CA TECHNOLOGIES 
By ISLANDIA, N.Y., Jan. 24, 2012 /PRNewswire/ -- CA Technologies (NASDAQ: CA) today reported financial results for its third quarter of fiscal year 2012, ended Dec. 31, 2011.
-- Revenue $1.263 Billion, Up 10 Percent in Constant Currency and as
Reported
-- GAAP EPS $0.54, Up 39 Percent in Constant Currency and 42 Percent as
Reported
-- Non-GAAP EPS $0.65, Up 28 Percent in Constant Currency and 30 Percent as
Reported
-- Single License Payment Contributes 3 Percentage Points to Revenue Growth
and $0.05 to GAAP and Non-GAAP EPS Growth
-- Cash Flow from Continuing Operations $396 Million, Down 19 Percent in
Constant Currency and 20 Percent as Reported
-- Raises Full Year Outlook for GAAP and non-GAAP EPS and Adjusts Revenue
Guidance to High End of Range; Maintains Cash Flow from Continuing
Operations Outlook
-- Enhances Capital Allocation Program, Targeting Return of $2.5 Billion To
Shareholders Through Fiscal Year 2014
FINANCIAL OVERVIEW
Note: All financial results have been adjusted to reflect discontinued operations.
Third Quarter FY12 vs. FY11
---------------------------
(in millions, except share
data) FY12 FY11 % Change % Change
-------------------------- ---- ---- -------- CC**
----
Revenue $1,263 $1,144 10% 10%
------- ------ ------ --- ---
GAAP Income from
continuing operations $263 $196 34% 24%
---------------------- ---- ---- --- ---
Non-GAAP Income from
continuing operations* $319 $256 25% 18%
----------------------- ---- ---- --- ---
GAAP Diluted EPS from
continuing operations $0.54 $0.38 42% 39%
---------------------- ----- ----- --- ---
Non-GAAP Diluted EPS
from continuing
operations* $0.65 $0.50 30% 28%
--------------------- ----- ----- --- ---
Cash Flow from continuing
operations $396 $492 (20%) (19%)
------------------------- ---- ---- ----- -----
* 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 had a good quarter on many measures and continued to make solid progress against our long-term goals," said Bill McCracken, chief executive officer, CA Technologies. "However, we are not done. We remain focused on continuing to execute on our strategy and making further operational enhancements including driving new product sales and increasing sales productivity.
"The $2.5 billion enhanced capital allocation program announced today is the culmination of significant work evaluating ways to optimize our balance sheet, while maintaining the financial flexibility needed to build our business and enhance our competitive positioning," McCracken continued. "We believe we're on a path to achieve a balanced approach to return even more cash to shareholders, while still investing in our future."
REVENUE AND BOOKINGS
The Company received a final license payment in the third quarter of $39 million under a license agreement entered into in connection with a 2009 litigation settlement with a software company. The payment reflects the final amount owed, which was scheduled to be repaid in fiscal years 2013 and 2014. The company made the final payment at its discretion, without any discount or concession by CA Technologies.
During the third quarter, the Company saw demand for its virtualization and service automation products, security solutions including products from Arcot Systems, Interactive TKO (ITKO) products, mainframe solutions and professional services. About 8 percentage points of revenue growth in constant currency and as reported were driven by organic products, while about 2 percentage points in constant currency and as reported came from acquired products. 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 $1.263 billion, up 10 percent in constant currency and
as reported. The single license payment contributed 3 percentage points
of revenue growth, all in North America.
-- Total revenue backlog was $8.084 billion, up 2 percent in constant
currency and as reported. The current portion of revenue backlog was
$3.576 billion, up 2 percent in constant currency and 1 percent as
reported.
-- North America revenue was $791 million, up 15 percent in constant
currency and as reported.
-- International revenue was $472 million, up 3 percent in constant
currency and as reported.
Bookings year-over-year:
-- Total bookings in the third quarter were $1.284 billion, up 2 percent in
constant currency and 1 percent as reported. The single license payment
contributed 3 percentage points of growth to bookings, all in North
America.
