Document and Entity Information
Document and Entity Information (USD $) | |||
12 Months Ended
Mar. 31, 2010 | May. 03, 2010
| Sep. 30, 2009
| |
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | 2010-03-31 | ||
Document Fiscal Year Focus | 2,010 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | BMC | ||
Entity Registrant Name | BMC SOFTWARE INC | ||
Entity Central Index Key | 0000835729 | ||
Current Fiscal Year End Date | --03-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 181,523,000 | ||
Entity Public Float | $6,865,673,000 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 12 Months Ended
Mar. 31, 2010 | 12 Months Ended
Mar. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | 1368.6 | 1023.3 |
Short-term investments | 65.5 | 73.6 |
Trade accounts receivable, net | 212.3 | 217.8 |
Trade finance receivables, net | 117.7 | 99.3 |
Deferred tax assets | 53.7 | 68 |
Other current assets | 87.2 | 78.5 |
Total current assets | 1,905 | 1560.5 |
Property and equipment, net | 95 | 103 |
Software development costs | 145.5 | 122.6 |
Long-term investments | 62.4 | 72.3 |
Long-term trade finance receivables, net | 122.6 | 92.1 |
Intangible assets, net | 158.8 | 189.9 |
Goodwill | 1365.6 | 1288.7 |
Other long-term assets | 282.7 | 268.4 |
Total assets | 4137.6 | 3697.5 |
Current liabilities: | ||
Trade accounts payable | 37.5 | 48.9 |
Finance payables | 23 | 13.7 |
Accrued liabilities | 324.7 | 293.4 |
Deferred revenue | 975.9 | 977.3 |
Total current liabilities | 1361.1 | 1333.3 |
Long-term deferred revenue | 847.2 | 810.6 |
Long-term borrowings | 340.9 | 313.6 |
Other long-term liabilities | 200.7 | 191.5 |
Total liabilities | 2749.9 | 2,649 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $.01 par value, 1.0 shares authorized, none issued and outstanding | ||
Common stock, $.01 par value, 600.0 shares authorized, 249.1 shares issued | 2.5 | 2.5 |
Additional paid-in capital | 965.4 | 881.2 |
Retained earnings | 2389.3 | 1985.4 |
Accumulated other comprehensive income (loss) | 5.4 | -25.5 |
Stockholders Equity Subtotal Before Treasury Stock, Total | 3362.6 | 2843.6 |
Treasury stock, at cost (67.2 and 64.4 shares) | -1974.9 | -1795.1 |
Total stockholders' equity | 1387.7 | 1048.5 |
Total liabilities and stockholders' equity | 4137.6 | 3697.5 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
Share data in Millions, except Per Share data | Mar. 31, 2010
| Mar. 31, 2009
|
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, shares authorized | 1 | 1 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 600 | 600 |
Common stock, shares issued | 249.1 | 249.1 |
Treasury stock, shares | 67.2 | 64.4 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | |||
In Millions, except Per Share data | 12 Months Ended
Mar. 31, 2010 | 12 Months Ended
Mar. 31, 2009 | 12 Months Ended
Mar. 31, 2008 |
Revenue: | |||
License | 758.4 | 709.7 | 647.6 |
Maintenance | 1023.7 | 1017.8 | 967.7 |
Professional services | 129.1 | 144.4 | 116.3 |
Total revenue | 1911.2 | 1871.9 | 1731.6 |
Operating expenses: | |||
Cost of license revenue | 115.5 | 117.1 | 100.4 |
Cost of maintenance revenue | 158.3 | 166.3 | 168.9 |
Cost of professional services revenue | 137.4 | 141.6 | 125.1 |
Selling and marketing expenses | 556.2 | 541.5 | 527.4 |
Research and development expenses | 195.6 | 222 | 209.4 |
General and administrative expenses | 206.4 | 197.7 | 209.4 |
In-process research and development | 50.3 | 4 | |
Amortization of intangible assets | 32.7 | 34.1 | 14.8 |
Severance, exit costs and related charges | 3 | 33.5 | 14.7 |
Total operating expenses | 1405.1 | 1504.1 | 1374.1 |
Operating income | 506.1 | 367.8 | 357.5 |
Other income (loss), net: | |||
Interest and other income, net | 15.9 | 26.5 | 74.7 |
Interest expense | -21.3 | (17) | -1.1 |
Gain (loss) on investments, net | 3.5 | -13.4 | 3.3 |
Total other income (loss), net | -1.9 | -3.9 | 76.9 |
Earnings before income taxes | 504.2 | 363.9 | 434.4 |
Provision for income taxes | 98.1 | 125.8 | 120.8 |
Net earnings | 406.1 | 238.1 | 313.6 |
Basic earnings per share | 2.21 | 1.27 | 1.59 |
Diluted earnings per share | 2.17 | 1.25 | 1.56 |
Shares used in computing basic earnings per share | 183.1 | 187.1 | 194.8 |
Shares used in computing diluted earnings per share | 186.8 | 190.2 | 199.6 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (USD $) | |||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Retained Earnings
| Accumulated Other Comprehensive Income (Loss) Foreign Currency Translation Adjustment
| Accumulated Other Comprehensive Income (Loss) Unrealized Gain (Loss) on Securities Available for Sale, Net of Taxes
| Treasury Stock, at Cost
| Total
|
Beginning Balance at Mar. 31, 2007 | 2.5 | 679.4 | $1,478 | -8.8 | -0.5 | -1101.5 | 1049.1 |
Beginning Balance (in shares) at Mar. 31, 2007 | 249.1 | ||||||
Comprehensive income: | |||||||
Net earnings | 313.6 | 313.6 | |||||
Foreign currency translation adjustment, net of taxes of $8.4 in 2010, $9.5 in 2009 and $4.0 in 2008 | 31.3 | 31.3 | |||||
Realized gain (loss) on securities available for sale, net of taxes of $0.3 in 2009 and $1.4 in 2008 | -2.3 | -2.3 | |||||
Total comprehensive income | 342.6 | ||||||
Adoption of accounting standards for uncertain tax positions | -37.1 | -37.1 | |||||
Treasury stock purchases | -579.6 | -579.6 | |||||
Shares issued/forfeited for share-based compensation | 11.9 | -1.4 | 113.6 | 124.1 | |||
Share-based compensation expense | 69.7 | 69.7 | |||||
Tax benefit of share-based compensation expense | 25.7 | 25.7 | |||||
Ending Balance (in shares) at Mar. 31, 2008 | 249.1 | ||||||
Ending Balance at Mar. 31, 2008 | 2.5 | 786.7 | 1753.1 | 22.5 | -2.8 | -1567.5 | 994.5 |
