Computer Associates 2004 Annual Report Download - page 51

Other Gains/Expenses, Net
Gains and losses attributable to sales of fixed assets, certain foreign currency exchange rate fluctuations, and certain
other infrequent events have been included in the “Other gains/expenses, net” line item on the Consolidated Statements
of Operations. The components of “Other gains/expenses, net” are as follows:
Year Ended March 31,
2004 2003 2002
(in millions)
(Gains) losses attributable to sales of fixed assets.................................................................................. $ (19) $ 3 $—
Expenses attributable to fluctuations in foreign currency exchange rates .............................................. 41 66 6
Expenses attributable to legal settlements.............................................................................................. 26 15 1
Payment to Ranger Governance Ltd. ...................................................................................................... — 10 —
Impairment of capitalized software.......................................................................................................... 4 — 28
$ 52 $94 $35
Shareholder Litigation Settlement and Investigation Charge
In August 2003, we announced the settlement of all outstanding litigation related to the stockholder and derivative
actions. Approval of the Federal Court was granted in December 2003. Under the settlement, we agreed to issue a total of
up to 5.7 million shares of common stock to the shareholders represented in the three class action lawsuits, including
payment of attorneys’ fees. In January 2004, approximately 1.6 million settlement shares were issued along with
approximately $3.3 million to the plaintiffs’ attorneys for attorney fees and related expenses. In March 2004,
approximately 200,000 settlement shares were issued to participants and beneficiaries of the CASH Plan. The remaining
3.8 million settlement shares, less any additional administrative expenses, will be issued to class members in the
stockholder class action lawsuits upon completion of the claims administration process. At the time of the distribution to
the class members, if the price of our common stock is below $23.43 per share, a portion of the remaining settlement
shares (currently up to 1.5 million shares) will be distributed to the class members in cash at the price of $23.43 per
share. Therefore, as of March 31, 2004, our maximum cash distribution would have been approximately $35 million.
We expect to issue the balance of the shares (or corresponding amounts of cash) in our second quarter of fiscal year
2005, or at such time as the claims administration process has been completed.
An initial estimate for the value of the shareholder litigation settlement was established on August 22, 2003, and until all
settlement shares are issued, the projected impact will be reviewed quarterly and the expense adjusted accordingly. The
related liability is reflected on the “Other current liabilities” line item on the Consolidated Balance Sheets. The chart
below summarizes the New York Stock Exchange (NYSE) closing price of our common stock and the estimated value of
the shareholder litigation settlement since the initial estimate was established.
Shareholder
NYSE Closing Litigation Settlement
Stock Price Estimated Value
(in millions)
March 31, 2004........................................................................................................................ $26.86 $158
December 31, 2003 ................................................................................................................ 27.34 158
September 30, 2003 ................................................................................................................ 26.11 150
August 22, 2003 ...................................................................................................................... 25.00 144
We also recorded a $10 million charge in the fourth quarter of fiscal year 2004 associated with the pending investigation
by the United States Attorney’s Office for the Eastern District of New York and the staff of the Northeast Regional Office
of the SEC. The charge was based on an initial offer we made to the government in connection with recent settlement
discussions associated with the investigation. We cannot predict the timing or outcome of the government investigation
or the amount of any fine or penalty, which may be significant, that may be imposed. See Item 3, “Legal Proceedings”
and Note 7 of the Consolidated Financial Statements for additional information.
Interest Expense, Net
Interest expense, net for fiscal year 2004 decreased $52 million as compared to fiscal year 2003 to $117 million. The
decrease was primarily due to a reduction in average debt outstanding, which resulted in a $46 million decrease in interest
expense; a reduction in the weighted-average interest rate, which resulted in a $9 million decrease in interest expense;
and accelerated amortization of financing fees in the third quarter of fiscal year 2003. This decrease was partially offset
by a $3 million gain related to the early retirement of a portion of outstanding debt in fiscal year 2003.
CA 2004 FORM 10-K | PAGE 23