Saturday, May 09, 2009

Petroleum Development Corporation Trading Losses Surpass Operations

Petroleum Development Corporation (Nasdaq: PETD) announced quarterly losses late Friday well after market close. The fact that energy prices are down is well understood in the market place. Live by the sword die by the sword. But what is becoming apparent is that this firm’s earnings are more influenced by energy trading and derivatives contracts as opposed to the operating activities that investors would normally expect. The company reported a net loss for the first quarter ended March 31, 2009 of $5.7 million.

Then they explain

“The net loss for the first quarter 2009 was impacted by a $12.9 million net decrease in the mark to market value of the Company's derivatives resulting from contracts settled during the quarter. This unrealized loss was offset by realized gains of $36.6 million during the quarter, resulting in a net gain from price risk management activities in the first quarter 2009 of $23.7 million, compared to a net loss of $42.3 million in the same first quarter period of 2008.”

Friday, May 08, 2009

BJS Talks Doom & Gloom But Shareholders Buy?

BJ Services (BJS) an petroleum services company has been announcing poor results as the demand for drilling drops off and rig utilization rates drop. When you listen to the management this all makes sense. But management comments are all about the rear view mirror and very little effort is put into looking forward. All executive commentary are doom and gloom.

The stock has dropped from a 52 week high of approximately $34-$35 range to as low as $8.34. It currently has rebounded quite smartly to around the $16 range. The stock has attracted a lot of very recent attention in the options market. Effective May 4, 2009 at lot of insiders were granted options in non open market transactions and they all seem happy enough to not sell.

So senior officers talk doom and gloom. But they do not sell personal holdings and continue to acquire shares by virtue of employment compensation. That’s disclosure for you.

Thursday, May 07, 2009

Wal-Mart Entices To The End

Wal-Mart (WMT) announces same store sales are up some 5% which beats the streets expectations by a country mile. The stock bounces upward. The best information is that groceries accounted for a big portion of the improved results; yet comparables are other department stores and not grocery chains.I know Wal-Mart is going off line when it comes to monthly announcements so one will expect an excellent explanation when quarterlies are released in a few weeks.

Kimball Receivables Concerns

Kimball International, Inc. (NASDAQ: KBALB) today reported net sales of $268.9 million and income from continuing operations of $4.1 million. As business softens they are experiencing difficulties in collecting receivables and some write-offs are occurring. Then the explanation stops. No further discussion about future losses or concerns about doubtful accounts. Read this quote from James C. Thyen, Chief Executive Officer and President,

We are keenly focused on a daily basis on prudent management of our trade receivables and reducing our inventory levels. As expected, we have seen some aging of our accounts receivable which necessitated an increase in our bad debt reserve during the quarter. As the length and breadth of the recession remains difficult to predict, visibility into the future is very limited and will continue to present significant operating challenges in the near–term. Our strong balance sheet and the timely generation of cash by our timberland sales position us well to navigate through this global economic crisis.”

Essentially this guy is admitting that he cannot see but he got away with it this time because he scored some extraordinary gains by selling timberland positions. What about next time? The receivables book is suspect.

Wednesday, May 06, 2009 Skimpy Product Development Excuses Limited (HKSE:1688) (HK.1688) announced Q1 results which show increasing revenues and decreasing profits. The classic conundrum for a growth company. The executive excuse is that they are spending on product development which while true is also troubling.

Alibaba could not or would not explain how much longer this state of affairs is expected to continue. They also did not explain where they are focusing their development efforts. Just stating that they are in e-commerce in China, Japan and other countries is not enough. Investors need to understand the product offerings and hear reports on results. The press release underwhelms in terms of disclosure and transparency.

Tuesday, May 05, 2009

Green Shoots 15 Risk Factors

Green Shoots is being referred to by an increasing amount of desperate personalities; all looking to grasp at financial straws. Here are a few risk factors when dealing with green shoots. Its all in the metaphor.

1. Unexpected frost
2. Squirrels and other desperate rodents looking for a quick snack
3. Too much rain and moisture.
4. Not enough rain and moisture
5. Poor soil conditions
6. Incompetent transplant
7. Poor fertilization
8. Inadequate cultivation techniques
9. Weeds and competing foliage
10. Inadequate sun exposure
11. Someone stealing things from your garden at night
12. Someone not stealing from your garden because its not worth it
13. The empty and disappointing feeling that you planted the wrong thing and it actually grew.
14. The empty and disappointing feeling that you planted the right thing but in the wrong place.
15. The terrible feeling you or others get when they realize that you are not even close to having a green thumb.

