Computer Associates 2010 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2010 Computer Associates annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of certain stock-based awards.
The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected lives, and risk-free
interest rates.
In addition to stock options and restricted share awards with time-based vesting, the Company issues performance share units
(PSUs). Compensation costs for the PSUs are amortized over the requisite service periods based on the expected level of
achievement of the performance targets. At the conclusion of the performance periods, the applicable number of shares of
restricted share awards (RSAs) or restricted stock units (RSUs) or unrestricted shares granted may vary based upon the level of
achievement of the performance targets and the approval of the Company’s Compensation and Human Resources Committee
(which has discretion to reduce any award for any reason). The value of the PSU awards is remeasured each reporting period
until the Committee approves attainment of the specified performance targets, at which time a grant date is deemed to have
been achieved for accounting purposes, the value of the award is fixed and any remaining unrecognized compensation
expense is recognized over the remaining vesting period.
(i) Net income per share: Under the two-class method, net income is reduced by the amount of dividends declared in the
period for each class of common stock and participating securities. The remaining undistributed income is then allocated to
common stock and participating securities as if all of the net income for the period had been distributed. Basic income per
common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted-
average number of common shares outstanding for the period. Diluted income per common share is calculated by dividing
net income allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as
adjusted for the potential dilutive effect of non-participating share-based awards and convertible notes.
The following table reconciles income per common share for the fiscal years ended March 31, 2010, 2009 and 2008,
respectively.
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2010 2009 2008
YEAR ENDED MARCH 31,
Basic income per common share:
Net income $ 771 $ 671 $ 479
Less: Net income allocable to participating securities (8) (8) (5)
Net income allocable to common shares $ 763 $ 663 $ 474
Weighted average common shares outstanding 515 513 514
Basic income per common share 1.48 1.29 0.92
Diluted income per common share:
Net income $ 771 $ 671 $ 479
Add: Interest expense associated with 1.625% Notes, net of tax
(1)
22 27 —
Less: Net income allocable to participating securities (8) (7) (4)
Net income allocable to common shares $ 785 $ 691 $ 475
Weighted average shares outstanding and common share equivalents:
Weighted average common shares outstanding 515 513 514
Weighted average shares outstanding upon conversion of 1.625% Notes
(1)
16 23 —
Weighted average effect of share-based payment awards 211
Denominator in calculation of diluted income per share 533 537 515
Diluted income per share $ 1.47 $ 1.29 $ 0.92
(1) If the common share equivalents for the 1.625% Notes (23 million shares) had been dilutive in the fiscal year ended March 31, 2008, interest expense, net of tax, related to the 1.625% Notes
would have been added back to net income to calculate diluted earnings per share. The related interest expense, net of tax, for the fiscal year ended March 31, 2008 was approximately
$24 million.
For the fiscal years ended March 31, 2010, 2009 and 2008, approximately 6 million, 14 million and 13 million restricted
stock units and options to purchase common stock, respectively, were excluded from the calculation, as their effect on net
income per share was anti-dilutive during the respective periods. Weighted average restricted stock awards of 5 million,
5 million and 4 million for the fiscal years ended March 31, 2010, 2009, and 2008, respectively, were considered
participating securities in the calculation of net income available to common shareholders.
59