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EX-23 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - CA, INC.ca-ex23_20180331.htm
EX-32 - CERTIFICATION PURSUANT TO 906 - CA, INC.ca-ex32_20180331.htm
EX-31.2 - CERTIFICATION OF THE CFO PURSUANT TO 302 - CA, INC.ca-ex312_20180331.htm
EX-31.1 - CERTIFICATION OF THE CEO PURSUANT TO 302 - CA, INC.ca-ex311_20180331.htm
EX-24 - POWER OF ATTORNEY - CA, INC.ca-ex24_20180331.htm
EX-21 - SUBSIDIARIES OF THE REGISTRANT - CA, INC.ca-ex21_20180331.htm
EX-12 - STATEMENT OF RATIOS OF EARNINGS TO FIXED CHARGES - CA, INC.ca-ex12_20180331.htm
EX-10.58 - FORM OF EXECUTIVE RESTRICTED STOCK AGREEMENT UNDER CA, INC. 2011 INCENTIVE PLAN - CA, INC.ca-ex1058_20180331.htm
EX-10.52 - AMENDED AND RESTATED TERM LOAN AGREEMENT - CA, INC.ca-ex1052_20180331.htm
EX-10.49 - SCHEDULES A, B AND C TO CA, INC. CHANGE IN CONTROL SEVERANCE POLICY - CA, INC.ca-ex1049_20180331.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
 
ü
Annual Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
For the fiscal year ended March 31, 2018
 
OR
 
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission file number 1-9247
CA, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
13-2857434
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification Number)
520 Madison Avenue,
New York, New York
 

10022
(Address of Principal Executive Offices)
 
(Zip Code)
1-800-225-5224
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
 
(Name of each exchange on which registered)
Common Stock, par value $0.10 per share
Stock Purchase Rights Preferred Stock, Class A
 
The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    ü    No         
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.   Yes          No    ü   
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    ü    No         
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes    ü    No         
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.         
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer    ü    Accelerated filer          Non-accelerated filer          Smaller reporting company         
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes          No    ü   
The aggregate market value of the common stock held by non-affiliates of the registrant as of September 29, 2017 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $10.3 billion based on the closing price of $33.38 on the NASDAQ Stock Market LLC on that date.
The number of shares of each of the registrant’s classes of common stock outstanding at May 2, 2018 was 416,617,226 shares of common stock, par value $0.10 per share.
Documents Incorporated by Reference:
Part III: Portions of the Proxy Statement to be issued in conjunction with the registrant’s 2018 Annual Meeting of Stockholders.



CA, Inc.
Table of Contents
Part I
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part III
 
 
 
 
 
 
 
 
 
 
 
 
 
Part IV
 
 
 
 
 
 
 


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This Annual Report on Form 10-K (“Form 10-K”) contains certain forward-looking information relating to CA, Inc. (which we refer to as the “Company,” “Registrant,” “CA Technologies,” “CA,” “we,” “our,” or “us”) that is based on the beliefs of, and assumptions made by, our management as well as information currently available to management. When used in this Form 10-K, the words “believes,” “plans,” “anticipates,” “expects,” “estimates,” “targets,” and similar expressions relating to the future are intended to identify forward-looking information. Forward-looking information includes, for example, not only the statements relating to the future made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7, but also statements relating to the future that appear in other parts of this Form 10-K. This forward-looking information reflects our current views with respect to future events and is subject to certain risks, uncertainties, and assumptions, some of which are described under the caption “Risk Factors” in Part I, Item 1A and elsewhere in this Form 10-K. Should one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results may vary materially from the forward-looking information described in this Form 10-K as believed, planned, anticipated, expected, estimated, targeted or similarly identified. We do not intend to update these forward-looking statements.
The product and service names mentioned in this Form 10-K are used for identification purposes only and may be protected by trademarks, trade names, service marks and/or other intellectual property rights of the Company and/or other parties in the United States and/or other jurisdictions. The absence of a specific attribution in connection with any such mark does not constitute a waiver of any such right. All other trademarks, trade names, service marks and logos referenced herein belong to their respective companies.
References in this Form 10-K to fiscal 2018, fiscal 2017, fiscal 2016, fiscal 2015, etc. are to our fiscal years ended on March 31, 2018, 2017, 2016, 2015, etc., respectively.



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Part I

Item 1. Business.
Overview
CA Technologies is a global leader in software solutions that simplify complex enterprise environments. Our solutions enable customers to plan, develop, automate, manage and secure applications across mobile, cloud, distributed and mainframe platforms. Many of the largest companies in the world, including most of the Fortune 500 and many government agencies, rely on CA software to help manage and secure their hybrid cloud environments.
Our mission is to eliminate the barriers between ideas and business outcomes. To achieve this, we have built a portfolio of solutions that enable customers to leverage the benefits of agility, automation, insights and security in managing business processes and technology investments. Customers are transforming their businesses to better manage the market demands for speed, exceptional customer experience and rich analytics. We believe this journey, broadly referred to as digital transformation, is fueled by software.
Operating Segments
In fiscal 2018, our business was organized in three distinct but highly complementary operating segments: Enterprise Solutions, Mainframe Solutions and Services. These also represented the operating segments used by our Chief Executive Officer for evaluating our performance and allocating resources.
Our Enterprise Solutions segment includes a broad range of software planning, development, and management tools. More specifically, our solutions help customers with secure application development, infrastructure management, automation, and identity-centric security solutions. These products are designed for mobile, cloud, and distributed computing environments and run on industry standard servers.
Our Mainframe Solutions segment includes solutions for the IBM z Systems® platform, which runs many of our largest customers’ mission critical business applications. Our Mainframe Solutions help customers improve economics by increasing throughput and lowering cost per transaction, increasing business agility through DevOps tooling and processes, increasing reliability and availability of operations through machine intelligence and automation solutions, and protecting enterprise data with security and compliance.
Our Services segment helps customers reach their information technology (“IT”) and business goals primarily by enabling the rapid implementation and adoption of our software solutions. Our Services team consists of experienced professionals who provide a variety of services, such as consulting, implementation, application management services, education and support services, to both commercial and government customers. With approximately 900 certified consultants, architects, project managers and advisors located in 31 countries and an extensive partner ecosystem, CA Services works with customers to navigate complex business and technology challenges.
Our segments strengthen each other in several ways. Our customers benefit from the ability of CA solutions to span their entire infrastructure stack, across mobile, cloud, distributed, and mainframe. This is critical as customers focus on their end users’ experiences on their apps and the underlying transactions that traverse their heterogeneous environments. CA is one of the few companies positioned to deliver solutions that span mobile, cloud, open systems and mainframe environments. This hybrid cloud capability helps customers remove the barriers between ideas and business outcomes. We are able to bidirectionally leverage our core strengths and development efforts in our products within the Enterprise Solutions segment to bring new innovations to the Mainframe Solutions segment and vice versa. Our strong market position enables our investment in development, innovation and support of the mainframe platform to be among the largest in the industry, which sustains ongoing customer commitment to our Mainframe Solutions. We leverage our core strengths and development efforts across platforms, allowing customers to apply automation that improves quality and efficiency while enabling flexibility to optimize their technology assets. Our solutions help customers bridge their historical investments to the frameworks and architectures they are building for the future. Our Services segment leverages our expertise across our Mainframe Solutions and Enterprise Solutions segments and helps customers deploy and maintain our solutions. Refer to Note 16, “Segment and Geographic Information,” in the Notes to the Consolidated Financial Statements for financial data pertaining to our segment and geographic operations.
Focus of Our Business
The focus of our business is aligned around three strategic pillars: Agile, DevOps and Security, each of which contain portfolios of solutions spanning the continuum of platforms, from mobile to mainframe.

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Agile
Our Agile portfolio defines how work is planned, executed and serviced to deliver rapid value to our customers, and enables customers to plan, deliver, manage and optimize application development and project management. Our capabilities within Agile include:
Agile Planning helps customers transform their development practices from traditional to modern agile methodologies. Agile development utilizes an iterative work cadence with a feedback loop that decreases time-to-market, increases product quality and, most importantly, maintains a focus on generating rapid business value. CA’s cloud-based solutions in this space help customers to collaboratively plan, prioritize and track agile software development at scale.
Project & Portfolio Management, which is highly complementary to Agile Planning, enables customers to collect, prioritize, plan and deliver products, services and customer experiences. CA’s solutions improve decision making processes and resource optimizations, and decrease project execution risk.
DevOps
Our DevOps portfolio accelerates software delivery and enables customers to more efficiently deliver and manage applications and infrastructure. The portfolio empowers developers with a rich set of tools that help simplify, automate, and make their processes and applications more robust. They enable better experiences for developers and for the end users of their higher quality applications. Our DevOps portfolio strategy is platform agnostic, providing customers the flexibility to optimize workloads across mobile, cloud, on-premise, and mainframe environments. Our capabilities within DevOps include:
Continuous Delivery optimizes the application development processes by automating the deployment of applications across all stages of their lifecycles. Continuous delivery is key to transforming the technical aspects of software delivery. Our solutions enable the development, testing and release teams to work concurrently and continuously to remove the excess overhead and delays that come with traditional software development.
Automation solutions help customers transform business processes. They automate, orchestrate and accelerate the entire application delivery process. Our unified platform provides end-to-end automation capabilities that cover service orchestration, workload automation and release automation capabilities.
Agile Operations helps customers correlate end-user, application and infrastructure data from cloud-hosted containers to mainframes. Our solutions help customers see application dependencies and provide intelligent analytics, comprehensive coverage, and an open, extensible architecture that improves end-user experience.
API (Application Programming Interface) Management facilitates the creation, security and management of APIs through their lifecycle, enabling customers to connect more directly with end-users via mobile apps, cloud platforms and “Internet of Things” devices.
Security
Our Security portfolio provides customers, employees and partners seamless access to the right data, regardless of the underlying platform. Our Security portfolio is designed to minimize the risk of data breaches and alleviate the increased pressures faced by chief information security officers. Our capabilities within Security include:
Application Security offers a holistic and scalable way to manage security risk across an application lifecycle. Through our acquisition of Veracode, we provide a wide range of security testing and threat mitigation techniques. Our solution is hosted on a unified application security testing platform and integrates into existing development toolchains. This enables users to quickly identify and remediate security flaws earlier in the development process and supports the development of high-quality, secure code.
Identity & Access Management provides enterprise-grade identity management and governance capabilities, including broad provisioning support for on-premises and cloud-based applications, extensibility and flexibility to integrate with other IT systems and consumer-grade scale.
Privileged Access Management enables organizations to control and monitor the access and activity of privileged users, or users with elevated access or administrator rights. Our solutions help detect and prevent the threat of internal and external attacks leveraging both network and host-based controls for the enterprise and hybrid cloud.
Payment Security is a software as a service (“SaaS”)-based payment authentication service to help banks protect against fraud and ensure a hassle-free online shopping experience for their customers.

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Figure 1 - Portfolio and Platform Overview
portfolioandplatformoverview.jpg
Business Strategy
Our goal is to be the world’s leading independent enterprise software provider that helps organizations and enterprises plan, develop, manage, and secure modern software environments, across mainframe, distributed, cloud and mobile platforms. To accomplish this, key elements of our strategy include:
Drive organic innovation. Our product development strategy is built around key growth areas, where we are focused on innovating and delivering differentiated products and solutions across both distributed and mainframe platforms. We are focused on developing solutions that are easy to use, easy to implement and have a low total cost of ownership. A key element of our organic innovation approach is the broad adoption of the Agile methodology to govern our software development process, which we believe improves our product development time-to-market, quality and relevance, and supports our customer success initiatives.
Incubate technology for next generation products. We are researching and dedicating resources to the development of emerging technologies that are logical extensions of our core areas of focus. We are working on opportunities in areas such as containers, data analytics, big data, artificial intelligence, machine learning and open source, some of which may enhance or extend our current product portfolio and others of which may evolve into new product categories.
Pursue new business models and expanded routes to market. While our traditional on-premise software delivery remains relevant to many enterprise customers, we see cloud-based and try-and-buy models as attractive to both our existing and potential customers. These models simplify decision-making and accelerate the value customers can derive from new solution investments. New delivery models allow us to extend our market reach, speed adoption of our solutions, improve our efficiencies and compete more effectively for a larger number of customers globally. As such, our new product development is focused on our customers’ need for solutions that are simple and cost-effective to buy, install, deploy, manage and secure.
Expand relationships with our global customer base and address opportunities with new and underserved customers. We are focused on maintaining and expanding the strong relationships with our established customer base, and will proactively target growth with other potential customers that we do not currently serve. In parallel, we seek to broaden our customer base to new buyers in geographic regions we have underserved. The emerging roles of chief information security officers and chief development officers impact who and where IT environment purchasing decisions are made within our customers. This shift aligns with the product portfolio decisions we are making across our solutions set to meet our customers’ accelerating need for speed and agility. We are refining our sales, services, marketing and customer success resources to reach beyond the customers’ chief information officer and IT department to serve these new customer roles and respond to changes in customer buying behaviors.

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Execute strategic and disciplined technology acquisitions. We intend to supplement our organic innovation efforts with key technology acquisitions that are within or adjacent to our core areas of focus. We conduct a thorough acquisition process, which includes build vs. buy analysis and opportunity identification, detailed business case modeling, rigorous due diligence and extensive integration, to fully realize the value of our acquisitions. We also focus on organically developing nascent technologies from companies we have acquired to provide them with the necessary interoperability, resilience and security to operate at scale in the large, heterogeneous IT environments utilized by our customers.
Fiscal 2018 Developments and Highlights
The following are significant developments and highlights relating to our business during fiscal 2018:
In November 2017, we held our user conference, CA World ‘17. This event showcased the most extensive list of products in recent Company history, with more than 20 new offerings and enhancements designed to help customers leverage agile practices, intelligent automation, data insights and end-to-end security for better and faster business outcomes.
In February 2018, Jean M. Hobby was elected as a member of the Company’s Board of Directors.
In February 2018, Ethisphere Institute named CA Technologies one of the World’s Most Ethical Companies.
In fiscal 2018, CA Technologies was recognized as a leader in 20 industry analyst reports.
Organizational Update
Effective May 3, 2018, Adam Elster no longer serves as our President, Global Field Operations. Mr. Elster will remain employed through August 17, 2018 in order to be available to assist with an orderly transition. We have inserted interim leadership as an external search for Mr. Elster’s replacement is underway.
Seasonality
Some of our business results are seasonally weighted toward the second half of our fiscal year, including cash flow from operations and total bookings. However, these business results may not always follow this pattern during a fiscal year. Given the varying durations and dollar amounts of the contracts being renewed, year-over-year comparisons of total bookings and collections associated with these bookings, financial results are not always indicative of the overall total bookings trend.
Customers
We currently serve customers across most major industries worldwide, including banks, insurance companies, other financial services providers, government agencies, global IT service providers, telecommunication providers, transportation companies, manufacturers, technology companies, retailers, educational organizations and health care institutions. Our traditional customers generally consist of large enterprises that have computing environments from multiple vendors and are highly complex. As the emergence of cloud computing has democratized the technology landscape, we have increased our focus on addressing a broader customer set.
No single customer accounted for 10% or more of our total revenue for fiscal 2018, 2017 or 2016. Approximately 7% and 6% of our total revenue backlog at March 31, 2018 and 2017, respectively, is associated with multi-year contracts signed with the U.S. federal government and other U.S. state and local government agencies, which are generally subject to annual fiscal funding approval and/or renegotiation or termination at the discretion of the government.
Sales and Marketing
We offer our solutions through our direct and digital sales forces as well as indirectly through our partners. We remain focused on strengthening relationships and increasing penetration within our core customers and partners - approximately our top 2,000 accounts. We refer to this key group of customers as “Enterprise” accounts. We believe maintaining and expanding our relationships within our traditional customer base of large enterprises with multi-year agreements will continue to drive renewals and provide opportunities to increase account penetration to help drive revenue growth. We address our “Commercial” account opportunities through partners and our digital sales efforts. We believe this group of customers and potential customers represents an opportunity for us to leverage a cost-effective distribution network to sell to net new customers and increase our share of wallet at customers where we have lower levels of penetration.
We are working to accelerate the velocity of our sales transactions and are implementing initiatives to drive consistent improvement in sales execution. We are continuing to shift to a more solutions-driven sales approach, using real-time data and intelligence to drive on-going evolution of our go-to-market strategy towards the highest potential and highest-yielding opportunities. We continue to increase investment in our digital sales and marketing organization to drive additional new land and expand opportunities. This enables us to cost effectively scale our reach to a broader set of buyers.

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Our sales organization operates globally, with groups serving the North America (“NA”), Europe, the Middle East and Africa (“EMEA”), Latin America (“LA”), and Asia Pacific and Japan (“APJ”) geographies. We operate through branches, subsidiaries and partners around the world. Approximately 37% and 36% of our revenue in fiscal 2018 and 2017, respectively, was from operations outside of the United States. At March 31, 2018 and 2017, we had approximately 2,800 and 3,000, respectively, of sales and sales support personnel.
Marketing has played a key role in the ongoing transformation of our Company. It has helped to reshape perceptions of CA and to build capability that enables us to better serve our customers’ digital transformation. The critical role we play in enabling companies to compete and service customers in a software-defined era is now better understood and is driving interest in our offerings. The concept of the “Modern Software Factory” is resonating with customers and helps to reinforce the value proposition of CA’s portfolio of solutions. Operationally, to accelerate the role marketing plays in creating demand, we have sharpened our talent, tools and processes to better reach new customers to drive a higher velocity of opportunity creation for sales via digital marketing. Our marketing and sales organizations utilize common systems and analytics to initiate and respond to market opportunities, optimize resources, maximize efficiency and drive awareness and consideration of our brand and portfolio capabilities across our broad base of customers and prospects.
Partners
Our partners represent a foundational component of our go-to-market strategy. Our objective is to leverage our solutions and our partners’ strengths to deliver exceptional customer experiences, create greater value for our customers, and drive profitable and sustainable growth for both us and our partners. At the core of our global partner strategy, we aim to align our products, routes to market, customer segments and our strategic partners. Our data-driven approach of aligning our global partner strategy with market opportunities, channel trends and dynamic changes in the industry enables us to match our offerings and investments to specific markets.
We jointly build business with our partners in all our geographic regions through five key routes to market:
Resellers derive revenue primarily from the resale of third-party products. We work with a number of key strategic national and regional reseller partners to expand our global reach.
Global Service Providers provide a platform for application infrastructure or cloud-based service offerings. We seek to establish long-term partnerships, usually via outsourcing arrangements, to support the development of innovative, differentiated service offerings.
Global System Integrators offer our software within their business practices, leveraging their process design, planning, and vertical expertise to provide holistic solutions and implementation services to our joint customers.
Managed Service Providers leverage our solutions to power their subscription-based IT services. We work together to deliver differentiated, high-value managed services.
Global Technology Partners (including Independent Software Vendors and Infrastructure and Public Cloud Vendors) offer an opportunity for joint solutions, innovative business models, and CA brand awareness.
Global Customer Success
The Global Customer Success (“GCS”) organization is made up of customer experience designers, customer advocates, technical support engineers, community managers and an advanced customer data analytics team that share a common goal to deliver a superior end-to-end customer experience that creates and sustains satisfaction and loyalty, and serves as a source of competitive advantage for CA.
The Customer Success team within GCS works with customers to understand their unique business challenges to help maximize the value of their investments in our solutions. The Customer Success team aligns with members from education, support, services, partners and development to drive customer adoption, facilitate product expansion and to provide maximum return in minimal time.
CA Support engineers within GCS work with customers during trials and after the sale to assist in migration and upgrades, resolve issues 24/7, create self-help knowledge documentation, and proactively mitigate risks to prevent issues before they occur. CA Support operates in 42 locations worldwide, providing assistance in 16 languages while consistently earning industry-leading customer satisfaction ratings.
Throughout the customer experience, customers are encouraged to join online communities to interact and engage with their peers, partners, and our CA experts. We have more than 61,000 community members in our 50 most active communities who network, ask and answer questions, and share knowledge about our solutions.
Research and Development
We have approximately 5,100 employees globally who design, develop, and support our software. We operate principal research and development centers across the United States, including California, Colorado, Illinois, Massachusetts, New York, Pennsylvania, and Texas. Internationally, we have principal centers in Austria, Canada, Czech Republic, India, and Israel.

