Tag Archives: SEC

Qatar and SEC Comment Letters on State Sponsors of Terrorism

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Recently several Gulf nations, including Saudi Arabia, have severed connections with Qatar; they claim the country is destabilizing the region with its support for extremist groups. Though the United States has interests in the country of Qatar, President Trump has expressed his support for the boycotting of Qatar by the Gulf Nations, claiming “…perhaps this will be the beginning of the end to the horror of terrorism!”

If President Trump followed Saudi Arabia’s lead and pushed to label Qatar as a state sponsor of terrorism, what would this mean for public companies? What industries would most be affected?

Currently, the Department of State has labeled three different countries as state sponsors of terrorism: Sudan, Syria, and Iran. These countries are subject to U.S. economic sanctions and export controls.

The Securities and Exchange Commission ensures that public companies are depicting the nature and extent of any past, current, and anticipated contacts with these countries, whether through subsidiaries, affiliates, distributor, partners, joint venture partners or other direct or indirect arrangements in their SEC filings.

MyLogIQ studied trends in SEC Comment Letters relating states labeled as sponsors of terrorism and found the following data:

The top 10 industries who received SEC Comment Letters relating to countries designated as sponsors of terrorism and the number of companies for each industry are:

MyLogIQ also studied SEC filings for mentions of Qatar. The top 10 industries who have disclosed relationships or possible associations with Qatar are shown below.

SEC Comment Letter Disclosures:

Company: Delta Airlines Inc/DE/

SEC Comment Letter Disclosure: Please discuss the materiality of any contacts with Sudan and Syria you describe in response to the comment above, and whether the contacts constitute a material investment risk for your security holders.

Company Response: Deltas total revenues for 2014, 2015, 2016 and the first three months of 2017 were $40.4 billion, $40.7 billion, $39.6 billion, and $9.1 billion, respectively. As discussed in the response to comment 1 above, Delta did not operate flights to or from either Sudan or Syria during the referenced period nor did its subsidiaries or the companies in which Delta holds a minority investment operate in either of the two countries. The interline sales commission revenue Delta received from flights operated to or from Sudan (on carriers other than Sudanese carriers) did not exceed $3,000 per annum in any of the referenced period and did not exceed $2,000 per annum in two of the years in the referenced period. Delta had no revenue related to Syria in any of the years in the referenced period.

 

Company: Comcast Corp

SEC Comment Letter Disclosure: A press release on the NBCUniversal.com website dated January 13, 2016 states that NBCUniversal International signed a long-term deal with OSN, a pay-TV network in the Middle East and North Africa, granting OSN exclusive rights to NBCUniversal International content including the Syfy channel. The OSN.com website provides TV scheduling for its services in Sudan and Syria that include the Syfy channel and programming produced by Universal Pictures, an entity you identify on page 1 of the 10- K as included in your filmed entertainment business segment. Sudan and Syria are designated by the Department of State as state sponsors of terrorism, and are subject to U.S. economic sanctions and export controls. Please describe to us the nature and extent of any past, current, and anticipated contacts with Sudan and Syria, whether through subsidiaries, affiliates, distributors, partners, joint venture partners or other direct or indirect arrangements.

Company Response: NBCUniversal has not had any agreements and/or commercial arrangements with the governments of either Syria or Sudan during the last three fiscal years or the three months ended March 31, 2017 (the Relevant Time). NBCUniversal has had minimal contacts with Sudan and Syria during the Relevant Time as described below. We note that, although Sudan has not yet been removed from the list of state sponsors of terrorism, pursuant to a general license issued on January 17, 2017 by the U.S. Department of the Treasurys Office of Foreign Assets Control (OFAC), U.S. persons are currently generally permitted to transact with individuals and entities in Sudan. Further, Executive Order 13761, dated January 13, 2017, provides for the revocation of the sanctions provisions in prior Sudan-related Executive Orders on July 12, 2017, if the Government of Sudan sustains certain positive actions. We do not have business offices or ongoing operations located in Sudan or Syria. While our general approach is to exclude Sudan and Syria, as well as other countries subject to U.S. economic sanctions, from NBCUniversals distribution, programming, and licensing contracts, occasionally Sudan and/or Syria have been included within a larger territory covered in certain contractual arrangements in a manner consistent with OFAC regulations based on the application of guidance related to the general inventory rule and/or the informational materials exemption.

