Foundry Networks, one of at least 140 companies under investigation for alleged stock options backdating, has revised its second-quarter results to take a non-cash charge related to compensation costs. The change makes up for adjustments made during the networking services provider’s recent restatement process.
When Foundry re-adjusted its previously announced results in a regulatory filing on Thursday, it reduced net income by about $750,000. Earlier this summer, Foundry became current with its regulatory filings when it submitted its delayed 2006 annual report and three quarterly reports. The most recent revision results from a non-cash charge not included in the previously announced earnings results, the company added.
The company elaborated that the additional charge stems from the time when former employees who were not permitted to exercise their options while the company completed its restatement and became up-to-date with its reporting obligations to the Securities and Exchange Commission. During parts of 2006 and 2007, options vested and held by some of Foundry’s former employees could not be exercised.
As a result of the blackout restriction, options covering about 262,313 shares of common stock were scheduled to expire and could not be exercised. Foundry said it had previously extended the expiration date of the options to 30 days after its filing obligations had been met and had to reclassify the options. The company added that it does not expect the remaining costs associated with the extension of these exercise dates to be material.
In January, Foundry disclosed that a special committee looking into its stock-option practices determined that for fiscal years 1999 through 2005, the company had unrecorded non-cash equity-based compensation charges associated with its equity incentive plans. Foundry said it planned to record a pre-tax charge of between $185 million and $205 million for that period.
At the same time, the company demoted vice president for finance and administration and CFO Timothy Heffner to vice president of corporate development. Daniel Fairfax, corporate controller and principal accounting officer took over the top finance spot.
Last year, the SEC opened an informal investigation into the company’s historical stock option granting practices. The company has also received a subpoena from the Department of Justice regarding the same issue.