-- The Company renewed a total of 12 license agreements with incremental
contract values in excess of $10 million each, for an aggregate contract
value of $452 million. During the third quarter of fiscal year 2011,
the Company renewed a total of 15 license agreements with incremental
contract values in excess of $10 million each, for an aggregate contract
value of $456 million.
-- The weighted average duration of subscription and maintenance bookings
for the quarter was 3.53 years, compared with 3.20 years for the same
period in fiscal year 2011.
-- North America bookings were $766 million, up 1 percent in constant
currency and as reported.
-- International bookings were $518 million, up 4 percent in constant
currency and 2 percent as reported.
EXPENSES AND MARGIN
Year-over-year GAAP results:
-- Operating expenses, before interest and income taxes, were $850 million,
up 5 percent in constant currency and as reported.
-- Operating income, before interest and income taxes, was $413 million, up
22 percent in constant currency and up 24 percent as reported.
-- Operating margin was 33 percent, up 4 percentage points from the prior
year period.
Year-over-year non-GAAP results, which exclude purchased software and other intangibles amortization, pre-fiscal year 2010 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 $788 million,
up 4 percent in constant currency and as reported.
-- Operating income, before interest and income taxes, was $475 million, up
21 percent in constant currency and 23 percent as reported.
-- Operating margin was 38 percent, up 4 percentage points from the prior
year period.
Both GAAP and non-GAAP operating expense increases were primarily driven by costs associated with acquisitions and expenses resulting from increased Services engagements, and product development and enhancement costs.
For the third quarter of fiscal year 2012, the Company's effective GAAP tax rate was 34.9 percent, compared with 39.1 percent in the prior year. The Company's effective non-GAAP tax rate was 31.5 percent, compared with 31.7 percent in the prior year.
GAAP and non-GAAP EPS were favorably affected by about $0.05 per share by the single license payment. In addition, GAAP and non-GAAP EPS were positively affected by currency and a reduction in share count. The single license payment also had a positive impact of about 2 percentage points on both GAAP and non-GAAP margin.
SEGMENT INFORMATION
Beginning in the first quarter of fiscal year 2012, CA Technologies began reporting segment results in three areas: Mainframe Solutions, Enterprise Solutions and Services.
-- Mainframe Solutions revenue was $682 million, up 9 percent in constant
currency and as reported. The single license payment contributed 6
percent points of growth to Mainframe Solutions revenue. Operating
expense was $277 million and operating profit was $405 million.
Operating margin was 59 percent, up from 54 percent a year ago.
-- Enterprise Solutions revenue was $478 million, up 11 percent in constant
currency and 12 percent as reported. Operating expense was $419 million
and operating profit was $59 million. Operating margin was 12 percent,
up from 9 percent a year ago.
-- Services revenue was $103 million, up 16 percent in constant currency
and 17 percent as reported. Operating expense was $92 million and
operating profit was $11 million. Operating margin was 11 percent, up
from 10 percent a year ago.
CASH FLOW FROM CONTINUING OPERATIONS
Cash flow from continuing operations in the third quarter was $396 million, including the $39 million single license payment, compared with $492 million in the prior year. Cash flow from operations reflected a decline in cash collections, including a reduction in single installment payments. The Company reiterated its fiscal year 2012 outlook for cash flow from operations.
CAPITAL STRUCTURE
-- Cash, cash equivalents and marketable securities at Dec. 31, 2011 were
$2.539 billion.
-- With $1.309 billion in total debt outstanding and approximately $120
million in notional pooling, the Company's net cash, cash equivalents
and marketable securities position was $1.110 billion.
-- In the third quarter, the Company repurchased approximately 9.6 million
shares of stock, for $200 million and distributed $25 million in
dividends.
-- The Company's outstanding share count at Dec. 31, 2011 was 480 million.
CAPITAL ALLOCATION PROGRAM
The Company announced that its Board of Directors has approved a capital allocation program that targets the return of up to $2.5 billion to CA Technologies shareholders through the fiscal year ending March 31, 2014.
