Definition
The National Association of Purchasing Management - Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Manufacturing and non-manufacturing firms are both surveyed, but until recently, market players have believed that the survey primarily covers the manufacturing sector. Readings above 50 percent indicate an expanding business sector. The NAPM - Chicago is considered a leading indicator of the ISM manufacturing index.
Why Do Investors Care?
Investors should track economic data like the NAPM - Chicago to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures.
The NAPM - Chicago gives a detailed look at the Chicago region's manufacturing and non-manufacturing sectors. Many market players don't realize that non-manufacturing activity is covered in this index and tend to focus on the manufacturing side only. Consequently, market players consider this as a leading indicator for the ISM manufacturing survey. On its own, it can be viewed as a regional indicator of general business activity. Some of the NAPM - Chicago's sub-indexes also provide insight on commodity prices and other clues on inflation. The Federal Reserve closely watches this report because in its long history, it has proven to be a good indicator of business activity as well as inflation. As a result, the financial markets can be highly sensitive to this report.
Monday, June 30, 2008
Chicago NAPM Index Better Than Expected
Chicago manufacturing index dips
By James P. Miller Tribune staff reporter
9:57 AM CDT, June 30, 2008
Manufacturing activity in the heavily industrialized Chicago area showed a fractional decline in June, but showed more resilience than most economists had been anticipating, according to a report issued Monday.
NAPM Chicago said its business barometer, commonly referred to as the Chicago PMI or purchasing managers index, firmed to 49.6 in June from May’s 49.1 reading. The upturn came as a surprise for most economists, who had been expecting the Chicago index to decline to 48.0. Under the format used by NAPM Chicago, any reading below 50 indicates that manufacturing activity is weakening, while an above-50 level indicates the sector is expanding.
The unexpected improvement in the index is encouraging, said Moody's Economy.com's Ryan Sweet, but the economist also noted that the Chicago PMI has now been in below-50 contraction territory for five consecutive months. In addition, Sweet said, details of the report were less upbeat than the headline number would suggest. The monthly survey examines a number of different indicators, with separate readings for new orders, inventory levels, employment trends and the like. New orders, a forward-looking statistic that offers a clue to future industrial activity, softened to 52.0 in June from 56.1 in May, and production dropped to 45.1 its lowest reading in more than seven years. Readings for employment, supplier deliveries and inventries managed to improve in June, noted High Frequency Economics economist Ian Shepherdson, so the overall picture is not as grim as we expected in the light of the huge, sustained drop in auto sales.”
By James P. Miller Tribune staff reporter
9:57 AM CDT, June 30, 2008
Manufacturing activity in the heavily industrialized Chicago area showed a fractional decline in June, but showed more resilience than most economists had been anticipating, according to a report issued Monday.
NAPM Chicago said its business barometer, commonly referred to as the Chicago PMI or purchasing managers index, firmed to 49.6 in June from May’s 49.1 reading. The upturn came as a surprise for most economists, who had been expecting the Chicago index to decline to 48.0. Under the format used by NAPM Chicago, any reading below 50 indicates that manufacturing activity is weakening, while an above-50 level indicates the sector is expanding.
The unexpected improvement in the index is encouraging, said Moody's Economy.com's Ryan Sweet, but the economist also noted that the Chicago PMI has now been in below-50 contraction territory for five consecutive months. In addition, Sweet said, details of the report were less upbeat than the headline number would suggest. The monthly survey examines a number of different indicators, with separate readings for new orders, inventory levels, employment trends and the like. New orders, a forward-looking statistic that offers a clue to future industrial activity, softened to 52.0 in June from 56.1 in May, and production dropped to 45.1 its lowest reading in more than seven years. Readings for employment, supplier deliveries and inventries managed to improve in June, noted High Frequency Economics economist Ian Shepherdson, so the overall picture is not as grim as we expected in the light of the huge, sustained drop in auto sales.”
Can Things Get Worse?
From Barrons -
DEFEATED BY A DELUGE of grim news, stocks fell to their lowest level in nearly two years as investors brooded about $143 crude oil, mounting bank losses and the creeping spread of economic palsy.
Before it clawed back slightly Friday afternoon, the Dow Jones Industrial Average had fallen more than 20% from its October peak -- a technical definition of a bear market.
Last week saw the worst kind of selling: a relentless but orderly decline that showed little of the kind of panic that might hint at capitulation. The Dow's 7.8% drubbing in two weeks has traders asking, quite rightly, how much further oversold stocks can fall. But not many, not even those who argue we're closer to a stock-market bottom, seemed willing to take the plunge and buy -- yet.
Narrowing down the cause of hesitation is tough. Automakers' earnings were slashed by record fuel costs. Warnings of weaker profits from UPS (ticker: UPS) and Nike (NKE) pointed to broadening economic weakness. Consumer confidence continues to plummet, with home-buying intentions falling to a 26-year low and travel plans declining to its worst in four decades. Even a 5.7% rise in disposable personal income in May was dismissed as a momentary spike from rebate checks. Meanwhile, Street analysts dissed their peers with rare abandon and, as Barron's news editor Anita Peltonen adroitly suggests, seem to be "doing what mean girls do." Goldman Sachs (GS), for instance, downgraded Citigroup (C) and other brokerages, Wachovia cut down Goldman, and Sanford Bernstein slashed its forecast for Merrill Lynch (MER) this year from a 56-cent gain to $1.07 loss.
The Dow ended the week down 496, or 4.2%, to 11,347, and is 19.9% from its October peak. Its 10.2% drop so far this month could become its worst monthly loss since September 2002, and its worst June since 1930. The Standard & Poor's 500 fell 40, or 3%, to 1278, and is 18.3% from its October record. The Nasdaq Composite Index slipped 90, or 3.8%, to 2316, while the Russell 2000 gave up 28, or 3.8%, to 698.
DEFEATED BY A DELUGE of grim news, stocks fell to their lowest level in nearly two years as investors brooded about $143 crude oil, mounting bank losses and the creeping spread of economic palsy.
Before it clawed back slightly Friday afternoon, the Dow Jones Industrial Average had fallen more than 20% from its October peak -- a technical definition of a bear market.
Last week saw the worst kind of selling: a relentless but orderly decline that showed little of the kind of panic that might hint at capitulation. The Dow's 7.8% drubbing in two weeks has traders asking, quite rightly, how much further oversold stocks can fall. But not many, not even those who argue we're closer to a stock-market bottom, seemed willing to take the plunge and buy -- yet.
Narrowing down the cause of hesitation is tough. Automakers' earnings were slashed by record fuel costs. Warnings of weaker profits from UPS (ticker: UPS) and Nike (NKE) pointed to broadening economic weakness. Consumer confidence continues to plummet, with home-buying intentions falling to a 26-year low and travel plans declining to its worst in four decades. Even a 5.7% rise in disposable personal income in May was dismissed as a momentary spike from rebate checks. Meanwhile, Street analysts dissed their peers with rare abandon and, as Barron's news editor Anita Peltonen adroitly suggests, seem to be "doing what mean girls do." Goldman Sachs (GS), for instance, downgraded Citigroup (C) and other brokerages, Wachovia cut down Goldman, and Sanford Bernstein slashed its forecast for Merrill Lynch (MER) this year from a 56-cent gain to $1.07 loss.
The Dow ended the week down 496, or 4.2%, to 11,347, and is 19.9% from its October peak. Its 10.2% drop so far this month could become its worst monthly loss since September 2002, and its worst June since 1930. The Standard & Poor's 500 fell 40, or 3%, to 1278, and is 18.3% from its October record. The Nasdaq Composite Index slipped 90, or 3.8%, to 2316, while the Russell 2000 gave up 28, or 3.8%, to 698.
Time Warner Rant
My apologies for not posting on Friday. I lost cable service on major parts of Thursday, Friday, and Saturday. My service is from Time Warner and if there is ever any other service in my area I definitely will switch. Too many outages and no OSU football/basketball.
Paychex 4th Qtr 2008 Earnings
FISCAL 2008 HIGHLIGHTS
• Diluted earnings per share increased 16% to $1.56 per share.
• Net income increased 12% to $576 million.
• Total revenue increased 10% to $2 billion.
• Payroll service revenue increased 8% to $1.5 billion and Human Resource Services revenue increased 19% to $0.5 billion.
• Service revenue increased 10% to $1.9 billion.
• Operating income increased 18% to $828 million.
• Cash flow from operations increased 15% to $725 million.
• For the three months ended May 31, 2008, service revenue increased 8% and diluted earnings per share was $0.38 per share.
ROCHESTER, NY, June 26, 2008 -- Paychex, Inc. ("we," "our," or "us") (NASDAQ:PAYX) today announced record net income of $576.1 million for the fiscal year ended May 31, 2008 ("fiscal 2008"), a 12% increase over net income of $515.4 million for the prior fiscal year. Diluted earnings per share was $1.56, an increase of 16% over $1.35 per share for the prior fiscal year. Total revenue was $2.1 billion, a 10% increase over $1.9 billion for the prior fiscal year.
"Fiscal 2008 is our eighteenth consecutive year of record revenues, net income, and earnings per share," commented Jonathan J. Judge, President and Chief Executive Officer of Paychex. "This year is a milestone for us as total revenue exceeded $2 billion for the first time. In addition, we have realized solid profits during a period of declining interest rates as the Federal Funds rate decreased 325 basis points since June 1, 2007. We are very proud of the efforts of all our employees in managing the business this past fiscal year."
Payroll service revenue increased 8% to $1.5 billion over the prior fiscal year from client base growth, higher check volume, price increases, and growth in the utilization of ancillary services. Our client base growth was 2% for fiscal 2008. As of May 31, 2008 and May 31, 2007, 93% of our clients utilized our payroll tax administration services, and nearly all of our new clients purchase these services. Employee payment services utilization was 73% as of May 31, 2008 compared to 71% as of May 31, 2007, with over 80% of our new clients selecting these services.
Human Resource Services revenue increased 19% to $471.8 million for fiscal 2008.
The growth was generated primarily from the following: retirement services client base increased 9% to 48,000 clients; comprehensive human resource outsourcing services client employees increased 18% to 439,000 client employees served; and workers’ compensation insurance client base increased 17% to 72,000 clients. The asset value of the retirement services client employees’ funds increased 11% to $9.7 billion. In addition, revenue from health and benefits services and BeneTrac contributed to the increase in Human Resource Services revenue in fiscal 2008.
Total expenses increased 4% to $1.2 billion for fiscal 2008, as a result of increases in personnel and other costs related to selling and retaining clients, and promoting new services. Excluding a $38.0 million expense charge to increase the litigation reserve for the year ended May 31, 2007, expenses would have increased 8%.
For fiscal 2008, our operating income was $828.3 million, an increase of 18% over the prior fiscal year. Operating income, net of certain items (see Note 1) increased 15% to $696.5 million for fiscal 2008 as compared to $605.4 million for the prior fiscal year. As a percent of service revenues, operating income, net of certain items, improved to 36% for fiscal 2008 from 35% for the prior fiscal year.
OUTLOOK
Our current outlook for the fiscal year ending May 31, 2009 ("fiscal 2009") is based upon current economic and interest rate conditions continuing with no significant changes. Consistent with our policy regarding guidance, our projections do not anticipate or speculate on future changes to interest rates. We estimate the earnings effect of a 25-basis-point increase or decrease in the Federal Funds rate at the present time would be approximately $4.5 million, after taxes, for the next twelve-month period. Projected revenue and net income growth for fiscal 2009 are as follows:
Payroll service revenue
7% — 8%
Human Resource Services revenue
19% — 22%
Total service revenue
9% — 11%
Interest on funds held for clients
(30%) — (25%)
Total revenue
7% — 9%
Investment income, net
(60%) — (55%)
Net income
2% — 4%
This Week's Market Movers
June 30 - NAPM Chicago (consensus 48.0)
July 1 - Construction Spending (-0.5)
---------ISM Mfg Index (48.7)
July 2 - Factory Orders (0.6)
July 3 - Employment Situation (-50,000, Rate 5.5)
---------Jobless Claims (385,000)
---------ISM Non Mfg Survey (51.0)
July 1 - Construction Spending (-0.5)
---------ISM Mfg Index (48.7)
July 2 - Factory Orders (0.6)
July 3 - Employment Situation (-50,000, Rate 5.5)
---------Jobless Claims (385,000)
---------ISM Non Mfg Survey (51.0)
Thursday, June 26, 2008
No Drilling Here - The Democrats No Drill Zone
To the left are the US areas that Democrats have declared off limits to oil and gas production (in red). The yellow areas are areas controlled by either Canada, Mexico, and Cuba.
Below are some of the areas that are open to drilling by foreign countries including China.
Pictures courtesy of Sen. Larry Craig
Oracle 4th Qtr 2008 Earnings
ORACLE REPORTS Q4 GAAP EPS UP 27% TO 39 CENTS, NON-GAAP EPS UP 27% TO 47 CENTS Q4 Applications New License Revenues Up 36%, Q4 Technology New License Revenues Up 23%
REDWOOD SHORES, Calif., 25-JUN-2008 01:47 PM Oracle Corporation (NASDAQ: ORCL) today announced that fiscal 2008 Q4 GAAP earnings per share were up 27% to $0.39, compared to the same quarter last year. Fourth quarter GAAP revenues were up 24% to $7.2 billion, while quarterly GAAP net income was up 27% to $2.0 billion. Total GAAP software revenues were up 26% to $6.0 billion. GAAP new software license revenues were up 27% with database and middleware new license revenues up 23% and applications new license revenues up 36%. GAAP software license updates and product support revenues were up 25% to $2.8 billion. GAAP service revenues were up 18% to $1.3 billion.
Fourth quarter non-GAAP earnings per share were up 27% to $0.47 (consensus $0.44), and non-GAAP net income was up 27% to $2.4 billion.
For fiscal year 2008, GAAP earnings per share were up 30% to $1.06. Fiscal year 2008 GAAP revenues were up 25% to $22.4 billion, while annual GAAP net income was up 29% to $5.5 billion. Total GAAP new software license revenues for the year were up 28% to $7.5 billion with database and middleware new license revenues up 24% and applications new license revenues up 38%. For the year, GAAP software license updates and product support revenues were up 24% to $10.3 billion. Annual GAAP service revenues were up 21% to $4.6 billion. GAAP operating margins were up nearly 200 basis points to 35% in FY08.
Fiscal year 2008 non-GAAP earnings per share were up 29% year over year to $1.30. Annual non-GAAP net income was up 28% to $6.8 billion compared to fiscal year 2007.
