- Fourth Quarter and FY2014 Revenue of
$1.108 Billion and $4.515 Billion, Compared With $1.143 Billion and
$4.610 Billion Last Year, Respectively
- Fourth Quarter and FY2014 GAAP EPS
of $0.23 and $1.99, Compared With $0.52 and $2.03 Last Year,
Respectively
- Fourth Quarter and FY2014 Non-GAAP
EPS of $0.61 and $3.07, Compared With $0.67 and $2.48 Last Year,
Respectively
- Fourth Quarter and FY2014 Cash Flow
From Continuing Operations of $483 Million and $997 Million,
Compared With $565 Million and $1.390 Billion Last Year,
Respectively
- Announces Authorization to
Repurchase up to $1 Billion in CA Technologies Common
Stock
CA Technologies (NASDAQ:CA) today reported financial results for
its fourth quarter and full fiscal year 2014, ended March 31,
2014.
FINANCIAL OVERVIEW
Note: All financial results have been adjusted to reflect
the classification of the Company's ERwin Data Modeling Business as
a discontinued operation as announced in Form 8-K filed on March
13, 2014.
(dollars in millions, except share data)
Fourth
Quarter FY14 vs. FY13 Full Year FY14 vs. FY13
FY14 FY13
%Change
% ChangeCC**
FY14 FY13
%Change
% ChangeCC**
Revenue $1,108 $1,143 (3)% (2)% $4,515
$4,610 (2)% (1)% GAAP Income from Continuing
Operations $104 $238 (56)% (53)% $899
$939 (4)% (2)% Non-GAAP Income from Continuing
Operations* $274 $305 (10)% (6)% $1,387
$1,148 21% 22% GAAP Diluted EPS from
Continuing Operations $0.23 $0.52 (56)% (52)%
$1.99 $2.03 (2)% 0% Non-GAAP Diluted
EPS from Continuing Operations* $0.61 $0.67 (9)%
(4)% $3.07 $2.48 24% 25% Cash
Flow from Continuing Operations
$483
$565 (15)% (16)%
$997
$1,390 (28)% (26)%
* 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
Mike Gregoire, CA Technologies Chief Executive Officer, made the
following comments:
“We concluded a year of significant transformation and strategic
progress on our journey to build CA for growth and market
leadership. We have successfully executed our rebalancing program,
consolidated development resources in key hubs, shifted innovation
investment to new growth markets, and renewed our focus on building
and delivering excellent, differentiated solutions to our
customers.
"Against this backdrop of activity, our continued focus on
financial and operational execution resulted in a margin increase
to 37 percent* and the attainment of all financial guidance
measures for fiscal year 2014.
"As we look toward fiscal year 2015, we will remain
laser-focused on driving execution, innovation and speed across the
organization. Revenue is still not where we would like it to be,
and we will not be satisfied until we are driving meaningful growth
for our company and our shareholders. All 12,700 people across the
Company are focused on the work ahead to position CA to win.”
*Reference is to non-GAAP operating margin
REVENUE AND BOOKINGS
Fourth Quarter
(dollars in millions)
Fourth Quarter FY14 vs. FY13 FY14
% ofTotal
FY13 % ofTotal
%Change
%ChangeCC**
North America Revenue $699 63% $716
63% (2)% (2)%
International Revenue $409 37% $427
37% (4)% (2)% Total
Revenue $1,108 $1,143
(3)% (2)%
North America Bookings $768 62% $975
67% (21)% (22)%
International Bookings $473 38% $477
33% (1)% 0% Total
Bookings $1,241 $1,452
(15)% (15)%
Current Revenue Backlog $3,542
$3,545 0% 0% Total
Revenue Backlog $7,704 $7,747
(1)% (1)%
**CC: Constant Currency
•
The decrease in revenue was primarily attributable to a
decrease in Enterprise Solutions new product sales in both the
current and prior fiscal years.
•
The Company executed a total of 16 license agreements with
incremental contract values in excess of $10 million each, for an
aggregate contract value of $456 million. During the fourth quarter
of fiscal 2013, the Company executed a total of 20 license
agreements with incremental contract values in excess of $10
million each, for an aggregate contract value of $744 million,
which included one contract of more than $200 million with a U.S.
government agency. • The weighted average duration of
subscription and maintenance bookings for the quarter was 3.15
years, compared with 3.78 years for the same period in fiscal 2013.
Full Year
(dollars in millions)
Full Year FY14 vs. FY13 FY14 %
ofTotal FY13 %
ofTotal %Change
%ChangeCC**
North America Revenue $2,852 63% $2,893
63% (1)% (1)%
International Revenue $1,663 37% $1,717
37% (3)% (1)% Total
Revenue $4,515 $4,610
(2)% (1)%
North America Bookings $2,679 59%
$2,465 60% 9% 9%
International Bookings $1,842 41%
$1,617 40% 14% 16% Total
Bookings $4,521 $4,082
11% 11%
**CC: Constant Currency
•
The decrease in revenue was primarily attributable to a decrease in
fiscal 2014 and prior period Enterprise Solutions new product
sales.