Company: Exar Corp

SEC Comment Letter Disclosure: We are aware of publicly available information indicating that you have significant business with ZTE Corporation, which is reported to have sold products into Sudan and Syria. Sudan and Syria are designated as state sponsors of terrorism by the State Department and are subject to U.S. economic sanctions and export controls. You do not include disclosure in the Form 10-K about contacts with Sudan and Syria. Please describe to us the nature and extent of any past, current and anticipated contacts with Sudan and Syria, whether through subsidiaries, original equipment manufacturers, distributors, customers or other direct or indirect arrangements.

Company Response: The Company has not entered into any agreements, arrangements or other contacts with Sudan or Syria and has no future plans to enter into any such agreements, arrangements or other contacts. Moreover, the Company does not maintain any offices or other facilities in Sudan or Syria, has no employees in either of those countries, and has no assets or liabilities associated with activities in either of those countries. The Company derives its revenue from the sale of semiconductors to distributors who then sell parts to their customers to integrate or incorporate into other products. The Companys distributors work with their customers to fulfill any orders that involve Company products. The Company receives a weekly resale report from its distributors so it can monitor its sell-through to its end customer. With respect to ZTE, which the Company considers its end customer, the Company does not directly sell any products to ZTE; all prior sales to ZTE have gone through the Companys distributors and consisted of sales of the Companys standard commodity products. In addition, the Company believes its standard terms and conditions of sale obligate its distributors and its end customers to strictly comply with United States export control laws and regulations.

 

 

For more information on our study or on how to use the Company IQ™ software to analyze your peer companies, please contact us at info@mylogiq.com or call 888-564-4910 and speak with one of our specialists. If you are quoting this study, attribution to MyLogIQ, LLC by providing a link to www.mylogiq.com and mention our service Company IQ™ “The new standard in public company research and competitive intelligence” is required.

New Trends in Disclosure. MyLogIQ teams up with EY & FERF on “Disclosure effectiveness in action: companies make great strides.”

MyLogIQ Fact Studies, , , ,

Disclosure effectiveness has been generating a lot of buzz. Forward-thinking enterprises are creating innovative approaches to the presentation of key metrics in disclosures, particularly in MD&A and Risk Factors. The world is taking notice. As you might imagine, we at MyLogIQ love a good trend. We’re a bit obsessed with disclosure data. So we teamed up with EY & FERF and supplied key data and metrics for the recently published report “Disclosure effectiveness in action: companies make great strides.” The full report can be found in our recent article, linked below. Our intelligent algorithms curated, sorted, and analyzed disclosures pulled from S&P 500 companies. Our data clearly shows new trends…

Click on the picture below to view our full article with a link to the report:
New Trends in Disclosure
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Is the SEC listening to your earnings calls?

Non-GAAP Earnings Call, , ,
conf-transcripts

You bet they do! May be they are very busy and don’t listen in live, but they surely are scanning the earnings call transcripts.

It is earnings season again. As the analysts and investors are curious to hear how companies have fared, the regulators may be listening in to see what Non-GAAP metrics companies are disclosing & talking about.
The use of Non-GAAP is not new and neither is the SEC’s comments on the use of Non-GAAP. Recently with speeches being made by SEC Commissioner Mary Jo white (Dec 2015) and other senior staffers giving their opinions, the heat seems to be picking up.

