ISLANDIA, N.Y., Jan. 24 /PRNewswire-FirstCall/ -- CA (NYSE: CA), one of the world's largest management software companies, today reported financial results for its third quarter fiscal year 2006, ended December 31, 2005.
Financial Overview (in millions, except share data) Percent Q3FY06** Q3FY05*** Change Revenue $967 $917 5% Operating EPS* $0.24 $0.18 33% GAAP EPS from continuing operations $0.09 $0.05 80% Income from continuing operations $56 $31 81% * 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. ** Q3FY06 GAAP results include $21 million in restructuring and other charges and $114 million in amortization. *** Q3FY05 GAAP results include $18 million in shareholder litigation charges and $112 million in amortization.
"In the third quarter, CA continued to make enhancements to the business to drive long-term growth," said CA President and Chief Executive Officer John Swainson. "We have the right strategy in place to transform the business and establish CA as the company customers turn to for end-to-end enterprise IT management solutions that unify and simplify their IT environments."
CA reported total revenues for the quarter of $967 million, an increase of 5 percent over the prior year period, or 8 percent on a constant currency basis. Revenue results reflect an increase in subscription revenue related to the Company's continued transition to its ratable business model and the effect of its recent acquisitions.
CA's income from continuing operations of $56 million for the quarter increased 81 percent from the prior year's third quarter principally as a result of higher revenue and lower interest and taxes.
CA reported $422 million in cash flow from continuing operations in the third quarter, compared to $365 million reported in the similar period last year. On a comparable basis, non-GAAP adjusted cash flow from continuing operations was $433 million (adjusted for $11 million in restructuring payments) versus $460 million reported the prior year (adjusted for $20 million in restructuring payments and a $75 million payment to the Restitution Fund).
For the first nine months ended December 31, cash flow from continuing operations was $814 million, up 3 percent from the $789 million reported in the prior year period. Non-GAAP adjusted cash flow from continuing operations for the first nine months of the fiscal year was up 17 percent to $904 million (adjusted for $75 million in payments to the Restitution Fund and $15 million in restructuring payments), from $775 million reported in the prior year (adjusted for a $75 million Restitution Fund payment, $20 million for restructuring payments and $109 million in tax benefits).
Billings for the third quarter were $1.29 billion, down 1 percent from the prior year period and up 2 percent on a constant currency basis. Organic billings for the quarter decreased approximately 5 percent, or 2 percent on a constant currency basis. Billings for the trailing twelve months, which normalize quarterly fluctuations and other factors, were $4.45 billion, an increase of 1 percent over the prior year comparable twelve month period. Organic billings for the trailing twelve months decreased approximately 2 percent. Currency fluctuations had an immaterial impact on billings for the trailing twelve months compared to the prior year comparable period.
As is normal in our industry, some customers pay the entire contract value in one single installment at the outset rather than being invoiced on an annual basis over the life of the contract. In the third quarter, CA executed two contracts with an outsourcer that provided for single payments. These two contracts had a favorable impact on third quarter billings and cash flows, contributing an incremental $59 million more in the period than if the contracts were invoiced on an annual basis over the term of these contracts.
Based on its strong year-to-date cash flow performance, CA increased its full-year guidance for non-GAAP adjusted cash flow from continuing operations growth over the prior year from 10 percent growth, to an expected growth range of 12 percent to 15 percent.(1)
The Company also reiterated its full-year guidance of billings growth of mid-to-high single digits.
"Despite the inherently variable nature in billings from quarter to quarter, we have an excellent pipeline going forward and we are confident in our ability to deliver strong fourth quarter performance," said CA Chief Operating Officer Jeff Clarke.
Total bookings for the third quarter, which include $82 million from the Company's indirect business, decreased 14 percent over the prior year period to $832 million. This decline was primarily due to an expected decrease in early contract renewals, as the Company has focused on driving new contract value. North American direct bookings for the quarter grew 11 percent; however, this gain was more than offset by a decline in international bookings.
Total expenses for the quarter were $899 million compared with $870 million in the prior year, up 3 percent, primarily due to restructuring charges, acquisitions and new marketing initiatives.
The balance of cash and marketable securities at December 31, 2005, was $1.83 billion, up from $1.64 billion at September 30, 2005. With $1.81 billion in total debt outstanding, the Company has a net cash position of approximately $22 million.