•
The increase in the Company's full year bookings was primarily due
to a year-over-year increase in renewals within subscription and
maintenance bookings. This was partially offset by a decrease in
total new product and Mainframe Solutions capacity sales.
•
The Company executed a total of 54 license agreements with
incremental contract values in excess of $10 million each, for an
aggregate contract value of $1.973 billion. During fiscal 2013, the
Company executed a total of 52 license agreements with incremental
contract values in excess of $10 million each, for an aggregate
contract value of $1.514 billion. • The weighted average
duration of subscription and maintenance bookings for fiscal 2014
was 3.35 years, compared with 3.27 years for fiscal 2013.
EXPENSES AND MARGIN
Fourth Quarter
(dollars in millions)
Fourth Quarter FY14 vs. FY13 FY14
FY13
%Change
%Change CC**
GAAP Operating Expenses Before Interest and Income
Taxes $918 $875 5% 4%
Operating Income Before Interest and Income Taxes $190
$268 (29)% (24)% Operating
Margin 17% 23%
Effective Tax Rate 40.6% 7.4%
Non-GAAP*
Operating Expenses Before Interest and Income Taxes $781
$766 2% 2% Operating Income
Before Interest and Income Taxes $327 $377
(13)% (10)% Operating Margin 30%
33% Effective Tax Rate
12.2% 16.7%
*A reconciliation of non-GAAP financial measures to their
comparable GAAP financial measures is included in the tables
following this news release. Year-over-year non-GAAP results
exclude purchased software and other intangibles amortization,
share-based compensation, capitalization (an add-back) and
amortization of internal software costs, Board approved rebalancing
initiatives, 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 on hedges that do not mature within
the quarter.
**CC: Constant Currency
• GAAP operating income was negatively affected by $38
million, or $0.08 per diluted share, as a result of a decrease in
the amount of capitalized software development costs. In addition,
GAAP operating income was negatively affected by $37 million, or
$0.07 per diluted share, as a result of costs associated with the
Company's fiscal 2014 rebalancing plan (the Fiscal 2014 Plan).
•
This negative effect was partially offset by an impairment of $55
million, or $0.11 per diluted share, related to purchased software
products recognized in the fourth quarter of fiscal 2013.
•
The decline in non-GAAP operating income was driven by an increase
in external consulting and promotional expenses, and was partially
offset by lower personnel costs.
•
GAAP EPS was negatively affected by $0.13 due to a higher effective
tax rate. Non-GAAP EPS was positively affected by $0.03 due to a
lower effective tax rate.
Full Year
(dollars in millions)
Full Year FY14 vs.
FY13 FY14 FY13
%Change
%Change CC**
GAAP Operating Expenses Before Interest and Income
Taxes $3,422 $3,273 5% 5%
Operating Income Before Interest and Income Taxes $1,093
$1,337 (18)% (17)% Operating
Margin 24% 29%
Effective Tax Rate 13.5% 27.4%
Non-GAAP*
Operating Expenses Before Interest and Income Taxes $2,858
$2,985 (4)% (4)% Operating
Income Before Interest and Income Taxes $1,657 $1,625
2% 3% Operating Margin 37%
35% Effective Tax
Rate 13.5% 27.4%
*A reconciliation of non-GAAP financial measures to their
comparable GAAP financial measures is included in the tables
following this news release. Year-over-year non-GAAP results
exclude purchased software and other intangibles amortization,
share-based compensation, capitalization (an add-back) and
amortization of internal software costs, Board approved rebalancing
initiatives and certain other gains and losses.
**CC: Constant Currency
•
GAAP operating income was negatively affected by $171 million, or
$0.27 per diluted share, as a result of expenses associated with
the Fiscal 2014 Plan. In addition, GAAP operating income was
negatively affected by $128 million, or $0.20 per diluted share, as
a result of a decrease in the amount of capitalized software
development costs.
•
Fiscal 2013 GAAP earnings included an impairment of $55 million, or
$0.09 per diluted share, related to purchased software products
recognized in the fourth quarter of fiscal 2013. • GAAP and
non-GAAP operating expenses were positively affected by lower
personnel costs, primarily within selling and marketing.
•
GAAP and non-GAAP EPS were positively affected by $0.31 and $0.48,
respectively, due to a lower effective tax rate. The Company
recognized a net benefit of approximately $168 million in fiscal
2014, primarily from the resolution of uncertain tax positions
relating to U.S. and non-U.S. jurisdictions.
