UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2007
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
Commission file number 0-20900
COMPUWARE CORPORATION ESOP/401(k) PLAN
(Full title of the plan)
Compuware Corporation
One Campus Martius
Detroit, Michigan 48226
COMPUWARE CORPORATION ESOP/401(K) PLAN
Financial Statements as of and for the Years Ended March 31, 2007 and 2006,
Supplemental Schedule as of March 31, 2007 and Independent Auditors' Report
COMPUWARE CORPORATION ESOP/401(K) PLAN
TABLE OF CONTENTS
PAGE
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................ 3
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
MARCH 31, 2007 and 2006:
Statements of Net Assets Available for Benefits ..................... 4
Statements of Changes in Net Assets Available for Benefits .......... 5
Notes to Financial Statements ....................................... 6- 10
SUPPLEMENTAL SCHEDULE AS OF MARCH 31, 2007: ............................ 11
Form 5500, Schedule H, Part IV, Line 4i--Schedule of Assets
(Held at End of Year) ............................................ 12
All other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 have been omitted because they are not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Compuware
Corporation, which administers the Plan, has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
Compuware Corporation
ESOP/401(k) Plan
Date: September 25, 2007 By: \S\ Laura L. Fournier
------------------------------------
Laura L. Fournier
Senior Vice President and
Chief Financial Officer
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator
Compuware Corporation ESOP/401(k) Plan
Detroit, Michigan
We have audited the accompanying statements of net assets available for benefits
of the Compuware Corporation ESOP/401(k) Plan (Plan) as of March 31, 2007 and
2006 and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
March 31, 2007 and 2006 and the changes in net assets available for benefits for
the years then ended, in conformity with U.S. generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic 2007 financial statements and, in
our opinion, is fairly stated in all material respects in relation to the basic
2007 financial statements taken as a whole.
(CROWE CHIZEK AND COMPANY LLC)
Crowe Chizek and Company LLC
South Bend, Indiana
September 19, 2007
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COMPUWARE CORPORATION ESOP/401(K) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
MARCH 31, 2007 AND 2006
2007 2006
------------ ------------
ASSETS:
Investments--at fair value:
Common Stock--Compuware Corporation $ 92,357,967 $ 87,484,023
Commingled Pool - Fidelity U.S. Equity Index 59,576,200 58,376,577
Unitized Fund - State Street Global Advisors
Mid-Cap Blend Unitized Fund 61,150,728 63,274,353
Mutual Funds:
Short-term securities 37,521,538 33,316,736
Bonds (government and corporate) 38,480,611 35,340,730
Equity 219,619,652 193,310,643
Real estate 13,598,031 8,584,475
Participant loans 5,258,886 4,973,654
------------ ------------
Total investments 527,563,613 484,661,191
Other receivable 143,345 39,173
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $527,706,958 $484,700,364
============ ============
The accompanying notes are an integral part of the financial statements
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COMPUWARE CORPORATION ESOP/401(K) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED MARCH 31, 2007 AND 2006
2007 2006
------------ ------------
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO:
Investment income:
Interest and dividends $ 18,405,223 $ 13,373,807
Net appreciation in fair value of
Compuware Corporation common stock 16,657,288 8,240,449
Net appreciation in fair value of Fidelity
U.S. Equity Index Commingled Pool 6,500,001 6,426,653
Net appreciation in fair value of State
Street Global Advisors Mid-Cap Blend
Unitized Fund 6,783,844 1,151,998
Net appreciation in fair value of Mutual Funds 11,277,491 39,413,383
------------ ------------
Total investment income 59,623,847 68,606,290
Contributions:
Employee 29,179,820 28,297,287
Employer non-cash contribution 200,794
Participant rollover 2,911,030 1,378,894
------------ ------------
Total contributions 32,291,644 29,676,181
------------ ------------
Total additions 91,915,491 98,282,471
------------ ------------
REDUCTIONS IN NET ASSETS ATTRIBUTABLE TO:
Benefits paid to participants 48,908,699 49,762,606
Administrative and other expenses 56,609 18,972
------------ ------------
Total reductions 48,965,308 49,781,578
------------ ------------
NET INCREASE 42,950,183 48,500,893
Plan mergers (Note 6) 56,411 855,224
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 484,700,364 435,344,247
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS--End of year $527,706,958 $484,700,364
============ ============
The accompanying notes are an integral part of the financial statements
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COMPUWARE CORPORATION ESOP/401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2007 AND 2006
1. GENERAL DESCRIPTION OF THE PLAN
The following description of the Compuware Corporation (Company)
ESOP/401(k) Plan (Plan) provides only general information. The Plan
document should be referred to for a more complete description of the
Plan's provisions.
