Posts related to ‘Annual Report’

Wal-Mart Proves ‘Less Bad’ Is Really Good (WMT)

Wal-Mart (WMT-NYSE) finally remembered that they are a public company today because they have held their annual shareholder meeting.  This proves that the company is truly owned by the investors for at least one-day of any year.  If you thought you would only hear negative comments from us on the company, that is not true.  Today’s news in the company isn’t quite as good as the company could have done.  But the reality is that it only has to do ‘less bad’ to end up being good.

Despite all of my slamming Lee Scott and calls for him to go and despite criticisms of how the company has been under-performing, I actually said on CNBC in an interview that Wal-Mart may actually begin to recapture some of its lost mojo that Target (TGT-NYSE) and that the company will likely be a better long-term investment than Target.  Does Lee Scott absolutely and positively have to go?  The simple answer is NO.  But he’s got serious issues ahead of him and frankly there are probably very few men or women who would want to step into his shoes.  The good news is that so far everything being telegraphed looks  ‘less bad’ today and this will ultimately be good  for shareholders.

There is a ton of data out of the company and you can literally spend your whole day on this if you choose.

Here are the guts of the actual plan.

The company is taking its $3.3 Billion share buyback plan up to a new amount of $15 Billion.  The company has already boosted its dividend, although that was snubbed initially earlier this year.  They are slowing down their supercenter growth, albeit not by enough of a slowdown by my account; but it is still a start.  As I have noted before: the company doesn’t actually have to get it exactly right to reward shareholders, they just have to get it ‘less wrong.’  The result will be between 190 and 200 new U.S. supercenters during this fiscal year and approximately 170 supercenters each year for the next three fiscal years.  The company has also said it will review its growth strategy annually, although that is a promise that doesn’t mean much.

For fiscal year 2008, the 190 to 200 range includes approximately 70 relocations and 40 expansions of discount stores into supercenters. In October 2006, the Company had announced that its fiscal year 2008 growth plans included between 265 and 270 supercenters in the United States. Approximately 80 of the supercenters originally scheduled to open in January 2008 now will open in early fiscal year 2009.  I have been under the belief that the growth and expansion plans needed to be cut in half or even by two-thirds for it to focus on its core operations and fix what it already has, but as already noted this is still good because it is ‘less wrong.  It also notes that its consolidated square footage growth rate will be approximately 6% for fiscal years 2008 and 2009; Wal-Mart U.S. square footage growth rate is expected to range from 4% to 5% during these same fiscal years. This figure is key and one that analysts will probably applaud.

It is also in the second year of a three-year plan under Eduardo Castro-Wright to improve customer relevancy in operations and merchandise.  That plan should perhaps be scrubbed and rekindled with a newer plan, but once again, it is still ‘less bad.’ 

Capital expenditure (Cap-ex) cuts have finally come into play.  Wal-Mart is recognizing that they are no longer a growth company inside the U.S. and this is a start. This Cap-ex cut is now going from a planned $17 Billion down to $15.5 Billion, and the extra $1.5 Billion will go to fund the buyback.  The company could cut this by much more and they should consider it, although once again it is ‘less bad’ and that is good for shareholders.  The new strategy does not affect the capital investment plans for the Company’s Sam’s Club or International operations.  This is actually good (not even ‘less bad’) because the company has major opportunities there outside of the U.S.  I previously noted that their recent purchase in China was a home run and looked like a great purchase.

continued….

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Posted on: June 1, 2007 – 12:04 pm in Annual Report, Apparel, Consumer Electronics, Corporate Governance, Management Change, Press Digest, Shareholder Issues, Stock Buybacks, , , , , , ,

Vonage Files Its Annual Report; Risks, Legal Proceedings, & All

If you look through the Vonage Holdings’ (VG-NYSE) annual report just filed with the SEC, you might end up asking yourself if the company is just an accounts payable entity that funds lawyers and trials rather than the company being a VoIP telephony provider.  The "RISKS" section of this 10-K filing goes on and on, but that is actually typical of many companies.  That section also spells out some of the judgements and royalties it may have to pay.  The "LEGAL PROCEEDINGS" section of the document does at least show the "actual" issues the company is involved in, and it is substantial.

The good news is that at least the company did get its 10-K filing in at the SEC, and the stock actually looks up almost 1% in after-hours.  It is actually fairly odd that the shares closed up less than 1% today when you consider the "talk of a sale" news last night had the shares up over 10%.  Perhaps the market was even more skeptical than we were about the probability that the company would be able to get shareholders to go along with it.

