Saturday, July 28, 2012

Play it Safe: Jeweler Stocks

  • Risk level: 25
Also See
  • 7 Tips for Buying an Engagement Ring

Diamond dealers and traders thought the world's consumers were finally feeling wealthier after the recession, so they started hoarding stones. In the first six months of 2011, diamond prices soared more than 30 percent, to nearly $11,000 for a 1-carat stone, according to the widely followed Rapaport-RapNet Diamond Index. But when consumers didn't flock back, diamond prices plummeted. These days, a 1-carat stone runs about $9,400, about the same price as in spring 2011. Experts still think diamonds have a bright future, due to growing demand in Asia and the Middle East. One of the safest ways for investors to jump in is through the stocks of jewelers, says Paul Swinand, an equity analyst at Morningstar. Profits at Harry Winston Diamond (HWD) more than tripled in the most recent quarter. Meanwhile, more than half of Tiffany & Co.'s (TIF) sales come from goods containing the stones, and the store is increasing sales in China.

Go for Broke: Jewels

  • Risk level: 95

Unlike gold or silver, diamonds are not easy to trade on the open market; there's an exchange-traded fund tracking diamond prices in the works, but for now, to truly speculate on diamond prices, investors essentially have to get the stones themselves. Of course, experts warn that this method is particularly risky (and that's assuming cat burglary isn't involved in acquiring the diamonds). No two diamonds are alike, and many dealers sell stones at a premium -- or discount -- to the prices reported by Rapaport, Swinand says. But for those willing to try, a basket of investment-grade diamonds (typically round, polished, 1- to 5-carat stones) are the most direct way to invest, says Saul Singer, a partner at Fusion Alternatives, an investment advisory firm specializing in diamonds. Plus, there's one great perk: showing off the stones. "Put them in safe keeping, and then take them out for a gala or an event," Singer says.

LSI Rising on Q2 Beat; Q3 View Light

Shares of chip maker LSI (LSI) are up 15 cents, or 2.5%, at $6.20 in late trading after the company this afternoon reported Q2 revenue and earnings per share that topped consensus estimates.

Revenue in the three months ended in June rose 32%, year over year, and 6%, quarter over quarter, to $660 million, yielding EPS of 21 cents.

Analysts on average had been expecting $644 million and 17 cents.

CEO Abhi Talwalkar said the company was pleased with the results.

For the current quarter, the company sees revenue in a range of $620 million to $660 million, and EPS of 14 cents to 20� cents. That is below the average estimate for $657 million and 18 cents.

The company ended the quarter with $601 million in cash and investments.

LSI management will host a conference call with investors at 5 pm, Eastern time, and you can catch the webcast of it here.

Limited- Vs Full-Service Restaurants

Full-service restaurants (FSRs), otherwise known as “sit-down” or casual-dining restaurants, have long dominated the U.S. food-service landscape in terms of numbers. New research from Technomic shows that in the last ten years the tide has shifted in favor of limited-service restaurants (LSRs) that have been able to grow enough to blur the line of fast-casual dining. LSRs have proven their ability to transition from unique street-food offerings to in-store entities that provide unique food offerings and ambiance to customers with more sophisticated tastes who are looking for something different. For more on this continue reading the following article from Blue MauMau.

Limited-service restaurants accounted for more than $200 billion, or half, of the total restaurant industry sales compared to full-service restaurants, despite their low check averages.  That's according to one foodservice researcher, Technomic.

Ten years ago limited service restaurants (LSR) made up 47 percent of the total commercial foodservice industry, while full-service restaurants (FSRs) made up 53 percent. According to Technomic, the landscape has now reversed. LSRs account for 53 percent and FSRs 47 percent. Within the LSR segment fast-casual restaurants continue to gain market share while fast-food restaurants are working overtime to upscale their menu and concept positioning–not only to keep pace, but to compete directly with fast-casual leaders.

"The key to LSR growth is differentiation," says Executive Vice President Darren Tristano. "Many LSRs that have demonstrated growth have a broad consumer appeal, yet each has a discerned approach. Consumers are looking for fresh, better quality ingredients, a contemporary décor and ambiance, and interactive service formats to offer something unique and enhance the customer experience."

One of the trends it has observed is that rustic, handheld street foods with a global spin have helped LSR menu developers create unique and craveable offerings. Consumers are looking for new flavor supplements for their sophisticated palettes.

Fast-food patronage thrives on its convenience and value, while food distinction and ambiance are key factors driving patronage at fast-casual locations. Look for a blurring of the lines between fast-food and fast-casual restaurants, with operators in each subsegment tweaking their concepts with new unit designs and convenient service formats in order to remain competitive.

Technomic's The Future of LSR: Fast-Foods & Fast-Casual Restaurants Consumer Trend Report also observes that 72 percent of consumers visit fast-food restaurants once a week or more, while only half (49 percent) visit fast-casual restaurants. It also says that consumers visit fast-food and fast-casual restaurants for lunch more often than for any other daypart; 21 percent purchase fast-food lunches at least twice a week and 19 percent visit fast-casual restaurants, largely due to time pressures.

Draghi’s Dilemma: ‘Whatever it takes’ Could Alienate Fellow ECB Members

Mario Draghi, president of the European Central Bank (ECB), may have painted himself into a corner with his London speech on Thursday promising to do “whatever it takes” to rescue the euro. Markets rejoiced at his words, sending yields on Spanish and Italian bonds lower—at least temporarily—but it remains to be seen exactly what Draghi will—or can—do.

Bloomberg reported Friday that a number of policymakers on the council of the ECB remain firmly opposed to one possibility, that of the ECB resuming its bond purchase program, or Securities Markets Program (SMP), which it halted in March. And that could leave Draghi in a tight spot.

“Draghi is damned if he does and damned if he doesn’t,” Carsten Brzeski said in the report. Brzeski, senior economist at ING Group in Brussels, added, “He maneuvered himself into an extremely difficult situation. Expectations are very high.”

Heavy opposition continues from such council members as Bundesbank President Jens Weidmann, as well as from former Bundesbank President Axel Weber, who declined the top post at the ECB over the issue, and ECB Chief Economist Juergen Stark, who retired at the end of 2011. The strength of the opposition makes some economists feel that the ECB will not revisit the policy any time soon.

“I don’t believe you will see government bond purchases yet,” said Jacques Cailloux in the report. Cailloux, chief European economist at Nomura International in London, continued, “But there are other things they can do that will help, such as lowering the haircut on sovereign bonds they accept as collateral or buying private-sector securities.”

Markets will not be happy if there is no decisive action taken soon. While at first bond buying was effective, it soon developed that it did not go far enough in magnitude or degree to keep yields down. That led to the ECB’s offer of three-year unlimited loans at exceptionally low interest rates. That, too, failed to reassure markets and contain the crisis, and many are critical of the central bank’s efforts.

Richard Urwin, head of investments at BlackRock’s Fiduciary Mandate Investment Team in London, was quoted saying, “We still don’t think policy makers have done enough to make the market sit up and take note.”

While there are other options to bond purchases, such as giving the ESM a banking license, Draghi did not mention it in his speech on Thursday, and has been opposed to such a move when previously suggested.

It may be that a return to bond buying, and in a big way, is the only way to ward off further escalation, and some economists are voicing their thoughts on the matter. Marius Daheim said in the report, “The ECB appears to be running out of conventional ammunition.” According to Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich, “What is left … is the ‘bazooka’”—large-scale intervention in bond markets.

Julian Callow, chief international economist at Barclays Capital in London, was quoted saying, “The thing we wonder here is exactly where the Bundesbank stands.” He continued, “The Bundesbank has historically been resisting the reactivation of the SMP. In the view of most economists, the ECB is justified in reactivating the SMP.”

Nick Kounis, who heads macro research at ABN Amro in Amsterdam, was not so sure that it would be enough. In the report, he was quoted saying that “the crisis response looks likely to focus on direct intervention in the government bond market. We have some doubts about whether the interventions will be of the required scale. It therefore seems likely that the bond purchases will just allow policy makers to muddle through unless much more financial firepower is put on the table.”

10 Everyday Items That Cost Way More Thanks to U.S. Import Taxes

By Alex Brokaw

It might be said that America is a country built on tariffs. In 1790, Alexander Hamilton proposed The Act Laying Duties on Imports, which suggested imported goods should be more expensive to protect American industries. Since the law was passed into legislation, taxes on imports have been an American mainstay, and have helped to support our industries ever since.

Of course, tariffs have also sparked controversy and political battles, especially in the last few decades. Recent headlines on tariffs have highlighted the ongoing economic tensions between the United States and China. In June, the Department of Commerce announced preliminary tariff hikes as high as 5.81% on Chinese solar-product manufacturers Trina Solar (TSL) and Suntech Power Holdings (STP) in an effort to protect U.S. manufacturers. And this month, the United States filed a complaint with the World Trade Organization for China's tariffs on U.S.-manufactured automobiles.

U.S.-China relations are only a single, albeit considerably complex, factor that play into a host of import taxes influenced both by international relations and private and public interests.

Here, Minyanville braves the complexities of the United States' current Tariff Schedule and digs up some of America's highest, least expected, and most controversial duties.

10 Everyday Items That Cost More Because of U.S. Import Taxes
  • Roquefort Cheese
  • Peanuts
  • Paper Clips
  • Canned Tuna
  • Synthetic Fabrics
  • Tobacco
  • Sneakers
  • Japanese Leather
  • Brooms
  • Tires

Coal Stocks Rebound as CEO Touts Chinese Demand

Coal stocks have frequently made large daily percentage moves in the past few months, in part because many of the stocks are so beaten down. When your shares are worth $1.25, a 10-cent move is worth 8% of your market cap. Today, coal stocks jumped following comments from Peabody Energy (BTU) CEO Gregory Boyce claiming that demand in China has been on the upswing in recent months.

