- Improving Sales Execution with
Positive Enterprise Solutions New Sales Performance and Continued
Financial Discipline
- First Quarter Revenue of $977
Million, Compared With $1,069 Million Last Year
- First Quarter GAAP EPS of $0.47,
Compared With $0.48 Last Year
- First Quarter Non-GAAP EPS of $0.64,
Compared With $0.65 Last Year
- First Quarter Cash Flow From
Continuing Operations of $188 Million, Compared With $166 Million
Last Year
- Hired Industry Veteran Ayman Sayed,
Former Senior Vice President of the Network Operating Systems Group
at Cisco, as Chief Product Officer
CA Technologies (NASDAQ:CA) today reported financial results for
its first quarter fiscal 2016, which ended June 30, 2015.
Mike Gregoire, CA Technologies Chief Executive Officer,
said:
"In the first quarter of 2016, we achieved a strong 41 percent
non-GAAP operating margin.* We continued to make progress in
achieving our long-term goals. While our overall first-quarter
total revenue and new sales declined year-over-year, I am quite
encouraged by the positive trend over the past three quarters in
enterprise solutions new sales growth rates. This was achieved
mainly from our Named and Growth accounts, which is proof that our
strategy is beginning to show impact.
"We have enhanced our internal development capabilities with the
acquisition of Rally Software, which closed earlier this month. We
will continue to focus on organic innovation but make strategic
acquisitions when they make sense. Rally adds to our portfolio an
award-winning, cloud-based agile development platform. Along with
Rally's transformation consultants and coaches, this positions CA
to become an industry leader in the fast growing Agile Application
Lifecycle Management market.
"Continuing our focus on product innovation, we today named
industry veteran Ayman Sayed, former senior vice president of the
Network Operating Systems Group at Cisco, as our chief product
officer. Ayman is a visionary technologist who has a demonstrated
track record of innovating at scale using modern platforms and
Agile methodologies. Last month, we also named Xbox co-founder
and Microsoft veteran Otto Berkes as CA's Chief Technology
Officer. I am confident that the partnership between Ayman and
Otto will accelerate our ability to bring meaningful products to
market.
"Looking at the rest of fiscal 2016, we will continue to focus
on execution, invest in key growth areas and push to deliver
long-term value for our shareholders."
* GAAP operating margin was 31 percent.
FINANCIAL OVERVIEW
(dollars in
millions, except share data)
First
Quarter FY16 vs. FY15 FY16
FY15 % Change
% ChangeCC**
Revenue $977 $1,069
(9)% (3)% GAAP Income from Continuing
Operations $207 $212
(2)% 14% Non-GAAP Income from
Continuing Operations* $283 $289
(2)% 8% GAAP Diluted EPS from
Continuing Operations $0.47 $0.48
(2)% 15% Non-GAAP Diluted
EPS from Continuing Operations* $0.64
$0.65 (2)% 9% Cash Flow
from Continuing Operations $188 $166
13% 38%
* 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
REVENUE AND BOOKINGS
(dollars in
millions)
First Quarter FY16 vs.
FY15 FY16 %
ofTotal FY15
% ofTotal
%Change %Change
CC** North America Revenue $652
67% $682 64%
(4)% (4)% International Revenue
$325 33% $387
36% (16)%
0% Total Revenue $977
$1,069
(9)% (3)%
North America Bookings $451
68% $459 63%
(2)% (1)% International
Bookings $211 32%
$265 37% (20)%
(8)% Total Bookings $662
$724
(9)% (3)%
Current Revenue Backlog $3,042
$3,402
(11)% (3)% Total
Revenue Backlog $6,278
$7,330
(14)% (7)%
**CC: Constant Currency
- Total revenue
declined primarily as a result of an unfavorable foreign
exchange effect of $65 million and, to a lesser extent, a decrease
in subscription and maintenance revenue.
- Total bookings were lower primarily due
to an unfavorable foreign exchange effect and, to a lesser extent,
a decrease in renewals in our Mainframe Solutions business.
- The Company executed a total of 6
license agreements with incremental contract values in excess of
$10 million each, for an aggregate contract value of $214 million.
During the first quarter of fiscal 2015, the Company executed a
total of 8 license agreements with incremental contract values in
excess of $10 million each, for an aggregate contract value of $330
million.
