Computer Associates 2007 Annual Report Download - page 107

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Purchased software products are being amortized over five years, trademarks/tradenames are being amortized over six years,
and customer relationships are being amortized over seven years.
The allocation of a significant portion of the Concord purchase price to goodwill was predominantly due to the relatively short
lives of the developed technology assets; whereby a substantial amount of the purchase price was based on earnings beyond
the estimated lives of the intangible assets.
Based upon additional information received subsequent to the Concord Acquisition Date, goodwill was adjusted downward
by approximately $18 million as of March 31, 2007, primarily due to the recognition of deferred tax assets and adjustments to
net liabilities assumed. This adjustment has been included in the allocation presented above.
In connection with the acquisition of Concord, the Company assumed $86 million in 3% convertible senior notes payable due
2023. In accordance with the notes’ terms, the Company paid off the notes in full in July 2005.
At March 31, 2007, the Company had approximately $9 million in remaining holdback payments related to the acquisitions of
Wily, XOsoft, and Cendura, which were included in the “Accrued expenses and other current liabilities” line on the
Consolidated Balance Sheet. During fiscal year 2007, the Company made payments against these liabilities of
approximately $38 million and the remaining balances are expected to be paid within the next twelve months.
Accrued acquisition-related costs and changes in these accruals, including additions related to the Company’s fiscal year
2007 and 2006 acquisitions were as follows:
(IN MILLIONS)
DUPLICATE
FACILITIES &
OTHER COSTS
EMPLOYEE
COSTS
Balance at March 31, 2005 $41 $ 9
Additions 31 23
Settlements (18) (18)
Adjustments 6—
Balance at March 31, 2006 60 14
Additions 13
Settlements (12) (10)
Adjustments (22) (1)
Balance at March 31, 2007 $27 $ 6
The liabilities for duplicate facilities and other costs relate to operating leases, which are actively being renegotiated and expire
at various times through 2010, negotiated buyouts of the operating lease commitments, and other contractual liabilities. The
liabilities for employee costs primarily relate to involuntary termination benefits. Adjustments to the corresponding liability
and related goodwill accounts are recorded when obligations are settled at amounts less than those originally estimated.
Adjustments for fiscal year 2007 primarily consisted of a $20 million favorable resolution to certain foreign tax credits that
were acquired and fully reserved that resulted from the conclusion of an Internal Revenue Service audit.The remaining liability
balances are included in the “Accrued expenses and other current liabilities” line item on the Consolidated Balance Sheets.
Discontinued Operations
In November 2006, the Company sold its 70% interest in Benit for approximately $3.3 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 is 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 book value of the net assets disposed of was approximately $16 million,
which included goodwill of approximately $31 million, and was not considered material to the March 31, 2006 Consolidated
Balance Sheet.The assets and liabilities for Benit, as well as the cash flows were deemed immaterial for separate presentation
as a discontinued operation in the Consolidated Balance Sheets and Consolidated Statements of Cash Flow. 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 plan (the
fiscal 2007 plan), which included an estimated headcount reduction of 300 positions associated with consolidated
95