Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Sep. 30, 2018 | Oct. 31, 2018 | |
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, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 418,222,273 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2018 | Mar. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 2,931 | $ 3,405 |
Trade accounts receivable, net of allowance for doubtful accounts of $9 and $10, respectively | 507 | 793 |
Contract assets | 817 | 0 |
Other current assets | 107 | 210 |
Total current assets | 4,362 | 4,408 |
Property and equipment, net of accumulated depreciation of $822 and $865, respectively | 213 | 237 |
Goodwill | 6,790 | 6,804 |
Capitalized software and other intangible assets, net | 981 | 1,111 |
Deferred income taxes | 124 | 346 |
Contract assets | 112 | 0 |
Contract costs | 400 | 0 |
Other noncurrent assets, net | 121 | 154 |
Total assets | 13,103 | 13,060 |
Current liabilities: | ||
Current portion of long-term debt | 20 | 269 |
Accounts payable | 81 | 85 |
Accrued salaries, wages and commissions | 201 | 242 |
Accrued expenses and other current liabilities | 309 | 340 |
Deferred revenue and advanced payments | 1,002 | 2,289 |
Taxes payable, other than income taxes payable | 25 | 55 |
Federal, state and foreign income taxes payable | 72 | 41 |
Total current liabilities | 1,710 | 3,321 |
Long-term debt, net of current portion | 2,506 | 2,514 |
Federal, state and foreign income taxes payable | 297 | 311 |
Deferred income taxes | 171 | 111 |
Deferred revenue and advanced payments | 419 | 820 |
Other noncurrent liabilities | 98 | 88 |
Total liabilities | 5,201 | 7,165 |
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; 413,476,935 and 412,056,923 shares outstanding, respectively | 59 | 59 |
Additional paid-in capital | 3,735 | 3,744 |
Retained earnings | 9,156 | 6,971 |
Accumulated other comprehensive loss | (463) | (290) |
Treasury stock, at cost, 176,218,146 and 177,638,158 shares, respectively | (4,585) | (4,589) |
Total stockholders' equity | 7,902 | 5,895 |
Total liabilities and stockholders' equity | $ 13,103 | $ 13,060 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2018 | Mar. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 9 | $ 10 |
Accumulated depreciation | $ 822 | $ 865 |
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 | 413,476,935 | 412,056,923 |
Treasury stock, Shares | 176,218,146 | 177,638,158 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue: | ||||
Total revenue | $ 895 | $ 1,034 | $ 1,833 | $ 2,059 |
Expenses: | ||||
Amortization of capitalized software costs | 49 | 67 | 109 | 137 |
Selling and marketing | 252 | 244 | 487 | 490 |
General and administrative | 99 | 97 | 203 | 204 |
Product development and enhancements | 158 | 161 | 320 | 319 |
Depreciation and amortization of other intangible assets | 28 | 27 | 54 | 53 |
Other expenses, net | 4 | 9 | 107 | 20 |
Total expenses before interest and income taxes | 728 | 752 | 1,564 | 1,514 |
Income before interest and income taxes | 167 | 282 | 269 | 545 |
Interest expense, net | 19 | 24 | 39 | 49 |
Income before income taxes | 148 | 258 | 230 | 496 |
Income tax expense (benefit) | 19 | 74 | (65) | 134 |
Net income | $ 129 | $ 184 | $ 295 | $ 362 |
Basic income per common share: | ||||
Basic income per common share (in dollars per share) | $ 0.31 | $ 0.44 | $ 0.70 | $ 0.86 |
Basic weighted average shares used in computation | 413 | 415 | 414 | 415 |
Diluted income per common share: | ||||
Diluted income per common share (in dollars per share) | $ 0.31 | $ 0.44 | $ 0.70 | $ 0.86 |
Diluted weighted average shares used in computation | 416 | 416 | 416 | 416 |
License and Maintenance | ||||
Revenue: | ||||
Total revenue | $ 824 | $ 959 | $ 1,694 | $ 1,909 |
Expenses: | ||||
Costs of licensing and maintenance and professional services | 74 | 73 | 150 | 144 |
Professional Services | ||||
Revenue: | ||||
Total revenue | 71 | 75 | 139 | 150 |
Expenses: | ||||
Costs of licensing and maintenance and professional services | $ 64 | $ 74 | $ 134 | $ 147 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 129 | $ 184 | $ 295 | $ 362 |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustments | (23) | 48 | (164) | 132 |
Total other comprehensive (loss) income | (23) | 48 | (164) | 132 |
Comprehensive income | $ 106 | $ 232 | $ 131 | $ 494 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Operating activities: | ||
Net income | $ 295 | $ 362 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 163 | 190 |
Deferred income taxes | (12) | (23) |
Provision for bad debts | 0 | 2 |
Share-based compensation expense | 68 | 61 |
Other non-cash items | 5 | 2 |
Foreign currency transaction (gains) losses | (4) | 9 |
Changes in other operating assets and liabilities, net of effect of acquisitions: | ||
Decrease in trade accounts receivable | 279 | 317 |
Increase in contract assets | (26) | 0 |
Decrease in contract costs | 18 | 0 |
Decrease in deferred revenue and advanced payments | (314) | (460) |
Decrease in taxes payable, net | (258) | (58) |
Increase in accounts payable, accrued expenses and other | 33 | 11 |
Decrease in accrued salaries, wages and commissions | (34) | (81) |
Changes in other operating assets and liabilities, net | 38 | 3 |
Net cash provided by operating activities | 251 | 335 |
Investing activities: | ||
Acquisitions of businesses, net of cash acquired, and purchased software | (25) | (15) |
Purchases of property and equipment | (24) | (22) |
Other investing activities | (1) | (1) |
Net cash used in investing activities | (50) | (38) |
Financing activities: | ||
Dividends paid | (214) | (215) |
Purchases of common stock | (80) | (90) |
Notional pooling borrowings | 1,076 | 1,173 |
Notional pooling repayments | (1,053) | (1,204) |
Debt repayments | (259) | (9) |
Debt issuance costs | 0 | (3) |
Exercise of common stock options | 21 | 5 |
Payments related to tax withholding for share-based compensation | (40) | (35) |
Other financing activities | (9) | (3) |
Net cash used in financing activities | (558) | (381) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (118) | 136 |
(Decrease) increase in cash, cash equivalents and restricted cash | (475) | 52 |
Cash, cash equivalents and restricted cash at beginning of period | 3,407 | 2,772 |
Cash, cash equivalents and restricted cash at end of period | $ 2,932 | $ 2,824 |
Accounting Policies
Accounting Policies | 6 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Accounting Policies | NOTE 1 – ACCOUNTING POLICIES Basis of Presentation: The accompanying unaudited condensed consolidated financial statements (“Condensed Consolidated Financial Statements”) of CA, Inc. and its subsidiaries (the “Company”) as of and for the periods ended September 30, 2018 reflect the adoption of Topic 606 (as defined below) on April 1, 2018 using the modified retrospective method. The accompanying Condensed Consolidated Balance Sheet as of March 31, 2018 and the Condensed Consolidated Statements of Operations, Comprehensive Income and Cash Flows for the periods ended September 30, 2017 have not been revised for the effects of Topic 606 and are therefore not comparable to the September 30, 2018 periods. The Condensed Consolidated Financial Statements of the 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, 2018 (“ 2018 Form 10-K”). In the opinion of the Company’s 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 the Company’s 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, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019 . Cash, Cash Equivalents and Restricted Cash: The Company’s cash and cash equivalents are held in numerous locations throughout the world, with approximately 53% being held by the Company’s foreign subsidiaries outside the United States at September 30, 2018 . At September 30, 2018 and March 31, 2018 , the total amount of restricted cash included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheets was approximately $1 million and $2 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, 2018 and 2017 . New Accounting Pronouncements: New Accounting Pronouncements Recently 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, creating new ASC Topic 606 (“Topic 606”) that replaces most existing revenue recognition guidance in GAAP. Topic 606 was adopted by the Company effective April 1, 2018 using the modified retrospective method. Reporting periods prior to the adoption of Topic 606 were presented in accordance with ASC Topic 605 (“Topic 605”). As a result of adopting Topic 606, the Company now recognizes revenue for the license component of all its on-premise software arrangements at the point-in-time control of the software license is transferred to the customer, rather than ratably over the term of the contract. The Company reflected the impact of the changes at transition with a cumulative increase of approximately $2,104 million to the opening balance of retained earnings. Refer to Note 2, “Revenue from Contracts with Customers,” and Note 3, “Impact of Adopting Topic 606,” for a discussion of the changes in the Company’s policies for revenue recognition and commissions, and the required disclosures related to the impact of adopting Topic 606. Refer to the Company’s Annual Report on Form 10-K for policies in accordance with Topic 605. 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 was adopted by the Company when effective in first quarter of fiscal year 2019 using the modified retrospective method of adoption. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842), with amendments in 2018, requiring 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 in the first quarter of fiscal year 2020 and requires the modified retrospective method of adoption, with an option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings. Early adoption is permitted. The Company will adopt ASU 2016-02 when effective in the first quarter of fiscal year 2020. Although the Company is currently evaluating 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 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 in the first quarter of fiscal year 2021 and requires a prospective method of adoption. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption of ASU 2017-04, it does not currently expect the adoption to have a material effect 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 in the 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. In February 2018, the FASB issued Accounting Standards Update No. 2018-02 (“ASU 2018-02”), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which allows stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”) to be reclassified from accumulated other comprehensive income to retained earnings. Since ASU 2018-02 only relates to the income tax effects from the Tax Act, the underlying guidance that requires the effects from changes in tax laws or rates be included in income from continuing operations is not affected. ASU 2018-02 will be effective for the Company in the first quarter of fiscal year 2020. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption of ASU 2018-02, it does not currently expect the adoption to have a material effect on its consolidated financial statements and related disclosures. In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (“ASU 2018-13”), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which modifies the disclosure requirements on fair value measurements. ASU 2018-13 will be effective for the Company in the first quarter of fiscal year 2021. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption of ASU 2018-13, it does not currently expect the adoption to have a material effect on its consolidated financial statements and related disclosures. In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (“ASU 2018-15”), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 will be effective for the Company in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effect that ASU 2018-15 will have on its consolidated financial statements and related disclosures. Reclassifications: As a result of the adoption of Topic 606 on a modified retrospective basis, the Company’s presentation of prior year revenue in its Condensed Consolidated Statement of Operations has been revised to combine the previously reported revenue line items “Subscription and maintenance” and “Software fees and other” into the revenue line item “Software licenses and maintenance” in the current year presentation. This reclassification had no effect on total revenue as previously reported for the three and six months ended September 30, 2017. Refer to Note 3, “Impact of Adopting Topic 606,” for the transitional disclosures required by Topic 606. Other Information: On July 11, 2018, the Company, Broadcom Inc. (“Broadcom”), and Collie Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Broadcom (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The transaction closed on November 5, 2018. Pursuant to the terms of the Merger Agreement, effective as of the closing, Merger Sub was merged with and into the Company (the “Merger”), with the Company surviving the Merger and becoming a wholly owned subsidiary of Broadcom. Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of Company common stock (other than shares that were (i) owned or held in treasury by the Company or owned by Broadcom or Merger Sub and (ii) owned by any wholly owned subsidiary of Broadcom or of the Company) was cancelled and automatically converted into the right to receive $44.50 in cash, without interest. On November 5, 2018, following the consummation of the Merger, the Company’s common stock was delisted from the NASDAQ Global Select Market (“NASDAQ”) and deregistered under the Exchange Act. Trading of the Company’s common stock on NASDAQ was halted prior to the opening of trading on November 5, 2018. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 6 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERS In accordance with Topic 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. A. Nature of products and services The Company’s products and services can be broadly categorized as perpetual licenses to use software, term-based licenses for Software-as-a-Service (“SaaS”) and on-premise use of software, maintenance for perpetual and term-based on-premise licenses, and professional services. The Company’s software licenses and maintenance are for mainframe, enterprise, and SaaS computing environments. Perpetual licenses : The Company sells perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which may be paid either at contract inception or in installments over the contract term. The Company’s on-premise software licenses have standalone functionality from which customers derive a substantial portion of the benefit. Accordingly, for perpetual licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is generally upon delivery to the customer. Term-based arrangements : Term-based arrangements consists of on-premise term licenses, SaaS solutions, as well as maintenance. • On-premise term licenses : The Company sells term licenses which provide customers the right to use software for a specified period of time. Like perpetual licenses, the Company’s term licenses have standalone functionality from which customers derive a substantial portion of the benefit. Accordingly, for on-premise term licenses, revenue is generally recognized at the point-in-time when the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon the commencement of the renewal term. Payments for term licenses may be paid either at contract inception or in installments over the period of the term licenses. • SaaS solutions : The Company offers cloud-based solutions that provide customers the right to access the Company’s software through the internet for a period of time. The payment for SaaS solutions may be received either at inception of the arrangement, or over the term of the arrangement. The Company’s SaaS solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue from a SaaS solution is generally recognized ratably over the term of the arrangement. Revenue related to SaaS solutions provided on a usage basis, such as the number of users, is recognized based on customer’s utilization of the service in a given period. • Maintenance : Maintenance is provided for both perpetual and on-premise term license arrangements, and consists primarily of telephone support and the provision of unspecified updates and upgrades on a when-and-if-available basis. Maintenance for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Maintenance for on-premise term-based licenses is always renewed concurrently with the term-based licenses for the same duration of time. Maintenance represents stand-ready obligations for which revenue is recognized ratably over the term of the arrangement. Payments for maintenance may be paid either at inception of the maintenance period or in installments over the term of the maintenance period. Professional services : Professional services consist of product implementation, consulting, customer education and customer training services. Payment for professional services is generally a fixed fee or a fee based on time and materials. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For professional services, revenue is recognized by measuring progress toward the complete satisfaction of the Company’s obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours, and as a practical expedient, progress for services that are contracted for time and materials is generally based on the amount the Company has the right to invoice. Material rights Contracts with customers may include material rights which are also performance obligations. Material rights primarily arise when the contract gives the customer the right to renew or receive products or services at a discounted price in the future. Revenue allocated to material rights is recognized when the customer exercises the right or the right expires. If exercised by the customer, revenue is classified consistent with the products or services obtained through the exercise of the right. If expired, revenue is classified consistent with the products or services in the contract that gave rise to the material right. Arrangements with multiple performance obligations The Company’s contracts generally contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation. Allocation of consideration : The Company allocates total contract consideration to each distinct performance obligation in an arrangement on a relative standalone selling price basis. The standalone selling price reflects the price the Company would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. If the arrangement contains professional services and other products or services, the Company first allocates to the professional service obligation a portion of the total contract consideration equal to the standalone selling price of professional services that is observed from consistently priced standalone sales. The Company allocates the remaining consideration among the other products and services in the contract on a relative standalone selling price basis. The standalone selling price for perpetual and on-premise term licenses, which are always sold with maintenance, is the price for the combined license and maintenance bundle. The amount assigned to the license and maintenance bundle is separated into license and maintenance amounts using the respective standalone selling prices represented by the value relationship between the software license and maintenance. When two or more contracts are entered into at or near the same time with the same customer, the Company evaluates the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, the Company will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly. Standalone selling price : When available, the Company uses directly observable transactions to determine the standalone selling prices for performance obligations. Observable data is available for maintenance renewals on previously sold perpetual licenses and SaaS. When perpetual or term licenses are sold together with maintenance in a bundled arrangement, the Company estimates a narrow range of standalone selling price using observable pricing information from standalone sales of the bundle, when available, and other relevant information, such as market conditions and pricing strategies. The value relationship the Company uses to allocate consideration between the license and maintenance performance obligations is derived from the observable relationship of the selling price of a standalone perpetual license maintenance renewal to the related perpetual license fee, which is generally 20% of the net license fee for one year of maintenance. The Company separates the license and maintenance performance obligations of a term license and maintenance bundle using the same observable value relationship as in a perpetual license and maintenance bundle because the nature of the maintenance performance obligation and its value relationship with the right to use the software were determined to be similar. Arrangements that include a software license sold with more than one year of maintenance for the license use a value relationship which reflects an annual maintenance rate of 20% of the total value ascribed to the right to use the software. As a result, a greater portion of the bundle relates to maintenance as the length of the maintenance period included in the bundle increases. The Company separately determines the standalone selling prices by geographic region, distribution channel and by volume when the pricing strategies include volume purchase discounts. The Company also estimates the standalone selling prices of its material rights, which primarily include contractually stated amounts that the customer can use to acquire additional products and services. The Company estimates the value of these rights by considering the stated amount and the likelihood of the customer exercising its right. In addition, an option to purchase or receive additional products or services at a discounted price is estimated as the incremental discount the customer would obtain when exercising the option and the likelihood that the option would be exercised. Other policies and judgments Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice. In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied, however, the Company’s contracts generally do not contain a significant financing component. The Company may modify contracts to offer customers additional products or services. The additional products and services will generally be considered distinct from those products or services transferred to the customer before the modification and will generally be accounted for as a separate contract. The Company evaluates whether the price for the additional products and services reflects the standalone selling price adjusted as appropriate for facts and circumstances applicable to that contract. In determining whether an adjustment is appropriate, the Company evaluates whether the incremental consideration is consistent with the prices previously paid by the customer or similar customers. The Company reduces transaction price for an estimate of returns that is based on historical data. B. Disaggregation The disaggregation of revenue by region, type of performance obligation, timing of revenue recognition, and segment was as follows: (in millions) Three Months Ended September 30, 2018 Six Months Ended September 30, 2018 Revenue by region: United States $ 592 $ 1,164 EMEA (1) 186 415 Other 117 254 Total revenue $ 895 $ 1,833 Revenue by type of performance obligation: Perpetual licenses $ 70 $ 146 Renewable: On-premise term licenses 157 350 Maintenance 473 960 SaaS 124 238 Professional services 71 139 Total revenue $ 895 $ 1,833 Timing of revenue recognition: Point-in-time, including professional services $ 297 $ 634 Over time 598 1,199 Total revenue $ 895 $ 1,833 Revenue by segment: Mainframe Solutions $ 388 $ 828 Enterprise Solutions 436 866 Services 71 139 Total revenue $ 895 $ 1,833 (1) Consists of Europe, the Middle East and Africa. C. Contract Balances The Company’s contract assets and deferred revenue balances for the periods indicated below were as follows: (in millions) Contract Assets Deferred Revenue Balance at April 1, 2018 $ 931 $ 1,751 Balance at September 30, 2018 $ 929 $ 1,421 The difference in the opening and closing balances of the Company’s contract assets and deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. The Company fulfills its obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. The Company recognizes a contract asset when it transfers products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. The Company recognizes deferred revenue when it has received consideration or an amount of consideration is due from the customer and the Company has a future obligation to transfer products or services. Deferred revenue includes amounts billed or collected and advanced payments on contracts which may include termination for convenience clauses. The amount of revenue recognized during the six months ended September 30, 2018 that was included in the deferred revenue balance at April 1, 2018 was $770 million . D. Transaction Price Allocated to the Remaining Performance Obligations The following table discloses the aggregate amount of the transaction price and advanced payments allocated to remaining performance obligations as of the end of the reporting period, and when the Company expects to recognize the revenue. (in millions) 12 months or less Greater than 12 months (1) Perpetual licenses $ 10 $ 11 Renewable: On-premise term licenses $ 231 $ 113 Maintenance $ 1,464 $ 1,632 SaaS $ 345 $ 221 Professional services $ 61 $ 31 Material rights $ 3 $ 178 (1) Of the amount of performance obligations greater than 12 months, the portion that is 2 to 3 years is approximately $1.7 billion and the remaining amount is generally between 4 and 5 years . The Company’s multi-year contracts with government customers may have termination for convenience clauses. Approximately $105 million of advanced payments received from government customers that have termination for convenience rights are included in “Deferred revenue and advanced payments” in the Company’s Condensed Consolidated Balance Sheet and allocated to the remaining performance obligations in the table above. In addition, approximately $574 million related to the remaining unbilled contract value and performance obligations in these contracts with termination for convenience clauses are not included in the allocation of transaction price and not included in “Deferred revenue and advanced payments” in the Company’s Condensed Consolidated Balance Sheet. E. Contract Costs The Company pays commissions for new product sales as well as for renewals of existing contracts. Commissions paid to obtain renewal contracts are not commensurate with the commissions paid for new product sales and therefore, a portion of the commissions paid for new contracts relate to future renewals. The Company accounts for commissions using a portfolio approach and allocates the cost of commissions in proportion to the allocation of transaction price of license and maintenance performance obligations, including assumed renewals. Commissions allocated to the license and license renewal components are expensed at the time the license revenue is recognized. Commissions allocated to maintenance are capitalized and amortized on a straight-line basis over a period of seven years for new contracts, reflecting the Company’s estimate of the expected period that the Company will benefit from those commissions. Commissions paid on renewal contracts that are allocated to maintenance are capitalized and amortized over the renewal term of approximately three years . Service contracts are generally less than one year and accordingly, as a practical expedient, commissions paid for service contracts are expensed as incurred. Amortization of capitalized contract costs is included in “Selling and marketing” expenses in the Company’s Condensed Consolidated Statement of Operations. The amount of amortization for the three and six months ended September 30, 2018 was approximately $31 million and $61 million , respectively, and there was no impairment loss in relation to the costs capitalized. |
Impact of Adopting Topic 606
Impact of Adopting Topic 606 | 6 Months Ended |
Sep. 30, 2018 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Impact of Adopting Topic 606 | NOTE 3 – IMPACT OF ADOPTING TOPIC 606 The Company adopted Topic 606 using the modified retrospective method. The cumulative effect of applying the new guidance to all contracts with customers that were not completed at March 31, 2018 was recorded as an adjustment to retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt Topic 606, the following adjustments were made to the opening balances of the Condensed Consolidated Balance Sheet accounts: Condensed Consolidated Balance Sheet (in millions) As Reported Adjustments Due to Topic 606 Adjusted Assets Current assets: Cash and cash equivalents $ 3,405 $ — $ 3,405 Trade accounts receivable, net 793 9 802 Contract assets — 772 772 Other current assets 210 (38 ) 172 Total current assets $ 4,408 $ 743 $ 5,151 Property and equipment, net 237 — 237 Goodwill 6,804 — 6,804 Capitalized software and other intangible assets, net 1,111 — 1,111 Deferred income taxes 346 (221 ) 125 Contract assets — 159 159 Contract costs — 427 427 Other noncurrent assets, net 154 (19 ) 135 Total assets $ 13,060 $ 1,089 $ 14,149 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt $ 269 $ — $ 269 Accounts payable 85 — 85 Accrued salaries, wages and commissions 242 — 242 Accrued expenses and other current liabilities 340 (8 ) 332 Deferred revenue and advanced payments 2,289 (1,067 ) 1,222 Taxes payable, other than income taxes payable 55 — 55 Federal, state and foreign income taxes payable 41 170 211 Total current liabilities $ 3,321 $ (905 ) $ 2,416 Long-term debt, net of current portion 2,514 — 2,514 Federal, state and foreign income taxes payable 311 110 421 Deferred income taxes 111 80 191 Deferred revenue and advanced payments 820 (291 ) 529 Other noncurrent liabilities 88 — 88 Total liabilities $ 7,165 $ (1,006 ) $ 6,159 Stockholders’ equity: Preferred stock $ — $ — $ — Common stock 59 — 59 Additional paid-in capital 3,744 — 3,744 Retained earnings 6,971 2,104 9,075 Accumulated other comprehensive loss (290 ) (9 ) (299 ) Treasury stock (4,589 ) — (4,589 ) Total stockholders’ equity $ 5,895 $ 2,095 $ 7,990 Total liabilities and stockholders’ equity $ 13,060 $ 1,089 $ 14,149 In connection with the adoption of Topic 606, the Company increased its retained earnings by approximately $2,104 million . This increase was a result of a decrease in deferred revenue of approximately $1,358 million and the establishment of contract assets of approximately $931 million for amounts that would have been recognized under Topic 606 prior to April 1, 2018. In addition, upon adoption of Topic 606, the Company capitalized contract costs of approximately $427 million relating to commissions incurred to obtain customer contracts. Refer to Note 2 “Revenue from Contracts with Customers” for additional details on contract costs. The net change in deferred income taxes of approximately $301 million and income taxes payable of approximately $280 million is primarily due to the current and deferred tax effects resulting from the aforementioned items. In addition, the Company made other changes, primarily due to professional services, to our Condensed Consolidated Balance Sheet on April 1, 2018 to comply with Topic 606. The following table compares the Condensed Consolidated Balance Sheet at September 30, 2018 to the proforma amounts had the previous standard of Topic 605 been in effect: At September 30, 2018 Condensed Consolidated Balance Sheet (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Assets Current assets: Cash and cash equivalents $ 2,931 $ 2,931 $ — Trade accounts receivable, net 507 502 5 Contract assets 817 — 817 Other current assets 107 183 (76 ) Total current assets $ 4,362 $ 3,616 $ 746 Property and equipment, net 213 213 — Goodwill 6,790 6,790 — Capitalized software and other intangible assets, net 981 981 — Deferred income taxes 124 338 (214 ) Contract assets 112 — 112 Contract costs 400 — 400 Other noncurrent assets, net 121 136 (15 ) Total assets $ 13,103 $ 12,074 $ 1,029 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt $ 20 $ 20 $ — Accounts payable 81 81 — Accrued salaries, wages and commissions 201 201 — Accrued expenses and other current liabilities 309 319 (10 ) Deferred revenue and advanced payments 1,002 1,826 (824 ) Taxes payable, other than income taxes payable 25 25 — Federal, state and foreign income taxes payable 72 — 72 Total current liabilities $ 1,710 $ 2,472 $ (762 ) Long-term debt, net of current portion 2,506 2,506 — Federal, state and foreign income taxes payable 297 187 110 Deferred income taxes 171 98 73 Deferred revenue and advanced payments 419 638 (219 ) Other noncurrent liabilities 98 98 — Total liabilities $ 5,201 $ 5,999 $ (798 ) Stockholders’ equity: Preferred stock $ — $ — $ — Common stock 59 59 — Additional paid-in capital 3,735 3,735 — Retained earnings 9,156 7,263 1,893 Accumulated other comprehensive loss (463 ) (397 ) (66 ) Treasury stock (4,585 ) (4,585 ) — Total stockholders’ equity $ 7,902 $ 6,075 $ 1,827 Total liabilities and stockholders’ equity $ 13,103 $ 12,074 $ 1,029 The following tables compare the Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2018 to the proforma amounts had the previous standard of Topic 605 been in effect: For the Three Months Ended September 30, 2018 Condensed Consolidated Statement of Operations (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Revenue: Software licenses and maintenance $ 824 $ 971 $ (147 ) Professional services 71 74 (3 ) Total revenue $ 895 $ 1,045 $ (150 ) Expenses: Costs of licensing and maintenance $ 74 $ 74 $ — Cost of professional services 64 70 (6 ) Amortization of capitalized software costs 49 49 — Selling and marketing 252 246 6 General and administrative 99 99 — Product development and enhancements 158 158 — Depreciation and amortization of other intangible assets 28 28 — Other expenses, net 4 4 — Total expenses before interest and income taxes $ 728 $ 728 $ — Income before interest and income taxes $ 167 $ 317 $ (150 ) Interest expense, net 19 19 — Income before income taxes $ 148 $ 298 $ (150 ) Income tax expense 19 53 (34 ) Net income $ 129 $ 245 $ (116 ) Basic income per common share $ 0.31 $ 0.59 $ (0.28 ) Basic weighted average shares used in computation 413 413 — Diluted income per common share $ 0.31 $ 0.58 $ (0.27 ) Diluted weighted average shares used in computation 416 416 — For the Six Months Ended September 30, 2018 Condensed Consolidated Statement of Operations (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Revenue: Software licenses and maintenance $ 1,694 $ 1,949 $ (255 ) Professional services 139 148 (9 ) Total revenue $ 1,833 $ 2,097 $ (264 ) Expenses: Costs of licensing and maintenance $ 150 $ 150 $ — Cost of professional services 134 143 (9 ) Amortization of capitalized software costs 109 109 — Selling and marketing 487 471 16 General and administrative 203 202 1 Product development and enhancements 320 320 — Depreciation and amortization of other intangible assets 54 54 — Other expenses, net 107 112 (5 ) Total expenses before interest and income taxes $ 1,564 $ 1,561 $ 3 Income before interest and income taxes $ 269 $ 536 $ (267 ) Interest expense, net 39 39 — Income before income taxes $ 230 $ 497 $ (267 ) Income tax benefit (65 ) (9 ) (56 ) Net income $ 295 $ 506 $ (211 ) Basic income per common share $ 0.70 $ 1.21 $ (0.51 ) Basic weighted average shares used in computation 414 414 — Diluted income per common share $ 0.70 $ 1.20 $ (0.50 ) Diluted weighted average shares used in computation 416 416 — The following table provides a summary of the Company’s revenue amounts under Topic 605 for the three and six months ended September 30, 2018 and 2017 in a manner consistent with its presentation prior to the adoption of Topic 606. Refer to Note 1, “Accounting Policies,” for additional information on the current year reclassification. For the Three For the Six (in millions) 2018 2017 2018 2017 Revenue: Subscription and maintenance $ 829 $ 826 $ 1,667 $ 1,643 Professional services 74 75 148 150 Software fees and other 142 133 282 266 Total revenue $ 1,045 $ 1,034 $ 2,097 $ 2,059 The adoption of Topic 606 had no impact on the Company’s net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table compares the operating activities within the Condensed Consolidated Statement of Cash Flows for the six months ended September 30, 2018 to the proforma amounts had the previous standard of Topic 605 been in effect: For the Six Months Ended September 30, 2018 Condensed Consolidated Statement of Cash Flows (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Operating activities: Net income $ 295 $ 506 $ (211 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 163 163 — Deferred income taxes (12 ) (10 ) (2 ) Provision for bad debts — (1 ) 1 Share-based compensation expense 68 68 — Other non-cash items 5 5 — Foreign currency transaction (gains) losses (4 ) 2 (6 ) Changes in other operating assets and liabilities, net of effect of acquisitions: Decrease in trade accounts receivable 279 275 4 Increase in contract assets (26 ) — (26 ) Decrease in contract costs 18 — 18 Decrease in deferred revenue and advanced payments (314 ) (598 ) 284 Decrease in taxes payable, net (258 ) (204 ) (54 ) Increase in accounts payable, accrued expenses and other 33 35 (2 ) Decrease in accrued salaries, wages and commissions (34 ) (34 ) — Changes in other operating assets and liabilities, net 38 44 (6 ) Net cash provided by operating activities $ 251 $ 251 $ — |
Restructuring
Restructuring | 6 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | NOTE 4 – RESTRUCTURING On May 2, 2018, the Company’s Board of Directors (the “Board”) approved a restructuring plan (“Fiscal 2019 Plan”) to better align its business priorities. The Fiscal 2019 Plan comprises the termination of approximately 800 employees and global facility exits and consolidations. These actions were intended to better align the Company’s cost structure with the skills and resources required to more effectively pursue opportunities in the marketplace and execute the Company’s long-term growth strategy. Costs associated with the Fiscal 2019 Plan are presented in “Other expenses, net” in the Company’s Condensed Consolidated Statement of Operations. Severance and facility exit and consolidation actions under the Fiscal 2019 Plan are expected to be substantially completed by the end of fiscal year 2019. Under the Fiscal 2019 Plan, the Company expects to incur pre-tax charges between approximately $140 million and $160 million (including severance costs between approximately $90 million and $100 million and facility exit and consolidation costs between approximately $50 million and $60 million ). Accrued restructuring severance and exit costs and changes in the accruals during the six months ended September 30, 2018 were as follows: (in millions) Accrued Balance at March 31, 2018 Expense Change in Estimate Payments Accretion and Other Accrued Balance at September 30, 2018 Severance charges $ — $ 82 $ (6 ) $ (44 ) $ — $ 32 Facility exit charges 7 37 — (6 ) — 38 Total accrued liabilities $ 7 $ 70 The balance at September 30, 2018 includes facility exit accruals of approximately $7 million for plans and actions prior to the Fiscal 2019 Plan. The severance liabilities are included in “Accrued salaries, wages and commissions” in the Condensed Consolidated Balance Sheets. The facility exit liabilities are included in “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” in the Condensed Consolidated Balance Sheets. |
