue backlog(2)		$	7,916			$	7,378			$	538			$	7,031			$	885

Analyses of our performance indicators, including general trends, can be found in the “Results of Operations” and “Liquidity and Capital Resources” sections of this MD&A.

Subscription and Maintenance Revenue — Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from both: (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, and (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. These amounts include the sale of products directly by us, as well as by distributors, resellers and value-added resellers to end-users, where 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. Subscription license agreements can also include sales of products that are sold on a perpetual basis within close proximity to or in contemplation of subscription agreements that cannot be accounted for separately because we have not established VSOE for all of the products included in the arrangement.

Total Bookings — Total bookings includes the incremental value of all subscription, maintenance and professional service contracts and software fees and other contracts entered into during the reporting period.

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, as well as indirectly by distributors, resellers and value-added resellers 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 agreement. Subscription and maintenance bookings excludes the value associated with certain perpetual based licenses, license-only indirect sales, 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, although in certain cases customer commitments can be for longer or shorter periods. The amount of new subscription and maintenance bookings recorded in a period is affected by the volume and value of contracts renewed during that period. Our subscription and maintenance bookings typically increase in each consecutive quarter during a fiscal year, with the first quarter being the least and the fourth quarter being the most. 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. Additionally, period-to-period changes in subscription and maintenance bookings do not necessarily correlate to changes in billings or 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.

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 license agreements executed during a period, weighted by the total contract value of each individual agreement.

Annualized Subscription and Maintenance Bookings — Annualized subscription and maintenance bookings is an indicator that normalizes the bookings recorded in the current period as compared with the same metric in the prior 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 a period by the weighted average subscription and license agreement duration in years of all such license and maintenance agreements recorded during the same period.

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 associated with balances yet to be billed under subscription and maintenance and software fees and other agreements. Amounts are classified as current or non-current depending on when they are expected to be earned and therefore recognized as revenue. 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” in the Deferred Revenue table in Note A, “Basis of Presentation” in the Notes to the Condensed Consolidated Financial Statements).

RESULTS OF OPERATIONS

The following table presents changes in the line items on our Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2009 and 2008 measured by Dollar Change, Percentage of Dollar Change, and Percentage of Total Revenue. Past financial results are not necessarily indicative of future results.

		Three Months Ended December 31,
														Percentage
										Dollar				of				Percentage of
										Change				Dollar				Total
										2009/				Change				Revenue
		2009				2008				2008				2009/2008				2009				2008
						(dollars in millions)
Revenue
Subscription and maintenance revenue		$	1,000			$	919			$	81				9	%			89	%			88	%
Professional services			74				87				(13	)			(15	)			7				8
Software fees and other			54				36				18				50				4				4
Total revenue		$	1,128			$	1,042			$	86				8	%			100	%			100	%
Expenses
Costs of licensing and maintenance		$	73			$	70			$	3				4	%			6	%			7	%
Cost of professional services			67				76				(9	)			(12	)			6				7
Amortization of capitalized software costs			34				31				3				10				3				3
Selling and marketing			316				307				9				3				28				29
General and administrative			129				110				19				17				11				11
Product development and enhancements			119				115				4				3				11				11
Depreciation and amortization of other intangible assets			40				36				4				11				4				3
Other (gains) expenses, net			(3	)			(14	)			11				79				—				(1	)
Restructuring and other			2				2				—				—				—				—
Total expenses before interest and income taxes			777				733				44				6				69				70
Income before interest and income taxes			351				309				42				14				31				30
Interest expense, net			23				16				7				44				2				2
Income before income taxes			328				293				35				12				29				28
Income tax expense			71				85				(14	)			(16	)			6				8
Net income		$	257			$	208			$	49				24	%			23	%			20	%