“We project they will reach a record 285 million tons in 2012 as the country increasingly looks to the seaborne coal markets,” Boyce said at an investor conference, according to the Associated Press. “We expect global metallurgical coal use to increase 25 percent by 2016, translating to an additional 250 million tons of demand growth, with the bulk of increases led by China and India.”

The global growth should offset a decline in coal use in the U.S. as some power plants switch to natural gas, Boyce said.

Peabody jumped 5.5% on the news. Alpha Natural Resources (ANR) rose 6%, Arch Coal (ACI) was up 8.7% and Patriot Coal (PCX) rose 18%.

Friday, July 27, 2012

WW Grainger Beats 3Q Estimates and Ups Guidance Again

W.W. Grainger, Inc. (GWW) delivered adjusted earnings per share (EPS) of $1.99 in its third quarter ended September 30, 2010, up from $1.51 in the year-ago period. The company exceeded the Zacks Consensus estimate of $1.82.

The third quarter’s EPS excluded a 7 cents per share benefit from a change for employee paid time off policy. In the third quarter of fiscal 2009, Grainger obtained a majority ownership of MonotaRO Co., Ltd. in Japan, and recognized a one-time, non-operating gain of 37 cents per share, from the revaluation of this investment. Including these items, EPS in the third quarter of fiscal 2010 was $2.06 comoared with $1.88 in the year-ago quarter.

Revenues in the quarter were $1,899.4 million, a 19.5% jump from $1,589.7 million in the year-ago period and above the Zacks Consensus of $1848 million. Foreign exchange contributed 1% while acquisitions added another 5 percentage points to the growth in the quarter. Pricing was flat and volumes were up 9%. Sales of oil spill related products contributed 3 percentage points. On a daily sales basis, sales showed a declining trend with July, August and September, posting increases of 21%, 20% and 18%, respectively.

As a percentage of revenue, the cost of merchandise declined a marginal 6 basis points to 58.4% and warehousing, marketing and administrative expenses as a percentage of revenue decreased 142 basis points to 28.3%. Consequently, gross margin increased 6 basis points to 41.6% and operating margin expanded 148 basis points to 13.2% in the quarter.

Segment Performance

Revenues from the United States segment surged 15% (13% excluding acquisitions) year over year to $1,608.4 million as all the end markets showed improvement. Monthly sales, however, showed an declining trend with daily sales increasing 17% in July, 15% in August followed by 13% in September. Sales of products used for the oil spill clean up contributed 3 percentage points to growth and sales of seasonal products added 1 percentage point due to the hot weather experienced across much of the United States in July and August.

Operating income for the segment upped 29% (25% excluding the change in the paid time off policy) to $262.8 million, primarily driven by positive cost leverage. Segment operating margin expanded 172 basis points to 16.3%.

Revenues from the Acklands-Grainger business in Canada leaped 22% to $202.2 million. In local currency, revenue increased 15%. Strong growth to customers in the agriculture and mining, oil and gas, heavy manufacturing and forestry sectors were partially offset by decline in sales to the government. Local currency sales on a daily basis were up 13% in July, up 14% in August and up 19% in September.

Operating income in Canada increased 74% (64% in local currency) to $14.5 million. Gross margin improved 340 basis points due to lower product costs, positive foreign currency translation and improved mix driven by an increase in sales of private label products. However, this was partially offset higher operating expenses driven by increased payroll and benefits costs due to higher commissions and bonuses on higher sales, increased volume-related headcount, start-up costs for a new distribution center in Vancouver, British Columbia and incremental costs for acquisitions made during the last 12 months.

Revenues from the other businesses (which include Japan, Mexico, India, Puerto Rico, China and Panama) were up 191% to $101.6 million ascribed to incremental sales from the Japanese and Colombian businesses acquired in the last 12 months, combined with strong sales growth in Mexico, India, China and Panama.

Operating earnings of $4 million for the Other Businesses were a stark contrast to the loss of $2 million in the year-ago period. In addition to the earnings contribution from acquired businesses, the Mexico and Panama businesses reported a strong quarter and China reduced its loss versus the prior year.

Financial Position

Grainger had cash and cash equivalents of $286 million as of September 30, 2010, down from $388 million as of June 30, 2010.

The company generated net cash from operating activities of $216.3 million from continuing operating activities in third-quarter of fiscal 2010 compared with $275.5 million in the year-ago period.

Grainger returned approximately $248 million to shareholders through the repurchase of nearly 2.3 million shares of common stock during the quarter. The company paid dividends of approximately $39 million, reflecting the 17% increase in the quarterly dividend announced in April 2010.

Debt-to-capitalization ratio was 19% as of September 30, 2010, compared with 18.6% as of June 30, 2010.


Grainger is hiring another 150 sales representatives and onsite inventory services managers, expanding its eCommerce capabilities and developing services that complement its broad product offering to accelerating its growth. The company expects these investments to contribute to continued market share growth by helping its customers improve their productivity.

However, in the near term the company expects fourth quarter organic revenue growth to moderate given increasingly tougher comparisons, lower sales contribution from products used to clean up the Gulf of Mexico oil spill and the slowing of the inventory build cycle with its customers.

Based on strong performance so far in 2010, Grainger upped its sales growth guidance for fiscal 2010 to a range of 14 to 15% from its previous projection of 12 to 14% percent. Earnings per share guidance has also been raised to a range of $6.40 to $6.70 from the previous range of $6.10 to $6.40.

Grainger remains focused on increasing its market share. It is also is on track with its investments to secure long-term growth. Grainger’s balance sheet remains strong and given its cash position, we believe Grainger can further invest in growth opportunities, increase dividends and reinvest capital through share repurchases. The company has been rewarding shareholders with an uninterrupted streak of increased dividends for 38 consecutive years. Based on the third quarter earnings beat and increased guidance, we maintain our Zacks #2 Rank (Buy) on Grainger.

Performance of Competitor

Fastenal Co. (FAST) reported a third quarter EPS of 51 cents, a 59.4% jump from 32 cents a year ago, a penny beyond the Zacks Consensus Estimate of 50 cents per share. Sales rose 23.4% to $603.8 million, higher than the Zacks Consensus Estimate of $597 million. This was attributable to a 30.6% increase in the company’s manufacturing customers, which accounts for 50% of sales.

Illinois-based Grainger is a leading North American distributor of material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, forestry and agriculture equipment, building and home inspection supplies, vehicle and fleet components, and various aftermarket components; and services comprise inventory management and energy efficiency solutions.

Disclosure: No positions

Visa rises, J.P. Morgan slips after hours

LOS ANGELES (MarketWatch) � Shares of Visa Inc. and MasterCard Inc. each bounced higher Friday evening after the companies settled lawsuits brought by merchants. Meanwhile, banking stocks were mixed following dayside gains after better-than-expected quarterly figures from J.P. Morgan Chase & Co. and Wells Fargo & Co.

Stock in Visa V �rose 2.8% to $127.55 and MasterCard MA �moved 3.4% higher to $445.32. MasterCard said that it, along with Visa and various banks, have agreed to a memorandum of understanding to settle litigation under which MasterCard will pay $790 million in cash and give the merchants a 10 basis-point reduction in credit interchange rates for eight months.

MasterCard also agreed to modify its surcharge rule to allow U.S. merchants to levy checkout fees on credit cards. Visa agreed to similar conditions and its share of the total cash liability will be $4.4 billion.

Click to Play U.S. week ahead: Citi, Google earns

A flood of large-cap companies release results next week, including Citigroup, Goldman Sachs, Bank of America, Google, Microsoft and IBM.

As a result of the cash portion of the settlements, MasterCard said it will incur an additional $20 million pretax, second-quarter charge. The company recorded a $770 million charge in the fourth quarter of 2011.

Citigroup Inc. C �shares rose 0.3% to $26.72, coming off a 5.4% climb in the regular session, while Morgan Stanley MS �shares turned up 0.2% to $14.08. They closed the regular session up 3.7%.

Late-traded J.P. Morgan shares JPM �edged down 0.3% at $35.98. They jumped 6% in the day session, with the company posting a nearly 9% fall in second-quarter profit of $4.96 billion that still beat Wall Street�s targets. The market also appeared to find relief after the company�s trading loss of $4.4 billion wasn�t as large as expected. Read more about J.P. Morgan's quarterly results.

The company�s trading losses now total $5.8 billion, which include previously announced sums, according to J.P. Morgan�s chief financial officer.

Evening-traded shares of Wells Fargo WFC �shed 0.1% at $33.87, slightly pulling back from their 3.2% rise earlier Friday after the bank�s second-quarter profit rose to $4.62 billion, or 86 cents a share, from $3.95 billion in the year-ago quarter.

Reuters J.P. Morgan Chief Executive Jamie Dimon

The advance in bank stocks helped lift the broader U.S. equity market on Friday. Read more in Market Snapshot.

The Dow Jones Industrial Average DJIA �rallied 204 points, or 1.6%, to 12,777.09. The S&P 500 Index SPX finished 1.7% higher at 1,356.77 and the Nasdaq Composite Index COMP �ended up 1.5% at 2,908.47.

Next week, investors will look for quarterly results from Google Inc. GOOG , Bank of America Corp. BAC �and Intel Corp. INTC , among a number of other companies. See preview of Intel's second-quarter results.

Brocade Tells Fat Lady to Hold Her Tongue

Someone please tell the fat lady she will not be needed this evening. Just when you thought Brocade Communications (Nasdaq: BRCD  ) was ready to go quietly into the night, the company surprised Wall Street, but not me, with a quarterly report that should have value investors tingling with excitement.

The company, which is a supplier of switches used to connect data storage systems, reported revenue of $550 million and a profit of $0.16 (excluding one-time charges), both of which beat analyst forecasts. Its storage business, which accounts for roughly 70% of sales, exhibited sequential growth of 8% sales while its Ethernet segment showed 12% sequential sales growth.

