Power Integrations Involved in Stock Options Snafu
Staff Reporter -- EDN, May 5, 2006
Power conversion chipmaker Power Integrations Inc. said today that an internal investigation has reached a preliminary determination that the actual dates for certain past stock option grants differed from the recorded grant dates.
It also said that Howard Earhart, its board chairman, and CFO John Cobb both resigned Thursday. It did not cite specific reasons for the resignations.
As a result, the Silicon Valley-based company expects to record additional non-cash charges for stock-based compensation expenses in prior periods. Furthermore, Power Integrations expects that it may need to restate its historical financial statements for each of the fiscal years 1999 through 2004, and for the first three quarters of 2005, and that previously published financials for those periods can’t be relied upon.
The company had initially disclosed on March 13 of this year that it had created a special committee comprised of disinterested members of its board of directors to conduct an internal investigation of company practices related to stock option grants to officers and directors. The special committee is being assisted by independent outside legal counsel and accounting experts.
The committee’s investigation is ongoing, and it hasn’t reached any final conclusions, the company noted. It is one of several other companies that are dealing with corporate headaches over the dating of options
Any additional charges that will be recorded would have the effect of decreasing income from operations, net income and retained earnings figures during the corresponding periods, Power Integrations said. It does not expect the anticipated will have a material impact on its historical revenues, cash position or operating expenses not related to stock options.
As for the resignation of its chairman and CFO the company said it is beginning a search for a new CFO immediately, and that its board plans to elect a non-executive chairman from among existing independent directors in the near future.
In the midst of all this, the company further said it has staved off delisting from the Nasdaq National Market, for the time being. The company received notice in March that it wasn’t in compliance with Nasdaq rules, not having filed its Form 10-K annual report for 2005. After seeking an exception, Power Integrations learned earlier this week that the exception had been granted.
Nasdaq officials said Power Integrations would continue to be listed on the Nasdaq under several conditions: that it provide Nasdaq with information regarding the final results of the investigation by the special committee on or before June 7, 2006; that it file its Form 10-K for the year ended December 31, 2005 and all required restatements on or before July 12, 2006; and that it file its Form 10-Q for the quarter ended March 31, 2006 on or before August 2, 2006.
Power Integrations said it intends to file its Form 10-K for 2005 and any financial statements required to be restated, as well as its Form 10-Q for the quarter ended March 31, 2006, as soon as practicable after the completion of the special committee's review.
Investors reacted predictably to all this news; in late morning trading today, the company’s stock was down more than 12 percent at $17.26 per share; it had closed the night before at $19.64.
