CA Technologies (NASDAQ:CA) today reported financial results for
its fourth quarter and full fiscal year 2012, ended March 31,
2012.
Fourth Quarter FY12 vs. FY11
Full Year FY12 vs. FY11 (dollars in millions, except
share data)
FY12 FY11
%Change
%ChangeCC**
FY12 FY11
%Change
%ChangeCC**
Revenue $1,188 $1,128 5% 6% $4,814
$4,429 9% 7% GAAP Income from continuing operations
$211 $187 13% 12% $938 $823 14%
9% Non-GAAP Income from continuing operations* $264
$247 7% 2% $1,117 $984 14% 8%
GAAP Diluted EPS from continuing operations $0.45 $0.37
22% 19% $1.90 $1.60 19% 14%
Non-GAAP Diluted EPS from continuing operations* $0.56 $0.48
17% 10% $2.27 $1.92 18% 13% Cash
Flow from continuing operations $776 $634 22%
20% $1,505 $1,377 9%
6% * 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
“We finished fiscal 2012 by delivering a solid fourth quarter,”
said Bill McCracken, CA Technologies chief executive officer.
“Fiscal 2012 was a year that further demonstrated CA Technologies
progress against its strategic goals and our commitment to
consistently delivering innovative solutions and services to our
customers, revenue and earnings growth and attractive, sustainable
returns to our shareholders.
“In fiscal 2013 we will continue to focus on improving our
execution, expanding our presence in large existing enterprises,
and winning new accounts in large new enterprises and growth
markets,” he said. “We also will continue to follow a strategy that
thoughtfully balances investments in the business to fuel growth
with the return of cash to our shareholders.”
REVENUE AND BOOKINGS
During the fourth quarter, the Company saw demand for its
services and learning, virtualization and service automation,
security and mainframe solutions. This was offset by softness in
mainframe capacity and service assurance. About 4 percentage points
of revenue growth in constant currency and 3 percentage points as
reported were driven by organic products, with the remaining 2
percentage points in constant currency and as reported coming from
products from recent acquisitions. About 63 percent of the
Company’s revenue in the fourth quarter came from North America,
while 37 percent came from International operations.
Fourth Quarter
Total revenue year-over-year:
- Total revenue was $1.188 billion, up 6
percent in constant currency and 5 percent as reported.
- Total revenue backlog was $8.473
billion, down 2 percent in constant currency and 3 percent as
reported. The current portion of revenue backlog was $3.714
billion, up 1 percent in constant currency and flat as
reported.
- North America revenue was $748 million,
up 9 percent in constant currency and as reported.
- International revenue was $440 million,
up 1 percent in constant currency and flat as reported.
Bookings year-over-year:
- Total bookings in the fourth quarter
were $1.542 billion, down 17 percent in constant currency and 18
percent as reported. Fourth quarter bookings in fiscal year 2011
were positively affected by a five-year contract renewal of
approximately $500 million with a large IT outsourcer.
- The Company renewed a total of 27
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $694 million.
During the fourth quarter of fiscal year 2011, the Company renewed
a total of 21 license agreements with incremental contract values
in excess of $10 million each, for an aggregate contract value of
$989 million. The fiscal year 2011 total included the large renewal
mentioned above.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 3.41
years, compared with 3.82 years for the same period in fiscal year
2011.
- North America bookings were $895
million, down 35 percent in constant currency and as reported.
North America bookings in the fourth quarter of fiscal year 2011
were positively affected by the large contract renewal mentioned
above.
- International bookings were $647
million, up 33 percent in constant currency and 27 percent as
reported. International bookings were positively affected by a
large, multi-year contract with a financial institution in
Europe.
Full Year
About 5 percentage points of revenue growth in constant currency
and 7 percentage points as reported were driven by organic
products, with the remaining 2 percentage points in constant
currency and as reported coming from products from recent
acquisitions. About 62 percent of the Company’s full year revenue
came from North America, while 38 percent came from International
operations.
Total revenue year-over-year:
- Total revenue was $4.814 billion, up 7
percent in constant currency and 9 percent as reported. Full year
results benefited from a large IT outsourcer renewal booked in the
fourth quarter of fiscal year 2011 and a final license payment
received in the third quarter of fiscal year 2012 that will not
recur.
- North America revenue was $2.990
billion, up 11 percent in constant currency and as reported.
- International revenue was $1.824
billion, flat in constant currency and up 5 percent as
reported.
Bookings year-over-year:
- Total bookings were $4.663 billion,
down 5 percent in constant currency and as reported. Bookings in
fiscal year 2011 were positively affected by the aforementioned
renewal of approximately $500 million with a large IT
outsourcer.
- North America bookings were $2.859
billion, down 12 percent in constant currency and as reported.
North America bookings in fiscal year 2011 were positively affected
by the large contract renewal mentioned above.
