CURRENT DEVELOPMENTS IN THE DIVISION OF CORPORATION FINANCE

1
CURRENT DEVELOPMENTS IN THE DIVISION OF
CORPORATION FINANCE

National Conference on Current SEC PCAOB
Developments December 6, 2004
2
Disclaimer

• The Securities and Exchange Commission, as a
  matter of policy, disclaims responsibility for
  any private publication or statement by any of
  its employees. Therefore, the views expressed
  today are our own, and do not necessarily
  reflect the views of the Commission or the other
  members of the staff of the Commission.

3
Corporation Finance

• Overview
• Financial Reporting and Disclosure Issues

4
Corporation Finance

• OVERVIEW
• Craig Olinger

5
Accounting Branch Chiefs

• Health Care Insurance
• James Atkinson
• Consumer Products
• Michael Moran
• George Ohsiek
• Computers On Line Services
• Stephen Krikorian
• Brad Skinner
• Natural Resources Food
• Jill Davis
• Structured Finance, Transportation Leisure
• Linda Cvrkel
• Michael Fay
• David Humphrey

6
Accounting Branch Chiefs

• Manufacturing Construction
• John Cash
• Rufus Decker
• Financial Services
• John Nolan
• Kevin Vaughn
• Real Estate Business Services
• Kathleen Collins
• Donna DiSilvio
• Emerging Growth Companies
• Hugh West

7
Accounting Branch Chiefs

• Electronics Machinery
• Brian Cascio
• Daniel Gordon
• Telecommunications
• Terry French
• Robert Littlepage
• Kyle Moffatt

8
Financial Reporting and Disclosure

• SOX Section 404 and 302
• Use of Other Auditors
• Louise Dorsey
• Stephanie Hunsaker

9
SOX Section 404 and 302

• Effective Date for 404
• 404 vs. 302 Requirements
• Interaction of 404 and 302
• Evaluating ICFR
• Managements Report
• FAQs

10
Effective Date of 404 for Accelerated Filers

• 10-K due March 16, 2005
• 11/17/04 SEC postponed final phase-in period
  for one year
• Annual report deadline still 75 days
• Quarterly report deadlines still 40 days
• Accelerated filing phase-in resumes for FYE
  ending on or after 12/15/05
• Annual report- due in 60 days
• Quarterly report- due in 35 days

11
Effective Date of 404 for Accelerated Filers

• 11/30/04 Exemptive Order
• 45 Day Extension for cos. with
• lt700 mil market cap at end of 2nd Qtr
• 10-K still due March 16, 2005
• All required items except 404 reports

12
Effective Date of 404 for Accelerated Filers

• 10-K/A should include
• Two 404 reports
• 302 certifications
• 307/308 disclosures, revised as needed
• Consent, if necessary (i.e. shelf offerings,
  etc)
• Due 5/2/05 for calendar year filers
• Co. not timely for S-3 until 10-K/A filed
• No 12b-25 on the 10-K/A

13
404 vs 302 Requirements

• 404 ICFR
• Annually assess ICFR
• Review conducted as of year-end
• Quarterly evaluation of any changes in ICFR
• Documentation requirements for auditor to test
• Internal control report

• 302 DCP
• Quarterly assess DCP
• Review conducted as of quarter and year-end
• Quarterly evaluation of any changes in DCP
• N/A no auditor testing requirements
• Officers certification

14
Interaction of 404 and 302

• Substantial overlap DCP and ICFR
• DCP includes components of ICFR that provide
  reasonable assurance that transactions are
  recorded as necessary to permit preparation of
  F/S in accordance with GAAP
• Key differences
• DCP apply to material financial and
  non-financial information required in public
  reports
• ICFR covers items that do not directly relate to
  disclosure

15
Interaction of 404 and 302

• To the extent that ICFR impacts public
  disclosure, DCP are inclusive of such internal
  controls
• Disclosure controls apply to all material
  information to be included in financial reports,
  both within outside f/ss

16
Interaction of 404 and 302

• Question
• Could you have a situation where CFO/CEO reach a
  conclusion in their 302 certifications that DCP
  are effective at reasonable assurance level, even
  though there is a material weakness in ICFR?

