May 18, 2009 Jeffrey D. MorganPresident and CEONational Investor Relations Institute

Public Company Forward-Looking Guidance Practices in 2009

Despite the extremely difficult economic environment, comprehensive annual NIRI study finds only slight declines in guidance across financial and non-financial measures.

Key Findings

•

60% of respondents provide

earnings guidance

* compared to 64% in 2008.

•

82% provide

other financial guidance

* (or “

financial

”) versus 86% in 2008.

•

55% provide

non-financial guidance*

compared to 57% in 2008.

•

25% provide guidance in all three of the measures defined in the survey — earnings,financial and non-financial guidance (* see pg. 5,

About the Survey

, for definitions).

•

Earnings guidance is provided as a range of greater than 5% for the largest proportion ofrespondents (42% in 2009, 38% in 2008), a shift from 2008 when the most popularresponse was a range of less than 5% (32% in 2009, 45% in 2008), possibly attributableto the difficult economic and, thus more challenging, forecasting environment.

•

Responses for other financial guidance displayed greater heterogeneity, with a range ofless than 5% still the most popular response, but at only 26% versus 38% last year.Twenty-two percent selected a range of greater than 5% this year, versus 24% in 2008.

•

Of those respondents who do not provide earnings guidance at this time, 45% havedone so in the past. Of that 45%, 43% have discontinued guidance within the past sixmonths. For other financial guidance measures, 40% of those who don’t currentlyprovide financial guidance did so in the past, with 45% of that population havingdiscontinued the practice in the last six months. The most common reason cited was achange in visibility/forecasting ability of the business (64% for earnings guidancestoppers and 76% for other financial guidance stoppers).

•

Overall, the respondents whose companies discontinued all types of guidance did notfavor a particular industry or market cap segment.

•

Large cap companies were less likely than all other segments, except micro-caps, toprovide financial guidance (Figure 1). Those large caps that do not provide earningsguidance currently were the least likely market cap segment to ever have done so. Andthose large caps that formerly provided earnings guidance were more likely to havediscontinued their guidance in the past six months than any other market cap segment.

Discussion

Guidance practices are difficult to distill into a set ofacross the board

“best practices.”

The NIRI Boardenunciated this concept in an August 2008Executive Alert,essentially encouraging companiesto define their guidance practices in the context oftheir own unique circumstances. Nevertheless,given the central role that guidance plays for the IRprofession, it is imperative for NIRI to provide ascomplete a picture as possible of

current practice

aswell as trends over time. Important nuances clearlyexist and help to differentiate companies from oneanother, but there are nonetheless commonalitiesand noting them here will permit the creation of alingua franca for forward-looking guidance. The corecomponents of a guidance policy are:

•

Measures

on which the company chooses toprovide guidance.

•

Periodicity

of guidance, or the timeframe theestimates cover.

•

Frequency

of guidance communications, orhow often guidance, updates or reiterationsare provided.Additionally

the media and methods employed forcommunications as well as industry-specificvariations and other critical minutiae are part of theart of providing guidance. Further, recent changessuch as the SEC’s 2008 interpretive guidance regarding the use of a company’s IR Web site fordisclosure and the current challenging economicenvironment are also important factors potentiallyimpacting guidance policy.One might assume that the recent dramaticeconomic decline would necessarily result in ameaningful decline of public company guidance.Counterintuitively, NIRI member respondents havenot abandoned guidance in large numbers. Rather,as Figure 2 shows, the decline has been modest – from 64% last year to 60% this year for EPSguidance, and from 56% last year to 50% this yearfor revenue guidance.For all measures of guidance, the estimate period(periodicity) most commonly used for guidance isannual, as shown in Figure 3. Although the wordingof the question was slightly modified this year toallow for multiple selections (as opposed to simplyone choice in previous surveys), the increase in

0%20%40%60%80%100%

TotalMega cap:$25B andaboveLarge cap:$10B to< $25BMid-cap:$2B to< $10BSmall-cap:$250Mto < $2BMicro-cap:Less than$250M