GENERAL--The Plan is a defined contribution plan with two benefit features:
an Employee Stock Ownership Plan (ESOP) and a 401(k) Plan. The assets for
both features are combined in a common trust. All U.S. employees that are
salaried or part-time hourly, as well as certain full-time hourly
employees, meeting the eligibility requirements, will receive any
discretionary employer ESOP contribution. The 401(k) feature covers all
full-time and part-time U.S. employees of the Company who have completed
one hour of service. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). Compuware has entered into
a trust agreement with Fidelity Management Trust Company (Fidelity)
appointing Fidelity to act as trustee of the Plan.
CONTRIBUTIONS--ESOP--Employer contributions to the ESOP are at the
discretion of the Company's Board of Directors, subject to a maximum of 25%
of eligible compensation. Contributions may be made in cash, in Company
stock or a combination of both and are valued based upon the quoted market
price of the Company common stock on the date of contribution. During the
2007 Plan year, the company contributed $200,794 in Company stock to the
Plan. During the 2006 Plan year, the Company's Board of Directors
determined not to make an ESOP contribution.
CONTRIBUTIONS--401(K)--Participants in the Plan may elect to defer up to
75% of their pay per pay period on a pre-tax basis, and up to 10% of their
pay per pay period on an after-tax basis, with a combined maximum limit of
85% for investment in the Plan. Effective January 3, 2006, the Plan
initiated an opt-out clause wherein unless an active participant with an
employment commencement date on or after January 3, 2006 elects otherwise,
they are deemed to have elected to make an automatic pre-tax contributions
of 2% in the Plan. The automatic pre-tax contribution is effective as soon
as administratively possible after 90 days from the employment date.
The amount of pay deferral contributions for each participant is limited to
$15,500 during the 2007 calendar year and $15,000 during the 2006 calendar
year based on the applicable provisions of the Internal Revenue Code.
Participants who reach age 50 during the calendar year and are making the
maximum Internal Revenue Service pre-tax contribution may make additional
pre-tax "catch-up" contributions in accordance with the provisions of Code
Section 414(v). The maximum annual catch-up contribution is $5,000 for 2007
and $5,000 for 2006.
PARTICIPANTS' ACCOUNTS--ESOP--Company contributions to the ESOP are
allocated to eligible individual participant accounts. These amounts are
not subject to the individual participant's investment direction until the
contribution has been allocated to the participant's account for at least
two years, and the participant is fully vested.
PARTICIPANTS' ACCOUNTS--401(K)--All Plan withholdings contributed to the
Plan are deposited in each participant's account according to the
investment option(s) selected by the participant. Earnings on investments,
net of investment management fees, are allocated to participants' accounts
based on the actual earnings of the investment funds selected by the
participants.
VESTING--ESOP--Participants are vested based on the number of years of
service. Vesting begins after three years of service, with full vesting
occurring after seven years of service for employees that terminated their
employment.
VESTING--401(K)--All participant contributions and earnings thereon are
fully vested.
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FORFEITED ACCOUNTS - ESOP--During the Plan year ended March 31, 2007 and
2006, forfeited nonvested accounts totaled $692,307 and $2,987,929,
respectively. These accounts may be allocated to remaining participants in
the same manner as Company ESOP contributions. During the 2007 plan year,
in accordance with the 5th amendment to the Plan dated May 23, 2006, all
eligible participants received a contribution of 100 shares of company
stock. This amendment applies to the 2007 plan year only. The primary
source of this allocation was from the forfeiture account.