"Non-GAAP operating margins were up 200 basis points in FY08 to a record 43.0%," said President and CFO Safra Catz. "Non-GAAP earnings per share were up 29% for the year and non-GAAP EPS has tripled over the last five years. Oracle has delivered solid results year-after-year."
"Oracle's application new software license revenues grew 38% in FY08, while SAP's new software license revenues grew only 13% in their most recent fiscal year," said President Charles Phillips. "This is the third consecutive year we've taken applications market share from SAP."
"Four years ago we publicly announced a five year plan to deliver non-GAAP earnings per share at a compound annual growth rate of 20%," said Oracle CEO Larry Ellison. "During the past four years we exceeded our plan and delivered a non-GAAP EPS CAGR of over 26%."Q4
REDWOOD SHORES, Calif., 25-JUN-2008 01:47 PM Oracle Corporation (NASDAQ: ORCL) today announced that fiscal 2008 Q4 GAAP earnings per share were up 27% to $0.39, compared to the same quarter last year. Fourth quarter GAAP revenues were up 24% to $7.2 billion, while quarterly GAAP net income was up 27% to $2.0 billion. Total GAAP software revenues were up 26% to $6.0 billion. GAAP new software license revenues were up 27% with database and middleware new license revenues up 23% and applications new license revenues up 36%. GAAP software license updates and product support revenues were up 25% to $2.8 billion. GAAP service revenues were up 18% to $1.3 billion.
Fourth quarter non-GAAP earnings per share were up 27% to $0.47 (consensus $0.44), and non-GAAP net income was up 27% to $2.4 billion.
For fiscal year 2008, GAAP earnings per share were up 30% to $1.06. Fiscal year 2008 GAAP revenues were up 25% to $22.4 billion, while annual GAAP net income was up 29% to $5.5 billion. Total GAAP new software license revenues for the year were up 28% to $7.5 billion with database and middleware new license revenues up 24% and applications new license revenues up 38%. For the year, GAAP software license updates and product support revenues were up 24% to $10.3 billion. Annual GAAP service revenues were up 21% to $4.6 billion. GAAP operating margins were up nearly 200 basis points to 35% in FY08.
Fiscal year 2008 non-GAAP earnings per share were up 29% year over year to $1.30. Annual non-GAAP net income was up 28% to $6.8 billion compared to fiscal year 2007.
"Non-GAAP operating margins were up 200 basis points in FY08 to a record 43.0%," said President and CFO Safra Catz. "Non-GAAP earnings per share were up 29% for the year and non-GAAP EPS has tripled over the last five years. Oracle has delivered solid results year-after-year."
"Oracle's application new software license revenues grew 38% in FY08, while SAP's new software license revenues grew only 13% in their most recent fiscal year," said President Charles Phillips. "This is the third consecutive year we've taken applications market share from SAP."
"Four years ago we publicly announced a five year plan to deliver non-GAAP earnings per share at a compound annual growth rate of 20%," said Oracle CEO Larry Ellison. "During the past four years we exceeded our plan and delivered a non-GAAP EPS CAGR of over 26%."Q4
Nike 4th Qtr Earnings
NIKE, Inc. Reports Fiscal 2008 Earnings Per Share of $3.74
Fiscal Year Revenue Up 14 Percent, Earnings Per Share Up 28 Percent Worldwide Futures Orders Up 11 Percent
BEAVERTON, Ore.--(BUSINESS WIRE)--June 25, 2008--NIKE, Inc. (NYSE:NKE) today reported financial results for the 2008 fiscal year ended May 31, 2008. For the fiscal year, revenues grew 14 percent to $18.6 billion, compared to $16.3 billion last year. Net income increased 26 percent to $1.9 billion, compared to $1.5 billion last year, and diluted earnings per share increased 28 percent to $3.74 versus $2.93 last year. For the fourth quarter, revenues increased 16 percent to $5.1 billion, compared to $4.4 billion for the same period last year. Fourth quarter net income increased 12 percent to $490.5 million, compared to $437.9 million in the prior year, and diluted earnings per share increased 14 percent to $0.98 (consensus was $0.96), versus $0.86 last year. Changes in currency exchange rates increased revenue growth by 5 percentage points for the full year and 7 percentage points for the fourth quarter.
Futures Orders
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from June 2008 through November 2008, totaling $8.8 billion, 11 percent higher than such orders reported for the same period last year. Changes in currency exchange rates increased reported orders growth by 3 percentage points.(a)
By region, futures orders for the U.S. were flat to last year; Europe (which includes the Middle East and Africa) increased 10 percent; Asia Pacific grew 31 percent; and the Americas increased 30 percent. Changes in currency exchange rates increased reported futures orders growth in Europe by 6 percentage points; by 7 percentage points in the Asia Pacific region; and by 1 percentage point in the Americas region.
Share Repurchase
During the fourth quarter, the Company purchased a total of 4,447,605 shares for approximately $290 million in conjunction with the Company's four-year, $3 billion share repurchase program approved by the Board of Directors in June 2006. As of the end of the fiscal year, the Company has purchased a total of 38,646,058 shares for approximately $2.1 billion under this program.
NIKE, Inc. based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Cole Haan, which designs, markets and distributes luxury shoes, handbags, accessories and coats; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories; and Umbro Ltd., a leading United Kingdom-based global football (soccer) brand. For more information, visit nikebiz.com.
Fiscal Year Revenue Up 14 Percent, Earnings Per Share Up 28 Percent Worldwide Futures Orders Up 11 Percent
BEAVERTON, Ore.--(BUSINESS WIRE)--June 25, 2008--NIKE, Inc. (NYSE:NKE) today reported financial results for the 2008 fiscal year ended May 31, 2008. For the fiscal year, revenues grew 14 percent to $18.6 billion, compared to $16.3 billion last year. Net income increased 26 percent to $1.9 billion, compared to $1.5 billion last year, and diluted earnings per share increased 28 percent to $3.74 versus $2.93 last year. For the fourth quarter, revenues increased 16 percent to $5.1 billion, compared to $4.4 billion for the same period last year. Fourth quarter net income increased 12 percent to $490.5 million, compared to $437.9 million in the prior year, and diluted earnings per share increased 14 percent to $0.98 (consensus was $0.96), versus $0.86 last year. Changes in currency exchange rates increased revenue growth by 5 percentage points for the full year and 7 percentage points for the fourth quarter.
Futures Orders
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from June 2008 through November 2008, totaling $8.8 billion, 11 percent higher than such orders reported for the same period last year. Changes in currency exchange rates increased reported orders growth by 3 percentage points.(a)
By region, futures orders for the U.S. were flat to last year; Europe (which includes the Middle East and Africa) increased 10 percent; Asia Pacific grew 31 percent; and the Americas increased 30 percent. Changes in currency exchange rates increased reported futures orders growth in Europe by 6 percentage points; by 7 percentage points in the Asia Pacific region; and by 1 percentage point in the Americas region.
Share Repurchase
During the fourth quarter, the Company purchased a total of 4,447,605 shares for approximately $290 million in conjunction with the Company's four-year, $3 billion share repurchase program approved by the Board of Directors in June 2006. As of the end of the fiscal year, the Company has purchased a total of 38,646,058 shares for approximately $2.1 billion under this program.
NIKE, Inc. based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Cole Haan, which designs, markets and distributes luxury shoes, handbags, accessories and coats; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories; and Umbro Ltd., a leading United Kingdom-based global football (soccer) brand. For more information, visit nikebiz.com.
BusinessWeek's No. 32 - Expeditors Intl
No. 32: Expeditors Intl. of Washington
Industry: Air Freight & Logistics
Sales: $5.2 billion
Net Income: $269.2 million
Expeditors International (EXPD) connects the dots of global trade. The Seattle-based logistics planner arranges for transportation of goods between importers and exporters by air, sea, and ground. One of the largest and fastest-growing players in the fragmented tangle of customs brokers and global shipment companies, Expeditors has doubled revenue and profits since 2003, to $5.2 billion and $269 million, respectively. CEO Peter Rose pays his troops in 63 countries relatively modest salaries, but motivates them with heavy performance incentives—each of 247 branch offices gets to keep 20% of its pretax profits.
Industry: Air Freight & Logistics
Sales: $5.2 billion
Net Income: $269.2 million
Expeditors International (EXPD) connects the dots of global trade. The Seattle-based logistics planner arranges for transportation of goods between importers and exporters by air, sea, and ground. One of the largest and fastest-growing players in the fragmented tangle of customs brokers and global shipment companies, Expeditors has doubled revenue and profits since 2003, to $5.2 billion and $269 million, respectively. CEO Peter Rose pays his troops in 63 countries relatively modest salaries, but motivates them with heavy performance incentives—each of 247 branch offices gets to keep 20% of its pretax profits.
BusinessWeek's No. 31 - Pepsico
No. 31: PepsiCo
Industry: Consumer Staples
Sales: $39.5 billion
Net Income: $5.7 billion
The Cola Wars may be back, but today's PepsiCo (PEP) actually derives more revenue from food products than from fizzy beverages. And PepsiCo has a propitious portfolio, big on healthier snacks and strong in faster-growth markets outside the U.S. CEO Indra Nooyi, born and raised in India, has an international background that suits the company perfectly; most consumer-products companies have seen a slowdown at home as a recession begins to take hold. Indeed, last year PepsiCo's international sales made up 40% of revenue and grew 26%, or almost three times the rate of domestic sales. The looming challenge: dealing with record-high prices for essential commodities such as corn and wheat.
Industry: Consumer Staples
Sales: $39.5 billion
Net Income: $5.7 billion
The Cola Wars may be back, but today's PepsiCo (PEP) actually derives more revenue from food products than from fizzy beverages. And PepsiCo has a propitious portfolio, big on healthier snacks and strong in faster-growth markets outside the U.S. CEO Indra Nooyi, born and raised in India, has an international background that suits the company perfectly; most consumer-products companies have seen a slowdown at home as a recession begins to take hold. Indeed, last year PepsiCo's international sales made up 40% of revenue and grew 26%, or almost three times the rate of domestic sales. The looming challenge: dealing with record-high prices for essential commodities such as corn and wheat.
Wednesday, June 25, 2008
Addicted To Oil? - True Or Not
One of the leftist environmentalist's mantra is that we are addicted to oil. True or not? It all depends on how you look at it. We do consume more than anyone else but we also produce more goods and services than anyone. We are still the economic engine that drives the world.
We are no more addicted to oil than we are to other life necessities like food and water. What we are addicted to is foreign oil. And we can thank the leftist Democratic party and the leftist environmentalists.
We will continue to use oil as we transition to a mix of alternative fuels/energy; clean coal, nuclear, wind, solar, etc. Let's just make sure that we produce and use our own oil. Let's create jobs and prosperity for American workers. Let's put a downward pressure on oil prices. Let's stop sending our money overseas. (Tim)
We are no more addicted to oil than we are to other life necessities like food and water. What we are addicted to is foreign oil. And we can thank the leftist Democratic party and the leftist environmentalists.
We will continue to use oil as we transition to a mix of alternative fuels/energy; clean coal, nuclear, wind, solar, etc. Let's just make sure that we produce and use our own oil. Let's create jobs and prosperity for American workers. Let's put a downward pressure on oil prices. Let's stop sending our money overseas. (Tim)
Oil Inventories
Summary of Weekly Petroleum Data for the Week Ending June 20, 2008
U.S. crude oil refinery inputs averaged nearly 15.3 million barrels per day during the week ending June 20, down 181 thousand barrels per day from the previous week's average. Refineries operated at 88.6 percent of their operable capacity last week. Gasoline production rose last week, averaging about 9.1 million barrels per day. Distillate fuel production increased last week, averaging about 4.6 million barrels per day.
U.S. crude oil imports averaged about 10.3 million barrels per day last week, down 8 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.0 million barrels per day, 86 thousand barrels per day below the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged nearly 1.2 million barrels per day. Distillate fuel imports averaged 107 thousand barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.8 million barrels from the previous week. At 301.8 million barrels, U.S. crude oil inventories are near the lower boundary of the average range for this time of year. Total motor gasoline inventories decreased by 0.1 million barrels last week, and are in the lower half of the average range. Finished gasoline inventories increased last week while gasoline blending components inventories decreased during this same time. Distillate fuel inventories increased by 2.8 million barrels, and are in the middle of the average range for this time of year. Propane/propylene inventories increased by 1.2 million barrels last week but remain below the lower limit of the average range. Total commercial petroleum inventories increased by 5.4 million barrels last week, and are near the bottom of the average range for thistime of year.
Total products supplied over the last four-week period has averaged 20.2 million barrels per day, down by 2.3 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand has averaged about 9.3 million barrels per day, down by 2.1 percent from the same period last year. Distillate fuel demand has averaged nearly 4.1 million barrels per day over the last four weeks, down by 1.1 percent from the same period last year. Jet fuel demand is 3.6 percent lower over the last four weeks compared to the same four-week period last year.
U.S. crude oil refinery inputs averaged nearly 15.3 million barrels per day during the week ending June 20, down 181 thousand barrels per day from the previous week's average. Refineries operated at 88.6 percent of their operable capacity last week. Gasoline production rose last week, averaging about 9.1 million barrels per day. Distillate fuel production increased last week, averaging about 4.6 million barrels per day.
U.S. crude oil imports averaged about 10.3 million barrels per day last week, down 8 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.0 million barrels per day, 86 thousand barrels per day below the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged nearly 1.2 million barrels per day. Distillate fuel imports averaged 107 thousand barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.8 million barrels from the previous week. At 301.8 million barrels, U.S. crude oil inventories are near the lower boundary of the average range for this time of year. Total motor gasoline inventories decreased by 0.1 million barrels last week, and are in the lower half of the average range. Finished gasoline inventories increased last week while gasoline blending components inventories decreased during this same time. Distillate fuel inventories increased by 2.8 million barrels, and are in the middle of the average range for this time of year. Propane/propylene inventories increased by 1.2 million barrels last week but remain below the lower limit of the average range. Total commercial petroleum inventories increased by 5.4 million barrels last week, and are near the bottom of the average range for thistime of year.
Total products supplied over the last four-week period has averaged 20.2 million barrels per day, down by 2.3 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand has averaged about 9.3 million barrels per day, down by 2.1 percent from the same period last year. Distillate fuel demand has averaged nearly 4.1 million barrels per day over the last four weeks, down by 1.1 percent from the same period last year. Jet fuel demand is 3.6 percent lower over the last four weeks compared to the same four-week period last year.
