Computer Associates 2010 Annual Report Download - page 42

Liquidity and capital resources
Our cash balances, including cash equivalents, are held by numerous subsidiaries throughout the world, with 46% residing
outside the United States at March 31, 2010. Cash and cash equivalents totaled $2,583 million as of March 31, 2010,
representing a decrease of $129 million from the March 31, 2009 balance of $2,712 million.
We expect that existing cash and cash equivalents, the availability of borrowings under existing and renewable credit lines,
and cash expected to be provided from operations will be sufficient to meet ongoing cash requirements.
We expect to use existing cash balances and future cash generated from operations to fund capital spending, financing
activities such as the repayment of our debt balances as they mature, the payment of dividends, and the potential repurchase
of shares of common stock in accordance with any plans approved by our Board of Directors, as well as our continued
investment in our enterprise resource planning implementation and future acquisitions.
Sources and uses of cash
Cash generated by operating activities, which represents our primary source of liquidity, increased $148 million in fiscal 2010
to $1,360 million from $1,212 million in fiscal 2009. For fiscal 2010, accounts receivable decreased by $9 million, excluding
the effect of foreign exchange, compared with a decline in the comparable prior year period of $199 million. For fiscal 2010,
accounts payable, accrued expenses and other liabilities decreased $21 million, excluding the effect of foreign exchange,
compared with a decrease in the comparable prior year period of $75 million.
Under our subscription and maintenance agreements, customers generally make installment payments over the term of the
agreement, often with 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 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. Alternatively, we may decide to
transfer our rights to the future committed installment payments due under the license agreement to a third party financial
institution in exchange for a cash payment. Once transferred, the future committed installments are payable by the customer
to the third party financial institution. Whether the future committed installments have been financed directly by the
customer with our assistance or by the transfer of our rights to future committed installments to a third party, such financing
agreements may contain limited recourse provisions with respect to our continued performance under the license agreements.
Based on our historical experience, we believe that any liability that we may incur as a result of these limited recourse
provisions will be immaterial.
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 the Consolidated Balance Sheets as “Deferred revenue (billed or collected).” Amounts received from either the
customer or a third-party financial institution in the current period that are attributable to later years of a license agreement
have a positive effect on billings and cash provided by operating activities. Accordingly, to the extent such 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 2010, gross receipts related to single installments for the entire contract value, or a substantial portion of the
contract value, were $484 million, compared with $526 million in fiscal 2009.
Cash provided by operating activities typically increases in each consecutive quarter throughout the fiscal year in accordance
with our bookings cycle, with the fourth quarter being the highest and the first quarter being the lowest. The timing of net
cash provided by operating activities during the fiscal year is also affected by many other factors, including the timing of any
customer financing or transfer of our interest in contractual installments and the level and timing of expenditures.
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
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