Digital River 2006 Annual Report Download - page 62

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information has been adjusted to reflect the restatement of our financial results, which is
more fully described in the “Explanatory Note” immediately preceding Part I Item 1 and in Note 2,
“Restatement of Consolidated Financial Statements” in Notes to Consolidated Financial Statements of this
Form 10-K.
Our Financial Statements and Notes thereto appear beginning at page 68 of this report.
QUARTERLY FINANCIAL DATA (UNAUDITED)
March 31 June 30 September 30 December 31
Quarter Ended
(In thousands, except per share data)
2006
Revenue . ............................. $78,014 $71,277 $75,337 $83,004
Income from operations ................... 20,824 14,189 14,565 18,017
Net income ............................ 16,377 13,289 14,788 16,355
Net income per share — basic .............. $ 0.46 $ 0.34 $ 0.37 $ 0.41
Net income per share — diluted ............. $ 0.41 $ 0.30 $ 0.33 $ 0.36
March 31 June 30 September 30 December 31
Quarter Ended
As Restated(1) As Restated(1) As Restated(1) As Restated(1)
(In thousands, except per share data)
2005
Revenue....................... $54,529 $51,143 $53,179 $61,557
Income from operations ........... 17,661 14,489 15,460 18,810
Net income .................... 15,905 10,178 12,313 18,116
Net income per share — basic ...... $ 0.47 $ 0.30 $ 0.35 $ 0.52
Net income per share — diluted ..... $ 0.39 $ 0.26 $ 0.31 $ 0.45
(1) See Note 2, “Restatement of Consolidated Financial Statements,” and Note 13, “Selected Quarterly
Financial Information (Unaudited)” in Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Special Committee Review into Stock Option Grant Practices and Restatement.
As discussed in the Explanatory Note preceding Part I and in Note 2 in Notes to Consolidated Financial
Statements of this Form 10-K, we recently completed a voluntary internal investigation of our stock option
grant practices. The investigation covered all grants of options made since our initial public offering in August
1998 through December 2006. During the course of the internal investigation, we determined that eighteen
grant dates, representing three million shares, had improper measurement dates for the related options. In
particular, we identified certain instances in which (i) grants to non-officer employees were backdated in order
to obtain favorable exercise prices; (ii) grants to Section 16 officers were awarded without proper authority;
(iii) grants to newly hired employees were awarded upon the offer of employment rather than as of or after the
actual commencement of employment; and (iv) grants to consultants were not properly expensed. In each
instance, the grants were subsequently ratified by the Board of Directors at a subsequent meeting. As a result,
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