One of the key areas of disclosure focus for the Securities and Exchange Commission (SEC) following the emergence of the COVID-19 pandemic was the impact that the pandemic might have on the presentation of non-GAAP financial measures for public companies.  For example, when providing  disclosure guidance for how registrants should approach COVID-19-related considerations in CF Disclosure Guidance: Topic No. 9, issued by the Division of Corporation Finance on March 25, 2020 (CF Disclosure Topic 9), the Staff stated that, with respect to the disclosure of non-GAAP financial measures in the pandemic environment, “where a GAAP financial measure is not available at the time of the earnings release because the measure may be impacted by COVID-19-related adjustments,” the SEC “would not object to companies reconciling a non-GAAP financial measure to preliminary GAAP results that either include provisional amount(s) based on a reasonable estimate, or a range of reasonably estimable GAAP results.”

Nevertheless, it has been our experience (consistent with the survey results summarized below) that most registrants did not include COVID-19-related adjustments in connection with the presentation of non-GAAP financial measures in the first quarter.  This article summarizes our survey results and analyzes factors that may have impacted the determination of most registrants not to include any COVID-19-related adjustments in connection with their presentation of non-GAAP financial measures in first-quarter disclosure materials.

As part of our survey, we reviewed 55 public companies that presented Adjusted EBITDA in their earnings release filed in the period from April 1, 2020, to May 14, 2020.  We chose to focus on Adjusted EBITDA in this survey (recognizing that such measure is utilized more frequently in some industries than others) because such measure is commonly utilized by public companies to measure their operational performance and frequently includes adjustments for items that are believed not to reflect the ongoing operational performance of the company.  While we limited our survey to registrants that presented Adjusted EBITDA, we believe that the survey results have relevance for companies that present other types of non-GAAP performance measures which are adjusted for special items or items outside of the ordinary course of business.


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In case you missed it, we discussed virtual annual meetings at our recent Public Company Town Hall Webinar: Securities Law Guidance for First Quarter Reporting Season. Access the recording here.

Among the numerous considerations related to upcoming annual stockholder meetings being hosted solely using remote (virtual) communication as a result of the novel coronavirus (COVID-19) pandemic, one question that several clients and colleagues have raised is whether management must host a “live” question and answer (Q&A) session on the webcast or whether stockholders must submit their questions in advance (i.e., no “real-time” submission of questions at the meeting).

Based on our survey of company practices in the Fortune 100 (as discussed further below), most companies in our survey are allowing shareholders to ask questions during the virtual annual meeting, with 58% permitting stockholders to submit questions only during the virtual annual meeting and another 32% also permitting stockholders to submit questions in advance of the virtual annual meeting.
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As calendar-year public companies are beginning to prepare their Quarterly Report on Form 10-Q (Form 10-Q) for their first quarter, the novel coronavirus (COVID-19) pandemic and the related societal and economic impact continues to evolve. One important item that companies will need to consider as part of their Form 10-Q preparation is whether any new (or expanded) risk factors relating to COVID-19 should be included in their Form 10-Q.

Form 10-Q requires companies to disclose any material changes to the risk factors that were included in their Annual Report on Form 10-K (Form 10-K). Absent merger and acquisition activity or other material developments, it is not unusual for companies to determine no material changes have occurred since their Form 10-K was filed (and as a result no new risk factor disclosure is required).

However, given the significant impact of COVID-19 on businesses so far this year, we expect most companies will update their existing risk factor disclosure. Investors and other stakeholders are paying particular attention to COVID-19 disclosures, and the risks that COVID-19 poses to a company may not always be obvious to such stakeholders absent robust disclosure.


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In a previous blog post, we discussed certain high-level considerations for first-quarter 2020 earnings releases and guidance in the context of the macroeconomic uncertainty brought about by the novel coronavirus (COVID-19) pandemic.  We indicated our expectation that a significant number of registrants would elect to withdraw guidance in light of this uncertainty.

To get a more comprehensive view of how registrants have approached financial guidance, we analyzed disclosures in earnings releases by off-calendar year-end companies furnished with the Securities and Exchange Commission (SEC) on or after March 16, 2020.  As noted in greater detail below, a majority of companies issuing earnings releases during this period have withdrawn or suspended guidance.  This post presents the results of our analysis.


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For public companies and for market participants generally, the impacts of the coronavirus (COVID-19) pandemic have been unpredictable, swift, and universal.  In a groundbreaking joint statement entitled “The Importance of Disclosure – For Investors, Markets and Our Fight Against COVID-19,” issued on April 8, Jay Clayton, the Chairman of the U.S. Securities and Exchange Commission (SEC), and William Hinman, Director of the SEC’s Division of Corporation Finance, tackled the question of how public companies should approve their disclosures in the coming weeks when they are issuing earnings releases and conducting analyst and investor calls.