- International bookings were $1.804
billion, up 9 percent in constant currency and 10 percent as
reported.
EXPENSES AND MARGIN
Fourth Quarter
Year-over-year GAAP results:
- Operating expenses, before interest and
income taxes, were $887 million, up 8 percent in constant currency
and 7 percent as reported.
- Operating income, before interest and
income taxes, was $301 million, down 1 percent in constant currency
and up 1 percent as reported.
- Operating margin was 25 percent, down 2
percentage points from the prior year period.
Year-over-year non-GAAP results, which exclude purchased
software and other intangibles amortization, fiscal year 2007
restructuring costs, and certain other gains and losses (including
recoveries and certain costs associated with derivative litigation
matters and share-based compensation expense), and which include
gains and losses on hedges that mature within the quarter, but
which exclude gains and losses on hedges that do not mature within
the quarter:
- Operating expenses, before interest and
income taxes, were $811 million, up 8 percent in constant currency
and 5 percent as reported.
- Operating income, before interest and
income taxes, was $377 million, up 1 percent in constant currency
and 6 percent as reported.
- Operating margin was 32 percent, flat
with the previous year.
For the fourth quarter of fiscal year 2012, the Company’s
effective GAAP tax rate was 27 percent, compared with 35 percent in
the prior year. The Company’s effective non-GAAP tax rate was 28
percent, down from 29 percent in the prior year.
Full Year
Year-over-year GAAP results:
- Operating expenses, before interest and
income taxes, were $3.425 billion, up 7 percent in constant
currency and 8 percent as reported.
- Operating income, before interest and
income taxes, was $1.389 billion, up 6 percent in constant currency
and 11 percent as reported.
- Operating margin was 29 percent, up
from 28 percent in the prior year.
Year-over-year non-GAAP results:
- Operating expenses, before interest and
income taxes, were $3.167 billion, up 7 percent in constant
currency and 8 percent as reported.
- Operating income, before interest and
income taxes, was $1.647 billion, up 6 percent in constant currency
and 11 percent as reported.
- The Company recorded a non-GAAP
operating margin of 34 percent, flat with fiscal year 2011.
For the full year, the Company’s effective GAAP and non-GAAP tax
rate was 31 percent, compared with 32 percent in the prior
year.
SEGMENT INFORMATION
Beginning in the first quarter of fiscal year 2012, CA
Technologies began reporting results in three segment areas:
Mainframe Solutions, Enterprise Solutions and Services.
Fourth Quarter
- Mainframe Solutions revenue was $629
million, up 2 percent in constant currency and 1 percent as
reported. Operating expense was $279 million and operating profit
was $350 million. Operating margin was 56 percent, up from 52
percent a year ago.
- Enterprise Solutions revenue was $466
million, up 10 percent in constant currency and as reported.
Operating expense was $445 million and operating profit was $21
million. Operating margin was 5 percent, down from 7 percent a year
ago.
- Services revenue was $93 million, up 15
percent in constant currency and 13 percent as reported. Operating
expense was $87 million and operating profit was $6 million.
Operating margin was 6 percent, up from 2 percent a year ago.
Full Year
- Mainframe Solutions revenue was $2.612
billion, up 3 percent in constant currency and 5 percent as
reported. Full year 2012 results were positively affected by a
final license payment of $39 million in the third quarter and $55
million in revenue associated with the large IT outsourcer contract
renewal. Operating expense was $1.140 billion and operating profit
was $1.472 billion. Operating margin was 56 percent, up from 54
percent a year ago.
- Enterprise Solutions revenue was $1.820
billion, up 10 percent in constant currency and 12 percent as
reported. Operating expense was $1.668 billion and operating profit
was $152 million. Operating margin was 8 percent, flat from a year
ago.
- Services revenue was $382 million, up
14 percent in constant currency and 17 percent as reported.
Operating expense was $359 million and operating profit was $23
million. Operating margin was 6 percent, up from 5 percent a year
ago.
CASH FLOW FROM CONTINUING OPERATIONS
- Cash flow from continuing operations in
the fourth quarter was $776 million, compared with $634 million in
the prior year. Cash flow was positively affected by an increase in
collections over the previous year partially offset by higher cash
taxes.
- For the full year, cash flow from
continuing operations was $1.505 billion, compared with $1.377
billion in the prior fiscal year. Cash flow from operations was
positively affected by increased collections and currency. This was
partially offset by higher disbursements due primarily to
acquisition costs and higher cash taxes.
CAPITAL STRUCTURE
- Cash, cash equivalents and marketable
securities at March 31, 2012, were $2.679 billion.
- With $1.301 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash, cash equivalents and marketable securities position was
$1.239 billion.
