-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, S+3jASVkvnC76GdeOn6mtKMRlHr27ovXzeGI/KqI8/G67ibAs5PASvAs+Dxz0lyk tHWP3TfVhqbMA5KEwZliMQ== 0000356028-95-000002.txt : 19950608 0000356028-95-000002.hdr.sgml : 19950608 ACCESSION NUMBER: 0000356028-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950131 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER ASSOCIATES INTERNATIONAL INC CENTRAL INDEX KEY: 0000356028 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 132857434 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09247 FILM NUMBER: 95504013 BUSINESS ADDRESS: STREET 1: ONE COMPUTER ASSOCIATES PLAZA CITY: ISLANDIA STATE: NY ZIP: 11788 BUSINESS PHONE: 5163425224 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 1994 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period ended from _____ to _____ Commission File Number 0-10180 COMPUTER ASSOCIATES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-2857434 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE COMPUTER ASSOCIATES PLAZA ISLANDIA, NEW YORK 11788-7000 (Address of principal executive offices) (Zip Code) (516) 342-5224 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: Title of Class Shares Outstanding Common Stock January 30, 1995 par value $.10 per share 160,006,061 COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES INDEX PART I. Financial Information: Page No. Item 1. Consolidated Condensed Balance Sheets - December 31, 1994 and March 31, 1994 . . . . . . . . . 1 Consolidated Statements of Income - Three Months Ended December 31, 1994 and 1993 . . . . . 2 Nine Months Ended December 31, 1994 and 1993. . . . . . 3 Consolidated Condensed Statements of Cash Flows - Nine Months Ended December 31, 1994 and 1993. . . . . . 4 Notes to Consolidated Condensed Financial Statements . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . 8 PART II. Other Information: Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 11 Item 1: Part I. FINANCIAL INFORMATION COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) December 31, March 31, 1994 1994 ------------- --------------- (Unaudited) ASSETS: Cash and cash equivalents . . . . . $ 79,659 $ 133,127 Marketable securities . . . . . . . 167,726 235,071 Trade and installment accounts receivable - net. . . . . . . . . . 717,486 594,854 Inventories and other current assets . . . . . . . . . . . . . . 47,322 36,169 TOTAL CURRENT ASSETS 1,012,193 999,221 Installment accounts receivable, due after one year - net . . . . . 852,531 626,923 Property and equipment - net . . . . 351,056 304,590 Purchased software products - net. . 384,809 259,290 Excess of cost over net assets acquired - net . . . . . . . . . . 304,033 201,665 Investments and other noncurrent assets . . . . . . . . . . . . . . 99,560 99,916 TOTAL ASSETS $3,004,182 $2,491,605 LIABILITIES AND STOCKHOLDERS' EQUITY: Loans payable - banks . . . . . . . $ 285,000 $ 50,000 Other current liabilities . . . . . 630,979 498,622 Long-term debt and other . . . . . 51,930 71,381 Deferred income taxes . . . . . . . 404,934 298,914 Deferred maintenance revenue . . . 312,779 329,555 Stockholders' equity . . . . . . . . 1,318,560 1,243,133 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,004,182 $2,491,605 See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts) For the Three Months Ended December 31, -------------------- 1994 1993 ---- ---- Product revenue and other related income . . . $ 535,831 $ 399,326 Maintenance fees . . . . . . . . . . . . . . . 185,201 175,054 TOTAL REVENUE 721,032 574,380 Costs and expenses: Selling, marketing and administrative . . . 268,294 257,964 Product development and enhancements . . . . 60,380 52,132 Commissions and royalties . . . . . . . . . 37,294 27,295 Depreciation and amortization . . . . . . . 71,532 42,884 Interest expense (income) - net . . . . . . 2,554 ( 51) TOTAL COSTS AND EXPENSES 440,054 380,224 Income before income taxes . . . . . . . . . . 280,978 194,156 Provision for income taxes . . . . . . . . . . 106,772 69,968 NET INCOME $ 174,206 $ 124,188 Net income per share of Common Stock . . . . $ 1.04 $ .72 Weighted average number of shares used in computation . . . . . . . . . . . . . . . . . 167,778 171,936 See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands except per share amounts) For the Nine Months Ended December 31, ------------------- 1994 1993 ---- ---- Product revenue and other related income . . . $1,286,317 $ 994,235 Maintenance fees . . . . . . . . . . . . . . . 534,686 520,495 TOTAL REVENUE 1,821,003 1,514,730 Costs and expenses: Selling, marketing and administrative . . . . 