Computer Associates 2013 Annual Report Download - page 48

operating risks and exposure to foreign currency exchange rates. In addition, for fiscal 2012, other (gains) expenses, net
included $9 million of expenses in connection with litigation claims.
For fiscal 2011, other (gains) expenses, net included $14 million of losses relating to our foreign exchange derivative
contracts, which were used to mitigate our operating risks and exposure to foreign currency exchange rates. These losses
were offset by foreign currency transaction gains due to the weakening of the U.S. dollar against the currencies of other
countries in which we conduct our operations. During fiscal 2011, we received $10 million in settlements of claims
associated with previous stockholder derivative actions following the substitution of us as plaintiff in those actions. These
settlements were offset by expenses in connection with other litigation claims. In addition, during fiscal 2011 we recorded a
$10 million gain from the sale of our interest in an investment.
Interest Expense, Net
The increase in interest expense, net for fiscal 2013 compared with fiscal 2012 was primarily attributable to a decrease in
interest income due to lower interest rates and lower cash balances in the current period.
The decrease in interest expense, net for fiscal 2012 compared with fiscal 2011 was primarily due to the decrease in interest
expense resulting from our overall decrease in debt. During the first quarter of fiscal 2012, we repaid $250 million of our
revolving credit facility, which was due August 2012.
Refer to the ‘‘Liquidity and Capital Resources’’ section of this MD&A and Note 8, ‘‘Debt,’’ in the Notes to the
Consolidated Financial Statements for additional information.
Income Taxes
Our effective tax rate was 28%, 31% and 32%, for fiscal 2013, 2012 and 2011, respectively.
The reduction in the effective tax rate for fiscal 2013, compared with fiscal 2012, resulted primarily from resolutions of
uncertain tax positions relating to U.S and non-U.S. jurisdictions (including the completion of the examination of our U.S.
federal income tax returns for the tax years ended March 31, 2008, 2009 and 2010) and the retroactive reinstatement of the
U.S. Research and Development Tax Credit in January 2013, partially offset by refinements of tax positions taken for prior
periods. These items taken together resulted in a net benefit of $63 million for fiscal 2013 as we continue our efforts to
improve our long-term tax profile.
The reduction in the effective tax rate for fiscal 2012, compared with fiscal 2011, resulted primarily from the recognition of
tax benefits related to an investment in a foreign subsidiary and a decrease in the valuation allowance from the recognition
of state net operating loss carryforwards due to a change in forecasted state taxable income. These items taken together
resulted in a net benefit of $36 million for fiscal 2012.
The reduction in the effective tax rate for fiscal 2011, compared with fiscal 2010, resulted primarily from affirmative claims
in the context of tax audits, resolutions of uncertain tax positions relating to non-U.S. jurisdictions and the retroactive
reinstatement of the U.S. Research and Development Tax Credit in December 2010, partially offset by refinements of tax
positions taken in prior periods. These items taken together resulted in a net benefit of $33 million for fiscal 2011.
No provision has been made for U.S. federal income taxes on $2,220 million and $1,999 million at March 31, 2013 and
2012, respectively, of unremitted earnings of our foreign subsidiaries since we plan to permanently reinvest all such earnings
outside the United States. It is not practicable to determine the amount of tax associated with such unremitted earnings.
On May 7, 2013, the Company received final approval by the Joint Committee of Taxation on the U.S. Internal Revenue
Service (IRS) examination of the Company’s federal income tax returns for the tax years ended March 31, 2005, 2006 and
2007. As a result, we estimate we will record an income tax benefit of approximately $165 million to $185 million in fiscal
2014 (see Note 19, ‘‘Subsequent Events,’’ in the Notes to the Consolidated Financial Statements for additional information).
Refer to Note 15, ‘‘Income Taxes,’’ in the Notes to the Consolidated Financial Statements for additional information.
Discontinued Operations
In the first quarter of fiscal 2012, we sold our Internet Security business for $14 million. In the first quarter of fiscal 2011,
we sold our Information Governance business, consisting primarily of the CA Records Manager and CA Message Manager
software offerings and related professional services, for $19 million.
The results of discontinued operations for fiscal 2012 and 2011 included revenue of $15 million and $83 million,
respectively, and income from operations, net of taxes, of $13 million and $4 million, respectively.
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