CA Technologies
Oct 25, 2005

CA Reports Strong Q2 FY2006 Results

Robust Billings and Cash Flow Growth Highlight Quarter

ISLANDIA, N.Y., Oct. 25 /PRNewswire-FirstCall/ -- Computer Associates International, Inc. (NYSE: CA), one of the world's largest management software companies, today reported strong financial results for its second quarter fiscal year 2006, ended September 30, 2005.

    Financial Overview

    (in millions, except share data)   Q2FY06**     Q2FY05***   Percent Change

    Revenue                              $942         $865             9%
    Operating EPS*                      $0.24        $0.21            14%
    GAAP EPS (LPS)                      $0.07       $(0.17)           n/m
    Net Income (loss)                     $41        $(98)            n/m

     *   Operating EPS is a non-GAAP financial measure, as noted in the
         discussion of non-GAAP results below. A reconciliation of GAAP
         results to non-GAAP operating income is included in the tables
         following this press release.

     **  Q2FY06 GAAP results include $45 million in restructuring and other
         charges, a $14 million in-process research and development charge
         related to the Company's acquisition of Niku Corporation and a tax
         benefit of approximately $16 million.

     *** Q2FY05 GAAP results include a tax benefit of $26 million.

"We are very pleased with our results for the second quarter," said CA President and Chief Executive Officer John Swainson. "We clearly sharpened our execution as we implemented the changes necessary for growth. It continues to be a highly competitive IT environment where customers are demanding measurable ROI for their spending, and as a result, CA's solutions and our commitment to helping simplify, unify and secure IT environments are being well received.

"We've also made good progress in transforming CA during the first half of the fiscal year. We have aligned the business to our growth opportunities, put programs in place to encourage our sales force to become better partners to customers and made a number of key acquisitions to strengthen our product portfolio. Together, these and our other transformation initiatives continue to drive our goals of achieving sustainable growth, enhancing customer relationships and increasing shareholder value," added Swainson.

CA reported $299 million in cash flow from operations in the second quarter, compared to $152 million reported in the similar period last year. On a comparable basis, adjusting for the second of three $75 million in payments to the Restitution Fund and $4 million in restructuring payments and other charges, adjusted cash flow from operations would have been $378 million.

For the trailing twelve months, cash flow from operations was $1.50 billion, up from $1.35 billion in the previous trailing twelve months. Adjusted cash flow from operations for the trailing twelve months was up 19 percent over the prior year period to $1.48 billion, which is adjusted for $150 million in payments to the Restitution Fund, $29 million in restructuring and other payments, and excludes a $191 million tax benefit. On a comparable basis in the prior year, adjusted cash flow from operations for the trailing twelve months was $1.24 billion and is adjusted for a $109 million tax benefit.

Billings for the quarter were $975 million, up 14 percent over the prior year period, and 8 percent organically. Billings for the trailing twelve months, which normalize quarterly fluctuations and other factors, were $4.46 billion, an increase of 3 percent over the prior trailing twelve months, with growth driven by recent acquisitions.

"We entered the quarter with a strong pipeline, executed on our business plan, improved working capital management and held our costs in line," said CA Chief Operating Officer Jeff Clarke. "We generated billings growth across all geographies and delivered results."

Total bookings for the second quarter, which includes $73 million from the Company's indirect business, decreased 11 percent over the prior year period to $665 million. This decline was primarily due to an expected decrease in early contract renewals, as the Company has focused on driving new contract value.

Expenses for the quarter totaled $902 million compared with $1.05 billion in the prior year comparable period. Last year's expenses included charges related to the Restitution Fund for shareholders.

The balance of cash and marketable securities at September 30, 2005, was $1.64 billion, down from $1.95 billion at June 30, 2005. With $1.81 billion in total debt outstanding, the Company has a net debt position of $171 million. During the quarter, the Company closed on its acquisition of Niku Corporation, repurchased approximately $176 million of CA shares and made a $75 million payment to the Restitution Fund.



