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Xtrackers California Municipal Bonds ETF | NASDAQ:CA | NASDAQ | Exchange Traded Fund |
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CA Technologies (NASDAQ:CA) today reported financial results for its third quarter fiscal 2016, which ended December 31, 2015.
Mike Gregoire, CA Technologies Chief Executive Officer, said:
"I am pleased to report that total new sales, revenue, earnings and cash flow from operations outperformed our expectations. Third quarter results benefited from the combination of strong performance from recent acquisitions, a higher level of renewal bookings growth, and better sales execution, relative to our expectations. It shows that our strategy is beginning to gather momentum. I am really happy to see that our acquisitions are beginning to deliver on their potential.
"We feel that we are near an inflection point in the business. We stand by our fiscal 2016 and medium-term guidance. As we said in November, we expect our upcoming fiscal 2017 to be the year CA crosses into sustained, albeit initially modest, revenue growth. That said, we know there is still work to be done to grow at a rate that is representative of CA’s true potential.
"As the pendulum swings towards the desire to reduce complexity and consolidate around full suite solutions providers who can operate globally at scale, customers are finding CA and its broad portfolio to be more attractive than point product vendors. We are investing in innovation that matters to ensure that CA solutions are meaningful, compelling and can drive growth for years to come, while maintaining rigorous fiscal and execution discipline."
FINANCIAL OVERVIEW
(dollars in millions, except share data) Third Quarter FY16 vs. FY15FY16
FY15 % Change% ChangeCC**
Revenue $1,034 $1,091 (5)% (1)% GAAP Income from Continuing Operations $219 $218 0% 13% Non-GAAP Income from Continuing Operations* $268 $297 (10)% (2)% GAAP Diluted EPS from Continuing Operations $0.52 $0.49 6% 18% Non-GAAP Diluted EPS from Continuing Operations* $0.63 $0.67 (6)% 1% Cash Flow from Continuing Operations $332 $313 6% 18%* 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
REVENUE AND BOOKINGS
(dollars in millions) Third Quarter FY16 vs. FY15 FY16% ofTotal
FY15% ofTotal
%Change
%ChangeCC**
North America Revenue $702 68% $709 65% (1)% 0% International Revenue $332 32% $382 35% (13)% (1)% Total Revenue $1,034 $1,091 (5)% (1)% North America Bookings $727 59% $615 58% 18% 19% International Bookings $515 41% $452 42% 14% 29% Total Bookings $1,242 $1,067 16% 23% Current Revenue Backlog $3,030 $3,189 (5)% (2)% Total Revenue Backlog $6,800 $6,685 2% 5%**CC: Constant Currency
EXPENSES AND MARGIN
(dollars in millions) Third Quarter FY16 vs. FY15 FY16 FY15%Change
%ChangeCC**
GAAP Operating Expenses Before Interest and Income Taxes $741 $773 (4)% (2)% Operating Income Before Interest and Income Taxes $293 $318 (8)% 2% Operating Margin 28% 29% Effective Tax Rate 21.2% 28.8% Non-GAAP* Operating Expenses Before Interest and Income Taxes $644 $680 (5)% (2)% Operating Income Before Interest and Income Taxes $390 $411 (5)% 3% Operating Margin 38% 38% Effective Tax Rate 28.5% 25.6%*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
SELECTED HIGHLIGHTS FROM THE QUARTER
SEGMENT INFORMATION
(dollars in millions) Third Quarter FY16 vs. FY15 Revenue%Change
%ChangeCC**
Operating Margin FY16 FY15 FY16 FY15 Mainframe Solutions $554 $596 (7)% (2)% 61% 58% Enterprise Solutions $398 $405 (2)% 3% 12% 14% Services $82 $90 (9)% (4)% 6% 6%**CC: Constant Currency
CASH FLOW FROM OPERATIONS
CAPITAL STRUCTURE
OUTLOOK FOR FISCAL YEAR 2016
The Company reaffirmed the following outlook, which represents "forward-looking statements" (as defined below).