SEGMENT INFORMATION
Starting in the first quarter of fiscal 2014, the measure of
segment expenses and segment profit was revised to treat all costs
of internal software development as segment expense in the period
the costs are incurred. As a result, the Company will add back
capitalized internal software costs and exclude amortization of
internally developed software costs previously capitalized from
segment expenses. Segment expenses also exclude the effects of the
Fiscal 2014 Plan. Prior period segment expenses and profit
information have been revised to present segment profit and
expenses on a consistent basis.
Fourth Quarter
(dollars in millions)
Fourth Quarter FY14 vs. FY13 Revenue
%Change
%ChangeCC**
Operating Margin FY14
FY13 FY14
FY13 Mainframe Solutions $613
$620 (1)% 0% 55%
57% Enterprise Solutions $405 $424
(4)% (4)% (2)% 3%
Services $90 $99 (9)%
(7)% 1% 10%
**CC: Constant Currency
•
The decrease in Enterprise Solutions revenue and operating margin
was primarily due to lower new product sales in both the current
and prior fiscal year.
•
The decrease in Services revenue was primarily due to a decrease in
engagements relating to customer education and government agencies.
Full Year
(dollars in millions)
Full Year FY14 vs.
FY13 Revenue %Change
%ChangeCC**
Operating Margin FY14
FY13 FY14
FY13 Mainframe Solutions $2,478
$2,489 0% 0% 60%
59% Enterprise Solutions $1,658 $1,739
(5)% (4)% 9% 8%
Services $379 $382 (1)%
0% 6% 6%
**CC: Constant Currency
•
Enterprise Solutions revenue decreased compared with the
year-ago period primarily due to a decrease in new product sales in
both the current and prior fiscal year.
CASH FLOW FROM OPERATIONS
• Cash flow from continuing operations in the fourth quarter
was $483 million, compared with $565 million in the prior year. The
decrease year-over-year was due to a decrease in cash collections
from single installment payments of $90 million, payments related
to the Fiscal 2014 Plan and a reduction in capitalized software
development costs. • For the full year, cash flow from
continuing operations was $997 million, compared with $1.390
billion in the prior year. The decrease year-over-year was due to a
decrease in cash collections and a number of expected factors
including higher cash taxes, payments related to the Fiscal 2014
Plan and a reduction in capitalized software development costs. The
decrease in cash collections was primarily due to a decrease in
cash collections from single installment payments of $170 million.
CAPITAL STRUCTURE
• Cash, cash equivalents and investments at March 31, 2014
were $3.252 billion. • With $1.766 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash, cash equivalents and investments position was $1.347 billion.
• In the fourth quarter of fiscal 2014, the Company
repurchased more than 5 million shares of stock for $167 million.
For fiscal 2014, the Company repurchased 16 million shares of stock
for $505 million. • At March 31, 2014, the Company has
completed the purchases of its common stock under its stock
repurchase program that was authorized in January 2012. •
During the fourth quarter of fiscal 2014, the Company distributed
$112 million in dividends to shareholders. For fiscal 2014, the
Company distributed $453 million in dividends to shareholders.
• The Company’s outstanding share count at March 31, 2014
was 439 million.
NEW AUTHORIZED SHARE REPURCHASE PROGRAM
On May 14, 2014, the Company's Board of Directors approved a
stock repurchase program that authorized the Company to acquire up
to $1 billion of CA common stock. The Company expects to complete
the program in approximately three years. The Company expects to
fund the program with available cash on hand and repurchase shares
on the open market, through solicited or unsolicited privately
negotiated transactions or otherwise, from time to time, based on
market conditions and other factors.
OUTLOOK FOR FISCAL 2015
The following outlook for fiscal 2015 contains "forward-looking
statements" (as defined below).
The Company expects the following:
•
Total revenue to decrease in a range of minus 2 percent to
minus 1 percent in constant currency. At March 31, 2014 exchange
rates, this translates to reported revenue of $4.43 billion to
$4.49 billion.
•
GAAP diluted earnings per share from continuing operations to
decrease in a range of minus 12 percent to minus 8 percent in
constant currency. At March 31, 2014 exchange rates, this
translates to reported GAAP diluted earnings per share of $1.79 to
$1.86. • Non-GAAP diluted earnings per share from continuing
operations to decrease in a range of minus 21 percent to minus 19
percent in constant currency. At March 31, 2014 exchange rates,
this translates to reported non-GAAP diluted earnings per share of
$2.45 to $2.52. • Cash flow from continuing operations to
increase in a range of 5 percent to 12 percent in constant
currency. At March 31, 2014 exchange rates, this translates to
reported cash flow from continuing operations of $1.06 billion to
$1.13 billion.
