Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Sep. 30, 2017 | Oct. 19, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CA, INC. | |
Entity Central Index Key | 356,028 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 418,543,394 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,822 | $ 2,771 |
Trade accounts receivable, net of allowance for doubtful accounts of $11 and $11, respectively | 457 | 764 |
Other current assets | 178 | 198 |
Total current assets | 3,457 | 3,733 |
Property and equipment, net of accumulated depreciation of $846 and $841, respectively | 230 | 237 |
Goodwill | 6,883 | 6,857 |
Capitalized software and other intangible assets, net | 1,247 | 1,307 |
Deferred income taxes | 336 | 327 |
Other noncurrent assets, net | 160 | 149 |
Total assets | 12,313 | 12,610 |
Current liabilities: | ||
Current portion of long-term debt | 268 | 18 |
Accounts payable | 80 | 91 |
Accrued salaries, wages and commissions | 182 | 256 |
Accrued expenses and other current liabilities | 324 | 326 |
Deferred revenue (billed or collected) | 1,909 | 2,222 |
Taxes payable, other than income taxes payable | 36 | 63 |
Federal, state and foreign income taxes payable | 0 | 30 |
Total current liabilities | 2,799 | 3,006 |
Long-term debt, net of current portion | 2,517 | 2,773 |
Federal, state and foreign income taxes payable | 130 | 131 |
Deferred income taxes | 132 | 119 |
Deferred revenue (billed or collected) | 708 | 794 |
Other noncurrent liabilities | 92 | 98 |
Total liabilities | 6,378 | 6,921 |
Stockholders' equity: | ||
Preferred stock, no par value, 10,000,000 shares authorized; No shares issued and outstanding | 0 | 0 |
Common stock, $0.10 par value, 1,100,000,000 shares authorized; 589,695,081 and 589,695,081 shares issued; 413,716,991 and 413,409,346 shares outstanding, respectively | 59 | 59 |
Additional paid-in capital | 3,687 | 3,702 |
Retained earnings | 7,070 | 6,923 |
Accumulated other comprehensive loss | (351) | (483) |
Treasury stock, at cost, 175,978,090 and 176,285,735 shares, respectively | (4,530) | (4,512) |
Total stockholders' equity | 5,935 | 5,689 |
Total liabilities and stockholders' equity | $ 12,313 | $ 12,610 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 11 | $ 11 |
Accumulated depreciation | $ 846 | $ 841 |
Preferred stock, No par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, Shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, Shares issued | 0 | 0 |
Preferred stock, Shares outstanding | 0 | 0 |
Common stock, Par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, Shares authorized | 1,100,000,000 | 1,100,000,000 |
Common stock, Shares issued | 589,695,081 | 589,695,081 |
Common stock, Shares outstanding | 413,716,991 | 413,409,346 |
Treasury stock, Shares | 175,978,090 | 176,285,735 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenue: | ||||
Subscription and maintenance | $ 826 | $ 824 | $ 1,643 | $ 1,650 |
Professional services | 75 | 75 | 150 | 152 |
Software fees and other | 133 | 119 | 266 | 215 |
Total revenue | 1,034 | 1,018 | 2,059 | 2,017 |
Expenses: | ||||
Costs of licensing and maintenance | 73 | 66 | 144 | 134 |
Cost of professional services | 74 | 73 | 147 | 148 |
Amortization of capitalized software costs | 67 | 59 | 137 | 125 |
Selling and marketing | 244 | 235 | 490 | 477 |
General and administrative | 97 | 84 | 204 | 172 |
Product development and enhancements | 161 | 136 | 319 | 284 |
Depreciation and amortization of other intangible assets | 27 | 18 | 53 | 38 |
Other expenses, net | 9 | 27 | 20 | 27 |
Total expenses before interest and income taxes | 752 | 698 | 1,514 | 1,405 |
Income before interest and income taxes | 282 | 320 | 545 | 612 |
Interest expense, net | 24 | 14 | 49 | 29 |
Income before income taxes | 258 | 306 | 496 | 583 |
Income tax expense | 74 | 94 | 134 | 173 |
Net income | $ 184 | $ 212 | $ 362 | $ 410 |
Basic income per common share: | ||||
Basic income per common share (in dollars per share) | $ 0.44 | $ 0.50 | $ 0.86 | $ 0.98 |
Basic weighted average shares used in computation | 415 | 414 | 415 | 414 |
Diluted income per common share: | ||||
Diluted income per common share (in dollars per share) | $ 0.44 | $ 0.50 | $ 0.86 | $ 0.98 |
Diluted weighted average shares used in computation | 416 | 415 | 416 | 415 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 184 | $ 212 | $ 362 | $ 410 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 48 | 10 | 132 | (19) |
Total other comprehensive income (loss) | 48 | 10 | 132 | (19) |
Comprehensive income | $ 232 | $ 222 | $ 494 | $ 391 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating activities: | ||
Net income | $ 362 | $ 410 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 190 | 163 |
Deferred income taxes | (23) | (11) |
Provision for bad debts | 2 | 2 |
Share-based compensation expense | 61 | 54 |
Other non-cash items | 2 | 3 |
Foreign currency transaction losses (gains) | 9 | (1) |
Changes in other operating assets and liabilities, net of effect of acquisitions: | ||
Decrease in trade accounts receivable | 317 | 176 |
Decrease in deferred revenue | (460) | (562) |
Decrease in taxes payable, net | (58) | (82) |
Increase in accounts payable, accrued expenses and other | 11 | 19 |
Decrease in accrued salaries, wages and commissions | (81) | (47) |
Changes in other operating assets and liabilities, net | 3 | 17 |
Net cash provided by operating activities | 335 | 141 |
Investing activities: | ||
Acquisitions of businesses, net of cash acquired, and purchased software | (15) | (1) |
Purchases of property and equipment | (22) | (16) |
Other investing activities | (1) | 0 |
Net cash used in investing activities | (38) | (17) |
Financing activities: | ||
Dividends paid | (215) | (214) |
Purchases of common stock | (90) | (100) |
Notional pooling borrowings | 1,173 | 467 |
Notional pooling repayments | (1,204) | (456) |
Debt repayments | (9) | (4) |
Debt issuance costs | (3) | 0 |
Exercise of common stock options | 5 | 22 |
Payments related to tax withholding for share-based compensation | (35) | (34) |
Other financing activities | (3) | 0 |
Net cash used in financing activities | (381) | (319) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 136 | (32) |
Increase (decrease) in cash, cash equivalents and restricted cash | 52 | (227) |
Cash, cash equivalents and restricted cash at beginning of period | 2,772 | 2,813 |
Cash, cash equivalents and restricted cash at end of period | $ 2,824 | $ 2,586 |
Accounting Policies
Accounting Policies | 6 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | NOTE A – ACCOUNTING POLICIES Basis of Presentation: The accompanying unaudited condensed consolidated financial statements (Condensed Consolidated Financial Statements) of CA, Inc. and its subsidiaries (Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 270, for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and therefore should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 ( 2017 Form 10-K). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual results. Operating results for the three and six months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2018 . Cash, Cash Equivalents and Restricted Cash: The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 66% being held by the Company’s foreign subsidiaries outside the United States at September 30, 2017 . At September 30, 2017 and March 31, 2017 , the total amount of restricted cash included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheets was approximately $2 million and $1 million , respectively. Restricted cash was included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown in the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2017 and 2016 . New Accounting Pronouncements: New Accounting Pronouncements Recently Adopted In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (ASU 2016-09), Improvements to Employee Share-Based Payment Accounting (Topic 718), which is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences and classification on the statements of cash flows. ASU 2016-09 was adopted by the Company when effective in the first quarter of fiscal year 2018. The adoption of ASU 2016-09 resulted in the presentation of cash flows for employee taxes paid by withholding shares of restricted stock as a financing activity within the Condensed Consolidated Statements of Cash Flows, which were previously presented as an operating activity. A retrospective method of adoption was required for this change, which resulted in the reclassification of cash outflows of approximately $34 million from operating activities to financing activities within the Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2016 . Although not material, ASU 2016-09 also requires that excess tax benefits on share-based compensation expense be recognized in the Condensed Consolidated Statements of Operations as a component of the provision for income taxes, rather than additional paid-in capital, on a prospective basis. As permitted by ASU 2016-09, although not material, the Company elected to retrospectively reclassify cash flows related to excess tax benefits on share-based compensation expense as an operating activity within the Condensed Consolidated Statements of Cash Flows, which were previously presented as a financing activity. In addition, as permitted by ASU 2016-09, the Company elected to continue to estimate forfeitures expected to occur to determine the amount of share-based compensation expense to be recognized in each period. In August 2016, the FASB issued Accounting Standards Update No. 2016-15 (ASU 2016-15), Classification of Certain Cash Receipts and Cash Payments (Topic 230), which is intended to reduce diversity in practice on how certain cash receipts and cash payments are classified and presented in the statements of cash flows. In November 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18), Restricted Cash (Topic 230), which is intended to reduce diversity in practice on how changes in restricted cash are classified and presented in the statements of cash flows. ASU 2016-18 requires amounts generally described as restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company elected to early adopt both ASU 2016-15 and ASU 2016-18 in the first quarter of fiscal year 2018 using the retrospective transition method of adoption. The adoption of these standards did not have a material effect on the Company’s consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers , with amendments in 2015, 2016 and 2017, which creates new ASC Topic 606 (Topic 606) that will replace most existing revenue recognition guidance in GAAP when it becomes effective. Topic 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will be effective for the Company’s first quarter of fiscal year 2019 and early application for fiscal year 2018 is permitted. Topic 606 may be applied retrospectively to each prior period presented (full retrospective method) or with the cumulative effect recognized as of the date of initial application (modified retrospective method). The Company has established a cross-functional implementation team consisting of representatives across the organization and a third-party service provider to develop a project plan, including the evaluation of customer contracts across the organization, the development of policies, processes and tools to report financial results, and the implementation and evaluation of the Company’s internal controls over financial reporting that will be necessary under the new standard. The Company currently plans to adopt Topic 606 in the first quarter of fiscal year 2019 using the modified retrospective method. While the Company is continuing to determine the full effect of the new standard, it currently anticipates that this standard will have a material effect on its consolidated financial statements and related disclosures, and currently believes the most significant effect relates to the timing of the recognition of its software license revenue. Specifically, under the new standard, the Company currently expects to recognize license revenue for its Mainframe Solutions and Enterprise Solutions products at the point-in-time the licensed software is transferred to the customer, rather than ratably over the term of the customer contract as required by existing GAAP for most of the Company’s software arrangements. As a result, a significant portion of the Company’s revenue backlog ( i.e. , deferred revenue and future billings on committed contracts) relating to the license component of customer contracts at March 31, 2018 under existing GAAP will not be recognized as revenue in future periods but instead will be included as part