CA Technologies
Jan 25, 2011

CA Technologies Reports Third Quarter 2011 Results

ISLANDIA, N.Y., Jan. 25, 2011 /PRNewswire/ --

  • Revenue $1.165 Billion, Up 5 Percent in Constant Currency and Up 4 Percent as Reported
  • GAAP EPS $0.39, Down 17 Percent in Constant Currency and Down 20 Percent as Reported
  • Non-GAAP EPS $0.51, Up 11 Percent in Constant Currency and as Reported
  • Raises Full Year Guidance for GAAP and non-GAAP EPS and Increases Revenue Outlook
  • Announces Acquisition of Torokina Networks to Extend Reach in Communication Service Providers (CSP) Market  

CA Technologies (Nasdaq: CA) today reported financial results for its third quarter ended Dec. 31, 2010.

FINANCIAL OVERVIEW



Third Quarter FY11 vs. FY10


(in millions, except share data)


FY11

FY10

% Change

% Change CC**


Revenue


$1,165

$1,122

4%

5%


GAAP Income from Continuing Operations


$200

$256

(22%)

(19%)


Non-GAAP Income from Continuing Operations*


$260

$246

6%

7%


GAAP Diluted EPS from Continuing Operations


$0.39

$0.49

(20%)

(17%)


Non-GAAP  Diluted EPS from Continuing Operations*


$0.51

$0.46

11%

11%


Cash Flow from Operations


$496

$342

45%

45%



*Non-GAAP income and earnings per share are non-GAAP financial measures, as noted in the discussion of non-GAAP results below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.

**CC: Constant Currency



EXECUTIVE COMMENTARY

"CA Technologies delivered another strong quarter thanks to continued focus on execution and a leading portfolio of solutions to manage and secure IT infrastructures from the mainframe to cloud computing environments," said Chief Executive Officer Bill McCracken.  "Over the past year, we have bolstered our product portfolio with the addition of new technologies from nine acquisitions and combined these acquired capabilities with our own development to provide customers with the solutions they need to help manage and secure their IT environments.  This is driving our growth and establishing the base for growth going forward.

"As we head into the last two months of the fiscal year, we feel very good about where we are both from a strategic standpoint and our ability to reach our financial objectives," McCracken continued.  "We continue to focus on accelerating new product sales, reaching new and emerging enterprise customers, penetrating growth geographies and leading the technology evolution — the evolution to virtualization and cloud computing.  Finally, the current portion of revenue backlog, which is a key measure for our performance going forward, is up 4 percent, which further demonstrates the strength of our business." 

THIRD QUARTER REVENUE AND BOOKINGS

Total revenue growth in the third quarter can be attributed to increased sales of the Company's service assurance, virtualization management and service automation, Software as a Service products and service and education offerings. About 3 percentage points of the revenue growth in constant currency was driven by organic products and services, with the remaining 2 percentage points in constant currency coming from acquisitions including products from 3Tera, Inc., Arcot Systems and Nimsoft, Inc. On an as reported basis, this revenue growth was about evenly split.  About 60 percent of the Company's revenue came from North America, while 40 percent came from International operations.

  • Revenue was $1.165 billion, up 5 percent in constant currency and 4 percent as reported.
  • Total revenue backlog was $8.015 billion, up 2 percent in constant currency and up 1 percent as reported.  The current portion of revenue backlog was $3.592 billion, up 4 percent in both constant currency and as reported.
  • North America revenue was $697 million, up 7 percent in both constant currency and as reported.
  • International revenue was $468 million, up 1 percent in constant currency and down 1 percent as reported.
  • Total bookings in the third quarter were $1.281 billion, down 5 percent in constant currency and down 6 percent as reported primarily due to a decrease in license and maintenance renewal bookings.  This decrease was partially offset by positive results for total new product and capacity sales for the quarter.
  • The Company signed 15 license agreements with aggregate values greater than $10 million for a total of $456 million, compared to 16 agreements for a total of $514 million in the third quarter of fiscal year 2010.
  • The weighted average duration of subscription and maintenance bookings for the quarter was 3.20 years, compared to 3.23 years in the prior year period.
  • North America bookings were $766 million, up 7 percent in constant currency and up 8 percent as reported.
  • International bookings were $515 million, down 19 percent in constant currency and 22 percent as reported.

