CA Technologies
May 10, 2012

CA Technologies Reports Fourth Quarter and Full Fiscal Year 2012 Results

ISLANDIA, N.Y.--(BUSINESS WIRE)-- CA Technologies (NASDAQ:CA) today reported financial results for its fourth quarter and full fiscal year 2012, ended March 31, 2012.

    Fourth Quarter FY12 vs. FY11       Full Year FY12 vs. FY11
(dollars in millions, except share data) FY12   FY11  

%
Change

 

%
Change
CC**

      FY12   FY11  

%
Change

 

%
Change
CC**

Revenue $1,188   $1,128   5%   6% $4,814   $4,429   9%   7%
GAAP Income from continuing operations $211   $187   13%   12% $938   $823   14%   9%
Non-GAAP Income from continuing operations* $264   $247   7%   2% $1,117   $984   14%   8%
GAAP Diluted EPS from continuing operations $0.45   $0.37   22%   19% $1.90   $1.60   19%   14%
Non-GAAP Diluted EPS from continuing operations* $0.56   $0.48   17%   10% $2.27   $1.92   18%   13%
Cash Flow from continuing operations   $776   $634   22%   20%       $1,505   $1,377   9%   6%
* 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

"We finished fiscal 2012 by delivering a solid fourth quarter," said Bill McCracken, CA Technologies chief executive officer. "Fiscal 2012 was a year that further demonstrated CA Technologies progress against its strategic goals and our commitment to consistently delivering innovative solutions and services to our customers, revenue and earnings growth and attractive, sustainable returns to our shareholders.

"In fiscal 2013 we will continue to focus on improving our execution, expanding our presence in large existing enterprises, and winning new accounts in large new enterprises and growth markets," he said. "We also will continue to follow a strategy that thoughtfully balances investments in the business to fuel growth with the return of cash to our shareholders."

REVENUE AND BOOKINGS

During the fourth quarter, the Company saw demand for its services and learning, virtualization and service automation, security and mainframe solutions. This was offset by softness in mainframe capacity and service assurance. About 4 percentage points of revenue growth in constant currency and 3 percentage points as reported were driven by organic products, with the remaining 2 percentage points in constant currency and as reported coming from products from recent acquisitions. About 63 percent of the Company's revenue in the fourth quarter came from North America, while 37 percent came from International operations.

Fourth Quarter

Total revenue year-over-year:

Bookings year-over-year:

Full Year

About 5 percentage points of revenue growth in constant currency and 7 percentage points as reported were driven by organic products, with the remaining 2 percentage points in constant currency and as reported coming from products from recent acquisitions. About 62 percent of the Company's full year revenue came from North America, while 38 percent came from International operations.

Total revenue year-over-year:

Bookings year-over-year:

EXPENSES AND MARGIN

Fourth Quarter

Year-over-year GAAP results:

Year-over-year non-GAAP results, which exclude purchased software and other intangibles amortization, fiscal year 2007 restructuring costs, and certain other gains and losses (including recoveries and certain costs associated with derivative litigation matters and share-based compensation expense), and which include gains and losses on hedges that mature within the quarter, but which exclude gains and losses on hedges that do not mature within the quarter:

For the fourth quarter of fiscal year 2012, the Company's effective GAAP tax rate was 27 percent, compared with 35 percent in the prior year. The Company's effective non-GAAP tax rate was 28 percent, down from 29 percent in the prior year.

Full Year

Year-over-year GAAP results:

Year-over-year non-GAAP results:

For the full year, the Company's effective GAAP and non-GAAP tax rate was 31 percent, compared with 32 percent in the prior year.

SEGMENT INFORMATION

Beginning in the first quarter of fiscal year 2012, CA Technologies began reporting results in three segment areas: Mainframe Solutions, Enterprise Solutions and Services.

Fourth Quarter

Full Year

CASH FLOW FROM CONTINUING OPERATIONS

CAPITAL STRUCTURE

BUSINESS HIGHLIGHTS

During the fourth quarter the Company:

OUTLOOK FOR FISCAL YEAR 2013

The Company provided its outlook for fiscal year 2013. The following guidance consists of "forward-looking statements" (as defined below).

The Company expects the following:

This outlook also assumes no material acquisitions and a partial currency hedge of operating income. The Company expects a full-year GAAP operating margin of 30 percent and non-GAAP operating margin of 35 percent. The Company also expects an effective full-year GAAP and non-GAAP tax rate in a range of 30 to 31 percent.

