So when they popped up on our radar again last week, we took a closer look.

And we got an eyeful: an 8-K that included the PowerPoint presentation shown to investors at the company’s Fourth Annual Investor Summit on December 15 — a presentation weighing in at a whopping 123 pages. (Curiously, the event was at the company’s Watertown, Massachusetts, headquarters, and not at Point Lookout in Maine — why have a 396-acre resort complete with squash courts and a bowling alley if you’re not going to use it?)

Even at a minute a slide, you’re talking about more than two hours, from several presenters, plus a video, before you get to the Q&A. If you’re really curious, you can see the whole webcast on athenahealth’s Investor Relations site.

But we skimmed the thing and at first thought whomever created this should get some kind of prize for most extensive use of clip-art in a major corporate presentation. Then we realized that some of the icons and images, and maybe most of them, had to be custom-made for anthenahealth.

Take the presentation’s repeated use of “Jedi” imagery and concepts. (“Jedi Knights are warriors who have moved beyond fighting. They have studied so much, so hard, for so long, that they have internalized it. They can feel when things are off before they know why…”) and you can see how easy it is to get to 123 pages.

Throughout, the term is accompanied by a little clip-art image of a doctor (see the stethoscope?) with Yoda-ears, or a sort of caped call-center employee with what we presume is a light-saber:

At one point, athenahealth’s graphics department also got busy slapping little red blindfolds on other images (including an ambulance, test-tube and office building!) to show how the health-care system doesn’t notice cost and quality.

Meantime, deep inside (on page 77), the company even offers an inspirational quote from none other than Niccolo Machiavelli, the 16th Century impresario in the art of winning at all costs:

“I am not interested in preserving the status quo; I want to overthrow it.”

We’re not convinced that Machiavelli is the right inspiration when it comes to improving the cut-throat, bloated and mind-numbingly complex health-care system, but the presentation goes on, over three slides with images of medieval Italy and Sienna, to draw a parallel between Niccolo’s focus on key city figures and athenahealth’s plan to “coordinate around key physician influencers.” (To which we can only say, Physician, watch thy back!)

This behemoth of a presentation was spotted (and read) by our former intern extraordinaire, Andy Cheng — he’s moved on to other things, and we’ll miss him! — and he also noted that it came out on a day that athenahealth shares dropped sharply on a bleaker-than-expected full-year earnings forecast.

Overthrowing the health-care status quo — in the sense of endless bureaucracy, lack of transparency and skyrocketing costs — is something we can all get behind, with or without the help of Niccolo Machiavelli. But in the end, we’re not sure that a 123-page PowerPoint presentation is a step in the right direction.

Image source: athenahealth presentation

Don’t forget to vote for the worst footnote of 2011! 

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Over on  footnotedPro, we’re preparing for the pre-Christmas Friday night dump. We’re expecting some interesting disclosures late Friday afternoon. For more information or to inquire about a trial subscription, email us atpro@footnoted.com. 

But here at footnoted, we’re manning the filings because despite all the Black Friday hoopla, and despite the fact that markets are closing early today, it’s a regular day in the land of Edgar. Which, as regular readers know, means that we can expect an extended session of the Friday Night Dump (hence, the extra large image).

On a typical Friday, companies dump their juiciest stuff in the 90 minutes between the time markets close at 4 pm and 5:30 pm when the SEC stops accepting most filings for the day. But since markets are closing at 1 pm today, the dump is open an extra three hours! Woo-hoo!

So far, the stream of filings has been pretty slow today. But we’re going to take a wild guess that the pace will pick up pretty dramatically shortly after 1 pm today.

As something of a professional shopper (perhaps haggler is a better word), I won’t be going near a store today. Like New Year’s Eve, there’s simply too many amateurs out there. Besides trolling the Friday night dump will undoubtedly be a lot more entertaining. Of course, we’ll be posting our most actionable finds over on footnotedPro. And, as we usually do on Friday nights, we’ll post some of the more entertaining finds on Twitter. Happy hunting!