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In fiscal 2018, research and development continued to focus on developing solutions that are easy for customers to buy, install, use and maintain, and improving the quality and stability in our broadly deployed products which allows us to focus investment towards innovation initiatives.
We are advancing our Agile, DevOps and Security solutions while endeavoring to build a common technology stack across several of our product lines. We are making strides towards this shared component approach to make it easier, faster and more efficient for new solutions to be built.
We are also accelerating innovation with our CA Accelerator, which uses an incubator model to apply lean start-up best practices to grow new businesses. We are interested in areas of increasing importance to enterprises, such as big data, analytics, containerization, developer productivity, security and the “Internet of Things”. This model helps ensure we are making appropriate investments and building technology that customers value, using a small-batch, cost-efficient approach. We are also utilizing university partnerships to support and advance development.
Our research and development activities include a number of efforts to support our technical community in its pursuit of creating leading solutions for customers. We continue to use our Office of the Chief Technology Officer Research and Open Source and Open Standards initiatives to strengthen our relationships with research communities by working with academia, professional associations, industry standards bodies, customers and partners to explore novel products and emerging technologies. We also engage with universities to conduct product-focused research to create solutions for emerging opportunities.
We have charged to operations $642 million$586 million, and $560 million in fiscal 2018, 2017 and 2016, respectively, for product development and enhancements.
Our product offerings and go-to-market strategy continue to evolve to include solutions that may be delivered either on-premise or via SaaS or cloud platforms. We expect our product offerings to continue to become available to customers at more frequent intervals than our historical release cycles. Over the last few years, we have continued to leverage Agile development methodologies, which are characterized by a dynamic development process with more frequent revisions to a product release’s features and functions as the software is being developed. In addition, we have implemented a holistic product strategy and portfolio management process, which has improved transparency and efficiency across the portfolio through a quarterly cadence of business reviews.
Intellectual Property
Our products and technology are generally proprietary. We rely on U.S. and foreign intellectual property laws, including patent, copyright, trademark and trade secret laws, to protect our proprietary rights. However, the extent and duration of protection given to different types of intellectual property rights vary under different countries' legal systems. In some countries, full-scale intellectual property protection for our products and technology may be unavailable, and the laws of other jurisdictions may not protect our proprietary technology rights to the same extent as the laws of the United States. We also maintain contractual restrictions in our agreements with customers, employees and others to protect our intellectual property rights. These restrictions generally bind our customers and employees to confidentiality regarding our intellectual property and limit our customers’ use of our software and prohibit certain disclosures to third parties.
We regularly license software and technology from third parties, including some competitors, and incorporate them into our own software products. We include third-party technology in our products in accordance with contractual relationships that specify our rights.
We believe that our patent portfolio differentiates our products and services from those of our competitors, enhances our ability to access third-party technology and helps protect our investment in research and development. We continue to enhance our internal patent program to increase our ability to capture patents, strengthen their quality and increase the pace at which we are able to move our innovations through the patent process. At March 31, 2018, our patent portfolio included more than 1,500 issued patents and more than 950 pending applications in the United States and abroad. The patents generally expire at various times over the next 20 years. Although the durations and geographic intellectual property protection coverage for our patents may vary, we believe our patent portfolio adequately protects our interests. Although we have a number of patents and pending applications that may be of value to various aspects of our products and technology, we are not aware of any single patent that is essential to us or to any of our reportable segments.
The source code for our products is protected both as trade secrets and as copyrighted works. Our customers do not generally have access to the source code for our products. Rather, on-premise customers typically access only the executable code for our products, and SaaS customers access only the functionality of our SaaS offerings. Under certain contingent circumstances, some of our customers are beneficiaries of a source code escrow arrangement that enables them to obtain a limited right to access our source code.
We continue to be engaged in efforts to more fully employ our intellectual property by strategically licensing and/or assigning selected assets within our portfolio. This effort is intended to better position us in the marketplace and allow us the flexibility to reinvest in improving our overall business.

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Licensing and Engagements with Customers
For traditional, on-premise licensing, we typically license to customers either perpetually or on a subscription basis for a specified term. Our customers also purchase maintenance and support services that provide technical support and any general product enhancements released during the maintenance period.
Under a perpetual license, the customer has the right to use the licensed program for an indefinite period of time, typically upon payment of a one-time license fee. If the customer wants to receive maintenance, the customer is required to pay an additional annual maintenance fee.
Under a subscription license, the customer has the right to usage and maintenance of the licensed products during the term of the agreement. Under our licensing terms, customers can license our software products under multi-year licenses, with most customers choosing one to five-year terms, although some large customers may negotiate longer terms. Thereafter, the license generally renews for the same period of time on the same terms and conditions.
Within these license categories, our contracts provide customers with the right to use our products under a variety of models including, but not limited to:
A typical designated central processing unit (“CPU”) license, under which the customer may use the licensed product on a single, designated CPU.
A license based on millions of instructions per second (“MIPS”), which allows the customer to use the licensed product on one or more CPUs, limited by the aggregate MIPS rating of the CPUs covered by the license.
A user-based license, under which the customer may use the licensed product by or for the agreed number of licensed users.
A designated server license, under which the customer may use a certain distributed product on a single, designated server. The licensed products must be licensed for use with a specific operating system.
Customers can obtain licenses to our products through individual discrete purchases to meet their immediate needs or through the adoption of enterprise license agreements. Enterprise license agreements are comprehensive licenses that cover multiple products and also provide for maintenance and support.
For our mainframe solutions, the majority of our licenses provide customers with the right to use one or more of our products up to a specific license capacity, generally measured in MIPS. For these products, customers may acquire additional capacity during the term of a license by paying us an additional license fee and maintenance fee. For our enterprise solutions, our licenses may provide customers with the right to use one or more of our products limited to a number of servers, users or copies, among other things. Customers may license these products for additional servers, users or copies, etc., during the term of a license by paying us an additional license fee and maintenance fee.
Our services are typically delivered on a time-and-materials basis, but alternative pay arrangements, such as fixed fee or staff augmentations, could be offered as well.
SaaS is another delivery model we offer for certain products when a customer prefers to use our technology off-premises with little or no infrastructure required. Our SaaS offerings are typically licensed for a designated term using a subscription fee. Some of our SaaS business is transaction or usage-based. Our SaaS products, which are becoming a larger part of our Enterprise Solutions portfolio, typically have a shorter average duration and smaller initial contract values compared to the more traditional on-premise delivery model.
Competition
Our industry is extremely competitive and characterized by: continually changing customer needs, rapid technological change; frequent emergence of new companies and products; evolving industry standards, computing platforms, go-to-market approaches and business models.
Our competition can generally be categorized into the following groups:
A broad set of point product vendors in a number of our markets, many of which lack near-term profit expectations;
Larger, vertically integrated technology companies that can bundle software to generate other revenue capture tied to hardware, platform, and services offerings;
Continued expansion of cloud service provider offerings from Amazon Web Services, Microsoft Azure, and Google Cloud Platform embedded with management and security capabilities; and
Increasing adoption of open source solutions that may substitute for commercial spend.
Among the companies with which we compete are: AppDynamics, Inc. (acquired by Cisco); Atlassian Corporation, Plc; BMC Software Inc.; BeyondTrust; Compuware Corporation; CyberArk Software, Ltd.; International Business Machines Corporation; Micro Focus; Microsoft Corporation; MuleSoft, Inc. (acquired by Salesforce.com, Inc. in May 2018); New Relic, Oracle Corporation; SailPoint, Inc.; ServiceNow, Inc.; SolarWinds, Inc.; Splunk, Inc.; and VMware, Inc.

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We believe the combination of our breadth of portfolio of enterprise management tools, our platform and hardware independence, and our deep customer relationships set us apart from other established competitors in the market. Further, we believe we are differentiated from emerging point-product providers by our global reach, breadth and synergy of offerings, deep industry experience, and strong balance sheet.
Employees
We believe that innovation and invention are the by-products of an inclusive and diverse workplace. Diversity of perspective, experience and thought are key to driving creativity, innovation, and results. We are committed to providing equitable opportunities and giving employees avenues for success - both personally and professionally. We believe that workforce diversity is an important topic in the technology sector, and we are dedicated to moving the conversation on diversity forward.
We had approximately 11,300 and 11,800 employees at March 31, 2018 and 2017, respectively.
Fiscal 2018 Employee Highlights
In May 2017, we were named one of America’s Best Employers by Forbes Magazine.
In May 2017, we were named a Best Company for Multicultural Women by Working Mother Magazine.
In September 2017, we were named one of Working Mother Magazine’s 100 Best Companies.
In November 2017, we received a perfect score of 100 percent on the 2018 Corporate Equality Index, a national benchmarking survey and report on corporate policies and practices related to LGBT workplace equality, administered by the Human Rights Campaign Foundation.
In December 2017, we were named one of Fortune’s Best Workplaces for Diversity by Great Places to Work®.
In January 2018, we were included in Bloomberg’s first Sector-Neutral Gender-Equality Index.
In March 2018, we were named one of NAFE’s Top Companies for Executive Women by the National Association for Female Executives.
Financial Information About Geographic Areas
Refer to Note 16 “Segment and Geographic Information,” in the Notes to the Consolidated Financial Statements for financial data pertaining to our segment and geographic operations.
Corporate Information
The Company was incorporated in Delaware in 1974, began operations in 1976 and completed an initial public offering of common stock in December 1981. Our common stock is traded on The NASDAQ Global Select Market tier of The NASDAQ Stock Market LLC under the symbol “CA.”
Our corporate website address is www.ca.com. All filings we make with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available for free in the Investor Relations section of our website (www.ca.com/invest) as soon as reasonably practicable after they are filed with or furnished to the SEC. Our SEC filings are available to be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information about the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. Our filings can also be obtained for free on the SEC’s website at www.sec.gov. The reference to our website address does not constitute inclusion or incorporation by reference of the information contained on our website in this Form 10-K or other filings with the SEC, and the information contained on our website is not part of this document.
The Investor Relations section of our website (www.ca.com/invest) also contains information about our initiatives in corporate governance, including: our Corporate Governance Principles; information about our Board of Directors (including specific procedures for communicating with them); information concerning our Board of Directors Committees; and our Code of Conduct (which qualifies as a “code of ethics” under applicable SEC regulations and is applicable to all of our employees, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, and our directors are expected to act consistently with the underlying ethical principles of such code). These documents can also be obtained in print by writing to our Corporate Secretary at CA, Inc., 520 Madison Avenue, New York, New York 10022.

Item 1A. Risk Factors.
Current and potential stockholders should consider carefully the risk factors described below. Any of these risks, some of which are beyond our control, could materially adversely affect our business, financial condition, operating results and cash flow, which could negatively impact our stock price.

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Failure to execute our growth strategy could materially adversely affect our business, financial condition, operating results and cash flow.
Our business strategy is to create long-term sustainable growth, both organically and through acquisitions, while selling products and services that address customer needs and capitalize on current and next-generation market opportunities. The success of this strategy could be affected by our ability to:
Ensure that any new offerings address the needs of a rapidly changing market while not adversely affecting demand for our traditional products;
Execute renewals within our existing customer base at acceptable renewal rates;
Expand relationships with our global customer base and address opportunities with new customers (e.g., in geographic regions where we have underserved, or with chief information security officers and chief development officers, who have not been our traditional customers) at levels sufficient to offset any declines in revenue in our Mainframe Solutions segment, which is subject to an industry-wide decline due to new technologies, and in mature product lines in our Enterprise Solutions segment;
Effectively manage the strategic shift in our business model to increase sales through our digital sales forces and indirectly through our partners, as well as provide additional SaaS offerings, offer try-and-buy models and refocus our professional services and education engagements on those engagements that are connected to new product sales, without affecting our financial performance to an extent greater than anticipated; and
Effectively manage our pricing and other go-to-market strategies, as well as improve the CA Technologies brand, technology and innovation awareness in the marketplace.
If we are unable to successfully execute our growth strategy, there could be a material adverse effect on our business, financial condition, operating results and cash flow.
We are subject to intense competition in product and service offerings and pricing, and we expect this to continue in the future, which could either diminish demand for, or inhibit growth of, our products and reduce our sales, revenue and market presence.
Our business strategy is based upon our ability to develop and acquire products and services that are accepted by the market better than those of our competitors. There can be no assurance that we will effectively meet these competitive demands. The markets for our products and services are intensely competitive, and we expect product and service offerings and pricing competition to continue. Some of our competitors have longer operating histories, greater name recognition, a larger installed base of customers in any particular market niche, larger technical staffs, established relationships with hardware vendors, or greater financial, technical and marketing resources than us. We also face competition from numerous start-ups and smaller companies that specialize in specific aspects of the highly fragmented software industry, and from open source authors who may provide software and intellectual property for free, competitors who may offer their products through try-and-buy or freemium models, and customers who may develop competing products. Competition from any of these sources could also result in price reductions or displacement of our products, which could materially adversely affect our financial results.
Our competitors also include large vendors of hardware and operating system software and cloud service providers, who continue to both expand their product and service offerings, and consolidate offerings into broad product lines. The widespread inclusion of products that perform the same or similar functions as our products bundled within computer hardware or other companies’ software products, or the provision of services similar to those provided by us, could reduce the perceived need for our products and services, or render our products obsolete and unmarketable. In addition, the software industry is currently undergoing consolidation as software companies seek to offer more extensive suites and broader arrays of software products and services, as well as integrated software and hardware solutions. The increased bundling of products and services and industry consolidation may adversely affect our competitive position, which could materially adversely affect our sales, revenue and market presence. Refer to Part I, Item 1, “Business - Competition,” of this Form 10-K for additional information.
Failure to innovate or adapt to technological changes, or develop and introduce new software products and services in a timely and market-accepted manner, could materially adversely affect our business.
We operate in a highly competitive industry characterized by rapid technological changes, evolving industry standards, changes in customer requirements and new delivery methods. The newer enterprise solutions markets in which we operate - including non-mainframe platforms from physical to virtual and cloud - are far more crowded and competitive than our traditional mainframe systems management markets.

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Our ability to compete effectively depends upon many factors, including the success of our existing solutions, the timely introduction and success of future software products and services, including those that we acquire or develop, and related delivery methods (e.g., SaaS), as well as our ability to provide successful, timely and adequate customer support. Further, as our existing products mature, they may become obsolete. The emergence of cloud computing means that many of our enterprise solutions customers are themselves undergoing a radical shift in the way they deliver IT services to their businesses. The shift towards delivering infrastructure and SaaS from the cloud may negatively affect our ability to sell IT management solutions to our traditional enterprise solutions customers. Failure to adapt our products, solutions, delivery models and sales approaches to effectively plan for cloud computing may adversely affect our business. If we are not successful in anticipating the rate of market change towards the cloud computing paradigm and evolving with it by delivering solutions for IT management in the cloud computing environment, customers may forgo the use of our products, particularly certain mature product lines in our Enterprise Solutions segment, in favor of those with comparable functionality delivered via the cloud.
We have experienced long development cycles and product delays in the past, particularly with some of our enterprise solutions, and even with the Agile development methodology we may experience delays in the future. In addition, we have incurred and expect to continue to incur significant research and development costs to introduce new products and integrate products into solution sets. If there are delays in new product introduction or solution set integration, or if there is less-than-anticipated market acceptance of these new products or solution sets, we may have invested substantial resources without realizing adequate revenues in return. Furthermore, there can be no assurance that as technologies become outdated or new delivery methods are required, we will be able to adopt or introduce them as quickly as our competitors, or within budgeted costs and time frames, which could adversely affect our business and reputation.
If our products do not remain compatible with ever-changing operating environments, platforms, or third-party products, we could lose customers and the demand for our products and services could decrease, which could materially adversely affect our business, financial condition, operating results and cash flow.
The largest suppliers of systems and computing software are, in most cases, the manufacturers of the computer hardware systems used by most of our customers, particularly in the mainframe space. These companies periodically modify or introduce new operating systems, systems software and computer hardware. In the future, new products from these companies could require substantial modification of our products to maintain compatibility with these companies’ hardware or software. There can be no assurance that we will be able to adapt our products and our business to future changes introduced by hardware manufacturers and system software developers.
Further, our solutions interact with a variety of software and hardware developed by third parties and we may lose access to third-party code and specifications for the development of code, which could materially adversely affect our ability to develop software compatible with third-party software products in the future. Some software providers and hardware manufacturers, including some of the largest vendors, have a policy of restricting the use or availability of their code or technical documentation for some of their operating systems, applications, or hardware. To date, this policy has not had a material effect on us. Some companies, however, may adopt more restrictive policies in the future or impose unfavorable terms and conditions for such access. These restrictions may, in the future, result in higher research and development costs for us in connection with the enhancement and modification of our existing products and the development of new products. Any additional restrictions could materially adversely affect our business, financial condition, operating results and cash flow.
Given the global nature of our business, economic factors or political events beyond our control and other business and legal risks associated with global operations can affect our business in unpredictable ways.
International revenue has historically represented a significant percentage of our total worldwide revenue. Success in selling and developing our products throughout the world depends on a variety of factors, including:
Developing and executing an effective go-to-market strategy in various locations;
Foreign exchange rates;
Changes in global, economic and political landscapes;
Acts of terrorism;
Workforce reorganizations in various locations, including global reorganizations of sales, research and development, technical services, finance, human resources and facilities functions;
Effectively staffing key managerial and technical positions;
Successfully localizing software products for a significant number of international markets;
Restrictive employment regulation; and
Trade restrictions such as tariffs, duties, taxes or other controls.

