CA Technologies (NASDAQ:CA) today reported financial results for
its first quarter of fiscal year 2013, ended June 30, 2012.
FINANCIAL OVERVIEW
First Quarter FY13 vs. FY12
(in millions, except sharedata)
FY13
FY12 % Change
% Change CC**
Revenue $1,145 $1,163 (2%) 1%
GAAP Income from continuingoperations
$240 $228 5% 4%
Non-GAAP Income fromcontinuing
operations*
$297 $279 6% 9%
GAAP Diluted EPS fromcontinuing
operations
$0.51 $0.45 13% 11%
Non-GAAP Diluted EPS fromcontinuing
operations*
$0.63 $0.55 15% 16%
Cash Flow from continuingoperations
$183 $143 28% 10% * 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
“Despite the headwinds to top-line growth we experienced during
the first quarter, we remain committed to delivering the earnings
per share and cash flow from operations growth we provided at the
beginning of the fiscal year,” said Bill McCracken, chief executive
officer, CA Technologies. “In addition to the benefits of a $35
million intellectual property transaction we closed during the
quarter, we will drive increased profitability in our organic
business and now expect to deliver further expansion of our
GAAP operating margin to 31 percent and our non-GAAP operating
margin to 36 percent for the full fiscal year.”
REVENUE AND BOOKINGS
In constant currency, revenue from existing products and
services was flat, while revenue increased 1 percent from acquired
technologies. On an as reported basis, revenue from existing
products and services decreased 2 percent, while revenue from
acquired technologies increased less than 1 percent. Acquired
technologies are defined as technologies acquired within the past
12 months. About 63 percent of the Company’s revenue came from
North America, while 37 percent came from International
operations.
Revenue year-over-year:
- Total revenue was $1.145 billion, up 1
percent in constant currency and down 2 percent as reported.
- Total revenue backlog was $7.771
billion, down 5 percent in constant currency and 9 percent as
reported. The current portion of revenue backlog was $3.527
billion, down 1 percent in constant currency and 5 percent as
reported.
- North America revenue was $726 million,
up 2 percent in constant currency and 1 percent as reported.
- International revenue was $419 million,
up 1 percent in constant currency and down 6 percent as
reported.
Bookings year-over-year:
- Total bookings in the first quarter
were $553 million, down 34 percent in constant currency and 36
percent as reported, primarily due to a decrease in renewals. The
Company previously stated that it expected its fiscal year 2013
renewal portfolio to decline in the single digits year-over-year
with the first quarter being the low point.
- The Company renewed a total of 4
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $61 million.
During the first quarter of fiscal year 2012, the Company renewed a
total of 8 license agreements with incremental contract values in
excess of $10 million each, for an aggregate contract value of $255
million.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 2.79
years, compared with 3.28 years for the same period in fiscal year
2012.
- North America bookings were $326
million, down 39 percent in constant currency and as reported.
- International bookings were $227
million, down 26 percent in constant currency and 31 percent as
reported.
EXPENSES AND MARGIN
As part of the Company’s efforts to more fully utilize its
intellectual property assets, in the first quarter of fiscal year
2013, it closed a transaction that assigned the rights to certain
intellectual property assets to a large technology company for $35
million. The Company will continue to have the right to use these
intellectual property assets in current and future product
offerings. For the first quarter of fiscal year 2013, total
expenses before interest and income taxes includes the positive
effect of $35 million received from this transaction.
Year-over-year GAAP results:
- Operating expenses, before interest and
income taxes, were $764 million, down 3 percent in constant
currency and 7 percent as reported.
- Operating income, before interest and
income taxes, was $381 million, up 10 percent in constant currency
and 11 percent as reported.
- Operating margin was 33 percent, up 4
percentage points from the prior year period.
Year-over-year non-GAAP results exclude purchased software and
other intangibles amortization, share-based compensation, and
certain other gains and losses. The results also include gains and
losses on hedges that mature within the quarter, but exclude gains
and losses of hedges that do not mature within the quarter.
- Operating expenses, before interest and
income taxes, were $706 million, down 2 percent in constant
currency and 5 percent as reported.
- Operating income, before interest and
income taxes, was $439 million, up 8 percent in constant currency
and 5 percent as reported.
