Corporate Research Basics

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Corporate Research Basics

• Philip Mattera Corporate Research Project

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General principles

• Theres a lot more available than you think
• Most of what is available is intended for other
  kinds of users (mainly investors).
• A lot of info can be found online, but you need
  to know where to look. Avoid Google-type
  needle-in-haystack searches.
• Not everything is online. Sometimes you need to
  go to the library or a government office.

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Types of online info sources

• Searchable free websites on the open web
• Free websites on the invisible web e.g.
  government sites such as EDGAR/SEDAR
• Individual subscription sites on the web
• Large commercial aggregators (e.g. Nexis and
  Factiva)
• Database services available through university or
  public library systems

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Major categories of information

• Basic operating and financial information
• Essential relationships
• Social (ir)responsibility record

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Types of Basic Information

• Company profiles
• Company histories
• Company operating information
• Company financials
• Company websites
• Press releases and media coverage

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Basic information Company Profiles and Histories

• Hooverss online
• Stock market websites such as Yahoo Finance
• Advice for Investors (Canada)
• Mergent Manuals
• Business and Company Resource Center
• DB reports for private companies

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Hoovers (www.hoovers.com) longer profiles by
subscription
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Yahoo Finance (biz.yahoo.com)
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Canadian equivalent to Yahoo Finance (Advice for
Investors)
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Mergent Manuals(academic library systems)
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Business and Company Resource Center (public
library databases)
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DB Business Information Reports(by subscription
or pay per view on web)
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Specialized mining industry information sources

• InfoMine website
• MiningUSA website
• Mining Journal Online
• Mining Magazine online
• National Mining Association website

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Operating information on public companies in 10-K
filings
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10-K Item 1- Business
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Main types of operating information in 10-Ks

• Description of business
• Competitive environment
• Regulatory environment
• Major suppliers (if highly dependent)
• Major customers (if over 10)
• Properties/facilities
• Labor information

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Main types of financial data found in 10-K
filings and annual reports

• Recent performance
• Income statements
• Balance Sheets
• Historical performance (past 5-10 years)
• Segment breakdown
• Exhibits (including loan agreements)
• Look for updates in 10-Q quarterly filings

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Canadian equivalents to 10-K

• Annual Information Form
• Description of business
• Risk Factors
• Legal Proceedings etc.
• MDA (Management Discussion Analysis)
• Review of results in past couple of years
• Available via SEDAR (www.sedar.com)

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Outside analysis of financial data

• Wall Street analyst reports
• Sources Investext (via Nexis or some academic
  library database services)
• Look especially for reports in which an analyst
  initiates coverage of a company, since these have
  much more detail and background.

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Key resources in company websites

• Glossy annual reports
• Archive of company press releases
• Full Disclosure documents (e.g., transcripts of
  analyst conference calls
• Biographies of executives
• Location of plants and research centers
• Store directory (for retailers)

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PART II. KEY RELATIONSHIPS

• Focus on these to understand how the company
  works and what may be important areas of
  vulnerability.
• For example
• Parent companies and subsidiaries
• Institutional shareholders creditors
• Outside directors
• Major customers and suppliers

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KEY RELATIONSHIPSParent companies
subsidiaries

• Directory of Corporate Affiliations (on
  Lexis-Nexis, some academic database systems and
  via direct subscription)
• Americas Corporate Families or Who Owns Whom (on
  Dialog database service)

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Sample page from Directory of Corporate
Affiliations on Nexis
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KEY RELATIONSHIPS Outside Directors

• Are supposed to be watchdogs but often act as
  lapdogs of top management
• Since the scandals involving Enron etc., there is
  more emphasis on director independence
• Frequently targeted in corporate campaigns, since
  they are ultimately responsible for company policy

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KEY RELATIONSHIPS Outside Directors

• Key info source Proxy Statements (also known as
  Form DEF 14A)
• Key pieces of information - director biography
  and affiliations - transactions with company -
  director pay and shareholdings - board committee
  memberships
• Also has info on annual meeting, executive
  compensation and shareholder resolutions

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Sample of proxy cover page
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Canadian equivalent to DEF14A

• Management Information Circular
• Principal shareholders
• Director biographies
• Direct shareholdings
• Executive compensation
• Available via SEDAR (www.sedar.com)

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KEY RELATIONSHIPS Institutional Shareholders

• Institutions include pension funds (private and
  public), mutual funds and other investment firms,
  insurance companies, university endowments, etc.
• Majority of stock in most large corporations held
  through institutions.
• Institutions can have great power over corporate
  practices, though they dont always exercise that
  power.

