Source: Transaction Systems Architects
Transaction Systems Architects (NASDAQ:TSAI) announced the completion of its previously announced voluntary review of historical stock option granting practices.
With the completion of its internal review, the Company has indicated that a number of measurement date errors occurred in fiscal years 1995 to 2002 that will require non-cash stock-based compensation-related adjustments to prior period financial statements. Management currently estimates that the non-cash adjustments will aggregate approximately $17 million, pretax, substantially all of which will be reflected in adjustments to the Company's financial statements for fiscal years 1995 to 2001.
While the Company has completed its internal review, the Company's independent auditors have not concluded the audit of the Company's financial statements for the fiscal year ending September 30, 2006, including the impact of the above stock-based compensation adjustments. As such, the foregoing amount is subject to change as a result of the audit. The Company presently expects that audit to be concluded, and the Company's Annual Report on Form 10-K to be filed, on or about March 30, 2007.
The review found that the Company's stock option granting practices prior to fiscal 2003 were subject to control weaknesses and other deficiencies. In a number of instances from 1995 through fiscal 2001, the Company's then CFO, not the Compensation Committee, selected grant dates for options awards, using hindsight in selecting grant dates. Management's consultations with Board members regarding option granting decisions during this period were not properly documented in all instances, and the record of Board action approving or ratifying option awards was, in a number of instances, inconsistent and incomplete. The review found no evidence of intentional misconduct.
No member of current senior management was involved in the historical option granting practices.
Under the accounting principles in effect during the periods prior to fiscal 2003, non-cash charges should have been recorded over the relevant option vesting periods to the extent that the prices of Company common stock on the actual measurement dates were higher than the prices on the previously recorded dates. Accordingly, the Company will restate its prior period financial statements to correct these errors in instances in which the NASDAQ closing market price on the revised measurement dates exceeded the closing market price on the original grant dates.
The Company presently expects to restate all such prior period financial statements in its fiscal 2006 Form 10-K report as well as the key findings of the stock options review. As a result of these additional charges, the Company will also be restating its consolidated balance sheet as of September 30, 2005, and related consolidated statements of operations, stockholders' equity and cash flows for each of the fiscal years ended September 30, 2005 and 2004 and each of the quarters in fiscal year 2005 in its 2006 Annual Report on Form 10-K. These additional charges do not affect previously reported revenue or cash provided by operating activities. These restated financials may include other adjustments unrelated to stock option matters. The aggregate amount of these adjustments is not expected to exceed $1 million dollars over the period 1995 through the present.
The review was conducted under the direction of the Audit Committee of the Company's Board of Directors by special independent counsel and forensic accountants, with assistance from the Company's current management and regular outside counsel. The Company estimates that the aggregate cost of conducting the review and management's analysis will be approximately $6 million, approximately $3 million of which was incurred in the Company's fiscal quarter ended December 31, 2006, and approximately $3 million of which is or will be incurred in the Company's fiscal quarter ended March 31, 2007.
As previously announced, the financial statements referred to in this press release are subject to restatements as herein described and should no longer be relied upon.