F5 Networks (FFIV)

The matters relating to the Special Committee’s review of our historical stock option practices and the restatement of our consolidated financial statements has resulted in regulatory proceedings against us and may result in future regulatory proceedings, which could have a material adverse impact on our financial condition

 

On November 8, 2006, we announced that the Special Committee had completed its review of our historical stock option practices. Upon completion of its review, the Special Committee found that the recorded grant dates for certain stock options granted during fiscal years 1999 to 2004 should be adjusted as the measurement date for accounting purposes and the accounting treatment used for the vesting of certain stock options was incorrect. Based on the Special Committee’s review, to correct the accounting treatment, we amended our Annual Report on Form 10-K/A (as amended) for the year ended September 30, 2005 and our Quarterly Reports on Form 10-Q for the three months ended December 31, 2005 and March 31, 2006 to restate the consolidated financial statements contained in those reports.

 

In May 2006, we received notice from both the Securities and Exchange Commission (“SEC”) and the United States Attorney’s Office for the Eastern District of New York (the “Department of Justice”) that they were conducting informal inquiries into our historical stock option practices. We have fully cooperated with both agencies. Considerable legal and accounting expenses related to our historical stock option practices have been incurred and we may in the future be subject to additional regulatory proceedings or actions arising in relation to our historical stock option practices and the restatement of our prior period financial statements. Any potential regulatory proceeding or action may be time consuming, expensive and distracting for management from the conduct of our business. The adverse resolution of any potential regulatory proceeding or action could adversely affect our business, results of operations or financial condition. We cannot assure you that the SEC and Department of Justice inquiries, or any future regulatory action relating to our historical stock option practices, will result in the same conclusions reached by the Special Committee. Furthermore, if we are subject to adverse findings in any of these matters, we could be required to pay damages or penalties or have other remedies imposed upon us, including criminal penalties, which could adversely affect our business, results of operations or financial condition.

 

 

We are a party to lawsuits in the normal course of our business.
Litigation in general, and intellectual property and securities
litigation in particular, can be expensive, lengthy and
disruptive to normal business operations. Moreover, the results
of complex legal proceedings are difficult to predict.
Responding to lawsuits has been, and will likely continue to be,
expensive and time-consuming for us. An unfavorable resolution
of these lawsuits could adversely affect our business, results
of operations or financial condition.

 

Our historical stock option practices and the restatement of our
prior financial statements have exposed us to greater risks
associated with litigation. Beginning in May 2006 several
derivative actions were filed against certain current and former
directors and officers (as discussed further in Part II,
Item 8, Note 7, “Commitments and
Contingencies — Litigation”) based on allegations
relating to our historical stock option practices. We cannot
assure you that this current litigation will result in the same
conclusions reached by the special committee of outside
directors formed by our Board of Directors to conduct a review
of our stock option practices (the “Special
Committee”).

 

We may in the future be subject to additional litigation arising
in relation to our historical stock option practices and the
restatement of our prior financial statements. Litigation may be
time consuming, expensive and distracting for management from
the conduct of our business. The adverse resolution of any
lawsuit could have a material adverse effect on our business,
financial condition and results of operations. We cannot assure
you that any future litigation relating to our historical stock
option practices will result in the same conclusions reached by
the Special Committee. Furthermore, if we are subject to adverse
findings in any of these matters, we could be required to pay
damages or penalties or have other remedies imposed upon us
which could adversely affect our business, results of operations
or financial condition.

The
matters relating to the Special Committee’s review of our
historical stock option practices and the restatement of our
consolidated financial statements has resulted in regulatory
proceedings against us and may result in future regulatory
proceedings, which could have a material adverse impact on our
financial condition

 

On November 8, 2006, we announced that the Special
Committee had completed its review of our historical stock
option practices. Upon completion of its review, the Special
Committee found that the recorded grant dates for certain stock
options granted during fiscal years 1999 to 2004 should be
adjusted as the measurement date for accounting purposes and the
accounting treatment used for the vesting of certain stock
options was incorrect. Based on the Special Committee’s
review, to correct the accounting treatment, we amended our
Annual Report on
Form 10-K/A
(as amended) for the year ended September 30, 2005 and our
Quarterly Reports on
Form 10-Q
for the three months ended December 31, 2005 and
March 31, 2006 to restate the consolidated financial
statements contained in those reports.

 

In May 2006, we received notice from both the Securities and
Exchange Commission (“SEC”) and the United States
Attorney’s Office for the Eastern District of New York (the
“Department of Justice”) that they were conducting
informal inquiries into our historical stock option practices.
We have fully cooperated with both agencies. Considerable legal
and accounting expenses related to our historical stock option
practices have been incurred and we may in the future be subject
to additional regulatory proceedings or actions arising in
relation to our historical stock option practices and the
restatement of our prior period financial statements. Any
potential regulatory proceeding or action may be time consuming,
expensive and distracting for management from the conduct of our
business. The adverse resolution of any potential regulatory
proceeding or action could adversely affect our business,
results of operations or financial condition. We cannot assure
you that the SEC and Department of Justice inquiries, or any
future regulatory action relating to our historical stock option
practices, will result in the same conclusions reached by the
Special Committee. Furthermore, if we are subject to adverse
findings in any of these matters, we could be required to pay
damages or penalties or have other remedies imposed upon us,
including criminal penalties, which could adversely affect our
business, results of operations or financial condition.

 

upon us, including criminal penalties, which could adversely affect our business, results of operations, or financial condition.

 

upon us, including criminal penalties, which could adversely affect our business, results of operations, or financial condition.