of the cumulative effect adjustment within retained earnings upon adoption of Topic 606. Such cumulative effect adjustment will primarily result from (i) the significant reduction in deferred revenue relating to the license component of customer contracts as mentioned above, (ii) the establishment of a significant contract asset related to the Company’s contractual right to consideration for completed performance obligations not yet billed or collected ( i.e. , license revenue recognized in advance of billings), and (iii) the increase in deferred tax liabilities related to the increase in contract assets and the increase in income taxes payable for the portion of deferred revenue included in the cumulative effect adjustment that has not been previously included as taxable income on a tax return, which will result in an acceleration of the timing of income tax payments. This acceleration of the timing of income tax payments will be significant in relation to the Company’s current annual income tax payments within cash flows from operations. The Company is currently evaluating the amounts for the items listed above, as well as the timing of income tax payments upon adoption of Topic 606. However, the Company does not currently expect Topic 606 to have a significant effect on its customer billings and cash collections from customer billings. The Company currently believes that the point-in-time recognition requirement of the new standard will increase the variability of its revenue and overall net income period-to-period. The Company does not currently expect Topic 606 will have a significant effect on the timing of revenue recognition for its maintenance, Software-as-a-Service and professional services contracts. Under Topic 606, more judgment and estimates will be required within the revenue recognition process than are required under existing GAAP, including estimates of the standalone selling price for each performance obligation identified within the Company’s contracts. Topic 606 will also require the Company to capitalize a portion of its sales commissions and other incremental costs to acquire contracts upon adoption, which are currently expensed as incurred. The Company currently anticipates it will amortize these capitalized costs over an expected period of benefit ranging from approximately four to seven years. The Company is currently evaluating the effect of this requirement on its consolidated financial statements and related disclosures. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842), which requires a lessee to recognize assets and liabilities on its consolidated balance sheet for leases with accounting lease terms of more than 12 months. ASU 2016-02 will replace most existing lease accounting guidance in GAAP when it becomes effective. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations. ASU 2016-02 will be effective for the Company’s first quarter of fiscal year 2020 and requires the modified retrospective method of adoption. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption and the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16), Intra-Equity Transfers of Assets Other Than Inventory (Topic 740), which is intended to eliminate diversity in practice and provide a more accurate depiction of the tax consequences on intercompany asset transfers (excluding inventory). ASU 2016-16 requires entities to immediately recognize the tax consequences on intercompany asset transfers (excluding inventory) at the transaction date, rather than deferring the tax consequences under current GAAP. ASU 2016-16 will be effective for the Company’s first quarter of fiscal year 2019 and requires a modified retrospective method of adoption. Early adoption is permitted, but only in the first quarter of an entity’s fiscal year. The Company does not currently expect the adoption of ASU 2016-16 to have a material effect on its consolidated financial statements and related disclosures. In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04), Simplifying the Test for Goodwill Impairment (Topic 350), which is intended to simplify the subsequent measurement of goodwill. ASU 2017-04 eliminates Step 2 of the goodwill impairment test requiring the assessment of fair value of individual assets and liabilities of a reporting unit to measure goodwill impairments. Upon adoption of this new standard, goodwill impairments will be the amount by which a reporting unit's carrying value exceeds its fair value. ASU 2017-04 will be effective for the Company’s first quarter of fiscal year 2021 and requires a prospective method of adoption. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effect that ASU 2017-04 will have on its consolidated financial statements and related disclosures. In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (ASU 2017-12), Targeted Improvements to Accounting for Hedging Activities (Topic 815), which is intended to improve the financial reporting of hedging relationships to better portray the economic results of risk management activities in financial statements. ASU 2017-12 makes certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. ASU 2017-12 will be effective for the Company’s first quarter of fiscal year 2020 and requires a prospective method of adoption for the amended presentation and disclosure guidance. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effect that ASU 2017-12 will have on its consolidated financial statements and related disclosures. |
Acquisitions
Acquisitions | 6 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
ACQUISITIONS | NOTE B – ACQUISITIONS In the fourth quarter of fiscal year 2017, the Company acquired Automic Holding GmbH (Automic) and Veracode, Inc. (Veracode). The results of operations of Automic and Veracode are reported predominantly in the Company’s Enterprise Solutions segment. The preliminary purchase price allocation for Automic and Veracode is provided within the table below. (dollars in millions) Automic Veracode Estimated Useful Life Finite-lived intangible assets (1) $ 174 $ 99 2-12 years Purchased software 273 240 1-8 years Goodwill 312 411 Indefinite Deferred tax liabilities, net (115 ) (108 ) — Other assets net of other liabilities assumed (2) 31 (24 ) — Purchase price $ 675 $ 618 (1) Includes customer relationships and trade names. (2) Includes approximately $34 million and $16 million of cash acquired from Automic and Veracode, respectively. The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded to goodwill. The preliminary allocation of the purchase price to goodwill was predominantly due to synergies the Company expects to achieve through integration of the acquired technology with the Company’s existing product portfolio and the intangible assets that are not separable, such as assembled workforce and going concern. The goodwill relating to the Company’s acquisitions of Automic and Veracode is not expected to be deductible for tax purposes and is allocated to the Enterprise Solutions segment. For both Automic and Veracode, the allocation of purchase price to acquired identifiable assets, including intangible assets, is preliminary because the Company has not yet completed its analysis of their historical tax records. Thus, the measurements of fair value set forth above for both Automic and Veracode are subject to change. The Company expects to finalize the valuations as soon as practical, but not later than one year from the acquisition dates. The Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2017 included total revenue of approximately $55 million and $114 million , respectively, and net loss of approximately $18 million and $37 million , respectively, from Automic and Veracode. The unaudited pro forma combined financial information in the table below summarizes the results of operations for the Company, Automic and Veracode as though the companies were combined as of the beginning of fiscal year 2017. The pro forma financial information presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal year 2017, nor does it attempt to represent the results of future operations of the combined entities under the ownership and operation of the Company. The pro forma results of operations also do not include any cost savings or other synergies that may result from these acquisitions or any estimated costs that have been or will be incurred by the Company to integrate the acquired assets. The pro forma results below were based on estimates and assumptions, which the Company believes are reasonable. The pro forma financial information for all periods presented also includes the business combination accounting effects resulting from these acquisitions, including the amortization charges from acquired intangible assets and other purchase accounting adjustments, employee retention costs and the related tax effects as though the Company, Automic and Veracode were combined as of the beginning of fiscal year 2017. Three Months Ended September 30, 2016 Six Months Ended September 30, 2016 (in millions, except per share amounts) unaudited Total revenue $ 1,069 $ 2,117 Net income $ 184 $ 346 Basic income per common share $ 0.44 $ 0.82 Diluted income per common share $ 0.44 $ 0.82 The pro forma effects of the Company’s other fiscal year 2017 acquisitions on the Company’s revenues and results of operations during the three and six months ended September 30, 2016 were immaterial. The Company had approximately $11 million and $12 million of accrued acquisition-related costs at September 30, 2017 and March 31, 2017 , respectively, related to purchase price amounts withheld subject to indemnification protections. |
Goodwill, Capitalized Software
Goodwill, Capitalized Software and Other Intangible Assets | 6 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS | NOTE C – GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at September 30, 2017 were as follows: At September 30, 2017 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,560 $ 4,909 $ 1,651 $ 778 $ 873 Internally developed software products 1,467 1,287 180 154 26 Other intangible assets 1,219 824 395 47 348 Total capitalized software and other intangible assets $ 9,246 $ 7,020 $ 2,226 $ 979 $ 1,247 The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2017 were as follows: At March 31, 2017 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,496 $ 4,914 $ 1,582 $ 667 $ 915 Internally developed software products 1,467 1,029 438 391 47 Other intangible assets 1,193 812 381 36 345 Total capitalized software and other intangible assets $ 9,156 $ 6,755 $ 2,401 $ 1,094 $ 1,307 Based on the capitalized software and other intangible assets recorded through September 30, 2017 , the projected annual amortization expense for fiscal year 2018 and the next four fiscal years is expected to be as follows: Year Ended March 31, 2018 2019 2020 2021 2022 (in millions) Purchased software products $ 236 $ 185 $ 161 $ 117 $ 109 Internally developed software products 37 9 1 — — Other intangible assets 41 40 36 36 35 Total $ 314 $ 234 $ 198 $ 153 $ 144 The Company evaluates the useful lives and recoverability of capitalized software and other intangible assets when events or changes in circumstances indicate that an impairment may exist. These evaluations require complex assumptions about key factors such as future customer demand, technology trends and the impact of those factors on the technology the Company acquires and develops for its products. Impairments or revisions to useful lives could result from the use of alternative assumptions that reflect reasonably possible outcomes related to future customer demand or technology trends for assets within the Enterprise Solutions segment. Goodwill activity by segment for the six months ended September 30, 2017 was as follows: (in millions) Mainframe Solutions Enterprise Solutions Services Total Balance at March 31, 2017 $ 4,178 $ 2,598 $ 81 $ 6,857 Acquisitions (1) — (10 ) — (10 ) Foreign currency translation adjustment — 36 — 36 Balance at September 30, 2017 $ 4,178 $ 2,624 $ 81 $ 6,883 (1) Acquisitions amount relates to purchase price allocation adjustments that occurred during the six months ended September 30, 2017 . |
Deferred Revenue
Deferred Revenue | 6 Months Ended |
Sep. 30, 2017 | |
Deferred Revenue Disclosure [Abstract] | |
DEFERRED REVENUE | NOTE D – DEFERRED REVENUE The current and noncurrent components of “Deferred revenue (billed or collected)” at September 30, 2017 and March 31, 2017 were as follows: September 30, March 31, (in millions) Current: Subscription and maintenance $ 1,635 $ 1,948 Professional services 141 135 Software fees and other 133 139 Total deferred revenue (billed or collected) – current $ 1,909 $ 2,222 Noncurrent: Subscription and maintenance $ 683 $ 769 Professional services 19 19 Software fees and other 6 6 Total deferred revenue (billed or collected) – noncurrent $ 708 $ 794 Total deferred revenue (billed or collected) $ 2,617 $ 3,016 |