775,979 745,293 Product development and enhancements . . . . 164,764 153,706 Commissions and royalties . . . . . . . . . . 87,705 70,505 Depreciation and amortization . . . . . . . . 185,274 164,080 Interest expense - net . . . . . . . . . . . 4,752 2,166 Purchased research and development . . . . . 249,300 TOTAL COSTS AND EXPENSES 1,467,774 1,135,750 Income before income taxes . . . . . . . . . . 353,229 378,980 Provision for income taxes . . . . . . . . . . 134,227 136,505 NET INCOME $ 219,002 $ 242,475 Net income per share of Common Stock . . . . . $ 1.30 $ 1.41 Weighted average number of shares used in computation . . . . . . . . . . . . . . . . . 167,988 171,907 See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands) For the Nine Months Ended December 31, -------------------- 1994 1993 OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . $ 219,002 $242,475 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . 185,274 164,080 Provision for deferred income taxes . . . . . . 64,903 25,464 Charge for purchased research and development. . 154,500 Increase in noncurrent installment accounts receivable - net . . . . . . . . . . . . . . . (206,439) (152,657) Decrease in deferred maintenance revenue . . . . ( 20,217) ( 26,486) Foreign currency transaction loss before taxes . . . . . . . . . . . . . . . . . 4,619 19,188 Changes in other operating assets and liabilities, excludes effects of acquisitions . ( 95,705) 39,811 NET CASH PROVIDED BY OPERATING ACTIVITIES 305,937 311,875 INVESTING ACTIVITIES: Acquisitions, primarily purchased software, marketing rights and intangibles . . . . . . . . (371,991) ( 3,092) Purchase of property and equipment . . . . . . . . ( 30,589) ( 15,148) Purchase of noncurrent marketable securities . . . ( 317) Decrease (increase) in current marketable securities . . . . . . . . . . . . . . . . . . . 62,498 (102,137) Capitalized development costs . . . . . . . . . . ( 12,203) ( 11,370) NET CASH USED IN INVESTING ACTIVITIES (352,285) (132,064) FINANCING ACTIVITIES: Decrease in long-term debt - net . . . . . . . . . ( 84,076) ( 99,400) Increase in loans payable-banks - net . . . . . . 235,000 25,000 Dividends Paid . . . . . . . . . . . . . . . . . . ( 16,172) ( 11,643) Exercise of common stock options/other . . . . . . 12,933 20,162 Purchases of treasury stock . . . . . . . . . . . (161,666) (121,524) NET CASH USED IN FINANCING ACTIVITIES ( 13,981) (187,405) DECREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 60,329) ( 7,594) Effect of exchange rate changes on cash . . . . . . 6,861 ( 5,803) DECREASE IN CASH AND CASH EQUIVALENTS ( 53,468) ( 13,397) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 133,127 79,483 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 79,659 $ 66,086
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1994 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended December 31, 1994 are not necessarily indicative of the results that may be expected for the year ending March 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in Computer Associates International, Inc.'s (the Registrant" or the "Company") Annual Report on Form 10-K for the fiscal year ended March 31, 1994. Dividends: In December 1994, the Company's Board of Directors declared its semi-annual cash dividend of $.10 per share. The dividend was paid on January 9, 1995 to stockholders of record on December 20, 1994. Net Income per Share: Net income per share of Common Stock is computed by dividing net income by the weighted average number of common shares and any dilutive common share equivalents outstanding. Fully diluted net income per share is the same or not materially different from net income per share. Statements of Cash Flows: For the nine months ended December 31, 1994 and 1993, interest paid was $16 and $10 million, respectively, and income taxes paid were $158 and $93 million, respectively. COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1994 NOTE B -- ACQUISITIONS On June 22, 1994, the Company acquiried 98% of the issued and outstanding Common Stock of The ASK Group, Inc. ("ASK"), and on September 20, 1994, merged ASK into one of its wholly owned subsidiaries. The aggregate cost of acquiring the Common Stock of ASK was approximately $314 million. The purchase price was provided from existing cash balances and from a revolving credit agreement with a group of banks. ASK was primarily in the business of developing, marketing and selling computer-based relational database management systems, data access and connectivity products, manufacturing and financial software application tools and provided related consulting and support