PARTICIPANT LOANS--Participants may have only two outstanding loans at any
time. Effective January 3, 2006, loans must originate from assets in the
401(k) portion of the participants' accounts. Prior to January 3, 2006,
participants were allowed to have one loan originating from the ESOP
allocations and one loan from the remaining portion of their 401(k) Plan
account, excluding certain amounts from plan mergers.
The maximum loan amount is equal to the lesser of $50,000 or 50% of their
vested balance (excluding the ESOP source beginning January 3, 2006) minus
the highest outstanding loan balance in the past 12 months. Generally, loan
terms range from 6 to 60 months. The loans are secured by the balance in
the participant's account. Interest is paid quarterly at 1% above the Prime
Interest Rate. Interest rates on loans currently outstanding range from 5%
to 10%. Principal and interest is paid ratably through semi-monthly payroll
deductions for salaried employees and via Fidelity's loan coupon service
for hourly employees, terminated employees and rehires.
PAYMENT OF BENEFITS--On termination of service due to death, disability,
retirement, or other reasons, a participant may request to receive a
lump-sum amount equal to the value of the participant's vested interest in
the account. Benefit payments from merged plans shall be payable in such
other forms as were permitted under the terms of the merged plan from which
they were transferred.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING--The financial statements of the Plan are prepared on
an accrual basis in accordance with U.S. generally accepted accounting
principles.
INVESTMENT VALUATION--The Plan's investments are stated at fair value as of
the financial statement date. The Plan's investment in Company stock is
valued at its quoted market price of $9.49 and $7.83 at March 31, 2007 and
2006, respectively. The Plan's investments in all other common stocks and
mutual funds are valued at fair value as determined by quoted market
prices. Investments in commingled investment pools are valued at estimated
fair value as determined by the Plan Trustee based upon the market prices
of the underlying investments. Investments in the unitized fund are valued
at estimated fair value based upon the market prices of the underlying
investments, which include investments in collective investment funds and
registered investment companies valued at the net asset value per
share/unit on the valuation date, and short-term investments which are
stated at amortized cost, which approximates fair value. Participant loans
receivable are valued at cost plus accrued interest, which approximates
fair value.
Net appreciation or depreciation in fair value of investments is determined
using the fair value at the beginning of the year or purchase price, if
acquired since that date, and is presented in the statements of changes in
net assets available for benefits. Purchases and sales of securities are
recorded on a trade-date basis. Interest and dividend income are reported
as earned.
USE OF ESTIMATES--The preparation of the financial statements in conformity
with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of net
assets available for benefits at March 31, 2007 and 2006, and the reported
amounts of changes in net assets available for benefits during the years
then ended. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES--The Plan invests in various securities including
mutual funds and corporate stocks. Investment securities, in general, are
exposed to various risks, such as interest rate, credit and overall market
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volatility. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes
could materially affect the amounts reported in the statements of net
assets available for benefits and participants' individual account
balances. The Company common stock held by the Plan as of March 31, 2007
has been valued at its quoted market price as of the 2007 financial
statement date of $9.49 per share.
PLAN EXPENSES-- During the Plan year, Plan expenses consisting primarily of
fees to the recordkeeper, were expensed when incurred. Certain other
expenses were absorbed by the Company. Beginning in the first calendar
quarter of 2007, the forfeited cash reserves will be used to pay the Plan's
future administrative expenses.
BENEFIT PAYMENTS--Payments for benefits are recorded when paid.
3. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of plan
termination, participants will become fully vested in their accounts.
4. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated December 1, 2003, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code. The
Plan has been amended since the receipt of the determination letter.
However, the Plan Administrator believes the Plan is designed and is
currently being operated in accordance with applicable provisions of the
Internal Revenue Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
5. PARTIES-IN-INTEREST
Parties-in-interest are defined under Department of Labor regulations as
any fiduciary of the plan, any party rendering service to the Plan, the
employer, and certain others. Certain investments of the Plan are shares of
mutual funds and a commingled pool fund which are offered by Fidelity
Investments, an affiliate of Fidelity Management Trust Company
(collectively, Fidelity). Fidelity is the Plan trustee and, therefore,
these transactions and the Plan's payment of trustee fees to Fidelity
qualify as party-in-interest transactions. The Plan also invests in shares
of common stock issued by Compuware Corporation, which qualifies as a
party-in-interest investment. Further, participant loan transactions and
investments are also party-in-interest transactions.
