Computer Associates 2006 Annual Report Download - page 71

3% Concord Convertible Notes
In connection with our acquisition of Concord in June 2005, we assumed $86 million in 3% convertible senior notes
due 2023. In accordance with the notes’ terms, we redeemed (for cash) the notes in full in July 2005.
International Line of Credit
An unsecured and uncommitted multi-currency line of credit is available to meet short-term working capital needs
for our 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 our subsidiaries and the local bank at
the time of each specific transaction. As of March 31, 2006, this line totaled approximately $5 million and
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, our 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.
Share Repurchases, Stock Option Exercises and Dividends
We repurchased approximately $590 million of common stock in connection with our publicly announced corporate
buyback program in fiscal year 2006 compared with $161 million in fiscal year 2005; we received approximately
$97 million in proceeds resulting from the exercise of Company stock options in fiscal year 2006 compared with
$73 million in fiscal year 2005; and we paid dividends of $93 million, $47 million and $47 million in each of the
fiscal years 2006, 2005 and 2004, respectively.
As announced in April 2005, beginning in fiscal year 2006 we increased our annual cash dividend to $0.16 per
share, which was paid out in quarterly installments of $0.04 per share as and when declared by the Board of
Directors.
On June 26, 2006, the Board of Directors authorized a new $2 billion common stock repurchase plan for fiscal year
2007 which will replace the $600 million common stock repurchase plan announced in March 2006. We expect to
finance the stock repurchase plan through a combination of cash on hand and bank financing.
Effect of Exchange Rate Changes
There was a negative $63 million impact to our cash flows in fiscal year 2006 predominantly due to the weakening
of the British pound and the euro against the dollar of approximately 8% and 6%, respectively. In fiscal year 2005,
we had a $47 million favorable impact to our cash flows predominantly due to a strengthening of the pound and euro
of approximately 3% and 5%, respectively.
Other Matters
At March 31, 2006, our 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, our senior unsecured notes ratings remained
at Ba1, BBB⫺, and BBB⫺by Moody’s, S&P and Fitch, respectively, all with a negative outlook. Following the
announcement of the delayed filing of our Form 10-K beyond its extended due date of June 29, 2006 and the
announcement of our $2 billion stock buy back program, S&P and Fitch downgraded our ratings to BB and BB+,
respectively. As of July 2006, Moody’s has placed us under review for possible downgrade, the outlook from Fitch is
negative and S&P has placed our notes on CreditWatch with negative implications.
Peak borrowings under all debt facilities during the fiscal year 2006 totaled approximately $2.64 billion, with a
weighted average interest rate of 4.9%.
In March 2005, we pre-funded contributions to the CA Savings Harvest Plan, a 401(k) plan. The Company elected
not to pre-fund its contribution in March 2006 as a result of IRS Treasury Regulations eliminating the tax benefit
associated with the pre-funding of elective and matching contributions.
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