When Reebok International Ltd., International Flavors & Fragrances Inc. (IFF), and Technitrol announced their earnings in the second quarter, they characteristically declined to publish a full income statement or balance sheet at the same time. The practice is unusual for corporations, and is a subject of some debate in the investment world.
Take New Yorkbased IFF, for example. The chemicals manufacturer's CFO, Douglas Wetmore, explained in a recent Wall Street Journal report that IFF has never published a detailed quarterly statement prior to filing the requisite 10-Q, because the bottom line is the main focus of analysts.
Not so, says John Carey, manager of the $6.6 billion Pioneer Fund. Carey has been analyzing stocks for more than 20 years, and he likes to look at the full balance sheet, including changes in inventory and receivables relative to changes in sales volume. "I'd certainly like to see the details as soon as possible, although I understand that companies have some leeway about filing that information."
Companies do, in fact, have 45 days to file their 10-Qs with the SEC once the quarter closes. But many companies publish complete financial statements in tandem with quarterly earnings reports to satisfy investor interest.
"Earnings are just a small, quantifiable element of a much larger picture," explains Matt Ankrum, assistant portfolio manager of the $1.5 billion Janus Enterprise Fund. "They're just one piece of the puzzle we pay attention to. And they're easy to manipulate."
Technitrol's David Stakun, investor relations officer for the Philadelphia-based electronic and precision-engineered parts manufacturer, bristles at that implication. "We file our 10- Q just a couple of weeks after we release our earnings. Otherwise, we highlight the items that our shareholders think are most important, and we've never had a complaint. If anyone did complain, we'd certainly consider a change."
Interesting, then, that IFF, for one, is tinkering with its investor-relations practices of late. "I called the company a few weeks ago to get some information, and I was surprised when the secretary told me they were holding a conference call for analysts," says Standard & Poor's Richard O'Reilly, a chemicals analyst who has been tracking IFF for more than a decade. "They've never done that before. Companies simply settle into a format and stick with it. It's just habit."