The Company expects the following:
This outlook assumes no further material acquisitions. The Company expects a full-year GAAP operating margin of 28 percent and non-GAAP operating margin of 38 percent, unchanged from previous guidance.
The Company also expects a full-year GAAP and non-GAAP effective tax rate of between 28 percent and 29 percent, unchanged from previous guidance.
The Company anticipates approximately 412 million shares outstanding at fiscal 2016 year-end and weighted average diluted shares outstanding of approximately 427 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 third quarter 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) Gartner, Inc., “Magic Quadrant for Integrated IT Portfolio Analysis Applications, 2015,” Daniel B. Stang and Jim Duggan, November 30, 2015.
The Gartner Report(s) described herein, (the "Gartner Report(s)") represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this [Annual/Quarterly Report]) and the opinions expressed in the Gartner Report(s) are subject to change without notice.
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
(2) KuppingerCole Leadership Compass: Privilege Management, December 2015
(3) Ovum Decision Matrix: Selecting a Privileged Identity Management Solution, 2015-2016
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.
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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, 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, 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; 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; 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; the failure to renew large license transactions on a satisfactory basis; 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; 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; changes in generally accepted accounting principles; 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 Nine Months EndedDecember 31,
December 31,
Revenue:2015
2014
2015
2014
Subscription and maintenance $ 828 $ 892 $ 2,496 $ 2,709 Professional services 82 90 244 268 Software fees and other 124 109 276 262 Total revenue $ 1,034 $ 1,091 $ 3,016 $ 3,239 Expenses: Costs of licensing and maintenance $ 73 $ 74 $ 209 $ 217 Cost of professional services 75 84 224 253 Amortization of capitalized software costs 65 62 192 204 Selling and marketing 277 283 751 782 General and administrative 90 90 279 269 Product development and enhancements 133 143 420 443 Depreciation and amortization of other intangible assets 27 31 83 99 Other expenses, net 1 6 2 21 Total expenses before interest and income taxes $ 741 $ 773 $ 2,160 $ 2,288 Income from continuing operations before interest and income taxes $ 293 $ 318 $ 856 $ 951 Interest expense, net 15 12 36 38 Income from continuing operations before income taxes $ 278 $ 306 $ 820 $ 913 Income tax expense 59 88 222 248 Income from continuing operations $ 219 $ 218 $ 598 $ 665 Income from discontinued operations, net of income taxes $ 4 $ 4 $ 11 $ 30 Net income $ 223 $ 222 $ 609 $ 695 Basic income per common share: Income from continuing operations $ 0.52 $ 0.49 $ 1.37 $ 1.50 Income from discontinued operations 0.01 0.01 0.03 0.07 Net income $ 0.53 $ 0.50 $ 1.40 $ 1.57 Basic weighted average shares used in computation 420 440 431 440 Diluted income per common share: Income from continuing operations $ 0.52 $ 0.49 $ 1.37 $ 1.49 Income from discontinued operations 0.01 0.01 0.03 0.07 Net income $ 0.53 $ 0.50 $ 1.40 $ 1.56 Diluted weighted average shares used in computation 421 441 432 441 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) December 31, March 31, 2015 2015 (unaudited) Cash and cash equivalents $ 2,353 $ 2,804 Trade accounts receivable, net 618 652 Deferred income taxes 341 318 Other current assets 142 213 Total current