CA Technologies
May 11, 2016

CA Technologies Reports Fourth Quarter and Full Fiscal Year 2016 Results

NEW YORK--(BUSINESS WIRE)-- CA Technologies (NASDAQ:CA) today reported financial results for its fourth quarter and full fiscal year 2016, which ended March 31, 2016.

Mike Gregoire, CA Technologies Chief Executive Officer, said:

"I am pleased to report that we achieved our guidance for full-year revenue, operating margin and EPS results, and exceeded guidance for full-year cash flow from continuing operations.

"Our efforts to reposition the product portfolio, refine our go-to-market strategy, and sharpen our focus on customer success have culminated in new sales growth for the year. This was a notable improvement relative to prior years. At the same time, there is still work to do to drive the level of sustained growth that our company is capable of delivering.

"Looking forward, we will continue to manage the business with thoughtful discipline, and remain committed to our strategic imperative of delivering long term growth and profitability."

FINANCIAL OVERVIEW

 
(dollars in millions, except share data)   Fourth Quarter FY16 vs. FY15   Full Year FY16 vs. FY15
FY16   FY15  

%
Change

 

%
Change
CC**

FY16   FY15  

%
Change

 

%
Change
CC**

Revenue $1,009   $1,023   (1)%   1% $4,025   $4,262   (6)%   (1)%
GAAP Income from Continuing Operations $171   $145   18%   30% $769   $810   (5)%   10%
Non-GAAP Income from Continuing Operations* $252   $247   2%   15% $1,050   $1,125   (7)%   3%
GAAP Diluted EPS from Continuing Operations $0.41   $0.33   24%   36% $1.78   $1.82   (2)%   13%
Non-GAAP Diluted EPS from Continuing Operations* $0.60   $0.56   7%   21% $2.43   $2.53   (4)%   6%
Cash Flow from Continuing Operations   $471   $485   (3)%   0%   $1,034   $1,030   0%   9%
* Non-GAAP income and non-GAAP earnings per share are non-GAAP financial measures, as noted in the discussion of non-GAAP results below. A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release.
**CC: Constant Currency
 

REVENUE AND BOOKINGS

Fourth Quarter

(dollars in millions)   Fourth Quarter FY16 vs. FY15
FY16  

% of
Total

  FY15  

% of
Total

 

%
Change

 

%
Change
CC**

North America Revenue $681   67%   $682   67%   0%   0%
International Revenue $328   33%   $341   33%   (4)%   3%
Total Revenue $1,009       $1,023       (1)%   1%
                       
North America Bookings $636   66%   $727   68%   (13)%   (12)%
International Bookings $324   34%   $342   32%   (5)%   (4)%
Total Bookings $960       $1,069       (10)%   (10)%
                       
Current Revenue Backlog $3,113       $3,141       (1)%   (1)%
Total Revenue Backlog   $6,829       $6,530       5%   4%

**CC: Constant Currency

 

Full Year

(dollars in millions)   Full Year FY16 vs. FY15
FY16  

% of
Total

  FY15  

% of
Total

 

%
Change

 

%
Change
CC**

North America Revenue $2,712   67%   $2,766   65%   (2)%   (1)%
International Revenue $1,313   33%   $1,496   35%   (12)%   1%
Total Revenue $4,025       $4,262       (6)%   (1)%
                       
North America Bookings $2,987   70%   $2,353   65%   27%   28%
International Bookings $1,260   30%   $1,256   35%   0%   11%
Total Bookings   $4,247       $3,609       18%   22%

**CC: Constant Currency

 

EXPENSES, MARGIN AND EARNINGS PER SHARE

Fourth Quarter

(dollars in millions)   Fourth Quarter FY16 vs. FY15
FY16   FY15  

%
Change

 

%
Change
CC**

GAAP  
Operating Expenses Before Interest and Income Taxes $730   $812   (10)%   (10)%
Operating Income Before Interest and Income Taxes $279   $211   32%   45%
GAAP Diluted EPS from Continuing Operations $0.41   $0.33   24%   36%
Operating Margin 28%   21%        
Effective Tax Rate   35.2%   28.2%        
                 
Non-GAAP*  
Operating Expenses Before Interest and Income Taxes $630   $693   (9)%   (11)%
Operating Income Before Interest and Income Taxes $379   $330   15%   29%
Non-GAAP Diluted EPS from Continuing Operations $0.60   $0.56   7%   21%
Operating Margin 38%   32%        
Effective Tax Rate   30.8%   23.1%        
*A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release. Year-over-year non-GAAP results exclude purchased software and other intangibles amortization, share-based compensation, amortization of internal software costs, Board approved workforce rebalancing initiatives and certain other gains and losses. The results also include gains and losses on hedges that mature within the quarter, but exclude gains and losses on hedges that do not mature within the quarter.
**CC: Constant Currency
 