Goodwill, Capitalized Software
Goodwill, Capitalized Software and Other Intangible Assets | 6 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill, Capitalized Software and Other Intangible Assets | NOTE 5 – GOODWILL, CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at September 30, 2018 were as follows: At September 30, 2018 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,579 $ 5,247 $ 1,332 $ 658 $ 674 Internally developed software products 1,467 1,458 9 6 3 Other intangible assets 1,215 834 381 77 304 Total capitalized software and other intangible assets $ 9,261 $ 7,539 $ 1,722 $ 741 $ 981 The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2018 were as follows: At March 31, 2018 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,572 $ 4,961 $ 1,611 $ 845 $ 766 Internally developed software products 1,467 1,347 120 109 11 Other intangible assets 1,226 823 403 69 334 Total capitalized software and other intangible assets $ 9,265 $ 7,131 $ 2,134 $ 1,023 $ 1,111 Based on the capitalized software and other intangible assets recorded through September 30, 2018 , the projected annual amortization expense for fiscal year 2019 and the next four fiscal years is expected to be as follows: Year Ended March 31, 2019 2020 2021 2022 2023 (in millions) Purchased software products $ 189 $ 166 $ 122 $ 113 $ 86 Internally developed software products 10 1 — — — Other intangible assets 40 36 36 35 31 Total $ 239 $ 203 $ 158 $ 148 $ 117 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, 2018 was as follows: (in millions) Mainframe Solutions Enterprise Solutions Services Total Balance at March 31, 2018 $ 4,178 $ 2,545 $ 81 $ 6,804 Acquisitions — 6 — 6 Foreign currency translation adjustment — (20 ) — (20 ) Balance at September 30, 2018 $ 4,178 $ 2,531 $ 81 $ 6,790 |
Derivatives
Derivatives | 6 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | NOTE 6 – 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 currency 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 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, 2018 , foreign currency contracts outstanding consisted of purchase and sale contracts with a total gross notional value of approximately $720 million and durations of less than six months . The net fair value of these contracts at September 30, 2018 was a net asset of approximately $10 million , of which approximately $18 million was included in “Other current assets” and approximately $8 million was included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheet. At March 31, 2018 , foreign currency contracts outstanding consisted of purchase and sale contracts with a total gross notional value of approximately $456 million and durations of less than three months . The net fair value of these contracts at March 31, 2018 was a net asset of approximately $1 million , of which approximately $2 million was included in “Other current assets” and approximately $1 million was 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 (Gain) Recognized in the Condensed Consolidated Statements of Operations Three Months Ended Six Months Ended (in millions) 2018 2017 2018 2017 Other expenses, net – foreign currency contracts $ — $ 4 $ (10 ) $ 8 The Company is subject to collateral security arrangements with most of its major counterparties. The Company posted no collateral at September 30, 2018 or March 31, 2018 . 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, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | NOTE 7 – 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, 2018 and March 31, 2018 : At September 30, 2018 At March 31, 2018 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) $ 906 $ — $ 906 $ 1,281 $ — $ 1,281 Foreign exchange derivatives (2) — 18 18 — 2 2 Total assets $ 906 $ 18 $ 924 $ 1,281 $ 2 $ 1,283 Liabilities: Foreign exchange derivatives (2) $ — $ 8 $ 8 $ — $ 1 $ 1 Total liabilities $ — $ 8 $ 8 $ — $ 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 6, “Derivatives,” for additional information. At September 30, 2018 and March 31, 2018 , 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, 2018 and March 31, 2018 : At September 30, 2018 At March 31, 2018 (in millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Liabilities: Total debt (1) $ 2,526 $ 2,550 $ 2,783 $ 2,844 Facility exit reserves (2) $ 38 $ 39 $ 7 $ 8 (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, 2018 and March 31, 2018 . At September 30, 2018 and March 31, 2018 , the facility exit reserves included carrying values of approximately $12 million and $2 million , respectively, in “Accrued expenses and other current liabilities” and approximately $26 million and $5 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, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 8 – COMMITMENTS AND CONTINGENCIES The Company, 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 with contract issues and disputes with customers. Based on the Company’s experience, the Company’s 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 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 any amounts that have been accrued. Beginning on August 3, 2018, subsequent to the Company’s announcement of the Merger Agreement with Broadcom (as defined in Note 1, “Accounting Policies,” above), four (4) purported class action complaints were filed on behalf of the Company’s stockholders (the “Broadcom Acquisition-Related Litigation”). These included: (i) Kelli Harvey v. Michael Gregoire, Jens Alder, Raymond Bromark, Jean Hobby, Rohit Kapoor, Jeffrey Katz, Kay Koplovitz, Christopher Lofgren, Richard Sulpizio, Laura Unger, Arthur Weinbach, Collie Acquisition Corp., and Broadcom Inc., United States District Court for the Southern District of New York (1:18-cv-06996-JGK) (filed August 3, 2018); (ii) Vladimir Guzinsky Rev. Trust v. Michael P. Gregoire, Jens Alder, Raymond J. Bromark, Jean M. Hobby, Rohit Kapoor, Jeffrey G. Katz, Kay Koplovitz, Christopher B. Lofgren, Richard Sulpizio, Laura S. Unger, and Arthur Weinbach , U.S. District Court for the District of Delaware (1:18-cv-01221-LPS) (filed August 9, 2018); (iii) Jacob Scheiner Retirement Account v. CA, Inc. Michael Gregoire, Jens Alder, Raymond Bromark, Jean Hobby, Rohit Kapoor, Jeffrey Katz, Kay Koplovitz, Christopher Lofgren, and Richard Sulpizio , United States District Court for the District of Delaware (1:18-cv-01251-LPS) (filed August 15, 2018); and (iv) Kenneth Gilley v. CA, Inc. Michael Gregoire, Jens Alder, Raymond Bromark, Jean Hobby, Rohit Kapoor, Jeffrey Katz, Kay Koplovitz, Christopher Lofgren, and Richard Sulpizio , U.S. District Court for the District of Delaware (1:18-cv-01286-LPS) (filed August 22, 2018), (collectively, the “Stockholder Actions”). The plaintiffs sought to enjoin the defendants from consummating the proposed transaction, or, if the transaction was consummated, the plaintiffs alternatively sought rescission and/or damages. The plaintiffs also sought costs and fees associated with the suits. To avoid the risk of the Stockholder Actions delaying or adversely affecting the merger and to minimize the expense of defending the Broadcom Acquisition-Related Litigation, and without admitting any liability or wrongdoing, on September 5, 2018, the Company made certain disclosures that supplemented and revised those contained in the definitive proxy statement on Schedule 14A filed by the Company with the U.S. Securities and Exchange Commission on August 10, 2018. On September 24, 2018, each of the plaintiffs filed a Notice of Voluntary Dismissal, and each of the four (4) cases is now closed. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Stockholders’ Equity | NOTE 9 – STOCKHOLDERS’ EQUITY Stock Repurchases: On November 13, 2015, the 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, 2018 , the Company repurchased approximately 2.3 million shares of its common stock for approximately $80 million . At September 30, 2018 , the Company remained authorized to purchase approximately $407 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, 2018 and March 31, 2018 were approximately $463 million and $290 million , respectively. Cash Dividends: The Board declared the following dividends during the six months ended September 30, 2018 and 2017 : Six Months Ended September 30, 2018 : (in millions, except per share amounts) Declaration Date Dividend Per Share Record Date Total Amount Payment Date May 2, 2018 $0.255 May 17, 2018 $107 June 5, 2018 August 9, 2018 $0.255 August 23, 2018 $107 September 11, 2018 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 |
Income Per Common Share
Income Per Common Share | 6 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Income Per Common Share | NOTE 10 – 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, 2018 and 2017 : Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions, except per share amounts) Basic income per common share: Net income $ 129 $ 184 $ 295 $ 362 Less: Net income allocable to participating securities (2 ) (3 ) (4 ) (5 ) Net income allocable to common shares $ 127 $ 181 $ 291 $ 357 Weighted average common shares outstanding 413 415 414 415 Basic income per common share $ 0.31 $ 0.44 $ 0.70 $ 0.86 Diluted income per common share: Net income $ 129 $ 184 $ 295 $ 362 Less: Net income allocable to participating securities (2 ) (3 ) (4 ) (5 ) Net income allocable to common shares $ 127 $ 181 $ 291 $ 357 Weighted average shares outstanding and common share equivalents: Weighted average common shares outstanding 413 415 414 415 Weighted average effect of share-based payment awards 3 1 2 1 Denominator in calculation of diluted income per share 416 416 416 416 Diluted income per common share $ 0.31 $ 0.44 $ 0.70 $ 0.86 For the three months ended September 30, 2018 , there were no shares of Company common stock underlying restricted stock awards (“RSAs”) and options to purchase common stock that were excluded from the calculation because their effect on income per share was anti-dilutive during the respective periods. For the three months ended September 30, 2017 , approximately 2 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 for the three months ended September 30, 2018 and 2017 were considered participating securities in the calculation of net income allocable to common stockholders. For the six months ended September 30, 2018 and 2017 , respectively, approximately 1 million shares and 2 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 for the six months ended September 30, 2018 and 2017 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, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Accounting for Share-Based Compensation | NOTE 11 – 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 2018 2017 2018 2017 (in millions) Costs of licensing and maintenance $ 2 $ 2 $ 4 $ 4 Cost of professional services — — 1 1 Selling and marketing 11 10 21 20 General and administrative 13 11 25 23 Product development and enhancements 9 6 17 13 Share-based compensation expense before tax $ 35 $ 29 $ 68 $ 61 Income tax benefit (8 ) (9 ) (16 ) (20 ) Net share-based compensation expense $ 27 $ 20 $ 52 $ 41 There were no capitalized share-based compensation costs for the three and six months ended September 30, 2018 and 2017 . The following table summarizes the unrecognized share-based compensation costs at September 30, 2018 : Unrecognized Share-Based Compensation Costs Weighted Average Period Expected to be Recognized (in millions) (in years) Stock option awards $ 6 2.1 Restricted stock awards (“RSAs”) 95 2.1 Restricted stock units (“RSUs”) 27 2.2 Performance share units 52 2.6 Total unrecognized share-based compensation costs $ 180 2.3 For the six months ended September 30, 2018 and 2017 , the Company issued stock options for approximately 0.9 million shares and 1.0 million shares, respectively. The weighted average fair values and assumptions used for the options granted were as follows: Six Months Ended 2018 2017 Weighted average fair value $ 5.70 $ 4.72 Dividend yield 3.07 % 3.17 % Expected volatility factor (1) 21 % 21 % Risk-free interest rate (2) 3.0 % 2.1 % 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, 2018 and 2017 : Three Months Ended Six Months Ended 2018 2017 2018 2017 (shares in millions) RSAs: Shares — — (3) 2.9 2.9 Weighted average grant date fair value (1) $ — $ 32.98 $ 35.28 $ 31.70 RSUs: Shares — (3) — 1.2 1.1 Weighted average grant date fair value (2) $ 37.02 $ — $ 34.06 $ 30.35 (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, 2018 , the Company issued approximately 0.1 million shares under the Employee Stock Purchase Plan (“ESPP”) at $33.87 per share. As of September 30, 2018 , approximately 28.7 million shares were available for future issuances under the ESPP. |
Income Taxes
Income Taxes | 6 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 12 – INCOME TAXES Income tax expense for the three months ended September 30, 2018 was approximately $19 million and income tax benefit for the six months ended September 30, 2018 was approximately $65 million compared with income tax expense for the three and six months ended September 30, 2017 of approximately $74 million and $134 million , respectively. For the three and six months ended September 30, 2018 , the Company recorded a net discrete tax benefit of approximately $16 million and $114 million , respectively, resulting primarily from refinements to the provisional estimates of the impact of changes in tax law in the United States resulting from the enactment of the Tax Act. 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 cumulative expense recorded for the impacts of the Tax Act are provisional amounts of approximately $176 million in total, including expense of approximately $193 million related to the taxation of unremitted earnings of the Company’s foreign subsidiaries, which is payable over eight years , partially offset by a benefit of approximately $113 million related to a dividends received deduction for certain foreign tax credits relating to the fiscal 2018 year calculation of taxation of unremitted earnings, and expense of approximately $96 million related to the remeasurement of deferred tax assets and liabilities for the change in income tax rates. The Company will continue to refine the provisional amounts as it reviews and analyzes the historic unremitted earnings of its foreign subsidiaries, as well as the attendant computations that impact the measurement of the taxation of unremitted earnings, and also takes into consideration any additional regulatory guidance published by the U.S. tax authorities in respect of the Tax Act. The Company expects to finalize the tax expense as soon as practical, but not later than the third quarter of fiscal year 2019. The $113 million tax benefit for the dividends received deduction was based on the Company’s assessment of the treatment under the provisions of the Tax Act. Congress or the Department of Treasury may provide legislative or regulatory updates which would change the Company’s assessment. If legislative or regulatory updates are issued related to this item, the timing of which is uncertain, the Company may be required to recognize additional tax expense up to the full amount of the $113 million in the period such updates are issued. Excluding the impact of discrete items for the six months ended September 30, 2018 and 2017 , the Company’s estimated annual effective tax rate was 20.8% and 28.6% , respectively. The reduction in the Company’s estimated annual effective tax rate is primarily resulting from the Tax Act which provided for a lower statutory tax rate in the United States. 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 2019 , 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 2019 . |
Supplemental Statement of Cash
Supplemental Statement of Cash Flows Information | 6 Months Ended |
Sep. 30, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Statement of Cash Flows Information | NOTE 13 – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION For the six months ended September 30, 2018 and 2017 , interest payments were approximately $61 million and $60 million , respectively, and income taxes paid, net were approximately $130 million and $156 million , respectively. Non-cash financing activities for the six months ended September 30, 2018 and 2017 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 $47 million (net of approximately $41 million of income taxes withheld) and $46 million (net of approximately $35 million of income taxes withheld), respectively; discretionary stock contributions to the CA, Inc. Savings Harvest Plan of approximately $24 million and $23 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, 2018 and 2017 was as follows: Six Months Ended 2018 2017 (in millions) Total borrowings outstanding at beginning of period (1) $ 137 $ 137 Borrowings 1,076 1,173 Repayments (1,053 ) (1,204 ) Foreign exchange effect (24 ) 31 Total borrowings outstanding at end of period (1) $ 136 $ 137 (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, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | NOTE 14 – SEGMENT INFORMATION In accordance with FASB ASC Topic 280, Segment Reporting , the Company disaggregates its operations into Mainframe Solutions, Enterprise Solutions and Services segments, which is utilized by the Chief Operating Decision Maker, who is the Company's Chief Executive Officer, for evaluating segment performance and allocating resources. 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. The Company regularly enters into a single arrangement with a customer that includes mainframe solutions, enterprise solutions and services. The amount of contract revenue assigned to operating segments is generally based on the manner in which the proposal is made to the customer. The software product revenue assigned to the Mainframe Solutions and Enterprise Solutions segments is based on either (1) a list price allocation method (which allocates a discount in the total contract price to the individual products in proportion to the list price of the products); (2) allocations included within internal contract approval documents; or (3) the value for individual software products as stated in the customer contract. The price for the implementation, consulting, education and training services is separately stated in the contract and these amounts of contract revenue are assigned to the Services segment. The contract value assigned to each operating segment is then recognized in a manner consistent with the revenue recognition policies of the Company prior to the adoption of Topic 606. Accordingly, differences in segment revenue and consolidated revenue arise primarily from (a) term and perpetual software licenses that are recognized ratably under the Company’s segment policies and in its Condensed Consolidated Statement of Operations for periods prior to the adoption of Topic 606 that, after adoption of Topic 606, are recognized at a point-in-time; and (b) differences in the allocations of contract value among products and services in a contract arising from the use of a relative standalone selling price allocation method in the Company’s Condensed Consolidated Statement of Operations for periods after adoption of Topic 606 as compared to the aforementioned approach to assigning contract value to the Company’s segments. Segment expenses include costs that are controllable by segment managers ( i.e. , direct costs) and, in the case of the Mainframe Solutions and Enterprise Solutions segments, an allocation of shared and indirect costs ( i.e. , allocated costs). Segment-specific direct costs include a portion of selling and marketing costs, licensing and maintenance costs, product development costs and general and administrative costs. Allocated segment costs primarily include indirect and non-segment-specific direct selling and marketing costs and general and administrative costs that are not directly attributable to a specific segment. The basis for allocating shared and indirect costs between the Mainframe Solutions and Enterprise Solutions segments is dependent on the nature of the cost being allocated and is generally either in proportion to segment revenues or in proportion to the related direct cost category. Expenses for the Services segment consist of cost of professional services and other direct costs included within selling and marketing and general and administrative expenses. There are no allocated or indirect costs for the Services segment. 