New Home Sales Down In May
NEW RESIDENTIAL SALES IN MAY 2008
Sales of new one-family houses in May 2008 were at a seasonally adjusted annual rate of 512,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.5 percent (±13.7%)* below the revised April rate of 525,000 and is 40.3 percent (±6.9%) below the May 2007 estimate of
857,000.
The median sales price of new houses sold in May 2008 was $231,000; the average sales price was $311,300. The seasonally adjusted estimate of new houses for sale at the end of May was 453,000. This represents a supply of 10.9 months at the current sales rate.
The number of months supply in May 2007 was 7.8 months and peaked (so far) in March 2008 at 11.4 months supply. (Tim)
Sales of new one-family houses in May 2008 were at a seasonally adjusted annual rate of 512,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.5 percent (±13.7%)* below the revised April rate of 525,000 and is 40.3 percent (±6.9%) below the May 2007 estimate of
857,000.
The median sales price of new houses sold in May 2008 was $231,000; the average sales price was $311,300. The seasonally adjusted estimate of new houses for sale at the end of May was 453,000. This represents a supply of 10.9 months at the current sales rate.
The number of months supply in May 2007 was 7.8 months and peaked (so far) in March 2008 at 11.4 months supply. (Tim)
Monsanto Growing Earnings - 3rd Qtr 2008 Results
Operations Update
Monsanto reported record net sales of $3.6 billion for the third quarter of fiscal year 2008, which were 26 percent higher than sales in the same period in fiscal year 2007. Results in the quarter reflected increased revenues from the company's Roundup agricultural herbicides globally, increased soybean seed and traits revenues in the United States, increased corn seed and trait revenues in the United States, higher corn seed revenues in Europe-Africa, and higher cotton seed and trait revenue in the United States.
Net sales in the company's first nine months of fiscal year 2008 resulted in year-to-date sales of $9.5 billion, which were 35 percent higher compared with sales in the same period last year. Key contributors to the company's growth included increased sales of Roundup and other glyphosate-based herbicides globally, higher worldwide corn seed and traits revenues as well as increased soybean seed and traits revenues and cotton seed and traits revenues in the United States.
Monsanto's net income for the third quarter of fiscal year 2008 was $811 million or 42 percent higher than net income in the same period last year. For the first nine months of fiscal year 2008, net income was 83 percent higher than net income in the same period last year.
Earnings per share (EPS) for the third quarter of fiscal year 2008 were $1.45 both on an as-reported basis and an ongoing basis. EPS for the first nine months of fiscal year 2008 were $3.93 on an as-reported basis, and $3.70 on an ongoing basis. EPS results for the first three quarters were affected favorably by $0.23 per share after tax from the settlement of Monsanto's claims in conjunction with Solutia's emergence from bankruptcy. (For a reconciliation of ongoing EPS, see page 1.)
Cash Flow
For the first nine months of fiscal year 2008, net cash provided by operating activities was $1.3 billion, compared with $89 million in the same period in 2007. Net cash required by investing activities was $650 million for the first nine months of 2008, compared with net cash required of $410 million for the same period last year. As a result, free cash flow was a source of $675 million for the first nine months of fiscal year 2008, compared with a use of $321 million in the same period in fiscal year 2007. (For a reconciliation of free cash flow, see note 1.) Improved earnings, higher collections from accounts receivable and customer prepayments and the settlement of the Solutia-related claim contributed to the increase in free cash flow in the first nine months of 2008. Net cash provided by financing activities was $93 million for the first nine months of 2008, compared with net cash required of $204 million for the same period last year.
Outlook
Monsanto's fourth quarter is largely influenced by its global cotton business and U.S. Roundup agricultural herbicides business. The company historically records a loss in the fourth quarter.
Monsanto now expects that its full-year 2008 EPS will be approximately $3.63 on a reported basis and approximately $3.40 on an ongoing basis. (For a reconciliation of ongoing EPS, see page 1). Monsanto's full-year 2008 EPS guidance on a reported basis does not include an estimate for the in-process, research and development charge associated with the company's fourth quarter acquisitions.
The company now expects that its free cash flow for fiscal year 2008 will be $550 million. The company expects net cash provided by operating activities to be in the range of $2.6 billion, and net cash required by investing activities to be approximately $2.05 billion for fiscal year 2008. (For a reconciliation of free cash flow, see note 1.) This revised free cash flow guidance reflects the recently-completed acquisition of De Ruiter Seeds as well as the recently-announced acquisition of Marmot, S.A., which operates Semillas Cristiani Burkard (SCB), a privately-held seed company headquartered in Guatemala City, Guatemala.
Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
"Backed by continued growing demand for our products, the first nine months of our fiscal year has been remarkable and we're now increasing our full-year guidance. This strong growth sets up a solid foundation for our business and to reach our target of more than doubling gross profit in 2012. Because we're both discovering and delivering innovative tools that can help increase productivity on farm, we offer an attractive solution to the farmer and their mission of meeting our world's growing food, feed and fuel needs. While others are asking should it be food OR feed OR fuel, we believe the answer is AND, and we have the solutions in hand to be a significant part of that answer."
Monsanto reported record net sales of $3.6 billion for the third quarter of fiscal year 2008, which were 26 percent higher than sales in the same period in fiscal year 2007. Results in the quarter reflected increased revenues from the company's Roundup agricultural herbicides globally, increased soybean seed and traits revenues in the United States, increased corn seed and trait revenues in the United States, higher corn seed revenues in Europe-Africa, and higher cotton seed and trait revenue in the United States.
Net sales in the company's first nine months of fiscal year 2008 resulted in year-to-date sales of $9.5 billion, which were 35 percent higher compared with sales in the same period last year. Key contributors to the company's growth included increased sales of Roundup and other glyphosate-based herbicides globally, higher worldwide corn seed and traits revenues as well as increased soybean seed and traits revenues and cotton seed and traits revenues in the United States.
Monsanto's net income for the third quarter of fiscal year 2008 was $811 million or 42 percent higher than net income in the same period last year. For the first nine months of fiscal year 2008, net income was 83 percent higher than net income in the same period last year.
Earnings per share (EPS) for the third quarter of fiscal year 2008 were $1.45 both on an as-reported basis and an ongoing basis. EPS for the first nine months of fiscal year 2008 were $3.93 on an as-reported basis, and $3.70 on an ongoing basis. EPS results for the first three quarters were affected favorably by $0.23 per share after tax from the settlement of Monsanto's claims in conjunction with Solutia's emergence from bankruptcy. (For a reconciliation of ongoing EPS, see page 1.)
Cash Flow
For the first nine months of fiscal year 2008, net cash provided by operating activities was $1.3 billion, compared with $89 million in the same period in 2007. Net cash required by investing activities was $650 million for the first nine months of 2008, compared with net cash required of $410 million for the same period last year. As a result, free cash flow was a source of $675 million for the first nine months of fiscal year 2008, compared with a use of $321 million in the same period in fiscal year 2007. (For a reconciliation of free cash flow, see note 1.) Improved earnings, higher collections from accounts receivable and customer prepayments and the settlement of the Solutia-related claim contributed to the increase in free cash flow in the first nine months of 2008. Net cash provided by financing activities was $93 million for the first nine months of 2008, compared with net cash required of $204 million for the same period last year.
Outlook
Monsanto's fourth quarter is largely influenced by its global cotton business and U.S. Roundup agricultural herbicides business. The company historically records a loss in the fourth quarter.
Monsanto now expects that its full-year 2008 EPS will be approximately $3.63 on a reported basis and approximately $3.40 on an ongoing basis. (For a reconciliation of ongoing EPS, see page 1). Monsanto's full-year 2008 EPS guidance on a reported basis does not include an estimate for the in-process, research and development charge associated with the company's fourth quarter acquisitions.
The company now expects that its free cash flow for fiscal year 2008 will be $550 million. The company expects net cash provided by operating activities to be in the range of $2.6 billion, and net cash required by investing activities to be approximately $2.05 billion for fiscal year 2008. (For a reconciliation of free cash flow, see note 1.) This revised free cash flow guidance reflects the recently-completed acquisition of De Ruiter Seeds as well as the recently-announced acquisition of Marmot, S.A., which operates Semillas Cristiani Burkard (SCB), a privately-held seed company headquartered in Guatemala City, Guatemala.
Comment from Monsanto Chairman, President and Chief Executive Officer Hugh Grant:
"Backed by continued growing demand for our products, the first nine months of our fiscal year has been remarkable and we're now increasing our full-year guidance. This strong growth sets up a solid foundation for our business and to reach our target of more than doubling gross profit in 2012. Because we're both discovering and delivering innovative tools that can help increase productivity on farm, we offer an attractive solution to the farmer and their mission of meeting our world's growing food, feed and fuel needs. While others are asking should it be food OR feed OR fuel, we believe the answer is AND, and we have the solutions in hand to be a significant part of that answer."
Durable Goods - Up Slightly
New Orders
New orders for manufactured durable goods in May increased slightly to $213.6 billion, the U.S. Census Bureau announced today. This was the first increase in three months and followed a 1.0 percent April decrease. Excluding transportation, new orders decreased 0.9 percent. Excluding defense, new orders decreased 0.6 percent.
Shipments
Shipments of manufactured durable goods in May, down three of the last four months, decreased $2.3 billion or 1.1 percent to $211.3 billion. This followed a 1.8 percent April increase.
Unfilled Orders
Unfilled orders for manufactured durable goods in May, up twenty-seven of the last twenty-eight months, increased $7.1 billion or 0.9 percent to $810.2 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.7 percent April increase.
Inventories
Inventories of manufactured durable goods in May, up ten of the last eleven months, increased $1.4 billion or 0.4 percent to $330.4 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.6 percent April increase.
Capital Goods Industries
Nondefense
Nondefense new orders for capital goods in May increased $0.3 billion or 0.4 percent to $73.9 billion.
Defense
Defense new orders for capital goods in May increased $0.9 billion or 10.9 percent to $9.5 billion.
Another positive is new orders for computers&electronic products (+2.0%) and electrical equipment, appliances and components (+ 1.5%). Tim
New orders for manufactured durable goods in May increased slightly to $213.6 billion, the U.S. Census Bureau announced today. This was the first increase in three months and followed a 1.0 percent April decrease. Excluding transportation, new orders decreased 0.9 percent. Excluding defense, new orders decreased 0.6 percent.
Shipments
Shipments of manufactured durable goods in May, down three of the last four months, decreased $2.3 billion or 1.1 percent to $211.3 billion. This followed a 1.8 percent April increase.
Unfilled Orders
Unfilled orders for manufactured durable goods in May, up twenty-seven of the last twenty-eight months, increased $7.1 billion or 0.9 percent to $810.2 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.7 percent April increase.
Inventories
Inventories of manufactured durable goods in May, up ten of the last eleven months, increased $1.4 billion or 0.4 percent to $330.4 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.6 percent April increase.
Capital Goods Industries
Nondefense
Nondefense new orders for capital goods in May increased $0.3 billion or 0.4 percent to $73.9 billion.
Defense
Defense new orders for capital goods in May increased $0.9 billion or 10.9 percent to $9.5 billion.
Another positive is new orders for computers&electronic products (+2.0%) and electrical equipment, appliances and components (+ 1.5%). Tim
General Mills 4th Qtr 2008
MINNEAPOLIS--(BUSINESS WIRE)--June 25, 2008--General Mills (NYSE: GIS) today reported results for the fourth quarter and full 2008 fiscal year. For the fiscal year ended May 25, 2008, General Mills net sales grew 10 percent to $13.7 billion. Volume (measured in pounds) contributed 3 points of sales growth. Segment operating profits grew 6 percent to $2.4 billion despite higher input costs and a 13 percent increase in consumer marketing expense. Net earnings grew 13 percent to $1.3 billion including non-cash net gains from mark-to-market valuation of certain commodity positions and a favorable ruling related to a tax contingency. (These non-cash items are discussed in the section titled Corporate Items below). Diluted earnings per share (EPS) totaled $3.71 including $0.19 from the commodity and tax items. Excluding these items, earnings per share would have totaled $3.52 for the year, up 11 percent from reported earnings of $3.18 per share a year ago.
Fourth Quarter Results
Net sales for the fourth quarter of 2008 increased 13 percent to $3.5 billion. Volume contributed 3 points of sales growth, pricing and mix added 8 points, and foreign currency exchange accounted for 2 points of growth. Segment operating profits of $517 million rose 5 percent, despite higher input costs and a 20 percent increase in consumer marketing expense in the quarter. Net earnings were $185 million including a reduction of the mark-to-market valuation of certain commodity positions from a net gain of $168 million at the end of the third quarter to a net gain of $57 million at the end of the fiscal year. This reduction was primarily due to declines in key commodity market prices from the prevailing levels recognized last quarter. Excluding this $111 million pre-tax mark-to-market reduction, diluted earnings per share would have been 73 cents, up 18 percent from 62 cents per share reported for the fourth quarter a year ago.
Net sales for the fourth quarter of 2008 increased 13 percent to $3.5 billion. Volume contributed 3 points of sales growth, pricing and mix added 8 points, and foreign currency exchange accounted for 2 points of growth. Segment operating profits of $517 million rose 5 percent, despite higher input costs and a 20 percent increase in consumer marketing expense in the quarter. Net earnings were $185 million including a reduction of the mark-to-market valuation of certain commodity positions from a net gain of $168 million at the end of the third quarter to a net gain of $57 million at the end of the fiscal year. This reduction was primarily due to declines in key commodity market prices from the prevailing levels recognized last quarter. Excluding this $111 million pre-tax mark-to-market reduction, diluted earnings per share would have been 73 cents, up 18 percent from 62 cents per share reported for the fourth quarter a year ago.
International Segment Results
Net sales for General Mills' consolidated international businesses grew 21 percent in 2008 to $2.6 billion. Volume contributed 6 points of growth, price and mix were up 6 points, and favorable currency exchange added another 9 points. The company recorded sales growth in every region where it operates. In Canada, net sales grew 14 percent for the year, primarily reflecting favorable currency exchange. Net sales in Europe rose 19 percent. In the Asia-Pacific region, net sales grew 25 percent, and net sales in Latin America were up 31 percent. International segment operating profits rose 25 percent to $269 million despite higher input costs and double-digit growth in consumer marketing expense.
For the fourth quarter, International net sales grew 21 percent to $681 million. Volume increased 3 percent, price and mix contributed 9 points of growth, and foreign currency exchange added the remaining 9 points. Fourth-quarter operating profits rose 10 percent to $61 million.
