Who's Filing Now?

Once again, as Wall Street waits for happy hour, we Fools wade into 8-K filings that executives would rather you not read.

Filings like this one from newspaper chain Sun-Times Media Group (NYSE: SVN  ) , which announced the immediate departure of Chief Financial Officer Gregory Stoklosa for "personal reasons."

Watch out for the head fake
Worried? I don't blame you. Don't-let-the-door-hit-you-on-the-way-out departures can be a prelude to trouble. Meanwhile, newspaper chains of all sizes have been suffering -- from New York Times (NYSE: NYT  ) to McClatchy (NYSE: MNI  ) to Media General (NYSE: MEG  ) .

But Sun-Times gets extra points for the head fake it put on investors. Minutes before the Stoklosa scoop was filed -- without a press release, by the way -- executives announced promotions in the paper's publishing ranks.

You can call that coincidental if you'd like, but my 15 years of experience in the PR industry tells me it's a blatant attempt at damage control. And I'm not buying it.

Grand theft shareholder
Then there are the findings of the stock options investigation at game publisher Take-Two Interactive (Nasdaq: TTWO  ) , whose former CEO, Ryan Brant, this month pleaded guilty to criminal charges relating to backdating.

Now, a new 8-K says that 76,984 of 228,750 options granted to independent directors from February 2002 to January 2003 were "improperly dated." All of those options have since been canceled, and the five directors in question have agreed to repay a little more than $539,000 in total.

Still, this deal stinks. Only 34% of the available options were canceled. Meanwhile, most, if not all, of the 150,000-plus that remain appear to be exercisable immediately. And every one of those is in the money.

Not exactly pay for performance
But my favorite 8-K comes courtesy of I2 Technologies (Nasdaq: ITWO  ) , which issued restricted stock to Chief Financial Officer Michael Berry, Chief Customer Officer Hiten Varia, and Chief Delivery Officer Dr. Pallab Chatterjee. Each was granted 50,000 shares last Monday. Vesting begins in two years, but only if certain earnings per-share targets are met.

Seems fair to me. So why announce it via an 8-K on Friday night, especially when the grant was made four days earlier? Perhaps executives would prefer we Fools didn't read the fine print?

That seems to be the case. Follow me to exhibit A of the 8-K attachment entitled "Form of Restricted Stock Issuance Agreement." It begins innocently enough. Vesting of the first third of the grant, payable in 2009, is contingent upon I2 boosting per-share earnings by 40% from 2006 to 2008. The last two-thirds, payable in 2010, requires that I2 increase per-share earnings by 60% from 2006 to 2009.

But, as you might expect, there's a catch. Check this out:

"Earnings Per Share shall mean earnings per share as measured under U.S. Generally Accepted Accounting Principles (GAAP), assuming normal business operations and events ... Should there be one or more extraordinary or unusual events that in effect increase or decrease Earnings Per Share on a GAAP basis, and as such, make it inappropriate for comparing 2006 Earnings Per Share to the future periods, then the Plan Administrator, at its sole discretion, will adjust the Earnings Per Share performance measure for comparing the 2006 Earnings Per Share to the future periods." [Emphasis mine.]

Not surprisingly, the "plan administrator" is the board of directors. And, according to the language in the filing, they have the power to alter the earnings target in any way they see fit. Nice.

For what it's worth, I2 recently reported $0.82 in diluted per-share GAAP earnings and $1.27 in per-share non-GAAP earnings for 2006. Analysts appear to be tracking I2 on a non-GAAP basis, and they're expecting $1.80 a share for 2008.

Not that Berry, Varia, and Chatterjee need I2 to hit that mark. They could earn their first 16,667 shares of restricted stock if I2 produces adjusted earnings of just $1.78 a stub. Sweet deal, eh?

That's all for this week. Think you've found a late filing we Fools should see? Let me know.

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Fool contributor Tim Beyers, who is ranked 1,720 out of more than 23,300 in our Motley Fool CAPS 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. His holdings can be found at Tim's Fool profile. New York Times is an Income Investor pick. The Fool's disclosure policy may be filed under "F" for fair, or Foolish.


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