Derivatives
Derivatives | 6 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES | NOTE E – DERIVATIVES The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into derivative contracts with the intent of mitigating a portion of these risks. Foreign Currency Contracts: The Company enters into foreign currency option and forward contracts to manage balance sheet and forecasted transaction foreign currency risks. The Company has not designated its foreign exchange derivatives as hedges for accounting purposes. The Company’s foreign currency derivative trading strategy is to economically hedge a majority of its material exposures due to forecasted and actual intercompany cash flows, such as royalties and development costs. The Company also economically hedges its material receivable, payable and cash balances held in non-functional currencies. The Company’s foreign currency contracts are generally short-term in duration. Principal currencies hedged include the euro, the British pound sterling, the Australian dollar, the Brazilian real, the Japanese yen, the Canadian dollar, the Israeli shekel, the Indian rupee and the Czech koruna. Changes in fair value from these contracts are recorded as “Other expenses, net” in the Company’s Condensed Consolidated Statements of Operations. At September 30, 2017 , foreign currency contracts outstanding consisted of purchase and sale contracts with a total gross notional value of approximately $890 million and durations of less than six months . The net fair value of these contracts at September 30, 2017 was a net liability of approximately $6 million , of which approximately $7 million is included in “Other current assets” and approximately $13 million is included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheet. At March 31, 2017 , foreign currency contracts outstanding consisted of purchase and sale contracts with a total gross notional value of approximately $336 million and durations of less than three months . The net fair value of these contracts at March 31, 2017 was a net asset of approximately $1 million , of which approximately $2 million is included in “Other current assets” and approximately $1 million is included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheet. A summary of the effect of the foreign exchange derivatives on the Company’s Condensed Consolidated Statements of Operations was as follows: Amount of Net Loss Recognized in the Condensed Consolidated Statements of Operations Three Months Ended Six Months Ended (in millions) 2017 2016 2017 2016 Other expenses, net – foreign currency contracts $ 4 $ 3 $ 8 $ 6 The Company is subject to collateral security arrangements with most of its major counterparties. The Company posted no collateral at September 30, 2017 or March 31, 2017 . Under these agreements, if the Company’s credit ratings had been downgraded one rating level, the Company would still not have been required to post collateral. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE F – FAIR VALUE MEASUREMENTS The following table presents the Company’s assets and liabilities that were measured at fair value on a recurring basis at September 30, 2017 and March 31, 2017 : At September 30, 2017 At March 31, 2017 Fair Value Measurement Using Input Types Estimated Fair Value Fair Value Measurement Using Input Types Estimated Fair Value (in millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: Money market funds (1) $ 971 $ — $ 971 $ 1,077 $ — $ 1,077 Foreign exchange derivatives (2) — 7 7 — 2 2 Total assets $ 971 $ 7 $ 978 $ 1,077 $ 2 $ 1,079 Liabilities: Foreign exchange derivatives (2) $ — $ 13 $ 13 $ — $ 1 $ 1 Total liabilities $ — $ 13 $ 13 $ — $ 1 $ 1 (1) The Company’s investments in money market funds are classified as “Cash and cash equivalents” in its Condensed Consolidated Balance Sheets. (2) Refer to Note E, “Derivatives” for additional information. At September 30, 2017 and March 31, 2017 , the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The carrying values of financial instruments classified as current assets and current liabilities, such as cash and cash equivalents, short-term investments, accounts payable, accrued expenses and short-term borrowings, approximate fair value due to the short-term maturity of the instruments. The following table presents the carrying amounts and estimated fair values of the Company’s other financial instruments that were not measured at fair value on a recurring basis at September 30, 2017 and March 31, 2017 : At September 30, 2017 At March 31, 2017 (in millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Liabilities: Total debt (1) $ 2,785 $ 2,889 $ 2,791 $ 2,903 Facility exit reserves (2) $ 9 $ 10 $ 11 $ 12 (1) Estimated fair value of total debt is based on quoted prices for similar liabilities for which significant inputs are observable except for certain long-term lease obligations, for which fair value approximates carrying value (Level 2). (2) Estimated fair value for the facility exit reserves is determined using the Company’s incremental borrowing rate at September 30, 2017 and March 31, 2017 . At September 30, 2017 and March 31, 2017 , the facility exit reserves included carrying values of approximately $2 million and $3 million , respectively, in “Accrued expenses and other current liabilities” and approximately $7 million and $8 million , respectively, in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets (Level 3). |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE G – COMMITMENTS AND CONTINGENCIES The Company has been or, from time to time, may be named as a defendant in various lawsuits and claims arising in the normal course of business. The Company may also become involved in contract issues and disputes with customers, including government customers. Based on the Company’s experience, management believes that the damages amounts claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases. The Company believes that it has meritorious defenses in connection with its current lawsuits and any material claims and disputes, and intends to vigorously contest each of them. In the opinion of the Company’s management based upon information currently available to the Company, while the outcome of its lawsuits, claims and disputes is uncertain, the likely results of these lawsuits, claims and disputes are not expected, either individually or in the aggregate, to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the effect could be material to the Company’s results of operations or cash flows for any interim reporting period. For some matters, the Company is unable to estimate a range of reasonably possible loss due to the stage of the matter and/or other particular circumstances of the matter. For others, a range of reasonably possible loss can be estimated. For those matters for which such a range can be estimated, the Company estimates that, in the aggregate, the range of reasonably possible loss does not exceed $20 million . This is in addition to amounts, if any, that have been accrued for those matters. The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted by Delaware law. As a part of that obligation, the Company may, from time to time, advance certain attorneys’ fees and expenses incurred by officers and directors in various lawsuits and investigations, as permitted under Delaware law. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE H – STOCKHOLDERS’ EQUITY Stock Repurchases: On November 13, 2015, the Board of Directors (Board) approved a stock repurchase program that authorized the Company to acquire up to $750 million of its common stock. During the six months ended September 30, 2017 , the Company repurchased approximately 2.8 million shares of its common stock for approximately $90 million . At September 30, 2017 , the Company remained authorized to purchase approximately $560 million of its common stock under its current stock repurchase program. Accumulated Other Comprehensive Loss: Foreign currency translation losses included in “Accumulated other comprehensive loss” in the Company’s Condensed Consolidated Balance Sheets at September 30, 2017 and March 31, 2017 were approximately $351 million and $483 million , respectively. Cash Dividends: The Board declared the following dividends during the six months ended September 30, 2017 and 2016 : Six Months Ended September 30, 2017 : (in millions, except per share amounts) Declaration Date Dividend Per Share Record Date Total Amount Payment Date May 9, 2017 $0.255 May 25, 2017 $107 June 13, 2017 August 9, 2017 $0.255 August 24, 2017 $108 September 12, 2017 Six Months Ended September 30, 2016 : (in millions, except per share amounts) Declaration Date Dividend Per Share Record Date Total Amount Payment Date May 4, 2016 $0.255 May 26, 2016 $107 June 14, 2016 August 3, 2016 $0.255 August 25, 2016 $107 September 13, 2016 |
Income Per Common Share
Income Per Common Share | 6 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
INCOME PER COMMON SHARE | NOTE I – INCOME PER COMMON SHARE Basic net income per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted net income per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares, as adjusted for the potential dilutive effect of non-participating share-based awards. The following table presents basic and diluted income per common share information for the three and six months ended September 30, 2017 and 2016 : Three Months Ended Six Months Ended 2017 2016 2017 2016 (in millions, except per share amounts) Basic income per common share: Net income $ 184 $ 212 $ 362 $ 410 Less: Net income allocable to participating securities (3 ) (3 ) (5 ) (5 ) Net income allocable to common shares $ 181 $ 209 $ 357 $ 405 Weighted average common shares outstanding 415 414 415 414 Basic income per common share $ 0.44 $ 0.50 $ 0.86 $ 0.98 Diluted income per common share: Net income $ 184 $ 212 $ 362 $ 410 Less: Net income allocable to participating securities (3 ) (3 ) (5 ) (5 ) Net income allocable to common shares $ 181 $ 209 $ 357 $ 405 Weighted average shares outstanding and common share equivalents: Weighted average common shares outstanding 415 414 415 414 Weighted average effect of share-based payment awards 1 1 1 1 Denominator in calculation of diluted income per share 416 415 416 415 Diluted income per common share $ 0.44 $ 0.50 $ 0.86 $ 0.98 For the three months ended September 30, 2017 and 2016 , respectively, approximately 2 million shares and 1 million shares of Company common stock underlying restricted stock awards (RSAs) and options to purchase common stock were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods. Weighted average RSAs of approximately 5 million shares and 5 million shares for the three months ended September 30, 2017 and 2016 , respectively, were considered participating securities in the calculation of net income allocable to common stockholders. For the six months ended September 30, 2017 and 2016 , respectively, approximately 2 million shares and 1 million shares of Company common stock underlying RSAs and options to purchase common stock were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods. Weighted average RSAs of approximately 5 million shares and 5 million shares for the six months ended September 30, 2017 and 2016 , respectively, were considered participating securities in the calculation of net income allocable to common stockholders. |
Accounting for Share-Based Comp
Accounting for Share-Based Compensation | 6 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