During the quarter, the Company repurchased almost 4 million shares of its stock at an aggregate cost of $107 million. Since the beginning of its fiscal year 2006 through today, CA has repurchased approximately 14 million shares of its stock at an aggregate cost of approximately $400 million. The Company intends to repurchase $600 million of its shares during fiscal year 2006.
Recent Progress Since reporting second quarter results in October, CA: * Launched its Enterprise IT Management (EITM) vision for unifying and simplifying the management of IT across the enterprise, which included 26 fully EITM-enabled products, including Unicenter r11, the first major Unicenter version in more than four years; * Unveiled a new global branding program, changed its name to CA, launched a modified logo and unveiled a new marketing campaign, "Believe Again"; * Announced an agreement to acquire Wily Technology, a leader in enterprise application management, in January, for approximately $375 million in cash. * The transaction is expected to close by the end of the current quarter; * Formed a partnership with Garnett & Helfrich Capital to divest CA's open source database unit, Ingres, in a move to further focus CA's product line on strategic core capabilities where the Company can obtain market leadership, and recognized a pretax gain of approximately $8 million; * Acquired Control-F1 to provide leading-edge support automation solutions to increase customers' IT efficiencies; * Divested MultiGen-Paradigm, Inc., to further focus CA's product line; and * Named to CA's Board of Directors, Christopher B. Lofgren, Ph.D., president, chief executive officer and a member of the Board of Directors for Schneider National, Inc. Outlook for Q4 and Fiscal Year 2006
The following updated financial guidance is based on current expectations and represents "forward looking statements" (as defined below). It also includes the estimated dilutive earnings per share effect from the close of the acquisition of Wily Technology, which is expected to occur during the fourth quarter.
(in Q4FY06** Q4FY05 % Increase FY06** FY05 % Increase millions, over over except Q4FY05 FY05 share data) Revenue $975-$1,000 $917 6%-9% $3,805-$3,830 $3,560 7%-8% Operating $0.23-$0.24 $.20 15%-20% $0.93-$0.94 $0.80 16%-18% EPS* GAAP EPS (LPS) $0.09-$0.10 $0.03*** 200%-233% $0.40-$0.41 $(0.01)*** n/m from cont. ops. 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. Q4FY06 and FY06 include an estimated dilutive effect of $0.01 to operating EPS and $0.02 to GAAP EPS due to the Wily acquisition. *** FY05 GAAP EPS includes pretax charges of $218 million, $28 million and $16 million related to the Restitution Fund, restructuring and shareholder litigation, respectively.
"During the third quarter, CA continued to strive for operational excellence through strong expense control and cash optimization," said CA Chief Financial Officer Bob Davis. "We will continue to take the steps necessary to capture even more cost efficiencies while making the investments necessary to grow our business. In addition, we plan to carefully utilize our cash to return value to shareholders while also making strategic acquisitions that further build out our EITM strategy and give us a competitive advantage in the marketplace."
Webcast and Additional Information
This press 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 and related slide presentation, as well as a conference call which will be held at 5 p.m. EST today. The conference call will be archived on the site. Individuals can access the information at http://ca.com/investor listen to the call at 1 (706) 679-5227.
CA (NYSE: CA), one of the world's largest information technology (IT) management software companies, unifies and simplifies the management of enterprise-wide IT. 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.
(1) A reconciliation of GAAP cash flow from continuing operations to non- GAAP adjusted cash flow from continuing 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 and other charges, and 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: Restitution Fund payments, restructuring payments, and the impact of certain 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 measures, which are 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 SEC 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/A for the year ended March 31, 2005, and any amendment thereto, and in its most recent quarterly reports 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.
