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

For the quarterly period ended December 31, 2008

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period ended from                      to                     

CA, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-2857434
(State or other jurisdiction of		(I.R.S. Employer Identification
incorporation or organization)		Number)
One CA Plaza
Islandia, New York		11749
(Address of principal executive offices)		(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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o     No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

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		as of January 22, 2009
par value $0.10 per share		518,867,425

 

 

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
		Condensed Consolidated Balance Sheets — December 31, 2008 and March 31, 2008			2
		Condensed Consolidated Statements of Operations — Three and Nine Months Ended December 31, 2008 and 2007			3
		Condensed Consolidated Statements of Cash Flows — Nine Months Ended December 31, 2008 and 2007			4
		Notes to the Condensed Consolidated Financial Statements			5
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
		Overview			25
		Quarterly Update			26
		Performance Indicators			27
		Results of Operations			30
		Liquidity and Capital Resources			36
		Critical Accounting Policies and Business Practices			42
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			44
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			46
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			48
EX-10.1: FIRST AMENDMENT TO COMPENSATORY PLAN
EX-10.2: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.3: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.4: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.5: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.6: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.7: LETTER REGARDING TERMS OF EMPLOYMENT
EX-10.8: AMENDMENT TO LETTER REGARDING TERMS OF EMPLOYMENT
EX-12.1: STATEMENT OF RATIOS OF EARNINGS TO FIXED CHARGES
EX-15: ACCOUNTANTS' ACKNOWLEDGEMENT LETTER
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

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, 2008, the related condensed consolidated statements of operations for the three-month and nine-month periods ended December 31, 2008 and 2007, and the related condensed consolidated statements of cash flows for the nine-month periods ended December 31, 2008 and 2007. 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 standards established by the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of CA, Inc. and subsidiaries as of March 31, 2008, 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 23, 2008, which contains an explanatory paragraph relating to the adoption, effective April 1, 2007, of the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 and an explanatory paragraph relating to the Company’s change, during the fourth quarter of fiscal year 2008, of its method of accounting for accounts receivable and unearned revenue on billed and uncollected amounts due from customers from a “net method of presentation” to a “gross method of presentation,” 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, 2008, 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 30, 2009

Item 1.

CA, INC. AND SUBSIDIARIES

(in millions, except share and per share amounts)

		December 31,				March 31,
		2008				2008
		(unaudited)
ASSETS
CURRENT ASSETS
Cash, cash equivalents and marketable securities		$	2,369			$	2,796
Trade and installment accounts receivable, net			879				970
Deferred income taxes — current			453				623
Other current assets			139				79
TOTAL CURRENT ASSETS			3,840				4,468
Installment accounts receivable, due after one year, net			129				234
Property and equipment, net of accumulated depreciation of $1,010 and $996, respectively			452				496
Purchased software products, net			165				171
Goodwill			5,348				5,351
Deferred income taxes — noncurrent			237				293
Other noncurrent assets, net			721				743
TOTAL ASSETS		$	10,892			$	11,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt and loans payable		$	826			$	361
Accounts payable			91				152
Accrued salaries, wages and commissions			258				400
Accrued expenses and other current liabilities			382				439
Deferred revenue (billed or collected) — current			2,146				2,664
Taxes payable, other than income taxes payable — current			73				97
Federal, state and foreign income taxes payable — current			127				59
Deferred income taxes — current			90				106
TOTAL CURRENT LIABILITIES			3,993				4,278
Long-term debt, net of current portion			1,292				2,221
Deferred income taxes — noncurrent			115				200
Deferred revenue (billed or collected) — noncurrent			956				1,036
Federal, state and foreign income taxes payable — noncurrent			195				225
Other noncurrent liabilities			72				87
TOTAL LIABILITIES			6,623				8,047
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; 514,182,668 and 509,782,514 shares outstanding, respectively			59				59
Additional paid-in capital			3,527				3,566
Retained earnings			2,733				2,173
Accumulated other comprehensive loss			(174	)			(101	)
Treasury stock, at cost, 75,512,413 shares and 79,912,567 shares, respectively			(1,876	)			(1,988	)
TOTAL STOCKHOLDERS’ EQUITY			4,269				3,709
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	10,892			$	11,756

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,
		2008				2007				2008				2007
REVENUE
Subscription and maintenance revenue		$	919			$	968			$	2,859			$	2,811
Professional services			87				92				274				280
Software fees and other			36				40				103				101
TOTAL REVENUE			1,042				1,100				3,236				3,192
EXPENSES
Costs of licensing and maintenance			70				64				225				199
Cost of professional services			76				92				239				278
Amortization of capitalized software costs			31				29				91				87
Selling and marketing			307				333				915				956
General and administrative			110				123				342				406
Product development and enhancements			115				135				358				390
Depreciation and amortization of other intangible assets			36				40				109				117
Other (gains) expenses, net			(14	)			13				4				8
Restructuring and other			2				22				6				47
TOTAL EXPENSES BEFORE INTEREST AND TAXES			733				851				2,289				2,488
Income before interest and income taxes			309				249				947				704
Interest expense, net			8				10				14				37
Income before income taxes			301				239				933				667
Income tax expense			88				76				311				238
NET INCOME		$	213			$	163			$	622			$	429
BASIC INCOME PER SHARE		$	0.41			$	0.32			$	1.21			$	0.83
Basic weighted average shares used in computation			514				510				513				515
DILUTED INCOME PER SHARE		$	0.40			$	0.31			$	1.16			$	0.80
Diluted weighted average shares used in computation			539				536				540				541

See accompanying Notes to the Condensed Consolidated Financial Statements.

CA, INC. AND SUBSIDIARIES

(unaudited) (in millions)

		For the Nine Months
		Ended December 31,
		2008				2007
OPERATING ACTIVITIES:
Net income		$	622			$	429
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			200				204
Provision for deferred income taxes			65				46
Provision for bad debts			10				22
Non-cash stock based compensation expense and defined contribution plan			86				96
(Gain) loss on sale and disposal of assets and repayment of debt, net			(2	)			4
Foreign currency transaction loss (gain), before taxes			62				(19	)
Changes in other operating assets and liabilities, net of effect of acquisitions:
Decrease in trade and current installment accounts receivable, net			32				36
Decrease in noncurrent installment accounts receivable, net			143				71
Decrease in deferred revenue (billed and collected) — current & noncurrent			(414	)			(277	)
Increase in taxes payable, net			7				7
Decrease in accounts payable, accrued expenses and other			(95	)			(109	)
Decrease in accrued salaries, wages and commissions			(61	)			(25	)
Restructuring and other, net			(79	)			(37	)
Changes in other operating assets and liabilities			(12	)			(35	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			564				413
INVESTING ACTIVITIES:
Acquisitions, primarily goodwill, purchased software, and other intangible assets, net of cash acquired			(54	)			(27	)
Settlements of purchase accounting liabilities			(4	)			(7	)
Purchases of property and equipment			(64	)			(81	)
Proceeds from sale of assets			6				35
Purchases of marketable securities, net			—				(3	)
Decrease in restricted cash			5				—
Capitalized software development costs			(102	)			(79	)
NET CASH USED IN INVESTING ACTIVITIES			(213	)			(162	)
FINANCING ACTIVITIES:
Dividends paid			(62	)			(63	)
Purchases of treasury stock (common stock)			(4	)			(500	)
Debt repayments			(501	)			(758	)
Debt borrowings			—				750
Debt issuance costs			—				(3	)
Exercise of common stock options and other			7				19
NET CASH USED IN FINANCING ACTIVITIES			(560	)			(555	)
DECREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH			(209	)			(304	)
Effect of exchange rate changes on cash			(217	)			106
DECREASE IN CASH AND CASH EQUIVALENTS			(426	)			(198	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			2,795				2,275
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	2,369			$	2,077

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) 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. 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-month periods ended December 31, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2009. For further information, refer to the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008 (2008 Form 10-K).

