SCO has filed its monthly operating reports for SCO Group and SCO Operations for the month of March, and it looks like SCO Group has achieved its goal of having no money left for Novell, although it's hard to tell, since the document for Group is almost blank.
I totally know nothing about accounting, so I'll just list what I notice, and you can figure out what it means. I see a net loss on page 5 of $59,811 for "China Investment Income". That is the "Net Profit/Loss". Then on page 7, we learn that SCO China, which didn't always exist, now has a "book value" of $488,544 and SCO Japan $765,366. Germany has $24,944; Canada $38,031 and UK and France have $43 and $70 respectively. A book value of $43? But the Mother Ship?
Page 6 lists $1,317,018 as "Total Assets" in the "Other" category. The rest is blank. No cash. No restricted cash. Just blanks. Then under the category of "Liabilities Subject to Compromise (prepetition)" SCO lists unsecured debt in the amount of $1,745,258. Then "Retained Earnings - Prepetition" is (352,922); "Retained Earnings - Postpetion" is (75,318); "Net Owner Equity" (428,240); for a "Total Liabilities and Owners' Equity" of $1,317,018.
So where's the rest of the money? SCO Operations lists $4,410,536 in cash at the end of the month of March; restricted cash for "Novell SVRx" of $386,163. I gather that may be their highest projected offer, they hope. Page 7 begins the very long list of professionals who got paid. A lot. And on page 9, we see a "Net Loss" of $966,820. And on page 11, SCO operations lists its total assets at $13,016,547, counting everything, office equipment, professional retainers, and the lot. Intercompany Receivables on page 12 are $1,745,258 from SCO Group and $369,259 from SCO Japan. So... wait. You don't suppose they intend to argue that SCO Group is who is being sued by Novell, not SCO Operations? Or is this just reflective of the reorganization, and only SCO Operations is intended to survive? I confess, I have no idea. SCO Operations lists a total for Postpetition Debts at $5,603,339, on page 13, by the way. I guess Novell can gnaw on some bones, but IBM? What is IBM supposed to get for all that litigation annoyance and badmouthing in the media?
I don't understand something else. On page three at the bottom, after listing $2,174,884 in "Total Disbursements", under the final heading it lists $4,410,536 as "Total Disbursements for Calculating U.S. Trustee Quarterly Fees." Those of you who are accountants or lawyers probably understand that, but I don't.
Then on page 9, there is footnote 2, under "Operating Expense" after "Other". It's a blank line for March, but it was (1,859,392) under "Cumulative Filing to Date". Footnote 2 reads, "Adjustment to allocate legal expenses surrounding the IBM and Novell litigation to Cost of Goods Sold at Fiscal Quarter Closes (October, January, April & July). I just have never understood SCO math. Hopefully you guys will.
Here are the filings:
448 - Filed & Entered: 04/21/2008
Affidavit/Declaration of Service
Docket Text: Affidavit/Declaration of Service of Epiq Bankruptcy Solutions, LLC (related document(s) ) Filed by The SCO Group, Inc.. (Werkheiser, Rachel)
449 Filed & Entered: 04/21/2008
Docket Text: Debtor-In-Possession Monthly Operating Report for Filing Period as of 3/31/08 for The SCO Group, Inc. for March 2008 Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)
450 - Filed & Entered: 04/21/2008
Docket Text: Debtor-In-Possession Monthly Operating Report for Filing Period as of 3/31/08 for SCO Operations, Inc. for March 2008 Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheise
If you'd like to compare February's monthlies, here is SCO Group and SCO Operations [PDFs]. I see on SCO Group's February Operating Expenses that the blanks are there also, so it may be normal SCO. The China Investment Income Loss for February was ($4,140). That's on page 5. Total assets on page 6 are listed as $1,310,790. But that's because they didn't list anything for office equipment and such. Net Owner Equity is ($434,463). Then if you go to page 11, you get the itemization, and the total assets there, including office furniture, is $13,573,085.
Update: We've had a lot of helpful comments explaining basic accounting principles, which I found helpful. Artiken gives an overview here, for example. And randall provides a link to the GnuCash Tutorial. The consensus seems to be that there is no way to get a true picture from the snapshot this monthly provides. But Artiken points out some odd items that may or may not be issues, subject to looking at the books themselves:
Dividends declared - 2,399,095, My guess is that this is saying that SCO is
going to pay out 2.4million in dividends. Now the money is just promised. If
it was actually paid out in cash, the Asset:Cash account would be credited
(lowering Assets) and the OE:JohnDoe account would be debited (lowering Owners
Equity). Since this amount is still on the books it means the company still
has the money, but it is promised (credited to OE) to the
owners. OK that is strange. What company pays dividends when they operate at a
Treasury Stock - (2,445,757), Ok a negative number which means that they sold
some treasury stocks. hmmm. Owner Equity? How? Stocks bought from the US
Treasury would normally be an Asset not OE. Unless the stocks are SCO stocks,
then It means that SCO bought back some stocks, Assets:Cash going out, OE:Stocks
coming in and lowering the amount that SCO owes to an Owner. I'm confused. But
looks strange to me since SCO is in Chapter 11.
If OE:Treasury Stock and OE:Dividends declared are a related transaction. It
would mean that the company lowered its level of stocks owed and raised the
amount of dividends. In other words by moving the numbers in the OE accounts
from one account to another they shifted from stocks (bought and thus lowered
the amount payable/due upon cash-in) and raised the amount due in dividends. Ah
traded stocks for dividends. Chapter 11 or 7. Stock holders. ha ha neener,
neener. sorry sucker. Stocks worth Zero. Dividends are payable as a debt. Last
in line. But still payable. Since it didn't effect the Cash or bank accounts it
wouldn't effect the Assets account or the Liabilities account. So it wouldn't
show up under Prof&Loss or A&L reports.
Except the two numbers are not the same. So The transactions do effect an Asset
or Liabilities accounts.
And NibbleAbit notices the following:
First, I am not an acountant, but I have been designing accounting systems for over a decade. Second, I am way too busy to go over these numbers in any detail, and I'm sure others have pointed out some of my observations (I haven't read all the posts). If they owed me money, I would want to know more details about the following items:
* funding to subsidiaries.
* Employee benifits ($220K sounds high, how many employees do they have left?, it looks 25% of compensation is in benifits)
* What are the details of the intercompany transfers?
* Their accounts payable look to be going up pretty fast. Not unusual in a bankrupcy i guess, as long as they are legitimate entries.
* I would want to know why they think they have 2 million in goodwill.
* The adjustments to owners equity look interesting. At least needing an explanation.