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 summary of segment revenue and reconciliation to total consolidated revenue for the three and six months ended September 30, 2018 and 2017 was as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions) Revenue by segment: Mainframe Solutions $ 548 $ 539 $ 1,101 $ 1,075 Enterprise Solutions 423 420 848 834 Services 74 75 148 150 Total segment revenue $ 1,045 $ 1,034 $ 2,097 $ 2,059 Impact of segment policies that differ from U.S. GAAP (1) (150 ) — (264 ) — Total consolidated revenue $ 895 $ 1,034 $ 1,833 $ 2,059 (1) The manner in which the Company measures and recognizes revenues for segment reporting was not revised upon adoption of Topic 606. For segment reporting purposes, the Company follows its previous Topic 605 policies, which recognizes software license revenue ratably, except for sales of perpetual licenses on a stand-alone basis, which are recognized at a point-in-time. The Company’s summary of segment profit and reconciliation to income before income taxes for the three and six months ended September 30, 2018 and 2017 was as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions) Segment profit: Mainframe Solutions $ 354 $ 351 $ 724 $ 700 Enterprise Solutions 54 40 114 73 Services 4 1 4 2 Total segment profit $ 412 $ 392 $ 842 $ 775 Impact of segment policies that differ from U.S. GAAP (1) (150 ) — (267 ) — Less unallocated amounts: Purchased software amortization 47 58 102 116 Other intangibles amortization 11 10 21 20 Internally developed software products amortization 2 9 7 21 Share-based compensation expense 35 29 68 61 Other expenses, net (2) — 4 108 12 Interest expense, net 19 24 39 49 Income before income taxes $ 148 $ 258 $ 230 $ 496 (1) The manner in which the Company measures and recognizes revenues and expenses, including commissions, for segment reporting was not revised upon adoption of Topic 606. For segment reporting purposes, commissions are expensed in the period earned by the employee. (2) Other expenses, net for the three and six months ended September 30, 2018 consisted of costs associated with the Fiscal 2019 Plan of $(1) million and $113 million , respectively, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Other expenses, net for the three and six months ended September 30, 2017 consisted of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Depreciation by segment for the three and six months ended September 30, 2018 and 2017 was as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions) Depreciation: Mainframe Solutions $ 10 $ 10 $ 19 $ 19 Enterprise Solutions 7 7 14 14 Services — — — — Total depreciation $ 17 $ 17 $ 33 $ 33 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15 – SUBSEQUENT EVENTS On July 11, 2018, the Company, Broadcom, and Merger Sub entered into the Merger Agreement, pursuant to which Merger Sub was merged with and into the Company, with the Company surviving the Merger and becoming a wholly owned subsidiary of Broadcom. The Merger closed on November 5, 2018. Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of Company common stock (other than shares that were (i) owned or held in treasury by the Company or owned by Broadcom or Merger Sub and (ii) owned by any wholly owned subsidiary of Broadcom or of the Company) was cancelled and automatically converted into the right to receive $44.50 in cash, without interest. On November 5, 2018, in connection with the completion of the Merger and as required by the terms of the Merger Agreement, the Company prepaid (or caused to be prepaid) in full all obligations outstanding and terminated all commitments under (i) the Amended and Restated Credit Agreement, dated as of June 27, 2017 (the “Revolving Credit Agreement”), among the Company, the lenders and other parties from time to time party thereto and Citibank, N.A., as administrative agent, and (ii) the Amended and Restated Term Loan Agreement, dated as of April 20, 2018 (the “Term Loan Agreement”), among the Company, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, in each case as amended, restated, supplemented or otherwise modified. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 6 Months Ended |
Sep. 30, 2018 | |
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 (the “Company”) as of and for the periods ended September 30, 2018 reflect the adoption of Topic 606 (as defined below) on April 1, 2018 using the modified retrospective method. The accompanying Condensed Consolidated Balance Sheet as of March 31, 2018 and the Condensed Consolidated Statements of Operations, Comprehensive Income and Cash Flows for the periods ended September 30, 2017 have not been revised for the effects of Topic 606 and are therefore not comparable to the September 30, 2018 periods. The Condensed Consolidated Financial Statements of the 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, 2018 (“ 2018 Form 10-K”). In the opinion of the Company’s 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 the Company’s 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, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019 . |
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 53% being held by the Company’s foreign subsidiaries outside the United States at September 30, 2018 . At September 30, 2018 and March 31, 2018 , the total amount of restricted cash included in “Other noncurrent assets, net” in the Company’s Condensed Consolidated Balance Sheets was approximately $1 million and $2 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, 2018 and 2017 . |
New Accounting Pronouncements | New Accounting Pronouncements: New Accounting Pronouncements Recently 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, creating new ASC Topic 606 (“Topic 606”) that replaces most existing revenue recognition guidance in GAAP. Topic 606 was adopted by the Company effective April 1, 2018 using the modified retrospective method. Reporting periods prior to the adoption of Topic 606 were presented in accordance with ASC Topic 605 (“Topic 605”). As a result of adopting Topic 606, the Company now recognizes revenue for the license component of all its on-premise software arrangements at the point-in-time control of the software license is transferred to the customer, rather than ratably over the term of the contract. The Company reflected the impact of the changes at transition with a cumulative increase of approximately $2,104 million to the opening balance of retained earnings. Refer to Note 2, “Revenue from Contracts with Customers,” and Note 3, “Impact of Adopting Topic 606,” for a discussion of the changes in the Company’s policies for revenue recognition and commissions, and the required disclosures related to the impact of adopting Topic 606. Refer to the Company’s Annual Report on Form 10-K for policies in accordance with Topic 605. 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 was adopted by the Company when effective in first quarter of fiscal year 2019 using the modified retrospective method of adoption. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842), with amendments in 2018, requiring 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 in the first quarter of fiscal year 2020 and requires the modified retrospective method of adoption, with an option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings. Early adoption is permitted. The Company will adopt ASU 2016-02 when effective in the first quarter of fiscal year 2020. Although the Company is currently evaluating 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 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 in the first quarter of fiscal year 2021 and requires a prospective method of adoption. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption of ASU 2017-04, it does not currently expect the adoption to have a material effect 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 in the 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. In February 2018, the FASB issued Accounting Standards Update No. 2018-02 (“ASU 2018-02”), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which allows stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”) to be reclassified from accumulated other comprehensive income to retained earnings. Since ASU 2018-02 only relates to the income tax effects from the Tax Act, the underlying guidance that requires the effects from changes in tax laws or rates be included in income from continuing operations is not affected. ASU 2018-02 will be effective for the Company in the first quarter of fiscal year 2020. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption of ASU 2018-02, it does not currently expect the adoption to have a material effect on its consolidated financial statements and related disclosures. In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (“ASU 2018-13”), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which modifies the disclosure requirements on fair value measurements. ASU 2018-13 will be effective for the Company in the first quarter of fiscal year 2021. Early adoption is permitted. Although the Company is currently evaluating the timing of adoption of ASU 2018-13, it does not currently expect the adoption to have a material effect on its consolidated financial statements and related disclosures. In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (“ASU 2018-15”), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 will be effective for the Company in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effect that ASU 2018-15 will have on its consolidated financial statements and related disclosures. |
Reclassifications | Reclassifications: As a result of the adoption of Topic 606 on a modified retrospective basis, the Company’s presentation of prior year revenue in its Condensed Consolidated Statement of Operations has been revised to combine the previously reported revenue line items “Subscription and maintenance” and “Software fees and other” into the revenue line item “Software licenses and maintenance” in the current year presentation. This reclassification had no effect on total revenue as previously reported for the three and six months ended September 30, 2017. Refer to Note 3, “Impact of Adopting Topic 606,” for the transitional disclosures required by Topic 606. |
Other Information | Other Information: On July 11, 2018, the Company, Broadcom Inc. (“Broadcom”), and Collie Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Broadcom (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The transaction closed on November 5, 2018. Pursuant to the terms of the Merger Agreement, effective as of the closing, Merger Sub was merged with and into the Company (the “Merger”), with the Company surviving the Merger and becoming a wholly owned subsidiary of Broadcom. Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of Company common stock (other than shares that were (i) owned or held in treasury by the Company or owned by Broadcom or Merger Sub and (ii) owned by any wholly owned subsidiary of Broadcom or of the Company) was cancelled and automatically converted into the right to receive $44.50 in cash, without interest. On November 5, 2018, following the consummation of the Merger, the Company’s common stock was delisted from the NASDAQ Global Select Market (“NASDAQ”) and deregistered under the Exchange Act. Trading of the Company’s common stock on NASDAQ was halted prior to the opening of trading on November 5, 2018. |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Policies) | 6 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | In accordance with Topic 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. A. Nature of products and services The Company’s products and services can be broadly categorized as perpetual licenses to use software, term-based licenses for Software-as-a-Service (“SaaS”) and on-premise use of software, maintenance for perpetual and term-based on-premise licenses, and professional services. The Company’s software licenses and maintenance are for mainframe, enterprise, and SaaS computing environments. Perpetual licenses : The Company sells perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which may be paid either at contract inception or in installments over the contract term. The Company’s on-premise software licenses have standalone functionality from which customers derive a substantial portion of the benefit. Accordingly, for perpetual licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is generally upon delivery to the customer. Term-based arrangements : Term-based arrangements consists of on-premise term licenses, SaaS solutions, as well as maintenance. • On-premise term licenses : The Company sells term licenses which provide customers the right to use software for a specified period of time. Like perpetual licenses, the Company’s term licenses have standalone functionality from which customers derive a substantial portion of the benefit. Accordingly, for on-premise term licenses, revenue is generally recognized at the point-in-time when the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon the commencement of the renewal term. Payments for term licenses may be paid either at contract inception or in installments over the period of the term licenses. • SaaS solutions : The Company offers cloud-based solutions that provide customers the right to access the Company’s software through the internet for a period of time. The payment for SaaS solutions may be received either at inception of the arrangement, or over the term of the arrangement. The Company’s SaaS solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue from a SaaS solution is generally recognized ratably over the term of the arrangement. Revenue related to SaaS solutions provided on a usage basis, such as the number of users, is recognized based on customer’s utilization of the service in a given period. • Maintenance : Maintenance is provided for both perpetual and on-premise term license arrangements, and consists primarily of telephone support and the provision of unspecified updates and upgrades on a when-and-if-available basis. Maintenance for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Maintenance for on-premise term-based licenses is always renewed concurrently with the term-based licenses for the same duration of time. Maintenance represents stand-ready obligations for which revenue is recognized ratably over the term of the arrangement. Payments for maintenance may be paid either at inception of the maintenance period or in installments over the term of the maintenance period. Professional services : Professional services consist of product implementation, consulting, customer education and customer training services. Payment for professional services is generally a fixed fee or a fee based on time and materials. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For professional services, revenue is recognized by measuring progress toward the complete satisfaction of the Company’s obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours, and as a practical expedient, progress for services that are contracted for time and materials is generally based on the amount the Company has the right to invoice. Material rights Contracts with customers may include material rights which are also performance obligations. Material rights primarily arise when the contract gives the customer the right to renew or receive products or services at a discounted price in the future. Revenue allocated to material rights is recognized when the customer exercises the right or the right expires. If exercised by the customer, revenue is classified consistent with the products or services obtained through the exercise of the right. If expired, revenue is classified consistent with the products or services in the contract that gave rise to the material right. Arrangements with multiple performance obligations The Company’s contracts generally contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation. Allocation of consideration : The Company allocates total contract consideration to each distinct performance obligation in an arrangement on a relative standalone selling price basis. The standalone selling price reflects the price the Company would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. If the arrangement contains professional services and other products or services, the Company first allocates to the professional service obligation a portion of the total contract consideration equal to the standalone selling price of professional services that is observed from consistently priced standalone sales. The Company allocates the remaining consideration among the other products and services in the contract on a relative standalone selling price basis. The standalone selling price for perpetual and on-premise term licenses, which are always sold with maintenance, is the price for the combined license and maintenance bundle. The amount assigned to the license and maintenance bundle is separated into license and maintenance amounts using the respective standalone selling prices represented by the value relationship between the software license and maintenance. When two or more contracts are entered into at or near the same time with the same customer, the Company evaluates the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, the Company will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly. Standalone selling price : When available, the Company uses directly observable transactions to determine the standalone selling prices for performance obligations. Observable data is available for maintenance renewals on previously sold perpetual licenses and SaaS. When perpetual or term licenses are sold together with maintenance in a bundled arrangement, the Company estimates a narrow range of standalone selling price using observable pricing information from standalone sales of the bundle, when available, and other relevant information, such as market conditions and pricing strategies. The value relationship the Company uses to allocate consideration between the license and maintenance performance obligations is derived from the observable relationship of the selling price of a standalone perpetual license maintenance renewal to the related perpetual license fee, which is generally 20% of the net license fee for one year of maintenance. The Company separates the license and maintenance performance obligations of a term license and maintenance bundle using the same observable value relationship as in a perpetual license and maintenance bundle because the nature of the maintenance performance obligation and its value relationship with the right to use the software were determined to be similar. Arrangements that include a software license sold with more than one year of maintenance for the license use a value relationship which reflects an annual maintenance rate of 20% of the total value ascribed to the right to use the software. As a result, a greater portion of the bundle relates to maintenance as the length of the maintenance period included in the bundle increases. The Company separately determines the standalone selling prices by geographic region, distribution channel and by volume when the pricing strategies include volume purchase discounts. The Company also estimates the standalone selling prices of its material rights, which primarily include contractually stated amounts that the customer can use to acquire additional products and services. The Company estimates the value of these rights by considering the stated amount and the likelihood of the customer exercising its right. In addition, an option to purchase or receive additional products or services at a discounted price is estimated as the incremental discount the customer would obtain when exercising the option and the likelihood that the option would be exercised. Other policies and judgments Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice. In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied, however, the Company’s contracts generally do not contain a significant financing component. The Company may modify contracts to offer customers additional products or services. The additional products and services will generally be considered distinct from those products or services transferred to the customer before the modification and will generally be accounted for as a separate contract. The Company evaluates whether the price for the additional products and services reflects the standalone selling price adjusted as appropriate for facts and circumstances applicable to that contract. In determining whether an adjustment is appropriate, the Company evaluates whether the incremental consideration is consistent with the prices previously paid by the customer or similar customers. The Company reduces transaction price for an estimate of returns that is based on historical data. |