- In the fourth quarter, the Company
repurchased approximately 15 million shares of stock for a total of
$375 million. For the year, the Company repurchased approximately
41 million shares for a total of $925 million. In January 2012, the
Company announced an enhanced capital allocation program aimed at
returning up to $2.5 billion to shareholders through the fiscal
year ending March 31, 2014 through an increased dividend and stock
repurchases. During the fiscal year, the Company distributed $192
million in dividends to shareholders.
- The Company’s outstanding share count
at March 31, 2012 was 466 million.
BUSINESS HIGHLIGHTS
During the fourth quarter the Company:
- Announced an enhanced capital
allocation program that targets the return of up to $2.5 billion to
CA Technologies shareholders through fiscal year ending March 31,
2014.
- Announced that 12 CA Technologies
software products are now certified by VCE to run on Vblock™
Infrastructure Platforms. CA Technologies Vblock Ready™ offerings
span IT automation and management capabilities including service
management, virtualization, automation, service assurance
and capacity management, allowing customers using VCE
technology to automate their cloud deployments more quickly while
containing costs.
- Announced new and enhanced offerings in
its CA ecoSoftware solution designed to further extend the
Company’s support for Data Center Infrastructure Management (DCIM)
and IT energy management.
- Announced a new release of its CA
Cross-Enterprise Application Performance Management (CA CE APM)
which extends mainframe monitoring capabilities and provides richer
information about the health and performance of key IT
services.
- Announced several significant new
features, partners, offerings and growth milestones in the Cloud
Commons® ecosystem. Since the launch of the Cloud Commons
Marketplace and Developer Studio in November, membership has
increased by more than 40 percent and more than 500 members have
joined the Developer Studio.
- Announced that the Federal Court of
Australia has found that Independent Systems Integrators (ISI) of
Sydney, Australia violated copyright laws and breached its duty of
confidentiality in developing and selling a product using
intellectual property from CA Technologies CA Datacom
relational database management system.
OUTLOOK FOR FISCAL YEAR 2013
The Company provided its outlook for fiscal year 2013. The
following guidance consists of "forward-looking statements" (as
defined below).
The Company expects the following:
- Total revenue growth in a range of 2
percent to 4 percent in constant currency. At March 31, 2012
exchange rates, this translates to reported revenue of $4.85
billion to $4.95 billion.
- GAAP diluted earnings per share growth
in constant currency in a range of 10 percent to 14 percent. At
March 31, 2012 exchange rates, this translates to GAAP reported
diluted earnings per share of $2.07 to $2.14.
- Non-GAAP diluted earnings per share
growth in constant currency in a range of 9 percent to 12 percent.
At March 31, 2012 exchange rates, this translates to reported
non-GAAP diluted earnings per share of $2.45 to $2.53.
- Cash flow from continuing operations
growth in a range of 4 percent to 6 percent in constant currency.
At March 31, 2012 exchange rates, this translates to reported cash
flow from operations of $1.56 billion to $1.59 billion.
This outlook also assumes no material acquisitions and a partial
currency hedge of operating income. The Company expects a full-year
GAAP operating margin of 30 percent and non-GAAP operating margin
of 35 percent. The Company also expects an effective full-year GAAP
and non-GAAP tax rate in a range of 30 to 31 percent.
The Company anticipates approximately 448 million shares
outstanding at fiscal year 2013 year-end and weighted average
diluted shares outstanding of approximately 461 million for the
fiscal year.
“We believe the results in fiscal year 2012 and our outlook for
fiscal year 2013 are the right steps towards achieving the long
term guidance we issued to financial analysts in July of 2011,”
McCracken said. “We reaffirmed that long term outlook in January
when we announced our Enhanced Capital Allocation Program and are
reaffirming that outlook now,” said McCracken.
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 fourth quarter results. The webcast will be
archived on the 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 1-877-561-2748.
The international participant number is 1-720-545-0044.
About CA Technologies
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
www.ca.com.
Follow CA Technologies
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Non-GAAP Financial Measures
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
continuing operations and diluted earnings per share exclude the
following items: non-cash amortization of purchased software and
other intangibles, share-based compensation, fiscal year 2007
restructuring costs 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.
Prior to fiscal year 2011, 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 continuing 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. Adjusted cash flow from operations excludes restructuring
and other payments. Free cash flow excludes purchases of property,
equipment and capitalized software development costs. 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, 2011, 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.
Cautionary Statement Regarding Forward-Looking
Statements
The declaration and payment of future dividends is subject to
the determination of the Company’s Board of Directors, in its sole
discretion, after considering various factors, including the
Company’s financial condition, historical and forecast operating
results, and available cash flow, as well as any applicable laws
and contractual covenants and any other relevant factors. The
Company’s practice regarding payment of dividends may be modified
at any time and from time to time.