- Operating margin was 38 percent, up 2
percentage points from the prior year period.
For the first quarter of fiscal year 2013, the Company’s
effective GAAP tax rate was 35.1 percent, compared with 31.5
percent in the prior year period. The Company’s effective non-GAAP
tax rate was 30.6 percent, compared with 31.6 percent in the prior
year period.
GAAP and non-GAAP EPS were favorably affected by about $0.05 per
share from the intellectual property transaction. In addition, GAAP
and non-GAAP EPS were positively affected by a reduction in share
count. The intellectual property transaction also had a positive
impact of about 3 percentage points on both GAAP and non-GAAP
operating margin.
SEGMENT INFORMATION
- Mainframe Solutions revenue was $628
million, flat in constant currency and down 3 percent as reported.
Operating expense was $260 million and operating profit was $368
million. Operating margin was 59 percent, up from 57 percent a year
ago.
- Enterprise Solutions revenue was $426
million, up 2 percent in constant currency and flat as reported.
Operating expense was $359 million and operating profit was $67
million. Operating margin was 16 percent, up from 11 percent a year
ago. The intellectual property transaction had a favorable effect
of about 8 percentage points on this margin.
- Services revenue was $91 million, up 4
percent in constant currency and 1 percent as reported. Operating
expense was $87 million and operating profit was $4 million.
Operating margin was 4 percent, up from 2 percent a year ago.
CASH FLOW FROM CONTINUING OPERATIONS
Cash flow from continuing operations in the first quarter was
$183 million, which includes the $35 million received from the
intellectual property transaction, compared with $143 million in
the prior year. Cash flow from continuing operations was also
favorably affected by lower income tax payments and an increase in
upfront cash collections.
CAPITAL STRUCTURE
- Cash and cash equivalents at June 30,
2012 were $2.541 billion.
- With $1.298 billion in total debt
outstanding and $140 million in notional pooling, the Company’s net
cash and cash equivalents was $1.103 billion.
- During the quarter, the Company
successfully completed its Accelerated Share Repurchase (ASR)
agreement with the receipt of 3.7 million common shares, in
addition to the 15 million shares received in the fourth quarter of
fiscal year 2012.
- Subsequent to the completion of the
ASR, the Company repurchased 3.8 million shares in the market for
approximately $96 million.
- The Company is currently authorized to
repurchase an additional $900 million of common stock through
fiscal year 2014.
- The Company’s outstanding share count
at June 30, 2012 was 463 million.
- During the quarter, the Company
distributed $119 million in dividends.
BUSINESS HIGHLIGHTS
During the first quarter the Company:
- Announced a new CA Global Partner
Program that provides an expanded set of benefits to support
partners’ evolving business models. The program supports efforts by
solution providers, service providers, alliance partners and
resellers to enable customers to deliver innovative business
services. Later in the quarter, the program was extended to include
next-generation mainframe modernization solutions to help customers
reduce costs and increase efficiency.
- Announced it has extended its
university relationship program with plans to roll out a new
Innovation Center in partnership with Tel Aviv University (TAU) in
Israel, collaborating on topics such as IT management and cyber
security. The announcement builds on its programs recently
announced at the University Innovation Center in Hyderabad, India
and at the CA Technologies Innovation Center at Stony Brook
University in New York.
- Announced that channel partners with
expert proficiency in CA Automation Suite for Clouds now meet
the Cloud Management Competency Validation criteria for the Cloud
Builder designation of the Cisco Cloud Partner Program.
- Announced Nimsoft Monitor has attained
the VCE™ and Vblock™ Ready certification. This enables
users to confidently leverage Nimsoft IT Management-as-a-Service
capabilities to rapidly and cost-efficiently gain full visibility
into their Vblock infrastructure—along with the rest of their cloud
and non-cloud environments.
- Announced a new version of CA
Process Automation that helps customers increase agility for
competitive advantage while lowering costs.
OUTLOOK FOR FISCAL YEAR 2013
The Company updated its revenue and GAAP and non-GAAP earnings
per share from continuing operations outlook and reaffirmed cash
flow from continuing operations guidance 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 1
percent to 2 percent in constant currency. At June 30, 2012
exchange rates, this translates to reported revenue of $4.74
billion to $4.80 billion. Previously, total revenue growth outlook
was in a range of 2 percent to 4 percent in constant currency.