Comprehensive income: | |||||||
Net earnings | 238.1 | 238.1 | |||||
Foreign currency translation adjustment, net of taxes of $8.4 in 2010, $9.5 in 2009 and $4.0 in 2008 | -39.9 | -39.9 | |||||
Unrealized gain (loss) on securities available for sale, net of taxes of $1.4 in 2010, $4.2 in 2009 and $ 1.0 in 2008 | -10.7 | -10.7 | |||||
Realized gain (loss) on securities available for sale, net of taxes of $0.3 in 2009 and $1.4 in 2008 | 5.4 | 5.4 | |||||
Total comprehensive income | 192.9 | ||||||
Treasury stock purchases | -346.2 | -346.2 | |||||
Shares issued/forfeited for share-based compensation | -9.8 | -5.8 | 118.6 | 103 | |||
Share-based compensation expense | 81 | 81 | |||||
Tax benefit of share-based compensation expense | 23.3 | 23.3 | |||||
Ending Balance (in shares) at Mar. 31, 2009 | 249.1 | ||||||
Ending Balance at Mar. 31, 2009 | 2.5 | 881.2 | 1985.4 | -17.4 | -8.1 | -1795.1 | 1048.5 |
Comprehensive income: | |||||||
Net earnings | 406.1 | 406.1 | |||||
Foreign currency translation adjustment, net of taxes of $8.4 in 2010, $9.5 in 2009 and $4.0 in 2008 | 27.8 | 27.8 | |||||
Unrealized gain (loss) on securities available for sale, net of taxes of $1.4 in 2010, $4.2 in 2009 and $ 1.0 in 2008 | 3.1 | 3.1 | |||||
Total comprehensive income | 437 | ||||||
Treasury stock purchases | -288.1 | -288.1 | |||||
Shares issued/forfeited for share-based compensation | -16.9 | -2.2 | 108.3 | 89.2 | |||
Share-based compensation expense | 89.3 | 89.3 | |||||
Tax benefit of share-based compensation expense | 11.8 | 11.8 | |||||
Ending Balance (in shares) at Mar. 31, 2010 | 249.1 | ||||||
Ending Balance at Mar. 31, 2010 | 2.5 | 965.4 | 2389.3 | 10.4 | ($5) | -1974.9 | 1387.7 |
1_CONSOLIDATED STATEMENTS OF ST
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Parenthetical) (USD $) | |||
In Millions | 12 Months Ended
Mar. 31, 2010 | 12 Months Ended
Mar. 31, 2009 | 12 Months Ended
Mar. 31, 2008 |
Foreign currency translation adjustment, taxes | 8.4 | 9.5 | $4 |
Unrealized gain (loss) on securities available for sale, taxes | 1.4 | 4.2 | 1 |
Realized gain (loss) on securities available for sale, taxes | 0.3 | 1.4 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | |||
In Millions | 12 Months Ended
Mar. 31, 2010 | 12 Months Ended
Mar. 31, 2009 | 12 Months Ended
Mar. 31, 2008 |
Cash flows from operating activities: | |||
Net earnings | 406.1 | 238.1 | 313.6 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||
In-process research and development | 50.3 | 4 | |
Depreciation and amortization | 175.8 | 182.8 | 152.1 |
Deferred income tax provision (benefit) | 28.2 | 3.1 | -76.2 |
Share-based compensation expense | 88.9 | 82 | 66.6 |
Loss (gain) on investments, net | -3.5 | 13.4 | -3.3 |
Changes in operating assets and liabilities, net of acquisitions: | |||
Trade accounts receivable | 9.4 | 16.5 | (21) |
Trade finance receivables | -47.8 | (46) | 109.1 |
Trade accounts payable | -12.5 | 4.9 | -11.1 |
Finance payables | 8.1 | 9.3 | -34.6 |
Deferred revenue | 30.5 | 0.8 | 48.2 |
Other operating assets and liabilities | -47.8 | 24.5 | 46.3 |
Net cash provided by operating activities | 635.4 | 579.7 | 593.7 |
Cash flows from investing activities: | |||
Proceeds from maturities/sales of investments | 367 | 194.2 | 728.7 |
Purchases of investments | -330.8 | -173.5 | -289.3 |
Cash paid for acquisitions, net of cash acquired, and other investments | -92.3 | -783.7 | -114.8 |
Capitalization of software development costs | (81) | -67.3 | -68.2 |
Purchases of property and equipment | -22.1 | (28) | -38.4 |
Other investing activities | -0.1 | 6.4 | 3.4 |
Net cash provided by (used in) investing activities | -159.3 | -851.9 | 221.4 |
Cash flows from financing activities: | |||
Treasury stock acquired | -275.1 | (330) | -579.6 |
Repurchases of stock to satisfy employee tax withholding obligations | (13) | -16.2 | |
Proceeds from stock option exercises and other | 89.2 | 101.8 | 124.1 |
Excess tax benefit from share-based compensation expense | 13.7 | 24.1 | 23.9 |
Repayments of borrowings and capital lease obligations | -15.5 | -17.9 | -6.6 |
Proceeds from borrowings, net of issuance costs | 42 | 295.6 | |
Net cash provided by (used in) financing activities | -158.7 | 57.4 | -438.2 |
Effect of exchange rate changes on cash and cash equivalents | 27.9 | -50.2 | 27.9 |
Net change in cash and cash equivalents | 345.3 | (265) | 404.8 |
Cash and cash equivalents, beginning of year | 1023.3 | 1288.3 | 883.5 |
Cash and cash equivalents, end of year | 1368.6 | 1023.3 | 1288.3 |
Supplemental disclosure of cash flow information: | |||
Cash paid for interest | 23 | 11.7 | 1.1 |
Cash paid for income taxes, net of amounts refunded | 89.8 | 69.3 | $62 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
12 Months Ended
Mar. 31, 2010 | |
Summary of Significant Accounting Policies | (1) Summary of Significant Accounting Policies Nature of Operations BMC Software, Inc. (collectively, we, us, our, the Company or BMC) develops software that provides system and service management solutions primarily for large enterprises. We market and sell our products in most major world markets directly through our sales force and indirectly through channel partners, including resellers, distributors and systems integrators. We also provide maintenance and support for our products and perform software implementation, integration and education services for our customers. Basis of Presentation The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have evaluated subsequent events through the date the financial statements were issued. Certain reclassifications have been made to the prior years financial statements to conform to the current years presentation. Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Cash and Cash Equivalents We consider investments with an original maturity of three months or less when purchased to be cash equivalents. At March31, 2010 and 2009, our cash equivalents were comprised primarily of money-market funds and United States Treasury securities. Our cash equivalents are subject to potential credit risk. Our cash management and investment policies restrict investments to investment grade, highly liquid securities. The carrying value of cash and cash equivalents approximates fair value. Investments We classify our investments in equity securities that have readily determinable fair values and all debt securities as held-to-maturity, available-for-sale or trading at acquisition and reevaluate such classification at each subsequent balance sheet date. We do not have any investments classified as held-to-maturity at March31, 2010 or 2009. Our investments are recorded at fair value in the consolidated balance sheets. Unrealized gains and losses on available-for-sale securities are recorded, net of tax, as a component of accumulated other comprehensive income (loss), unless an impairment is considered to be other-than-temporary. Other-than-temporary unrealized losses on available-for-sale securities are generally recorded in gain (loss) on investments, net, in the consolidated statements of operations unless certain criteria are met. The primary factors considered when determining if a charge must be recorded because a decline in the fair value of an investment is other-than-temporary include whether: (i)the fair value of the investment is significantly below our cost basis; (ii)the financial condition of the issuer of the secur |
Business Combinations
Business Combinations | |
12 Months Ended
Mar. 31, 2010 | |
Business Combinations | (2) Business Combinations Fiscal 2010 Acquisitions During fiscal 2010, we completed the acquisitions of MQSoftware, Inc., a provider of middleware and enterprise application transaction management software, Tideway Systems Limited, a provider of IT discovery solutions, and Phurnace Software, Inc., a developer of software that automates the deployment and configuration of business-critical Java EE applications, for combined purchase consideration of $94.3 million. The purchase consideration was allocated to acquired assets and assumed liabilities under the current accounting requirements for business combinations adopted April1, 2009, consisting primarily of approximately $36.3 million of acquired technology and $9.4 million of customer relationships, with weighted average economic lives of approximately three years, in addition to other tangible assets and liabilities. These acquisitions resulted in a preliminary allocation of $62.3 million to goodwill, of which $13.8 million was assigned to the Mainframe Service Management (MSM) segment and $48.5 million was assigned to the Enterprise Service Management (ESM) segment. We are in the process of finalizing our assessment of the fair value of certain acquired assets and assumed liabilities, principally related to tax loss carryforwards and other deferred tax attributes, and will adjust the purchase price allocations when finalized. The operating results of the acquired companies have been included in our consolidated financial statements since the respective acquisition dates. Pro forma information is not included because the acquired companies operations would not have materially impacted our consolidated operating results. Fiscal 2009 Acquisition In April 2008, we completed the acquisition of all of the outstanding common shares of BladeLogic, Inc. (BladeLogic), a provider of data center automation software, for $28 per share. In addition, outstanding and unvested options to acquire the common stock of BladeLogic and other share-based awards were converted pursuant to the terms of the transaction into options to purchase our common stock and other share-based awards, respectively. BladeLogics operating results have been included in our consolidated financial statements since the acquisition date as part of our ESM segment. This acquisition expands our offerings for server provisioning, application release management, automation and compliance. The acquisition of BladeLogics outstanding common stock and other equity instruments resulted in total purchase consideration of $854.0 million, including approximately $19.9 million of direct acquisition costs. The estimated fair values of the acquired assets and assumed liabilities at the date of acquisition were: April18, 2008 (Inmillions) Cash and cash equivalents $ 73.3 Trade accounts receivable 27.0 Deferred tax assets 36.5 Other current assets 1.5 Property and equipment 1.4 Intangible assets 214.8 In-process research and development 50.3 Goodwill 557.3 Total assets 962.1 Current liabilities (14.3 ) Defer |
Financial Instruments
Financial Instruments | |
12 Months Ended
Mar. 31, 2010 | |
