MD&A Practical Drafting Points

Transcription

1 MD&A Practical Drafting Points February 10, 2017 Steve Bernard Corporate Andy Hoffman Corporate The materials in this presentation, and the opinions expressed in this webinar, are those of the authors and speakers, respectively, and do not necessarily reflect the opinions of the companies or institutions with which such authors or speakers are affiliated. In addition, neither these materials nor the views expressed in this webinar are intended to constitute legal advice as to any particular situation. 1

2 Overview Nuts-and-Bolts The Purpose of MD&A To provide readers information necessary to an understanding of the company s results of operations and financial condition Three principal objectives: To enable investors to see the company through the eyes of management; To enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and To provide information about the quality of, and potential variability of, a company s earnings and cash flows, so that investors can ascertain the likelihood that past performance is indicative of future performance. Known trends and uncertainties 2

3 Setting the Stage for the Financial Story MD&A Overview Explain the company s business from a financial perspective so that the reader has the necessary context for reading and evaluating the remainder of the MD&A Perhaps the most important section (Overview) of the most important section (MD&A) of the prospectus How does the company generate revenue, and how has this changed over time? What are its principal costs? What have been the primary sources and uses of cash? What trends has the company experienced and are they expected to continue? Does the company sell its product direct or through a sales channel? What are the key factors that affect the company s financial performance? What additional key operating metrics does management track to evaluate and manage the business? Are there specific items that will surprisingly impact future reported financial results particularly the first quarter out of the box? 3

4 Drafting the Line Item Disclosures WeDoLaptopsAndNothingMore, Inc. 4

5 third quarter of

6 third quarter of

7 of units sold in the third quarter of

8 in the beginning of July

9 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of

10 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of % increase in volume = $17,600,000 10

11 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of The increase in revenue attributable to the increase in units sold was partially offset by a 14.8% decline in average selling prices as we continue to experience pricing pressure from our competitors. 30% increase in volume = $17,600,000 11

12 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of The increase in revenue attributable to the increase in units sold was partially offset by a 14.8% decline in average selling prices as we continue to experience pricing pressure from our competitors. 30% increase in volume = $17,600, % decline in ASPs = ($11,300,000) 12

13 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of The increase in revenue attributable to the increase in units sold was partially offset by a 14.8% decline in average selling prices as we continue to experience pricing pressure from our competitors. Approximately $2.5 million of the increase was attributable to sales of monitors, a product line which we acquired as part of the Laptops-R-Us acquisition. The Laptops-R-Us acquisition was accounted for under the purchase method of accounting, and thus no revenue attributable to the monitor product line was included in our results for the third quarter of % increase in volume = $17,600, % decline in ASPs = ($11,300,000) 13

14 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of The increase in revenue attributable to the increase in units sold was partially offset by a 14.8% decline in average selling prices as we continue to experience pricing pressure from our competitors. Approximately $2.5 million of the increase was attributable to sales of monitors, a product line which we acquired as part of the Laptops-R-Us acquisition. The Laptops-R-Us acquisition was accounted for under the purchase method of accounting, and thus no revenue attributable to the monitor product line was included in our results for the third quarter of % increase in volume = $17,600, % decline in ASPs = ($11,300,000) Increase due to monitors = $ 2,500,000 14

15 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of The increase in revenue attributable to the increase in units sold was partially offset by a 14.8% decline in average selling prices as we continue to experience pricing pressure from our competitors. Approximately $2.5 million of the increase was attributable to sales of monitors, a product line which we acquired as part of the Laptops-R-Us acquisition. The Laptops-R-Us acquisition was accounted for under the purchase method of accounting, and thus no revenue attributable to the monitor product line was included in our results for the third quarter of % increase in volume = $17,600, % decline in ASPs = ($11,300,000) Increase due to monitors = $ 2,500,000 Revenue for Q3 of 2016 = $67,467,000 15

16 in the beginning of July The remaining increase in units sold was due to the significant decline in unit sales that we experienced in the third quarter of 2015 that resulted from the previously disclosed unavailability of motherboards from one of our third-party suppliers, which caused us to delay several shipments until the fourth quarter of The increase in revenue attributable to the increase in units sold was partially offset by a 14.8% decline in average selling prices as we continue to experience pricing pressure from our competitors. Approximately $2.5 million of the increase was attributable to sales of monitors, a product line which we acquired as part of the Laptops-R-Us acquisition. The Laptops-R-Us acquisition was accounted for under the purchase method of accounting, and thus no revenue attributable to the monitor product line was included in our results for the third quarter of We expect that future sales will be adversely impacted by the recently announced bankruptcy and cessation of operations of Laptops.com, an Internet retailer of computers and computer products, which has been a significant distribution channel for our products for the last two years. 30% increase in volume = $17,600, % decline in ASPs = ($11,300,000) Increase due to monitors = $ 2,500,000 Revenue for Q3 of 2016 = $67,467,000 16

17 Thank you! Steve Bernard Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA Office: (650) Andrew Hoffman Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA Office: (650)