Two figures that were represented in Brocade's report that management did pay much heed to but I think are important are the gross margin and cash from operations.

On a year-over-year basis, Brocade improved its gross margin by 70 basis points to 62.9%. This is the primary reason that net income came in as strong as it did even though sales were up only marginally over the year-ago period.

Also of note, the company's cash from operations was $206 million, a clean $100 million more than the fourth quarter of last year. This extra cash flow allowed the company to pay down another $50 million on its revolving credit line and purchase 46.5 million shares, or 9% of its outstanding float, during the quarter. Do you think Brocade's management believes in their long-term outlook? I'd say purchasing $200 million worth of stock during the quarter is a prime indication of that.

Brocade's strong results should only reinvigorate the rumor that a larger rival may be interested in acquiring the company. Brocade currently has supply partnerships with IBM (NYSE: IBM  ) , Dell (Nasdaq: DELL  ) , Hewlett-Packard (NYSE: HPQ  ) , EMC (NYSE: EMC  ) , and Juniper Networks (Nasdaq: JNPR  ) and, last I looked, all five had ample cash on hand to acquire a relatively inexpensive Brocade if they chose to.

Finally, there's the case of Brocade's valuation relative to its peers. It would be wrong to assume that Brocade is going to grow as quickly as F5 Networks (Nasdaq: FFIV  ) . But with F5 valued at 20 times forward earnings and seven times book, Brocade looks like a steal trading just below its book value and under 10 times 2012's expected earnings.

What's your opinion on Brocade? Is the company a buyout candidate, a stand-alone winner, or am I misplacing my bullishness?

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He still wonders if anyone reads these disclosures and as such would love to discreetly profess his love for the return of Beavis & Butthead and see if anyone notices. You can follow him on CAPS under the screen name TMFUltraLong , track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of IBM and EMC. Motley Fool newsletter services have recommended buying shares of Dell. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that'll never switch course on you.

SEC Charges Phony Western Gold Sales Team in $300 Million Ponzi Case

In a fraud case that sounds like it came straight out of the Wild Wild West, the Securities and Exchange Commission (SEC) charged Friday, June 11, that a group of swindlers persuaded more than 3,000 U.S. and Canadian investors to put their savings, retirement funds, and home equity into a $300 million Ponzi scheme for a phony gold-mining operation.

The SEC charges that as "primary architects" of the scam, Milowe Allen Brost and Gary Allen Sorenson of Calgary, Alberta, put together a sales team posing as an independent financial education firm that had discovered profitable investment opportunities with companies involved in gold mining.

"They held seminars where they promised investors they could earn 18% to 36% annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold," the SEC charged in its litigation release.

The complaint names four other individuals and four companies in the securities fraud: Larry Lee Adair, of Fort Lauderdale, Florida; Ward K. Capstick, a Canadian citizen living in Snohomish, Washington; Bradley Dean Regier, also of Calgary; Martin M. Werner, of Boca Raton, Florida; Syndicated Gold Depository; Merendon Mining Corp. Ltd.; Merendon Mining (Nevada) Inc.; and the Institute for Financial Learning Group of Companies Inc.

Sorenson allegedly hosted tours by potential investors at his Honduran refinery and demonstrated the pouring of gold bars while making false claims about the profitability of his company. Brost and Sorenson concealed their ownership and control of SGD by using personal aliases, corporate entities and trust agreements with nominee shareholders. Brost and his sales team, calling themselves "Structurists," sold investors shares in shell companies and then put their money through a "structuring" process that culminated with the transfer of funds from Syndicated Gold Depository to Merendon Mining.

"Unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson," according to the SEC's injunctive action taken in U.S. District Court for the Western District of Washington. "Investor funds were often transferred multiple times through numerous bank accounts held as far away as Asia, Europe and South America, and then ultimately used to make 'interest payments' to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme."

Brost and Sorenson apparently spent millions of dollars to buy and renovate extravagant homes, ranches, and recreational vehicles. Sorenson also purchased and outfitted a luxury fishing resort in South America. His wife and daughter are named as relief defendants in the case in order to recover investor assets now in their possession.

Read a story about the Kenneth Starr Ponzi scheme from the archives of

Biotech Hot Stock PDL BioPharma Soars on Dividend News

PDL BioPharma Inc. (NASDAQ: PDLI) shares soared in today�s trading after the company announced that it would begin paying regular quarterly dividends. The stock reached a high of $5.80 in today�s trading and ended the day 14.20% higher at $5.55, with volume up from daily average of 2.52 million to 15.02 million.

PDL shares have a 52-week range of $4.66-$7.30. The stock is currently trading above its 50-day and 200-day moving averages. Year-to-date PDL shares fell 10.91%. In the last one year the stock fell 20.71%.

Earlier today PDL said that it will start paying a regular quarterly dividend of $0.15 per share. Dividend payment dates would be March 15, June 15, September 15 and December 15. The record date would be a week before the dividend payment date. PDL previously paid on special one-time dividends.

PDL also announced that it settled its legal disputes withNovartis AG (NYSE: NVS). As part of the settlement the company will pay Novartis a certain sum of money based on the sale of the drug Lucentis by Novartis.

PDL BioPharma is engaged in the management of antibody humanization patents. It also engaged in the management of royalty assets. The company has licensing arrangements with several pharmaceutical and biotechnology companies. The company was previously known as Protein Design Labs Inc. The company is based in Incline Village, Nevada.

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2 Upstart Stocks with 50% Upside

It's so hard for new companies to gain traction in a mature industry. A few big players typically control most of the market share, so when upstarts come along with a better set of products or services, they often get acquired by the big players anyway.

Yet despite long odds, every year brings a new set of companies that are largely unfamiliar to investors. These companies push hard to boost sales at a fast pace, and once the revenue base hits a certain level, they can suddenly get a much bigger following on Wall Street. If successful, these companies can get swept up in a virtuous cycle of bullish research reports, increased hedge-fund interest, and analysis from folks like me in the financial journalism community. All of these usually lead to higher share prices, giving investors who got in early substantial gains.


To be sure, the road to higher sales gets very bumpy. These companies often need to keep raising cash just to fund key growth initiatives. And because these companies seek out small acquisitions to widen their reach, they are a turn-off to investors that shun a growth-through-acquisition strategy.

I've been looking at two of these "industry upstarts," both of which saw their stock slump sharply in 2011. Might they finally fulfill their promise in 2012?

1. MDC Partners (Nasdaq: MDCA)
This company is attempting to crack the mature advertising agency market that is dominated by veterans such as Omnicom (NYSE: OMC), Interpublic (NYSE: IPG), Publicis (Pink Sheets: PUBGY) and WPP (Nasdaq: WPPGY).

MDC has carved out a niche as a developer of online marketing and branding strategies (57% of revenue is tied to interactive advertising). And thanks to a combination of strong internal growth and selected acquisitions, MDC is on a hot growth streak. Sales rose 28% in 2010 to $698 million, and likely rose more than 30% in 2011 to more than $900 million. (Roughly one-third of that growth has been organic and the remainder through acquisitions.) MDC should handily crack the $1 billion revenue mark this year, yet the company is still largely unknown on Wall Street.

MDC would have a deeper following among investors -- and a richer stock price -- if the company wasn't spending every spare penny investing in growth. On that 2010 sales base cited above, MDC Partners generated just $15 million in free cash flow. The 2011 numbers aren't likely to look much better. (That's the result of 20 acquisitions during the past three years.)

Management appears committed to a better balance between growth and free cash flow, having surely been chastened after seeing the company's stock fall from $21 in late July to a recent $13.

Yet investors may soon realize that MDC is actually very well-positioned in the ad biz. The company knows how to get blue-chip firms to better adapt to the era of social networking and mobile devices. Companies like BMW, Samsung and Microsoft (Nasdaq: MSFT) are among MDC's 900 clients. As that customer base has expanded, customer concentration has decreased. MDC's top 10 clients accounted for 49% if sales in 2009, though that figure is now below 30%. (The loss of an account with Burger King this past summer dealt shares a blow, highlighting the perceived risk of customer concentration.)

It's hard to assess what free cash flow will look like in 2012, as MDC may or may not make additional cash-sapping acquisitions. But at the current sales base, 2012 EBITDA should top $120 million. This means shares trade for less than seven times EBITDA, on an enterprise-value basis. When investors come to understand this company's attractive industry positioning better, this multiple should expand to 10, which would push this stock back to its 52-week high of $21 seen last summer. That's 50% upside from here.

2. Rentrak (Nasdaq: RENT)
This company has been transforming from a provider of weekly DVD sales data (which is of interest to very few people these days) to a provider of media-consumption data. Its analytical software helps advertisers and broadcasters understand what consumers are watching in the online and broadcast spheres.
Rentrak's stock hit almost $30 by the end of 2010 (from $15 a year before) as investors saw a potential budding rival for media-tracking giant Nielsen Holdings (Nasdaq: NLSN).

At the start of 2011, management laid out a series of lofty growth targets that simply could not be met. Rentrak missed quarterly analysts' estimate in three of the last four quarters -- by a significant margin -- and shares fell more than 50% compared the past year. The shortfalls were the result of a faster-than-expected decline in the DVD sales tracking business, and a slower-than-expected ramp in the new media consumption tracking segment. Since the new business can't ramp fast enough to offset the declines in the legacy business, Rentrak's total sales are expected to actually shrink 4% to $94 million in fiscal (March) 2012. Further expected sales declines in the DVD business will likely cap 2013 sales growth at around 10%.

Yet its' the viewing tracking business, known as TVEssentials, that is the real focus for investors. After a solid run of new contract signings throughout calendar 2010, Rentrak found few new takers for its TVEssentials service in the first half of 2011, giving the impression that upstart's momentum had stalled. The good news: Rentrak signed up more than 30 new licensees in the September quarter, and the December quarter appears to have been strong as well.