assets $ 3,454 $ 3,987 Property and equipment, net $ 249 $ 252 Goodwill 6,123 5,806 Capitalized software and other intangible assets, net 866 731 Deferred income taxes 55 92 Other noncurrent assets, net 110 111 Total assets $ 10,857 $ 10,979 Current portion of long-term debt $ 8 $ 10 Deferred revenue (billed or collected) 1,983 2,114 Deferred income taxes 7 7 Other current liabilities 701 807 Total current liabilities $ 2,699 $ 2,938 Long-term debt, net of current portion $ 1,956 $ 1,253 Deferred income taxes 53 45 Deferred revenue (billed or collected) 667 863 Other noncurrent liabilities 255 255 Total liabilities $ 5,630 $ 5,354 Common stock $ 59 $ 59 Additional paid-in capital 3,638 3,631 Retained earnings 6,506 6,221 Accumulated other comprehensive loss (469 ) (418 ) Treasury stock (4,507 ) (3,868 ) Total stockholders’ equity $ 5,227 $ 5,625 Total liabilities and stockholders’ equity $ 10,857 $ 10,979
Table 3
CA Technologies Condensed Consolidated Statements of Cash Flows (unaudited) (in millions) Three Months EndedDecember 31,
2015
2014
Operating activities from continuing operations: Net income $ 223 $ 222 Income from discontinued operations (4 ) (4 ) Income from continuing operations $ 219 $ 218 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization 92 93 Deferred income taxes (25 ) (13 ) Provision for bad debts (1 ) - Share-based compensation expense 25 23 Asset impairments and other non-cash items 1 1 Foreign currency transaction gains (1 ) (2 ) Changes in other operating assets and liabilities, net of effect of acquisitions: Increase in trade accounts receivable (181 ) (172 ) Increase in deferred revenue 143 52 Increase in taxes payable, net 51 76 Decrease in accounts payable, accrued expenses and other (41 ) (16 ) Increase in accrued salaries, wages and commissions 23 17 Changes in other operating assets and liabilities 27 36 Net cash provided by operating activities - continuing operations $ 332 $ 313 Investing activities from continuing operations: Acquisitions of businesses, net of cash acquired, and purchased software $ (1 ) $ (20 ) Purchases of property and equipment (11 ) (12 ) Net cash used in investing activities - continuing operations $ (12 ) $ (32 ) Financing activities from continuing operations: Dividends paid $ (105 ) $ (111 ) Purchases of common stock (590 ) (75 ) Notional pooling borrowings, net 10 25 Debt borrowings (repayments), net 298 (502 ) Debt issuance costs (1 ) - Exercise of common stock options 1 11 Other financing activities (5 ) - Net cash used in financing activities - continuing operations $ (392 ) $ (652 ) Effect of exchange rate changes on cash $ (37 ) $ (125 ) Net change in cash and cash equivalents - continuing operations $ (109 ) $ (496 ) Cash provided by (used in) operating activities - discontinued operations $ 4 $ (14 ) Net effect of discontinued operations on cash and cash equivalents $ 4 $ (14 ) Decrease in cash and cash equivalents $ (105 ) $ (510 ) Cash and cash equivalents at beginning of period $ 2,458 $ 3,193 Cash and cash equivalents at end of period $ 2,353 $ 2,683 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 December 31, 2015 Nine Months Ended December 31, 2015
MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) TotalMainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 554 $ 398 $ 82 $ 1,034 $ 1,668 $ 1,104 $ 244 $ 3,016 Expenses (3) 218 349 77 644 641 996 227 1,864 Segment profit $ 336 $ 49 $ 5 $ 390 $ 1,027 $ 108 $ 17 $ 1,152 Segment operating margin 61 % 12 % 6 % 38 % 62 % 10 % 7 % 38 % Segment profit $ 390 $ 1,152 Less: Purchased software amortization 39 106 Other intangibles amortization 11 36 Internally developed software products amortization 26 86 Share-based compensation expense 25 70 Other gains, net (4) (4 ) (2 ) Interest expense, net 15 36 Income from continuing operations before income taxes $ 278 $ 820 Three Months Ended December 31, 2014 Nine Months Ended December 31, 2014MainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) TotalMainframeSolutions (1)
