Apple Releases Financial Results, Discusses Options Scandal

[MacRumors]

Today Apple released both its tardy 10Q (for 2Q 2006) and 10K (for fiscal year 2006) reports to the SEC. Much of the attention of the press release was placed on the continuing Stock Options back-dating investigation.

According to the release, Apple found a total of $84 million in charges related to the case, which dates back to 1997, including $4 million in 2006 and $7 million in 2005. However, to put the issue in perspective, Apple's profits for 2005 and 2006 were $1 billion-plus each year, so the corrections represent less than 1% of Apple's profitability in those years.

In addition, Apple's board expressed confidence in CEO Steve Jobs, who was recently in headlines regarding some of the backdated options he received but never profited from.

“The special committee, its independent counsel and forensic accountants have performed an exhaustive investigation of Apple’s stock option granting practices,” in a joint statement said Al Gore, chair of the special committee, and Jerome York, chair of Apple’s Audit and Finance Committee. “The board of directors is confident that the Company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team.”

Apple's stock has been traded heavily over the past few days, with the stock dipping as much as 6% before recovering on December 27th (Wednesday). As of this writing, Apple's stock is up over 5%.

 

[PlaceofDis]

good news right?

lets hope these issues get resolved quickly.

 

[Thanatoast]

Huzzah! On with MWSF!

 

[AidenShaw]

Jobs' new Stevenote speech - "I am not a crook!"

In addition, Apple's board expressed confidence in CEO Steve Jobs, who was recently in headlines regarding some of the backdated options he received but never profited from.

Of course he didn't profit from them - when the stock dropped sharply the options went underwater.

They were exchanged, however, for restricted shares.

http://www.usatoday.com/money/industries/technology/2004-03-11-dirt-poor-jobs_x.htm

Posted 3/11/2004 11:59 AM

Apple CEO took $1 salary again in 2003

NEW YORK (Reuters) — Apple Computer Chief Executive Steven Jobs took a $1 salary in 2003, as he has since 1998, and received $74.75 million in restricted stock in exchange for his outstanding stock options in March 2003.
The Cupertino, California company did not pay Jobs, who is also a co-founder of the company, any new stock options or cash bonus in 2003. No other executive received stock options in 2003, Apple said.

Jobs began taking a $1 salary one year after he returned to Apple in 1997, aiming to turn around the company he helped found. But over the years, other compensation for Jobs has been criticized, such as stock options and a $90 million jet.

The grant of restricted stock, which Jobs received in exchange for cancellation of 27.5 million stock options, vests three years from the date of the grant. The move, which Apple disclosed a year ago, was part of the company's effort to reduce the percentage of issued stock options as a total of options and shares outstanding.​

So, please try to convince me that "exchanging" the options for a stock grant is not "profiting" from them.

Or, probably more to the point, convince the judges in the class action shareholder lawsuits that will surely come that exchanging the options for a $75M "grant" isn't profiting.

And, don't forget that in March 2003 that grant was 10 million shares - at today's stock prices it's about $850M.

 

[cadillaccactus]

i feel like mr steve has so much money already that it's wouldnt be worth the time/trouble to imbezzle from apple.

__________________

Digg my stories!

 

[xPismo]

Good to see. Sad to see the craze this has been on the TV networks. Of all the pundits I watched, they all failed to mention that no one has commented on record. . . bah.

 

[mkrishnan]

Putting aside the accounting issue, looks like a great Q2 for Apple! Healthy sales across markets for both the iPod and Mac lines. Although the same-three-month services sales related to the iPod seemed to be off. Hopefully that trend won't continue. Looks like they were down on desktops too, perhaps because of the transition, although they were up in Mac sales overall, so one could also interpret it as a healthy shift towards a richer mix of notebooks....

Looks good! Keep it coming.

 

[kresh]

You say that as if its a bad thing.

It's not a bad thing, but Steve's dry cleaning expenses are crazy when they visit. It's so hard to get the stains out of Steve's cashmere turtleneck shirts.

 

[Multimedia]

Tempest In A Teapot

I do not believe anyone at Apple would ever intentionally do anything against the rules for their own personal advantage. I believe they are all very honorable and honest people. Anything they may have done "wrong" was probably an innocent mistake.

 

[freeny]

I do not believe anyone at Apple would ever intentionally do anything against the rules for their own personal advantage. I believe they are all very honorable and honest people. Anything they may have done "wrong" was probably an innocent mistake.

Dont ever assume this of anyone! not even your own mother

Any who, glad this is over, lets move on...

 

[BornAgainMac]

Enough with the politics

It looks like the mess is over with this scandal. It made some great press headlines. I want to see additional headlines about Apple in a more positive light in the future.

