CA Technologies Reports Fourth Quarter and Full Fiscal Year 2014 Results - CA Technologies
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CA Technologies Reports Fourth Quarter and Full Fiscal Year 2014 Results


  • Fourth Quarter and FY2014 Revenue of $1.108 Billion and $4.515 Billion, Compared With $1.143 Billion and $4.610 Billion Last Year, Respectively
  • Fourth Quarter and FY2014 GAAP EPS of $0.23 and $1.99, Compared With $0.52 and $2.03 Last Year, Respectively
  • Fourth Quarter and FY2014 Non-GAAP EPS of $0.61 and $3.07, Compared With $0.67 and $2.48 Last Year, Respectively
  • Fourth Quarter and FY2014 Cash Flow From Continuing Operations of $483 Million and $997 Million, Compared With $565 Million and $1.390 Billion Last Year, Respectively
  • Announces Authorization to Repurchase up to $1 Billion in CA Technologies Common Stock

NEW YORK, May 15, 2014 - CA Technologies (NASDAQ: CA) today reported financial results for its fourth quarter and full fiscal year 2014, ended March 31, 2014.

FINANCIAL OVERVIEW

Note: All financial results have been adjusted to reflect the classification of the Company's ERwin Data Modeling Business as a discontinued operation as announced in Form 8-K filed on March 13, 2014.

Mike Gregoire, CA Technologies Chief Executive Officer, made the following comments:

“We concluded a year of significant transformation and strategic progress on our journey to build CA for growth and market leadership.  We have successfully executed our rebalancing program, consolidated development resources in key hubs, shifted innovation investment to new growth markets, and renewed our focus on building and delivering excellent, differentiated solutions to our customers.

"Against this backdrop of activity, our continued focus on financial and operational execution resulted in a margin increase to 37 percent* and the attainment of all financial guidance measures for fiscal year 2014.

"As we look toward fiscal year 2015, we will remain laser-focused on driving execution, innovation and speed across the organization.  Revenue is still not where we would like it to be, and we will not be satisfied until we are driving meaningful growth for our company and our shareholders.  All 12,700 people across the Company are focused on the work ahead to position CA to win.”

*Reference is to non-GAAP operating margin


REVENUE AND BOOKINGS

Fourth Quarter

  • The decrease in revenue was primarily attributable to a decrease in Enterprise Solutions new product sales in both the current and prior fiscal years.

  • The Company executed a total of 16 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $456 million.  During the fourth quarter of fiscal 2013, the Company executed a total of 20 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $744 million, which included one contract of more than $200 million with a U.S. government agency.

  • The weighted average duration of subscription and maintenance bookings for the quarter was 3.15 years, compared with 3.78 years for the same period in fiscal 2013.


Full Year

  • The decrease in revenue was primarily attributable to a decrease in fiscal 2014 and prior period Enterprise Solutions new product sales.

  • The increase in the Company's full year bookings was primarily due to a year-over-year increase in renewals within subscription and maintenance bookings.  This was partially offset by a decrease in total new product and Mainframe Solutions capacity sales.

  • The Company executed a total of 54 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $1.973 billion.  During fiscal 2013, the Company executed a total of 52 license agreements with incremental contract values in excess of $10 million each, for an aggregate contract value of $1.514 billion.

  • The weighted average duration of subscription and maintenance bookings for fiscal 2014 was 3.35 years, compared with 3.27 years for fiscal 2013.

EXPENSES AND MARGIN

Fourth Quarter

  • GAAP operating income was negatively affected by $38 million, or $0.08 per diluted share, as a result of a decrease in the amount of capitalized software development costs.  In addition, GAAP operating income was negatively affected by $37 million, or $0.07 per diluted share, as a result of costs associated with the Company's fiscal 2014 rebalancing plan (the Fiscal 2014 Plan).

  • This negative effect was partially offset by an impairment of $55 million, or $0.11 per diluted share, related to purchased software products recognized in the fourth quarter of fiscal 2013.

  • The decline in non-GAAP operating income was driven by an increase in external consulting and promotional expenses, and was partially offset by lower personnel costs.

  • GAAP EPS was negatively affected by $0.13 due to a higher effective tax rate. Non-GAAP EPS was positively affected by $0.03 due to a lower effective tax rate.

Full Year

  •  GAAP operating income was negatively affected by $171 million, or $0.27 per diluted share, as a result of expenses associated with the Fiscal 2014 Plan.  In addition, GAAP operating income was negatively affected by $128 million, or $0.20 per diluted share, as a result of a decrease in the amount of capitalized software development costs.

  • Fiscal 2013 GAAP earnings included an impairment of $55 million, or $0.09 per diluted share, related to purchased software products recognized in the fourth quarter of fiscal 2013.

  • GAAP and non-GAAP operating expenses were positively affected by lower personnel costs, primarily within selling and marketing.

  • GAAP and non-GAAP EPS were positively affected by $0.31 and $0.48, respectively, due to a lower effective tax rate.  The Company recognized a net benefit of approximately $168 million in fiscal 2014, primarily from the resolution of uncertain tax positions relating to U.S. and non-U.S. jurisdictions.