    Recent Progress

    Since reporting first quarter results, CA:

     - Announced the availability of BrightStor r11.5, an integrated set of
       modular, Intelligent Storage Management solutions that enable
       organizations to manage and protect information and storage assets
       while aligning with business objectives;

     - Acquired iLumin, a leader of enterprise message management and
       archiving software, in October for approximately $47 million to help
       customers meet storage optimization, compliance and litigation support
       objectives;

     - Announced the formation of CA Labs, a new organization within CA
       dedicated to promoting and performing advanced research in systems and
       security management for the enterprise. This cross-business and
       academia effort will be led by Dr. Gabriel (Gabby) Silberman, who
       recently joined the Company as senior vice president and head of CA
       Labs;

     - Completed its acquisition of Niku in July, including its leading
       information technology governance (ITG) solution;

     - Unveiled integration between eHealth and SPECTRUM Network Management
       Solution and unveiled a new telecom vertical market strategy to advance
       its Enterprise Systems Management solutions;

     - Released a fully integrated CA Protection Suite that includes six fully
       integrated solutions suites with security and storage products in one
       package, on one disk, to help SMBs minimize risks and reduce IT
       management costs;

     - Announced comprehensive support for the new IBM System z9 and
       associated software across mainframe management product lines to help
       System z9 users leverage the new technology to meet evolving business
       needs, including delivery of on-demand IT services;

     - Launched its Worldwide Internet Service Provider (ISP) Partner Program,
       providing its eTrust security software to ISPs around the globe, and
       announced that America Online launched AOL Spyware Protection 2.0
       technology from CA, providing one of the most comprehensive protection
       packages available; and

     - Added Marc Loupe, a technology industry veteran, to serve as senior
       vice president and head of internal audit.

    Outlook for Q3 and Fiscal Year 2006

The following updated guidance is based on current expectations and represents "forward looking statements" (as defined below).

    (in         Q3FY06**   Q3FY05*** %Increase    FY06**      FY05   %Increase
     millions,                         over                             over
     except                           Q3FY05                            FY05
     share
     data)

    Revenue    $950-$980     $917     4%-7%   $3,800-$3,850  $3,560    7%-8%

    Operating
     EPS*         $0.24     $0.18       33%     $0.94-$0.96   $0.80   18%-20%

    GAAP EPS
    (LPS)         $0.10     $0.05***   100%     $0.41-$0.43  $(0.01)****  n/m

    FOOTNOTES

       * Operating EPS is a non-GAAP financial measure, as noted in the
         discussion of non-GAAP results below. A reconciliation of GAAP
         results to non-GAAP operating income is included in the tables
         following this press release.

      ** GAAP outlook for FY06 is inclusive of the previously announced
         restructuring charge of $75 million.

     *** Q3FY05 GAAP EPS includes $18 million related to shareholder
         litigation.

    **** FY05 GAAP EPS includes charges of $218 million, $28 million and $16
         million related to the Restitution Fund, restructuring and
         shareholder litigation, respectively.

"With the first half of the fiscal year completed, we are raising the floor on operating earnings and refining the guidance ranges previously provided to account for foreign currency exchange and increased investments in the business, including marketing initiatives and acquisitions," said CA Chief Financial Officer Bob Davis. "We are comfortable with our performance and execution in the first half of the fiscal year, and are confident in our ability to achieve the full-year goals we've set in place."

In addition, Davis said the Company continues to expect to meet its projections of mid-to-high single digit billings growth for the year and 10 percent adjusted, non-GAAP cash flow growth for the year.(1)

Webcast

The Company will host a Webcast at 5 p.m. EDT today to discuss its second quarter results. Individuals can access the webcast, as well as this press release and supplemental financial information, including slides, at http://ca.com/invest or listen to the call at 1 (706) 679-5227.