This outlook assumes no material acquisitions and a partial
currency hedge of operating income. The Company expects a full-year
GAAP operating margin of 28 percent and non-GAAP operating margin
of 37 percent. The Company also expects to return to a normalized
full-year GAAP and non-GAAP effective tax rate of about 30 percent,
which results in a negative impact to GAAP and non-GAAP diluted
earnings per share from continuing operations of approximately
$0.42 and $0.58, respectively.
The Company anticipates approximately 436 million shares
outstanding at fiscal 2015 year-end and weighted average diluted
shares outstanding of approximately 442 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 live webcast that the Company will host at 8:30 a.m.
ET today to discuss its unaudited fourth quarter and full
fiscal year results. The webcast will be archived on the website.
Individuals can access the webcast, as well as the press release
and supplemental financial information at http://ca.com/invest or can 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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• Social Media Page
• 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, include 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 2007
restructuring costs, recoveries and certain costs associated with
derivative litigation matters and certain other gains and losses,
which include 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. The Company will expense
costs for internally developed software where development efforts
commenced in the first quarter of fiscal 2014 and afterwards. As a
result, product development and enhancement expenses are expected
to increase in future periods as the amount capitalized for
internally developed software costs decreases. Due to this change,
the Company will also add back capitalized internal software costs
and exclude the amortization of internal software costs from these
non-GAAP metrics. Also beginning in the first quarter of fiscal
2014, the Company will exclude charges relating to rebalancing
initiatives that are large enough to require approval from the
Company's Board of Directors. 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. These 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 in which such items arise and the
effective tax rate for non-GAAP generally allocating the impact of
discrete items pro rata to the fiscal year's remaining reporting
periods. Adjusted cash flow from operations excludes payments
associated with the fiscal 2014 Board-approved rebalancing
initiative as described above, capitalized software development
costs as described above, and restructuring and other payments.
Free cash flow excludes purchases of property and equipment and
capitalized software development costs. The Company presents
constant currency information to provide a framework for assessing
how the Company's 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 U.S. dollars are
converted into U.S. dollars at the exchange rate in effect on the
last day of the Company's prior fiscal year (i.e., March 31, 2014,
March 31, 2013, March 31, 2012 and March 31, 2011, respectively).
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 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 relating to the
future) 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 managing the Company's sales force to
enable the Company to maintain and enhance its strong relationships
in its traditional customer base and to increase penetration and
accelerate growth in customer segments and geographic regions where
the Company currently may not have a strong presence or the Company
has underserved, enabling the sales force to sell new products,
improving the Company's brand, technology and innovation awareness
in the marketplace and ensuring the Company's set of cloud
computing, application development and IT operations (DevOps),
Software-as-a-Service, mobile device management 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
innovate and/or 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 of the Company's products to
remain compatible with ever-changing operating environments,
platforms or third party products; the ability to successfully
integrate acquired companies and products into the Company's
existing business; the ability to adequately manage, evolve and
protect the Company's information systems, infrastructure and
processes; risks associated with sales to government customers;
breaches of the Company's data center, network and software
products, and the IT environments of the Company's vendors and
customers; discovery of errors or omissions in the Company's
software products or documentation and potential product liability
claims; the failure to protect the Company's intellectual property
rights and source code; events or circumstances that would require
the Company to record an impairment charge relating to the
Company's goodwill or capitalized software and other intangible
assets balances; access to software licensed from third parties;
risks associated with the use of software from open source code
sources; 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; potential tax
liabilities; changes in market conditions or the Company's credit
ratings; fluctuations in foreign currencies; the failure to
effectively execute the Company's workforce reductions, workforce
rebalancing and facilities consolidations; successful and secure
outsourcing of various functions to third parties; 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 the Company's 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 © 2014 CA, Inc. All Rights Reserved. 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:
2014
2013
2014
2013
Subscription and maintenance $ 925 $ 946 $ 3,747 $ 3,833
Professional services 90 99 379 382 Software fees and other
93 98 389 395
Total revenue $
1,108 $ 1,143 $ 4,515 $ 4,610
Expenses: Costs of
licensing and maintenance $ 82 $ 74 $ 303 $ 282 Cost of
professional services 89 88 353 354 Amortization of capitalized
software costs (1) 69 121 282 317 Selling and marketing 318 323
1,150 1,273 General and administrative 118 101 395 405 Product
development and enhancements 159 121 587 489 Depreciation and
amortization of other intangible assets 31 38 144 158 Other (gains)
expenses, net (2) 52 9 208 (5 )
Total expenses before interest and income taxes $ 918 $ 875
$ 3,422 $ 3,273
Income from continuing operations before
interest and income taxes $ 190 $ 268 $ 1,093 $ 1,337 Interest
expense, net 15 11 54 44
Income from continuing operations before income taxes $ 175
$ 257 $ 1,039 $ 1,293 Income tax expense 71 19
140 354
Income from continuing operations $
104 $ 238 $ 899 $ 939
Income from discontinued operations, net
of income taxes 3 4 15 16
Net income $ 107 $ 242 $ 914 $ 955
Basic
income per common share: Income from continuing operations $
0.23 $ 0.52 $ 2.00 $ 2.03 Income from discontinued operations
0.01 0.01 0.03 0.04
Net
income $ 0.24 $ 0.53 $ 2.03 $ 2.07
Basic weighted
average shares used in computation 442 449 446 456
Diluted income per common share: Income from continuing
operations $ 0.23 $ 0.52 $ 1.99 $ 2.03 Income from discontinued
operations 0.01 0.01 0.03 0.04
Net income $ 0.24 $ 0.53 $ 2.02 $ 2.07
Diluted
weighted average shares used in computation 444 450 448 457 (1)
Amortization of capitalized software costs includes an
impairment of $55 million relating to purchased software products,
for the three and twelve month periods ending March 31, 2013.