Net sales for General Mills' consolidated international businesses grew 21 percent in 2008 to $2.6 billion. Volume contributed 6 points of growth, price and mix were up 6 points, and favorable currency exchange added another 9 points. The company recorded sales growth in every region where it operates. In Canada, net sales grew 14 percent for the year, primarily reflecting favorable currency exchange. Net sales in Europe rose 19 percent. In the Asia-Pacific region, net sales grew 25 percent, and net sales in Latin America were up 31 percent. International segment operating profits rose 25 percent to $269 million despite higher input costs and double-digit growth in consumer marketing expense.
For the fourth quarter, International net sales grew 21 percent to $681 million. Volume increased 3 percent, price and mix contributed 9 points of growth, and foreign currency exchange added the remaining 9 points. Fourth-quarter operating profits rose 10 percent to $61 million.
Fiscal 2009 Outlook
Commenting on fiscal 2009, Powell said, Our plans call for another year of good sales and earnings growth despite an estimated 9 percent increase in supply chain costs. Net sales are expected to grow at a mid single-digit rate, driven primarily by price and mix. Segment operating profits are also expected to grow at a mid single-digit rate, in line with our long-term model.
Diluted earnings per share will continue to include mark-to-market valuation of commodity positions, but the company cannot predict its effect on earnings. Assuming no mark-to-market impact in fiscal 2009, earnings are expected to be between $3.78 and $3.83 per share for the year, representing growth of 7 to 9 percent from the $3.52 EPS excluding tax and commodity items in fiscal 2008.
Commenting on fiscal 2009, Powell said, Our plans call for another year of good sales and earnings growth despite an estimated 9 percent increase in supply chain costs. Net sales are expected to grow at a mid single-digit rate, driven primarily by price and mix. Segment operating profits are also expected to grow at a mid single-digit rate, in line with our long-term model.
Diluted earnings per share will continue to include mark-to-market valuation of commodity positions, but the company cannot predict its effect on earnings. Assuming no mark-to-market impact in fiscal 2009, earnings are expected to be between $3.78 and $3.83 per share for the year, representing growth of 7 to 9 percent from the $3.52 EPS excluding tax and commodity items in fiscal 2008.
Green River Oil Shale Resources
Green River Oil Shale Resources
Location of the Green River Formation Oil Shale and Its Main Basins
While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation would last for more than 400 years1.
More than 70% of the total oil shale acreage in the Green River Formation, including the richest and thickest oil shale deposits, is under federally owned and managed lands. Thus, the federal government directly controls access to the most commercially attractive portions of the oil shale resource base.
Location of the Green River Formation Oil Shale and Its Main Basins
While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation would last for more than 400 years1.
More than 70% of the total oil shale acreage in the Green River Formation, including the richest and thickest oil shale deposits, is under federally owned and managed lands. Thus, the federal government directly controls access to the most commercially attractive portions of the oil shale resource base.
Darden Restaurants Led By Olive Garden
Darden Restaurants Reports Fourth Quarter and Annual Diluted Net Earnings Per Share; Announces Quarterly Dividend of 20 Cents Per Share; Discusses Fiscal 2009 Financial Outlook
ORLANDO, Fla., June 24, 2008 /PRNewswire-FirstCall via COMTEX News Network
Darden Restaurants, Inc. (NYSE: DRI) today reported sales and diluted net earnings per share for the fourth quarter and fiscal year ended May 25, 2008. In the fourth quarter, diluted net earnings per share from continuing operations increased 7% to 72 cents, versus 67 cents in the prior year. The Company estimates that integration costs and purchase accounting adjustments related to the October 2007 acquisition of RARE Hospitality International, Inc. (RARE) reduced diluted net earnings per share by approximately six cents in the fourth quarter. Excluding the estimated integration costs and purchase accounting adjustments of approximately six cents, net earnings from continuing operations were 78 cents per diluted share.
For the fiscal year, diluted net earnings per share from continuing operations increased 1% to $2.55 from $2.53 in the prior year. The Company estimates that integration costs and purchase accounting adjustments related to the acquisition of RARE reduced diluted net earnings per share by approximately 19 cents in the fiscal year. Excluding the estimated integration costs and purchase accounting adjustments of approximately 19 cents, net earnings from continuing operations were $2.74 per diluted share.
Fourth quarter sales from continuing operations were $1.83 billion, compared to $1.46 billion reported in the prior year, a 25% increase. Fiscal 2008 sales from continuing operations were $6.63 billion, which is a 19% increase from the prior year's sales from continuing operations of $5.57 billion. These increases reflect sales from the LongHorn Steakhouse and The Capital Grille brands as part of the RARE acquisition as well as meaningful new and same-restaurant sales growth at Olive Garden.
Darden reported fourth quarter diluted net earnings per share including discontinued operations of $0.71, compared to diluted net losses per share of $0.38 for the same period last year. Fiscal 2008 diluted net earnings per share including discontinued operations were $2.60, compared to $1.35 in the prior year.
Other Actions
Darden's Board of Directors declared a quarterly cash dividend of 20 cents per share on the Company's outstanding common stock. The dividend is payable on August 1, 2008 to shareholders of record at the close of business on July 10, 2008. Previously, the Company paid a quarterly dividend of 18 cents per share. Based on the 20 cent quarterly dividend declaration, the Company's indicated annual dividend is 80 cents per share, an increase of more than 11%.
Darden continued the buyback of its common stock, purchasing 201,525 shares in the fourth quarter. In fiscal 2008, the Company spent $159 million purchasing 5.0 million shares. Since commencing its repurchase program in December 1995, the Company has purchased almost 147 million shares for $2.78 billion under authorizations totaling 162.4 million shares. The Company's current expectation is that it will repurchase approximately $200 million to $225 million of its common stock in fiscal 2009.
Fiscal 2009 Financial Outlook
Darden announced that it expects combined U.S. same-restaurant sales growth in fiscal 2009 of approximately 2% for Red Lobster, Olive Garden and LongHorn Steakhouse, and that it expects to open approximately 75 to 80 net new restaurants in fiscal 2009. As a result, the Company expects total sales growth of between 14% and 15% in fiscal 2009, compared to reported sales from continuing operations of $6.63 billion in fiscal 2008. This total sales growth includes the two percentage point impact of the 53rd week in fiscal 2009; excluding the 53rd week, the expected total sales growth would be approximately 12% to 13%.
The Company also announced that it anticipates reported diluted net earnings per share growth from continuing operations of 14% to 15% in fiscal 2009, which includes the impact of the 53rd week. This compares to reported diluted net earnings per share from continuing operations of $2.55 in fiscal 2008. The additional week is expected to contribute approximately two percentage points, or $0.05, of growth in fiscal 2009
Excluding the estimated integration costs and purchase accounting adjustments of approximately 19 cents in fiscal 2008, net earnings from continuing operations were $2.74 per diluted share. In fiscal 2009, these costs and adjustments are estimated to be approximately 6 to 7 cents per diluted share. Excluding the impact of these costs and adjustments for both fiscal 2008 and fiscal 2009, the Company expects diluted net earnings per share growth of 9% to 10% on a 53-week basis and 7% to 8% on a 52-week basis.
Darden Restaurants, Inc., (NYSE: DRI) headquartered in Orlando, Fla., is the world's largest company-owned and operated full-service restaurant company with almost $6.7 billion in annual sales and approximately 180,000 employees. The Company owns and operates over 1,700 restaurants including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52.
ORLANDO, Fla., June 24, 2008 /PRNewswire-FirstCall via COMTEX News Network
Darden Restaurants, Inc. (NYSE: DRI) today reported sales and diluted net earnings per share for the fourth quarter and fiscal year ended May 25, 2008. In the fourth quarter, diluted net earnings per share from continuing operations increased 7% to 72 cents, versus 67 cents in the prior year. The Company estimates that integration costs and purchase accounting adjustments related to the October 2007 acquisition of RARE Hospitality International, Inc. (RARE) reduced diluted net earnings per share by approximately six cents in the fourth quarter. Excluding the estimated integration costs and purchase accounting adjustments of approximately six cents, net earnings from continuing operations were 78 cents per diluted share.
For the fiscal year, diluted net earnings per share from continuing operations increased 1% to $2.55 from $2.53 in the prior year. The Company estimates that integration costs and purchase accounting adjustments related to the acquisition of RARE reduced diluted net earnings per share by approximately 19 cents in the fiscal year. Excluding the estimated integration costs and purchase accounting adjustments of approximately 19 cents, net earnings from continuing operations were $2.74 per diluted share.
Fourth quarter sales from continuing operations were $1.83 billion, compared to $1.46 billion reported in the prior year, a 25% increase. Fiscal 2008 sales from continuing operations were $6.63 billion, which is a 19% increase from the prior year's sales from continuing operations of $5.57 billion. These increases reflect sales from the LongHorn Steakhouse and The Capital Grille brands as part of the RARE acquisition as well as meaningful new and same-restaurant sales growth at Olive Garden.
Darden reported fourth quarter diluted net earnings per share including discontinued operations of $0.71, compared to diluted net losses per share of $0.38 for the same period last year. Fiscal 2008 diluted net earnings per share including discontinued operations were $2.60, compared to $1.35 in the prior year.
Other Actions
Darden's Board of Directors declared a quarterly cash dividend of 20 cents per share on the Company's outstanding common stock. The dividend is payable on August 1, 2008 to shareholders of record at the close of business on July 10, 2008. Previously, the Company paid a quarterly dividend of 18 cents per share. Based on the 20 cent quarterly dividend declaration, the Company's indicated annual dividend is 80 cents per share, an increase of more than 11%.
Darden continued the buyback of its common stock, purchasing 201,525 shares in the fourth quarter. In fiscal 2008, the Company spent $159 million purchasing 5.0 million shares. Since commencing its repurchase program in December 1995, the Company has purchased almost 147 million shares for $2.78 billion under authorizations totaling 162.4 million shares. The Company's current expectation is that it will repurchase approximately $200 million to $225 million of its common stock in fiscal 2009.
Fiscal 2009 Financial Outlook
Darden announced that it expects combined U.S. same-restaurant sales growth in fiscal 2009 of approximately 2% for Red Lobster, Olive Garden and LongHorn Steakhouse, and that it expects to open approximately 75 to 80 net new restaurants in fiscal 2009. As a result, the Company expects total sales growth of between 14% and 15% in fiscal 2009, compared to reported sales from continuing operations of $6.63 billion in fiscal 2008. This total sales growth includes the two percentage point impact of the 53rd week in fiscal 2009; excluding the 53rd week, the expected total sales growth would be approximately 12% to 13%.
The Company also announced that it anticipates reported diluted net earnings per share growth from continuing operations of 14% to 15% in fiscal 2009, which includes the impact of the 53rd week. This compares to reported diluted net earnings per share from continuing operations of $2.55 in fiscal 2008. The additional week is expected to contribute approximately two percentage points, or $0.05, of growth in fiscal 2009
Excluding the estimated integration costs and purchase accounting adjustments of approximately 19 cents in fiscal 2008, net earnings from continuing operations were $2.74 per diluted share. In fiscal 2009, these costs and adjustments are estimated to be approximately 6 to 7 cents per diluted share. Excluding the impact of these costs and adjustments for both fiscal 2008 and fiscal 2009, the Company expects diluted net earnings per share growth of 9% to 10% on a 53-week basis and 7% to 8% on a 52-week basis.
Darden Restaurants, Inc., (NYSE: DRI) headquartered in Orlando, Fla., is the world's largest company-owned and operated full-service restaurant company with almost $6.7 billion in annual sales and approximately 180,000 employees. The Company owns and operates over 1,700 restaurants including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52.
Tuesday, June 24, 2008
Future Shock - Oil Shale
Colorado Oil Shale Leases - Green River Formation
Map of the Oil Shale Basins in Colorado, Wyoming and Utah.The Bureau of Land Management issued leases for five oil shale research projects. These are the first federal oil shale leases issued in over thirty years. Increasing demand for energy and increasing oil prices have spurred a renewal of interest in oil shale. Oil shale is a rock that is rich in an organic material known as kerogen. If it is heated in the absence of air the kerogen will yield liquid oil. The Green River Formation, which underlies large portions of Wyoming, Utah and Colorado contains the world’s largest oil shale resource. According to BLM this deposit could contain over 800 billion barrels of recoverable oil - more equivalent oil than the Middle East. However, this resource has not been developed because the cost of extracting oil from the shale has historically been too high.
Recent increases in oil prices and demand have spurred a renewed interest in oil shale research. These new BLM leases grant rights to develop the oil shale on 160-acre tracts for a period of ten years. The leases can be extended in time and expanded to up to 5000 acres if specific commercial production levels have been met.There are two different approaches to extracting oil from the shale. One process involves mining the shale, crushing it and running it through a heat treatment process. The other heats the shale while it is still in the ground and produces the oil through wells. This in-situ conversion is currently favored by many industry experts. Challenges which accompany the development of an oil shale resource include: greenhouse gas emissions, mined land reclamation, disposal of spent shale, and water use.
Energy 101 - Oil Shale
What Is Oil Shale?
Oil shale
The term oil shale generally refers to any sedimentary rock that contains solid bituminous materials (called kerogen) that are released as petroleum-like liquids when the rock is heated in the chemical process of pyrolysis. Oil shale was formed millions of years ago by deposition of silt and organic debris on lake beds and sea bottoms. Over long periods of time, heat and pressure transformed the materials into oil shale in a process similar to the process that forms oil; however, the heat and pressure were not as great. Oil shale generally contains enough oil that it will burn without any additional processing, and it is known as "the rock that burns".
Oil shale can be mined and processed to generate oil similar to oil pumped from conventional oil wells; however, extracting oil from oil shale is more complex than conventional oil recovery and currently is more expensive. The oil substances in oil shale are solid and cannot be pumped directly out of the ground. The oil shale must first be mined and then heated to a high temperature (a process called retorting); the resultant liquid must then be separated and collected. An alternative but currently experimental process referred to as in situ retorting involves heating the oil shale while it is still underground, and then pumping the resulting liquid to the surface.
Oil shale
The term oil shale generally refers to any sedimentary rock that contains solid bituminous materials (called kerogen) that are released as petroleum-like liquids when the rock is heated in the chemical process of pyrolysis. Oil shale was formed millions of years ago by deposition of silt and organic debris on lake beds and sea bottoms. Over long periods of time, heat and pressure transformed the materials into oil shale in a process similar to the process that forms oil; however, the heat and pressure were not as great. Oil shale generally contains enough oil that it will burn without any additional processing, and it is known as "the rock that burns".