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 consulting and education. Revenue is recorded net of applicable sales taxes.

The Company recognizes revenue pursuant to the requirements of Statement of Position (SOP) 97-2, "Software Revenue Recognition,” issued by the American Institute of Certified Public Accountants, as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” In accordance with SOP 97-2, 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 in accordance with SOP 97-2 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

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

receive unspecified future software products. However, in the event such license agreements are executed within close proximity to or in contemplation of other license agreements that are signed 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 vendor specific objective evidence (VSOE) of fair value has been to record revenue initially on the acquired company’s systems, generally under an up-front model; and, starting within the first fiscal year after the acquisition, to enter new licenses for such products under the Company’s subscription model, following which revenue is recognized ratably and recorded as “Subscription and maintenance revenue.” In some instances, the Company sells newly developed and recently acquired 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 of the SOP 97-2 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 sale of products to distributors, resellers and value-added resellers that include licensing terms that provide the right for the end-users to receive certain unspecified future software products is recognized on a ratable basis.

For further information, refer to the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s 2008 Form 10-K.

Cash Dividends:

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 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.

In November 2007, 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 28, 2007 to stockholders of record at the close of business on December 14, 2007. In August 2007, 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 September 26, 2007 to stockholders of record at the close of business on September 12, 2007. In June 2007, 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 29, 2007 to stockholders of record at the close of business on June 22, 2007.

Cash, Cash Equivalents and Marketable Securities:

The Company’s cash, cash equivalents and marketable securities are held in numerous locations throughout the world, with approximately 50% residing outside the

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

United States at December 31, 2008. Marketable securities were less than $1 million at December 31, 2008 and March 31, 2008.

Restricted Cash:

The Company’s insurance subsidiary requires 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 and $62 million as of December 31, 2008 and March 31, 2008, respectively, and is included in the “Other noncurrent assets, net” line item in the Condensed Consolidated Balance Sheets.

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 balance sheet. The components of “Deferred revenue (billed or collected) — current “ and “Deferred revenue (billed or collected) — noncurrent “ as of December 31, 2008 and March 31, 2008 are as follows:

		December 31,				March 31,
		2008				2008
		(in millions)
Current:
Subscription and maintenance		$	1,981			$	2,455
Professional services			155				166
Financing obligations and other			10				43
Total deferred revenue (billed or collected) — current			2,146				2,664
Noncurrent:
Subscription and maintenance			941				1,001
Professional services			12				22
Financing obligations and other			3				13
Total deferred revenue (billed or collected) — noncurrent			956				1,036
Total deferred revenue (billed or collected)		$	3,102			$	3,700

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, marketable securities, derivatives and accounts receivable.

The Company holds cash and cash equivalents in major financial institutions and related money market funds, some of which are protected by the US Treasury’s Temporary Guarantee Program for Money Market Funds. Amounts invested in international funds enjoy different levels of protection depending upon the jurisdiction. The Company historically has not 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 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

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

outsourcer with a license arrangement that extends through fiscal year 2012 with a net unbilled receivable balance of approximately $232 million.

Prior to fiscal 2001, we sold individual accounts receivable from certain financial institutions to a third party subject to certain recourse provisions. The outstanding principal balance subject to recourse of these receivables approximated $45 million and $81 million as of December 31, 2008 and March 31, 2008, respectively. As of December 31, 2008, the Company has established a liability for the fair value of the recourse provision of approximately $2 million associated with these receivables.

Statement of Cash Flows:

For the nine-month periods ended December 31, 2008 and 2007, interest payments were $95 million and $122 million, respectively, and income taxes paid were $180 million and $170 million, respectively.

In June 2007, the Company entered into an Accelerated Share Repurchase program (ASR) with a third-party financial institution and paid $500 million to repurchase shares of its common stock. In June 2007, the Company purchased approximately 16.9 million shares under the ASR. Based on the terms of the agreement between the Company and the third-party financial institution, the Company received approximately 3.0 million additional shares of its common stock at the conclusion of the program in November 2007 at no additional cost. The average price paid under the Accelerated Share Repurchase program was $25.13 per share and total shares repurchased were approximately 19.9 million. The $500 million paid in June 2007 under the ASR is included in cash used in financing activities in the Company’s Condensed Consolidated Statement of Cash Flows for the nine-month period ended December 31, 2007 and is recorded as treasury stock in the stockholders’ equity section of the Condensed Consolidated Balance Sheets at December 31, 2008 and March 31, 2008.

In the first quarter of fiscal year 2009, the Company paid the remaining $350 million principal amount of its 6.500% Senior Notes due 2009 that was due and payable at that time. The $350 million payment is included in “Cash used in financing activities” in the Company’s Condensed Consolidated Statement of Cash Flows for the nine-month period ended December 31, 2008.

During the third quarter of fiscal year 2009, the Company repurchased approximately $148 million principal amount of its 4.750% Senior Notes due 2009 at a price of approximately $143 million in cash. As a result of this repurchase, the Company recognized a gain of approximately $5 million in the “Other (gains) expenses, net” line of the Condensed Consolidated Statements of Operations. At December 31, 2008, approximately $352 million principal of the 4.750% Senior Notes due 2009 remains outstanding. The approximate $143 million payment is included in “Cash used in financing activities” in the Company’s Condensed Consolidated Statement of Cash Flows for the nine-month period ended December 31, 2008.

During the third quarter of fiscal year 2009, the Company paid approximately $4 million to repurchase approximately 0.3 million of its common shares at an average price of $15.84. The repurchase is included in “Cash used in financing activities” in the Company’s Condensed Consolidated Statement of Cash Flows for the nine-month period ended December 31, 2008. As of December 31, 2008, the Company remained authorized to purchase an aggregate amount of up to approximately $246 million of additional common shares under the current stock repurchase program.

Non-cash financing activities for the nine-month periods ended December 31, 2008 and 2007 consisted of treasury shares issued in connection with the following: share-based incentive awards issued under the Company’s equity compensation plans of approximately $53 million (net of approximately $24 million of tax withholding) and $38 million (net of approximately $15 million of tax withholding), respectively; the Company’s Employee Stock Purchase Plan of approximately $36 million and $32 million, respectively; and discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $19 million and $22 million, respectively.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

Adoption of new accounting principles:

Effective April 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements,” as modified by the Financial Accounting Standards Board (FASB) Staff Position (FSP) Financial Accounting Standard (FAS) 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Its Related Interpretive Accounting Pronouncements That Address Leasing Transactions,” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. FSP FAS 157-1 removes leasing from the scope of SFAS No. 157. FSP FAS 157-2 delays the effective date of SFAS No. 157 from the Company’s fiscal year ending March 31, 2009 to the Company’s fiscal year ending March 31, 2010 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

The provisions of SFAS No. 157 as amended by FSP FAS 157-1 were applied prospectively to fair value measurements and disclosures for financial assets and financial liabilities recognized or disclosed at fair value in the financial statements. The adoption of these Statements did not have an effect on the Company’s consolidated results of operations or financial position for the first nine months of fiscal year 2009. While the Company does not expect the adoption of this Statement to have a material effect on its consolidated results of operations or financial position in subsequent reporting periods, the Company will continue to monitor any additional implementation guidance that is issued that addresses the fair value measurements for certain financial assets, and non-financial assets and non-financial liabilities not disclosed at fair value in the financial statements on at least an annual basis as required by SFAS No. 157.