Repurchases under the Company's stock repurchase program are
expected to be made with cash on hand and may be made from time to
time, subject to market conditions and other factors, in the open
market, through solicited or unsolicited privately negotiated
transactions or otherwise. The program, which is authorized through
the fiscal year ending March 31, 2014, does not obligate the
Company to acquire any particular amount of common stock, and it
may be modified or suspended at any time at the Company's
discretion.
Certain statements in this communication (such as statements
containing the words "believes," "plans," "anticipates," "expects,"
"estimates," “targets” 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, effectively rebalancing the Company’s sales force to
increase penetration in growth markets and with large enterprises
that have not historically been significant customers, enabling the
sales force to sell new products, improving the Company’s brand in
the marketplace and ensuring the Company’s set of cloud computing,
Software-as-a-Service and other new offerings address the needs of
a rapidly changing market, while not adversely affecting the demand
for the Company’s traditional products or its profitability; global
economic factors or political events beyond the Company's control;
general economic conditions and credit constraints, or unfavorable
economic conditions in a particular region, industry or business
sector; the ability to adapt to rapid technological changes and
introduce new software products and services in a timely manner;
competition in product and service offerings and pricing; the
failure to expand partner programs; the ability to retain and
attract adequate qualified personnel; the ability to integrate
acquired companies and products into existing businesses; the
ability to adequately manage and evolve financial reporting and
managerial systems and processes; the ability of the Company’s
products to remain compatible with ever-changing operating
environments; breaches of the Company’s software products and the
Company’s and customers’ data centers and IT environments;
discovery of errors in the Company's software and potential product
liability claims; the failure to protect the Company's intellectual
property rights and source code; risks associated with sales to
government customers; access to software licensed from third
parties; risks associated with the use of software from open source
code sources; access to third-party code and specifications for the
development of code; third-party claims of intellectual property
infringement or royalty payments; fluctuations in the number, terms
and duration of the Company’s license agreements as well as the
timing of orders from customers and channel partners; the failure
to renew large license transactions on a satisfactory basis;
changes in market conditions or the Company’s credit ratings;
fluctuations in foreign currencies; the failure to effectively
execute the Company’s workforce reductions; successful outsourcing
of various functions to third parties; events or circumstances that
would require us to record a goodwill impairment charge; potential
tax liabilities; acquisition opportunities that may or may not
arise; and other factors described more fully in the Company's
filings with the Securities and Exchange Commission. Should one or
more of these risks or uncertainties occur, or should our
assumptions prove incorrect, actual results may vary materially
from those described herein as believed, planned, anticipated,
expected, estimated or targeted. 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.
Copyright © 2012 CA, Inc. All Rights Reserved. One CA Plaza,
Islandia, N.Y. 11749. All other trademarks, trade names, service
marks, and logos referenced herein belong to their respective
companies.
Table 1 CA Technologies Consolidated Statements of
Operations (unaudited) (in millions, except per share amounts)
Three Months Ended Fiscal Year Ended
March 31,
March 31,
Revenue
2012
2011
2012
2011
Subscription and maintenance revenue $ 986 $ 970 $ 4,021 $ 3,822
Professional services 93 82 382 327 Software fees and other
109 76 411 280
Total revenue $ 1,188 $
1,128 $ 4,814 $ 4,429
Expenses Costs of licensing and
maintenance $ 79 $ 71 $ 286 $ 278 Cost of professional services 87
80 357 303 Amortization of capitalized software costs 61 48 225 192
Selling and marketing 356 355 1,394 1,286 General and
administrative 131 107 462 451 Product development and enhancements
126 108 510 471 Depreciation and amortization of other intangible
assets 42 51 176 187 Other expenses, net 5 9
15 7
Total expenses before interest and income taxes
$ 887 $ 829 $ 3,425 $ 3,175 Income from continuing operations
before interest and income taxes $ 301 $ 299 $ 1,389 $ 1,254
Interest expense, net 11 10 35 45
Income from continuing operations before income taxes $ 290 $ 289 $
