-----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, EeeTbEMYHRELRKZakYH7LDVi76/KwdUBf3Wobr5tKe4brX8ZSaJo/7XcqgCkjcSe f4JPfBKyeLQnscfidAobkQ== 0000356028-94-000021.txt : 19941104 0000356028-94-000021.hdr.sgml : 19941104 ACCESSION NUMBER: 0000356028-94-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941103 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER ASSOCIATES INTERNATIONAL INC CENTRAL INDEX KEY: 0000356028 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94557432 BUSINESS ADDRESS: STREET 1: ONE COMPUTER ASSOCIATES PLAZA CITY: ISLANDIA STATE: NY ZIP: 11788 BUSINESS PHONE: 5163425224 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 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 November 1, 1994 par value $.10 per share 160,828,311 COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES INDEX PART I. Financial Information: Page No. Item 1. Consolidated Condensed Balance Sheets - September 30, 1994 and March 31, 1994 . . . . . . . . 1 Consolidated Statements of Income - Three Months Ended September 30, 1994 and 1993 . . . . 2 Six Months Ended September 30, 1994 and 1993 . . . . . 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended September 30, 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 4. Submission of matters to a Vote of Security Holders . . 11 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 12 Item 1: Part I. FINANCIAL INFORMATION COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) September 30, March 31, 1994 1994 ------------- -------------- (Unaudited) ASSETS: Cash and cash equivalents . . . . . $ 53,955 $ 133,127 Marketable securities . . . . . . . 222,904 235,071 Trade and installment accounts receivable - net. . . . . . . . . . 664,274 594,854 Inventories and other current assets . . . . . . . . . . . . . . 39,445 36,169 TOTAL CURRENT ASSETS 980,578 999,221 Installment accounts receivable, due after one year - net . . . . . 781,643 626,923 Property and equipment - net . . . . 356,800 304,590 Purchased software products - net. . 432,801 259,290 Excess of cost over net assets acquired - net . . . . . . . . . . 300,832 201,665 Investments and other noncurrent assets . . . . . . . . . . . . . . 100,717 99,916 TOTAL ASSETS $2,953,371 $2,491,605 LIABILITIES AND STOCKHOLDERS' EQUITY: Loans payable - banks . . . . . . . $ 392,000 $ 50,000 Other current liabilities . . . . . 579,447 498,622 Long-term debt and other . . . . . 54,670 71,381 Deferred income taxes . . . . . . . 384,926 298,914 Deferred maintenance revenue . . . 333,068 329,555 Stockholders' equity . . . . . . . . 1,209,260 1,243,133 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,953,371 $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 September 30, -------------------- 1994 1993 ---- ---- Product revenue and other related income . . . $ 443,998 $ 343,463 Maintenance fees . . . . . . . . . . . . . . . 179,342 173,505 TOTAL REVENUE 623,340 516,968 Costs and expenses: Selling, marketing and administrative . . . 256,114 235,623 Product development and enhancements . . . . 54,146 51,744 Commissions and royalties . . . . . . . . . 30,065 23,033 Depreciation and amortization . . . . . . . 69,809 68,973 Interest expense - net . . . . . . . . . . . 2,924 817 TOTAL COSTS AND EXPENSES 413,058 380,190 Income before income taxes . . . . . . . . . . 210,282 136,778 Provision for income taxes . . . . . . . . . . 79,907 49,240 NET INCOME $ 130,375 $ 87,538 Net income per share of Common Stock . . . . $ .78 $ .51 Weighted average number of shares used in computation . . . . . . . . . . . . . . . . . 168,198 171,707 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 Six Months Ended September 30, ------------------- 1994 1993 ---- ---- Product revenue and other related income . . . $ 750,486 $ 594,909 Maintenance fees . . . . . . . . . . . . . . . 349,485 345,441 TOTAL REVENUE 1,099,971 940,350 Costs and expenses: Selling, marketing and administrative . . . . 507,685 487,329 Product development and enhancements . . . . 104,384 101,574 Commissions and royalties . . . . . . . . . . 50,411 43,210 Depreciation and amortization . . . . . . . . 113,742 121,196 Interest expense - net . . . . . . . . . . . 2,198 2,217 Purchased research and development . . . . . 249,300 TOTAL COSTS AND EXPENSES 1,027,720 755,526 Income before income taxes . . . . . . . . . . 72,251 184,824 Provision for income taxes . . . . . . . . . . 27,455 66,537 NET INCOME $ 44,796 $ 118,287 Net income per share of Common Stock . . . . . $ .27 $ .69 Weighted average number of shares used in computation . . . . . . . . . . . . . . . . . 168,064 171,757 See Notes to Consolidated Condensed Financial Statements.