ACCOUNTING FOR SHARE-BASED COMPENSATION | NOTE J – ACCOUNTING FOR SHARE-BASED COMPENSATION The Company recognized share-based compensation in the following line items in the Condensed Consolidated Statements of Operations for the periods indicated: Three Months Ended Six Months Ended 2017 2016 2017 2016 (in millions) Costs of licensing and maintenance $ 2 $ 1 $ 4 $ 3 Cost of professional services — 1 1 2 Selling and marketing 10 9 20 19 General and administrative 11 8 23 19 Product development and enhancements 6 6 13 11 Share-based compensation expense before tax $ 29 $ 25 $ 61 $ 54 Income tax benefit (9 ) (8 ) (20 ) (18 ) Net share-based compensation expense $ 20 $ 17 $ 41 $ 36 There were no capitalized share-based compensation costs for the three and six months ended September 30, 2017 and 2016 . The following table summarizes the unrecognized share-based compensation costs at September 30, 2017 : Unrecognized Share-Based Compensation Costs Weighted Average Period Expected to be Recognized (in millions) (in years) Stock option awards $ 6 2.1 Restricted stock units (RSUs) 25 2.1 Restricted stock awards (RSAs) 92 2.1 Performance share units 45 2.6 Total unrecognized share-based compensation costs $ 168 2.2 For the six months ended September 30, 2017 and 2016 , the Company issued stock options for approximately 1.0 million shares and 1.1 million shares, respectively. The weighted average fair values and assumptions used for the options granted were as follows: Six Months Ended 2017 2016 Weighted average fair value $ 4.72 $ 4.41 Dividend yield 3.17 % 3.57 % Expected volatility factor (1) 21 % 22 % Risk-free interest rate (2) 2.1 % 1.5 % Expected life (in years) (3) 6.0 6.0 (1) Expected volatility is measured using historical daily price changes of the Company’s common stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded options. (2) The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant. (3) The expected life is the number of years the Company estimates that options will be outstanding prior to exercise. The Company’s computation of expected life was determined based on the simplified method (the average of the vesting period and option term). The table below summarizes all of the RSAs and RSUs granted, including grants made pursuant to the Company’s long-term incentive plans, during the three and six months ended September 30, 2017 and 2016 : Three Months Ended Six Months Ended 2017 2016 2017 2016 (shares in millions) RSAs: Shares — (3) — (3) 2.9 2.9 Weighted average grant date fair value (1) $ 32.98 $ 34.31 $ 31.70 $ 31.55 RSUs: Shares — — (3) 1.1 1.0 Weighted average grant date fair value (2) $ — $ 31.82 $ 30.35 $ 30.16 (1) The fair value is based on the quoted market value of the Company’s common stock on the grant date. (2) The fair value is based on the quoted market value of the Company’s common stock on the grant date reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting of the RSUs, which is calculated using a risk-free interest rate. (3) Less than 0.1 million. Employee Stock Purchase Plan: For the six-month offer period ended June 30, 2017 , the Company issued approximately 0.1 million shares under the Employee Stock Purchase Plan (ESPP) at $32.75 per share. As of September 30, 2017 , approximately 28.9 million shares were available for future issuances under the ESPP. |
Income Taxes
Income Taxes | 6 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE K – INCOME TAXES Income tax expense for the three and six months ended September 30, 2017 was approximately $74 million and $134 million , respectively, compared with income tax expense for the three and six months ended September 30, 2016 of approximately $94 million and $173 million , respectively. For the six months ended September 30, 2017 , the Company recorded a net discrete tax benefit of approximately $8 million resulting primarily from reductions in uncertain tax positions related to effectively settled tax audits. The Company’s estimated annual effective tax rate, which excludes the impact of discrete items, for the six months ended September 30, 2017 and 2016 was 28.6% and 29.0% , respectively. Changes in tax laws, the outcome of tax audits and any other changes in potential tax liabilities may result in additional tax expense or benefit in fiscal year 2018 , which are not considered in the Company’s estimated annual effective tax rate. While the Company does not currently view any such items as individually material to the results of the Company’s consolidated financial position or results of operations, the impact of certain items may yield additional tax expense or benefit in the remaining quarters of fiscal year 2018 . The Company is currently anticipating a fiscal year 2018 effective tax rate between 28% and 29% . |
Supplemental Statement of Cash
Supplemental Statement of Cash Flows Information | 6 Months Ended |
Sep. 30, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION | NOTE L – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION For the six months ended September 30, 2017 and 2016 , interest payments were approximately $60 million and $43 million , respectively, and income taxes paid, net were approximately $156 million and $202 million , respectively. Non-cash financing activities for the six months ended September 30, 2017 and 2016 consisted of treasury common shares issued in connection with the following: share-based incentive awards issued under the Company’s equity compensation plans of approximately $46 million (net of approximately $35 million of income taxes withheld) and $43 million (net of approximately $33 million of income taxes withheld), respectively; discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $23 million and $24 million , respectively; and the Company’s ESPP of approximately $2 million and $2 million , respectively. The Company uses a notional pooling arrangement with an international bank to help manage global liquidity. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either cash deposit or borrowing positions through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because it maintains a security interest in the cash deposits and has the right to offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both. The activity under this notional pooling arrangement for the six months ended September 30, 2017 and 2016 was as follows: Six Months Ended 2017 2016 (in millions) Total borrowings outstanding at beginning of period (1) $ 137 $ 139 Borrowings 1,173 467 Repayments (1,204 ) (456 ) Foreign exchange effect 31 (11 ) Total borrowings outstanding at end of period (1) $ 137 $ 139 (1) Included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheets. |
Segment Information
Segment Information | 6 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | NOTE M – SEGMENT INFORMATION The Company’s Mainframe Solutions and Enterprise Solutions segments are comprised of its software business organized by the nature of the Company’s software offerings and the platforms on which the products operate. The Services segment is comprised of product implementation, consulting, customer education and customer training services, including those directly related to the Mainframe Solutions and Enterprise Solutions software that the Company sells to its customers. Segment expenses do not include amortization of purchased software, amortization of other intangible assets, amortization of internally developed software products, share-based compensation expense, certain foreign exchange derivative hedging gains and losses, severance and facility actions approved by the Board, and other miscellaneous costs. A measure of segment assets is not currently provided to the Company’s Chief Executive Officer and has therefore not been disclosed. The Company’s segment information for the three and six months ended September 30, 2017 and 2016 was as follows: Three Months Ended September 30, 2017 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 539 $ 420 $ 75 $ 1,034 Expenses 188 380 74 642 Segment profit $ 351 $ 40 $ 1 $ 392 Segment operating margin 65 % 10 % 1 % 38 % Depreciation $ 10 $ 7 $ — $ 17 Reconciliation of segment profit to income before income taxes for the three months ended September 30, 2017 : (in millions) Segment profit $ 392 Less: Purchased software amortization 58 Other intangibles amortization 10 Internally developed software products amortization 9 Share-based compensation expense 29 Other expenses, net (1) 4 Interest expense, net 24 Income before income taxes $ 258 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Six Months Ended September 30, 2017 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 1,075 $ 834 $ 150 $ 2,059 Expenses 375 761 148 1,284 Segment profit $ 700 $ 73 $ 2 $ 775 Segment operating margin 65 % 9 % 1 % 38 % Depreciation $ 19 $ 14 $ — $ 33 Reconciliation of segment profit to income before income taxes for the six months ended September 30, 2017 : (in millions) Segment profit $ 775 Less: Purchased software amortization 116 Other intangibles amortization 20 Internally developed software products amortization 21 Share-based compensation expense 61 Other expenses, net (1) 12 Interest expense, net 49 Income before income taxes $ 496 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Three Months Ended September 30, 2016 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 550 $ 393 $ 75 $ 1,018 Expenses 211 324 73 608 Segment profit $ 339 $ 69 $ 2 $ 410 Segment operating margin 62 % 18 % 3 % 40 % Depreciation $ 8 $ 6 $ — $ 14 Reconciliation of segment profit to income before income taxes for the three months ended September 30, 2016 : (in millions) Segment profit $ 410 Less: Purchased software amortization 38 Other intangibles amortization 4 Internally developed software products amortization 21 Share-based compensation expense 25 Other expenses, net (1) 2 Interest expense, net 14 Income before income taxes $ 306 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Six Months Ended September 30, 2016 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 1,101 $ 764 $ 152 $ 2,017 Expenses 419 648 148 1,215 Segment profit $ 682 $ 116 $ 4 $ 802 Segment operating margin 62 % 15 % 3 % 40 % Depreciation $ 17 $ 12 $ — $ 29 Reconciliation of segment profit to income before income taxes for the six months ended September 30, 2016 : (in millions) Segment profit $ 802 Less: Purchased software amortization 81 Other intangibles amortization 9 Internally developed software products amortization 44 Share-based compensation expense 54 Other expenses, net (1) 2 Interest expense, net 29 Income before income taxes $ 583 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. The table below summarizes the Company’s revenue from the United States and from international ( i.e. , non-U.S.) locations: Three Months Ended Six Months Ended 2017 2016 2017 2016 (in millions) United States $ 658 $ 657 $ 1,315 $ 1,294 EMEA (1) 235 219 464 444 Other 141 142 280 279 Total revenue $ 1,034 $ 1,018 $ 2,059 $ 2,017 (1) Consists of Europe, the Middle East and Africa. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 6 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: The accompanying unaudited condensed consolidated financial statements (Condensed Consolidated Financial Statements) of CA, Inc. and its subsidiaries (Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 270, for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and therefore should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 ( 2017 Form 10-K). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from actual results. Operating results for the three and six months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2018 . |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash: The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 66% being held by the Company’s foreign subsidiaries outside the United States at September 30, 2017 . At September 30, 2017 and March 31, 2017 , the total amount of restricted cash included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheets was approximately $2 million and $1 million , respectively. Restricted cash was included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown in the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2017 and 2016 . |
