CA Issues Preliminary Fourth Quarter and Fiscal Year 2006 Re

ISLANDIA, N.Y., May 30, 2006 — CA (NYSE:CA), one of the world’s largest management software companies, today said it is delaying its fourth quarter and full fiscal year 2006 earnings report.

The Company attributed the delay to additional work that needs to be completed on sales commission expense and income taxes to finalize its financial results. CA expects to announce final results when it files its Annual Report on Form 10-K.

The Company issued the following preliminary results:

- Revenue for the fourth quarter of $947 million, in line with the updated guidance of $940 million to $950 million issued on April 25, 2006.
- Fully-diluted non-GAAP operating earnings per share for the fourth quarter of $0.14, after giving effect to the $0.03 per share favorable impact of the third quarter restatement described below. Without giving effect to the restatement, non-GAAP operating earnings per share would have been below the updated guidance of $0.14 to $0.16. (1)
- GAAP loss per share for the fourth quarter of $0.07, after giving effect to the $0.03 per share favorable impact of the third quarter restatement, compared to updated guidance of $0.00 to $0.02.
- Full-year 2006 adjusted non-GAAP cash flow from operations of approximately $1.54 billion, up 16 percent from the prior year, in line with updated guidance. Full-year adjusted non-GAAP cash flow from operations was positively affected by a significant increase in accelerated customer payments in the fourth quarter, as well as by lower tax payments and improved working capital management. (2)
- Full-year GAAP cash flow from operations of approximately $1.37 billion, in line with updated guidance. This amount was positively impacted by the same factors described above.
- Billings growth of 5 percent for the full year, in line with updated guidance. This billings growth was due to the favorable impact of sales of acquisition-related products and accelerated customer payments; excluding these two items, billings for fiscal year 2006 would have been slightly down.

The completion of the Company’s year-end closing procedures and the annual audit could result in adjustments to the amounts reported in this release. Therefore, all results reported in this release should be considered preliminary until CA files its Annual Report on Form 10-K for the 2006 fiscal year.

“Clearly we are disappointed that what would have been a solid year was impacted by execution issues relating to commissions, which adversely affected our fourth quarter performance and led to a restatement of our third quarter results,” said John Swainson, CA’s president and CEO. “We are making changes to ensure that these problems do not recur, and are confident going forward that our value proposition of helping customers manage and secure their enterprise IT environments is sound.”

GAAP loss per share for the fourth quarter of $0.07 will come in below previously indicated guidance of earnings of $0.00 to $0.02 partly because sales commission expense was significantly higher than anticipated. The Company estimates that commissions and royalties for the fiscal year will be approximately $387 million, which includes approximately $70 million more in sales commissions than originally expected. This increase in sales commission expense resulted from a new sales commission plan that did not appropriately align commission payments with the Company’s overall performance. The impact of the higher sales commission expense was partially offset through reductions in variable compensation programs, including management bonuses, which are all included in the commissions and royalties line item. Non-GAAP earnings per share of $0.14 will come in at the low end of the Company’s previously disclosed guidance of $0.14 to $0.16. Without giving effect to the restatement described below, non-GAAP earnings per share would have been below the guidance primarily because of the increased sales commission expense as described above.

The Company announced that it will restate its earnings for the third quarter of fiscal 2006 to reflect approximately $26 million of additional commission expense that should have been recorded in the Company’s third fiscal quarter. The restatement will reduce previously reported earnings on a GAAP and non-GAAP basis for the third quarter of fiscal 2006 by approximately $0.03 per share and have an offsetting favorable impact on GAAP and non-GAAP earnings per share for the fourth quarter. This restatement does not affect previously reported third quarter total revenue and cash flow from operations or financial results for the full fiscal year. The Company also will report a material weakness in its financial controls relating to the forecasting, processing, and monitoring of sales commissions. As stated above, the Company has not concluded its review of this matter and further adjustments may be necessary.

The Company also expects that GAAP results for the fourth quarter will be adversely affected by an estimated $36 million in additional income taxes associated with the repatriation of cash from foreign subsidiaries. As stated above, the Company has not concluded its review of income taxes and related internal controls, and further adjustments may be necessary.

The Company also announced that it is postponing its June 8 Financial Analyst Day. A new date will be announced in the future.

“We are looking forward to meeting with financial analysts soon to share with them our progress in rebuilding CA,” Swainson said.

(1) Operating EPS is a non-GAAP financial measure, as noted in the discussion of non-GAAP results below. A reconciliation of GAAP (loss) income from continuing operations to non-GAAP operating income is included in the tables following this press release.

(2) Adjusted cash flow from operations is a non-GAAP financial measure, as noted in the discussion of non-GAAP results below. A reconciliation of GAAP cash flow from operations to non-GAAP adjusted cash flow from operations is included in the tables following this press release.

About CA
CA (NYSE:CA), one of the world´s largest information technology (IT) management software companies, unifies and simplifies the management of enterprise-wide IT. Founded in 1976, CA is headquartered in Islandia, N.Y., and serves customers in more than 140 countries. For more information, please visit http://ca.com.

Source: CA Inc.
www.ca.com

2006-06-03 16:32

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