CA reports Q1 FY2006 financial results

Computer Associates International, Inc (NYSE: CA), one of the world`s largest management software companies, has reported financial results for its first quarter fiscal year 2006, ended 30 June 2005.

* Q1FY05 results have been restated to reflect the modified retrospective adoption of FAS123, which changes the method under which the company expenses stock-based compensation, and to reflect other adjustments as disclosed in the company`s most recent filing on Form 10-K.
** Operating EPS is a non-GAAP financial measure, as noted in the discussion of non-GAAP results below. A reconciliation of GAAP results to non-GAAP operating income is included in the tables following this press release.
*** Q1FY06 GAAP results include approximately $36 million, or $0.06 per share, of tax credits resulting from the estimated tax associated with the repatriation of cash under the American Jobs Creation Act. Combined with the $55 million tax charge taken in Q4FY05, the net tax impact for the repatriation is expected to be approximately $19 million.

"We`ve made progress laying the foundation for growth and are now focusing on accelerating the execution of our business strategy," said CA President and Chief Executive Officer John Swainson. "There have been, and will continue to be, a number of significant but necessary transitions at CA. And while the first quarter met our revenue and earnings goals, we need to do additional work to ensure the changes yield the results intended and help effectively position CA for the long-term.

"Enterprise security continues to be a big focus for the market and our European business is showing signs of improvement, both positive indicators for CA. CIOs are interested in working with CA, and our solutions and vision for helping them simplify and achieve the highest ROI from their IT infrastructure investments."

Total bookings for the first quarter decreased 30% over the prior year period to $415 million, including $69 million from the company`s indirect business.

Billings for the quarter were $672 million, down 2% over the prior year period. Billings for the trailing 12 months, which normalises quarterly fluctuations and other factors, were $4.3 billion, an increase of 2% over the prior trailing 12 months.

"For fiscal year 2006, we modified our sales force compensation plan to drive sales of new products with the end goal of driving billings growth," said CA Chief Operating Officer Jeff Clarke. "At the start of the first quarter, billings were predictably slow due to the sales compensation changes, but they accelerated over the course of the period."

Clarke said that based on this momentum and a review of the company`s second quarter pipeline, the company is confident it will meet its earlier projections of mid-to-high single digit billings growth for the year. In addition, he said the company expects to reach 10% adjusted, non-GAAP cash flow growth* for the year.

CA reported approximately $93 million in cash flow from operations in the first quarter, compared to the $272 million reported in the similar period last year. On a comparable basis, adjusting for a one-time tax benefit in 2005 of approximately $110 million, cash flow from operations declined by $70 million. The decline is primarily due to fluctuations in working capital, along with timing of interest payments. As previously stated, CA expects GAAP cash flow from operations to decline between 15% and 20% in fiscal year 2006, primarily due to the aforementioned one-time tax benefit.

Expenses for the quarter totalled $834 million compared with $785 million in the prior year comparable period. The increase in expenses primarily was associated with additional control documentation and testing efforts associated with the company`s compliance with the Sarbanes-Oxley Act and legal expenses.

The balance of cash and marketable securities at 30 June 2005 was approximately $1.95 billion, down from $3.13 billion at 31 March 2005. With approximately $1.9 billion in total debt outstanding, the company has a net cash position of approximately $55 million. During the quarter, the company repaid $825 million in debt, closed on its acquisition of Concord for approximately $350 million, and executed the repurchase of approximately 3.6 million CA shares.

As part of its continuing effort to improve its overall efficiency and productivity and more closely align the company`s investments with its strategic growth opportunities, CA also announced today a restructuring plan that is expected to yield approximately $75 million in annualised savings. The company expects to take a charge of between $50 million to $75 million in the second quarter. A separate press release with additional details is available at http://ca.com/press.

During Q1, CA:

* Enhanced the breadth and skill level of its senior leadership team, naming former BEA executive Andrew Dutton to serve as head of its Europe, Middle East and Africa business and former HP executive Claude Pumilia as senior vice-president of worldwide sales finance.
* Continued its strategy of acquiring key core technologies in its focus areas of systems and security management for the enterprise, announcing plans to acquire Niku Corporation, a leading provider of IT management and governance solutions, which is expected to close shortly; and closing on its acquisitions of Concord Communications and Tiny Software.
* Focused on delivering value back to shareholders, authorising the doubling of its dividend to $0.16 per year, and extending its share buyback programme to up to $400 million in fiscal year 2006. During the first quarter, CA executed the repurchase of approximately 3.6 million CA shares.
* Advanced its leadership position in enterprise security management, with eTrust Security Command Centre being listed in the "Leader" quadrant in Gartner`s Security Information and Event Management Magic Quadrant for the second half of 2005;** launching eTrust Anti-Spam; and having eTrust Antivirus incorporated into Check Point`s new integrated security gateway.
* Was named the worldwide market leader based on new licence revenue in IT Asset Management in 2004 with a 27 percent share, according to a Gartner report entitled "Market Share: Enterprise Management, Worldwide, 2004".
* Extended its commitment to the mainframe, announcing plans to open a Mainframe Centre of Excellence in Prague and extending measured workload pricing across the mainframe management portfolio to small and medium enterprises.

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* Results for Q2FY05 and FY05 have been restated to reflect the modified retrospective adoption of SFAS 123(R), which changes the method under which the company expenses stock-based compensation, and to reflect other adjustments as disclosed in the company`s most recent filing on Form 10-K.
** GAAP outlook for Q2FY06 and FY06 is inclusive of the expected restructuring charge noted above.
*** Q2FY05 and FY05 GAAP EPS includes charges of $225 million and $28 million related to the Restitution Fund and restructuring, respectively.

"Our overall financial position continues to be strong. We are confident in our ability to perform for the year and are committed to a rapid execution of our restructuring plan," said CA Chief Financial Officer Bob Davis. "Based on this, we are increasing our operating earnings per share guidance range for the full fiscal year 2006 from $0.90 to $0.95, to $0.93 to $0.98."

The company will host a Webcast at 5pm EDT today to discuss its first quarter results. Individuals can access the Webcast, as well as this press release and supplemental financial information, including slides, at http://ca.com/invest or listen to the call at 1 (706) 679-5227.

** Gartner Research, "Security Information and Event Management Leaders, 2H05", M Nicolett, AT Williams, 3 June 2005. *** Gartner, Inc, "Market Share: Enterprise Management, Worldwide, 2004", Laurie Wurster, 22 June 2005.