17
Interaction of 404 and 302

• Answer
• Generally officers will not be able to conclude
  DCP are effective when material weaknesses have
  been identified in IFCR
• But
• There may be some limited circumstances

18
Interaction of 404 and 302

• Some elements of ICFR are not directly subsumed
  within the definition of DCP
• Example in 404 adopting release pure
  safeguarding of assets

19
Interaction of 404 and 302

• Likely impossible to conclude DCP are effective
  when material weaknesses exist in certain areas
• Example
• Material weakness in fraud prevention
• Multiple material weaknesses

20
Interaction of 404 and 302

• Question
• What if a company has to restate its F/S because
  it or the auditor discovers a material weakness
  in ICFR that is also part of the companys DCP?

21
Interaction of 404 and 302

• ANSWER
• Need to consider whether the disclosures provided
  under Item 307 in original filing must be
• modified, supplemented or corrected
• in order to explain relationship between failure
  of DCP and restated F/S

22
Interaction of 404 and 302

• If officers conclude original conclusions are no
  longer correct
• Disclose this fact based on duty to correct a
  misstatement when it became known and Rule 12b-20

23
Interaction of 404 and 302

• Question
• Can the officers conclude DCP were not effective
  as of end of reporting period covered by amended
  report, but conclude DCP are effective as of date
  the amendment filed?

24
Interaction of 404 and 302

• Answer
• Yes
• Company should expand disclosure to explain how
  mgmt determined DCP are now effective given the
  material weakness and other matters identified

25
Interaction of 404 and 302

• Other Areas for Disclosure?
• MDA Disclosure
• Material weakness in ICFR may constitute a
  material trend or uncertainty that should be
  disclosed in MDA
• Detailed discussion of material weakness
• quantification and analysis of associated
  uncertainties trends

26
Evaluating ICFR

• Will vary among companies
• No specific method or procedures required
• Must be based on procedures sufficient to
  evaluate both design operating effectiveness
• Documentation evidential matter is key
• Inquiry alone not adequate!

27
Evaluating ICFR

• Mgmt must attain the level of reasonable
  assurance when formulating conclusions regarding
  effectiveness of ICFR
• Reasonable Assurance
• Conforms to current auditing literature (AU 319)
• Mgmt must use judgment
• Implies consideration by mgmt of the cost of the
  control and its benefits in reducing risk

28
Managements Report

• No standard format
• Certain statements to be included
• Managements responsibility for ICFR
• Framework used
• Mgmts assessment of the effectiveness of ICFR,
  as of end of most recent year
• Auditor has issued report on ICFR
• Disclosure of any material weaknesses

29
Managements Report, contd

• Other Requirements
• Report should be located in close proximity to
  auditors attestation report
• If managements report contains additional
  information (i.e. plans, corrective actions to be
  taken, etc.)
• Auditor to disclaim additional information

30
Managements Report

• 2 Possible Options
• Effective
• Not Effective
• Prohibited from concluding effective ICFR if one
  or more material weaknesses

31
Managements Report

• What if management does not have the ability to
  assess certain aspects of ICFR?
• Example
• SAS 70 report not available at service
  organization and no other ability to assess
  controls in place at the service organization

32
Managements Report

• NO scope limitation permitted in report
• Mgmt must conclude if ICFR effective or not
  effective based on extent of scope limitation

33
Managements Report

• EXCEPTIONS ( SEC FAQ 1, 2, 3)
• FAQ 1 FIN 46 entity in existence prior to
  12/15/03
• FAQ 2 equity method investments
• FAQ 3 acquisitions 1 yr max.

34
Required Communications

• Mgmt must communicate all significant
  deficiencies material weaknesses they detect to
  audit committee external auditor
• Part of 302 certification
• Mgmt also must provide written representations to
  auditor

35
SEC FAQs

• 23 FAQs
• Updated October 6, 2004
• www.sec.gov/info/accountants/controlfaq1004.htm
• PCAOB also issued 3 separate sets of Staff QAs
  (39)
• June 23, 2004
• October 6, 2004
• November 22, 2004

36
SEC FAQs

• Scope Limitations Questions 13
• FAQ 1 consolidated VIEs, proportionate
  consolidations
• What is the meaning of does not have the right
  or authority to assess?
• Neither legal rights nor ability of mgmt to
  remediate deficiencies are necessarily tied to
  mgmts ability to assess ICFR
• Facts and circumstances will dictate when mgmt
  has the ability

37
SEC FAQs

• FAQ 2- Equity investee
• Not intended to prohibit registrants from
  assessing ICFR of investees under the equity
  method