Oil shale can be mined and processed to generate oil similar to oil pumped from conventional oil wells; however, extracting oil from oil shale is more complex than conventional oil recovery and currently is more expensive. The oil substances in oil shale are solid and cannot be pumped directly out of the ground. The oil shale must first be mined and then heated to a high temperature (a process called retorting); the resultant liquid must then be separated and collected. An alternative but currently experimental process referred to as in situ retorting involves heating the oil shale while it is still underground, and then pumping the resulting liquid to the surface.
Market Capitulation? Or Have We Bottomed Yet?
Call the latest banks-inspired stock market selloff whatever you want, but don't call it a capitulation.
That's wishful thinking, according to many market pros, who say that despite Merrill Lynch's warning that banks are in capitulation and on their way to dividend cuts, the phenomenon hasn't spread to the larger market.
Capitulation is considered a point at which stocks are oversold and setting themselves up as bargains. That would be bad news in the short term as it would mean equities have fallen to perilously low levels, but good news in the long range in that it would signal a bottom and a point off which the market can rally.
Analysts and investment advisors say that a lack of sustained panic-selling indicates we're just not there yet despite Merrill's call on bank stocks, which have been the biggest weight on the broader market.
"I think capitulation's a strong word," says Brian Gendreau, investment strategist at ING Investment Management. "When you get a capitulation trade you get a feeling of total despair and darkness in the market where people just completely throw in the towel, and I don't see that at all."
One measure getting a lot of attention as the market heads toward testing new lows is the Chicago Board Options Exchange's Volatility Index which moved up sharply on Friday but remains well off the highs it generally shows during a market bottom. A reading above 20 in the VIX generally indicates substantial volatility, but the number typically has reached the 30s during times of market bottom like in 2002 and 2003.
As long as the VIX remains in the 20s, analysts see little reason to expect a bottom.
That's wishful thinking, according to many market pros, who say that despite Merrill Lynch's warning that banks are in capitulation and on their way to dividend cuts, the phenomenon hasn't spread to the larger market.
Capitulation is considered a point at which stocks are oversold and setting themselves up as bargains. That would be bad news in the short term as it would mean equities have fallen to perilously low levels, but good news in the long range in that it would signal a bottom and a point off which the market can rally.
Analysts and investment advisors say that a lack of sustained panic-selling indicates we're just not there yet despite Merrill's call on bank stocks, which have been the biggest weight on the broader market.
"I think capitulation's a strong word," says Brian Gendreau, investment strategist at ING Investment Management. "When you get a capitulation trade you get a feeling of total despair and darkness in the market where people just completely throw in the towel, and I don't see that at all."
One measure getting a lot of attention as the market heads toward testing new lows is the Chicago Board Options Exchange's Volatility Index which moved up sharply on Friday but remains well off the highs it generally shows during a market bottom. A reading above 20 in the VIX generally indicates substantial volatility, but the number typically has reached the 30s during times of market bottom like in 2002 and 2003.
As long as the VIX remains in the 20s, analysts see little reason to expect a bottom.
Consumer Confidence Index Declines Again
The Conference Board Consumer Confidence Index Declines
June 24, 2008
The Conference Board Consumer Confidence Index, which had declined in May, declined even further in June. The Index now stands at 50.4 (1985=100), down from 58.1 in May. The Present Situation Index decreased to 64.5 from 74.2. The Expectations Index declined to 41.0 from 47.3 in May.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for June's preliminary results was June 18th.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: "This month's Consumer Confidence Index is the fifth lowest reading ever. Consumers' assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear. Looking ahead, consumers' economic outlook is so bleak that the Expectations Index has reached a new all-time low. Perhaps the silver lining to this otherwise dismal report is that Consumer Confidence may be nearing a bottom."
Consumers' assessment of present conditions grew dimmer in June. Those claiming business conditions are "bad" increased to 32.5 percent from 29.7 percent, while those claiming business conditions are "good" declined to 11.5 percent from 13.0 percent last month. Consumers' appraisal of the job market was also more pessimistic. Those saying jobs are "hard to get" increased to 30.5 percent from 28.3 percent in May. Those claiming jobs are "plentiful" declined to 14.1 percent from 16.1 percent.
Consumers' short-term expectations deteriorated further in June. Those expecting business conditions to worsen over the next six months rose to 33.9 percent from 32.9 percent, while those anticipating business conditions to improve decreased to 8.8 percent from 10.6 percent in May.
The outlook for the labor market was also more pessimistic. The percent of consumers expecting fewer jobs in the months ahead increased to 35.5 percent from 32.3 percent, while those anticipating more jobs declined to 8.0 percent from 9.0 percent. The proportion of consumers expecting their incomes to increase declined to 12.3 percent from 14.1 percent.
June 24, 2008
The Conference Board Consumer Confidence Index, which had declined in May, declined even further in June. The Index now stands at 50.4 (1985=100), down from 58.1 in May. The Present Situation Index decreased to 64.5 from 74.2. The Expectations Index declined to 41.0 from 47.3 in May.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for June's preliminary results was June 18th.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: "This month's Consumer Confidence Index is the fifth lowest reading ever. Consumers' assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear. Looking ahead, consumers' economic outlook is so bleak that the Expectations Index has reached a new all-time low. Perhaps the silver lining to this otherwise dismal report is that Consumer Confidence may be nearing a bottom."
Consumers' assessment of present conditions grew dimmer in June. Those claiming business conditions are "bad" increased to 32.5 percent from 29.7 percent, while those claiming business conditions are "good" declined to 11.5 percent from 13.0 percent last month. Consumers' appraisal of the job market was also more pessimistic. Those saying jobs are "hard to get" increased to 30.5 percent from 28.3 percent in May. Those claiming jobs are "plentiful" declined to 14.1 percent from 16.1 percent.
Consumers' short-term expectations deteriorated further in June. Those expecting business conditions to worsen over the next six months rose to 33.9 percent from 32.9 percent, while those anticipating business conditions to improve decreased to 8.8 percent from 10.6 percent in May.
The outlook for the labor market was also more pessimistic. The percent of consumers expecting fewer jobs in the months ahead increased to 35.5 percent from 32.3 percent, while those anticipating more jobs declined to 8.0 percent from 9.0 percent. The proportion of consumers expecting their incomes to increase declined to 12.3 percent from 14.1 percent.
Case-Shiller Housing Index Drops Again
Steep Declines in Home Prices Continued in April 2008 According to the
S&P/Case-Shiller Home Price Indices
New York, June 24, 2008 – Data through April 2008, released today by Standard & Poor's for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show annual declines in the prices of existing single family homes across the United States continued to worsen in April 2008, with all 20 MSAs now posting annual declines, 13 of which are posting record low annual declines, and 10 of which are in double-digits.
S&P/Case-Shiller Home Price Indices
New York, June 24, 2008 – Data through April 2008, released today by Standard & Poor's for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show annual declines in the prices of existing single family homes across the United States continued to worsen in April 2008, with all 20 MSAs now posting annual declines, 13 of which are posting record low annual declines, and 10 of which are in double-digits.
GM Hires Citi To Cut Hummer?
DETROIT (Reuters) - General Motors Corp confirmed on Monday it is offering zero-percent financing for 72 months on most of its 2008 models and has hired Citibank to advise on the ongoing review of its Hummer brand.
Citibank will help the No.1 U.S. automaker with the review, including assessing any potential offers from potential buyers for the military-derived SUV line, U.S. sales chief Mark LaNeve told reporters on a conference call.
(Reporting by Soyoung Kim and Poornima Gupta, editing by Phil Berlowitz)
Citibank will help the No.1 U.S. automaker with the review, including assessing any potential offers from potential buyers for the military-derived SUV line, U.S. sales chief Mark LaNeve told reporters on a conference call.
(Reporting by Soyoung Kim and Poornima Gupta, editing by Phil Berlowitz)
FedEx Lower 4th Qtr 2008 Earnings
FedEx Corp. Reports Fourth Quarter and Full Year Earnings
MEMPHIS, Tenn., June 18, 2008 ... FedEx Corp. (NYSE: FDX) today reported a loss of $0.78 per diluted share for the fourth quarter ended May 31, compared to earnings of $1.96 per diluted share a year ago. The quarter's results include the previously announced charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to one-time, non-cash asset impairment charges. These charges were associated with the decision to minimize the use of the Kinko's trade name and a reduction in the value of the goodwill resulting from the Kinko's acquisition. Last year's fourth quarter included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were $1.45 per diluted share in the fourth quarter compared to $1.90 per diluted share a year ago.
"Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Despite the challenging conditions, our team members continue their outstanding performance in support of our customers, as service levels and morale remain high. We will continue to reduce expenses to match volume and revenue expectations."
Outlook
Earnings are difficult to predict in light of very volatile and high fuel prices and an uncertain economic outlook. FedEx projects earnings to be $0.80 to $1.00 per diluted share in the first quarter. This is in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger. The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share. This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company's transportation segments. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy.
"The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "However, we will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across our portfolio of services."
The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.
MEMPHIS, Tenn., June 18, 2008 ... FedEx Corp. (NYSE: FDX) today reported a loss of $0.78 per diluted share for the fourth quarter ended May 31, compared to earnings of $1.96 per diluted share a year ago. The quarter's results include the previously announced charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to one-time, non-cash asset impairment charges. These charges were associated with the decision to minimize the use of the Kinko's trade name and a reduction in the value of the goodwill resulting from the Kinko's acquisition. Last year's fourth quarter included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were $1.45 per diluted share in the fourth quarter compared to $1.90 per diluted share a year ago.
"Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Despite the challenging conditions, our team members continue their outstanding performance in support of our customers, as service levels and morale remain high. We will continue to reduce expenses to match volume and revenue expectations."
Outlook
Earnings are difficult to predict in light of very volatile and high fuel prices and an uncertain economic outlook. FedEx projects earnings to be $0.80 to $1.00 per diluted share in the first quarter. This is in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger. The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share. This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company's transportation segments. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy.
"The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "However, we will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across our portfolio of services."
The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.
UPS Warns
UPS Lowers 2Q Earnings Expectations
Press Release
Slow Economic Growth, High Fuel Costs Cited
ATLANTA, June 23, 2008 - UPS (NYSE: UPS) today announced it expects earnings per diluted share for the second quarter within a range of $0.83-to-$0.88 compared to the $0.97-to $1.04 per share the company originally anticipated.
Slow U.S. economic growth and an unprecedented increase in the cost of fuel have resulted in lower-than-expected U.S. package volume and an accelerating contraction in the use of premium air products. In addition, the anemic U.S. economy is negatively impacting package volume into the United States, affecting results for the International segment. Performance in the Supply Chain & Freight segment is continuing to exceed expectations.
On July 22, UPS will release second quarter results followed by a conference call to provide insight into the quarter and remainder of the year.
Press Release
Slow Economic Growth, High Fuel Costs Cited
ATLANTA, June 23, 2008 - UPS (NYSE: UPS) today announced it expects earnings per diluted share for the second quarter within a range of $0.83-to-$0.88 compared to the $0.97-to $1.04 per share the company originally anticipated.
Slow U.S. economic growth and an unprecedented increase in the cost of fuel have resulted in lower-than-expected U.S. package volume and an accelerating contraction in the use of premium air products. In addition, the anemic U.S. economy is negatively impacting package volume into the United States, affecting results for the International segment. Performance in the Supply Chain & Freight segment is continuing to exceed expectations.
On July 22, UPS will release second quarter results followed by a conference call to provide insight into the quarter and remainder of the year.
Two Fund Recommendations - CGMFX, FAIRX
I have two recommendations for those interested in quality mutual funds. CGM Focus Funds (CGMFX) and Fairholme (FAIRX). I have recently invested in both funds. Below is the chart and returns for CGMFX.
Returns
2004-----2005-----2006-----2007-----2008
12.4-----25.3------14.9------80.0------10.7
Below is the chart and returns for FAIRX.
Returns
2004-----2005-----2006-----2007-----2008
24.9-----13.7------16.7------12.4------5.3
Returns
2004-----2005-----2006-----2007-----2008
12.4-----25.3------14.9------80.0------10.7
Below is the chart and returns for FAIRX.
Returns
2004-----2005-----2006-----2007-----2008
24.9-----13.7------16.7------12.4------5.3
Monday, June 23, 2008
Energy 101 - Oil Consumption Per Person
The following stats are an indication that we need to continue to produce more oil, at least in the short and medium term. Conservation, alternative fuels, and expansion of non-oil energy are vital for the long term but the opening of ANWR and offshore drilling are vital in the short and medium term. Politicians should not tie the hands of the producers but promote and encourage increased production.
---------Oil Consumption per person (2006)
US------------24.5 barrels
China----------1.8 barrels
India-----------0.8 barrels
While our consumption has leveled off it is inevitable that China and India consumption will increase dramatically. (Tim)
---------Oil Consumption per person (2006)
US------------24.5 barrels
China----------1.8 barrels
India-----------0.8 barrels
While our consumption has leveled off it is inevitable that China and India consumption will increase dramatically. (Tim)
Oil In The Great States Of North Dakota And Montana
Reston, VA - North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.
A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.
As a comparison ANWR is estimated to hold between 5.7 and 16.0 billion barrels. (Tim)
3 to 4.3 Billion Barrels of Oil in North Dakota and Montana
Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.
New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007.
The USGS Bakken study was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol as required by the Energy Policy and Conservation Act of 2000.
The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the USGS. A "continuous" oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest "continuous" oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil.
"It is clear that the Bakken formation contains a significant amount of oil - the question is how much of that oil is recoverable using today's technology?" said Senator Byron Dorgan, of North Dakota. "To get an answer to this important question, I requested that the U.S. Geological Survey complete this study, which will provide an up-to-date estimate on the amount of technically recoverable oil resources in the Bakken Shale formation."
The USGS estimate of 3.0 to 4.3 billion barrels of technically recoverable oil has a mean value of 3.65 billion barrels. Scientists conducted detailed studies in stratigraphy and structural geology and the modeling of petroleum geochemistry. They also combined their findings with historical exploration and production analyses to determine the undiscovered, technically recoverable oil estimates.
USGS worked with the North Dakota Geological Survey, a number of petroleum industry companies and independents, universities and other experts to develop a geological understanding of the Bakken Formation. These groups provided critical information and feedback on geological and engineering concepts important to building the geologic and production models used in the assessment.