Full Year

(dollars in millions)   Full Year FY16 vs. FY15
FY16   FY15  

%
Change

 

%
Change
CC**

GAAP  
Operating Expenses Before Interest and Income Taxes $2,890   $3,100   (7)%   (5)%
Operating Income Before Interest and Income Taxes $1,135   $1,162   (2)%   11%
GAAP Diluted EPS from Continuing Operations $1.78   $1.82   (2)%   13%
Operating Margin 28%   27%        
Effective Tax Rate   29.1%   27.4%        
                 
Non-GAAP*  
Operating Expenses Before Interest and Income Taxes $2,494   $2,665   (6)%   (4)%
Operating Income Before Interest and Income Taxes $1,531   $1,597   (4)%   5%
Non-GAAP Diluted EPS from Continuing Operations $2.43   $2.53   (4)%   6%
Operating Margin 38%   37%        
Effective Tax Rate   29.1%   27.4%        
*A reconciliation of non-GAAP financial measures to their comparable GAAP financial measures is included in the tables following this news release. Year-over-year non-GAAP results exclude purchased software and other intangibles amortization, share-based compensation, amortization of internal software costs, Board approved workforce rebalancing initiatives and certain other gains and losses.
**CC: Constant Currency
 

SELECTED HIGHLIGHTS

Leadership and recognition during the quarter include:

Customer traction for CA Technologies innovation during the quarter include:

SEGMENT INFORMATION

Fourth Quarter

(dollars in millions)   Fourth Quarter FY16 vs. FY15
Revenue  

%
Change

 

%
Change
CC**

  Operating Margin
FY16   FY15       FY16   FY15
Mainframe Solutions $547   $572   (4)%   (2)%   61%   56%
Enterprise Solutions $380   $368   3%   6%   10%   4%
Services   $82   $83   (1)%   0%   7%   -4%

**CC: Constant Currency

 

Full Year

(dollars in millions)   Full Year FY16 vs. FY15
Revenue  

%
Change

 

%
Change
CC**

  Operating Margin
FY16   FY15       FY16   FY15
Mainframe Solutions $2,215   $2,392   (7)%   (2)%   61%   59%
Enterprise Solutions $1,484   $1,519   (2)%   2%   10%   11%
Services   $326   $351   (7)%   (3)%   7%   3%

**CC: Constant Currency

 

CASH FLOW FROM OPERATIONS

CAPITAL STRUCTURE

OUTLOOK FOR FISCAL 2017

The following outlook for fiscal 2017 contains "forward-looking statements" (as defined below).

The Company expects the following:

This outlook assumes no material acquisitions. The Company expects a full-year GAAP operating margin of 30 percent and non-GAAP operating margin of 38 percent. The Company also expects a full-year GAAP and non-GAAP effective tax rate of between 28 percent and 29 percent.

The Company anticipates approximately 410 million shares outstanding at fiscal 2017 year-end and weighted average diluted shares outstanding of approximately 414 million for the fiscal year.

Webcast

This news release and the accompanying tables should be read in conjunction with additional content that is available on the Company's website, including a supplemental financial package, as well as a conference call and webcast that the Company will host at 5:00 p.m. ET today to discuss its unaudited fourth quarter and full fiscal year results. The webcast will be archived on the website. Individuals can access the webcast, as well as the press release and supplemental financial information at http://ca.com/invest or can listen to the call at 1-877-561-2748. The international participant number is 1-720-545-0044.

(1) KuppingerCole Leadership Compass: Access Management and Federation, March 2016

(2) 2016 IDC MarketScape: Worldwide Enterprise IT PPM 2016 Vendor Assessment - Enabling Business Execution and Optimization, February 2016, IDC #US40473615

About CA Technologies

CA Technologies (NASDAQ:CA) creates software that fuels transformation for companies and enables them to seize the opportunities of the application economy. Software is at the heart of every business in every industry. From planning, to development, to management and security, CA is working with companies worldwide to change the way we live, transact, and communicate - across mobile, private and public cloud, distributed and mainframe environments. Learn more at www.ca.com.