- GAAP diluted earnings per share from
continuing operations growth in constant currency in a range of 12
percent to 14 percent. At June 30, 2012 exchange rates, this
translates to GAAP reported diluted earnings per share of $2.07 to
$2.12. Previously, GAAP diluted earnings per share from continuing
operations in constant currency was 10 percent to 14 percent.
- Non-GAAP diluted earnings per share
from continuing operations growth in constant currency in a range
of 10 percent to 12 percent. At June 30, 2012 exchange rates, this
translates to reported non-GAAP diluted earnings per share of $2.45
to $2.50. Previously, non-GAAP diluted earnings per share from
continuing operations in constant currency was 9 percent to 12
percent.
- Cash flow from continuing operations
growth in a range of 4 percent to 6 percent in constant currency.
At June 30, 2012 exchange rates, this translates to reported cash
flow from continuing operations of $1.54 billion to $1.57
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 31 percent, up from the previous guidance
of 30 percent, and non-GAAP operating margin of 36 percent, up from
a previous outlook of 35 percent. The Company also expects an
effective full-year GAAP and non-GAAP tax rate to come in closer to
the high-end of the 30 to 31 percent provided at the outset of the
fiscal year.
The Company anticipates approximately 452 million shares
outstanding at fiscal year 2013 year-end and weighted average
diluted shares outstanding of approximately 459 million for the
fiscal year.
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 first 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) provides IT management solutions
that help customers manage and secure complex IT environments to
support agile business services. Organizations leverage CA
Technologies software and SaaS solutions to accelerate innovation,
transform infrastructure and secure data and identities, from the
data center to the cloud. Learn more about CA Technologies at
www.ca.com.
Follow CA Technologies
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- Press Releases
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 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. In fiscal year 2011, non-GAAP income
also excludes recoveries and certain costs associated with
derivative litigation matters. 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, 2012, 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 failure to adapt to 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,
targeted or similarly expressed in a forward-looking manner. 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
June 30,
Revenue
2012
2011
Subscription and maintenance revenue $ 977 $ 1,007 Professional
services 91 90 Software fees and other 77 66
Total
revenue $ 1,145 $ 1,163
Expenses Costs of licensing and
maintenance $ 69 $ 67 Cost of professional services 86 88
Amortization of capitalized software costs 64 50 Selling and
marketing 305 326 General and administrative 110 114 Product
development and enhancements 125 118 Depreciation and amortization
of other intangible assets 41 47 Other (gains) expenses, net
(36) 11
Total expenses before interest and income
taxes $ 764 $ 821 Income from continuing operations before
interest and income taxes $ 381 $ 342 Interest expense, net
11 9 Income from continuing operations before income taxes $
370 $ 333 Income tax expense 130 105
Income from continuing
operations $ 240 $ 228 Income from discontinued operations, net
of income taxes - 13
Net income $ 240 $ 241
Basic income per share Income from continuing
operations $ 0.51 $ 0.45 Income from discontinued operations
- 0.03 Net income $ 0.51 $ 0.48 Basic weighted average
shares used in computation 465 500
Diluted income per
share Income from continuing operations $ 0.51 $ 0.45 Income
from discontinued operations - 0.02 Net income $ 0.51
$ 0.47 Diluted weighted average shares used in computation 467 501
Table 2 CA Technologies Condensed Consolidated
Balance Sheets (in millions) June 30, March 31,
2012 2012 (unaudited) Cash and cash equivalents $ 2,541 $ 2,679
Trade accounts receivable, net 491 902 Deferred income taxes 236
231 Other current assets 151 153
Total current
assets $ 3,419 $ 3,965 Property and equipment, net $ 363