TVEssentials now has more than 160 customers, of which two-thirds are local broadcasting affiliates of the major networks. Rentrak is winning contracts against Nielsen because it does a better job of gauging viewership by the second, highlighting which commercials are being watched. (Nielsen takes a snapshot of viewership every 15 minutes.) This article from trade publication Variety neatly summarizes the distinction.

The market opportunity is huge. Nielsen generated $1.5 billion in revenue from its TV rating service in 2011. Rentrak is on track for just $40 million in TVEssentials' revenue in fiscal (March) 2012. Yet analysts see that revenue base rising at a 30% annual clip through 2015. This is a stock you should get to know. If the March quarter comes in ahead of forecasts, this may be a rising star of 2012.

Risks to Consider: Aggressive growth stocks bring heightened execution risk as management sets lofty growth targets and then stresses the company to meet them. Management appears chastened, but these companies will need to deliver a string of solid quarters to win back investors.

> After a sharp drop in 2011, each of these stocks appears more attractively valued when measured against their still-robust growth prospects. Even minor market share gains against their much bigger rivals would translate into robust organic sales growth. Pay attention to both of these stocks. I wouldn't be surprised to see 50% upside in either of these names this year.

Alcoa Earnings

Alcoa (AA) reports after the close today, and we used the Bespoke Interactive Earnings Report Database to see how the stock typically trades in reaction to its quarterly release. Alcoa is a stock that reports after the close, so we use its price change on the following day to track its one-day reaction.

Looking at Alcoa's last fifteen reports, the stock has averaged an opening gap of 0.70% and then an open to close change of -2.05%. In fact, the stock has traded lower from the open to the close following 12 out of its last 15 earnings reports. In the case of Alcoa, traders typically bid the stock higher in after-hours and pre-market trading and then sell the stock during regular trading hours from 9:30 to the close.

2-Star Stocks Poised to Plunge: RadioShack?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, electronics retailer RadioShack (NYSE: RSH  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at RadioShack's business and see what CAPS investors are saying about the stock right now.

RadioShack facts

Headquarters (Founded) Fort Worth, Texas (1899)
Market Cap $725.8 million
Industry Computer and electronics retail
Trailing-12-Month Revenue $4.5 billion
Management CEO James Gooch (since 2011)
CFO Dorvin Lively (since 2011)
Return on Equity (Average, Past 3 Years) 19.3%
Cash/Debt $667.7 million / $666.4 million
Dividend Yield 6.9%
Best Buy

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 45% of the 805 members who have rated RadioShack believe the stock will underperform the S&P 500 going forward.

Earlier this week, one of those Fools, tompiarulli, succinctly summed up the bear case for our community:

Over the short term there it could go up a bit, simply because its taking such a pounding some might consider it undervalued.

In my opinion it would take a miracle to keep RadioShack going for another 10 years. They have failed to evolve as their competitors have, and even those competitors (like Best Buy) are in serious trouble from companies like Amazon. It may die a slow, painful death, but I don't see RadioShack going anywhere but down over the long term.

If you want to retire rich, you need to protect your portfolio from any undue risk. Luckily, we've found another retailer we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2012." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the new TrackPoisedTo CAPS account.

Thursday, July 26, 2012

Monsanto is a Bad Seed

Monsanto Company (NYSE: MON) reports fiscal Q3 earnings Wednesday, June 30, before the market open. Analysts expect a modest increase in profits — $1.35 compared to $1.25 a year ago. The trouble is that MON has failed to meet expectations in the past two quarters. And for good reason.�

MON used to rule the roost with its tightly controlled, genetically rendered seeds. But that’s not the case anymore, as MON is no longer the dominant presence in the agriculture sector that it once was.�

Despite a plunge of more than 40% from its January high and 70% from its 2008 peak, the stock still sports a relatively high P/E ratio of around 20. That’s more than its peers and the overall agricultural chemicals sector. That means investors continue to consider MON overpriced, which just adds more weight to an already beleaguered stock price.�

Perhaps of more importance, it adds more pressure on MON to perform in its earnings numbers. Based on recent reports and the company’s teetering position within the sector, that could be a tall order.

MON’s chart is ugly. The stock hasn’t closed above its 20-day moving average in three months and is also struggling with its 10-day. In fact, the shares are trading at levels last seen in late 2006.

On the sentiment front, it’s interesting that options traders have been playing calls more than puts. With the put/call ratio now bouncing off an annual low, this could be changing, which tells us that selling pressure is on the rise.

In addition, analysts, while hardly enthusiastic about MON, still refuse to turn their backs on the stock. Just one of 16 analysts rates MON a “sell,” which leaves plenty of room for downgrades.�

With a lot riding on next week’s earnings, the odds are against MON blowing the market’s hair back. The MON July 50 Puts look like a solid play to bet on post-earnings weakness.

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HNI Beats Analyst Estimates on EPS

HNI (NYSE: HNI  ) �reported earnings on Feb. 7. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), HNI beat expectations on revenues and earnings per share.

Compared to the prior-year quarter, revenue improved and GAAP earnings per share grew significantly.

Gross margins contracted, operating margins contracted, and net margins improved.

Revenue details
HNI booked revenue of $500.3 million. The five analysts polled by S&P Capital IQ expected net sales of $490.1 million. Sales were 7.3% higher than the prior-year quarter's $466.1 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.41. The five earnings estimates compiled by S&P Capital IQ forecast $0.40 per share on the same basis. GAAP EPS of $0.40 for Q4 were 43% higher than the prior-year quarter's $0.28 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 35.6%, 10 basis points worse than the prior-year quarter. Operating margin was 6.2%, 10 basis points worse than the prior-year quarter. Net margin was 3.6%, 90 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $424.0 million. On the bottom line, the average EPS estimate is $0.

Next year's average estimate for revenue is $1.95 billion. The average EPS estimate is $1.44.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 34 members out of 46 rating the stock outperform, and 12 members rating it underperform. Among 16 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 14 give HNI a green thumbs-up, and two give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on HNI is hold, with an average price target of $27.50.

Can your portfolio provide you with enough income to last through retirement? You'll need more than HNI. Learn how to maximize your investment income and "Secure Your Future With 11 Rock-Solid Dividend Stocks." Click here for instant access to this free report.

  • Add HNI to My Watchlist.

Wednesday, July 25, 2012

3 Ways to Play the Mobile-Payment Industry in 2012

The following video is part of our nationally syndicated Motley Fool Money radio show, with host Chris Hill talking with Bill Mann, Tim Hanson, and Joe Magyer about what investors should expect in 2012. In this segment they guys discuss why the mobile-payment industry will be one to watch in the new year and why companies such as Visa and eBay are poised to be among the winners.

Please enable Javascript to view this video.

Looking for more ways to play the mobile industry? Apple is just one company in the next generation of multibillion-dollar companies riding the mobile revolution to a record profits. The Motley Fool has a new free report on mobile named "The Next Trillion-Dollar Revolution" that details a "hidden" component play inside mobile phones that also is a market leader in the exploding Chinese market. Inside the report we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. You can access this just-released report by clicking here -- it's free.

Welcome to Today’s Online Conference

Thank you for taking the time to attend this special Online Conference.  With the credit crisis, real estate hitting new lows and the Fed scrambling to turn the market around, many investors are wondering what to do now. I’m here to say that there is a way to survive a falling market with your portfolio intact.

That is exactly what I want to talk about today. In this session, I’ll not only give you a panoramic overview of the forces affecting this market but also give you the specific actions you must take now to protect yourself AND profit.

I hope you’ll participate in today’s conference by submitting your own questions.  Just click on the “Ask Richard a Question” button in the middle of your screen.

Some of what we’ll cover:

  • What the media isn’t telling you about the banking crisis, and what you really need to be concerned about—it’s not what you think.
  • Why those who run for cover in this market could be the first ones to end up in the poorhouse.
  • Why gas prices are shooting back towards $4, and gold is soaring above $1,000 an ounce—and how you can benefit from these run ups.
  • The surprising impact of the Fed’s historic actions of the past week—and three stocks that will benefit the most.
  • PLUS I’ll share with you how I’m shielding my own portfolio from the fallout and introduce you to my top recommendations right now.
  • Plus, I’ll try to answer as many of your questions as I can.

My name is Richard Band, and I’ve been serving investors like you for more than two decades.  In my Profitable Investing newsletter, I focus on finding low-risk growth, value and high-yielding investments.  I work hard to spot trends early, identify the biggest profit-takers and make sure we get out when the tide turns and the next trend comes along.

It’s an approach that works, and works well—our Total Return Portfolio for 2007, according to figures compiled by the independent Hulbert Financial Digest, was 35% less volatile than the S&P 500.

For more information on how you can try Profitable Investing risk-free, click here now.

How Structured Products Work

Structured products have certainly suffered much of their popularity during the financial crisis 2008. However, after 2008 there has been a raised interest in structured products again. Today I’m going to explain you how they work, how banks earn money with them and why you should keep your hands off them.

There’s no point in talking about the more complex instruments. These products are only really understood by the investment product services department of their issuing banks, or maybe not even by them. Therefore I will speak about a simple standard structured product with the following terms:

Denomination: USD 1,000
Interest: 5% p.a.
Strike: USD 50
Ratio: USD 1,000: 20 shares
Lifetime: 1 year

There are two possible redemption scenarios on expiration:

Scenario 1: Underlying share closes above strike. Investor receives USD 1,000 in Cash per denomination.
Scenario 2: Underlying share closes below strike. Investor receives 20 underlying shares per denomination.

When talking about structured products there are always different point of views. One is the investor’s view and the other is the issuer’s view. Structured products are issued by banks and as such the issuing bank’s main focus is to earn money with the structured product. This conflicts to some degree with the investor’s interest to earn money with the product. So as an investor in the above product you will want the first scenario to happen. In this case you would receive your investment of USD 1,000 plus USD 50 interest on expiration. You would then pat yourself on the back for your flair for investments. On the other hand you could also be hit by the second scenario. You would then receive 20 shares plus USD 50 interest on expiration. The value of the redemption will then be lower than your initial investment.