THIRD QUARTER EXPENSES AND MARGIN

Year-over-year GAAP results:

  • Operating expenses, before interest and income taxes, were $827 million, up 7 percent in constant currency and as reported.
  • Operating income, before interest and income taxes, was $338 million, flat in constant currency and down 3 percent as reported.
  • Operating margin was 29 percent, down 2 percentage points from the prior year period.

Expenses, operating income and operating margin for the third quarter primarily were affected by increased costs associated with acquisitions.  

Year-over-year non-GAAP results, which exclude purchased software and intangibles amortization, pre-fiscal year 2010 restructuring costs and certain other gains and losses, which include recoveries and certain costs associated with derivative litigation matters, share-based compensation expense, and 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:

  • Operating expenses, before interest and income taxes, were $774 million, up 7 percent in constant currency and up 6 percent as reported.  
  • Operating income, before interest and income taxes, was $391 million, up 1 percent in constant currency and down 1 percent as reported.
  • Operating margin was 34 percent, a decrease of 1 percentage point.

Non-GAAP results also primarily were affected by the increased cost associated with acquisitions.

In the third quarter, GAAP earnings per share were affected by a 39 percent tax rate, compared with a 22 percent GAAP tax rate in the third quarter of the previous year.  The current period GAAP tax rate was increased by unfavorable tax items and the prior period GAAP tax rate decreased by favorable tax items which are not expected to recur and that were unique to the respective periods.  Such tax items affect the company's non-GAAP tax rate more evenly across the quarterly periods of its fiscal year than its GAAP tax rate.  In the third quarter of fiscal 2011, non-GAAP EPS was positively affected by the year-over-year improvement in non-GAAP tax rate from 36 percent to 32 percent.

CASH FLOW FROM OPERATIONS

Cash flow from operations was $496 million compared to $342 million in the prior year. Third quarter cash flow was positively affected by a year-over-year increase of $78 million in upfront cash collections from single installment customer payments and an increase of $122 million  in collections of trade receivables. Cash flow was adversely affected by increased disbursements related to acquisitions and personnel costs.

CAPITAL STRUCTURE

  • Cash, cash equivalents and marketable securities were $2.685 billion.
  • With $1.555 billion in total debt outstanding, the Company's net cash position was $1.130 billion.
  • The Company repurchased approximately 1.5 million shares of stock in the third quarter for a total of $35 million under the $500 million stock repurchase program authorized by the Board of Directors in May 2010.  

QUARTER HIGHLIGHTS

During the third quarter the Company:

  • Completed the acquisition of privately-held Arcot Systems, Inc. for about $200 million in an all-cash transaction.
  • Announced the release of CA 3Tera® AppLogic®, the Company's new turnkey cloud computing platform.
  • Announced the next-generation CA Automation Suite to help customers with their journey to a virtualized, dynamic cloud computing infrastructure.
  • Completed the acquisition of privately-held Hyperformix, a leading provider of capacity management software for dynamic physical, virtual and cloud IT infrastructures. Terms of the transaction were not disclosed.
  • Announced the availability of CA Mainframe Chorus, the next step in CA Technologies Mainframe 2.0 strategy to simplify mainframe management, and help the platform to continue to be an effective and integral part of evolving IT infrastructures.

ACQUISITION OF TOROKINA NETWORKS

The Company today announced the acquisition of privately-held Torokina Networks Pty Ltd, a Sydney, Australia, based provider of telecommunications management solutions to 2G, 3G, next generation networks (NGN) and VoIP service providers and network operators worldwide. CA Technologies and Torokina Networks previously worked together as partners and independent vendors.  Terms of the acquisition were not disclosed.  A separate news release has been issued and can be found here.

OUTLOOK FOR FISCAL YEAR 2011


Beginning in the first quarter of fiscal year 2011 the Company has excluded share-based compensation expense from its non-GAAP financial measures. The following guidance, which represents "forward-looking statements" (as defined below), takes into account the exclusion of share-based compensation expense from future non-GAAP results. To enable fiscal year 2011 guidance for non-GAAP earnings per share to be compared to fiscal year 2010 full year results, the Company provides full fiscal year 2010 results for non-GAAP earnings per share excluding stock-based compensation expense below.