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands) For the Six Months Ended September 30, -------------------- 1994 1993 OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . $ 44,796 $118,287 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . 113,742 121,196 Provision for deferred income taxes . . . . . . 21,540 11,443 Charge for purchased research and development. . 154,500 Increase in noncurrent installment accounts receivable - net . . . . . . . . . . . . . . . (122,909) ( 96,758) Decrease in deferred maintenance revenue . . . . ( 9,514) ( 27,008) Foreign currency transaction loss before taxes . . . . . . . . . . . . . . . . . 2,620 18,091 Changes in other operating assets and liabilities, excludes effects of acquisitions . ( 44,238) 44,322 NET CASH PROVIDED BY OPERATING ACTIVITIES 160,537 189,573 INVESTING ACTIVITIES: Acquisitions, primarily purchased software, marketing rights and intangibles . . . . . . . . (353,247) ( 318) Purchase of property and equipment . . . . . . . . ( 33,370) ( 24,572) Purchase of noncurrent marketable securities . . . ( 203) Decrease (increase) in current marketable securities . . . . . . . . . . . . . . . . . . . 9,047 ( 84,940) Capitalized development costs . . . . . . . . . . ( 8,038) ( 7,542) NET CASH USED IN INVESTING ACTIVITIES (385,608) (117,575) FINANCING ACTIVITIES: Decrease in long-term debt - net . . . . . . . . . ( 82,458) ( 4,540) Increase (decrease) in loans payable-banks - net . 342,000 ( 25,000) Dividends Paid . . . . . . . . . . . . . . . . . . ( 16,172) ( 11,643) Exercise of common stock options/other . . . . . . 8,133 15,464 Purchases of treasury stock . . . . . . . . . . . (109,027) ( 68,877) NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES 142,476 ( 94,596) DECREASE IN CASH AND CASH EQUIVALENTS BEFORE EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 82,595) ( 22,598) Effect of exchange rate changes on cash . . . . . . 3,423 ( 2,226) DECREASE IN CASH AND CASH EQUIVALENTS ( 79,172) ( 24,824) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 133,127 79,483 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 53,955 $ 54,659
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 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 six months ended September 30, 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. 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 six months ended September 30, 1994 and 1993, interest paid was $9 and $8 million, respectively, and income taxes paid were $111 and $54 million, respectively. COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 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 six month period ended September 30, 1994 would have been $199 million, or $1.19 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, expect per share amounts) For the Six Months For the Three Months Ended September 30, Ended September 30, 1994 1993 1994 1993 Revenue . . . . . . . . . $1,141,539 $ 1,107,690 $ 631,175 $ 584,063 Net income (loss) . . . . 9,497 ( 89,652) 135,231 56,190 Net income (loss) per Common Share . . . . . . $ .06 $( .54) $ .80 $ .33 Shares used in computation . . . . . . 168,064 166,165 168,198 171,707
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 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 Six Months For the Three Months Ended September 30, Ended September 30, 1994 1993 1994 1993 Revenue . . . . . . . . . . $1,141,539 $ 1,107,690 $ 631,175 $ 584,063 Net income . . . . . . . . 163,997 64,848 135,231 56,190 Net income per Common Share . . . . . . . $ .98 $ .38 $ .80 $ .33 Shares used in computation . . . . . . . 168,064 171,757 168,198 171,707
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 September 30, 1994 increased by 21%, or $106 million, over the prior year's comparable quarter. The increase was attributable to product revenue growth primarily in the midrange platform. The midrange environment experienced year over year growth of 177% due to continued strong acceptance of CA-Unicenter now available on several platforms and the integration of the ASK/Ingres products. Maintenance revenues increased by $6 million, primarily due to the acquisition of ASK. Price changes did not have a material impact during either quarter. Costs and Expenses: Selling, marketing and administrative expenses as a percentage of total revenue decreased to 41% in the September 1994 quarter from 46% in the September 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. Development expenditures capitalized during the fiscal 1995 quarter totaled $5 million, and $5 million of previously capitalized software development expenditures was