Baltimore-based SafeNet Inc. announced Monday that it would restate almost five years worth of earnings reports because of possible accounting irregularities concerning stock options granted to company executives.
The earnings restatement and internal review of stock options will cost SafeNet about $7 million this fiscal year, the company reported in filings with the Securities and Exchange Commission. The filing did not go into details about specific stock options or who within the company received the options.
A committee appointed by SafeNet?s board of directors that includes independent legal advisers and forensic accountants has been investigating the company?s “stock option granting practices,” SafeNet stated in the SEC filings.
“Based on its review to date, the company has concluded that certain option grants made between 2000 and 2005, including grants to directors, officers and employees, were using incorrect measurement dates ? ” the company stated in its SEC filing Monday.
Thus SafeNet, an information security technology company, stated it would restate annual and quarterly earnings reports from 2000 to March 31, 2006.
And it stated that the adjusted numbers would likely decrease earnings reported in previously profitable periods and increase losses in previously reported periods where the company lost money.
SafeNet had previously announced in May that the company had received a subpoena from the U.S. Attorney?s Office in New York inquiring about allegations that the company had improperly dated stock options awarded to executives.
Specifically, the attorney general is investigating possible backdating of stock options.
The Police and Fire Retirement System of the City of Detroit has filed a lawsuit claiming the company improperly granted stock options to company executives.
In a separate SEC filing outlining earnings prospects for the third quarter, SafeNet Chief Executive Officer Anthony A. Caputo said the review and earnings restatements will hurt profits this year.
“As a result of its efforts to complete its review and file its restated financial statements for the impacted periods in an expeditious manner, the company may incur costs totaling approximately $12 million during fiscal 2006, which is $7 million higher than the original expectation,” Caputo said.
But the company expects revenues in the current quarter to remain essentially the same.
“For the quarter ending September 30, 2006, consistent with original financial guidance, the Company continues to expect to achieve revenues in the range of $70 to $74 million,” Caputo stated in the release.
