Computer Associates 2005 Annual Report Download - page 144

Download and view the complete annual report

Please find page 144 of the 2005 Computer Associates annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 166

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166

Table of Contents
Note 9 — Stock Plans (Continued)
Year Ended March 31,
2005 2004 2003
Dividend yield .27% .33% .56%
Expected volatility factor(1) .25 .53 .70
Risk-free interest rate(2) 2.1% 1.0% 1.5%
Expected life (in years)(3) 0.5 0.5 0.5
(1) Expected volatility
is measured using
historical daily
p
rice changes of the
Company’ s stock
over the respective
term of the offer
period.
(2) The risk-free rate
for periods within
the contractual term
of the offer period is
based on the U.S.
Treasury yield
curve in effect at the
beginning of the
offer period.
(3) The expected term
is the offer period
Under the 1998 Incentive Award Plan (the 1998 Plan), a total of four million Phantom Shares, as defined in the 1998 Plan, were available
for grant to certain of the Company’ s employees from time to time through March 31, 2003. Each Phantom Share is equivalent to one
share of the Company’ s common stock. Vesting, at 20% of the grant amount per annum, was contingent upon attainment of specific
criteria, including an annual Target Closing Price (Price) for the Company’ s common stock and the participant’ s continued employment.
The Price is based on the average closing price of the Company’ s common stock on the New York Stock Exchange for the 10 days up to
and including March 31 of each fiscal year. The Price for the first tranche was met on March 31, 2000 and the Price was not met for any
subsequent tranche. Under SFAS No. 123, the Company is required to record a non-cash charge over the employment period irrespective
of the attainment of the Price for each tranche. As a result, for the fiscal years ended March 31, 2005, 2004, and 2003 the pre-tax
non-cash amounts (credited) charged to expense were approximately $(5) million, $(2) million, and $6 million, respectively. Fiscal
years 2005 and 2004 reflect a credit to expense as a result of forfeitures. As of March 31, 2005, approximately 106,000 Phantom Shares
have vested and were outstanding under the 1998 Plan. These shares will be paid out in increments of 10%, 20%, 30% and 40% on
August 25, 2005, 2006, 2007, and 2008, respectively.
Note 10 — Profit-Sharing Plan
The Company maintains a defined contribution plan, the Computer Associates Savings Harvest Plan (CASH Plan), for the benefit of the
U.S. employees of the Company. The CASH Plan is intended to be a qualified plan under Section 401(a) of the Internal Revenue Code of
1986 (the Code), and contains a qualified cash or deferred arrangement as described under Section 401(k) of the Code. Pursuant to the
CASH Plan, eligible participants may elect to contribute a percentage of their base compensation. The matching contributions to the
CASH Plan, excluding the discontinued operations of ACCPAC, totaled approximately $12 million in each of the fiscal years ended
March 31, 2005, 2004, and 2003. In addition, the Company may make discretionary contributions to the CASH Plan. The discretionary
contributions to the CASH Plan, excluding the discontinued operations of ACCPAC, totaled approximately $15 million in the fiscal year
ended March 31, 2005 and $20 million in each of the fiscal years ended March 31, 2004 and 2003.
The Company made contributions to international retirement plans of $23 million, $20 million, and $17 million in the fiscal years ended
March 31, 2005, 2004, and 2003, respectively.
Note 11 — Rights Plan
Each outstanding share of the Company’ s common stock carries a stock purchase right issued under the Company’ s Rights Agreement,
dated June 18, 1991, as amended May 17, 1995, May 23, 2001, and November 9, 2001 (the Rights Agreement). Under certain
circumstances, each right may be exercised to purchase one one-thousandth of a share of Series One Junior Participating Preferred Stock,
Class A, for $150. Under certain circumstances, following (i) the acquisition of 20% or more of the Company’ s outstanding common
stock by an Acquiring Person (as defined in the Rights Agreement), (ii) the commencement of a tender offer or exchange offer which
would result in a person or group owning 20% or more of the Company’ s outstanding common stock, or (iii) the determination by the
Company’ s Board of Directors and a majority of the Disinterested Directors (as defined in the Rights Agreement) that a 15% stockholder