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In addition, compliance by us and our partners (including unaffiliated third-party partners) with differing local laws, regulations and interpretations in multiple international jurisdictions, as well as compliance with U.S. laws and regulations where applicable in these international locations increases our cost of doing business. These laws and regulations include restrictive local laws regarding the transfer of funds from, or the conversion of currencies in, certain countries, international intellectual property laws, which may be more restrictive or may offer lower levels of protection than U.S. law, as well as anti-corruption, competition, anti-money laundering, export control and data privacy laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010, the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks, as well as the new EU General Data Protection Regulation, which will become effective on May 25, 2018, the Network and Information Security Directive in the EU, trade controls and sanctions administered by the U.S. Office of Foreign Assets Control, and similar laws and regulations in other jurisdictions.
We have implemented policies, procedures and controls designed to achieve compliance with applicable laws and regulations, but our corporate policies, process and controls may not prevent or detect all potential breaches of law or other governance practices. Any violation of these laws could lead to substantial civil and criminal fines and penalties, litigation, loss of operating licenses or permits and other collateral consequences.
An unfavorable development regarding any of the foregoing factors, many of which are beyond our control, could materially adversely affect our business.
Failure to sell and renew license agreements on a satisfactory basis could materially adversely affect our business, financial condition, operating results and cash flow.
The success of our business depends on attracting new customers to our products and solution sets and retaining or increasing the level of revenues derived from existing customers. We utilize direct sales efforts, as well as third-party partners, to sell our products and solutions sets, and our sales efforts may be unsuccessful. Many of our existing customers have multi-year enterprise license agreements, some of which involve substantial aggregate fee amounts. These customers have no contractual obligation to purchase additional solutions. Customer renewal rates may decline or fluctuate as a result of a number of factors, including the level of customer satisfaction with our solutions or customer support, customer budgets and the pricing of our solutions as compared with the solutions offered by our competitors, any of which may cause our revenue to grow more slowly than expected, if at all. The failure to sell new license agreements and renew transactions in the future, or failure to replace those enterprise license agreements with renewal transactions of similar scope, on terms that are commercially attractive to us, could materially adversely affect our business, financial condition, operating results and cash flow.
Failure to expand partner programs and failure by our partners to leverage their sales channels to drive our revenue growth may result in lost sales opportunities and a weakening of our market position.
In addition to our direct sales efforts, we sell our products and solutions through various partner channels, which include resellers, global service providers, global system integrators, managed service providers and global technology partners. Through our various global partner programs, we provide incentives, training, enablement and marketing investments so our partners have the capability and expertise to sell and deliver these solutions to their customers. We also leverage global systems integrators and global service providers to assist with and influence the sales of solutions to our top customers and we utilize resellers to better penetrate the partner-driven commercial market. The failure to expand partner programs or failure by our partners to leverage their sales channels could result in lost incremental sales opportunities that adversely affect our overall business success, including our market position.
Our business may suffer if we are not able to retain and attract qualified professionals, including key managerial, technical, marketing and sales professionals.
We depend on our ability to identify, recruit, hire, train, develop and retain qualified and effective professionals and to attract and retain talent needed to execute our business strategy, which ability depends on, among other factors, the strength of our brand recognition. We also depend on our ability to perform these tasks with respect to professionals from acquired companies, which ability may be negatively impacted by our efforts to integrate and rationalize the products and lines of business we have acquired. Our ability to do so depends on numerous factors, including factors that we cannot control, such as competition and conditions in the local employment markets in which we operate. Effective succession planning is also important for our long-term success. Failure to ensure effective transfers of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. As our success depends in a large part on the continued contribution of our senior management and other key employees, a loss of a significant number of skilled managerial, technical or other professionals could have a negative effect on the quality of our products. A loss of a significant number of experienced and effective sales professionals could result in lower sales of our products. Furthermore, many of our key personnel receive a compensation package that includes equity awards. Any new regulations, volatility in the stock market or other factors could diminish our use, and the value, of our equity awards, forcing us to use a higher proportion of cash compensation to incentivize our key personnel, or putting us at a competitive disadvantage.

14


Changes in generally accepted accounting principles may materially adversely affect our reported results of operations or financial position.
From time to time, the Financial Accounting Standards Board (“FASB”) issues new accounting principles. For example, in May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, with amendments in 2015, 2016 and 2017, which creates new Accounting Standards Codification Topic 606 (“Topic 606”) that will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles (“GAAP”) when it becomes effective for us in the first quarter of fiscal 2019. Under Topic 606, more judgment and estimates will be required within the revenue recognition process than are required under existing GAAP. We currently anticipate that this standard will have a material effect on our consolidated financial statements, revenue recognition policies and related disclosures. We also presently anticipate that this standard could create volatility in our reported revenue and operating results, which could negatively impact our stock price. We currently believe the most significant effect relates to the timing of the recognition of our software license revenue. As a result, a significant portion of our revenue backlog (i.e., deferred revenue and future billings on committed contracts) relating to the license component of customer contracts at March 31, 2018 under existing GAAP will not be recognized as revenue in future periods but instead will be included as part of the cumulative effect adjustment within retained earnings upon adoption of Topic 606. Refer to Note 1, “Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements for additional information about Topic 606 and other new accounting pronouncements. Changes to existing rules, or changes to the interpretations of existing rules, could lead to changes in our accounting policies, systems and internal controls over financial reporting. For example, in connection with our adoption of Topic 606, we are developing new policies and processes based on the changes in revenue recognition guidance and implementing a new revenue recognition accounting system. Such changes and any difficulties implementing such changes could materially adversely affect our reported financial results and the effectiveness of our internal controls.
We may encounter difficulties in successfully integrating companies and products that we have acquired or may acquire into our existing business, which could materially adversely affect our business, financial condition, operating results and cash flow.
In the past we have acquired, and in the future we expect to acquire, complementary companies, products, services and technologies through a number of different vehicles, including through mergers, asset acquisitions, joint ventures, partnerships, strategic alliances and equity investments. Additionally, we expect to acquire technology that is consistent with our business strategy. The risks we may encounter with any such acquisition or integration of an acquisition include:
We may find that the acquired company or assets do not improve our financial and/or strategic position as planned;
We may have difficulty integrating the operations, facilities, personnel and compensation plans of the acquired business;
We may have difficulty retaining the skills needed to further market, sell or provide services on the acquired products in a manner that will be accepted by the market;
We may have difficulty incorporating the acquired technologies or products into our existing product lines, and in selling such technologies or products to our customers and through our partner programs;
Our ongoing business may be disrupted by transition or integration issues and our management’s attention may be diverted from other business initiatives;
Our relationships with current and new employees, customers and business partners could be impaired;
An acquisition may result in increased litigation risk, including litigation from terminated employees or third parties, as well as product, customer or intellectual property liability;
Our due diligence process may fail to identify significant issues with the acquired company’s product quality, financial disclosures, accounting practices, internal control deficiencies including material weaknesses, product architecture, legal and tax contingencies, compliance with differing, changing and potentially inconsistent local laws, regulations and interpretations in multiple international jurisdictions, as well as compliance with U.S. laws and regulations where applicable in these international locations, and other matters; and
We may not be able to realize the benefits of recognized goodwill and intangible assets and this may result in the potential impairment of these assets.
These risks can be heightened during periods when we seek to integrate multiple acquisitions at the same time or in a relatively short period of time. Furthermore, to the extent we issue shares of stock or other rights to purchase stock, including options, to pay for acquisitions or to retain employees, existing stockholders’ interests may be diluted and income per share may decrease. The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition and cash flow.

15


Our data center, network and software products, and the IT environments of our business partners and customers are subject to hacking or other cybersecurity threats, which could result in a loss or misuse of proprietary, personally identifiable and confidential information and/or harm to our customer relationships and the market perception of the effectiveness of our products.
Given that some of our products are intended to manage and secure IT infrastructures and environments, we expect to be an ongoing target of cybersecurity attacks. Open source code or other third-party software used in our infrastructure and products could also be targeted, as could our software being utilized by our customers. This risk can be heightened for acquired products, which may not have gone through the same testing and quality control measures as our organically developed products. Additionally, our SaaS business includes the hosting of customer data and uses third-party data centers that may also be subject to hacking incidents. If our SaaS business increases substantially, whether due to organic growth or the acquisition of SaaS businesses, our exposure to hacking incidents could increase due to the increase in the volume of SaaS business activity and the potential increase in the number of SaaS technology platforms we might maintain. Although we continually seek to improve our countermeasures to prevent such incidents, we may be unable to anticipate every scenario and it is possible that certain cyber threats or vulnerabilities will be undetected or unmitigated in time to prevent an attack on us and our customers. Cybersecurity attacks could require significant expenditures of our capital and diversion of our resources. Additionally, efforts by hackers or others could cause interruptions, delays or cessation of our product licensing, or modification of our software, which could cause us to lose existing or potential customers. If these attacks are successful, they could result in the theft of proprietary, personally identifiable, confidential and sensitive information of ours, our employees, our customers and our business partners, and could materially disrupt business for us, our customers and our business partners. A successful cybersecurity attack involving our data center, network or software products could also negatively impact the market perception of the effectiveness of our products or lead to contractual disputes, litigation or government regulatory action against us, any of which could materially adversely affect our business.
If we do not adequately manage, evolve and protect our information systems, infrastructure and processes, our ability to manage and grow our business may be harmed.
We rely on our information systems and those of third parties for managing the financial information of our business. For example, in connection with our adoption of Topic 606, we are implementing a new revenue recognition accounting system. Any disruption in such information systems could have a significant impact on our business. In addition, we continuously work to enhance our information systems and infrastructure and integrate those of acquired companies, which is frequently disruptive to the underlying business. Additionally, delays in adapting our information systems to address new business models, such as SaaS, or the adoption of Topic 606 could limit the success or result in the failure of those initiatives and impair the effectiveness of our internal controls.
Although we have implemented a disaster recovery program, our system redundancy may be ineffective or inadequate and our disaster recovery planning may not be sufficient for all situations, including scenarios associated with acquired companies. Failure to adequately address these issues, as well as to manage and protect our infrastructure, could adversely affect our ability to manage and grow our business, including our SaaS business.
General economic conditions and credit constraints, or unfavorable economic conditions in a particular region, business or industry sector, may lead our customers to delay or forgo technology investments and could have other impacts, any of which could materially adversely affect our business, financial condition, operating results and cash flow.
Our products are designed to improve the productivity and efficiency of our customers’ information processing resources. However, a general slowdown in the global economy or in a particular region, such as Europe, a disruption in a business or an industry sector or tightening of credit markets could cause our current or any new customers to have difficulty accessing credit sources, delay contractual payments, or delay or forgo decisions to (i) license our products (particularly with respect to discretionary spending for software), (ii) upgrade existing environments or (iii) purchase services.
Furthermore, a general slowdown in the global economy may also materially affect the global banking system, including individual institutions as well as a particular business or industry sector, which could cause consolidations or failures in that sector. Approximately one third of our revenue is derived from arrangements with financial institutions (i.e., banking, brokerage and insurance companies). In addition, we derive material portions of our revenue from other industries such as telecommunications and health care that rely on transaction processing. The majority of these arrangements are for the renewal of mainframe solutions capacity and maintenance associated with transactions processed by our customers. While we cannot predict what impact there may be on our business from changes to the financial industry, telecommunications or health care sectors, or the impact on our business from the economy in general, any material change in general economic conditions, or conditions in a particular sector, may lead our customers to delay or forgo technology investments and could have other impacts, any of which could affect the manner in which we are able to conduct business.

16


Our sales to government clients subject us to uncertainties regarding fiscal funding approvals, renegotiations or terminations at the discretion of the government, as well as audits and investigations, which could result in litigation, penalties and sanctions including early termination, suspension and debarment.
Approximately 7% of our total revenue backlog at March 31, 2018 is associated with multi-year contracts signed with the U.S. federal government and other U.S. state and local government agencies. These contracts are generally subject to annual fiscal funding approval and may be renegotiated or terminated at the discretion of the government. Termination, renegotiation or the lack of funding approval for a contract could adversely affect our sales, revenue and reputation. Additionally, our government contracts are generally subject to certain requirements, some of which are generally not present in commercial contracts and/or may be complex, as well as to audits and investigations. Failure to meet contractual requirements could result in various civil and criminal actions and penalties, and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the government and could materially adversely affect our business, financial condition, operating results and cash flow.
Fluctuations in foreign exchange rates could result in losses.
We operate global businesses and our consolidated financial results are reported in U.S. dollars. Most of the revenue and expenses of our foreign subsidiaries are denominated in local currencies. Given that cash is typically received over an extended period of time for many of our license agreements and given that a substantial portion of our revenue is generated outside of the United States, fluctuations in foreign exchange rates against the U.S. dollar could result in substantial changes in reported revenues and operating results due to the foreign exchange impact of translating these transactions into U.S. dollars.
In the normal course of business, we employ various hedging strategies to partially mitigate these risks, including the use of derivative instruments. These strategies may not be effective in protecting us against the effects of fluctuations from movements in foreign exchange rates. As a result, fluctuations of the foreign exchange rates could result in financial losses.
Discovery of errors or omissions in our software products could materially adversely affect our revenue and earnings.
The software products we offer are inherently complex. Despite testing and quality control, we cannot be certain that errors or omissions will not be found in current versions, new versions, documentation or enhancements of our software products. This risk can be heightened with acquired products which may not have gone through the same testing and quality control measures as our organically developed products. If new or existing customers have difficulty deploying our products or require significant amounts of customer support, our operating margins could be adversely affected. We could also face possible claims and higher development costs if our products contain errors that we have not detected, cause damage to customer or third-party systems, or otherwise fail to meet customer expectations. Significant technical challenges also arise with our products because our customers license and deploy our products across a variety of computer platforms and integrate them with a number of third party software applications and databases. These combinations increase our risk further because, in the event of a system-wide failure, it may be difficult to determine which product is at fault, which could cause us to be harmed by the failure of another supplier’s products. As a result of the foregoing, we could experience:
Loss of or delay in revenue and loss of market share;
Loss of customers, including the inability to obtain repeat business with existing key customers;
Damage to our reputation;
Failure to achieve market acceptance;
Diversion of development resources;
Remediation efforts that may be required;
Increased service and warranty costs;
Legal actions by customers or government authorities against us that, whether or not successful, could be costly, distracting and time-consuming;
Increased insurance costs; and
Failure to successfully complete service or customer support engagements for product installations, implementations and integrations.
Consequently, the discovery of errors in our products after delivery could materially adversely affect our revenue and earnings.

17


Failure to protect our intellectual property rights and source code could weaken our competitive position.
Our success is highly dependent upon our proprietary technology. We protect our rights through a variety of measures, including patents, copyrights, trademarks, trade secret laws, confidentiality procedures and contractual provisions. Notwithstanding our efforts to protect our rights, policing unauthorized use is difficult, and intellectual property litigation can be expensive and disruptive to our business. The laws of other countries may not be as protective as those of the United States. In addition, our patents may be circumvented, challenged, invalidated or designed around by other companies. Furthermore, confidentiality procedures and contractual provisions can be difficult to enforce and, even if successfully enforced, may not be entirely effective. Failure to protect such technology could lead to the loss of valuable assets and our competitive advantage. Refer to Part I, Item 1, “Business - Intellectual Property,” of this Form 10-K for additional information.
Certain software that we use in our products is licensed from third parties and, for that reason, may not be available to us in the future, which has the potential to delay product development and production or cause us to incur additional expense.
Some of our solutions contain software licensed from third parties. Some of these licenses may not be available to us in the future on terms that are acceptable to us or allow our products to remain competitive. The loss of these licenses or the inability to maintain any of them on commercially acceptable terms could delay development of future products or the enhancement of existing products. We may also choose to pay a premium price for such a license in certain circumstances where the benefit of continuity of the licensed product would outweigh the premium cost of the license.
Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow.
Some of our products contain software from open source code sources. The use of such open source code may subject us to certain conditions, including the obligation to offer our products that use open source code for no cost or to make the proprietary source code of those products publicly available. Further, although some open source vendors provide warranty and support agreements in conjunction with the use of their open source software, it is common for many open source software authors to make their open source software available “as-is” with no warranty, indemnity or support. We monitor our use of such open source code to avoid subjecting our products to conditions we do not intend. However, the use of such open source code may ultimately subject some of our products to unintended conditions, which could require us to take remedial action that may divert resources away from our development efforts and could materially adversely affect our business, financial condition, operating results and cash flow.
Third parties could claim that our products infringe or contribute to the infringement of their intellectual property rights and/or that we owe royalty payments to them, which could result in significant litigation expense or settlement with unfavorable terms.
From time to time, third parties have claimed and may claim that our products, both organically developed and acquired, infringe various forms of their intellectual property and/or that we owe royalty payments to them. Investigation of these claims can be expensive and could affect development, marketing or shipment of our products. As the number of software patents issued increases, it is likely that additional claims will be asserted. Defending against such claims is time consuming and could result in significant litigation expense, adverse judgments or settlement on unfavorable terms, and divert our management’s attention, any of which could materially adversely affect our business.
The number, terms and duration of our license agreements, as well as the timing of orders from our customers and channel partners, may cause fluctuations in some of our financial metrics, which may affect our quarterly financial results.
Historically, a substantial portion of our license agreements are executed in the last month of a quarter and the number of contracts executed during a given quarter can vary substantially. In addition, it is characteristic of our industry when dealing with enterprise customers to experience long sales cycles, which for us is driven in part by the varying terms and conditions of our software contracts. These factors can make it difficult for us to predict sales and cash flow on a quarterly basis. Any failure or delay in executing new or renewed license agreements in a given quarter could cause declines in some of our financial metrics (e.g., revenue or cash flow), and, accordingly, increases the risk of unanticipated variations in our quarterly results.
Potential tax liabilities may materially adversely affect our results.
We are subject to income taxes in the United States and in numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, we engage in many transactions and calculations where the ultimate tax determination is uncertain.

18


The Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”) includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate, limitations on the deductibility of executive compensation and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. This new law also includes a provision that imposes a transition tax on foreign earnings whether or not such earnings are repatriated to the U.S. We have provided provisional amounts to estimate the tax impacts of the Tax Act. We will continue to refine the provisional amounts as we review and analyze results from operations needed for calculations under the Tax Act, as well as further review the historic unremitted earnings of our foreign subsidiaries and take into consideration any additional regulatory guidance published by the U.S. tax authorities in respect of the Tax Act. Compliance with the Tax Act may require the collection of information not regularly produced within the Company, the use of estimates in our financial statements, interpretation of further regulatory guidance and the exercise of significant judgment in accounting for our tax provisions. The Company expects to finalize the tax expense as soon as practical, but not later than the third quarter of fiscal 2019, and such updates to our calculations may differ, possibly materially, from the provisional amounts previously recorded.
We are regularly under audit by tax authorities. We believe our tax estimates are reasonable, including the provisional amounts relating to the Tax Act. However, the final determination of tax audits and any related litigation could be materially different from that which is reflected in our income tax provisions and accruals. Additional tax assessments resulting from audit, litigation or changes in tax laws, as well as further guidance to clarify or interpret uncertainties in the tax laws, such as the Tax Act, may result in increased tax provisions or payments or possibly criminal claims, penalties or fines which could materially adversely affect our business, financial condition, operating results and cash flow in the period or periods in which that determination is made. Refer to Note 14, “Income Taxes,” in the Notes to the Consolidated Financial Statements for additional information about our tax matters.
Changes in market conditions or our credit ratings could increase our interest costs and adversely affect the cost of refinancing our debt and our ability to refinance our debt, which could materially adversely affect our business, financial condition, operating results and cash flow.
At March 31, 2018 and 2017, we had $2,783 million and $2,791 million, respectively, of debt outstanding, consisting mostly of unsecured senior note obligations. Refer to Note 7, “Debt,” in the Notes to the Consolidated Financial Statements for the payment schedule of our long-term debt obligations. Our senior unsecured notes are rated by Moody’s Investors Service, Fitch Ratings, and Standard and Poor’s. These agencies or any other credit rating agency could downgrade or take other negative action with respect to our credit ratings in the future. If our credit ratings were downgraded or other negative action is taken, or market conditions change, we could be required to, among other things, pay additional interest on outstanding borrowings under our principal revolving credit agreement and term loan agreement. Any downgrades or changes in market conditions could affect our ability to obtain additional financing in the future and may affect the terms of any such financing.
We expect that existing cash, cash equivalents, short-term investments, cash provided from operations and our bank credit facilities will be sufficient to meet ongoing cash requirements. However, our failure to generate sufficient cash as our debt becomes due, renew credit lines prior to their expiration or refinance our existing debt on satisfactory terms could materially adversely affect our business, financial condition, operating results and cash flow.
We may encounter events or circumstances that would require us to record an impairment charge relating to our goodwill or capitalized software and other intangible assets balances.
Under GAAP, we are required to evaluate our capitalized software and other intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. We test goodwill for impairment at least annually, and more frequently if impairment indicators are present. In future periods, we may be subject to factors that may constitute a change in circumstances, indicating that the carrying value of our goodwill exceeds fair value or our capitalized software and other intangible assets may not be recoverable. These changes may consist of, but are not limited to, declines in our stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. Any of these factors, or others, could require us to record a significant non-cash impairment charge in our financial statements during a period. Acquisitions can result in additional goodwill or capitalized software and other intangible assets balances subject to impairment risk. If we determine that a significant impairment of our goodwill or our capitalized software and other intangible assets has occurred in any of our operating segments, this could materially adversely affect our financial condition and operating results.
Failure by us to effectively execute on our announced restructuring plans could result in total costs that are greater than expected or revenues that are less than anticipated.
In May 2018, we announced a restructuring plan, which includes workforce reductions, global facility exits and consolidations and other cost reduction initiatives, to better align our business priorities. We may have further workforce reductions, global facility exits and consolidations and other cost reduction initiatives in the future, as part of this restructuring plan or subsequent plans. Risks associated with these actions include delays in implementation, changes in plans that increase or decrease the number of employees affected, adverse effects on employee morale and the failure to meet operational targets due to the loss of employees, any of which may impair our ability to achieve anticipated cost reductions or may otherwise harm our business, which could materially adversely affect our financial condition, operating results and cash flow.