(2) Other (gains) expenses, net includes approximately $37
million and $171 million of charges relating to the FY2014 Board
approved re-balancing initiative (the Fiscal 2014 Plan), for the
three and twelve month periods ending March 31, 2014, respectively.
Prior year results have been adjusted to reflect the
discontinued operations associated with the sale of the CA ERwin
Data Modeling business.
Table 2 CA
Technologies Condensed Consolidated Balance Sheets (in
millions) March 31, March
31, 2014 2013 (unaudited) Cash and cash equivalents $ 3,252 $ 2,593
Short-term investments - 183 Trade accounts receivable, net 800 856
Deferred income taxes 315 346 Other current assets 192
148
Total current assets $ 4,559 $
4,126 Property and equipment, net $ 295 $ 311 Goodwill 5,922
5,864 Capitalized software and other intangible assets, net 1,063
1,242 Deferred income taxes 59 77 Other noncurrent assets, net
118 195
Total assets $ 12,016
$ 11,815 Current portion of long-term debt $
514 $ 16 Deferred revenue (billed or collected) 2,459 2,465
Deferred income taxes 9 12 Other current liabilities 940
1,048
Total current liabilities $ 3,922
$ 3,541 Long-term debt, net of current portion $ 1,252 $
1,274 Deferred income taxes 67 124 Deferred revenue (billed or
collected) 890 969 Other noncurrent liabilities 315
457
Total liabilities $ 6,446 $ 6,365
Common stock $ 59 $ 59 Additional paid-in capital
3,610 3,593 Retained earnings 5,818 5,357 Accumulated other
comprehensive loss (171 ) (155 ) Treasury stock (3,746 )
(3,404 )
Total stockholders’ equity $ 5,570 $
5,450
Total liabilities and stockholders’ equity $
12,016 $ 11,815
Table 3 CA
Technologies Condensed Consolidated Statements of Cash
Flows (unaudited) (in millions)
Three Months Ended
March 31,
2014
2013
Operating activities from continuing operations: Net income
$ 107 $ 242 Income from discontinued operations (3 )
(4 ) Income from continuing operations $ 104 $ 238 Adjustments to
reconcile income from continuing operations to net cash provided by
operating activities: Depreciation and amortization 100 159
Deferred income taxes 6 (33 ) Provision for bad debts 2 3
Share-based compensation expense 18 16 Asset impairments and other
non-cash items 1 6 Foreign currency transaction losses (gains) 7 (3
) Changes in other operating assets and liabilities, net of effect
of acquisitions: Increase in trade accounts receivable (91 ) (70 )
Increase in deferred revenue 326 292 Decrease in taxes payable, net
(84 ) (130 ) Increase in accounts payable, accrued expenses and
other 62 43 Increase in accrued salaries, wages and commissions 29
24 Changes in other operating assets and liabilities 3
20
Net cash provided by operating
activities - continuing operations $ 483 $ 565
Investing activities from continuing operations:
Acquisitions of businesses, net of cash acquired, and purchased
software $ (6 ) $ (58 ) Purchases of property and equipment (13 )
(9 ) Capitalized software development costs (1 ) (43 ) Maturities
of investments 7 - Decrease in restricted cash 50 - Other investing
activities - (1 )
Net cash provided by
(used in) investing activities - continuing operations $ 37
$ (111 )
Financing activities from continuing
operations: Dividends paid $ (112 ) $ (114 ) Purchases of
common stock, including accelerated share repurchase (167 ) (72 )
Notional pooling repayments, net (6 ) - Debt repayments (3 ) (4 )
Exercise of common stock options and other 19
5
Net cash used in financing activities - continuing
operations $ (269 ) $ (185 )
Net change in cash and cash
equivalents before effect of exchange rate
changes on cash - continuing
operations
$ 251 $ 269 Effect of exchange rate changes on cash $ 24 $ (34 )
Cash provided by operating activities - discontinued operations $ 3
$ 5
Increase in cash and cash equivalents $
278 $ 240
Cash and cash equivalents at beginning of period $
2,974 $ 2,353
Cash and cash equivalents at end of
period $ 3,252 $ 2,593
Prior year results have been adjusted to reflect the
discontinued operations associated with the sale of the CA ERwin
Data Modeling business.
