Computer Associates 2006 Annual Report Download - page 73

As of March 31, 2006, we have no material capital lease obligations, either individually or in the aggregate.
Outlook for Fiscal Year 2007
This outlook contains certain forward-looking statements and information relating to us that are based on the beliefs
and assumptions made by management, as well as information currently available to management. Should business
conditions change or should our assumptions prove incorrect, actual results may vary materially from those
described below. We do not intend to update these forward-looking statements.
The outlook for our fiscal year 2007 is based on the assumption that there will be limited-to-modest improvement in
the current economic and IT environments. We also believe customers will continue to be cautious with their
technology purchases.
Our preliminary outlook for fiscal year 2007 is to generate revenue of approximately $3.9 billion, earnings per share
of approximately $0.44 as calculated on a GAAP basis, and cash generated from operations of $1.3 billion.
We expect that:
• We will incur approximately $105 million (pre-tax) in non-cash stock-based compensation charges in
connection with SFAS No. 123(R) (we incurred approximately $99 million of total stock-based
compensation charges in fiscal year 2006);
• Cash generated from operations will be negatively impacted by an additional $200 million in tax payments,
higher disbursements due to a decline in the days payables cycle and lower collections from contracts with
accelerated payment terms; and
• Our effective tax rate should be approximately 34% in fiscal year 2007.
This outlook has not been adjusted to reflect the $2 billion common stock repurchase plan for fiscal year 2007 or the
impact of any related financing activities. This outlook also assumes that the Company will take steps to achieve
certain cost savings. These steps may have related non-operating costs that would have a negative effect on GAAP
earnings per share. The Company has not yet identified these savings or quantified their potential impact on GAAP
earnings per share, and it is possible that GAAP earnings per share could be lower than the amount included in this
outlook.
Critical Accounting Policies and Estimates
We review our financial reporting and disclosure practices and accounting policies quarterly to help ensure that they
provide accurate and transparent information relative to the current economic and business environment. Note 1,
“Significant Accounting Policies”, in the Notes to the Consolidated Financial Statements contains a summary of the
significant accounting policies that we use. Many of these accounting policies involve complex situations and
require a high degree of judgment, either in the application and interpretation of existing accounting literature or in
the development of estimates that impact our financial statements. On an ongoing basis, we evaluate our estimates
and judgments based on historical experience as well as other factors that are believed to be reasonable under the
circumstances. These estimates may change in the future if underlying assumptions or factors change.
We consider the following significant accounting polices to be critical because of their complexity and the high
degree of judgment involved in implementing them.
Revenue Recognition
We generate revenue from the following primary sources: (1) licensing software products; (2) providing customer
technical support (referred to as maintenance); and (3) providing professional services, such as consulting and
education.
We recognize revenue pursuant to the requirements of Statement of Position 97-2 “Software Revenue Recognition”
(SOP 97-2), issued by the American Institute of Certified Public Accountants, as amended by SOP 98-9
“Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” In
53