Five continuous assessment units (AU) were identified and assessed in the Bakken Formation of North Dakota and Montana - the Elm Coulee-Billings Nose AU, the Central Basin-Poplar Dome AU, the Nesson-Little Knife Structural AU, the Eastern Expulsion Threshold AU, and the Northwest Expulsion Threshold AU.
At the time of the assessment, a limited number of wells have produced oil from three of the assessments units in Central Basin-Poplar Dome, Eastern Expulsion Threshold, and Northwest Expulsion Threshold. The Elm Coulee oil field in Montana, discovered in 2000, has produced about 65 million barrels of the 105 million barrels of oil recovered from the Bakken Formation.
A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.
As a comparison ANWR is estimated to hold between 5.7 and 16.0 billion barrels. (Tim)
3 to 4.3 Billion Barrels of Oil in North Dakota and Montana
Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.
New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007.
The USGS Bakken study was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol as required by the Energy Policy and Conservation Act of 2000.
The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the USGS. A "continuous" oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest "continuous" oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil.
"It is clear that the Bakken formation contains a significant amount of oil - the question is how much of that oil is recoverable using today's technology?" said Senator Byron Dorgan, of North Dakota. "To get an answer to this important question, I requested that the U.S. Geological Survey complete this study, which will provide an up-to-date estimate on the amount of technically recoverable oil resources in the Bakken Shale formation."
The USGS estimate of 3.0 to 4.3 billion barrels of technically recoverable oil has a mean value of 3.65 billion barrels. Scientists conducted detailed studies in stratigraphy and structural geology and the modeling of petroleum geochemistry. They also combined their findings with historical exploration and production analyses to determine the undiscovered, technically recoverable oil estimates.
USGS worked with the North Dakota Geological Survey, a number of petroleum industry companies and independents, universities and other experts to develop a geological understanding of the Bakken Formation. These groups provided critical information and feedback on geological and engineering concepts important to building the geologic and production models used in the assessment.
Five continuous assessment units (AU) were identified and assessed in the Bakken Formation of North Dakota and Montana - the Elm Coulee-Billings Nose AU, the Central Basin-Poplar Dome AU, the Nesson-Little Knife Structural AU, the Eastern Expulsion Threshold AU, and the Northwest Expulsion Threshold AU.
At the time of the assessment, a limited number of wells have produced oil from three of the assessments units in Central Basin-Poplar Dome, Eastern Expulsion Threshold, and Northwest Expulsion Threshold. The Elm Coulee oil field in Montana, discovered in 2000, has produced about 65 million barrels of the 105 million barrels of oil recovered from the Bakken Formation.
Citi ValueLine Outlook
Citigroup reported a first-quarter loss of $1.02 per share. Results included $6.0 billion in subprime mortgage writedowns, and $3.1 billion in consumer loan losses. Additional charge-offs for leveraged finance commitments, exposure to monoline insurers, and auction rate securities totaled $6.1 billion. The writedowns lowered revenues almost 50% from last year, and caused the loss. Domestic credit costs reflected higher delinquencies on first and second mortgages, credit card, and auto loans. International credit costs reflected weakness in Mexican credit cards and consumer finance in India.
Capital counts. Recent large capital raises affirm that management is ‘‘committed’’ to excess capital ‘‘in this (challenging) environment’’. Too, capital
allocation will now be even more driven by expected payback.
CEO Vikram Pandit’s strategy is multifaceted, as articulated at the investor day that we recently attended at Citigroup headquarters. Citi aims to shed up to $500 billion of assets over time, downsizing the consumer and investment banking businesses, as well as others that are generating unattractive returns. The risk management function has been expanded, and all regions now have their own risk
manager. Too, Citi has added risk managers to its real estate lending and structured finance units, in addition to those it already had in place for its consumer, wealth management, and investment banking operations. Management aims to cut $15 billion of costs per year by 2010 to boost return metrics, simultaneously improving the efficiency ratio. Over 15 database centers will be merged into two or three, eliminating some of the 25,000 employees that oversee the various systems.
These shares are untimely. Mr. Pandit has no interest in breaking up the financial conglomerate that is Citigroup, but instead aims to divest underperforming assets, cut costs, increase capital levels, and improve morale. The de-emphasis of the recently troubled mortgage operations, and an increased focus on international opportunities appear reasonable, in our view. Still, CFO Gary Crittenden notes that there ‘‘could be significant deterioration of credit’’ in the second half of 2008.
Douglas G. Maurer, CFA May 23, 2008
BUSINESS: Citigroup is a diversified financial services company with operations in consumer and corporate banking, insurance, investment banking, and asset management. Businesses include Citibank, Smith Barney, CitiFinancial, Primerica Financial Services, and Banamex. Spun off 23.0% of Travelers Property Casualty, 3/02; spun off 67.0%, 8/02. Sold Travelers Life & Annuity, 7/05. Has about 200 million customer accounts in over 100 countries. Has around 300,000 employees. Officers/directors own approximately .7% of common stock (3/08 proxy). Chairman: Win Bischoff; CEO: Vikram Pandit. Incorporated: Delaware. Address: 153 East
53rd Street, New York, New York 10043. Telephone: 212-559-1000. Internet: www.citigroup.com.
2011-13 PROJECTIONS
-----------------------------------------------------Ann’l Total
Price---------------------Gain-----------------------Return
High 45------------------(+95%)----------------------21%
Low 30------------------(+30%)----------------------11%
Capital counts. Recent large capital raises affirm that management is ‘‘committed’’ to excess capital ‘‘in this (challenging) environment’’. Too, capital
allocation will now be even more driven by expected payback.
CEO Vikram Pandit’s strategy is multifaceted, as articulated at the investor day that we recently attended at Citigroup headquarters. Citi aims to shed up to $500 billion of assets over time, downsizing the consumer and investment banking businesses, as well as others that are generating unattractive returns. The risk management function has been expanded, and all regions now have their own risk
manager. Too, Citi has added risk managers to its real estate lending and structured finance units, in addition to those it already had in place for its consumer, wealth management, and investment banking operations. Management aims to cut $15 billion of costs per year by 2010 to boost return metrics, simultaneously improving the efficiency ratio. Over 15 database centers will be merged into two or three, eliminating some of the 25,000 employees that oversee the various systems.
These shares are untimely. Mr. Pandit has no interest in breaking up the financial conglomerate that is Citigroup, but instead aims to divest underperforming assets, cut costs, increase capital levels, and improve morale. The de-emphasis of the recently troubled mortgage operations, and an increased focus on international opportunities appear reasonable, in our view. Still, CFO Gary Crittenden notes that there ‘‘could be significant deterioration of credit’’ in the second half of 2008.
Douglas G. Maurer, CFA May 23, 2008
BUSINESS: Citigroup is a diversified financial services company with operations in consumer and corporate banking, insurance, investment banking, and asset management. Businesses include Citibank, Smith Barney, CitiFinancial, Primerica Financial Services, and Banamex. Spun off 23.0% of Travelers Property Casualty, 3/02; spun off 67.0%, 8/02. Sold Travelers Life & Annuity, 7/05. Has about 200 million customer accounts in over 100 countries. Has around 300,000 employees. Officers/directors own approximately .7% of common stock (3/08 proxy). Chairman: Win Bischoff; CEO: Vikram Pandit. Incorporated: Delaware. Address: 153 East
53rd Street, New York, New York 10043. Telephone: 212-559-1000. Internet: www.citigroup.com.
2011-13 PROJECTIONS
-----------------------------------------------------Ann’l Total
Price---------------------Gain-----------------------Return
High 45------------------(+95%)----------------------21%
Low 30------------------(+30%)----------------------11%
Walgreens
06/23/08 Walgreen Co. Reports Record Sales and Earnings in Third Quarter 2008
Net earnings increase 2.0 percent to $572 million
Diluted earnings per share increase to 58 cents
Total sales increase 9.6 percent; front-end comparable store sales up 4.6 percent
Expense dollars grow 10.0 percent while the company opens 138 new drugstores
DEERFIELD, Ill., June 23, 2008 — Walgreens (NYSE, NASDAQ: WAG) today announced record sales and earnings for the fiscal year 2008 third quarter and first nine months.
Net earnings for the quarter ended May 31 rose 2.0 percent to $572 million or 58 cents per share (diluted), from $561 million or 56 cents per share (diluted) in the same quarter a year ago. Walgreens recorded a LIFO provision of $16.1 million in this year's quarter versus a credit of $3.5 million in last year's third quarter. Last year's quarter also included a $13.5 million credit from the resolution of a multiyear state tax matter.
Net earnings for the nine months increased 4.2 percent to $1.71 billion or $1.72 per share (diluted), versus last year's $1.64 billion or $1.63 per share (diluted). Last year's nine-month earnings also benefited from the previously mentioned lower LIFO rate and tax benefit.
"In a challenging economy, we continued investing in our future with a relentless focus on cost control," said Walgreens Chairman and CEO Jeffrey A. Rein. "We posted solid results while going up against a nearly 20 percent earnings increase in the year-ago quarter and a more robust economic environment. At a time when Americans are searching for value and convenience, we're one of the retailers they're turning to."
Net earnings increase 2.0 percent to $572 million
Diluted earnings per share increase to 58 cents
Total sales increase 9.6 percent; front-end comparable store sales up 4.6 percent
Expense dollars grow 10.0 percent while the company opens 138 new drugstores
DEERFIELD, Ill., June 23, 2008 — Walgreens (NYSE, NASDAQ: WAG) today announced record sales and earnings for the fiscal year 2008 third quarter and first nine months.
Net earnings for the quarter ended May 31 rose 2.0 percent to $572 million or 58 cents per share (diluted), from $561 million or 56 cents per share (diluted) in the same quarter a year ago. Walgreens recorded a LIFO provision of $16.1 million in this year's quarter versus a credit of $3.5 million in last year's third quarter. Last year's quarter also included a $13.5 million credit from the resolution of a multiyear state tax matter.
Net earnings for the nine months increased 4.2 percent to $1.71 billion or $1.72 per share (diluted), versus last year's $1.64 billion or $1.63 per share (diluted). Last year's nine-month earnings also benefited from the previously mentioned lower LIFO rate and tax benefit.
"In a challenging economy, we continued investing in our future with a relentless focus on cost control," said Walgreens Chairman and CEO Jeffrey A. Rein. "We posted solid results while going up against a nearly 20 percent earnings increase in the year-ago quarter and a more robust economic environment. At a time when Americans are searching for value and convenience, we're one of the retailers they're turning to."
In The Citi
From Barrons - Jacqueline Doherty
LAST WEEK CITIGROUP ONCE AGAIN SPOOKED the market by warning investors it would report large loan write-downs in the second quarter. Analysts now expect write-offs of around $10 billion and, as you'd expect, the shares fell with a thud -- down 6% on the week, to 19.21. Citi (C) now is down an eye-popping 65% from its 2006 peak and trades just a tad north of its March low.
Even after the latest news, Dick Bove, an analyst at Ladenburg Thalmann, is positive on the shares. Write-offs will continue, he says, but the bank has raised billions in capital; it's adding low-cost deposits, increasing its loan volume, controlling costs and improving margins.
Write-offs are like the proverbial pig swallowed by a snake. They take time to work through, and the snake doesn't look too pretty. But once Citi's cleansing is over, Bove says, the company will look better than before. His price target: $25.
LAST WEEK CITIGROUP ONCE AGAIN SPOOKED the market by warning investors it would report large loan write-downs in the second quarter. Analysts now expect write-offs of around $10 billion and, as you'd expect, the shares fell with a thud -- down 6% on the week, to 19.21. Citi (C) now is down an eye-popping 65% from its 2006 peak and trades just a tad north of its March low.
Even after the latest news, Dick Bove, an analyst at Ladenburg Thalmann, is positive on the shares. Write-offs will continue, he says, but the bank has raised billions in capital; it's adding low-cost deposits, increasing its loan volume, controlling costs and improving margins.
Write-offs are like the proverbial pig swallowed by a snake. They take time to work through, and the snake doesn't look too pretty. But once Citi's cleansing is over, Bove says, the company will look better than before. His price target: $25.
The Week Ahead - June 23
Market Movers
June 24 - Consumer Confidence Index (56.5)
June 25 - Durable Goods Order (0.0)
----------New Homes Sales (515K)
----------EIA Petroleum Status
June 26 - GDP (1st Qtr final, 1.0)
----------Jobless Claims (380K)
----------Existing Home Sales (5.0M)
June 27 - Personal Income and Outlays (0.4, 0.7)
Earnings
June 23 - Walgreens (0.59)
June 24 - Darden Restaurants (0.75)
June 25 - General Mills (0.70)
----------Monsanto (1.34)
----------Nike (0.96)
----------Oracle (0.44)
June 26 - Paychex (0.38)
Friday, June 20, 2008
Healthy Care 101 - The Life Expectancy Myth
By N. GREGORY MANKIW
Published: November 4, 2007
WITH the health care system at the center of the political debate, a lot of scary claims are being thrown around. The dangerous ones are not those that are false; watchdogs in the news media are quick to debunk them. Rather, the dangerous ones are those that are true but don’t mean what people think they mean.
Here is the first of three true but misleading statements about health care that politicians and pundits love to use to frighten the public:
STATEMENT 1 The United States has lower life expectancy and higher infant mortality than Canada, which has national health insurance.
The differences between the neighbors are indeed significant. Life expectancy at birth is 2.6 years greater for Canadian men than for American men, and 2.3 years greater for Canadian women than American women. Infant mortality in the United States is 6.8 per 1,000 live births, versus 5.3 in Canada.
These facts are often taken as evidence for the inadequacy of the American health system. But a recent study by June and Dave O’Neill, economists at Baruch College, from which these numbers come, shows that the difference in health outcomes has more to do with broader social forces.
For example, Americans are more likely than Canadians to die by accident or by homicide. For men in their 20s, mortality rates are more than 50 percent higher in the United States than in Canada, but the O’Neills show that accidents and homicides account for most of that gap. Maybe these differences have lessons for traffic laws and gun control, but they teach us nothing about our system of health care.
Americans are also more likely to be obese, leading to heart disease and other medical problems. Among Americans, 31 percent of men and 33 percent of women have a body mass index of at least 30, a definition of obesity, versus 17 percent of men and 19 percent of women in Canada. Japan, which has the longest life expectancy among major nations, has obesity rates of about 3 percent.