Follow CA Technologies

Non-GAAP Financial Measures

This news release, the accompanying tables and the additional content that is available on the Company's website, including a supplemental financial package, include certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP). Non-GAAP metrics for operating expenses, operating income, operating margin, income from continuing operations and diluted earnings per share exclude the following items: share-based compensation expense; non-cash amortization of purchased software and other intangible assets; charges relating to rebalancing initiatives that are large enough to require approval from the Company's Board of Directors and certain other gains and losses, which include the gains and losses since inception of hedges that mature within the quarter, but exclude gains and losses of hedges that do not mature within the quarter. The Company began expensing costs for internally developed software where development efforts commenced in the first quarter of fiscal 2014. Due to this change, the Company excludes amortization of internally developed software costs previously capitalized from these non-GAAP metrics. The effective tax rate on GAAP and non-GAAP income from operations is the Company's provision for income taxes expressed as a percentage of pre-tax GAAP and non-GAAP income from continuing operations, respectively. These tax rates are determined based on an estimated effective full year tax rate, with the effective tax rate for GAAP generally including the impact of discrete items in the period in which such items arise and the effective tax rate for non-GAAP generally allocating the impact of discrete items pro rata to the fiscal year's remaining reporting periods. Adjusted cash flow from operations excludes payments associated with the fiscal 2014 Board-approved rebalancing initiative as described above, capitalized software development costs as described above, and restructuring and other payments. Free cash flow excludes purchases of property and equipment and capitalized software development costs. The Company presents constant currency information to provide a framework for assessing how the Company's underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. dollars are converted into U.S. dollars at the exchange rate in effect on the last day of the Company's prior fiscal year (i.e., March 31, 2016, March 31, 2015, March 31, 2014 and March 31, 2013, respectively). Constant currency excludes the impacts from the Company's hedging program. The constant currency calculation for annualized subscription and maintenance bookings is calculated by dividing the subscription and maintenance bookings in constant currency by the weighted average subscription and maintenance duration in years. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. By excluding these items, non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and cash flows, to competitors' operating results and cash flows, and to estimates made by securities analysts. Management uses these non-GAAP financial measures internally to evaluate its performance and they are key variables in determining management incentive compensation. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency of supplemental information used by management in its financial and operational decision-making. In addition, the Company has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this news release to their most directly comparable GAAP financial measures, which are attached to this news release.

Cautionary Statement Regarding Forward-Looking Statements

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

Repurchases under the Company's stock repurchase program may be made from time to time, subject to market conditions and other factors, in the open market, through solicited or unsolicited privately negotiated transactions or otherwise. The program does not obligate the Company to acquire any particular amount of common stock, and it may be modified or suspended at any time at the Company's discretion.

Certain statements in this communication (such as statements containing the words "believes," "plans," "anticipates," "expects," "estimates," "targets" and similar expressions relating to the future) constitute "forward-looking statements" that are based upon the beliefs of, and assumptions made by, the Company's management, as well as information currently available to management. These forward-looking statements reflect the Company's current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the ability to achieve success in the Company's strategy by, among other things, enabling the Company's sales force to accelerate growth of new product sales (at levels sufficient to offset any decline in revenue in the Company's Mainframe Solutions segment), improving the Company's brand, technology and innovation awareness in the marketplace, ensuring the Company's offerings for cloud computing, application development and IT operations (DevOps), Software-as-a-Service (SaaS), and mobile device management, as well as other new offerings, address the needs of a rapidly changing market, while not adversely affecting the demand for the Company's traditional products or its profitability to an extent greater than anticipated, and effectively managing the strategic shift in the Company's business model to develop more easily installed software, provide additional SaaS offerings and refocus the Company's professional services and education engagements on those engagements that are connected to new product sales, without affecting the Company's performance to an extent greater than anticipated; the failure to innovate or adapt to technological changes and introduce new software products and services in a timely manner; competition in product and service offerings and pricing; the ability of the Company's products to remain compatible with ever-changing operating environments, platforms or third party products; global economic factors or political events beyond the Company's control and other business and legal risks associated with non-U.S. operations; the failure to expand partner programs and sales of our solutions by our partners; the ability to retain and attract qualified professionals; general economic conditions and credit constraints, or unfavorable economic conditions in a particular region, industry or business sector; the ability to successfully integrate acquired companies and products into the Company's existing business; risks associated with sales to government customers; breaches of the Company's data center, network, as well as the Company's software products, and the IT environments of the Company's vendors and customers; the ability to adequately manage, evolve and protect the Company's information systems, infrastructure and processes; the failure to renew large license transactions on a satisfactory basis; fluctuations in foreign exchange rates; discovery of errors or omissions in the Company's software products or documentation and potential product liability claims; the failure to protect the Company's intellectual property rights and source code; access to software licensed from third parties; risks associated with the use of software from open source code sources; third-party claims of intellectual property infringement or royalty payments; fluctuations in the number, terms and duration of the Company's license agreements, as well as the timing of orders from customers and channel partners; events or circumstances that would require the Company to record an impairment charge relating to the Company's goodwill or capitalized software and other intangible assets balances; potential tax liabilities; changes in market conditions or the Company's credit ratings; changes in generally accepted accounting principles; the failure to effectively execute the Company's workforce reductions, workforce rebalancing and facilities consolidations; successful and secure outsourcing of various functions to third parties; and other factors described more fully in the Company's filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties occur, or should the Company's assumptions prove incorrect, actual results may vary materially from those described herein as believed, planned, anticipated, expected, estimated, targeted or similarly expressed in a forward-looking manner. The Company assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Copyright © 2016 CA, Inc. All Rights Reserved. All other trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