The Company's capital allocation program plans to return approximately 80 percent of expected cumulative free cash flow to shareholders through fiscal 2014. This includes a planned increase in the annual dividend from $0.20 to $1.00 per common share and the authorization to repurchase up to $1.5 billion in CA Technologies common stock, including $232 million remaining under the Company's current share repurchase authorization. Approximately $500 million of the planned repurchase is expected to be an accelerated share repurchase pursuant to an agreement executed in the Company's fiscal fourth quarter ending March 31, 2012. For more information, see separate news release announced today.
BUSINESS HIGHLIGHTS
During the third quarter:
-- The Company held CA World, a user conference that had about 5,000
attendees including 135 sponsors and nearly 350 exhibitors, and
announced key initiatives and 12 solutions centered on Business Service
Innovation - a customer value proposition that helps support customers
as they transition from simply managing IT to delivering critical
business services.
-- Infraserve, an Australian provider of Infrastructure-as-a-Service (IaaS)
solutions, announced it is offering a new Platform as a Service (PaaS)
solution powered by the CA AppLogic® turnkey cloud computing platform.
ViaWest, one of the largest privately owned data center and managed
services providers in North America, also announced it is using CA
AppLogic and CA Process Automation as the backbone of its new Xen-based
KINECTed(TM) Cloud - Innovator service.
-- The Company was named one of the top two market share leaders in the
worldwide cloud systems management software market by IDC, a leading
provider of global IT research and advice.
-- CA Technologies announced CA Access Control for Virtual Environments, a
new solution that extends its identity and access management (IAM)
security expertise, and complements and protects VMware® virtual
environments.
-- The Company was ranked ninth out of 500 in Newsweek's 2011 Green
Rankings. Newsweek ranks the 500 largest publicly traded U.S. companies
on their environmental footprint, management and disclosure.
OUTLOOK FOR FISCAL YEAR 2012
The Company updated its outlook for fiscal year 2012. The following guidance represents "forward-looking statements" (as defined below). Updated guidance includes the impact of the single license payment, which was not included in previous guidance.
The Company expects the following:
-- Total revenue growth of 6 percent in constant currency, compared with
the previous outlook of 5 percent to 6 percent. At Dec. 31, 2011
exchange rates, this translates to reported revenue of about $4.8
billion.
-- GAAP diluted earnings per share growth raised to a range of 11 percent
to 13 percent in constant currency, compared with the previous outlook
of 6 percent to 9 percent. At Dec. 31, 2011 exchange rates, this
translates to reported GAAP diluted earnings per share of $1.86 to
$1.90.
-- Non-GAAP diluted earnings per share growth raised to a range of 11
percent to 13 percent in constant currency, compared with the previous
outlook of 7 percent to 10 percent. At Dec. 31, 2011 exchange rates,
this translates to reported non-GAAP diluted earnings per share of $2.21
to $2.25.
-- Cash flow from operations growth continues in a range of 3 percent to 5
percent in constant currency. At Dec. 31, 2011 exchange rates, this
translates to reported cash flow from operations of $1.44 billion to
$1.47 billion.
The Company expects a full-year GAAP operating margin of 29 percent and non-GAAP operating margin of 34 percent. The Company also expects a full-year GAAP and non-GAAP tax rate in a range of 31 to 32 percent. The Company anticipates 463 million shares outstanding at fiscal year 2012 year-end and weighted average diluted shares outstanding of 486 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 third 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.
(Logo: http://photos.prnewswire.com/prnh/20100516/NY05617LOGO )
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.
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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 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. 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 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 fiscal year 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, increasing sales in new and emerging enterprises and markets, 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; failure to expand partner programs; the ability to adequately manage and evolve financial reporting and managerial systems and processes; acquisition opportunities that may or may not arise; the ability to 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; 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; third-party claims of intellectual property infringement or royalty payments; fluctuations in foreign currencies; failure to effectively execute the Company's workforce reductions; successful outsourcing of various functions to third parties; potential tax liabilities; 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.