The 9,732,136 and 11,172,928 shares of Compuware Corporation common stock
held by the Plan as of March 31, 2007 and 2006 represent approximately 3.2%
and 2.9% of the Company's outstanding shares as of March 31, 2007 and 2006.
The Company common stock held by the Plan as of March 31, 2007 and 2006 has
been valued at its quoted market price as of the 2007 and 2006 financial
statement date of $9.49 and $7.83 per share.
There were no cash dividends paid to the Plan by Compuware Corporation
during the plan year end March 31, 2007 and 2006. Total appreciation for
the Compuware Corporation common stock for the plan year ended March 31,
2007 and 2006 was $16,657,288 and $8,240,449, respectively. This is
included in net appreciation per the Statement of Changes in Net Assets
Available for Benefits.
6. PLAN MERGERS
On August 2, 2006, the Plan was merged with the Providerlink 401(k) Plan.
All of the assets of the Providerlink 401(k) Plan were transferred to the
Plan, causing the dissolution of the Providerlink 401(k) Plan. Each
participant in the Providerlink 401(k) Plan became eligible to participate
in the plan upon, or before, the effective date of the merger.
-8-
On September 1, 2005, the Plan was merged with the Gevity 401(k) Plan -
ChangePoint Group. All of the assets of the Gevity 401(k) Plan -
ChangePoint Group were transferred to the Plan, causing the dissolution of
the Gevity 401(k) Plan - ChangePoint Group. Each participant in the Gevity
401(k) Plan - ChangePoint Group became eligible to participate in the plan
upon, or before, the effective date of the merger.
On September 2, 2005, the Plan was merged with the Adlex Corporation 401(k)
Profit Sharing Plan. All of the assets of the Adlex Corporation 401(k)
Profit Sharing Plan were transferred to the Plan, causing the dissolution
of the Adlex Corporation 401(k) Profit Sharing Plan. Each participant in
the Adlex Corporation 401(k) Profit Sharing Plan became eligible to
participate in the plan upon, or before, the effective date of the merger.
7. INVESTMENTS
The fair value of individual investments that represent 5% or more of the
Plan's assets available for benefits are as follows:
2007 2006
---------- ----------
Compuware Corporation Common Stock:
ESOP* (8,249,279 and 9,285,910 shares, respectively) $78,285,654 $72,708,676
401(k) (1,482,857 and 1,887,018 shares, respectively) 14,072,313 14,775,347
Fidelity Equity Income Fund 40,450,253 33,493,737
Fidelity Diversified International Fund 60,769,816 51,484,822
Fidelity Retirement Money Market Fund 33,529,848 29,551,242
Fidelity U.S Bond Index 26,893,645 25,587,294
Fidelity U.S. Equity Index Commingled Pool 59,576,200 58,376,577
State Street Global Advisors Mid-Cap Blend Unitized Fund 61,150,728 63,274,353
* Non-participant directed
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8. FUND INFORMATION
Investment income, participant contributions, employer contributions,
benefits paid to participants, administrative and other expenses and
exchanges are as follows for the years ended March 31, 2007 and 2006:
NON-PARTICIPANT DIRECTED
---------------------------
COMPUWARE COMPUWARE
COMMON STOCK COMMON STOCK PARTICIPANT
ESOP* LOAN DIRECTED TOTAL
------------ ------------ ------------ ------------
BEGINNING BALANCE--MARCH 31, 2006 $72,713,009 $ 594,819 $411,392,536 $484,700,364
INVESTMENT INCOME 13,928,001 26,662 45,669,184 59,623,847
CONTRIBUTIONS:
Employee -- -- 29,179,820 29,179,820
Employer 758,377 -- (557,583) 200,794
Participant rollover 2,911,030 2,911,030
----------- ----------- ------------ ------------
Total contributions 758,377 31,533,267 32,291,644