The Company anticipates approximately 448 million shares outstanding at fiscal year 2013 year-end and weighted average diluted shares outstanding of approximately 461 million for the fiscal year.

"We believe the results in fiscal year 2012 and our outlook for fiscal year 2013 are the right steps towards achieving the long term guidance we issued to financial analysts in July of 2011," McCracken said. "We reaffirmed that long term outlook in January when we announced our Enhanced Capital Allocation Program and are reaffirming that outlook now," said McCracken.

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 fourth quarter results. The webcast will be archived on the 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 1-877-561-2748. The international participant number is 1-720-545-0044.

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.

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Non-GAAP Financial Measures

This news release, the accompanying tables and the additional content that is available on the Company's website, including a supplemental financial package, 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 continuing operations and diluted earnings per share exclude the following items: non-cash amortization of purchased software and other intangibles, share-based compensation, fiscal year 2007 restructuring costs 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. Prior to fiscal year 2011, 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 continuing 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. Adjusted cash flow from operations excludes restructuring and other payments. Free cash flow excludes purchases of property, equipment and capitalized software development costs. 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, 2011, 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

The declaration and payment of future dividends is subject to the determination of the Company's Board of Directors, in its sole discretion, after considering various factors, including the Company's financial condition, historical and forecast operating results, and available cash flow, as well as any applicable laws and contractual covenants and any other relevant factors. The Company's practice regarding payment of dividends may be modified at any time and from time to time.

Repurchases under the Company's stock repurchase program are expected to be made with cash on hand and may be made from time to time, subject to market conditions and other factors, in the open market, through solicited or unsolicited privately negotiated transactions or otherwise. The program, which is authorized through the fiscal year ending March 31, 2014, does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company's discretion.

Certain statements in this communication (such as statements containing the words "believes," "plans," "anticipates," "expects," "estimates," "targets" and similar expressions) constitute "forward-looking statements" that are based upon the beliefs of, and assumptions made by, the Company's management, as well as information currently available to management. These forward-looking statements reflect the Company's current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company's strategy by, among other things, effectively rebalancing the Company's sales force to increase penetration in growth markets and with large enterprises that have not historically been significant customers, enabling the sales force to sell new products, improving the Company's brand in the marketplace and ensuring the Company's set of cloud computing, Software-as-a-Service and other new offerings address the needs of a rapidly changing market, while not adversely affecting the demand for the Company's traditional products or its profitability; global economic factors or political events beyond the Company's control; general economic conditions and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; the ability to adapt to rapid technological changes and introduce new software products and services in a timely manner; competition in product and service offerings and pricing; the failure to expand partner programs; the ability to retain and attract adequate qualified personnel; the ability to integrate acquired companies and products into existing businesses; the ability to adequately manage and evolve financial reporting and managerial systems and processes; the ability of the Company's products to remain compatible with ever-changing operating environments; breaches of the Company's software products and the Company's and customers' data centers and IT environments; discovery of errors in the Company's software and potential product liability claims; the failure to protect the Company's intellectual property rights and source code; risks associated with sales to government customers; access to software licensed from third parties; risks associated with the use of software from open source code sources; access to third-party code and specifications for the development of code; third-party claims of intellectual property infringement or royalty payments; fluctuations in the number, terms and duration of the Company's license agreements as well as the timing of orders from customers and channel partners; the failure to renew large license transactions on a satisfactory basis; changes in market conditions or the Company's credit ratings; fluctuations in foreign currencies; the failure to effectively execute the Company's workforce reductions; successful outsourcing of various functions to third parties; events or circumstances that would require us to record a goodwill impairment charge; potential tax liabilities; acquisition opportunities that may or may not arise; and other factors described more fully in the Company's filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties occur, or should our assumptions prove incorrect, actual results may vary materially from those described herein as believed, planned, anticipated, expected, estimated or targeted. 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 © 2012 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.