Segment Information (Policies)
Segment Information (Policies) | 6 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | In accordance with FASB ASC Topic 280, Segment Reporting , the Company disaggregates its operations into Mainframe Solutions, Enterprise Solutions and Services segments, which is utilized by the Chief Operating Decision Maker, who is the Company's Chief Executive Officer, for evaluating segment performance and allocating resources. |
Revenue from Contracts with C_3
Revenue from Contracts with Customers (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of revenue | The disaggregation of revenue by region, type of performance obligation, timing of revenue recognition, and segment was as follows: (in millions) Three Months Ended September 30, 2018 Six Months Ended September 30, 2018 Revenue by region: United States $ 592 $ 1,164 EMEA (1) 186 415 Other 117 254 Total revenue $ 895 $ 1,833 Revenue by type of performance obligation: Perpetual licenses $ 70 $ 146 Renewable: On-premise term licenses 157 350 Maintenance 473 960 SaaS 124 238 Professional services 71 139 Total revenue $ 895 $ 1,833 Timing of revenue recognition: Point-in-time, including professional services $ 297 $ 634 Over time 598 1,199 Total revenue $ 895 $ 1,833 Revenue by segment: Mainframe Solutions $ 388 $ 828 Enterprise Solutions 436 866 Services 71 139 Total revenue $ 895 $ 1,833 (1) Consists of Europe, the Middle East and Africa. |
Contract balances | The Company’s contract assets and deferred revenue balances for the periods indicated below were as follows: (in millions) Contract Assets Deferred Revenue Balance at April 1, 2018 $ 931 $ 1,751 Balance at September 30, 2018 $ 929 $ 1,421 |
Transaction price allocated to remaining performance obligations | The following table discloses the aggregate amount of the transaction price and advanced payments allocated to remaining performance obligations as of the end of the reporting period, and when the Company expects to recognize the revenue. (in millions) 12 months or less Greater than 12 months (1) Perpetual licenses $ 10 $ 11 Renewable: On-premise term licenses $ 231 $ 113 Maintenance $ 1,464 $ 1,632 SaaS $ 345 $ 221 Professional services $ 61 $ 31 Material rights $ 3 $ 178 (1) Of the amount of performance obligations greater than 12 months, the portion that is 2 to 3 years is approximately $1.7 billion and the remaining amount is generally between 4 and 5 years . |
Impact of Adopting Topic 606 (T
Impact of Adopting Topic 606 (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Impact on financial statements from adoption of Topic 606 | As a result of applying the modified retrospective method to adopt Topic 606, the following adjustments were made to the opening balances of the Condensed Consolidated Balance Sheet accounts: Condensed Consolidated Balance Sheet (in millions) As Reported Adjustments Due to Topic 606 Adjusted Assets Current assets: Cash and cash equivalents $ 3,405 $ — $ 3,405 Trade accounts receivable, net 793 9 802 Contract assets — 772 772 Other current assets 210 (38 ) 172 Total current assets $ 4,408 $ 743 $ 5,151 Property and equipment, net 237 — 237 Goodwill 6,804 — 6,804 Capitalized software and other intangible assets, net 1,111 — 1,111 Deferred income taxes 346 (221 ) 125 Contract assets — 159 159 Contract costs — 427 427 Other noncurrent assets, net 154 (19 ) 135 Total assets $ 13,060 $ 1,089 $ 14,149 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt $ 269 $ — $ 269 Accounts payable 85 — 85 Accrued salaries, wages and commissions 242 — 242 Accrued expenses and other current liabilities 340 (8 ) 332 Deferred revenue and advanced payments 2,289 (1,067 ) 1,222 Taxes payable, other than income taxes payable 55 — 55 Federal, state and foreign income taxes payable 41 170 211 Total current liabilities $ 3,321 $ (905 ) $ 2,416 Long-term debt, net of current portion 2,514 — 2,514 Federal, state and foreign income taxes payable 311 110 421 Deferred income taxes 111 80 191 Deferred revenue and advanced payments 820 (291 ) 529 Other noncurrent liabilities 88 — 88 Total liabilities $ 7,165 $ (1,006 ) $ 6,159 Stockholders’ equity: Preferred stock $ — $ — $ — Common stock 59 — 59 Additional paid-in capital 3,744 — 3,744 Retained earnings 6,971 2,104 9,075 Accumulated other comprehensive loss (290 ) (9 ) (299 ) Treasury stock (4,589 ) — (4,589 ) Total stockholders’ equity $ 5,895 $ 2,095 $ 7,990 Total liabilities and stockholders’ equity $ 13,060 $ 1,089 $ 14,149 In connection with the adoption of Topic 606, the Company increased its retained earnings by approximately $2,104 million . This increase was a result of a decrease in deferred revenue of approximately $1,358 million and the establishment of contract assets of approximately $931 million for amounts that would have been recognized under Topic 606 prior to April 1, 2018. In addition, upon adoption of Topic 606, the Company capitalized contract costs of approximately $427 million relating to commissions incurred to obtain customer contracts. Refer to Note 2 “Revenue from Contracts with Customers” for additional details on contract costs. The net change in deferred income taxes of approximately $301 million and income taxes payable of approximately $280 million is primarily due to the current and deferred tax effects resulting from the aforementioned items. In addition, the Company made other changes, primarily due to professional services, to our Condensed Consolidated Balance Sheet on April 1, 2018 to comply with Topic 606. The following table compares the Condensed Consolidated Balance Sheet at September 30, 2018 to the proforma amounts had the previous standard of Topic 605 been in effect: At September 30, 2018 Condensed Consolidated Balance Sheet (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Assets Current assets: Cash and cash equivalents $ 2,931 $ 2,931 $ — Trade accounts receivable, net 507 502 5 Contract assets 817 — 817 Other current assets 107 183 (76 ) Total current assets $ 4,362 $ 3,616 $ 746 Property and equipment, net 213 213 — Goodwill 6,790 6,790 — Capitalized software and other intangible assets, net 981 981 — Deferred income taxes 124 338 (214 ) Contract assets 112 — 112 Contract costs 400 — 400 Other noncurrent assets, net 121 136 (15 ) Total assets $ 13,103 $ 12,074 $ 1,029 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt $ 20 $ 20 $ — Accounts payable 81 81 — Accrued salaries, wages and commissions 201 201 — Accrued expenses and other current liabilities 309 319 (10 ) Deferred revenue and advanced payments 1,002 1,826 (824 ) Taxes payable, other than income taxes payable 25 25 — Federal, state and foreign income taxes payable 72 — 72 Total current liabilities $ 1,710 $ 2,472 $ (762 ) Long-term debt, net of current portion 2,506 2,506 — Federal, state and foreign income taxes payable 297 187 110 Deferred income taxes 171 98 73 Deferred revenue and advanced payments 419 638 (219 ) Other noncurrent liabilities 98 98 — Total liabilities $ 5,201 $ 5,999 $ (798 ) Stockholders’ equity: Preferred stock $ — $ — $ — Common stock 59 59 — Additional paid-in capital 3,735 3,735 — Retained earnings 9,156 7,263 1,893 Accumulated other comprehensive loss (463 ) (397 ) (66 ) Treasury stock (4,585 ) (4,585 ) — Total stockholders’ equity $ 7,902 $ 6,075 $ 1,827 Total liabilities and stockholders’ equity $ 13,103 $ 12,074 $ 1,029 The following tables compare the Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2018 to the proforma amounts had the previous standard of Topic 605 been in effect: For the Three Months Ended September 30, 2018 Condensed Consolidated Statement of Operations (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Revenue: Software licenses and maintenance $ 824 $ 971 $ (147 ) Professional services 71 74 (3 ) Total revenue $ 895 $ 1,045 $ (150 ) Expenses: Costs of licensing and maintenance $ 74 $ 74 $ — Cost of professional services 64 70 (6 ) Amortization of capitalized software costs 49 49 — Selling and marketing 252 246 6 General and administrative 99 99 — Product development and enhancements 158 158 — Depreciation and amortization of other intangible assets 28 28 — Other expenses, net 4 4 — Total expenses before interest and income taxes $ 728 $ 728 $ — Income before interest and income taxes $ 167 $ 317 $ (150 ) Interest expense, net 19 19 — Income before income taxes $ 148 $ 298 $ (150 ) Income tax expense 19 53 (34 ) Net income $ 129 $ 245 $ (116 ) Basic income per common share $ 0.31 $ 0.59 $ (0.28 ) Basic weighted average shares used in computation 413 413 — Diluted income per common share $ 0.31 $ 0.58 $ (0.27 ) Diluted weighted average shares used in computation 416 416 — For the Six Months Ended September 30, 2018 Condensed Consolidated Statement of Operations (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Revenue: Software licenses and maintenance $ 1,694 $ 1,949 $ (255 ) Professional services 139 148 (9 ) Total revenue $ 1,833 $ 2,097 $ (264 ) Expenses: Costs of licensing and maintenance $ 150 $ 150 $ — Cost of professional services 134 143 (9 ) Amortization of capitalized software costs 109 109 — Selling and marketing 487 471 16 General and administrative 203 202 1 Product development and enhancements 320 320 — Depreciation and amortization of other intangible assets 54 54 — Other expenses, net 107 112 (5 ) Total expenses before interest and income taxes $ 1,564 $ 1,561 $ 3 Income before interest and income taxes $ 269 $ 536 $ (267 ) Interest expense, net 39 39 — Income before income taxes $ 230 $ 497 $ (267 ) Income tax benefit (65 ) (9 ) (56 ) Net income $ 295 $ 506 $ (211 ) Basic income per common share $ 0.70 $ 1.21 $ (0.51 ) Basic weighted average shares used in computation 414 414 — Diluted income per common share $ 0.70 $ 1.20 $ (0.50 ) Diluted weighted average shares used in computation 416 416 — The following table provides a summary of the Company’s revenue amounts under Topic 605 for the three and six months ended September 30, 2018 and 2017 in a manner consistent with its presentation prior to the adoption of Topic 606. Refer to Note 1, “Accounting Policies,” for additional information on the current year reclassification. For the Three For the Six (in millions) 2018 2017 2018 2017 Revenue: Subscription and maintenance $ 829 $ 826 $ 1,667 $ 1,643 Professional services 74 75 148 150 Software fees and other 142 133 282 266 Total revenue $ 1,045 $ 1,034 $ 2,097 $ 2,059 The adoption of Topic 606 had no impact on the Company’s net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table compares the operating activities within the Condensed Consolidated Statement of Cash Flows for the six months ended September 30, 2018 to the proforma amounts had the previous standard of Topic 605 been in effect: For the Six Months Ended September 30, 2018 Condensed Consolidated Statement of Cash Flows (in millions) As Reported under Topic 606 Proforma as if the previous accounting of Topic 605 was in effect Effect of Change Higher/(Lower) Operating activities: Net income $ 295 $ 506 $ (211 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 163 163 — Deferred income taxes (12 ) (10 ) (2 ) Provision for bad debts — (1 ) 1 Share-based compensation expense 68 68 — Other non-cash items 5 5 — Foreign currency transaction (gains) losses (4 ) 2 (6 ) Changes in other operating assets and liabilities, net of effect of acquisitions: Decrease in trade accounts receivable 279 275 4 Increase in contract assets (26 ) — (26 ) Decrease in contract costs 18 — 18 Decrease in deferred revenue and advanced payments (314 ) (598 ) 284 Decrease in taxes payable, net (258 ) (204 ) (54 ) Increase in accounts payable, accrued expenses and other 33 35 (2 ) Decrease in accrued salaries, wages and commissions (34 ) (34 ) — Changes in other operating assets and liabilities, net 38 44 (6 ) Net cash provided by operating activities $ 251 $ 251 $ — |
Restructuring (Tables)
Restructuring (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Accrued restructuring severance and exit costs activity | Accrued restructuring severance and exit costs and changes in the accruals during the six months ended September 30, 2018 were as follows: (in millions) Accrued Balance at March 31, 2018 Expense Change in Estimate Payments Accretion and Other Accrued Balance at September 30, 2018 Severance charges $ — $ 82 $ (6 ) $ (44 ) $ — $ 32 Facility exit charges 7 37 — (6 ) — 38 Total accrued liabilities $ 7 $ 70 |
Goodwill, Capitalized Softwar_2
Goodwill, Capitalized Software and Other Intangible Assets (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
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, 2018 were as follows: At September 30, 2018 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,579 $ 5,247 $ 1,332 $ 658 $ 674 Internally developed software products 1,467 1,458 9 6 3 Other intangible assets 1,215 834 381 77 304 Total capitalized software and other intangible assets $ 9,261 $ 7,539 $ 1,722 $ 741 $ 981 The gross carrying amounts and accumulated amortization for capitalized software and other intangible assets at March 31, 2018 were as follows: At March 31, 2018 Gross Amortizable Assets Less: Fully Amortized Assets Remaining Amortizable Assets Accumulated Amortization on Remaining Amortizable Assets Net Assets (in millions) Purchased software products $ 6,572 $ 4,961 $ 1,611 $ 845 $ 766 Internally developed software products 1,467 1,347 120 109 11 Other intangible assets 1,226 823 403 69 334 Total capitalized software and other intangible assets $ 9,265 $ 7,131 $ 2,134 $ 1,023 $ 1,111 |
Projected annual amortization expense | Based on the capitalized software and other intangible assets recorded through September 30, 2018 , the projected annual amortization expense for fiscal year 2019 and the next four fiscal years is expected to be as follows: Year Ended March 31, 2019 2020 2021 2022 2023 (in millions) Purchased software products $ 189 $ 166 $ 122 $ 113 $ 86 Internally developed software products 10 1 — — — Other intangible assets 40 36 36 35 31 Total $ 239 $ 203 $ 158 $ 148 $ 117 |
Goodwill activity by segment | Goodwill activity by segment for the six months ended September 30, 2018 was as follows: (in millions) Mainframe Solutions Enterprise Solutions Services Total Balance at March 31, 2018 $ 4,178 $ 2,545 $ 81 $ 6,804 Acquisitions — 6 — 6 Foreign currency translation adjustment — (20 ) — (20 ) Balance at September 30, 2018 $ 4,178 $ 2,531 $ 81 $ 6,790 |
Derivatives (Tables)
Derivatives (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
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 (Gain) Recognized in the Condensed Consolidated Statements of Operations Three Months Ended Six Months Ended (in millions) 2018 2017 2018 2017 Other expenses, net – foreign currency contracts $ — $ 4 $ (10 ) $ 8 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
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, 2018 and March 31, 2018 : At September 30, 2018 At March 31, 2018 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) $ 906 $ — $ 906 $ 1,281 $ — $ 1,281 Foreign exchange derivatives (2) — 18 18 — 2 2 Total assets $ 906 $ 18 $ 924 $ 1,281 $ 2 $ 1,283 Liabilities: Foreign exchange derivatives (2) $ — $ 8 $ 8 $ — $ 1 $ 1 Total liabilities $ — $ 8 $ 8 $ — $ 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 6, “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, 2018 and March 31, 2018 : At September 30, 2018 At March 31, 2018 (in millions) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Liabilities: Total debt (1) $ 2,526 $ 2,550 $ 2,783 $ 2,844 Facility exit reserves (2) $ 38 $ 39 $ 7 $ 8 (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, 2018 and March 31, 2018 . At September 30, 2018 and March 31, 2018 , the facility exit reserves included carrying values of approximately $12 million and $2 million , respectively, in “Accrued expenses and other current liabilities” and approximately $26 million and $5 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, 2018 | |
Equity [Abstract] | |
Cash dividends | Cash Dividends: The Board declared the following dividends during the six months ended September 30, 2018 and 2017 : Six Months Ended September 30, 2018 : (in millions, except per share amounts) Declaration Date Dividend Per Share Record Date Total Amount Payment Date May 2, 2018 $0.255 May 17, 2018 $107 June 5, 2018 August 9, 2018 $0.255 August 23, 2018 $107 September 11, 2018 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 |
Income Per Common Share (Tables
Income Per Common Share (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
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, 2018 and 2017 : Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions, except per share amounts) Basic income per common share: Net income $ 129 $ 184 $ 295 $ 362 Less: Net income allocable to participating securities (2 ) (3 ) (4 ) (5 ) Net income allocable to common shares $ 127 $ 181 $ 291 $ 357 Weighted average common shares outstanding 413 415 414 415 Basic income per common share $ 0.31 $ 0.44 $ 0.70 $ 0.86 Diluted income per common share: Net income $ 129 $ 184 $ 295 $ 362 Less: Net income allocable to participating securities (2 ) (3 ) (4 ) (5 ) Net income allocable to common shares $ 127 $ 181 $ 291 $ 357 Weighted average shares outstanding and common share equivalents: Weighted average common shares outstanding 413 415 414 415 Weighted average effect of share-based payment awards 3 1 2 1 Denominator in calculation of diluted income per share 416 416 416 416 Diluted income per common share $ 0.31 $ 0.44 $ 0.70 $ 0.86 |
