CA Technologies Reports Third Quarter 2011 Results
ISLANDIA, N.Y., Jan. 25, 2011 /PRNewswire/ --
-- Revenue $1.165 Billion, Up 5 Percent in Constant Currency and Up 4
Percent as Reported
-- GAAP EPS $0.39, Down 17 Percent in Constant Currency and Down 20 Percent
as Reported
-- Non-GAAP EPS $0.51, Up 11 Percent in Constant Currency and as Reported
-- Raises Full Year Guidance for GAAP and non-GAAP EPS and Increases
Revenue Outlook
-- Announces Acquisition of Torokina Networks to Extend Reach in
Communication Service Providers (CSP) Market
CA Technologies (Nasdaq: CA) today reported financial results for its third quarter ended Dec. 31, 2010.
*Non-GAAP income and earnings per share are non-GAAP financial
measures, as noted in the discussion of non-GAAP results below. A
reconciliation of non-GAAP financial measures to their comparable
GAAP financial measures is included in the tables following this
news release.
**CC: Constant Currency
EXECUTIVE COMMENTARY
"CA Technologies delivered another strong quarter thanks to continued focus on execution and a leading portfolio of solutions to manage and secure IT infrastructures from the mainframe to cloud computing environments," said Chief Executive Officer Bill McCracken. "Over the past year, we have bolstered our product portfolio with the addition of new technologies from nine acquisitions and combined these acquired capabilities with our own development to provide customers with the solutions they need to help manage and secure their IT environments. This is driving our growth and establishing the base for growth going forward.
"As we head into the last two months of the fiscal year, we feel very good about where we are both from a strategic standpoint and our ability to reach our financial objectives," McCracken continued. "We continue to focus on accelerating new product sales, reaching new and emerging enterprise customers, penetrating growth geographies and leading the technology evolution - the evolution to virtualization and cloud computing. Finally, the current portion of revenue backlog, which is a key measure for our performance going forward, is up 4 percent, which further demonstrates the strength of our business."
THIRD QUARTER REVENUE AND BOOKINGS
Total revenue growth in the third quarter can be attributed to increased sales of the Company's service assurance, virtualization management and service automation, Software as a Service products and service and education offerings. About 3 percentage points of the revenue growth in constant currency was driven by organic products and services, with the remaining 2 percentage points in constant currency coming from acquisitions including products from 3Tera, Inc., Arcot Systems and Nimsoft, Inc. On an as reported basis, this revenue growth was about evenly split. About 60 percent of the Company's revenue came from North America, while 40 percent came from International operations.
-- Revenue was $1.165 billion, up 5 percent in constant currency and 4
percent as reported.
-- Total revenue backlog was $8.015 billion, up 2 percent in constant
currency and up 1 percent as reported. The current portion of revenue
backlog was $3.592 billion, up 4 percent in both constant currency and
as reported.
-- North America revenue was $697 million, up 7 percent in both constant
currency and as reported.
-- International revenue was $468 million, up 1 percent in constant
currency and down 1 percent as reported.
-- Total bookings in the third quarter were $1.281 billion, down 5 percent
in constant currency and down 6 percent as reported primarily due to a
decrease in license and maintenance renewal bookings. This decrease was
partially offset by positive results for total new product and capacity
sales for the quarter.
-- The Company signed 15 license agreements with aggregate values greater
than $10 million for a total of $456 million, compared to 16 agreements
for a total of $514 million in the third quarter of fiscal year 2010.
-- The weighted average duration of subscription and maintenance bookings
for the quarter was 3.20 years, compared to 3.23 years in the prior year
period.
-- North America bookings were $766 million, up 7 percent in constant
currency and up 8 percent as reported.
-- International bookings were $515 million, down 19 percent in constant
currency and 22 percent as reported.
THIRD QUARTER EXPENSES AND MARGIN
Year-over-year GAAP results:
-- Operating expenses, before interest and income taxes, were $827 million,
up 7 percent in constant currency and as reported.
-- Operating income, before interest and income taxes, was $338 million,
flat in constant currency and down 3 percent as reported.
-- Operating margin was 29 percent, down 2 percentage points from the prior
year period.
Expenses, operating income and operating margin for the third quarter primarily were affected by increased costs associated with acquisitions.