So as you can see, by investing in this structured product you basically “buy” yourself a buffer of USD 50 on your investment if the share price stays level or goes south. On the other hand though you renounce any possible profits if the prices should raise and you also renounce the possible dividend of the company. Remember you receive no dividend from the company for holding the structured product.

Now how does a bank make money from the structured product? It’s not too complex actually and yet pretty clever. This works in two steps. The first step happens when the structured product is bought so you’ll want to know what technically happens at this point. Basically the investor buys a bond from the issuer while at the same time selling the issuer a put warrant on the underlying share. The issuer has now USD 1,000 plus a put warrant from the investor. The second step now is about what the issuer is going to do with the money from the investor. The issuer will invest a considerable amount (let’s say USD 900) into a bond that will yield enough profit to repay the USD 1,000 on expiry. With the remaining USD 100 the issuer will buy a call warrant on the underlying share. In the end the issuer has USD 900 invested in bonds plus one call warrant and one put warrant.

So whether the markets go through the roof or they crash on the ground the issuer will profit either from the call warrant or from the put warrant. The only risk for the issuer is if the prices stay about level. In this case both warrants will be more or less worthless but due to the USD 900 initially invested in bonds the issuer will be able to repay the USD 1,000 to the investor. There’s only three ways the market price can go: up, down or stay level. With the above technique the issuer has a 66% chance to make a considerable profit while the risk is rather limited.

If you would buy the share directly you would renounce the USD 50 interest but on the other hand you would receive the dividend if a dividend is paid. The risk of dropping prices is the same but you would also be able to profit from raising prices. That’s something you can’t do if you buy the structured product. So I can barely see a reason to buy a structured product. The chances for a better profit over the direct investments are pretty low.

Learn more about investing Read the full article with more examples and illustrations on Fancy Millionaire You will find more articles and an interesting community there. Check it out!

Apple: When Will They Build Their Own Mobile Search Engine?

Are you ready for iSearch?

Piper Jaffray analyst Gene Munster writes today that there is a 70% chance that Apple will develop its own search engine within five years. “We believe the company needs to develop its own search technology to protect the data generated on the iPhone,” he contends. “We believe Apple could utilize data unavailable from ,Google, data generated by the company’s App Store, to create a mobile centric search engine.”

Munster figures the company could start by making a minor acquisition of a search startup like Cuil, and then use the index as the base for building its own search engine.

He also things the company should invest in the maps business, asserting that “in the long term for mobile…it is going to be critical for companies offering mobile platforms to own their own map data.” He says the company’s reliance on Google Maps “yields one of the most unique aspects of the mobile platform: location.” His suggestion is that they buy a mapping company like Europa Technologies to start.

“The� bottom line is that protecting the data generated on the iPhone OS platform must become an increasing priority for Apple and we believe the company has the resources to develop its own products in both maps and search in the next five years,” he writes.

How Quantitative Easing Could Change Market Dynamics

If you have followed the Fed for any length of time, you know they give every syllable careful consideration when making any kind of public statement. You don’t need to have a Ph.D. in Fed watching to understand Thursday’s release of James Bullard’s paper concerning quantitative easing is a carefully calculated move to signal to the markets the real possibility exists the Fed will begin buying Treasury Bonds in the not too distant future. We read Mr. Bullard’s Seven Faces of “The Peril” last week and put together this “read between the lines” interpretation of what it could mean to individual investors and the value of assets in the coming weeks and months. Regardless of whether or not you agree with or feel this type of policy will be effective in the longer-term, there is no question the Fed can significantly alter behavior and impact asset prices in the short-to-intermediate term. This means an announcement of quantitative easing in the coming weeks could significantly impact where stocks, bonds, and commodities settle on 12.31.2010.

After reading James Bullard’s twenty-three page paper on possible monetary responses to further economic shocks, we feel it is important for investors to gain a basic understanding of how future Fed policy could impact the value of an individual’s savings and other financial assets. The basic premise of Mr. Bullard’s work is as follows:

    • Current Fed policy keeping interest rates low for an extended period may be causing the economy to fall into an undesirable steady state of low nominal interest rates and low inflation expectations.
    • This undesirable steady state is similar to what sparked Japan’s lost decade.
    • Current Fed policy reinforces a low expectation of future inflation, which in turn helps keep inflation at bay as market participants feel no compelling reason to take actions in preparation for future inflation. These actions might include investing, buying hard assets, or taking out a loan before interest rates go up.
    • Keeping rates low for an extended period also creates a perception that “things must be bad; therefore, it is not a good time to hire, expand, or take risk".
    • If there is no credible reason to believe policy or inflation rates are about to change, there is no impending event to prepare for future inflation.
    • Rising inflation expectations can become a self-fulfilling prophecy as market participants begin to prepare for a future with higher inflation and higher interest rates.
    • The best way to shock market participants out of the undesirable steady state is to begin a program of quantitative easing, where the Fed purchases U.S. Treasuries.
    • In order for quantitative easing to sufficiently increase future inflation expectations, market participants must believe the Fed will do "whatever it takes for as long as necessary" to obtain the objective of sufficiently positive inflation. This means the Fed must be willing to leave balance sheet expansion in place for as long as necessary to create expectations of higher future inflation by market participants (consumers, investors, companies, etc.). This remainds us of past "bazooka-like" policy moves, where policymakers would say, "You think we can't create positive inflation? Just watch."

What could all this mean to me and my investments?

Let’s start with quantitative easing, where the Federal Reserve buys Treasury bonds. Using a hypothetical example to illustrate the basic concepts, assume a typical American citizen has some Treasury Bond certificates in a shoe box under their bed. If the Fed offers to buy those bonds, they will be exchanging paper money, not currently in circulation, for a bond certificate. After the transaction, the American citizen has newly printed money and the Fed now has a bond certificate. It is easy to see in this example the Fed has increased the money supply by buying the bonds. The Treasury Bond represents an IOU from the U.S. Government. When the Fed buys bonds in the open market, it is like the government buying back its own IOU with newly created money. This is about as close to pure money printing as it gets.

How is this policy any different from lowering interest rates or increasing bank reserves?

Lowering interest rates and flooding the banking system with cash has one major drawback; if the banks won’t issue loans or customers do not want to take out loans, the low rates and excess bank reserves do little to expand the supply of money in the real economy. Therefore, these policies can fall into the "pushing on a rope" category. Quantitative easing, or Fed purchases of Treasury bonds, injects cash directly into the real economy, which is a significant difference.

How could all this create inflation and why should I care?

In a simple hypothetical example, assume we could keep the amount of goods and services available in the economy constant for one year. During that year, the Fed buys enough Treasuries to exactly double the dollar bills in circulation. The laws of supply and demand say if we hold supply constant (goods and services) and double demand (dollars chasing those good and services), prices will theoretically double. Obviously, if the prices of all goods and services doubled, the purchasing power of your current dollars in hand would be cut in half. This is known as purchasing power risk.

If the Fed starts buying bonds what could happen?

Since the Fed would be devaluing the paper currency in circulation, market participants would most likely wish to store their wealth in other assets, such as gold, silver, oil, copper, stocks, real estate, etc. The mere announcement of such a program would begin to accomplish the Fed’s objective of creating an expectation of higher future inflation. The expectation of future inflation can lead to asset purchases and investing, which in theory creates inflation by driving the prices of goods, services, and assets higher. In fact, the creation of this document and your reading of it assist in the process of creating increased expectations of future inflation, which is exactly what the Fed is trying to accomplish.

Chicken or Egg: Inflation Expectations or Inflation

Mr. Bullard hypothesizes the current economy may need rising inflation expectations to come first, which in turn would help create actual inflation since it would influence the buying and investing habits of both consumers and businesses. If you feel the Fed will “do whatever it takes” to create inflation, you may decide you need to protect yourself from inflation by investing in hard assets, like silver and copper. Your purchases of hard assets would help drive their prices higher. The mere perception of the possible devaluation of a paper currency can change the buying and investing patterns of both consumers and businesses.

Wild Card Makes 945 to 1,010 on S&P 500 Difficult

From a money management perspective, understanding possible Fed actions, especially before high stress and volatile periods arrive, can assist you in making more rationale and well planned decisions. Even prior to the release of Bullard’s paper, we hypothesized some possible market scenarios on July 22, 2010 in Bernanke, the Fed, Deflation, and the Dollar. The comments from July 22nd still apply, but it appears now as if the Fed would move directly to an asset purchase program.

How serious is this?

We should stress Mr. Bullard’s work relates to contingency plans only. He states a deflationary outcome could occur in the U.S. "within the next several years". In a conference call on Thursday, Bullard said, "This is a matter of being ready in case something else hits. What if there's a terrorist attack? What if there is some kind of trouble in the Asian recovery or something like that?" He added, "The most likely possibility from where we sit today is that the recovery will continue through the fall, inflation will start to move up and this issue will all go away".

Unfortunately, sometimes when an option is given to the markets, it forces the hand of policymakers. This means markets may remain volatile for a time, maybe even long enough to bring about an announcement of quantitative easing from the Fed. We will continue to comment on this topic from time to time in our blog, Short Takes.

Disclosure: The author and CCM clients have numerous long and short positions in the global stock, bond, commodity, and currency markets.

Tuesday, July 24, 2012

It's hard to say which will annoy customers more: Verizon's latest cellphone fee or the company's unlikely justification for imposing it.