$ 386 Goodwill 5,855 5,856 Capitalized software and other
intangible assets, net 1,348 1,389 Deferred income taxes 127 151
Other noncurrent assets, net 247 250
Total
assets $ 11,359 $ 11,997 Current portion of long-term
debt $ 15 $ 14 Deferred revenue (billed or collected) 2,313 2,658
Deferred income taxes 14 14 Other current liabilities 812
1,065
Total current liabilities $ 3,154 $ 3,751
Long-term debt, net of current portion $ 1,283 $ 1,287
Deferred income taxes 43 44 Deferred revenue (billed or collected)
882 972 Other noncurrent liabilities 560 546
Total
liabilities $ 5,922 $ 6,600 Common stock $ 59 $ 59
Additional paid-in capital 3,555 3,491 Retained earnings 4,986
4,865 Accumulated other comprehensive loss (134) (108) Treasury
stock (3,029) (2,910)
Total stockholders’
equity $ 5,437 $ 5,397
Total liabilities and stockholders’
equity $ 11,359 $ 11,997
Table 3 CA Technologies
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions) Three Months Ended
June 30,
2012
2011
Operating activities from continuing operations: Net income
$ 240 $ 241 Income from discontinued operations -
(13) Income from continuing operations $ 240 $ 228 Adjustments to
reconcile income from continuing operations to net cash provided by
operating activities: Depreciation and amortization 105 97
Provision for deferred income taxes 25 71 Provision for bad debts 1
- Share-based compensation expense 23 25 Asset impairments and
other non-cash items 1 2 Foreign currency transaction losses 12 2
Changes in other operating assets and liabilities, net of effect of
acquisitions: Decrease in trade accounts receivable 398 274
Decrease in deferred revenue (394) (214) Decrease in taxes payable,
net (93) (241) Increase (decrease) in accounts payable, accrued
expenses and other 18 (6) Decrease in accrued salaries, wages and
commissions (141) (84) Changes in other operating assets and
liabilities (12) (11)
Net cash provided by
operating activities - continuing operations $ 183 $ 143
Investing activities from continuing operations:
Acquisitions of businesses, net of cash acquired, and purchased
software $ (5) $ (29) Purchases of property and equipment (22) (19)
Capitalized software development costs (36) (50) Purchases in
marketable securities, net - (8) Other investing activities
2 (1)
Net cash used in investing activities - continuing
operations $ (61) $ (107)
Financing activities from
continuing operations: Dividends paid $ (119) $ (25) Purchases
of common stock (86) (153) Debt borrowings (repayments), net 5
(184) Exercise of common stock options and other 17 9
Net cash used in financing activities - continuing
operations $ (183) $ (353)
Net change in cash and cash
equivalents before effect of exchange rate changes on cash -
continuing operations $ (61) $ (317) Effect of exchange rate
changes on cash $ (77) $ 37
Cash provided by (used in) operating
activities - discontinued operations $ - $ (8)
Decrease in
cash and cash equivalents $ (138) $ (288)
Cash and cash
equivalents at beginning of period $ 2,679 $ 3,049
Cash and
cash equivalents at end of period $ 2,541 $ 2,761
Table
4 CA Technologies Operating Segments (unaudited)
(in millions)
Three Months Ended June 30, 2012
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 628 $ 426 $ 91 $ 1,145
Expenses (3) 260 359 87 706 Segment
profit $ 368 $ 67 $ 4 $ 439 Segment operating margin 59% 16% 4% 38%
Segment profit $ 439 Less: Purchased software amortization
27 Other intangibles amortization 14 Share-based compensation
expense 23 Other (gains) expenses, net (4) (6) Interest expense,
net 11 Income from continuing operations before income taxes
$ 370 Three Months Ended June 30, 2011
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1)
Total Revenue (2) $ 646 $ 427 $ 90 $ 1,163 Expenses (3)
276 382 88 746 Segment profit $ 370 $
45 $ 2 $ 417 Segment operating margin 57% 11% 2% 36% Segment
profit $ 417 Less: Purchased software amortization 23 Other
intangibles amortization 19 Share-based compensation expense 25
Other (gains) expenses, net (4) 8 Interest expense, net 9
Income from continuing operations before income taxes $ 333 (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 expenses (gains), net consists of other
unallocated costs including foreign exchange derivative (gains)
losses, and other miscellaneous costs.