Financial Instruments | (3) Financial Instruments We measure certain financial instruments at fair value on a recurring basis using the following valuation techniques: (A) Market approach Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. (B) Income approach Uses valuation techniques to convert future estimated cash flows to a single present amount based on current market expectations about those future amounts, using present value techniques. The fair values of our financial instruments were determined using the following input levels and valuation techniques at March31, 2010: Fair Value Measurements at Reporting Date Using Valuation Technique Total QuotedPricesinActive Markets for Identical Assets (Level 1) Significant Other ObservableInputs (Level 2) Significant Unobservable Inputs (Level 3) (In millions) Assets Cash equivalents Money-market funds $ 757.6 $ 757.6 $ $ A United States Treasury securities 200.0 200.0 A Certificates of deposit 12.6 12.6 A Short-term and long-term investments United States Treasury securities 50.0 50.0 A Auction rate securities 60.5 60.5 B Mutual funds and other 17.4 17.4 A Foreign currency forward contracts 3.5 3.5 A Auction rate securities put option 1.1 1.1 B Total $ 1,102.7 $ 1,037.6 $ 3.5 $ 61.6 Liabilities Foreign currency forward contracts $ (1.0 ) $ $ (1.0 ) $ A Total $ (1.0 ) $ $ (1.0 ) $ Level 1 classification is applied to any asset or liability that has a readily available quoted market price from an active market where there is significant transparency in the executed/quoted price. Level 2 classification is applied to assets and liabilities that have evaluated prices where the data inputs to these valuations are observable either directly or indirectly, but do not represent quoted market prices from an active market. Level 3 classification is applied to assets and liabilities when prices are not derived from existing market data and requires us to develop our own assumptions about how market participants would price the asset or liability. The following table summarizes the activity in Level 3 financial instruments: Year EndedMarch31, 2010 2009 Auction Rate Securities Put Option Total Auction Rate Securities Put Option Total (In millions) Balance at the beginning of year $ 60.0 $ 2.0 $ 62.0 $ 68.9 $ $ 68.9 Redemption of auction rate securities (4.9 ) (4.9 ) Gain (loss) related to put option included in interest and |
Property and Equipment
Property and Equipment | |
12 Months Ended
Mar. 31, 2010 | |
Property and Equipment | (4) Property and Equipment Property and equipment at March31, 2010 and 2009 consisted of: March31, 2010 2009 (In millions) Computers, software, furniture and equipment $ 493.8 $ 466.1 Leasehold improvements 43.9 41.1 Projects in progress 4.8 6.3 542.5 513.5 Less accumulated depreciation and amortization (447.5 ) (410.5 ) Property and equipment, net $ 95.0 $ 103.0 Property and equipment includes computer equipment procured by us under capital lease arrangements with net book values of $13.7 million and $19.9 million (net of $12.9 million and $6.0 million in accumulated depreciation) at March31, 2010 and 2009, respectively. Depreciation of capital lease equipment is included in depreciation expense. Depreciation expense recorded during fiscal 2010, 2009 and 2008 was $38.2 million, $42.4 million and $45.8 million, respectively. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | |
12 Months Ended
Mar. 31, 2010 | |
Intangible Assets and Goodwill | (5) Intangible Assets and Goodwill Intangible assets at March31, 2010 and 2009 consisted of: March31, 2010 2009 Gross Carrying Amount Net Book Value Gross Carrying Amount Net Book Value (In millions) Acquired technology $ 548.4 $ 88.7 $ 507.2 $ 96.5 Customer relationships 254.3 70.1 243.2 93.4 Tradenames and trademarks 29.3 29.1 Total intangible assets $ 832.0 $ 158.8 $ 779.5 $ 189.9 Amortization of acquired technology totaling $43.8 million, $44.6 million and $27.6 million was included in cost of license revenue in the consolidated statements of operations for fiscal 2010, 2009 and 2008, respectively. Amortization of other intangible assets is included in amortization of intangible assets in the consolidated statements of operations. The weighted average remaining life of acquired technology and customer relationships is approximately 1.8 years and 2.3 years at March31, 2010 and 2009, respectively. Future amortization expense associated with our intangible assets existing at March31, 2010 is expected to be: Year Ending March31, (Inmillions) 2011 $ 76.4 2012 69.6 2013 12.8 $ 158.8 The following table summarizes goodwill activity and ending goodwill balances by operating segment: Enterprise Service Management Mainframe Service Management Total (In millions) Balance at March31, 2008 $ 684.5 $ 72.0 $ 756.5 Goodwill acquired during the year 557.8 557.8 Effect of foreign currency exchange rate changes (25.6 ) (25.6 ) Balance at March31, 2009 1,216.7 72.0 1,288.7 Goodwill acquired during the year 48.5 13.8 62.3 Effect of foreign currency exchange rate changes 14.6 14.6 Balance at March31, 2010 $ 1,279.8 $ 85.8 $ 1,365.6 |
Long-Term Borrowings
Long-Term Borrowings | |
12 Months Ended
Mar. 31, 2010 | |
Long-Term Borrowings | (6) Long-Term Borrowings Long-term borrowings at March31, 2010 and 2009 consisted of: March31, 2010 2009 (In millions) Senior unsecured notes due 2018 (net of $1.5 million and $1.6 million of unamortized discount at March31, 2010 and 2009) $ 298.5 $ 298.4 Capital leases and other obligations 62.6 23.1 Total 361.1 321.5 Less current maturities of capital leases and other obligations (included in accrued liabilities) (20.2 ) (7.9 ) Long-term borrowings $ 340.9 $ 313.6 In June 2008, we issued $300.0 million of senior unsecured notes due in 2018 (the Notes). Net proceeds to us after original issuance discount and issuance costs amounted to $295.6 million, which were used for general corporate purposes. The Notes were issued at an original issuance discount of $1.8 million. The Notes bear interest at a rate of 7.25%per annum payable semi-annually in June and December of each year. The Notes are redeemable at our option at any time in whole or, from time to time, in part at a redemption price equal to the greater of: (i)100% of the principal amount of the Notes to be redeemed, or (ii)the sum of the present values of the remaining scheduled payments of principal and interest discounted at the applicable United States Treasury rate plus 50 basis points, plus accrued and unpaid interest. The Notes are subject to the provisions of an indenture which includes covenants limiting, among other things, the creation of liens securing indebtedness and sale-leaseback transactions. At March31, 2010, we were in compliance with all such debt covenants. |