Year-over-year non-GAAP results, which exclude purchased software and intangibles amortization, pre-fiscal year 2010 restructuring costs and certain other gains and losses, which include recoveries and certain costs associated with derivative litigation matters, share-based compensation expense, and include gains and losses on hedges that mature within the quarter, but exclude gains and losses on hedges that do not mature within the quarter:
-- Operating expenses, before interest and income taxes, were $774 million,
up 7 percent in constant currency and up 6 percent as reported.
-- Operating income, before interest and income taxes, was $391 million, up
1 percent in constant currency and down 1 percent as reported.
-- Operating margin was 34 percent, a decrease of 1 percentage point.
Non-GAAP results also primarily were affected by the increased cost associated with acquisitions.
In the third quarter, GAAP earnings per share were affected by a 39 percent tax rate, compared with a 22 percent GAAP tax rate in the third quarter of the previous year. The current period GAAP tax rate was increased by unfavorable tax items and the prior period GAAP tax rate decreased by favorable tax items which are not expected to recur and that were unique to the respective periods. Such tax items affect the company's non-GAAP tax rate more evenly across the quarterly periods of its fiscal year than its GAAP tax rate. In the third quarter of fiscal 2011, non-GAAP EPS was positively affected by the year-over-year improvement in non-GAAP tax rate from 36 percent to 32 percent.
CASH FLOW FROM OPERATIONS
Cash flow from operations was $496 million compared to $342 million in the prior year. Third quarter cash flow was positively affected by a year-over-year increase of $78 million in upfront cash collections from single installment customer payments and an increase of $122 million in collections of trade receivables. Cash flow was adversely affected by increased disbursements related to acquisitions and personnel costs.
CAPITAL STRUCTURE
-- Cash, cash equivalents and marketable securities were $2.685 billion.
-- With $1.555 billion in total debt outstanding, the Company's net cash
position was $1.130 billion.
-- The Company repurchased approximately 1.5 million shares of stock in the
third quarter for a total of $35 million under the $500 million stock
repurchase program authorized by the Board of Directors in May 2010.
QUARTER HIGHLIGHTS
During the third quarter the Company:
-- Completed the acquisition of privately-held Arcot Systems, Inc. for
about $200 million in an all-cash transaction.
-- Announced the release of CA 3Tera® AppLogic®, the Company's new
turnkey cloud computing platform.
-- Announced the next-generation CA Automation Suite to help customers with
their journey to a virtualized, dynamic cloud computing infrastructure.
-- Completed the acquisition of privately-held Hyperformix, a leading
provider of capacity management software for dynamic physical, virtual
and cloud IT infrastructures. Terms of the transaction were not
disclosed.
-- Announced the availability of CA Mainframe Chorus, the next step in CA
Technologies Mainframe 2.0 strategy to simplify mainframe management,
and help the platform to continue to be an effective and integral part
of evolving IT infrastructures.
ACQUISITION OF TOROKINA NETWORKS
The Company today announced the acquisition of privately-held Torokina Networks Pty Ltd, a Sydney, Australia, based provider of telecommunications management solutions to 2G, 3G, next generation networks (NGN) and VoIP service providers and network operators worldwide. CA Technologies and Torokina Networks previously worked together as partners and independent vendors. Terms of the acquisition were not disclosed. A separate news release has been issued and can be found here.
OUTLOOK FOR FISCAL YEAR 2011
Beginning in the first quarter of fiscal year 2011 the Company has excluded share-based compensation expense from its non-GAAP financial measures. The following guidance, which represents "forward-looking statements" (as defined below), takes into account the exclusion of share-based compensation expense from future non-GAAP results. To enable fiscal year 2011 guidance for non-GAAP earnings per share to be compared to fiscal year 2010 full year results, the Company provides full fiscal year 2010 results for non-GAAP earnings per share excluding stock-based compensation expense below.
The Company updated its outlook issued on Oct. 21, 2010. It increased its revenue outlook, increased guidance for GAAP and non-GAAP earnings per share and reaffirmed its guidance for cash flow from operations. The Company also updated projected as reported numbers based on Dec. 31, 2010 exchange rates:
-- Total revenue growth in a range of 4 percent to 5 percent in constant
currency. Previously, the range was 3 percent to 5 percent. At Dec.
31, 2010 exchange rates, this translates to reported revenue of $4.48
billion to $4.55 billion;
-- GAAP diluted earnings per share from continuing operations growth in
constant currency increases to a range of 8 percent to 14 percent.
Previously, the range was 5 percent to 13 percent. At Dec. 31, 2010
exchange rates, this translates to diluted earnings per share of $1.57
to $1.67;
-- Non-GAAP diluted earnings per share from continuing operations growth in
constant currency increases to a range of 10 percent to 15 percent.