Table 1
CA Technologies
Consolidated Statements of Operations
(unaudited)
(in millions, except per share amounts)
                 
Three Months Ended Fiscal Year Ended

March 31,

March 31,

Revenue

2012

2011

2012

2011

Subscription and maintenance revenue $ 986 $ 970 $ 4,021 $ 3,822
Professional services 93 82 382 327
Software fees and other   109   76   411   280
Total revenue $ 1,188 $ 1,128 $ 4,814 $ 4,429
Expenses
Costs of licensing and maintenance $ 79 $ 71 $ 286 $ 278
Cost of professional services 87 80 357 303
Amortization of capitalized software costs 61 48 225 192
Selling and marketing 356 355 1,394 1,286
General and administrative 131 107 462 451
Product development and enhancements 126 108 510 471
Depreciation and amortization of other intangible assets 42 51 176 187
Other expenses, net   5   9   15   7
Total expenses before interest and income taxes $ 887 $ 829 $ 3,425 $ 3,175
Income from continuing operations before interest and income taxes $ 301 $ 299 $ 1,389 $ 1,254
Interest expense, net   11   10   35   45
Income from continuing operations before income taxes $ 290 $ 289 $ 1,354 $ 1,209
Income tax expense 79 102 416 386
Income from continuing operations $ 211 $ 187 $ 938 $ 823
Income from discontinued operations, net of income taxes   -   1   13   4
Net income $ 211 $ 188 $ 951 $ 827
 
Basic income per share
Income from continuing operations $ 0.45 $ 0.37 $ 1.91 $ 1.60
Income from discontinued operations   -   -   0.03   0.01
Net income $ 0.45 $ 0.37 $ 1.94 $ 1.61
Basic weighted average shares used in computation 466 503 486 506
 
Diluted income per share
Income from continuing operations $ 0.45 $ 0.37 $ 1.90 $ 1.60
Income from discontinued operations   -   -   0.03   0.01
Net income $ 0.45 $ 0.37 $ 1.93 $ 1.61
Diluted weighted average shares used in computation 467 505 487 507
 
 

Table 2
CA Technologies
Condensed Consolidated Balance Sheets
(in millions)
       
March 31, March 31,

2012

2011

(unaudited)
Cash and cash equivalents $ 2,679 $ 3,049
Marketable securities - 75
Trade accounts receivable, net 902 849
Deferred income taxes 231 244
Other current assets   153   152
Total current assets $ 3,965 $ 4,369
 
Marketable securities $ - $ 104
Property and equipment, net 386 437
Goodwill 5,856 5,686
Capitalized software and other intangible assets, net 1,389 1,284
Deferred income taxes 151 285
Other noncurrent assets, net   250   246
Total assets $ 11,997 $ 12,411
 
Current portion of long-term debt and loans payable $ 14 $ 269
Deferred revenue (billed or collected) 2,658 2,597
Deferred income taxes 14 68
Other current liabilities   1,065   987
Total current liabilities $ 3,751 $ 3,921
 
Long-term debt, net of current portion $ 1,287 $ 1,282
Deferred income taxes 44 64
Deferred revenue (billed or collected) 972 969
Other noncurrent liabilities   546   555
Total liabilities $ 6,600 $ 6,791
 
Common stock $ 59 $ 59
Additional paid-in capital 3,491 3,615
Retained earnings 4,865 4,106
Accumulated other comprehensive loss (108) (65)
Treasury stock   (2,910)   (2,095)
Total stockholders' equity $ 5,397 $ 5,620
Total liabilities and stockholders' equity $ 11,997 $ 12,411
 
 

Table 3
CA Technologies
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in millions)
      Three Months Ended

March 31,

2012

   

2011

Operating activities from continuing operations:
Net income $ 211 $ 188
Income from discontinued operations   -     (1 )
Income from continuing operations $ 211   $ 187  

