Research In Motion Delays Financial Filing; Finds More Options Problems - 500 Beiträge pro Seite

[nachtschatten]

marketwatch-artikel:
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BDDA…

aus Barrons:

October 13, 2006, 4:47 pm
Research In Motion Delays Financial Filing; Finds More Options Problems
Posted by Eric Savitz

Research in Motion (RIMM) today disclosed that it found, well, a complicated accounting nightmare while looking at its historic practices regarding the granting of stock options.

I present here the entire RIM announcement, with some commentary from yours truly.


WATERLOO, ONTARIO–(MARKET WIRE)–Oct 13, 2006 — Following the announcement of its preliminary second quarter results on September 28, 2006, Research In Motion Limited (RIM) announced today that the filing of its interim financial statements for the three months ended September 2, 2006 will be delayed pending completion of its management-initiated, voluntary review of historical stock option grants.


Pretty routine so far. Lots of companies are delaying financial filings for stock options investigatons.

As previously announced on September 28, 2006, the Audit Committee of RIM’s Board of Directors, comprised solely of independent directors, is completing a management-initiated, voluntary review of RIM’s historical option granting practices. While the Audit Committee has not completed its review, it had made a preliminary determination that GAAP accounting errors were made around the administration of certain historical stock options granted from fiscal 1998 to present, and made a preliminary determination that a restatement of RIM’s historical financial statements will be required to reflect this. As a result, management will delay the filing of RIM’s second quarter financial statements, which are due to be filed by October 17, 2006, in order for the Audit Committee to complete its review and to effect the restatement. RIM will file the financial statements as soon as practicable.

Again, no surprises, really; they did not say previously that the filing would be delayed, but still fairly routine for a stock options backdating probe.

In connection with the ongoing review, and subsequent to September 28, 2006, the Company identified an additional technical error under U.S. GAAP that will likely require a further adjustment to its historical financial statements.


Here comes the new stuff. And the weird stuff.

This error stems from a difference in the historical application of U.S. GAAP and Canadian GAAP accounting rules. While the Company is unable to specify the additional adjustment resulting from this error as the review is ongoing, the Company does not currently anticipate a material adjustment to the preliminary second quarter operating results reported on September 28, 2006 or to current or future financial years’ operating results.


Translation: We found something weird, but no reason to go sell the stock.

This technical error relates to a “net settlement” feature that existed in RIM’s stock option plan prior to February 2002. Under this feature, instead of paying the exercise price in cash, the employee could apply to receive a lesser number of RIM common shares equal in value to the difference between the grant price and market price at the time of exercise multiplied by the number of options exercised.


This is for…what…tax reasons? To prevent the need to actually provide cash? Both?

RIM has a broadly based stock option plan and this feature was designed to facilitate the exercise of stock options by employees who lacked the financial resources to fund the exercise price.


Ah, I get it.

This specific feature was eliminated from RIM’s stock option plan effective February 2002 and only a small fraction of the total options granted prior to February 2002 were exercised using this feature. Prior to 2002, there were no accounting implications relating to this feature under Canadian GAAP, which RIM used as its primary GAAP at that time. However, in connection with its current internal review, RIM has been advised that it was required under U.S. GAAP to presume that all employees receiving options under a plan containing this feature would exercise their stock options in this manner regardless of the fact that only a small percentage of its employees actually used this feature. As a result, variable accounting was required under U.S. GAAP for all stock options granted prior to February, 2002.

Ah, and here’s the rub.

Variable accounting requires RIM to recognize a non-cash compensation expense for all stock options, which includes (1) all realized gains on exercise of stock options, and (2) an allocation of all unrealized gains for unexercised stock options based on the stock’s trading price at each reporting period. The elimination of this feature in February, 2002 limits the impact of variable accounting for subsequent periods, but given the historical volatility of RIM’s share price over these periods, variable accounting will result in significant fluctuations in non-cash compensation charges from year to year.


And the implication is…

The net effect of the variable accounting will be to substantially increase the amount of RIM’s previously estimated non-cash charges associated with past option grants and thereby reduce the amount of the Company’s previously reported U.S. GAAP earnings over the periods to be restated. As noted above, the Company does not currently anticipate a material adjustment to its preliminary second quarter operating results or current or future financial years’ operating results.


Are there any other consequences?

In accordance with applicable Canadian securities laws, RIM will request that the Canadian securities regulators issue a “Management and Insider Cease Trade Order” that prohibits trading in RIM’s securities by its senior officers, directors and other insiders, who are already subject to a Company-initiated blackout, until the required financial statements are filed. Pending the filing of the financial statements, RIM intends to satisfy the alternative information guidelines recommended by OSC Policy 57-603 and Canadian Securities Administrators’ Staff Notice 57-301 by issuing a news release every two weeks to update the shareholders on the filing delay. RIM is also required to disclose that if the second quarter financial statements and MD&A are not filed by December 17, 2006, Canadian securities regulators may impose an issuer cease trade order.


Well, shareholders would not be happy about that.

In after hours trading, RIM is down $1.54, at $112.30.
Permalink | Trackback URL: http://blogs.barrons.com/techtraderdaily/2006/10/13/research…

[cuca1949]

Antwort auf Beitrag Nr.: 24.650.683 von nachtschatten am 16.10.06 08:54:56

Das passiert jetzt irgendwie bei vielen Aktien!!

Mir fallen gerade auch Apple, Autodesk und Nvidia dazu ein.

[nachtschatten]

Antwort auf Beitrag Nr.: 24.650.954 von cuca1949 am 16.10.06 09:14:43

mal schauen, was daraus wird. RIMM ist ja momentan WallStreets liebling und sind dementsprechend gut gelaufen - von anfang august bei 65 dollar auf jetzt 113. mal schauen, ob heute ne handvoll gewinne realisiert werden