Also See
  • 5 Ways the Government May Friend Facebook
  • The Smartphone Data Diet
  • Dialing In on Smartphone Deals

In recent weeks, Verizon started charging existing customers $30 to upgrade to a new phone when they renew their contract. AT&T and Sprint charge $36 and $18 for the same thing, respectively, so one might forgive Verizon for just doing what everyone else is doing. But Verizon's excuse for adding the charge is pretty rich. The millions the company rakes in from the fee will be used to offer customers "wireless workshops" and "online educational tools," among other things, spokeswoman Brenda Rayney told SmartMoney. According to the press release announcing the fee, there will also be "consultations with experts who provide advice and guidance on devices that are more sophisticated than ever."

Here's an idea: how about I let you know when I want to spend my Saturday hanging out in a Verizon store learning things I could read in the manual -- and then you can charge me a $30 admission. Otherwise, I'm good.

What turns the knife harder on this latest move is that just a year ago Verizon abandoned its "New Every Two" program, which gave customers signing renewing two-year contracts $30 to $50 off their new phone. So now, not only do you not get the $30 credit when you upgrade, you have to pay them a $30 fee to get the new phone. That's as much as an $80 price hike! (When I asked about this point, Verizon declined to comment.)

 Dodging Verizon's New $30 Upgrade Fee3:28

It's hard to say which will annoy customers more: Verizon's latest cellphone fee or the company's unlikely justification for imposing it. Ben Popken tells digits how to avoid it altogether. (Photo: AP)

Sure, in out-of-pocket terms, $30 isn't that much. But to pay for "wireless workshops?" Say that it's for building out the 4G network, or, better yet, say, "Hey guys, we feel like making more money and -- at least we don't charge as much as AT&T's." Don't insult our intelligence.

Annoyed, I looked into ways for avoiding the $30 upgrade fee.

For starters, Verizon suggests it may be possible to offset the fee by trading in one's old phone. "While trade-in values vary, they can get 'cash' in the form of a debit card for their older phone and use that money to help offset the Upgrade Fee," Rayney says. You can check that program out at Customers may even get a better price selling the phone on their own and keeping the cash. However, while iPhones tend to hold their value, many less-desirable phones may not cover the $30 fee.

Another promising-sounding alternative method I researched involved a three-step switcheroo. First, start a new line of service with the new phone you want. Then, port your old phone number to a 3rd party service, like Google Voice (here's a guide from Lifehacker on doing so). Lastly, cancel the line with the old phone and port the old phone number back onto the new phone, thus keeping the new phone, the old number, and dodging the fee. But there's a catch. It only works if you wait three months to port the number back. If you do it before then, Verizon's system treats it like you're continuing the same service, and they hit you with the $30 upgrade fee. Curses.

Then there's the squeaky-wheel approach. If your phone is error-prone, complain to Verizon and they may end up swapping it out for free with a new phone. That's one backdoor method to getting a fee-free upgrade. Your mileage may vary, and you'll need to be "lucky" enough to have a faulty device.

Okay, so why not just leave Verizon? If they care so little about customer loyalty that they're going to penalize you for staying with them, why give them the satisfaction? Simply switch to a new carrier at the end of your contract and get your newer and fancier phone there. Unfortunately, unless you go with a pay-as-you go plan, you will need to pay the new service's activation fee. Wouldn't you know, it's usually about the same as the Verizon fee you're trying to avoid. Sweet-talking the customer service rep over the phone into dropping the fee sometimes works, and some credit unions waive cellphone plan activation fees for their members. Also, wireless retailer sites like periodically run promotions waiving activation fees if you buy through them. But depending on how frugal you're feeling, saving $30 may not be worth the hassle of jumping ship.

There is one one foolproof method I found for avoiding Verizon's new $30 upgrade fee: buy your new phone from someone other than Verizon on eBay for instance. Then you can add the phone to your account, sans upgrade fee. Because you're already a Verizon customer, there's no activation fee. Success -- that is, if you can find a phone cheaper than Verizon's discounted rate. This method also works for avoiding upgrade fees at other carriers as well.

However, if you buy your phone from someone other than Verizon, be sure to check that the phone hasn't been reported as lost or stolen. A "hot" phone can't be activated, leaving you with a pricey brick. Ask the seller for the ESN, MEID, or IMEI numbers, which are basically serial numbers for your phone, then check them out with Verizon. You can enter the number on this page at or call Verizon and they'll do it for you. If you buy a phone on eBay, you won't be locked into a new contract with an early termination fee either, but you also won't be able to get the discount pricing Verizon provides with signing those long-term contracts. It's a toss-up depending on what you value more: flexibility or price.

In the end, Verizon's new $30 upgrade fee is bound to become the new normal. I took an informal poll of a few friends who were on Verizon. At first they were shocked, because they hadn't heard of it, then incredulous, because the explanation was so inane. However, when I asked them if the fee was enough to make them move to a new carrier when it came time to upgrade their phone, they said no. "After all," my friend Melinda said, shrugging her shoulders, "it's only $30."

Looks like Verizon's got our number on this one.

Safeguarding Your Reputation

In terms of guarding your reputation inside the on the internet world, it may be challenging. Fortunately, there are plenty of reputation protection firms, such as Reputation Management Zone, to assist with managing unfavorable reviews, posts, etc. In an instant, a solid on the web reputation could be damaged because of the efforts of a single disgruntled or angry client. Larger corporations are able to bounce back; nevertheless, for smaller or commence up organizations, this can definitely impact present and future sales and possibilities. Finding out the best way to appropriately handle these situations together with a few other tricks and maneuvers, the worry about damaging your private and/or enterprise reputation could be subdued.

You may come across your self overwhelmed using the activity of cleaning up your reputation, specifically when it entails the vast Planet Wide Net. Should you obtain yourself in this scenario, then it is most effective to receive support from organizations that specialize in this kind of work. Lots of individuals and clients look for data by typing in keywords, which leads to millions of outcomes in different search engines. This is where negative reviews or unfavorable remarks will seem and ultimately deter men and women clicking on your ad or link. Search engine reputation management firms are in a position to get rid of this from taking place by employing individuals to discover and attack those negative sources, therefore leading to far more clicks, sales, etc., for your self or organization.

Apart from searching for assist from the experts, you will find ways to improve your reputation which you can do your self; nevertheless, with this alternative, you will devote additional time weeding out numerous World wide web sources and webpages. An awesome method to virtually instantly strengthen your on line reputation is always to stop by well-liked web sites that specialize in individuals submitting bad critiques and experiences, for example the Ripoff Report site. Lots of people come to websites like these to see what other people have said about a specific person or organization. You cannot completely remove Ripoff Report from the internet; nevertheless, you could remove particular posts related to you by contacting the web-site or the originator of your bad review/experience.

As you could inform, it requires many perform to enhance a person’s reputation, specifically when it is solely on the web. It is not impossible although and with all the proper people and mindset, it may be done inside a short matter of time. This can be only a temporary remedy although plus the reputation you put out is controlled by you. Should you are concerned about your business’ reputation, begin to create modifications with the way your organization practices or interacts with shoppers. Occasionally little adjustments can lead to significant final results, but you can expect to not know until you try.

In the event you uncover that just after a number of attempts of trying to boost your reputation basically is not operating, it may be ideal to consult with enterprise pros that will enable help with business handling as a way to improve sales, productivity and most importantly, reputation. Guard your reputation and treat it as a precious item due to the fact it is an extremely crucial factor within the business enterprise and individual worlds.

Looking to find the best deal on remove ripoff report, then visit to find the best advice on reputation protection for you.

Top Stocks For 2011-12-14-8

Global Hunter (GBLHF.PK)

Global Hunter’s focus is on strategic and base metals, with an advanced stage copper oxide project in Chile and a highly prospective molybdenum property in British Columbia, Canada. GBLHF teams are working on developing the Corona de Cobre property in Chile and the Rabbit south property in British Columbia.

Molybdenum is a silver-like metal extracted from molybdenite. Molybdenite is freely available in nature. The United States, Peru, China, Russia and Canada process and extract the majority of molybdenum from molybdenite. Molybdenum is noted for its softness and greasy feel. Molybdenum is used in a number of applications ranging from batteries to aircraft. Its use in batteries provides several advantages.

Global Hunter Corp. (GBLHF.PK) is pleased to announce initial assay results from its previously announced surface sampling program. The results are encouraging with new gold showings as well as very positive copper oxide assays over wide-spread areas.

Highlights of the entire program

9 mineralized shear and/or alteration zones sampled total of 13.5 kilometers of strike length along know copper bearing shear and alteration zones tested with 205 rock chip samples

Good grades of soluble copper (oxide) over a significantly large area have been identified; however they represent only about 50% of the total copper grade indicating a mixed oxide-sulphide zone. Numerous iron oxide structures have also been mapped but no iron assays have been received to date.

The Company is planning to re-assay samples for iron to determine if iron is present in significant quantities to represent another target

For more information

Haverty Furniture Companies Inc. (NYSE:HVT) reports third quarter 2011 operating results of earnings per share of $0.01 compared to $0.05 for the same period of 2010. The loss per share for the nine months ended September 30, 2011 is ($0.07) compared to earnings per share of $.13 for the same period of 2010.

Haverty Furniture Companies, Inc., together with its subsidiaries, operates as a specialty retailer of residential furniture and accessories in the United States.

Vishay Intertechnology Inc (NYSE:VSH) announced its results for the fiscal quarter and nine fiscal months ended October 1, 2011. Revenues for the fiscal quarter ended October 1, 2011 were $637.6 million, compared to $694.4 million for the fiscal quarter ended October 2, 2010. The net earnings attributable to Vishay stockholders for the fiscal quarter ended October 1, 2011 were $50.5 million, or $0.31 per diluted share, compared to $89.8 million, or $0.47 per diluted share for the fiscal quarter ended October 2, 2010.

Vishay Intertechnology, Inc. engages in the design, manufacture, and marketing of discrete semiconductors and passive electronic components in the United States, Europe, and Asia.