1,354 $ 1,209 Income tax expense 79 102 416 386
Income from
continuing operations $ 211 $ 187 $ 938 $ 823 Income from
discontinued operations, net of income taxes - 1
13 4
Net income $ 211 $ 188 $ 951 $ 827
Basic income per share Income from continuing operations $
0.45 $ 0.37 $ 1.91 $ 1.60 Income from discontinued operations
- - 0.03 0.01 Net income $ 0.45 $ 0.37
$ 1.94 $ 1.61 Basic weighted average shares used in computation 466
503 486 506
Diluted income per share Income from
continuing operations $ 0.45 $ 0.37 $ 1.90 $ 1.60 Income from
discontinued operations - - 0.03 0.01
Net income $ 0.45 $ 0.37 $ 1.93 $ 1.61 Diluted weighted average
shares used in computation 467 505 487 507
Table
2 CA Technologies Condensed Consolidated Balance
Sheets (in millions) March 31,
March 31,
2012
2011
(unaudited) Cash and cash equivalents $ 2,679 $ 3,049 Marketable
securities - 75 Trade accounts receivable, net 902 849 Deferred
income taxes 231 244 Other current assets 153 152
Total current assets $ 3,965 $ 4,369 Marketable
securities $ - $ 104 Property and equipment, net 386 437 Goodwill
5,856 5,686 Capitalized software and other intangible assets, net
1,389 1,284 Deferred income taxes 151 285 Other noncurrent assets,
net 250 246
Total assets $ 11,997 $ 12,411
Current portion of long-term debt and loans payable $ 14 $
269 Deferred revenue (billed or collected) 2,658 2,597 Deferred
income taxes 14 68 Other current liabilities 1,065
987
Total current liabilities $ 3,751 $ 3,921
Long-term debt, net of current portion $ 1,287 $ 1,282 Deferred
income taxes 44 64 Deferred revenue (billed or collected) 972 969
Other noncurrent liabilities 546 555
Total
liabilities $ 6,600 $ 6,791 Common stock $ 59 $ 59
Additional paid-in capital 3,491 3,615 Retained earnings 4,865
4,106 Accumulated other comprehensive loss (108) (65) Treasury
stock (2,910) (2,095)
Total stockholders’
equity $ 5,397 $ 5,620
Total liabilities and stockholders’
equity $ 11,997 $ 12,411
Table 3 CA
Technologies Condensed Consolidated Statements of Cash
Flows (unaudited) (in millions) Three
Months Ended
March 31,
2012
2011
Operating activities from continuing operations: Net income
$ 211 $ 188 Income from discontinued operations -
(1 ) Income from continuing operations $ 211 $ 187
Adjustments to reconcile income from
continuing operations to net cash provided by operating
activities:
Depreciation and amortization 103 99 Provision for deferred income
taxes (94 ) (47 ) Provision for bad debts 2 1 Share-based
compensation expense 28 19 Asset impairments and other non-cash
items 5 2 Foreign currency transaction losses 12 1 Changes in other
operating assets and liabilities, net of effect of acquisitions:
(Increase) decrease in trade accounts receivable, net (57 ) 35
Increase in deferred revenue 486 176 (Decrease) increase in taxes
payable, net (13 ) 74 Increase in accounts payable, accrued
expenses and other 40 28 Increase in accrued salaries, wages and
commissions 53 35 Changes in other operating assets and liabilities
- 24
Net cash provided by operating
activities - continuing operations $ 776 $ 634
Investing activities from continuing operations:
Acquisitions of businesses, net of cash acquired, and purchased
software $ (14 ) $ - Purchases of property and equipment (19 ) (19
) Capitalized software development costs (43 ) (54 ) Proceeds from
(purchases in) marketable securities, net 182 (13 ) Other investing
activities (1 ) (1 )
Net cash used in investing
activities - continuing operations $ 105 $ (87 )
Financing activities from continuing operations: Dividends
paid $ (117 ) $ (21 ) Purchases of common stock, including
accelerated share repurchase (500 ) (47 ) Debt borrowings
(repayments) 8 (4 ) Exercise of common stock options and other
26 3
Net cash used in financing
activities - continuing operations $ (583 ) $ (69 )
Net
change in cash and cash equivalents before effect of exchange rate
changes on cash - continuing operations $ 298 $ 478
Effect of exchange rate changes on cash $ 29 $ 49
Cash
(used in) provided by operating activities - discontinued
operations $ (6 ) $ 4
Increase in cash and cash
equivalents $ 321 $ 531
Cash and cash equivalents at
beginning of period $ 2,358 $ 2,518
Cash and
cash equivalents at end of period $ 2,679 $ 3,049
Table 4 CA Technologies Operating
Segments (unaudited) (in millions)
Three Months Ended March 31, 2012 Fiscal Year Ended
March 31, 2012 Mainframe Enterprise
Mainframe Enterprise
Solutions (1)
Solutions (1)
Services (1)
Total
Solutions (1)
Solutions (1)
Services (1)
Total Revenue (2) $ 629 $ 466 $ 93 $ 1,188 $ 2,612 $ 1,820 $
382 $ 4,814 Expenses (3) 279 445 87 811
1,140 1,668 359 3,167
Segment profit $ 350 $ 21 $ 6 $ 377 $ 1,472 $ 152 $ 23 $
1,647 Segment operating margin 56% 5% 6% 32% 56% 8% 6% 34%
Segment profit $ 377 $ 1,647 Less: Purchased software
amortization 27 103 Other intangibles amortization 15 65
Share-based compensation expense 28 89 Other unallocated operating