New Accounting Pronouncements | New Accounting Pronouncements: New Accounting Pronouncements Recently Adopted In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (ASU 2016-09), Improvements to Employee Share-Based Payment Accounting (Topic 718), which is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences and classification on the statements of cash flows. ASU 2016-09 was adopted by the Company when effective in the first quarter of fiscal year 2018. The adoption of ASU 2016-09 resulted in the presentation of cash flows for employee taxes paid by withholding shares of restricted stock as a financing activity within the Condensed Consolidated Statements of Cash Flows, which were previously presented as an operating activity. A retrospective method of adoption was required for this change, which resulted in the reclassification of cash outflows of approximately $34 million from operating activities to financing activities within the Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2016 . Although not material, ASU 2016-09 also requires that excess tax benefits on share-based compensation expense be recognized in the Condensed Consolidated Statements of Operations as a component of the provision for income taxes, rather than additional paid-in capital, on a prospective basis. As permitted by ASU 2016-09, although not material, the Company elected to retrospectively reclassify cash flows related to excess tax benefits on share-based compensation expense as an operating activity within the Condensed Consolidated Statements of Cash Flows, which were previously presented as a financing activity. In addition, as permitted by ASU 2016-09, the Company elected to continue to estimate forfeitures expected to occur to determine the amount of share-based compensation expense to be recognized in each period. In August 2016, the FASB issued Accounting Standards Update No. 2016-15 (ASU 2016-15), Classification of Certain Cash Receipts and Cash Payments (Topic 230), which is intended to reduce diversity in practice on how certain cash receipts and cash payments are classified and presented in the statements of cash flows. In November 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18), Restricted Cash (Topic 230), which is intended to reduce diversity in practice on how changes in restricted cash are classified and presented in the statements of cash flows. ASU 2016-18 requires amounts generally described as restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company elected to early adopt both ASU 2016-15 and ASU 2016-18 in the first quarter of fiscal year 2018 using the retrospective transition method of adoption. The adoption of these standards did not have a material effect on the Company’s consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers , with amendments in 2015, 2016 and 2017, which creates new ASC Topic 606 (Topic 606) that will replace most existing revenue recognition guidance in GAAP when it becomes effective. Topic 606 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will be effective for the Company’s first quarter of fiscal year 2019 and early application for fiscal year 2018 is permitted. Topic 606 may be applied retrospectively to each prior period presented (full retrospective method) or with the cumulative effect recognized as of the date of initial application (modified retrospective method). The Company has established a cross-functional implementation team consisting of representatives across the organization and a third-party service provider to develop a project plan, including the evaluation of customer contracts across the organization, the development of policies, processes and tools to report financial results, and the implementation and evaluation of the Company’s internal controls over financial reporting that will be necessary under the new standard. The Company currently plans to adopt Topic 606 in the first quarter of fiscal year 2019 using the modified retrospective method. While the Company is continuing to determine the full effect of the new standard, it currently anticipates that this standard will have a material effect on its consolidated financial statements and related disclosures, and currently believes the most significant effect relates to the timing of the recognition of its software license revenue. Specifically, under the new standard, the Company currently expects to recognize license revenue for its Mainframe Solutions and Enterprise Solutions products at the point-in-time the licensed software is transferred to the customer, rather than ratably over the term of the customer contract as required by existing GAAP for most of the Company’s software arrangements. As a result, a significant portion of the Company’s revenue backlog ( i.e. , deferred revenue and future billings on committed contracts) relating to the license component of customer contracts at March 31, 2018 under existing GAAP will not be recognized as revenue in future periods but instead will be included as part of the cumulative effect adjustment within retained earnings upon adoption of Topic 606. Such cumulative effect adjustment will primarily result from (i) the significant reduction in deferred revenue relating to the license component of customer contracts as mentioned above, (ii) the establishment of a significant contract asset related to the Company’s contractual right to consideration for completed performance obligations not yet billed or collected ( i.e. , license revenue recognized in advance of billings), and (iii) the increase in deferred tax liabilities related to the increase in contract assets and the increase in income taxes payable for the portion of deferred revenue included in the cumulative effect adjustment that has not been previously included as taxable income on a tax return, which will result in an acceleration of the timing of income tax payments. This acceleration of the timing of income tax payments will be significant in relation to the Company’s current annual income tax payments within cash flows from operations. The Company is currently evaluating the amounts for the items listed above, as well as the timing of income tax payments upon adoption of Topic 606. However, the Company does not currently expect Topic 606 to have a significant effect on its customer billings and cash collections from customer billings. The Company currently believes that the point-in-time recognition requirement of the new standard will increase the variability of its revenue and overall net income period-to-period. The Company does not currently expect Topic 606 will have a significant effect on the timing of revenue recognition for its maintenance, Software-as-a-Service and professional services contracts. Under Topic 606, more judgment and estimates will be required within the revenue recognition process than are required under existing GAAP, including estimates of the standalone selling price for each performance obligation identified within the Company’s contracts. Topic 606 will also require the Company to capitalize a portion of its sales commissions and other incremental costs to acquire contracts upon adoption, which are currently expensed as incurred. The Company currently anticipates it will amortize these capitalized costs over an expected period of benefit ranging from approximately four to seven years. The Company is currently evaluating the effect of this requirement on its consolidated financial statements and related disclosures. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842), which requires a lessee to recognize assets and liabilities on its consolidated balance sheet for leases with accounting lease terms of more than 12 months. ASU 2016-02 will replace most existing lease accounting guidance in GAAP when it becomes effective. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations. ASU 2016-02 will be effective for the Company’s first quarter of fiscal year 2020 and requires the modified retrospective method of adoption. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption and the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16), Intra-Equity Transfers of Assets Other Than Inventory (Topic 740), which is intended to eliminate diversity in practice and provide a more accurate depiction of the tax consequences on intercompany asset transfers (excluding inventory). ASU 2016-16 requires entities to immediately recognize the tax consequences on intercompany asset transfers (excluding inventory) at the transaction date, rather than deferring the tax consequences under current GAAP. ASU 2016-16 will be effective for the Company’s first quarter of fiscal year 2019 and requires a modified retrospective method of adoption. Early adoption is permitted, but only in the first quarter of an entity’s fiscal year. The Company does not currently expect the adoption of ASU 2016-16 to have a material effect on its consolidated financial statements and related disclosures. In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04), Simplifying the Test for Goodwill Impairment (Topic 350), which is intended to simplify the subsequent measurement of goodwill. ASU 2017-04 eliminates Step 2 of the goodwill impairment test requiring the assessment of fair value of individual assets and liabilities of a reporting unit to measure goodwill impairments. Upon adoption of this new standard, goodwill impairments will be the amount by which a reporting unit's carrying value exceeds its fair value. ASU 2017-04 will be effective for the Company’s first quarter of fiscal year 2021 and requires a prospective method of adoption. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effect that ASU 2017-04 will have on its consolidated financial statements and related disclosures. In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (ASU 2017-12), Targeted Improvements to Accounting for Hedging Activities (Topic 815), which is intended to improve the financial reporting of hedging relationships to better portray the economic results of risk management activities in financial statements. ASU 2017-12 makes certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. ASU 2017-12 will be effective for the Company’s first quarter of fiscal year 2020 and requires a prospective method of adoption for the amended presentation and disclosure guidance. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effect that ASU 2017-12 will have on its consolidated financial statements and related disclosures. |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Acquisition purchase price allocation | The preliminary purchase price allocation for Automic and Veracode is provided within the table below. (dollars in millions) Automic Veracode Estimated Useful Life Finite-lived intangible assets (1) $ 174 $ 99 2-12 years Purchased software 273 240 1-8 years Goodwill 312 411 Indefinite Deferred tax liabilities, net (115 ) (108 ) — Other assets net of other liabilities assumed (2) 31 (24 ) — Purchase price $ 675 $ 618 (1) Includes customer relationships and trade names. (2) Includes approximately $34 million and $16 million of cash acquired from Automic and Veracode, respectively. |
Unaudited pro forma combined financial information | Three Months Ended September 30, 2016 Six Months Ended September 30, 2016 (in millions, except per share amounts) unaudited Total revenue $ 1,069 $ 2,117 Net income $ 184 $ 346 Basic income per common share $ 0.44 $ 0.82 Diluted income per common share $ 0.44 $ 0.82 |
Goodwill, Capitalized Softwar22
Goodwill, Capitalized Software and Other Intangible Assets (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Capitalized software and other intangible assets | The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at September 30, 2017 were as follows: At September 30, 2017 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,560 $ 4,909 $ 1,651 $ 778 $ 873 Internally developed software products 1,467 1,287 180 154 26 Other intangible assets 1,219 824 395 47 348 Total capitalized software and other intangible assets $ 9,246 $ 7,020 $ 2,226 $ 979 $ 1,247 The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2017 were as follows: At March 31, 2017 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,496 $ 4,914 $ 1,582 $ 667 $ 915 Internally developed software products 1,467 1,029 438 391 47 Other intangible assets 1,193 812 381 36 345 Total capitalized software and other intangible assets $ 9,156 $ 6,755 $ 2,401 $ 1,094 $ 1,307 |
Projected annual amortization expense | Based on the capitalized software and other intangible assets recorded through September 30, 2017 , the projected annual amortization expense for fiscal year 2018 and the next four fiscal years is expected to be as follows: Year Ended March 31, 2018 2019 2020 2021 2022 (in millions) Purchased software products $ 236 $ 185 $ 161 $ 117 $ 109 Internally developed software products 37 9 1 — — Other intangible assets 41 40 36 36 35 Total $ 314 $ 234 $ 198 $ 153 $ 144 |
Goodwill activity by segment | Goodwill activity by segment for the six months ended September 30, 2017 was as follows: (in millions) Mainframe Solutions Enterprise Solutions Services Total Balance at March 31, 2017 $ 4,178 $ 2,598 $ 81 $ 6,857 Acquisitions (1) — (10 ) — (10 ) Foreign currency translation adjustment — 36 — 36 Balance at September 30, 2017 $ 4,178 $ 2,624 $ 81 $ 6,883 (1) Acquisitions amount relates to purchase price allocation adjustments that occurred during the six months ended September 30, 2017 . |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Deferred Revenue Disclosure [Abstract] | |
