Computer Associates 2012 Annual Report Download - page 47

Liquidity and Capital Resources
Our cash and cash equivalent balances are held in numerous locations throughout the world, with 64% held in our subsidiaries
outside the United States at March 31, 2012. Cash, cash equivalents and marketable securities totaled $2,679 million at March 31,
2012, representing a decrease of $549 million from the March 31, 2011 balance of $3,228 million. The decrease in cash was
primarily due to the utilization of cash to pay for common stock repurchases and dividends and to repay our revolving credit facility
due August 2012. During fiscal 2012, there was a $67 million unfavorable translation effect from foreign currency exchange rates on
cash held outside the United States in currencies other than the U.S. dollar.
Although 64% of our cash and cash equivalents is held by foreign subsidiaries, we currently neither intend nor anticipate a need to
repatriate these funds to the United States in the foreseeable future. We expect existing domestic cash, cash equivalents, short-term
investments, and cash flows from operations to be sufficient to fund our domestic operating activities and our investing and financing
activities, including, among other things, the payment of regular quarterly dividends, compliance with our debt repayment schedules,
repurchases of our common stock and the funding for capital expenditures, for at least the next 12 months and for the foreseeable
future thereafter. In addition, we expect existing foreign cash, cash equivalents and cash flows from foreign operations to be
sufficient to fund our foreign operating activities and investing activities, including, among other things, the funding for capital
expenditures for acquisitions and research and development, for at least the next 12 months and for the foreseeable future thereafter.
Sources and Uses of Cash
Under our subscription and maintenance agreements, customers generally make installment payments over the term of the agreement,
often with at least one payment due at contract execution, for the right to use our software products and receive product support,
software fixes and new products when available. The timing and actual amounts of cash received from committed customer
installment payments under any specific agreement can be affected by several factors, including the time value of money and the
customer’s credit rating. Often, the amount received 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 financial institution. Alternatively, we may decide to transfer our rights to the future committed installment payments due
under the license agreement to a third-party financial institution in exchange for a cash payment. Once transferred, the future
committed installments are payable by the customer to the third-party financial institution. Whether the future committed installments
have been financed directly by the customer with our assistance or by the transfer of our rights to future committed installments to a
third party, these financing agreements may contain limited recourse provisions with respect to our continued performance under the
license agreements. Based on our historical experience, we believe that any liability that we may incur as a result of these limited
recourse provisions will be immaterial.
Amounts billed or collected as a result of a single installment for the entire contract value, or a substantial portion of the contract value,
rather than being invoiced and collected over the life of the license agreement, are reflected in the liability section of our Consolidated
Balance Sheets as “Deferred revenue (billed or collected).” Amounts received from either a customer or a third-party financial
institution that are attributable to later years of a license agreement have a positive impact on billings and cash provided by operating
activities in the current period. Accordingly, to the extent such collections are attributable to the later years of a license agreement,
billings and cash provided by operating activities during the license’s later years will be lower than if the payments were received over
the license term. We are unable to predict with certainty the amount of cash to be collected from single installments for the entire
contract value, or a substantial portion of the contract value, under new or renewed license agreements to be executed in future periods.
For fiscal 2012, gross receipts related to single installments for the entire contract value, or a substantial portion of the contract value,
were $479 million compared with $542 million in fiscal 2011. In any quarter, we may receive payments in advance of the
contractually committed date on which the payments are otherwise due. In limited circumstances, we may offer discounts to
customers to ensure payment in the current period of invoices that have been billed, but might not otherwise be paid until a
subsequent period because of payment terms or other factors. Historically, any such discounts have not been material.
Amounts due from customers from our subscription licenses are offset by deferred revenue related to these license agreements,
leaving no or minimal net carrying value on our Consolidated Balance Sheets for those amounts. The fair value of those amounts may
exceed or be less than this carrying value but cannot be practically assessed since there is no existing market for a pool of customer
receivables with contractual commitments similar to those owned by us. The actual fair value may not be known until these amounts
are sold, securitized or collected. Although these customer license agreements commit the customer to payment under a fixed
schedule, to the extent amounts are not yet due and payable by the customer, the agreements are considered executory in nature due
to our ongoing commitment to provide maintenance and unspecified future software products as part of the agreement terms.
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