Gustav, Palin, Geothermal, Dykstra
– Maybe the most hyped weather event this century?
– They are just like us
– This is very interesting
– If you still listen to Lenny after reading Adam, you are beyond helping..
Categories
Categories
ADM 10-K Notables
Some notables from the recent 10-K filed by Archer Daniels Midland (ADM)
Cap Ex for Expansion:
During the past five years, the Company has experienced significant growth, spending approximately $5.3 billion for construction of new plants, maintenance and expansions of existing plants, and the acquisitions of plants and transportation equipment. The Company is constructing two dry corn milling plants which will increase the Company’s annual ethanol production capacity by 550 million gallons to 1.7 billion gallons. In addition, the Company is currently constructing a polyhydroxy alkanoate (PHA) natural plastics production facility, a propylene/ethylene glycol production facility, two cocoa processing facilities, and two coal cogeneration facilities. Construction of these plants is expected to be completed during the next two fiscal years. The Company expects to spend approximately $2.5 billion to complete construction of these facilities and other approved capital projects over the next five years. There have been no significant dispositions during the last five years.
Sales by Product:
Soybeans= 16%
Corn = 14%
Soybean Meal = 11%
Wheat = 10%
Hedges
The Company uses futures and options to fix the sales price of anticipated volumes of these ethanol sales in future months. These derivatives are designated as cash flow hedges. The changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. The amounts representing the ineffectiveness of these cash flow hedges are immaterial. Gains and losses arising from open and closed hedging transactions are deferred in other comprehensive income, net of applicable income taxes, and recognized as a component of cost of products sold in the statement of earnings when the hedged item is recognized. As of June 30, 2008, the Company has recorded $81 million of after-tax gains in accumulated other comprehensive income related to gains and losses from cash flow hedge transactions. The Company expects to recognize these after-tax gains in the statement of earnings principally during fiscal year 2009.
Status of New Products
The Company continues to expand its business through the development of new products to meet the growing demands for food, animal feed, chemicals and energy.
The Company’s researchers continue to develop custom low-trans fats and oils for bakery and quick-service restaurants that utilize the Company’s Novalipid portfolio of low-trans fats and oils. These products have enabled customers to comply with various municipal trans fat bans.
The Company’s cooked, dried edible bean products are finding a number of new applications due to the increased interest among our customers in improving nutrition, especially in the area of foods designed for children.
The Company’s alliance with Metabolix for production of PHA, a biodegradable plastic, is proceeding. Semi-works production of PHA is being used for market development by Telles, a joint-venture company between the Company and Metabolix. The construction of the Company’s 50,000 metric ton per year commercial manufacturing facility is scheduled for completion in fiscal 2009.
The Company is proceeding with construction of a 100,000 metric ton per year commercial propylene/ethylene glycol facility. These products are principally used in industrial applications such as antifreeze and coolants, the manufacture of certain plastics, and paints and coatings.
The Company has entered into a joint development agreement with ConocoPhillips (COP) that will develop renewable transportation fuels from agriculture, forestry, and crops grown specifically for energy. This development effort is focused on the production of bio-crude oil that can be used by conventional petroleum refineries to produce transportation fuels.
FULL FILING
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Monday’s Links
iPhone, Scams, Cullen, Fuld
– So many problems
– Do not invest in any mail solicitations until you check them here
– James Cullen ponders what Warren bought
– Should have been “over” months ago
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Saturday Viewing
This didn’t take long………
Categories
Credit Conversation (video)
Watch this video, there is a great conversation between Don Luskin and Kudlow about credit.
The current yield at the new level is 4%
The Board of Directors of Philip Morris International Inc. (PM) today increased the company’s regular quarterly dividend by 17.4%, to an annualized rate of $2.16 per common share.
The new quarterly dividend of $0.54 per common share, up from $0.46 per common share, is payable on October 10, 2008, to stockholders of record as of September 15, 2008. The ex-dividend date is September 11, 2008.
This is a rock solid yield on a company growing earnings in the mid-teens. As close to a no-brainer as you can get..