 

[Peace]

Man..MacWorld 2007 can't come soon enough..

Apple restates earnings that reflect a $84 million write-off while other silicon valley companies are doing $600 million write-offs and folks here call Gore and Jobs crooks..

You people should be ashamed of yourselves..

And I might add that $84 million is chump change compared to the BILLIONS Microsoft has paid out in fines etc.

And Aiden.

Of course he didn't profit from them - when the stock dropped sharply the options went underwater.

They were exchanged, however, for restricted shares.

http://www.usatoday.com/money/industries/technology/2004-03-11-dirt-poor-jobs_x.htm

Posted 3/11/2004 11:59 AM

Apple CEO took $1 salary again in 2003

NEW YORK (Reuters) — Apple Computer Chief Executive Steven Jobs took a $1 salary in 2003, as he has since 1998, and received $74.75 million in restricted stock in exchange for his outstanding stock options in March 2003.
The Cupertino, California company did not pay Jobs, who is also a co-founder of the company, any new stock options or cash bonus in 2003. No other executive received stock options in 2003, Apple said.

Jobs began taking a $1 salary one year after he returned to Apple in 1997, aiming to turn around the company he helped found. But over the years, other compensation for Jobs has been criticized, such as stock options and a $90 million jet.

The grant of restricted stock, which Jobs received in exchange for cancellation of 27.5 million stock options, vests three years from the date of the grant. The move, which Apple disclosed a year ago, was part of the company's effort to reduce the percentage of issued stock options as a total of options and shares outstanding.​

So, please try to convince me that "exchanging" the options for a stock grant is not "profiting" from them.

Or, probably more to the point, convince the judges in the class action shareholder lawsuits that will surely come that exchanging the options for a $75M "grant" isn't profiting.

And, don't forget that in March 2003 that grant was 10 million shares - at today's stock prices it's about $850M.

The company also reported today, as it had previously, that Jobs never exercised his own options. Along with an earlier set of 10 million options, the 7.5 million options from 2001 were cancelled in March 2003, when Jobs was instead given 5 million shares of restricted stock, the company said.

So canceling 17.5 million shares and getting 5 million instead is what Aiden?

Sure isn't $850 million..

 

[Clive At Five]

Damn, I almost wish stocks would have dropped lower... I would have bought!

On the other hand, if MacWorld sucks, I'll have a second opportunity. *crosses fingers*



-Clive

 

[tcrab]

Well I'm glad Apple got away with this one with a slap on the wrist. I'd hate to see Jobs go. At least they won't do that again.

I wonder if anyone is looking into Microsoft and see if there are some inequalities.

 

[AidenShaw]

The company also reported today, as it had previously, that Jobs never exercised his own options.

No argument, the options were exchanged for a restricted grant.

That's a lot different from claiming that Jobs never got anything for the options.

Along with an earlier set of 10 million options, the 7.5 million options from 2001 were cancelled in March 2003, when Jobs was instead given 5 million shares of restricted stock, the company said.

So canceling 17.5 million shares and getting 5 million instead is what Aiden?

Sure isn't $850 million..

The USA Today article said that 27.5 million options were cancelled in exchange for a $75 million grant. Since Apple stock has split since then, the 5 million shares are now 10 million. (I used split-adjusted prices for 2003.)

The only point to clarify is that a little less than a third of the options that Jobs exchanged were tainted by this scandal, therefore only about $250M of his profit is tainted.

 

[Peace]

No argument, the options were exchanged for a restricted grant.

That's a lot different from claiming that Jobs never got anything for the options.


The USA Today article said that 27.5 million options were cancelled in exchange for a $75 million grant. Since Apple stock has split since then, the 5 million shares are now 10 million. (I used split-adjusted prices for 2003.)

The only point to clarify is that a little less than a third of the options that Jobs exchanged were tainted by this scandal, therefore only about $250M of his profit is tainted.

Well the USA Today article differs from Apple's statement.

Apple stated 17.5 million shares were cancelled and Jobs was given 5 million in restricted stock.

That differs greatly from "27.5 million options were cancelled in exchange for a $75 million grant."

The stock split was in 2005.AFTER Jobs took the exchange of stock.There is NO WAY a person can take stock in 2003 knowing it was going to go up and split 2 years later.

 

[AidenShaw]

Well the USA Today article differs from Apple's statement.

Apple stated 17.5 million shares were cancelled and Jobs was given 5 million in restricted stock.

That differs greatly from "27.5 million options were cancelled in exchange for a $75 million grant."

