CA reports solid third quarter 2005 results

Computer Associates International, Inc today reported financial results for its third fiscal 2005 quarter ended 31 December 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."

Total revenue for the third quarter of fiscal year 2005 was $911 million, a 9% 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% 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%, and security continues to be a strong segment of our business, with more than 94% 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% 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% year-over-year increase.

CA`s total deferred subscription revenue balance as of 31 December 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.

Trek to the summit

00Days

:

00Hrs

:

00Min

:

00Sec

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 31 December 2004, was approximately $3.33 billion, up from $2.25 billion on 30 September 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.

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 under way;

* 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 WiFi security management; and

* Following its successful acquisition of PestPatrol, announcing eTrust PestPatrol Anti-Spyware r5.

The following updated guidance is based on current expectations and represents "forward looking statements" (as defined below):

For the fourth quarter ending 31 March 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 31 March 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."

The company will host a Webcast at 5pm 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.

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 US generally accepted accounting principles (GAAP). Non-GAAP "operating" net income and earnings per share exclude non-cash amortisation 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.