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

March 31,

March 31,

Revenue:

2016

 

2015

2016

 

2015

Subscription and maintenance $ 821 $ 851 $ 3,317 $ 3,560
Professional services 82 83 326 351
Software fees and other   106     89     382     351  
Total revenue $ 1,009   $ 1,023   $ 4,025   $ 4,262  
Expenses:
Costs of licensing and maintenance $ 74 $ 80 $ 283 $ 297
Cost of professional services 76 85 300 338
Amortization of capitalized software costs 64 69 256 273
Selling and marketing 255 278 1,006 1,060
General and administrative 88 108 367 377
Product development and enhancements 140 160 560 603
Depreciation and amortization of other intangible assets 23 30 106 129
Other expenses, net   10     2     12     23  
Total expenses before interest and income taxes $ 730   $ 812   $ 2,890   $ 3,100  
Income from continuing operations before interest and income taxes $ 279 $ 211 $ 1,135 $ 1,162
Interest expense, net   15     9     51     47  
Income from continuing operations before income taxes $ 264 $ 202 $ 1,084 $ 1,115
Income tax expense   93     57     315     305  
Income from continuing operations $ 171 $ 145 $ 769 $ 810
Income from discontinued operations, net of income taxes $ 3   $ 6   $ 14   $ 36  
Net income $ 174   $ 151   $ 783   $ 846  
 
Basic income per common share:
Income from continuing operations $ 0.41 $ 0.33 $ 1.79 $ 1.83
Income from discontinued operations   0.01     0.01     0.03     0.08  
Net income $ 0.42   $ 0.34   $ 1.82   $ 1.91  
Basic weighted average shares used in computation 413 437 426 439
 
Diluted income per common share:
Income from continuing operations $ 0.41 $ 0.33 $ 1.78 $ 1.82
Income from discontinued operations   0.01     0.01     0.03     0.08  
Net income $ 0.42   $ 0.34   $ 1.81   $ 1.90  
Diluted weighted average shares used in computation 414 439 427 441
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling and CA arcserve data protection businesses.
 

Table 2
CA Technologies
Condensed Consolidated Balance Sheets
(in millions)
 
  March 31,   March 31,
2016 2015
(unaudited)
Cash and cash equivalents $ 2,812 $ 2,804
Trade accounts receivable, net 625 652
Deferred income taxes - 318
Other current assets   124     212  
Total current assets $ 3,561 $ 3,986
 
Property and equipment, net $ 242 $ 252
Goodwill 6,086 5,806
Capitalized software and other intangible assets, net 795 731
Deferred income taxes 407 92
Other noncurrent assets, net   113     106  
Total assets $ 11,204   $ 10,973  
 
Current portion of long-term debt $ 6 $ 10
Deferred revenue (billed or collected) 2,197 2,114
Deferred income taxes - 7
Other current liabilities   691     807  
Total current liabilities $ 2,894 $ 2,938
 
Long-term debt, net of current portion $ 1,947 $ 1,247
Deferred income taxes 3 45
Deferred revenue (billed or collected) 737 863
Other noncurrent liabilities   245     255  
Total liabilities $ 5,826   $ 5,348  
 
Common stock $ 59 $ 59
Additional paid-in capital 3,664 3,631
Retained earnings 6,575 6,221
Accumulated other comprehensive loss (416 ) (418 )
Treasury stock   (4,504 )   (3,868 )
Total stockholders' equity $ 5,378   $ 5,625  
Total liabilities and stockholders' equity $ 11,204   $ 10,973  
 

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

March 31,

2016

 

2015

Operating activities from continuing operations:
Net income $ 174 $ 151
Income from discontinued operations   (3 )   (6 )
Income from continuing operations $ 171 $ 145

