Apple incurs $84m options expense, maintains 'confidence' in Jobs

[AppleInsider]

Apple Computer in a long-awaited filing with the Securities and Exchange Commission on Friday provided a detail review of its investigation into historic stock option practices in which it maintained that no evidence of misconduct by current company officials had been found.

Based on an analysis of the findings of the independent investigation, the Cupertino-based company said it will incur total additional non-cash stock-based compensation expense of $84 million after tax, including $4 million and $7 million in fiscal years 2006 and 2005, respectively.

Apple said the restatement arose solely from certain stock option grants made between 1997 and 2002 and that it found no grants after December 31, 2002 that required accounting adjustments.

"The special committee, its independent counsel and forensic accountants have performed an exhaustive investigation of Apple’s stock option granting practices," said Al Gore, chair of the special committee, and Jerome York, chair of Apple’s Audit and Finance Committee, in a joint statement.

The company's board of directors said they remain confident that management has corrected the problems that led to the restatement, and they have "complete confidence" in chief executive Steve Jobs and the senior management team.

Apple said its investigative team reviewed the facts and circumstances surrounding stock option grants made on 259 dates, in which team members "spent over 26,500 person-hours searching more than one million physical and electronic documents and interviewing more than 40 current and former directors, officers, employees, and advisors."

Following the review, a special committee of outside directors "found no misconduct by current management" but did "identified a number of grants for which grant dates were intentionally selected in order to obtain favorable exercise prices."

"Although the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications," the company said.

In total, Apple's investigation turned up irregularly assigned grant dates for 6,428 grants on 42 dates. As a result, the company has recognized stock-based compensation expense of $105 million on a pre-tax basis over the respective awards’ vesting terms -- which boils down to $84 million after tax.

Apple said a controversial grant to Jobs dated October*19, 2001 was originally approved at a Board meeting on August*29, 2001, with an exercise price of $17.83. However, it noted that the terms of the grant were not finalized until December*18, 2001 and that the grant was later dated October*19, 2001 with an exercise price of $18.30.

"The approval for the grant was improperly recorded as occurring at a special Board meeting on October*19, 2001," the company said. "Such a special Board meeting did not occur. There was no evidence, however, that any current member of management was aware of this irregularity."

Apple recognized $20 million in stock-based compensation expense for the grant, reflecting the difference between the exercise price of $18.30 and the share price on December*18, 2001 of $21.01.

The results of the company's independent investigation have been turned over to the SEC and the U.S. Attorney’s Office, Apple said.

Shares of the company rose $3.10 or 3.83 percent to $83.97 in early morning trading on the Nasdaq.

[ View this article at AppleInsider.com ]

[olmalove]

happy new year

[JeffDM]

Shares of the company $3.10 or 3.83 percent to $83.97 in early morning trading.

This sentence no verb.

[freeny]

Now I hope this all just goes away....

[BuzDots]

Yep, just a bunch of headline hungry reporters and Feds with their panties in a wad!

A fairly strong message when it comes from the ex Vice-President, even if he is only a fat boy from Tennessee.....

Go Steve 8)

[Chucker]

Originally Posted by JeffDM

This sentence no verb.

I'm not sure what you?

[olmalove]

and we can go back to humping Steve's leg

[BlackSummerNight]

Hahaha. If you go believe a company that does it's on "investigation", then you're not very bright. I bet a internal "investigation" done by Enron a few years back would no have found any problems either. I'll save my cheers after the FCC does it's investigation.

On a different note, if no problem are found in the end, some of these "analysts" should get fired. We all know that people should look at rumor sites and listen to the words of analysts when trading stock, but some do, and they should be held accountable (analysts).

[JeffDM]

Originally Posted by Chucker

I'm not sure what you?

Thanks for playing along.

That line in the story was fixed.

[fizzmaster]

I'll save my cheers after the FCC does it's investigation.

Why would the FCC investigate? I know the SEC is investigating but never heard anything about the FCC.