Crown Equity Holdings, Inc. (CRWE)

Some advantages of VoIP are given below;

o The main advantage of VoIP broadband phone service is the cost. VoIP broadband phone providers charge you a much lower monthly fee for local, long distance and international calls than traditional phone service.

o VoIP broadband phone service provides features that are usually not available with traditional phone service, such as virtual phone number, you can choose a phone number with an area code different from where you reside. Friends, families or customers living in that area will only be charged for local calls when they call your virtual number.

o VoIP service is usually bundled with free features (such as caller ID with name, call waiting, conference calls, call forwarding) which are charged for additional cost by traditional phone companies.

Crown Equity Holdings Inc. (CRWE) recently announced that it has entered into a joint venture to deploy VoIP (Voice over Internet Protocol) technology delivering voice, video and data services to residential and commercial customers. The joint venture company is Crown Tele Services Inc. which was a wholly-owned subsidiary of Crown Equity Holdings Inc. Crown Equity Holdings Inc. will own fifty percent (50%) interest in the joint venture.

Commenting on the joint venture, Kenneth Bosket, President of Crown Equity Holdings Inc., said: “We are excited to deliver VoIP communications solutions specifically designed to meet the business and residential market needs in this fast-growing global market.”

Crown Equity Holdings Inc., together with its digital network, currently provides electronic media services specializing in online publishing, which brings together targeted audiences and advertisers. Crown Equity Holdings Inc. offers internet media-driven advertising services, which covers and connects a range of marketing specialties, as well as search engine optimization for clients interested in online media awareness.

For more information visit their web site;

Top Stocks For 2011-12-5-13

SAN DIEGO–11/21/2011 (CRWENEWSWIRE) — Jack in the Box Inc. (NASDAQ:JACK) today reported net earnings of $22.7 million, or $0.49 per diluted share, for the fourth quarter ended October 2, 2011, compared with net earnings of $4.0 million, or $0.07 per diluted share, for the fourth quarter of fiscal 2010. Fiscal 2011 net earnings totaled $80.6 million, or $1.61 per diluted share, compared with net earnings of $70.2 million, or $1.26 per diluted share, in fiscal 2010. In last year�s fourth quarter, 40 Jack in the Box(R) company restaurants were closed, and the company recorded pre-tax charges totaling $28.0 million (included in �impairment and other charges, net� in the accompanying consolidated statements of earnings), which reduced diluted earnings per share by approximately $0.33 in both the fourth quarter and fiscal 2010.

Operating earnings per share, a non-GAAP measure which the company defines as diluted earnings per share on a GAAP basis less gains from refranchising, were approximately $0.19 per diluted share in the fourth quarter of 2011. For fiscal year 2011, operating earnings per share were approximately $0.83 compared with approximately $0.61 last year (including the $0.33 charge relating to restaurant closures in 2010).

Gains from refranchising contributed approximately $0.30 per diluted share for the fourth quarter of 2011 and approximately $0.78 for fiscal year 2011 as compared with approximately $0.65 per diluted share in fiscal year 2010.

The fourth quarter and fiscal year ended October 2, 2011, included 12 weeks and 52 weeks, respectively, as compared to 13 weeks and 53 weeks in the fourth quarter and fiscal year ended October 3, 2010, respectively. The company estimates that the extra week benefited diluted earnings per share by approximately $0.03 in both the fourth quarter and fiscal 2010.

Increase (decrease) in same-store sales:

12 Weeks Ended13 Weeks Ended52 Weeks Ended53 Weeks Ended
October 2, 2011October 3, 2010October 2, 2011October 3, 2010
Jack in the Box:

Linda A. Lang, chairman, chief executive officer and president, said, �Jack in the Box company same-store sales increased 5.8 percent in the fourth quarter, ahead of our expectations, as sales and traffic accelerated in the last two months of the quarter. On a two-year cumulative basis, this represented our fifth consecutive quarter of sequentially improving company same-store sales trends. We believe these results have been largely driven by the investments we have made to enhance the entire guest experience at the Jack in the Box brand.

�Qdoba�s same-store sales in the fourth quarter increased 3.7 percent system-wide, representing the third consecutive quarter that two-year cumulative same-store sales have been greater than 9 percent,� Lang said.

Consolidated restaurant operating margin was 13.5 percent of sales in the fourth quarter of 2011, compared with 12.5 percent of sales in the year-ago quarter.

Food and packaging costs in the quarter were 190 basis points higher than prior year. Overall commodity costs were approximately 7 percent higher in the quarter, driven by higher costs for most commodities other than poultry and largely consistent with the company�s expectations.

Payroll and employee benefits costs were 110 basis points lower than the year-ago quarter, reflecting lower insurance costs and the benefit of refranchising. These decreases were partially offset by higher unemployment taxes resulting from rate increases in several states.

Occupancy and other costs decreased 180 basis points in the fourth quarter due primarily to lower repairs and maintenance costs and utilities expenses, and the benefit of refranchising. These decreases were partially offset by higher rent expense as a percentage of sales due to the greater proportion of company-operated Qdoba restaurants versus the prior year.

SG&A expense for the fourth quarter decreased by $7.3 million and was 10.6 percent of revenues compared with 10.8 percent last year. SG&A expense for fiscal 2011 decreased by $18.9 million and was 10.2 percent of revenues compared with 10.6 percent last year. The variances in SG&A were attributable primarily to the following:

The 53rd week added approximately $3.6 million to SG&A in last year�s fourth quarter and fiscal year.
Advertising costs were $5.2 million lower in the fourth quarter and $17.9 million lower in fiscal 2011, due primarily to the impact of refranchising Jack in the Box restaurants and a decrease in incremental spending compared to the fourth quarter and fiscal 2010. These decreases were partially offset by higher advertising expense for Qdoba due to the increase in the number of company-owned restaurants and same-store sales growth.
Incentive compensation accruals decreased by $2.3 million in the fourth quarter of 2011.
Pension expense, which is non-cash in nature, decreased by $1.3 million in the fourth quarter and by $5.3 million for fiscal 2011.
The company�s refranchising strategy and planned overhead reductions resulted in lower general and administrative costs of approximately $0.4 million for the fourth quarter and $5.9 million for the full year.

These decreases were partially offset by the following:

Mark-to-market adjustments on investments supporting the company�s non-qualified retirement plans negatively impacted SG&A by $4.6 million in the fourth quarter as compared to a positive impact of $2.1 million in last year�s fourth quarter, resulting in a year-over-year increase in SG&A of $6.7 million. For fiscal 2011, mark-to-market adjustments negatively impacted SG&A by $0.1 million as compared to a positive impact of $2.7 million last year, resulting in a year-over-year increase in SG&A of $2.8 million.
Insurance recoveries related to Hurricane Ike resulted in a $1.2 million benefit in the fourth quarter of 2010 and a $4.2 million benefit in fiscal 2010.
Incentive compensation accruals increased by $2.2 million in fiscal 2011.
Qdoba G&A increased by $0.9 million in the fourth quarter and $4.4 million in fiscal 2011 due primarily to higher overhead to support recently acquired franchise markets and new unit growth.

Gains on the sale of 106 company-operated Jack in the Box restaurants to franchisees totaled $22.2 million in the fourth quarter, or approximately $0.30 per diluted share. For fiscal 2011, gains on the sale of 332 company-operated restaurants to franchisees totaled $61.1 million, or approximately $0.78 per diluted share, compared with $55.0 million, or approximately $0.65 per diluted share in fiscal 2010 from the sale of 219 company-operated restaurants. Total proceeds related to refranchising, including cash and notes receivable, for the fourth quarter and fiscal 2011 were $43.4 million and $120.3 million, respectively.

�With the sale of 332 restaurants in fiscal 2011, the Jack in the Box system was 72 percent franchised as of the end of the year, and we�ve achieved our original goal of increasing the percentage of franchise ownership to 70 to 80 percent two years ahead of plan,� Lang said. �Over the last six years, we have refranchised more than 1,000 restaurants and expect to refranchise 150 to 200 restaurants over the next couple of years, which will bring our Jack in the Box franchise ownership to approximately 80 percent of the system.�

The company repurchased approximately 2,637,000 shares of its common stock in the fourth quarter of 2011 at an average price of $20.42 per share. In fiscal 2011, the company returned over $193 million to shareholders through the repurchase of approximately 9,106,000 shares of its common stock at an average price of $21.27 per share. In October 2011, the company completed the repurchase of the remaining $6.4 million authorized by its board of directors in May 2011. In November 2011, the company�s board of directors authorized an additional $100 million stock-buyback program that expires in November 2013.

Restaurant openings

Ten new Jack in the Box restaurants opened in the fourth quarter, including 6 franchised locations, compared with 14 new restaurants opened system-wide during the same quarter last year, of which 2 were franchised. For the full year, 31 new Jack in the Box restaurants opened, including 16 franchised locations, compared with 46 new restaurants in fiscal 2010, 16 of which were franchised.

In the fourth quarter, 20 Qdoba restaurants opened, including 12 franchised locations, versus 13 new restaurants in the year-ago quarter, of which 6 were franchised. For the full year, 67 Qdoba restaurants opened, including 42 franchised locations, compared with 36 new restaurants in fiscal 2010, 21 of which were franchised.

At October 2, 2011, the company�s system total comprised 2,221 Jack in the Box restaurants, including 1,592 franchised locations, and 583 Qdoba restaurants, including 338 franchised locations.


The following guidance and underlying assumptions reflect the company�s current expectations for the first quarter ending January 22, 2012, and the fiscal year ending September 30, 2012. Fiscal 2012 is a 52-week year, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.

First quarter fiscal year 2012 guidance

Same-store sales are expected to increase approximately 4 to 5 percent at Jack in the Box company restaurants versus a 1.5 percent increase in the year-ago quarter.
Same-store sales are expected to increase approximately 2 to 3 percent at Qdoba system restaurants versus a 6.4 percent increase in the year-ago quarter.