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KEY RELATIONSHIPSInstitutional Shareholders

• Obtaining lists of largest holders.
• Holders with 5 or more will be disclosed in the
  proxy statement.
• List of ten largest holders available from free
  websites such as Yahoo Finance.
• Detailed (but not totally complete) lists
  available from subscription services such as
  Vickers and Thomson.

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Sample list from Yahoo Finance
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Sample list from Vickers (screen showing voting
authority)
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KEY RELATIONSHIPSWall Street Analysts

• Can have a lot of influence over stock prices and
  thus are key parties to try to influence in a
  corporate campaign
• Get their reports from services such as Investext
• Use Nelsons Directory of Investment Research to
  find out which ones cover a company (print
  version or on Lexis-Nexis)

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KEY RELATIONSHIPS Creditors

• Types of lenders
• Single banks
• Credit syndicates (groups of banks)
• Bondholders
• Get most involved when a company is in financial
  distress or bankruptcy, but concern about major
  environmental liabilities, e.g., can lead to
  higher interest rates for the company.

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KEY RELATIONSHIPS Creditors

• Sources of information on lenders
• Debt section of Notes to Financial Statements in
  10-K
• Credit agreements in 10-K Exhibits
• DB services will list firms main bank
• Specialized newsletters such as Bank Loan Report
  (available via Nexis)
• Uniform Commercial Code filings

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KEY RELATIONSHIPS Customers

• Companies are secretive about their customers.
• 10-Ks will disclose only if company is very
  dependent on a few major customers.
• Do a full-text search of EDGAR to find firms that
  list your target company as a major supplier.
• Trade publications and customer websites.

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KEY RELATIONSHIPS Suppliers

• As with customers, companies tend not to disclose
  much about suppliers.
• 10-K will include a disclosure only if the firm
  is highly dependent on a supplier.
• To determine which firms supply a particular
  product, see Thomas Register in libraries or
  ThomasNet on web.
• For info on supply chains (especially for
  timber), see Endgame.org

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Part III. SOCIAL RESPONSIBILITY RECORD

• Social responsibility profiles
• Court proceedings
• Federal regulatory matters
• Labor relations employment practices
• Workplace safety and health
• Environmental compliance
• Campaign contributions and lobbying

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Other social responsibility issues

• Public relations
• Advertising practices
• Corporate philanthropy
• Sponsored research
• Executive compensation
• Corporate subsidies
• Tax compliance

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SOCIAL RESPONSIBILITY Company Profiles

• KLDs Socrates database (expensive)
• SocialFunds.coms Corporate Social Research
  Center
• 10-K sections on Legal Proceedings
• Company sustainability reports/web pages

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Newmont sustainability report
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Types of court information

• Dockets (basic info and chronologies federal
  PACER state web, Courtlink)
• Case documents (complaints, motions etc.
  increasingly online, especially PACER)
• Written federal and state court opinions
  (Lexis-Nexis and Westlaw)
• Selected verdicts and settlements (Lexis-Nexis
  and Westlaw)

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SOCIAL RESPONSIBILITY Federal regulatory agencies

• Securities and Exchange Commission
• Federal Trade Commission
• Consumer Product Safety Commission
• Food and Drug Administration
• General Services Administration (oversight of
  federal contractors)

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SOCIAL RESPONSIBILITY Labor and employment issues

• National Labor Relations Board (labor-management
  issues)
• U.S. Dept. of Labor (wage hour, employee
  benefits, etc.)
• Equal Employment Opportunity Commission
• Pension Benefit Guaranty Corporation
• FAST CD-ROM

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SOCIAL RESPONSIBILITY Workplace safety
Environment

• Occupational Safety and Health Administration
  inspection database
• Mine Safety Health Administration
• Environmental Protection Agency databases
• Environmental Compliance History Online
• Toxics Release Inventory
• Envirofacts

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Mine Safety Health Admin.Data Retrieval System
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Environmental Compliance History Online (ECHO)
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SOCIAL RESPONSIBILITY Campaign contributions

• Federal campaign contributions
• Federal Election Commission website
• Center for Responsive Politics- Open Secrets
  website
• State campaign contributions
• Institute on Money in State Politics Follow the
  Money website

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SOCIAL RESPONSIBILITY Lobbying

• Secretary of the Senate website
• Open Secrets Lobbying Database
• Washington Representatives
• State-level lobbying websites of individual
  state legislatures or state ethics commissions

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Staying up to date on new sources