Top Ships - Are They a Going Concern

TOP Ships Inc. (Nasdaq: TOPS) announced operating results for the Q1 ended March 31, 2009. They claim to be making money as opposed to red ink this time last year. They proceed with some discussion on operations. But the question becomes are they a going concern. They are in breech of loan covenants. The business model is malfunctioning. Then they lay this comment out about how they will finance the future.

“The Company expects to rely upon operating cash flows, long-term borrowings and equity financings to implement its future growth plan.”

What company does not? When you have violated your financial covenants your credibility disappears. The question becomes is Top Ships a going concern? How would we know?

Ciena Two Way Communication

Ciena Corporation (NASDAQ:CIEN) released Q2 info and identified itself as schizophrenic. We all know that the business environment is difficult. But when you follow this quote you will realize that the management team wants to speak out of both sides of their mouth at the same time.

“Our fiscal second quarter was particularly challenging, reflecting the difficult macro and industry environment and continued delays in customer spending,” said Gary Smith, Ciena’s CEO and president. “While recent service providers’ public commentary about expected annual capital expenditures has given the industry reason to be more optimistic about the second half of the year, our customers continue to spend cautiously, and as a result, our visibility remains limited. However, based on our direct conversations with customers and supported by trends we are seeing currently in the business, including recently improved order flow, we expect to deliver sequential revenue growth in our fiscal third quarter.”

Talk about a statement that was drafted in anticipation of rear view observation at some point in the future.

Frank Stronach Plays it Cagey

Frank Stronach Chairman of Magna International (NYSE:MGA) and lead deal maker of the Opel purchase from General Motors was just interviewed on BNN news. They tried hard to get him to talk about the Opel deal but he refused to discuss it. Admitting that a memorandum of understanding has been signed and claiming that governments are twitchy he begged off all questions.

You keep hearing stories about China wanting involvement. You know Stronach has Russian partners but Frank does the talking. Are the Bear and the Dragon squaring off in a back room battle. Will the GM deal have a black swan component to it?

The China market is huge. Players are carving up tomorrows territories. In the mean time investors are focused on the short term mechanics of GM bankruptcy.

Hovnanian Calls Out for Government Support

Hovnanian Enterprises, Inc. (NYSE: HOV) reported results and as a home builder had no choice but to make the case that they are trying very hard in a difficult environment. They point with some optimism to the contract cancellation rate which is now tracking at 24% is a real improvement over previous quarters.

But when you listen to the executives cry out to the government you realize that they do not have enough control over their own business model. I know times are tough; but they are tough for everyone. investing is Darwinian and management teams that do not have control over their business model will face the obvious consequences. Read this quote

“...we remain concerned that the combination of the expiration of the $8,000 federal tax credit in November of this year, the depletion of the state funds allocated for the $10,000 California state tax credit for new home buyers and the potential increase in existing home listings due to another wave of foreclosures as the recent moratoriums on foreclosures have ended could have a dampening effect on our future contract pace. We are hopeful that our government will realize the importance of taking action to both increase the amount of the tax credit and extend its term."

Essentially they are looking for third party events to alter their cost structure. Not good.

Lionsgate Caution Flags

Lionsgate (NYSE:LGF) Reports Record Revenues of $1.47 Billion for Fiscal 2009, up 8% From Previous Year; Net Loss is $163.0 Million. I usually find it difficult to understand movie production houses. Its quite similar to wildcat exploration. You win some you lose some. But when revenues are up 8% and you still print red ink you have to look at the caution flags.

This is what I see.

Cash is down from $372 million to $138 million. The company points out correctly that This is prior to the sale of a 49% equity interest in TV Guide Network and TV Guide.com to global private equity investment fund One Equity Partners for $123 million in cash on May 28, 2009. They fail to point out what they did with that sizeable amount of cash.

Good will is up from $225 million to $379 million. Bank loans are up from zero to $225 million. These are all seriously bad problems in the hundreds of millions. Anyone show or movie will not solve this. So enough with the show biz and lets talk wealth creation.