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

Depreciation and amortization 103 99
Provision for deferred income taxes (94 ) (47 )
Provision for bad debts 2 1
Share-based compensation expense 28 19
Asset impairments and other non-cash items 5 2
Foreign currency transaction losses 12 1
Changes in other operating assets and liabilities, net of effect of acquisitions:
(Increase) decrease in trade accounts receivable, net (57 ) 35
Increase in deferred revenue 486 176
(Decrease) increase in taxes payable, net (13 ) 74
Increase in accounts payable, accrued expenses and other 40 28
Increase in accrued salaries, wages and commissions 53 35
Changes in other operating assets and liabilities   -     24  
Net cash provided by operating activities - continuing operations $ 776   $ 634  
Investing activities from continuing operations:
Acquisitions of businesses, net of cash acquired, and purchased software $ (14 ) $ -
Purchases of property and equipment (19 ) (19 )
Capitalized software development costs (43 ) (54 )
Proceeds from (purchases in) marketable securities, net 182 (13 )
Other investing activities   (1 )   (1 )
Net cash used in investing activities - continuing operations $ 105   $ (87 )
Financing activities from continuing operations:
Dividends paid $ (117 ) $ (21 )
Purchases of common stock, including accelerated share repurchase (500 ) (47 )
Debt borrowings (repayments) 8 (4 )
Exercise of common stock options and other   26     3  
Net cash used in financing activities - continuing operations $ (583 ) $ (69 )
Net change in cash and cash equivalents before effect of exchange rate changes on cash - continuing operations $ 298   $ 478  
Effect of exchange rate changes on cash $ 29 $ 49
Cash (used in) provided by operating activities - discontinued operations $ (6 ) $ 4  
Increase in cash and cash equivalents $ 321 $ 531
Cash and cash equivalents at beginning of period $ 2,358   $ 2,518  
Cash and cash equivalents at end of period $ 2,679   $ 3,049  
 
 

Table 4
CA Technologies
Operating Segments
(unaudited)
(in millions)
                             
Three Months Ended March 31, 2012 Fiscal Year Ended March 31, 2012
Mainframe Enterprise

 

Mainframe Enterprise

Solutions (1)

Solutions (1)

Services (1)

Total  

Solutions (1)

Solutions (1)

Services (1)

Total
 
Revenue (2) $ 629 $ 466 $ 93 $ 1,188 $ 2,612 $ 1,820 $ 382 $ 4,814
Expenses (3)   279   445   87   811     1,140   1,668   359   3,167  
Segment profit $ 350 $ 21 $ 6 $ 377   $ 1,472 $ 152 $ 23 $ 1,647  
Segment operating margin 56% 5% 6% 32% 56% 8% 6% 34%
 
Segment profit $ 377 $ 1,647
Less:
Purchased software amortization 27 103
Other intangibles amortization 15 65
Share-based compensation expense 28 89
Other unallocated operating gains, net (4) 6 1
Interest expense, net   11     35  
Income from continuing operations before income taxes $ 290   $ 1,354  
 
 
 
 
 
Three Months Ended March 31, 2011 Fiscal Year Ended March 31, 2011
Mainframe Enterprise Mainframe Enterprise

Solutions (1)

Solutions (1)

Services (1)

Total  

Solutions (1)

Solutions (1)

Services (1)

Total
 
Revenue (2) $ 621 $ 425 $ 82 $ 1,128 $ 2,479 $ 1,623 $ 327 $ 4,429
Expenses (3)   295   397   80   772     1,129   1,501   310     2,940  
Segment profit $ 326 $ 28 $ 2 $ 356   $ 1,350 $ 122 $ 17   $ 1,489  
Segment operating margin 52% 7% 2% 32% 54% 8% 5% 34%
 
Segment profit $ 356 $ 1,489
Less:
Purchased software amortization 21 88
Other intangibles amortization 22 73
Share-based compensation expense 19 80

Other unallocated operating gains, net (4)

(5

)

(6

)

Interest expense, net   10     45  
Income from continuing operations before income taxes $ 289   $ 1,209  
(1)   • Mainframe Solutions — Our Mainframe Solutions segment addresses the mainframe market and is focused on making significant investments in order to be innovative in key management disciplines across our broad portfolio of products. Ongoing development is guided by customer needs, our cross-enterprise management philosophy and our Mainframe 2.0 strategy, which offers management capabilities designed to appeal to the next generation of mainframe staff while also offering productivity improvements to today's mainframe experts. Our mainframe business assists customers by addressing three major challenges: lowering costs, providing high service levels by sustaining critical workforce skills and increasing agility to help deliver on business goals.

 

• Enterprise Solutions — Our Enterprise Solutions segment includes products that operate on non-mainframe platforms, such as service assurance, security (identity and access management), project and portfolio management, service management, virtualization and service automation, SaaS, and cloud offerings. Our offerings help customers address their regulatory compliance demands, privacy needs, and internal security policies. Enterprise Solutions also focuses on delivering growth to the Company in the form of new customer acquisitions and revenue, while leveraging non-traditional routes-to-market and delivery models.