Refer to Note G, “Derivatives and Fair Value Measurements,” for additional information regarding the assets and liabilities carried at fair value on the Company’s financial statements.

Effective April 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits entities to elect to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. As permitted by SFAS No. 159 implementation options, the Company chose not to elect the fair value option for its financial assets and liabilities that had not been previously measured at fair value. Therefore, material financial assets and liabilities, such as the Company’s short and long-term debt obligations, are reported at their historical carrying amounts.

Effective April 1, 2008, the Company elected to adopt the provisions of SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133.” SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The adoption of SFAS No. 161 did not have an effect on the Company’s consolidated results of operations or financial position for the first nine months of fiscal year 2009.

Refer to Note G, “Derivatives and Fair Value Measurements,” for additional information regarding the Company’s derivative activities.

Reclassification and revisions:

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

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

Effective with the filing of the Company’s fiscal year 2008 Form 10-K, the Company modified its financial statements by adding line items for “Selling and marketing” costs and “General and administrative” expenses. Costs applicable to these new line items were reclassified from the prior line item entitled “Selling, general and administrative” costs.

Effective with the filing of the first quarter of fiscal year 2009 Quarterly Report on Form 10-Q, the Company refined the classification of certain costs reported on its Condensed Consolidated Statement of Operations to better reflect the allocation of various expenses to the new line items and to better align the Company’s reported financial statements with the Company’s internal view of its business performance. To maintain consistency and comparability, the Company reclassified prior-year amounts to conform to the current-year Condensed Consolidated Statements of Operations presentation. These expense reclassifications had no effect on previously reported total expenses or total revenue.

The following table summarizes the expense section of the Company’s Condensed Consolidated Statements of Operations for the reported prior periods indicated, giving effect to the reclassifications described above.

		Three Months								Nine Months
		Ended December 31, 2007								Ended December 31, 2007
		Previously								Previously
		Reported (1)				Revised				Reported (1)				Revised
		(in millions)								(in millions)
Costs of licensing and maintenance		$	63			$	64			$	195			$	199
Cost of professional services			87				92				265				278
Amortization of capitalized software costs			29				29				87				87
Selling and marketing			—				333				—				956
Selling, general and administrative			464				—				1,386				—
General and administrative			—				123				—				406
Product development and enhancements			133				135				383				390
Depreciation and amortization of other intangible assets			40				40				117				117
Other gains, net			13				13				8				8
Restructuring and other			22				22				47				47
Total expenses before interest and taxes		$	851			$	851			$	2,488			$	2,488

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

NOTE B — COMPREHENSIVE INCOME

Comprehensive income includes net income, unrealized losses on derivative transactions and marketable securities and foreign currency translation adjustments. The components of comprehensive income for the three- and nine-month periods ended December 31, 2008 and 2007 are as follows:

		Three Months								Nine Months
		Ended December 31,								Ended December 31,
		2008				2007				2008				2007
		(in millions)
Net income		$	213			$	163			$	622			$	429
Net unrealized losses on marketable securities, net of tax			—				(1	)			—				(1	)
Net unrealized losses on derivative transactions, net of tax			(5	)			—				(5	)			—
Foreign currency translation adjustments			(21	)			(4	)			(68	)			(3	)
Total comprehensive income		$	187			$	158			$	549			$	425

NOTE C — INCOME PER SHARE

Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted income per share is computed by dividing (i) the sum of net income and the after-tax amount of interest expense recognized in the period associated with the outstanding dilutive 1.625% Convertible Senior Notes due December 2009 (Convertible Senior Notes) by (ii) the sum of the weighted average number of common shares and the weighted average dilutive common share equivalents outstanding for the period.

For the three-month periods ended December 31, 2008 and 2007, approximately 15 million and 13 million of restricted stock awards and options to purchase common stock, respectively, were excluded from the calculation of diluted income per share, as their effect on income per share was anti-dilutive during the respective periods. For the nine-month periods ended December 31, 2008 and 2007, approximately 14 million of restricted stock awards and options to purchase common stock were excluded from the calculation in each period, as their effect on income per share was anti-dilutive during the respective periods.

		Three								Nine
		Months Ended								Months Ended
		December 31,								December 31,
		2008				2007				2008				2007
		(in millions, except per share amounts)
Net income		$	213			$	163			$	622			$	429
Interest expense associated with Convertible Senior Notes, net of tax			1				1				3				3
Numerator in calculation of diluted income per share		$	214			$	164			$	625			$	432
Weighted average shares outstanding and common share equivalents
Weighted average common shares outstanding			514				510				513				515
Weighted average shares outstanding upon conversion of Convertible Senior Notes			23				23				23				23
Weighted average equity awards outstanding			2				3				4				3
Denominator in calculation of diluted income per share			539				536				540				541
Diluted income per share		$	0.40			$	0.31			$	1.16			$	0.80

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

NOTE D — ACCOUNTING FOR SHARE-BASED COMPENSATION

Effective April 1, 2005, the Company adopted, under the modified retrospective basis, the provisions of SFAS No. 123(R), “Share-based payment,” which requires share-based awards exchanged for employee services to be accounted for under the fair value method. Accordingly, share-based compensation cost is measured at the grant date, based on the fair value of the award. The Company uses the straight-line attribution method to recognize share-based compensation costs related to awards with only service conditions. The expense is recognized over the employee’s requisite service period (generally the vesting period of the award).

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,
		2008				2007				2008				2007
		(in millions)
Cost of professional services		$	1			$	1			$	3			$	3
Costs of licensing and maintenance			-	(1)			-	(1)			2				2
Selling and marketing			7				9				21				21
General and administrative			7				11				23				31
Product development and enhancements			5				8				19				21
Share-based compensation expense before tax			20				29				68				78
Income tax benefit			6				9				22				25
Net share-based compensation expense		$	14			$	20			$	46			$	53

There were no capitalized share-based compensation costs at December 31, 2008 or 2007.

The following table summarizes information about unrecognized share-based compensation costs as of December 31, 2008:

						Weighted
		Unrecognized				Average Period
		Compensation				Expected to be
		Costs				Recognized
		(in millions)				(in years)
Stock option awards		$	3				1.0
Restricted stock units			8				1.5
Restricted stock awards			59				1.4
Performance share units			26				1.8
Total unrecognized share-based compensation costs		$	96				1.5

Share-based incentive awards are provided to employees under the terms of the Company’s equity compensation plans (the Plans). The Plans are administered by the Compensation and Human Resources Committee of the Board of Directors (the Committee). Awards under the Plans may include at-the-money stock options, premium-priced stock options, restricted stock awards (RSAs), restricted stock units (RSUs), performance share units (PSUs), or any combination thereof. The non-employee members of the Company’s Board of Directors receive deferred stock units under a separate director compensation plan.

Additional information relating to the Company’s other Plans which have been approved by stockholders and a description of the awards issued under these Plans can be found in Note 10, “Stock Plans” in the Company’s fiscal year 2008 Form 10-K.

