CA reports strong Q2 FY2006 results

Computer Associates (CA) International, Inc, one of the world`s largest management software companies, today reported strong financial results for its second quarter fiscal year 2006, ended 30 September 2005.

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*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.

**Q2FY06 GAAP results include $45 million in restructuring and other charges, a $14 million in-process research and development charge related to the company`s acquisition of Niku Corporation and a tax benefit of approximately $16 million.

***Q2FY05 GAAP results include a tax benefit of $26 million.

"We are very pleased with our results for the second quarter," said CA President and Chief Executive Officer John Swainson. "We clearly sharpened our execution as we implemented the changes necessary for growth. It continues to be a highly competitive IT environment where customers are demanding measurable ROI for their spending, and as a result, CA`s solutions and our commitment to helping simplify, unify and secure IT environments are being well received.

"We`ve also made good progress in transforming CA during the first half of the fiscal year. We have aligned the business to our growth opportunities, put programmes in place to encourage our sales force to become better partners to customers and made a number of key acquisitions to strengthen our product portfolio. Together, these and our other transformation initiatives continue to drive our goals of achieving sustainable growth, enhancing customer relationships and increasing shareholder value," added Swainson.

CA reported $299 million in cash flow from operations in the second quarter, compared to $152 million reported in the similar period last year. On a comparable basis, adjusting for the second of three $75 million in payments to the Restitution Fund and $4 million in restructuring payments and other charges, adjusted cash flow from operations would have been $378 million.

For the trailing 12 months, cash flow from operations was $1.50 billion, up from $1.35 billion in the previous trailing 12 months. Adjusted cash flow from operations for the trailing 12 months was up 19% over the prior year period to $1.48 billion, which is adjusted for $150 million in payments to the Restitution Fund, $29 million in restructuring and other payments, and excludes a $191 million tax benefit. On a comparable basis in the prior year, adjusted cash flow from operations for the trailing 12 months was $1.24 billion and is adjusted for a $109 million tax benefit.

Billings for the quarter were $975 million, up 14% over the prior year period, and 8% organically. Billings for the trailing 12 months, which normalise quarterly fluctuations and other factors, were $4.46 billion, an increase of 3% over the prior trailing 12 months, with growth driven by recent acquisitions.

"We entered the quarter with a strong pipeline, executed on our business plan, improved working capital management and held our costs in line," said CA Chief Operating Officer Jeff Clarke. "We generated billings growth across all geographies and delivered results."

Total bookings for the second quarter, which includes $73 million from the company`s indirect business, decreased 11% over the prior year period to $665 million. This decline was primarily due to an expected decrease in early contract renewals, as the company has focused on driving new contract value.

Expenses for the quarter totalled $902 million compared with $1.05 billion in the prior year comparable period. Last year`s expenses included charges related to the Restitution Fund for shareholders.

The balance of cash and marketable securities at 30 September 2005 was $1.64 billion, down from $1.95 billion at 30 June 2005. With $1.81 billion in total debt outstanding, the company has a net debt position of $171 million. During the quarter, the company closed on its acquisition of Niku Corporation, repurchased approximately $176 million of CA shares and made a $75 million payment to the Restitution Fund.

Since reporting first quarter results, CA:

* Announced the availability of BrightStor r11.5, an integrated set of modular, intelligent storage management solutions that enable organisations to manage and protect information and storage assets while aligning with business objectives.

* Acquired iLumin, a leader of enterprise message management and archiving software, in October for approximately $47 million to help customers meet storage optimisation, compliance and litigation support objectives.

* Announced the formation of CA Labs, a new organisation within CA dedicated to promoting and performing advanced research in systems and security management for the enterprise. This cross-business and academia effort will be led by Dr Gabriel (Gabby) Silberman, who recently joined the company as senior vice-president and head of CA Labs.

* Completed its acquisition of Niku in July, including its leading information technology governance (ITG) solution.

* Unveiled integration between eHealth and SPECTRUM Network Management Solution and unveiled a new telecom vertical market strategy to advance its enterprise systems management solutions.

* Released a fully integrated CA Protection Suite that includes six fully integrated solutions suites with security and storage products in one package, on one disk, to help SMBs minimise risks and reduce IT management costs.

* Announced comprehensive support for the new IBM System z9 and associated software across mainframe management product lines to help System z9 users leverage the new technology to meet evolving business needs, including delivery of on-demand IT services.

* Launched its Worldwide Internet Service Provider (ISP) Partner Programme, providing its eTrust security software to ISPs around the globe, and announced that America Online launched AOL Spyware Protection 2.0 technology from CA, providing one of the most comprehensive protection packages available.

* Added Marc Loup'e, a technology industry veteran, to serve as senior vice-president and head of internal audit.

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*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.

**GAAP outlook for FY06 is inclusive of the previously announced restructuring charge of $75 million.

***Q3FY05 GAAP EPS includes $18 million related to shareholder litigation.

****FY05 GAAP EPS includes charges of $218 million, $28 million and $16 million related to the Restitution Fund, restructuring and shareholder litigation, respectively.

"With the first half of the fiscal year completed, we are raising the floor on operating earnings and refining the guidance ranges previously provided to account for foreign currency exchange and increased investments in the business, including marketing initiatives and acquisitions," said CA Chief Financial Officer Bob Davis. "We are comfortable with our performance and execution in the first half of the fiscal year, and are confident in our ability to achieve the full-year goals we`ve set in place."

In addition, Davis said the company continues to expect to meet its projections of mid-to-high single digit billings growth for the year and 10% adjusted, non-GAAP cash flow growth for the year. (1)

The company will host a Webcast at 5pm EDT today to discuss its second 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.