The Company updated its outlook issued on Oct. 21, 2010.  It increased its revenue outlook, increased guidance for GAAP and non-GAAP earnings per share and reaffirmed its guidance for cash flow from operations. The Company also updated projected as reported numbers based on Dec. 31, 2010 exchange rates:

  • Total revenue growth in a range of 4 percent to 5 percent in constant currency.  Previously, the range was 3 percent to 5 percent.  At Dec. 31, 2010 exchange rates, this translates to reported revenue of $4.48 billion to $4.55 billion;
  • GAAP diluted earnings per share from continuing operations growth in constant currency increases to a range of 8 percent to 14 percent.  Previously, the range was 5 percent to 13 percent. At Dec. 31, 2010 exchange rates, this translates to diluted earnings per share of $1.57 to $1.67;
  • Non-GAAP diluted earnings per share from continuing operations growth in constant currency increases to a range of 10 percent to 15 percent. Previously the range was 7 percent to 14 percent. At Dec. 31, 2010 exchange rates, this translates to non-GAAP diluted earnings per share of $1.88 to $1.98. Fiscal year 2010 non-GAAP diluted earnings per share was $1.74 excluding share-based compensation expense; and
  • Cash flow from operations growth remains in a range of 2 percent to 7 percent in constant currency. At Dec. 31, 2010 exchange rates, this translates to cash flow from operations of $1.400 billion to $1.475 billion.

This outlook also assumes no material acquisitions and a partial currency hedge of operating income. The Company expects its full-year GAAP and non-GAAP tax rate to be in a range of 32 percent to 33 percent. This lowers the previous guidance range of between 33 percent to 34 percent.

The Company anticipates approximately 504 million shares outstanding at fiscal year 2011 year-end and a weighted average diluted shares outstanding of approximately 508 million for the fiscal year. Guidance does not include the impact from any future stock repurchases.

Webcast

This news release and the accompanying tables should be read in conjunction with additional content that is available on the Company's website, including a supplemental financial package, as well as a webcast that the Company will host at 5 p.m. ET today to discuss its unaudited third quarter results. The webcast will be archived on the Company website. Individuals can access the webcast, as well as this press release and supplemental financial information, at http://ca.com/invest or listen to the call at 1-877-857-6161. The international participant number is 1-719-325-4753.

(Logo: http://photos.prnewswire.com/prnh/20100516/NY05617LOGO )

About CA Technologies

CA Technologies (Nasdaq: CA) is an IT management software and solutions company with expertise across all IT environments — from mainframe and distributed, to virtual and cloud. CA Technologies manages and secures IT environments and enables customers to deliver more flexible IT services. CA Technologies innovative products and services provide the insight and control essential for IT organizations to power business agility. The majority of the Global Fortune 500 relies on CA Technologies to manage evolving IT ecosystems. For additional information, visit CA Technologies at www.ca.com.

Follow CA Technologies


Non-GAAP Financial Measures  (Update)