Under the Company’s long-term incentive program for fiscal years 2009, 2008 and 2007, senior executives were issued PSUs under which they are eligible to receive RSAs or RSUs and unrestricted shares at the end

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

of the performance period if certain performance targets are achieved. Quarterly, PSU values are marked to the closing price of the Company’s common stock on the last trading day of the quarter until the PSU’s 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 fiscal year 2009 1-year and 3-year PSUs and the performance periods for the fiscal year 2008 and 2007 3-year PSUs, the applicable number of shares of RSAs or RSUs and unrestricted stock granted may vary based upon the level of achievement of the performance targets and the approval of the Committee (which has discretion to reduce any award for any reason). The related compensation cost recognized will be based on the number of shares granted and the closing stock price on the day of grant.

When the Company grants a stock option award, the fair value of the option is estimated at the grant date using the Black-Scholes option pricing model, consistent with the provisions of SFAS No. 123(R) and the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 107, “Interaction Between FASB Statement No. 123(R), and Certain SEC Rules and Regulations Regarding the Valuation of Share-Based Payment Arrangements for Public Companies” (SAB 107). The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive stock option awards.

For the three-month periods ended December 31, 2008 and 2007 and nine-month period ended December 31, 2008, the Company did not issue options. For the nine-month period ended December 31, 2007, the Company issued options covering fewer than 0.1 million shares of common stock.

The table below summarizes the RSUs and RSAs granted, including grants provided pursuant to the long term incentive plans:

		Three Months								Nine Months
		Ended December 31,								Ended December 31,
		2008				2007				2008				2007
		(shares in millions)
RSUs
Shares			—				—				0.3				0.2
Weighted Avg. Grant Date Fair Value (2)			N/A				—			$	24.36			$	25.23
RSAs
Shares			—	(1)			—	(1)			3.8				2.6
Weighted Avg. Grant Date Fair Value (3)		$	16.34			$	26.01			$	25.28			$	25.93

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. Net trade and installment accounts receivable represent financial assets derived from the committed amounts due from the Company’s customers. These accounts receivable balances are reflected net of unamortized discounts based on imputed interest for the time value of money for license agreements under our prior business model and allowances for doubtful accounts. These balances do not include unbilled contractual commitments executed under the

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

Company’s current business model. Trade and installment accounts receivable are comprised of the following components:

		December 31,				March 31,
		2008				2008
		(in millions)
Current:
Accounts receivable		$	692			$	817
Other receivables			114				107
Unbilled amounts due within the next 12 months — prior business model			109				103
Less: Allowance for doubtful accounts			(27	)			(30	)
Less: Unamortized discounts			(9	)			(27	)
Net trade and installment accounts receivable — current		$	879			$	970
Noncurrent:
Unbilled amounts due beyond the next 12 months — prior business model		$	135			$	239
Less: Allowance for doubtful accounts			(1	)			(1	)
Less: Unamortized discounts			(5	)			(4	)
Net installment accounts receivable — noncurrent		$	129			$	234

During the first nine months of fiscal year 2008, the Company transferred its rights and interest in future committed installments under certain software license agreements to a third party financial institution with an aggregate contract value of approximately $17 million, for which cash was received in the amount of approximately $14 million, which reflects a discount based on the present value of the future committed installments. The Company did not have any similar transactions during the first nine months of fiscal year 2009. As of December 31, 2008 and March 31, 2008, the aggregate remaining amounts due to third party financial institutions included within “Deferred revenue (billed or collected)” were approximately $11 million and $56 million, respectively. The financing agreements may contain limited recourse provisions in the event the Company does not meet its continued performance obligations under the license agreements. Based on historical experience, the Company believes that any liability that may be incurred as a result of these limited recourse provisions is remote.

NOTE F — IDENTIFIED INTANGIBLE ASSETS

In the table below, capitalized software includes both purchased and internally developed software costs; other identified intangible assets include both purchased customer relationships and trademarks/trade name costs. Internally developed capitalized software costs and other identified intangible asset costs are included in “Other noncurrent assets, net” on the Condensed Consolidated Balance Sheets.

The gross carrying amounts and accumulated amortization for identified intangible assets are as follows:

		December 31, 2008
		Gross				Accumulated				Net
		Assets				Amortization				Assets
						(in millions)
Capitalized software:
Purchased		$	4,865			$	4,700			$	165
Internally developed			837				511				326
Other identified intangible assets subject to amortization			660				429				231
Other identified intangible assets not subject to amortization			14				—				14
Total		$	6,376			$	5,640			$	736

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

		March 31, 2008
		Gross				Accumulated				Net
		Assets				Amortization				Assets
						(in millions)
Capitalized software:
Purchased		$	4,833			$	4,662			$	171
Internally developed			742				466				276
Other identified intangible assets subject to amortization			660				389				271
Other identified intangible assets not subject to amortization			14				—				14
Total		$	6,249			$	5,517			$	732

Amortization of capitalized software costs was $31 million and $29 million in the third quarter of fiscal years 2009 and 2008, respectively. Amortization of other identified intangible assets was $13 million and $16 million in the third quarter of fiscal years 2009 and 2008, respectively.

For the first nine months of fiscal years 2009 and 2008, amortization of capitalized software costs was $91 million and $87 million, respectively, and amortization of other identified intangible assets was $39 million and $51 million, respectively.

Based on the identified intangible assets recorded through December 31, 2008, annual amortization expense is expected to be as follows:

		Year Ended March 31,
		2009				2010				2011				2012				2013
		(in millions)
Capitalized software:
Purchased		$	57			$	50			$	39			$	27			$	19
Internally developed			65				85				78				62				48
Other identified intangible assets subject to amortization			53				52				51				31				25
Total		$	175			$	187			$	168			$	120			$	92

The carrying value of goodwill was $5.348 billion and $5.351 billion as of December 31, 2008 and March 31, 2008, respectively. During the nine-month period ended December 31, 2008, goodwill decreased by approximately $3 million, primarily due to tax settlements relating to the Company’s prior acquisitions offset by additions for companies acquired during the first nine months of fiscal year 2009.

NOTE G — DERIVATIVES AND FAIR VALUE MEASUREMENT

The Company is exposed to certain financial market risks relating to its business operations, including changes in interest rates, which could include monetary assets and liabilities and foreign exchange rate risk associated with the Company’s operating exposures, which could include its exposure to foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into derivative contracts with the intent of mitigating a certain portion of these risks.

Derivatives are accounted for in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133). During the first nine months of fiscal year 2009 and the year ended March 31, 2008, the Company did not designate its foreign exchange derivatives as hedges under SFAS No. 133. Accordingly, all foreign exchange derivatives are recognized on the balance sheet at fair value and unrealized or realized changes in fair value from these contracts are recorded as “Other (gains) expenses, net” in the Company’s Condensed Consolidated Statements of Operations.

During the third quarter of 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

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

are designated as cash flow hedges under SFAS No. 133. The effective portion of these cash flow hedges are recorded as “Accumulated other comprehensive loss” in the Company’s Condensed Consolidated Balance Sheet and reclassified into “Interest expense, net”, in the Company’s Condensed Consolidated Statements of Operations in the same period during which the hedged transaction affects earnings. Any ineffective portion of the cash flow hedges would be recorded immediately to “Interest expense, net;” however, no ineffectiveness existed at December 31, 2008.