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

Depreciation and amortization 87 99
Deferred income taxes (62 ) (10 )
Provision for bad debts - 2
Share-based compensation expense 27 22
Other non-cash items (1 ) 4
Foreign currency transaction gains (1 ) (3 )
Changes in other operating assets and liabilities, net of effect of acquisitions:
Decrease (increase) in trade accounts receivable 4 (12 )
Increase in deferred revenue 248 307
Decrease in taxes payable, net (25 ) (132 )
(Decrease) increase in accounts payable, accrued expenses and other (12 ) 29
Increase in accrued salaries, wages and commissions 25 22
Changes in other operating assets and liabilities   10     12  
Net cash provided by operating activities - continuing operations $ 471   $ 485  
Investing activities from continuing operations:
Acquisitions of businesses, net of cash acquired, and purchased software $ - $ (6 )
Purchases of property and equipment (14 ) (7 )
Decrease in restricted cash 4 -
Other investing activities   (1 )   -  
Net cash used in investing activities - continuing operations $ (11 ) $ (13 )
Financing activities from continuing operations:
Dividends paid $ (104 ) $ (111 )
Purchases of common stock (2 ) (90 )
Notional pooling borrowings, net 15 83
Debt repayments (1 ) (1 )
Exercise of common stock options 3 1
Other financing activities   (1 )   -  
Net cash used in financing activities - continuing operations $ (90 ) $ (118 )
Effect of exchange rate changes on cash $ 62   $ (222 )
Net change in cash and cash equivalents - continuing operations $ 432 $ 132
Cash used in operating activities - discontinued operations $ (23 ) $ (11 )
Cash provided by investing activities - discontinued operations   50     -  
Net effect of discontinued operations on cash and cash equivalents $ 27   $ (11 )
Increase in cash and cash equivalents $ 459 $ 121
Cash and cash equivalents at beginning of period $ 2,353   $ 2,683  
Cash and cash equivalents at end of period $ 2,812   $ 2,804  
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling business.
 

Table 4
CA Technologies
Operating Segments
(unaudited)
(dollars in millions)
 
  Three Months Ended March 31, 2016   Fiscal Year Ended March 31, 2016

Mainframe

 

Enterprise

   

Mainframe

 

Enterprise

   

Solutions (1)

Solutions (1)

Services (1) Total

Solutions (1)

Solutions (1)

Services (1) Total
 
Revenue (2) $ 547 $ 380 $ 82 $ 1,009 $ 2,215 $ 1,484 $ 326 $ 4,025
Expenses (3)   213     341     76     630     854     1,337     303     2,494  
Segment profit $ 334   $ 39   $ 6   $ 379   $ 1,361   $ 147   $ 23   $ 1,531  
Segment operating margin 61 % 10 % 7 % 38 % 61 % 10 % 7 % 38 %
 
Segment profit $ 379 $ 1,531
Less:
Purchased software amortization 40 146
Other intangibles amortization 8 44
Internally developed software products amortization 24 110
Share-based compensation expense 27 97
Other expenses (gains), net (4) 1 (1 )
Interest expense, net   15     51  
Income from continuing operations before income taxes $ 264   $ 1,084  
 
 
Three Months Ended March 31, 2015 Fiscal Year Ended March 31, 2015

Mainframe

Enterprise

Mainframe

Enterprise

Solutions (1)

Solutions (1)

Services (1) Total

Solutions (1)

Solutions (1)

Services (1) Total
 
Revenue (2) $ 572 $ 368 $ 83 $ 1,023 $ 2,392 $ 1,519 $ 351 $ 4,262
Expenses (3)   253     354     86     693     970     1,353     342     2,665  
Segment profit $ 319   $ 14   $ (3 ) $ 330   $ 1,422   $ 166   $ 9   $ 1,597  
Segment operating margin 56 % 4 % -4 % 32 % 59 % 11 % 3 % 37 %
 
Segment profit $ 330 $ 1,597
Less:
Purchased software amortization 37 124
Other intangibles amortization 13 58
Internally developed software products amortization 32 149
Share-based compensation expense 22 87
Other expenses, net (4) 15 17
Interest expense, net   9     47  
Income from continuing operations before income taxes $ 202   $ 1,115  
(1)   The Company's Mainframe Solutions and Enterprise Solutions segments comprise its software business organized by the nature of the Company's software offerings and the platform on which the products operate. The Services segment comprises product implementation, consulting, customer education and customer training, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers.
 
