Computer Associates 2004 Annual Report Download - page 4

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Kenneth D. Cron
Interim
Chief Executive Officer
Lewis S. Ranieri
Chairman of the Board
Jeff Clarke
Chief Operating Officer
Dear Fellow Investor:
Fiscal 2004 was a year of great significance for
Computer Associates (CA). We seized key growth
opportunities, despite difficult events that tested
us in extraordinary ways. CA followed through
on our commitment to help customers run their
businesses better, delivered new and expanded
software solutions, increased customer satisfaction
and improved financial performance.
As a result, CA is a stronger company than
we were a year ago, with the team, vision and
strategy to move to a new level of performance
and success.
Challenge
In April 2004, CA’s Audit Committee, chaired by
outside Director and former SEC Chief Accountant
Walter P. Schuetze, completed its nine-month
independent investigation into past revenue
recognition practices. As a result, CA restated
certain financial data for the fiscal years ended
March 31, 2000 and 2001, the full details of
which are included in the financial review section
of this report.
The Audit Committee found that, for several
years prior to the adoption of CA’s new Business
Model in October 2000, CA had a practice of
prematurely recognizing revenue on license
agreements. This practice involved holding the
financial period open after the end of a fiscal
quarter in order to recognize revenue on contracts
that were not executed by the end of such fiscal
quarter. It’s important to note that the “35-day
month” practice involved the premature timing
of revenue recognition, not the making up of
revenues. Thus, the restatement involved the
moving of revenue from one quarter to another.
This 35-day month practice was wrong, and CA’s
Board of Directors deeply regrets that this conduct
occurred. We have shared with the government
evidence of wrongdoing by former CA executives
who have since pled guilty to federal crimes. We
fully support the government’s efforts to bring
all wrongdoers to justice. We are working hard
to take all remedial steps necessary to make
sure that this conduct does not happen again.
The Board is confident that CA’s current financial
reporting is sound.
A New Chapter
When we stepped into the Chairman and interim
Chief Executive Officer (CEO) roles in April, we
pledged to work to resolve the government
inquiries as quickly as possible, to ensure that CA
conducts itself according to the highest standards
of financial controls and integrity, and to help the
people of CA move forward by empowering them
to build on their many achievements.
We were gratified to find that the high regard
we had developed for CA as Board members
was well deserved; this is a company with
tremendous strength in technology, products
and people.
And we are convinced that we have a leadership
team to leverage those strengths.
In addition to a new Chairman and an interim CEO,
CA now has — for the first time in a number of
years — a Chief Operating Officer (COO). Jeff Clarke