Accounting for Share-Based Co_2
Accounting for Share-Based Compensation (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
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 2018 2017 2018 2017 (in millions) Costs of licensing and maintenance $ 2 $ 2 $ 4 $ 4 Cost of professional services — — 1 1 Selling and marketing 11 10 21 20 General and administrative 13 11 25 23 Product development and enhancements 9 6 17 13 Share-based compensation expense before tax $ 35 $ 29 $ 68 $ 61 Income tax benefit (8 ) (9 ) (16 ) (20 ) Net share-based compensation expense $ 27 $ 20 $ 52 $ 41 |
Unrecognized share-based compensation costs | The following table summarizes the unrecognized share-based compensation costs at September 30, 2018 : Unrecognized Share-Based Compensation Costs Weighted Average Period Expected to be Recognized (in millions) (in years) Stock option awards $ 6 2.1 Restricted stock awards (“RSAs”) 95 2.1 Restricted stock units (“RSUs”) 27 2.2 Performance share units 52 2.6 Total unrecognized share-based compensation costs $ 180 2.3 |
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 2018 2017 Weighted average fair value $ 5.70 $ 4.72 Dividend yield 3.07 % 3.17 % Expected volatility factor (1) 21 % 21 % Risk-free interest rate (2) 3.0 % 2.1 % 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, 2018 and 2017 : Three Months Ended Six Months Ended 2018 2017 2018 2017 (shares in millions) RSAs: Shares — — (3) 2.9 2.9 Weighted average grant date fair value (1) $ — $ 32.98 $ 35.28 $ 31.70 RSUs: Shares — (3) — 1.2 1.1 Weighted average grant date fair value (2) $ 37.02 $ — $ 34.06 $ 30.35 (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 Cas_2
Supplemental Statement of Cash Flows Information (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |
Notional pooling arrangement | The activity under this notional pooling arrangement for the six months ended September 30, 2018 and 2017 was as follows: Six Months Ended 2018 2017 (in millions) Total borrowings outstanding at beginning of period (1) $ 137 $ 137 Borrowings 1,076 1,173 Repayments (1,053 ) (1,204 ) Foreign exchange effect (24 ) 31 Total borrowings outstanding at end of period (1) $ 136 $ 137 (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, 2018 | |
Segment Reporting [Abstract] | |
Summary of segment revenue and reconciliation to total consolidated revenue | The Company’s summary of segment revenue and reconciliation to total consolidated revenue for the three and six months ended September 30, 2018 and 2017 was as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions) Revenue by segment: Mainframe Solutions $ 548 $ 539 $ 1,101 $ 1,075 Enterprise Solutions 423 420 848 834 Services 74 75 148 150 Total segment revenue $ 1,045 $ 1,034 $ 2,097 $ 2,059 Impact of segment policies that differ from U.S. GAAP (1) (150 ) — (264 ) — Total consolidated revenue $ 895 $ 1,034 $ 1,833 $ 2,059 (1) The manner in which the Company measures and recognizes revenues for segment reporting was not revised upon adoption of Topic 606. For segment reporting purposes, the Company follows its previous Topic 605 policies, which recognizes software license revenue ratably, except for sales of perpetual licenses on a stand-alone basis, which are recognized at a point-in-time. |
Summary of segment profit and reconciliation to income before income taxes | The Company’s summary of segment profit and reconciliation to income before income taxes for the three and six months ended September 30, 2018 and 2017 was as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions) Segment profit: Mainframe Solutions $ 354 $ 351 $ 724 $ 700 Enterprise Solutions 54 40 114 73 Services 4 1 4 2 Total segment profit $ 412 $ 392 $ 842 $ 775 Impact of segment policies that differ from U.S. GAAP (1) (150 ) — (267 ) — Less unallocated amounts: Purchased software amortization 47 58 102 116 Other intangibles amortization 11 10 21 20 Internally developed software products amortization 2 9 7 21 Share-based compensation expense 35 29 68 61 Other expenses, net (2) — 4 108 12 Interest expense, net 19 24 39 49 Income before income taxes $ 148 $ 258 $ 230 $ 496 (1) The manner in which the Company measures and recognizes revenues and expenses, including commissions, for segment reporting was not revised upon adoption of Topic 606. For segment reporting purposes, commissions are expensed in the period earned by the employee. (2) Other expenses, net for the three and six months ended September 30, 2018 consisted of costs associated with the Fiscal 2019 Plan of $(1) million and $113 million , respectively, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Other expenses, net for the three and six months ended September 30, 2017 consisted of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. |
Summary of depreciation by segment | Depreciation by segment for the three and six months ended September 30, 2018 and 2017 was as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 (in millions) Depreciation: Mainframe Solutions $ 10 $ 10 $ 19 $ 19 Enterprise Solutions 7 7 14 14 Services — — — — Total depreciation $ 17 $ 17 $ 33 $ 33 |
Accounting Policies (Details)
Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Millions | Jul. 11, 2018 | Sep. 30, 2018 | Apr. 01, 2018 | Mar. 31, 2018 |
Accounting policies | ||||
Percentage of cash and cash equivalents held by the Company's foreign subsidiaries outside the United States | 53.00% | |||
Retained earnings | $ 9,156 | $ 6,971 | ||
Amount to be paid to shareholders by acquiree per Merger Agreement (in dollars per share) | $ 44.50 | |||
Adjustments Due to Topic 606 | ||||
Accounting policies | ||||
Retained earnings | 1,893 | $ 2,104 | ||
Other Noncurrent Assets, Net | ||||
Accounting policies | ||||
Restricted cash | $ 1 | $ 2 |
Revenue from Contracts with C_4
Revenue from Contracts with Customers 1 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | ||
Disaggregation of revenue | |||||
Total revenue | $ 895 | $ 1,034 | $ 1,833 | $ 2,059 | |
Mainframe Solutions | |||||
Disaggregation of revenue | |||||
Total revenue | 388 | 828 | |||
Enterprise Solutions | |||||
Disaggregation of revenue | |||||
Total revenue | 436 | 866 | |||
Services | |||||
Disaggregation of revenue | |||||
Total revenue | 71 | 139 | |||
Point-in-Time, Including Professional Services | |||||
Disaggregation of revenue | |||||
Total revenue | 297 | 634 | |||
Over Time | |||||
Disaggregation of revenue | |||||
Total revenue | 598 | 1,199 | |||
Perpetual Licenses | |||||
Disaggregation of revenue | |||||
Total revenue | 70 | 146 | |||
On-Premise Term Licenses | |||||
Disaggregation of revenue | |||||
Total revenue | 157 | 350 | |||
Maintenance | |||||
Disaggregation of revenue | |||||
Total revenue | 473 | 960 | |||
SaaS | |||||
Disaggregation of revenue | |||||
Total revenue | 124 | 238 | |||
Professional Services | |||||
Disaggregation of revenue | |||||
Total revenue | 71 | $ 75 | 139 | $ 150 | |
United States | |||||
Disaggregation of revenue | |||||
Total revenue | 592 | 1,164 | |||
EMEA | |||||
Disaggregation of revenue | |||||
Total revenue | [1] | 186 | 415 | ||
Other | |||||
Disaggregation of revenue | |||||
Total revenue | $ 117 | $ 254 | |||
[1] | Consists of Europe, the Middle East and Africa. |
Revenue from Contracts with C_5
Revenue from Contracts with Customers 2 (Details) $ in Millions | Sep. 30, 2018USD ($) |
Contract assets | |
Balance at April 1, 2018 | $ 931 |
Balance at September 30, 2018 | 929 |
Deferred revenue | |
Balance at April 1, 2018 | 1,751 |
Balance at September 30, 2018 | $ 1,421 |
Revenue from Contracts with C_6
Revenue from Contracts with Customers 3 (Details) $ in Millions | 6 Months Ended | |
Sep. 30, 2018USD ($) | ||
Period between Two and Three Years | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | $ 1,700 | |
Period between Two and Three Years | Minimum | ||
Transaction price allocated to remaining performance obligations | ||
Period of performance obligations greater than 12 months | 2 years | |
Period between Two and Three Years | Maximum | ||
Transaction price allocated to remaining performance obligations | ||
Period of performance obligations greater than 12 months | 3 years | |
Period between Four and Five Years | Minimum | ||
Transaction price allocated to remaining performance obligations | ||
Period of performance obligations greater than 12 months | 4 years | |
Period between Four and Five Years | Maximum | ||
Transaction price allocated to remaining performance obligations | ||
Period of performance obligations greater than 12 months | 5 years | |
Perpetual Licenses | 12 Months or Less | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | $ 10 | |
Perpetual Licenses | Greater than 12 Months | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 11 | [1] |
On-Premise Term Licenses | 12 Months or Less | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 231 | |
On-Premise Term Licenses | Greater than 12 Months | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 113 | [1] |
Maintenance | 12 Months or Less | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 1,464 | |
Maintenance | Greater than 12 Months | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 1,632 | [1] |
SaaS | 12 Months or Less | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 345 | |
SaaS | Greater than 12 Months | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 221 | [1] |
Professional Services | 12 Months or Less | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 61 | |
Professional Services | Greater than 12 Months | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 31 | [1] |
Material Rights | 12 Months or Less | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | 3 | |
Material Rights | Greater than 12 Months | ||
Transaction price allocated to remaining performance obligations | ||
Remaining performance obligations | $ 178 | [1] |
[1] | Of the amount of performance obligations greater than 12 months, the portion that is 2 to 3 years is approximately $1.7 billion and the remaining amount is generally between 4 and 5 years. |
Revenue from Contracts with C_7
Revenue from Contracts with Customers 4 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Contract costs | ||
Impairment loss on capitalized contract costs | $ 0 | $ 0 |
Selling and Marketing | ||
Contract costs | ||
Amortization of capitalized contract costs | $ 31 | $ 61 |
New Contracts | ||
Contract costs | ||
Capitalized contract costs, Amortization period | 7 years | |
Renewal Contracts | ||
Contract costs | ||
Capitalized contract costs, Amortization period | 3 years |
Revenue from Contracts with C_8
Revenue from Contracts with Customers 5 (Details) $ in Millions | 6 Months Ended |
Sep. 30, 2018USD ($) | |
Revenue from Contracts with Customers, Other | |
Value relationship to allocate consideration between license and maintenance performance obligations, Annual maintenance as a percentage of total license fee | 20.00% |
Contract with customer, Liability, Revenue recognized | $ 770 |
Unbilled value of government contracts with termination for convenience clauses | 574 |
Deferred Revenue and Advanced Payments | |
Revenue from Contracts with Customers, Other | |
Advanced payments from government customers with termination for convenience rights | $ 105 |
Minimum | |
Revenue from Contracts with Customers, Other | |
General payment terms | 30 days |
Maximum | |
Revenue from Contracts with Customers, Other | |
General payment terms | 60 days |
Impact of Adopting Topic 606 1
Impact of Adopting Topic 606 1 (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Apr. 01, 2018 | Mar. 31, 2018 |
Current assets: | |||
Cash and cash equivalents | $ 2,931 | $ 3,405 | |
Trade accounts receivable, net | 507 | 793 | |
Contract assets | 817 | 0 | |
Other current assets | 107 | 210 | |
Total current assets | 4,362 | 4,408 | |
Property and equipment, net | 213 | 237 | |
Goodwill | 6,790 | 6,804 | |
Capitalized software and other intangible assets, net | 981 | 1,111 | |
Deferred income taxes | 124 | 346 | |
Contract assets | 112 | 0 | |
Contract costs | 400 | 0 | |
Other noncurrent assets, net | 121 | 154 | |
Total assets | 13,103 | 13,060 | |
Current liabilities: | |||
Current portion of long-term debt | 20 | 269 | |
Accounts payable | 81 | 85 | |
Accrued salaries, wages and commissions | 201 | 242 | |
Accrued expenses and other current liabilities | 309 | 340 | |
Deferred revenue and advanced payments | 1,002 | 2,289 | |
Taxes payable, other than income taxes payable | 25 | 55 | |
Federal, state and foreign income taxes payable | 72 | 41 | |
Total current liabilities | 1,710 | 3,321 | |
Long-term debt, net of current portion | 2,506 | 2,514 | |
Federal, state and foreign income taxes payable | 297 | 311 | |
Deferred income taxes | 171 | 111 | |
Deferred revenue and advanced payments | 419 | 820 | |
Other noncurrent liabilities | 98 | 88 | |
Total liabilities | 5,201 | 7,165 | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 59 | 59 | |
Additional paid-in capital | 3,735 | 3,744 | |
Retained earnings | 9,156 | 6,971 | |
Accumulated other comprehensive loss | (463) | (290) | |
Treasury stock | (4,585) | (4,589) | |
Total stockholders' equity | 7,902 | 5,895 | |
Total liabilities and stockholders' equity | 13,103 | 13,060 | |
As Reported March 31, 2018 | |||
Current assets: | |||
Cash and cash equivalents | 2,931 | 3,405 | |
Trade accounts receivable, net | 502 | 793 | |
Contract assets | 0 | 0 | |
Other current assets | 183 | 210 | |
Total current assets | 3,616 | 4,408 | |
Property and equipment, net | 213 | 237 | |
Goodwill | 6,790 | 6,804 | |
Capitalized software and other intangible assets, net | 981 | 1,111 | |
Deferred income taxes | 338 | 346 | |
Contract assets | 0 | 0 | |
Contract costs | 0 | 0 | |
Other noncurrent assets, net | 136 | 154 | |
Total assets | 12,074 | 13,060 | |
Current liabilities: | |||
Current portion of long-term debt | 20 | 269 | |
Accounts payable | 81 | 85 | |
Accrued salaries, wages and commissions | 201 | 242 | |
Accrued expenses and other current liabilities | 319 | 340 | |
Deferred revenue and advanced payments | 1,826 | 2,289 | |
Taxes payable, other than income taxes payable | 25 | 55 | |
Federal, state and foreign income taxes payable | 0 | 41 | |
Total current liabilities | 2,472 | 3,321 | |
Long-term debt, net of current portion | 2,506 | 2,514 | |
Federal, state and foreign income taxes payable | 187 | 311 | |
Deferred income taxes | 98 | 111 | |
Deferred revenue and advanced payments | 638 | 820 | |
Other noncurrent liabilities | 98 | 88 | |
Total liabilities | 5,999 | 7,165 | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 59 | 59 | |
Additional paid-in capital | 3,735 | 3,744 | |
Retained earnings | 7,263 | 6,971 | |
Accumulated other comprehensive loss | (397) | (290) | |
Treasury stock | (4,585) | (4,589) | |
Total stockholders' equity | 6,075 | 5,895 | |
Total liabilities and stockholders' equity | 12,074 | $ 13,060 | |
Adjustments Due to Topic 606 | |||
Current assets: | |||
Cash and cash equivalents | 0 | $ 0 | |
Trade accounts receivable, net | 5 | 9 | |
Contract assets | 817 | 772 | |
Other current assets | (76) | (38) | |
Total current assets | 746 | 743 | |
Property and equipment, net | 0 | 0 | |
Goodwill | 0 | 0 | |
Capitalized software and other intangible assets, net | 0 | 0 | |
Deferred income taxes | (214) | (221) | |
Contract assets | 112 | 159 | |
Contract costs | 400 | 427 | |
Other noncurrent assets, net | (15) | (19) | |
Total assets | 1,029 | 1,089 | |
Current liabilities: | |||
Current portion of long-term debt | 0 | 0 | |
Accounts payable | 0 | 0 | |
Accrued salaries, wages and commissions | 0 | 0 | |
Accrued expenses and other current liabilities | (10) | (8) | |
Deferred revenue and advanced payments | (824) | (1,067) | |
Taxes payable, other than income taxes payable | 0 | 0 | |
Federal, state and foreign income taxes payable | 72 | 170 | |
Total current liabilities | (762) | (905) | |
Long-term debt, net of current portion | 0 | 0 | |
Federal, state and foreign income taxes payable | 110 | 110 | |
Deferred income taxes | 73 | 80 | |
Deferred revenue and advanced payments | (219) | (291) | |
Other noncurrent liabilities | 0 | 0 | |
Total liabilities | (798) | (1,006) | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 0 | 0 | |
Additional paid-in capital | 0 | 0 | |
Retained earnings | 1,893 | 2,104 | |
Accumulated other comprehensive loss | (66) | (9) | |
Treasury stock | 0 | 0 | |
Total stockholders' equity | 1,827 | 2,095 | |
Total liabilities and stockholders' equity | 1,029 | 1,089 | |
Adjusted April 1, 2018 | |||
Current assets: | |||
Cash and cash equivalents | 2,931 | 3,405 | |
Trade accounts receivable, net | 507 | 802 | |
Contract assets | 817 | 772 | |
Other current assets | 107 | 172 | |
Total current assets | 4,362 | 5,151 | |
Property and equipment, net | 213 | 237 | |
Goodwill | 6,790 | 6,804 | |
Capitalized software and other intangible assets, net | 981 | 1,111 | |
Deferred income taxes | 124 | 125 | |
Contract assets | 112 | 159 | |
Contract costs | 400 | 427 | |
Other noncurrent assets, net | 121 | 135 | |
Total assets | 13,103 | 14,149 | |
Current liabilities: | |||
Current portion of long-term debt | 20 | 269 | |
Accounts payable | 81 | 85 | |
Accrued salaries, wages and commissions | 201 | 242 | |
Accrued expenses and other current liabilities | 309 | 332 | |
Deferred revenue and advanced payments | 1,002 | 1,222 | |
Taxes payable, other than income taxes payable | 25 | 55 | |
Federal, state and foreign income taxes payable | 72 | 211 | |
Total current liabilities | 1,710 | 2,416 | |
Long-term debt, net of current portion | 2,506 | 2,514 | |
Federal, state and foreign income taxes payable | 297 | 421 | |
Deferred income taxes | 171 | 191 | |
Deferred revenue and advanced payments | 419 | 529 | |
Other noncurrent liabilities | 98 | 88 | |
Total liabilities | 5,201 | 6,159 | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 59 | 59 | |
Additional paid-in capital | 3,735 | 3,744 | |
Retained earnings | 9,156 | 9,075 | |
Accumulated other comprehensive loss | (463) | (299) | |
Treasury stock | (4,585) | (4,589) | |
Total stockholders' equity | 7,902 | 7,990 | |
Total liabilities and stockholders' equity | $ 13,103 | $ 14,149 |
Impact of Adopting Topic 606 2
Impact of Adopting Topic 606 2 (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Apr. 01, 2018 | Mar. 31, 2018 |
Current assets: | |||
Cash and cash equivalents | $ 2,931 | $ 3,405 | |
Trade accounts receivable, net | 507 | 793 | |
Contract assets | 817 | 0 | |
Other current assets | 107 | 210 | |
Total current assets | 4,362 | 4,408 | |
Property and equipment, net | 213 | 237 | |
Goodwill | 6,790 | 6,804 | |
Capitalized software and other intangible assets, net | 981 | 1,111 | |
Deferred income taxes | 124 | 346 | |
Contract assets | 112 | 0 | |
Contract costs | 400 | 0 | |
Other noncurrent assets, net | 121 | 154 | |
Total assets | 13,103 | 13,060 | |
Current liabilities: | |||
Current portion of long-term debt | 20 | 269 | |
Accounts payable | 81 | 85 | |
Accrued salaries, wages and commissions | 201 | 242 | |
Accrued expenses and other current liabilities | 309 | 340 | |
Deferred revenue and advanced payments | 1,002 | 2,289 | |
Taxes payable, other than income taxes payable | 25 | 55 | |
Federal, state and foreign income taxes payable | 72 | 41 | |