- The weighted average duration of
subscription and maintenance bookings for the quarter was 3.45
years, compared with 3.60 years for the same period in fiscal
2015.
EXPENSES AND MARGIN
(dollars in
millions)
First Quarter FY16 vs.
FY15 FY16 FY15
%Change
%Change CC** GAAP
Operating Expenses Before Interest and Income Taxes $673
$756 (11)%
(8)% Operating Income Before Interest and Income Taxes
$304 $313 (3)%
12% Operating Margin 31%
29%
Effective Tax Rate 29.8% 29.1%
Non-GAAP*
Operating Expenses Before Interest and Income Taxes $572
$642 (11)%
(7)% Operating Income Before Interest and Income Taxes
$405 $427 (5)%
4% Operating Margin 41%
40%
Effective Tax Rate 28.5% 30.0%
*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 workforce
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 and non-GAAP first quarter
operating expenses were favorably affected by foreign exchange and
lower personnel-related expenses.
SELECTED HIGHLIGHTS FROM THE QUARTER
- Customer traction for CA Technologies
innovations continued in the quarter.
- CA Project and Portfolio Management (CA
PPM) high profile wins included a competitive replacement with
Delta Air Lines, which is leveraging CA’s solution to automate the
vast number of complex business process across a multitude of
different internal organizations.
- CA Secure Cloud, CA’s identity and
access management solution for managed service providers, has been
integrated into telecommunications giant BT’s new managed identity
service supporting cloud, on-premise and hybrid IT systems.
- A financial institution in the Europe,
Middle East and Africa region selected CA Capacity Manager to
ensure that the sizing and capacity of its IT infrastructure
matches the evolving business demands in a cost-effective and
timely manner.
- A large financial services provider
based in the United Kingdom selected CA Advanced Authentication
solution to enable a simplified and secure user experience and
mitigate security performance risk driving customer
experience.
- Solutions leadership:
- CA enhanced its internal development
capabilities by acquiring Rally Software Development Corp. (Rally),
a leading provider of Agile development software and services. The
deal closed earlier this month and complements our organic
innovation strategy.
- CA announced the integration of its CA
Release Automation solution with the Docker platform and the newest
release of its CA PPM solution.
- CA was designated a “Leader” in the
Gartner Magic Quadrant for IT Project and Portfolio Management
Software Applications, Worldwide (1).
- CA was positioned in the Leaders
Quadrant of the Gartner Magic Quadrant for Application Services
Governance for its API Management product (2).
SEGMENT INFORMATION
(dollars in
millions)
First Quarter FY16 vs.
FY15 Revenue
%Change
%Change CC**
Operating Margin FY16
FY15 FY16
FY15 Mainframe Solutions $560
$614 (9)%
(3)% 62% 62% Enterprise
Solutions $338 $368
(8)% (2)% 14%
12% Services $79
$87 (9)% (3)%
10% 6%
**CC: Constant Currency
- Mainframe Solutions revenue was lower
primarily due to an unfavorable foreign exchange effect of $38
million and, to a lesser extent, insufficient revenue from prior
period new sales. Operating margin was similar to a year ago.
- Enterprise Solutions revenue decreased
due to an unfavorable foreign exchange effect of $22 million and a
decrease in the percentage of Enterprise Solutions product sales
recognized on an up-front basis. Enterprise Solutions operating
margin increased primarily as a result of lower personnel-related
costs and other expenses.
- Services revenue decreased primarily
due to an unfavorable foreign exchange effect of $5 million and, to
a lesser extent, a decline in fiscal 2015 professional services
engagements. Operating margin for professional services increased
primarily due to a decrease in personnel-related costs as a result
of our prior period severance actions.
CASH FLOW FROM OPERATIONS
- Cash flow from operations for the first
quarter of fiscal 2016 was $188 million, versus $166 million in the
year ago period. Cash flow from operations increased compared
with the year-ago period primarily due to lower vendor
disbursements and payroll costs, and lower income tax payments
partially offset by a decline in cash collections.
- Cash flow was negatively affected by
foreign exchange. Excluding currency effects, collections would
have been positive.
CAPITAL STRUCTURE
- Cash, cash equivalents and investments
at June 30, 2015 were $2.816 billion.
- With $1.258 billion in total debt
outstanding and $139 million in notional pooling, the Company’s net
cash, cash equivalents and investments position was $1.419
billion.