Image source: St. Louis County, Minnesota

]]> http://www.footnoted.com/on-the-lighter-side/extra-hours-at-the-friday-night-dump/feed/ 0 http://www.footnoted.com/pr-spin/occupy-wall-street-gets-cme-groups-attention/ http://www.footnoted.com/pr-spin/occupy-wall-street-gets-cme-groups-attention/#comments Thu, 10 Nov 2011 16:01:20 +0000 Theo Francis http://www.footnoted.com/?p=6500

We’ve observed before that the lawyers drafting Securities and Exchange Commission filings can be a little slow to adopt the latest trends, or adapt to the latest cultural developments — see our January post on Wikileaks in the filings, for example, or Michelle’s look at “double-dip” fears in September last year. So when something starts cropping up in the filings, you know it has truly arrived, at least on some level.

And so it is with Occupy Wall Street, the quirky demonstration against corporate misdeeds, greed and inequality that has spawned parallel protests and spoofs across the country, as well as a bunch of smart, and not-so-smart, signs. (The funniest moment so far, as brought to us by the Canadian Broadcasting Corporation: Occupy Whitehorse has become a “virtual occupation” with the onset of winter — propane doesn’t come cheap, after all.)

As far as we can tell, Occupy Wall Street made its SEC-filing debut yesterday, at least by name, in two separate filings. The first, in an 8-K from Strategic Hotels & Resorts (BEE) — a $943-million market-cap real-estate investment trust that concentrates on luxury hotels — landed on the SEC’s virtual desk a few minutes before noon. More on them in a moment.

The second instance came not two hours later, when CME Group (CME) filed its 10-Q. CME Group, of course, runs the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange. So it’s not surprising that it would take a dim view of the protests in New York’s financial district and see itself as a potential target of any nefarious foes of the financial system.

In disclosing a new risk factor for investors to consider, the company warns that “Our role in the global marketplace may place us at greater risk for a cyber attack and other cyber security risks.” It continues:

“In connection with the continued economic uncertainty, groups such as Occupy Wall Street and Anonymous, have targeted the financial services industry as part of their protest against the perceived lax regulation of the financial sector and economic inequality.”

The filing then goes on to explain how Anonymous – the online organization perhaps best known for retaliating against businesses that cut off financial and other support for Wikileaks – “called on its supporters to launch a ‘distributed denial of service’ attack to overwhelm website traffic on NYSE Euronext’s external Web site,” succeeding in causing a “brief outage.” The disclosure concludes,

“While we have no evidence at this time that we are a specific target of a cyber attack, our role in the global marketplace places us at greater risk.”

We’re not sure if CME really means to lump Occupy Wall Street together with Anonymous so indiscriminately, or if it’s a kind of rhetorical sleight of hand. For our part, we haven’t heard of any Occupy Wall Street-linked cyber-attacks — beyond suggestions that Anonymous members supporting the movement might try to hack the New York Stock Exchange — and to our eye the two groups seem pretty different, except perhaps for a penchant for pseudo-revolutionary sloganeering and a generally anti-corporatist attitude.

Strategic Hotels seems to have had a more practical and indirect reason for addressing Occupy Wall Street, and did so in response to an analyst’s question. In an accompanying transcript of the company’s quarterly results, Enrique Torres, an analyst with Green Street Advisors, asks:

“Laurence, if I look at the headlines, I see a lot of corporations having now to balance between some job cuts and then their budgets for rewards spending. In addition, you also see the Occupy Wall Street headlines. Combining these two elements, what do you think the perceived risk is of a revisit or return of the AIG effect on corporate luxury spending?”