The causes of American obesity are not fully understood, but they involve lifestyle choices we make every day, as well as our system of food delivery. Research by the Harvard economists David Cutler, Ed Glaeser and Jesse Shapiro concludes that America’s growing obesity problem is largely attributable to our economy’s ability to supply high-calorie foods cheaply. Lower prices increase food consumption, sometimes beyond the point of optimal health.
Infant mortality rates also reflect broader social trends, including the prevalence of infants with low birth weight. The health system in the United States gives low birth-weight babies slightly better survival chances than does Canada’s, but the more pronounced difference is the frequency of these cases. In the United States, 7.5 percent of babies are born weighing less than 2,500 grams (about 5.5 pounds), compared with 5.7 percent in Canada. In both nations, these infants have more than 10 times the mortality rate of larger babies. Low birth weights are in turn correlated with teenage motherhood. (One theory is that a teenage mother is still growing and thus competing with the fetus for nutrients.) The rate of teenage motherhood, according to the O’Neill study, is almost three times higher in the United States than it is in Canada.
Whatever its merits, a Canadian-style system of national health insurance is unlikely to change the sexual mores of American youth
The bottom line is that many statistics on health outcomes say little about our system of health care.
Published: November 4, 2007
WITH the health care system at the center of the political debate, a lot of scary claims are being thrown around. The dangerous ones are not those that are false; watchdogs in the news media are quick to debunk them. Rather, the dangerous ones are those that are true but don’t mean what people think they mean.
Here is the first of three true but misleading statements about health care that politicians and pundits love to use to frighten the public:
STATEMENT 1 The United States has lower life expectancy and higher infant mortality than Canada, which has national health insurance.
The differences between the neighbors are indeed significant. Life expectancy at birth is 2.6 years greater for Canadian men than for American men, and 2.3 years greater for Canadian women than American women. Infant mortality in the United States is 6.8 per 1,000 live births, versus 5.3 in Canada.
These facts are often taken as evidence for the inadequacy of the American health system. But a recent study by June and Dave O’Neill, economists at Baruch College, from which these numbers come, shows that the difference in health outcomes has more to do with broader social forces.
For example, Americans are more likely than Canadians to die by accident or by homicide. For men in their 20s, mortality rates are more than 50 percent higher in the United States than in Canada, but the O’Neills show that accidents and homicides account for most of that gap. Maybe these differences have lessons for traffic laws and gun control, but they teach us nothing about our system of health care.
Americans are also more likely to be obese, leading to heart disease and other medical problems. Among Americans, 31 percent of men and 33 percent of women have a body mass index of at least 30, a definition of obesity, versus 17 percent of men and 19 percent of women in Canada. Japan, which has the longest life expectancy among major nations, has obesity rates of about 3 percent.
The causes of American obesity are not fully understood, but they involve lifestyle choices we make every day, as well as our system of food delivery. Research by the Harvard economists David Cutler, Ed Glaeser and Jesse Shapiro concludes that America’s growing obesity problem is largely attributable to our economy’s ability to supply high-calorie foods cheaply. Lower prices increase food consumption, sometimes beyond the point of optimal health.
Infant mortality rates also reflect broader social trends, including the prevalence of infants with low birth weight. The health system in the United States gives low birth-weight babies slightly better survival chances than does Canada’s, but the more pronounced difference is the frequency of these cases. In the United States, 7.5 percent of babies are born weighing less than 2,500 grams (about 5.5 pounds), compared with 5.7 percent in Canada. In both nations, these infants have more than 10 times the mortality rate of larger babies. Low birth weights are in turn correlated with teenage motherhood. (One theory is that a teenage mother is still growing and thus competing with the fetus for nutrients.) The rate of teenage motherhood, according to the O’Neill study, is almost three times higher in the United States than it is in Canada.
Whatever its merits, a Canadian-style system of national health insurance is unlikely to change the sexual mores of American youth
The bottom line is that many statistics on health outcomes say little about our system of health care.
Deal Or No Deal - Boeing/Northrop
By Keith Epstein, with Carol Matlack in Paris
BW Magazine
The dogfight is only going to get worse between the two aerospace titans vying for one of the 21st century's most lucrative, delayed, and politically contentious military contracts. But when it's over, both Boeing (BA) and rival Northrop Grumman (NOC) could emerge as winners.
Back on Feb. 29 the U.S. Air Force had awarded Northrop—teamed with the Franco-German European Aeronautic Defence & Space Co. (EADS)—the entire $35 billion order for 179 tankers capable of refueling fighter jets in the air. But Boeing protested, and on June 18 the Government Accountability Office, a congressional watchdog, backed its claim that the Air Force skewed the contest in favor of Northrop.
Even Northrop didn't expect a slam dunk. But the unexpectedly strong ruling lashed the Air Force for making "significant errors" that "could have affected the outcome" of the competition. The Air Force now has 60 days to decide whether it will stick with its original decision or reopen the competition.
Whichever way the Air Force goes, the GAO ruling gives Boeing and its backers powerful new ammunition in their bid to gain the contract. "We're going to the mat," vows Representative Norm Dicks (D-Wash.). Their quest: Round up enough congressional votes to stymie funding for the tankers unless Boeing gets the deal.
But there is another way. Behind the scenes on Capitol Hill, there's talk of a brokered deal that would split the contract—an idea first raised in 2007 by Northrop and the Air Force but rejected by Boeing. A day before the ruling, Boeing Vice-President Mark McGraw, who heads the tanker program, told BusinessWeek that if a deal were offered, "we'd certainly be in listening mode." Now? McGraw won't say.
For years, ongoing turbulence over the tankers has thwarted Air Force attempts to replace its aging fleet. Alaskan Ted Stevens, the top Republican on a U.S. Senate defense appropriations subcommittee, is quietly pushing to divvy up production between Boeing and Northrop to get the deal moving. The Air Force, too, could decide that compromise is the fastest way out of the current mess rather than letting the fight drag on. That could also ease political controversy over the deal, which has become a flashpoint in the coming election. Critics of the Northrop-EADS bid dispute the companies' claim that their deal would sustain more U.S. jobs.
The stakes go well beyond the initial contract. The winning manufacturer and its subcontractors are likely to have an edge in bidding for the $100 billion the U.S. will eventually spend to replace the entire aerial-refueling tanker fleet. A cut of the current deal would help Boeing stabilize its slipping military business; moreover, other nations probably won't buy Boeing tankers if the U.S. doesn't. And for EADS, half a deal would give it a U.S. foothold—better, perhaps, than continued skirmishing amid uncertainty. Would Northrop now be willing to split the difference? If so, it's keeping mum. All three companies say they'll study the ruling before deciding on their next steps.
Any perception abroad that the U.S. is bending rules for Boeing could hurt projects such as the F-35 Lightning II aircraft, which the U.S. is building with help from Britain and others. "It would have very negative consequences on international programs," warns Robbin Laird, president of Arlington (Va.) defense consultant International Communications & Strategic Assessments. "F-35 partners are already nervous."
BW Magazine
The dogfight is only going to get worse between the two aerospace titans vying for one of the 21st century's most lucrative, delayed, and politically contentious military contracts. But when it's over, both Boeing (BA) and rival Northrop Grumman (NOC) could emerge as winners.
Back on Feb. 29 the U.S. Air Force had awarded Northrop—teamed with the Franco-German European Aeronautic Defence & Space Co. (EADS)—the entire $35 billion order for 179 tankers capable of refueling fighter jets in the air. But Boeing protested, and on June 18 the Government Accountability Office, a congressional watchdog, backed its claim that the Air Force skewed the contest in favor of Northrop.
Even Northrop didn't expect a slam dunk. But the unexpectedly strong ruling lashed the Air Force for making "significant errors" that "could have affected the outcome" of the competition. The Air Force now has 60 days to decide whether it will stick with its original decision or reopen the competition.
Whichever way the Air Force goes, the GAO ruling gives Boeing and its backers powerful new ammunition in their bid to gain the contract. "We're going to the mat," vows Representative Norm Dicks (D-Wash.). Their quest: Round up enough congressional votes to stymie funding for the tankers unless Boeing gets the deal.
But there is another way. Behind the scenes on Capitol Hill, there's talk of a brokered deal that would split the contract—an idea first raised in 2007 by Northrop and the Air Force but rejected by Boeing. A day before the ruling, Boeing Vice-President Mark McGraw, who heads the tanker program, told BusinessWeek that if a deal were offered, "we'd certainly be in listening mode." Now? McGraw won't say.
For years, ongoing turbulence over the tankers has thwarted Air Force attempts to replace its aging fleet. Alaskan Ted Stevens, the top Republican on a U.S. Senate defense appropriations subcommittee, is quietly pushing to divvy up production between Boeing and Northrop to get the deal moving. The Air Force, too, could decide that compromise is the fastest way out of the current mess rather than letting the fight drag on. That could also ease political controversy over the deal, which has become a flashpoint in the coming election. Critics of the Northrop-EADS bid dispute the companies' claim that their deal would sustain more U.S. jobs.
The stakes go well beyond the initial contract. The winning manufacturer and its subcontractors are likely to have an edge in bidding for the $100 billion the U.S. will eventually spend to replace the entire aerial-refueling tanker fleet. A cut of the current deal would help Boeing stabilize its slipping military business; moreover, other nations probably won't buy Boeing tankers if the U.S. doesn't. And for EADS, half a deal would give it a U.S. foothold—better, perhaps, than continued skirmishing amid uncertainty. Would Northrop now be willing to split the difference? If so, it's keeping mum. All three companies say they'll study the ruling before deciding on their next steps.
Any perception abroad that the U.S. is bending rules for Boeing could hurt projects such as the F-35 Lightning II aircraft, which the U.S. is building with help from Britain and others. "It would have very negative consequences on international programs," warns Robbin Laird, president of Arlington (Va.) defense consultant International Communications & Strategic Assessments. "F-35 partners are already nervous."
Energy 101 - Renewables At Range Fuels
A new plant, a new vision
On November 6, 2007 Range Fuels broke ground on our first commercial-scale cellulosic ethanol plant near Soperton, Georgia. This plant will be the first in the United States to produce commercial quantities of ethanol from biomass, which includes all plant and plant-derived material, such as wood, grasses, and corn stover.
We are focused on utilizing leftover wood residues from timber harvesting that serve no useful purpose, converting them to about 20 million gallons of ethanol and other alcohols per year, initially. By the time we ramp up to full-scale operations at the Soperton Plant, the plant is projected to produce up to 100 million gallons of ethanol each year.
The plant will employ Range Fuels’ innovative and proprietary two-step thermo-chemical process, K2, which uses heat, pressure, and steam to convert biomass into synthesis gas. The syngas is then passed over our proprietary catalyst and transformed into ethanol that’s suitable for fueling vehicles.
On November 6, 2007 Range Fuels broke ground on our first commercial-scale cellulosic ethanol plant near Soperton, Georgia. This plant will be the first in the United States to produce commercial quantities of ethanol from biomass, which includes all plant and plant-derived material, such as wood, grasses, and corn stover.
We are focused on utilizing leftover wood residues from timber harvesting that serve no useful purpose, converting them to about 20 million gallons of ethanol and other alcohols per year, initially. By the time we ramp up to full-scale operations at the Soperton Plant, the plant is projected to produce up to 100 million gallons of ethanol each year.
The plant will employ Range Fuels’ innovative and proprietary two-step thermo-chemical process, K2, which uses heat, pressure, and steam to convert biomass into synthesis gas. The syngas is then passed over our proprietary catalyst and transformed into ethanol that’s suitable for fueling vehicles.
On November 6, 2007 Range Fuels broke ground on the site of the nation's first commercial cellulosic ethanol plant in Treutlen County near the town of Soperton, Georgia. Site clearing, which began in late November, will encompass around 100 acres and involve various types of equipment supplied by local construction companies. The plant itself will occupy about 60 acres of the total site, and construction of the first 20 million gallon per year phase is scheduled for completion in 2009.
Energy 101 - Renewables
Cellulosic Ethanol
While ethanol is typically produced from the starch contained in grains such as corn and grain sorghum, it can also be produced from cellulose. Cellulose is the main component of plant cell walls and is the most common organic compound on earth. It is more difficult to break down cellulose to convert it into usable sugars for ethanol production. Yet, making ethanol from cellulose dramatically expands the types and amount of available material for ethanol production. This includes many materials now regarded as wastes requiring disposal, as well as corn stalks, rice straw and wood chips or "energy crops" of fast-growing trees and grasses.
Producing ethanol from cellulose promises to greatly increase the volume of fuel ethanol that can be produced in the U.S. and abroad. A recent report found the land resources in the U.S. are capable of producing a sustainable supply of 1.3 billion tons per year of biomass, and that 1 billion tons of biomass would be sufficient to displace 30 percent or more of the country's present petroleum consumption. Importantly, it offers tremendous opportunities for new jobs and economic growth outside the traditional "grain belt," with production across the country from locally available resources. Cellulose ethanol production will also provide additional greenhouse gas emissions reductions. Building upon the strong foundation grain-based ethanol technology has provided, the ethanol industry is rapidly developing and expanding the number of feedstocks available for ethanol production.
Iogen Corporation in Ottawa, Canada produces just over a million gallons annually of cellulose ethanol from wheat, oat and barley straw in their demonstration facility. In late 2007, Range Fuels broke ground on a 20 million gallon per year facility that will process ethanol from wood and wood waste in Georgia. Several existing ethanol plants in the U.S. are engaged in research and demonstration projects with the U.S. Department of Energy utilizing the existing fiber in their facility that typically goes into the livestock feed coproduct. Enzyme companies including Genencor International and Novozymes are working on research projects with the Department to significantly reduce enzyme cost and increase enzyme life and durability. With continued advancements in pretreatment technology, fermentation, and collection and storage logistics, the commercial production of cellulose ethanol becomes more economically feasible.
While ethanol is typically produced from the starch contained in grains such as corn and grain sorghum, it can also be produced from cellulose. Cellulose is the main component of plant cell walls and is the most common organic compound on earth. It is more difficult to break down cellulose to convert it into usable sugars for ethanol production. Yet, making ethanol from cellulose dramatically expands the types and amount of available material for ethanol production. This includes many materials now regarded as wastes requiring disposal, as well as corn stalks, rice straw and wood chips or "energy crops" of fast-growing trees and grasses.