Table 4 CA Technologies Operating
Segments (unaudited) (dollars in millions)
Three Months Ended March
31, 2014 Fiscal Year Ended March 31, 2014
MainframeSolutions(1)
EnterpriseSolutions (1)
Services (1)
Total
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1)
Total Revenue (2) $ 613 $ 405 $ 90 $ 1,108 $ 2,478 $ 1,658 $
379 $ 4,515 Expenses (3) 278 414
89 781 987 1,514
357 2,858 Segment profit $ 335 $
(9 ) $ 1 $ 327 $ 1,491 $ 144 $ 22
$ 1,657 Segment operating margin 55 % (2 )% 1 % 30 %
60 % 9 % 6 % 37 % Segment profit $ 327 $ 1,657 Less:
Purchased software amortization 29 117 Other intangibles
amortization
12 60 Software development costs capitalized (1 ) (33 ) Internally
developed software products amortization 40 165 Share-based
compensation expense 18 82 Other (gains) expenses, net (4) 39 173
Interest expense, net 15 54 Income from
continuing operations before income taxes $ 175 $ 1,039
Three Months Ended March
31, 2013 Fiscal Year Ended March 31, 2013
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 620 $ 424 $ 99 $ 1,143 $
2,489 $ 1,739 $ 382 $ 4,610 Expenses (3) 264
413 89 766 1,028
1,599 358 2,985 Segment
profit $ 356 $ 11 $ 10 $ 377 $ 1,461
$ 140 $ 24 $ 1,625 Segment operating
margin 57 % 3 % 10 % 33 % 59 % 8 % 6 % 35 % Segment profit $
377 $ 1,625 Less: Purchased software amortization (5) 83 163 Other
intangibles amortization 13 54 Software development costs
capitalized (39 ) (161 ) Internally developed software products
amortization 38 154 Share-based compensation expense 16 78 Other
(gains) expenses, net (4) (2 ) - Interest expense, net 11
44 Income from continuing operations before
income taxes $ 257 $ 1,293 (1) The Company’s
Mainframe Solutions and Enterprise Solutions segments comprise its
software business organized by the nature of the Company’s software
offerings and the platform on which the products operate. The
Services segment comprises product implementation, consulting,
customer education and customer training, including those directly
related to the Mainframe Solutions and Enterprise Solutions
software that the Company sells to its customers. (2) The
Company regularly enters into a single arrangement with a customer
that includes mainframe solutions, enterprise solutions and
services. The amount of contract revenue assigned to operating
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 operating segment is
then recognized in a manner consistent with the revenue recognition
policies the Company applies to the customer contract for purposes
of preparing the 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 and
general and administrative costs. Allocated segment costs primarily
include indirect and non-segment specific direct 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 of cost of
professional services and other direct costs included within
selling and marketing and general and administrative expenses.
There are no allocated or indirect costs for the Services segment.
(4) Other (gains) expenses, net includes charges relating to
the FY2014 Board approved re-balancing initiative (the Fiscal 2014
Plan), certain foreign exchange derivative hedging gains and
losses, and other miscellaneous costs. (5) Purchased
software amortization includes an impairment of $55 million
relating to purchased software products, for the three and twelve
month periods ending March 31, 2013. Prior year results have
been adjusted to reflect the discontinued operations associated
with the sale of the CA ERwin Data Modeling business and for
internally developed software.
