Exhibit 99.1
CA REPORTS SOLID THIRD QUARTER 2005 RESULTS
- Revenue of $911 million, up 9 percent from prior year
- GAAP earnings from continuing operations of $36 million, or $0.06
per share
- Operating (non-GAAP) EPS of $0.19, up 19 percent from prior year
- Cash flow from operations up 8 percent from prior year to $366
million
- Will hold webcast at 5 p.m. EST
ISLANDIA, N.Y., January 25, 2005 - Computer Associates International, Inc.
(NYSE: CA) today reported financial results for its third fiscal 2005 quarter
ended December 31, 2004 that exceeded previous guidance for revenue and met
expectations for operating earnings. In addition, the Company updated guidance
for the full fiscal year 2005.
"We had another quarter of solid results based on strong execution of our
business strategy," said CA's Interim Chief Executive Officer Kenneth Cron. "CA
is now in a position to succeed and move forward to grow the Company; our
financials are sound and we are solidifying a strong management team for the
future."
"We are putting the pieces in place to position CA for long-term, sustainable
growth," said CA's President and CEO-elect John Swainson. "Today's enterprise IT
customers are looking for a more holistic approach to tackling the challenges of
IT systems management and security. By redefining our go-to-market strategy,
focusing on our core competencies and aligning our product portfolio to customer
needs, we will grow the business and become a true partner to our customers."
FINANCIAL OVERVIEW: THIRD QUARTER FISCAL YEAR 2005
Total revenue for the third quarter of fiscal year 2005 was $911 million, a 9
percent increase over the third quarter of fiscal year 2004, and $46 million
greater than the high end of the range of the Company's previous guidance.
On a constant currency basis and excluding $15 million in revenue related to
Netegrity products, total revenue for the third quarter would have increased
approximately 3 percent compared to the similar period last year.
"We are starting to see real traction from our growth initiatives," said CA
Chief Operating Officer Jeff Clarke. "Our channel business performed well this
quarter, up 17 percent, and security continues to be a strong segment of our
business, with more than 94 percent bookings growth. CA's cost-cutting efforts
are on track and the Netegrity integration is going extremely well."
Revenue from CA's Technology Services unit was $64 million for the quarter, up
approximately 8 percent when compared to the similar quarter last year, due to
strong performance in North America and Asia, particularly related to CA's
Identity and Access Management solutions.
New deferred subscription revenue was $898 million for the quarter, which
includes $845 million in direct bookings and $53 million in indirect bookings.
Total indirect bookings for the quarter were $84 million, a 17 percent
year-over-year increase.
CA's total deferred subscription revenue balance as of December 31, 2004, was
approximately $4.8 billion.
The Company reported GAAP earnings from continuing operations for the third
quarter of $36 million, or $0.06 per diluted share, compared to GAAP earnings
from continuing operations of $17 million, or $0.03 per diluted share, reported
in the comparable period last year. GAAP results for the current quarter include
an $18 million, or $0.02 per diluted share non-cash charge related to the fiscal
2004 shareholder litigation settlement.
On a fully diluted operating basis, excluding special charges, CA earned $0.19
per share in the third quarter of fiscal year 2005, compared with $0.16 per
share in the third quarter of fiscal year 2004.
Operating earnings per share is a non-GAAP financial measure, as noted in the
discussion of non-GAAP results below. A reconciliation of GAAP income from
continuing operations to non-GAAP operating income is included in the tables
following this press release.
CAPITAL STRUCTURE
CA generated approximately $366 million in cash from continuing operations in
the third quarter, compared to the $339 million reported in the similar period
last year.
The balance of cash and marketable securities at December 31, 2004, was
approximately $3.33 billion, up from $2.25 billion on September 30, 2004. With
approximately $3.30 billion in total debt outstanding, the Company has a net
cash position of $28 million. This is the first time in more than nine years
that the Company's cash and marketable securities balance exceeds its total
debt.
DEVELOPMENTS DURING THE QUARTER
During the quarter, CA made a number of important advances, including:
- Naming 26-year industry veteran John Swainson president and
CEO-elect;
- Enhancing its capital structure with a successful private placement
of $1 billion senior unsecured notes and a four-year $1 billion
revolving credit facility;
- Selecting SAP for its enterprise resource planning system and
Accenture to assist with the implementation, which is already
underway;
- Outlining its EMEA growth strategy with a strong focus on small and
medium businesses and expanded OEM partnerships;
- Completing its acquisition of Netegrity ahead of schedule;
- Offering CA Wireless Site Management 4.0 to bolster and streamline
Wi-Fi security management; and
- Following its successful acquisition of PestPatrol, announcing
eTrust PestPatrol Anti-Spyware r5.