38
SEC FAQs

• FAQ 3 Recent business acquisition
• Intent of issuing FAQ 3 is not to negatively
  impact mgmts business decisions
• Will likely not object to anyone who decides to
  use this relief in the year of acquisition
• Business as defined in EITF 98-3 or Article 11
  of S-X

39
SEC FAQs

• FAQ 4 Conclusion that ICFR is not effective
• Registrant will still be considered timely
  current re
• Rule 144, S-2/S-3/S-8 eligibility

40
SEC FAQs

• FAQ 9 Disclosure of changes to ICFR made in
  preparation of 1st Mgmt report
• Giving relief for the 302 requirement to disclose
  material changes in ICFR
• HOWEVER..
• If change is driven from material weakness,
  notwithstanding the relief that is being given,
  registrants should carefully consider disclosing
  the material weakness and the resulting changes

41
SEC FAQs

• Other most frequent
• FAQ 8 Transition reports
• FAQ 14 SAS 70 reports
• FAQ 21 Consents
• FAQ 22 Annual glossy reports
• FAQ 23 Supplementary information

42
Other Questions

• IPO -Initial 404 assessment
• Due with first annual report
• once effective date passes
• Discontinued operations not finalized as of end
  of year
• No relief

43
Other Questions

• Registrants in Chapter 11
• No automatic exemption from 404
• If registrant qualifies for modified reporting
  under SLB 2 then registrant does not need to
  comply with 404
• Must request relief in advance

44
What we are seeing

• Significant deficiencies material weaknesses
  identified are being disclosed in Form 8-K and
  Form 10-Q
• Typical areas where significant
  deficiencies/material weaknesses have been
  identified
• Personnel issues
• Financial systems
• Restatements due to lack of controls

45
Final Remarks

• We know there will be material weaknesses
• Key is disclosure
• What the problem is
• What it impacts
• How are you going to remediate
• Timetable for remediation

46
Use of Other Auditors

• EXAMPLE
• U.S. auditor relies on work of foreign audit firm
  to perform work on foreign subs of registrant
• U.S. firm chooses not to place reliance on work
  of other audit firm (i.e. no reference to other
  auditor)

47
Use of Other Auditors

• Foreign firm must be registered with PCAOB if
• Performing a substantial portion of the audit
• Foreign firm must be recognized by SEC

48
Use of Other Auditors

• Recognition of Foreign Firm
• Registration with PCAOB does not supercede
  existing means by which a firm demonstrates its
  qualifications to practice before the SEC
• US affiliation and Appendix K compliance
• Demonstration to OCA of knowledge and experience
  of applying U.S. GAAP, PCAOB standards, SEC rules
  and SEC independence requirements

49
Use of Other Auditors

• Other Questions
• What if U.S. firm uses local persons as
  independent contractors?
• i.e., Individuals, not firms
• Is the U.S. firm required to travel to the
  foreign location as part of the audit?

50
Other Auditor Issues

• Licensing Requirements
• Have seen instances where auditor is not licensed
  in the state or country where principal audit
  procedures were conducted
• Problematic in certain instances
• Addressing on case-by-case basis
• Contact DCF with questions on real life fact
  patterns

51

• BREAK

52
Financial Reporting and Disclosure

• Tagged Data Initiative
• Joel Levine

53
Tagged Data Initiative

• Concept release
• Use of tagged data to facilitate timely and
  accurate financial analysis.

54
Tagged Data Initiative

• Possible benefits from tagged data
• Information that is tagged can be searched,
  retrieved, and analyzed by automated means.
• Reduces time, cost and errors commonly associated
  with manual information collection and analysis.

55
Tagged Data Initiative

• Rule proposal
• Voluntary program allowing registrants to furnish
  financial information in XBRL format.

56
Concept Release

• Concept release sought comment on
• Adequacy of XBRL format and technologies.
• Types of information to be tagged.
• Sufficiency of standard taxonomies.

57
Concept Release

• A taxonomy is a list of standard financial
  reporting elements (terms) with their definitions
  and other information. These elements may be
  tagged with
• Monetary values
• Text words or labels

58
Concept Release

• Concept release also sought comment on
• Commissions role in development and maintenance
  of standard taxonomies.
• Impact on investors, registrants, and accountants.

