This document provides an overview of key topics in covering company news and corporate disclosure, including: 1) It discusses different types of corporate stories journalists may cover, such as IPOs, M&A deals, and earnings announcements. 2) It outlines various models for writing spot news articles and commentary pieces on corporate developments. 3) It provides guidance on how to approach covering specific corporate events like new product launches, executive changes, and secondary share offerings. 4) It explains key components of corporate disclosure documents like annual reports and what financial information journalists should focus on.

1. Fundamentals of
Business & Financial Journalism
Week 5: Covering company news & Corporate disclosure
Jeffrey Timmermans
Tuesday, 23 October, 12

2. News Quiz
✤ Name one reason why property prices in Hong Kong are currently so
high.
✤ What is one factor behind the current strong sales in Hong Kong’s
retail sector?
✤ Google announced their earnings for the third quarter. How did they
do?
✤ EXTRA CREDIT: What is SoftBank, and why is it in the news
recently?
Tuesday, 23 October, 12

3. Types of corporate stories
✤ Initial public offering (first sale of shares to public)
✤ New product/line of business
✤ Top executive changes
✤ Fundraising: secondary share sales & bond issues
✤ Mergers & acquisitions
✤ Earnings announcements
Tuesday, 23 October, 12

4. Spot/market comment model
✤ Change: What happened? What changed?
✤ Cause: Why?
✤ Expectations: What was expected to happen?
✤ Context: Is this the first? Only? Biggest? Consistent with others?
✤ Comment: What are people saying about it? Get quotes.
✤ Future: What is likely to happen next?
Tuesday, 23 October, 12

5. Spot news model (variant)
✤ What happened?
✤ Why did it happen?
✤ Key details of what happened
✤ Context & significance of what happened (“nut graf”)
✤ Consequences
✤ What’s next?
Tuesday, 23 October, 12

6. Bloomberg’s four-paragraph lead
✤ Theme: What & Why
✤ Authority: Quote from someone that backs up the theme
✤ Details: Additional info & data that “are essential to telling the story”
✤ What’s at Stake: Why people should care
Tuesday, 23 October, 12

7. New product/line of business
✤ How does the new product/ ✤ What are initial sales goals?
business fit in with company’s
existing products? ✤ What are the competing
products?
✤ Price? Which markets?
✤ How will the new product/
✤ When available? business affect the company’s
profits?
✤ Supply chain?
✤ Development costs?
Tuesday, 23 October, 12

8. New product: example
Volvo to Slash U.S. Line-Up in Bid to Reverse Sagging Sales
By Ola Kinnander - Jan 26, 2011
Volvo Cars, the Swedish carmaker owned by Zhejiang Geely Holding Group Co. of China, will
slash the number of models it offers in the U.S. to focus on its best- selling vehicles in a bid to Theme
reverse years of declining sales.
“Five or six is probably a good number,” said Doug Speck, head of Volvo’s operations in the
U.S., in a telephone interview yesterday, noting that Volvo currently offers nine models there. Authority
“We have to focus on the key segments with significant volume potential.”
The V50 station wagon will be discontinued, falling victim to U.S. car buyers’ change in taste
from wagons to crossovers, Speck said. He declined to say when the car will stop selling, saying Details
Source: Bloomberg, 26 Jan. 2011
he wants to tell his 316 dealers first. Volvo, based in Gothenburg, Sweden, is still reviewing
which other models will be cut from the U.S. line-up and has decided to mainly focus on the
new S60 sedan and the XC60 and XC90 crossovers, he said.
Volvo’s U.S. sales have declined steadily since 2004 when it sold 139,384 cars. Deliveries slid What’s
12 percent last year to 53,948 vehicles, while premium-segment rivals like Bayerische Motoren
Werke AG and Volkswagen AG’s Audi gained. Volvo currently offers about as many models in
at stake
the U.S. as the VW brand, which sold 256,830 vehicles in the country last year.
Tuesday, 23 October, 12