You’ll recall that American International Group  (AIG) drew buckets of scorn from lawmakers after feting a hundred advisers at a luxury resort in California not long after securing a federal bailout. The backlash led other companies to rein in their own travel and entertainment efforts — at least for a little while; it looks like even AIG is back at it, according to Bloomberg News.  Strategic Hotels’ chief executive, Laurence Geller, says he’s heard “no noise about it, no rumblings” either “politically” or “at the corporate level.” Companies are being a little more careful about appearances, but Geller suggests it’s not a problem:

“It’s got to do with prudence, given the headlines. So instead of a divisional president making his decision, it may need a signature from a group CFO or group COO, for example, but that has had no negative impact on it at all.”

In any case, the two filings mark a milestone of sorts, both for Occupy Wall Street and for the SEC.

Image source: Tony the Misfit via Flickr

Data source: Morningstar Document Research

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Some warnings aren’t so innocuous. See more of what’s in the filings with footnotedPro, where we highlight unusual opportunities and potential problems well in advance of the market. For more information or to inquire about a trial subscription, email us at pro@footnoted.com.

But there’s actually an after-hours party at the Friday Night Dump. Think of it as filings that show up so late to the party that they end up dragging into work the next morning with a hangover. At least, that’s the image that came to mind when we came across the 8-K that LinkedIn Corp. (LNKD) filed so late last Friday that while the SEC officially “accepted” it on 10/28/11 at 6:22 p.m., the actual “filing date” shows up as Monday, 10/31/11.

So was it something horribly scandalous? Not really. Along with an 8-K, LinkedIn filed an exhibit – “Sixth Amendment to Lease.” That sounds pretty harmless, but maybe the company is trying to fly under the radar so that we don’t learn about its plan to achieve world domination, or – at least – control a growing chunk of real estate in Googleburg (also known as Mountain View, California).

LinkedIn’s headquarters has been “the” place to be lately. Given the company’s hiring boom, it was the perfect place for President Obama to visit at the end of September to talk about his proposed jobs bill. And just a couple of weeks ago, Pulitzer Prize-winning journalist, Thomas Friedman, showed up to talk for the LinkedIn Speaker series.

Thanks to the first five leases, LinkedIn already occupied around 145,000 square feet in three buildings on Stierlin Court. It also subleased nearly 45,000 square feet of additional space in the same complex from a Silicon Valley neighbor, Microsemi Corp. (MSCC). While Microsemi moved its primary operations to Aliso Viejo this past summer, it still has some employees toiling away in Building 2051.

We noted that LinkedIn’s prior lease, the Fifth Amendment to Lease, isn’t that old; it was signed Dec. 17, 2010. But a few months later, on May 18, 2011, LinkedIn went public. Going public requires whole new departments to issue and track stock options, not to mention write the 10Ks, 10Qs and other SEC filings that we spend so much time reading.

Needing more space for new employees, LinkedIn went back to its landlord and signed a lease for more than 158,000 square feet in two buildings on Stierlin Court – 92,256 square feet in the building where Microsemi is, although it’s currently vacating the space “in phases”, and another 66,100 square feet in yet another building at 2061 Stierlin Court. All told, that’s about 303,200 square feet of office space.

But that’s not enough! The landlord agreed to build a brand new building for LinkedIn that will have “approximately 70,000 rentable square feet of space” at 2019 Stierlin Court. LinkedIn also extended the term of the lease from its prior 5-year duration to a new 10-year term that will start after the new building is open for business.

It’s a good thing that LinkedIn’s market cap has grown to an impressive $8.5 billion, because the company is going to need deep pockets to pay the rent. The minimum monthly rent for the current and expanded space will be almost $803,500 per month – a number that’s scheduled to grow to more than $1.173 million per month in 2023. And not surprisingly, the rent for the new building is about a dollar per square foot higher, obligating LinkedIn to pay $252,000 per month once the building is ready, increasing over the next decade to roughly $343,500 per month.

With all that space, we imagine that the company will dedicate one conference room just for signing its executives’ stock options, and maybe the one across the hall for issuing stock awards.