Components of deferred revenue (billed or collected) | The current and noncurrent components of “Deferred revenue (billed or collected)” at September 30, 2017 and March 31, 2017 were as follows: September 30, March 31, (in millions) Current: Subscription and maintenance $ 1,635 $ 1,948 Professional services 141 135 Software fees and other 133 139 Total deferred revenue (billed or collected) – current $ 1,909 $ 2,222 Noncurrent: Subscription and maintenance $ 683 $ 769 Professional services 19 19 Software fees and other 6 6 Total deferred revenue (billed or collected) – noncurrent $ 708 $ 794 Total deferred revenue (billed or collected) $ 2,617 $ 3,016 |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Effect of foreign exchange derivatives | A summary of the effect of the foreign exchange derivatives on the Company’s Condensed Consolidated Statements of Operations was as follows: Amount of Net Loss Recognized in the Condensed Consolidated Statements of Operations Three Months Ended Six Months Ended (in millions) 2017 2016 2017 2016 Other expenses, net – foreign currency contracts $ 4 $ 3 $ 8 $ 6 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities measured at fair value on a recurring basis | The following table presents the Company’s assets and liabilities that were measured at fair value on a recurring basis at September 30, 2017 and March 31, 2017 : At September 30, 2017 At March 31, 2017 Fair Value Measurement Using Input Types Estimated Fair Value Fair Value Measurement Using Input Types Estimated Fair Value (in millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: Money market funds (1) $ 971 $ — $ 971 $ 1,077 $ — $ 1,077 Foreign exchange derivatives (2) — 7 7 — 2 2 Total assets $ 971 $ 7 $ 978 $ 1,077 $ 2 $ 1,079 Liabilities: Foreign exchange derivatives (2) $ — $ 13 $ 13 $ — $ 1 $ 1 Total liabilities $ — $ 13 $ 13 $ — $ 1 $ 1 (1) The Company’s investments in money market funds are classified as “Cash and cash equivalents” in its Condensed Consolidated Balance Sheets. (2) Refer to Note E, “Derivatives” for additional information. |
Carrying amounts and estimated fair values of other financial instruments not measured at fair value on a recurring basis | The following table presents the carrying amounts and estimated fair values of the Company’s other financial instruments that were not measured at fair value on a recurring basis at September 30, 2017 and March 31, 2017 : At September 30, 2017 At March 31, 2017 (in millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Liabilities: Total debt (1) $ 2,785 $ 2,889 $ 2,791 $ 2,903 Facility exit reserves (2) $ 9 $ 10 $ 11 $ 12 (1) Estimated fair value of total debt is based on quoted prices for similar liabilities for which significant inputs are observable except for certain long-term lease obligations, for which fair value approximates carrying value (Level 2). (2) Estimated fair value for the facility exit reserves is determined using the Company’s incremental borrowing rate at September 30, 2017 and March 31, 2017 . At September 30, 2017 and March 31, 2017 , the facility exit reserves included carrying values of approximately $2 million and $3 million , respectively, in “Accrued expenses and other current liabilities” and approximately $7 million and $8 million , respectively, in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets (Level 3). |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Cash dividends | Cash Dividends: The Board declared the following dividends during the six months ended September 30, 2017 and 2016 : Six Months Ended September 30, 2017 : (in millions, except per share amounts) Declaration Date Dividend Per Share Record Date Total Amount Payment Date May 9, 2017 $0.255 May 25, 2017 $107 June 13, 2017 August 9, 2017 $0.255 August 24, 2017 $108 September 12, 2017 Six Months Ended September 30, 2016 : (in millions, except per share amounts) Declaration Date Dividend Per Share Record Date Total Amount Payment Date May 4, 2016 $0.255 May 26, 2016 $107 June 14, 2016 August 3, 2016 $0.255 August 25, 2016 $107 September 13, 2016 |
Income Per Common Share (Tables
Income Per Common Share (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Reconciliation of basic and diluted income per common share | The following table presents basic and diluted income per common share information for the three and six months ended September 30, 2017 and 2016 : Three Months Ended Six Months Ended 2017 2016 2017 2016 (in millions, except per share amounts) Basic income per common share: Net income $ 184 $ 212 $ 362 $ 410 Less: Net income allocable to participating securities (3 ) (3 ) (5 ) (5 ) Net income allocable to common shares $ 181 $ 209 $ 357 $ 405 Weighted average common shares outstanding 415 414 415 414 Basic income per common share $ 0.44 $ 0.50 $ 0.86 $ 0.98 Diluted income per common share: Net income $ 184 $ 212 $ 362 $ 410 Less: Net income allocable to participating securities (3 ) (3 ) (5 ) (5 ) Net income allocable to common shares $ 181 $ 209 $ 357 $ 405 Weighted average shares outstanding and common share equivalents: Weighted average common shares outstanding 415 414 415 414 Weighted average effect of share-based payment awards 1 1 1 1 Denominator in calculation of diluted income per share 416 415 416 415 Diluted income per common share $ 0.44 $ 0.50 $ 0.86 $ 0.98 |
Accounting for Share-Based Co28
Accounting for Share-Based Compensation (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Recognized share-based compensation | The Company recognized share-based compensation in the following line items in the Condensed Consolidated Statements of Operations for the periods indicated: Three Months Ended Six Months Ended 2017 2016 2017 2016 (in millions) Costs of licensing and maintenance $ 2 $ 1 $ 4 $ 3 Cost of professional services — 1 1 2 Selling and marketing 10 9 20 19 General and administrative 11 8 23 19 Product development and enhancements 6 6 13 11 Share-based compensation expense before tax $ 29 $ 25 $ 61 $ 54 Income tax benefit (9 ) (8 ) (20 ) (18 ) Net share-based compensation expense $ 20 $ 17 $ 41 $ 36 |
Unrecognized share-based compensation costs | The following table summarizes the unrecognized share-based compensation costs at September 30, 2017 : Unrecognized Share-Based Compensation Costs Weighted Average Period Expected to be Recognized (in millions) (in years) Stock option awards $ 6 2.1 Restricted stock units (RSUs) 25 2.1 Restricted stock awards (RSAs) 92 2.1 Performance share units 45 2.6 Total unrecognized share-based compensation costs $ 168 2.2 |
Weighted average fair values and assumptions used for options granted | The weighted average fair values and assumptions used for the options granted were as follows: Six Months Ended 2017 2016 Weighted average fair value $ 4.72 $ 4.41 Dividend yield 3.17 % 3.57 % Expected volatility factor (1) 21 % 22 % Risk-free interest rate (2) 2.1 % 1.5 % Expected life (in years) (3) 6.0 6.0 (1) Expected volatility is measured using historical daily price changes of the Company’s common stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded options. (2) The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant. (3) The expected life is the number of years the Company estimates that options will be outstanding prior to exercise. The Company’s computation of expected life was determined based on the simplified method (the average of the vesting period and option term). |
Summary of all RSAs and RSUs granted, including grants made pursuant to long-term incentive plans | The table below summarizes all of the RSAs and RSUs granted, including grants made pursuant to the Company’s long-term incentive plans, during the three and six months ended September 30, 2017 and 2016 : Three Months Ended Six Months Ended 2017 2016 2017 2016 (shares in millions) RSAs: Shares — (3) — (3) 2.9 2.9 Weighted average grant date fair value (1) $ 32.98 $ 34.31 $ 31.70 $ 31.55 RSUs: Shares — — (3) 1.1 1.0 Weighted average grant date fair value (2) $ — $ 31.82 $ 30.35 $ 30.16 (1) The fair value is based on the quoted market value of the Company’s common stock on the grant date. (2) The fair value is based on the quoted market value of the Company’s common stock on the grant date reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting of the RSUs, which is calculated using a risk-free interest rate. (3) Less than 0.1 million. |
Supplemental Statement of Cas29
Supplemental Statement of Cash Flows Information (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
Notional pooling arrangement | The activity under this notional pooling arrangement for the six months ended September 30, 2017 and 2016 was as follows: Six Months Ended 2017 2016 (in millions) Total borrowings outstanding at beginning of period (1) $ 137 $ 139 Borrowings 1,173 467 Repayments (1,204 ) (456 ) Foreign exchange effect 31 (11 ) Total borrowings outstanding at end of period (1) $ 137 $ 139 (1) Included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheets. |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment information | Three Months Ended September 30, 2017 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 539 $ 420 $ 75 $ 1,034 Expenses 188 380 74 642 Segment profit $ 351 $ 40 $ 1 $ 392 Segment operating margin 65 % 10 % 1 % 38 % Depreciation $ 10 $ 7 $ — $ 17 Three Months Ended September 30, 2016 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 550 $ 393 $ 75 $ 1,018 Expenses 211 324 73 608 Segment profit $ 339 $ 69 $ 2 $ 410 Segment operating margin 62 % 18 % 3 % 40 % Depreciation $ 8 $ 6 $ — $ 14 Six Months Ended September 30, 2017 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 1,075 $ 834 $ 150 $ 2,059 Expenses 375 761 148 1,284 Segment profit $ 700 $ 73 $ 2 $ 775 Segment operating margin 65 % 9 % 1 % 38 % Depreciation $ 19 $ 14 $ — $ 33 Six Months Ended September 30, 2016 Mainframe Solutions Enterprise Solutions Services Total (dollars in millions) Revenue $ 1,101 $ 764 $ 152 $ 2,017 Expenses 419 648 148 1,215 Segment profit $ 682 $ 116 $ 4 $ 802 Segment operating margin 62 % 15 % 3 % 40 % Depreciation $ 17 $ 12 $ — $ 29 |
Reconciliation of segment profit to income before income taxes | Reconciliation of segment profit to income before income taxes for the six months ended September 30, 2016 : (in millions) Segment profit $ 802 Less: Purchased software amortization 81 Other intangibles amortization 9 Internally developed software products amortization 44 Share-based compensation expense 54 Other expenses, net (1) 2 Interest expense, net 29 Income before income taxes $ 583 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Reconciliation of segment profit to income before income taxes for the six months ended September 30, 2017 : (in millions) Segment profit $ 775 Less: Purchased software amortization 116 Other intangibles amortization 20 Internally developed software products amortization 21 Share-based compensation expense 61 Other expenses, net (1) 12 Interest expense, net 49 Income before income taxes $ 496 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Reconciliation of segment profit to income before income taxes for the three months ended September 30, 2017 : (in millions) Segment profit $ 392 Less: Purchased software amortization 58 Other intangibles amortization 10 Internally developed software products amortization 9 Share-based compensation expense 29 Other expenses, net (1) 4 Interest expense, net 24 Income before income taxes $ 258 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Reconciliation of segment profit to income before income taxes for the three months ended September 30, 2016 : (in millions) Segment profit $ 410 Less: Purchased software amortization 38 Other intangibles amortization 4 Internally developed software products amortization 21 Share-based compensation expense 25 Other expenses, net (1) 2 Interest expense, net 14 Income before income taxes $ 306 (1) Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. |
Revenue from the United States and international locations | The table below summarizes the Company’s revenue from the United States and from international ( i.e. , non-U.S.) locations: Three Months Ended Six Months Ended 2017 2016 2017 2016 (in millions) United States $ 658 $ 657 $ 1,315 $ 1,294 EMEA (1) 235 219 464 444 Other 141 142 280 279 Total revenue $ 1,034 $ 1,018 $ 2,059 $ 2,017 (1) Consists of Europe, the Middle East and Africa. |
Accounting Policies (Details)
Accounting Policies (Details) - USD ($) $ in Millions | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Mar. 31, 2017 | |
Accounting Policies [Abstract] | |||
Percentage of cash and cash equivalents held by the Company's foreign subsidiaries outside the United States | 66.00% | ||
Accounting Policies [Line Items] | |||
Payments related to tax withholding for share-based compensation | $ 35 | $ 34 | |
Minimum | |||
Accounting Policies [Line Items] | |||
Capitalized contract costs, Amortization period | 4 years | ||
Maximum | |||
Accounting Policies [Line Items] | |||
Capitalized contract costs, Amortization period | 7 years | ||