Disclosure (“none” means no position):Long PM
Visit the ValuePlays Bookstore for Great Investing Books
Categories
SHLD…Updated "Short" Math
Some updated Short Math…
Holder Name—Shares—%
ESL Investments, Inc.—65,639,184—51.0%
Fairholme Capital Management LLC—16,110,090—12.5%
Legg Mason Capital Management, Inc.—12,503,168—9.7%
Pershing Square Capital Management—6,746,568—5.2%
ClearBridge Advisors—4,789,523—3.7%
Perry Capital—2,694,95—22.1%
Davis Advisors—2,020,96—11.6%
Dalal Street, Inc.—517,608—0.4%
T2 Partners Management LP—50,625—0.0%
Greenlight Capital, Inc.—11,240—0.0%
Total held by above—111,083,919—86.2%
Total Outstanding—128,800,000
Short Interest—33,656,888—26.1%
Share Not held by Above Holders—17,716,081—13.8%
Here is why I added some shareholders to the list.
ClearBridge Advisors is actually owned by Legg Mason and considering Bill Miller’s influence at the entire firm I wouldn’t think it is crazy for the ClearBridge PMs and analysts to be communicating with or with directly with Bill Miller and his team.
Perry Capital is a no brainer to be added to the list as Rchard Perry is actually on the Board of Directors at SHLD. One other interesting tidbit is that Richard Perry worked on the Arb desk at Goldman during the Robert Rubin years (according to this months Fortune magazine). This is te same desk that Eddie Lampert worked on.
Dalal Street (Mohnish Pabrai), Davis Advisors, Greenlight (David Einhorn) and T2 (Whitney Tilson) are all well known for being value guys who will hold onto positions for extended periods as long as the position is trading sufficiently below intrinsic value. Einhorn, Tilson and Pabrai will all be presenting at the upcoming Value Investor Congress.
So over 86% of the shares outstanding are being held by long-term value investors which is really a great sign. The shares sold short is almost double the number of shares that we estimate are in the trading float…but the real question is does it really matter? If the long-term holders listed above hold their shares in a margin account, then those shares can be borrowed and shorted. So the answer to the question really is no. However if all these holders were to move their holdings to the cash account or requested their share not be lent out then that would create a situation where the maximum number of shares that could be borrowed at approximately 17.7mm.
Disclosure (“none” means no position): Long-SHLD
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Sears Holdings 10-Q Notables
Some very interesting items in this mornings 10-Q from Sears Holdings (SHLD).
Short Term Borrowings:
Credit Agreement
“We have a $4.0 billion, five-year credit agreement (the “Credit Agreement”) in place as a funding source for general corporate purposes, which includes a $1.5 billion letter of credit sublimit. The Credit Agreement, which has an expiration date of March 2010, is a revolving credit facility under which Sears Roebuck Acceptance Corp. (“SRAC”) and Kmart Corporation are the borrowers. The Credit Agreement is guaranteed by Holdings and certain of our direct and indirect subsidiaries and is secured by a first lien on our domestic inventory, credit card accounts receivable and the proceeds thereof. Availability under the Credit Agreement is determined pursuant to a borrowing base formula, based on domestic inventory levels, subject to certain limitations. As of August 2, 2008, we had $800 million of borrowings and $1.0 billion of letters of credit outstanding under the Credit Agreement with $2.2 billion of availability remaining under the Credit Agreement. The $800 million in borrowings, borrowed in the first half of fiscal 2008, are classified within short-term borrowings on our condensed consolidated balance sheet as of August 2, 2008 as we intend to repay the entire amount within the next 12 months. The Credit Agreement does not contain provisions that would restrict borrowings or letter of credit issuances based on material adverse changes or credit ratings.”
Reorganization:
“In January 2008, we announced that we would implement a new organizational structure and operating model designed to simplify the way our business lines are managed. While we have begun the process of transforming the Company to this new model, it will take some time to build the processes and information systems necessary to support the structure. We continue to assess the impact our new organizational structure will have on the business segment information used by our management to operate Holdings on an on-going basis. “
Interest Expense
“We incurred $65 million in interest expense during the second quarter of fiscal 2008, as compared to $71 million in the second quarter of last year. The reduction was attributable to lower average borrowings outstanding during the quarter.”
