In a 10-K report filed with the Securities and Exchange Commission early Friday, Apple said it recorded $84 million in noncash expenses to account for backdated stock options.
The relatively small restatement was a BIG relief to investors, but their main cause for celebration centered around Jobs, whose future had been called into question as details of the stock option irregularities have come to light.
The filed statements with the U.S. Securities and Exchange Commission that took pains to exonerate Chief Executive Steve Jobs from wrongdoing in the company's handling of stock options from 1997 to 2002. A special committee appointed by Apple's board "found no misconduct by current management," the company said in a lengthy explanatory note attached to its yearend financial filing. That reiterated remarks made by Apple in October, and it was exactly what many investors and analysts wanted to hear. In early afternoon trading, Apple's shares got a 5% boost, to $84.93.
As upbeat as the tone was toward management, the documents nevertheless underscores concerns over the way Apple handled options, which were used by many companies in recent years to compensate employees, and have become the target of widespread investigation. The practice of backdating, or changing a grant date to artificially boost the value of the option, can skew results by understating compensation costs and overstating profit.
Apple said its own probe turned up "a number of grants for which grant dates were intentionally selected in order to obtain favorable exercise prices," and that Jobs was "aware or recommended the selection of some of the favorable grant dates." Jobs "did not receive or financially benefit from these grants or appreciate the accounting implications."
Al Gore, the former US Vice-President and chairman of the special board committee, and Jerome York, chairman of Apple’s audit and finance committee, said: “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.”
The company admitted that it had falsified records to show that a board meeting on October 19, 2001, had approved the awarding of 7.5 million stock options to Mr Jobs. In fact, no meeting took place on that day and the records were fabricated, the company said.
The market applauded the Apple report, however, and seemed to share the company’s view that Mr. Jobs had been exonerated as the shares surged more than 5 per cent by midday on Wall Street.
