Summary
F5 Networks, Inc. (FFIV) filed an 8-K on November 8, 2006, primarily to announce the completion of its Board's Special Committee review into stock option practices. The review found that certain stock options granted between fiscal years 1999 and 2004 had incorrect accounting treatment regarding their grant dates and vesting. Consequently, the company will need to record an aggregate non-cash stock-based compensation expense of approximately $22.9 million across fiscal years 1999 through 2006. This adjustment will not impact current cash or previously reported revenues. Furthermore, the company's Audit Committee determined that financial statements for fiscal years 1999 through 2005 and the first two quarters of fiscal 2006 will need to be restated to reflect these non-cash expenses. The filing also indicates a delay in the third quarter fiscal 2006 10-Q due to this inquiry and an ongoing evaluation of the impact on internal controls over financial reporting. Investors should note that while the cash impact is nil, the restatement and control evaluation represent significant accounting and governance events.
Key Highlights
- 1F5 Networks announces completion of its Special Committee's review into stock option granting practices.
- 2The review identified accounting errors related to the measurement date and vesting of certain stock options granted between FY1999 and FY2004.
- 3The company will record an additional non-cash stock-based compensation expense of approximately $22.9 million in aggregate from FY1999 to FY2006.
- 4This expense adjustment will not affect the company's current cash position or previously reported revenues.
- 5F5 Networks will restate financial statements for FY1999-2005 and the first two quarters of FY2006 to reflect the stock-based compensation adjustments.
- 6The filing of the Q3 FY2006 10-Q is delayed due to the stock option inquiry.
- 7The company is evaluating the impact of these findings on its internal controls over financial reporting.