- In the first quarter of fiscal 2016,
the Company repurchased 1.7 million shares of common stock for $50
million.
- As of June 30, 2015, the Company
is currently authorized to purchase $735 million of its common
stock under its current stock repurchase program.
- Effective July 1, 2015, the Company
entered into an agreement to repurchase $50 million of its common
stock to be delivered in September 2015.
- The Company distributed $110 million in
dividends to shareholders.
- The Company’s outstanding share count
at June 30, 2015 was 437 million.
LEADERSHIP
- The Company today named industry
veteran Ayman Sayed as chief product officer. Sayed most recently
served as senior vice president of the Network Operating Systems
Technology Group at Cisco, where he led the development of
networking operating software on which nearly every Cisco
networking product runs.
- The Company has hired Xbox co-founder
and Microsoft Corporation veteran Otto Berkes as chief technology
officer. Berkes most recently served as the chief technology
officer at HBO, where was responsible for the development of HBO
GO®, as well as all of the company’s technology efforts including
media production, internal business systems and technology
operations.
OUTLOOK FOR FISCAL YEAR 2016
The Company updated its fiscal 2016 outlook for revenue, GAAP
and non-GAAP diluted earnings per share from continuing operations,
full-year GAAP and non-GAAP operating margin. This guidance
includes the acquisition of Rally, which closed earlier this month,
and assumes no incremental material acquisitions. The following
outlook contains "forward-looking statements" (as defined
below).
The Company expects the following:
- Total revenue to change in a range of
minus 1 percent to flat in constant currency. Previous guidance was
to decrease 2 percent in constant currency. At June 30, 2015
exchange rates, this translates to reported revenue of $4.04
billion to $4.11 billion.
- GAAP diluted earnings per share from
continuing operations to increase in a range of 6 percent to 10
percent in constant currency. Previous guidance was to increase in
a range of 12 percent to 17 percent in constant currency. At
June 30, 2015 exchange rates, this translates to reported GAAP
diluted earnings per share from continuing operations of $1.72 to
$1.80.
- Non-GAAP diluted earnings per share
from continuing operations to increase in a range of 2 percent to 5
percent in constant currency, unchanged from previous guidance. At
June 30, 2015 exchange rates, this translates to reported
non-GAAP diluted earnings per share from continuing operations of
$2.37 to $2.44.
- Cash flow from continuing operations to
increase in the range of 2 percent to 7 percent in constant
currency, unchanged from previous guidance. At June 30, 2015
exchange rates, this translates to reported cash flow from
continuing operations of $0.98 billion to $1.03 billion.
The Company expects a full-year GAAP operating margin of 28
percent and non-GAAP operating margin of 38 percent, which
translates to a 2-point decrease and 1-point decrease from previous
guidance, respectively.
The Company also expects a full-year GAAP and non-GAAP effective
tax rate of between 28 percent and 29 percent, unchanged from
previous guidance.
The Company anticipates approximately 432 million shares
outstanding at fiscal 2016 year-end and weighted average diluted
shares outstanding of approximately 436 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 conference call and webcast that the Company will host at
5:00 p.m. ET today to discuss its unaudited first quarter results.
The webcast will be archived on the website. Individuals can access
the webcast, as well as 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.
(1) Gartner, Inc., “Magic Quadrant for IT Project and Portfolio
Management Software Applications, Worldwide,” Daniel B. Stang,
Robert A. Handler, Teresa Jones, May 20, 2015
(2) Gartner, Inc. "Magic Quadrant for Application Services
Governance," Paolo Malinverno April 9, 2015.
Gartner does not endorse any vendor, product or service depicted
in its research publications, and does not advise technology users
to select only those vendors with the highest ratings or other
designation. Gartner research publications consist of the opinions
of Gartner's research organization and should not be construed as
statements of fact. Gartner disclaims all warranties, expressed or
implied, with respect to this research, including any warranties of
merchantability or fitness for a particular purpose.
About CA Technologies
CA Technologies (NASDAQ: CA) creates software that fuels
transformation for companies and enables them to seize the
opportunities of the application economy. Software is at the heart
of every business in every industry. From planning, to development,
to management and security, CA is working with companies worldwide
to change the way we live, transact, and communicate - across
mobile, private and public cloud, distributed and mainframe
environments. Learn more at www.ca.com.