CNA Reveals More On Conference Call

CNA Financial (CNA) conference call went into great depth about the investment portfolio. The information was largely not dealt with in the press release. Richard W. Scott - Chief Investment Officer went into a lot of qualitative discussion. The investment analyst had many questions. But one thing was missing hard numbers in some kind of an acceptable financial format so that we could actually track the risks. I am not saying someone is lying. But the transparency is appalling.

Loews Invokes Wizard of OZ

Loews Corporation (L) conference call revealed a great deal more information than was actually included in the press release. James S. Tisch President, Chief Executive Officer, Office of the President & Director started his comments with the following

“The Wizard of Oz famously said, “Pay no attention to that man behind the curtain,” and I feel like saying that today with respect to our first quarter earnings.”

But then they issue earnings releases they fail to provide relevant information leaving significant commentary for the conference call.

Diebold Reports Profits From Governance Cost Recovery

Diebold, Incorporated (NYSE: DBD) today reported first quarter 2009 income from continuing operations attributable to Diebold of $4.4 million, or $.06 per share, down 70% and 73%, respectively, from the first quarter 2008. First quarter 2009 revenue was $663.2 million, down 4% from the first quarter 2008.

They started off their press release with this significant item

Diebold reached an agreement in principle with staff of SEC

And then went on to say “In addition, first quarter operating expenses benefited from a $10 million expense recovery accrual from one of the company's director and officer (D&O) insurance carriers related to legal and other expenses incurred as part of the government investigations, which was received April 17, 2009. The company continues to pursue reimbursement of the remaining incurred legal and other expenditures with its other D&O insurance carriers.”

They have wordsmith a governance problem into a financial triumph. The SEC starts an investigation, the company settles which seemed like the wise move and then they trigger insurance settlements under D&O policies. They also tell you that they are on the hunt for more D&O money making it sound like they have it figured out.

No information is provided about which directors or officers blemished their records or what the blemish is about or what governance procedures are being adjusted to avoid these problems in the future. But the investor should be happy to know that this really swell cost recovery exercise is underway and seems to be paying really good dividends.

Monday, May 04, 2009

CNA's Portfolio Silence

CNA Financial (CNA) substantially owned by Loews announced Q1 results had a lot of red ink. A major culprit was net realized investment losses which in Q1 amounted to $344 million. OK everyone knows the markets stink but absolutely no commentary was provided as to the quality of the investment portfolio, reliance on derivatives and or other dubious instruments. To properly understand the company you will need to have a handle on where the portfolio is now. By refusing to discuss it the executive throws up a red flag. Conference call today at exactly the same time as Loews conference call. A multi-taskers delight.

Loews Corporation Abbreviated Reporting

Loews Corporation (L) released its Q1 results and let shareholders know that they lost some money. The press release was one of the most abbreviated documents on Wall Street, containing little to no information that an investor could rely on. Essentially they put out a few high level statements and some basic financial information; told investors they had lost an astounding $647 million and then signed of. Conference call scheduled for today Monday 10:00 May 4, 2009. The press release is so abbreviated the conference call has to be Reg FD challenged if significant financial information comes out.

Top Ten Executive Pay Cheques

Associated Press came out with an interesting article and identified the top ten executive pay cheques. Are these guy's worth it or did they just win the lottery?

1. Aubrey McClendon, Chesapeake Energy Corp., $112.5 million
2. Sanjay Jha, Motorola Inc., $104.4 million
3. Robert Iger, Walt Disney Co., $51.1 million
4. Lloyd Blankfein, Goldman Sachs Group Inc., $42.9 million
5. Kenneth Chenault, American Express Co., $42.9 million
6. Vikram Pandit, Citigroup Inc., $38.2 million
7. Steven Farris, Apache Corp., $37.2 million
8. Louis Camilleri, Philip Morris International Inc., $36.9 million
9. Kevin Johnson, Juniper Networks Inc., $36.1 million
10. Jamie Dimon, JPMorgan Chase & Co., $35.7 million