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
(unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
Revenue 2011 2010 2011 2010
---- ---- ---- ----
Subscription and
maintenance revenue $1,006 $974 $3,035 $2,852
Professional services 103 88 289 245
Software fees and other 154 82 302 204
Total revenue 1,263 1,144 3,626 3,301
----- ----- ----- -----
Expenses
Costs of licensing and
maintenance 69 74 207 207
Cost of professional
services 91 77 270 223
Amortization of
capitalized software
costs 59 52 164 144
Selling and marketing 342 341 1,038 931
General and
administrative 113 114 331 344
Product development and
enhancements 126 110 384 363
Depreciation and
amortization of other
intangible assets 44 47 134 136
Other expenses (gains),
net 6 (3) 10 (2)
Total expenses before
interest and income
taxes 850 812 2,538 2,346
--- --- ----- -----
Income from continuing
operations before
interest and income
taxes 413 332 1,088 955
Interest expense, net 9 10 24 35
--- --- --- ---
Income from continuing
operations before
income taxes 404 322 1,064 920
Income tax expense 141 126 337 284
Income from continuing
operations 263 196 727 636
Income from discontinued
operations, net of
income taxes - 4 13 3
--- --- --- ---
Net income $263 $200 $740 $639
==== ==== ==== ====
Basic income per share
Income from continuing
operations $0.54 $0.38 $1.46 $1.24
Income from discontinued
operations - 0.01 0.03 -
Net income $0.54 $0.39 $1.49 $1.24
===== ===== ===== =====
Basic weighted average
shares used in
computation 483 505 492 507
Diluted income per share
Income from continuing
operations $0.54 $0.38 $1.46 $1.24
Income from discontinued
operations - 0.01 0.02 -
Net income $0.54 $0.39 $1.48 $1.24
===== ===== ===== =====
Diluted weighted average
shares used in
computation 484 506 493 508
Prior year results have been adjusted to reflect the discontinued
operations associated with the sale of the Information Governance
business and the Internet Security business.
Table 2
CA Technologies
Condensed Consolidated Balance Sheets
(in millions)
December
31, March 31,
2011 2011
---- ----
(unaudited)
Cash and cash equivalents $2,358 $3,049
Marketable securities - current 102 75
Trade accounts receivable, net 840 849
Deferred income taxes - current 158 246
Other current assets 146 152
--- ---
Total current assets 3,604 4,371
Marketable securities -noncurrent 79 104
Property and equipment, net 387 437
Goodwill 5,856 5,688
Capitalized software and other
intangible assets, net 1,426 1,284
Deferred income taxes -noncurrent 175 284
Other noncurrent assets, net 264 246
--- ---
Total assets $11,791 $12,414
======= =======
Current portion of long-term debt
and loans payable $18 $269
Deferred revenue (billed or
collected) -current 2,270 2,600
Deferred income taxes - current 44 68
Other current liabilities 969 987
--- ---
Total current liabilities 3,301 3,924
Long-term debt, net of current
portion 1,291 1,282
Deferred income taxes -noncurrent 62 64
Deferred revenue (billed or
collected) -noncurrent 854 969
Other noncurrent liabilities 555 555
--- ---
Total liabilities 6,063 6,794
----- -----
Common stock 59 59
Additional paid-in capital 3,593 3,615
Retained earnings 4,771 4,106
Accumulated other comprehensive
loss (131) (65)
Treasury stock (2,564) (2,095)
------ ------
Total stockholders' equity 5,728 5,620
----- -----
Total liabilities and stockholders'
equity $11,791 $12,414
======= =======
Table 3
CA Technologies
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in millions)
Three Months Ended
December 31,
------------
2011 2010
---- ----
Operating activities from continuing operations:
Net income $263 $200
(Income) loss from discontinued operations - (4)
--- ---
Income from continuing operations 263 196
--- ---
Adjustments to reconcile income from continuing operations
to net cash provided
by operating activities:
Depreciation and amortization 103 99