Deferred Revenue
Deferred Revenue | |
12 Months Ended
Mar. 31, 2010 | |
Deferred Revenue | (7) Deferred Revenue Deferred revenue is comprised of deferred maintenance, license and professional services revenue. Deferred maintenance revenue is not recorded on arrangements with trade payment terms until the related maintenance fees have been collected. The components of deferred revenue at March31, 2010 and 2009 were: March31, 2010 2009 (In millions) Current: Maintenance $ 637.6 $ 637.6 License 319.0 322.2 Professional services 19.3 17.5 Total current deferred revenue 975.9 977.3 Long-term: Maintenance 542.0 521.5 License 305.2 288.7 Professional services 0.4 Total long-term deferred revenue 847.2 810.6 Total deferred revenue $ 1,823.1 $ 1,787.9 |
Income Taxes
Income Taxes | |
12 Months Ended
Mar. 31, 2010 | |
Income Taxes | (8) Income Taxes The income tax provision for fiscal 2010, 2009 and 2008 consists of: Year Ended March31, 2010 2009 2008 (In millions) Current: Federal $ 26.2 $ 62.8 $ 156.3 State (0.5 ) 11.3 10.1 Foreign 44.2 48.6 30.6 Total current 69.9 122.7 197.0 Deferred: Federal 24.6 33.3 (65.0 ) State 4.3 (4.0 ) (7.3 ) Foreign (0.7 ) (26.2 ) (3.9 ) Total deferred 28.2 3.1 (76.2 ) Income tax provision $ 98.1 $ 125.8 $ 120.8 The foreign income tax provision was based on foreign pre-tax earnings of $214.5 million, $173.0 million and $170.4 million for fiscal 2010, 2009 and 2008, respectively. The federal income tax provision includes the United States tax effects of certain foreign entities that are treated as a branch of the United States entity for tax purposes and therefore their earnings are included in the United States consolidated income tax return. A reconciliation of income tax computed at the United States federal statutory rate of 35% to reported income tax expense for fiscal 2010, 2009 and 2008 follows (dollars in millions): Year Ended March31, 2010 2009 2008 Amount Percent Amount Percent Amount Percent Expense computed at United States statutory rate $ 176.5 35.0 % $ 127.4 35.0 % $ 152.0 35.0 % Effect of foreign rate differentials (29.7 ) (5.9 )% (21.9 ) (6.0 )% (27.6 ) (6.4 )% Extraterritorial income and production activities deductions (51.5 ) (10.2 )% (22.3 ) (6.1 )% (25.5 ) (5.8 )% State income taxes, net of federal benefit 3.1 0.6 % 4.7 1.3 % 1.8 0.4 % In-process research and development 24.1 6.6 % 1.4 0.3 % Other, net (0.3 ) 13.8 3.8 % 18.7 4.3 % $ 98.1 19.5 % $ 125.8 34.6 % $ 120.8 27.8 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the related amounts recognized for income tax purposes. The significant components of deferred tax assets and liabilities at March31, 2010 and 2009 were: March31, 2010 2009 (In millions) Deferred tax assets: Deferred revenue $ 60.4 $ 69.6 Compensation plans 49.2 39.4 Propertyand equipment, net 7.8 13.7 Acquired intangible assets 11.7 Net operating loss carryforwards 36.0 46.1 Tax credit carryforwards 2.4 1.0 Other 75.2 76.4 Total gross deferred tax asset 231.0 25 |
Share-Based Compensation
Share-Based Compensation | |
12 Months Ended
Mar. 31, 2010 | |
Share-Based Compensation | (9) Share-Based Compensation We have various share-based compensation plans that authorize, among other types of awards, (i)the discretionary granting of stock options to purchase shares of our common stock, and (ii)the discretionary issuance of nonvested common stock awards directly in the form of time-based, market performance-based and performance-based nonvested stock and units. The share-based awards granted by us generally contain vesting provisions ranging from one to four years, and with respect to stock options granted by us, have a term of not more than ten years from the date of grant. Options granted to employees generally vest monthly over four years and have a term of six years. Options granted to non-employee board members become fully vested within one year from the date of grant and have terms of ten years with respect to grants through fiscal 2008 and six years for all subsequent grants. We granted 0.2million, 5.1million and 5.1million stock options and 3.0million, 3.5million and 0.8million nonvested stock awards during fiscal 2010, 2009 and 2008, respectively. There were no significant modifications made to any share-based grants during these periods. At March31, 2010, there were 16.7million shares available for grant under our share-based compensation plans. However, to the extent that we issue nonvested stock awards from the 2007 and 1994 plans, the plans require us to reduce shares available for grant by a factor of 2.25 shares and 2.0 shares, respectively, for each nonvested stock award actually granted. We also sponsor an employee stock purchase plan that permits eligible employees to acquire shares of our stock at a 15% discount to the lower of the market price of our common stock at the beginning or end of six-month offering periods. Share-based compensation costs for stock options are based on the fair value calculated from the Black-Scholes option-pricing model on the date of grant for stock options and on the first day of the offering period for the employee stock purchase plan. The fair value of nonvested stock awards equals their intrinsic value on the date of grant, except for certain market performance-based