BENEFITS PAID TO PARTICIPANTS 6,491,346 23,551 42,393,802 48,908,699
ADMINISTRATIVE AND OTHER
EXPENSES 26,026 -- 30,583 56,609
PLAN MERGERS -- -- 56,411 56,411
EXCHANGES (1,911,927) (284,706) 2,196,633 --
----------- ----------- ------------ ------------
ENDING BALANCE--MARCH 31, 2007 $78,970,088 $ 313,224 $448,423,646 $527,706,958
=========== =========== ============ ============
COMMON STOCK COMMON STOCK PARTICIPANT
ESOP* LOAN DIRECTED TOTAL
------------ ------------ ------------ ------------
BEGINNING BALANCE--MARCH 31, 2005 $74,554,316 $661,513 $360,128,418 $435,344,247
INVESTMENT INCOME 6,724,171 39,619 61,842,500 68,606,290
CONTRIBUTIONS:
Employee -- -- 28,297,287 28,297,287
Participant rollover -- -- 1,378,894 1,378,894
----------- -------- ------------ ------------
Total contributions -- -- 29,676,181 29,676,181
BENEFITS PAID TO PARTICIPANTS 7,875,490 39,685 41,847,431 49,762,606
ADMINISTRATIVE AND OTHER
EXPENSES -- -- 18,972 18,972
PLAN MERGERS -- -- 855,224 855,224
EXCHANGES (689,988) (66,628) 756,616 --
----------- -------- ------------ ------------
ENDING BALANCE--MARCH 31, 2006 $72,713,009 $594,819 $411,392,536 $484,700,364
=========== ======== ============ ============
* This Balance includes previously forfeited amounts held within the money
market accounts.
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SUPPLEMENTAL SCHEDULE
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COMPUWARE CORPORATION ESOP/401(K) PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4I--
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
MARCH 31, 2007
IDENTITY OF ISSUE, DESCRIPTION OF INVESTMENT INCLUDING
BORROWER, MATURITY DATE, RATE OF INTEREST, COLLATERAL CURRENT
LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE (IN SHARES) COST VALUE
- ----------------------- ---------------------------------------------------- ----------- ------------
* Compuware Corporation Compuware Corporation Common Stock; 9,732,136 shares $55,667,251 $ 92,357,967
* Fidelity Equity Income Fund; 694,663 units 36,427,878 40,450,252
* Fidelity Diversified International Fund; 1,595,427 units 42,266,457 60,769,816
* Fidelity Dividend Growth Fund; 532,295 units 14,831,952 16,905,696
American Funds Growth Fund of America - Class A Fund; 440,963 units 12,630,300 14,697,296
* Fidelity Retirement Money - Market Fund; 33,529,848 units 33,529,848 33,529,848
* Fidelity U.S. Bond Index Fund; 2,467,307 units 26,846,164 26,893,645
* Fidelity Institutional Short - Intermediate Government Fund;
419,295 units 4,004,483 3,991,690
Domini Social Equity Fund; 21,999 units 635,011 740,478
PIMCO Foreign Bond Index Fund; 405,229 units 4,235,926 4,121,177
Laudus Rosenberg U.S. Small Capitalization Fund; 726,990 units 9,552,687 9,138,266
Nicholas Applegate High Yield Bond Fund; 727,660 units 7,339,293 7,465,789
Janus Twenty Fund; 405,782 units 19,585,354 22,744,094
MSIFT Mid-Cap Growth Fund; 601,139 units 14,150,078 16,447,174
Managers Special Equity; 60,502 units 5,155,239 5,257,633
* Fidelity Real Estate Investments; 360,786 units 12,966,857 13,598,031
Lord Abbett Cap Value Fund; 796,043 units 16,465,840 18,372,667
* Fidelity U.S. Equity Index Commingled Pool Fund; 1,303,922
units 44,073,109 59,576,200
State Street Global
Advisors Mid-Cap Blend Unitized Fund; 2,290,019 units 53,820,186 61,150,728
American Funds New Perspective R5 Fund; 436,147 units 12,532,098 14,096,280
* Participants Loans to participants (interest rates of 5%
to 10%) 5,258,886
------------
Total assets held for investment purposes $527,563,613
============
* Party-in-interest
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