KLA-Tencor sees restatements from stock-option review

September 28, 2006 – KLA-Tencor Corp. has confirmed that it will have to restate previous financial results dating back to 1997 (primarily from 1997-200) to correct accounting of stock option grants, and will record an as-yet-undetermined amount of noncash charges. Any financial statements made by the company relating to periods since July 1, 1997, “should no longer be relied upon,” the company said, in a statement.

The announcement confirms the company’s milder admission in June, when it said actual measurement dates of certain stock options granted to members of senior management and employees “likely differ” from the recorded grant dates of such awards, and that it “may” have to record additional noncash charges.

“Any stock-based compensation charges incurred as a result of the restatement would have the effect of decreasing reported income or increasing reported loss from operations, and decreasing reported net income or increasing reported net loss, and decreasing reported retained earnings amounts,” the company now has stated, adding that it will file restated financial results “as quickly as practicable.”

KLA-Tencor is just one of dozens of companies embroiled in controversy over stock option “backdating” — many of them in the chip industry, e.g. Altera and Broadcom — which has drawn attention from the SEC and even the IRS. Earlier this year, reports from Merrill Lynch and The Wall Street Journal shed doubt on the timing of stock option distribution at companies listed in the Philadelphia Semiconductor Index. For example, those reports calculated a one-in-20-million chance that 10 grants to CEO Ken Levy from 1994-2001 that preceded stock rallies could have been just coincidence, according to the San Jose Mercury News.


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