Computer Associates 2007 Annual Report Download - page 97

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provisions of SFAS No. 123(R), stock-based compensation cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense over the employee requisite service period (generally the vesting period of
the equity grant).
(i) Net Income From Continuing Operations per Share: Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing
(i) the sum of net income and the after-tax amount of interest expense recognized in the period associated with outstanding
dilutive Convertible Senior Notes by (ii) the sum of the weighted average number of common shares outstanding for the
period and dilutive common share equivalents.
For the year ended March 31, 2007, 2006 and 2005, approximately 15 million, 11 million and 15 million options to purchase
common stock, respectively, were excluded from the calculation, as the exercise prices were greater than the average market
price of the common stock during the respective periods.
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2007 2006 2005
YEAR ENDED MARCH 31,
Income from continuing operations, net of taxes 121 160 27
Interest expense associated with the 1.625% Convertible Senior
Notes, net of tax
1
55—
Numerator in calculation of diluted income per share 126 165 27
Weighted average shares outstanding and common share equivalents
Weighted average common shares outstanding 544 581 588
Weighted average shares upon assumed conversion of 1.625% Convertible Senior Notes 23 23 —
Weighted average awards outstanding 232
Denominator in calculation of diluted income per share
2
569 607 590
Diluted income per share from continuing operations $ 0.22 $ 0.27 $ 0.05
1 If the common share equivalents for the 5% Convertible Senior Notes (27 million shares) issued in March 2002 and 1.625% Convertible Senior Notes (23 million shares) issued in December 2002
had been dilutive, interest expense, net of tax, related to the 1.625% Convertible Senior Notes would have been added back to income from continuing operations to calculate diluted earnings per
share from continuing operations in fiscal years 2005. The related interest expense, net of tax, for the fiscal year ended March 31, 2005 was approximately $25 million.
2 If all common share equivalents for the fiscal year ended March 31, 2005 had been dilutive, the denominator in calculation of diluted income per share would have been 640 million shares.
(j) Comprehensive Income: Comprehensive income includes net income, foreign currency translation adjustments and
unrealized gains (losses), net of taxes on the Company’s available-for-sale securities. As of March 31, 2007 and 2006,
accumulated other comprehensive loss included foreign currency translation losses of $98 million and $110 million,
respectively. Accumulated other comprehensive loss also includes an unrealized gain on equity securities, net of tax, of
$2 million for the fiscal year ended March 31, 2007 and an unrealized gain on equity securities, net of tax, of $3 million for the
fiscal year ended March 31, 2006.The components of comprehensive income, net of applicable tax, for the fiscal years ended
March 31, 2007, 2006 and 2005 are included within the Consolidated Statements of Stockholders’ Equity.
(k) Fair Value of Financial Instruments: The carrying value of financial instruments classified as current assets and current
liabilities, such as cash and cash equivalents, accounts payable, accrued expenses, and short-term debt, approximate fair
value due to the short-term maturity of the instruments. The fair values of marketable securities and long-term debt, including
current maturities, have been based on quoted market prices. See Note 4, “Marketable Securities”, and Note 7, “Debt”.
(l) Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk
consist primarily of marketable securities and accounts receivable. Amounts included in accounts receivable expected to be
collected from customers, as disclosed in Note 6, “Trade and Installment Accounts Receivable,” have limited exposure to
concentration of credit risk due to the diverse customer base and geographic areas covered by operations. Unbilled amounts
due under our prior business model that are expected to be collected from customers includes one large IToutsourcer with a
license arrangement that extends through fiscal year 2012 with a net unbilled receivable balance in excess of $400 million.
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