19


We have outsourced various functions to third parties that may not be successful or fully secure, which could result in increased costs or an increased chance of a cybersecurity breach.
We have outsourced various functions to third parties, including certain product development and administrative functions, cloud-based services and hosting for our SaaS business. We may outsource additional functions to third parties in the future. These outsourced functions may involve confidential and/or personally identifiable information. We rely on these third parties to provide outsourced services on a timely and effective basis and to adequately address their own cybersecurity threats. Although we periodically monitor the performance of these third parties and maintain contingency plans in case the third parties are unable to perform as agreed, we do not ultimately control the performance of these third parties. The failure of third-party outsourcing partners or vendors to perform as expected could result in significant disruptions and costs to our operations or our customers’ operations, or the potential loss of personally identifiable information of our customers, employees and business partners that could subject us to legal action by government authorities or private parties.
There is no assurance that we will continue to pay dividends or repurchase shares of our common stock in any particular amount or at all.
The payment of a regular quarterly cash dividend and the repurchase of shares of our common stock is subject to, among other things, the best interests of the Company and our stockholders, our financial condition, historical and forecast operating results, and available cash flow, as well as any applicable laws and contractual covenants and any other factors that our Board of Directors may deem relevant. A reduction in or elimination of our dividend payments or stock repurchases could have an adverse effect on the price of our common stock.

Item 1B. Unresolved Staff Comments.
None.

Item 2. Properties.
Our principal real estate properties are located in areas necessary to meet our operating requirements. All of the properties are considered to be both suitable and adequate to meet our current and anticipated operating requirements.
At March 31, 2018, we leased 43 facilities throughout the United States and 57 facilities outside the United States. Our lease obligations expire on various dates with the longest commitment extending to fiscal 2029. We believe that substantially all of our leases will be renewable at market terms at our option as they become due or that suitable alternatives will be available at market terms.
We own four facilities globally, consisting of one facility in Germany totaling approximately 100,000 square feet, one facility comprised of two buildings in Italy totaling approximately 140,000 square feet, one facility comprised of two buildings in India totaling approximately 455,000 square feet and one facility in the United Kingdom totaling approximately 215,000 square feet.
We utilize our leased and owned facilities for sales, technical support, research and development and administrative functions.

Item 3. Legal Proceedings.
Refer to Note 10, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements for information regarding certain legal proceedings, the contents of which are herein incorporated by reference.

Item 4. Mine Safety Disclosures.
Not applicable.
*        *        *


20


Executive Officers of the Registrant.
The name, age, present position and business experience for at least the past five years of each of our executive officers at May 9, 2018 are listed below:
Michael P. Gregoire, 52, has been Chief Executive Officer and a director of the Company since January 2013. Previously, he served as President and Chief Executive Officer of Taleo Corporation (“Taleo”), a provider of on-demand talent management software solutions, from March 2005 until Taleo’s acquisition by Oracle Corporation in April 2012. Mr. Gregoire also served as a director of Taleo from April 2005 until April 2012 and served as Taleo’s Chairman of the Board from May 2008 until April 2012. Mr. Gregoire served as Executive Vice President, Global Services and held various other senior management positions at PeopleSoft, Inc., an enterprise software company, from May 2000 to January 2005. Mr. Gregoire served as Managing Director for global financial markets at Electronic Data Systems, Inc., a global technology services company, from 1996 to April 2000, and in various other roles from 1988 to 1996. Mr. Gregoire currently serves on the executive council of TechNet, a national bipartisan network of technology CEOs that promotes growth of the innovation economy, and as a director of NPower, a non-profit information technology services network.
Lauren P. Flaherty, 60, has been the Company’s Executive Vice President and Chief Marketing Officer since August 2013. She is responsible for all facets of the Company’s marketing efforts. Previously, she was Executive Vice President and Chief Marketing Officer at Juniper Networks, Inc., which develops and markets networking products, where she led the company’s global marketing activities, from February 2009 to July 2013 and Chief Marketing Officer at Nortel Networks Corporation, a telecommunications and data networking equipment manufacturer, from May 2006 to December 2008.
Ava M. Hahn, 45, has been the Company’s Executive Vice President, General Counsel and Corporate Secretary since February 2018, and the Company’s Chief Ethics and Compliance Officer since May 2018. She is responsible for overseeing the Company’s legal organization worldwide. Previously, she was General Counsel at Kleiner Perkins Caufield & Byers LLC, a venture capital firm, from May 2017 to January 2018, General Counsel and Partner at Felicis Ventures, a venture capital firm, from June 2016 to May 2017, General Counsel and Corporate Secretary at Aruba Networks, Inc., a wireless networking company, from April 2013 to May 2016, and General Counsel and Corporate Secretary at ShoreTel, Inc., a telecommunications company, from June 2007 to March 2013.
Jacob Lamm, 53, has been the Company’s Executive Vice President, Strategy and Corporate Development since February 2009. He is responsible for directing the Company’s overall business strategy, as well as the Company’s strategy for acquisitions. Mr. Lamm has held various management positions since joining the Company in 1998, including serving as Executive Vice President, Governance Group from January 2008 to February 2009 and as Executive Vice President and General Manager, Business Service Optimization Business Unit from March 2007 to January 2008.
Kieran J. McGrath, 59, has been the Company’s Executive Vice President and Chief Financial Officer since November 2016. He is responsible for the Company’s corporate and business unit financial functions worldwide. He served as the Company’s Senior Vice President and interim Chief Financial Officer from July 2016 to November 2016, and as Senior Vice President and Corporate Controller from September 2014, when he joined the Company, until July 2016. Prior to joining the Company, Mr. McGrath was Vice President, Finance at International Business Machines Corporation, a cognitive solutions and cloud platform company, where he held a variety of senior executive finance positions across the company, including leading the finance department for IBM's Software Group, from January 2009 until August 2014.
Paul L. Pronsati, 60, has been the Company’s Executive Vice President, Global Operations and Information Technology since November 2014. He is responsible for managing the Company’s business operations worldwide and for overseeing the Company’s information technology. Mr. Pronsati served as the Company’s Senior Vice President, Global Operations and Information Technology from February 2013, when he joined the Company, until November 2014. Previously, he was Senior Vice President, Operations at Taleo from April 2005 to May 2012.
Ayman Sayed, 55, has been the Company’s President, Chief Product Officer since August 2016. He served as the Company’s Executive Vice President and Chief Product Officer from August 2015, when he joined the Company, until August 2016. Mr. Sayed is responsible for the strategy and development of CA’s full portfolio of products and solutions. Previously, he served as Senior Vice President of Engineering, Mobility Virtualization Group at Cisco Systems, Inc., which designs and sells broad lines of products, provides services and delivers integrated solutions to develop and connect networks around the world, from August 2014 to August 2015, where he oversaw the vision and engineering direction for Cisco System’s software strategy. He was previously Senior Vice President of Engineering, Network Operating System Group at Cisco Systems from February 2012 to August 2014 and Vice President of Engineering, Enterprise Switching Group at Cisco Systems from June 2010 to February 2012.


21


Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded on The NASDAQ Global Select Market tier of The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “CA.” The following table sets forth, for the fiscal quarters indicated, the quarterly high and low closing sales prices on NASDAQ:
 
Fiscal 2018
 
Fiscal 2017
 
High
 
Low
 
High
 
Low
Fourth Quarter
$
37.12

 
$
32.66

 
$
33.25

 
$
30.95

Third Quarter
$
34.29

 
$
32.12

 
$
33.29

 
$
30.41

Second Quarter
$
35.03

 
$
30.85

 
$
34.85

 
$
31.95

First Quarter
$
35.80

 
$
31.04

 
$
33.58

 
$
29.36

At April 30, 2018, we had approximately 4,400 stockholders of record.
We have paid cash dividends each year since July 1990. During each of fiscal 2018 and 2017, we paid annual cash dividends of $1.02 per share. During each of fiscal 2018 and 2017, we paid quarterly cash dividends of $0.255 per share.
Purchases of Equity Securities by the Issuer
The following table sets forth, for the months indicated, our purchases of common stock in the fourth quarter of fiscal 2018:
Issuer Purchases of Equity Securities
Period
Total Number Of Shares Purchased
 
Average Price Paid Per Share
 
Total Number Of Shares Purchased As Part Of Publicly Announced Plans Or Programs
 
Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans Or Programs
 
(in thousands, except average price paid per share)
January 1, 2018 — January 31, 2018

 
$

 

 
$
506,509

February 1, 2018 — February 28, 2018

 
$

 

 
$
506,509

March 1, 2018 — March 31, 2018
575

 
$
34.74

 
575

 
$
486,509

Total
575

 
$
34.74

 
575

 
$
486,509

In November 2015, our Board of Directors (the “Board”) approved a stock repurchase program that authorized us to acquire up to $750 million of our common stock. We expect to repurchase shares on the open market, through solicited or unsolicited privately negotiated transactions or otherwise from time to time based on market conditions and other factors.
During fiscal 2018, we repurchased 5.0 million shares of our common stock for $163 million. At March 31, 2018, we remained authorized to purchase $487 million of our common stock under our current stock repurchase program.
During fiscal 2017, we repurchased 3.1 million shares of our common stock for $100 million.


22


Item 6. Selected Financial Data.
The information set forth below should be read in conjunction with the “Results of Operations” section included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
Year Ended March 31,
Statement Of Operations And Other Data
2018
 
2017
 
2016
 
2015
 
2014
 
(in millions, except per share amounts)
Total revenue
$
4,235

 
$
4,036

 
$
4,025

 
$
4,262

 
$
4,412

Income from continuing operations (1)
$
476

 
$
775

 
$
769

 
$
810

 
$
887

Net cash provided by operating activities - continuing operations (2)
$
1,198

 
$
1,078

 
$
1,066

 
$
1,061

 
$
1,007

Basic income per common share from continuing operations
$
1.14

 
$
1.85

 
$
1.79

 
$
1.83

 
$
1.97

Diluted income per common share from continuing operations
$
1.13

 
$
1.85

 
$
1.78

 
$
1.82

 
$
1.96

Dividends declared per common share (3)
$
1.02

 
$
1.02

 
$
1.00

 
$
1.00

 
$
1.00

(1)
In fiscal 2018, we incurred a tax charge of $290 million from reasonable estimates of the impact of changes in tax law in the United States from the Tax Cuts and Jobs Act (“Tax Act”). In fiscal 2014, we incurred after-tax charges of $114 million for costs associated with our fiscal year 2014 rebalancing plan.
(2)
Net cash provided by operating activities - continuing operations for fiscal 2017, 2016, 2015 and 2014 were adjusted to reflect the adoption of Accounting Standards Update No. 2016-09 (“ASU 2016-09”), Improvements to Employee Share-Based Payment Accounting (Topic 718). Refer to Note 1, “Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements for further details.
(3)
In fiscal 2018 and 2017, dividends declared per common share were $0.255 per quarter. In fiscal 2016, 2015 and 2014, dividends declared per common share were $0.25 per quarter.
 
At March 31,
Balance Sheet Data
2018
 
2017
 
2016
 
2015
 
2014
 
(in millions)
Working capital surplus (1)
$
1,087

 
$
727

 
$
667

 
$
1,048

 
$
635

Working capital surplus, excluding current deferred revenue (2)
$
3,376

 
$
2,949

 
$
2,864

 
$
3,162

 
$
3,054

Total assets
$
13,060

 
$
12,610

 
$
11,204

 
$
10,973

 
$
12,008

Long-term debt (less current maturities)
$
2,514

 
$
2,773

 
$
1,947

 
$
1,247

 
$
1,244

Stockholders’ equity
$
5,895

 
$
5,689

 
$
5,378

 
$
5,625

 
$
5,570

(1)
Working capital surplus is current assets less current liabilities.
(2)
Deferred revenue includes amounts billed or collected in advance of revenue recognition, including subscription license agreements, maintenance and professional services. It does not include unearned revenue on future installments not yet billed at the respective balance sheet dates.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) is intended to provide an understanding of our financial condition, changes in financial condition, cash flow, liquidity and results of operations. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying Notes to Consolidated Financial Statements appearing elsewhere in this Form 10-K and the Risk Factors included in Part I, Item 1A of this Form 10-K, as well as other cautionary statements and risks described elsewhere in this Form 10-K.

Business Overview
CA Technologies is a global leader in software solutions that simplify complex enterprise environments. Our solutions enable customers to plan, develop, automate, manage and secure applications across mobile, cloud, distributed and mainframe platforms. Many of the largest companies in the world, including most of the Fortune 500 and many government agencies, rely on CA software to help manage and secure their hybrid cloud environments.

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Our mission is to eliminate the barriers between ideas and business outcomes. To achieve this, we have built a portfolio of solutions that enable customers to leverage the benefits of agility, automation, insights and security in managing business processes and technology investments. Customers are transforming their businesses to better manage the market demands for speed, exceptional customer experience and rich analytics. We believe this journey, broadly referred to as digital transformation, is fueled by software.
In fiscal 2018, our business was organized in three distinct but highly complementary operating segments: Enterprise Solutions, Mainframe Solutions and Services. These also represented the operating segments used by our Chief Executive Officer for evaluating our performance and allocating resources.
Our Enterprise Solutions segment includes a broad range of software planning, development, and management tools. More specifically, our solutions help customers with secure application development, infrastructure management, automation, and identity-centric security solutions. These products are designed for mobile, cloud, and distributed computing environments and run on industry standard servers.
Our Mainframe Solutions segment includes solutions for the IBM z Systems® platform, which runs many of our largest customers’ mission critical business applications. Our Mainframe Solutions help customers improve economics by increasing throughput and lowering cost per transaction, increasing business agility through DevOps tooling and processes, increasing reliability and availability of operations through machine intelligence and automation solutions, and protecting enterprise data with security and compliance.
Our Services segment helps customers reach their information technology (“IT”) and business goals primarily by enabling the rapid implementation and adoption of our software solutions. Our Services team consists of experienced professionals who provide a variety of services, such as consulting, implementation, application management services, education and support services, to both commercial and government customers.
Our segments strengthen each other in several ways. Our customers benefit from the ability of CA solutions to span their entire infrastructure stack, across mobile, cloud, distributed, and mainframe. This is critical as customers focus on their end users’ experiences on their apps and the underlying transactions that traverse their heterogeneous environments. CA is one of the few companies positioned to deliver solutions that span mobile, cloud, open systems and mainframe environments. This hybrid cloud capability helps customers remove the barriers between ideas and business outcomes. We are able to bidirectionally leverage our core strengths and development efforts in our products within the Enterprise Solutions segment to bring new innovations to the Mainframe Solutions segment and vice versa. Our strong market position enables our investment in development, innovation and support of the mainframe platform to be among the largest in the industry, which sustains ongoing customer commitment to our Mainframe Solutions. Our Services segment leverages our expertise across our Mainframe Solutions and Enterprise Solutions segments and helps customers deploy and maintain our solutions.
The focus of our business is aligned around three strategic pillars: Agile, DevOps and Security, each of which contain portfolios of solutions spanning the continuum of platforms, from mobile to mainframe.
Agile
Our Agile portfolio defines how work is planned, executed and serviced to deliver rapid value to our customers, and enables customers to plan, deliver, manage and optimize application development and project management. Our capabilities within Agile include:
Agile Planning helps customers transform their development practices from traditional to modern agile methodologies. Agile development utilizes an iterative work cadence with a feedback loop that decreases time-to-market, increases product quality and, most importantly, maintains a focus on generating rapid business value. CA’s cloud-based solutions in this space help customers to collaboratively plan, prioritize and track agile software development at scale.
Project & Portfolio Management, which is highly complementary to Agile Planning, enables customers to collect, prioritize, plan and deliver products, services and customer experiences. CA’s solutions improve decision making processes and resource optimizations, and decrease project execution risk.
DevOps
Our DevOps portfolio accelerates software delivery and enables customers to more efficiently deliver and manage applications and infrastructure. The portfolio empowers developers with a rich set of tools that help simplify, automate, and make their processes and applications more robust. They enable better experiences for developers and for the end users of their higher quality applications. Our DevOps portfolio strategy is platform agnostic, providing customers the flexibility to optimize workloads across mobile, cloud, on-premise, and mainframe environments. Our capabilities within DevOps include:
Continuous Delivery optimizes the application development processes by automating the deployment of applications across all stages of their lifecycles. Continuous delivery is key to transforming the technical aspects of software delivery. Our solutions enable the development, testing and release teams to work concurrently and continuously to remove the excess overhead and delays that come with traditional software development.

