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.

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