Figure 1: Guidance by Market Cap

6 7 %7 6 % 8 9 % 8 2 % 8 2 % 8 9 % 5 0 % 5 2 % 6 9 % 5 0 % 5 5 % 5 6 % 3 5 % 6 1 % 5 9 % 6 0 % 6 0 % 6 5 %

Earnings Other financialNon-financial

Source: NIRI

0% 10% 20% 30% 40% 50% 60% 70%

20082009

EPSRevenue

Figure 2: EPS and RevenueGuidance Trends

60%50%56%64%

Source: NIR

0%20%40%60%80%100%

Other Long termAnnualQuarterlyMonthly

Figure 3: Periodicity of Guidance*

0 % 8 1 % 5 %1 %1 % 3 9 % 3 0 %4 2 %7 0 %2 2 % 3 % 9 % 8 4 %N / A2 9 %

Earnings Other financialNon-financial

*Multiple responsesSource: NIRI

respondents selecting annual is noteworthy (84% in2009 versus 55% in 2008).Nevertheless, Figure 4 shows that guidance tendsto be

communicated

(frequency) on a quarterlybasis. This distinction between guidance periodicity(annual) and frequency (quarterly) is relevant to thepublic commentary concerning public companyforward-looking guidance practices and theincreasingly short-term focus of the marketplace.In a new survey question this year, respondentswho currently provide financial guidance were askedif they planned to change their guidance policy forthose core components identified above (measures,periodicity and frequency) as well as for the range ofguidance. Only 18% indicated that they areconsidering changes to their guidance policy. Ofthose respondents considering changes, 55% mayreduce the number of measures on which theyprovide guidance. Forty percent are considering lessfrequent guidance, 53% are planning no changewith the balance (7%) considering more frequentguidance. One third of those considering change toguidance are considering expanding their ranges,26% are considering tightening their ranges and thebalance (40%) are not considering changing theirrange.On the question of periodicity, half of therespondents who are considering any changes maychange the periodicity of their guidance, but areroughly evenly split between moving to longerperiods (26%) and shortening the estimate periods(25%). This seems to underscore the tensionbetween practical realities of forecasting and theideals of managing the business for the long term.Of those that currently provide all types of financialguidance (including earnings guidance), only 12%are considering discontinuing it altogether.The reasons that respondents gave for providingguidance have been consistent with past years.Companies primarily guide to ensure sell-sideconsensus and reasonable market expectations. Itis interesting to note that 84% of respondents whosupply earnings guidance provided this rationale.One might expect that, as a result, companies withthe largest analyst coverage would be more likely toissue earnings guidance to ensure analystconsensus. But increased coverage does not strictlycorrelate to increased rates of earnings guidance.

0%10%20%30%40%50%60%70%80%

Other Undecided/Don't knowAs neededAnnuallywith quarterlyupdatesAnnuallyQuarterly

Figure 4: Frequency of Guidance*

6 3 % 6 0 % 5 8 % 9 %1 4 % 6 %2 7 %2 2 %1 1 %6 %1 0 %2 0 % 0 % 0 %1 % 3 %4 %4 %

EarningsOther financialNon-financial

*Multiple responses.Zero respondents indicated Mid-quarterly.

0%20%40%60%80%100%

30 or more20 to 2915 to 1910 to 145 to 91 to 4None

Figure 5: Guidance by Analyst Coverage

9 %2 7 %4 6 % 3 8 %7 1 %7 7 % 5 5 % 6 4 %5 0 % 6 4 % 8 5 % 6 0 %7 1 % 9 5 %4 9 % 6 1 % 9 0 % 5 9 % 6 3 % 9 6 % 6 3 %

Earnings Other financialNon-financial

Source: NIRI

Figure 6: Factors to Consider

©NIRI 20092

Factors to consider in determiningguidance policy

Factors

encouraging

guidance:•Desire to attract analystcoverage•Strong internalforecasting ability•Need to “educate”sell-side/wide spread ofestimates•Intolerance for stockvolatilityFactors

discouraging

guidance•Inability to forecastaccurately/lack of visibility•Peers who are privatelyheld or do not guide•A well understoodindustry•Intolerance for stockvolatility (if forecastsprove inaccurate)

Source: NIRI

*Some numbers will not add to 100% due to rounding

Source: NIRI