About CA

Computer Associates International, Inc. (NYSE:CA), one of the world's largest management software companies, delivers software and services across operations, security, storage and life cycle management to optimize the performance, reliability and efficiency of enterprise IT environments. Founded in 1976, CA is headquartered in Islandia, N.Y., and serves customers in more than 140 countries. For more information, please visit http://ca.com.

    FOOTNOTES

     (1) A reconciliation of GAAP cash flow from operations to non-GAAP
         adjusted cash flow from operations for fiscal years 2005 and 2006 is
         included in the tables following this press release.

    Non-GAAP Financial Measures

This press release includes financial measures for per share earnings and cash flows 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 "operating" earnings per share excludes the following items: non-cash amortization of acquired technology and other intangibles, in process research and development charges, the government investigation and class settlement charges, restructuring charges, the tax resulting from the planned repatriation of approximately $500 million of foreign cash and interest on dilutive convertible bonds (the convertible shares rather than the interest, are more dilutive, thus the interest is added back and the shares increased to calculate non-GAAP operating earnings). Non- GAAP taxes are provided based on the estimated effective annual Non-GAAP tax rate. Non-GAAP adjusted cash flow excludes the following items: investigation and class settlement payments, restructuring payments, and the impact of non- recurring tax payments or tax benefits. 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 press release to their most directly comparable GAAP financial measure, which is attached to this press release.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this communication (such as statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) constitute "forward-looking statements." A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the risks and uncertainties associated with the CA deferred prosecution agreement with the United States Attorney's Office of the Eastern District, including that CA could be subject to criminal prosecution or civil penalties if it violates this agreement; the risks and uncertainties associated with the agreement that CA entered into with the Securities and Exchange Commission ("SEC"), including that CA may be subject to criminal prosecution or substantial civil penalties and fines if it violates this agreement; civil litigation arising out of the matters that are the subject of the Department of Justice and the Securities and Exchange Commission investigations, including shareholder derivative litigation; changes to the compensation plan of CA's sales organization may encourage behavior not anticipated or intended as it is implemented; CA may encounter difficulty in successfully integrating acquired companies and products into its existing businesses; CA is subject to intense competition in product and service offerings and pricing and increased competition is expected in the future; certain software that CA uses in daily operations is licensed from third parties and thus may not be available to CA in the future, which has the potential to delay product development and production; if CA's products do not remain compatible with ever-changing operating environments, CA could lose customers and the demand for CA's products and services could decrease; CA's credit ratings have been downgraded and could be downgraded further which would require CA to pay additional interest under its credit agreement and could adversely affect CA's ability to borrow; CA has a significant amount of debt; the failure to protect CA's intellectual property rights would weaken its competitive position; CA may become dependent upon large transactions; general economic conditions may lead CA's customers to delay or forgo technology upgrades; the market for some or all of CA's key product areas may not grow; third parties could claim that CA's products infringe their intellectual property rights; fluctuations in foreign currencies could result in transaction losses; and the other factors described in CA's Annual Report on Form 10-K for the year ended March 31, 2005, and any amendment thereto, and in its most recent quarterly report filed with the SEC. CA 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 that speak only as of the date hereof.

One Computer Associates Plaza, Islandia, N.Y. 11749. All trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

                                   Table 1
                   COMPUTER ASSOCIATES INTERNATIONAL, INC.
               Consolidated Condensed Statements of Operations
                   (in millions, except per share amounts)
                                 (unaudited)

                                      Three Months Ended      Six Months Ended
                                          Sept 30,                Sept 30,
                                        2005     2004          2005     2004
                                              (Restated)            (Restated)
                                                 (1)                    (1)

    Subscription revenue                $696     $621        $1,391   $1,225
    Maintenance                          113      108           220      220
    Software fees and other               43       56            80      122
    Financing fees                        13       21            27       45
    Professional services                 77       59           144      114