That was 5 million shares (at about $15 then), or $75M. The shares were a grant - not options, an outright gift (when they vested).

http://www.appleinsider.com/article.php?id=1621

Apple's Jobs pays $295M in taxes on 10M vested shares

By Kasper Jade

Published: 06:00 PM EST
Apple Computer chief executive Steve Jobs this month used over 4.5M of the 10M restricted shares owed to him by the company to pay income and other employment taxes applicable to those shares, AppleInsider has discovered.​

http://www.apple.com/pr/library/2003/mar/20governance.html

The second measure is for Apple CEO Steve Jobs to voluntarily exchange his 27.5 million stock options for a new grant of 5 million restricted shares that will vest on the third anniversary of the grant.​

USA Today is essentially correct.

 

[Peace]

This is useless Aiden.Just like Multimedia said.A tempest in a Teapot..

Move along..Nothing to see here

 

[MasterJediDan]

Hooray!! Now Apple doesn't have to worry about losing Jobs again. When they pushed him out the first time, all heck broke loose at Apple, and they started losing out against Microsoft. But now that Steve is back, Apple is gaining significant ground against Microsoft. If they lost him again I would be very worried about what they would do next.

 

[hagjohn]

Huh? That was the end of the Apples "internal" investigation about the matter. That has nothing to do with a Gov't investigation.

Well I'm glad Apple got away with this one with a slap on the wrist. I'd hate to see Jobs go. At least they won't do that again.

I wonder if anyone is looking into Microsoft and see if there are some inequalities.

 

[AidenShaw]

This is useless Aiden. Just like Multimedia said. A tempest in a Teapot...

True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money.

I'll also point out that the record shows that Steve traded options, including the tainted ones, for an outright grant of millions of shares. That makes it hard to claim that he didn't benefit.

If the investigations show that Jobs knew of the falsification of records, and that therefore he was involved in covering up the misdeeds - then it will be bye-bye Steve.

 

[gnasher729]

Or, probably more to the point, convince the judges in the class action shareholder lawsuits that will surely come that exchanging the options for a $75M "grant" isn't profiting.

And, don't forget that in March 2003 that grant was 10 million shares - at today's stock prices it's about $850M.

It's only $850 million because the same Steve Jobs that is apparently annoying you so much has increased the market capitalization of the company about tenfold to a bit over 70 billion dollars.

And it is only small change to the 3500 million that Disney paid him for his share of Pixar.

 

[jragosta]

True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money.

You're forgetting one thing.

Steve traded 17 milion options that were under water for a stock grant. If the options had not been backdated, they would have been EVEN MORE underwater when they were traded for the stock grant. Backdating the options merely made them a little closer to being of value.

So, he traded worthless options for a stock grant. If there had been no backdating, he presumably would have traded options that were even more worthless for a stock grant.

Tempest in a teapot.

 

[Gusman]

True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money.

I'll also point out that the record shows that Steve traded options, including the tainted ones, for an outright grant of millions of shares. That makes it hard to claim that he didn't benefit.

If the investigations show that Jobs knew of the falsification of records, and that therefore he was involved in covering up the misdeeds - then it will be bye-bye Steve.

Interesting in that you seem aware of a number of facts yet reach the conclusion you have.

Did you read the official filing? Notice this?


The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83. The terms of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise price of $18.30.

Seems pretty clear to me that the Board was in the loop, just the paperwork details messed up. Guidelines for options were changing significantly over the years involved due to abuse. Do I as a apple shareholder think this is significant, or even abuse? no way . . . add up all the compensation, perks etc that S Jobs has received and the shareholders would have tripled it for the results he has guided the company towards. Shareholder lawsuit, LOL, ya I guess the $6 to $85 return on stock price in 3 years isn't enough.

 

[dongmin]

True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money.

I'll also point out that the record shows that Steve traded options, including the tainted ones, for an outright grant of millions of shares. That makes it hard to claim that he didn't benefit.

If the investigations show that Jobs knew of the falsification of records, and that therefore he was involved in covering up the misdeeds - then it will be bye-bye Steve.

You're missing a few facts:

The options were a form of compensation that Apple gave to Jobs since he wasn't taking any salary. The correct date for the options was Dec. 18, 2001 when AAPL was $21.01; the falsified date was Oct. 19 when AAPL was $18.03. In March of 2003 when Jobs canceled his options in exchange for the stock grant, AAPL was hovering around $15 so Jobs's options were worth ZERO at that point.

I fail to see how Jobs profited from the backdating of the options since AAPL at the time of the transaction was actually lower than the $18.03 of 9/19/03. Apple gave him the stock grant in exchange for the options because his earlier compensation was worth nothing.