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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situituations.

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New Item 12 of Form 8-K - A Timing Trap for the Unwary

March 2003

A new SEC rule makes it advisable for all public companies to hold their quarterly conference calls no more than 48 hours after their quarterly press releases and to file the press release by means of a Form 8-K before the conference call occurs. This sequence will require more attention to timing details than most issuers have been required to address in the past. Most issuers hold conference calls after their quarterly press releases, but now will probably need to allow enough time to assure prior filing of the press release with the SEC on Form 8-K before the conference call.

In addition, for Nasdaq-listed issuers that provide earnings or other material financial "guidance," a recent Nasdaq Bulletin gives issuers the choice of including such guidance in the press release or providing it to Nasdaq in advance of the conference call, such as by means of furnishing the conference call "script" to Nasdaq MarketWatch.

New Item 12 of Form 8-K

As most are now aware, on March 28, 2003, new Item 12 of Form 8-K, "Results of Operations and Financial Condition," becomes effective. New Item 12 requires that press releases containing material non-public financial information regarding completed quarterly or annual periods, such as the typical quarterly earnings press release, be "furnished" to the SEC under cover of Form 8-K within five business days of the date of the press release. However, if the Company's related quarterly conference call or webcast (even if the conference call or webcast is Regulation FD compliant) is expected to convey additional material non-public financial information, then the conference call must occur (i) within 48 hours following the issuance of the press release and (ii) after the new Item 12 Form 8-K has been "furnished" to the SEC.[fn1] [fn2] If either the conference call does not occur within the 48-hour period or the new Item 12 Form 8-K is not "furnished" to the SEC prior to the conference call, then a transcript, outline or summary of the additional material data to be conveyed during the conference call must also be furnished to the SEC under cover of an Item 12 Form 8-K within five business days of the conference call. For more detailed information regarding new Item 12 of Form 8-K and the requirements of Regulation G, please see our update SEC Adopts Final Rules for the Use of Non-GAAP Financial Measures and the Furnishing of Earnings Releases on Form 8-K (February 2003).

Recent Nasdaq Bulletin on Pre-Notification to Nasdaq MarketWatch

Nasdaq-listed companies should also be mindful of the existing Nasdaq rules (Rules 4310(c)(16) and 4320(e)(14)) that require pre-notification to Nasdaq's MarketWatch Department of material news announcements, including earnings press releases. Moreover, in a recent Bulletin dated December 9, 2002 (available at www.nasdaq.com/about/RegFD_Bulletin_12-9-02.pdf), Nasdaq stated that MarketWatch should also be provided pre-notification of specific material information, including eight events that are presumed to have a material impact on the price of a company's securities, including future operating result "guidance." Thus, a company that typically puts historical information in its press release and discusses future "guidance" or other material information only during its earnings conference call would appear, according to the Nasdaq Bulletin, to be under a duty to provide a copy or summary of that other material information to Nasdaq MarketWatch prior to the conference call or webcast. The obvious alternative to providing the "guidance" to Nasdaq is to include the other material information, including "guidance," in the Company's earnings press release.

Conclusion

If a public company intends to discuss material information in its conference call that is not in the related press release and wishes to avoid filing a transcript, outline or summary of the conference call with the SEC on Form 8-K, the conference call must be held within 48 hours of the press release as well as after the Form 8-K, containing the press release, has been delivered to the SEC. This effectively shortens from five business days to 48 hours the time period in which the Item 12 Form 8-K must be filed and requires issuers to coordinate the release of quarterly earnings announcements very carefully so that the Form 8-K is filed with the SEC before the conference call.

In addition to pre-notification of earnings press releases, Nasdaq requires that any "guidance" or other material information that Nasdaq-listed companies intend to disseminate during conference calls or webcasts be presented to MarketWatch prior to the conference call or webcast. Issuers that furnish financial "guidance" may avoid this requirement if the "guidance" is included in the quarterly press release.

Footnotes

1: Note that this will require filing the new Item 12 Form 8-K within 48 hours following the press release, rather than waiting the full permitted five business days. Companies that schedule their press release and earnings call within hours of each other need to be particularly diligent with respect to finalizing the Form 8-K and their press release well ahead of time thus allowing enough time to "EDGARize" the Form 8-K so that the new Item 12 Form 8-K can be "furnished" to the SEC before the conference call.

2: Also note that certain other requirements must also be satisfied, including that the financial and other statistical information expected to be conveyed in the conference call or webcast must be provided concurrently on the company's website, together with any reconciling information with respect to any non-GAAP financial measures required under new Regulation G.