Fiscal year 2012 guidance

Same-store sales are expected to increase approximately 2 to 4 percent at Jack in the Box company restaurants.
Same-store sales are expected to increase approximately 3 to 5 percent at Qdoba system restaurants.
Overall commodity costs are expected to increase by approximately 5 percent for the full year, with higher inflation in the first half of the fiscal year.
Restaurant operating margin for the full year is expected to be in the mid-13 percent range, depending on same-store sales and commodity inflation.
25 to 30 new Jack in the Box restaurants are expected to open, including approximately 15 company locations.
70 to 90 new Qdoba restaurants are expected to open, of which approximately half are expected to be company locations.
$15 to $25 million in gains on the sale of 80 to 120 Jack in the Box restaurants to franchisees, with $35 to $50 million in total proceeds resulting from the sales.
Capital expenditures of $90 to $100 million.

SG&A expense in the mid-10 percent range, including higher pension expense, restaurant technology investments and costs related to Qdoba growth.
Impairment and other charges of 30 to 40 basis points.
Tax rate of approximately 37 to 38 percent.
Diluted earnings per share of $1.10 to $1.43, with the range reflecting uncertainty in the timing of anticipated refranchising transactions as well as same-store sales results and commodity inflation. Operating earnings per share, which the company defines as diluted earnings per share on a GAAP basis less gains from refranchising, are expected to range from $0.90 to $1.10 per diluted share. Diluted earnings per share includes approximately $0.07 to $0.09 of re-image incentive payments to franchisees in fiscal 2012 to complete the re-image program as compared to $0.11 in fiscal 2011. Gains from refranchising are expected to contribute $0.20 to $0.33 to diluted earnings per share, as compared to approximately $0.79 in fiscal 2011.

Conference call

The company will host a conference call for financial analysts and investors on Tuesday, November 22, 2011, beginning at 8:30 a.m. PT (11:30 a.m. ET). The conference call will be broadcast live over the Internet via the Jack in the Box website. To access the live call through the Internet, log onto the Investors section of the Jack in the Box Inc. website at at least 15 minutes prior to the event in order to download and install any necessary audio software. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days, beginning at approximately 11:30 a.m. PT on November 22.

About Jack in the Box Inc.

Jack in the Box Inc., based in San Diego, is a restaurant company that operates and franchises Jack in the Box(R) restaurants, one of the nation�s largest hamburger chains, with more than 2,200 restaurants in 19 states. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill(R), a leader in fast-casual dining, with more than 580 restaurants in 42 states and the District of Columbia. For more information, visit

Safe harbor statement

This press release contains forward-looking statements within the meaning of the federal securities laws. Such statements are subject to substantial risks and uncertainties. A variety of factors could cause the company�s actual results to differ materially from those expressed in the forward-looking statements, including the success of new products and marketing initiatives, the impact of competition, stock market volatility, unemployment, trends in consumer spending patterns, commodity costs, and timing of sales of Jack in the Box restaurants to franchisees. These factors are discussed in the company�s annual report on Form 10-K and its periodic reports on Form 10-Q filed with the Securities and Exchange Commission which are available online at or in hard copy upon request. The company undertakes no obligation to update or revise any forward-looking statement, whether as the result of new information or otherwise.

Source: Jack in the Box Inc.

Jack in the Box Inc.
Investor Contact:
Carol DiRaimo, 858-571-2407
Media Contact:
Brian Luscomb, 858-571-2291

(In thousands, except per share data)
Weeks EndedWeeks EndedWeeks EndedWeeks Ended
October 2,October 3,October 2,October 3,
Company restaurant sales$296,088$391,989$1,380,273$1,668,527
Distribution sales137,206108,558530,959397,977
Franchise revenues70,87262,666282,066231,027
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging101,064126,328460,790530,613
Payroll and employee benefits85,226117,127414,463505,138
Occupancy and other69,86499,644329,766398,066
Total company restaurant costs256,154343,0991,205,0191,433,817
Distribution costs138,255108,776533,496399,707
Franchise costs34,87928,535136,148104,845
Selling, general and administrative expenses53,60760,902224,455243,353
Impairment and other charges, net2,48135,65312,67248,887
Gains on the sale of company-operated restaurants, net(22,185)(18,934)(61,125)(54,988)
Earnings from operations40,9755,182142,633121,910
Interest expense, net4,2834,16516,85515,894
Earnings before income taxes36,6921,017125,778106,016
Income taxes14,040(3,024)45,17835,806
Net earnings$22,652$4,041$80,600$70,210
Net earnings per share:
Weighted-average shares outstanding:
(Dollars in thousands, except per share data)
October 2,October 3,
Current assets:
Cash and cash equivalents$11,424$10,607
Accounts and other receivables, net86,21381,150
Prepaid expenses18,73736,100
Deferred income taxes45,52046,185
Assets held for sale and leaseback51,79359,897
Other current assets1,7933,592
Total current assets254,411274,922
Property and equipment, at cost:
Restaurant and other equipment343,718437,547
Construction in progress44,66058,664
Less accumulated depreciation and amortization(663,373)(684,690)
Property and equipment, net855,426878,039
Intangible assets, net17,49517,986
Other assets, net199,118151,104
Current liabilities:
Current maturities of long-term debt$21,148$13,781
Accounts payable94,348101,216
Accrued liabilities167,487168,186
Total current liabilities282,983283,183
Long-term debt, net of current maturities447,350352,630
Other long-term liabilities290,723250,440
Deferred income taxes5,310376
Stockholders� equity:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued--
Common stock $0.01 par value, 175,000,000 shares authorized, 74,992,487 and 74,461,632 issued, respectively750745
Capital in excess of par value202,684187,544
Retained earnings1,063,020982,420
Accumulated other comprehensive loss, net(95,940)(78,787)
Treasury stock, at cost, 30,746,099 and 21,640,400 shares, respectively(764,558)(571,459)
Total stockholders’ equity405,956520,463
(Dollars in thousands)
Fiscal Year
Cash flows from operating activities:
Net earnings$80,600$70,210
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization96,147101,514
Deferred finance cost amortization2,5541,658
Deferred income taxes(12,832)(27,554)
Share-based compensation expense8,06210,605
Pension and postretirement expense23,84529,140
Losses (gains) on cash surrender value of company-owned life insurance1,094(6,199)
Gains on the sale of company-operated restaurants, net(61,125)(54,988)
Gains on the acquisition of franchise-operated restaurants(426)-
Losses on the disposition of property and equipment, net7,65010,757
Impairment charges and other1,36712,970
Loss on early retirement of debt-513
Changes in assets and liabilities, excluding acquisitions and dispositions:
Accounts and other receivables(26,116)(8,174)
Prepaid expenses and other current assets19,163(22,967)
Accounts payable1,498(2,219)
Pension and postretirement contributions(4,790)(24,072)
Cash flows provided by operating activities from continuing operations124,26064,038
Cash flows used in operating activities from discontinued operations-(2,172)
Cash flows provided by operating activities124,26061,866
Cash flows from investing activities:
Purchases of property and equipment(129,312)(95,610)
Proceeds from the sale of company-operated restaurants119,27566,152
Proceeds from (purchases of) assets held for sale and leaseback, net(3,262)45,348
Collections on notes receivable20,8488,322
Acquisition of franchise-operated restaurants(31,077)(8,115)
FFE loans to franchisees(14,473)-
Cash flows provided by (used in) investing activities(35,802)19,173
Cash flows from financing activities:
Borrowings on revolving credit facilities721,160881,000
Repayments of borrowings on revolving credit facilities(605,000)(721,000)
Proceeds from issuance of debt-200,000
Principal repayments on debt(13,760)(418,836)
Debt issuance costs(989)(9,548)
Proceeds from issuance of common stock5,5305,186
Repurchase of common stock(193,099)(97,000)
Excess tax benefits from share-based compensation arrangements1,2902,037
Change in book overdraft(2,773)34,727
Cash flows used in financing activities(87,641)(123,434)
Net increase (decrease) in cash and cash equivalents817(42,395)
Cash and cash equivalents at beginning of period10,60753,002
Cash and cash equivalents at end of period$11,424$10,607
The following table presents certain income and expense items included in the company�s condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding:
QuarterFiscal Year
October 2,October 3,October 2,October 3,
Statement of Earnings Data:
Company restaurant sales58.7%69.6%62.9%72.6%
Distribution sales27.2%19.3%24.2%17.3%
Franchise revenues14.1%11.1%12.9%10.1%
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1)34.1%32.2%33.4%31.8%
Payroll and employee benefits (1)28.8%29.9%30.0%30.3%
Occupancy and other (1)23.6%25.4%23.9%23.9%
Total company restaurant costs (1)86.5%87.5%87.3%85.9%
Distribution costs (1)100.8%100.2%100.5%100.4%
Franchise costs (1)49.2%45.5%48.3%45.4%
Selling, general and administrative expenses10.6%10.8%10.2%10.6%
Impairment and other charges, net0.5%6.3%0.6%2.1%
Gains on the sale of company-operated restaurants, net(4.4)%(3.4)%(2.8)%(2.4)%
Earnings from operations8.1%0.9%6.5%5.3%
Income tax rate (2)38.3%(297.3)%35.9%33.8%
(1) As a percentage of the related sales and/or revenues.
(2) As a percentage of earnings before income taxes.
The following table summarizes the year-to-date changes in the number of Jack in the Box and Qdoba company and franchise restaurants:
October 2, 2011October 3, 2010
Jack in the Box:
Beginning of period9561,2502,2061,1901,0222,212
Acquired from franchisees---1(1)-
End of period6291,5922,2219561,2502,206
% of system28%72%100%43%57%100%
Beginning of period188337525157353510
Acquired from franchisees32(32)-16(16)-
End of period245338583188337525
% of system42%58%100%36%64%100%
Total system8741,9302,8041,1441,5872,731
% of system31%69%100%42%58%100%