OUTLOOK FOR THE REMAINDER OF FISCAL YEAR 2005
The following updated guidance is based on current expectations and represents
"forward looking statements" (as defined below):
For the fourth quarter ending March 31, 2005:
- Revenue in the range of $900 million to $920 million;
- GAAP earnings per share in the range of $0.07 to $0.08; and
- Diluted operating (non-GAAP) earnings per share in the range of
$0.19 to $0.20.
For the full year, ending March 31, 2005:
- Revenue in the range of $3.526 billion to $3.546 billion;
- GAAP earnings per share in the range of $0.06 to $0.07; and
- Diluted operating (non-GAAP) earnings per share in the range of
$0.81 to $0.82.
"With solid execution and upside from our recent acquisitions, we are raising
the midpoint of both our revenue and earnings guidance," said Clarke. "Cash flow
continues to remain on track for modest growth this year."
THIRD QUARTER WEBCAST
The Company will host a webcast at 5 p.m. EST today to discuss its third quarter
fiscal year 2005 results. Individuals can access the webcast, as well as this
press release and supplemental financial information, at http://ca.com/invest or
listen to the call at 1 (706) 679-5227.
NON-GAAP FINANCIAL MEASURES
This press release includes financial measures for net income and related per
share amounts that exclude certain charges and therefore have not been
calculated in accordance with U.S. generally accepted accounting principles
(GAAP). Non-GAAP "operating" net income and earnings per share exclude non-cash
amortization of acquired technology and other intangibles, the government
investigation and restructuring charges, the class-action and derivative
litigation settlement charge and the applicable tax effects of these items.
These non-GAAP financial measures may be different from non-GAAP financial
measures used by other companies. Non-GAAP financial measures should not be
considered as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. By excluding certain charges,
these non-GAAP financial measures facilitate management's internal comparisons
to the Company's historical operating results, to competitors' operating
results, and to estimates made by securities analysts. Management uses these
non-GAAP financial measures internally to evaluate its performance and they are
key variables in determining management incentive compensation. The Company
believes these non-GAAP financial measures are useful to investors in allowing
for greater transparency of supplemental information used by management in its
financial and operational decision-making. In addition, the Company has
historically reported similar non-GAAP financial measures to its investors and
believes that the inclusion of comparative numbers provides consistency in its
financial reporting. Investors are encouraged to review the reconciliation of
the non-GAAP financial measures used in this press release to their most
directly comparable GAAP financial measure as provided with the financial
statements attached to this press release.
ABOUT CA
Computer Associates International, Inc. (NYSE:CA), delivers software and
services across operations, security, storage and life cycle management to
optimize the performance, reliability and efficiency of
enterprise IT environments. Founded in 1976, CA is headquartered in Islandia,
N.Y. and serves customers in more than 140 countries. For more information,
please visit http://ca.com.
###
Certain statements in this press release may constitute forward-looking
statements that involve risks and uncertainties. Certain factors could cause our
results to differ materially from those projected or forecast in the
forward-looking statements. These include: the risks and uncertainties
associated with the Company's deferred prosecution agreement with the United
States Attorney's Office and Securities and Exchange Commission investigation
consent judgement; litigation arising out of the matters that are the subject of
the Department of Justice and Securities and Exchange Commission investigations;
the software industry is subject to intense competition; risks associated with
the recent loss and ongoing replacement of key personnel; risks associated with
changing operating environments; risks associated with our debt including that
our credit ratings have been downgraded and could be downgraded further; risks
associated with integrating acquisitions; the failure to protect our
intellectual property rights, which could weaken our competitive position;
possible dependency upon large transactions; general economic conditions;
possible claims by third parties that our products infringe their intellectual
property rights; fluctuations in foreign currencies that could result in
transaction losses; acts of war and terrorism, which could adversely affect our
business; the volatility of the international marketplace; and other risks
described in our filings with the Securities and Exchange Commission, which are
available at http://www.sec.gov. CA assumes no obligation to update the
information contained herein, except as otherwise required by law.
