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Stage Stores Inc. (SSI) is a Houston-based company that
operates as a specialty department store retailer that offers
brand name and private label apparel, accessories,
cosmetics, and footwear for the entire family in small and
midsize markets.
On August 16, 2006, the Company disclosed three pieces
of bad news. First, that it will delay the release of its
second quarter results pending the completion of an internal
review of its inventory valuation methodology. Second, that
the Company’s previously provided earnings guidance for
2006 second quarter and 2006 fiscal year should no longer
be relied upon. Finally, the Company indicated that a
retrospective application of a preferable accounting
methodology or a restatement of its previously issued
financial statements may be required.
Not surprisingly, its stock tumbled on this news.
The Company expects that the effect of any required
adjustments would be to reduce its previously reported
diluted earnings per share from $1.76 to $1.64
(7% reduction) for fiscal 2003, from $1.72 to $1.59
(8% reduction) for fiscal 2004, from $1.90 to $1.78
(6% reduction) for fiscal 2005, and from $0.72 to $0.57
for the quarter ended April 29, 2006 (18% reduction).
The Company explained that the accounting errors relate
to improper inventory valuation that was discovered in the
course of reviewing preliminary results for the quarter
ended July 31, 2006.
It appears that investors who purchased stock between
May 22, 2003 and August 16, 2006, are affected.
Backdating Woes for Witness Systems Investors
Another compelling example of how the ongoing backdated
options scandal has negatively affected investors is
Witness Systems, Inc. (WITS). The Georgia-based company
provides workforce optimization software and services in
the United States.
In the last month, investors in Witness Systems have
received three pieces of bad news – each of which has
resulted in significant stock drops. First, on July 27, 2006,
the Company disclosed that it was reviewing its stock
options grants.
Second, On August 8, 2006, the Company announced that
its Board of Directors had formed a special committee to
investigate the stock option practices because the Company
had identified some "discrepancies." The Company delayed
the filing of its Form 10-Q for the period ending June 30, 2006,
pending the outcome of the investigation. The Company
admitted that it "believes it will need to record additional
non-cash charges for stock-based compensation expense
in prior periods . . . (which) will total approximately $10 million."
As a result of the internal investigation, the Board stated that
the Company's previously issued financial statements from
February 2000 through June 30, 2006, should no longer be
relied upon.
Finally, on August 11, 2006, the Company disclosed that it
intended to restate its prior financials and revealed that
NASDAQ informed it on August 11 that the Company may
be subject to delisting as a result of the matters disclosed
thus far.
The price of Witness Systems common stock has fallen from
its July 27, 2006, closing price of $18.19 per share to as low
as $12.76 per share. The stock closed at $12.91 per share
on August 11, 2006. Investors who purchased between
April 23, 2004, and August 11, 2006, are affected.
This by no means is the only company whose stock has been
negatively affected by the backdated options scandal. You
may want to check your portfolio for the following companies:
Affiliated Computer Services Inc. (NYSE: ACS), Altera Corp
(NASDAQ: ALTR), CNET Networks (NASDAQ: CNET),
F5 Networks Inc. (NASDAQ: FFIV), M-Systems Flash Disk
Pioneers Ltd (NASDAQ: FLSH), Power Integrations Inc.
(NASDAQ: POWI), Quest Software Inc. (NASDAQ: QSFT),
Rambus Inc. (NASDAQ: RMBS), SafeNet Inc. (NASDAQ: SFNT)
and Semtech (NASDAQ: SMTC).
Another situation of interest is Canadian-based IMAX
(which trades on the Toronto Stock Exchange and NASDAQ).
On August 9, 2006, after the close of trading, the Company
disclosed that it is “in the process of responding to an informal inquiry
from the SEC regarding the Company's timing of revenue recognition,
including its application of multiple element arrangement accounting
in its revenue recognition for theatre systems. The Company also
disclosed that it had identified a material weakness in the internal
controls surrounding the analysis and recording of a complex film
accounting transaction in the second quarter of 2006.
The market reaction was swift and harsh. On August 10, 2006,
in heavy trading IMAX shares declined $3.93 per share or 41%,
from $9.63 at the close of trading on August 9, 2006, to close at
$5.70 per share, at the close of trading on August 10, 2006. It
appears that investors who purchased IMAX between March 9, 2006
and August 9, 2006 are affected.
If you are an affected investor in any of these companies, you may
wish to contact Mark McNair at info@securitiessleuth.com or
877.511.4717 to discuss your options.
Now with respect to settled cases. If you are an affected
investor – you purchased any of these stocks during the
relevant class period, you may wish to contact the claims
administrator to obtain additional information. Remember,
if you don’t submit your claim form, you won’t receive your
share of any settlement.
Symbol Technology, Inc. (SBL)
Class Period: March 2, 2000 tp October 17, 2002
Claims Deadline: October 31, 2006
Claims Administrator: A.B. Data
Tellium, Inc. (TELM)
Class Period: May 17, 2001 to July 1, 2002
Claims Deadline: October 18, 2006
Claims Administrator: Analytics
Information regarding other recent settled cases, including
the cases listed below can be found at www.securitiessleuth.com.
Imperial Chemical Industries PLC (ICI)
Vistacare, Inc. (VSTA)
ARM Financial Group (ARMGQ)
Carreker Corp. (CANI)
Loewen Group Inc. (LWN)
Razorfish, Inc. (RAZF)
Again you should contact the claims administrator (rather than us).
However, if you are an affected investor in any of the companies
under investigation, you many wish to contact us so that you
can consider your options.
Likewise, if you happen to be aware of corporate restatements
or other financial fraud -- especially if you're a victim --
you're encouraged to contribute to the Sleuth by giving your
own tip-offs at www.securitiessleuth.com or by e-mailing
info@securitiessleuth.com. You can also call Mark McNair
at 877-511-4717. If you have a friend or colleague you
think would benefit from The Sleuth, please pass along
this issue and ask them to sign up at
www.cartville.com/app/join.asp?MerchantID=47994.
Warmest regards,
Mark McNair
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