Follow CA Technologies
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Releases
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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, 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: share-based compensation expense; non-cash
amortization of purchased software and other intangible assets;
charges relating to rebalancing initiatives that are large enough
to require approval from the Company's Board of Directors, fiscal
2007 restructuring costs 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 began expensing costs
for internally developed software where development efforts
commenced in the first quarter of fiscal 2014. 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 also adds
back capitalized internal software costs and excludes amortization
of internally developed software costs previously capitalized from
these non-GAAP metrics. 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, 2015,
March 31, 2014 and March 31, 2013, 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, enabling the Company's sales force to accelerate
growth of new product sales (at levels sufficient to offset any
decline in revenue in the Company's Mainframe Solutions segment),
improving the Company's brand, technology and innovation awareness
in the marketplace, ensuring the Company's offerings for cloud
computing, application development and IT operations (DevOps),
Software-as-a-Service (SaaS), and mobile device management, as well
as 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 to an extent greater than
anticipated, and effectively managing the strategic shift in the
Company's business model to develop more easily installed software,
provide additional SaaS offerings and refocus the Company's
professional services and education engagements on those
engagements that are connected to new product sales, without
affecting the Company's performance to an extent greater than
anticipated; the failure to innovate 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 ability of the Company's products to remain compatible
with ever-changing operating environments, platforms or third party
products; global economic factors or political events beyond the
Company's control; the failure to expand partner programs; the
ability to retain and attract qualified professionals; general
economic conditions and credit constraints, or unfavorable economic
conditions in a particular region, industry or business sector; the
ability to successfully integrate acquired companies and products
into the Company's existing business; risks associated with sales
to government customers; breaches of the Company's data center,
network, as well as the Company's software products, and the IT
environments of the Company's vendors and customers; the ability to
adequately manage, evolve and protect the Company's information
systems, infrastructure and processes; fluctuations in foreign
exchange rates; 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; the failure to renew large license
transactions on a satisfactory basis; 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;
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; potential tax
liabilities; changes in market conditions or the Company's credit
ratings; 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; changes in generally accepted accounting principles; 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 © 2015 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
June 30,
Revenue:
2015
2014
Subscription and maintenance $ 836 $ 909 Professional services 79
87 Software fees and other 62
73
Total revenue $ 977 $
1,069
Expenses: Costs of licensing and
maintenance $ 66 $ 72 Cost of professional services 71 81
Amortization of capitalized software costs 60 67 Selling and
marketing 226 246 General and administrative 90 92 Product
development and enhancements 136 150 Depreciation and amortization
of other intangible assets 27 34 Other (gains) expenses, net
(3 ) 14
Total expenses before
interest and income taxes $ 673 $
756
Income from continuing operations before interest and
income taxes $ 304 $ 313 Interest expense, net
9 14
Income from continuing
operations before income taxes $ 295 $ 299 Income tax expense
88 87
Income
from continuing operations $ 207 $ 212 Income from discontinued
operations, net of income taxes $ 5 $
5
Net income $ 212 $
217
Basic income per common share: Income from
continuing operations $ 0.47 $ 0.48 Income from discontinued
operations 0.01
0.01
Net income $ 0.48 $
0.49
Basic weighted average shares used in computation 436
440
Diluted income per common share: Income from
continuing operations $ 0.47 $ 0.48 Income from discontinued
operations 0.01
0.01
Net income $ 0.48 $
0.49
Diluted weighted average shares used in computation 438
441 Results reflect the discontinued operations associated
with the CA ERwin Data Modeling and CA arcserve data protection
businesses.