Reclass from Operating Activities to Financing Activities | |||
Accounting Policies [Line Items] | |||
Payments related to tax withholding for share-based compensation | $ 34 | ||
Other Noncurrent Assets, Net | |||
Accounting Policies [Line Items] | |||
Restricted cash | $ 2 | $ 1 |
Acquisitions 1 (Details)
Acquisitions 1 (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Jan. 18, 2017 | Sep. 30, 2017 | |
Acquisition purchase price allocation | ||||
Goodwill | $ 6,857 | $ 6,883 | ||
Automic | ||||
Business Acquisition | ||||
Cash acquired from acquisition | $ 34 | |||
Acquisition purchase price allocation | ||||
Finite-lived intangible assets | [1] | 174 | ||
Goodwill | 312 | |||
Deferred tax liabilities, net | (115) | |||
Other assets net of other liabilities assumed | [2] | 31 | ||
Purchase price | 675 | |||
Automic | Purchased Software | ||||
Acquisition purchase price allocation | ||||
Finite-lived intangible assets | 273 | |||
Veracode | ||||
Business Acquisition | ||||
Cash acquired from acquisition | $ 16 | |||
Acquisition purchase price allocation | ||||
Finite-lived intangible assets | [1] | 99 | ||
Goodwill | 411 | |||
Deferred tax liabilities, net | (108) | |||
Other assets net of other liabilities assumed | [2] | (24) | ||
Purchase price | 618 | |||
Veracode | Purchased Software | ||||
Acquisition purchase price allocation | ||||
Finite-lived intangible assets | $ 240 | |||
Automic and Veracode | ||||
Estimated useful life | ||||
Goodwill, Estimated useful life | Indefinite | |||
Automic and Veracode | Minimum | ||||
Estimated useful life | ||||
Finite-lived intangible assets, Estimated useful life (in years) | [1] | 2 years | ||
Automic and Veracode | Maximum | ||||
Estimated useful life | ||||
Finite-lived intangible assets, Estimated useful life (in years) | [1] | 12 years | ||
Automic and Veracode | Purchased Software | Minimum | ||||
Estimated useful life | ||||
Finite-lived intangible assets, Estimated useful life (in years) | 1 year | |||
Automic and Veracode | Purchased Software | Maximum | ||||
Estimated useful life | ||||
Finite-lived intangible assets, Estimated useful life (in years) | 8 years | |||
[1] | Includes customer relationships and trade names. | |||
[2] | Includes approximately $34 million and $16 million of cash acquired from Automic and Veracode, respectively. |
Acquisitions 2 (Details)
Acquisitions 2 (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended |
Sep. 30, 2016 | Sep. 30, 2016 | |
Unaudited pro forma combined financial information for the Company, Automic and Veracode as though combined as of beginning of fiscal year 2017 | ||
Total revenue | $ 1,069 | $ 2,117 |
Net income | $ 184 | $ 346 |
Basic income per common share (in dollars per share) | $ 0.44 | $ 0.82 |
Diluted income per common share (in dollars per share) | $ 0.44 | $ 0.82 |
Acquisitions 3 (Details)
Acquisitions 3 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Mar. 31, 2017 | |
Business Combinations [Abstract] | |||||
Accrued acquisition-related costs related to purchase price amounts withheld subject to indemnification protections | $ 11 | $ 11 | $ 12 | ||
Business Acquisition | |||||
Total revenue | 1,034 | $ 1,018 | 2,059 | $ 2,017 | |
Net income (loss) | 184 | $ 212 | 362 | $ 410 | |
Automic and Veracode | |||||
Business Acquisition | |||||
Total revenue | 55 | 114 | |||
Net income (loss) | $ (18) | $ (37) |
Goodwill, Capitalized Softwar35
Goodwill, Capitalized Software and Other Intangible Assets 1 (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 |
Capitalized software and other intangible assets | ||
Gross amortizable assets | $ 9,246 | $ 9,156 |
Less: Fully amortized assets | 7,020 | 6,755 |
Remaining amortizable assets | 2,226 | 2,401 |
Accumulated amortization on remaining amortizable assets | 979 | 1,094 |
Net assets | 1,247 | 1,307 |
Purchased Software Products | ||
Capitalized software and other intangible assets | ||
Gross amortizable assets | 6,560 | 6,496 |
Less: Fully amortized assets | 4,909 | 4,914 |
Remaining amortizable assets | 1,651 | 1,582 |
Accumulated amortization on remaining amortizable assets | 778 | 667 |
Net assets | 873 | 915 |
Internally Developed Software Products | ||
Capitalized software and other intangible assets | ||
Gross amortizable assets | 1,467 | 1,467 |
Less: Fully amortized assets | 1,287 | 1,029 |
Remaining amortizable assets | 180 | 438 |
Accumulated amortization on remaining amortizable assets | 154 | 391 |
Net assets | 26 | 47 |
Other Intangible Assets | ||
Capitalized software and other intangible assets | ||
Gross amortizable assets | 1,219 | 1,193 |
Less: Fully amortized assets | 824 | 812 |
Remaining amortizable assets | 395 | 381 |
Accumulated amortization on remaining amortizable assets | 47 | 36 |
Net assets | $ 348 | $ 345 |
Goodwill, Capitalized Softwar36
Goodwill, Capitalized Software and Other Intangible Assets 2 (Details) $ in Millions | Sep. 30, 2017USD ($) |
Projected annual amortization expense | |
2,018 | $ 314 |
2,019 | 234 |
2,020 | 198 |
2,021 | 153 |
2,022 | 144 |
Purchased Software Products | |
Projected annual amortization expense | |
2,018 | 236 |
2,019 | 185 |
2,020 | 161 |
2,021 | 117 |
2,022 | 109 |
Internally Developed Software Products | |
Projected annual amortization expense | |
2,018 | 37 |
2,019 | 9 |
2,020 | 1 |
2,021 | 0 |
2,022 | 0 |
Other Intangible Assets | |
Projected annual amortization expense | |
2,018 | 41 |
2,019 | 40 |
2,020 | 36 |
2,021 | 36 |
2,022 | $ 35 |
Goodwill, Capitalized Softwar37
Goodwill, Capitalized Software and Other Intangible Assets 3 (Details) $ in Millions | 6 Months Ended | |
Sep. 30, 2017USD ($) | ||
Goodwill activity by segment | ||
Balance at March 31, 2017 | $ 6,857 | |
Acquisitions | (10) | [1] |
Foreign currency translation adjustment | 36 | |
Balance at September 30, 2017 | 6,883 | |
Mainframe Solutions | ||
Goodwill activity by segment | ||
Balance at March 31, 2017 | 4,178 | |
Acquisitions | 0 | |
Foreign currency translation adjustment | 0 | |
Balance at September 30, 2017 | 4,178 | |
Enterprise Solutions | ||
Goodwill activity by segment | ||
Balance at March 31, 2017 | 2,598 | |
Acquisitions | (10) | [1] |
Foreign currency translation adjustment | 36 | |
Balance at September 30, 2017 | 2,624 | |
Services | ||
Goodwill activity by segment | ||
Balance at March 31, 2017 | 81 | |
Acquisitions | 0 | |
Foreign currency translation adjustment | 0 | |
Balance at September 30, 2017 | $ 81 | |
[1] | Acquisitions amount relates to purchase price allocation adjustments that occurred during the six months ended September 30, 2017. |
Goodwill, Capitalized Softwar38
Goodwill, Capitalized Software and Other Intangible Assets 4 (Details) | 6 Months Ended |
Sep. 30, 2017 | |
Enterprise Solutions | |
Finite-Lived Intangible Assets | |
Uncertainty, Continued marketability of goods and services | The Company evaluates the useful lives and recoverability of capitalized software and other intangible assets when events or changes in circumstances indicate that an impairment may exist. These evaluations require complex assumptions about key factors such as future customer demand, technology trends and the impact of those factors on the technology the Company acquires and develops for its products. Impairments or revisions to useful lives could result from the use of alternative assumptions that reflect reasonably possible outcomes related to future customer demand or technology trends for assets within the Enterprise Solutions segment. |
Deferred Revenue (Details)
Deferred Revenue (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 |
Current: | ||
Total deferred revenue (billed or collected) - current | $ 1,909 | $ 2,222 |
Noncurrent: | ||
Total deferred revenue (billed or collected) - noncurrent | 708 | 794 |
Total deferred revenue (billed or collected) | 2,617 | 3,016 |
Subscription and Maintenance | ||
Current: | ||
Total deferred revenue (billed or collected) - current | 1,635 | 1,948 |
Noncurrent: | ||
Total deferred revenue (billed or collected) - noncurrent | 683 | 769 |
Professional Services | ||
Current: | ||
Total deferred revenue (billed or collected) - current | 141 | 135 |
Noncurrent: | ||
Total deferred revenue (billed or collected) - noncurrent | 19 | 19 |
Software Fees and Other | ||
Current: | ||
Total deferred revenue (billed or collected) - current | 133 | 139 |
Noncurrent: | ||
Total deferred revenue (billed or collected) - noncurrent | $ 6 | $ 6 |
Derivatives 1 (Details)
Derivatives 1 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Foreign Currency Contracts | Other Expenses, Net | ||||
Effect of foreign exchange derivatives | ||||
Amount of net loss from derivative instruments recognized in the Condensed Consolidated Statements of Operations | $ 4 | $ 3 | $ 8 | $ 6 |
Derivatives 2 (Details)
Derivatives 2 (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Collateral posted under collateralized security arrangements | $ 0 | $ 0 |
Foreign Currency Contracts | ||
Derivatives, Fair Value [Line Items] | ||
Gross notional value of foreign currency contracts outstanding consisting of purchase and sale contracts | $ 890 | $ 336 |
Tenure of foreign currency contracts outstanding | less than six months | less than three months |
Net fair value of foreign currency contracts | $ (6) | $ 1 |
Foreign Currency Contracts | Other Current Assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of foreign currency contracts included in "Other current assets" | 7 | 2 |
Foreign Currency Contracts | Accrued Expenses and Other Current Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of foreign currency contracts included in "Accrued expenses and other current liabilities" | $ 13 | $ 1 |
Fair Value Measurements 1 (Deta
Fair Value Measurements 1 (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 | |
Assets: | |||
Foreign exchange derivatives | [1] | $ 7 | $ 2 |
Total assets | 978 | 1,079 | |
Liabilities: | |||
Foreign exchange derivatives | [1] | 13 | 1 |
Total liabilities | 13 | 1 | |
Money Market Funds | Cash and Cash Equivalents | |||
Assets: | |||
Money market funds | [2] | 971 | 1,077 |
Fair Value, Inputs, Level 1 | |||
Assets: | |||
Foreign exchange derivatives | 0 | 0 | |
Total assets | 971 | 1,077 | |
Liabilities: | |||
Foreign exchange derivatives | 0 | 0 | |
Total liabilities | 0 | 0 | |
Fair Value, Inputs, Level 1 | Money Market Funds | Cash and Cash Equivalents | |||
Assets: | |||
Money market funds | [2] | 971 | 1,077 |
Fair Value, Inputs, Level 2 | |||
Assets: | |||
Foreign exchange derivatives | [1] | 7 | 2 |
Total assets | 7 | 2 | |
Liabilities: | |||
Foreign exchange derivatives | [1] | 13 | 1 |
Total liabilities | 13 | 1 | |
Fair Value, Inputs, Level 2 | Money Market Funds | Cash and Cash Equivalents | |||
Assets: | |||
Money market funds | 0 | 0 | |
Fair Value, Inputs, Level 3 | |||
Assets: | |||
Total assets | 0 | 0 | |
Liabilities: | |||
Total liabilities | $ 0 | $ 0 | |
[1] | Refer to Note E, “Derivatives” for additional information. | ||
[2] | The Company’s investments in money market funds are classified as “Cash and cash equivalents” in its Condensed Consolidated Balance Sheets. |
Fair Value Measurements 2 (Deta
Fair Value Measurements 2 (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 | |
Carrying Value | |||
Liabilities: | |||
Total debt | $ 2,785 | $ 2,791 | |
Carrying Value | Facility Exit | |||
Liabilities: | |||
Facility exit reserves | [1] | 9 | 11 |
Estimated Fair Value | |||
Liabilities: | |||
Total debt | [2] | 2,889 | 2,903 |
Estimated Fair Value | Facility Exit | |||
Liabilities: | |||
Facility exit reserves | [1] | $ 10 | $ 12 |
[1] | Estimated fair value for the facility exit reserves is determined using the Company’s incremental borrowing rate at September 30, 2017 and March 31, 2017. At September 30, 2017 and March 31, 2017, the facility exit reserves included carrying values of approximately $2 million and $3 million, respectively, in “Accrued expenses and other current liabilities” and approximately $7 million and $8 million, respectively, in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets (Level 3). | ||
[2] | Estimated fair value of total debt is based on quoted prices for similar liabilities for which significant inputs are observable except for certain long-term lease obligations, for which fair value approximates carrying value (Level 2). |
Fair Value Measurements 3 (Deta
Fair Value Measurements 3 (Details) - Facility Exit - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 |
Accrued Expenses and Other Current Liabilities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Facility exit reserves | $ 2 | $ 3 |