This news release, the accompanying tables and the additional content that is available on the Company's website, including a supplemental financial package, includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP). Non-GAAP metrics for operating expenses, operating income, operating margin, income from operations and diluted earnings per share exclude the following items: non-cash amortization of purchased software and other intangibles, share-based compensation,  pre-fiscal year 2010 restructuring and certain other gains and losses, which includes recoveries and certain costs associated with derivative litigation matters and includes the gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter. Non-GAAP income also excludes the interest on convertible bonds. The effective tax rate on GAAP and non-GAAP income from operations is the Company's provision for income taxes expressed as a percentage of pre-tax GAAP and non-GAAP income from operations, respectively. Such tax rates are determined based on an estimated effective full year tax rate, with the effective tax rate for GAAP generally including the impact of discrete items in the  period such items arise and the effective tax rate for non-GAAP income generally allocating the impact of discrete items pro rata to the fiscal year's remaining reporting periods. Non-GAAP adjusted cash flow excludes restructuring and other payments. Free cash flow excludes capital expenditures. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations.  To present this information, current and comparative prior period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate in effect on March 31, 2010, which was the last day of our prior fiscal year.  Constant currency excludes the impacts from the Company's hedging program.  The constant currency calculation for annualized subscription and maintenance bookings is calculated by dividing the subscription and maintenance bookings in constant currency by the weighted average subscription and maintenance duration in years. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and cash flows, to competitors' operating results and cash flows, and to estimates made by securities analysts. Management uses these non-GAAP financial measures internally to evaluate its performance and they are key variables in determining management incentive compensation. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. In addition, the Company has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures, which are attached to this news release.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this communication (such as statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) constitute "forward-looking statements" that are based upon the beliefs of, and assumptions made by, the Company's management, as well as information currently available to management. These forward-looking statements reflect the Company's current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company's strategy by, among other things, increasing sales in new and emerging enterprises and markets, enabling the sales force to sell new products and Software-as-a-Service offerings and improving the Company's brand in the marketplace; global economic factors or political events beyond the Company's control; general economic conditions, including concerns regarding a global recession and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; failure to expand channel partner programs; the ability to adequately manage and evolve financial reporting and managerial systems and processes; the ability to successfully acquire technology and software that are consistent with our strategy and integrate acquired companies and products into existing businesses; competition in product and service offerings and pricing; the ability to retain and attract qualified key personnel; the ability to adapt to rapid technological and market changes; the ability of the Company's products to remain compatible with ever-changing operating environments; access to software licensed from third parties, third-party code and specifications for the development of code; use of software from open source code sources; discovery of errors in the Company's software and potential product liability claims; significant amounts of debt and possible future credit rating changes; the failure to protect the Company's intellectual property rights and source code; fluctuations in the number, terms and duration of our license agreements as well as the timing of orders from customers and channel partners; reliance upon large transactions with customers; risks associated with sales to government customers; breaches of the Company's software products and the Company's and customers' data centers and IT environments; access to third-party microcode; third-party claims of intellectual property infringement or royalty payments; fluctuations in foreign currencies; failure to successfully execute restructuring plans; successful outsourcing of various functions to third parties; potential tax liabilities; and these factors and the other factors described more fully in the Company's filings with the Securities and Exchange Commission.  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 © 2011 CA, Inc. All Rights Reserved. One CA Plaza, Islandia, N.Y. 11749. All other trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

Contacts:  

Dan Kaferle

Kelsey Doherty


Public Relations

Investor Relations


(631) 342-2111

(212) 415-6844


daniel.kaferle@ca.com 

kelsey.doherty@ca.com



Table 1

CA Technologies

Condensed Consolidated Statements of Operations

(in millions, except per share amounts)

(unaudited)










Three Months Ended


Nine Months Ended


December 31,


December 31,

Revenue

2010


2009


2010


2009

Subscription and maintenance revenue

$       995


$         995


$    2,917


$    2,905

Professional services

88


73


245


213

Software fees and other

82


54


204


115

Total revenue

1,165


1,122


3,366


3,233

Expenses








Costs of licensing and maintenance

82


73


233


211

Cost of professional services

77


66


223


191

Amortization of capitalized software costs

52


34


145


101

Selling and marketing

348


315


955


879

General and administrative

114


129


344


358

Product development and enhancements

110


117


363


348

Depreciation and amortization of other intangible assets

47


39


136


116

Other expenses (gains), net

5


(3)


9


11

Restructuring and other

(8)


2


(11)


4

Total expenses before interest and income taxes

827


772


2,397


2,219

Income from continuing operations before interest and income taxes

338


350


969


1,014

Interest expense, net

10


23


35


62

Income from continuing operations before income taxes

328


327


934


952

Income tax expense

128


71


289


283

INCOME FROM CONTINUING OPERATIONS

$       200


$         256


$       645


$       669

Income (loss) from discontinued operations, net of income taxes

-


1


(6)


1

NET INCOME

$       200


$         257


$       639


$       670









Basic income (loss) per share








Income from continuing operations

$      0.39


$        0.49


$      1.26


$      1.28

Loss from discontinued operations

-


-


(0.01)


-

Net Income

$      0.39


$        0.49


$      1.25


$      1.28

Basic weighted average shares used in computation

505


515


507


516









Diluted income (loss) per share








Income from continuing operations

$      0.39


$        0.49


$      1.25


$      1.27

Loss from discontinued operations

-


-


(0.01)


-

Net Income

$      0.39


$        0.49


$      1.24


$      1.27

Diluted weighted average shares used in computation

506


535


508


539









Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.