nonvested stock awards, for which the fair value is calculated using a Monte Carlo simulation model on the date of grant. The fair values of stock grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is shown in the operating activities section in the consolidated statements of cash flows. We estimate the volatility of our stock price by using a combination of both historical volatility and implied volatility derived from traded options on our common stock in the marketplace. We believe that the combination of historical volatility and implied volatility provides a better estimate of future stock price volatility. The expected term of options granted has been derived from the simplified method allowed by relevant accounting standards, due to changes in vesting terms and contractual lives of current options compared to our historical grants. We base the estimate of the risk-free interest rate on the United St |
Retirement Plans
Retirement Plans | |
12 Months Ended
Mar. 31, 2010 | |
Retirement Plans | (10) Retirement Plans We sponsor a 401(k) plan that is available to substantially all United States employees. The plan provides for an employer match element having annual per-employee limitations that we have changed and may change from time to time. The costs of our matching contributions amounted to $14.5 million, $13.1 million and $6.4 million during fiscal 2010, 2009 and 2008, respectively. Employees become 100% vested in the employer match contributions upon reaching two years of service from date of hire. We also sponsor a non-qualified deferred compensation plan for certain eligible employees. At March31, 2010 and 2009, $17.4 million and $12.3 million, respectively, is included in accrued liabilities, with a corresponding amount included in long-term investments, related to obligations under this plan and related investments held by us. Employees participating in this plan receive distributions of their respective balances based on predetermined payout schedules or other events, as defined by the plan. |
Stockholders' Equity
Stockholders' Equity | |
12 Months Ended
Mar. 31, 2010 | |
Stockholders' Equity | (11) Stockholders Equity Earnings Per Share The two-class method is utilized for the computation of earnings per share (EPS). The two-class method requires a portion of net income be allocated to participating securities, which are unvested awards of share-based payments with nonforfeitable rights to receive dividends or dividend equivalents, if declared. Income allocated to these participating securities is excluded from net earnings allocated to common shares, as shown in the table below. Basic earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options and other dilutive securities using the treasury stock method. The following table summarizes the basic and diluted EPS computations for fiscal 2010, 2009 and 2008: Year Ended March31, 2010 2009 2008 (Inmillions,exceptpershare data) Basic earnings per share: Net earnings $ 406.1 $ 238.1 $ 313.6 Less earnings allocated to participating securities (0.8 ) (1.1 ) (3.3 ) Net earnings allocated to common shares $ 405.3 $ 237.0 $ 310.3 Weighted average number of common shares 183.1 187.1 194.8 Basic earnings per share $ 2.21 $ 1.27 $ 1.59 Diluted earnings per share: Net earnings $ 406.1 $ 238.1 $ 313.6 Less earnings allocated to participating securities (0.8 ) (1.1 ) (3.2 ) Net earnings allocated to common shares $ 405.3 $ 237.0 $ 310.4 Weighted average number of common shares 183.1 187.1 194.8 Incremental shares from assumed conversions of share-based awards 3.7 3.1 4.8 Adjusted weighted average number of common shares 186.8 190.2 199.6 Diluted earnings per share $ 2.17 $ 1.25 $ 1.56 For the years ended March31, 2010, 2009 and 2008, 5.2million, 10.5million and 6.0million weighted average potential common shares, respectively, have been excluded from the calculation of diluted EPS as they were anti-dilutive. Treasury Stock Our Board of Directors had previously authorized a total of $3.0 billion to repurchase common stock. During fiscal 2010, 2009 and 2008, 7.5million, 10.7million and 18.2million shares, respectively, were purchased for $275.1 million, $330.0 million, and $579.6 million, respectively, under these authorizations. At March31, 2010, there was approximately $69.8 million remaining in this stock repurchase program, which does not have an expiration date. In April 2010, our Board of Directors authorized an additional $1.0 billion to repurchase stock. In addition, dur |
Guarantees, Commitments and Con
Guarantees, Commitments and Contingencies | |
12 Months Ended
Mar. 31, 2010 | |
Guarantees, Commitments and Contingencies | (12) Guarantees, Commitments and Contingencies Guarantees Under our standard software license agreements, we agree to indemnify, defend and hold harmless our licensees from and against certain losses, damages and costs arising from claims alleging the licensees use of our software infringes the intellectual property rights of a third party. Also, under these standard license agreements, we represent and warrant to licensees that our software products operate substantially in accordance with published specifications. Other guarantees include promises to indemnify, defend and hold harmless each of our executive officers, non-employee directors and certain key employees from and against losses, damages and costs incurred by each such individual in administrative, legal or investigative proceedings arising from alleged wrongdoing by the individual while acting in good faith within the scope of his or her job duties on our behalf. We also had outstanding letters of credit, performance bonds and