(2) The Company regularly enters into a single arrangement with a customer that includes mainframe solutions, enterprise solutions and services. The amount of contract revenue assigned to operating segments is generally based on the manner in which the proposal is made to the customer. The software product revenue is assigned to the Mainframe Solutions and Enterprise Solutions segments based on either: (1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the list price of the product); (2) allocations included within internal contract approval documents; or (3) the value for individual software products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately stated in the contract and these amounts of contract revenue are assigned to the Services segment. The contract value assigned to each operating segment is then recognized in a manner consistent with the revenue recognition policies the Company applies to the customer contract for purposes of preparing the Consolidated Financial Statements.
 
(3) Segment expenses include costs that are controllable by segment managers (i.e., direct costs) and, in the case of the Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs (i.e., allocated costs). Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product development costs and general and administrative costs. Allocated segment costs primarily include indirect and non-segment specific direct selling and marketing costs and general and administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs between the Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated and is either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for the Services segment consist of cost of professional services and other direct costs included within selling and marketing and general and administrative expenses. There are no allocated or indirect costs for the Services segment.
 
(4) Other expenses (gains), net consists of costs associated with the FY2014 Board approved rebalancing initiative (the Fiscal 2014 Plan), certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling and CA arcserve data protection businesses.
 

Table 5
CA Technologies
Constant Currency Summary
(unaudited)
(dollars in millions)
 
    Three Months Ended March 31,   Fiscal Year Ended March 31,
     

% Increase

     

% Increase

% Increase

(Decrease)

% Increase

(Decrease)

(Decrease)

in Constant

(Decrease)

in Constant

2016

2015

in $ US

Currency (1)

2016

2015

in $ US

Currency (1)

 
Bookings $ 960 $ 1,069 (10 )% (10 )% $ 4,247 $ 3,609 18 % 22 %
 
Revenue:
North America $ 681 $ 682 0 % 0 % $ 2,712 $ 2,766 (2 )% (1 )%
International   328     341   (4 )% 3 %   1,313     1,496   (12 )% 1 %
Total revenue $ 1,009 $ 1,023 (1 )% 1 % $ 4,025 $ 4,262 (6 )% (1 )%
 
Revenue:
Subscription and maintenance $ 821 $ 851 (4 )% (1 )% $ 3,317 $ 3,560 (7 )% (2 )%
Professional services 82 83 (1 )% 0 % 326 351 (7 )% (3 )%
Software fees and other   106     89   19 % 23 %   382     351   9 % 13 %
Total revenue $ 1,009 $ 1,023 (1 )% 1 % $ 4,025 $ 4,262 (6 )% (1 )%
 
Segment Revenue:
Mainframe solutions $ 547 $ 572 (4 )% (2 )% $ 2,215 $ 2,392 (7 )% (2 )%
Enterprise solutions $ 380 368 3 % 6 % 1,484 1,519 (2 )% 2 %
Services 82 83 (1 )% 0 % 326 351 (7 )% (3 )%
 
Total expenses before interest and income taxes:
Total non-GAAP (2) $ 630 $ 693 (9 )% (11 )% $ 2,494 $ 2,665 (6 )% (4 )%
Total GAAP 730 812 (10 )% (10 )% 2,890 3,100 (7 )% (5 )%
(1)   Constant currency information is presented to provide a framework for assessing how the Company's underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. dollars are converted into U.S. dollars at the exchange rate in effect on March 31, 2015, which was the last day of the prior fiscal year. Constant currency excludes the impacts from the Company's hedging program.
 
(2) Refer to Table 7 for a reconciliation of total expenses before interest and income taxes to total non-GAAP operating expenses.
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling and CA arcserve data protection businesses.
 
Certain non-material differences may arise versus actual from impact of rounding.
 

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

March 31,

March 31,

2016

 

2015

2016

 

2015

GAAP net income $ 174 $ 151 $ 783 $ 846
GAAP income from discontinued operations, net of income taxes   (3 )   (6 )   (14 )   (36 )
GAAP income from continuing operations $ 171 $ 145 $ 769 $ 810
GAAP income tax expense 93 57 315 305
Interest expense, net   15     9     51     47  
GAAP income from continuing operations before interest and income taxes $ 279   $ 211   $ 1,135   $ 1,162  
GAAP operating margin (% of revenue) (1) 28 % 21 % 28 % 27 %
 
