Saturday, February 28, 2009

Duff & Phelps Rebuttal To The Balance Sheet Issue

Duff & Phelps (DUF) is upset with my post. They sent me the below quoted email asking for changes or retractions. Here is the point that I believe they are not comprehending correctly. Financial Statements are critical documents. When you issue a press release which investors are supposed to rely on, why not include the entire financial statement? Why are some parts of the financial statement included and some parts left out?

There is no question in my mind that Duff & Phelps (DUF) filed with the SEC. As a matter of fact the balance sheet is on page 26 according to their corporate communications people. In an era of corporate communication message positioning you have to wonder why the balance sheet is on page 26 but other facts are highlighted in high profile press releases.

So I ask readers to go to page 26 of the latest 10-K. Check out the Consolidated Balance Sheet and tell us if you believe this is helpful in developing an understanding of the company. We all know that the Consolidated Balance Sheet was not in the press release. Perhaps the Duff & Phelps would like to explain their strategy in drafting the press releases in general and of course the latest one in particular.

By the way I am not happy that the SEC has created a disclosure environment that creates this type of dynamic.

Here is the email request from their communications/investor relations advisers.

"George – inexplicably, you posted a note concerning Duff & Phelps and their alleged failure to provide a balance sheet yesterday. Please see the attached, which is the Company’s 2008 10K filing. This document was made publicly available in conjunction with earnings. I would direct you to page 26 – a full consolidated balance sheet.

I am certain your service to your readers includes providing accurate information, and with 20 years of financial and investor relations expertise under your belt, you are no doubt savvy enough to distinguish between hyperbole and fact; accordingly, we suspect you will take the time to correct the erroneous posting concerning Duff & Phelps.

Many thanks
Jon Morgan

Jonathan Morgan
Perry Street Communications
1801 N. Lamar St., Ste. 450
Dallas, TX 75202

(w) 214-965-9955
(m) 212-333-5525"

Thursday, February 26, 2009

Duff & Phelps No Balance Sheet Disclosure

Duff & Phelps (DUF) announced Q4 and year end results, trumpeting the fact that they are still doing well with a variety of financial advisory services. Basically everyone’s business card says something about restructuring and they seem to have dropped mergers and acquisition transactions.

What is peculiar or hilarious is that the very company that sells its ability to analyze all things financial did not provide a balance sheet and did not make any significant comments about their balance sheet. I know it’s a services company. But we are in a trust no one environment. These guys should lead by example. You do have one don’t you?

Wednesday, February 25, 2009

Home Depot Tone Deaf Merchandising Margins

Home Depot (HD) announced Q4 and year end numbers. To no one’s surprise the numbers were difficult. 2009 guidance did not offer an encouragement. They are forecasting further sales declines, which most observers will agree is astute.

But the interesting bet was that gross margins would be flat to slight expansion. Given that your average piece of lumber is a commodity that is quite the assumption. You have several large retailers fighting it out in this space and it is hard to see how margins will stay the same or improve when revenues are dropping.

Home Depot does not speak to a merchandising mix; so my criticism is much the same as my Lowes (LOW) post a few days ago. Home Depot despite its stature as a Dow Jones 30 Index bell weather stock thinks in monolithic market coverage terms. They follow metrics such as stores, square footage, locations and even countries that they are expanding into. No one is thinking what will drive customer traffic into the stores. The demand driver is passive acceptance.

True merchants think their way through their product offerings and are margin oriented. Frank Blake, Chairman & CEO. as well as the board of Home Depot seem to be tone deaf on this critical metric.

Tuesday, February 24, 2009

PG&E Are Risks Explaned.

PG&E (PCG) announced much improved results when comparing 2008 over 2007. They of course are a rather large utility and subject to much regulation. Essentially everyone who ever turns on a light bulb is a paying customer. Considering that point they still have operating challenges in managing huge infrastructure, capital expenditures, cost of capital and volatile raw fuel pricing.

But look at the bottom of their press release. No fewer than 19 separate and distinct items are identified in their risks including the ability of trading parties to return collateral under various hedge agreements. The last cautionary item is a gem.

“other factors and risks discussed in PG&E Corporation and Pacific Gas and Electric Company's 2008 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.”

You know the lawyers had the last word but you have to worry about the fine print. When you read through the other points they essentially are cautioning you on every major factor in their business.

But when you listen to management comments or read disclosure documents they do not correlate and align to the stated risks. The devil is in the details as they say.

Open comment to the SEC. When a company gives you a list of risks that may influence operations why are they not obligated to report on those risks and let investors large and small know where things stand. It is one thing to manage risk. It is quite another to blindfold investors and say just trust us, no one has this trust level any more.

Monday, February 23, 2009

Citigroup: Control Gone Long Time Ago

Citigroup (C) and other banks in negotiations with the financial cavalry apparently will be giving up voting control and equity positions within the banks that are supported. The voting control was all but gone a long time ago. When the Fed and Treasury has to bail out problems by the hundreds of billions the so called vote that shareholders had does not count for anything.

The regulators are driving everything now. The problem is that they are still relying on information from the sick patient and the information is just wrong and inaccurate.

Whole Foods: Cut Capex But UK Expansion?

Whole Foods Market Inc.(WFMI) reported improved cash flows, reductions in debt, successful preferred share issue; and generally looked rather good. The margins are down but they claim seasonality. Comparable revenues are down and I blame cash strapped consumers and a slowly growing availability of organic products at traditional food retailers. They are expanding into the UK and any market needs economies of scale. So far they are referring to decisions in August to cut capex and reduce costs. But they still insist on the UK being a future driver of growth and profits. There is a conflict here. Whole Foods will most certainly hit a few potholes along the way because of this one.