Provision for deferred income taxes (45) -
Provision for bad debts (3) -
Share-based compensation expense 20 21
Asset impairments and other non-cash items 6 1
Foreign currency transaction (gains) losses (3) 3
Changes in other operating assets and liabilities, net of
effect of acquisitions:
Increase in trade accounts receivable, net (243) (168)
Increase in deferred revenue 94 209
Increase in taxes payable, net 182 142
Decrease in accounts payable, accrued expenses and other (44) (20)
Increase in accrued salaries, wages and commissions 26 12
Changes in other operating assets and liabilities 40 (3)
Net cash provided by operating activities -continuing
operations 396 492
--- ---
Investing activities from continuing operations:
Acquisitions of businesses, net of cash acquired, and
purchased software (4) (224)
Purchases of property and equipment (13) (26)
Cash proceeds from divestiture of assets - 3
Capitalized software development costs (41) (43)
Investment in marketable securities, net (2) (168)
Other investing activities - (1)
Net cash used in investing activities -continuing
operations (60) (459)
--- ----
Financing activities from continuing operations:
Dividends paid (25) (20)
Purchases of common stock (200) (33)
Debt borrowings (repayments) 58 (2)
Exercise of common stock options and other 1 3
Net cash used in financing activities -continuing
operations (166) (52)
---- ---
Net change in cash and cash equivalents before effect of
exchange rate changes on 170 (19)
cash - continuing operations
Effect of exchange rate changes on cash (11) 8
Cash (used) provided by operating activities -
discontinued operations (4) 4
--- ---
Net effect of discontinued operations on cash and cash
equivalents (4) 4
Increase (decrease) in cash and cash equivalents 155 (7)
Cash and cash equivalents at beginning of period 2,203 2,525
----- -----
Cash and cash equivalents at end of period $2,358 $2,518
====== ======
Prior year results have been adjusted to reflect the discontinued
operations associated with the sale of the Information Governance
business and the Internet Security business.
Table 4
CA Technologies
Operating Segments
(unaudited)
(in millions)
Three Months Ended December 31, 2011 Nine Months Ended December 31, 2011
------------------------------------ -----------------------------------
Services Services
Mainframe Enterprise (1) Total Mainframe Enterprise (1) Total
Solutions Solutions Solutions Solutions
(1) (1) --------- ----- (1) (1) --------- -----
---------- ---------- ---------- ----------
Revenue
(2) $682 $478 $103 $1,263 $1,983 $1,354 $289 $3,626
Expenses
(3) 277 419 92 788 861 1,223 272 2,356
Segment
profit $405 $59 $11 $475 $1,122 $131 $17 $1,270
==== === === ==== ====== ==== === ======
Segment
operating
margin 59% 12% 11% 38% 57% 10% 6% 35%
Segment profit $475 $1,270
Less:
Purchased software
amortization 27 76
Other intangibles amortization 16 50
Share-based compensation
expense 20 61
Other unallocated operating
gains, net (4) (1) (5)
Interest expense, net 9 24
--- ---
Income from continuing
operations before income
taxes $404 $1,064
==== ======
Three Months Ended December 31, 2010 Nine Months Ended December 31, 2010
------------------------------------ -----------------------------------
Services Services
Mainframe Enterprise (1) Total Mainframe Enterprise (1) Total
Solutions Solutions Solutions Solutions
(1) (1) --------- ----- (1) (1) --------- -----
---------- ---------- ---------- ----------
Revenue
(2) $628 $428 $88 $1,144 $1,858 $1,198 $245 $3,301
Expenses
(3) 289 391 79 759 834 1,104 230 2,168
Segment
profit $339 $37 $9 $385 $1,024 $94 $15 $1,133
==== === === ==== ====== === === ======
Segment
operating
margin 54% 9% 10% 34% 55% 8% 6% 34%
Segment profit $385 $1,133
Less:
Purchased software
amortization 23 67
Other intangibles amortization 18 51
Share-based compensation
expense 21 61
Other unallocated operating
gains, net (4) (9) (1)