    Total revenue                        942      865         1,862    1,726

    Amortization of capitalized
     software costs                      111      111           224      223
    Cost of professional services         65       54           125      110
    Selling, general and administrative  382      342           770      653
    Product development and enhancements 179      178           350      352
    Commissions and royalties             68       69           130      135
    Depreciation and amortization of
     other intangibles                    32       32            62       64
    Interest expense, net                 10       24            19       50
    Other (gains) losses, net             (4)       -            (7)       3

    Restructuring & other                 45       28            45       28
    Acquisition IPR&D                     14        -            18        -

    Government investigation and
     shareholder litigation settlements    -      211             -      216

    Total expenses                       902    1,049         1,736    1,834

    Income (loss) before income taxes     40     (184)          126     (108)

    Income tax (benefit) (3)              (1)     (88)           (9)     (59)

    Income (loss) from continuing
     operations                           41      (96)          135      (49)

    Adjustment to gain on disposal of
     discontinued operations, net of
     income taxes                          -       (2)            -       (2)

    Net income (loss)                    $41     $(98)         $135     $(51)

    Basic Earnings (Loss) Per Share:
    Income (loss) from continuing
     operations                        $0.07   $(0.17)        $0.23   $(0.09)
    Discontinued operation                 -        -             -        -
    Net income (loss)                  $0.07   $(0.17)        $0.23   $(0.09)
    Basic weighted-average shares
     used in computation                 584      587           585      587

    Diluted Earnings (Loss) Per Share:
    Income (loss) from continuing
     operations (2)                    $0.07   $(0.17)        $0.23   $(0.09)
    Discontinued operation                 -        -             -        -
    Net income (loss) (2)              $0.07   $(0.17)        $0.23   $(0.09)
    Diluted weighted-average shares
         used in computation             610      587           611      587

     (1) The three and six month periods ended September 30, 2004 have been
         restated to reflect the modified retrospective adoption of SFAS
         123(R) and other corrections relating to the recognition of revenue
         as disclosed in Note 12b of the Company's Form 10-K/A filing for
         fiscal year ended March 31, 2005.

     (2) Net income and the number of shares used in the computation of
         diluted GAAP EPS for the three & six month periods ended September
         30, 2005 have been adjusted to reflect the dilutive impact of the
         Company's 1.625 percent Convertible Senior Notes.

     (3) The three and six month periods ended September 30, 2004 included a
         $26.4 million or $.04 per share one-time tax benefit resulting from
         an IRS decision impacting Foreign Sales Corporations.


                                   Table 2
                   COMPUTER ASSOCIATES INTERNATIONAL, INC.
                    Consolidated Condensed Balance Sheets
                                (in millions)
                                 (unaudited)

                                                     Sept 30,      March 31,
                                                       2005           2005
                                                                 (Restated)(1)

    Cash and marketable securities                    $1,640         $3,125
    Trade and installment A/R, net                       371            674
    Federal and state income taxes receivable              -             55
    Deferred income taxes                                136             79
    Other current assets                                  89            102

    Total current assets                               2,236          4,035

    Installment A/R, net                                 549            595
    Property and equipment, net                          634            622
    Purchased software products, net                     584            726
    Goodwill, net                                      5,120          4,544
    Deferred income taxes                                115            105

    Other noncurrent assets, net                         630            536

    Total assets                                      $9,868        $11,163

    Loans payable and current portion of
     long-term debt                                       $1           $826
    Deferred subscription
     revenue (collected)-current                       1,109          1,407
    Government investigation settlement                   77            153
    Other current liabilities                          1,340          1,308

    Total current liabilities                          2,527          3,694

    Long-term debt, net of current portion             1,810          1,810
    Deferred income taxes                                 57            121
    Deferred subscription
      revenue (collected)-noncurrent                     297            273
    Deferred maintenance revenue                         237            270
    Other noncurrent liabilities                          52             53

    Total liabilities                                  4,980          6,221

    Stockholders' equity                               4,888          4,942

    Total liabilities and stockholders' equity        $9,868        $11,163

     (1) Fiscal year 2005 has been restated to reflect the modified
         retrospective adoption of SFAS 123(R) and other corrections relating
         to the recognition of revenue as disclosed in Note 12b of the
         Company's Form 10-K/A filing for fiscal year ended March 31, 2005.