As described in Note A, the Company adopted the provisions of SFAS No. 157 as amended by FSP FAS 157-1 and FSP FAS 157-2 on April 1, 2008. Pursuant to the provisions of FSP FAS 157-2, the Company will not apply the provisions of SFAS No. 157 to any nonfinancial assets and nonfinancial liabilities until April 1, 2009. The Company recorded no change to its opening balance of retained earnings as of April 1, 2008 as it did not have any financial instruments requiring retrospective application under the provisions of SFAS No. 157.

Fair Value Hierarchy

SFAS No. 157 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the company’s own assumptions of market participant valuation (unobservable inputs). In accordance with SFAS No. 157, these two types of inputs have created the following fair value hierarchy:

	•		Level 1—Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
	•		Level 2—Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
	•		Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

SFAS No. 157 requires the use of observable market data if such data is available without undue cost and effort.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

Items Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2008 consistent with the fair value hierarchy provisions of SFAS No. 157 (in millions):

		Fair Value Measurement at Reporting Date Using
		(amounts in millions)
						Quoted Prices in				Significant Other
		Estimated Fair				Active Markets for				Observable
		Value at				Identical Assets				Inputs
Description		December 31, 2008				(Level 1)				(Level 2)
Assets:
Money market funds		$	1,636			$	1,636			$	—
Foreign exchange derivatives (1)			9				—				9
Total Assets		$	1,645			$	1,636			$	9
Liabilities:
Foreign exchange derivatives (1)		$	4			$	—			$	4
Interest Rate Derivatives (2)			8				—				8
Total Liabilities		$	12			$	—			$	12

At December 31, 2008, the Company had approximately $1.586 billion and $50 million of investments in money market funds classified as “Cash, cash equivalents and marketable securities” and “other noncurrent assets, net” for restricted cash amounts, respectively, in its Condensed Consolidated Balance Sheet. The money market funds are reported at fair value based on quoted prices that are equivalent to par value.

At December 31, 2008, approximately $9 million and $4 million of the Company’s foreign exchange derivatives were included in “Other current assets” and “Other current liabilities”, respectively, on the Condensed Consolidated Balance Sheet. At December 31, 2008, approximately $8 million of the Company’s interest rate derivatives are included in “Other current liabilities” on the Condensed Consolidated Balance Sheet.

At December 31, 2008, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The Company did not have any outstanding asset or liability derivatives at March 31, 2008.

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

A summary of the effect of the foreign exchange derivatives on the Company’s Condensed Consolidated Statement of Operations is as follows:

		Amount of Net Gain Recognized in Income on
		Derivative
		(amounts in millions)
Location of Net Gain Recognized in		Three Months ended				Nine Months ended
Income on Derivative		December 31, 2008				December 31, 2008
Other (gains) expenses, net		$	(31	)		$	(64	)

For the Company’s interest rate derivatives, the amount of loss recorded in accumulated other comprehensive loss from the “Effective Portion” was approximately $8 million for the three and nine months ended December 31, 2008. The amount of loss reclassified from accumulated other comprehensive income into “Interest expense, net” was less than $1 million for both the three and nine months ended December 31, 2008. In the next twelve months, approximately $4 million is expected to be released from “Accumulated other comprehensive loss” on the Condensed Consolidated Balance Sheet to “Other (gains) expenses, net” on the Condensed Consolidated Statement of Operations.

NOTE H — RESTRUCTURING AND OTHER

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 include a workforce reduction, global facilities consolidations and other cost reduction initiatives estimated to cost $275 million to $300 million in total. The Company currently estimates a reduction in workforce of approximately 2,800 individuals under the fiscal 2007 plan.

Through December 31, 2008, the Company has incurred approximately $247 million in expenses under the fiscal 2007 plan, which is comprised of approximately $186 million in severance costs and approximately $61 million in facilities abandonment costs. The Company anticipates total severance costs for the fiscal 2007 plan of approximately $190 million and total facilities abandonment costs of approximately $85 million to $105 million. The majority of the remaining expenses are expected to be recognized by the end of fiscal 2009.

Severance: The termination benefits the Company has offered in connection with the workforce reduction under the fiscal 2007 plan are substantially the same as the benefits the Company has provided historically for non-performance-based workforce reductions, and in certain countries have been provided based upon prior experiences. These costs have been recognized in accordance with SFAS No. 112, “Employers Accounting for Post Employment Benefits, an Amendment of FASB Statements No. 5 and 43.” Enhancements to termination benefits that exceed past practice are recognized as incurred in accordance with SFAS No. 146, “Accounting for Costs Associated With Exit or Disposal Activities.” Final payment of these amounts is dependent upon settlement with the works councils in certain international locations. The plans associated with the balance of the workforce reductions are still being finalized and the associated charges will be recorded once the actions are approved by management.

The Company recorded a reduction of approximately $8 million in severance costs in the first nine months of fiscal 2009, including less than $1 million in expenses during the third quarter of fiscal year 2009.

Facilities Abandonment: The Company records the costs associated with lease termination or abandonment when the Company ceases to utilize the leased property. Under SFAS No. 146, the liability associated with lease termination or abandonment is measured as the present value of the total remaining lease costs and associated operating costs, less probable sublease income. The Company accretes its obligations related to facilities abandonment to the then-present value and, accordingly, recognizes accretion expense as a restructuring expense in future periods. The Company recorded approximately $12 million of expenses

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

during the first nine months of fiscal year 2009, including less than $1 million in expenses recorded in the third quarter of fiscal year 2009.

For the nine-month period ended December 31, 2008, restructuring activity under the fiscal 2007 plan was as follows:

						Facilities
		Severance				Abandonment
		(in millions)
Accrued balance as of March 31, 2008		$	93			$	27
(Reductions) additions			(8	)			12
Payments			(59	)			(18	)
Accrued balance as of December 31, 2008		$	26			$	21

The liability balance for the severance portion of the remaining reserve is included in the “Accrued salaries, wages and commissions” line on the Condensed Consolidated Balance Sheets. The liability balance for the facilities abandonment portion of the remaining reserve is included in the “Accrued expenses and other current liabilities” line item on the Condensed Consolidated Balance Sheets. The net costs are included in the “Restructuring and other” line item on the Condensed Consolidated Statements of Operations for the period ended December 31, 2008.

NOTE I — INCOME TAXES

Income tax expense for the three- and nine-month periods ended December 31, 2008 was $88 million and $311 million, respectively, compared with the three- and nine-month periods ended December 31, 2007 of $76 million and $238 million, respectively. For the three- and nine- month periods 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-month period 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.

NOTE J — COMMITMENTS AND CONTINGENCIES

Certain legal proceedings in which we are involved are discussed in Note 8, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements included in the Company’s 2008 Form 10-K. The following discussion should be read in conjunction with the 2008 Form 10-K.

Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 — Background

The Company, its former Chairman and CEO Charles B. Wang, its former Chairman and CEO Sanjay Kumar, its former Chief Financial Officer Ira Zar, and its Vice Chairman and Founder Russell M. Artzt were defendants in one or more stockholder class action lawsuits filed in July 1998, February 2002, and March 2002 in the United States District Court for the Eastern District of New York (the Federal Court), alleging, among other things, that a class consisting of all persons who purchased the Company’s Common Stock during the period from January 20, 1998 until July 22, 1998 were harmed by misleading statements, misrepresentations, and omissions regarding the Company’s future financial performance. In addition, in May 2003, a class action lawsuit captioned John A. Ambler v. Computer Associates International, Inc., et al. was filed in the Federal Court. The complaint in this matter, a purported class

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

action on behalf of the CA Savings Harvest Plan (the CASH Plan) and the participants in, and beneficiaries of, the CASH Plan for a class period from March 30, 1998 through May 30, 2003, asserted claims of breach of fiduciary duty under the federal Employee Retirement Income Security Act (ERISA). The named defendants were the Company, the Company’s Board of Directors, the CASH Plan, the Administrative Committee of the CASH Plan, and the following current or former employees and/or former directors of the Company: Messrs. Wang, Kumar, Zar, Artzt, Peter A. Schwartz, and Charles P. McWade; and various unidentified alleged fiduciaries of the CASH Plan. The complaint alleged that the defendants breached their fiduciary duties by causing the CASH Plan to invest in Company securities and sought damages in an unspecified amount.

A stockholder derivative lawsuit was filed by Charles Federman against certain current and former directors of the Company, based on essentially the same allegations as those contained in the February and March 2002 stockholder lawsuits discussed above. This action was commenced in April 2002 in the Delaware Chancery Court, and an amended complaint was filed in November 2002. The defendants named in the amended complaint were current Company director The Honorable Alfonse M. D’Amato and former Company directors Shirley Strum Kenny and Messrs. Wang, Kumar, Artzt, Willem de Vogel, Richard Grasso, Roel Pieper, and Lewis S. Ranieri. The Company was named as a nominal defendant. The derivative suit alleged breach of fiduciary duties on the part of all the individual defendants and, as against the former management director defendants, insider trading on the basis of allegedly misappropriated confidential, material information. The amended complaint sought an accounting and recovery on behalf of the Company of an unspecified amount of damages, including recovery of the profits allegedly realized from the sale of Common Stock.

On August 25, 2003, the Company announced the settlement of the above-described class action lawsuits against the Company and certain of its present and former officers and directors, alleging misleading statements, misrepresentations, and omissions regarding the Company’s financial performance, as well as breaches of fiduciary duty. At the same time, the Company also announced the settlement of a derivative lawsuit, in which the Company was named as a nominal defendant, filed against certain present and former officers and directors of the Company, alleging breaches of fiduciary duty and, against certain management directors, insider trading, as well as the settlement of an additional derivative action filed by Charles Federman that had been pending in the Federal Court. As part of the class action settlement, which was approved by the Federal Court in December 2003, the Company agreed to issue a total of up to 5.7 million shares of Common Stock to the stockholders represented in the three class action lawsuits, including payment of attorneys’ fees. The Company has completed the issuance of the settlement shares as well as payment of $3.3 million to the plaintiffs’ attorneys in legal fees and related expenses.
In settling the derivative suits, which settlement was also approved by the Federal Court in December 2003, the Company committed to maintain certain corporate governance practices. Under the settlement, the Company, the individual defendants and all other current and former officers and directors of the Company were released from any potential claim by stockholders arising from accounting-related or other public statements made by the Company or its agents from January 1998 through February 2002 (and from March 11, 1998 through May 2003 in the case of the employee ERISA action). The individual defendants were released from any potential claim by or on behalf of the Company relating to the same matters.

On October 5, 2004 and December 9, 2004, four purported Company stockholders served motions to vacate the Order of Final Judgment and Dismissal entered by the Federal Court in December 2003 in connection with the settlement of the derivative action. These motions primarily sought to void the releases that were granted to the individual defendants under the settlement. On December 7, 2004, a motion to vacate the Order of Final Judgment and Dismissal entered by the Federal Court in December 2003 in connection with the settlement of the 1998 and 2002 stockholder lawsuits discussed above (together with the October 5, 2004 and December 9, 2004 motions, the “60(b) Motions”) was filed by Sam Wyly and certain related parties (the “Wyly Litigants”). The motion sought to reopen the settlement to permit the moving stockholders to pursue individual claims against certain present and

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

former officers of the Company. The motion stated that the moving stockholders did not seek to file claims against the Company.

Derivative Actions Filed in 2004

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 (the Derivative Actions). In November 2004, the Federal Court issued an order consolidating the Derivative Actions. The plaintiffs filed a consolidated amended complaint (the Consolidated Complaint) on January 7, 2005. The Consolidated Complaint names as defendants Messrs. Wang, Kumar, Zar, Artzt, D’Amato, Stephen Richards, Ranieri and Steven Woghin; David Kaplan, David Rivard, Lloyd Silverstein; Michael A. McElroy; Messrs. McWade and Schwartz; Gary Fernandes; Robert E. La Blanc; Jay W. Lorsch; Kenneth Cron; Walter P. Schuetze; Messrs. de Vogel and Grasso; Roel Pieper; 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 current and former stockholders in settlement of certain class action litigation commenced against the Company and certain officers and directors in 1998 and 2002 (see “— Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004—Background”), (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 Securities and Exchange Commission (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 (as described in the 2008 Form 10-K) 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.

The consolidated derivative action was stayed pending resolution of the 60(b) Motions, which have been denied (see “—Current Procedural Status of Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 and Derivative Actions Filed in 2004”). 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 Consolidated Complaint and the 60(b) Motions. 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 Actions and in the 60(b) Motions. Also, in response to the Consolidated Complaint, the Special Litigation Committee 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:

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(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 Charles Wang (the Company’s former Chairman and CEO) and former officer Peter Schwartz.

• 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 David Kaplan (CA’s former head of Financial Reporting), Stephen Richards (the Company’s former head of Worldwide Sales), David Rivard (the Company’s former head of Sales Accounting), Lloyd Silverstein (the Company’s former head of the Global Sales Organization), Steven Woghin (the Company’s former General Counsel) and Ira Zar (the Company’s former CFO). 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 Sanjay Kumar (the Company’s former Chairman and CEO), Charles McWade (the Company’s former head of Financial Reporting and business development) and Russell Artzt (currently Vice Chairman and Founder and a former member of the Company’s Board of Directors).

• The Special Litigation Committee believes that the claims (the Director Claims) against current and former Company directors Kenneth Cron, Alfonse D’Amato, Willem de Vogel, Gary Fernandes, Richard Grasso, Shirley Strum Kenny, Robert La Blanc, Jay Lorsch, Roel Pieper, Lewis Ranieri, Walter Schuetze and Alex Vieux 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 the Company’s former independent auditor, Ernst & Young LLP, the Company’s current independent auditors, KPMG LLP and Michael McElroy (the Company’s former senior vice president of the Legal department).

The Special Litigation Committee has served motions which seek dismissal of the Director Claims, the claims against Ernst & Young LLP and KPMG LLP, and Michael McElroy and certain other claims. In addition, the Special Litigation Committee has asked for the Federal Court’s approval for the Company to be realigned as the plaintiff with respect to claims against certain other parties, including Messrs. Wang and Schwartz.

Current Procedural Status of Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 and Derivative Actions Filed in 2004

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 Actions 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 the motion after a decision by the appellate court regarding the Federal Court’s decisions concerning the 60(b) Motions (see “—Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 — Background”).

In a memorandum and order dated August 2, 2007, the Federal Court denied all of the 60(b) Motions and reaffirmed the 2003 settlements (the August 2 decision). On August 24, 2007, Ranger and the Wyly Litigants filed notices of appeal of the August 2 decision. On August 16, 2007, the Special Litigation Committee filed a motion to amend or clarify the August 2 decision, and the Company joined that motion. On September 12, 2007 and October 4, 2007, the Federal Court issued opinions denying the motions to amend or clarify. On September 18, 2007, the Wyly Litigants and Ranger filed notices of appeal of the September 12 decision. The Company filed notices of cross-appeal of the September 12 and October 4

CA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
(unaudited)

decisions on November 2, 2007. All appellate briefs have been filed and the appeals are expected to be scheduled for oral argument for the week of March 9, 2009.