SEGMENT INFORMATION

Starting in the first quarter of fiscal 2014, the measure of segment expenses and segment profit was revised to treat all costs of internal software development as segment expense in the period the costs are incurred.  As a result, the Company will add back capitalized internal software costs and exclude amortization of internally developed software costs previously capitalized from segment expenses.  Segment expenses also exclude the effects of the Fiscal 2014 Plan.  Prior period segment expenses and profit information have been revised to present segment profit and expenses on a consistent basis.

Fourth Quarter

  • The decrease in Enterprise Solutions revenue and operating margin was primarily due to lower new product sales in both the current and prior fiscal year. 

  • The decrease in Services revenue was primarily due to a decrease in engagements relating to customer education and government agencies. 

Full Year

  • Enterprise Solutions revenue decreased compared with the year-ago period primarily due to a decrease in new product sales in both the current and prior fiscal year. 

CASH FLOW FROM OPERATIONS

  • Cash flow from continuing operations in the fourth quarter was $483 million, compared with $565 million in the prior year.  The decrease year-over-year was due to a decrease in cash collections from single installment payments of $90 million, payments related to the Fiscal 2014 Plan and a reduction in capitalized software development costs.

  • For the full year, cash flow from continuing operations was $997 million, compared with $1.390 billion in the prior year.  The decrease year-over-year was due to a decrease in cash collections and a number of expected factors including higher cash taxes, payments related to the Fiscal 2014 Plan and a reduction in capitalized software development costs.  The decrease in cash collections was primarily due to a decrease in cash collections from single installment payments of $170 million.

CAPITAL STRUCTURE

  • Cash, cash equivalents and investments at March 31, 2014 were $3.252 billion.

  • With $1.766 billion in total debt outstanding and $139 million in notional pooling, the Company’s net cash, cash equivalents and investments position was $1.347 billion.

  • In the fourth quarter of fiscal 2014, the Company repurchased more than 5 million shares of stock for $167 million.  For fiscal 2014, the Company repurchased 16 million shares of stock for $505 million.

  • At March 31, 2014, the Company has completed the purchases of its common stock under its stock repurchase program that was authorized in January 2012.

  • During the fourth quarter of fiscal 2014, the Company distributed $112 million in dividends to shareholders. For fiscal 2014, the Company distributed $453 million in dividends to shareholders.

  • The Company’s outstanding share count at March 31, 2014 was 439 million.

NEW AUTHORIZED SHARE REPURCHASE PROGRAM

On May 14, 2014, the Company's Board of Directors approved a stock repurchase program that authorized the Company to acquire up to $1 billion of CA common stock.  The Company expects to complete the program in approximately three years.  The Company expects to fund the program with available cash on hand and repurchase shares on the open market, through solicited or unsolicited privately negotiated transactions or otherwise, from time to time, based on market conditions and other factors.

OUTLOOK FOR FISCAL 2015

The following outlook for fiscal 2015 contains "forward-looking statements" (as defined below).

The Company expects the following:

  • Total revenue to decrease in a range of minus 2 percent to minus 1 percent in constant currency.  At March 31, 2014 exchange rates, this translates to reported revenue of $4.43 billion to $4.49 billion.

  • GAAP diluted earnings per share from continuing operations to decrease in a range of minus 12 percent to minus 8 percent in constant currency.  At March 31, 2014 exchange rates, this translates to reported GAAP diluted earnings per share of $1.79 to $1.86.

  • Non-GAAP diluted earnings per share from continuing operations to decrease in a range of minus 21 percent to minus 19 percent in constant currency.  At March 31, 2014 exchange rates, this translates to reported non-GAAP diluted earnings per share of $2.45 to $2.52.

  • Cash flow from continuing operations to increase in a range of 5 percent to 12 percent in constant currency.  At March 31, 2014 exchange rates, this translates to reported cash flow from continuing operations of $1.06 billion to $1.13 billion.

This outlook assumes no material acquisitions and a partial currency hedge of operating income.  The Company expects a full-year GAAP operating margin of 28 percent and non-GAAP operating margin of 37 percent.  The Company also expects to return to a normalized full-year GAAP and non-GAAP effective tax rate of about 30 percent, which results in a negative impact to GAAP and non-GAAP diluted earnings per share from continuing operations of approximately $0.42 and $0.58, respectively. 

The Company anticipates approximately 436 million shares outstanding at fiscal 2015 year-end and weighted average diluted shares outstanding of approximately 442 million for the fiscal year.

ABOUT CA TECHNOLOGIES

CA Technologies (NASDAQ: CA) provides IT management solutions that help customers manage and secure complex IT environments to support agile business services. Organizations leverage CA Technologies software and SaaS solutions to accelerate innovation, transform infrastructure and secure data and identities, from the data center to the cloud. Learn more about CA Technologies at www.ca.com.

LEGAL NOTICES

Copyright © 2014 CA, Inc. All Rights Reserved. All trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

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