Computer Associates 2006 Annual Report Download - page 143

Note 6 — Debt (Continued)
International Line of Credit
An unsecured and uncommitted multi-currency line of credit is available to meet short-term working capital needs
for the Company’s subsidiaries operating outside the United States. The line of credit is available on an offering
basis, meaning that transactions under the line of credit will be on such terms and conditions, including interest rate,
maturity, representations, covenants and events of default, as mutually agreed between the Company’s subsidiaries
and the local bank at the time of each specific transaction. As of March 31, 2006, this line totaled approximately
$5 million, of which approximately $3 million was pledged in support of bank guarantees. Amounts drawn under
these facilities as of March 31, 2006 were minimal.
In addition to the above facility, the Company’s foreign subsidiaries use guarantees issued by commercial banks to
guarantee performance on certain contracts. At March 31, 2006 the aggregate amount of significant guarantees
outstanding was approximately $5 million, none of which had been drawn down by third parties.
Other
As of March 31, 2006 and 2005, the Company had various other debt obligations outstanding, which approximated
$1 million.
At March 31, 2006, the Company’s senior unsecured notes were rated Ba1, BBB-, and BBB- and were on positive,
negative and stable outlook by Moody’s, S&P and Fitch, respectively. In June 2006, the Company’s senior
unsecured notes rating remained at Ba1, BBB-, and BBB- by Moody’s, S&P and Fitch, respectively, all with a
negative outlook. Subsequent to the announcement of the Company’s delayed filing of the Form 10-K beyond its
extended due date of June 29, 2006 and its $2 billion stock buy back program, the agencies changed their ratings on
our notes as follows: On June 30, 2006, Moody’s placed the Ba1 ratings of CA under review for possible
downgrade; on July 5, 2006, S&P lowered its ratings to BB and placed CA on CreditWatch with negative
implications; and on July 10, 2006, Fitch downgraded CA to BB+ with negative outlook.
The Company conducts an ongoing review of its capital structure and debt obligations as part of its risk management
strategy. The fair value of the Company’s long-term debt, including the current portion of long-term debt, was
$1.96 billion and $2.83 billion at March 31, 2006 and 2005, respectively. The fair value of long-term debt is based
on quoted market prices. See also Note 1, “Significant Accounting Policies”.
Interest expense for the fiscal years ended March 31, 2006, 2005, and 2004 was $95 million, $153 million, and
$136 million, respectively.
The maturities of outstanding debt are as follows:
2007 2008 2009 2010 2011 Thereafter
Year Ended March 31,
(in millions)
Amount due ............................ $1 $— $350 $960 $— $500
Note 7 — Commitments and Contingencies
The Company leases real estate and certain data processing and other equipment with lease terms expiring through
2023. The leases are operating leases and provide for renewal options and additional rentals based on escalations in
operating expenses and real estate taxes. The Company has no material capital leases.
Rental expense under operating leases for facilities and equipment was $199 million, $187 million, and $179 million
for the fiscal years ended March 31, 2006, 2005, and 2004, respectively. Rental expense for the fiscal years ended
March 31, 2006, 2005, and 2004 includes sublease income of $10 million, $16 million and $29 million, respectively.
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