CA Hits Targets, Delays 10-K

Updated from 5:16 p.m. EDT

CA(CA - Cramer's Take - Stockpickr) hit its reduced financial targets for the fourth quarter, but yet again announced that it is delaying the filing of its annual report, or 10-K, because of a batch of newly discovered accounting issues.

CA also issued fiscal-year earnings guidance well below Wall Street's expectations, and the company said a problem with the accounting of stock options could cost shareholders as much as $540 million.

"We are disappointed that we cannot file our 10-K to meet the extended deadline and that we continue to find problems associated with CA's past," said company CEO John Swainson.

"However, delaying the filing is our only option until we understand the full impact of the legacy stock-option issue and any potential financial adjustments," he said in a press release.

"These issues are about our past, and not our future, and we continue to focus on building the company."

The options issue does not appear to be similar to the backdating scandal that has rocked other companies, but the bill for the errors could be high. According to CA, there were delays of as much as two years from the date that employee stock options were approved by the board and the date such grants were communicated to employees.

The problems took place between 1997 and 2001. A preliminary estimate by the company put the potential cost at something less than $40 million total for 2005 and 2006, and $40 million to $100 million per year for the 2002 through $2004 on a pre-tax basis. Options issued between 1997 and 2002 will have a pretax impact "in excess of $200 million," the company said.

Additionally, CA said it may have understated subscription revenue by about $40 million in total during fiscal years before 2006. As the company makes adjustments, it will reduce subscription revenue through around 2011, it said.