“We incurred $131 million in interest expense during the first half of fiscal 2008, as compared to $144 million in the first half of last year. The reduction was attributable to lower average borrowings outstanding during the first half of the year in 2008.”
Investing Activities
“For the first half of fiscal 2008, we used $277 million of cash for capital expenditures as compared to $278 million used during the first half of fiscal 2007. In addition, we received $75 million of proceeds from sales of property and investments in the first half of fiscal 2008, which was mainly related to the sale of Sears Canada’s Calgary downtown full-line store. In the first half of fiscal 2007, $60 million of collateral was returned to us related to our investments in total return swaps. There were no total return swaps outstanding as of or during the period ended August 2, 2008.”
From May 4th to August 2nd, Lampert repurchased 5.6 million shares at an average price of $78.22. The stock, currently roughly $90 a share sits 15% above that level.
What I find interesting in much of the commentary out there is that the general thought is that Lampert “is cutting spending and using debt to fund operations”. Yet, the reality is that capex is flat, debt down & share count down.”
It is odd that so much of the commentary revolving Sears is factually inaccurate. It is one thing to look at the numbers and come to different conclusions, it is another entirely to not bother looking at them before making those conclusion because it is the general consensus.
Disclosure (“none” means no position):Long SHLD
Visit the ValuePlays Bookstore for Great Investing Books
Categories
GDP Revised Up to 3.3%……..Economists?
This is an update to a post the other day when Durable Goods was released.
Watch the video:
Now, economists were shocked when Q2 GDP came in at 2.7% because they were anticipating growth of under 2%. This isn’t a scenario where I am harping because they were a at 3.0$ and it came in at 3.3%. we are talking about error rates here in excess of 50%. Don’t forget they expected durable good to be DOWN .4% and they were UP 1.4%.
These are fantastic error margins and when you combine the two, it simply means that economists are FAR too negative in their outlook. Unemployment, by every historical measure is low…
Take what these guys say with a grain of salt…
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Dinallo on MBIA / FGIC Deal
If MBIA (MBI, Ambac (ABK) or FGIC fail, it won’t be because the NYC Insurance Commissioner did not do all he could to assure their survival. Berkshire Hathaway (BRK.A) was a bidder for the book also.
I think those who are still short on MBIA or Ambac have seen the most of their gains. If the NYC Insurance Dept. has not moved to force actions from either company that would wipe out shareholders at this point, I don’t think one should be thinking they will.
Dinallo does make the point that while large, heavily populated municipalities may not need the bond insurers, there are “thousands” of small municipalities that do need it. It that sense, the business of both companies is still needed.
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Friday’s Links
Tobacco, GDP, Baby, Gumshoe
– FDA bill looks to be delayed
– I guess this is why they say not to fly in the last trimester?
– Uncovering more scams…
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Sears Holdings…….Some "Short" Math
Let’s look at some numbers in stock ownership of Sears Holdings (SHLD)..
ESL Investments, Inc.= 65.6 million
Legg Mason Capital Management, Inc.= 12.5 million
Fairholme (Bruce Berkowitz)= 12.3 million
Pershing Square Capital Management, L.P.= 6.7 million
Total= 97.1 million shares or 77% of the total outstanding
As of 8/15, 33 million shares were short.
So, Sears has 126 million shares outstanding as of 8/2, 97.1 owned by people famous for long holding periods, and 33 million short.
By now you are saying, those numbers do not add up. I know. Is SEC commissioner Chris Cox concerned about naked shorting in Sears shares? Apparently not because, if the above 4 decide not to sell, there are not enough shares outstanding for the shorts to cover (the above number of shareholders does not include any other owners of sears shares, only those four).
That is the reason the price is up today. Shorts thought about another earnings loss, did not get it and realize Sears will be ok. They probably can do the above math also. So, many have made their money and now are buying to cover, 3.8 million shares traded today at 2:30 vs a daily average of 3.5 million on a VERY slow trading day.
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Altria Raises Dividend, Now Yields 6.1%
Altria is just drooling cash…..