Table 2

CA Technologies

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)






December 31,


March 31,


2010


2010





Cash and cash equivalents

$          2,518


$          2,583

Marketable securities- current

59


-

Trade and installment accounts receivable, net      

866


931

Deferred income taxes - current

194


360

Other current assets

159


116





Total current assets

3,796


3,990





Marketable securities - noncurrent

108


-

Installment accounts receivable, due after one year, net

-


46

Property and equipment, net

439


452

Goodwill

5,742


5,667

Capitalized software and other intangible assets, net

1,299


1,150

Deferred income taxes - noncurrent

309


355

Other noncurrent assets, net

198


178





Total assets

$        11,891


$        11,838





Current portion of long-term debt and loans payable

$               16


$               15

Deferred revenue (billed or collected) - current

2,342


2,555

Deferred income taxes - current

53


51

Other current liabilities

802


967





Total current liabilities

3,213


3,588





Long-term debt, net of current portion

1,539


1,530

Deferred income taxes - noncurrent

143


134

Deferred revenue (billed or collected) - noncurrent

995


1,068

Other noncurrent liabilities

536


535





Total liabilities

6,426


6,855





Common stock

59


59

Additional paid-in capital

3,598


3,657

Retained earnings

3,938


3,361

Accumulated other comprehensive loss

(79)


(130)

Treasury stock

(2,051)


(1,964)





Total stockholders' equity

5,465


4,983





Total liabilities and stockholders' equity

$        11,891


$        11,838



Table 3

 CA Technologies

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)


Three Months Ended


December 31,


2010


2009

OPERATING ACTIVITIES:




       Net income

$             200


$             257

       Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

99


74

Provision for deferred income taxes

-


(16)

Share based compensation expense

21


22

Amortization of discount on convertible debt

-


9

Asset impairments and other non-cash activities

1


1

Foreign currency transaction gains

3


6

       Changes in other operating assets and liabilities, net of effect of acquisitions:            




Increase in trade and installment accounts receivable, net  

(167)


(177)

Increase in deferred revenue

209


51

Increase in taxes payable, net

142


110

Decrease in accounts payable, accrued expenses and other

(17)


(26)

Increase in accrued salaries, wages and commissions

20


42

Decrease in restructuring liabilities

(12)


(7)

Changes in other operating assets and liabilities

(3)


(4)

NET CASH PROVIDED BY OPERATING ACTIVITIES

496


342

INVESTING ACTIVITIES:




        Acquisitions, primarily businesses, net of cash acquired,




        and purchased software

(224)


(198)

        Purchases of property and equipment

(26)


(15)

        Cash proceeds from divestiture of assets

3


-

        Capitalized software development costs

(43)


(46)

        Purchases of marketable securities

(168)


-

        Other investing activities

(1)


(1)

NET CASH USED IN INVESTING ACTIVITIES

(459)


(260)

FINANCING ACTIVITIES:




        Dividends paid

(20)


(21)

        Purchases of common stock

(33)


(45)

        Debt repayments

(2)


(406)

        Exercise of common stock options and other

3


4

NET CASH USED IN FINANCING ACTIVITIES

(52)


(468)

DECREASE IN CASH AND CASH EQUIVALENTS BEFORE




   EFFECT OF EXCHANGE RATE CHANGES ON CASH

(15)


(386)

Effect of exchange rate changes on cash

8


(15)

DECREASE IN CASH AND CASH EQUIVALENTS

(7)


(401)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

2,525


3,025

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$          2,518


$          2,624



Table 4

CA Technologies

Constant Currency Summary

(in millions)

(unaudited)



Three Months Ended December 31,



2010


2009


% Increase

(Decrease)

in $ US


% Increase

(Decrease) in

Constant

Currency (1)











Bookings

$         1,281


$        1,367


(6%)


(5%)











Revenue:









  North America

$            697


$           650


7%


7%


  International

468


472


(1%)