(C) 2005 Computer Associates International, Inc. One Computer Associates Plaza,
Islandia, N.Y. 11749. All trademarks, trade names, service marks, and logos
referenced herein belong to their respective companies.
Contacts: Shannon Lapierre Olivia Bellingham
Public Relations Investor Relations
(631) 342-3839 (631) 342-4687
shannon.lapierre@ca.com olivia.bellingham@ca.com
TABLE 1
COMPUTER ASSOCIATES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
Three Months Nine Months
Ended Ended
December 31, December 31,
------------ ------------
2004 2003 2004 2003
------- ------- ------- -------
Subscription revenue $ 623 $ 506 $ 1,784 $ 1,426
Software fees and other 75 84 204 226
Maintenance 126 145 376 455
Financing fees 23 43 84 146
Professional services 64 59 178 173
------- ------- ------- -------
Total revenue 911 837 2,626 2,426
Amortization of capitalized software costs 112 116 335 349
Cost of professional services 57 54 166 161
Selling, general and administrative 345 306 989 944
Product development and enhancements 168 167 514 494
Commissions and royalties 91 75 226 182
Depreciation and amortization of other
intangibles 33 33 97 100
Interest expense, net 29 29 79 89
Other losses, net 6 22 9 46
Restructuring charge -- -- 28 --
Shareholder litigation and government
investigation settlements 18 8 234 158
------- ------- ------- -------
Total expenses 859 810 2,677 2,523
Income (loss) from continuing operations
before income tax 52 27 (51) (97)
Income tax expense (benefit) 16 10 (46) (32)
------- ------- ------- -------
Income (loss) from continuing operations,
net of taxes 36 17 (5) (65)
Income from discontinued operation,
net of income taxes
-- 1 -- 1
Adjustment to gain on disposal of discontinued
operations, net of income taxes -- -- (2) --
------- ------- ------- -------
Net Income (Loss) $ 36 $ 18 $ (7) $ (64)
======= ======= ======= =======
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ 0.06 $ 0.03 $ (0.01) $ (0.11)
Discontinued operation -- -- -- --
------- ------- ------- -------
Net Income (Loss) $ 0.06 $ 0.03 $ (0.01) $ (0.11)
======= ======= ======= =======
Basic weighted-average shares
used in computation 589 580 587 579
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ 0.06 $ 0.03 $ (0.01) $ (0.11)
Discontinued operation -- -- -- --
------- ------- ------- -------
Net Income (Loss) $ 0.06 $ 0.03 $ (0.01) $ (0.11)
======= ======= ======= =======
Diluted weighted-average shares
used in computation 595 589 587 579
TABLE 2
COMPUTER ASSOCIATES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
(unaudited)
Dec 31, March 31,
2004 2004
------- -------
Cash and marketable securities $ 3,325 $ 1,902
Trade and installment A/R, net 702 949
Federal and state income tax receivable 245 96
Deferred income taxes 218 311
Other current assets 70 108
------- -------
Total current assets 4,560 3,366
Installment A/R, net 681 820
Property and equipment, net 631 641
Purchased software products, net 818 1,045
Goodwill, net 4,599 4,366
Other noncurrent assets, net 636 449
------- -------
Total assets $11,925 $10,687
======= =======
Loans payable and current
portion of long - term debt $ 826 $ 2
Deferred subscription
revenue (collected)-current 1,204 1,210
Shareholder litigation and government
investigation settlements 153 113
Other current liabilities 1,301 1,130
------- -------
Total current liabilities 3,484 2,455
Long-term debt, net of current portion 2,471 2,298
Deferred income taxes 473 618
Deferred subscription
revenue (collected)-noncurrent 233 276
Deferred maintenance revenue 239 293
Other noncurrent liabilities 32 29
------- -------
Total liabilities 6,932 5,969
Stockholders' equity 4,993 4,718
------- -------
Total liabilities and stockholders' equity $11,925 $10,687
======= =======
TABLE 3
COMPUTER ASSOCIATES INTERNATIONAL, INC.
