Altera to restate 10 years of earnings
Dylan McGrath
EE Times
(06/21/2006 6:48 PM EDT)
SAN FRANCISCO — Programmable logic supplier Altera Corp. said Wednesday (June 21) it will likely restate its financial earnings for 40 consecutive quarters for the fiscal years 1996 through 2005 following a preliminary conclusion in its ongoing investigation into the company's historical stock options granting practices.
Altera (San Jose, Calif.) said through a prepared statement that it expects to restate the earnings "to correct errors related to accounting for stock-based compensation expense."
In May, Altera's board of directors established a special committee to review the company's historical stock option practices and related accounting for the years 1996 through 2000. Altera said Wednesday that the special committee's investigation, which is being assisted by independent legal counsel and outside accounting experts, is not complete and that no final conclusions have been reached.
But the committee has reached a preliminary conclusion that the actual measurement dates for certain stock option grants issued between 1996 and 2000 differ from the recorded grant dates for such awards, Altera said. As a result, the company said it expects to record additional non-cash charges for stock-based compensation expense in prior periods.
Altera said it believes that these charges are material and, accordingly, expects to restate its financial statements for the fiscal years ended 1996 through 2005. The company said it has not yet determined the tax impact that may result from this matter, but that it currently does not anticipate that the restatement will result in a material charge to fiscal year 2005.
Altera is one of more than two dozen companies that has been implicated over the past several weeks in a controversy over historical stock options granting practices. At issue in most of these cases has been the practice of manipulating a stock option's strike date by retroactively backdating it to a time when a company's stock value was relatively low, thus increasing the potential for profit.
Most of the implicated companies have seen their stock values drop, and many, including Altera, are facing investigations by the U.S. Securities and Exchange Commission and the U.S. Attorney's Office, as well as shareholder lawsuits. Several other companies have already disclosed that they will have to restate some historical financial earnings, notably fab gear maker Brooks Automation Inc., which said May 11 it plans to restate earnings for 28 consecutive quarters from fiscal 1999 through 2005.
Because the special committee's review is still ongoing, Altera said, there may be additional years subject to restatement and the impact to fiscal year 2005 may be different than presently anticipated.
Altera intends to file its restated financial statements and its quarterly report for the period ended March 31, 2006, as soon as practicable after the completion of the special committee's investigation, the company said.
Altera said its audit committee, after consultation with management and the special committee, determined that the company's financial statements and any related reports of its independent registered public accounting firm for 1996 through 2005 should no longer be relied upon.
Altera said it is also evaluating management's report on internal controls over financial reporting set forth in the company's annual report for fiscal 2005 and determined that the company likely had a "material weakness in internal control over financial reporting as of December 30, 2005."
Any stock-based compensation charges incurred as a result of the restatement would decrease net income or increase net loss for the periods in question, Altera said. The company does not expect that the anticipated restatement will have any impact on its historical revenues, it said.
Altera said it expects to announce second quarter revenue results and third quarter revenue guidance on July 24. The company will not announce additional financial results for the second quarter until the special committee has completed its investigation and the company has filed its restated financial statements and its quarterly report for the period ended March 31, it said.
Altera's stock has shed more than 17 percent of its value since its May 8 disclosure. Alter closed at $17.83 Wednesday, prior to the announcement of the likely restatement.
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