1%


  Total revenue

$         1,165


$        1,122


4%


5%











Revenue:









  Subscription and maintenance

$            995


$           995


0%


1%


  Professional services

88


73


21%


23%


  Software fees and other

82


54


52%


50%


  Total revenue

$         1,165


$        1,122


4%


5%











Total expenses before interest and income taxes:









  Total Non-GAAP (2)

$            774


$           728


6%


7%


  Total GAAP

$            827


$           772


7%


7%





















Nine Months Ended December 31,



2010


2009


% Increase

(Decrease)

in $ US


% Increase

(Decrease) in

Constant

Currency (1)











Bookings

$         3,049


$        3,493


(13%)


(12%)











Revenue:









  North America

$         2,038


$        1,899


7%


7%


  International

1,328


1,334


0%


1%


  Total revenue

$         3,366


$        3,233


4%


4%











Revenue:









  Subscription and maintenance

$         2,917


$        2,905


0%


1%


  Professional services

245


213


15%


16%


  Software fees and other

204


115


77%


74%


  Total revenue

$         3,366


$        3,233


4%


4%











Total expenses before interest and income taxes:









  Total Non-GAAP (2)

$         2,219


$        2,059


8%


8%


  Total GAAP

$         2,397


$        2,219


8%


8%



















(1)  Constant currency information is presented to provide a framework to assess how the underlying businesses performed excluding the effect of foreign currency rate fluctuations.  To present this information, current and comparative prior period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate in effect on March 31, 2010, which was the last day of fiscal year 2010.  Constant currency excludes the impacts from the Company's hedging program.      


(2)  Refer to Table 6 for a reconciliation of total expenses before interest and income taxes on a GAAP basis to total expenses before interest and income taxes on a non-GAAP basis.  


    Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  


    Certain non-material differences may arise versus actual from impact of rounding.  



Table 5

CA Technologies

Reconciliation of GAAP to non-GAAP Income from Continuing Operations

(in millions, except per share amounts)

(unaudited)
















Three Months Ended


Three Months Ended



December 31, 2010


December 31, 2009



GAAP


Non-GAAP

Adjustments


Non-GAAP


GAAP


Non-GAAP

Adjustments


Non-GAAP















Total revenue

1,165


-


1,165


1,122


-


1,122


Expenses













Costs of licensing and maintenance(1)

82


1


81


73


-


73


Cost of professional services(1)

77


1


76


66


1


65


Amortization of capitalized software costs(2)

52


23


29


34


13


21


Selling and marketing(1)

348


8


340


315


8


307


General and administrative(1)

114


7


107


129


7


122


Product development and enhancements(1)

110


4


106


117


6


111


Depreciation and amortization of other intangible assets(3)

47


18


29


39


13


26


Other expenses (gains), net (4)

5


-


5


(3)


(6)


3


Restructuring and other (5)

(8)


(9)


1


2


2


-


Total expenses before interest and income taxes

827


53


774


772


44


728


Income from continuing operations before interest and income taxes

338


(53)


391


350


(44)


394















   Operating Margin (% of revenue)

29%




34%


31%




35%















Interest expense, net

10


-


10


23


-


23


Interest on dilutive convertible bonds(6)

-


-


-


-


11


(11)


Income from continuing operations before income taxes

328


(53)


381


327


(55)


382


Income tax expense(7)(8)

128


7


121


71


(65)


136


INCOME FROM CONTINUING OPERATIONS(6)

200


(60)


260


256


10


246















Diluted income (loss) per share













Income from continuing operations(7)(8)(9)

$        0.39


$               0.12


$           0.51


$        0.49


$             (0.03)


$           0.46


Diluted weighted average shares used in computation(9)

506




506


535




535
















Nine Months Ended


Nine Months Ended



December 31, 2010


December 31, 2009



GAAP


Non-GAAP Adjustments


Non-GAAP


GAAP


Non-GAAP Adjustments


Non-GAAP















Total revenue

3,366


-


3,366


3,233


-


3,233


Expenses













Costs of licensing and maintenance(1)

233


3


230


211


2


209


Cost of professional services(1)

223


3


220


191


2


189


Amortization of capitalized software costs(2)

145


67


78


101


39


62


Selling and marketing(1)