 

• Services — Our Services segment offers implementation, consulting, education and training services to customers, which is intended to promote a seamless customer experience and to increase the value that customers realize from our solutions.

 
(2) We regularly enter into a single arrangement with a customer that includes Mainframe Solutions segment software products, Enterprise Solutions segment software products and Services. The amount of contract revenue assigned to segments is generally based on the manner in which the proposal is made to the customer. The software product revenue is assigned to the Mainframe Solutions and Enterprise Solutions segments based on either: (1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the list price of the product); (2) allocations included within internal contract approval documents; or (3) the value for individual software products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately stated in the contract and these amounts of contract revenue are assigned to the Services segment. The contract value assigned to each segment is then recognized in a manner consistent with the revenue recognition policies we apply to the customer contract for purposes of preparing the Condensed Consolidated Financial Statements.
 
(3) Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of the Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs). Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product development costs, general and administrative costs and amortization of the cost of internally developed software. Allocated segment costs primarily include indirect selling and marketing costs and general and administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs between the Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated and is either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for the Services segment consist only of direct costs and there are no allocated or indirect costs for the Services segment.
 
(4) Other unallocated operating gains, net consists of restructuring costs associated with the Company's Fiscal 2007 Plan, foreign exchange derivative (gains) losses, and other miscellaneous costs.
 
 

Table 5

CA Technologies

Constant Currency Summary
(unaudited)
(in millions)
                   
Three Months Ended March 31,
% Increase
% Increase (Decrease)
(Decrease) in Constant
2012 2011 in $ US  

Currency (1)

 
Bookings $ 1,542 $ 1,889 (18%) (17%)
 
Revenue:
North America $ 748 $ 689 9% 9%
International   440   439 0% 1%
Total revenue $ 1,188 $ 1,128 5% 6%
 
Revenue:
Subscription and maintenance $ 986 $ 970 2% 2%
Professional services 93 82 13% 15%
Software fees and other   109   76 43% 44%
Total revenue $ 1,188 $ 1,128 5% 6%
 
Segment Revenue:
Mainframe solutions $ 629 $ 621 1% 2%
Enterprise solutions 466 425 10% 10%
Services 93 82 13% 15%
 
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 811 $ 772 5% 8%
Total GAAP 887 829 7% 8%
 
 
Fiscal Year Ended March 31,
% Increase
% Increase (Decrease)
(Decrease) in Constant
2012 2011 in $ US  

Currency (1)

 
Bookings $ 4,663 $ 4,888 (5%) (5%)
 
Revenue:
North America $ 2,990 $ 2,694 11% 11%
International   1,824   1,735 5% 0%
Total revenue $ 4,814 $ 4,429 9% 7%
 
Revenue:
Subscription and maintenance $ 4,021 $ 3,822 5% 3%
Professional services 382 327 17% 14%
Software fees and other   411   280 47% 45%
Total revenue $ 4,814 $ 4,429 9% 7%
 
Segment Revenue:
Mainframe solutions $ 2,612 $ 2,479 5% 3%
Enterprise solutions 1,820 1,623 12% 10%
Services 382 327 17% 14%
 
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 3,167 $ 2,940 8% 7%
Total GAAP 3,425 3,175 8% 7%
(1)   Constant currency information is presented 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, 2011, which was the last day of our prior fiscal year. Constant currency excludes the impacts from the Company's hedging program.
 
(2) Refer to Table 7 for a reconciliation of total expenses before interest and income taxes to total non-GAAP operating expenses.
 
Certain non-material differences may arise versus actual from impact of rounding.
 
 

Table 6
CA Technologies
Reconciliation of Select GAAP Measures to Non-GAAP Measures
(unaudited)
(in millions)
                   
Three Months Ended Fiscal Year Ended

March 31,

March 31,

2012

2011

2012

2011

GAAP net income $ 211 $ 188 $ 951 $ 827
GAAP income from discontinued operations, net of income taxes   -   (1)   (13)   (4)
GAAP income from continuing operations $ 211 $ 187 $ 938 $ 823
GAAP income tax expense 79 102 416 386
Interest expense, net   11   10   35   45
GAAP income from continuing operations before interest and income taxes $ 301 $ 299 $ 1,389 $ 1,254
GAAP operating margin (% of revenue) (1) 25% 27% 29% 28%
 