24


Automation solutions help customers transform business processes. They automate, orchestrate and accelerate the entire application delivery process. Our unified platform provides end-to-end automation capabilities that cover service orchestration, workload automation and release automation capabilities.
Agile Operations helps customers correlate end-user, application and infrastructure data from cloud-hosted containers to mainframes. Our solutions help customers see application dependencies and provide intelligent analytics, comprehensive coverage, and an open, extensible architecture that improves end-user experience.
API (Application Programming Interface) Management facilitates the creation, security and management of APIs through their lifecycle, enabling customers to connect more directly with end-users via mobile apps, cloud platforms and “Internet of Things” devices.
Security
Our Security portfolio provides customers, employees and partners seamless access to the right data, regardless of the underlying platform. Our Security portfolio is designed to minimize the risk of data breaches and alleviate the increased pressures faced by chief information security officers. Our capabilities within Security include:
Application Security offers a holistic and scalable way to manage security risk across an application lifecycle. Through our acquisition of Veracode, we provide a wide range of security testing and threat mitigation techniques. Our solution is hosted on a unified application security testing platform and integrates into existing development toolchains. This enables users to quickly identify and remediate security flaws earlier in the development process and supports the development of high-quality, secure code.
Identity & Access Management provides enterprise-grade identity management and governance capabilities, including broad provisioning support for on-premises and cloud-based applications, extensibility and flexibility to integrate with other IT systems and consumer-grade scale.
Privileged Access Management enables organizations to control and monitor the access and activity of privileged users, or users with elevated access or administrator rights. Our solutions help detect and prevent the threat of internal and external attacks leveraging both network and host-based controls for the enterprise and hybrid cloud.
Payment Security is a software as a service (“SaaS”)-based payment authentication service to help banks protect against fraud and ensure a hassle-free online shopping experience for their customers.
Our goal is to be the world’s leading independent enterprise software provider that helps organizations and enterprises plan, develop, manage, and secure modern software environments, across mainframe, distributed, cloud and mobile platforms. To accomplish this, key elements of our strategy include:
Drive organic innovation. Our product development strategy is built around key growth areas, where we are focused on innovating and delivering differentiated products and solutions across both distributed and mainframe platforms.
Incubate technology for next generation products. We are researching and dedicating resources to the development of emerging technologies that are logical extensions of our core areas of focus. We are working on opportunities in areas such as containers, data analytics, big data, artificial intelligence, machine learning and open source, some of which may enhance or extend our current product portfolio and others of which may evolve into new product categories.
Pursue new business models and expanded routes to market. While our traditional on-premise software delivery remains relevant to many enterprise customers, we see cloud-based and try-and-buy models as attractive to both our existing and potential customers. These models simplify decision-making and accelerate the value customers can derive from new solution investments.
Expand relationships with our global customer base and address opportunities with new and underserved customers. We are focused on maintaining and expanding the strong relationships with our established customer base, and will proactively target growth with other potential customers that we do not currently serve.
Execute strategic and disciplined technology acquisitions. We intend to supplement our organic innovation efforts with key technology acquisitions that are within or adjacent to our core areas of focus. We also focus on organically developing nascent technologies from companies we have acquired to provide them with the necessary interoperability, resilience and security to operate at scale in the large, heterogeneous IT environments utilized by our customers.


25


CA Technologies Business Model
We generate revenue from the following sources: license fees — licensing our products on a right-to-use basis; maintenance fees — providing customer technical support and product enhancements; service fees — providing professional services such as product implementation, consulting, customer training and customer education; and software as a service (“SaaS”) offerings. SaaS is another delivery model we offer to our customers who prefer to utilize our technology off-premise with little to no infrastructure required. Our SaaS offerings are typically licensed using a subscription fee, most commonly on a monthly or annual basis. The timing and amount of fees recognized as revenue during a reporting period are determined in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Revenue is reported net of applicable sales taxes.
Under our business model, we offer customers a wide range of licensing options. For traditional, on-premise licensing, we typically license to customers either perpetually or on a subscription basis for a specified term. Our customers also purchase maintenance and support services that provide technical support and any general product enhancements released during the maintenance period.
Under a perpetual license, the customer has the right to use the licensed program for an indefinite period of time, typically upon payment of a one-time license fee. If the customer wants to receive maintenance, the customer is required to pay an additional annual maintenance fee.
Under a subscription license, the customer has the right to usage and maintenance of the licensed products during the term of the agreement. Under our licensing terms, customers can license our software products under multi-year licenses, with most customers choosing one to five-year terms, although some large customers may negotiate longer terms. Thereafter, the license generally renews for the same period of time on the same terms and conditions.
For our mainframe solutions, the majority of our licenses provide customers with the right to use one or more of our products up to a specific license capacity, generally measured in millions of instructions per second (“MIPS”). For these products, customers may acquire additional capacity during the term of a license by paying us an additional license fee and maintenance fee. For our enterprise solutions, our licenses may provide customers with the right to use one or more of our products limited to a number of servers, users or copies, among other things. Customers may license these products for additional servers, users or copies, etc., during the term of a license by paying us an additional license fee and maintenance fee.
Our services are typically delivered on a time-and-materials basis, but alternative pay arrangements, such as fixed fee or staff augmentations, could be offered as well.
SaaS is another delivery model we offer for certain products when a customer prefers to use our technology off-premises with little or no infrastructure required. Our SaaS offerings are typically licensed for a designated term using a subscription fee. Some of our SaaS business is transaction or usage-based. Our SaaS products, which are becoming a larger part of our Enterprise Solutions portfolio, typically have a shorter average duration and smaller initial contract values compared to the more traditional on-premise delivery model.

Executive Summary
In general, we treat acquired technologies as organic in the quarter of their one-year anniversary date. Automic Holding GmbH (“Automic”) was acquired during the fourth quarter of fiscal 2017 and, as such, was treated as organic in the fourth quarter of fiscal 2018. Therefore, the first three quarters of fiscal 2018 included inorganic results from our Automic acquisition. Since Veracode, Inc. (“Veracode”) was acquired on the last day of fiscal 2017, it will be treated as organic in the first quarter of fiscal 2019 and, as such, all four quarters of fiscal 2018 included inorganic results from our Veracode acquisition.
A summary of key results for fiscal 2018 compared with fiscal 2017 is as follows:
Revenue
Total revenue increased primarily due to an increase in software fees and other revenue and, to a lesser extent, an increase in subscription and maintenance revenue. During fiscal 2018, total revenue included $218 million of inorganic revenue from our Automic and Veracode acquisitions, primarily included in software fees and other revenue. In addition, there was a favorable foreign exchange effect of $51 million for fiscal 2018.
Bookings
Total bookings decreased due to a decline in renewal bookings, which included a large system integrator transaction that occurred in the first quarter of fiscal 2017 with an incremental contract value in excess of $475 million.
Renewal bookings decreased by a percentage in the low-20s primarily due to the aforementioned large system integrator transaction and the timing of our renewal portfolio.
Total new product sales were generally consistent compared with the year-ago period. Excluding a favorable foreign exchange effect, total new product sales decreased by a percentage in the low single digits.

26


Mainframe Solutions new product sales (which includes sales of mainframe products and mainframe capacity) decreased by a percentage in the low single digits primarily due to the aforementioned large system integrator transaction. Excluding the aforementioned large system integrator transaction, Mainframe Solutions new product sales increased by a percentage in the low teens primarily due to higher Mainframe Solutions new product sales attached to renewals compared with the year-ago period.
Enterprise Solutions new product sales increased by a percentage in the low single digits. Excluding the aforementioned large system integrator transaction, Enterprise Solutions new product sales increased by a percentage in the mid-single digits due to our Automic and Veracode acquisitions. Excluding the aforementioned large system integrator transaction and Enterprise Solutions new product sales from our Automic and Veracode acquisitions, Enterprise Solutions new product sales decreased by a percentage in the low teens primarily due to a lower level of renewal bookings, which was attributable to the timing of our renewal portfolio. Typically, renewals provide an increased opportunity to generate new product sales.
Expenses
Operating expenses increased due to $284 million of additional operating expenses associated with our Automic and Veracode acquisitions, which were mainly personnel-related. This increase was partially offset by decreases in non-acquisition-related costs, which included personnel-related costs, legal settlements and commission costs.
Income taxes
Income tax expense for fiscal 2018 and 2017 was $545 million and $298 million, respectively. Our fiscal 2018 and 2017 effective tax rate was 53.4% and 27.8%, respectively. These increases resulted from additional income tax expense of $290 million related to the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”).
Diluted income per common share
Diluted income per common share from continuing operations decreased to $1.13 from $1.85 primarily due to additional income tax expense related to the Tax Act.
Segment results
Mainframe Solutions revenue was generally consistent with the year-ago period. Excluding a favorable foreign exchange effect of $24 million for fiscal 2018, Mainframe Solutions revenue decreased primarily due to insufficient revenue from prior period new sales to offset the decline in revenue contribution from renewals. Mainframe Solutions operating margin increased primarily due to a decrease in corporate overhead costs and the Mainframe Solutions portion of the litigation settlement costs incurred during fiscal 2017.
Enterprise Solutions revenue increased due to $194 million of revenue generated from our Automic and Veracode acquisitions during fiscal 2018, partially offset by a decrease in sales from our more mature Enterprise Solutions products. Enterprise Solutions operating margin decreased primarily due to costs associated with our Automic and Veracode acquisitions, which were mainly personnel-related.
Services revenue increased due to $24 million of professional services revenue generated from our Automic and Veracode acquisitions during fiscal 2018, partially offset by a decline in non-acquisition-related professional services engagements. The decline in non-acquisition-related professional services engagements was a result of several factors, including our products being easier to install and manage and an increase in customers’ use of partners for services engagements. Operating margin for Services increased primarily due to an increase in professional services revenue from our Automic and Veracode acquisitions and a decrease in personnel-related costs resulting from severance actions during fiscal 2017.
Cash flow from continuing operations
Net cash provided by operating activities from continuing operations increased primarily due to an increase in cash collections from billings of $276 million mainly from collections from our Automic and Veracode acquisitions and a decrease in income tax payments, net of $34 million, partially offset by an increase in vendor disbursements and payroll of $204 million mainly from disbursements from our Automic and Veracode acquisitions.


27


Performance Indicators
Management uses several quantitative and qualitative performance indicators to assess our financial results and condition. Each provides a measurement of the performance of our business and how well we are executing our plan.
Our predominantly subscription-based business model is less common among our competitors in the software industry and it may be difficult to compare the results for many of our performance indicators with those of our competitors. The following is a summary of the performance indicators that management uses to review performance:
 
 
Year Ended March 31,
 
Change
 
Percent Change
 
 
2018
 
2017
 
 
 
(dollars in millions)
 
 
Total revenue
 
$
4,235

 
$
4,036

 
$
199

 
5
 %
Income from continuing operations (1)
 
$
476

 
$
775

 
$
(299
)
 
(39
)%
Net cash provided by operating activities - continuing operations (2)
 
$
1,198

 
$
1,078

 
$
120

 
11
 %
Total bookings
 
$
4,074

 
$
4,763

 
$
(689
)
 
(14
)%
Subscription and maintenance bookings
 
$
3,029

 
$
3,918

 
$
(889
)
 
(23
)%
Weighted average subscription and maintenance license agreement duration in years
 
3.25

 
3.83

 
(0.58
)
 
(15
)%
(1)
In fiscal 2018, income from continuing operations included a tax charge of $290 million from reasonable estimates of the impact of changes in tax law in the United States from the Tax Act.
(2)
Net cash provided by operating activities - continuing operations for fiscal 2017 was adjusted to reflect the adoption of ASU 2016-09. Refer to Note 1, “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements for further details.
 
 
At March 31,
 
Change
 
Percent Change
 
 
2018
 
2017
 
 
 
(dollars in millions)
 
 
Cash and cash equivalents
 
$
3,405

 
$
2,771

 
$
634

 
23
 %
Total debt
 
$
2,783

 
$
2,791

 
$
(8
)
 
 %
Total expected future cash collections from committed contracts (1)
 
$
5,199

 
$
5,304

 
$
(105
)
 
(2
)%
Total revenue backlog (1)
 
$
7,515

 
$
7,556

 
$
(41
)
 
(1
)%
Total current revenue backlog (1)
 
$
3,372

 
$
3,240

 
$
132

 
4
 %
(1)
Refer to the discussion in the “Liquidity and Capital Resources” section of this MD&A for additional information about expected future cash collections from committed contracts and revenue backlog.
Analyses of our performance indicators shown above and our segment performance can be found in the “Results of Operations” and “Liquidity and Capital Resources” sections of this MD&A.
Total Revenue: Total revenue is the amount of revenue recognized during the reporting period from the sale of license, maintenance, SaaS and professional services agreements. Amounts recognized as subscription and maintenance revenue are recognized ratably over the term of the agreement. Professional services revenue is generally recognized as the services are performed or recognized on a ratable basis over the term of the related software arrangement. Software fees and other revenue generally represents license fee revenue recognized at the inception of a license agreement (i.e., upfront basis) and also includes our SaaS revenue, which is recognized as services are provided.
Price changes do not have a material effect on revenue in the period they become effective as a result of our ratable subscription model.
Subscription and Maintenance Revenue: Subscription and maintenance revenue is the amount of revenue recognized ratably during the reporting period from: (i) subscription license agreements that were in effect during the period, generally including maintenance that is bundled with and not separately identifiable from software usage fees or product sales, (ii) maintenance agreements associated with providing customer technical support and access to software fixes and upgrades that are separately identifiable from software usage fees or product sales, and (iii) license agreements bundled with additional products, maintenance or professional services for which vendor specific objective evidence (“VSOE”) has not been established. These amounts include the sale of products directly by us, as well as by distributors and volume partners, value-added resellers and exclusive representatives to end-users, where the contracts incorporate the right for end-users to receive unspecified future software products, and other contracts entered into in close proximity or contemplation of such agreements. The vast majority of our subscription and maintenance revenue in any particular reporting period comes from contracts signed in prior periods, generally ranging in duration from one to five years.

28


Total Bookings: Total bookings, or sales, includes the incremental value of all subscription, maintenance and professional services contracts and software fees and other contracts entered into during the reporting period and is generally reflective of the amount of products and services during the period that our customers have agreed to purchase from us. License fees for bookings attributed to sales of software products for which revenue is recognized on an upfront basis is reflected in “Software fees and other” in our Consolidated Statements of Operations, while the maintenance portion is reflected in “Subscription and maintenance” in our Consolidated Statements of Operations. Our SaaS bookings are recognized as revenue in “Software fees and other,” generally ratably over the term of the SaaS arrangement, rather than upfront.
Our management looks within total bookings at renewal bookings, which we define as bookings attributable to the renewable value of a prior contract (i.e., the maintenance value and, in the case of non-perpetual licenses, the license value), and at total new product sales, which we define as sales of mainframe and enterprise solutions products and mainframe solutions capacity that are new or in addition to sales of products or mainframe solutions capacity previously contracted for by a customer. Renewal bookings, as we report them, do not include new product or capacity sales or professional services arrangements and are reflected as subscription and maintenance bookings in the period (for which revenue is recognized ratably over the term of the contract). Renewals can close before their scheduled renewal date for a number of reasons, including customer preference, customer needs for additional products or capacity, or at our request. The level of contracts closed prior to scheduled expiration dates and the reasons for such closings can vary from quarter to quarter. Generally, quarters with smaller renewal inventories result in a lower level of bookings, since renewals remain an important opportunity for new product sales.
Mainframe Solutions new product sales and capacity growth can be inconsistent on both a quarterly and annual basis. We believe the period-over-period change in Mainframe Solutions new product sales and capacity combined is an appropriate measure of performance and, therefore, we provide only total Mainframe Solutions new sales information, which includes mainframe solutions capacity. The amount of new product sales for a period, as currently tracked by us, requires estimation by management and is reported by providing only growth rate comparisons. Within a given period, the amount of new product sales may not be material to the change in our total bookings or revenue compared with prior periods. New product sales can be reflected as subscription and maintenance bookings in the period (for which revenue would be recognized ratably over the term of the contract) or in software fees and other bookings (which are recognized as software fees and other revenue in the current period).
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 either directly by us or through distributors and volume partners, value-added resellers and exclusive representatives to end-users and may include the right for the customer to receive unspecified future software products and/or additional products, services or other fees for which we have not established VSOE for all undelivered elements. These amounts are recognized ratably as subscription and maintenance revenue over the applicable term of the agreements. Subscription and maintenance bookings excludes the value associated with perpetual licenses for which revenue is recognized on an upfront basis, SaaS offerings and professional services arrangements.
Within bookings, we also consider the yield on our renewals. We define “renewal yield” as the percentage of the renewable value of a prior contract (i.e., the maintenance value and, in the case of non-perpetual licenses, the license value) realized in current period bookings. The renewable value of a prior contract is an estimate affected by various factors including contractual renewal terms, price increases and other conditions. Price increases are not considered as part of the renewable value of the prior period contract. We estimate the aggregate renewal yield for a quarter based on a review of material transactions generally representing a majority of the dollar value of renewals during the current period. There may be no correlation between year-over-year changes in bookings and year-over-year changes in renewal yield, since renewal yield is based on the renewable value of contracts of various durations, most of which are longer than one year.
The license and maintenance agreements that contribute to subscription and maintenance bookings represent binding payment commitments by customers over periods that range generally from one to five years, although in certain cases customer commitments can be for longer periods. These current period bookings are often renewals of prior contracts that also had various durations, usually from one to five years. The amount of new subscription and maintenance bookings recorded in a period is affected by the volume, duration and value of contracts renewed during that period. Subscription and maintenance bookings typically increase in each consecutive quarter during a fiscal year, with the first quarter having the least bookings and the fourth quarter having the most bookings. However, subscription and maintenance bookings may not always follow the pattern of increasing in consecutive quarters during a fiscal year, and the quarter-to-quarter differences in subscription and maintenance bookings may vary. Given the varying durations and dollar amounts of the contracts being renewed, year-over-year comparisons of bookings are not always indicative of the overall bookings trend.
Additionally, period-to-period changes in subscription and maintenance bookings do not necessarily correlate to changes in cash receipts. The contribution to current period revenue from subscription and maintenance bookings from any single license or maintenance agreement is relatively small, since revenue is recognized ratably over the applicable term for these agreements.

29


Weighted Average Subscription and Maintenance License Agreement Duration in Years: The weighted average subscription and maintenance license agreement duration in years reflects the duration of all subscription and maintenance agreements executed during a period, weighted by the total contract value of each individual agreement. Weighted average subscription and maintenance license agreement duration in years can fluctuate from period-to-period depending on the mix of license agreements entered into during a period. Weighted average duration information is disclosed in order to provide additional understanding of the volume of our bookings.
Annualized Subscription and Maintenance Bookings: Annualized subscription and maintenance bookings is an indicator that normalizes the bookings recorded in the current period to account for contract length. It is calculated by dividing the total value of all new subscription and maintenance license agreements entered into during a period by the weighted average subscription and license agreement duration in years for all such subscription and maintenance license agreements recorded during the same period.
Total Revenue Backlog: Total revenue backlog represents the aggregate amount we expect to recognize as revenue in the future as either subscription and maintenance revenue, professional services revenue or software fees and other revenue associated with contractually committed amounts billed or to be billed as of the balance sheet date. Total revenue backlog is composed of amounts recognized as liabilities in our Consolidated Balance Sheets as deferred revenue (billed or collected) as well as unearned amounts yet to be billed under subscription and maintenance and software fees and other agreements. Classification of amounts as current and noncurrent depends on when such amounts are expected to be earned and, therefore, recognized as revenue. Amounts that are expected to be earned and, therefore, recognized as revenue in 12 months or less are classified as current, while amounts expected to be earned in greater than 12 months are classified as noncurrent. 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 Consolidated Statements of Operations. Generally, we believe that an increase or decrease in the current portion of revenue backlog on a year-over-year basis is a favorable or unfavorable indicator of future subscription and maintenance revenue performance, respectively, due to the high percentage of our revenue that is recognized from license agreements that are already committed and being recognized ratably. The value of backlog can fluctuate based upon the timing of contract expirations.
“Deferred revenue (billed or collected)” is composed of: (i) amounts received from customers in advance of revenue recognition and (ii) amounts billed but not collected for which revenue has not yet been earned.


