Summary
F5 Networks, Inc. (FFIV) filed this Form 8-K on July 20, 2006, primarily to announce two significant events. Firstly, the company released its financial results for the third quarter ended June 30, 2006, though the details of these results are found in an attached press release and are not detailed within the 8-K itself. More critically, the filing discloses that the company's previously issued financial statements and earnings releases for fiscal periods beginning on or after October 1, 2000, should no longer be relied upon. This non-reliance stems from an ongoing review of stock option granting practices by a Special Committee, which identified potential accounting errors related to the measurement date for stock options.
Key Highlights
- 1F5 Networks will restate its financial statements for fiscal years 2001 through 2005 and balance sheets for the first two quarters of fiscal 2006 due to stock option accounting errors.
- 2The company identified an incorrect accounting measurement date used for certain employee, officer, and director stock option awards.
- 3The restatement is expected to result in additional non-cash, stock-based compensation expense, impacting income statements and potentially increasing net losses or decreasing net income.
- 4The company anticipates that these adjustments will not affect its current cash position or previously reported revenues, and will likely be offset by increases in additional paid-in capital, leaving total shareholders' equity unchanged.
- 5The Audit Committee has determined that financial statements and earnings releases related to fiscal periods starting from October 1, 2000, are unreliable.
- 6The company has appointed Deborah Bevier to its Board of Directors as a Class II Director and a member of the Special Committee reviewing stock option practices.
- 7Deborah Bevier received a grant of 5,000 restricted stock units (RSUs) upon her appointment, vesting prior to the 2007 Annual Meeting of Shareholders.
Frequently Asked Questions
F5 Networks is restating its financial statements for fiscal years 2001-2005 and the first two quarters of fiscal 2006 because its Special Committee, while reviewing stock option granting practices, identified potential accounting errors related to the measurement date used for certain stock option awards. Consequently, the company determined that its previously issued financial statements and earnings releases from October 1, 2000, onwards should no longer be relied upon.
The restatement is expected to result in additional non-cash, stock-based compensation expense. This will likely decrease income from operations, net income, and earnings per share in profitable periods, or increase losses in loss-making periods. However, F5 Networks anticipates that these adjustments will not affect its current cash position or previously reported revenues. The company also expects the expense to be offset by corresponding increases in additional paid-in capital, leaving total shareholders' equity unaffected.
The review of the company's stock option granting practices by a Special Committee, assisted by independent legal counsel and forensic accountants, is ongoing and has not yet been completed. The Special Committee has not communicated any final findings to the company. It is possible that additional issues may be identified during this review, potentially leading to reliance on financial statements from periods prior to October 1, 2000, also being questioned.
Deborah Bevier was appointed to the F5 Networks Board of Directors on July 14, 2006, as a Class II Director, filling a newly created vacancy. Her appointment is considered independent under Nasdaq rules. Ms. Bevier has also been appointed to serve on the Special Committee that is reviewing the company's stock option granting practices. In connection with her appointment, she received a grant of 5,000 restricted stock units (RSUs).