Previously the range was 7 percent to 14 percent. At Dec. 31, 2010
exchange rates, this translates to non-GAAP diluted earnings per share
of $1.88 to $1.98. Fiscal year 2010 non-GAAP diluted earnings per share
was $1.74 excluding share-based compensation expense; and
-- Cash flow from operations growth remains in a range of 2 percent to 7
percent in constant currency. At Dec. 31, 2010 exchange rates, this
translates to cash flow from operations of $1.400 billion to $1.475
billion.
This outlook also assumes no material acquisitions and a partial currency hedge of operating income. The Company expects its full-year GAAP and non-GAAP tax rate to be in a range of 32 percent to 33 percent. This lowers the previous guidance range of between 33 percent to 34 percent.
The Company anticipates approximately 504 million shares outstanding at fiscal year 2011 year-end and a weighted average diluted shares outstanding of approximately 508 million for the fiscal year. Guidance does not include the impact from any future stock repurchases.
Webcast
This news release and the accompanying tables should be read in conjunction with additional content that is available on the Company's website, including a supplemental financial package, as well as a webcast that the Company will host at 5 p.m. ET today to discuss its unaudited third quarter results. The webcast will be archived on the Company website. Individuals can access the webcast, as well as this press release and supplemental financial information, at http://ca.com/invest or listen to the call at 1-877-857-6161. The international participant number is 1-719-325-4753.
CA Technologies (Nasdaq: CA) is an IT management software and solutions company with expertise across all IT environments - from mainframe and distributed, to virtual and cloud. CA Technologies manages and secures IT environments and enables customers to deliver more flexible IT services. CA Technologies innovative products and services provide the insight and control essential for IT organizations to power business agility. The majority of the Global Fortune 500 relies on CA Technologies to manage evolving IT ecosystems. For additional information, visit CA Technologies at http://www.ca.com.
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Non-GAAP Financial Measures (Update)
This news release, the accompanying tables and the additional content that is available on the Company's website, including a supplemental financial package, includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP). Non-GAAP metrics for operating expenses, operating income, operating margin, income from operations and diluted earnings per share exclude the following items: non-cash amortization of purchased software and other intangibles, share-based compensation, pre-fiscal year 2010 restructuring and certain other gains and losses, which includes recoveries and certain costs associated with derivative litigation matters and includes the gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter. Non-GAAP income also excludes the interest on convertible bonds. The effective tax rate on GAAP and non-GAAP income from operations is the Company's provision for income taxes expressed as a percentage of pre-tax GAAP and non-GAAP income from operations, respectively. Such tax rates are determined based on an estimated effective full year tax rate, with the effective tax rate for GAAP generally including the impact of discrete items in the period such items arise and the effective tax rate for non-GAAP income generally allocating the impact of discrete items pro rata to the fiscal year's remaining reporting periods. Non-GAAP adjusted cash flow excludes restructuring and other payments. Free cash flow excludes capital expenditures. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate in effect on March 31, 2010, which was the last day of our prior fiscal year. Constant currency excludes the impacts from the Company's hedging program. The constant currency calculation for annualized subscription and maintenance bookings is calculated by dividing the subscription and maintenance bookings in constant currency by the weighted average subscription and maintenance duration in years. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and cash flows, to competitors' operating results and cash flows, and to estimates made by securities analysts. Management uses these non-GAAP financial measures internally to evaluate its performance and they are key variables in determining management incentive compensation. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. In addition, the Company has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures, which are attached to this news release.
