Computer Associates 2009 Annual Report Download - page 41

For fiscal 2009 and 2008, we incurred expenses of $96 million and $97 million, respectively, primarily related to
severance and lease abandonment and termination costs under the fiscal 2007 restructuring plan, of which $116 million
remains unpaid as of March 31, 2009. The severance portion of the remaining liability balance is included in “Salaries,
wages and commissions” line on the Consolidated Balance Sheets. The facilities abandonment portion of the remaining
liability balance is included in “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” lines on
the Consolidated Balance Sheets. Final payment of these amounts is dependent upon settlement with the works councils
in certain international locations and our ability to negotiate lease terminations.
During fiscal 2008, we incurred $12 million in legal fees in connection with matters under review by the Special Litigation
Committee, composed of independent members of the Board of Directors (refer to Note 8, “Commitments and
Contingencies” in the Notes to the Consolidated Financial Statements for additional information). During fiscal 2009 and
fiscal 2008, we recorded impairment charges of $5 million and $6 million, respectively, for software that was capitalized for
internal use but was determined to be impaired. In the first quarter of fiscal 2008, we incurred $4 million expense related to
a loss on the sale of an investment in marketable securities associated with the closure of an international location.
Charge for In-Process Research and Development Costs
For fiscal 2007, the charge for in-process research and development costs of $10 million was associated with the
acquisition of XOsoft, Inc.
Interest Expense, Net
The decrease in interest expense, net, for fiscal 2009 compared with fiscal 2008 was primarily due to decreased interest
expenses as a result of the repayment of the $350 million 6.500% Senior Notes due April 2008 (the fiscal 1999 Senior
Notes) and partial repurchase of our 4.750% Senior Notes due December 2009.
The decrease in interest expense, net, for fiscal 2008 compared with fiscal 2007 was primarily due to an increase in
interest earned on higher average cash balances during the year.
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
Our effective tax rate from continuing operations was approximately 37%, 38%, and 21%, for fiscal years 2009, 2008
and 2007, respectively. Refer to Note 9, “Income Taxes,” in the Notes to the Consolidated Financial Statements for
additional information.
The income tax provision recorded for fiscal 2009 includes a net charge of $22 million, which is primarily attributable to
adjustments to uncertain tax positions (including certain refinements of amounts ascribed to tax positions taken in prior
periods), partially offset by the reinstatement of the U.S. Research and Development Tax Credit and the settlement of a
U.S. federal income tax audit for the fiscal years 2001 through 2004. As a result of this settlement, during the first
quarter of fiscal year 2009, we recognized a tax benefit of $11 million and a reduction of goodwill by $10 million.
The income tax provision recorded for fiscal 2008 included charges of $26 million associated with certain corporate
income tax rate reductions enacted in various non-US tax jurisdictions (with corresponding impacts on our net deferred
tax assets). As enacted income tax rates decline, the future value of the deferred tax assets declines, giving rise to a
charge through the corporate income tax provision in the current period. Accordingly, deferred tax assets were adjusted
to reflect the enacted rates in effect when the temporary items are expected to reverse.
The income tax provision for fiscal 2007 included benefits of $23 million, primarily arising from the resolution of certain
international and U.S. federal tax liabilities.
No provision has been made for U.S. federal income taxes on the remaining balance of the unremitted earnings of our
foreign subsidiaries since we plan to permanently reinvest all such earnings outside the U.S. Unremitted earnings totaled
$1,349 million and $1,110 million as of March 31, 2009 and 2008, respectively. It is not practicable to determine the
amount of the tax associated with such unremitted earnings.
Refer to Note 9, “Income Taxes” for additional information.
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