amortized in the quarter. Commissions and royalties as a percentage of revenue increased slightly in the September 1994 quarter over the prior year's comparable period, due primarily to the aforementioned revenue increase. Depreciation and amortization expense in the September 1994 quarter increased by $1 million over the September 1993 quarter. However, during the September 1994 quarter, the increased amortization of purchased software and excess cost over net assets acquired associated with the ASK acquisition was approximately $27 million. This incremental quarterly charge will continue throughout the remainder of fiscal year 1995. During the September 1993 quarter, there were $17 million of charges for the reasessment of the current carrying value of several purchased software products, as well as $7 million associated with the ADR acquisition neither of which are included in the current quarter. In the quarter ended September 1994, net interest expense increased by $2 million primarily as a result of increases in 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 September 1994 exceeded the prior year's comparable quarter by $73 million, or 54%, due to the higher revenue achievement and marginal increases in costs and expenses. Similarly, pre-tax income as a percentage of total revenue increased to 34% from 26% in the comparable prior year period as a result of limited 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 of 38% from 36% in the September 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 assimilation and integration of the ASK acquisition. 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 effectively manage fixed and variable expense growth relative to revenue growth; and the Company's ability to effectively 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 $84 million to $277 million during the quarter ended September 1994. This decrease was primarily attributable to expenditures in excess of $60 million for various shutdown costs related to the ASK acquisition. At September 30, 1994, $392 million was outstanding under the Company's revolving credit agreement with net borrowings of $12 million during the quarter ended September 30, 1994. 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 September 30, 1994, the Company added one million shares of Common Stock costing $44 million to its treasury under its previously announced open market repurchase program. The Company has authorization to repurchase an additional ten million shares under its current program. The Company's capital resource requirements as of the end of September 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 4: Submission of Matters to a Vote of Security Holders (a) Annual Meeting of Stockholders held on August 10, 1994 (b) The Stockholders notice to fix the number of Directors at eight and elected Directors for the ensuing year as follows: Affirmative Authority Name Votes Withheld Russell M. Artzt 137,562,336 650,268 Willem F.P. de Vogel 137,987,327 225,277 Irving Goldstein 137,986,039 226,565 Richard A. Grasso 137,892,003 320,401 Shirley Strum Kenny 137,982,710 229,894 Sanjay Kumar 137,562,164 650,440 Edward C. Lord 137,988,201 224,403 Charles B. Wang 137,612,922 599,482 (c) The Stockholders voted to approve the Company's Annual Incentive Compensation Plan : Affirmative Votes 116,222,149 Negative Votes 20,914,360 Abstentions 1,076,095 The Stockholders voted to ratify the appointment of Ernst & Young as the Company's independent auditors for the fiscal year ending March 31, 1995: Affirmative Votes 137,570,630 Negative Votes 208,135 Abstentions 434,640 PART II. OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) Exhibits. None. (b) Reports on Form 8-K. The registrant filed a Report on Form 8-K on or about July 1, 1994, reporting an event under Item 2, providing financial statements and pro forma financial information in accordance with Items 7(a) and (b) and furnishing exhibits under Item 7(c). The date of such report was June 23, 1994. 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: November 3, 1994 By:/s/Sanjay Kumar ---------------------------- Sanjay Kumar, President and Chief Operating Officer Dated: November 3, 1994 By:/s/Peter Schwartz ---------------------------- Peter Schwartz Sr. Vice President - Finance (Chief Financial and Accounting Officer) EX-27 2 ART. 5 FDS FOR COMPUTER ASSOCIATES 2ND QTR 10-Q
5 1000 6-MOS MAR-31-1995 SEP-30-1994 53955 222904 1445917 0 39445 980578 356800 0 2953371 971447 54670 0 0 0 1209260 2953371 0 1099971 0 1027720 0 0 0 72251 27455 44796 0 0 0 44796 .27 .27
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