Business Gems Unearthed in SEC Filings

By DAVID MOON, Moon Capital Management
December 11, 2005

In the past, I've written about the startling gems you can find hidden in the corporate filings that companies make with the Securities and Exchange Commission. If you own shares of stock in a company and don't read the filings, you are doing yourself a financial disservice. If you enjoy good clean voyeuristic fun and you don't read the filings, you're missing a great, free source of entertainment. Here are a few from the stack on the corner of my desk.

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Earlier this year the media conglomerate Gannett (the parent company of WBIR Television) accelerated the vesting schedule for options held by employees on more than 3.7 million shares of Gannett stock. The employees were supposed to get full ownership rights over three years. Instead, the board decided to give them full immediate ownership of the options, allowing them to exercise the options and theoretically pocket the profit differential between the exercise and market price of the stock.

At the time, the market price of the stock was a few dollars less than the exercise price of the options, so there wasn't an immediate profit. But if Gannett stock began to rise, the executives and other employees wouldn't have to wait three years to pocket the millions of dollars of gains.

In a sort of weird justice, Gannett stock has steadily fallen since the move and now sits $20 a share lower than when the options were fully vested. They are currently worthless.

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Some people spend a lot more to go on vacation than others. In 2004, Goody's CEO Robert Goodfriend received a salary of $1.2 million. In addition to that amount, however, he also used the company's aircraft for personal trips totaling another $464,000 in 'variable' expenses. That amount doesn't include little things like the purchase price of the airplane or pilots' salaries ' just incidentals like fuel and oil changes. It equals 39% percent of Goodfriend's salary.

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I've always been intrigued by check-cashing businesses. Twenty-five years ago in college, I couldn't understand why people would pay Gus at Good Times Deli a dollar to cash a $20 check. We didn't have ATMs in those days, but the bank would cash your check for free, if you'd just plan ahead a bit. And most of the refreshment houses I visited would trust a man and let him, as they say in the old country, 'pay on the never never.'

These check-cashing places must make a fortune. I read that they charge the equivalent of hundreds of percent a year in interest. That is, unless you work for Dollar Financial and you're the CEO.

Dollar Financial is one of those check-cashing money machines. A few weeks ago in a footnote of a proxy statement, the company revealed that CEO Jeffrey Weiss was somewhat like other customers to whom Dollar Financial advances cash: he had borrowed money from the company. Unlike other borrowers, however, CEO Weiss had the interest on his loan forgiven by the company. $2.3 million of it. Merry Christmas, Jeff.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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