VeriSign Shares Fall on Restatement
Shares of VeriSign , which manages the ".com" and ".net" domain names registry, dropped Monday after the company filed its first-quarter financial report, which included restatements related to historical stock option grants.
According to the filing with the Securities and Exchange Commission, first-quarter net income more than tripled to $61.8 million, or 25 cents per share, compared to restated earnings of $16.5 million, or 7 cents per share, for the first-quarter of 2006.
Quarterly revenues grew less than 1 percent to $373.1 million, from restated sales totaling $370.1 million in the prior year.
Analysts surveyed by Thomson Financial had forecast earnings of 22 cents per share on sales of $377.7 million.
The company said the restatement resulted in additional stock-based compensation and payroll tax expenses, net of income taxes, of $165.5 million from 1998 to 2005 and $1.5 million in the first quarter of 2006. VeriSign said other adjustments resulted in a $1.8 million decrease in net income in the first quarter of 2006.
The company did not previously provide full first-quarter results because it was restating past financial reports from 2002 through 2005 and for the first quarter of 2006 to record stock options expenses. VeriSign has said that a review of its past stock option grants, which is now complete, did not find any intentional wrongdoing by its managers.
In May, VeriSign Chief Executive Stratton Sclavos resigned for undisclosed reasons.
VeriSign said Monday's filing is the final report to contain restatements resulting from the company's historical stock option grant practices and that it is now current with its SEC filing requirements.
Hundreds of companies have disclosed federal or internal investigations of questionable stock options-granting practices.
At issue is a practice known as backdating, in which options are issued retroactively to coincide with low points in the stock price, which can increase the profit for the recipient. It is not necessarily illegal, but it must be disclosed to investors and accounted for properly.