955


23


932


879


25


854


General and administrative(1)

344


17


327


358


29


329


Product development and enhancements(1)

363


15


348


348


17


331


Depreciation and amortization of other intangible assets(3)

136


51


85


116


39


77


Other expenses (gains), net (4)

9


7


2


11


3


8


Restructuring and other (5)

(11)


(8)


(3)


4


4


-


Total expenses before interest and income taxes

2,397


178


2,219


2,219


160


2,059


Income from continuing operations before interest and income taxes

969


(178)


1,147


1,014


(160)


1,174















   Operating Margin (% of revenue)

29%




34%


31%




36%















Interest expense, net

35


-


35


62


-


62


Interest on dilutive convertible bonds(6)

-


-


-


-


35


(35)


Income from continuing operations before income taxes

934


(178)


1,112


952


(195)


1,147


Income tax expense(7)(8)

289


(77)


366


283


(124)


407


INCOME FROM CONTINUING OPERATIONS(6)

645


(101)


746


669


(71)


740















Diluted income (loss) per share













Income from continuing operations(7)(8)(9)

$        1.25


$               0.20


$           1.45


$        1.27


$               0.09


$           1.36


Diluted weighted average shares used in computation(9)

508




508


539




539









































(1)  Non-GAAP adjustment consists of Share-based Compensation


(2)  Non-GAAP adjustment consists of Purchased Software Amortization  


(3)  Non-GAAP adjustment consists of Intangibles Amortization  


(4)  Consists of gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter.  


(5)  Non-GAAP adjustment excludes $3 of benefit related to the Fiscal 2010 restructuring plan for the nine months ended December 31, 2010 and includes $9M net gain from one-time stockholder derivative litigation settlements during the three months ended December 31, 2010.  


(6)  Non-GAAP income from continuing operations and the number of shares used in the computation of non-GAAP diluted EPS from continuing operations have been adjusted to reflect the dilutive impact of the Company's 1.625% Convertible Senior Notes and stock awards outstanding for the three and nine months ended December 31, 2009.  


(7)  The effective tax rate on non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of non-GAAP income from continuing operations before income taxes.  Such tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).  


(8)  Includes an income tax benefit related to share based compensation of $7M and $20M for the three and nine months ended December 31, 2010, respectively, and $8M and $26M for the three and nine months ended December 31, 2009, respectively.  


(9)  The calculation of the non-GAAP diluted EPS from continuing operations includes certain adjustments required by ASC 260-10-45 which treats certain stock awards as participating securities for the computation of earnings per share.  As a result, non-GAAP diluted EPS from continuing operations may not equal the non-GAAP income from continuing operations divided by the diluted weighted average shares.    


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


    Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  


    Certain non-material differences may arise versus actual from impact of rounding.  



Table 6

CA Technologies

Reconciliation of GAAP to Non-GAAP

Operating Expenses and Diluted Earnings per Share

(in millions, except per share amounts)

(unaudited)












Three Months Ended


Nine Months Ended



December 31,


December 31,


Operating Expenses

2010


2009


2010


2009











Total expenses before interest and income taxes

$             827


$             772


$      2,397


$      2,219











Non-GAAP operating adjustments:









  Purchased software amortization

23


13


67


39


  Intangibles amortization

18


13


51


39


  Share-based compensation

21


22


61


75


  Restructuring and other

(9)


2


(8)


4


  Hedging (gains)/losses, net (1)

-


(6)


7


3


Total non-GAAP operating adjustments                

53


44


178


160











Total non-GAAP operating expenses

$             774


$             728


$      2,219


$      2,059





















Three Months Ended


Nine Months Ended



December 31,


December 31,


Diluted EPS from Continuing Operations

2010


2009


2010


2009











GAAP diluted EPS from continuing operations

$            0.39


$            0.49


$        1.25


$        1.27











Non-GAAP adjustments, net of taxes  









 Purchased software and intangibles amortization

0.05


0.03


0.15


0.09


 Share-based compensation

0.03


0.03


0.08


0.09


 Restructuring and other

(0.01)


-


(0.01)


-


 Hedging (gains)/losses, net (1)

-


(0.01)


0.01


(0.01)


 Non-GAAP effective tax rate adjustments (2)

0.05


(0.08)


(0.03)


(0.08)











Non-GAAP diluted EPS from continuing operations

$            0.51


$            0.46


$        1.45


$        1.36



















(1)  Consists of gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter.  