In fairness to the SEC protecting the investors interest, they ask that companies do the following “Where non-GAAP financial measures are made public orally, telephonically, by webcast, broadcast or similar means, please ensure that you include the most directly comparable GAAP financial measure as required by Item 100(a)(1) of Regulation G and provide a cross reference to the location on your website where the reconciliation for such measures can be
found’

How then do we know the SEC is listening/reading your earnings calls?
We looked at our SECAnalyzer™ SEC Comments Database for “earnings call” and “Non GAAP” and found the regulators refer to comments made during the earnings calls, and wrote the companies an SEC comment. Listed below are three companies that SEC staff have commented on.
So this earnings season, we will be analyzing the earnings releases to see what Non-GAAP companies are disclosing, never mind whether the sec comments or not.
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COVISINT CORP SEC Comment [12/23/2015] Comment Letter
4. In your Q2 2016 earnings call, management indicates that “free cash burn” for the quarter was about $5.4 million, which appears to be a discussion of non-GAAP measures. In the future, where non-GAAP financial measures are made public orally, telephonically, by webcast, broadcast or similar means, please ensure that you include the most directly comparable GAAP financial measure as required by Item 100(a)(1) of Regulation G and provide a cross reference to the location on your website where the reconciliation for such measures can be found. We refer you to Note 1 of Item 100 of Regulation G and Question 105.02 of the Non-GAAP Compliance and Disclosure Interpretations.

6. In your Q2 2016 earnings call, management states that you expect to finish the year with a net loss of between $11 and $14 million on a non-GAAP pro forma basis. However, the Guidance Summary on slide 4 of the presentation materials does not specify that your Net Income projections are on a non-GAAP basis and they are not reconciled to the comparable GAAP measure. Similarly, the Free Cash Flow projections are not reconciled to the comparable GAAP measure. In future filings and public presentations please ensure that your non-GAAP measures are clearly identified as such. In addition, ensure that you reconcile your non-GAAP projections to the most directly comparable GAAP measure or explain to us why you cannot provide that information without unreasonable effort. Please refer to Item 10(e)(1)(i) of Regulation S-K.

TRIMAS CORP SEC Comment [05/03/2016] Comment Letter
2. We note disclosure in your earnings presentation that “free cash flow approximated 87% of net income for 2015, excluding special items.” We also note your CFO stated on your earnings call that “free cash flow approximated 87% of net income.” It appears to us: the measure you refer to as “free cash flow” is adjusted for items in addition to what is commonly referred to as free cash flow; and the 87% calculation is actually based on “Income from Continuing Operations, Excluding Special Items. ” Please revise future filings to use titles or descriptions for non-GAAP financial measures that accurately reflect the amounts presented or calculated, and are not the same as, or confusingly similar to, GAAP measures. Also, to the extent you continue to present a cash conversion percentage based on non-GAAP financial measures, it appears you should also present the most directly comparable GAAP measure.

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. SEC Comment [03/18/2016] Comment Letter
1. We note that, over the past four years, you have reported approximately $9.8 billion of non – GAAP net income. During this same period, you reported GAA P net loss of approximately $330 million for a total increase from GAAP loss to non – GAAP income of over $10 billion.

In addition, you have reported taxes on $10.2 billion of non – GAAP pretax income at a rate of only 3% . During the call on February 26, 2016 between Valeant and the SEC staff, we discussed the company’s proposed change to the reconciliation between the GAAP tax provision and the non – GAAP provision. On that call, we expressed significant concern about the non – GAAP tax provision.

We learned through your March 15th earnings call that you plan to increase the tax rate used in calculating your future non – GAAP measure to between 10 and 15% in 2016. We also learned that you attributed this change to a suggestion made by the staff. At the time you publicized this change, the staff had informed you that we had concerns about whether your non – GAAP measure was potentially misleading due to the tax provision but we had not suggested any particular tax rate that would be appropriate nor that it would be appropriate to make a change only prospectively.

The measure used over at least the past four years gives the impression that you could have generated $10.2 billion in pre – tax profits during that time without paying any significant amount of tax. We find this presentation to be potentially misleading.

You should amend or supplement your earnings release to inform investors promptly that the hypothetical results suggested by this non – GAAP measure were unrealistic and show how the revised tax rates would have affected prior periods.
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MyLogIQ Fact Study

MyLogIQ Fact Studies, , , , , , , , , , , , , , , , , ,

Analysis of 10-K Filing Dates & Auditor Opinion Date

By using data retrieved from MyLogIQ, we were able to compile this analysis about filing dates for annual reports with a perspective on auditor opinion date, for all public companies. This study is based on annual reports as filed in the year 2015 for FYE in 2014. We will publish updates to this report when the annual reports for the majority of the companies FYE 2015 are filed in 2016.