similar instruments related to various customer, facilities and other obligations at March31, 2010 of approximately $43.6 million. Historically, we have not incurred significant costs related to such indemnifications, warranties and guarantees. As such, and based on other factors, no provision or accrual for these items has been made. Lease Commitments We lease office space and equipment under various non-cancelable operating leases. Rent expense is recognized on a straight-line basis over the respective lease terms and amounted to $48.1 million, $57.5 million and $51.6 million during fiscal 2010, 2009 and 2008, respectively. In fiscal 2007, we sold our headquarters campus and three surrounding undeveloped land parcels located in Houston, Texas for approximately $291.9 million in cash, net of closing costs. In connection with the sale of the buildings, we entered into a 15 year lease agreement for the occupied space which expires in June 2021, with the option to terminate the lease in June 2015 and options to renew the lease through June 2041 at market rates. Accordingly, we deferred and are amortizing the gain of approximately $24.2 million as a reduction to rent expense on a straight-line basis over the lease term. The lease agreement includes five scheduled rent increases over its term. Rent expense is being recognized on a straight-line basis over the lease term. The following table summarizes future minimum lease payments to be made under non-cancelable operating leases and minimum sublease payments to be received under non-cancelable subleases at March31, 2010: YearEnding March31, (In millions) 2011 $ 39.2 2012 31.6 2013 24.9 2014 20.1 2015 12.4 2016 and thereafter 14.0 Total minimum lease payments 142.2 Total minimum sublease payments (8.0 ) Total net minimum lease payments $ 134.2 We have procured certain equipment under non-cancelable capital lease arrangements. The current and long-term portions of these capital lease obligations, which are included in accrued liabilities and long-term borrowings, |
Segment Reporting
Segment Reporting | |
12 Months Ended
Mar. 31, 2010 | |
Segment Reporting | (13) Segment Reporting We are organized into two business segments, ESM and MSM. The ESM segment derives its revenue from our service support, service assurance and service automation solutions, along with professional services revenue derived from consulting, implementation, integration and educational services related to our software products. The MSM segment derives its revenue from products for mainframe database management, monitoring and automation, enterprise scheduling and output management solutions. Segment performance is measured based on segment operating income, reflecting segment revenue less direct and allocated indirect segment operating expenses. Direct segment operating expenses primarily include cost of revenue, selling and marketing, research and development and general and administrative expenses that can be specifically identified to a particular segment and are directly controllable by segment management, while allocated indirect segment operating expenses primarily include indirect costs within these operating expense categories that are not specifically identified to a particular segment or controllable by segment management. The indirect operating expenses are allocated to the segments based on budgeted bookings, revenue and other allocation methods that management believes to be reasonable. Our measure of segment operating income does not include the effect of share-based compensation expenses, amortization of acquired technology and other intangible assets, the write-off of purchased IPRD or the costs associated with severance and exit activities described in Note 14, which are collectively included in unallocated operating expenses below. Assets and liabilities are reviewed by management at the consolidated level only. The table below summarizes segment performance for fiscal 2010, 2009 and 2008. The prior year information has been reclassified to conform to our current segment reporting methodology. Year Ended March31, 2010 Enterprise Service Management Mainframe Service Management Consolidated (In millions) Revenue: License $ 462.2 $ 296.2 $ 758.4 Maintenance 550.9 472.8 1,023.7 Professional services 129.1 129.1 Total revenue 1,142.2 769.0 1,911.2 Direct and allocated indirect segment operating expenses 902.2 334.5 1,236.7 Segment operating income 240.0 434.5 674.5 Unallocated operating expenses (168.4 ) Other loss, net (1.9 ) Earnings before income taxes $ 504.2 Year Ended March31, 2009 Enterprise Service Management Mainframe Service Management Consolidated (In millions) Revenue: License $ 434.9 $ 274.8 $ 709.7 Maintenance 547.3 470.5 1,017.8 Professional services 144.4 144.4 Total revenue 1,126.6 745.3 1,871.9 Direct and allocated indirect segment operating expenses 938.0 |
Severance, Exit Costs and Relat
Severance, Exit Costs and Related Charges | |
12 Months Ended
Mar. 31, 2010 | |