Interest expense, net 10 35
--- ---
Income from continuing
operations before income
taxes $322 $920
==== ====
(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 December 31,
-------------------------------
2011 2010 % Increase % Increase
---- ---- (Decrease) (Decrease)
in
in $ US Constant
Currency
------- (1)
---------
Bookings $1,284 $1,266 1% 2%
Revenue:
North America $791 $686 15% 15%
International 472 458 3% 3%
--- --- --- ---
Total revenue $1,263 $1,144 10% 10%
Revenue:
Subscription and
maintenance $1,006 $974 3% 3%
Professional
services 103 88 17% 16%
Software fees
and other 154 82 88% 87%
--- --- --- ---
Total revenue $1,263 $1,144 10% 10%
Segment Revenue:
Mainframe
Solutions $682 $628 9% 9%
Enterprise
Solutions 478 428 12% 11%
Services 103 88 17% 16%
Total expenses
before interest
and income
taxes:
Total Non-GAAP
(2) $788 $759 4% 4%
Total GAAP $850 $812 5% 5%
Nine Months Ended December 31,
------------------------------
2011 2010 % Increase % Increase
---- ---- (Decrease) (Decrease)
in
in $ US Constant
Currency
------- (1)
---------
Bookings $3,121 $2,999 4% 2%
Revenue:
North America $2,242 $2,005 12% 12%
International 1,384 1,296 7% 0%
----- ----- --- ---
Total revenue $3,626 $3,301 10% 7%
Revenue:
Subscription and
maintenance $3,035 $2,852 6% 3%
Professional
services 289 245 18% 14%
Software fees
and other 302 204 48% 46%
--- --- --- ---
Total revenue $3,626 $3,301 10% 7%
Segment Revenue:
Mainframe
Solutions $1,983 $1,858 7% 4%
Enterprise
Solutions 1,354 1,198 13% 10%
Services 289 245 18% 14%
Total expenses
before interest
and income
taxes:
Total Non-GAAP
(2) $2,356 $2,168 9% 6%
Total GAAP $2,538 $2,346 8% 6%
(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.
Prior year results have been adjusted to reflect the discontinued
operations associated with the sale of the Information Governance
business and the Internet Security business.
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 Nine Months Ended
December 31, December 31, December 31, December 31,
2011 2010 2011 2010
------------- ------------- ------------- -------------
GAAP net income $263 $200 $740 $639
GAAP income from discontinued
operations, net of income taxes - 4 13 3
--- --- --- ---
GAAP income from continuing operations 263 196 727 636
GAAP income tax expense 141 126 337 284
Interest expense, net 9 10 24 35
GAAP income from continuing operations
before interest and income taxes 413 332 1,088 955
--- --- ----- ---
GAAP operating margin (% of revenue)
(1) 33% 29% 30% 29%
Non-GAAP adjustments to expenses:
Costs of licensing and maintenance(2) - 1 2 3
Cost of professional services(2) 1 1 3 3
Amortization of capitalized software
costs(3) 27 23 76 67
Selling and marketing(2) 9 8 25 23
General and administrative(2) 5 7 17 17
Product development and enhancements(2) 5 4 14 15
Depreciation and amortization of other
intangible assets(4) 16 18 50 51
Other (gains) losses, net (5) - - (5) 7
Restructuring and other (6) (1) (9) - (8)
--- --- --- ---
Total Non-GAAP adjustment to operating
expenses 62 53 182 178
--- --- --- ---
Non-GAAP income from continuing
operations before interest and income
taxes 475 385 1,270 1,133
Non-GAAP operating margin (% of
revenue) (7) 38% 34% 35% 34%
Interest expense, net 9 10 24 35
GAAP income tax expense 141 126 337 284
Non-GAAP adjustment to income tax
expense(8) 6 (7) 56 77
Non-GAAP income tax expense 147 119 393 361
--- --- --- ---
Non-GAAP income from continuing
operations $319 $256 $853 $737
==== ==== ==== ====
(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) 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.
(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 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.
Prior year results have been adjusted to reflect the discontinued
operations associated with the sale of the Information Governance
business and the Internet Security business.
