Computer Associates 2006 Annual Report Download - page 136

Note 2 — Acquisitions, Divestitures and Restructuring (Continued)
Garnett & Helfrich Capital, L.P., formed Ingres. The Company has a 25% ownership interest in the newly formed
entity, in which it received an equity stake of $15 million. As a result of the transaction, the Company recorded a
non-cash pre-tax gain for the three months ended December 31, 2005 of approximately $7 million due to the value
of assets that were contributed during the formation of Ingres in accordance with Emerging Issues Task Force
(EITF) Issue No. 01-2 Interpretations of APB Opinion No. 29. The gain is recorded as “Other (gains) losses, net” in
the Consolidated Statements of Operations.
Restructuring
In July 2005, the Company announced a restructuring plan to increase efficiency and productivity and to more
closely align its investments with strategic growth opportunities. The Company accounted for the individual
components of the restructuring plan as follows:
Severance: The plan includes a workforce reduction of approximately five percent or 800 positions worldwide.
The termination benefits the Company has offered in connection with this workforce reduction are substantially the
same as the benefits the Company has provided historically for non-performance-based workforce reductions, and
in certain countries have been provided based upon statutory minimum requirements. Accordingly, the employee
termination obligations incurred in connection with the restructuring plan did not meet the definition of a “one-time
benefit arrangement” under SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”
(SFAS No. 146), and the Company therefore accounted for such obligations in accordance with SFAS No. 112,
“Employers’ Accounting for Post Employment Benefits, an Amendment of FASB Statements No. 5 and 43.” In
certain countries, the Company elected to provide termination benefits in excess of legal requirements subsequent
to the initial implementation of the plan. These additional costs have been recognized as incurred in accordance
with SFAS No. 146. The Company incurred approximately $36 million of severance costs for the fiscal year ended
March 31, 2006. The Company anticipates the severance portion of the restructuring plan will cost approximately
$45 million and anticipates that the remaining amount will be incurred by the end of the fiscal year 2007. Final
payment of these amounts is dependent upon settlement with the works councils in certain international locations
and our ability to negotiate lease terminations.
Facilities Abandonment: The Company recorded the costs associated with lease termination and/or abandonment
when the Company ceased to utilize the leased property. Under SFAS No. 146, the liability associated with lease
termination and/or abandonment is measured as the present value of the total remaining lease costs and associated
operating costs, less probable sublease income. The Company incurred approximately $30 million of facilities
abandonment related costs for the fiscal year ended March 31, 2006. The Company will accrete its obligations
related to the facilities abandonment to the then-present value and, accordingly, will recognize accretion expense as
a restructuring expense in future periods. The Company anticipates the facilities abandonment portion of the
restructuring plan will cost up to a total of $40 million, and anticipates that the remaining amount will be incurred by
the end of the fiscal year 2007.
Accrued restructuring costs and changes in these accruals for the fiscal year ended March 31, 2006 were as follows:
Severance
Facilities
Abandonment
(in millions)
Balance at March 31, 2005 .................................... $— $—
Additions ................................................. 36 30
Payments ................................................. (19) (3)
Adjustments ............................................... 1 —
Balance at March 31, 2006 .................................... $18 $27
The liability balance is included in “Accrued expenses and other current liabilities” on the Consolidated Balance
Sheet at March 31, 2006.
As part of its restructuring initiatives and associated review of the benefits of owning versus leasing certain
properties, the Company also entered into three sale/leaseback transactions during the second half of fiscal year
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