Who's Filing Now?

For me, business trips can be a powerful source of story ideas, especially when my destination is Fool HQ. That's where I was two weeks ago, to hear Chris Roush, a business journalist and professor at the University of North Carolina, speak about digging for stories in unexpected places.

When he got to SEC filings, I perked up, which will surprise no one who reads my weekly column on insider buying. But, oddly, it wasn't the pesky Form 4s that caught my attention. This time, it was the 8-Ks, which are all-purpose forms through which material news is disclosed. Sometimes they're accompanied by a press release, sometimes not.

Roush challenged his audience to take a look at the 8-Ks filed each Friday after market close, suggesting that we'd find exactly what the firms filing would hate for us to see.

He's right.

First, Men's Wearhouse (NYSE: MW  ) announced that board member Kathleen Mason -- also CEO of Tuesday Morning (Nasdaq: TUES  ) -- had decided to not run for re-election. Then there was shell corporation nCoat, formerly known as Tylerstone Ventures, which filed an amended 8-K that revealed that the board had fired its accountant. Whoops.

But my favorite filing comes from Home Properties (NYSE: HME  ) , an apartment landlord based in Rochester, N.Y. that operates as a residential real estate investment trust, or REIT, for tax purposes. (REITs get tax-favored status in exchange for disbursing roughly 90% of their profits to partners.)

On Friday afternoon, Home Properties filed an 8-K in which it announced changes in how executives would be compensated. Here's the specific language:

"Finally, the Board of Directors waived the application of the mandatory deferral component of the Company's Incentive Compensation Plan with respect to the bonus to be paid to all participants, including the Chief Executive Officer and the other executive officers, for services rendered in 2006." [Emphasis mine.]

Translation: We'd rather make as much money as we can right now, so we're retroactively changing the rules.

Nice, but don't stop there! More goodies await:

"The Board of Directors also approved an amendment to the Incentive Compensation Plan to eliminate the mandatory deferral provisions from the Plan for future bonus payments. The mandatory deferral provision of the Plan provided that participants that were assigned a bonus factor of 3% and higher would be subject to a mandatory deferral of all amounts earned in excess of eight bonus units." [Emphasis mine.]

Who made more than eight bonus units in 2006? Surprise! CEO Edward Pettinella did, and he's now to be paid $680,459 on Wednesday. Home Properties reports fourth-quarter and full-year earnings Thursday after the market closes.

Don't be surprised if that report has its share of not-so-good news. Why? Because, by getting cash up front, managers are giving up a great long-term deal in stock.

I'd even call it a steal. Under the old rules, Home Properties would match up to 10% of the deferral and pay dividends on the held cash, which would then be reinvested to purchase more stock. Given the research of dividend maven Jeremy Siegel, it's hard to see how anyone wouldn't want that deal.

Unless, of course, there's reason to believe that investors won't want the stock. Look out below, Fool.

That's all for now. If you like this feature, and want it on a weekly or bi-weekly basis, please let me know.

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Fool contributor Tim Beyers, who is ranked 1,557 out of more than 22,800 in our Motley Fool CAPS investor intelligence database, usually favors two scoops of ice cream over the inside scoop. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on SEC filings, Foolishness, and investing in general may be found in his blog. Tuesday Morning is an Income Investor pick. The Motley Fool's disclosure policy may be filed under "F" for fair or Foolish.


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