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 Nine Months
Ended Ended
December 31, December 31,
------------ ------------
Operating Expenses 2011 2010 2011 2010
------------------ ---- ---- ---- ----
Total expenses before
interest and income taxes $850 $812 $2,538 $2,346
Non-GAAP operating
adjustments:
Purchased software
amortization 27 23 76 67
Other intangibles
amortization 16 18 50 51
Share-based compensation 20 21 61 61
Restructuring and other (1) (1) (9) - (8)
Hedging losses (gains), net
(2) - - (5) 7
Total non-GAAP operating
adjustments 62 53 182 178
--- --- --- ---
Total non-GAAP operating
expenses $788 $759 $2,356 $2,168
==== ==== ====== ======
Three Months Nine Months
Ended Ended
December 31, December 31,
------------ ------------
Diluted EPS from Continuing
Operations 2011 2010 2011 2010
--------------------------- ---- ---- ---- ----
GAAP diluted EPS from
continuing operations $0.54 $0.38 $1.46 $1.24
Non-GAAP adjustments, net
of taxes
Purchased software and other
intangibles amortization 0.06 0.05 0.18 0.15
Share-based compensation 0.03 0.03 0.08 0.09
Restructuring and other (1) - (0.01) - (0.01)
Hedging losses (gains), net
(2) - - - 0.01
Non-GAAP effective tax rate
adjustments (3) 0.02 0.05 (0.01) (0.04)
---- ---- ----- -----
Non-GAAP diluted EPS from
continuing operations $0.65 $0.50 $1.71 $1.44
===== ===== ===== =====
(1) Non-GAAP adjustment consists of Fiscal 2007 Restructuring Plan
expense adjustments.
(2) 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 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.
Prior year results have been adjusted to reflect the discontinued
operations associated with the sale of the Information Governance
business and the Internet Security business.
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 Nine Months Ended
December 31, 2011 December 31, 2011
----------------- -----------------
GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
Income from continuing
operations before
interest and income
taxes (1) $413 $475 $1,088 $1,270
Interest expense, net 9 9 24 24
--- --- --- ---
Income from continuing
operations before
income taxes $404 $466 $1,064 $1,246
Statutory tax rate 35% 35% 35% 35%
Tax at statutory rate 141 163 372 436
Adjustments for
discrete and
permanent items (2) - (16) (35) (43)
--- --- --- ---
Total tax expense $141 $147 $337 $393
Effective tax rate (3) 34.9% 31.5% 31.7% 31.5%
Three Months Ended Nine Months Ended
December 31, 2010 December 31, 2010
----------------- -----------------
GAAP Non-GAAP GAAP Non-GAAP
---- -------- ---- --------
Income from continuing
operations before
interest and income
taxes (1) $332 $385 $955 $1,133
Interest expense, net 10 10 35 35
--- --- --- ---
Income from continuing
operations before
income taxes $322 $375 $920 $1,098
Statutory tax rate 35% 35% 35% 35%
Tax at statutory rate 113 131 322 384
Adjustments for
discrete and
permanent items (2) 13 (12) (38) (23)
--- --- --- ---
Total tax expense $126 $119 $284 $361
Effective tax rate (3) 39.1% 31.7% 30.9% 32.9%
(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. 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 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, 2012
------------------------------------- --------------
Projected GAAP diluted EPS from continuing
operations range $1.86 to $1.90
Non-GAAP adjustments, net of taxes:
Purchased software and other intangibles
amortization 0.23 0.23
Share-based compensation 0.12 0.12
---- ----
Non-GAAP projected diluted EPS from
continuing operations range $2.21 to $2.25
===== =====
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
March 31, 2012
--------------
Projected GAAP operating margin range 29%
Non-GAAP adjustments, net of taxes:
Purchased software and other intangibles
amortization 3%
Share-based compensation 2%
Non-GAAP projected operating margin range 34%
===
Refer to the discussion of non-GAAP financial measures included in
the accompanying press release for additional information.
SOURCE CA Technologies