Producing ethanol from cellulose promises to greatly increase the volume of fuel ethanol that can be produced in the U.S. and abroad. A recent report found the land resources in the U.S. are capable of producing a sustainable supply of 1.3 billion tons per year of biomass, and that 1 billion tons of biomass would be sufficient to displace 30 percent or more of the country's present petroleum consumption. Importantly, it offers tremendous opportunities for new jobs and economic growth outside the traditional "grain belt," with production across the country from locally available resources. Cellulose ethanol production will also provide additional greenhouse gas emissions reductions. Building upon the strong foundation grain-based ethanol technology has provided, the ethanol industry is rapidly developing and expanding the number of feedstocks available for ethanol production.
Iogen Corporation in Ottawa, Canada produces just over a million gallons annually of cellulose ethanol from wheat, oat and barley straw in their demonstration facility. In late 2007, Range Fuels broke ground on a 20 million gallon per year facility that will process ethanol from wood and wood waste in Georgia. Several existing ethanol plants in the U.S. are engaged in research and demonstration projects with the U.S. Department of Energy utilizing the existing fiber in their facility that typically goes into the livestock feed coproduct. Enzyme companies including Genencor International and Novozymes are working on research projects with the Department to significantly reduce enzyme cost and increase enzyme life and durability. With continued advancements in pretreatment technology, fermentation, and collection and storage logistics, the commercial production of cellulose ethanol becomes more economically feasible.
Boeing Valueline Outlook
Some investors are concerned about the effect of the surging price of oil on demand for Boeing’s airliners. As a result, when petroleum’s price soared $10.75 on June 6th, this stock’s price dropped $4.15, or 5.4%. We don’t take the surge lightly, since the weight of higher prices
for this key commodity seems likely to broaden the economic slump and widen airline losses. In fact, there have already been a few airliner-order postponements and cancellations for both Boeing and Airbus Industrie, its European competitor. Even so, a countervailing factor is that aircraft now on order are more efficient than current fuel guzzlers. And much of the company’s huge backlog is from foreign airlines, many of which are backed by their governments. As a result, we haven’t cut our share-earnings estimates, and continue to look for big gains in both 2008 and 2009.
There is a huge backlog for the 787 Dreamliner, which is still under development. At the end of May, management cited firm orders for 896 airliners from 58 customers. Boeing, relying on outside contractors for many components, had numerous production problems that resulted in
rescheduling deliveries three times. In early May, however, a company spokeswoman said there have been no further delays. Accordingly, the first delivery is scheduled for the third quarter of 2009, with the average delay figured by Boeing at 20 months. Currently, the company anticipates a production rate of 10 a month in 2012. This would seem to mean that any
cancellation would quickly be filled in by waiting customers, since at the 12-amonth rate, the backlog amounts to 7.5 years of production.
Boeing’s finances are very strong. Its ‘‘Cash Flow’’ in excess of current needs has permitted it to raise its dividend regularly, steadily pay down debt, and retire its common stock at a good pace.
This stock retains above-average capital gains potential over the 3- to 5- year pull. We assume good gains for worldwide demand for its commercial aircraft for years to come. And if the USAF’s decision not to award a new flying tanker contract to Boeing is overturned, our
projections would probably be enhanced.
Morton L. Siegel June 20, 2008
for this key commodity seems likely to broaden the economic slump and widen airline losses. In fact, there have already been a few airliner-order postponements and cancellations for both Boeing and Airbus Industrie, its European competitor. Even so, a countervailing factor is that aircraft now on order are more efficient than current fuel guzzlers. And much of the company’s huge backlog is from foreign airlines, many of which are backed by their governments. As a result, we haven’t cut our share-earnings estimates, and continue to look for big gains in both 2008 and 2009.
There is a huge backlog for the 787 Dreamliner, which is still under development. At the end of May, management cited firm orders for 896 airliners from 58 customers. Boeing, relying on outside contractors for many components, had numerous production problems that resulted in
rescheduling deliveries three times. In early May, however, a company spokeswoman said there have been no further delays. Accordingly, the first delivery is scheduled for the third quarter of 2009, with the average delay figured by Boeing at 20 months. Currently, the company anticipates a production rate of 10 a month in 2012. This would seem to mean that any
cancellation would quickly be filled in by waiting customers, since at the 12-amonth rate, the backlog amounts to 7.5 years of production.
Boeing’s finances are very strong. Its ‘‘Cash Flow’’ in excess of current needs has permitted it to raise its dividend regularly, steadily pay down debt, and retire its common stock at a good pace.
This stock retains above-average capital gains potential over the 3- to 5- year pull. We assume good gains for worldwide demand for its commercial aircraft for years to come. And if the USAF’s decision not to award a new flying tanker contract to Boeing is overturned, our
projections would probably be enhanced.
Morton L. Siegel June 20, 2008
BusinessWeek's No. 30 - Bed Bath&Beyond
No. 30: Bed Bath & Beyond
Industry: Consumer Discretionary
Sales: $7.1 billion
Net Income: $595.7 million
Over the past few years, Bed Bath & Beyond (BBBY) has been on a shopping spree. The Union (N.J.) housewares retailer has acquired kids' chain buybuy Baby, discounter Christmas Tree Shops, and health and beauty retailer Harmon Stores. Historically, Bed Bath & Beyond has thrived by allowing store managers to cater to local tastes. In the face of weak consumer spending, Bed Bath & Beyond has also been discounting aggressively—too aggressively for some analysts. But Chief Executive Steven Temares has hinted he'll continue the strategy in a bid to grab market share from more timid competitors.
Industry: Consumer Discretionary
Sales: $7.1 billion
Net Income: $595.7 million
Over the past few years, Bed Bath & Beyond (BBBY) has been on a shopping spree. The Union (N.J.) housewares retailer has acquired kids' chain buybuy Baby, discounter Christmas Tree Shops, and health and beauty retailer Harmon Stores. Historically, Bed Bath & Beyond has thrived by allowing store managers to cater to local tastes. In the face of weak consumer spending, Bed Bath & Beyond has also been discounting aggressively—too aggressively for some analysts. But Chief Executive Steven Temares has hinted he'll continue the strategy in a bid to grab market share from more timid competitors.
BusinessWeek's No. 29 - T. Rowe Price
No. 29: T. Rowe Price Group
Industry: Financials
Sales: $2.2 billion
Net Income: $670.6 million
Money manager T. Rowe Price's (TROW)steady performance continues to attract legions of investors. About three-quarters of the Baltimore firm's mutual funds outperformed their peers over the past 3, 5, and 10 years through the end of 2007. In a mediocre year for the stock market, assets rose almost 20%, to $400 billion. Customers added a net $34 billion, including $11 billion to target-date retirement funds. Regular deposits from investors saving for retirement help the firm weather tumultuous markets, according to CEO and President James Kennedy. Now, T. Rowe is looking for growth overseas; at the end of 2006, the firm landed a plum assignment to help manage China's National Council for Social Security Fund, which provides retirement benefits for government workers.
Industry: Financials
Sales: $2.2 billion
Net Income: $670.6 million
Money manager T. Rowe Price's (TROW)steady performance continues to attract legions of investors. About three-quarters of the Baltimore firm's mutual funds outperformed their peers over the past 3, 5, and 10 years through the end of 2007. In a mediocre year for the stock market, assets rose almost 20%, to $400 billion. Customers added a net $34 billion, including $11 billion to target-date retirement funds. Regular deposits from investors saving for retirement help the firm weather tumultuous markets, according to CEO and President James Kennedy. Now, T. Rowe is looking for growth overseas; at the end of 2006, the firm landed a plum assignment to help manage China's National Council for Social Security Fund, which provides retirement benefits for government workers.
Thursday, June 19, 2008
Leading Economic Indicator Definitions
The purpose of the Board's Business Cycle Indicators (BCI) is to provide ways for analyzing the expansions and contractions of the economic cycle. The Composite Index of Leading Indicators is one of three components of the BCI - the other two are the Composite Index of Coincident Indicators and the Composite Index of Lagging Indicators. Since the leading-indicators component attempts to judge the future state of the economy, it is by far the most widely followed.
Methodology of the Index of Leading Indicators The Index of Leading Indicators incorporates the data from 10 economic releases (which we review below) that traditionally have peaked or bottomed ahead of the business cycle. The exact formula for calculating changes in the leading index is rather involved but not necessary for understanding the indicator from our perspective here. (However, if you are interested, the formula can be found here on the Board's website). Each of the 10 components is averaged, and a standardization factor is applied to equalize volatility. (You can find the current standardization factors here.) In 1996 the value of the Index of Leading Indicators was re-based to represent the average value of 100, and the CB releases the data on a monthly basis. Below are the ten components that make up the composite indicator (charts of each component can be found here).
The 10 Components
Average weekly hours (manufacturing) - Adjustments to the working hours of existing employees are usually made in advance of new hires or layoffs, which is why the measure of average weekly hours is a leading indicator for changes in unemployment.
Average weekly jobless claims for unemployment insurance - The CB reverses the value of this component from positive to negative because a positive reading indicates a loss in jobs. The initial jobless-claims data is more sensitive to business conditions than other measures of unemployment, and as such leads the monthly unemployment data released by the Department of Labor.
Manufacturer's new orders for consumer goods/materials - This component is considered a leading indicator because increases in new orders for consumer goods and materials usually mean positive changes in actual production. The new orders decrease inventory and contribute to unfilled orders, a precursor to future revenue.
Vendor performance (slower deliveries diffusion index) - This component measures the time it takes to deliver orders to industrial companies. Vendor performance leads the business cycle because an increase in delivery time can indicate rising demand for manufacturing supplies. Vendor performance is measured by a monthly survey from the National Association of Purchasing Managers (NAPM). This diffusion index measures one-half of the respondents reporting no change and all respondents reporting slower deliveries.
Manufacturer's new orders for non-defense capital goods - As stated above, new orders lead the business cycle because increases in orders usually mean positive changes in actual production and perhaps rising demand. This measure is the producer's counterpart of new orders for consumer goods/materials component (#3).
Building permits for new private housing units - Building permits mean future construction, and construction moves ahead of other types of production, making this a leading indicator.
The Standard & Poor's 500 stock index - The S&P 500 is considered a leading indicator because changes in stock prices reflect investor's expectations for the future of the economy and interest rates. The S&P 500 is a good measure of stock price as it incorporates the 500 largest companies in the United States.
Money Supply (M2) - The money supply measures demand deposits, traveler's checks, savings deposits, currency, money market accounts and small-denomination time deposits. Here, M2 is adjusted for inflation by means of the deflator published by the federal government in the GDP report. Bank lending, a factor contributing to account deposits, usually declines when inflation increases faster than the money supply, which can make economic expansion more difficult. Thus, an increase in demand deposits will indicate expectations that inflation will rise, resulting in a decrease in bank lending and an increase in savings.
Interest rate spread (10-year Treasury vs. Federal Funds target) - The interest rate spread is often referred to as the yield curve and implies the expected direction of short-, medium- and long-term interest rates. Changes in the yield curve have been the most accurate predictors of downturns in the economic cycle. This is particularly true when the curve becomes inverted, that is, when the longer-term returns are expected to be less than the short rates.
Index of consumer expectations - This is the only component of the leading indicators that is based solely on expectations. This component leads the business cycle because consumer expectations can indicate future consumer spending or tightening. The data for this component comes from the University of Michigan's Survey Research Center, and is released once a month.
Methodology of the Index of Leading Indicators The Index of Leading Indicators incorporates the data from 10 economic releases (which we review below) that traditionally have peaked or bottomed ahead of the business cycle. The exact formula for calculating changes in the leading index is rather involved but not necessary for understanding the indicator from our perspective here. (However, if you are interested, the formula can be found here on the Board's website). Each of the 10 components is averaged, and a standardization factor is applied to equalize volatility. (You can find the current standardization factors here.) In 1996 the value of the Index of Leading Indicators was re-based to represent the average value of 100, and the CB releases the data on a monthly basis. Below are the ten components that make up the composite indicator (charts of each component can be found here).
The 10 Components
Average weekly hours (manufacturing) - Adjustments to the working hours of existing employees are usually made in advance of new hires or layoffs, which is why the measure of average weekly hours is a leading indicator for changes in unemployment.
Average weekly jobless claims for unemployment insurance - The CB reverses the value of this component from positive to negative because a positive reading indicates a loss in jobs. The initial jobless-claims data is more sensitive to business conditions than other measures of unemployment, and as such leads the monthly unemployment data released by the Department of Labor.
Manufacturer's new orders for consumer goods/materials - This component is considered a leading indicator because increases in new orders for consumer goods and materials usually mean positive changes in actual production. The new orders decrease inventory and contribute to unfilled orders, a precursor to future revenue.
Vendor performance (slower deliveries diffusion index) - This component measures the time it takes to deliver orders to industrial companies. Vendor performance leads the business cycle because an increase in delivery time can indicate rising demand for manufacturing supplies. Vendor performance is measured by a monthly survey from the National Association of Purchasing Managers (NAPM). This diffusion index measures one-half of the respondents reporting no change and all respondents reporting slower deliveries.
Manufacturer's new orders for non-defense capital goods - As stated above, new orders lead the business cycle because increases in orders usually mean positive changes in actual production and perhaps rising demand. This measure is the producer's counterpart of new orders for consumer goods/materials component (#3).
Building permits for new private housing units - Building permits mean future construction, and construction moves ahead of other types of production, making this a leading indicator.
The Standard & Poor's 500 stock index - The S&P 500 is considered a leading indicator because changes in stock prices reflect investor's expectations for the future of the economy and interest rates. The S&P 500 is a good measure of stock price as it incorporates the 500 largest companies in the United States.
Money Supply (M2) - The money supply measures demand deposits, traveler's checks, savings deposits, currency, money market accounts and small-denomination time deposits. Here, M2 is adjusted for inflation by means of the deflator published by the federal government in the GDP report. Bank lending, a factor contributing to account deposits, usually declines when inflation increases faster than the money supply, which can make economic expansion more difficult. Thus, an increase in demand deposits will indicate expectations that inflation will rise, resulting in a decrease in bank lending and an increase in savings.
Interest rate spread (10-year Treasury vs. Federal Funds target) - The interest rate spread is often referred to as the yield curve and implies the expected direction of short-, medium- and long-term interest rates. Changes in the yield curve have been the most accurate predictors of downturns in the economic cycle. This is particularly true when the curve becomes inverted, that is, when the longer-term returns are expected to be less than the short rates.
Index of consumer expectations - This is the only component of the leading indicators that is based solely on expectations. This component leads the business cycle because consumer expectations can indicate future consumer spending or tightening. The data for this component comes from the University of Michigan's Survey Research Center, and is released once a month.
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