Special Report

The Least Candid Companies

10. ConAgra Foods Inc. (NYSE: CAG)
> 1-yr. share price change: +50.83%
> Industry: Processed and packaged goods

ConAgra fell dramatically in the survey this year from 56th to 91st out of 100 companies, after failing to maintain the focused and honest presentation of previous letter to shareholders. While the 2010 letter provided detailed information about the company’s efforts on meeting customers’ financial and nutritional needs, the 2011 letter used generalizations such as, “We know people want great-tasting, everyday food for every dollar they spend.” Because it detailed far less specific information in 2011 than the year before, ConAgra’s scores fell in accountability and leadership, among other factors.

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9. American International Group Inc. (NYSE: AIG)
> 1-yr. share price change: +53.35%
> Industry: Property and casualty insurance

AIG’s 2011 shareholder letter barely exceeded 800 words, about a quarter of the length of its average letter over the past decade. The company also received poor scores for failing to demonstrate strategy and accountability in the letter. The insurance giant provided little information on how it would meet its goals of growing its businesses, cutting its costs and improving its investment returns. Beyond offering to buy back shares, the company also did little to explain how it would grow earnings and returns to shareholders. In May, Goldman Sachs downgraded AIG, claiming that even if the company’s property and casualty insurance business improved as expected, it still would not provide desirable returns to shareholders.

8. Cisco Systems Inc. (NASDAQ: CSCO)
> 1-yr. share price change: +60.31%
> Industry: Networking and communication

Despite being among the least candid companies, Cisco actually improved in the survey from its rank of 98 last year. Cisco provided investors with information about its cash balances and cash flow in its 2011 shareholder letter, one year after failing to make any mention of the topic. In its 2011 letter, the company also provided concise information on how it had generated $10.1 billion in cash during fiscal year 2011, and how it planned to return much of that cash to shareholders. However, when it came to describing what sets Cisco apart, the company spoke only in general terms, when it should have provided more specific information. Cisco also received especially poor marks for its lack of vision, which helps shareholders know how a company is innovating and working to accomplish its goals.

7. Tim Hortons Inc. (NYSE: THI)
> 1-yr. share price change: +8.01%
> Industry: Restaurants

Tim Hortons is new to the Rittenhouse Rankings, but it had an auspicious debut. Its 2011 shareholder letter was one of the shortest included in the survey and still contained far more FOG than useful information. Among the factors that drove down its score were the limited use of helpful financial metrics and an extremely vague statement of the company’s “value proposition” to consumers. Recently, an Edward Jones analyst told The Vancouver Sun that the coffee and doughnut chain’s inability to distinguish its brand in a competitive environment was a major hurdle preventing it from achieving the same success in the United States as it has achieved in Canada.

6. Avon Products Inc. (NYSE: AVP)
> 1-yr. share price change: +47.95%
> Industry: Personal products

Avon is one case that illustrates the importance of language in investor materials, Rittenhouse told 24/7 Wall St. Investors “were not discriminating when [former CEO] Andrea Jung kept touting her messages of growth,” Rittenhouse said, yet reading between the lines revealed language full of contradictions. Jung’s support eroded after the company’s profits began to slide, a probe into overseas bribery was launched and the company rejected a takeover bid from Coty Inc. While the company was ranked for Jung’s letter, the introduction of Sherilyn McCoy as CEO has helped the company become more candid with shareholders. Rittenhouse Rankings praised McCoy’s 2012 shareholder letter as being direct, addressing the critical roles of customers and associates, and touting the company’s strengths and values.

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