Beyond the press release…

January 20, 2004

Tempting as it may sometimes be to rely on a press release, these releases — whether they’re talking about earnings or management changes — rarely seem to tell the whole story. Which is why it’s important to go to the SEC filings. Max & Erma’s (MAXE) , an Ohio-based casual restaurant chain, issued a tear-filled press release back in October on the departure of its chief operating officer, Mark Emerson, 56, who had served in that role since 1980. Emerson, who up until December, was a director (one whose term didn’t expire until 2005), is also the third largest holder of company stock. But the 16-page severance agreement/release included in the company’s 10-K filed on Friday, seems to hint that there’s something more to this story. Under the agreement, Emerson will be paid $180,000 this year for a maximum of 500 hours of consulting work, and another $25,000 for various other things. He also has to give the company a “first right of refusal” if he decides to sell more than 10,000 shares in any 30-day period. And then there’s the release where both sides agree not to sue or disparage the other. While some of that just might be legal boiler-plate, it certainly hints of something else. Could it be that despite higher revenues, earnings have been declining? For the fourth quarter, the company reported a 28 cent loss, compared with a 28 cent profit for the fourth quarter of 2002. And, in the second and third quarters, profits were down 25% and 30% respectively.

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