Severance, Exit Costs and Related Charges | (14) Severance, Exit Costs and Related Charges We have undertaken various restructuring and process improvement initiatives in recent years through the realignment of resources to focus on growth areas and the simplification, standardization and automation of key business processes. These process and realignment initiatives include workforce reductions across all functions and geographies, and the affected employees were, or will be, provided cash separation packages. As part of these initiatives, we have also exited certain leases, reduced the square footage required to operate certain locations and relocated some operations to lower cost facilities. As a result of these initiatives, we identified for termination approximately 140 and 250 employees during fiscal 2009 and 2008, respectively. Additionally, as a result of current economic conditions, we undertook a general workforce reduction of approximately 80 and 380 employees during fiscal 2010 and 2009, respectively. This general reduction was across all functions and geographies, and the affected employees were, or will be, provided cash separation packages. Activity related to fiscal 2008, 2009 and 2010 restructuring actions is summarized as follows: Balanceat April 1, 2007 Charged toExpense Adjustments toEstimates Foreign Exchange Adjustments Accretion CashPayments, Net of Sublease Income Balance at March31, 2008 (In millions) Process and realignment initiatives: Severance and related costs $ 17.0 $ 17.5 $ (3.3 ) $ 0.7 $ $ (23.3 ) $ 8.6 Facilities 16.3 2.2 (1.7 ) 0.5 (9.7 ) 7.6 Total accrued $ 33.3 $ 19.7 $ (5.0 ) $ 0.7 $ 0.5 $ (33.0 ) $ 16.2 Balanceat April 1, 2008 Charged toExpense Adjustments toEstimates Foreign Exchange Adjustments Accretion CashPayments, Net of Sublease Income Balance at March31, 2009 (In millions) Process and realignment initiatives: Severance and related costs $ 8.6 $ 12.3 $ (3.6 ) $ (0.6 ) $ $ (15.5 ) $ 1.2 Facilities 7.6 6.0 (0.4 ) 0.3 (5.8 ) 7.7 16.2 18.3 (4.0 ) (0.6 ) 0.3 (21.3 ) 8.9 General workforce reduction: Severance and related costs 20.3 (1.1 ) 0.1 (11.7 ) 7.6 Total accrued $ 16.2 $ 38.6 $ (5.1 ) $ (0.5 ) $ 0.3 $ (33.0 ) $ 16.5 Balanceat April 1, 2009 Charged toExpense Adjustments toEstimates Foreign Exchange Adjustments Accretion CashPayments, Net of Sublease Income Balanceat March31, 2010 (In millions) Process and realignment initiatives: |
New Accounting Pronouncements N
New Accounting Pronouncements Not Yet Adopted | |
12 Months Ended
Mar. 31, 2010 | |
New Accounting Pronouncements Not Yet Adopted | (15) New Accounting Pronouncements Not Yet Adopted In October2009, the FASB issued new revenue recognition guidance for arrangements that include both software and non-software related deliverables, where certain of those deliverables are non-software related. This guidance requires entities to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of VSOE or other third party evidence of the selling price. Additionally, the guidance modifies the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The new guidance is effective for us in the first quarter of fiscal 2012 interim financial statements, with earlier adoption permitted. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements. In June 2009, the FASB issued new guidance on accounting for transfers of financial assets, which amended previous GAAP literature. The amendment includes: (i)elimination of the qualifying special-purpose entity concept, (ii)a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, (iii)clarifications and changes to the derecognition criteria for a transfer to be accounted for as a sale, (iv)a change to the amount of recognized gain or loss on a transfer of financial assets accounted for as a sale when beneficial interests are received by the transferor, and (v)extensive new disclosures. This guidance is effective for us beginning in fiscal 2011 and is not expected to have a material effect on our financial position, results of operations or cash flows. |
Quarterly Results
Quarterly Results (Unaudited) | |
12 Months Ended
Mar. 31, 2010 | |
Quarterly Results (Unaudited) | (16) Quarterly Results (Unaudited) The following table sets forth certain unaudited quarterly financial data for fiscal 2010 and 2009. This information has been prepared on the same basis as the accompanying consolidated financial statements and all necessary adjustments have been included in the amounts below to present fairly the selected quarterly information when read in conjunction with the accompanying consolidated financial statements and notes thereto. Fiscal 2010 Fiscal 2009 Quarter Ended Quarter Ended June30, 2009 Sept.30, 2009 Dec. 31, 2009 Mar.31, 2010 June30, 2008 Sept.30, 2008 Dec. 31, 2008 Mar. 31, 2009 (In millions, except per share data) Total revenue $ 450.0 $ 461.8 $ 508.1 $ 491.3 $ 437.5 $ 466.7 $ 488.4 $ 479.3 Gross profit $ 351.4 $ 366.8 $ 403.7 $ 378.1 $ 334.2 $ 354.3 $ 385.2 $ 373.2 Operating income $ 108.2 $ 134.8 $ 147.6 $ 115.5 $ 13.3 $ 105.5 $ 128.7 $ 120.3 Net earnings $ 82.4 $ 94.2 $ 110.7 $ 118.8 $ 1.2 $ 69.8 $ 83.8 $ 83.3 Basic EPS $ 0.45 $ 0.51 $ 0.60 $ 0.65 $ 0.01 $ 0.37 $ 0.45 $ 0.45 Diluted EPS $ 0.44 $ 0.50 $ 0.59 $ 0.64 $ 0.01 $ 0.36 $ 0.44 $ 0.44 Shares used in computing basic EPS 184.3 183.5 182.8 182.0 188.8 188.8 186.0 184.2 Shares used in computing diluted EPS 187.9 187.0 186.5 185.7 192.9 192.2 188.3 186.9 We incurred severance, exit costs and related charges totaling $1.0 million, $0.5 million, $1.0 million and $0.5 million during the quarters ended June30, 2009,September30, 2009,December31, 2009 and March31, 2010, respectively, and totaling $6.4 million, $1.5 million, $16.0 million, and $9.6 million during the quarters ended June30, 2008,September30, 2008,December31, 2008 and March31, 2009, respectively. Refer to Note 14 for further information. We recorded a $50.3 million charge for purchased IPRD of BladeLogic during the quarter ended June30, 2008, as further discussed in Note 2, and an $8.4 million impairment charge in connection with the write-down of certain non-marketable equity investments to their fair values during the quarter ended December31, 2008. We recorded a net tax benefit of $30.0 million related to the settlement of certain tax matters during the quarter ended March31, 2010 as further discussed in Note 8. |