gains, net (4) 6 1 Interest expense, net 11 35
Income from continuing operations before income taxes $ 290
$ 1,354 Three
Months Ended March 31, 2011 Fiscal Year Ended March 31, 2011
Mainframe Enterprise Mainframe Enterprise
Solutions (1)
Solutions (1)
Services (1)
Total
Solutions (1)
Solutions (1)
Services (1)
Total Revenue (2) $ 621 $ 425 $ 82 $ 1,128 $ 2,479 $ 1,623 $
327 $ 4,429 Expenses (3) 295 397 80 772
1,129 1,501 310 2,940
Segment profit $ 326 $ 28 $ 2 $ 356 $ 1,350 $ 122 $
17 $ 1,489 Segment operating margin 52% 7% 2% 32% 54%
8% 5% 34% Segment profit $ 356 $ 1,489 Less: Purchased
software amortization 21 88 Other intangibles amortization 22 73
Share-based compensation expense 19 80
Other unallocated operating gains, net
(4)
(5
)
(6
)
Interest expense, net 10 45 Income from
continuing operations before income taxes $ 289 $ 1,209
(1) • Mainframe Solutions – Our Mainframe Solutions
segment addresses the mainframe market and is focused on making
significant investments in order to be innovative in key management
disciplines across our broad portfolio of products. Ongoing
development is guided by customer needs, our cross-enterprise
management philosophy and our Mainframe 2.0 strategy, which offers
management capabilities designed to appeal to the next generation
of mainframe staff while also offering productivity improvements to
today’s mainframe experts. Our mainframe business assists customers
by addressing three major challenges: lowering costs, providing
high service levels by sustaining critical workforce skills and
increasing agility to help deliver on business goals.
• Enterprise Solutions – Our Enterprise
Solutions segment includes products that operate on non-mainframe
platforms, such as service assurance, security (identity and access
management), project and portfolio management, service management,
virtualization and service automation, SaaS, and cloud offerings.
Our offerings help customers address their regulatory compliance
demands, privacy needs, and internal security policies. Enterprise
Solutions also focuses on delivering growth to the Company in the
form of new customer acquisitions and revenue, while leveraging
non-traditional routes-to-market and delivery models.
• Services – Our Services segment offers
implementation, consulting, education and training services to
customers, which is intended to promote a seamless customer
experience and to increase the value that customers realize from
our solutions.
(2) We regularly enter into a single arrangement with a
customer that includes Mainframe Solutions segment software
products, Enterprise Solutions segment software products and
Services. The amount of contract revenue assigned to segments is
generally based on the manner in which the proposal is made to the
customer. The software product revenue is assigned to the Mainframe
Solutions and Enterprise Solutions segments based on either: (1) a
list price allocation method (which allocates a discount in the
total contract price to the individual products in proportion to
the list price of the product); (2) allocations included within
internal contract approval documents; or (3) the value for
individual software products as stated in the customer contract.
The price for the implementation, consulting, education and
training services is separately stated in the contract and these
amounts of contract revenue are assigned to the Services segment.
The contract value assigned to each segment is then recognized in a
manner consistent with the revenue recognition policies we apply to
the customer contract for purposes of preparing the Condensed
Consolidated Financial Statements. (3) Segment expenses
include costs that are controllable by segment managers (i.e.,
direct costs) and, in the case of the Mainframe Solutions and
Enterprise Solutions segments, an allocation of shared and indirect
costs (i.e., allocated costs). Segment-specific direct costs
include a portion of selling and marketing costs, licensing and
maintenance costs, product development costs, general and
administrative costs and amortization of the cost of internally
developed software. Allocated segment costs primarily include
indirect selling and marketing costs and general and administrative
costs that are not directly attributable to a specific segment. The
basis for allocating shared and indirect costs between the
Mainframe Solutions and Enterprise Solutions segments is dependent
on the nature of the cost being allocated and is either in
proportion to segment revenues or in proportion to the related
direct cost category. Expenses for the Services segment consist
only of direct costs and there are no allocated or indirect costs
for the Services segment. (4) Other unallocated operating
gains, net consists of restructuring costs associated with the
Company's Fiscal 2007 Plan, foreign exchange derivative (gains)
losses, and other miscellaneous costs.
