Shares of J2 Global Communications Inc. plunged more than 10 percent on Friday after it said it will delay filing its annual report due to a likely “material weakness” in its internal controls.
The L.A.-based E-mail fax and messaging service said the delay was a result of an ongoing audit of the pricing of services provided by one of its subsidiaries. J2 Global and its independent auditor, Deloitte & Touche LLP, said the tax rate will increase from 28.7 percent to 31.2 percent or more, resulting in a change in its net income for 2005. The change would reduce J2 Global’s earnings by 7 cents per share or more, from $2.08 per share to $2.01 per share or less, according to a statement.
The pricing of services would affect the company’s provision for income taxes, which would be increased by $1.9 million for fiscal year 2005.
Auditors got hung up in a review of the pricing of services by one of J2’s subsidiaries, which will lead to a change in J2 Global’s tax provision likely causing the company to report a “material weakness” in its internal controls over financial reporting.
Shares were down 9.9 percent to $43 in late-afternoon trading, after falling as low as $42.82. Trading was heavy at nearly four times the average volume.
J2 Global’s stock has had a good 12 months, rising to nearly $50 per share from the low $30s. The company recently announced a stock repurchase program of up to 1 million shares over the next year and a half.
