Reg FD Makes Firms More Forthcoming, But Some Opt for Pretaped Conferences

DES MOINES, Iowa — When

[1] Inc.

talked about a big drop in profit last quarter, none of
the listeners to its earnings conference call asked any questions.

It wasn’t because the food-processing company had been so forthcoming
about its business or had anticipated every inquiry. It was because the
call had been prerecorded the night before — management wasn’t live on the

Analysts and investors who sought elaboration — or who wanted to ask
about something not mentioned in what amounted to an audio news release —
had to phone the company after the call.

Welcome to the uncertain world of corporate communications, post
Regulation FD. That, of course, is the Securities and Exchange Commission’s
guidance on what companies say about their businesses and how they say it.
The intent was to foster “fair disclosure” — FD for short — by
prohibiting the release of potentially market-moving information to a
favored few rather than to everyone at once.

In its aftermath, many companies are more forthcoming. Scores have
opened up their live briefings with analysts about quarterly results by
releasing them over the Internet. That way, everyone can listen — although
only those who have dialed in on special phone lines are able to ask
management questions. But everyone can hear the answers.

“Now we’re seeing companies that not only are having regularly scheduled
earnings calls, but also are having regularly scheduled interim ones,
typically in mid-quarter, or in some cases monthly,” said Chuck Hill,
director of research at Thomson Financial/First Call.

Informed that some companies are going to prerecorded calls instead, Mr.
Hill said, “That would be a very unfortunate step backwards if it started
to spread.”

Some Companies Don’t Hold Calls At All

Before Regulation FD, typically only a handful of analysts and
institutional investors were allowed to hear management elaborate on
quarterly results. Often that discussion disclosed details not in the
company’s news release. And sometimes the most telling information on those
calls came in the Q&A session between the analysts and the company
representatives — discussion the public couldn’t hear.

Despite the regulations, some companies, perhaps skittish about how much
they can say, are opting for canned calls. While still the exception,
pretaped presentations are favored by firms in a variety of fields, among
them retailing, banking and telecommunications.

Companies prerecording earnings reports include

Wells Fargo[2] Co.


Mellon Financial[3] Corp.


Sprint[4] Corp.

, and

Wal-Mart Stores[5] Inc.

Others, like

Schering-Plough[6] Corp.

, hold live
calls but don’t allow follow-up questions and answers.

A few big companies don’t hold any quarterly calls, live or taped. They

General Electric[7] Co.

, Warren

Berkshire Hathaway[8] Inc.,

credit-card giant

MBNA[9] Corp.


Washington Post[10] Co.

While there is no requirement that companies regularly converse with
analysts and investors, most do. Because of that, those who opt for
recorded remarks or hold no calls provoke questions.

“If one of my companies suddenly decided not to do live conference calls
I would think they were trying to hide something. It would raise red flags
all over the place,” said Douglas Lee, who tracks the semiconductor
industry for Bank of America Securities.

Others question the value of a prerecorded call.

“It really doesn’t add a lot to have someone from [investor relations]
reading the text that’s already available,” said Morningstar pharmaceutical
analyst Amy Arnott.

ConAgra’s decision not to hold live calls makes some who follow the
Omaha, Neb., company angry.

“It’s a lousy way to deal with investors,” said George Dahlman, food
analyst at U.S. Bancorp’s Piper Jaffray unit. William Leach of Banc of
America Securities said the practice “creates a shady atmosphere.” Said
Eric Katzman of Deutsche Banc Alex. Brown, “It’s unbelievable.” All say
ConAgra is the only big food processor they follow that doesn’t hold live
quarterly calls.

ConAgra said the analysts have it all wrong. By precluding questions
from the handful of Wall Street professionals typically on live calls, the
company contends that it won’t shortchange others not listening in.

“Our position is that we are going to create a means by which we will
communicate fairly and evenly with all our investors,” said Timothy P.
McMahon, ConAgra’s senior vice president of communications.

After every quarterly recording, ConAgra executives field dozens of
calls — be they from Wall Street professionals or the average little guy,
Mr. McMahon said. Sometimes those sessions can last all day. Last year a
member of a small investment club in Alaska ended up chatting with ConAgra
Chairman and Chief Executive Bruce Rohde, who happened to be in the room
when that call came in, Mr. McMahon said.

ConAgra Is Diligent About Answering Questions

Analysts critical of its prerecorded calls said that ConAgra is diligent
about answering their individual queries — although the analysts remain
uneasy about the process.

Call-in questioning “allows them to pick and choose which calls they
take, the order in which they take them — and you’ll never be able to pin
down if it’s the same story told to everybody,” Mr. Dahlman at Piper
Jaffray said.

Mr. McMahon noted that ConAgra posts answers to numerous questions about
its earnings on its Web site. But some analysts counter that such carefully
edited information isn’t the same as hearing a CEO or chief financial
officer respond to a real-time question on a live broadcast.

Sometimes conference calls that don’t include immediate, on-the-line
feedback can lead to confusion — as Wal-Mart learned last spring. On its
recorded call an official used the words “double-digit” to characterize
second-half earnings expectations.

Hearing that, analyst Emme Kozloff of Sanford C. Bernstein &
Associates assumed it meant at least a 13% earnings increase. But after
talking to the company, she learned that the company was indicating a 10%
or so rise. As a result Ms. Kozloff reduced her estimate, and Wal-Mart’s
stock fell more than $2 a share that day amid investor confusion.

Mindful of such situations, U.S. Bancorp spokesman Steve Dale said the
Minneapolis bank prefers live calls because “it gives us the ability to
address our results and answer questions in a more timely manner.”

Several analysts said a big plus to live Q&A on conference calls is
to hear what their colleagues are curious about. Others may raise questions
of which they hadn’t thought.

Regulation FD’s primary draftsman, former SEC general counsel Harvey
Goldschmid, said the rules “left room to do prerecording or only issuing a
press release. But,” he added, “in terms of good corporate policy and
legally, the more you open yourself up to public questioning, the

But those favoring taped remarks say they have their reasons. Mellon
Financial said it went to a recorded call that can be accessed at any time
in response to analysts. “Many in the investment community have told us how
busy they are,” said Ken Herz, spokesman for the Pittsburgh bank. Partly
that is because Mellon typically announces earnings on what is known as
“Super Tuesday,” when several big banks release numbers.

Explaining why the newspaper publisher has never had quarterly calls,
Washington Post Chief Financial Officer John (Jay) Morse said, “We just
don’t have that many analysts who call us, or that many shareholders.”

As for GE, spokesman David Frail said the company hasn’t seen the
necessity of live quarterly earnings updates since it communicates in many
other ways. Still, he added. “If we hear from enough people that they would
like to have it done, we will certainly give it consideration.”

Write to Richard Gibson at[11]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8


  1. ^ ConAgra
  2. ^ Wells Fargo (
  3. ^ Mellon Financial (
  4. ^ Sprint (
  5. ^ Wal-Mart Stores (
  6. ^ Schering-Plough (
  7. ^ General Electric (
  8. ^ Berkshire Hathaway (
  9. ^ MBNA (
  10. ^ Washington Post (
  11. ^ (

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