Total current liabilities | 1,710 | 3,321 | |
Long-term debt, net of current portion | 2,506 | 2,514 | |
Federal, state and foreign income taxes payable | 297 | 311 | |
Deferred income taxes | 171 | 111 | |
Deferred revenue and advanced payments | 419 | 820 | |
Other noncurrent liabilities | 98 | 88 | |
Total liabilities | 5,201 | 7,165 | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 59 | 59 | |
Additional paid-in capital | 3,735 | 3,744 | |
Retained earnings | 9,156 | 6,971 | |
Accumulated other comprehensive loss | (463) | (290) | |
Treasury stock | (4,585) | (4,589) | |
Total stockholders' equity | 7,902 | 5,895 | |
Total liabilities and stockholders' equity | 13,103 | 13,060 | |
As Reported under Topic 606 | |||
Current assets: | |||
Cash and cash equivalents | 2,931 | $ 3,405 | |
Trade accounts receivable, net | 507 | 802 | |
Contract assets | 817 | 772 | |
Other current assets | 107 | 172 | |
Total current assets | 4,362 | 5,151 | |
Property and equipment, net | 213 | 237 | |
Goodwill | 6,790 | 6,804 | |
Capitalized software and other intangible assets, net | 981 | 1,111 | |
Deferred income taxes | 124 | 125 | |
Contract assets | 112 | 159 | |
Contract costs | 400 | 427 | |
Other noncurrent assets, net | 121 | 135 | |
Total assets | 13,103 | 14,149 | |
Current liabilities: | |||
Current portion of long-term debt | 20 | 269 | |
Accounts payable | 81 | 85 | |
Accrued salaries, wages and commissions | 201 | 242 | |
Accrued expenses and other current liabilities | 309 | 332 | |
Deferred revenue and advanced payments | 1,002 | 1,222 | |
Taxes payable, other than income taxes payable | 25 | 55 | |
Federal, state and foreign income taxes payable | 72 | 211 | |
Total current liabilities | 1,710 | 2,416 | |
Long-term debt, net of current portion | 2,506 | 2,514 | |
Federal, state and foreign income taxes payable | 297 | 421 | |
Deferred income taxes | 171 | 191 | |
Deferred revenue and advanced payments | 419 | 529 | |
Other noncurrent liabilities | 98 | 88 | |
Total liabilities | 5,201 | 6,159 | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 59 | 59 | |
Additional paid-in capital | 3,735 | 3,744 | |
Retained earnings | 9,156 | 9,075 | |
Accumulated other comprehensive loss | (463) | (299) | |
Treasury stock | (4,585) | (4,589) | |
Total stockholders' equity | 7,902 | 7,990 | |
Total liabilities and stockholders' equity | 13,103 | 14,149 | |
Proforma as if the previous accounting of Topic 605 was in effect | |||
Current assets: | |||
Cash and cash equivalents | 2,931 | 3,405 | |
Trade accounts receivable, net | 502 | 793 | |
Contract assets | 0 | 0 | |
Other current assets | 183 | 210 | |
Total current assets | 3,616 | 4,408 | |
Property and equipment, net | 213 | 237 | |
Goodwill | 6,790 | 6,804 | |
Capitalized software and other intangible assets, net | 981 | 1,111 | |
Deferred income taxes | 338 | 346 | |
Contract assets | 0 | 0 | |
Contract costs | 0 | 0 | |
Other noncurrent assets, net | 136 | 154 | |
Total assets | 12,074 | 13,060 | |
Current liabilities: | |||
Current portion of long-term debt | 20 | 269 | |
Accounts payable | 81 | 85 | |
Accrued salaries, wages and commissions | 201 | 242 | |
Accrued expenses and other current liabilities | 319 | 340 | |
Deferred revenue and advanced payments | 1,826 | 2,289 | |
Taxes payable, other than income taxes payable | 25 | 55 | |
Federal, state and foreign income taxes payable | 0 | 41 | |
Total current liabilities | 2,472 | 3,321 | |
Long-term debt, net of current portion | 2,506 | 2,514 | |
Federal, state and foreign income taxes payable | 187 | 311 | |
Deferred income taxes | 98 | 111 | |
Deferred revenue and advanced payments | 638 | 820 | |
Other noncurrent liabilities | 98 | 88 | |
Total liabilities | 5,999 | 7,165 | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 59 | 59 | |
Additional paid-in capital | 3,735 | 3,744 | |
Retained earnings | 7,263 | 6,971 | |
Accumulated other comprehensive loss | (397) | (290) | |
Treasury stock | (4,585) | (4,589) | |
Total stockholders' equity | 6,075 | 5,895 | |
Total liabilities and stockholders' equity | 12,074 | $ 13,060 | |
Effect of Change Higher/(Lower) | |||
Current assets: | |||
Cash and cash equivalents | 0 | 0 | |
Trade accounts receivable, net | 5 | 9 | |
Contract assets | 817 | 772 | |
Other current assets | (76) | (38) | |
Total current assets | 746 | 743 | |
Property and equipment, net | 0 | 0 | |
Goodwill | 0 | 0 | |
Capitalized software and other intangible assets, net | 0 | 0 | |
Deferred income taxes | (214) | (221) | |
Contract assets | 112 | 159 | |
Contract costs | 400 | 427 | |
Other noncurrent assets, net | (15) | (19) | |
Total assets | 1,029 | 1,089 | |
Current liabilities: | |||
Current portion of long-term debt | 0 | 0 | |
Accounts payable | 0 | 0 | |
Accrued salaries, wages and commissions | 0 | 0 | |
Accrued expenses and other current liabilities | (10) | (8) | |
Deferred revenue and advanced payments | (824) | (1,067) | |
Taxes payable, other than income taxes payable | 0 | 0 | |
Federal, state and foreign income taxes payable | 72 | 170 | |
Total current liabilities | (762) | (905) | |
Long-term debt, net of current portion | 0 | 0 | |
Federal, state and foreign income taxes payable | 110 | 110 | |
Deferred income taxes | 73 | 80 | |
Deferred revenue and advanced payments | (219) | (291) | |
Other noncurrent liabilities | 0 | 0 | |
Total liabilities | (798) | (1,006) | |
Stockholders' equity: | |||
Preferred stock | 0 | 0 | |
Common stock | 0 | 0 | |
Additional paid-in capital | 0 | 0 | |
Retained earnings | 1,893 | 2,104 | |
Accumulated other comprehensive loss | (66) | (9) | |
Treasury stock | 0 | 0 | |
Total stockholders' equity | 1,827 | 2,095 | |
Total liabilities and stockholders' equity | $ 1,029 | $ 1,089 |
Impact of Adopting Topic 606 3
Impact of Adopting Topic 606 3 (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue: | ||||
Total revenue | $ 895 | $ 1,034 | $ 1,833 | $ 2,059 |
Expenses: | ||||
Amortization of capitalized software costs | 49 | 67 | 109 | 137 |
Selling and marketing | 252 | 244 | 487 | 490 |
General and administrative | 99 | 97 | 203 | 204 |
Product development and enhancements | 158 | 161 | 320 | 319 |
Depreciation and amortization of other intangible assets | 28 | 27 | 54 | 53 |
Other expenses, net | 4 | 9 | 107 | 20 |
Total expenses before interest and income taxes | 728 | 752 | 1,564 | 1,514 |
Income before interest and income taxes | 167 | 282 | 269 | 545 |
Interest expense, net | 19 | 24 | 39 | 49 |
Income before income taxes | 148 | 258 | 230 | 496 |
Income tax expense (benefit) | 19 | 74 | (65) | 134 |
Net income | $ 129 | $ 184 | $ 295 | $ 362 |
Basic income per common share: | ||||
Basic income per common share (in dollars per share) | $ 0.31 | $ 0.44 | $ 0.70 | $ 0.86 |
Basic weighted average shares used in computation | 413 | 415 | 414 | 415 |
Diluted income per common share: | ||||
Diluted income per common share (in dollars per share) | $ 0.31 | $ 0.44 | $ 0.70 | $ 0.86 |
Diluted weighted average shares used in computation | 416 | 416 | 416 | 416 |
License and Maintenance | ||||
Revenue: | ||||
Total revenue | $ 824 | $ 959 | $ 1,694 | $ 1,909 |
Expenses: | ||||
Costs of licensing and maintenance and professional services | 74 | 73 | 150 | 144 |
Professional Services | ||||
Revenue: | ||||
Total revenue | 71 | 75 | 139 | 150 |
Expenses: | ||||
Costs of licensing and maintenance and professional services | 64 | 74 | 134 | 147 |
As Reported under Topic 606 | ||||
Revenue: | ||||
Total revenue | 895 | 1,833 | ||
Expenses: | ||||
Amortization of capitalized software costs | 49 | 109 | ||
Selling and marketing | 252 | 487 | ||
General and administrative | 99 | 203 | ||
Product development and enhancements | 158 | 320 | ||
Depreciation and amortization of other intangible assets | 28 | 54 | ||
Other expenses, net | 4 | 107 | ||
Total expenses before interest and income taxes | 728 | 1,564 | ||
Income before interest and income taxes | 167 | 269 | ||
Interest expense, net | 19 | 39 | ||
Income before income taxes | 148 | 230 | ||
Income tax expense (benefit) | 19 | (65) | ||
Net income | $ 129 | $ 295 | ||
Basic income per common share: | ||||
Basic income per common share (in dollars per share) | $ 0.31 | $ 0.70 | ||
Basic weighted average shares used in computation | 413 | 414 | ||
Diluted income per common share: | ||||
Diluted income per common share (in dollars per share) | $ 0.31 | $ 0.70 | ||
Diluted weighted average shares used in computation | 416 | 416 | ||
As Reported under Topic 606 | License and Maintenance | ||||
Revenue: | ||||
Total revenue | $ 824 | $ 1,694 | ||
Expenses: | ||||
Costs of licensing and maintenance and professional services | 74 | 150 | ||
As Reported under Topic 606 | Professional Services | ||||
Revenue: | ||||
Total revenue | 71 | 139 | ||
Expenses: | ||||
Costs of licensing and maintenance and professional services | 64 | 134 | ||
Proforma as if the previous accounting of Topic 605 was in effect | ||||
Revenue: | ||||
Total revenue | 1,045 | 1,034 | 2,097 | 2,059 |
Expenses: | ||||
Amortization of capitalized software costs | 49 | 109 | ||
Selling and marketing | 246 | 471 | ||
General and administrative | 99 | 202 | ||
Product development and enhancements | 158 | 320 | ||
Depreciation and amortization of other intangible assets | 28 | 54 | ||
Other expenses, net | 4 | 112 | ||
Total expenses before interest and income taxes | 728 | 1,561 | ||
Income before interest and income taxes | 317 | 536 | ||
Interest expense, net | 19 | 39 | ||
Income before income taxes | 298 | 497 | ||
Income tax expense (benefit) | 53 | (9) | ||
Net income | $ 245 | $ 506 | ||
Basic income per common share: | ||||
Basic income per common share (in dollars per share) | $ 0.59 | $ 1.21 | ||
Basic weighted average shares used in computation | 413 | 414 | ||
Diluted income per common share: | ||||
Diluted income per common share (in dollars per share) | $ 0.58 | $ 1.20 | ||
Diluted weighted average shares used in computation | 416 | 416 | ||
Proforma as if the previous accounting of Topic 605 was in effect | License and Maintenance | ||||
Revenue: | ||||
Total revenue | $ 971 | $ 1,949 | ||
Expenses: | ||||
Costs of licensing and maintenance and professional services | 74 | 150 | ||
Proforma as if the previous accounting of Topic 605 was in effect | Professional Services | ||||
Revenue: | ||||
Total revenue | 74 | $ 75 | 148 | $ 150 |
Expenses: | ||||
Costs of licensing and maintenance and professional services | 70 | 143 | ||
Effect of Change Higher/(Lower) | ||||
Revenue: | ||||
Total revenue | (150) | (264) | ||
Expenses: | ||||
Amortization of capitalized software costs | 0 | 0 | ||
Selling and marketing | 6 | 16 | ||
General and administrative | 0 | 1 | ||
Product development and enhancements | 0 | 0 | ||
Depreciation and amortization of other intangible assets | 0 | 0 | ||
Other expenses, net | 0 | (5) | ||
Total expenses before interest and income taxes | 0 | 3 | ||
Income before interest and income taxes | (150) | (267) | ||
Interest expense, net | 0 | 0 | ||
Income before income taxes | (150) | (267) | ||
Income tax expense (benefit) | (34) | (56) | ||
Net income | $ (116) | $ (211) | ||
Basic income per common share: | ||||
Basic income per common share (in dollars per share) | $ (0.28) | $ (0.51) | ||
Basic weighted average shares used in computation | 0 | 0 | ||
Diluted income per common share: | ||||
Diluted income per common share (in dollars per share) | $ (0.27) | $ (0.50) | ||
Diluted weighted average shares used in computation | 0 | 0 | ||
Effect of Change Higher/(Lower) | License and Maintenance | ||||
Revenue: | ||||
Total revenue | $ (147) | $ (255) | ||
Expenses: | ||||
Costs of licensing and maintenance and professional services | 0 | 0 | ||
Effect of Change Higher/(Lower) | Professional Services | ||||
Revenue: | ||||
Total revenue | (3) | (9) | ||
Expenses: | ||||
Costs of licensing and maintenance and professional services | $ (6) | $ (9) |
Impact of Adopting Topic 606 4
Impact of Adopting Topic 606 4 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue: | ||||
Total revenue | $ 895 | $ 1,034 | $ 1,833 | $ 2,059 |
Professional Services | ||||
Revenue: | ||||
Total revenue | 71 | 75 | 139 | 150 |
Topic 605 | ||||
Revenue: | ||||
Total revenue | 1,045 | 1,034 | 2,097 | 2,059 |
Topic 605 | Subscription and Maintenance | ||||
Revenue: | ||||
Total revenue | 829 | 826 | 1,667 | 1,643 |
Topic 605 | Professional Services | ||||
Revenue: | ||||
Total revenue | 74 | 75 | 148 | 150 |
Topic 605 | Software Fees and Other | ||||
Revenue: | ||||
Total revenue | $ 142 | $ 133 | $ 282 | $ 266 |
Impact of Adopting Topic 606 5
Impact of Adopting Topic 606 5 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Operating activities: | ||||
Net income | $ 129 | $ 184 | $ 295 | $ 362 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 163 | 190 | ||
Deferred income taxes | (12) | (23) | ||
Provision for bad debts | 0 | 2 | ||
Share-based compensation expense | 68 | 61 | ||
Other non-cash items | 5 | 2 | ||
Foreign currency transaction (gains) losses | (4) | 9 | ||
Changes in other operating assets and liabilities, net of effect of acquisitions: | ||||
Decrease in trade accounts receivable | 279 | 317 | ||
Increase in contract assets | (26) | 0 | ||
Decrease in contract costs | 18 | 0 | ||
Decrease in deferred revenue and advanced payments | (314) | (460) | ||
Decrease in taxes payable, net | (258) | (58) | ||
Increase in accounts payable, accrued expenses and other | 33 | 11 | ||
Decrease in accrued salaries, wages and commissions | (34) | (81) | ||
Changes in other operating assets and liabilities, net | 38 | 3 | ||
Net cash provided by operating activities | 251 | $ 335 | ||
As Reported under Topic 606 | ||||
Operating activities: | ||||
Net income | 129 | 295 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 163 | |||
Deferred income taxes | (12) | |||
Provision for bad debts | 0 | |||
Share-based compensation expense | 68 | |||
Other non-cash items | 5 | |||
Foreign currency transaction (gains) losses | (4) | |||
Changes in other operating assets and liabilities, net of effect of acquisitions: | ||||
Decrease in trade accounts receivable | 279 | |||
Increase in contract assets | (26) | |||
Decrease in contract costs | 18 | |||
Decrease in deferred revenue and advanced payments | (314) | |||
Decrease in taxes payable, net | (258) | |||
Increase in accounts payable, accrued expenses and other | 33 | |||
Decrease in accrued salaries, wages and commissions | (34) | |||
Changes in other operating assets and liabilities, net | 38 | |||
Net cash provided by operating activities | 251 | |||
Proforma as if the previous accounting of Topic 605 was in effect | ||||
Operating activities: | ||||
Net income | 245 | 506 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 163 | |||
Deferred income taxes | (10) | |||
Provision for bad debts | (1) | |||
Share-based compensation expense | 68 | |||
Other non-cash items | 5 | |||
Foreign currency transaction (gains) losses | 2 | |||
Changes in other operating assets and liabilities, net of effect of acquisitions: | ||||
Decrease in trade accounts receivable | 275 | |||
Increase in contract assets | 0 | |||
Decrease in contract costs | 0 | |||
Decrease in deferred revenue and advanced payments | (598) | |||
Decrease in taxes payable, net | (204) | |||
Increase in accounts payable, accrued expenses and other | 35 | |||
Decrease in accrued salaries, wages and commissions | (34) | |||
Changes in other operating assets and liabilities, net | 44 | |||
Net cash provided by operating activities | 251 | |||
Effect of Change Higher/(Lower) | ||||
Operating activities: | ||||
Net income | $ (116) | (211) | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 0 | |||
Deferred income taxes | (2) | |||
Provision for bad debts | 1 | |||
Share-based compensation expense | 0 | |||
Other non-cash items | 0 | |||
Foreign currency transaction (gains) losses | (6) | |||
Changes in other operating assets and liabilities, net of effect of acquisitions: | ||||
Decrease in trade accounts receivable | 4 | |||
Increase in contract assets | (26) | |||
Decrease in contract costs | 18 | |||
Decrease in deferred revenue and advanced payments | 284 | |||
Decrease in taxes payable, net | (54) | |||
Increase in accounts payable, accrued expenses and other | (2) | |||
Decrease in accrued salaries, wages and commissions | 0 | |||
Changes in other operating assets and liabilities, net | (6) | |||
Net cash provided by operating activities | $ 0 |
Impact of Adopting Topic 606 6
Impact of Adopting Topic 606 6 (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Apr. 01, 2018 | Mar. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Retained earnings | $ 9,156 | $ 6,971 | |
Deferred revenue | 1,421 | $ 1,751 | |
Contract assets | 929 | 931 | |
Contract costs | 400 | $ 0 | |
Adjustments Due to Topic 606 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Retained earnings | 1,893 | 2,104 | |
Deferred revenue | (1,358) | ||
Contract assets | 931 | ||
Contract costs | $ 400 | 427 | |
Deferred income taxes | 301 | ||
Income taxes payable | $ 280 |
Restructuring 1 (Details)
Restructuring 1 (Details) $ in Millions | 6 Months Ended |
Sep. 30, 2018USD ($) | |
Accrued restructuring severance and exit costs activity | |
Accrued balance at March 31, 2018 | $ 7 |
Accrued balance at September 30, 2018 | 70 |
Employee Severance | |
Accrued restructuring severance and exit costs activity | |
Accrued balance at March 31, 2018 | 0 |
Expense | 82 |
Change in estimate | (6) |
Payments | (44) |
Accretion and other | 0 |
Accrued balance at September 30, 2018 | 32 |
Facility Exit | |
Accrued restructuring severance and exit costs activity | |
Accrued balance at March 31, 2018 | 7 |
Expense | 37 |
Change in estimate | 0 |
Payments | (6) |
Accretion and other | 0 |
Accrued balance at September 30, 2018 | $ 38 |
Restructuring 2 (Details)
Restructuring 2 (Details) $ in Millions | May 02, 2018USD ($)Employee | Sep. 30, 2018USD ($) | Mar. 31, 2018USD ($) |
Restructuring | |||
Facility exit accruals | $ 70 | $ 7 | |
Employee Severance | |||
Restructuring | |||
Facility exit accruals | 32 | 0 | |
Facility Exit and Consolidation | |||
Restructuring | |||
Facility exit accruals | 38 | $ 7 | |
Fiscal 2019 Plan | |||
Restructuring | |||
Expected number of positions eliminated | Employee | 800 | ||
Fiscal 2019 Plan | Minimum | |||
Restructuring | |||
Expected restructuring costs | $ 140 | ||
Fiscal 2019 Plan | Minimum | Employee Severance | |||
Restructuring | |||
Expected restructuring costs | 90 | ||
Fiscal 2019 Plan | Minimum | Facility Exit and Consolidation | |||
Restructuring | |||
Expected restructuring costs | 50 | ||
Fiscal 2019 Plan | Maximum | |||
Restructuring | |||
Expected restructuring costs | 160 | ||
Fiscal 2019 Plan | Maximum | Employee Severance | |||
Restructuring | |||
Expected restructuring costs | 100 | ||
Fiscal 2019 Plan | Maximum | Facility Exit and Consolidation | |||
Restructuring | |||
Expected restructuring costs | $ 60 | ||
Plans and Actions Prior to Fiscal 2019 Plan | Facility Exit and Consolidation | |||
Restructuring | |||
Facility exit accruals | $ 7 |
Goodwill, Capitalized Softwar_3
Goodwill, Capitalized Software and Other Intangible Assets 1 (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Mar. 31, 2018 |
Capitalized software and other intangible assets | ||
Gross amortizable assets | $ 9,261 | $ 9,265 |
Less: Fully amortized assets | 7,539 | 7,131 |
Remaining amortizable assets | 1,722 | 2,134 |
Accumulated amortization on remaining amortizable assets | 741 | 1,023 |
Net assets | 981 | 1,111 |
Purchased Software Products | ||
Capitalized software and other intangible assets | ||
Gross amortizable assets | 6,579 | 6,572 |