Image source: toms baugis via flickr

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While the filing itself had some seemingly routine raises — bumping CEO Michael Klayko’s salary up to $800,000 from the $775,000 he had been making, for example, because an outside compensation consultant thought it made sense after looking at what competing companies were paying — there was something else that caught our eye: a new incentive plan called the “Rev it Up” plan. We immediately thought of some theme music — Elvis Costello’s “Pump it Up” came to mind, since the words could very easily be changed. (There’s also the Vixen song that wouldn’t require any modification). And we wondered, did the comp consultant come up with the name and, if so, how much were they paid to do so?

Here’s a snip describing the plan from the filing:

Under the terms of the Rev It Up Plan, certain officers and each of Messrs. Fairfax and Wall would be eligible to earn a target cash payout equal to 25% of their respective annual base salary based upon the achievement of certain minimum revenue and non-GAAP operating performance targets. The actual payout is subject to upward or downward adjustment depending on the Company’s actual performance compared to the performance targets. The performance targets mirror the Company’s Senior Leadership Plan for fiscal year 2012 for these participants, which are as follows: revenue (weighted at 60%); non-GAAP operating income (weighted at 30%); and individual performance based on individual or departmental objectives (weighted at 10%).

Since the actual plan wasn’t filed, all we have is this brief description in the 8-K. More details will undoubtedly be available in Brocade’s proxy filing, but that’s not going to be filed until late February.

Of all the crazy names for ways we’ve come across to pay people in filings — and trust me, in 8+ years of reading SEC filings as closely as we have, there have been a lot — this one definitely ranks among the goofiest. As we poked around the web a bit, we were surprised to find that the top result when we entered the phrase “Rev It Up” was this site — something called “Rev it Up. Full Throttle for God”.

Which made us wonder if the compensation consultant who came up with the name did a quick Google search before suggesting it to Brocade’s board.

Image source: eBay

“Operating safely offshore is like holding a snake by its head. It’s a task that can’t be turned loose not for a microsecond or an accident will strike without pity.”

That may not be the most eloquent way to say that operating offshore is often dangerous and full of uncertainties. But it’s certainly memorable.

So we decided to look through Tidewater’s previous filings to find out just how often Tidewater embraces the snake, so to speak. The answer? A lot, especially over the past 1 1/2 years since the Deepwater Horizon accident. Just to be clear, Tidewater’s only role in that accident was when a Tidewater crew were among the first to rescue people stranded on the platform in the Gulf of Mexico.

Indeed, in this presentation that Tidewater Chairman and CEO Dean Taylor did last year, he joked about the snake slide at a conference sponsored by Barclay’s.

This picture we have of a snake is sort of indicative of the way we describe our safety challenge in operating offshore. It’s a picture that we feel like works very well across cultures. We have employees from about 91 different countries that work in our Company amongst our 8,000 employees. But amongst our 91 country employee base, this picture, we tell everyone that operating safely offshore is like holding the head of a snake. That is, it’s something you have to do all the time. You wake up in the morning, you’re holding this snake. You go to lunch, eat lunch, you’re holding the snake. You go back to work in the afternoon, you’re holding the snake. Go to dinner, you’re holding the snake. Go to bed that night and you sleep with the snake. The minute you turn that snake lose, it bites you. And you don’t have to turn it lose but a second. You turn it lose one second, safety, lack of safe operations will bite you.

By our count, Tidewater has used the snake anecdote 11 times since the accident occurred on April 22, 2010. It first appeared back in comments made by Taylor at a Bank of America (BAC) conference in 2005 when he said, “But like I tell our troops every day, having a safe culture is sort of like holding a snake. You’ve got this snake by the head and the minute you turn it loose it bites you.”

Personally, we prefer to talk about the monkey on our back, especially when the filings are coming in fast and furious on a Friday night. But the snake anecdote seems to be working for Tidewater.

Image source: Tidewater

And really, what better company to dope-slap for the practice than Wells Fargo (WFC)?

