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  "documentTitle": "Stroer SE & Co. KGaA (SAX)",
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  "authorName": "Carson C. Block",
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  "presentationDate": "2016-04-28 00:00:00",
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  "notes": "This is a research note page focusing on forensic accounting analysis and contradiction exposure.",
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      "text": "The company's response here is jaw-dropping. The company states that its borrowings are short-term, and therefore net presentation is appropriate.",
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      "text": "The company's response on the conference call \"The company executed the acquisition of Ströer Interactive Group, including freeXmedia and businessAD, with diligence in every respect. The board of management and supervisory board were fully aware of the special aspects of the transaction in terms of the related party position of the seller and took these into account in a particularly sensitive manner. All legal and valuation issues were examined step by step by legal firms of international repute, and their legality and correctness were documented in expert opinions. The supervisory board was informed of every step taken by the board of management and received detailed written and oral reports from the advisers. The company filed special valuation reports with the commercial register in connection with the capital increase performed during the transaction and made this publicly available at an Extraordinary Shareholder Meeting of the company in March 2013.\"",
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      "kind": "paragraph",
      "text": "6. Ströer Appears to Contradict Itself on freeXmedia, and Strengthened Our Conviction this was an Improper Transaction",
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      "text": "Ströer classifies the bulk of its borrowings as non-current borrowings. For example, in Q2 2015, non-current financial liabilities increased by €37 million, while current financial liabilities increased by only €18 million. The cash received from borrowings according to the cash flow statement was €46 million. If we generously assume that the entire €18 million increase in current financial liabilities were borrowings, then at least €28 million of the €46 million in cash flow from borrowings was non-current. Therefore, Ströer's response that its year end cash flow statement presentation of borrowings on a net basis is proper because the borrowings are short-term is contradicted by its own quarterly accounts. We maintain our view that Ströer's auditor erred in not apparently identifying this issue.",
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      "kind": "paragraph",
      "text": "5. Ströer's Response Strengthens Our Conviction that the Cash Flow Statement is Prepared Erroneously (and Misleadingly)",
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      "text": "The company's response here is jaw-dropping. The company states that its borrowings are short-term, and therefore net presentation is appropriate. While the company correctly states the accounting standard for short-term borrowings, it fails to acknowledge that a) the bulk of its borrowings are shown as non-current borrowings on its balance sheet, and these appear to be borrowings from its revolver, b) revolvers, unless extremely short-term in nature, are classified as long-term (so the company's classification on its balance sheet is correct), and c) the reference to the three-month Euribor is a refence to the interest rate it pays – not to the tenor. (This is a very, very misleading statement.)",
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      "text": "The company executed the acquisition of Ströer Interactive Group, including freeXmedia and businessAD, with diligence in every respect. The board of management and supervisory board were fully aware of the special aspects of the transaction in terms of the related party position of the seller and took these into account in a particularly sensitive manner. All legal and valuation issues were examined step by step by legal firms of international repute, and their legality and correctness were documented in expert opinions. The supervisory board was informed of every step taken by the board of management and received detailed written and oral reports from the advisers. The company filed special valuation reports with the commercial register in connection with the capital increase performed during the transaction and made this publicly available at an Extraordinary Shareholder Meeting of the company in March 2013. — Ströer conference call transcript",
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      "text": "5 Conference call transcript. 6 Ströer Q2 2015 Quarterly Report, p. 28. 7 Ströer Q2 2015 Quarterly Report, p. 29.",
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