Mr. McBride, will you please raise your right hand, sir?
Here's an audio recording of the creditors meeting held on Thursday, October 18, 2007 in In Re: The SCO Group, Inc., et al., No. 1:07-bk-11337, Bankr. D. Del.:
To follow along, grab the minute sheet (dkt #140) and the financial statements and schedules (dkt #130 through #133): docket.
Here are a few notes:
Joseph McMahon, representing the U.S. Trustee, Kelly Beaudin Stapleton, asks questions for about one and three quarter hours. Most of the testimony is by CEO Darl McBride, but SCO's new controller, Jean Acheson, is also sworn in. Arthur Spector, SCO's lead bankruptcy attorney from the Berger Singerman firm in Florida, is heard many times, and so is local co-counsel James O'Neill. There is at least one creditor present, but no creditors opt to ask any questions after McMahon finishes.
The $60,000 payments made on the last day before bankruptcy to ex-CFO Bert Young and ex-Controller Michael Olson, for "independent contracting", are discussed at about 00:46:39 to 00:59:02, which is succinctly summarized in this clip at 00:57:14 (the voices are O'Neill, Spector, and McMahon):
McMahon wonders whether the cloud cast by Judge Kimball's August 10 ruling leaves SCO with any viable business, and this question is tiptoed around from about 01:09:38 to 01:17:35. SCO's lawyers are very resistant to the idea of McBride giving any testimony about the ongoing Novell litigation, considering that Novell's motion to lift the stay of that case is pending and that Novell's lawyers are sitting right there in the room. Ultimately, McMahon drops the issue.
McMahon later asks about SCO's remarkable record of losing money in every quarter except the one in which it received and kept the disputed payments from Sun and Microsoft. McBride responds by admitting that 2003 was SCO's only profitable year. (Those transactions actually enabled SCO to report two profitable quarters: Q2 and Q3 of FY 2003.) McBride then blames most of the losses on legal costs, and he gets agitated enough to pound the table a couple of times. Here's a clip starting at 01:39:38:
"And over the last three or four years if you look at operations, you will see cash flow coming out of that, on a very consistent basis. What you will see negating that positive cash flow out of operations — when I say operations now I'm talking — I'm talking the business of selling UNIX. Because everything's rolled up under Operations — so let's just say the business of selling UNIX has generated profits over the last three or four years. It's been the majority of the quarters it's generated profits. It's only been a few times that it hasn't."
Oops. He's wandered off of the "cash-flow-positive" script and started talking about "profits". Here's the reality of SCO's reported quarterly profits and losses in its UNIX segment since the start of FY 2004 (the first year for which SCO reported separate segment numbers for just the UNIX business):
Number of profitable quarters: Four (allegedly "the majority") Total of those profits: $2,016,000
Number of losing quarters: Eleven ("only been a few times") Total of those losses: $14,461,000
Here's one of the tables I keep, which shows the UNIX profit/loss as part of a five-way breakdown of SCO's bottom line (in thousands of dollars):
(The Q1, Q2, Q3, and YTD numbers can all be found verbatim in SCO's Forms 10-Q (each 10-Q, starting in 2005, includes the segment numbers for the current quarter and for the year-prior quarter); the FY numbers can be found in the Forms 10-K; and to get the Q4 numbers you have to use subtraction.)