Certain statements in this communication (such as statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) constitute "forward-looking statements" that are based upon the beliefs of, and assumptions made by, the Company's management, as well as information currently available to management. These forward-looking statements reflect the Company's current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company's strategy by, among other things, increasing sales in new and emerging enterprises and markets, enabling the sales force to sell new products and Software-as-a-Service offerings and improving the Company's brand in the marketplace; global economic factors or political events beyond the Company's control; general economic conditions, including concerns regarding a global recession and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; failure to expand channel partner programs; the ability to adequately manage and evolve financial reporting and managerial systems and processes; the ability to successfully acquire technology and software that are consistent with our strategy and integrate acquired companies and products into existing businesses; competition in product and service offerings and pricing; the ability to retain and attract qualified key personnel; the ability to adapt to rapid technological and market changes; the ability of the Company's products to remain compatible with ever-changing operating environments; access to software licensed from third parties, third-party code and specifications for the development of code; use of software from open source code sources; discovery of errors in the Company's software and potential product liability claims; significant amounts of debt and possible future credit rating changes; the failure to protect the Company's intellectual property rights and source code; fluctuations in the number, terms and duration of our license agreements as well as the timing of orders from customers and channel partners; reliance upon large transactions with customers; risks associated with sales to government customers; breaches of the Company's software products and the Company's and customers' data centers and IT environments; access to third-party microcode; third-party claims of intellectual property infringement or royalty payments; fluctuations in foreign currencies; failure to successfully execute restructuring plans; successful outsourcing of various functions to third parties; potential tax liabilities; and these factors and the other factors described more fully in the Company's filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
Contacts: Dan Kaferle Kelsey Doherty
Public Relations Investor Relations
(631) 342-2111 (212) 415-6844
daniel.kaferle@ca.com kelsey.doherty@ca.com
Table 1
CA Technologies
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
Revenue 2010 2009 2010 2009
---- ---- ---- ----
Subscription and
maintenance revenue $995 $995 $2,917 $2,905
Professional services 88 73 245 213
Software fees and other 82 54 204 115
Total revenue 1,165 1,122 3,366 3,233
----- ----- ----- -----
Expenses
Costs of licensing and
maintenance 82 73 233 211
Cost of professional
services 77 66 223 191
Amortization of capitalized
software costs 52 34 145 101
Selling and marketing 348 315 955 879
General and administrative 114 129 344 358
Product development and
enhancements 110 117 363 348
Depreciation and
amortization of other
intangible assets 47 39 136 116
Other expenses (gains), net 5 (3) 9 11
Restructuring and other (8) 2 (11) 4
Total expenses before
interest and income taxes 827 772 2,397 2,219
--- --- ----- -----
Income from continuing
operations before interest
and income taxes 338 350 969 1,014
Interest expense, net 10 23 35 62
--- --- --- ---
Income from continuing
operations before income
taxes 328 327 934 952
Income tax expense 128 71 289 283
INCOME FROM CONTINUING
OPERATIONS $200 $256 $645 $669
Income (loss) from
discontinued operations,
net of income taxes - 1 (6) 1
--- --- ---
NET INCOME $200 $257 $639 $670
==== ==== ==== ====
Basic income (loss) per
share
Income from continuing
operations $0.39 $0.49 $1.26 $1.28
Loss from discontinued
operations - - (0.01) -
Net Income $0.39 $0.49 $1.25 $1.28
===== ===== ===== =====
Basic weighted average
shares used in computation 505 515 507 516
Diluted income (loss) per
share
Income from continuing
operations $0.39 $0.49 $1.25 $1.27
Loss from discontinued
operations - - (0.01) -
--- --- ----- ---
Net Income $0.39 $0.49 $1.24 $1.27
===== ===== ===== =====
Diluted weighted average
shares used in computation 506 535 508 539
Certain balances have been revised to reflect the discontinued
operations associated with the sale of the Information Governance
business.
Table 2
CA Technologies
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
December
31, March 31,
2010 2010
---- ----
Cash and cash equivalents $2,518 $2,583
Marketable securities- current 59 -
Trade and installment accounts
receivable, net 866 931
Deferred income taxes - current 194 360
Other current assets 159 116
--- ---
Total current assets 3,796 3,990
Marketable securities - noncurrent 108 -
Installment accounts receivable,
due after one year, net - 46
Property and equipment, net 439 452