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). Plaintiffs seek to obtain this declaratory judgment in order to file a derivative suit on behalf of the Company (see “— Derivative Actions Filed in 2004”). On February 18, 2005, Mr. Wyly filed a separate lawsuit in the United States District Court for the Northern District of Texas (the Texas Federal Court) alleging that he is entitled to attorneys’ fees in connection with the original litigation filed in Texas. The two actions have been consolidated. 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 1, 2005, the Texas Federal Court granted the Company’s motion to transfer the action to the Federal Court. On November 9, 2007, plaintiffs served a motion to reopen discovery for 90 days to permit unspecified additional document requests and depositions. The Federal Court denied plaintiffs’ discovery motion on August 29, 2008 and certified that discovery was complete on September 3, 2008. On September 15, 2008, the Company moved for summary judgment dismissing all of plaintiffs’ claims, and plaintiffs moved for reconsideration of the Federal Court’s August 29, 2008 order denying plaintiffs’ discovery motion. These motions are fully briefed and pending determination by the Court.

Other Civil Actions

In June 2004, a lawsuit captioned Scienton Technologies, Inc. et al. v. Computer Associates International, Inc. was filed in the Federal Court. The complaint seeks monetary damages in various amounts, some of which are unspecified, but which are alleged to exceed $868 million, based upon claims for, among other things, breaches of contract, misappropriation of trade secrets, and unfair competition. In December 2008, the Federal Court executed a stipulation and order by which plaintiffs agreed to “voluntarily strike from the Complaint all allegations that Scienton has incurred $800 million in damages because CA contends that no factual basis exists for such an allegation.”

The Company, various subsidiaries, and certain current and former officers have been or may be 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 that have been asserted, and intends to vigorously contest each of them. In the opinion of the Company’s management, the results of these other lawsuits and claims that have been asserted, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, annual results of operations, or annual cash flows, although the impact could be material to any interim reporting period.

Additional information about litigation involving the Company’s directors and executive officers is contained in the Company’s other reports filed with the SEC.

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: the timing of orders from customers and channel partners may cause fluctuations in some of our key financial metrics; given the global nature of our business, economic factors or political events beyond our control can affect our business in unpredictable ways; changes to the compensation of our sales organization and changes to our sales coverage model and organization could adversely affect our business, financial condition, operating results and cash flow; 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 difficulty in successfully integrating acquired companies and products into our existing businesses; we are subject to intense competition in product and service offerings and pricing and increased competition is expected in the future; our business may suffer if it is 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 revenue and earnings; 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; we may lose access to third party operating systems or certain third party software that we use in daily operations, either of which could delay product development and production; certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences; 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; our credit ratings have been downgraded in the past and could be downgraded further which would require us to pay additional interest under our credit agreement and could adversely affect our ability to borrow; we have a significant amount of debt; the failure to protect our intellectual property rights and source code would weaken our competitive position; we may become dependent upon large transactions with customers; our sales to government customers subject us to risks, including early termination, audits, investigations, sanctions and penalties; our software products, our customers’ and our data centers and IT environments may be subject to hacking or other breaches, harming the market perception of the effectiveness of our products; general economic conditions, including concerns regarding a potential 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; the market for some or all of our key product areas may not grow; the use of third party microcode could negatively affect our product development; we may lose access to third party operating systems, which could negatively affect our product development; third parties could claim that our products infringe their intellectual property rights or that we owe royalty payments; fluctuations in foreign currencies could result in translation losses; we have outsourced various functions to third parties and these arrangements may not be successful; 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

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

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.

OVERVIEW

We are one of the world’s leading independent information technology (IT) management software companies, helping organizations use IT to better perform, compete, innovate and grow. We help customers govern, manage and secure their entire IT operation — all of the people, information, processes, systems, networks, applications and databases, from a Web service to the mainframe, regardless of the hardware or software they are using.

We license our products worldwide, principally to large IT service providers, financial services companies, governmental agencies, retailers, manufacturers, educational institutions, and healthcare institutions. These customers typically maintain IT infrastructures that are both complex and central to their objectives for operational excellence.

We offer our software products and solutions directly to our customers through our direct sales force and indirectly through global systems integrators, value-added partners, original equipment manufacturers, and distribution partners.

For further discussion of our business and business model, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 (the 2008 Form 10-K). For further discussion of our Critical Accounting Policies and Business Practices, see “Critical Accounting Policies and Business Practices.”

We have assessed and will continue to assess the impact on our business of the general economic downturn and the related impact on the financial services sector in particular. Approximately one third of our revenue comes from arrangements with financial institutions (i.e., banking, brokerage and insurance companies). The majority of these arrangements are for the renewal of mainframe capacity and maintenance associated with transactions processed by our financial institution customers. While we cannot predict what impact there may be on our business from further consolidation of the financial industry sector, or the impact from the economy in general on our business, to date the impact has not been material to our balance sheet, results of operations or cash flows. The vast majority of our subscription and maintenance revenue in any particular reporting period comes from contracts signed in prior periods, generally pursuant to contracts ranging in duration from three to five years.

In the ordinary course of business we review our cash and investment balances with respect to counterparty exposure. To date we have not experienced any significant impact as a result of the recent financial credit crisis. In the future, our (or our customer’s) ability to finance transactions, or our ability to obtain liquidity at favorable terms could be adversely affected.

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

QUARTERLY UPDATE

	•		In October 2008, CA announced plans to expand its India Technology Center (ITC) with the construction of a new 180,000 square foot building on the CA campus in Hyderabad.
	•		In October 2008, CA announced that its Board of Directors approved a new stock repurchase program that authorizes the Company to buy up to $250 million of its common stock.
	•		In November 2008, CA announced the Software-as-a-Service (SaaS) delivery option for its leading enterprise-class PPM solution, CA Clarity Project & Portfolio Manager (PPM). By extending the availability options for its award-winning CA Clarity PPM product, CA now provides CIOs and business executives with best-in-class functionality through a flexible SaaS delivery model.
	•		In November 2008, CA announced that Kay Koplovitz was elected to its Board of Directors. Ms. Koplovitz was named to the Board’s Corporate Governance Committee.
	•		In November 2008, CA held its 13th user conference CA World in Las Vegas. CA World 2008 brought together more than 5,000 IT professionals from more than 70 countries to exchange IT management strategies for transforming IT from a cost center into an enabler of innovation and business growth.