Table 2 CA Technologies
Condensed Consolidated Balance Sheets (in millions)
June 30, March 31, 2015
2015 (unaudited) Cash and cash equivalents $ 2,816 $
2,804 Trade accounts receivable, net 432 652 Deferred
income taxes 335 318 Other current assets 162
213
Total current assets
$ 3,745 $ 3,987 Property and equipment, net $ 252 $ 252
Goodwill 5,817 5,806 Capitalized software and other intangible
assets, net 700 731 Deferred income taxes 88 92 Other noncurrent
assets, net 105
111
Total assets $ 10,707 $
10,979 Current portion of long-term
debt $ 8 $ 10 Deferred revenue (billed or collected) 2,040 2,114
Deferred income taxes 7 7 Other current liabilities
631 807
Total current
liabilities $ 2,686 $ 2,938 Long-term debt, net of
current portion $ 1,250 $ 1,253 Deferred income taxes 54 45
Deferred revenue (billed or collected) 720 863 Other noncurrent
liabilities 264
255
Total liabilities $ 4,974 $
5,354 Common stock $ 59 $ 59 Additional
paid-in capital 3,592 3,631 Retained earnings 6,323 6,221
Accumulated other comprehensive loss (386 ) (418 ) Treasury stock
(3,855 ) (3,868 )
Total stockholders’ equity $ 5,733 $
5,625
Total liabilities and stockholders’
equity $ 10,707 $ 10,979
Table 3 CA Technologies
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions) Three Months Ended
June 30,
2015
2014
Operating activities from continuing operations: Net income
$ 212 $ 217 Income from discontinued
operations (5 ) (5 )
Income from continuing operations $ 207 $ 212 Adjustments to
reconcile income from continuing operations to net cash provided by
operating activities: Depreciation and amortization 87 101 Deferred
income taxes (10 ) (20 ) Provision for bad debts 1 (1 ) Share-based
compensation expense 22 20 Asset impairments and other non-cash
items - 1 Foreign currency transaction losses 3 - Changes in other
operating assets and liabilities, net of effect of acquisitions:
Decrease in trade accounts receivable 228 251 Decrease in deferred
revenue (239 ) (285 ) Increase in taxes payable, net 27 17 Decrease
in accounts payable, accrued expenses and other (33 ) (30 )
Decrease in accrued salaries, wages and commissions (83 ) (97 )
Changes in other operating assets and liabilities
(22 ) (3 )
Net cash provided by
operating activities - continuing operations $
188 $ 166
Investing activities from
continuing operations: Acquisitions of businesses, net of cash
acquired, and purchased software $ (37 ) $ (11 ) Purchases of
property and equipment (13 )
(21 )
Net cash used in investing activities - continuing
operations $ (50 ) $ (32 )
Financing activities from continuing operations: Dividends
paid $ (110 ) $ (111 ) Purchases of common stock (50 ) (50 )
Notional pooling (repayments) borrowings, net (16 ) 11 Debt
repayments (5 ) (2 ) Exercise of common stock options 4 12 Other
financing activities (23 )
-
Net cash used in financing activities -
continuing operations $ (200 ) $ (140 ) Effect of exchange rate
changes on cash $ 69 $ 1
Net change in cash and cash equivalents - continuing
operations $ 7 $ (5 ) Cash provided by operating activities -
discontinued operations $ 5 $ 8
Net effect of discontinued operations on cash and cash
equivalents $ 5 $ 8
Increase in cash and cash equivalents $ 12 $ 3
Cash and
cash equivalents at beginning of period $ 2,804
$ 3,252
Cash and cash equivalents at
end of period $ 2,816 $
3,255 Results reflect the discontinued operations
associated with the CA ERwin Data Modeling and CA arcserve data
protection businesses.
Table
4 CA Technologies Operating Segments (unaudited)
(dollars in millions)
Three Months Ended June 30, 2015
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 560 $
338 $ 79 $ 977 Expenses (3)
211 290
71 572
Segment profit $ 349 $ 48
$ 8 $ 405
Segment operating margin 62 % 14 % 10 % 41 %
Segment profit $ 405
Less: Purchased software
amortization 28 Other intangibles amortization 11 Internally
developed software products amortization 32 Share-based
compensation expense 22 Other expenses, net (4) 8 Interest expense,
net 9
Income from continuing
operations before income taxes $ 295
Three Months Ended June 30, 2014
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 614 $ 368 $ 87 $ 1,069
Expenses (3) 235
325 82 642
Segment profit $ 379 $
43 $ 5 $ 427
Segment operating margin 62 % 12 % 6 % 40 %
Segment profit $ 427
Less: Purchased software
amortization 28 Other intangibles amortization 15 Internally
developed software products amortization 39 Share-based
compensation expense 20 Other expenses, net (4) 12 Interest
expense, net 14
Income from
continuing operations before income taxes $ 299
(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 expenses, net consists
of costs associated with the FY2014 Board approved rebalancing
initiative (the Fiscal 2014 Plan), certain foreign exchange
derivative hedging gains and losses, and other miscellaneous costs.