services. The acquisition was accounted for as a purchase. The results of ASK's operations have been combined with those of the Company since the date of acquisition. In conjunction with the purchase of ASK, the Company recorded an after-tax charge against earnings of $154 million relating to the write-off of purchased research and development technology that had not reached the working model stage and has no alternative future use. Had this one-time charge not been taken during the quarter ended June 30, 1994, net income for the nine month period ended December 31, 1994 would have been $374 million, or $2.22 per share. The following table reflects pro forma combined results of operations (unaudited) of the Company and ASK on the basis that the acquisitions had taken place and the related one-time charge, noted above, was recorded at the beginning of the fiscal year for each of the periods presented:
(In thousands, except per share amounts) For the Nine Months For the Three Months Ended December 31, Ended December 31, 1994 1993 1994 1993 Revenue . . . . . . . . . $1,868,656 $ 1,771,099 $ 727,137 $ 663,409 Net income (loss) . . . . 187,488 7,649 177,991 97,301 Net income (loss) per Common Share . . . . . . $ 1.12 $ .04 $ 1.06 $ .57 Shares used in computation . . . . . . 167,988 171,907 167,778 171,936
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1994 NOTE B -- ACQUISITIONS (continued) The following table reflects pro forma combined results of operations (unaudited) of the Company and ASK on the basis that the acquisitions had taken place at the beginning of the fiscal year for each of the periods presented and excludes the effect of the one-time after-tax charge of $154 million:
(In thousands, except per share amounts) For the Nine Months For the Three Months Ended December 31, Ended December 31, 1994 1993 1994 1993 Revenue . . . . . . . . . . $1,868,656 $ 1,771,099 $ 727,137 $ 663,409 Net income . . . . . . . . 341,988 162,149 177,991 97,301 Net income per Common Share . . . . . . . $ 2.04 $ .94 $ 1.06 $ .57 Shares used in computation . . . . . . . 167,988 171,907 167,778 171,936
In management's opinion, the pro forma combined results of operations are not indicative of the actual results that would have occurred had the acquisition been consummated at the beginning of fiscal year 1994 or of future operations of the combined companies under the ownership and operation of the Company. Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue: Total revenue in the quarter ended December 31, 1994 increased by 26%, or $147 million, over the prior year's comparable quarter. The increase continues to be attributable to product revenue growth, especially in the midrange platform. The midrange environment experienced strong year over year growth due to increased sales of CA-Unicenter, now available on several platforms as well as the integration of the ASK/Ingres products. Maintenance revenues increased by $10 million, primarily due to the acquisition of ASK. Price changes did not have a material impact in either quarter. Costs and Expenses: Selling, marketing and administrative expenses as a percentage of total revenue decreased to 37% in the December 1994 quarter from 45% in the December 1993 quarter. This percentage reduction between the two comparable quarters reflects the higher revenue achievement without a proportionate increase in total fixed, variable and administrative costs, and to a lesser extent operating efficiencies realized from the acquisition of ASK. Development expenditures in the December 1994 quarter increased by $8 million over the same period last year due to the additional technical staff associated with recent acquisitions. Development expenditures capitalized during the fiscal 1995 quarter totaled $4 million, and $5 million of previously capitalized software development expenditures was amortized in the quarter. Commissions and royalties as a percentage of total revenue remained constant in the December 1994 quarter over the prior year's comparable period. Depreciation and amortization expense in the December 1994 quarter increased by $29 million over the December 1993 quarter, due primarily to increased amortization of purchased software and excess cost over net assets acquired (approximately $27 million) associated with the ASK acquisition. This incremental quarterly charge will continue for the remainder of fiscal year 1995. In the quarter ended December 1994, net interest expense increased by over $2 million, primarily as a result of increases in the level of loans payable to banks and higher average interest rates. Item 2: (Continued) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Margins: Pre-tax income for the quarter ended December 1994 exceeded the prior year's comparable quarter by $87 million, or 45%, due to the higher revenue achievement (26% increase), while costs and expenses increased by only 16%. Similarly, pre-tax income as a percentage of total revenue increased to 39% from 34% in the comparable prior year period as a result of reduced expense growth and higher revenue achievement. The reduced availability of foreign tax credits was primarily responsible for the increase in the consolidated effective tax rate to 38% from 36% in the December 1993 quarter. Operations: The Company has traditionally reported lower profit margins in the first two quarters of each fiscal year than those experienced in the third and fourth quarters. As part of the annual budget process, management establishes higher discretionary expense levels in relation to projected revenue for the first half of the year. Historically, the Company's combined third and fourth quarter revenues have been greater than the first half of the year, as these two quarters coincide with the clients' calendar year budget periods and the culmination of the Company's annual sales plan. These historically higher second half revenues have resulted in significantly higher profit margins since total expenses have not increased in proportion to revenue. However, past financial performance may not be indicative of future performance, particularly in view of the uncertainties associated with integration of the ASK acquisition and the personnel and infrastructure investments necessary to capitalize on the migration to client server technology. The Company's near term operating results may be affected by a number of other factors, including, but not limited to: uncertainties relative to global economic conditions; market acceptance of competing technologies; the availability and cost of new solutions; the Company's ability to successfully maintain or increase market share in its core business while expanding its product base into other markets; the strength of its distribution channels; the Company's ability to manage fixed and variable expense growth relative to revenue growth; and the Company's ability to integrate acquired products and operations. Item 2: (Continued) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company's cash, cash equivalents and short-term marketable securities decreased by $30 million to $247 million during the quarter ended December 31, 1994. This decrease was primarily attributable to expenditures of $15 million for various shutdown costs related to the ASK acquisition, purchases of $53 million of common stock under the Company's open market repurchase plan and repayments of $107 million in bank debt offset by $145 million of cash generated from operations. At December 31, 1994, $285 million was outstanding under the Company's revolving credit agreement. It is expected that existing cash, cash equivalents, short-term marketable securities, the availability of short-term borrowings under committed and uncommitted credit lines as well as cash provided from operations will be sufficient to meet anticipated cash operating requirements. During the quarter ended December 31, 1994, the Company added 1.2 million shares of Common Stock to its treasury, leaving an additional nine million shares available for purchase under its current program. The Company's capital resource requirements as of the end of December 1994 consisted of lease obligations for office space, computer equipment, mortgage or loan obligations and amounts due as a result of product and company acquisitions. The Company intends to meet these commitments and other foreseeable needs from its available cash as outlined above. PART II. OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) Exhibits. None. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMPUTER ASSOCIATES INTERNATIONAL, INC. Dated: January 31, 1995 By: Sanjay Kumar ---------------------- Sanjay Kumar, President and Chief Operating Officer Dated: January 31, 1995 By: Peter Schwartz ---------------------- Peter Schwartz Sr. Vice President - Finance (Chief Financial and Accounting Officer) EX-27 2 ART. 5 FDS FOR COMPUTER ASSOCIATES 3RD QTR 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1000 U.S. DOLLARS 9-MOS MAR-31-1995 APR-01-1994 DEC-31-1994 79659 167726 717486 0 47322 1012193 351056 0 3004182 915979 51930 0 0 0 1318560 3004182 1286317 1821003 0 1467774 0 0 4752 353229 134227 219002 0 0 0 219002 1.30 1.30
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