59
Concept Release

• Comment period ended Nov. 15th
• XBRL standard is generally sufficient for tagging
  financial information.
• Technical complexity of XBRL.
• Eventually, a broader range of information in
  filings could be tagged (e.g., MDA, industry
  guide data, loan covenants, and officer
  compensation).

60
Concept Release

• (Continued)
• Taxonomies should be developed and maintained by
  the private sector, subject to public review and
  comment and Commission oversight.
• Impact on investors quicker data consumption
  allowing more time for substantive financial
  analytics.

61
Concept Release

• (Continued)
• Impact on registrants need to learn data
  tagging concepts and software tools consider
  taxonomy extensions after startup, tagging
  effort should be nominal and routine.
• Impact on accountants potential for enhanced
  financial analysis, risk assessments, and
  internal control testing once XBRL is integrated
  into accounting systems and audit tools are
  developed.

62
Concept Release

• (Continued)
• Auditor attestation of tagged data
• Will build investor confidence in reliability of
  tagged data.
• AICPA Interpretation No. 5 of SSAE No. 10 (AT
  Section 101) Attest Engagements on
  Financial Information Included in XBRL Instance
  Documents currently provides sufficient
  guidance.

63
Voluntary Program

• Registrants would tag their financial information
  in XBRL format using a US GAAP standard taxonomy
• Investment Management
• Insurance
• Banking and Savings Institutions
• Commercial and Industrial

64
Voluntary Program

• Regarding the XBRL documents
• Supplemental to official filing. Exhibit 100 to
  Exchange Act or Investment Company Act filings.
• Furnished rather than filed.
• Include in initial filing, an amendment, or an
  8-K (6-K for foreign private issuers).
• Information consistent with official filing.

65
Voluntary Program

• (Continued)
• Excluded from Section 302 certifications.
• No audit opinions or review reports.
• Label data unaudited (unreviewed).
• Volunteers could start and end their
  participation at any time may submit XBRL data
  regularly or from time to time.

66
Voluntary Program

• No stated end date. If adopted, after some
  period of time we may
• Leave voluntary program in place indefinitely,
  change one or more features in the program, or
  terminate the program.

67
Voluntary Program

• Rule proposal sought comment on
• Is there a better way to test XBRL?
• Should we permit tagging of less than a complete
  set of financial statements?
• Concerns about company extensions?
• Eliminate 8-K or 6-K filing options?
• Should mgmt. certify XBRL data?
• Should auditors attest to XBRL data?
• How to assess usefulness of the data?

68
Voluntary Program

• Comment period ended Nov. 1st
• Generally supportive of voluntary program and
  proposed features.
• Standard taxonomies thought to be sufficiently
  developed for purposes of the program.
• Software tools may prove challenging to use in
  their current state.

69
Voluntary Program

• All comment letters we received are available on
  our website
• www.sec.gov
• Under Regulatory Actions.

70
Tagged Data Initiative

• What were doing
• Learning more about XBRL.
• Evaluating comments received.
• Determining appropriate form of adopting release.
• Developing internal capabilities to receive and
  analyze XBRL formatted data.

71
Financial Reporting and Disclosure

• Statement of Cash Flows and Long-Term Customer
  Receivables
• Private-equity valuation
• Non-GAAP Managed Basis Measures
• Dividend Policy Disclosures
• Todd E. Hardiman

72
Statement of Cash FlowsL/T Customer Receivables

• Are the cash flow effects of customer receivables
  operating or investing cash flows?

73
Statement of Cash FlowsL/T Customer Receivables

• Paragraph 22a of Statement 95
• 22. Cash inflows from operating activities are
• a. Cash receipts from sales of goods or services,
  including receipts from collection or sale of
  accounts, and both short- and long-term notes
  receivable from customers arising from those
  sales.

74
Statement of Cash FlowsL/T Customer Receivables

• Paragraph 16a of Statement 95
• 16. Cash inflows from investing activities are
• a. Receipts from collections or sales of loans
  made by the enterprise and of other entities
  debt instruments (other than cash equivalents,
  certain debt instruments that are acquired
  specifically for resale as discussed in Statement
  102, and securities classified as trading
  securities as discussed in Statement 115) that
  were purchased by the enterprise.