[BuzDots]

Originally Posted by fizzmaster

Why would the FCC investigate? I know the SEC is investigating but never heard anything about the FCC.

For talking shit!!!

[MacRR]

Did Steve Jobs expose his nipple at MacWorld again?

Originally Posted by fizzmaster

Why would the FCC investigate? I know the SEC is investigating but never heard anything about the FCC.

[Bergermeister]

It was a wardrobe malfunction. Move on.

[davebarnes]

All the data (Annual Report) are at: http://www.sec.gov/Archives/edgar/da...25759_210k.htm

[quinney]

Originally Posted by MacRR

Did Steve Jobs expose his nipple at MacWorld again?

I think that was just the new airport base station as
viewed via the new stand-alone iSight

[SpamSandwich]

With Al Gore delivering the good news, the publicity storm can roll on... 8)

[cactus]

booya!

[mariofreak85]

Originally Posted by MacRR

Did Steve Jobs expose his nipple at MacWorld again?

that was just a wardrobe malfunction...

[anantksundaram]

26,500 person hours of investigator time!? Wow, at $100 per hour (conservative, because I assume they were a bunch of lawyers), that is $2.65 million. The option grantees -- and not shareholders -- should be asked to defray those expenses.

Also, other reports (see, e.g., the Intl Herald Tribune, www.iht.com) say there were a total of approx 42,000 grants during this period -- 6,428 option grants with "irregularly assigned grant dates" is a whopping 15% of all grants during the period.

Call me a pessimist, but this one ain't over until the fat lady sings (maybe that is why the FCC is involved! ).

[meh 2]

I shudder to think what similar (yet increasingly scaled) imbroglio is awaiting Microsoft should someone try to probe it.

I remember reading earlier that his type of thing (option back-dating) is exactly the kind of misfeasance many many corporations are still involved in following the aftermath of the Enron wake-up call.

[melgross]

Right now, the feds are informally asking for documents. Whether it goes beyond that is something we won't know for a while.

But the fact that they got the report out is good news, as is the fairly small amounts of money that have appeared to be involved.

There are some other companies where the amounts have resulted in hundreds of millions, and even numbers in the low billion dollar range.

Monetarily, this is no more than a glitch for Apple.

The gov will have to determine whether Jobs' knowledge resulted in a lapse or in intent to defraud.

[melgross]

Originally Posted by meh 2

I shudder to think what similar (yet increasingly scaled) imbroglio is awaiting Microsoft should someone try to probe it.

I remember reading earlier that his type of thing (option back-dating) is exactly the kind of misfeasance many many corporations are still involved in following the aftermath of the Enron wake-up call.

It isn't thought that MS has engaged in this activity.

[Denton]

Originally Posted by Chucker

I'm not sure what you?

Tut-tut! "Am," the "'m" in "I'm," is a verb. You're not very good at JeffDM's game, are you?

[monkeyastronaut]

This is Al Gore people. He invented the internet. I believe Apple is teh safe.

[SpamSandwich]

Originally Posted by monkeyastronaut

This is Al Gore people. He invented the internet. I believe Apple is teh safe.

Al: "These pretzels... are makin' me thirsty!"

[BlackSummerNight]

Ha. I'm writing a paper on the FCC, reading all this on Apple and the SEC, and watching the SEC play football. My hand was moving faster than my mind.8)

Originally Posted by fizzmaster

Why would the FCC investigate? I know the SEC is investigating but never heard anything about the FCC.

[Zandros]

Originally Posted by anantksundaram

26,500 person hours of investigator time!?

What's wrong with good old man hours nowadays?

[meh 2]

Originally posted by melgross:
"It isn't thought that MS has engaged in this activity."

Given the nightmare I've already been through with Enron (who btw was also not suspected of chicanery) I sincerely hope, as you imply, the fact that Microsoft has not been implicated in such a scheme bodes well for them. I would not care to see otherwise.