Results reflect the discontinued operations associated with
the CA ERwin Data Modeling and CA arcserve data protection
businesses.
Table 5 CA Technologies
Constant Currency Summary (unaudited) (dollars in millions)
Three Months Ended June 30, 2015 2014
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency
(1)
Bookings $ 662 $ 724 (9
)% (3 )%
Revenue: North America $ 652 $ 682 (4 )% (4
)% International 325 387
(16 )% 0 % Total revenue $ 977 $ 1,069 (9 )% (3 )%
Revenue: Subscription and maintenance $ 836 $ 909 (8 )% (2
)% Professional services 79 87 (9 )% (3 )% Software fees and other
62 73 (15 )% (11 )% Total
revenue $ 977 $ 1,069 (9 )% (3 )%
Segment Revenue:
Mainframe solutions $ 560 $ 614 (9 )% (3 )% Enterprise solutions
338 368 (8 )% (2 )% Services 79 87 (9 )% (3 )%
Total
expenses before interest and income taxes: Total non-GAAP (2) $
572 $ 642 (11 )% (7 )% Total GAAP 673 756 (11 )% (8 )% (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 U.S.
dollars are converted into U.S. dollars at the exchange rate in
effect on March 31, 2015, 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. Results reflect the
discontinued operations associated with the CA ERwin Data Modeling
and CA arcserve data protection businesses. 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
June 30,
2015
2014
GAAP net income $ 212 $ 217 GAAP income
from discontinued operations, net of income taxes
(5 ) (5 ) GAAP income from continuing
operations $ 207 $ 212 GAAP income tax expense 88 87 Interest
expense, net 9 14
GAAP income from continuing operations before interest and
income taxes $ 304 $ 313
GAAP operating margin (% of revenue) (1) 31 % 29 % Non-GAAP
adjustments to expenses: Costs of licensing and maintenance (2) $ 2
$ 1 Cost of professional services (2) 1 1 Amortization of
capitalized software costs (3) 60 67 Selling and marketing (2) 8 7
General and administrative (2) 7 6 Product development and
enhancements (2) 4 5 Depreciation and amortization of other
intangible assets (4) 11 15 Other expenses, net (5)
8 12 Total Non-GAAP
adjustment to operating expenses $ 101 $
114 Non-GAAP income from continuing operations
before interest and income taxes $ 405 $ 427 Non-GAAP operating
margin (% of revenue) (6) 41 % 40 % Interest expense, net 9
14 GAAP income tax expense 88 87 Non-GAAP adjustment to income tax
expense (7) 25 37
Non-GAAP income tax expense $ 113 $
124 Non-GAAP income from continuing operations
$ 283 $ 289 (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 June 30, 2015 and 2014, non-GAAP
adjustment consists of $28 million and $28 million of purchased
software amortization and $32 million and $39 million of internally
developed software products amortization, respectively. (4)
Non-GAAP adjustment consists of other intangibles amortization.
(5) Non-GAAP adjustment consists of charges relating to the
FY2014 Board approved rebalancing 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. (6) Non-GAAP operating margin is calculated by
dividing non-GAAP income from continuing operations before interest
and income taxes by total revenue (refer to Table 1 for total
revenue). (7) The full year non-GAAP income tax expense is
different from GAAP income tax expense because of the difference in
non-GAAP income from continuing operations before income taxes. On
an interim basis, this difference would also include a difference
in the impact of discrete and permanent items where for GAAP
purposes the effect is recorded in the period such items arise, but
for non-GAAP such items are recorded pro rata to the fiscal year's
remaining reporting periods. Refer to the discussion of
non-GAAP financial measures included in the accompanying press
release for additional information. Results reflect the
discontinued operations associated with the CA ERwin Data Modeling
and CA arcserve data protection businesses. Certain
non-material differences may arise versus actual from impact of
rounding.