Playboy Needs a New Playboy

Playboy Enterprises (NYSE:PLA) has chosen Scott N. Flanders, CEO of Freedom Communications, to lead the company founded by Hugh Hefner. It has been noted that Mr. Flanders had engineered the sale of Columbia House to the Blackstone Group, and speculated that his deal-making abilities may have played a role in Playboy’s decision to hire him.

So maybe yes maybe no. Is this company up for sale? No one seems to be bidding up the stock. Where are the arbs when you need them? The brand is tired and needs rejuvenation. Hefner knows it. So who will be the next playboy? The controversy may be similar to selecting a new Bond. Is George Clooney available? Does it have to be a white guy? Can Donald Trump resist the challenge?

If GM can survive well sort of, then what about Playboy?

GM Obama Says Board is Responsible

General Motors (NYSE:GM) President Obama eloquently pointed out that the government will stay out of GM’s hair except for the most fundamental decisions. The board will be responsible he says. Considering the track record the selection of board members will be critical. The AGM is set for Aug 4, 2009. How will the nominations work?

Frontline Reg FD Challenged

Frontline Limited (NYSE:FRO) reported quarterly results with a fairly skimpy press release issued through Marketwire on May 28, 2009 01:59 ET. They had an interesting way of describing comparable results essentially using the word equivalent instead of comparable. This creates confusion. Read this quote from their earnings release

“The Board of Frontline Ltd. (the "Company" or "Frontline") announces net income of $76.6 million for the first quarter of 2009, equivalent to earnings per share of $0.98 compared with net income of $51.6 million for the fourth quarter of 2008, equivalent to earnings per share of $0.66. Net operating income for the quarter was $111.0 million compared with $115.3 million in the fourth quarter of 2008.”

The release continues to deal with a few basic items. Then you go to the conference call transcript and learn about
1. Cash Break even rates on a daily basis
2. Details on cancellations in the newbuilding program
3. China has increased their rate of oil consumption which has impacted operations

All these points are critical but were left out of the press release. Therefore the press release is Reg FD challenged. But these guy’s operate from Hamilton Bermuda. Class action lawsuit; but how?

General Motors Board of Shame

General Motors (NYSE:GM) will file for bankruptcy Monday. While there are many culprits and stake holders the media has over looked the role of the board of directors. Yes the boat sank and they were in charge. While some of the directorships did change and not all of them bear equal blame, no one director has come forth and said they were trying to steer the ship in a different direction. Congress should subpoena and require testimony from the directors as well as senior officers.

Here is the list from http://tinyurl.com/5q9u32

The General Motors Board of Directors

Erskine B. Bowles
President,
The University of North Carolina
Director since 2005

John H. Bryan
Retired Chairman
and Chief Executive Officer,
Sara Lee Corporation
Director since 1993

Armando M. Codina
Chairman,
Flagler Development Group
Director since 2002

Erroll B. Davis, Jr.
Chancellor,
University System of Georgia
Director since 2007

George M.C. Fisher
Retired Chairman
and Chief Executive Officer,
Eastman Kodak Company
Director since 1996

E. Neville Isdell
Retired Chairman and Chief Executive Officer,
The Coca-Cola Company
Director since 2008

Karen Katen
Senior Advisor,
Essex Woodlands Health Ventures
Director since 1997

Kent Kresa
Interim Non-Executive Chairman of the Board,
General Motors Corporation
Director since 2003

Philip A. Laskawy
Retired Chairman
and Chief Executive Officer,
Ernst & Young LLP
Director since 2003

Kathryn V. Marinello
Chairman
and Chief Executive Officer,
Ceridian Corporation
Director since 2007

Eckhard Pfeiffer
Retired President
and Chief Executive Officer,
Compaq Computer Corporation
Director since 1996

Frederick A. Henderson
President
and Chief Executive Officer,
General Motors Corporation
Director since 2009