The big bank was reprimanded in a letter from the SEC staff on May 11 — but just released last week — for issuing risk-factor disclosures “too vague to be meaningful to investors.” The examples offered by the staff:

“Our financial results and condition may be adversely affected by difficult and business economic conditions… Financial and credit markets may experience a disruption… Higher charge-offs and worsening credit conditions could require us to increase our allowance … Our ability to grow revenue and earnings will suffer if we are unable to sell more products to customers.”

To all of which, no doubt, even the least sophisticated bank investor would probably say, “Duh.” Why not add that the Wachovia acquisition could hurt Wells Fargo if it doesn’t go as planned? Or that interest-rate changes could hurt interest income? Or that the company’s risk-management processes might not successfully manage risk? Or that bank customers might withdraw their money and put it to work elsewhere?

Oh, wait. They did. Really. Here’s how that last one was phrased:

“Our bank customers could take their money out of the bank and put it in alternative investments, causing us to lose a lower cost source of funding.”

Do tell.

Of course, if you’ve spent any time looking at SEC filings, or even just reading this blog, you know filings are often models of opacity and circumlocution. For all their bland vagueness, this kind of inanity is pretty much par for the course.

No wonder, then, that Wells Fargo actually tries to defend itself in its response to the SEC:

“We believe that our risk factors disclosure … appropriately described the most significant risk factors facing the Company as required…”

Still, the bank was good enough to revise its disclosures anyway (the changes show up in Exhibit A to Wells Fargo’s initial May 25, 2011, response to the SEC — scroll about two-thirds of the way down).

There are indeed some substantive revisions, though some of the changes strike us as little more than reshuffling some words. One heading, for example, was changed from “Risks relating to current economic and market conditions” to “Risks relating to economic and market conditions and regulatory activity.” That should make all the difference, no?

The risk-factor business actually made up a small part of the three-month exchange of correspondence — all told, the bank’s side of the correspondence alone worked out to more than 30,000 words, including the revised disclosures — and the SEC staff got into some considerably more substantive issues, including fluctuations in net gains from trading, first- and second-lien issues in its residential housing portfolios and a host of related issues.

But when it comes to individual investors, risk factors matter. They should be informative.

And here’s the other thing about risk factors: They’re not supposed to be generic. Not that you would know this by just looking at filings, of course. As we’ve footnoted before, it’s not uncommon for companies to warn about acts of God, social media, even spam – in other words, everything short of the risk that the continued expansion of the universe will leave it an empty, icy void bereft of sentient beings with a demand for widgets.

Here’s guidance from the Securities and Exchange Commission more than a decade ago, under the now-all-but-forgotten plain-English initiative (emphasis and link are ours):

“Amended Item 503(c) of Regulation S-K specifies that issuers should not present risks that could apply to any issuer or any offering. Further, the subheadings must adequately describe the risk that follows. Item 503(c) seems to be the least understood of the plain English requirements. We have provided sample risk factor disclosures and subheadings to help preparers comply with Rule 421(d) of Regulation C and Item 503(c) of Regulation S-K.”

The examples in that document are marvels of clarity and directness, at least by the standards of the logorrhea we generally encounter in the filings.

Too bad Wells Fargo, like so many other companies, never took the message to heart.

Image source: hotblack via morguefile.com

It was just a single page with a few key concepts. Indeed, the legal warning at the bottom of the slide was about the same length as the words on the page. Not only was it sparse in words. It was also sparse in design, lacking any fancy charts or graphics — the type that keep graphic artists across Manhattan steadily employed grinding out boring Powerpoint graphics for well-heeled corporate clients.

A quick search showed that JP Morgan was one of dozens of companies to present during the two-day event, so we decided to take a quick look at some of the other presentations to see whether other companies in the financial services space were also following this new minimalistic approach. The answer? Not exactly.

