Computer Associates 2007 Annual Report Download - page 53

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administrative expenses. All the remaining shareholder litigation settlement shares were issued in December 2004. Of the
3.8 million settlement shares, approximately 51,000 were used for the payment of administrative expenses in connection with
the settlement, approximately 76,000 were liquidated for cash distributions to class members entitled to receive a cash
distribution, and the remaining settlement shares were distributed to class members entitled to receive a distribution of shares.
The final shareholder litigation settlement value of approximately $174 million was calculated using the New York Stock
Exchange (NYSE) closing price of our common stock on December 14, 2004, the date the settlement shares were issued, and
also included certain administrative costs associated with the settlement. An initial estimate for the value of the shareholder
litigation settlement was established on August 22, 2003.The chart below summarizes the NYSE closing price of our common
stock and the estimated value of the shareholder litigation settlement since the initial estimate was established.
NYSE CLOSING
STOCK PRICE
SHAREHOLDER
LITIGATION SETTLEMENT
ESTIMATED VALUE
(IN MILLIONS)
December 14, 2004 $ 31.03 $ 174
September 30, 2004 26.30 156
June 30, 2004 28.06 163
March 31, 2004 26.86 158
December 31, 2003 27.34 158
September 30, 2003 26.11 150
August 22, 2003 25.00 144
The shareholder litigation settlement expense for fiscal year 2005 of $16 million was a result of the increase in our stock price
since March 31, 2004. The aggregate shareholder litigation settlement expense recorded was $174 million, including
$158 million in fiscal year 2004. Refer to Note 8, “Commitments and Contingencies”, in the Notes to the Consolidated
Financial Statements for additional information.
In September 2004, we reached agreements with the USAO and the SEC in connection with their investigations of improper
recognition of revenue and related reporting practices during the period January 1, 1998 through September 30, 2000, and the
actions of certain former employees to impede the investigations. Under the DPA, we agreed, among other things, to establish
a restitution fund of $225 million to compensate present and former Company shareholders for losses caused by the
misconduct of certain former Company executives. In connection with the DPA, we recorded a $10 million charge in the fourth
quarter of fiscal year 2004 and $218 million in the second quarter of fiscal year 2005 associated with the establishment of the
shareholder restitution fund and related administrative fees. The first payment of $75 million was made during the third
quarter of fiscal year 2005. The second payment of $75 million was made in the second quarter of fiscal year 2006 and the
final payment of $75 million was made in the fourth quarter of fiscal year 2006. Refer to Note 8, “Commitments and
Contingencies”, in the Notes to the Consolidated Financial Statements for additional information.
Charge for In-Process Research and Development Costs
Charge for in-process research and development costs for fiscal year 2007 decreased $8 million, or 44%, from the prior fiscal
year to $10 million. For fiscal year 2007, the charge for in-process research and development costs of $10 million was
associated with the acquisition of XOsoft. For fiscal year 2006, the charge for in-process research and development costs of
$18 million was associated with the acquisitions of Concord and Niku.
Interest Expense, Net
Interest expense, net for fiscal year 2007 increased $19 million as compared to fiscal year 2006 to $60 million. The increase
was primarily attributable to an increase in the average debt outstanding related to our borrowings under the credit facility
associated with our $1 billion tender offer. Refer to the “Liquidity and Capital Resources” section of this MD&A and Note 7,
“Debt”, in the Notes to the Consolidated Financial Statements, for additional information.
Interest expense, net for fiscal year 2006 decreased $65 million as compared to fiscal year 2005 to $41 million. The change
was primarily due to a decrease in average debt outstanding which resulted in a $39 million decrease in interest expense, and a
decrease in the average interest rate on our outstanding debt, which resulted in a $20 million decrease in interest expense.The
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