Table 5
CA Technologies
Constant Currency Summary (unaudited) (in millions)
Three Months Ended March 31, % Increase % Increase (Decrease)
(Decrease) in Constant 2012 2011 in $ US
Currency (1)
Bookings $ 1,542 $ 1,889 (18%) (17%)
Revenue: North America $ 748 $ 689 9% 9% International
440 439 0% 1% Total revenue $ 1,188 $ 1,128 5% 6%
Revenue: Subscription and maintenance $ 986 $ 970 2%
2% Professional services 93 82 13% 15% Software fees and other
109 76 43% 44% Total revenue $ 1,188 $ 1,128 5% 6%
Segment Revenue: Mainframe solutions $ 629 $ 621 1%
2% Enterprise solutions 466 425 10% 10% Services 93 82 13% 15%
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 811 $ 772 5% 8% Total GAAP 887 829 7% 8%
Fiscal Year Ended March 31, % Increase % Increase
(Decrease) (Decrease) in Constant 2012 2011 in $ US
Currency (1)
Bookings $ 4,663 $ 4,888 (5%) (5%)
Revenue: North America $ 2,990 $ 2,694 11% 11% International
1,824 1,735 5% 0% Total revenue $ 4,814 $ 4,429 9% 7%
Revenue: Subscription and maintenance $ 4,021 $ 3,822
5% 3% Professional services 382 327 17% 14% Software fees and other
411 280 47% 45% Total revenue $ 4,814 $ 4,429 9% 7%
Segment Revenue: Mainframe solutions $ 2,612 $ 2,479
5% 3% Enterprise solutions 1,820 1,623 12% 10% Services 382 327 17%
14%
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 3,167 $ 2,940 8% 7% Total GAAP 3,425 3,175 8%
7% (1) Constant currency information is presented 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, 2011, which was the last day of our prior fiscal year.
Constant currency excludes the impacts from the Company's hedging
program. (2) Refer to Table 7 for a reconciliation of total
expenses before interest and income taxes to total non-GAAP
operating expenses. Certain non-material differences may
arise versus actual from impact of rounding.
Table
6 CA Technologies Reconciliation of Select GAAP
Measures to Non-GAAP Measures (unaudited) (in millions)
Three Months Ended Fiscal Year Ended
March 31,
March 31,
2012
2011
2012
2011
GAAP net income $ 211 $ 188 $ 951 $ 827 GAAP income from
discontinued operations, net of income taxes - (1)
(13) (4) GAAP income from continuing operations $ 211
$ 187 $ 938 $ 823 GAAP income tax expense 79 102 416 386 Interest
expense, net 11 10 35 45 GAAP income
from continuing operations before interest and income taxes $ 301 $
299 $ 1,389 $ 1,254 GAAP operating margin (% of revenue) (1) 25%
27% 29% 28% Non-GAAP adjustments to expenses: Costs of
licensing and maintenance(2) $ 1 $ - $ 3 $ 3 Cost of professional
services(2) 1 - 4 3 Amortization of capitalized software costs(3)
27 21 103 88 Selling and marketing(2) 11 7 36 30 General and
administrative(2) 10 7 27 24 Product development and
enhancements(2) 5 5 19 20 Depreciation and amortization of other
intangible assets(4) 15 22 65 73 Other expenses (gains), net (5) 5
(7) - - Restructuring and other (6) 1 2 1
(6) Total Non-GAAP adjustment to operating expenses $ 76 $
57 $ 258 $ 235 Non-GAAP income from continuing operations before
interest and income taxes $ 377 $ 356 $ 1,647 $ 1,489 Non-GAAP
operating margin (% of revenue) (7) 32% 32% 34% 34% Interest
expense, net 11 10 35 45 GAAP income tax expense 79 102 416
386 Non-GAAP adjustment to income tax expense(8) 23
(3) 79 74 Non-GAAP income tax expense $ 102 $ 99 $
495 $ 460 Non-GAAP income from continuing operations $ 264 $ 247 $
1,117 $ 984 (1)
GAAP operating margin is calculated by
dividing GAAP income from continuing operations before interest and
income taxes by total revenue (refer to Table 1 for total
revenue).
(2) Non-GAAP adjustment consists of share-based
compensation. (3) Non-GAAP adjustment consists of purchased
software amortization. (4) Non-GAAP adjustment consists of
other intangibles amortization. (5) Non-GAAP adjustment
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. (6) Non-GAAP adjustment
consists of Fiscal 2007 Restructuring Plan expense adjustments.