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Posted on: April 17, 2007 – 4:55 pm in Annual Report

Crocs Sues Its Way Out of Ugliness

Perhaps one of the more interesting ways of looking at companies is trying to garner the mindset of the company’s legal department and the "Legal Proceedings" section of annual reports.  Crocs (CROX-NASDAQ) filed its annual report last night and it appears to be in many different legal activities where it is suing companies for trying to sell similar shoes and the companies distributing them.  Patent, trademark, and copyright does have to be protected, but sometimes things go too far.  At least they didn’t sue The Netherlands Historical Society for making clogs long ago as the original work shoes, even if theirs were made of wood.  The suits won’t likely damage Crocs, but they may be delusional on what they really own and what others should be allowed to do.  Read their pending lawsuits and legal actions below:


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Posted on: April 3, 2007 – 4:26 am in Annual Report, Apparel, Law, Retail, Shareholder Issues, , ,

Why UnitedHealth’s Filing Catch-Up Doesn’t Matter

UnitedHealth (UNH-NYSE) has finally become current in its SEC Filings as of this morning, but this shouldn’t be that big of a surprise.  The company did go back and restate earnings over stock option grants to reflect a $1.55 Billion reduction in earnings for 2006 and prior years to 2003.  This has been perhaps the largest of the telegraphed options cases out there and this should be no surprise.

The truth is that as long as Bill McGuire, the CEO that backdated options to a monstrous personal empire-building tune, didn’t pilfer actual funds and didn’t get involved in off-balance-sheet transactions that this was really more of media frenzy than it was a shareholder fiasco.  To prove this, there have actually been NO calls for the company to dissolve strangleholds in certain markets and there have been NO true shareholder revolts other than the attempt to get some of that money back after forcing McGuire out.  Its prized AARP deal was never really deemed at risk either.

It is ridiculous that the board let that man get away with so much, even if he has relinquished (or will have to) some of that money.  He isn’t the founder and he grew that company through major acquisitions.  Has the consumer been a beneficiary of fewer healthcare choices? Yeah right.  Have the shareholders made that much since the Pacificare merger?  No, in fact they are down.  There is a silver lining: the shares are actually up roughly 20% since the 2006 lows and this really was limited.

The company has grown to where it will be difficult for it to do more than smaller regional
mergers at this point.  They are up 1.7% to $53.85 on the day; and its 52-week trading range is $41.44 to $57.86.  Volume is already close to double its average daily volume and now sits at 11.5 million shares just after 2:00 PM.  The company had already telegraphed that it was "becoming current" in its filings on more than one occasion.

The good news is that this removes the "investability" issue for those who are barred from investing in companies which are either not current in SEC Filings or in companies that have excessive "unknown risks" for litigation.  Mr. McGuire may still have some pain to take, but this at least gets the current company back to operating on its own merits.

It will be interesting to see how the company performs in a year where premiums are expected to be low ahead of the 2008 election cycle, as many insurers tend to lighten up on their "increased insurance premium trends" ahead of shift changing elections.  How much of that is "opinion-based" rather than statistical?  Ask health insurance brokers who are friends or family. 

The last bit of good news is that after the earnings came in, it can now resume its share buyback now that it has resolved its delinquent filing issues.  It has 130+ million shares available under the current buyback plan when it resumes, and it would probably be prudent to assume that the company will begin some accelerated buybacks.

Jon C. Ogg
March 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 6, 2007 – 2:21 pm in Annual Report, Corporate Governance, Earnings, Medical, Restatements, SEC, Shareholder Issues

GE’s “Material Weakness” Not That Material

Usually when a 10-K (Annual Report) filing comes out, the first thing traders peer at is the ‘Legal Proceedings’ section and the ‘Auditor notes’.  Particularly of note, they look for phrases such as "Going Concern" and "Material Weakness," among others.  It was surprising to see the "material weakness" actually come up in the screen on a company the size of GE, but if you look at the explanation it looks like it is not a huge deal at all:

We identified the following material weakness in our internal control over financial reporting -  we did not have adequately designed procedures to designate each hedged commercial paper transaction with the specificity required by Statement of Financial Accounting Standards 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The restatement that resulted from this material weakness is discussed in (b) below. Solely as a result of this material weakness, we concluded that our disclosure controls and procedures were not effective as of December 31, 2006. Other than with respect to the identification of this material weakness, there was no change in our internal control over financial reporting during the quarter ended December 31, 2006, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The company remedied part of this by doing some restatements.  The "Legal Proceedings" section was actually shorter than on many smaller companies and that is perhaps some of what was adding gains right after the open on the stock besides a pre-market upgrade from UBS to a Buy from Attractive and the target was raised from $40.00 to $45.00.

The company also showed that its 2006 share buybacks were 49 million shares and it still has $11.8 Billion that it can use to repurchase stock.  Traders have taken the stock down today and it is either because of the weak market or because of the restatement from the "material weakness" note.  If it is on the material weakness note then they are probably reading too far into it and not qualifying the details in the statement.

GE said it is positioned for sustained high single-digit revenue and double-digit earnings growth, while expanding margins and returns.  GE had been positive on the day early on, but shares are now down 0.4% at $35.20.  Today’s high is $35.60 and the 52-week trading range is $32.06 to $38.49.

Jon C. Ogg
February 27, 2007

Jon Ogg is a partner in 24/7 Wall St., LLC and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: February 27, 2007 – 11:31 am in Analyst Calls, Annual Report, Conglomerates, Corporate Governance, SEC