Bank of New York Mellon (BNY)’s presentation (pdf), done by Chairman and CEO Gerald Hassell went on for 30 pages. Nasdaq OMX Group’s (NDAQ) presentation (pdf) was almost as long. Wells Fargo (WFC) even had an appendix attached to its 28-page presentation (pdf). And Bank of America’s (BAC) presentation (pdf) was 29 pages. Of course, that included two pages of highly legalistic warnings about “forward looking statements” — a jobs program for junior associates — and a few nifty graphics, so the actual content was really closer to 25 pages.

If we didn’t know any better, we’d assume that the conference rules specified that presentations couldn’t exceed 30 pages, given that pretty much every company we looked at seemed to come pretty close to that mark. And while we didn’t look at every single presentation — there had to be at least 50 over the two-day conference — we couldn’t find a single other company that managed to boil things down to just one page.

The French theologian François Fénelon, which according to Wikipedia was one of the main advocates of quietism, once said, “The more you say, the less people remember.” We wonder if the folks at Chase were thinking about Fénelon when they put their Barclay’s presentation together. And, if so, perhaps it can catch on at other companies too. Nobody wants to spend a Tuesday morning — or really any other morning — being force-fed a diet of 30-page Powerpoints.

Image source: Deeper Living

Risk avoidance is critical in the current market environment. Over on FootnotedPro, we shine a spotlight on potential problems well in advance of the market. For more information or to inquire about a trial subscription, contact Todd Serpico.

But when we find a subtle change to a seemingly routine statement, there’s usually an interesting back-story there. Take Apple (AAPL) cutting the word community from its principles of business conduct last year. Or, more seriously, Blockbuster using the word bankruptcy for the first time.

We thought about some of those oh-so subtle changes as we were reading the proxy that MF Global (MF) filed yesterday. As we skimmed the section on Chairman and CEO Jon Corzine, we thought it was interesting that the company added this sentence about Corzine’s experience at Goldman Sachs (GS):

Mr. Corzine also initiated and led the firm’s successful decision to go public in 1998-1999, a decision which secured its permanency of capital and facilitated its expansion of global activities.

Now, maybe this is just a subtle change: making Corzine out to be the guiding light on Goldman’s decision to go public and move away from a partnership. But as we say regularly, there are no accidents in SEC filings. Everything is there for a reason. And, given this story in the NY Post earlier this week, which said that Corzine was being tapped to help President Obama on Wall Street and might be rewarded with a high-ranking job if Obama were reelected, it’s hard to chalk up this subtle addition to an over-anxious junior attorney looking to increase his (or her) billable hours. As Theo footnoted back in March, Corzine’s latest employment contract with MF even has a generous escape clause if he winds up back in public office.

Of course, those looking for changes to Corzine’s bio in real time, would be better served to check Wikipedia. Judging by the history, it’s not quite an edit war, but it moves a lot more quickly than the typical SEC filing.

Image source: Corzine campaign website

Want to know which companies plan to visit the “Friday night dump” tonight? Our FootnotedPro subscribers get regular updates on Friday afternoon filing antics. For more information or to inquire about a trial subscription, qualified institutional investors can contact todd.serpico@morningstar.com.

Best of lists are normally the type of thing that you read in December or early January, when the news cycle is slow. That’s when we normally run our Worst Footnote of the Year contest.

But some things are on a different schedule, like proxies, for example. And now that practically all of the 2011 proxies are in, we decided to come out with another list: the
Top 10 Perks (pdf) of the 2011 Proxy Season.

While most of these will be familiar to regular readers of footnoted, since almost all of them have appeared on the site in one fashion or another, we decided that it made sense to gather them into one easy-to-digest list.

Among those that made the cut were Amazon (AMZN) CEO Jeff Bezos’ especially good deal on $1.6 million in security and the $6 million that footnoted frequent flyer Cheseapeake Energy (CHK) spent on tickets to Oklahoma City Thunder games.

Perhaps one day, there won’t be a need for lists like this. Or maybe one day, we’ll only be able to find five really crazy things. But judging from the 2011 proxy season, it doesn’t look as if that day is anytime soon.