Friday, April 25, 2008

1-800 Flowers Needs More Bloom

1-800 (FLWS) announced earnings early Thursday morning and told the world that they increased the net income by 212% and EBITDA by 28%. All this was achieved with only a 2.7% increase in revenues for the quarter. The strong growth was mainly attributable to the company’s BloomNet Wire Service. This all sounds like a gang buster announcement until you realize that the net profit is only $3.3 million. So any change is huge percentage wise.

What is also disconcerting is that BloomNet as a percentage of overall revenues is still relatively modest. It’s great that they are doing well. But management needs to talk more extensively about the core business and where it is going.

There have been changes in receivables and inventories as well as significant changes in deferred income tax which should be commented on. The cash position increased dramatically and the revolving line of credit was not in use. This is all very good news and investors deserve to have more information on what is going on to achieve these results.

Tuesday, April 22, 2008

Hasbro Balance Sheet Check Up

Hasbro (HAS) reported Q1 net revenues of $704.2 million, an increase of $78.9 million or 13% compared to $625.3 million a year ago, or an increase of 9%, net of the favourable foreign exchange impact of $25.4 million. The Company reported net earnings of $37.5 million or $0.25 per diluted share, compared to $32.9 million or $0.19 per diluted share in 2007.

During the quarter, the Board of Directors increased the May 2008 quarterly dividend by $0.04 per share, or 25%, to $0.20 per share. This is the fifth consecutive annual increase and the highest it has been in the history of the Company. Additionally, the Company spent a total of $156.0 million to repurchase 6.1 million shares of common stock at an average price of $25.63 per share.

Management commentary rested exclusively on income statement issues. So here are a few things to think about from the balance sheet.

Accounts receivable are up 19% which is faster than revenue growth. The current ratio has dropped from approximately 2.49x to 1.92x. The level of indebtedness has increased by 39% with a rather large increase in short term indebtedness. The company has been buying back its own stock and has just increased the dividend. The balance sheet has worsened and no new plans are being announced for investments for the future. Although product R&D hit $41.7 million for the quarter.

This stock could put you to sleep with its supposed lack of issues. Then you wake up one morning and wonder why you are in a cash flow bind.

Monday, April 21, 2008

UBS Blames One Guy

UBS (UBS) laid much of the blame for their current difficulties at the feet of former investment banking Chief Huw Jenkins. So he was the guy. Glad we figured it out. The news slipped out when an excerpt of a report to Swiss banking regulators was released to the press. The excerpt was released only after shareholder pressure. Many thanks to Ethos Fund for doing the heavy lifting. The report was approximately 400 pages and UBS only released a summary.

According to various news outlets the report fingers Huw Jenkins as distracted, and ineffectual. There are also claims that he had inadequate fixed income experience. Hey did anyone read his resume before they offered him the job.

The WSJ reported that “In the report, UBS faults Mr. Jenkins with keeping bank management and Chairman Marcel Ospel in the dark about the losses until August, several months after Dillon Read had been shut down for its losses.”

I have not been able to identify how long the regulator spent laughing after the report was presented. UBS obviously tried to beef up the reports credibility as WSJ further reported that ...The report was prepared by UBS's legal counsel Peter Kurer, who is set to replace long-standing chairman Ospel Wednesday, in conjunction with legal counsel from law firms Sullivan and Cromwell and Homburger AG, as well as auditor PriceWaterhouseCoopers.

Its about the governance and the entire risk management apparatus that supports it. UBS failed. Point the finger at the Board for failing to protect shareholder interests. If Huw Jenkins fooled them then shame on them.