Altria Group, Inc. (MO) today announced that its Board of Directors voted to increase the company’s regular quarterly dividend. The new quarterly dividend of $0.32 per common share is up 10.3% from the previous rate of $0.29 per common share, and represents an annualized rate of $1.28 per common share. The quarterly dividend is payable on October 10, 2008 to stockholders of record as of September 15, 2008. The ex-dividend date is September 11, 2008.
At the current $20.90 a share price, that equates to a 6.1% dividend yield….
Disclosure (“none” means no position):Long MO
Visit the ValuePlays Bookstore for Great Investing Books
For those who think the price Dow Chemical (DOW) paid for Rohm & Haas (ROH) was too high, it turn out there were two other bidders in the same ballpark, BASF (BASFY) and another.
Chemical Week Reports (sub. required)
Rohm and Haas (R&H) approached Dow Chemical and two other companies in early June to gauge their interest in acquiring R&H, a move that resulted in Dow’s July 10 acquisition agreement, says a recent R&H SEC filing. The surprise move late last year by the Haas family trusts, which control 32% of R&H shares, to seek the sale of its stake was the driver behind the R&H sale. Dow’s $18.8-billion, or $78/share, bid bested a $75/share offer from another chemical maker identified in the filing only as “company A.” BASF told CW last month that it placed a bid but declined to reveal the amount of its offer (CW, July 7/14, p. 7).
Haas trusts representatives told R&H chairman and CEO Raj Gupta in November 2007 that the trusts would seek to sell “all or substantially all” of their holdings within 12-18 months, the filing says. “Based on the trusts’ prior conduct, the company’s board of directors did not anticipate the request of the Haas trusts,” the filing says.
R&H and its financial adviser Goldman Sachs (New York) discussed several steps during the next six months to address the sale or purchase of the trusts’ holdings as well as other possible alternatives including putting R&H up for sale, the filings say. The group held discussions in April and May regarding R&H repurchasing a small percentage of the trusts’ shares as part of a deal that called for the trusts’ remaining holdings to be sold over a three-year period, R&H says.
R&H’s management maintained a strong desire to remain independent through negotiations, but management and the board were concerned about market and industry reaction to a sale by the trusts, the filings say. In early June, Gupta held separate discussions with Dow chairman and CEO Andrew Liveris as well as the CEO of company A, believed to be BASF, regarding their interest in R&H, the filings say. Gupta subsequently had a similar conversation with the third company’s CEO, it adds.
Dow responded with an initial offer of $74/share on June 16, which prompted R&H to conduct a “targeted process” among Dow and the two other potential acquirers, the filings say. Company A responded with an offer of $70/share. R&H requested definitive acquisition proposals, which resulted in a $76/share bid from Dow, and a $75/share bid from company A. R&H once again contacted the two companies seeking higher bids.
Dow submitted a $78/share bid on July 9, and company A submitted a revised agreement that improved certain terms but did not increase its offer, R&H says. Dow and R&H signed a definitive agreement that included a voting agreement with the Haas trusts.
In the very near future shareholders will be sitting back enjoying the fruits of this deal….very near…
Disclosure (“none” means no position):long Dow, none
Visit the ValuePlays Bookstore for Great Investing Books
Categories
Starbucks’ Confusing Memo
So, Howard Schultz the billionaire will not get a salary raise at Starbucks (SBUX) this year. This is news why? The memo gets leaked and then there is a section in it that catches my eye.
From the memo:
All U.S. vice presidents and above, including Howard Schultz and the senior leadership team, will receive no salary increases this year.
Based on Starbucks year-to-date performance, we are not currently on track to reach the requisite financial targets for the General Management Incentive Plan (GMIP). When we announce FY08 results in November, GMIP participants will learn more about the status of bonus payouts.
What status? If you are not on track to meet the targets, there ought to be nothing, correct? Or, are we going to play the Circuit City (CC) game of lowering the target and give them a bonus in lieu or a “raise next year”? Or, are we going to lower targets and increase incentives for next year so it all comes out in the wash? That statement was just way too ambiguous for me.
I am going to watch this. Think about it. How far has the brand fallen when corporate actions can be looked at in the same vein as those at Circuit City?
Disclosure (“none” means no position):None
Visit the ValuePlays Bookstore for Great Investing Books