Other Noncurrent Liabilities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Facility exit reserves | $ 7 | $ 8 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Sep. 30, 2017USD ($) |
Maximum | |
Loss Contingencies [Line Items] | |
Loss contingency, Estimate of possible loss | $ 20 |
Stockholders' Equity 1 (Details
Stockholders' Equity 1 (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |||
Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | |
Cash dividends | ||||
Declaration date | Aug. 9, 2017 | May 9, 2017 | Aug. 3, 2016 | May 4, 2016 |
Dividend per share (in dollars per share) | $ 0.255 | $ 0.255 | $ 0.255 | $ 0.255 |
Record date | Aug. 24, 2017 | May 25, 2017 | Aug. 25, 2016 | May 26, 2016 |
Total amount | $ 108 | $ 107 | $ 107 | $ 107 |
Payment date | Sep. 12, 2017 | Jun. 13, 2017 | Sep. 13, 2016 | Jun. 14, 2016 |
Stockholders' Equity 2 (Details
Stockholders' Equity 2 (Details) - Current Stock Repurchase Program - USD ($) shares in Millions, $ in Millions | 6 Months Ended | |
Sep. 30, 2017 | Nov. 13, 2015 | |
Stock Repurchase Program [Line Items] | ||
Stock repurchase program, Authorized amount | $ 750 | |
Shares of common stock repurchased | 2.8 | |
Value of common stock repurchased | $ 90 | |
Stock repurchase program, Remaining authorized common stock repurchase amount | $ 560 |
Stockholders' Equity 3 (Details
Stockholders' Equity 3 (Details) - USD ($) $ in Millions | Sep. 30, 2017 | Mar. 31, 2017 |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Foreign currency translation losses | $ (351) | $ (483) |
Income Per Common Share (Detail
Income Per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Basic income per common share: | ||||
Net income | $ 184 | $ 212 | $ 362 | $ 410 |
Less: Net income allocable to participating securities | (3) | (3) | (5) | (5) |
Net income allocable to common shares | $ 181 | $ 209 | $ 357 | $ 405 |
Weighted average common shares outstanding | 415 | 414 | 415 | 414 |
Basic income per common share (in dollars per share) | $ 0.44 | $ 0.50 | $ 0.86 | $ 0.98 |
Diluted income per common share: | ||||
Net income | $ 184 | $ 212 | $ 362 | $ 410 |
Less: Net income allocable to participating securities | (3) | (3) | (5) | (5) |
Net income allocable to common shares | $ 181 | $ 209 | $ 357 | $ 405 |
Weighted average shares outstanding and common share equivalents: | ||||
Weighted average common shares outstanding | 415 | 414 | 415 | 414 |
Weighted average effect of share-based payment awards | 1 | 1 | 1 | 1 |
Denominator in calculation of diluted income per share | 416 | 415 | 416 | 415 |
Diluted income per common share (in dollars per share) | $ 0.44 | $ 0.50 | $ 0.86 | $ 0.98 |
Income per common share, Other disclosures [Abstract] | ||||
Number of anti-dilutive restricted stock awards and options excluded from the calculation | 2 | 1 | 2 | 1 |
Weighted average restricted stock awards considered participating securities | 5 | 5 | 5 | 5 |
Accounting for Share-Based Co50
Accounting for Share-Based Compensation 1 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Recognized share-based compensation | ||||
Share-based compensation expense before tax | $ 29 | $ 25 | $ 61 | $ 54 |
Income tax benefit | (9) | (8) | (20) | (18) |
Net share-based compensation expense | 20 | 17 | 41 | 36 |
Costs of Licensing and Maintenance | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 2 | 1 | 4 | 3 |
Cost of Professional Services | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 0 | 1 | 1 | 2 |
Selling and Marketing | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 10 | 9 | 20 | 19 |
General and Administrative | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 11 | 8 | 23 | 19 |
Product Development and Enhancements | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | $ 6 | $ 6 | $ 13 | $ 11 |
Accounting for Share-Based Co51
Accounting for Share-Based Compensation 2 (Details) $ in Millions | 6 Months Ended |
Sep. 30, 2017USD ($) | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 168 |
Weighted average period expected to be recognized (in years) | 2 years 2 months 12 days |
Stock Option Awards | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 6 |
Weighted average period expected to be recognized (in years) | 2 years 1 month 6 days |
Restricted Stock Units (RSUs) | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 25 |
Weighted average period expected to be recognized (in years) | 2 years 1 month 6 days |
Restricted Stock Awards (RSAs) | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 92 |
Weighted average period expected to be recognized (in years) | 2 years 1 month 6 days |
Performance Share Units | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 45 |
Weighted average period expected to be recognized (in years) | 2 years 7 months 6 days |
Accounting for Share-Based Co52
Accounting for Share-Based Compensation 3 (Details) - $ / shares | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Weighted average fair values and assumptions used for options granted | |||
Weighted average fair value (in dollars per share) | $ 4.72 | $ 4.41 | |
Dividend yield | 3.17% | 3.57% | |
Expected volatility factor | [1] | 21.00% | 22.00% |
Risk-free interest rate | [2] | 2.10% | 1.50% |
Expected life (in years) | [3] | 6 years | 6 years |
[1] | Expected volatility is measured using historical daily price changes of the Company’s common stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded options. | ||
[2] | The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant. | ||
[3] | The expected life is the number of years the Company estimates that options will be outstanding prior to exercise. The Company’s computation of expected life was determined based on the simplified method (the average of the vesting period and option term). |
Accounting for Share-Based Co53
Accounting for Share-Based Compensation 4 (Details) - $ / shares shares in Millions | 3 Months Ended | 6 Months Ended | |||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||||
Restricted Stock Awards (RSAs) | |||||||
Summary of all RSAs and RSUs granted, including grants made pursuant to long-term incentive plans | |||||||
Shares | 0 | [1] | 0 | [1] | 2.9 | 2.9 | |
Weighted average grant date fair value (in dollars per share) | [2] | $ 32.98 | $ 34.31 | $ 31.70 | $ 31.55 | ||
Restricted Stock Units (RSUs) | |||||||
Summary of all RSAs and RSUs granted, including grants made pursuant to long-term incentive plans | |||||||
Shares | 0 | 0 | [1] | 1.1 | 1 | ||
Weighted average grant date fair value (in dollars per share) | [3] | $ 0 | $ 31.82 | $ 30.35 | $ 30.16 | ||
[1] | Less than 0.1 million. | ||||||
[2] | The fair value is based on the quoted market value of the Company’s common stock on the grant date. | ||||||
[3] | The fair value is based on the quoted market value of the Company’s common stock on the grant date reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting of the RSUs, which is calculated using a risk-free interest rate. |
Accounting for Share-Based Co54
Accounting for Share-Based Compensation 5 (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||
Capitalized share-based compensation costs | $ 0 | $ 0 | $ 0 | $ 0 | |
Stock options issued | 1 | 1.1 | |||
Computation of expected life, Simplified method | The Company’s computation of expected life was determined based on the simplified method (the average of the vesting period and option term). | ||||
Employee Stock Purchase Plan (ESPP) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares issued under ESPP | 0.1 | ||||
Share price issued under ESPP (in dollars per share) | $ 32.75 | ||||
Number of shares available for future issuances under ESPP | 28.9 | 28.9 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 74 | $ 94 | $ 134 | $ 173 |
Net discrete tax benefit | $ 8 | |||
Estimated annual effective tax rate, which excludes impact of discrete items | 28.60% | 29.00% | ||
Minimum | ||||
Expected Effective Tax Rate [Line Items] | ||||
Expected fiscal year 2018 effective tax rate | 28.00% | |||
Maximum | ||||
Expected Effective Tax Rate [Line Items] | ||||
Expected fiscal year 2018 effective tax rate | 29.00% |
Supplemental Statement of Cas56
Supplemental Statement of Cash Flows Information 1 (Details) - Notional Pooling Arrangement - USD ($) $ in Millions | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Notional pooling arrangement | |||
Borrowings | $ 1,173 | $ 467 | |
Repayments | (1,204) | (456) | |
Foreign exchange effect | 31 | (11) | |
Accrued Expenses and Other Current Liabilities | |||
Notional pooling arrangement | |||
Total borrowings outstanding at beginning of period | [1] | 137 | 139 |
Total borrowings outstanding at end of period | [1] | $ 137 | $ 139 |
[1] | Included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheets. |
Supplemental Statement of Cas57
Supplemental Statement of Cash Flows Information 2 (Details) - USD ($) $ in Millions | 6 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Supplemental Cash Flow Information [Abstract] | ||
Interest payments | $ 60 | $ 43 |
Income taxes paid, net | 156 | 202 |
Treasury common shares issued in connection with share-based incentive awards under equity compensation plans, Non-cash financing activities | 46 | 43 |
Withholding taxes on share-based incentive awards, Non-cash financing activities | 35 | 33 |
Treasury common shares issued in connection with discretionary stock contributions to CA, Inc. Savings Harvest Plan, Non-cash financing activities | 23 | 24 |
Treasury common shares issued in connection with Employee Stock Purchase Plan, Non-cash financing activities | $ 2 | $ 2 |
Segment Information 1 (Details)
Segment Information 1 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Segment information | |||||
Revenue | $ 1,034 | $ 1,018 | $ 2,059 | $ 2,017 | |
Expenses | 642 | 608 | 1,284 | 1,215 | |
Segment profit | $ 392 | $ 410 | $ 775 | $ 802 | |
Segment operating margin | 38.00% | 40.00% | 38.00% | 40.00% | |
Depreciation | $ 17 | $ 14 | $ 33 | $ 29 | |
Reconciliation of segment profit to income before income taxes | |||||
Segment profit | 392 | 410 | 775 | 802 | |
Share-based compensation expense | 29 | 25 | 61 | 54 | |
Other expenses, net | [1] | 4 | 2 | 12 | 2 |
Interest expense, net | 24 | 14 | 49 | 29 | |
Income before income taxes | 258 | 306 | 496 | 583 | |
Purchased Software Products | |||||
Reconciliation of segment profit to income before income taxes | |||||
Amortization of intangible assets | 58 | 38 | 116 | 81 | |
Other Intangible Assets | |||||
Reconciliation of segment profit to income before income taxes | |||||
Amortization of intangible assets | 10 | 4 | 20 | 9 | |
Internally Developed Software Products | |||||
Reconciliation of segment profit to income before income taxes | |||||
Amortization of intangible assets | 9 | 21 | 21 | 44 | |
Mainframe Solutions | |||||
Segment information | |||||
Revenue | 539 | 550 | 1,075 | 1,101 | |
Expenses | 188 | 211 | 375 | 419 | |
Segment profit | $ 351 | $ 339 | $ 700 | $ 682 | |
Segment operating margin | 65.00% | 62.00% | 65.00% | 62.00% | |
Depreciation | $ 10 | $ 8 | $ 19 | $ 17 | |
Reconciliation of segment profit to income before income taxes | |||||
Segment profit | 351 | 339 | 700 | 682 | |
Enterprise Solutions | |||||
Segment information | |||||
Revenue | 420 | 393 | 834 | 764 | |
Expenses | 380 | 324 | 761 | 648 | |
Segment profit | $ 40 | $ 69 | $ 73 | $ 116 | |
Segment operating margin | 10.00% | 18.00% | 9.00% | 15.00% | |
Depreciation | $ 7 | $ 6 | $ 14 | $ 12 | |
Reconciliation of segment profit to income before income taxes | |||||
Segment profit | 40 | 69 | 73 | 116 | |
Services | |||||
Segment information | |||||
Revenue | 75 | 75 | 150 | 152 | |
Expenses | 74 | 73 | 148 | 148 | |
Segment profit | $ 1 | $ 2 | $ 2 | $ 4 | |
Segment operating margin | 1.00% | 3.00% | 1.00% | 3.00% | |
Depreciation | $ 0 | $ 0 | $ 0 | $ 0 | |
Reconciliation of segment profit to income before income taxes | |||||
Segment profit | $ 1 | $ 2 | $ 2 | $ 4 | |
[1] | Other expenses, net consists of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. |
Segment Information 2 (Details)
Segment Information 2 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Revenue from the United States and international locations | |||||
Total revenue | $ 1,034 | $ 1,018 | $ 2,059 | $ 2,017 | |
United States | |||||
Revenue from the United States and international locations | |||||
Total revenue | 658 | 657 | 1,315 | 1,294 | |
EMEA | |||||
Revenue from the United States and international locations | |||||
Total revenue | [1] | 235 | 219 | 464 | 444 |
Other | |||||
Revenue from the United States and international locations | |||||
Total revenue | $ 141 | $ 142 | $ 280 | $ 279 | |
[1] | Consists of Europe, the Middle East and Africa. |