Prior fiscal year 2011 includes a $9 million net gain from one-time
stockholder derivative litigation settlements. (7) Non-GAAP
operating margin is calculated by dividing non-GAAP income from
continuing operations before interest and income taxes by total
revenue (refer to Table 1 for total revenue). (8) The full
year non-GAAP income tax expense is different from GAAP income tax
expense because of the difference in non-GAAP income from
continuing operations before income taxes. On an interim basis,
this difference would also include a difference in the impact of
discrete and permanent items where for GAAP purposes the effect is
recorded in the period such items arise, but for non-GAAP such
items are recorded pro rata to the fiscal year's remaining
reporting periods. 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
7 CA Technologies Reconciliation of GAAP to
Non-GAAP Operating Expenses and Diluted Earnings per
Share (unaudited) (in millions, except per share amounts)
Three Months Ended Fiscal Year Ended
March 31,
March 31,
Operating
Expenses
2012
2011
2012
2011
Total expenses before interest and income taxes $ 887 $ 829
$ 3,425 $ 3,175 Non-GAAP operating adjustments: Purchased
software amortization 27 21 103 88 Other intangibles amortization
15 22 65 73 Share-based compensation 28 19 89 80 Restructuring and
other (1) 1 2 1 (6) Hedging losses (gains), net (2) 5
(7) - - Total non-GAAP operating adjustments $ 76 $
57 $ 258 $ 235 Total non-GAAP operating expenses $ 811 $ 772
$ 3,167 $ 2,940 Three Months Ended Fiscal Year Ended
March 31,
March 31,
Diluted EPS from
Continuing Operations
2012
2011
2012
2011
GAAP diluted EPS from continuing operations $ 0.45 $ 0.37 $
1.90 $ 1.60 Non-GAAP adjustments, net of taxes Purchased
software and other intangibles amortization 0.06 0.06 0.24 0.21
Share-based compensation 0.04 0.02 0.13 0.11 Restructuring and
other (1) - - - - Hedging losses (gains), net (2) 0.01 (0.01) - -
Non-GAAP effective tax rate adjustments (3) - 0.04
- - Non-GAAP diluted EPS from continuing
operations $ 0.56 $ 0.48 $ 2.27 $ 1.92 (1)
Non-GAAP adjustment consists of Fiscal
2007 Restructuring Plan expense adjustments. Prior fiscal year 2011
includes a $9 million net gain from one-time stockholder derivative
litigation settlements.
(2) Non-GAAP adjustment 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.
(3) The non-GAAP effective tax rate is equal to the full
year GAAP effective tax rate, therefore no adjustment is required
on an annual basis. On an interim basis, the difference in non-GAAP
income tax expense and GAAP income tax expense relates to the
difference in non-GAAP income from continuing operations before
income taxes, and includes a difference in the impact of discrete
and permanent items where for GAAP purposes, the effect is recorded
in the period such items arise but for non-GAAP purposes, such
items are recorded pro rata to the fiscal year's remaining
reporting periods. 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 Effective Tax Rate
Reconciliation GAAP and Non-GAAP (unaudited) (in
millions)
Three Months Ended
Fiscal Year Ended
March 31,
2012
March 31,
2012
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 301 $ 377 $ 1,389 $ 1,647 Interest expense, net
11 11 35 35 Income from continuing operations
before income taxes $ 290 $ 366 $ 1,354 $ 1,612 Statutory
tax rate 35% 35% 35% 35% Tax at statutory rate $ 102 $ 128 $
474 $ 564 Adjustments for discrete and permanent items (2)
(23) (26) (58) (69) Total tax expense $ 79 $
102 $ 416 $ 495 Effective tax rate (3) 27.2% 27.9% 30.7%
30.7% Three Months Ended Fiscal Year Ended
March 31,
2011
March 31,
2011
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 299 $ 356 $ 1,254 $ 1,489 Interest expense, net
10 10 45 45 Income from continuing operations
before income taxes $ 289 $ 346 $ 1,209 $ 1,444 Statutory
tax rate 35% 35% 35% 35% Tax at statutory rate $ 101 $ 121 $
423 $ 505 Adjustments for discrete and permanent items (2) 1
(22) (37) (45) Total tax expense $ 102 $ 99 $
386 $ 460 Effective tax rate (3) 35.3% 28.6% 31.9% 31.9% (1)
Refer to Table 6 for a reconciliation of
income from continuing operations before interest and income taxes
on a GAAP basis to income from continuing operations before
interest and 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. The non-GAAP effective tax rate is equal to
the full year GAAP effective tax rate. On an interim basis, the
effective 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
9 CA Technologies Reconciliation of Projected GAAP
Earnings per Share to Projected Non-GAAP Earnings per
Share (unaudited) Fiscal
Year Ending
Projected Diluted
EPS from Continuing Operations
March 31,
2013
Projected GAAP diluted EPS from continuing operations range
$ 2.07 to $ 2.14 Non-GAAP adjustments, net of taxes:
Purchased software and other intangibles amortization 0.23 0.24
Share-based compensation 0.15 0.15 Projected
non-GAAP diluted EPS from continuing operations range $ 2.45 to $
2.53 Refer to the discussion of non-GAAP financial measures
included in the accompanying press release for additional
information.
Table 10 CA Technologies
Reconciliation of Projected GAAP Operating Margin to
Projected Non-GAAP Operating Margin (unaudited)
Fiscal Year Ending
Projected Operating
Margin
March 31,
2013
Projected GAAP operating margin 30% Non-GAAP
adjustments, net of taxes:
Purchased software and other intangibles
amortization
3% Share-based compensation 2% Projected non-GAAP operating
margin 35% Refer to the discussion of non-GAAP financial
measures included in the accompanying press release for additional
information.
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