30


Results of Operations
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for fiscal 2018, 2017 and 2016 and the period-over-period dollar and percentage changes for those line items. These comparisons of past results are not necessarily indicative of future results.
 
Year Ended March 31,
 
Dollar Change
2018/2017
 
Percent Change
2018/2017
 
Dollar Change
2017/2016
 
Percent Change
2017/2016
 
2018
 
2017
 
2016
 
 
(dollars in millions)
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription and maintenance
$
3,326

 
$
3,279

 
$
3,317

 
$
47

 
1
 %
 
$
(38
)
 
(1
)%
Professional services
311

 
301

 
326

 
10

 
3

 
(25
)
 
(8
)
Software fees and other
598

 
456

 
382

 
142

 
31

 
74

 
19

Total revenue
$
4,235

 
$
4,036

 
$
4,025

 
$
199

 
5
 %
 
$
11

 
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of licensing and maintenance
$
302

 
$
273

 
$
283

 
$
29

 
11
 %
 
$
(10
)
 
(4
)%
Cost of professional services
298

 
300

 
300

 
(2
)
 
(1
)
 

 

Amortization of capitalized software costs
271

 
243

 
256

 
28

 
12

 
(13
)
 
(5
)
Selling and marketing
1,061

 
1,028

 
1,006

 
33

 
3

 
22

 
2

General and administrative
406

 
375

 
367

 
31

 
8

 
8

 
2

Product development and enhancements
642

 
586

 
560

 
56

 
10

 
26

 
5

Depreciation and amortization of other intangible assets
107

 
77

 
106

 
30

 
39

 
(29
)
 
(27
)
Other expenses, net
29

 
19

 
12

 
10

 
53

 
7

 
58

Total expense before interest and income taxes
$
3,116

 
$
2,901

 
$
2,890

 
$
215

 
7
 %
 
$
11

 
 %
Income from continuing operations before interest and income taxes
$
1,119

 
$
1,135

 
$
1,135

 
$
(16
)
 
(1
)%
 
$

 
 %
Interest expense, net
98

 
62

 
51

 
36

 
58

 
11

 
22

Income from continuing operations before income taxes
$
1,021

 
$
1,073

 
$
1,084

 
$
(52
)
 
(5
)%
 
$
(11
)
 
(1
)%
Income tax expense
545

 
298

 
315

 
247

 
83

 
(17
)
 
(5
)
Income from continuing operations
$
476

 
$
775

 
$
769

 
$
(299
)
 
(39
)%
 
$
6

 
1
 %

31


The following table sets forth, for the fiscal years indicated, the percentage of total revenue presented by the items in the accompanying Consolidated Statements of Operations:
 
 
Percentage of Total Revenue
for the Year Ended March 31,
 
 
2018
 
2017
 
2016
Revenue:
 
 
 
 
 
 
Subscription and maintenance
 
79
%
 
81
%
 
82
%
Professional services
 
7

 
8

 
8

Software fees and other
 
14

 
11

 
10

Total revenue
 
100
%
 
100
%
 
100
%
Expenses:
 
 
 
 
 
 
Costs of licensing and maintenance
 
7
%
 
7
%
 
7
%
Cost of professional services
 
7

 
7

 
7

Amortization of capitalized software costs
 
6

 
6

 
6

Selling and marketing
 
25

 
25

 
25

General and administrative
 
10

 
9

 
9

Product development and enhancements
 
15

 
15

 
14

Depreciation and amortization of other intangible assets
 
3

 
2

 
3

Other expenses, net
 
1

 

 

Total expenses before interest and income taxes
 
74
%
 
72
%
 
72
%
Income from continuing operations before interest and income taxes
 
26
%
 
28
%
 
28
%
Interest expense, net
 
2

 
2

 
1

Income from continuing operations before income taxes
 
24
%
 
27
%
 
27
%
Income tax expense
 
13

 
7

 
8

Income from continuing operations
 
11
%
 
19
%
 
19
%
Note: Amounts may not add to their respective totals due to rounding.
Revenue
Total Revenue
Total revenue for fiscal 2018 increased compared with fiscal 2017 primarily due to an increase in software fees and other revenue and, to a lesser extent, an increase in subscription and maintenance revenue as described below. During fiscal 2018, total revenue included $218 million of inorganic revenue from our Automic and Veracode acquisitions, primarily included in software fees and other revenue. In addition, there was a favorable foreign exchange effect of $51 million for fiscal 2018.
In general, we treat acquired technologies as organic in the quarter of their one-year anniversary date. Automic was acquired during the fourth quarter of fiscal 2017 and, as such, was treated as organic in the fourth quarter of fiscal 2018. Therefore, the first three quarters of fiscal 2018 included inorganic revenue from our Automic acquisition. Since Veracode was acquired on the last day of fiscal 2017, it will be treated as organic in the first quarter of fiscal 2019 and, as such, all four quarters of fiscal 2018 included inorganic revenue from our Veracode acquisition.
Total revenue for fiscal 2017 increased compared with fiscal 2016 primarily due to an increase in software fees and other revenue, partially offset by decreases in subscription and maintenance revenue and professional services revenue as described below. There was an unfavorable foreign exchange effect of $19 million for fiscal 2017.
Rally Software Development Corp. (“Rally”) and Xceedium, Inc. (“Xceedium”) were acquired during the second quarter of fiscal 2016 and, as such, were treated as organic in the second quarter of fiscal 2017. During the first quarter of fiscal 2017, total revenue included $35 million of inorganic revenue from our Rally and Xceedium acquisitions. During the fourth quarter of fiscal 2017, total revenue included $25 million of inorganic revenue from our Automic acquisition. As noted above, since Veracode was acquired on the last day of fiscal 2017, there was no revenue from Veracode reflected within our Statement of Operations for fiscal 2017.

32


Subscription and Maintenance
Subscription and maintenance revenue for fiscal 2018 increased compared with fiscal 2017 due to $53 million of subscription and maintenance revenue generated from our Automic acquisition during fiscal 2018. This increase was partially offset by a decline in Mainframe Solutions revenue and, to a lesser extent, a decrease in revenue from our more mature Enterprise solutions products (refer to “Performance of Segments” below). There was a favorable foreign exchange effect of $39 million for fiscal 2018.
Subscription and maintenance revenue for fiscal 2017 decreased compared with fiscal 2016 primarily due to a decrease in Mainframe Solutions revenue as well as Enterprise Solutions revenue recognized on a ratable basis. There was an unfavorable foreign exchange effect of $14 million for fiscal 2017.
Professional Services
Professional services revenue primarily includes revenue derived from product implementation, consulting, customer education and customer training services. Professional services revenue for fiscal 2018 increased compared with fiscal 2017 due to $24 million of professional services revenue generated from our Automic and Veracode acquisitions during fiscal 2018, partially offset by a decline in non-acquisition-related professional services engagements. The decline in non-acquisition-related professional services engagements was a result of several factors, including our products being easier to install and manage and an increase in customers’ use of partners for services engagements. For the long term, we expect new versions of our on-premise software to be easier to implement and a higher percentage of our business to shift to a SaaS-based model, which could potentially reduce the demand for our professional services engagements.
Professional services revenue for fiscal 2017 decreased compared with fiscal 2016 primarily due to a decline in non-acquisition-related professional services engagements as discussed above.
Software Fees and Other
Software fees and other revenue consists of revenue that is recognized on an upfront basis and also includes our SaaS revenue. Upfront revenue includes revenue associated with enterprise solutions products recognized on an upfront basis that were sold directly by our sales force and through transactions with distributors and volume partners, value-added resellers and exclusive representatives. Our SaaS revenue is recognized as the services are provided, generally ratably over the term of the SaaS arrangement, rather than upfront.
Software fees and other revenue for fiscal 2018 increased compared with fiscal 2017 primarily due to $141 million of software fees and other revenue generated from our Automic and Veracode acquisitions during fiscal 2018 and, to a lesser extent, an increase in sales from our SaaS solutions.
Software fees and other revenue for fiscal 2017 increased compared with fiscal 2016 primarily due to an increase in SaaS revenue mainly from our CA Agile Central products (acquired from Rally), and, to a lesser extent, an increase in sales of our Enterprise Solutions products recognized on an upfront basis, which included revenue from our Automic acquisition. Software fees and other revenue for fiscal 2017 included $36 million of revenue from acquired technologies.
Total Revenue by Geography
The following table presents the amount of revenue earned from sales to unaffiliated customers in the United States and international regions and corresponding percentage changes for fiscal 2018, 2017 and 2016:
 
 
Fiscal 2018
Compared With
Fiscal 2017
 
Fiscal 2017
Compared With
Fiscal 2016
 
 
(dollars in millions)
 
 
2018
 
% Of Total
 
2017
 
% Of Total
 
%
Change
 
2017
 
% Of Total
 
2016
 
% Of Total
 
%
Change
United States
 
$
2,674

 
63
%
 
$
2,586

 
64
%
 
3
%
 
$
2,586

 
64
%
 
$
2,585

 
64
%
 
%
International
 
1,561

 
37

 
1,450

 
36

 
8
%
 
1,450

 
36

 
1,440

 
36

 
1
%
Total
 
$
4,235

 
100
%
 
$
4,036

 
100
%
 
5
%
 
$
4,036

 
100
%
 
$
4,025

 
100
%
 
%
Revenue in the United States for fiscal 2018 increased compared with fiscal 2017 due to our Automic and Veracode acquisitions. Excluding a favorable foreign exchange effect of $51 million for fiscal 2018, international revenue increased compared with fiscal 2017 due to our Automic acquisition. Excluding the revenue generated from our Automic and Veracode acquisitions, revenue in the United States and international revenue would have decreased.
Revenue in the United States for fiscal 2017 was generally consistent compared with fiscal 2016 primarily due to an increase in software fees and other revenue, offset by decreases in subscription and maintenance revenue and professional services revenue. International revenue increased by $10 million, or 1%, for fiscal 2017 compared with fiscal 2016 primarily due to an increase in software fees and other revenue in the Asia Pacific Japan and Latin America regions. There was an unfavorable foreign exchange effect of $19 million for fiscal 2017.

33


Expenses
Operating Expenses
Operating expenses for fiscal 2018 increased compared with fiscal 2017 due to $284 million of additional operating expenses associated with our Automic and Veracode acquisitions, which were mainly personnel-related. This increase was partially offset by decreases in non-acquisition-related costs, which included personnel-related costs, legal settlements and commission costs.
Based on the timing of our Automic acquisition as discussed above, the first three quarters of fiscal 2018 included inorganic operating expenses from our Automic acquisition. Since Veracode was acquired on the last day of fiscal 2017, all four quarters of fiscal 2018 included inorganic operating expenses from our Veracode acquisition.
We currently expect the costs associated with a restructuring plan (“Fiscal 2019 Plan”) to unfavorably affect operating expenses for fiscal 2019. Refer to Note 18, “Subsequent Events” in the Notes to the Consolidated Financial Statements for additional information.
Operating expenses for fiscal 2017 increased compared with fiscal 2016 primarily due to fiscal 2017 including additional operating expenses associated with our Rally, Xceedium and Automic acquisitions. This increase was partially offset by a favorable foreign exchange effect.
Based on the timing of our Rally, Xceedium and Automic acquisitions as discussed above, fiscal 2017 operating expenses included four quarters of expenses from our Rally and Xceedium acquisitions, while fiscal 2016 only included three quarters of expenses. During the first quarter of fiscal 2017, total operating expenses included $40 million of costs from our Rally and Xceedium acquisitions. In addition, Automic, which was acquired during the fourth quarter of fiscal 2017, contributed $35 million of costs in fiscal 2017, inclusive of one-time transaction costs. Since Veracode was acquired on the last day of fiscal 2017, there were no operating expenses for Veracode reflected within our Statement of Operations for fiscal 2017.
Costs of Licensing and Maintenance
Costs of licensing and maintenance include technical support, royalties, SaaS, and other manufacturing and distribution costs. Costs of licensing and maintenance for fiscal 2018 increased compared with fiscal 2017 due to costs associated with our Automic and Veracode acquisitions during fiscal 2018, which were mainly support and personnel-related.
Costs of licensing and maintenance for fiscal 2017 decreased compared with fiscal 2016 primarily due to a decrease in personnel-related costs as a result of lower headcount and a decrease in external royalties, partially offset by costs associated with our CA Agile Central products (acquired from Rally).
Cost of Professional Services
Cost of professional services consists primarily of our personnel-related costs associated with providing professional services and training to customers. Cost of professional services for fiscal 2018 decreased compared with fiscal 2017 as a result of lower costs primarily due to a decrease in the number of non-acquisition-related professional services engagements and severance actions during fiscal 2017, partially offset by personnel-related costs associated with our Automic and Veracode acquisitions during fiscal 2018. Operating margin for professional services increased to 4% for fiscal 2018 compared with 0% for fiscal 2017 primarily due to an increase in professional services revenue from our Automic and Veracode acquisitions and a decrease in personnel-related costs resulting from severance actions during fiscal 2017.
Cost of professional services for fiscal 2017 was consistent compared with fiscal 2016 due to lower costs attributable to the decline in professional services engagements, offset by an increase in personnel-related costs resulting from severance actions during fiscal 2017. Operating margin for professional services decreased to 0% for fiscal 2017 compared with 8% for fiscal 2016. The decrease in operating margin for professional services was primarily attributable to an overall decline in professional services revenue, an increase in personnel-related costs resulting from severance actions during fiscal 2017 and an increase in costs from our recent acquisitions.
Operating margin for professional services does not include certain additional direct costs that are included within the Services segment (refer to “Performance of Segments” below). Expenses for the Services segment consist of cost of professional services and other direct costs included within selling and marketing and general and administrative expenses.
Amortization of Capitalized Software Costs
Amortization of capitalized software costs consists of the amortization of both purchased software and internally generated capitalized software development costs. Internally generated capitalized software development costs relate to new products and significant enhancements to existing software products that have reached the technological feasibility stage.
We evaluate the useful lives and recoverability of capitalized software and other intangible assets when events or changes in circumstances indicate that an impairment may exist. These evaluations require complex assumptions about key factors such as future customer demand, technology trends and the impact of those factors on the technology we acquire and develop for our products. Impairments or revisions to useful lives could result from the use of alternative assumptions that reflect reasonably possible outcomes related to future customer demand or technology trends for assets within the Enterprise Solutions segment.

34


Amortization of capitalized software costs for fiscal 2018 increased compared with fiscal 2017 primarily due to an increase in amortization expense associated with purchased software products acquired from Automic and Veracode, partially offset by a decrease in amortization of our internally developed software products. With our adoption of the Agile development methodology in fiscal 2014, amortization expense of internally developed software products has decreased as we have not capitalized any internally developed software costs.
Amortization of capitalized software costs for fiscal 2017 decreased compared with fiscal 2016 primarily due to a decrease in amortization of our internally developed software products, partially offset by an increase in amortization of capitalized software costs related to our Rally, Xceedium and Automic acquisitions.
Selling and Marketing
Selling and marketing expenses include the costs relating to our sales force, partners, corporate and business marketing and customer training programs. Selling and marketing expenses for fiscal 2018 increased compared with fiscal 2017. During fiscal 2018, there were $111 million of costs associated with our Automic and Veracode acquisitions, which were mainly personnel-related, and an unfavorable foreign exchange effect of $14 million. These increases were partially offset by a decrease in non-acquisition-related costs of $92 million, which primarily included personnel-related and commission costs.
Selling and marketing expenses for fiscal 2017 increased compared with fiscal 2016 primarily due to $27 million of costs associated with our Rally, Xceedium and Automic acquisitions, which were mainly personnel-related, and, to a lesser extent, an increase in commission expense from our new sales growth during fiscal 2017. These increases were partially offset by a decrease in non-acquisition personnel-related costs of $12 million as a result of a lower headcount.
General and Administrative
General and administrative expenses include the costs of corporate functions, including our executive leadership and administration groups, finance, legal, human resources, corporate communications and other costs such as provisions for doubtful accounts. General and administrative expenses for fiscal 2018 increased compared with fiscal 2017 due to costs associated with our Automic and Veracode acquisitions during fiscal 2018, which were mainly personnel-related.
General and administrative expenses for fiscal 2017 increased compared with fiscal 2016 primarily due to an increase in non-acquisition related costs.
Product Development and Enhancements
For fiscal 2018 and fiscal 2017, product development and enhancements expense represented 15% and 15%, respectively, of total revenue. Product development and enhancements expense for fiscal 2018 increased compared with fiscal 2017. During fiscal 2018, there were $68 million of costs associated with our Automic and Veracode acquisitions, which were mainly personnel-related, and an unfavorable foreign exchange effect. These increases were partially offset by a decrease in non-acquisition-related costs of $21 million, which were mainly personnel-related.
For fiscal 2017 and fiscal 2016, product development and enhancements expense represented 15% and 14%, respectively, of total revenue. The increase in product development and enhancements expense for fiscal 2017 compared with fiscal 2016 was primarily attributable to an increase in personnel-related costs, which included the costs from our Rally, Xceedium and Automic acquisitions.
Depreciation and Amortization of Other Intangible Assets
Depreciation and amortization of other intangible assets consists of both depreciation of property and equipment and amortization of other intangible assets.
Depreciation and amortization of other intangible assets for fiscal 2018 increased compared with fiscal 2017 primarily due to an increase in amortization expense associated with other intangible assets acquired from Automic and Veracode.
Depreciation and amortization of other intangible assets for fiscal 2017 decreased compared with fiscal 2016 primarily due to a decrease in amortization expense associated with other intangible assets that became fully amortized in recent periods and, to a lesser extent, a decrease in property and equipment depreciation expense. These decreases were partially offset by an increase in amortization of other intangible assets from our Rally, Xceedium and Automic acquisitions.