EnterpriseSolutions (1)
Services (1) Total Revenue (2) $ 596 $ 405 $ 90 $ 1,091 $ 1,820 $ 1,151 $ 268 $ 3,239 Expenses (3) 248 347 85 680 717 999 256 1,972 Segment profit $ 348 $ 58 $ 5 $ 411 $ 1,103 $ 152 $ 12 $ 1,267 Segment operating margin 58 % 14 % 6 % 38 % 61 % 13 % 4 % 39 % Segment profit $ 411 $ 1,267 Less: Purchased software amortization 28 87 Other intangibles amortization 14 45 Internally developed software products amortization 34 117 Share-based compensation expense 23 65 Other (gains) expenses, net (4) (6 ) 2 Interest expense, net 12 38 Income from continuing operations before income taxes $ 306 $ 913 (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 (gains) expenses, 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 December 31, Nine Months Ended December 31, 2015 2014
% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency (1)
2015 2014% Increase(Decrease)in $ US
% Increase(Decrease)in ConstantCurrency (1)
Bookings $ 1,242 $ 1,067 16 % 23 % $ 3,287 $ 2,540 29 % 36 % Revenue: North America $ 702 $ 709 (1 )% 0 % $ 2,031 $ 2,084 (3 )% (2 )% International 332 382 (13 )% (1 )% 985 1,155 (15 )% 0 % Total revenue $ 1,034 $ 1,091 (5 )% (1 )% $ 3,016 $ 3,239 (7 )% (1 )% Revenue: Subscription and maintenance $ 828 $ 892 (7 )% (2 )% $ 2,496 $ 2,709 (8 )% (2 )% Professional services 82 90 (9 )% (4 )% 244 268 (9 )% (3 )% Software fees and other 124 109 14 % 18 % 276 262 5 % 10 % Total revenue $ 1,034 $ 1,091 (5 )% (1 )% $ 3,016 $ 3,239 (7 )% (1 )% Segment Revenue: Mainframe solutions $ 554 $ 596 (7 )% (2 )% $ 1,668 $ 1,820 (8 )% (3 )% Enterprise solutions 398 405 (2 )% 3 % 1,104 1,151 (4 )% 1 % Services 82 90 (9 )% (4 )% 244 268 (9 )% (3 )% Total expenses before interest and income taxes: Total non-GAAP (2) $ 644 $ 680 (5 )% (2 )% $ 1,864 $ 1,972 (5 )% (1 )% Total GAAP 741 773 (4 )% (2 )% 2,160 2,288 (6 )% (3 )% (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 Nine Months Ended
December 31,
December 31,
2015
2014
2015
2014
GAAP net income $ 223 $ 222 $ 609 $ 695 GAAP income from discontinued operations, net of income taxes (4 ) (4 ) (11 ) (30 ) GAAP income from continuing operations $ 219 $ 218 $ 598 $ 665 GAAP income tax expense 59 88 222 248 Interest expense, net 15 12 36 38 GAAP income from continuing operations before interest and income taxes $ 293 $ 318 $ 856 $ 951 GAAP operating margin (% of revenue) (1) 28 % 29 % 28 % 29 % Non-GAAP adjustments to expenses: Costs of licensing and maintenance (2) $ 2 $ 2 $ 5 $ 4 Cost of professional services (2) 1 1 3 3 Amortization of capitalized software costs (3) 65 62 192 204 Selling and marketing (2) 9 8 25 23 General and administrative (2) 9 8 25 21 Product development and enhancements (2) 4 4 12 14 Depreciation and amortization of other intangible assets (4) 11 14 36 45 Other (gains) expenses, net (5) (4 ) (6 ) (2 ) 2 Total Non-GAAP adjustment to operating expenses $ 97 $ 93 $ 296 $ 316 Non-GAAP income from continuing operations before interest and income taxes $ 390 $ 411 $ 1,152 $ 1,267 Non-GAAP operating margin (% of revenue) (6) 38 % 38 % 38 % 39 % Interest expense, net 15 12 36 38 GAAP income tax expense 59 88 222 248 Non-GAAP adjustment to income tax expense (7) 48 14 96 103 Non-GAAP income tax expense $ 107 $ 102 $ 318 $ 351 Non-GAAP income from continuing operations $ 268 $ 297 $ 798 $ 878 (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 December 31, 2015 and 2014, non-GAAP adjustment consists of $39 million and $28 million of purchased software amortization and $26 million and $34 million of internally developed software products amortization, respectively. For the nine month periods ending December 31, 2015 and 2014, non-GAAP adjustment consists of $106 million and $87 million of purchased software amortization and $86 million and $117 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 Nine Months Ended