Summary of Findings:
• Average number of days it takes a Large accelerator to file 10-K: 55 days
• Average number of days it takes an auditor to sign off (based on audit opinion date) for large accelerated filer: 55 days
• 16% of Large companies have their FYE outside of December, yet the average number of days to file (54) is only one day less.
• Fastest filing for FYE Dec. 31, 2015 is 27 days after FYE by filer United Rentals, Inc. (Ticker: URI) and filer Schlumberger, Ltd. (Ticker: SLB), while it was 21 days for FYE Dec 31, 2014. Which was also filed by United Rentals, Inc. (TICKER: URI).
• Within 30 Days after a Dec. 31st FYE, 7 companies filed their 10-K in 2016 vs 8 for FYE 2014.
• Auditors sometimes make mistakes and send in the auditor’s report signed before the FYE of the registrant.
• Majority of the Non-Accelerated filers don’t file their XBRL along with their 10-K (in html).

 

Overall picture of Annual report filing for all public companies:

On average it took Large Accelerated Filer companies 55 days from the fiscal year end to the audit opinion date, coinciding exactly with the average days it took Large Accelerated Filer companies to file their 10-Ks. We see this pattern continue with the other filers as well in the following table.

No. of Days Between 2014 FYE and Opinion Date
(days taken to file 10-K with the SEC)

Large Accelerated Filers

 Accelerated Filers Non-Accelerated Filers Smaller Reporting Companies
55 (55) 69 (69) 73 (75) 97 (99)

 

Only 16% of Large Accelerated Filer companies don’t have their fiscal year end date fall in December. On average, it confirms auditors need 54-55 days to review a company’s annual financials (LAF). It raises the question, how are some giants like Schlumberger, Netflix, Amazon and Facebook getting their financials audited and filed within 30 days?

Filer Status

 No. of Companies

(in %)

 Average No. Of Days It Takes to Publish 10-K

(FYE = Dec)

 No. of Companies

(in %)

 Average No. Of Days It Takes to Publish 10-K

(FYE ≠ Dec)

Large Accelerated Filers

 84% 55 16% 54

Accelerated Filers

 80% 68 20%

73
Non-Accelerated Filers 89% 78 11%

81
Smaller Reporting Companies 66% 96 34%

105

 

Detailed Analysis by Filer Status

Large Accelerated Filer:
For FYE 2014, on average it took all Large Accelerated Filer companies 55 days to publish their annual reports, regardless. Although the fiscal year end date for all of these companies vary and are spread throughout the year, 84% of them have a fiscal year end of December 31st, making it an extremely busy season for both companies and auditors. While the SEC gives Large Accelerated Filers 60 days past their fiscal year end to publish their annual reports, there are some overachievers who managed to do it in 30 days or less.

No. of Large Accelerated Filer Companies who filed within 30 days whose Fiscal Year Ends on Dec. 31, 2014 = 8
No. of Large Accelerated Filer Companies who filed within 30 days whose Fiscal Year Ends on Dec. 31, 2015 = 7

The following table shows all of the Large Accelerated Filer companies with FYE December 31st in 2014 and in 2015 who filed in half the time (30 days) of the 60-day SEC filing deadline:

Fastest Large Accelerated Filer Companies Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

 Days to File Company

Days to File

UNITED RENTALS INC /DE

 21 SCHLUMBERGER LTD /NV/ 27

MDC HOLDINGS INC

 28 UNITED RENTALS INC /DE

27

SCHLUMBERGER LTD /NV/

 29 FACEBOOK INC

28

NETFLIX INC

 29 NETFLIX INC

28
FACEBOOK INC 29 AMAZON COM INC

29

BROADCOM CORP

 29 CAMERON INTERNATIONAL CORP

29

AMAZON COM INC

 30 KANSAS CITY SOUTHERN

29

KANSAS CITY SOUTHERN

30

 

4

 

Accelerated Filers:
For FYE 2014, on average it took all Accelerated Filer companies 69 days to publish their annual reports. While the SEC gives Accelerated Filers 75 days past their fiscal year end to publish their annual reports, there are some overachievers who manage to do it in half the time.