Non-GAAP adjustments to expenses:
Costs of licensing and maintenance(2) $ 1 $ - $ 3 $ 3
Cost of professional services(2) 1 - 4 3
Amortization of capitalized software costs(3) 27 21 103 88
Selling and marketing(2) 11 7 36 30
General and administrative(2) 10 7 27 24
Product development and enhancements(2) 5 5 19 20
Depreciation and amortization of other intangible assets(4) 15 22 65 73
Other expenses (gains), net (5) 5 (7) - -
Restructuring and other (6)   1   2   1   (6)
Total Non-GAAP adjustment to operating expenses $ 76 $ 57 $ 258 $ 235
Non-GAAP income from continuing operations before interest and income taxes $ 377 $ 356 $ 1,647 $ 1,489
Non-GAAP operating margin (% of revenue) (7) 32% 32% 34% 34%
 
Interest expense, net 11 10 35 45
 
GAAP income tax expense 79 102 416 386
Non-GAAP adjustment to income tax expense(8)   23   (3)   79   74
Non-GAAP income tax expense $ 102 $ 99 $ 495 $ 460
Non-GAAP income from continuing operations $ 264 $ 247 $ 1,117 $ 984
(1)  

GAAP operating margin is calculated by dividing GAAP income from continuing operations before interest and income taxes by total revenue (refer to Table 1 for total revenue).

 
(2) Non-GAAP adjustment consists of share-based compensation.
 
(3) Non-GAAP adjustment consists of purchased software amortization.
 
(4) Non-GAAP adjustment consists of other intangibles amortization.
 
(5) Non-GAAP adjustment 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.
 
(6) Non-GAAP adjustment consists of Fiscal 2007 Restructuring Plan expense adjustments. Prior fiscal year 2011 includes a $9 million net gain from one-time stockholder derivative litigation settlements.
 
(7) Non-GAAP operating margin is calculated by dividing non-GAAP income from continuing operations before interest and income taxes by total revenue (refer to Table 1 for total revenue).
 
(8) The full year non-GAAP income tax expense is different from GAAP income tax expense because of the difference in non-GAAP income from continuing operations before income taxes. On an interim basis, this difference would also include a difference in the impact of discrete and permanent items where for GAAP purposes the effect is recorded in the period such items arise, but for non-GAAP such items are recorded pro rata to the fiscal year's remaining reporting periods.
 
Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
Certain non-material differences may arise versus actual from impact of rounding.
 
 

Table 7
CA Technologies
Reconciliation of GAAP to Non-GAAP
Operating Expenses and Diluted Earnings per Share
(unaudited)
(in millions, except per share amounts)
                   
Three Months Ended Fiscal Year Ended

March 31,

March 31,

Operating Expenses

2012

2011

2012

2011

 
Total expenses before interest and income taxes $ 887 $ 829 $ 3,425 $ 3,175
 
Non-GAAP operating adjustments:
Purchased software amortization 27 21 103 88
Other intangibles amortization 15 22 65 73
Share-based compensation 28 19 89 80
Restructuring and other (1) 1 2 1 (6)
Hedging losses (gains), net (2)   5   (7)   -   -
Total non-GAAP operating adjustments $ 76 $ 57 $ 258 $ 235
 
Total non-GAAP operating expenses $ 811 $ 772 $ 3,167 $ 2,940
 
 
Three Months Ended Fiscal Year Ended

March 31,

March 31,

Diluted EPS from Continuing Operations

2012

2011

2012

2011

 
GAAP diluted EPS from continuing operations $ 0.45 $ 0.37 $ 1.90 $ 1.60
 
Non-GAAP adjustments, net of taxes
Purchased software and other intangibles amortization 0.06 0.06 0.24 0.21
Share-based compensation 0.04 0.02 0.13 0.11
Restructuring and other (1) - - - -
Hedging losses (gains), net (2) 0.01 (0.01) - -
Non-GAAP effective tax rate adjustments (3)   -   0.04   -   -
 
Non-GAAP diluted EPS from continuing operations $ 0.56 $ 0.48 $ 2.27 $ 1.92
(1)  

Non-GAAP adjustment consists of Fiscal 2007 Restructuring Plan expense adjustments. Prior fiscal year 2011 includes a $9 million net gain from one-time stockholder derivative litigation settlements.