35


Other Expenses, Net
The summary of other expenses, net was as follows:
 
 
Year Ended March 31,
(in millions)
 
2018
 
2017
 
2016
Legal settlements
 
$
1

 
$
24

 
$
(13
)
Losses from foreign exchange derivative contracts
 
13

 
4

 
6

Losses (gains) from foreign exchange rate fluctuations
 
14

 
(6
)
 
20

Other miscellaneous items
 
1

 
(3
)
 
(1
)
Total
 
$
29

 
$
19

 
$
12

For fiscal 2017, other expenses, net included a $32 million legal settlement expense related to a settlement agreement that was then being negotiated with the U.S. government pertaining to our General Services Administration (“GSA”) schedule contract. The settlement agreement was finalized and the settlement amount was paid in full in the fourth quarter of fiscal 2017.
For fiscal 2016, other expenses, net included a foreign currency transaction loss of $11 million relating to the remeasurement of monetary assets and liabilities of our Argentinian subsidiary. As of March 31, 2018, our remaining net monetary assets in Argentina are not considered material to our overall financial statement presentation.
Interest Expense, Net
Interest expense, net for fiscal 2018 increased compared with fiscal 2017 primarily due to interest expense associated with our 3.600% Senior Notes due August 2022 and our 4.700% Senior Notes due March 2027, which were both issued during the fourth quarter of fiscal 2017.
Interest expense, net for fiscal 2017 increased compared with fiscal 2016 primarily due to fiscal 2017 including four quarters of interest expense associated with our 3.600% Senior Notes due August 2020 issued during the second quarter of fiscal 2016 and our term loan agreement entered into during the third quarter of fiscal 2016.
Refer to the “Liquidity and Capital Resources” section of this MD&A and Note 7, “Debt,” in the Notes to the Consolidated Financial Statements for additional information.
Income Taxes
Income tax expense for fiscal 2018, 2017 and 2016 was $545 million, $298 million and $315 million, respectively. Our effective tax rate was 53.4%, 27.8% and 29.1% for fiscal 2018, 2017 and 2016, respectively.
The increase in the effective tax rate for fiscal 2018 compared with fiscal 2017 resulted from additional income tax expense related to the Tax Act. The decrease in the effective tax rate for fiscal 2017 compared with fiscal 2016 resulted primarily from reductions in valuation allowances for certain jurisdictions due to changes in our judgment of estimated future taxable income.
Income tax expense for fiscal 2018 includes $290 million resulting from reasonable estimates of the impact of changes in tax law in the United States from the Tax Act. The amounts recorded for the impacts of the Tax Act are provisional amounts of $194 million related to the taxation of unremitted earnings of our foreign subsidiaries, which is payable over eight years, and $96 million related to the remeasurement of deferred tax assets and liabilities for the change in income tax rates. The provisional amounts were reduced by $28 million from our prior estimate due to results from the full fiscal 2018 operations needed for calculations under the Tax Act and analysis of the historic unremitted earnings of our foreign subsidiaries. We will continue to refine the provisional amounts as we review and analyze the historic unremitted earnings of our foreign subsidiaries and take into consideration any additional regulatory guidance published by the U.S. tax authorities in respect of the Tax Act. We expect to finalize the tax expense as soon as practical, but not later than the third quarter of fiscal 2019.
Previously, we did not recognize a deferred tax liability related to undistributed foreign earnings of our subsidiaries because such earnings were considered to be indefinitely reinvested in our foreign operations. Under the Tax Act, all foreign earnings are subject to U.S. taxation and we have recorded a provisional estimate of $194 million for the deemed repatriation tax on these earnings. Except to the extent of the U.S. income tax recognized under the Tax Act, we have not recognized other income taxes (e.g., state and foreign) and withholding taxes that would be incurred upon remittance of $2,274 million and $3,202 million at March 31, 2018 and 2017, respectively, of unremitted earnings of our foreign subsidiaries since we plan to permanently reinvest all such earnings outside the United States. Due to complexities in the laws of the foreign jurisdictions and the assumptions that would have to be made, it is not practicable to estimate the amount of tax associated with such unremitted earnings.

36


In November 2013, we received a tax assessment from the Brazilian tax authority relating to fiscal 2008 - 2013. The assessment included a report of findings in connection with the examination. We disagree with the proposed adjustments in the assessment and intend to vigorously dispute these matters through applicable judicial procedures, as appropriate. As the result of decisions at the administrative courts, the total potential liability from the tax assessment at March 31, 2018 was 228 million Brazilian reais (which translated to $69 million at March 31, 2018), including interest and penalties accumulated through March 31, 2018 and further regulatory assessments associated with appealing to the judicial courts. While we believe that we will ultimately prevail, if the assessment is not resolved in our favor, it would have an impact on our consolidated financial position, cash flows and results of operations.
We do not believe it is reasonably possible that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
Refer to Note 14, “Income Taxes,” in the Notes to the Consolidated Financial Statements for additional information.
Discontinued Operations
In the fourth quarter of fiscal 2016, we sold CA ERwin Data Modeling solution assets (“ERwin”) for $50 million and recognized a gain on disposal of $4 million, including tax expense of $24 million. The effective tax rate on the disposal was unfavorably affected by non-deductible goodwill of $36 million.
The divestiture of ERwin resulted from an effort to rationalize our product portfolio within the Enterprise Solutions segment. The results of this business were presented in income from discontinued operations for fiscal 2016.
Refer to Note 3, “Divestitures,” in the Notes to the Consolidated Financial Statements for additional information.
Performance of Segments
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, we disaggregate our operations into Mainframe Solutions, Enterprise Solutions and Services segments, which are utilized by our Chief Operating Decision Maker, who is our Chief Executive Officer, for evaluating segment performance and allocating resources.
Our Mainframe Solutions and Enterprise Solutions segments are comprised of our software business organized by the nature of our software offerings and the platforms on which our products operate. Our Mainframe Solutions segment products help customers and partners transform mainframe management, gain more value from existing technology and extend mainframe capabilities. Our Enterprise Solutions segment includes products that are designed for mobile, cloud, and distributed computing environments and run on industry standard servers. Our Services segment is comprised of product implementation, consulting, customer education and customer training services, including those directly related to our Mainframe Solutions and Enterprise Solutions software that we sell to our customers.
We regularly enter into a single arrangement with a customer that includes mainframe solutions, enterprise solutions and services. The amount of contract revenue assigned to operating segments is generally based on the manner in which the proposal is made to the customer. The software product revenue assigned to our Mainframe Solutions and Enterprise Solutions segments is based on either: (1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the list price of the products); (2) allocations included within internal contract approval documents; or (3) the value for individual software products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately stated in the contract and these amounts of contract revenue are assigned to our Services segment. The contract value assigned to each operating segment is then recognized in a manner consistent with the revenue recognition policies we apply to the customer contract for purposes of preparing our consolidated financial statements.
Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of our Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs). Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product development costs and general and administrative costs. Allocated segment costs primarily include indirect and non-segment-specific direct selling and marketing costs and general and administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs between our Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated and is generally either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for our Services segment consist of cost of professional services and other direct costs included within selling and marketing and general and administrative expenses. There are no allocated or indirect costs for our Services segment.
Segment expenses do not include amortization of purchased software, amortization of other intangible assets, amortization of internally developed software products, share-based compensation expense, severance and facility actions approved by the Board and other miscellaneous costs. A measure of segment assets is not currently provided to our Chief Executive Officer and has therefore not been disclosed.

37


Segment financial information for fiscal 2018, 2017 and 2016 is as follows:
Mainframe Solutions
 
Fiscal 2018
 
Fiscal 2017
 
Fiscal 2016
Revenue
 
$
2,176

 
$
2,182

 
$
2,215

Expenses
 
785

 
851

 
854

Segment profit
 
$
1,391

 
$
1,331

 
$
1,361

Segment operating margin
 
64
%
 
61
%
 
61
%
Mainframe Solutions revenue for fiscal 2018 was generally consistent with fiscal 2017. Excluding a favorable foreign exchange effect of $24 million for fiscal 2018, Mainframe Solutions revenue decreased primarily due to insufficient revenue from prior period new sales to offset the decline in revenue contribution from renewals. Mainframe Solutions operating margin for fiscal 2018 increased compared with fiscal 2017 primarily due to a decrease in corporate overhead costs and the Mainframe Solutions portion of the litigation settlement costs incurred during fiscal 2017.
Mainframe Solutions revenue for fiscal 2017 decreased compared with fiscal 2016 primarily due to insufficient revenue from new sales to offset the decline in revenue contribution from renewals. Mainframe Solutions operating margin for fiscal 2017 was consistent compared with the year-ago period.
Enterprise Solutions
 
Fiscal 2018
 
Fiscal 2017
 
Fiscal 2016
Revenue
 
$
1,748

 
$
1,553

 
$
1,484

Expenses
 
1,597

 
1,378

 
1,337

Segment profit
 
$
151

 
$
175

 
$
147

Segment operating margin
 
9
%
 
11
%
 
10
%
Enterprise Solutions revenue for fiscal 2018 increased compared with fiscal 2017 due to $194 million of revenue generated from our Automic and Veracode acquisitions during fiscal 2018, partially offset by a decrease in sales from our more mature Enterprise Solutions products. Enterprise Solutions operating margin for fiscal 2018 decreased compared with fiscal 2017 primarily due to costs associated with our Automic and Veracode acquisitions, which were mainly personnel-related.
Enterprise Solutions revenue for fiscal 2017 increased compared with fiscal 2016 primarily due to an increase in software fees and other revenue as a result of an increase in SaaS revenue and, to a lesser extent, an increase in sales of our enterprise solutions products recognized on an upfront basis, which included revenue from our fourth quarter acquisition of Automic. Enterprise Solutions operating margin for fiscal 2017 increased compared with fiscal 2016 primarily due to an increase in revenue and, to a lesser extent, a decrease in one-time acquisition-related transaction costs compared with the year-ago period.
Services
 
Fiscal 2018
 
Fiscal 2017
 
Fiscal 2016
Revenue
 
$
311

 
$
301

 
$
326

Expenses
 
302

 
302

 
303

Segment profit (loss)
 
$
9

 
$
(1
)
 
$
23

Segment operating margin
 
3
%
 
 %
 
7
%
Services segment expenses consist of cost of professional services and other direct costs included within selling and marketing and general and administrative expenses that are not included within the “Cost of professional services” line item of our Consolidated Statements of Operations.
Services revenue for fiscal 2018 increased compared with fiscal 2017 due to $24 million of professional services revenue generated from our Automic and Veracode acquisitions during fiscal 2018, partially offset by a decline in non-acquisition-related professional services engagements. The decline in non-acquisition-related professional services engagements was a result of several factors, including our products being easier to install and manage and an increase in customers’ use of partners for services engagements. For the long term, we expect new versions of our on-premise software to be easier to implement and a higher percentage of our business to shift to a SaaS-based model, which could potentially reduce the demand for our professional services engagements. Operating margin for Services increased to 3% for fiscal 2018 compared with 0% for fiscal 2017 primarily due to an increase in professional services revenue from our Automic and Veracode acquisitions and a decrease in personnel-related costs resulting from severance actions during fiscal 2017.
Services revenue for fiscal 2017 decreased compared with fiscal 2016 primarily due to a decline in professional services engagements from prior periods as discussed above. Operating margin for Services decreased to 0% for fiscal 2017 compared with 7% for fiscal 2016 primarily due to an overall decline in professional services revenue and an increase in personnel-related costs resulting from severance actions during fiscal 2017.

38


Refer to Note 16, “Segment and Geographic Information,” in the Notes to the Consolidated Financial Statements for additional information.
Bookings - Fiscal 2018 Compared with Fiscal 2017
Total Bookings: For fiscal 2018 and fiscal 2017, total bookings were $4,074 million and $4,763 million, respectively. This decrease in total bookings was due to a decline in renewal bookings, which included a large system integrator transaction that occurred in the first quarter of fiscal 2017 with an incremental contract value in excess of $475 million.
Based on the timing of our Automic acquisition as discussed above, the first three quarters of fiscal 2018 included inorganic bookings from our Automic acquisition. Since Veracode was acquired on the last day of fiscal 2017, all four quarters of fiscal 2018 included inorganic bookings from our Veracode acquisition.
Subscription and Maintenance Bookings: For fiscal 2018 and fiscal 2017, subscription and maintenance bookings were $3,029 million and $3,918 million, respectively. This decrease in subscription and maintenance bookings was primarily attributable to a decline in renewal bookings, which included the aforementioned large system integrator transaction that occurred in the first quarter of fiscal 2017.
Renewal Bookings: For fiscal 2018, renewal bookings decreased by a percentage in the low-20s compared with fiscal 2017 primarily due to the aforementioned large system integrator transaction that occurred in the first quarter of fiscal 2017 and the timing of our renewal portfolio. For the fourth quarter of fiscal 2018, our renewal yield percentage was above 90%. The average of the renewal yield percentage for the four quarters of fiscal 2018 was above 90%.
License Agreements over $10 million: During fiscal 2018, we executed a total of 49 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $1,518 million. During fiscal 2017, we executed a total of 72 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $2,450 million. The decrease during fiscal 2018 compared with fiscal 2017 was primarily attributable to a decline in renewal bookings, which included the aforementioned large system integrator transaction. In addition, as a result of the timing of our renewal portfolio, there was an overall lower number of license agreements with incremental contract values in excess of $10 million each.
Annualized Subscription and Maintenance Bookings and Weighted Average Subscription and Maintenance License Agreement Duration in Years: Annualized subscription and maintenance bookings decreased from $1,023 million in fiscal 2017 to $932 million in fiscal 2018. The weighted average subscription and maintenance license agreement duration in years decreased from 3.83 in fiscal 2017 to 3.25 in fiscal 2018. These decreases were primarily due to the aforementioned large system integrator transaction. Although each contract is subject to terms negotiated by the respective parties, we do not expect the weighted average subscription and maintenance agreement duration in years to change materially from historical levels for end-user contracts.
Total New Product Sales: Within total bookings, total new product sales for fiscal 2018 were generally consistent compared with fiscal 2017. Excluding a favorable foreign exchange effect, total new product sales for fiscal 2018 decreased by a percentage in the low single digits compared with fiscal 2017.
Mainframe Solutions New Product Sales: For fiscal 2018, Mainframe Solutions new product sales (which includes sales of mainframe products and mainframe capacity) decreased by a percentage in the low single digits compared with fiscal 2017 primarily due to the aforementioned large system integrator transaction that occurred in the first quarter of fiscal 2017. Excluding the aforementioned large system integrator transaction, Mainframe Solutions new product sales increased by a percentage in the low teens primarily due to higher Mainframe Solutions new product sales attached to renewals compared with the year-ago period. Overall, we expect our mainframe revenue growth to decline in a low single digit range over the medium term, which we believe is in line with the mainframe market.
Enterprise Solutions New Product Sales: For fiscal 2018, Enterprise Solutions new product sales increased by a percentage in the low single digits compared with fiscal 2017. Excluding the aforementioned large system integrator transaction, Enterprise Solutions new product sales increased by a percentage in the mid-single digits due to our Automic and Veracode acquisitions. Excluding the aforementioned large system integrator transaction and Enterprise Solutions new product sales from our Automic and Veracode acquisitions, Enterprise Solutions new product sales decreased by a percentage in the low teens primarily due to a lower level of renewal bookings, which was attributable to the timing of our renewal portfolio. Typically, renewals provide an increased opportunity to generate new product sales.
Total Bookings by Geography: Total bookings for fiscal 2018 decreased in all regions except for the Latin America region compared with fiscal 2017 primarily due to a decrease in our renewal portfolio. The decrease in the United States was primarily due to the aforementioned large system integrator transaction that occurred in the first quarter of fiscal 2017. The increase in total bookings in the Latin America region was primarily due to an increase in new product sales and renewals.

39


New Product Sales by Geography: Total new product sales for fiscal 2018 decreased in the United States compared with fiscal 2017 primarily due to a decrease in our renewal portfolio, which included the aforementioned large system integrator transaction that occurred in the first quarter of fiscal 2017, partially offset by an increase from our Automic and Veracode acquisitions. Total new product sales for fiscal 2018 increased in all other regions compared with fiscal 2017. Total new product sales in the Europe, Middle East and Africa region increased primarily due to our Automic acquisition.
Bookings - Fiscal 2017 Compared with Fiscal 2016
Total Bookings: For fiscal 2017 and fiscal 2016, total bookings were $4,763 million and $4,247 million, respectively. The increase in total bookings was primarily due to an increase in renewals and an increase in new product sales.
Total bookings for fiscal 2017 included the replacement and extension of a large system integrator transaction that was scheduled to expire in fiscal 2018 that occurred during the first quarter of fiscal 2017. The large system integrator transaction provided an incremental contract value in excess of $475 million and extended the term of the replaced agreement for an additional five years. Total bookings for fiscal 2016 included a renewal with a large system integrator in excess of $500 million for a term greater than five years that occurred during the second quarter of fiscal 2016.
Subscription and Maintenance Bookings: For fiscal 2017 and fiscal 2016, subscription and maintenance bookings were $3,918 million and $3,489 million, respectively. The increase in subscription and maintenance bookings was primarily attributable to an increase in Mainframe Solutions renewals.
Renewal Bookings: For fiscal 2017, renewal bookings increased by a percentage in the mid-teens compared with fiscal 2016 primarily due to an increase in Mainframe Solutions renewals and, to a lesser extent, an increase in Enterprise Solutions renewals. The increase in Mainframe Solutions renewals was primarily due to an increase in the renewal portfolio for Mainframe Solutions products in fiscal 2017 and, to a lesser extent, the aforementioned renewal with a large system integrator in excess of $475 million that occurred during the first quarter of fiscal 2017, which included a large amount of Mainframe Solutions products. The increase in Enterprise Solutions renewals was primarily attributable to renewals from our Rally, Xceedium and Automic acquisitions. For the fourth quarter of fiscal 2017, our renewal yield percentage was in the low 90% range. The average of the renewal yield percentage for the four quarters of fiscal 2017 was above 90%.
License Agreements over $10 million: During fiscal 2017, we executed a total of 72 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $2,450 million. During fiscal 2016, we executed a total of 48 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $1,965 million.
Annualized Subscription and Maintenance Bookings and Weighted Average Subscription and Maintenance License Agreement Duration in Years: Annualized subscription and maintenance bookings increased from $940 million in fiscal 2016 to $1,023 million in fiscal 2017 primarily due to the increase in subscription and maintenance bookings during fiscal 2017 compared with fiscal 2016. The weighted average subscription and maintenance license agreement duration in years increased from 3.71 in fiscal 2016 to 3.83 in fiscal 2017.
Total New Product Sales: Within total bookings, total new product sales increased by approximately 10% for fiscal 2017 compared with fiscal 2016 primarily due to an increase in Enterprise Solutions new product sales and, to a lesser extent, an increase in Mainframe Solutions new product sales. Excluding acquisitions, total new product sales increased by a percentage in the mid-single digits for fiscal 2017 compared with fiscal 2016.
Mainframe Solutions New Product Sales: For fiscal 2017, Mainframe Solutions new product sales (which includes sales of mainframe products and mainframe capacity) increased by a percentage in the mid-teens compared with fiscal 2016 primarily due to an increase in sales of mainframe products, partially offset by a decrease in sales of mainframe capacity.
Enterprise Solutions New Product Sales: For fiscal 2017, Enterprise Solutions new product sales increased by a percentage in the high single digits compared with fiscal 2016 primarily due to new product sales from our Rally, Xceedium and Automic acquisitions. Excluding acquisitions, Enterprise Solutions new product sales decreased by a percentage in the low single digits compared with fiscal 2016. Excluding acquisitions and an unfavorable foreign exchange effect, Enterprise Solutions new product sales were consistent compared with fiscal 2016. Enterprise Solutions new product sales performance was negatively affected by certain products that are more mature and not growing, but which generate positive segment operating margin and cash flows from operations.
Total Bookings by Geography: Total bookings in fiscal 2017 increased in the United States and all international regions compared with fiscal 2016 primarily due to an increase in renewals.
New Product Sales by Geography: Total new product sales in fiscal 2017 increased primarily in the United States and, to a lesser extent, an increase in the Europe, Middle East and Africa and Asia Pacific Japan regions compared with fiscal 2016. These increases were partially offset by a decrease in the Latin America region compared with fiscal 2016. Total new product sales increased in the United States primarily due to a higher level of new sales attached to our renewal portfolio. Total new product sales decreased in the Latin America region primarily due to continued macro-economic challenges in the region.