9. Executive changes
✤ Who is being replaced? ✤ What do his/her colleagues
think?
✤ What are the reasons given for
the departure? ✤ What does his/her assistant
think?
✤ What are the real reasons?
✤ What’s the new salary/
✤ What is the background of the benefits?
new person? Age? Who will
take his/her old place? ✤ How will this impact
company’s profitability?
Tuesday, 23 October, 12

10. Executive changes: example
Ranbaxy Chief Financial Officer Sethi Quits Five Months After
CEO Resigns
By Adi Narayan - Jan 27, 2011
Ranbaxy Laboratories Ltd., India’s largest drugmaker by sales, said President and Chief What
Financial Officer Omesh Sethi resigned on Jan. 25.
Ranbaxy, based in Gurgaon, near New Delhi, didn’t give a reason for the departure in a Why
statement to the Bombay Stock Exchange today.
The financial chief’s resignation is the second exit by a senior Ranbaxy executive in less than
six months, after former Chief Executive Officer Atul Sobti quit over differences with parent What’s
Daiichi Sankyo Co. Sethi, who joined the company in 1989, made a “significant contribution” to at stake
improve its financial performance and was involved in mergers and acquisitions, Ranbaxy said
on its website.
Source: Bloomberg, 27 Jan. 2011
“It just makes it a bit difficult” for Ranbaxy, said Hemant Bakhru, an analyst at CLSA Asia-
Pacific Markets in Mumbai. With the exit of two top executives, “you lose that continuity which
Authority
is essential for any corporate to run well.”
Masaya Tamae, a spokesman for Daiichi Sankyo in Tokyo, confirmed Sethi’s resignation and Details
declined to comment beyond that. Sethi couldn’t be reached on his office phone and didn’t
immediately respond to an e-mailed query today. Krishnan Ramalingam and Raghu Kochar,
spokesmen for Ranbaxy, didn’t answer calls to their mobile phones.
Tuesday, 23 October, 12

11. Stages of an initial public offering
✤ Company decides to raise funds ✤ Underwriters fine-tune price
via IPO range
✤ Company hires investment ✤ Retail investors are invited to
banks as underwriters subscribe to IPO
✤ Underwriters determine initial ✤ Underwriters announce
pricing range for shares subscription rate and final price
✤ Underwriters sound out ✤ Shares begin trading on stock
strategic (keystone) and exchange
institutional investors
Tuesday, 23 October, 12

12. IPOs: Key questions
✤ How much money will be ✤ Are there any keystone
raised? investors?
✤ How will it be used? ✤ Which investment banks are
handling the IPO?
✤ How many shares will be sold?
Percentage of total number of ✤ What are the key dates?
shares? Overallotment option?
✤ Pricing of IPO shares
✤ What percentage of IPO shares
will be reserved for institutional ✤ Listing date
investors?
Tuesday, 23 October, 12

13. IPO press release
Bakers Footwear Announces Pricing of
Initial Public Offering Of Common Stock
ST. LOUIS -- Bakers Footwear Group today announced the initial public offering of
2,160,000 shares of its common stock, all of which are being sold by the Company
at a price to the public of $7.75 per share. The Company has also granted the
underwriters a 45-day option to purchase up to 324,000 additional shares of common
stock to cover over-allotments, if any. The Company's common stock is listed on the
Nasdaq National Market under the symbol: BKRS. Ryan Beck & Co. and BB&T
Capital Markets are joint managing the offering.
Net proceeds to the Company from the sale of its common stock will be used
primarily to open new stores, remodel existing stores, repay debt and increase
working capital.
Source: BusinessWire, 5 Feb. 2004
Tuesday, 23 October, 12

14. IPOs: Sourcing
✤ Company executives (not just the spokespeople)
✤ Investment bankers bidding for the IPO
✤ Fund managers (often are pitched initial IPO pricing)
✤ Lawyers
Tuesday, 23 October, 12

