Computer Associates 2009 Annual Report Download - page 87

Note 2 — Acquisitions and Divestitures
Acquisitions
Acquisitions are accounted for as purchases and, accordingly, their results of operations have been included in the
Company’s Consolidated Financial Statements since the dates of the acquisitions. The purchase price for the Company’s
acquisitions is allocated to the assets acquired and liabilities assumed from the acquired entity. These allocations are
based upon estimates which may be revised within one year of the date of acquisition as additional information
becomes available. The Company’s acquisitions during fiscal years 2009 and 2008 were considered immaterial, both
individually and in the aggregate, compared with the results of the Company’s operations and therefore purchase
accounting information and proforma disclosure are not presented.
During fiscal year 2007, the Company acquired the following companies:
•Cybermation, Inc., a privately held provider of enterprise workload automation solutions.
•MDY Group International, Inc., a privately held provider of enterprise records management software and services.
•XOsoft, Inc., a privately held provider of complete recovery management solutions.
•Cendura Corporation, a privately held provider of IT service management service delivery solutions.
The total cost of these acquisitions was approximately $173 million, net of approximately $20 million of cash and cash
equivalents acquired and excluding a holdback of approximately $9 million. The Company paid the entire holdback
payment amount during fiscal year 2008.
The Company recorded a charge of approximately $10 million for in-process research and development costs associated
with the acquisition of XOsoft during the second quarter of fiscal year 2007. Total goodwill recognized in these
transactions amounted to approximately $117 million, which included a downward adjustment recorded in fiscal year
2008 of approximately $4 million. The downward adjustment was due to the recognition of deferred tax assets
associated with acquired net operating losses. The allocation of a significant portion of the purchase price to goodwill
was predominantly due to the relatively short lives of the developed technology assets, whereas a substantial amount of
the purchase price was based on anticipated earnings beyond the estimated lives of the intangible assets. The
acquisitions completed in fiscal year 2007 were considered immaterial, both individually and in the aggregate, and
therefore pro-forma information for fiscal year 2007 is not presented.
The Company had approximately $20 million and $13 million of accrued acquisition-related costs as of March 31, 2009
and 2008, respectively. Approximately $10 million of the March 31, 2009 accrued acquisition-related costs related to
holdback amounts for current year acquisitions. Acquisition-related costs are comprised of employee costs, duplicate
facilities and other acquisition-related costs that are incurred as a result of the Company’s current and prior period
acquisitions.
The liabilities for duplicate facilities and other costs relate to operating leases, which are actively being renegotiated and
expire at various times through 2013, negotiated buyouts of certain operating lease commitments, and other contractual
liabilities. The liabilities for employee costs primarily relate to involuntary termination benefits. The Company recorded
adjustments of approximately $12 million in fiscal year 2008. The adjustments primarily consisted of reductions to
obligations from prior period acquisitions that were settled for amounts less than originally estimated. This amount was
recorded as a reduction in general and administrative expenses. The remaining liability balances are included in the
“Accrued expenses and other current liabilities” line item on the Consolidated Balance Sheets.
Discontinued Operations
In fiscal year 2007, the Company sold its 70% interest in Benit for approximately $3 million. The 70% interest sold
represented all of the Company’s outstanding equity interest in Benit. As a result of the sale, the Company realized a
loss of approximately $2 million, net of taxes, in the third quarter of fiscal year 2007. Included in the loss was the
recognition of the cumulative foreign currency translation amount related to Benit of approximately $10 million which
was previously included in “Accumulated other comprehensive loss.” The cash flows for Benit were deemed immaterial
for separate presentation as a discontinued operation in the Consolidated Statements of Cash Flows. Benit offered a
wide range of corporate solution services, such as IT outsourcing, business integration services, enterprise solutions and
IT service management in Korea. The sale was part of the Company’s fiscal year 2007 cost reduction and restructuring
77