40



Selected Quarterly Information
 
 
Fiscal 2018 Quarter Ended
 
Total
 
 
June 30
 
September 30
 
December 31
 
March 31
 
 
 
(dollars in millions, except per share amounts)
Revenue
 
$
1,025

 
$
1,034

 
$
1,093

 
$
1,083

 
$
4,235

Percentage of annual revenue
 
24
%
 
24
%
 
26
%
 
26
%
 
100
%
Costs of licensing and maintenance
 
$
71

 
$
73

 
$
79

 
$
79

 
$
302

Cost of professional services
 
$
73

 
$
74

 
$
76

 
$
75

 
$
298

Amortization of capitalized software costs
 
$
70

 
$
67

 
$
68

 
$
66

 
$
271

Income (loss) from continuing operations
 
$
178

 
$
184

 
$
(93
)
 
$
207

 
$
476

Basic income (loss) per common share from continuing operations
 
$
0.42

 
$
0.44

 
$
(0.23
)
 
$
0.50

 
$
1.14

Diluted income (loss) per common share from continuing operations
 
$
0.42

 
$
0.44

 
$
(0.23
)
 
$
0.49

 
$
1.13

 
 
Fiscal 2017 Quarter Ended
 
Total
 
 
June 30
 
September 30
 
December 31
 
March 31
 
 
 
(dollars in millions, except per share amounts)
Revenue
 
$
999

 
$
1,018

 
$
1,007

 
$
1,012

 
$
4,036

Percentage of annual revenue
 
25
%
 
25
%
 
25
%
 
25
%
 
100
%
Costs of licensing and maintenance
 
$
68

 
$
66

 
$
68

 
$
71

 
$
273

Cost of professional services
 
$
75

 
$
73

 
$
74

 
$
78

 
$
300

Amortization of capitalized software costs
 
$
66

 
$
59

 
$
57

 
$
61

 
$
243

Income from continuing operations
 
$
198

 
$
212

 
$
208

 
$
157

 
$
775

Basic income per common share from continuing operations
 
$
0.47

 
$
0.50

 
$
0.50

 
$
0.38

 
$
1.85

Diluted income per common share from continuing operations
 
$
0.47

 
$
0.50

 
$
0.50

 
$
0.38

 
$
1.85


Liquidity and Capital Resources
Our cash and cash equivalent balances are held in numerous locations throughout the world, with 53% held in our subsidiaries outside the United States at March 31, 2018. Cash and cash equivalents totaled $3,405 million at March 31, 2018, representing an increase of $634 million from the March 31, 2017 balance of $2,771 million. During fiscal 2018, there was a $182 million favorable translation effect from foreign exchange rates on cash held outside the United States in currencies other than the U.S. dollar.
On December 22, 2017, the Tax Act was enacted into law. This new law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate, limitations on the deductibility of executive compensation and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. This new law includes a provision that imposes a transition tax on foreign earnings whether or not such earnings are repatriated to the U.S. and resulted in our recognition of income tax expense of $194 million for fiscal 2018. Refer to Note 14, “Income Taxes” in the Notes to the Consolidated Financial Statements for additional information.
We continue to expect domestic cash, cash equivalents, cash flows from operations and borrowings to be sufficient to fund our domestic operating activities and our investing and financing activities, including, among other things, the payment of regular quarterly dividends, compliance with our debt repayment schedules, repurchases of our common stock and the funding for capital expenditures, for at least the next 12 months and for the foreseeable future thereafter. In addition, we continue to expect foreign cash, cash equivalents and cash flows from foreign operations to be sufficient to fund our foreign operating activities and investing activities, including, among other things, the funding of capital expenditures, acquisitions and research and development, for at least the next 12 months and for the foreseeable future thereafter.

41


Sources and Uses of Cash
Under our subscription and maintenance agreements, customers generally make installment payments over the term of the agreement, often with at least one payment due at contract execution, for the right to use our software products and receive product support, software fixes and new products when available. The timing and actual amounts of cash received from committed customer installment payments under any specific agreement can be affected by several factors, including the time value of money and the customer’s credit rating. Often, the amount received is the result of direct negotiations with the customer when establishing pricing and payment terms. In certain instances, the customer negotiates a price for a single upfront installment payment and seeks its own internal or external financing sources. In other instances, we may assist the customer by arranging financing on the customer's behalf through a third-party financial institution.
Amounts billed or collected as a result of a single installment for the entire contract value, or a substantial portion of the contract value, rather than being invoiced and collected over the life of the license agreement, are reflected in the liability section of our Consolidated Balance Sheets as “Deferred revenue (billed or collected).” Amounts received from either a customer or a third-party financial institution that are attributable to later years of a license agreement have a positive impact on billings and cash provided by operating activities in the current period. Accordingly, to the extent these collections are attributable to the later years of a license agreement, billings and cash provided by operating activities during the license’s later years will be lower than if the payments were received over the license term. We are unable to predict with certainty the amount of cash to be collected from single installments for the entire contract value, or a substantial portion of the contract value, under new or renewed license agreements to be executed in future periods.
For fiscal 2018, gross receipts related to single installments for the entire contract value, or a substantial portion of the contract value, were $486 million compared with $489 million in fiscal 2017.
In any quarter, we may receive payments in advance of the contractually committed date on which the payments were otherwise due. In limited circumstances, we may offer discounts to customers to ensure payment in the current period of invoices that have been billed, but might not otherwise be paid until a subsequent period because of payment terms. Historically, any such discounts have not been material.
Amounts due from customers from our subscription licenses are offset by deferred revenue related to these license agreements, leaving no or minimal net carrying value on our Consolidated Balance Sheets for those amounts. The fair value of these amounts may exceed or be less than this carrying value, but cannot be practically assessed, since there is no existing market for a pool of customer receivables with contractual commitments similar to those owned by us. The actual fair value may not be known until these amounts are sold, securitized or collected. Although these customer license agreements commit the customer to payment under a fixed schedule, to the extent amounts are not yet due and payable by the customer, the agreements are considered executory in nature due to our ongoing commitment to provide maintenance and unspecified future software products as part of the agreement terms.
We can estimate the total amounts to be billed from committed contracts, referred to as our “billings backlog,” and the total amount to be recognized as revenue from committed contracts, referred to as our “revenue backlog.” The aggregate amounts of our billings backlog and trade receivables already reflected in our Consolidated Balance Sheets represent the amounts we expect to collect in the future from committed contracts.
 
 
March 31, 2018
 
March 31, 2017
 
 
(in millions)
Billings backlog:
 
 
 
 
Amounts to be billed — current
 
$
1,994

 
$
1,941

Amounts to be billed — noncurrent
 
2,412

 
2,599

Total billings backlog
 
$
4,406

 
$
4,540

Revenue backlog:
 
 
 
 
Revenue to be recognized within the next 12 months — current
 
$
3,372

 
$
3,240

Revenue to be recognized beyond the next 12 months — noncurrent
 
4,143

 
4,316

Total revenue backlog
 
$
7,515

 
$
7,556

Deferred revenue (billed or collected)
 
$
3,109

 
$
3,016

Total billings backlog
 
4,406

 
4,540

Total revenue backlog
 
$
7,515

 
$
7,556

Note: Revenue backlog includes deferred subscription and maintenance, professional services and software fees and other revenue.

42


The 3% decrease in total billings backlog at March 31, 2018 compared with March 31, 2017 was primarily due to a lower level of bookings during fiscal 2018. Excluding a favorable foreign exchange effect, total billings backlog decreased 5% at March 31, 2018 compared with March 31, 2017.
The 1% decrease in total revenue backlog at March 31, 2018 compared with March 31, 2017 was primarily due to a lower level of bookings during fiscal 2018. Excluding a favorable foreign exchange effect, total revenue backlog decreased 3% at March 31, 2018 compared with March 31, 2017.
Current revenue backlog, which is our revenue to be recognized within the next 12 months, increased 4% at March 31, 2018 compared with March 31, 2017 primarily due to an increase from our Automic and Veracode acquisitions. Excluding a favorable foreign exchange effect, current revenue backlog increased 1% at March 31, 2018 compared with March 31, 2017. Current revenue backlog declines as contracts move closer to their renewal dates. We expect revenue backlog will fluctuate throughout the year.
Generally, we believe that a change in current revenue backlog on a year-over-year basis is an indicator of future subscription and maintenance revenue performance due to the high percentage of our revenue that is recognized from license agreements that are already committed and being recognized ratably. We also believe that if we do not demonstrate multiple quarters of total new product and capacity sales growth while maintaining a renewal yield in the low 90% range, our current revenue backlog would be unlikely to increase.
We can also estimate the total cash to be collected in the future from committed contracts, referred to as our “Expected future cash collections,” by adding the total billings backlog to the trade accounts receivable, which represent amounts already billed but not collected, from our Consolidated Balance Sheets.
 
 
March 31, 2018
 
March 31, 2017
 
 
(in millions)
Expected future cash collections:
 
 
 
 
Total billings backlog
 
$
4,406

 
$
4,540

Trade accounts receivable, net
 
793

 
764

Total expected future cash collections
 
$
5,199

 
$
5,304

The decrease in total expected future cash collections at March 31, 2018 compared with March 31, 2017 was primarily driven by a decrease in billings backlog as described above.
Unbilled amounts relating to subscription and maintenance licenses are mostly collectible over a period of one-to-five years and at March 31, 2018, on a cumulative basis, 45%, 74%, 89%, 96% and 100% come due within fiscal 2019 through 2023, respectively.
Net Cash Provided by Operating Activities
 
Year Ended March 31,
 
$ Change
 
2018
 
2017
 
2016
 
2018 / 2017
 
2017 / 2016
 
(in millions)
Cash collections from billings (1)
$
4,529

 
$
4,253

 
$
4,229

 
$
276

 
$
24

Vendor disbursements and payroll (1)
(2,892
)
 
(2,688
)
 
(2,745
)
 
(204
)
 
57

Income tax payments, net
(350
)
 
(384
)
 
(365
)
 
34

 
(19
)
Other disbursements, net (2)
(89
)
 
(103
)
 
(53
)
 
14

 
(50
)
Net cash provided by operating activities from continuing operations (3)
$
1,198

 
$
1,078

 
$
1,066

 
$
120

 
$
12

(1)
Amounts include value added taxes and sales taxes.
(2)
For fiscal 2018, amount includes payments associated with interest, prior period restructuring plans and miscellaneous receipts and disbursements. For fiscal 2017, amount includes $49 million of payments associated with the litigation settlement agreement with the U.S. government pertaining to our GSA schedule contract, and payments associated with interest, prior period restructuring plans and miscellaneous receipts and disbursements. For fiscal 2016, amount includes payments associated with interest, prior period restructuring plans and miscellaneous receipts and disbursements.
(3)
Net cash provided by operating activities from continuing operations for fiscal 2017 and 2016 was adjusted to reflect the adoption of ASU 2016-09. Refer to Note 1, “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements for further details.

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Fiscal 2018 Compared with Fiscal 2017
Operating Activities
Net cash provided by operating activities from continuing operations for fiscal 2018 was $1,198 million, representing an increase of $120 million compared with fiscal 2017. The increase in net cash provided by operating activities was primarily due to an increase in cash collections from billings of $276 million mainly from collections from our Automic and Veracode acquisitions and a decrease in income tax payments, net of $34 million, partially offset by an increase in vendor disbursements and payroll of $204 million mainly from disbursements from our Automic and Veracode acquisitions.
For fiscal 2019, we currently expect payments associated with the Fiscal 2019 Plan to unfavorably affect net cash provided by operating activities from continuing operations. In addition, we currently expect an increase in incremental income tax payments resulting from the Topic 606 adoption and enactment of the Tax Act. Refer to Note 18, “Subsequent Events,” and Note 1, “Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements for additional information.
Investing Activities
Net cash used in investing activities from continuing operations for fiscal 2018 was $65 million compared with $1,337 million for fiscal 2017. The decrease in net cash used in investing activities was primarily due to a decrease in cash paid for acquisitions of businesses and purchased software of $1,273 million, mainly from the acquisitions of Automic and Veracode, compared with the year-ago period.
Financing Activities
Net cash used in financing activities from continuing operations for fiscal 2018 was $680 million compared with net cash provided by financing activities from continuing operations of $321 million for fiscal 2017. The change in net financing activities was primarily due to a decrease in debt borrowings of $850 million associated with our 3.600% Senior Notes due August 2022 and our 4.700% Senior Notes due March 2027, which were both issued during the fourth quarter of fiscal 2017. In addition, there was an increase in net debt repayments from our notional pooling arrangement of $67 million, an increase in common stock repurchases of $63 million, and an increase in debt repayments of $13 million compared with fiscal 2017.
Refer to the “Debt Arrangements” table below for additional information about our debt balances at March 31, 2018.
Fiscal 2017 Compared with Fiscal 2016
Operating Activities
Net cash provided by operating activities from continuing operations for fiscal 2017 was $1,078 million, representing an increase of $12 million compared with fiscal 2016. The increase in net cash provided by operating activities was due to a decrease in vendor disbursements and payroll of $57 million and an increase in cash collections from billings of $24 million from higher single installment collections. These favorable effects were offset by an increase in other disbursements, net of $50 million, primarily due to $49 million of payments associated with the litigation settlement agreement with the U.S. government pertaining to our GSA schedule contract, and an increase in income tax payments, net of $19 million.
Investing Activities
Net cash used in investing activities from continuing operations for fiscal 2017 was $1,337 million compared with $645 million for fiscal 2016. The increase in net cash used in investing activities was primarily due to an increase in net cash paid for acquisitions and purchased software of $644 million and a decrease in proceeds from the sale of short-term investments of $48 million, which were received from the acquisition of Rally during the second quarter of fiscal 2016, compared with the year-ago period.
Financing Activities
Net cash provided by financing activities from continuing operations for fiscal 2017 was $321 million compared with net cash used in financing activities from continuing operations of $475 million for fiscal 2016. The change in net financing activities was primarily due to a decrease in common shares repurchased of $607 million, which was primarily due to our share repurchase arrangement with Careal in fiscal 2016, and a decrease in debt repayments of $403 million, which was primarily due to the repayment of our $400 million borrowing under our revolving credit facility in fiscal 2016. These amounts were partially offset by a decrease in debt borrowings of $250 million compared with fiscal 2016.
Refer to the “Debt Arrangements” table below for additional information about our debt balances at March 31, 2017.

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Debt Arrangements
Our debt arrangements consisted of the following:
 
 
At March 31,
 
 
2018
 
2017
 
 
(in millions)
Revolving credit facility
 
$

 
$

2.875% Senior Notes due August 2018
 
250

 
250

5.375% Senior Notes due December 2019
 
750

 
750

3.600% Senior Notes due August 2020
 
400

 
400

3.600% Senior Notes due August 2022
 
500

 
500

4.500% Senior Notes due August 2023
 
250

 
250

4.700% Senior Notes due March 2027
 
350

 
350

Term Loan due April 2023
 
285

 
300

Other indebtedness, primarily capital leases
 
10

 
8

Unamortized debt issuance costs
 
(11
)
 
(14
)
Unamortized discount for Senior Notes
 
(1
)
 
(3
)
Total debt outstanding
 
$
2,783

 
$
2,791

Less the current portion
 
(269
)
 
(18
)
Total long-term debt portion
 
$
2,514

 
$
2,773

At March 31, 2018, our senior unsecured notes were rated Baa2 (stable) by Moody’s Investor Services, BBB+ (stable) by Standard and Poor’s and BBB+ (stable) by Fitch Ratings.
Significant changes to our debt obligations during fiscal 2018 consisted of the following:
Term Loan: In April 2018, we amended our term loan agreement with Bank of America, N.A. to extend the maturity date from April 2022 to April 2023.
Revolving Credit Facility: In June 2017, we amended our revolving credit facility to extend the termination date from June 2019 to June 2022. Our revolving credit facility provides a maximum committed amount available of $1 billion. The facility also provides us with an option to increase the available credit by an amount up to $500 million. This option is subject to certain conditions and the agreement of the facility lenders. At March 31, 2018 and 2017, there were no outstanding borrowings under our revolving credit facility.
Other Indebtedness: We had $114 million of unsecured and uncommitted multi-currency lines of credit at both March 31, 2018 and 2017 available to meet short-term working capital needs for our subsidiaries. We use guarantees and letters of credit issued by financial institutions to guarantee performance on certain contracts and other items. At March 31, 2018 and 2017, $60 million and $51 million, respectively, of these lines of credit were pledged in support of bank guarantees and other local credit lines. At March 31, 2018 and 2017, none of these arrangements were drawn down by third parties.
From time to time, we examine our debt balances in light of market conditions and other factors and thus, the levels of our debt balances may changeFor further information, refer to Note 7, “Debt,” in the Notes to the Consolidated Financial Statements.
Stock Repurchases
In November 2015, the Board approved a stock repurchase program that authorized us to acquire up to $750 million of our common stock. We expect to repurchase shares on the open market, through solicited or unsolicited privately negotiated transactions or otherwise from time to time based on market conditions and other factors.
During fiscal 2018, we repurchased 5.0 million shares of our common stock for $163 million. At March 31, 2018, we remained authorized to purchase $487 million of our common stock under our current stock repurchase program.
During fiscal 2017, we repurchased 3.1 million shares of our common stock for $100 million.

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In November 2015, we entered into and closed on an arrangement with Careal to repurchase 22 million shares of our common stock in a private transaction. The transaction was valued with an effective share repurchase price of $26.81 per share, which represented a 3% discount to the 10-trading day volume weighted average price of our common stock using a reference date of November 5, 2015. Our payment to Careal upon closing was reduced by $0.25 per share to account for our dividend that was paid on December 8, 2015 to stockholders of record on November 19, 2015. As a result of the share repurchase and dividend payment, in total we paid Careal $590 million during the third quarter of fiscal 2016 in connection with the 22 million shares repurchased. The transaction was funded with U.S. cash on hand and effectively concluded our prior $1 billion stock repurchase program approved by the Board in May 2014.
Including the November 2015 share repurchase arrangement with Careal, we repurchased 26 million shares of our common stock for $707 million during fiscal 2016.
Dividends
We have paid cash dividends each year since July 1990. During fiscal 2018, 2017 and 2016, we paid annual cash dividends of $1.02, $1.02 and $1.00 per share, respectively. During fiscal 2018, 2017 and 2016, we paid quarterly cash dividends of $0.255, $0.255 and $0.25 per share, respectively.
Effect of Foreign Exchange Rate Changes
There was a $182 million favorable translation effect on our cash balances in fiscal 2018 predominantly due to the weakening of the U.S. dollar against the euro (16%), the British pound sterling (12%), the Israeli shekel (3%) and the Danish krone (15%).
There was a $103 million unfavorable translation effect on our cash balances in fiscal 2017 predominantly due to the strengthening of the U.S. dollar against the euro (6%), the British pound sterling (13%) and the Danish krone (6%), partially offset by the weakening of the U.S. dollar against the Brazilian real (15%) and the Israeli shekel (3%).

Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and, accordingly, off-balance sheet risks to our liquidity and capital resources from unconsolidated entities are limited.

Contractual Obligations and Commitments
We have commitments under certain contractual arrangements to make future payments for goods and services. These contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of business. For example, we are contractually committed to make certain minimum lease payments for the use of property under operating lease agreements. In accordance with current accounting rules, the future rights and related obligations pertaining to such contractual arrangements are not reported as assets or liabilities on our Consolidated Balance Sheets. We expect to fund these contractual arrangements with cash generated from operations in the normal course of business.
The following table summarizes our contractual arrangements at March 31, 2018 and the timing and effect that those commitments are expected to have on our liquidity and cash flow in future perio