Computer Associates 2015 Annual Report Download - page 30

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• Within total bookings, total new product sales decreased by a percentage in the high single digits. Excluding the
unfavorable effect of foreign exchange, total new product sales decreased by a percentage in the mid-single digits. The
decrease in total new product sales was primarily due to lower renewals as well as fewer new sales outside of renewals.
• We currently expect our fiscal 2016 renewal portfolio to increase by approximately 10 percent compared with fiscal
2015.
Expenses
• Total expenses before interest and income taxes decreased 7% compared with fiscal 2014 primarily as a result of a
decrease in costs associated with the our fiscal 2014 rebalancing plan (Fiscal 2014 Plan), a favorable effect from foreign
exchange and a decrease in selling and marketing costs. These decreases were partially offset by an increase in
severance costs of $40 million as a result of our fourth quarter fiscal 2015 severance actions.
Income taxes
• Income tax expense for fiscal 2015 and fiscal 2014 was $305 million and $129 million, respectively.
• Our fiscal 2015 and 2014 effective tax rate was 27.4% and 12.7%, respectively. This increase resulted primarily from the
favorable resolutions of uncertain tax positions in fiscal 2014 relating to the completion of the examination of our U.S.
federal income tax returns for the tax years ended March 31, 2005, 2006 and 2007.
Diluted income per common share
• Diluted income per common share from continuing operations decreased to $1.82 from $1.96, primarily due to the
increase in income tax expense and decrease in revenue, partially offset by the decrease in operating expenses.
Segment results
• Mainframe Solutions revenue decreased primarily due to insufficient revenue from prior period new sales to offset the
decline in revenue contribution from renewals. There was also an unfavorable foreign exchange effect of $40 million for
fiscal 2015. For fiscal 2015, Mainframe Solutions operating margin decreased slightly as a result of the decrease in
revenue.
• Enterprise Solutions revenue decreased primarily due to an unfavorable foreign exchange effect of $25 million for fiscal
2015 and, to a lesser extent, a decrease in sales of Enterprise Solutions products recognized within the ‘‘Software fees
and other’’ line item of our Consolidated Statements of Operations. Enterprise Solutions operating margin for fiscal
2015 increased primarily as a result of lower commissions and personnel-related expenses.
• Services revenue decreased as a result of a decrease in the size and number of services engagements during fiscal 2015,
including non-core engagements with government customers that are not directly related to our software product sales.
We have also experienced a decline in professional services engagements that are connected to new product sales, due
to a decrease in our new product sales. Operating margin for our Services segment decreased as a result of an increase
in severance costs associated with our fourth quarter fiscal 2015 severance actions. Operating margin for our Services
segment also decreased as a result of the decrease in revenue and lower utilization rates for services personnel due to
the decrease in the number of services engagements.
Cash flow from continuing operations
• Net cash provided by operating activities — continuing operations increased 6% primarily due to lower cash tax
payments of $78 million, lower vendor disbursements and payroll payments of $65 million and decrease in payments
associated with the Fiscal 2014 Plan of $39 million. These favorable effects were partially offset by a decrease in cash
collections from billings.
Discontinued Operations
• In the second quarter of fiscal 2015, we sold our CA arcserve data protection solution assets (arcserve) for $170 million
and recognized a gain on disposal of $20 million, including tax expense of $77 million. The effective tax rate on the
disposal was unfavorably affected by non-deductible goodwill of $109 million. In the fourth quarter of fiscal 2014, we
identified our CA ERwin Data Modeling solution assets (ERwin) as available for sale. The divestiture of arcserve and
the planned divestiture of ERwin resulted from an effort to rationalize our product portfolio within the Enterprise
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