Goodwill 5,742 5,667
Capitalized software and other
intangible assets, net 1,299 1,150
Deferred income taxes - noncurrent 309 355
Other noncurrent assets, net 198 178
--- ---
Total assets $11,891 $11,838
======= =======
Current portion of long-term debt
and loans payable $16 $15
Deferred revenue (billed or
collected) -current 2,342 2,555
Deferred income taxes - current 53 51
Other current liabilities 802 967
--- ---
Total current liabilities 3,213 3,588
Long-term debt, net of current
portion 1,539 1,530
Deferred income taxes - noncurrent 143 134
Deferred revenue (billed or
collected) -noncurrent 995 1,068
Other noncurrent liabilities 536 535
--- ---
Total liabilities 6,426 6,855
----- -----
Common stock 59 59
Additional paid-in capital 3,598 3,657
Retained earnings 3,938 3,361
Accumulated other comprehensive
loss (79) (130)
Treasury stock (2,051) (1,964)
------ ------
Total stockholders' equity 5,465 4,983
----- -----
Total liabilities and stockholders'
equity $11,891 $11,838
======= =======
Table 3
CA Technologies
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
December 31,
------------
2010 2009
---- ----
OPERATING ACTIVITIES:
Net income $200 $257
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 99 74
Provision for deferred income taxes - (16)
Share based compensation expense 21 22
Amortization of discount on
convertible debt - 9
Asset impairments and other non-cash
activities 1 1
Foreign currency transaction gains 3 6
Changes in other operating assets and
liabilities, net of effect of
acquisitions:
Increase in trade and installment
accounts receivable, net (167) (177)
Increase in deferred revenue 209 51
Increase in taxes payable, net 142 110
Decrease in accounts payable, accrued
expenses and other (17) (26)
Increase in accrued salaries, wages
and commissions 20 42
Decrease in restructuring liabilities (12) (7)
Changes in other operating assets and
liabilities (3) (4)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 496 342
--- ---
INVESTING ACTIVITIES:
Acquisitions, primarily businesses,
net of cash acquired,
and purchased software (224) (198)
Purchases of property and equipment (26) (15)
Cash proceeds from divestiture of
assets 3 -
Capitalized software development costs (43) (46)
Purchases of marketable securities (168) -
Other investing activities (1) (1)
NET CASH USED IN INVESTING ACTIVITIES (459) (260)
---- ----
FINANCING ACTIVITIES:
Dividends paid (20) (21)
Purchases of common stock (33) (45)
Debt repayments (2) (406)
Exercise of common stock options and
other 3 4
NET CASH USED IN FINANCING ACTIVITIES (52) (468)
--- ----
DECREASE IN CASH AND CASH EQUIVALENTS
BEFORE
EFFECT OF EXCHANGE RATE CHANGES ON
CASH (15) (386)
Effect of exchange rate changes on
cash 8 (15)
--- ---
DECREASE IN CASH AND CASH EQUIVALENTS (7) (401)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,525 3,025
----- -----
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $2,518 $2,624
====== ======
Table 4
CA Technologies
Constant Currency Summary
(in millions)
(unaudited)
Three Months Ended December 31,
-------------------------------
%
2010 2009 Increase % Increase
---- ---- --------- ----------
(Decrease)
(Decrease) in
---------- -----------
in $ US Constant
------- --------
Currency
(1)
---------
Bookings $1,281 $1,367 (6%) (5%)
Revenue:
North America $697 $650 7% 7%
International 468 472 (1%) 1%
--- --- ---- ---
Total revenue $1,165 $1,122 4% 5%
Revenue:
Subscription
and
maintenance $995 $995 0% 1%
Professional
services 88 73 21% 23%
Software fees
and other 82 54 52% 50%
--- --- --- ---
Total revenue $1,165 $1,122 4% 5%
Total
expenses
before
interest and
income
taxes:
Total Non-
GAAP (2) $774 $728 6% 7%
Total GAAP $827 $772 7% 7%
Nine Months Ended December 31,
------------------------------
%
2010 2009 Increase % Increase
---- ---- --------- ----------
(Decrease)
(Decrease) in
---------- -----------
in $ US Constant
------- --------
Currency
(1)
---------
Bookings $3,049 $3,493 (13%) (12%)
Revenue:
North America $2,038 $1,899 7% 7%
International 1,328 1,334 0% 1%
----- ----- --- ---
Total revenue $3,366 $3,233 4% 4%
Revenue:
Subscription
and
maintenance $2,917 $2,905 0% 1%
Professional
services 245 213 15% 16%
Software fees
and other 204 115 77% 74%
--- --- --- ---
Total revenue $3,366 $3,233 4% 4%
Total
expenses
before
interest and
income
taxes:
Total Non-
GAAP (2) $2,219 $2,059 8% 8%
Total GAAP $2,397 $2,219 8% 8%
(1) Constant currency information is presented to provide a
framework to assess how the underlying businesses performed
excluding the effect of foreign currency rate fluctuations. To
present this information, current and comparative prior period
results for entities reporting in currencies other than US dollars
are converted into US dollars at the exchange rate in effect on
March 31, 2010, which was the last day of fiscal year 2010.
Constant currency excludes the impacts from the Company's hedging
program.
(2) Refer to Table 6 for a reconciliation of total expenses before
interest and income taxes on a GAAP basis to total expenses before
interest and income taxes on a non-GAAP basis.
Certain balances have been revised to reflect the discontinued
operations associated with the sale of the Information Governance
business.