 
(2) Non-GAAP adjustment 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.
 
(3) The non-GAAP effective tax rate is equal to the full year GAAP effective tax rate, therefore no adjustment is required on an annual basis. On an interim basis, the difference in non-GAAP income tax expense and GAAP income tax expense relates to the difference in non-GAAP income from continuing operations before income taxes, and includes a difference in the impact of discrete and permanent items where for GAAP purposes, the effect is recorded in the period such items arise but for non-GAAP purposes, such items are recorded pro rata to the fiscal year's remaining reporting periods.
 
Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
Certain non-material differences may arise versus actual from impact of rounding.
 
 

Table 8
CA Technologies
Effective Tax Rate Reconciliation
GAAP and Non-GAAP
(unaudited)
(in millions)
                 

Three Months Ended

Fiscal Year Ended

March 31, 2012

March 31, 2012

GAAP

Non-GAAP

GAAP

Non-GAAP

 
Income from continuing operations before interest and income taxes (1) $ 301 $ 377 $ 1,389 $ 1,647
Interest expense, net   11   11   35   35
Income from continuing operations before income taxes $ 290 $ 366 $ 1,354 $ 1,612
 
Statutory tax rate 35% 35% 35% 35%
 
Tax at statutory rate $ 102 $ 128 $ 474 $ 564
Adjustments for discrete and permanent items (2)   (23)   (26)   (58)   (69)
Total tax expense $ 79 $ 102 $ 416 $ 495
 
Effective tax rate (3) 27.2% 27.9% 30.7% 30.7%
 
Three Months Ended Fiscal Year Ended

March 31, 2011

March 31, 2011

GAAP

Non-GAAP

GAAP

Non-GAAP

 
Income from continuing operations before interest and income taxes (1) $ 299 $ 356 $ 1,254 $ 1,489
Interest expense, net   10   10   45   45
Income from continuing operations before income taxes $ 289 $ 346 $ 1,209 $ 1,444
 
Statutory tax rate 35% 35% 35% 35%
 
Tax at statutory rate $ 101 $ 121 $ 423 $ 505
Adjustments for discrete and permanent items (2)   1   (22)   (37)   (45)
Total tax expense $ 102 $ 99 $ 386 $ 460
 
Effective tax rate (3) 35.3% 28.6% 31.9% 31.9%
(1)  

Refer to Table 6 for a reconciliation of income from continuing operations before interest and income taxes on a GAAP basis to income from continuing operations before interest and income taxes on a non-GAAP basis.

 
(2) The effective tax rate for GAAP generally includes the impact of discrete and permanent items in the period such items arise, whereas the effective tax rate for non-GAAP generally allocates the impact of such items pro rata to the fiscal year's remaining reporting periods.
 
(3) The effective tax rate on GAAP and non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of GAAP and non-GAAP income from continuing operations before income taxes, respectively. The non-GAAP effective tax rate is equal to the full year GAAP effective tax rate. On an interim basis, the effective tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).
 
Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
Certain non-material differences may arise versus actual from impact of rounding.
 
 

Table 9
CA Technologies
Reconciliation of Projected GAAP Earnings per Share to
Projected Non-GAAP Earnings per Share
(unaudited)
         
Fiscal Year Ending

Projected Diluted EPS from Continuing Operations

March 31, 2013

 
Projected GAAP diluted EPS from continuing operations range $ 2.07 to $ 2.14
 
Non-GAAP adjustments, net of taxes:
Purchased software and other intangibles amortization 0.23 0.24
Share-based compensation   0.15   0.15
 
Projected non-GAAP diluted EPS from continuing operations range $ 2.45 to $ 2.53
  Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
 

Table 10
CA Technologies
Reconciliation of Projected GAAP Operating Margin to
Projected Non-GAAP Operating Margin
(unaudited)
     
Fiscal Year Ending

Projected Operating Margin

March 31, 2013

 
Projected GAAP operating margin 30%
 
Non-GAAP adjustments, net of taxes:

Purchased software and other intangibles amortization

3%
Share-based compensation 2%
 
Projected non-GAAP operating margin 35%
  Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
 

CA Technologies
Dan Kaferle
Public Relations
631-342-2111
daniel.kaferle@ca.com
or
Kelsey Doherty
Investor Relations
212-415-6844
kelsey.doherty@ca.com

Source: CA Technologies

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