Table 5
CA Technologies Constant Currency Summary (unaudited)
(dollars in millions) Three Months Ended March
31, Fiscal Year Ended March 31, 2014 2013
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
2014 2013
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
Bookings $ 1,241 $ 1,452 (15 )% (15 )% $ 4,521 $
4,082 11 % 11 %
Revenue: North America $ 699 $ 716 (2
)% (2 )% $ 2,852 $ 2,893 (1 )% (1 )% International 409
427 (4 )% (2 )% 1,663 1,717 (3 )% (1 )% Total
revenue $ 1,108 $ 1,143 (3 )% (2 )% $ 4,515 $ 4,610 (2 )% (1 )%
Revenue: Subscription and maintenance $ 925 $ 946 (2
)% (1 )% $ 3,747 $ 3,833 (2 )% (2 )% Professional services 90 99 (9
)% (7 )% 379 382 (1 )% 0 % Software fees and other 93
98 (5 )% (3 )% 389 395 (2 )% 0 % Total revenue $
1,108 $ 1,143 (3 )% (2 )% $ 4,515 $ 4,610 (2 )% (1 )%
Segment Revenue: Mainframe solutions $ 613 $ 620 (1 )% 0 % $
2,478 $ 2,489 0 % 0 % Enterprise solutions 405 424 (4 )% (4 )%
1,658 1,739 (5 )% (4 )% Services 90 99 (9 )% (7 )% 379 382 (1 )% 0
%
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 781 $ 766 2 % 2 % $ 2,858 $ 2,985 (4 )% (4 )%
Total GAAP (3) 918 875 5 % 4 % 3,422 3,273 5 % 5 % (1)
Constant currency information is presented to provide a
framework for assessing how the Company's 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, 2013, which was the last day of the 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. (3) Total GAAP
expenses include an impairment of $55 million relating to purchased
software products, for the three and twelve month periods ending
March 31, 2013. Prior year results have been adjusted to
reflect the discontinued operations associated with the sale of the
CA ERwin Data Modeling business and for internally developed
software. 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) (dollars in millions)
Three
Months Ended Fiscal Year Ended
March 31,
March 31,
2014
2013
2014
2013
GAAP net income $ 107 $ 242 $ 914 $ 955 GAAP income from
discontinued operations, net of income taxes (3 ) (4
) (15 ) (16 ) GAAP income from continuing operations
$ 104 $ 238 $ 899 $ 939 GAAP income tax expense 71 19 140 354
Interest expense, net 15 11 54
44 GAAP income from continuing operations
before interest and income taxes $ 190 $ 268 $ 1,093
$ 1,337 GAAP operating margin (% of revenue) (1) 17 %
23 % 24 % 29 % Non-GAAP adjustments to expenses: Costs of
licensing and maintenance (2) $ 1 $ 1 $ 4 $ 3 Cost of professional
services (2) 1 1 4 4 Amortization of capitalized software costs (3)
69 121 282 317 Selling and marketing (2) 6 7 29 31 General and
administrative (2) 6 2 26 23 Product development and enhancements
(4) 3 (34 ) (14 ) (144 ) Depreciation and amortization of other
intangible assets (5) 12 13 60 54 Other (gains) expenses, net (6)
39 (2 ) 173 -
Total Non-GAAP adjustment to operating expenses $ 137 $ 109
$ 564 $ 288 Non-GAAP income from continuing
operations before interest and income taxes $ 327 $ 377 $ 1,657 $
1,625 Non-GAAP operating margin (% of revenue) (7) 30 % 33 % 37 %
35 % Interest expense, net 15 11 54 44 GAAP income tax
expense 71 19 140 354 Non-GAAP adjustment to income tax expense (8)
(33 ) 42 76 79
Non-GAAP income tax expense $ 38 $ 61 $ 216 $
433 Non-GAAP income from continuing operations $ 274
$ 305 $ 1,387 $ 1,148 (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) For the
three month periods ending March 31, 2014 and 2013, non-GAAP
adjustment consists of $29 million and $83 million of purchased
software amortization and $40 million and $38 million of internally
developed software products amortization, respectively. For the
twelve month periods ending March 31, 2014 and 2013, non-GAAP
adjustment consists of $117 million and $163 million of purchased
software amortization and $165 million and $154 million of
internally developed software products amortization, respectively.
Purchased software amortization includes an impairment of $55
million relating to purchased software products, for the three and
twelve month periods ending March 31, 2013. (4) For the
three month periods ending March 31, 2014 and 2013, non-GAAP
adjustment consists of $4 million and $5 million of share-based
compensation and ($1) million and ($39) million of software
development costs capitalized, respectively. For the twelve month
periods ending March 31, 2014 and 2013, non-GAAP adjustment
consists of $19 million and $17 million of share-based compensation
and ($33) million and ($161) million of software development costs
capitalized, respectively. (5) Non-GAAP adjustment consists
of other intangibles amortization. (6) Non-GAAP adjustment
consists of charges relating to the FY2014 Board approved
re-balancing initiative (the Fiscal 2014 Plan) and certain other
gains and losses, including gains and losses since inception of
hedges that mature within the quarter, but excludes gains and
losses of hedges that do not mature within the quarter. (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. Prior year results have been
adjusted to reflect the discontinued operations associated with the