QUARTERLY CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
December 31,
2004 2003
------- -------
OPERATING ACTIVITIES:
Net Income $ 36 $ 18
Impact from discontinued operations, net of taxes -- 1
------- -------
Income from continuing operations 36 17
Adjustments to reconcile income from continuing operations to net cash
provided by continuing operating activities:
Depreciation and amortization 145 149
Provision for deferred income taxes 24 (141)
Non-cash stock-based compensation expense 13 7
Non-cash settlement charge 18 8
Decrease in noncurrent installment A/R, net 2 84
Government investigation settlement (75) --
Increase in deferred subscription
revenue (collected) - noncurrent 5 33
(Decrease) Increase in deferred maintenance revenue (13) 4
Decrease (Increase) in trade and current installment A/R, net 76 (101)
Increase in deferred subscription revenue (collected) - current 88 97
Other 47 182
------- -------
NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 366 339
INVESTING ACTIVITIES:
Acquisition of Netegrity, net of cash acquired (418) --
Acquisitions of purchased software -- (1)
Settlements of purchase accounting liabilities (9) (4)
Purchases of property and equipment, net (21) (4)
Sales (purchases) of marketable securities, net 19 (8)
Increase in capitalized software development costs and other (19) (11)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (448) (28)
FINANCING ACTIVITIES:
Debt borrowings, net 997 --
Exercises of common stock options and other 31 15
Debt issuance costs (12) --
Purchases of treasury stock -- (1)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,016 14
INCREASE IN CASH AND CASH EQUIVALENTS
BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH 934 325
Effect of exchange rates on cash 78 43
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 1,012 368
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,142 880
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,154 $ 1,248
======= =======
TABLE 4
COMPUTER ASSOCIATES INTERNATIONAL, INC.
RECONCILIATION OF GAAP RESULTS TO OPERATING RESULTS FROM CONTINUING OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
2004 2003 2004 2003
------- ------- ------- -------
Total Revenue (See Table 1) $ 911 $ 837 $ 2,626 $ 2,426
Total Expenses (See Table 1) 859 810 2,677 2,523
------- ------- ------- -------
Income (Loss) From Continuing Operations,
Before Taxes (See Table 1) 52 27 (51) (97)
Non-GAAP Adjustments:
Purchased Software Amortization 102 105 305 318
Intangibles Amortization 10 10 30 30
Restructuring Charge -- -- 28 --
Government Investigation Charge -- -- 218 --
Shareholder Litigation 18 8 16 158
------- ------- ------- -------
Total Non-GAAP Adjustments 130 123 597 506
Operating Income Before Interest Adj. & Taxes 182 150 546 409
Interest on Dilutive Convertible Bonds 11 2 31 6
------- ------- ------- -------
Operating Income Before Taxes 193 152 577 415
Income Tax Provision(1) 69 57 180 155
------- ------- ------- -------
Net Operating Income From Continuing Operations(1)(2) $ 124 $ 95 $ 397 $ 260
======= ======= ======= =======
Diluted Operating EPS(1)(2) $ 0.19 $ 0.16 $ 0.62 $ 0.43
======= ======= ======= =======
# of Shares Used(2) 645 612 643 609
(1) The nine months ended December 31, 2004 includes a $26.4 million or $.04
per share one-time tax benefit.
(2) Net operating income and the number of shares used in the computation of
diluted operating EPS for the three and nine months ended December 31,
2004 and 2003 have been adjusted to reflect the dilutive impact of the
Company's 1.625 percent Convertible Senior Notes. The number of shares for
the three and nine months ended December 31, 2004 also includes the
dilutive impact of the Company's 5 percent Convertible Senior Notes.
TABLE 5
COMPUTER ASSOCIATES INTERNATIONAL, INC.
RECONCILIATION OF PROJECTED GAAP RESULTS FROM CONTINUING OPERATIONS TO OPERATING
RESULTS
(in millions, except per share data)
(unaudited)
Three Months Ending Fiscal Year Ending
March 31, 2005 March 31, 2005
--------------------- ----------------------
Projected revenue range $ 900 to $ 920 $3,526 to $3,546
===== ===== ====== ======
Projected GAAP EPS range $0.07 to $0.08 $ 0.06 to $ 0.07
Non GAAP adjustments, net of taxes
Acquisition amortization 0.11 0.11 0.45 0.45
Government Investigation Settlement -- -- 0.22 0.22
Restructuring Charge -- -- 0.04 0.04
Interest on Dilutive Convertible Bonds 0.01 0.01 0.04 0.04
----- ----- ------ ------
Projected diluted operating EPS range $0.19 to $0.20 $ 0.81 to $ 0.82
===== ===== ====== ======