Companies that choose to extend their filing deadlines for Exchange Act reports may nevertheless intend to issue earnings estimates or other financial results to report quarter-ended March 31 results even though such releases are not required. An 8-K (Item 2.02) must still be filed upon the public dissemination of financial information to the extent it applies to a completed period.

Whether a periodic report filing is delayed or not, the Joint Statement encourages companies to provide as much information as possible regarding the company’s current status and plans to address COVID-19 related effects on operations and financial results. The Joint Statement acknowledges disseminating earnings statements and conducting earnings calls during this period present unique disclosure challenges. Historical financial information will be generally less helpful to investors than current updates on how a company’s operations have been affected by the economic crises and how they expect to modify operations moving forward. Specific disclosure regarding liquidity and access to capital will be of particular interest to investors. Companies that have applied or intend to apply for financial assistance under the CARES Act or other similar federal and state programs should provide information on how this assistance will affect future financial results to the extent practicable.

To the extent companies are presenting forward- looking information based on assumptions and expectations, it can be presented in a way to ensure such disclosure falls within the safe harbors provided in Section 27A of the Securities Act and Section 21E of the Exchange Act. The Joint Statement acknowledges the difficulty in providing forward-looking information in this unstable economic environment, and the SEC will generally not second guess a company’s good faith attempt to provide forward-looking information in accordance with the safe harbors.

Most companies are contemplating COVID-19 related addbacks of non-recurring items (for example, excluding expenses unique to COVID-19 from operating results) to non-GAAP measures such as Adjusted EBITDA. These pandemic- related non-GAAP disclosures should generally be permissible so long as they comply with Regulation G and Item 10 of Regulation S-K. However, these requirements were somewhat relaxed by the Division of Corporate Finance’s recently issued guidance dated March 25, 20205 (“CF Guidance“), which provides some flexibility for certain non-GAAP reconciliations. Regulation G and Form 8-K ordinarily require reconciliation to a GAAP number, but the Guidance allows an issuer, in its earnings release and on its earnings call, to reconcile to “preliminary” GAAP results based on a reasonable estimate, or a range of reasonably estimated GAAP results, if the GAAP financial measure is not available because it will require COVID-19-related adjustments that cannot yet be definitively calculated. The Staff states that the disclosure should explain, to the extent practicable, what information or analysis is needed to complete the GAAP accounting, and why it remains incomplete. This relief does not apply to 10-Ks, 10-Qs or other filings that require GAAP financial statements. In addition, any such non-GAAP metrics must be accompanied by an explanation of why management believes such non-GAAP metrics are useful, and companies must give equal or greater prominence to comparable GAAP measures. The Staff has cautioned that companies may not present these non-GAAP financial measures solely to present a more favorable view of the company, but rather only to help investors understand how management and the board of directors are analyzing the impact of COVID-19 on the company.  The Staff also stated that a company presenting non-GAAP measures that are reconciled to provisional GAAP measures should limit such measures to the same non-GAAP financial measures it uses to report financial results to the board of directors.

Public companies are no doubt receiving inquiries from investors regarding previously issued earnings guidance and whether the company expects to withdraw or guide “downward.” There is no explicit SEC rule or regulation to update or modify earnings guidance due to changed circumstances. However, some courts have imposed such a duty on companies when a reasonable investor could continue to rely on previously issued guidance that has become materially inaccurate. As a result and to avoid investor reliance on guidance based on assumptions that are no longer accurate, many companies have modified or completely withdrawn existing guidance.

Any withdrawal or update to earnings guidance is material non-public information. To the extent that a company intends to revise or otherwise withdraw previous guidance, it must do so using its normal public dissemination method. Prior to public disclosure, companies must be mindful of insider trading restrictions. The CF Guidance reminds companies that when COVID-19 has affected a company in a material way or when the company has become aware of a material risk related to COVID-19, corporate insiders must refrain from trading until such information has been publicly disclosed. Any employees with access to information regarding guidance should be prohibited from trading in company securities and the company must avoid engaging in securities transactions including offerings and stock buybacks until the information is publicly disclosed. The SEC Division of Enforcement has recently issued statements warning that it would be aggressive in its monitoring of insider trading violations due to the increased number of insiders with access to material non-public information during the pandemic. Furthermore, companies must be careful to avoid selective disclosure of guidance revisions to investors or analysts that is prohibited by Regulation FD.