Certain non-material differences may arise versus actual from impact
of rounding.
Table 5
CA Technologies
Reconciliation of GAAP to non-GAAP Income from Continuing Operations
(in millions, except per share amounts)
(unaudited)
Three Months Ended
December 31, 2010
-----------------
GAAP Non-GAAP Non-GAAP
---- -------- --------
Adjustments
-----------
Total revenue 1,165 - 1,165
----- --- -----
Expenses
Costs of licensing and
maintenance(1) 82 1 81
Cost of professional
services(1) 77 1 76
Amortization of
capitalized software
costs(2) 52 23 29
Selling and marketing(1) 348 8 340
General and
administrative(1) 114 7 107
Product development and
enhancements(1) 110 4 106
Depreciation and
amortization of other
intangible assets(3) 47 18 29
Other expenses (gains),
net (4) 5 - 5
Restructuring and other
(5) (8) (9) 1
---
Total expenses before
interest and income taxes 827 53 774
--- --- ---
Income from continuing
operations before
interest and income taxes 338 (53) 391
Operating Margin (% of
revenue) 29% 34%
Interest expense, net 10 - 10
Interest on dilutive
convertible bonds(6) - - -
--- --- ---
Income from continuing
operations before income
taxes 328 (53) 381
Income tax expense(7)(8) 128 7 121
INCOME FROM CONTINUING
OPERATIONS(6) 200 (60) 260
=== === ===
Diluted income (loss) per
share
Income from continuing
operations(7)(8)(9) $0.39 $0.12 $0.51
===== ===== =====
Diluted weighted average
shares used in
computation(9) 506 506
Nine Months Ended
December 31, 2010
-----------------
Non-GAAP
GAAP Adjustments Non-GAAP
---- ------------ --------
Total revenue 3,366 - 3,366
----- --- -----
Expenses
Costs of licensing and
maintenance(1) 233 3 230
Cost of professional
services(1) 223 3 220
Amortization of
capitalized software
costs(2) 145 67 78
Selling and marketing(1) 955 23 932
General and
administrative(1) 344 17 327
Product development and
enhancements(1) 363 15 348
Depreciation and
amortization of other
intangible assets(3) 136 51 85
Other expenses (gains),
net (4) 9 7 2
Restructuring and other
(5) (11) (8) (3)
---
Total expenses before
interest and income taxes 2,397 178 2,219
----- --- -----
Income from continuing
operations before
interest and income taxes 969 (178) 1,147
Operating Margin (% of
revenue) 29% 34%
Interest expense, net 35 - 35
Interest on dilutive
convertible bonds(6) - - -
--- --- ---
Income from continuing
operations before income
taxes 934 (178) 1,112
Income tax expense(7)(8) 289 (77) 366
--- ---
INCOME FROM CONTINUING
OPERATIONS(6) 645 (101) 746
=== ==== ===
Diluted income (loss) per
share
Income from continuing
operations(7)(8)(9) $1.25 $0.20 $1.45
===== ===== =====
Diluted weighted average
shares used in
computation(9) 508 508
Three Months Ended
December 31, 2009
-----------------
GAAP Non-GAAP Non-GAAP
---- -------- --------
Adjustments
-----------
Total revenue 1,122 - 1,122
----- --- -----
Expenses
Costs of licensing and
maintenance(1) 73 - 73
Cost of professional
services(1) 66 1 65
Amortization of capitalized
software costs(2) 34 13 21
Selling and marketing(1) 315 8 307
General and
administrative(1) 129 7 122
Product development and
enhancements(1) 117 6 111
Depreciation and
amortization of other
intangible assets(3) 39 13 26
Other expenses (gains), net
(4) (3) (6) 3
Restructuring and other (5) 2 2 -
---
Total expenses before
interest and income taxes 772 44 728
--- --- ---
Income from continuing
operations before interest
and income taxes 350 (44) 394
Operating Margin (% of
revenue) 31% 35%
Interest expense, net 23 - 23
Interest on dilutive
convertible bonds(6) - 11 (11)
--- --- ---
Income from continuing
operations before income
taxes 327 (55) 382
Income tax expense(7)(8) 71 (65) 136
INCOME FROM CONTINUING
OPERATIONS(6) 256 10 246
=== === ===
Diluted income (loss) per
share
Income from continuing
operations(7)(8)(9) $0.49 $(0.03) $0.46
===== ====== =====
Diluted weighted average
shares used in
computation(9) 535 535
Nine Months Ended
December 31, 2009
-----------------
Non-GAAP
GAAP Adjustments Non-GAAP
---- ------------ --------
Total revenue 3,233 - 3,233
----- --- -----
Expenses
Costs of licensing and
maintenance(1) 211 2 209
Cost of professional
services(1) 191 2 189
Amortization of capitalized
software costs(2) 101 39 62
Selling and marketing(1) 879 25 854
General and
administrative(1) 358 29 329
Product development and
enhancements(1) 348 17 331
