Aug 26, 2003 (12:08 PM EDT)
CA To Issue New Shares As Part Of Legal Settlements
Read the Original Article at InformationWeek
ISLANDIA, N.Y. (AP) -- Computer Associates International Inc. will issue nearly 6 million new shares as part of a settlement of three lawsuits related to its accounting practices, which remain under federal investigation.
Under the terms of the settlement, Computer Associates said it would issue up to 5.7 million shares of common stock to shareholders in three class action lawsuits. Plaintiffs' attorney fees will be covered by the stock issuance.
The suits pertain to how the Long Island-based company, which makes software for corporate mainframe computers, recognized revenue and awarded executive compensation.
Computer Associates plans to take a pretax charge in the current quarter of about $144 million.
The charge is based on the company's $25 closing price on the New York Stock Exchange on Friday and administrative costs associated with the settlement.
The after-tax impact of the charge is estimated at $97 million, or 17 cents a share.
Melvyn Weiss, an attorney whose firm is co-lead counsel in one of the consolidated suits, said the case appeared to be protracted.
"We felt that getting stock today, if the company has a good future, had a better upside for our clients than waiting three, four, or five years to resolve this case," he told The Wall Street Journal.
If the company's share price is below $23.43 per share at the time of distribution, up to 2.2 million of the 5.7 million shares would be payable in cash at that price--or a maximum of $51.5 million in cash. If that happens, the stock portion of the settlement would be reduced to no less than 3.5 million shares.
In a statement, chief executive Sanjay Kumar called the settlement "a major step forward, because it removes the uncertainty that always accompanies unresolved litigation and clears distractions that have clouded the real performance of our company."
The Securities and Exchange Commission and the U.S. attorney's office for the Eastern District of New York are continuing to investigate Computer Associates' accounting practices.