(2)  The effective tax rate on non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of non-GAAP income from continuing operations before income taxes.  Such tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).  


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


    Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  


    Certain non-material differences may arise versus actual from impact of rounding.  



Table 7

CA Technologies

Effective Tax Rate Reconciliation

GAAP and Non-GAAP

(in millions)

(unaudited)





















Three Months Ended


Nine Months Ended



December 31, 2010


December 31, 2010



GAAP


Non-GAAP


GAAP


Non-GAAP











Income from continuing operations before income taxes (1)

$             328


$             381


$         934


$         1,112











Statutory tax rate

35%


35%


35%


35%











Tax at statutory rate

115


133


327


389











Adjustments for discrete and permanent items (2)

13


(12)


(38)


(23)











Total tax expense                            

$             128


$             121


$         289


$            366











Effective tax rate (3)

39.0%


31.7%


30.9%


32.9%












Three Months Ended


Nine Months Ended



December 31, 2009


December 31, 2009



GAAP


Non-GAAP


GAAP


Non-GAAP











Income from continuing operations before income taxes (1)

$             327


$             382


$         952


$         1,147











Statutory tax rate

35%


35%


35%


35%











Tax at statutory rate

114


134


333


401











Adjustments for discrete and permanent items (2)

(43)


2


(50)


6











Total tax expense                            

$               71


$             136


$         283


$            407











Effective tax rate (3)

21.7%


35.6%


29.7%


35.5%




























(1)  Refer to Table 5 for a reconciliation of income from continuing operations before income taxes on a GAAP basis to income from continuing operations before income taxes on a non-GAAP basis.  


(2)  The effective tax rate for GAAP generally includes the impact of discrete and permanent items in the period such items arise, whereas the effective tax rate for non-GAAP generally allocates the impact of such items pro rata to the fiscal year's remaining reporting periods.  


(3)  The effective tax rate on GAAP and non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of GAAP and non-GAAP income from continuing operations before income taxes, respectively.  Such tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).    


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


    Certain non-material differences may arise versus actual from impact of rounding.  




Table 8

CA Technologies

Reconciliation of GAAP Earnings per Share to

Non-GAAP Earnings per Share

(unaudited)








Fiscal Year Ending


Projected Diluted EPS from Continuing Operations

March 31, 2011







Projected GAAP Diluted EPS From Continuing Operations Range  

$                  1.57

to

$         1.67







Non-GAAP Adjustments, Net of Taxes:





    Purchased Software and Intangibles Amortization

0.21


0.21


    Share-based Compensation

0.11


0.11


    Restructuring and Other

(0.01)


(0.01)


Non-GAAP Projected Diluted EPS From Continuing Operations Range

$                  1.88

to

$         1.98













Fiscal Year Ended




Diluted EPS from Continuing Operations

March 31, 2010









GAAP diluted EPS from continuing operations

$                  1.47









Non-GAAP adjustments, net of taxes  





 Purchased software and intangibles amortization

0.14




 Share-based compensation

0.13









Non-GAAP diluted EPS from continuing operations

$                  1.74













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


 Certain balances have been revised to reflect the discontinued operations associated with the sale of the Information Governance business.  


 Certain non-material differences may arise versus actual from impact of rounding.  



Table 9

CA Technologies

Allocation of Share-based Compensation

(in millions)

(unaudited)


















Three Months Ended


Nine Months Ended


December 31,


December 31,


2010


2009


2010


2009









Costs of licensing and maintenance

$                 1


$                -


$                 3


$                 2

Costs of professional services

1


1


3


2

Selling and marketing

8


8


23


25

General and administrative

7


7


17


29

Product development and enhancements

4


6


15


17

Share-based compensation expense before tax

21


22


61


75

Income tax benefit

(7)


(8)


(20)


(26)

    Net share-based compensation expense

$               14


$               14


$               41


$               49









Certain non-material differences may arise versus actual from impact of rounding.



SOURCE CA Technologies

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