Once burned, twice removed.

Hoping you're right, keeping my fingers crossed.

[paulherring]

OK, whatever else he's done (eg: LOST TO DUBBYA), 'An Inconvenient Truth' is an amazing film, however I couldn't help noticing the extremely large number of Macs featured in it. At the time I figured it was just an image thing, but now I hear he's on the 'special comittee'? Conflict of interests?

[Chucker]

Originally Posted by paulherring

OK, whatever else he's done (eg: LOST TO DUBBYA), 'An Inconvenient Truth' is an amazing film, however I couldn't help noticing the extremely large number of Macs featured in it. At the time I figured it was just an image thing, but now I hear he's on the 'special comittee'? Conflict of interests?

Al Gore has been on Apple's board of directors for years.

He also used Apple's Keynote app for many of the presentations in An Inconvenient Truth.

I don't see how this is a "conflict of interests" at all; their special committee consisted of board members; nothing unusual.

[anantksundaram]

Originally Posted by melgross

It isn't thought that MS has engaged in this activity.

Actually, they did engage in it. See:

http://users2.wsj.com/lmda/do/checkL...981081966.html

But they came clean, and got in front of the issue very aggressively. Everybody yawned and moved on.

One can criticize MSFT, Ballmer, and Gates with regards to their products and services, but when it comes to management/reporting of financials, MSFT is simply one of the finest companies around.

[melgross]

Originally Posted by anantksundaram

Actually, they did engage in it. See:

http://users2.wsj.com/lmda/do/checkL...981081966.html

But they came clean, and got in front of the issue very aggressively. Everybody yawned and moved on.

One can criticize MSFT, Ballmer, and Gates with regards to their products and services, but when it comes to management/reporting of financials, MSFT is simply one of the finest companies around.

The point is that nothing illegal was actually done.

As opposed to the way they run the company. Strange, isn't it?

[paulherring]

Originally Posted by Chucker

Al Gore has been on Apple's board of directors for years.

He also used Apple's Keynote app for many of the presentations in An Inconvenient Truth.

I don't see how this is a "conflict of interests" at all; their special committee consisted of board members; nothing unusual.

Oh, I didn't know that - Thanks! It explains all the Macs featured in 'An Inconvenient Truth!'

Al Gore must be pushing hard for Apple to be more environmentally friendly... Lets hope so anyway, otherwise all the cars he's chauferred in, planes he flies on, and new computers he uses during the film could make him look a bit hypocritical...

[anantksundaram]

Originally Posted by paulherring

Al Gore must be pushing hard for Apple to be more environmentally friendly... Lets hope so anyway, otherwise all the cars he's chauferred in, planes he flies on, and new computers he uses during the film could make him look a bit hypocritical...

PS:

Yup, hypocrisy is alive and well among some in the "environmental movement".

1) On the environmental impact of computers, see, e.g.:

http://update.unu.edu/archive/issue31_5.htm

2) On the enviornmental impact of jet engines, see, e.g.:

http://www.grida.no/climate/ipcc/aviation/089.htm

3) On top of all that, he's a gasbag too (but admittedly, a very smart one).

[melgross]

Originally Posted by anantksundaram

PS:

Yup, hypocrisy is alive and well among some in the "environmental movement".

1) On the environmental impact of computers, see, e.g.:

http://update.unu.edu/archive/issue31_5.htm

2) On the enviornmental impact of jet engines, see, e.g.:

http://www.grida.no/climate/ipcc/aviation/089.htm

3) On top of all that, he's a gasbag too (but admittedly, a very smart one).

Yup!

A lot of gasbags here too.

[anantksundaram]

Originally Posted by melgross

Yup!

A lot of gasbags here too.

Yes, indeed!

[monkeyastronaut]

Originally Posted by SpamSandwich

Al: "These pretzels... are makin' me thirsty!"

I had just seen that Seinfeld episode this weekend hehe