                                   Table 3
                   COMPUTER ASSOCIATES INTERNATIONAL, INC.
                 Quarterly Condensed Statements of Cash Flows
                                (in millions)
                                 (unaudited)

                                                       Three Months Ended
                                                          September 30,
                                                         2005         2004
                                                                 (Restated)(1)
    OPERATING ACTIVITIES:
       Net income (loss)                                 $41           $(98)
       Impact from discontinued operations,
        net of taxes                                       -             (2)
       Income (loss) from continuing operations           41            (96)

       Adjustments to reconcile net income (loss)
        from continuing operations to net
        cash provided by operating activities:
           Depreciation and amortization                 143            143
           Provision for deferred income taxes          (161)          (124)
           Non-cash compensation expense related to
            stock and pension plans                       35             24
           Acquisition IPR&D                              14              -
           Government investigation charge                 -            218
           Restructuring & other                          41              -
           Foreign currency transaction gain              (4)            (1)
       Changes in other operating assets and liabilities:
           Decrease in noncurrent installment A/R, net    42             47
           Increase (decrease) in deferred subscription
            revenue (collected) - noncurrent               6            (41)
           Decrease in deferred maintenance revenue       (5)           (25)
           Decrease in trade and current installment
            A/R, net                                     129             82
           Decrease in deferred subscription revenue
            (collected) - current                       (190)          (135)
           Increase in taxes payable                     153             13
           Restitution fund payment                      (75)             -
           Increase (decrease) in A/P, accrued expense
            and other                                    118             (6)
           Other                                          12             53
    NET CASH PROVIDED BY OPERATING ACTIVITIES            299            152

    INVESTING ACTIVITIES:
            Acquisitions, primarily goodwill, purchased
             software, and other intangible assets,
             net of cash acquired                       (302)           (40)
            Settlements of purchase
             accounting liabilities                      (17)            (2)
            Purchases of property and equipment, net     (27)           (12)
            Sales (purchase) of marketable
             securities, net                              83            (74)
            (Decrease) increase in restricted cash        (1)             1
            Capitalized software development
             costs and other                             (20)           (16)
    NET CASH USED IN INVESTING ACTIVITIES               (284)          (143)

    FINANCING ACTIVITIES:
            Debt (repayments) borrowing, net             (86)             1
            Dividends paid                               (23)           (23)
            Exercise of common stock options and other    29              9
            Purchases of treasury stock                 (176)             -
    NET CASH USED IN FINANCING ACTIVITIES               (256)           (13)

    DECREASE IN CASH AND CASH EQUIVALENTS
    BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH      (241)            (4)
    Effect of exchange rate changes on cash               (6)            10
    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS    (247)             6
    CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   1,776          2,059
    CASH AND CASH EQUIVALENTS AT END OF PERIOD        $1,529         $2,065

     (1) The three month period ended September 30, 2004 has been restated to
         reflect the modified retrospective adoption of SFAS 123(R) and other
         corrections relating to the recognition of revenue as disclosed in
         Note 12b of the Company's Form 10-K/A filing for fiscal year ended
         March 31, 2005.


                                   Table 4
                   COMPUTER ASSOCIATES INTERNATIONAL, INC.
            Reconciliation of GAAP Results to Net Operating Income
                     (in millions, except per share data)
                                 (unaudited)

                                Three Months Ended       Six Months Ended
                                     Sept 30,                 Sept 30,
                                 2005       2004         2005         2004
                                       (Restated)(2)             (Restated)(2)

    Total Revenue (See Table 1)  $942       $865       $1,862       $1,726

    Total Expenses (See Table 1)  902      1,049        1,736        1,834

    Income (Loss) Before Income
     Taxes (See Table 1)           40       (184)         126         (108)