Less: Fully amortized assets | 5,247 | 4,961 |
Remaining amortizable assets | 1,332 | 1,611 |
Accumulated amortization on remaining amortizable assets | 658 | 845 |
Net assets | 674 | 766 |
Internally Developed Software Products | ||
Capitalized software and other intangible assets | ||
Gross amortizable assets | 1,467 | 1,467 |
Less: Fully amortized assets | 1,458 | 1,347 |
Remaining amortizable assets | 9 | 120 |
Accumulated amortization on remaining amortizable assets | 6 | 109 |
Net assets | 3 | 11 |
Other Intangible Assets | ||
Capitalized software and other intangible assets | ||
Gross amortizable assets | 1,215 | 1,226 |
Less: Fully amortized assets | 834 | 823 |
Remaining amortizable assets | 381 | 403 |
Accumulated amortization on remaining amortizable assets | 77 | 69 |
Net assets | $ 304 | $ 334 |
Goodwill, Capitalized Softwar_4
Goodwill, Capitalized Software and Other Intangible Assets 2 (Details) $ in Millions | Sep. 30, 2018USD ($) |
Projected annual amortization expense | |
2,019 | $ 239 |
2,020 | 203 |
2,021 | 158 |
2,022 | 148 |
2,023 | 117 |
Purchased Software Products | |
Projected annual amortization expense | |
2,019 | 189 |
2,020 | 166 |
2,021 | 122 |
2,022 | 113 |
2,023 | 86 |
Internally Developed Software Products | |
Projected annual amortization expense | |
2,019 | 10 |
2,020 | 1 |
2,021 | 0 |
2,022 | 0 |
2,023 | 0 |
Other Intangible Assets | |
Projected annual amortization expense | |
2,019 | 40 |
2,020 | 36 |
2,021 | 36 |
2,022 | 35 |
2,023 | $ 31 |
Goodwill, Capitalized Softwar_5
Goodwill, Capitalized Software and Other Intangible Assets 3 (Details) $ in Millions | 6 Months Ended |
Sep. 30, 2018USD ($) | |
Goodwill activity by segment | |
Balance at March 31, 2018 | $ 6,804 |
Acquisitions | 6 |
Foreign currency translation adjustment | (20) |
Balance at September 30, 2018 | 6,790 |
Mainframe Solutions | |
Goodwill activity by segment | |
Balance at March 31, 2018 | 4,178 |
Acquisitions | 0 |
Foreign currency translation adjustment | 0 |
Balance at September 30, 2018 | 4,178 |
Enterprise Solutions | |
Goodwill activity by segment | |
Balance at March 31, 2018 | 2,545 |
Acquisitions | 6 |
Foreign currency translation adjustment | (20) |
Balance at September 30, 2018 | 2,531 |
Services | |
Goodwill activity by segment | |
Balance at March 31, 2018 | 81 |
Acquisitions | 0 |
Foreign currency translation adjustment | 0 |
Balance at September 30, 2018 | $ 81 |
Goodwill, Capitalized Softwar_6
Goodwill, Capitalized Software and Other Intangible Assets 4 (Details) | 6 Months Ended |
Sep. 30, 2018 | |
Enterprise Solutions | |
Capitalized software and other 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. |
Derivatives 1 (Details)
Derivatives 1 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Foreign Currency Contracts | Other Expenses, Net | ||||
Effect of foreign exchange derivatives | ||||
Amount of net loss (gain) from derivative instruments recognized in the Condensed Consolidated Statements of Operations | $ 0 | $ 4 | $ (10) | $ 8 |
Derivatives 2 (Details)
Derivatives 2 (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Collateral posted under collateralized security arrangements | $ 0 | $ 0 |
Foreign Currency Contracts | ||
Derivatives | ||
Gross notional value of foreign currency contracts outstanding consisting of purchase and sale contracts | $ 720 | $ 456 |
Tenure of foreign currency contracts outstanding | less than six months | less than three months |
Net fair value of foreign currency contracts | $ 10 | $ 1 |
Foreign Currency Contracts | Other Current Assets | ||
Derivatives | ||
Fair value of foreign currency contracts included in "Other current assets" | 18 | 2 |
Foreign Currency Contracts | Accrued Expenses and Other Current Liabilities | ||
Derivatives | ||
Fair value of foreign currency contracts included in "Accrued expenses and other current liabilities" | $ 8 | $ 1 |
Fair Value Measurements 1 (Deta
Fair Value Measurements 1 (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Sep. 30, 2018 | Mar. 31, 2018 | |
Assets: | |||
Foreign exchange derivatives | [1] | $ 18 | $ 2 |
Total assets | 924 | 1,283 | |
Liabilities: | |||
Foreign exchange derivatives | [1] | 8 | 1 |
Total liabilities | 8 | 1 | |
Money Market Funds | Cash and Cash Equivalents | |||
Assets: | |||
Money market funds | [2] | 906 | 1,281 |
Fair Value, Inputs, Level 1 | |||
Assets: | |||
Foreign exchange derivatives | 0 | 0 | |
Total assets | 906 | 1,281 | |
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] | 906 | 1,281 |
Fair Value, Inputs, Level 2 | |||
Assets: | |||
Foreign exchange derivatives | [1] | 18 | 2 |
Total assets | 18 | 2 | |
Liabilities: | |||
Foreign exchange derivatives | [1] | 8 | 1 |
Total liabilities | 8 | 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 6, “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, 2018 | Mar. 31, 2018 | |
Liabilities: | |||
Facility exit reserves | $ 70 | $ 7 | |
Facility Exit | |||
Liabilities: | |||
Facility exit reserves | 38 | 7 | |
Carrying Value | |||
Liabilities: | |||
Total debt | 2,526 | 2,783 | |
Carrying Value | Facility Exit | |||
Liabilities: | |||
Facility exit reserves | [1] | 38 | 7 |
Estimated Fair Value | |||
Liabilities: | |||
Total debt | [2] | 2,550 | 2,844 |
Estimated Fair Value | Facility Exit | |||
Liabilities: | |||
Facility exit reserves | [1] | $ 39 | $ 8 |
[1] | Estimated fair value for the facility exit reserves is determined using the Company’s incremental borrowing rate at September 30, 2018 and March 31, 2018. At September 30, 2018 and March 31, 2018, the facility exit reserves included carrying values of approximately $12 million and $2 million, respectively, in “Accrued expenses and other current liabilities” and approximately $26 million and $5 million, respectively, in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets (Level 3). | ||
[2] | Estimated fair value of total debt is based on quoted prices for similar liabilities for which significant inputs are observable except for certain long-term lease obligations, for which fair value approximates carrying value (Level 2). |
Fair Value Measurements 3 (Deta
Fair Value Measurements 3 (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Mar. 31, 2018 |
Fair value measurements | ||
Facility exit reserves | $ 70 | $ 7 |
Facility Exit | ||
Fair value measurements | ||
Facility exit reserves | 38 | 7 |
Facility Exit | Accrued Expenses and Other Current Liabilities | ||
Fair value measurements | ||
Facility exit reserves | 12 | 2 |
Facility Exit | Other Noncurrent Liabilities | ||
Fair value measurements | ||
Facility exit reserves | $ 26 | $ 5 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Sep. 30, 2018USD ($) |
Maximum | |
Commitments and contingencies | |
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, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Jun. 30, 2017 | |
Cash dividends | ||||
Declaration date | Aug. 9, 2018 | May 2, 2018 | Aug. 9, 2017 | May 9, 2017 |
Dividend per share (in dollars per share) | $ 0.255 | $ 0.255 | $ 0.255 | $ 0.255 |
Record date | Aug. 23, 2018 | May 17, 2018 | Aug. 24, 2017 | May 25, 2017 |
Total amount | $ 107 | $ 107 | $ 108 | $ 107 |
Payment date | Sep. 11, 2018 | Jun. 5, 2018 | Sep. 12, 2017 | Jun. 13, 2017 |
Stockholders' Equity 2 (Details
Stockholders' Equity 2 (Details) - Current Stock Repurchase Program - USD ($) shares in Millions, $ in Millions | 6 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2015 | |
Stock repurchases | ||
Stock repurchase program, Authorized amount | $ 750 | |
Shares of common stock repurchased | 2.3 | |
Value of common stock repurchased | $ 80 | |
Stock repurchase program, Remaining authorized common stock repurchase amount | $ 407 |
Stockholders' Equity 3 (Details
Stockholders' Equity 3 (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Mar. 31, 2018 |
Accumulated Other Comprehensive Loss | ||
Accumulated other comprehensive loss | ||
Foreign currency translation losses | $ (463) | $ (290) |
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, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Basic income per common share: | ||||
Net income | $ 129 | $ 184 | $ 295 | $ 362 |
Less: Net income allocable to participating securities | (2) | (3) | (4) | (5) |
Net income allocable to common shares | $ 127 | $ 181 | $ 291 | $ 357 |
Weighted average common shares outstanding | 413 | 415 | 414 | 415 |
Basic income per common share (in dollars per share) | $ 0.31 | $ 0.44 | $ 0.70 | $ 0.86 |
Diluted income per common share: | ||||
Net income | $ 129 | $ 184 | $ 295 | $ 362 |
Less: Net income allocable to participating securities | (2) | (3) | (4) | (5) |
Net income allocable to common shares | $ 127 | $ 181 | $ 291 | $ 357 |
Weighted average shares outstanding and common share equivalents: | ||||
Weighted average common shares outstanding | 413 | 415 | 414 | 415 |
Weighted average effect of share-based payment awards | 3 | 1 | 2 | 1 |
Denominator in calculation of diluted income per share | 416 | 416 | 416 | 416 |
Diluted income per common share (in dollars per share) | $ 0.31 | $ 0.44 | $ 0.70 | $ 0.86 |
Income per common share, Other disclosures | ||||
Number of anti-dilutive restricted stock awards and options excluded from the calculation | 0 | 2 | 1 | 2 |
Weighted average restricted stock awards considered participating securities | 5 | 5 | 5 | 5 |
Accounting for Share-Based Co_3
Accounting for Share-Based Compensation 1 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Recognized share-based compensation | ||||
Share-based compensation expense before tax | $ 35 | $ 29 | $ 68 | $ 61 |
Income tax benefit | (8) | (9) | (16) | (20) |
Net share-based compensation expense | 27 | 20 | 52 | 41 |
Costs of Licensing and Maintenance | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 2 | 2 | 4 | 4 |
Cost of Professional Services | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 0 | 0 | 1 | 1 |
Selling and Marketing | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 11 | 10 | 21 | 20 |
General and Administrative | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | 13 | 11 | 25 | 23 |
Product Development and Enhancements | ||||
Recognized share-based compensation | ||||
Share-based compensation expense before tax | $ 9 | $ 6 | $ 17 | $ 13 |
Accounting for Share-Based Co_4
Accounting for Share-Based Compensation 2 (Details) $ in Millions | 6 Months Ended |
Sep. 30, 2018USD ($) | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 180 |
Weighted average period expected to be recognized (in years) | 2 years 3 months 18 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 Awards (RSAs) | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 95 |
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 | $ 27 |
Weighted average period expected to be recognized (in years) | 2 years 2 months 12 days |
Performance Share Units | |
Unrecognized share-based compensation costs | |
Unrecognized share-based compensation costs | $ 52 |
Weighted average period expected to be recognized (in years) | 2 years 7 months 6 days |
Accounting for Share-Based Co_5
Accounting for Share-Based Compensation 3 (Details) - $ / shares | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | ||
Weighted average fair values and assumptions used for options granted | |||
Weighted average fair value (in dollars per share) | $ 5.70 | $ 4.72 | |
Dividend yield | 3.07% | 3.17% | |
Expected volatility factor | [1] | 21.00% | 21.00% |
Risk-free interest rate | [2] | 3.00% | 2.10% |
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 Co_6
Accounting for Share-Based Compensation 4 (Details) - $ / shares shares in Millions | 3 Months Ended | 6 Months Ended | |||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | ||||
Restricted Stock Awards (RSAs) | |||||||
Summary of all RSAs and RSUs granted, including grants made pursuant to long-term incentive plans | |||||||
Shares | 0 | 0 | [1] | 2.9 | 2.9 | ||
Weighted average grant date fair value (in dollars per share) | [2] | $ 0 | $ 32.98 | $ 35.28 | $ 31.70 | ||
Restricted Stock Units (RSUs) | |||||||
Summary of all RSAs and RSUs granted, including grants made pursuant to long-term incentive plans | |||||||
Shares | 0 | [1] | 0 | 1.2 | 1.1 | ||
Weighted average grant date fair value (in dollars per share) | [3] | $ 37.02 | $ 0 | $ 34.06 | $ 30.35 | ||
[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 Co_7
Accounting for Share-Based Compensation 5 (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | |
Accounting for share-based compensation | |||||
Capitalized share-based compensation costs | $ 0 | $ 0 | $ 0 | $ 0 | |
Stock options issued | 0.9 | 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) | |||||
Accounting for share-based compensation | |||||
Number of shares issued under ESPP | 0.1 | ||||
Share price issued under ESPP (in dollars per share) | $ 33.87 | ||||
Number of shares available for future issuances under ESPP | 28.7 | 28.7 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | |
Income taxes | |||||
Income tax expense (benefit) | $ 19 | $ 74 | $ (65) | $ 134 | |
Net discrete tax benefit | $ (16) | $ (114) | $ (8) | ||
Estimated annual effective tax rate excluding impact of discrete items | 20.80% | 28.60% | |||
Tax Cuts and Jobs Act (Tax Act) | |||||
Income taxes | |||||
Income tax expense (benefit) | $ 176 | ||||
Tax Cuts and Jobs Act (Tax Act) | Taxation of Unremitted Foreign Earnings | |||||
Income taxes | |||||
Income tax expense (benefit) | $ 193 | ||||
Period of tax payments on unremitted foreign earnings (in years) | 8 years | ||||
Tax Cuts and Jobs Act (Tax Act) | Dividends Received Deduction for Certain Foreign Tax Credits | |||||
Income taxes | |||||
Income tax expense (benefit) | $ (113) | ||||
Tax Cuts and Jobs Act (Tax Act) | Remeasurement of Deferred Tax Assets and Liabilities | |||||
Income taxes | |||||
Income tax expense (benefit) | $ 96 |
Supplemental Statement of Cas_3
Supplemental Statement of Cash Flows Information 1 (Details) - Notional Pooling Arrangement - USD ($) $ in Millions | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | ||
Notional pooling arrangement | |||
Borrowings | $ 1,076 | $ 1,173 | |
Repayments | (1,053) | (1,204) | |
Foreign exchange effect | (24) | 31 | |
Accrued Expenses and Other Current Liabilities | |||
Notional pooling arrangement | |||
Total borrowings outstanding at beginning of period | [1] | 137 | 137 |
Total borrowings outstanding at end of period | [1] | $ 136 | $ 137 |
[1] | Included in “Accrued expenses and other current liabilities” in the Company’s Condensed Consolidated Balance Sheets. |
Supplemental Statement of Cas_4
Supplemental Statement of Cash Flows Information 2 (Details) - USD ($) $ in Millions | 6 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Supplemental statement of cash flows information | ||
Interest payments | $ 61 | $ 60 |
Income taxes paid, net | 130 | 156 |
Treasury common shares issued in connection with share-based incentive awards under equity compensation plans, Non-cash financing activities | 47 | 46 |
Withholding taxes on share-based incentive awards, Non-cash financing activities | 41 | 35 |
Treasury common shares issued in connection with discretionary stock contributions to CA, Inc. Savings Harvest Plan, Non-cash financing activities | 24 | 23 |
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, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |||
Summary of segment revenue and reconciliation to total consolidated revenue | ||||||
Segment revenue | $ 1,045 | $ 1,034 | $ 2,097 | $ 2,059 | ||
Impact of segment policies that differ from U.S. GAAP | (150) | [1] | 0 | (264) | [1] | 0 |
Total consolidated revenue | 895 | 1,034 | 1,833 | 2,059 | ||
Mainframe Solutions | ||||||
Summary of segment revenue and reconciliation to total consolidated revenue | ||||||
Segment revenue | 548 | 539 | 1,101 | 1,075 | ||
Total consolidated revenue | 388 | 828 | ||||
Enterprise Solutions | ||||||
Summary of segment revenue and reconciliation to total consolidated revenue | ||||||
Segment revenue | 423 | 420 | 848 | 834 | ||
Total consolidated revenue | 436 | 866 | ||||
Services | ||||||
Summary of segment revenue and reconciliation to total consolidated revenue | ||||||
Segment revenue | 74 | $ 75 | 148 | $ 150 | ||
Total consolidated revenue | $ 71 | $ 139 | ||||
[1] | The manner in which the Company measures and recognizes revenues for segment reporting was not revised upon adoption of Topic 606. For segment reporting purposes, the Company follows its previous Topic 605 policies, which recognizes software license revenue ratably, except for sales of perpetual licenses on a stand-alone basis, which are recognized at a point-in-time. |
Segment Information 2 (Details)
Segment Information 2 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | ||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Total segment profit | $ 412 | $ 392 | $ 842 | $ 775 | |||
Impact of segment policies that differ from U.S. GAAP | (150) | [1] | 0 | (267) | [1] | 0 | |
Share-based compensation expense | 35 | 29 | 68 | 61 | |||
Other expenses, net | [2] | 0 | 4 | 108 | 12 | ||
Interest expense, net | 19 | 24 | 39 | 49 | |||
Income before income taxes | 148 | 258 | 230 | 496 | |||
Purchased Software Products | |||||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Amortization of intangible assets | 47 | 58 | 102 | 116 | |||
Other Intangible Assets | |||||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Amortization of intangible assets | 11 | 10 | 21 | 20 | |||
Internally Developed Software Products | |||||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Amortization of intangible assets | 2 | 9 | 7 | 21 | |||
Mainframe Solutions | |||||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Total segment profit | 354 | 351 | 724 | 700 | |||
Enterprise Solutions | |||||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Total segment profit | 54 | 40 | 114 | 73 | |||
Services | |||||||
Summary of segment profit and reconciliation to income before income taxes | |||||||
Total segment profit | $ 4 | $ 1 | $ 4 | $ 2 | |||
[1] | The manner in which the Company measures and recognizes revenues and expenses, including commissions, for segment reporting was not revised upon adoption of Topic 606. For segment reporting purposes, commissions are expensed in the period earned by the employee. | ||||||
[2] | Other expenses, net for the three and six months ended September 30, 2018 consisted of costs associated with the Fiscal 2019 Plan of $(1) million and $113 million, respectively, certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. Other expenses, net for the three and six months ended September 30, 2017 consisted of costs associated with certain foreign exchange derivative hedging gains and losses, and other miscellaneous costs. |
Segment Information 3 (Details)
Segment Information 3 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Summary of depreciation by segment | ||||
Depreciation | $ 17 | $ 17 | $ 33 | $ 33 |
Mainframe Solutions | ||||
Summary of depreciation by segment | ||||
Depreciation | 10 | 10 | 19 | 19 |
Enterprise Solutions | ||||
Summary of depreciation by segment | ||||
Depreciation | 7 | 7 | 14 | 14 |
Services | ||||
Summary of depreciation by segment | ||||
Depreciation | $ 0 | $ 0 | $ 0 | $ 0 |
Segment Information 4 (Details)
Segment Information 4 (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Fiscal 2019 Plan | Other Expenses, Net | ||
Segment information | ||
Restructuring charges | $ (1) | $ 113 |
Subsequent Events (Details)
Subsequent Events (Details) | Nov. 05, 2018$ / shares |
Subsequent Event | |
Subsequent Event [Line Items] | |
Amount paid to shareholders by acquiree per Merger Agreement (in dollars per share) | $ 44.50 |