December 31,
December 31,
Operating Expenses
2015
2014
2015
2014
Total expenses before interest and income taxes $ 741 $ 773 $ 2,160 $ 2,288 Non-GAAP operating adjustments: Purchased software amortization 39 28 106 87 Other intangibles amortization 11 14 36 45 Internally developed software products amortization 26 34 86 117 Share-based compensation 25 23 70 65 Other (gains) expenses, net (1) (4 ) (6 ) (2 ) 2 Total non-GAAP operating adjustment $ 97 $ 93 $ 296 $ 316 Total non-GAAP operating expenses $ 644 $ 680 $ 1,864 $ 1,972 Three Months Ended Nine Months EndedDecember 31,
December 31,
Diluted EPS from Continuing Operations
2015
2014
2015
2014
GAAP diluted EPS from continuing operations $ 0.52 $ 0.49 $ 1.37 $ 1.49 Non-GAAP adjustments, net of taxes: Purchased software amortization 0.07 0.05 0.18 0.14 Other intangibles amortization 0.02 0.02 0.06 0.08 Internally developed software products amortization 0.05 0.05 0.14 0.19 Share-based compensation 0.05 0.04 0.12 0.11 Other (gains) expenses, net (1) (0.01 ) (0.01 ) - - Non-GAAP effective tax rate adjustments (2) (0.07 ) 0.03 (0.04 ) (0.04 ) Total non-GAAP adjustment $ 0.11 $ 0.18 $ 0.46 $ 0.48 Non-GAAP diluted EPS from continuing operations $ 0.63 $ 0.67 $ 1.83 $ 1.97 (1) Other (gains) expenses, 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 Nine Months EndedDecember 31, 2015
December 31, 2015
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income taxes (1) $ 293 $ 390 $ 856 $ 1,152 Interest expense, net 15 15 36 36 Income from continuing operations before income taxes $ 278 $ 375 $ 820 $ 1,116 Statutory tax rate 35 % 35 % 35 % 35 % Tax at statutory rate $ 97 $ 131 $ 287 $ 391 Adjustments for discrete and permanent items (2) (38 ) (24 ) (65 ) (73 ) Total tax expense $ 59 $ 107 $ 222 $ 318 Effective tax rate (3) 21.2 % 28.5 % 27.1 % 28.5 % Three Months Ended Nine Months EndedDecember 31, 2014
December 31, 2014
GAAP
Non-GAAP
GAAP
Non-GAAP
Income from continuing operations before interest and income taxes (1) $ 318 $ 411 $ 951 $ 1,267 Interest expense, net 12 12 38 38 Income from continuing operations before income taxes $ 306 $ 399 $ 913 $ 1,229 Statutory tax rate 35 % 35 % 35 % 35 % Tax at statutory rate $ 107 $ 140 $ 320 $ 430 Adjustments for discrete and permanent items (2) (19 ) (38 ) (72 ) (79 ) Total tax expense $ 88 $ 102 $ 248 $ 351 Effective tax rate (3) 28.8 % 25.6 % 27.2 % 28.6 % (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, 2016
Projected GAAP diluted EPS from continuing operations range $ 1.74 to $ 1.80 Non-GAAP adjustments, net of taxes: Purchased software amortization 0.24 0.24 Other intangibles amortization 0.07 0.07 Internally developed software products amortization 0.18 0.18 Share-based compensation 0.16 0.16 Total non-GAAP adjustment $ 0.65 $ 0.65 Projected non-GAAP diluted EPS from continuing operations range $ 2.39 to $ 2.45 Fiscal Year EndingProjected Operating Margin
March 31, 2016
Projected GAAP operating margin 28% Non-GAAP operating adjustments: Purchased software amortization 4% Other intangibles amortization 1% Internally developed software products amortization 3% Share-based compensation 2% Total non-GAAP operating adjustment 10% Projected non-GAAP operating margin 38% Refer to the discussion of non-GAAP financial measures included in the accompanying press release for additional information.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160126006642/en/
CA TechnologiesSaswato DasCorporate Communications(646) 710-6690Saswato.das@ca.comorTraci TsuchiguchiInvestor Relations(650) 534-9814traci.tsuchiguchi@ca.com
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