15. IPO: example
Demand Media moves ahead with $112.5 mln IPO
NEW YORK, Jan 12 (Reuters) - Demand Media Inc, which relies on search engine data and
thousands of freelancers to churn out low-cost articles and video, set terms on Wednesday for
Lede
a $112.5 million initial public offering.
The company employs 13,000 freelancers who contribute to websites including its own
eHow.com and Gannett Co's (GCI.N: Quote, Profile, Research, Stock Buzz) website for the Context
newspaper USA Today.
Source: Reuters, 12 Jan. 2011
In August, Demand Media filed for an IPO of up to $125 million. On Wednesday, the company
and stockholders filed to sell 7.5 million shares for $14 to $16 per share. Details
Demand Media plans to sell 4.5 million shares while stockholders will sell an additional 3
million shares.
Since its founding in 2006, Demand has stoked controversy and intrigue among news editors
because of its use of software algorithms to predict what stories readers want and the lifetime
advertising revenue value from search engines such as Google Inc (GOOG.O: Quote, Profile,
Nut
Research, Stock Buzz).
Tuesday, 23 October, 12

16. Secondary Fundraising
✤ Debt ✤ Shares
✤ Loan or bond? ✤ New shares or existing?
✤ Maturity? Interest rate? ✤ Size of offering? Price?
✤ Credit rating? ✤ Who is underwriting?
✤ Cheaper than share offering? ✤ Cheaper than debt?
✤ How will it affect profits? ✤ How will it affect profits?
Tuesday, 23 October, 12

17. Corporate disclosure
✤ Directors’ report
✤ Auditor’s report
✤ Profit & loss (or income) statement (P&L)
✤ Balance sheet
✤ Cash-flow statement
✤ Footnotes
Tuesday, 23 October, 12

18. Directors’ report
✤ Details the “principal activities” of the company and its subsidiaries
during the reporting period
✤ Describes any significant changes in the fixed assets of the company
or its subsidiaries
✤ Lists any share or debt offerings during the period and the reasons
✤ Reviews any interests held by directors in contracts with company or
subdsidiaries
Tuesday, 23 October, 12

19. Auditor’s report
✤ An independent auditor (accounting firm) is required to attest that
the company’s balance sheet and income statement represent a “true
and fair” view of the company’s performance
✤ Auditor must also state whether the company’s accounts are in order
and whether they received all the information needed for the audit
✤ Any doubt about a company’s ability to remain a “going concern”
must be clearly stated
Tuesday, 23 October, 12

20. Profit & loss statement
✤ Also called an “income statement”
✤ A roadmap that leads you from revenue to net profit
✤ Details the expenses that are incurred on the way to net profit
✤ Consolidated vs. company
✤ Always check the footnotes!
Tuesday, 23 October, 12

21. Hutchison Whampoa Limited
Consolidated Income Statement
for the year ended 31 December 2009
As restated
Note 1
2009 2008
Note HK$ millions HK$ millions
Company and subsidiary companies:
Revenue 2 208,808 235,478
Cost of inventories sold (74,275) (77,172)
Staff costs (28,309) (31,929)
Telecommunications customer acquisition costs (16,544) (22,926)
Depreciation and amortisation 2 (16,258) (24,876)
Other operating expenses (60,769) (66,001)
Change in fair value of investment properties 1,117 672
Profit on disposal of investments and others 3 12,472 3,458
Share of profits less losses after tax of:
Associated companies before profit on disposal of investments and others 5,927 12,522
Jointly controlled entities 3,677 5,286
Associated company's profit on disposal of an investment and others 3 - 3,122
2 35,846 37,634
Interest and other finance costs 4 (9,613) (17,286)
Profit before tax 26,233 20,348
Current tax charge 5 (4,588) (3,443)
Deferred tax credit 5 92 2,576
Profit after tax 21,737 19,481
Allocated as : Profit attributable to minority interests (7,569) (6,800)
Profit attributable to shareholders of the Company 14,168 12,681
Earnings per share for profit attributable to shareholders of the Company 6 HK$ 3.32 HK$ 2.97
Tuesday, 23 October, 12

22. The importance of cash
Profit is opinion, cash is fact
COMPANIES CAN LIE, BUT CASH CAN’T
Tuesday, 23 October, 12