75
Statement of Cash FlowsL/T Customer Receivables

• Statement 95 deliberations
• Explicit consideration of Installment Sales
• Exposure Draft - split presentation
• Final standard ALL cash flows from inventory
  sales are operating cash flows

76
Statement of Cash FlowsL/T Customer Receivables

• Effect of Statement 102 - Statement of Cash Flows
  Exemption of Certain Enterprises and
  Classification of Cash Flows from Certain
  Securities Acquired for Resale
• Are cash flows of a financial institutions
  trading account and similar items, such as loans
  acquired for resale, similar to inventory?

77
Statement of Cash FlowsL/T Customer Receivables

• Example - Captive Finance Subsidiary
• Assumptions
• Registrant (Parent) sells Product A for 10
• Customer pays no cash
• Captive finance sub issues loan to customer for
  10 and remits 10 to Parent

78
Statement of Cash FlowsL/T Customer Receivables

• Example - Captive Finance Sub., continued
• Stand-alone Parent perspective
• Operating cash inflow of 10
• Stand-alone Sub perspective
• Investing cash outflow of 10
• Consolidated entity perspective
• Non-cash transaction

79
Statement of Cash FlowsL/T Customer Receivables

• Example - Captive Finance Sub., continued
• Conclusions
• Consolidated entity perspective
• Analogies to EITF 85-12 not persuasive
• ALL Cash flows from sale of inventory are
  operating cash flows regardless if
• Collection from customer or sale to others
• On account or in form of a note or loan
• Short-term or long-term

80
Financial Reporting and Disclosure

• Valuation of Privately-Held-Company Equity
  Securities Issued as Compensation
• (VPES or Cheap Stock)

81
VPES or Cheap Stock

• Circumstances
• No Quoted Market Prices
• No Recent Sales of the Same or a Similar Company
  Security
• Valuation Methodologies
• Generally, Two Step Approach
• Enterprise Value Determination
• Enterprise Value Allocation (if Multiple Equity
  Classes)

82
VPES or Cheap Stock

• Theme 1 The Approach Used to Determine
  Enterprise Value Must be Appropriate for the
  Companys Stage of Development
• Stages of Development
• No revenue/founders capital
• Initiate product development/Outside financing
• Achieve product development milestones
• Saleable product
• Operating profitability
• Sustained Operations

83
VPES or Cheap Stock

• Theme 1 - continued
• Three Broad Approaches to Determine Enterprise
  Value
• Market Approach
• Income Approach
• Asset-Based Approach

84
VPES or Cheap Stock

• Theme 1 - continued
• Observation
• Asset-based approach likely not appropriate for
  IPO reporting periods

85
VPES or Cheap Stock

• Theme 2 The Method Used to Allocate Enterprise
  Value Must be Appropriate for the Companys Stage
  of Development
• Required if Multiple Classes of Stock
• Three Broad Methods
• Probability-Weighted Expected Return Method
• Possible Future Outcomes might include IPO,
  Remaining Private, Merger or Sale, Dissolution
• Option-Pricing Method
• Current-Value Method

86
VPES or Cheap Stock

• Theme 2 -continued
• Two Trends in IPO Filing Reviews
• Use of Current Value Allocation Method
• Averaging Allocation Methods

87
VPES or Cheap Stock

• Theme 2 - continued
• Use of Current Value Allocation Method
• Observation
• Current-Value method likely not appropriate for
  IPO reporting periods

88
VPES or Cheap Stock

• Theme 2 - continued
• Averaging Allocation Methods
• Observations
• Select the allocation method that is most
  appropriate for the circumstances
• Averaging disparate results of different
  allocation methods may not be appropriate

89
VPES or Cheap Stock

• Theme 3 Discounts
• Objective and Reliable Support Needed
• Appropriateness of
• Type of Discount
• Lack of Control Discount
• Disproportionate Returns?

90
VPES or Cheap Stock

• Theme 3 Discounts - continued
• Appropriateness of
• Magnitude of Discount
• No Bright Lines
• Burden on Management
• Sufficient Objective Support
• Facts and Circumstances of Entity

91
Financial Reporting and Disclosure

• Non-GAAP Managed-Basis Measures

92
Non-GAAP Managed-Basis Measures

• Financial Institutions and Retailing Companies
• Remove sale treatment of loan and receivable
  securitizations accounted for as sales
• Non-Financial Institutions
• Include revenue of businesses managed on behalf
  of others

93
Non-GAAP Managed-Basis Measures

• Non-Financial Institutions
• System Wide Revenues
• Frequently calculated as
• Registrants revenues
• Managed entities revenue
• Registrants management fees
• Appropriate or prohibited?

