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Yesterday, CA (NASDAQ:CA) announced earnings, a material restructuring intended to reduce ongoing expense levels and the expected initiation of their previously announced $2 billion stock repurchase program.

CA's Capital Structure Philosophy

CA has historically been a sector leader in its aggressive use of debt as a financing mechanism. While the management team has seen much change in the past five years, the aggressive use of debt remains firmly in place. As we have seen with the recent Veritas financing as well as the financing of the Secure Computing acquisition of CipherTrust, debt has found its way into the mainstream of the software industry.

CA intends to use the Microsoft (NASDAQ:MSFT) technique and initiate a tender offer to repurchase $1 billion of its common stock. The Company expects to finance between 50% -75% of the purchase price with a bank facility and the balance with cash from the balance sheet. The net effect is that leverage ratio's will rise to the highest levels of the past several years. Today CA's debt/common stockholder equity ratio is 40%. Following the buyback that ratio will rise to between 57% - 67%, well above CA's previous debt levels.

CA 1-yr chart:

Source: CA Earnings Announcement: Restructure, Reduce and Repurchase