No. of Accelerated Filer Companies who filed within 38 days whose Fiscal Year Ends on Dec. 31, 2014 = 6
No. of Accelerated Filer Companies who filed within 38 days whose Fiscal Year Ends on Dec. 31, 2015 = 5

The following table shows all of the Large Accelerated Filer companies with FYE December 31st in 2014 and in 2015 who filed in half the time (38 days) of the 75-day SEC filing deadline:

Fastest Accelerated Filer Companies in Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

 Days to File Company

Days to File

FLOTEK INDUSTRIES INC/CN/

 27 WL ROSS HOLDING CORP.

14

UNITIL CORP

 28 VASCULAR SOLUTIONS, INC

22

VASCULAR SOLUTIONS INC

 34 FLOTEK INDUSTRIES INC/CN/

27

CAMBREX CORP

 37 UNITIL CORP

28

22nd CENTURY GROUP, INC

 37 HAWAIIAN HOLDINGS, INC

39

FREESCALE SEMICONDUCTOR, LTD

37

 

2a

 

Non- Accelerated Filers:
For FYE 2014, on average it took all Non-Accelerated Filer companies 75 days to publish their annual reports. While the SEC gives Non-Accelerated Filers 90 days past their fiscal year end to publish their annual reports, there are some overachievers who manage to do it in 45 days or less.

No. of Non-Accelerated Filer Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2014 = 20
No. of Non-Accelerated Filer Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2015 = 6 (As of Feb. 10, 2016)

The following table shows all of the Large Accelerated Filer companies with FYE December 31st in 2014 and in 2015 who filed in half the time (45 days) of the 90-day SEC filing deadline:

Fastest Non-Accelerated Filer Companies in Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

 Days to File Company

Days to File

KANSAS CITY SOUTHER DE MEXICO, S.A. DE C.V.

 30 PACE HOLDINGS CORP

26

GENERAL MOTORS FINANCIAL COMPANY, INC

 35 MEDICAL INFORMATION TECHNOLOGY, INC

29

BIOMED REALTY L.P.

 37 GENERAL MOTORS FINANCIAL COMPANY, INC

34

PACIFIC GAS & ELECTRIC Co

 41 CNX COAL RESOURCES LP

36

HIGHWOODS REALTY LTD PARTNERSHIP

 41 NBCUNIVERSAL MEDIA, LLC

36

KILROY REALTY, L.P.

 41 HIGHWOODS REALTY LTD PARTNERSHIPS

40

OWENS-ILLINOIS GROUP INC

41

CARETRUST REIT, INC

42

ALLIANCEBERNSTEIN L.P.

43

TOBIRA THERAPEUTICS, INC

 43

BALTIMORE GAS & ELECTRIC CO

 44
COMMONWEALTH EDISON CO

44
DTE ELECTRIC CO

44

FORD MOTOR CREDIT CO LLC

 44

PECO ENERGY CO

 44

UNION CARBIDE CORP /NEW/

44
MLM INDEX FUND

44
EXELON GENERATION CO LLC

44

TROPICANA LAS VEGAS HOTEL & CASINO, INC

 44
IMS HEALTH HOLDINGS, INC

44

 

2b

 

Smaller Reporting Companies:
For FYE 2014, on average it took all Smaller reporting companies 99 days to publish their annual reports, regardless. While the SEC gives Large small reporting Filers 90 days past their fiscal year end to publish their annual reports, there are some overachievers who manage to do it in 45 days or less.