94
Non-GAAP Managed-Basis Measures

• Financial Institutions and Retailing Companies
• Managed Basis Measures
• Remove Effects of Securitization Accounted for as
  Sales Non-GAAP Measure
• Consistency with Managements Approach?
• Comparability vs. Normalize?

95
Non-GAAP Managed-Basis Measures

• Financial Institutions and Retailing Companies
• Disclosures required by Statement 140
• Not a Non-GAAP Measure
• Goal is to Highlight Sources of Risk and Benefit
  Stemming from Retained Interest

96
Financial Reporting and Disclosure

• Managements Statement of Intent to Pay Future
  Dividends
• and the Need for
• Dividend Policy Disclosures

97
Dividend Policy Disclosures

• Income Deposit Security (IDS)
• Yield
• Coupon on Debt
• plus
• Intended Dividend
• Equal to Cash in Excess of Operating Needs
• Paid quarterly

98
Dividend Policy Disclosures

• Why Focus on Disclosures about Intended
  Dividends?
• Significance
• Company
• Assumes Best Use of Excess Cash is Payout to
  Shareholders, Not Reinvestment in Business
• Marketing
• Contrast to equity IPO where return on investment
  stems primarily from stock appreciation

99
Dividend Policy Disclosures

• Why Focus on Disclosures about Intended
  Dividends?
• Discretionary
• No Contractual Obligation to Pay
• Different from REITs Not Obligated by Tax Code
  to Pay Out Most of their Cash
• Board Discretion as to Timing and Amount (can be
  0), regardless of policy
• Shareholder has No Contractual Demand Right
• Lack of Precedent

100
Dividend Policy Disclosures

• Key Elements of Disclosure
• Clear articulation of what the dividend policy
  will be, how the company arrived at it, and how
  they expect to be able to pay it
• Identification of Risks and Limitations
• Inclusion of Forward-looking information to
  support ability to pay intended dividends
• Analysis - Liquidity and Capital Resources
• Note Not a One-Size Fits All Model address
  specific facts and circumstances

101
Dividend Policy Disclosures

• Risks and Limitations (clearly disclose them)
• Discretionary
• Intended policy can be modified/revoked at any
  time
• Dividends may not be paid in accordance with
  policy
• Limitations imposed by debt covenants and state
  laws
• Consequences of no invest. in future growth
• Assumes ability to refinance debt when due
• No provision for unexpected cash needs
• Impact of adverse tax outcomes, if any
• Impact of subordination clauses, if any, when
  multiple classes of stock

102
Dividend Policy Disclosures

• Forward-looking info - (include in filing)
• Must support the assertion registrant will have
  cash necessary to pay the intended dividends
• Intended dividends policy should not be stated
  for periods in excess of period supported by
  expected future cash flows (for example, next 12
  months)

103
Dividend Policy Disclosures

• Forward-looking info - (include in filing)
• Balance Forward-Looking estimated cash
  available with comparable Historical Amounts of
  cash available
• Identify Differences from Historical Amounts
  perhaps
• Increased costs due to being public
• Increased interest expense (Income Deposit Sec.)
• Changes in levels of capital expenditures
• Explain why mgt. believes they can pay intended
  dividend if historical amounts indicate otherwise
• Identify need, if any, to borrow to pay dividends

104
Dividend Policy Disclosures

• Forward-looking info - (include in filing)
• Detailed Assumptions used in forward-looking
  info.
• Bullet point list of assumptions and any changes
  from historical amounts is an acceptable
  presentation
• Discuss risks and possible outcomes if expected
  results are not achieved
• State whether mgt. expects company to be in
  compliance with debt covenants based on
  forward-looking operating results and expected
  cash flows

105
Dividend Policy Disclosures

• MDA -Liquidity and Capital Resources
• Intended dividend policy for the next year, and
  how they intend to fund it (e.g., cash from
  operations or borrowings/credit facility)
• Assumptions re Cash available for dividends
• Effect of new securities and financing
  agreements, if any
• Increased interest expense
• Effect of paying out cash as dividends rather
  than retaining for expansion and reinvestment in
  the business

106
Conclusion

• Questions and Answers

?
?
?
?
?