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
		2008				2007				Change				Change
		(dollars in millions)
Total revenue		$	1,042			$	1,100			$	(58	)			(5)	%
Subscription and maintenance revenue		$	919			$	968			$	(49	)			(5)	%
Net income		$	213			$	163			$	50				31	%
Cash provided by operating activities		$	292			$	233			$	59				25	%
Total bookings		$	1,248			$	1,270			$	(22	)			(2)	%
Subscription and maintenance bookings		$	1,113			$	1,113			$	—				—	%
Weighted average subscription and maintenance duration in years			3.10				2.94				0.16				5	%
Annualized subscription and maintenance bookings		$	359			$	379			$	(20	)			(5)	%

		Nine Months
		Ended December 31,												Percent
		2008				2007				Change				Change
						(dollars in millions)
Total revenue		$	3,236			$	3,192			$	44				1	%
Subscription and maintenance revenue		$	2,859			$	2,811			$	48				2	%
Net income		$	622			$	429			$	193				45	%
Cash provided by operating activities		$	564			$	413			$	151				37	%
Total bookings		$	3,780			$	3,206			$	574				18	%
Subscription and maintenance bookings		$	3,424			$	2,772			$	652				24	%
Weighted average subscription and maintenance duration in years			3.60				2.95				0.65				22	%
Annualized subscription and maintenance bookings		$	951			$	940			$	11				1	%

										Change
										From								Change
		Dec. 31,				March 31,				Fiscal				Dec. 31,				From Prior
		2008				2008				Year End				2007				Year Quarter
		(in millions)
Cash, cash equivalents and marketable securities (1)		$	2,369			$	2,796			$	(427	)		$	2,078			$	291
Total debt		$	2,118			$	2,582			$	(464	)		$	2,575			$	(457	)
Total expected future cash collections from committed contracts(2)		$	4,937			$	4,362			$	575			$	4,475			$	462
Total revenue backlog(2)		$	7,031			$	6,858			$	173			$	6,354			$	677

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. The performance indicators discussed below are those that we believe are unique because of our subscription-based business model.

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

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, which generally include 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 CA, 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.

Total Bookings — Total bookings includes the incremental value of all subscription, maintenance and professional service contracts, software fees and other contracts entered into during the reporting period. Effective April 1, 2008, we changed our measurement of our new business activity from new deferred subscription value to total bookings. In addition to what was previously included in new deferred subscription value, subscription and maintenance bookings now includes the value of maintenance contracts committed by customers in the current period that were separate from license subscription contracts, whereas new deferred subscription value excluded certain of these types of agreements. The bookings amounts disclosed in this MD&A include the effects of this change. The incremental value of these agreements was $59 million for the quarter ended December 31, 2007. Total bookings also includes the value of new professional services and software fees and other contracts that were not previously included in new deferred subscription value.

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 CA, 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 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 typically 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. Typically, our subscription and maintenance bookings increase in each consecutive quarter during a fiscal year, with the first quarter being the weakest and the fourth quarter being the strongest. However, as we make efforts to improve the balance of the distribution of our contract renewals throughout the fiscal year, 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 be more moderate. Additionally, changes in subscription and maintenance bookings, relative to previous periods, do not necessarily correlate to changes in billings or cash receipts, relative to previous periods. 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 agreement term.

Weighted Average Subscription and Maintenance Duration in Years — The weighted average subscription and maintenance duration in years reflects the duration of all subscription and maintenance agreements executed during a period, weighted by the contract value of each individual agreement. Effective April 1, 2008, our calculation of weighted average subscription and maintenance duration in years now includes all subscription and maintenance contracts from both direct and indirect channels, whereas the prior

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

calculation reflected direct product subscription licenses only. This modification has also been reflected in the weighted average subscription and maintenance duration in years from the first quarter of fiscal year 2008 for comparison purposes and resulted in a decrease of 0.22 years for the third quarter of fiscal year 2008. The increase in the weighted average subscription and maintenance duration in years for the third quarter and first nine months of fiscal 2009 compared with the comparable prior year periods was attributable to an increase in the number and dollar values of contracts executed with contract terms longer than the historical averages.

Annualized Subscription and Maintenance Bookings— Annualized subscription and maintenance bookings is an indicator of future revenue to be realized on an annual basis from contracts signed during the period. It is calculated by dividing the total value of all new term-based software license agreements entered into during a period by the weighted average 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 the Company expects to recognize as revenue in the future as either subscription and maintenance revenue or professional services revenue associated with contractually committed amounts billed or to be billed as of the balance sheet date. Total revenue backlog is comprised of amounts recognized as a liability 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 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 comprised of: (i) amounts received in advance of revenue recognition from the customer, (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 the Company has transferred its interest in committed installments (referred to as “Financing obligations” in Note A, “Basis of Presentation” in the Condensed Consolidated Financial Statements).

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

RESULTS OF OPERATIONS

The following table presents changes in the line items on our Condensed Consolidated Statement of Operations for the three- and nine-month periods ended December 31, 2008 and 2007 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				Percentage
										Dollar				of				of
										Change				Dollar				Total
										2008/				Change				Revenue
		2008				2007				2007				2008/2007				2008				2007
						(dollars in millions)
Revenue
Subscription and maintenance revenue		$	919			$	968			$	(49	)			(5	)%			88	%			88	%
Professional services			87				92				(5	)			(5	)			8				8
Software fees and other			36				40				(4	)			(10	)			4				4
Total revenue			1,042				1,100				(58	)			(5	)%			100	%			100	%
Expenses
Costs of licensing and maintenance			70				64				6				9	%			7	%			6	%
Cost of professional services			76				92				(16	)			(17	)			7				8
Amortization of capitalized software costs			31				29				2				7				3				3
Selling and marketing			307				333				(26	)			(8	)			29				30
General and administrative			110				123				(13	)			(11	)			11				11
Product development and enhancements			115				135				(20	)			(15	)			11				12
Depreciation and amortization of other intangible assets			36				40				(4	)			(10	)			3				4
Other (gains) expenses, net			(14	)			13				(27	)			(208	)			(1	)			1
Restructuring and other			2				22				(20	)			(91	)			—				2
Total expenses before interest and income taxes			733				851				(118	)			(14	)			70				77
Income before interest and income taxes			309				249				60				24				30				23
Interest expense, net			8				10				(2	)			(20	)			1				1
Income before income taxes			301				239				62				26				29				22
Income tax expense			88				76				12				16				8				7
Net income		$	213			$	163			$	50				31	%			20	%			15	%

Note — Amounts may not add to their respective totals due to rounding.

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

		Nine Months Ended December 31,
														Percentage				Percentage
										Dollar				of				of
										Change				Dollar				Total
										2008/				Change				Revenue
		2008				2007				2007				2008/2007				2008				2007
		(dollars in millions)
Revenue
Subscription and maintenance revenue		$	2,859			$	2,811			$	48				2	%			88	%			88	%
Professional services			274				280				(6	)			(2	)			9				9
Software fees and other			103				101				2				2				3				3
Total revenue			3,236				3,192				44				1	%			100	%			100	%
Expenses
Costs of licensing and maintenance			225				199				26				13	%			7	%			6	%
Cost of professional services			239				278				(39	)			(14	)			7				9
Amortization of capitalized software costs			91				87				4				5				3				3
Selling and marketing			915				956				(41	)			(4	)			28				30
General and administrative			342				406				(64	)			(16	)			11				13
Product development and enhancements			358				390				(32	)			(8	)			11				12
Depreciation and amortization of other intangible assets			109				117				(8	)			(7	)			3				4
Other expenses (gains), net			4				8				(4	)			(50	)			—				0
Restructuring and other			6				47				(41	)			(87	)			—				1
Total expenses before interest and income taxes			2,289				2,488				(199	)			(8	)			71				78
Income before interest and income taxes			947				704				243				35				29				22
Interest expense, net			14				37				(23	)			(62	)			—				1
Income before income taxes			933				667				266				40				29				21
Income tax expense			311				238				73				31				10				7
Net income		$	622			$	429			$	193				45	%			19	%			13	%