Business Context and Reporting Period
Company: First Community Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: January 17, 2006
Reporting Period: The filing addresses actions taken effective December 31, 2005, in preparation for the fiscal year beginning January 1, 2006.
Key Financial Metrics
This filing does not report standard operating metrics such as revenue, net income, cash flow, or debt levels. The primary financial data relates to the projected impact of a change in accounting treatment for stock options.
- Projected Expense Avoidance (Fiscal 2006): Approximately $123,000
- Projected Expense Avoidance (Fiscal 2007): Approximately $76,000
- Projected Expense Avoidance (Fiscal 2008): Approximately $45,000
Material Changes
The Company is implementing Financial Accounting Standards Board Statement No. 123 (Revised 2004), "Share-Based Payment" (SFAS 123R), effective January 1, 2006. This standard requires the recognition of fair value for share-based payments as compensation expense, a change from the previous APB 25 method under which no expense was recognized.
To mitigate the impact of this new standard, the Board of Directors approved the acceleration of vesting for 67,000 unvested stock options, effective December 31, 2005. All other terms of the options remain unchanged.
Management Commentary and Outlook
Management determined that the future compensation expense resulting from the adoption of SFAS 123R would outweigh the incentive and retention value of the unvested options. Consequently, accelerating the vesting avoids the recognition of pre-tax compensation expense in the financial statements for the upcoming fiscal years.
The Company intends to disclose the pro-forma effect of this acceleration in its audited consolidated financial statements for the fiscal year ending December 31, 2005, within its 2005 Annual Report to shareholders.
Investor Verification Checklist
- Verify the total number of outstanding stock options and the specific terms of the 67,000 accelerated options.
- Review the 2005 Annual Report to shareholders for the pro-forma disclosure of the acceleration effect as promised by management.
- Confirm the Company's adoption of SFAS 123R in the 2006 fiscal year financial statements.
- Assess whether the acceleration of vesting impacts employee retention strategies or future equity compensation plans.