Human Capital & Careers

Jabil, Fossil Get Caught in Options Mess

Restatements are announced as one company is slapped with a subpoena, and the other a new lawsuit.
Stephen TaubNovember 15, 2006

Jabil Circuit said it will need to restate its 2005 financials and related disclosures as a result of a special review of its historical stock option grants. The maker of electronic components for mobile phones and computers had previously disclosed shareholder lawsuits related to the grants.

In addition, the company is responding to an informal inquiry from the Securities and Exchange Commission and has received a subpoena from the U.S. Attorney’s office for the Southern District of New York on the matter. Jabil explained in a regulatory filing that the issues under review mostly reflect “changes in the company’s understanding” of the accounting-related requirements for identifying appropriate measurement dates for option grants or errors in interpreting the guidance, and administrative and logistical errors made in effecting the options program.

While Jabil said that the review of its financial statements is not complete, the company conceded that other time periods may need to be restated. It also said it currently does not know the exact amount of the restatements or the impact of any related tax consequences of the differences in measurement dates.

Meanwhile, watch and accessory maker Fossil Inc. said it may need to restate prior results because of past equity granting practices. In a regulatory filing, the company noted that a committee made up of all independent members of its board of directors is voluntarily reviewing these practices.

Furthermore, the company disclosed that two shareholder derivative lawsuits have been filed in federal court naming Fossil as a nominal defendant and naming all of the company’s current directors, and certain current and former officers and directors, as defendants. The complaints allege violations of federal securities laws and state law claiming a breach of fiduciary duty, abuse of control, constructive fraud, corporate waste, unjust enrichment, and gross mismanagement related to certain stock option grants made by the company, according to the filing.

Fossil added that the company and its directors have reviewed the allegations and intend to respond when appropriate.