Computer Associates 2007 Annual Report Download - page 55

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2 Includes an after-tax charge of approximately $1 million in connection with certain DPA related costs and an after-tax charge of approximately $29 million for severance and other expenses in
connection with a restructuring plan (refer to “Shareholder Litigation and Government Investigation Settlement” and “Restructuring Charge” within Results of Operations).
3 Includes an after-tax charge of approximately $8 million in connection with matters under review by the Special Litigation Committee, composed of independent members of our Board of Directors
(refer to Note 8, “Commitments and Contingencies”, in the Notes to the Consolidated Financial Statements for further details) and an after-tax charge of approximately $17 million for severance and
other expenses in connection with a restructuring plan (refer to “Shareholder Litigation and Government Investigation Settlement” and “Restructuring Charge” within Results of Operations).
4 Includes an after-tax charge of approximately $1 million in connection with certain DPA related costs, an after-tax charge of approximately $1 million in connection with matters under review by the
Special Litigation Committee, composed of independent members of our Board of Directors (refer to Note 8, “Commitments and Contingencies”, in the Notes to the Consolidated Financial
Statements for further details) and an after-tax charge of approximately $50 million for severance and other expenses in connection with a restructuring plan (refer to “Shareholder Litigation and
Government Investigation Settlement” and “Restructuring Charge” within Results of Operations). Also includes an after-tax impairment charge of approximately $7 million, relating to certain
indefinite lived assets that were acquired in conjunction with a prior year acquisition and an after-tax charge of approximately $2 million for internal-use software capitalized in connection with our
ERP implementation that was deemed to have no future value as we have selected a different technology solution which we believe better satisfies the specific needs of the business.
5 Includes a tax benefit of approximately $36 million reflecting the Department of Treasury and Internal Revenue Service Notice 2005-38, which permitted the utilization of additional foreign tax
credits to reduce the estimated taxes associated with cash repatriation (refer to “Income Taxes” within Results of Operations). Also includes a charge of approximately $4 million related to the write-
off of in-process research and development costs in relation to the acquisition of Concord (refer to Note 2, “Acquisitions, Divestitures and Restructuring”, in the Notes to the Consolidated Financial
Statements) and an after-tax credit of approximately $2 million related to a reduction in the allowance for doubtful accounts (refer to Note 6, “Trade and Installment Accounts Receivable”, in the
Notes to the Consolidated Financial Statements).
6 Includes an after-tax charge of approximately $14 million related to the write-off of in-process research and development costs in relation to the acquisition of Niku (refer to Note 2, “Acquisitions,
Divestitures and Restructuring”, in the Notes to the Consolidated Financial Statements), an after-tax charge of approximately $6 million in connection with certain DPA related costs and the
termination of a non-core application development professional services project, an after-tax charge of approximately $23 million for severance and other expenses in connection with a
restructuring plan (refer to “Shareholder Litigation and Government Investigation Settlement” and “Restructuring Charge” within Results of Operations), and an after-tax credit of approximately
$6 million related to a reduction in the allowance for doubtful accounts (refer to Note 6, “Trade and Installment Accounts Receivable”, in the Notes to the Consolidated Financial Statements).
7 Includes an after-tax charge of approximately $2 million in connection with certain DPA related costs, an after-tax charge of approximately $9 million for severance and other expenses in connection
with a restructuring plan (refer to “Shareholder Litigation and Government Investigation Settlement” and “Restructuring Charge” within Results of Operations), a tax charge of $2 million relating to
the loss on a sale/leaseback transaction, an after-tax credit of approximately $2 million related to a reduction in the allowance for doubtful accounts (refer to Note 6, “Trade and Installment
Accounts Receivable”, in the Notes to the Consolidated Financial Statements), and an after-tax credit of approximately $5 million relating to the gain on the sale of assets that were contributed
during the formation of Ingres Corp. (refer to Note 2, “Acquisitions, Divestitures and Restructuring”, in the Notes to the Consolidated Financial Statements).
8 Includes a tax charge of $36 million required due to the finalization of our 2006 tax estimates, including the repatriation of $584 million of cash in the fourth quarter of fiscal year 2006 (refer to
“Income Taxes” within Results of Operations). Also includes an after-tax charge of approximately $3 million in connection with certain DPA related costs, an after-tax charge of approximately
$9 million for severance and other expenses in connection with a restructuring plan (refer to “Shareholder Litigation and Government Investigation Settlement” and “Restructuring Charge” within
Results of Operations), a tax charge of approximately $2 million relating to the loss on a sale-leaseback transaction, and after-tax credits of approximately $1 million related to a reduction in the
allowance for doubtful accounts (refer to Note 6, “Trade and Installment Accounts Receivable”, in the Notes to the Consolidated Financial Statements), $6 million due to full year reductions in
variable compensation programs, and $7 million due to our decision in the fourth quarter of fiscal year 2006 to forego the discretionary contribution to the company-sponsored 401(k) plan.
Liquidity and Capital Resources
Our cash balances, including cash equivalents and marketable securities, are held in numerous locations throughout the
world, with the majority residing outside the United States. Cash and cash equivalents totaled $2.28 billion at March 31, 2007,
representing an increase of $444 million from the March 31, 2006 balance of $1.83 billion. Compared to the prior year, cash
and cash equivalents increased by approximately $93 million due to the positive translation effect that foreign currency
exchange rates had on cash for the fiscal year ended March 31, 2007. In fiscal year 2006, the Company repatriated
approximately $584 million in cash to the United States in order to avail itself of the provisions of the American Jobs Creation
Act of 2004. The aggregate amount of taxes related to the repatriation was approximately $55 million.
Sources and Uses of Cash
Cash generated by continuing operating activities, which represents the primary source of liquidity, was $1.07 billion and
$1.38 billion for the fiscal years ended March 31, 2007 and 2006, respectively. For the fiscal year ended March 31, 2007,
accounts receivable, net of deferred revenue, maintenance and financing obligations, decreased approximately $554 million,
compared to a decline in the comparable prior year period of $743 million. In fiscal year 2007, accounts payable, accrued
expenses and other liabilities declined approximately $22 million compared to an increase in the comparable prior year period
of $87 million. The decline in accounts payable for fiscal year 2007 as compared to the increase in fiscal year 2006 was
primarily a result of management’s determination in fiscal year 2007 that its payable cycle had exceeded an optimal level and
that the accounts payable balance should be reduced from the March 31, 2006 balance.We do not expect a significant impact
on future cash flows from further changes in the payable cycle. Other factors contributing to the decline in cash from
operations included higher expenses, the payment of fiscal year 2007 contributions to the CA Savings Harvest Plan, a 401(k)
plan, which was not pre-funded in fiscal year 2006, as well as an increase in the amount of cash paid for income taxes.
Customers generally pay for the right to use our software products over the term of the associated software license
agreement. We refer to these payments as installment payments. The timing and actual amounts of cash received from
committed customer installment payments under any specific license agreement can be impacted by several factors. Often, it
is the result of direct negotiations with the customer when establishing pricing and payment terms. In certain instances the
customer negotiates a price for a single up-front installment payment and seeks its own internal or external financing sources.
In other instances, we may assist the customer by arranging financing on their behalf through a third party. Although the terms
and conditions of the financing arrangement have been negotiated by us with the financial institution, the decision of whether
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