Table 5 CA
Technologies Constant Currency Summary (unaudited) (in
millions) Three Months Ended June 30,
2012 2011
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
Bookings $ 553 $ 865 (36%) (34%)
Revenue: North America $ 726 $ 716 1% 2% International
419 447 (6%) 1% Total revenue $ 1,145 $ 1,163 (2%) 1%
Revenue: Subscription and maintenance $ 977 $ 1,007
(3%) 0% Professional services 91 90 1% 4% Software fees and other
77 66 17% 19% Total revenue $ 1,145 $ 1,163 (2%) 1%
Segment Revenue: Mainframe solutions $ 628 $ 646 (3%)
0% Enterprise solutions 426 427 0% 2% Services 91 90 1% 4%
Total expenses before interest and income taxes: Total
non-GAAP (2) $ 706 $ 746 (5%) (2%) Total GAAP 764 821 (7%) (3%) (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, 2012, 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
June 30,
2012
2011
GAAP net income $ 240 $ 241 GAAP income from discontinued
operations, net of income taxes - (13) GAAP income
from continuing operations $ 240 $ 228 GAAP income tax expense 130
105 Interest expense, net 11 9 GAAP income from
continuing operations before interest and income taxes $ 381 $ 342
GAAP operating margin (% of revenue) (1) 33% 29% Non-GAAP
adjustments to expenses: Costs of licensing and maintenance(2) $ -
$ 1 Cost of professional services(2) 1 1 Amortization of
capitalized software costs(3) 27 23 Selling and marketing(2) 10 10
General and administrative(2) 8 8 Product development and
enhancements(2) 4 5 Depreciation and amortization of other
intangible assets(4) 14 19 Other (gains) expenses, net (5)
(6) 8 Total Non-GAAP adjustment to operating expenses $ 58 $
75 Non-GAAP income from continuing operations before interest and
income taxes $ 439 $ 417 Non-GAAP operating margin (% of revenue)
(6) 38% 36% Interest expense, net 11 9 GAAP income tax
expense 130 105 Non-GAAP adjustment to income tax expense(7)
1 24 Non-GAAP income tax expense $ 131 $ 129 Non-GAAP income
from continuing operations $ 297 $ 279 (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 other miscellaneous
costs including 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
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). (7) 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
June 30,
Operating
Expenses
2012
2011
Total expenses before interest and income taxes $ 764 $ 821
Non-GAAP operating adjustments: Purchased software
amortization 27 23 Other intangibles amortization 14 19 Share-based
compensation 23 25 Other (gains) expenses, net (1) (6) 8 Total
non-GAAP operating adjustments $ 58 $ 75 Total non-GAAP
operating expenses $ 706 $ 746 Three Months Ended
June 30,
Diluted EPS from
Continuing Operations
2012
2011
GAAP diluted EPS from continuing operations $ 0.51 $ 0.45
Non-GAAP adjustments, net of taxes: Purchased software and
other intangibles amortization 0.06 0.06 Share-based compensation
0.03 0.03 Other (gains) expenses, net (1) (0.01) 0.01 Non-GAAP
effective tax rate adjustments (2) 0.04 - Non-GAAP diluted
EPS from continuing operations $ 0.63 $ 0.55 (1) Non-GAAP
adjustment consists of other miscellaneous costs including 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 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
June 30,
2012
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 381 $ 439 Interest expense, net 11 11
Income from continuing operations before income taxes $ 370 $ 428
Statutory tax rate 35% 35% Tax at statutory rate $
130 $ 150 Adjustments for discrete and permanent items (2) -
(19) Total tax expense $ 130 $ 131 Effective tax rate
(3) 35.1% 30.6% Three Months Ended
June 30,
2011
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 342 $ 417 Interest expense, net 9 9
Income from continuing operations before income taxes $ 333 $ 408
Statutory tax rate 35% 35% Tax at statutory rate $
117 $ 143 Adjustments for discrete and permanent items (2)
(12) (14) Total tax expense $ 105 $ 129 Effective tax
rate (3) 31.5% 31.6% (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
$ 2.12 Non-GAAP adjustments, net of taxes: Purchased
software and other intangibles amortization 0.24 0.24 Share-based
compensation 0.14 0.14 Projected non-GAAP
diluted EPS from continuing operations range $ 2.45
to
$ 2.50 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 31% Non-GAAP
adjustments, net of taxes: Purchased software and other intangibles
amortization 3% Share-based compensation 2% Projected
non-GAAP operating margin 36% Refer to the discussion of non-GAAP
financial measures included in the accompanying press release for
additional information.
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