Table 7 CA Technologies
Reconciliation of GAAP to Non-GAAP Operating Expenses and
Diluted Earnings per Share (unaudited) (in millions, except per
share amounts)
Three Months Ended
June 30,
Operating
Expenses
2015
2014
Total expenses before interest and income taxes $
673 $ 756 Non-GAAP operating
adjustments: Purchased software amortization 28 28 Other
intangibles amortization 11 15 Internally developed software
products amortization 32 39 Share-based compensation 22 20 Other
expenses, net (1) 8 12
Total non-GAAP operating adjustment $ 101 $
114 Total non-GAAP operating expenses $
572 $ 642 Three
Months Ended
June 30,
Diluted EPS from
Continuing Operations
2015
2014
GAAP diluted EPS from continuing operations $ 0.47 $ 0.48
Non-GAAP adjustments, net of taxes: Purchased software
amortization 0.05 0.04 Other intangibles amortization 0.02 0.03
Internally developed software products amortization 0.05 0.06
Share-based compensation 0.03 0.03 Other expenses, net (1) 0.01
0.02 Non-GAAP effective tax rate adjustments (2)
0.01 (0.01 ) Total non-GAAP adjustment
$ 0.17 $ 0.17 Non-GAAP
diluted EPS from continuing operations $ 0.64 $
0.65 (1) Other expenses, net consists
of costs associated with the FY2014 Board approved rebalancing
initiative (the Fiscal 2014 Plan), certain foreign exchange
derivative hedging gains and losses, and other miscellaneous costs.
(2) The non-GAAP effective tax rate is equal to the full
year GAAP effective tax rate, therefore no adjustment is required
on an annual basis. On an interim basis, the difference in non-GAAP
income tax expense and GAAP income tax expense relates to the
difference in non-GAAP income from continuing operations before
income taxes, and includes a difference in the impact of discrete
and permanent items where for GAAP purposes the effect is recorded
in the period such items arise but for non-GAAP purposes such items
are recorded pro rata to the fiscal year's remaining reporting
periods. Refer to the discussion of non-GAAP financial
measures included in the accompanying press release for additional
information. Results reflect the discontinued operations
associated with the CA ERwin Data Modeling and CA arcserve data
protection businesses. 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
June 30,
2015
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 304 $ 405 Interest expense,
net 9 9
Income from continuing operations before income taxes $ 295 $ 396
Statutory tax rate 35 % 35 % Tax at statutory rate $
103 $ 139 Adjustments for discrete and permanent items (2)
(15 ) (26 ) Total tax expense $
88 $ 113 Effective tax rate (3) 29.8 % 28.5 % Three
Months Ended
June 30,
2014
GAAP
Non-GAAP
Income from continuing operations before interest and income
taxes (1) $ 313 $ 427 Interest expense, net 14
14 Income from continuing
operations before income taxes $ 299 $ 413 Statutory tax
rate 35 % 35 % Tax at statutory rate $ 105 $ 145 Adjustments
for discrete and permanent items (2) (18 )
(21 ) Total tax (benefit) expense $ 87 $ 124
Effective tax rate (3) 29.1 % 30.0 % (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. Results reflect the discontinued
operations associated with the CA ERwin Data Modeling and CA
arcserve data protection businesses. 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,
2016
Projected GAAP diluted EPS from continuing operations range
$ 1.72 to $ 1.80 Non-GAAP
adjustments, net of taxes: Purchased software amortization 0.26
0.25 Other intangibles amortization 0.06 0.06 Internally developed
software products amortization 0.18 0.18 Share-based compensation
0.15 0.15 Total non-GAAP
adjustment $ 0.65 $ 0.64
Projected non-GAAP diluted EPS from continuing operations range $
2.37 to $ 2.44 Fiscal
Year Ending
Projected Operating
Margin
March 31,
2016
Projected GAAP operating margin 28 % Non-GAAP
operating adjustments: Purchased software amortization 4 % Other
intangibles amortization 1 % Internally developed software products
amortization 3 % Share-based compensation 2 % Total
non-GAAP operating adjustment 10 % Projected
non-GAAP operating margin 38 % Refer to
the discussion of non-GAAP financial measures included in the
accompanying press release for additional information.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150723006537/en/
CA TechnologiesCorporate CommunicationsSaswato Das,
646-710-6690saswato.das@ca.comorJennifer Hallahan,
212-415-6924jennifer.hallahan@ca.comorInvestor
RelationsMichael Bauer, 212-415-6870michael.bauer@ca.comorTraci Tsuchiguchi,
650-534-9814traci.tsuchiguchi@ca.com
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