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Table 1 COMPUTER ASSOCIATES INTERNATIONAL, INC. Consolidated Condensed Statements of Operations (in millions, except per share amounts) (unaudited) Three Months Ended Nine Months Ended Dec 31, Dec 31, 2005 2004 2005 2004 (restated)(1) (restated)(1) Subscription revenue $713 $650 $2,104 $1,875 Maintenance 108 112 328 332 Software fees and other 49 74 129 196 Financing fees 11 17 38 62 Professional services 86 64 230 178 Total revenue 967 917 2,829 2,643 Amortization of capitalized software costs 111 112 335 335 Cost of professional services 69 57 194 167 Selling, general and administrative 405 352 1,175 1,005 Product development and enhancements 171 172 521 524 Commissions and royalties 87 91 217 226 Depreciation and amortization of other intangibles 33 33 95 97 Other (gains) losses, net (2) (10) 6 (17) 9 Restructuring & other 21 - 66 28 Acquisition IPR&D - - 18 - Restitution fund and shareholder litigation settlements - 18 - 234 Expenses before interest and taxes 887 841 2,604 2,625 Income from continuing operations before interest and taxes 80 76 225 18 Interest expense, net 12 29 31 79 Income (loss) from continuing operations before taxes 68 47 194 (61) Income tax expense (benefit) (3) 12 16 3 (43) Income (loss) from continuing operations 56 31 191 (18) Disposal of discontinued operations, net of income taxes 3 - 3 (2) Net income (loss) $59 $31 $194 $(20) Basic Earnings (Loss) Per Share: Income (loss) from continuing operations $0.09 $0.05 $0.32 $(0.03) Discontinued operations 0.01 - 0.01 - Net income (loss) $0.10 $0.05 $0.33 $(0.03) Basic weighted-average shares used in computation 579 589 583 587 Diluted Earnings (Loss) Per Share: Income (loss) from continuing operations (4) $0.09 $0.05 $0.31 $(0.03) Discontinued operations 0.01 - 0.01 - Net income (loss) (4) $0.10 $0.05 $0.32 $(0.03) Diluted weighted-average shares used in computation 606 594 610 587 (1) The three and nine month periods ended December 31, 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) The three and nine month periods ended December 31, 2005 include an approximate $8 million pre tax gain on the divestiture of Ingres. (3) The three and nine month periods ended December 31, 2005 include benefits from certain tax credits realized in Q3 FY06. The nine month period ended December 31, 2005 also includes a reduction in taxes associated with the repatriation of funds, favorable tax audits and realization of deferred tax assets related to net operating losses. The nine month period ended December 31, 2004 included a one-time tax benefit resulting from an IRS decision impacting Foreign Sales Corporations. (4) Net income and the number of shares used in the computation of diluted GAAP EPS for the three and nine month periods ended December 31, 2005 have been adjusted to reflect the dilutive impact of the Company's 1.625 percent Convertible Senior Notes. Table 2 COMPUTER ASSOCIATES INTERNATIONAL, INC. Consolidated Condensed Balance Sheets (in millions) (unaudited) December 31, March 31, 2005 2005 (restated)(1) Cash and marketable securities $1,833 $3,125 Trade and installment A/R, net 400 674 Federal and state income taxes receivable 53 55 Deferred income taxes 131 79 Other current assets 66 102 Total current assets 2,483 4,035 Installment A/R, net 505 595 Property and equipment, net 626 622 Purchased software products, net 507 726 Goodwill, net 5,141 4,544 Deferred income taxes 123 105 Other noncurrent assets, net 672 536 Total assets $10,057 $11,163 Loans payable and current portion of long-term debt $1 $826 Deferred subscription revenue (collected)-current 1,244 1,407 Government investigation settlement 77 153 Other current liabilities 1,443 1,308 Total current liabilities 2,765 3,694 Long-term debt, net of current portion 1,810 1,810 Deferred income taxes 42 121 Deferred subscription revenue (collected) - noncurrent 272 273 Deferred maintenance revenue 238 270 Other noncurrent liabilities 53 53 Total liabilities 5,180 6,221 Stockholders' equity 4,877 4,942 Total liabilities and stockholders' equity $10,057 $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 Nine Months Ended December 31, December 31, 2005 2004 2005 2004 OPERATING ACTIVITIES: (restated) (restated) (1) (1) Net income (loss) $59 $31 $194 $(20) Discontinued operations, net of taxes 3 - 3 (2) Income (loss) from continuing operations 56 31 191 (18) Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: Depreciation and amortization 144 145 430 432 Provision for deferred income taxes (21) 24 (262) (215) Non-cash compensation expense related to stock & pension plans 29 32 93 77 Gain on divestiture (8) - (8) - Shareholder litigation settlement - 18 - 18 Foreign currency transaction (gain) loss (3) 5 (10) 6 Acquisition IPR&D - - 18 - Changes in other operating assets and