CA Technologies Updates FY 2014 Outlook Following Favorable Resolution of a US Tax Matter - CA Technologies
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CA Technologies Updates FY 2014 Outlook Following Favorable Resolution of a U.S. Tax Matter


New Ranges for GAAP and Non-GAAP Diluted EPS and CFFO Include Benefit of a Discrete Tax Item

NEW YORK, N.Y., May 9, 2013 – CA Technologies (NASDAQ:CA) today announced it is updating its fiscal year 2014 outlook for GAAP and non-GAAP diluted earnings per share, cash flow from continuing operations, and its GAAP and non-GAAP effective tax rate following completion of an Internal Revenue Service appeals process relating to the examination of its federal income tax returns for fiscal years 2005, 2006 and 2007.

The Company now expects a fiscal year 2014 GAAP and non-GAAP effective tax rate of approximately 14 percent. Previously the Company expected a fiscal year 2014 GAAP and non-GAAP effective tax rate of approximately 31 percent.

The Company said it expects to record a benefit of approximately $165 million to $185 million to GAAP income in the first quarter of fiscal year 2014 from the reversal of the previous accounting accrual related to this matter. The benefit will affect non-GAAP income over the course of fiscal year 2014.

The Company also expects to receive a cash refund of approximately $70 million to $80 million by the end of the second quarter of fiscal year 2014.

The Company previously disclosed the potentially favorable resolution of the U.S. tax matter during its financial analyst briefing on May 7, 2013. 

The following outlook, which represents "forward-looking statements" (as defined below), takes into account the adjustment for internally developed software costs, the costs and payments associated with a rebalancing charge announced on May 7, 2013 and the resolution of the U.S. tax matter mentioned above.

The Company expects the following:

  • GAAP diluted earnings per share decline in constant currency in a range of minus 11 percent to minus 6 percent.  At March 31, 2013 exchange rates, this translates to GAAP reported diluted earnings per share of $1.84 to $1.94. Previous outlook projected a decline in GAAP diluted earnings per share in constant currency in a range of minus 29 percent to minus 25 percent. 
  • Non-GAAP diluted earnings per share growth in constant currency in a range of 16 percent to 20 percent.  At March 31, 2013 exchange rates, this translates to reported non-GAAP diluted earnings per share of $2.93 to $3.03. Previous outlook projected a decline in non-GAAP diluted earnings per share in constant currency in a range of minus 7 percent to minus 4 percent.
  • Cash flow from continuing operations decline in a range of minus 30 percent to minus 24 percent in constant currency.  At March 31, 2013 exchange rates, this translates to reported cash flow from continuing operations of $970 million to $1.05 billion. Previous outlook projected a decline in cash flow from continuing operations in a range of minus 35 percent to minus 29 percent in constant currency. 
  • Total revenue outlook is unchanged and projects a decrease in a range of minus 4 percent to minus 2 percent in constant currency.  At March 31, 2013 exchange rates, this translates to reported revenue of $4.43 billion to $4.52 billion.

As it previously stated, the Company expects its product offerings and go-to-market strategy will evolve in future periods and that these product offerings will become available at more frequent intervals than in historical release cycles. The Company also expects a more extensive adoption of agile development methodologies, which are characterized by a more dynamic development process. The Company expects this will result in commencing capitalization much later in the development life cycle. As a result, product development and enhancement expenses are expected to increase in future periods as the amount capitalized for internally developed software costs decreases. Due to this change, beginning in the first quarter of fiscal year 2014, the Company will expense research and development costs for internally developed products as they are incurred. The fiscal year 2014 outlook for non-GAAP measures will be adjusted for internally developed software and also exclude the costs and payments associated with a rebalancing charge.
Outlook for cash flow from continuing operations is being adversely affected by costs associated with the rebalancing of resources during the fiscal year, an expected increase in cash taxes and an increase in cash outflows relating to product development and enhancement expenses for fiscal 2014.  In fiscal year 2013, cash flow from continuing operations does not reflect $165 million of capitalized software development costs that appears as an investment activity in our Statement of Cash Flows.

This outlook also assumes no material acquisitions and a partial currency hedge of operating income.  The Company continues to expect a full-year GAAP operating margin of 23 percent and non-GAAP operating margin of 36 percent.  

The Company anticipates approximately 432 million shares outstanding at fiscal year 2014 year-end and weighted average diluted shares outstanding of approximately 441 million for the fiscal year.

Slides presented at CA Technologies investor briefing on May 7, 2013 have been updated to reflect the impact of the U.S. tax matter mentioned above and can be accessed at http://ca.com/invest.

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.

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Copyright © 2013 CA, Inc. All Rights Reserved. All trademarks, trade names, service marks, and logos referenced herein belong to their respective companies.

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