    Non-GAAP Adjustments:

      Purchased Software
       Amortization               100        101          200          203
      Intangibles Amortization     12         10           23           20
      Acquisition IPR&D            14          -           18            -
      Restructuring and other(4)   45         28           45           28
      Government Investigation
       charge                       -        218            -          218
      Shareholder Litigation        -         (7)           -           (2)
    Total Non-GAAP Adjustments    171        350          286          467

    Operating Income Before
     Interest Adj. & Taxes        211        166          412          359

    Interest on Dilutive
     Convertible Bonds              2         10            4           20
    Operating Income Before
      Taxes                       213        176          416          379

    Income Tax Provision (3)       67         39          137          114

    Net Operating Income(1)      $146       $137         $279         $265

    Diluted Operating EPS(1)    $0.24      $0.21        $0.46        $0.41

    # of Shares Used(1)           610        640          612          640

     (1) Net operating income and the number of shares used in the computation
         of diluted operating EPS for the three and six month periods ended
         September 30, 2005 and 2004 have been adjusted to reflect the
         dilutive impact of the Company's 1.625 percent Convertible Senior
         Notes. The number of shares for the three month and six month
         periods ended September 30, 2004 also includes the dilutive impact of
         the Company's 5 percent Convertible Senior Notes.

     (2) The three and six month periods ended September 30, 2004 have been
         restated to reflect the modified retrospective adoption of SFAS
         123(R) and other corrections relating to the recognition of revenue
         as disclosed in Note 12b of the Company's Form 10-K/A filing for
         fiscal year ended March 31, 2005.

     (3) Non-GAAP taxes are provided based on the estimated effective annual
         non-GAAP tax rate.

     (4) Three and six month periods ended September 30, 2005 include
         restructuring charges of $37 million and other charges of $8 million.

Refer to the discussion of non-GAAP measures included in the accompanying press release for additional information.

                                   Table 5
                   COMPUTER ASSOCIATES INTERNATIONAL, INC.
        Reconciliation of Projected GAAP Results to Operating Results
                     (in millions, except per share data)
                                 (unaudited)

                                Three Months Ending    Fiscal Year Ending
                                 December 31, 2005      March 31, 2006

    Projected revenue range        $950 to  $980      $3,800 to $3,850

    Projected GAAP EPS range      $0.10 to $0.10       $0.41 to  $0.43

    Non GAAP adjustments,
     net of taxes

      Acquisition amortization     0.12     0.12        0.47      0.47
      Acquisition IPR&D            0.00     0.00        0.03      0.03
      Tax savings on
       repatriation                0.00     0.00       (0.06)    (0.06)
      Restructuring & other
       charges                     0.02     0.02        0.08      0.08
      Impact from convertible
       senior notes                0.00     0.00        0.01      0.01


    Projected diluted
     operating EPS range          $0.24 to $0.24       $0.94 to  $0.96

Refer to the discussion of non-GAAP measures included in the accompanying press release for additional information.

                                   Table 6
                   COMPUTER ASSOCIATES INTERNATIONAL, INC.
 Reconciliation of Projected GAAP Cash Flow From Operations to Adjusted Cash


                             Flow From Operations
                     (in millions, except per share data)
                                 (unaudited)

                                          FY2005              FY2006
                                                            Projected

    Cash Flow from Operations             $1,529              $1,250

    Benefit from Tax Law Change             (300)                  -

    Restitution Fund                          75                 150

    Restructuring                             25                  60

    Adjusted Cash Flow from Operations    $1,329              $1,460

Refer to the discussion of non-GAAP measures included in the accompanying press release for additional information.

SOURCE Computer Associates International, Inc.
CONTACT: Public Relations - Shannon Lapierre , +1-631-342-3839, shannon.lapierre@ca.com,
Investor Relations - Olivia Bellingham, +1-631-342-4687, olivia.bellingham@ca.com,
both of Computer Associates International, Inc.