Non-GAAP adjustments to expenses:
Costs of licensing and maintenance (2) $ 2 $ 1 $ 7 $ 5
Cost of professional services (2) 1 1 4 4
Amortization of capitalized software costs (3) 64 69 256 273
Selling and marketing (2) 9 7 34 30
General and administrative (2) 10 8 35 29
Product development and enhancements (2) 5 5 17 19
Depreciation and amortization of other intangible assets (4) 8 13 44 58
Other expenses (gains), net (5)   1     15     (1 )   17  
Total Non-GAAP adjustment to operating expenses $ 100   $ 119   $ 396   $ 435  
Non-GAAP income from continuing operations before interest and income taxes $ 379 $ 330 $ 1,531 $ 1,597
Non-GAAP operating margin (% of revenue) (6) 38 % 32 % 38 % 37 %
 
Interest expense, net 15 9 51 47
GAAP income tax expense 93 57 315 305
Non-GAAP adjustment to income tax expense (7)   19     17     115     120  
Non-GAAP income tax expense $ 112   $ 74   $ 430   $ 425  
Non-GAAP income from continuing operations $ 252   $ 247   $ 1,050   $ 1,125  
(1)   GAAP operating margin is calculated by dividing GAAP income from continuing operations before interest and income taxes by total revenue (refer to Table 1 for total revenue).
 
(2) Non-GAAP adjustment consists of share-based compensation.
 
(3) For the three month periods ending March 31, 2016 and 2015, non-GAAP adjustment consists of $40 million and $37 million of purchased software amortization and $24 million and $32 million of internally developed software products amortization, respectively. For the twelve month periods ending March 31, 2016 and 2015, non-GAAP adjustment consists of $146 million and $124 million of purchased software amortization and $110 million and $149 million of internally developed software products amortization, respectively.
 
(4) Non-GAAP adjustment consists of other intangibles amortization.
 
(5) Non-GAAP adjustment consists of charges relating to the FY2014 Board approved rebalancing initiative (the Fiscal 2014 Plan) and certain other gains and losses, including gains and losses since inception of hedges that mature within the quarter, but excludes gains and losses of hedges that do not mature within the quarter.
 
(6) Non-GAAP operating margin is calculated by dividing non-GAAP income from continuing operations before interest and income taxes by total revenue (refer to Table 1 for total revenue).
 
(7) The full year non-GAAP income tax expense is different from GAAP income tax expense because of the difference in non-GAAP income from continuing operations before income taxes. On an interim basis, this difference would also include a difference in the impact of discrete and permanent items where for GAAP purposes the effect is recorded in the period such items arise, but for non-GAAP such items are recorded pro rata to the fiscal year's remaining reporting periods.
 
Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling and CA arcserve data protection businesses.
 
Certain non-material differences may arise versus actual from impact of rounding.
 

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

March 31,

March 31,

Operating Expenses

2016

 

2015

2016

 

2015

 
Total expenses before interest and income taxes $ 730 $ 812 $ 2,890 $ 3,100
 
Non-GAAP operating adjustments:
Purchased software amortization 40 37 146 124
Other intangibles amortization 8 13 44 58
Internally developed software products amortization 24 32 110 149
Share-based compensation 27 22 97 87
Other expenses (gains), net (1)   1     15     (1 )   17  
Total non-GAAP operating adjustment $ 100   $ 119   $ 396   $ 435  
 
Total non-GAAP operating expenses $ 630   $ 693   $ 2,494   $ 2,665  
 
 
Three Months Ended Fiscal Year Ended

March 31,

March 31,

Diluted EPS from Continuing Operations

2016

2015

2016

2015

 
GAAP diluted EPS from continuing operations $ 0.41 $ 0.33 $ 1.78 $ 1.82
 
Non-GAAP adjustments, net of taxes:
Purchased software amortization 0.06 0.06 0.24 0.20
Other intangibles amortization 0.01 0.02 0.07 0.10
Internally developed software products amortization 0.04 0.05 0.18 0.24
Share-based compensation 0.04 0.04 0.16 0.14
Other expenses, net (1) - 0.02 - 0.03
Non-GAAP effective tax rate adjustments (2)   0.04     0.04     -     -  
Total non-GAAP adjustment $ 0.19   $ 0.23   $ 0.65   $ 0.71  
 
Non-GAAP diluted EPS from continuing operations $ 0.60   $ 0.56   $ 2.43   $ 2.53  
(1)   Other expenses (gains), net consists of costs associated with the FY2014 Board approved rebalancing initiative (the Fiscal 2014 Plan), certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs.
 
(2) The non-GAAP effective tax rate is equal to the full year GAAP effective tax rate, therefore no adjustment is required on an annual basis. On an interim basis, the difference in non-GAAP income tax expense and GAAP income tax expense relates to the difference in non-GAAP income from continuing operations before income taxes, and includes a difference in the impact of discrete and permanent items where for GAAP purposes the effect is recorded in the period such items arise but for non-GAAP purposes such items are recorded pro rata to the fiscal year's remaining reporting periods.
 
Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling and CA arcserve data protection businesses.
 
Certain non-material differences may arise versus actual from impact of rounding.
 

Table 8
CA Technologies
Effective Tax Rate Reconciliation
GAAP and Non-GAAP
(unaudited)
(dollars in millions)
 
  Three Months Ended   Fiscal Year Ended

March 31, 2016

March 31, 2016

GAAP

 

Non-GAAP

GAAP

 

Non-GAAP

 
Income from continuing operations before interest and income taxes (1) $ 279 $ 379 $ 1,135 $ 1,531
Interest expense, net   15     15     51     51  
Income from continuing operations before income taxes $ 264 $ 364 $ 1,084 $ 1,480
 
Statutory tax rate 35 % 35 % 35 % 35 %
 
Tax at statutory rate $ 92 $ 127 $ 379 $ 518
Adjustments for discrete and permanent items (2)   1     (15 )   (64 )   (88 )
Total tax expense $ 93 $ 112 $ 315 $ 430
 
Effective tax rate (3) 35.2 % 30.8 % 29.1 % 29.1 %
 
 
Three Months Ended Fiscal Year Ended

March 31, 2015

March 31, 2015

GAAP

Non-GAAP

GAAP

Non-GAAP

 
Income from continuing operations before interest and income taxes (1) $ 211 $ 330 $ 1,162 $ 1,597
Interest expense, net   9     9     47     47  
Income from continuing operations before income taxes $ 202 $ 321 $ 1,115 $ 1,550
 
Statutory tax rate 35 % 35 % 35 % 35 %
 
Tax at statutory rate $ 71 $ 112 $ 390 $ 543
Adjustments for discrete and permanent items (2)   (14 )   (38 )   (85 )   (118 )
Total tax expense $ 57 $ 74 $ 305 $ 425
 
Effective tax rate (3) 28.2 % 23.1 % 27.4 % 27.4 %
(1)   Refer to Table 6 for a reconciliation of income from continuing operations before interest and income taxes on a GAAP basis to income from continuing operations before interest and income taxes on a non-GAAP basis.
 
(2) The effective tax rate for GAAP generally includes the impact of discrete and permanent items in the period such items arise, whereas the effective tax rate for non-GAAP generally allocates the impact of such items pro rata to the fiscal year's remaining reporting periods.
 
(3) The effective tax rate on GAAP and non-GAAP income from continuing operations is the Company's provision for income taxes expressed as a percentage of GAAP and non-GAAP income from continuing operations before income taxes, respectively. The non-GAAP effective tax rate is equal to the full year GAAP effective tax rate. On an interim basis, the effective tax rates are determined based on an estimated effective full year tax rate after the adjustments for the impacts of certain discrete items (such as changes in tax rates, reconciliations of tax returns to tax provisions and resolutions of tax contingencies).
 
Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
 
Results reflect the discontinued operations associated with the CA ERwin Data Modeling and CA arcserve data protection businesses.
 
Certain non-material differences may arise versus actual from impact of rounding.
 

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

Projected Diluted EPS from Continuing Operations

March 31, 2017

     
Projected GAAP diluted EPS from continuing operations range

$

 

1.92

 

to

$

 

1.97

 

 
Non-GAAP adjustments, net of taxes:
Purchased software amortization 0.25 0.25
Other intangibles amortization 0.03 0.03
Internally developed software products amortization 0.14 0.14
Share-based compensation     0.17       0.17  
Total non-GAAP adjustment $   0.59   $   0.59  
 
Projected non-GAAP diluted EPS from continuing operations range $   2.51   to $   2.56  
 
 
Fiscal Year Ending

Projected Operating Margin

March 31, 2017

 
Projected GAAP operating margin 30 %
 
Non-GAAP operating adjustments:
Purchased software amortization 4 %
Other intangibles amortization 0 %
Internally developed software products amortization 2 %
Share-based compensation     2 %
Total non-GAAP operating adjustment     8 %
 
Projected non-GAAP operating margin     38 %

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

CA Technologies
Saswato Das, 646-710-6690
Corporate Communications
Saswato.das@ca.com
or
Jennifer DiClerico, 917-968-9680
Corporate Communications
Jennifer.diclerico@ca.com
or
Traci Tsuchiguchi, 650-534-9814
Investor Relations
traci.tsuchiguchi@ca.com
or
Robert Lung, 212-415-6908
Investor Relations
robert.lung@ca.com

Source: CA Technologies

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