Computer Associates 2011 Annual Report Download - page 84

subject to the right of holders of record on the relevant interest payment date to receive interest due on the relevant interest
payment date.
6.125% notes due December 2014: The Company has entered into interest rate swaps to convert $500 million of its
6.125% Notes into floating interest rate payments through December 1, 2014. Under the terms of the swaps, the Company
will pay quarterly interest at an average rate of 2.88% plus the three-month London Interbank Offered Rate (LIBOR), and will
receive payment at 5.625%. The LIBOR based rate is set quarterly three months prior to the date of the interest payment. The
Company designated these swaps as fair value hedges and accounting for them in accordance with the shortcut method of
FASB ASC Topic 815. The carrying value of the 6.125% Notes has been adjusted by an amount that is equal and offsetting to
the fair value of the swaps.
Other indebtedness: The Company has available an unsecured and uncommitted multi-currency line of credit to meet short-
term working capital needs for the Company’s subsidiaries operating outside the United States and uses guarantees and
letters of credit issued by financial institutions to guarantee performance on certain contracts. At March 31, 2011,
approximately $55 million was pledged in support of bank guarantees and other local credit lines and none of these
arrangements had been drawn down by third parties.
The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements.
Under this pooling arrangement, the Company and its participating subsidiaries may maintain either cash deposit or
borrowing positions through local currency accounts with the bank, so long as the aggregate position of the global pool is a
notionally calculated net cash deposit. Because it maintains a security interest in the cash deposits, and has the right to
offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable
interest terms on both. At March 31, 2011, there were no borrowings outstanding under this cash pooling arrangement.
Borrowings and repayments were approximately $260 million for the year ended March 31, 2011. Borrowings outstanding
during the period did not exceed $130 million.
Note 10 — derivatives
The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes
in interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect
the Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters
into derivative contracts with the intent of mitigating a portion of these risks.
Interest rate swaps: The Company has interest rate swaps with a total notional value of $500 million, $200 million of which
were entered into during fiscal year 2011, that swap a total of $500 million of its 6.125% Senior Notes due December 2014
into floating interest rate debt through December 1, 2014. These swaps are designated as fair value hedges.
At March 31, 2011, the fair value of these derivatives was an asset of approximately $15 million, of which approximately
$11 million is included in “Other current assets” and approximately $4 million is included in “Other noncurrent assets, net” in
the Company’s Consolidated Balance Sheet. At March 31, 2010, the fair value of these derivatives was approximately
$1 million and is included in “Other current assets” in the Company’s Consolidated Balance Sheet.
During fiscal year 2009, the Company entered into interest rate swaps with a total notional value of $250 million to hedge a
portion of its variable interest rate payments on the Revolving Credit Facility. These derivatives were designated as cash flow
hedges and matured in October 2010. At March 31, 2010, the fair value of these derivatives was a liability of approximately
$4 million and is included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.
The effective portion of these cash flow hedges is recorded as “Accumulated other comprehensive loss” in the Company’s
Consolidated Balance Sheets and is reclassified into “Interest expense, net,” in the Company’s Consolidated Statements of
Operations in the same period during which the hedged transaction affected earnings. Any ineffective portion of the cash flow
hedges would have been recorded immediately to “Interest expense, net”; however, no ineffectiveness existed for fiscal years
2011, 2010 and 2009.
Foreign currency contracts: The Company enters into foreign currency option and forward contracts to manage foreign
currency risks. The Company has not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value
from these contracts are recorded as “Other expenses (gains), net” in the Company’s Consolidated Statements of Operations.
At March 31, 2011, foreign currency contracts outstanding consisted of purchase and sales contracts with a total notional
72