sale of the CA ERwin Data Modeling business and for internally
developed software. 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
2014
2013
2014
2013
Total expenses before interest and income taxes $ 918 $ 875
$ 3,422 $ 3,273 Non-GAAP operating adjustments: Purchased
software amortization (1) 29 83 117 163 Other intangibles
amortization 12 13 60 54 Software development costs capitalized (1
) (39 ) (33 ) (161 ) Internally developed software products
amortization 40 38 165 154 Share-based compensation 18 16 82 78
Other (gains) expenses, net (2) 39 (2 )
173 - Total non-GAAP operating adjustment $
137 $ 109 $ 564 $ 288 Total
non-GAAP operating expenses $ 781 $ 766 $ 2,858
$ 2,985 Three Months Ended Fiscal Year
Ended
March 31,
March 31,
Diluted EPS from
Continuing Operations
2014
2013
2014
2013
GAAP diluted EPS from continuing operations $ 0.23 $ 0.52 $
1.99 $ 2.03 Non-GAAP adjustments, net of taxes: Purchased
software amortization (1) 0.04 0.17 0.22 0.25 Other intangibles
amortization 0.02 0.02 0.11 0.09 Software development costs
capitalized - (0.08 ) (0.06 ) (0.25 ) Internally developed software
products amortization 0.05 0.08 0.32 0.24 Share-based compensation
0.02 0.03 0.16 0.12 Other (gains) expenses, net (2) 0.05 - 0.33 -
Non-GAAP effective tax rate adjustments (3) 0.20
(0.07 ) - - Total non-GAAP
adjustment $ 0.38 $ 0.15 $ 1.08 $ 0.45
Non-GAAP diluted EPS from continuing operations $ 0.61
$ 0.67 $ 3.07 $ 2.48 (1)
Purchased software amortization includes an impairment of $55
million relating to purchased software products, for the three and
twelve month periods ending March 31, 2013. (2) Non-GAAP
adjustment consists of charges relating to the FY2014 Board
approved re-balancing initiative (the Fiscal 2014 Plan) and certain
other gains and losses, including gains and losses since inception
of hedges that mature within the quarter, but excludes 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. Prior year results have been adjusted to
reflect the discontinued operations associated with the sale of the
CA ERwin Data Modeling business and for internally developed
software. 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) (dollars in millions)
Three
Months Ended Fiscal Year Ended
March 31,
2014
March 31,
2014
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 190 $ 327 $ 1,093 $ 1,657 Interest expense, net
15 15 54 54 Income
from continuing operations before income taxes $ 175 $ 312 $ 1,039
$ 1,603 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 61 $ 109 $ 364 $ 561 Adjustments for discrete and
permanent items (2) 10 (71 ) (224 )
(345 ) Total tax expense $ 71 $ 38 $ 140 $ 216
Effective tax rate (3) 40.6 % 12.2 % 13.5 % 13.5 % Three
Months Ended Fiscal Year Ended
March 31,
2013
March 31,
2013
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 268 $ 377 $ 1,337 $ 1,625 Interest expense, net
11 11 44 44 Income
from continuing operations before income taxes $ 257 $ 366 $ 1,293
$ 1,581 Statutory tax rate 35 % 35 % 35 % 35 % Tax at
statutory rate $ 90 $ 128 $ 453 $ 553 Adjustments for discrete and
permanent items (2) (71 ) (67 ) (99 )
(120 ) Total tax expense $ 19 $ 61 $ 354 $ 433 Effective tax
rate (3) 7.4 % 16.7 % 27.4 % 27.4 % (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. Prior year results have been
adjusted to reflect the discontinued operations associated with the
sale of the CA ERwin Data Modeling business and for internally
developed software. Certain non-material differences may
arise versus actual from impact of rounding.
Table 9
CA Technologies Reconciliation of Projected GAAP Metrics
to Projected Non-GAAP Metrics (unaudited)
Fiscal Year Ending
Projected Diluted
EPS from Continuing Operations
March 31,
2015
Projected GAAP diluted EPS from continuing operations range
$ 1.79 to $ 1.86 Non-GAAP adjustments, net of taxes:
Purchased software amortization 0.18 0.18 Other intangibles
amortization 0.09 0.09 Internally developed software products
amortization 0.23 0.23 Share-based compensation 0.14 0.14 Other
(gains) expenses, net (1) 0.02 0.02 Total non-GAAP
adjustment $ 0.66 $ 0.66 Projected non-GAAP diluted EPS from
continuing operations range $ 2.45 to $ 2.52 Fiscal
Year Ending
Projected Operating
Margin
March 31,
2015
Projected GAAP operating margin 28 % Non-GAAP
operating adjustments: Purchased software amortization 3 % Other
intangibles amortization 1 % Internally developed software products
amortization 3 % Share-based compensation 2 % Other (gains)
expenses, net (1) 0 % Total non-GAAP operating adjustment 9 %
Projected non-GAAP operating margin 37 % (1)
Non-GAAP adjustment consists of charges relating to the FY2014
Board approved re-balancing initiative (the Fiscal 2014 Plan).
Refer to the discussion of non-GAAP financial measures
included in the accompanying press release for additional
information.
CA, Inc.Jennifer Hallahan, 212-415-6924Public
Relationsjennifer.hallahan@ca.comorJonathan Doros,
212-415-6870Investor Relationsjonathan.doros@ca.com
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