ScanSource Expects Charges From Options Backdating Findings

The Greenville, S.C.-based distributor said the charges will be at least $5.9 million for grant dates from 1994 to 2006.

ScanSource first was tied to the stock-option backdating issue last October, during a time when more than 100 other companies became the subject of investigations.

ScanSource reviewed its practices after the Charlotte Observer newspaper reported that ScanSource may have backdated grants for several executives last October.

Options backdating, which involves selecting a previous date for grants when the stock price is lower, allows executives to make more money selling the granted shares.

ScanSource announced on Jan. 19, 2007, that a special committee comprised of independent directors had asked executive management to make appropriate adjustments.

Most of the charges are attributable to failures to satisfy accounting criteria for establishing a grant measurement date, the number of options and the date of the grant, according to the company. Other charges are attributable to grants that "may have been selected with the benefit of hindsight as identified by the special committee."

Senior management and "rank and file employees" had the same grant dates for all annual grants, the company said.

In addition, each of ScanSource's two outside directors who received grants within the sope of the review -- as well as its CEO, CFO, vice president of marketing and former chairman and CEO -- have offered appropriate remediation of financial benefits from options identified by the special committee.

Last October, the Charlotte Observer reported that ScanSource granted options on 18 dates since 1995, and seven times the stock was at its lowest point for at least a month on either side. In two more cases, the price was at the second-lowest point during that two-month period. In all but two instances, the stock dropped before the grant and then increased, according to the newspaper's report.