For Checkers Drive-In, silence wasn't golden

Except for short-sellers who make their money betting stocks will go down, investors fear bad news. But as Checkers Drive-In Restaurants recently found out, investors often hate surprises -- or silence -- even more.

Consider the comedy of errors surrounding the Tampa burger chain's fourth-quarter earnings results. Checkers originally said it would issue the figures after the stock market closed March 5. Usually that means between 4 and 6 p.m.

At 9:46 that night, Checkers issued a news release saying it would postpone its fourth-quarter disclosure by about two weeks. No explanation was offered. To make matters worse, the new announced disclosure date (March 22) didn't match the day of the week (Wednesday).

Speculation ran wild that night and the next morning on a Yahoo.com message board that follows the company. Did a key employee die? Were insiders preparing to announce a buyout?

At 9:28 the next morning, two minutes before the market opened, Checkers corrected its calendar error and promised to release its earnings on Wednesday, March 19. But its explanation for the delay -- the company and auditor KPMG were puzzling over how to handle a tax issue -- didn't come until 2:30 p.m.

By then, the damage was done. Checkers' stock fell 15 percent during the first two hours of trading. It was the heaviest daily trading in more than seven months.

When Checkers finally released its earnings March 19, the news was not good: A writedown of bad assets had led to a substantial quarterly loss. During a conference call the next day with analysts, chief financial officer David Koehler said the company used some of the two-week hiatus to make sure it was in compliance with tough, post-Enron accounting rules. Checkers spokeswoman Kim Francis adds, "We had to look at our options, and that took the additional time."

Investors didn't react as skittishly to the bad earnings news as they had to the silence. The company's stock dropped just 4 percent the next day. It closed Friday at $5.70, down 13 cents.

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