Depreciation and
amortization of other
intangible assets(3) 116 39 77
Other expenses (gains), net
(4) 11 3 8
Restructuring and other (5) 4 4 -
---
Total expenses before
interest and income taxes 2,219 160 2,059
----- --- -----
Income from continuing
operations before interest
and income taxes 1,014 (160) 1,174
Operating Margin (% of
revenue) 31% 36%
Interest expense, net 62 - 62
Interest on dilutive
convertible bonds(6) - 35 (35)
--- --- ---
Income from continuing
operations before income
taxes 952 (195) 1,147
Income tax expense(7)(8) 283 (124) 407
--- ---- ---
INCOME FROM CONTINUING
OPERATIONS(6) 669 (71) 740
=== === ===
Diluted income (loss) per
share
Income from continuing
operations(7)(8)(9) $1.27 $0.09 $1.36
===== ===== =====
Diluted weighted average
shares used in
computation(9) 539 539
(1) Non-GAAP adjustment consists of Share-based Compensation
(2) Non-GAAP adjustment consists of Purchased Software Amortization
(3) Non-GAAP adjustment consists of Intangibles Amortization
(4) Consists of gains and losses since inception of hedges that
mature within the quarter, but exclude gains and losses of hedges
that do not mature within the quarter.
(5) Non-GAAP adjustment excludes $3 of benefit related to the
Fiscal 2010 restructuring plan for the nine months ended December
31, 2010 and includes $9M net gain from one-time stockholder
derivative litigation settlements during the three months ended
December 31, 2010.
(6) Non-GAAP income from continuing operations and the number of
shares used in the computation of non-GAAP diluted EPS from
continuing operations have been adjusted to reflect the dilutive
impact of the Company's 1.625% Convertible Senior Notes and stock
awards outstanding for the three and nine months ended December 31,
2009.
(7) The effective tax rate on non-GAAP income from continuing
operations is the Company's provision for income taxes expressed as
a percentage of non-GAAP income from continuing operations before
income taxes. Such tax rates are determined based on an estimated
effective full year tax rate after the adjustments for the impacts
of certain discrete items (such as changes in tax rates,
reconciliations of tax returns to tax provisions and resolutions of
tax contingencies).
(8) Includes an income tax benefit related to share based
compensation of $7M and $20M for the three and nine months ended
December 31, 2010, respectively, and $8M and $26M for the three and
nine months ended December 31, 2009, respectively.
(9) The calculation of the non-GAAP diluted EPS from continuing
operations includes certain adjustments required by ASC 260-10-45
which treats certain stock awards as participating securities for
the computation of earnings per share. As a result, non-GAAP
diluted EPS from continuing operations may not equal the non-GAAP
income from continuing operations divided by the diluted weighted
average shares.
Refer to the discussion of non-GAAP financial measures included in
the accompanying press release for additional information.
Certain balances have been revised to reflect the discontinued
operations associated with the sale of the Information Governance
business.
Certain non-material differences may arise versus actual from impact
of rounding.
Table 6
CA Technologies
Reconciliation of GAAP to Non-GAAP
Operating Expenses and Diluted Earnings per Share
(in millions, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
Operating Expenses 2010 2009 2010 2009
------------------ ---- ---- ---- ----
Total expenses
before interest
and income taxes $827 $772 $2,397 $2,219
(1) Consists of gains and losses since inception of hedges that
mature within the quarter, but exclude gains and losses of hedges
that do not mature within the quarter.
(2) The effective tax rate on non-GAAP income from continuing
operations is the Company's provision for income taxes expressed as
a percentage of non-GAAP income from continuing operations before
income taxes. Such tax rates are determined based on an estimated
effective full year tax rate after the adjustments for the impacts
of certain discrete items (such as changes in tax rates,
reconciliations of tax returns to tax provisions and resolutions of
tax contingencies).
Refer to the discussion of Non-GAAP financial measures included in
the accompanying press release for additional information.