liabilities: Decrease in noncurrent installment A/R, net 50 2 112 121 (Decrease) increase in deferred subscription revenue (collected) - noncurrent (21) 5 5 (52) Increase (decrease) in deferred maintenance revenue 2 (13) (27) (61) (Increase) decrease in trade and current installment A/R, net (48) 73 241 299 Increase (decrease) in deferred subscription revenue (collected) - current 148 88 (115) (59) Increase in taxes payable 17 36 82 108 Restitution fund - (75) (75) 143 Restructuring & other, net - (20) 41 8 Increase in A/P, accrued expense and other 48 (8) 110 (28) Other 29 22 (12) 10 NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 422 365 814 789 INVESTING ACTIVITIES: Acquisitions, primarily goodwill, purchased software, and other intangible assets, net of cash acquired (54) (418) (680) (458) Settlements of purchase accounting liabilities (10) (9) (30) (16) Purchases of property and equipment, net (56) (21) (111) (42) Proceeds from sale of assets 41 - 41 14 Sales (purchases) of marketable securities, net 39 (133) 301 (217) Increase (decrease) in restricted cash 1 (3) (3) (2) Capitalized software development costs and other (23) (16) (65) (47) NET CASH USED IN INVESTING ACTIVITIES (62) (600) (547) (768) FINANCING ACTIVITIES: Debt borrowing (repayments), net - 997 (911) 997 Dividends paid (23) - (70) (23) Debt issuance fees - (12) - (12) Exercise of common stock options and other 26 32 105 81 Purchases of treasury stock (107) - (367) (11) NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (104) 1,017 (1,243) 1,032 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH 256 782 (976) 1,053 Effect of exchange rate changes on cash (23) 78 (91) 79 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 233 860 (1,067) 1,132 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,529 2,065 2,829 1,793 CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,762 $2,925 $1,762 $2,925 (1) The three and nine month periods ended December 31, 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. Table 4 COMPUTER ASSOCIATES INTERNATIONAL, INC. Reconciliation of GAAP Results to Net Operating Income (in millions, except per share data) (unaudited) Three Months Ended Nine Months Ended December 31, December 31, 2005 2004 2005 2004 (restated)(2) (restated)(2) Total Revenue $967 $917 $2,829 $2,643 Total Expenses 899 870 2,635 2,704 Income (Loss) Before Income Taxes 68 47 194 (61) Non-GAAP Adjustments: Purchased Software Amortization 100 102 300 305 Intangibles Amortization 14 10 37 30 Acquisition IPR&D - - 18 - Restructuring and other(4) 21 - 66 28 Restitution fund charge - - - 218 Shareholder Litigation - 18 - 16 Total Non-GAAP Adjustments 135 130 421 597 Operating Income Before Interest Adj. & Taxes 203 177 615 536 Interest on Dilutive Convertible Bonds 2 11 6 31 Operating Income Before Taxes 205 188 621 567 Income Tax Provision (3) 59 69 196 183 Net Operating Income(1) $146 $119 $425 $384 Diluted Operating EPS(1) $0.24 $0.18 $0.70 $0.60 # of Shares Used(1) 606 644 610 641 (1) Net operating income and the number of shares used in the computation of diluted operating EPS for the three and nine month periods ended December 31, 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 nine month periods ended December 31, 2004 also includes the dilutive impact of the Company's 5 percent Convertible Senior Notes. (2) The three and nine month periods ended December 31, 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 nine month periods ended December 31, 2005 include restructuring charges of $17 and $54 million and other charges of $4 and $12 million, respectively. The nine month period ended December 31, 2004 includes restructuring charges of $28 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 March 31, 2006 March 31, 2006 Projected revenue range $ 975 to $1,000 $3,805 to $3,830 Projected GAAP EPS from cont. ops. range $0.09 to $0.10 $0.40 to $0.41 Non GAAP adjustments, net of taxes Acquisition amortization 0.12 0.12 0.47 0.47 Acquisition IPR&D 0.01 0.01 0.03 0.03 Tax savings on repatriation 0.00 0.00 (0.06) (0.06) Restructuring & other charges 0.01 0.01 0.08 0.08 Impact from convertible senior notes 0.00 0.00 0.01 0.01 Projected diluted operating EPS range $0.23 to $0.24 $0.93 to $0.94
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) (unaudited) FY2005 FY2006 Projected Cash Flow from Operations $1,527 $1,311 to $1,351 Benefit from Tax Law Change (300) - - Restitution Fund 75 150 150 Restructuring 25 25 25 Adjusted Cash Flow from Operations $1,327 $1,486 to $1,526
Refer to the discussion of non-GAAP measures included in the accompanying press release for additional information.
CONTACT: Shannon Lapierre, Public Relations, +1-631-342-3839,
firstname.lastname@example.org, or Olivia Bellingham, Investor Relations,
+1-631-342-4687, email@example.com, both of CA