In summary, Chair Clayton and Director Hinton request companies to provide as much information as is practicable regarding their current status and plans for addressing the effects of COVID-19.


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On March 23, the Division of Enforcement of the Securities and Exchange Commission (SEC) issued a Statement warning against insider trading during the ongoing COVID-19 pandemic.  In particular, the SEC cautioned that insiders are “regularly learning” new material non-public information (MNPI) that may “hold an even greater value than under normal circumstances.”  The SEC also noted that unique circumstances mean more people may have access to MNPI than may typically be the case.  This is particularly true for companies that delay earnings releases and SEC filings due to the pandemic.

Recognizing the heightened risk of illegal securities trading as a result of these and other factors, the SEC urged publicly traded companies to be mindful of their established controls and policies to protect against the improper dissemination and use of MNPI.

Proactive Steps for Public Companies

In light of the SEC’s Statement and the unique circumstances that companies are facing during the pandemic, publicly traded companies should take affirmative steps to mitigate insider trading risks.


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Please join the Bass, Berry & Sims Corporate & Securities Practice Group for a series of complimentary webinars exploring various public company-related securities law issues. These programs are an extension of our Securities Law Exchange Blog and feature timely and practical guidance to SEC disclosure counsel on key topics of interest.

The COVID-19 global pandemic

The Securities Exchange Commission (SEC) recently issued interpretive guidance, effective February 25, 2020, regarding the disclosure of key performance indicators and metrics (KPIs) in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

While this guidance may not have been an area of significant focus for many companies in the recent periodic reporting cycle given that the effective date of this guidance was after the time that many calendar-year public companies filed their Annual Reports on Form 10-K, this guidance will need to be considered in connection with the preparation of upcoming Quarterly Reports on Form 10-Q.

Overview of the Staff’s Recent Guidance Regarding KPIs in MD&As

The MD&A is generally required to contain discussion of a company’s financial condition, changes in financial condition, and results of operations. Also, according to Item 303(a) of Regulation S-K, the MD&A is also required to contain discussion of information not specifically referenced in the item that the company believes is necessary to an understanding of its financial condition, changes in financial condition, and results of operations. Instruction 1 to Item 303(a) also provides that the MD&A should include a discussion and analysis of other statistical data that in the company’s judgment enhances a reader’s understanding of MD&A.


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As companies continue to evaluate the impact of the novel coronavirus (COVID-19) pandemic on their business, public companies will be facing challenging disclosure considerations in connection with their upcoming first-quarter earnings calls and earnings releases.

As a backdrop, a significant number of public companies, concentrated in industries which have felt the strongest immediate impact of the crisis (such as companies whose business is tied to the travel industry), have either updated (e.g., Mastercard) or withdrawn (e.g., Hyatt Hotels, MGM Resorts, Twitter) their 2020 guidance due to the economic fallout and the uncertainty surrounding this pandemic.

Whether or not a public company has updated or withdrawn its 2020 guidance based on COVID-19 considerations, public companies will face challenging disclosure decisions as they approach their first-quarter (for calendar year-end companies) earnings releases and earnings calls.  A key reference point in this regard is CF Disclosure Guidance, Topic No. 9, issued by the Division of Corporation Finance on March 25, which highlights the perspective of the Staff regarding various disclosure considerations related to the COVID-19 pandemic.


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The COVID-19 pandemic has created a disclosure nightmare for public companies.  The Securities and Exchange Commission (SEC) has recognized this challenge and, to its credit, has provided relief to public companies by, among other things, extending the deadline for companies to file certain disclosure reports.  Nonetheless, companies are faced with the challenge of crafting disclosures regarding the risks presented by the coronavirus crisis to their business and operations and their plans for addressing those risks.  This challenge is made all the more difficult by the looming presence of securities class action firms, which already have sued companies over coronavirus-related disclosures.  In addition, the SEC in the recent past has charged companies for allegedly insufficient disclosures made in reaction to crisis situations.

The COVID-19 pandemic is wreaking havoc on the world economically.  Businesses are being harmed in a myriad of ways, from losing customers, to supply chain disruptions, to employee layoffs.  Many businesses and industries will change their operations in the short term and possibly permanently, while others will cease to exist.  Public companies have a unique responsibility under federal securities laws to disclose information to the public, including assessments and plans relating to their business and operations and related risks.  Such assessments and disclosures become thorny in the face of volatile markets, unprecedented events, and colossal business uncertainty.


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