No. of Smaller Reporting Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2014 = 18
No. of Smaller Reporting Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2015 = 12 (As of Feb. 10, 2016)

The following table shows all of the Smaller Reporting companies with FYE December 31st in 2014 and in 2015 who filed in half the time (45 days) of the 90-day SEC filing deadline:

Fastest Smaller Reporting Companies in Filing 10-K Whose Fiscal Year Ends on December 31st
2014

2015

Company

 Days to File Company

Days to File

DIEGO PELLICER WORLDWIDE, INC

 28 DUTCH OVEN GOLD GROUP, INC

27

COMSTOCK MINING, INC

 29 RAMPART STUDIOS, INC

27

INFINITY ENERGY RESOURCES, INC

 35 COMSTOCK MINING, INC

28

ELECTRONIC SYSTEMS TECHNOLOGY INC

 37 ANDES 9, INC

32

BOSTON OMAHA Corp

 37 ANDES 8, INC 32

FUTURE HEALTH CARE OF AMERICA

 37 HEADGEPATH PHARMACEUTICAL, INC

32
INUVO, INC 40 ANDES 7, INC

32

CORBUS PHARMACEUTICALS HOLDINGS, INC

 41 YANGTZE RIVER DEVELOPMENT, LTD

33
SCI ENGINEERED MATERIALS, INC 42 PARAGON REAL ESTATE EQUITY & INVESTMENT TRUST

36

PARAGON REAL ESTATE EQUITY & INVESTMENT TRUST

 42 LABSTYLE INNOVATIONS CORP

39

AKARI THERAPEUTICS PLC

 42 SCI ENGINEERED MATERIAL, INC

40

GLOBAL SEAFOOD HOLDINGS CORP

 43 TRANSACT ENERGY CORP

40

RVUE HOLDINGS, INC.

 43
MEDIZONE INTERNATIONAL INC

44

HEDGEPATH PHARMACEUTICALS, INC

 44
PROTEA BIOSCIENCES GROUP, INC

44

SEMLER SCIENTIFIC, INC

 44
TRIUMPH VENTURES CORP

44

 

2c

 

Curious Public Accountant Errors:

We never thought we would find auditors making a mistake on their opinion date, but the table below shows the companies whose auditors signed off on their reports prior to the FYE. Are the auditors thinking ahead?

The following table lists the companies whose auditor reports are dated before their fiscal year end, in 2015:

Company Filer Status Auditor FYE

Opinion date

CALAVO GROWERS, INC.

 Large Accelerrated ERNST & YOUNG LLP 10/31/2015

1/30/2015

CHINA YCT INTERNATIONAL GROUP, INC.

 Smaller Reporting Company PARITZ & COMPANY PA 3/31/2015

7/9/2014

REGI U S INC

 Smaller Reporting Company MALONEBAILEY LLP 4/30/2015

7/28/2014
TARSIER LTD. Smaller Reporting Company KCCW ACCOUNTANCY CORP 5/31/2015

9/15/2014

VERITEC INC

 Smaller Reporting Company WEINBERG & COMPANY, P.A. 6/30/2015

1/21/2015

PETRICHOR CORP.

 Smaller Reporting Company KLJ & ASSOCIATES, LLP 5/31/2015

8/20/2014

CODE NAVY

 Smaller Reporting Company YU CERTIFIED PUBLIC ACCOUNTANT, P.C. 6/30/2015

12/11/2014

PEAK PHARMACEUTICALS, INC.

 Smaller Reporting Company EIDE BAILLY LLP 9/30/2015

1/12/2015

AXIOM HOLDINGS, INC.

 Smaller Reporting Company SADLER, GIBB AND ASSOCIATES, LLC 9/30/2015

1/20/2015

INTERUPS, INC.

 Smaller Reporting Company SADLER, GIBB AND ASSOCIATES, LLC 5/31/2015

1/20/2015

 

Other Observations:

Another observation we have made was the number of companies who filed their XBRL on the same day as their HTML in 2014. The following table shows the number of companies who filed their XBRL and HTML on the same day based on the filer status.

Was the XBRL & HTML filed on the same day?

Filer Status

Large Accelerated Filers

 Accelerated Filers Non-Accelerated Filers

Smaller Reporting Companies

Yes

 1811 1321 741

2684

No

 18 42 591

171

 

Future Study & Follow-Up:

After completion of period end, during the month of March 2016, MyLogIQ, LLC will be releasing a study of earnings releases.