Certain balances have been revised to reflect the discontinued
operations associated with the sale of the Information Governance
business.
Certain non-material differences may arise versus actual from impact
of rounding.
Table 7
CA Technologies
Effective Tax Rate Reconciliation
GAAP and Non-GAAP
(in millions)
(unaudited)
Three Months Ended Nine Months Ended
December 31, 2010 December 31, 2010
----------------- -----------------
GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
Income from
continuing
operations before
income taxes (1) $328 $381 $934 $1,112
Statutory tax rate 35% 35% 35% 35%
Tax at statutory
rate 115 133 327 389
Adjustments for
discrete and
permanent items
(2) 13 (12) (38) (23)
--- --- --- ---
Total tax expense $128 $121 $289 $366
Effective tax rate
(3) 39.0% 31.7% 30.9% 32.9%
Three Months Ended Nine Months Ended
December 31, 2009 December 31, 2009
----------------- -----------------
GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
Income from
continuing
operations before
income taxes (1) $327 $382 $952 $1,147
Statutory tax rate 35% 35% 35% 35%
Tax at statutory
rate 114 134 333 401
Adjustments for
discrete and
permanent items
(2) (43) 2 (50) 6
--- --- --- ---
Total tax expense $71 $136 $283 $407
Effective tax rate
(3) 21.7% 35.6% 29.7% 35.5%
(1) Refer to Table 5 for a reconciliation of income from continuing
operations before income taxes on a GAAP basis to income from
continuing operations before income taxes on a non-GAAP basis.
(2) The effective tax rate for GAAP generally includes the impact of
discrete and permanent items in the period such items arise, whereas
the effective tax rate for non-GAAP generally allocates the impact
of such items pro rata to the fiscal year's remaining reporting
periods.
(3) The effective tax rate on GAAP and non-GAAP income from
continuing operations is the Company's provision for income taxes
expressed as a percentage of GAAP and non-GAAP income from
continuing operations before income taxes, respectively. Such tax
rates are determined based on an estimated effective full year tax
rate after the adjustments for the impacts of certain discrete items
(such as changes in tax rates, reconciliations of tax returns to tax
provisions and resolutions of tax contingencies).
Refer to the discussion of non-GAAP financial measures included in
the accompanying press release for additional information.
Certain non-material differences may arise versus actual from impact
of rounding.
Table 8
CA Technologies
Reconciliation of GAAP Earnings per Share to
Non-GAAP Earnings per Share
(unaudited)
Fiscal Year Ending
Projected Diluted EPS from
Continuing Operations March 31, 2011
-------------------------- --------------
Projected GAAP Diluted EPS From
Continuing Operations Range $1.57 to $1.67
Non-GAAP Adjustments, Net of
Taxes:
Purchased Software and
Intangibles Amortization 0.21 0.21
Share-based Compensation 0.11 0.11
Restructuring and Other (0.01) (0.01)
----- -----
Non-GAAP Projected Diluted EPS
From Continuing Operations Range $1.88 to $1.98
===== =====
Fiscal Year
Ended
Diluted EPS from Continuing March 31,
Operations 2010
--------------------------- ----------
GAAP diluted EPS from continuing
operations $1.47
Non-GAAP adjustments, net of
taxes
Purchased software and
intangibles amortization 0.14
Share-based compensation 0.13
----
Non-GAAP diluted EPS from
continuing operations $1.74
=====
Refer to the discussion of non-GAAP financial measures included in
the accompanying press release for additional information.
Certain balances have been revised to reflect the discontinued
operations associated with the sale of the Information Governance
business.
Certain non-material differences may arise versus actual from impact
of rounding.
Table 9
CA Technologies
Allocation of Share-based Compensation
(in millions)
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
2010 2009 2010 2009
---- ---- ---- ----
Costs of licensing
and maintenance $1 $- $3 $2
Costs of
professional
services 1 1 3 2
Selling and
marketing 8 8 23 25
General and
administrative 7 7 17 29
Product development
and enhancements 4 6 15 17
--- --- --- ---
Share-based
compensation
expense before tax 21 22 61 75
Income tax benefit (7) (8) (20) (26)
--- --- --- ---
Net share-based
compensation
expense $14 $14 $41 $49
=== === === ===
Certain non-material differences may arise versus actual from impact
of rounding.
CONTACT: Dan Kaferle, Public Relations, +1-631-342-2111, daniel.kaferle@ca.com, or Kelsey Doherty, Investor Relations, +1-212-415-6844, kelsey.doherty@ca.com