Friday, July 14, 2006

American Woodmark: Executives Win our First Golden Fleece Award.

One of the greatest of the England’s Romantic poets, a man of letters, and addicted to opium for most of his adult life, Samuel Taylor Coleridge (1772 – 1834) wrote: “Let us have a little less of "hands across the sea," and a little more of that elemental distrust that is the security of nations. War loves to come like a thief in the night; professions of eternal amity provide the night.

In the Middle East, distrust breeds more distrust—which spawns endless conflicts. The military wing of Hezbollah (Islamic: “Party of God”) infiltrated Israel's northern border July 12, killing three soldiers and capturing two. The Hezbollah raid mirrored one carried out by Hamas, the Palestinian group that abducted an Israeli soldier June 25.

In response, Israel's stated diplomatic position is that it is looking to completely remove any Hezbollah presence in southern Lebanon. Israeli army chief warned, “nothing is safe” in Lebanon.

Israel jets are pounding Hezbollah strongholds in Southern Lebanon, a highway linking the Lebanese capital to Damascus, and Beirut's international airport for the third time in 24 hours. The Israeli Defense Force has also placed a blockade on Lebanese air, land and sea routes.

The Syrian-backed Lebanese Hezbollah militia has fired about 140 rockets into northern Israel in the past 48 hours, including one that reached Haifa (Israel’s third-largest city and 45 kilometers from the Lebanese border) for the first-time late yesterday. This sends an ominous signal to Israeli military intelligence. Hezbollah has long pledged that its overall mission is the complete destruction of Israel (and to drive the Jews into the Sea).

And the three-day conflict is escalating—ah…let’s call it what it is—WAR!

It has long been known that Iran (with its own anti-Semitic issues and Nuclear ambitions) has provided financial aid to terrorist groups like Hezbollah and Hamas. Military intelligence (knew two years ago) confirms, too, that Iran has supplied Hezbollah with solid-fuel, Zelzal-2 missiles with a 200-km range. The rockets are not very accurate, for they do not have a self-guidance system. Noneless, packed with explosive warheads weighing up to 600 kilograms, the Zelzal-2 missiles are intended to strike broad targets such as communities and cities—and to inflict as many casualties and property damage as possible. Iran’s role darkerns further, too, as rumors circulate that the two recently captured Israeli soldiers are being moved to Tehran.

If history is any guide, do not expect a settlement of this “conflict” to play out on the World Stage: (i) The only resolution from the United Nations Security Council demanded that Israel end its “disproportionate use of force;” (ii) The European Union stated that Israel has no justification for its air and sea blockade on Lebanon. The EU presidency added, “Actions, which are contrary to international humanitarian law, can only aggravate the vicious circle of violence and retribution;” and, (iii) Russia, Italy and France have all agreed with the EU, calling Israel’s actions against Lebanon “disproportionate.”

The good news, despite the potential for the fighting in Lebanon to threaten a broader conflict in the Middle East—Syria & Golan Heights dispute—the U.S. backed Arab regimes like Egypt and Jordan are sitting on the sidelines, professing that they would like to see a peaceful settlement.

Intensifying conflict in the Middle East (sectarian strife in Iraq, too) and concerns about Nigeria oil supplies being cut by the country's rebels recent activities are raising concerns of possible supply disruptions. Light sweet crude for August delivery was as high as $78.40 a barrel in trading on the New York Mercantile Exchange. By midmorning in Europe, however, the price was $77.45, up 75 cents from Thursday's record settlement of $76.70 a barrel.

On Wall Street, stock market futures on Friday were pointing to a modest rebound following two days of heavy losses in the markets, with traders to focus on General Electric earnings and retail-sales data. Nonetheless, we suspect as trading dries up later in the day, the major stock indices will dip south towards the close.

Here at home in the Northeast, with the weather expected to soar into the 90’s this weekend, the Wall Street elite have more pressing problemswhat time should they retreat from their offices—to beat the mass exodus and inclined traffic—and hit the roadways to their summer homes?

The Hamptons (pristine beaches and sophisticated nightlife), Fire Island (the “don’t ask – don’t tell” crowd), and, Martha’s Vineyard and Nantucket, the bucolic Massachusetts vacation areas frequented by as many high-profile celebrities, politicians as business executives. [Sorry—according to our sources, luxury properties (with high-speed Internet access) renting for $150,000 a month on Martha's Vineyard were gone by January.]

Given the gravitas of many of our recent articles, the 10Q Detective thought it might be fun to inject some levity in today’s entry. Our method is to look back at the pages and pages of SEC filings that we have read this past week, and then to offer up to our readers notice of whom is the winner of our first Golden Fleece award. (First established in 1975, by the late Senator from Wisconsin, William Proxmire, the Golden Fleece was awarded to those public officials he judged to be wasting public monies.)

The first 10Q Detective Golden Fleece award is presented to the executives of cabinet maker American Woodmark Corp. (AMWD-$32.34). The summary Compensation (Salary + Cash Bonus + Other Annual Compensation + LT Option Awards/Current Value) earned/awarded to James J. Gosa, Chairman & CEO (in FY 2004), Ian J. Sole, former Senior Vice President, Sales and Marketing (in FY 2004), and, Jonathan H. Wolk, CFO (in FY 2006) totaled $1.6 million, $691,359.00, $545,067.00, respectively. Despite the gobs of monies earned by these executives, they still felt it necessary to ask for—and of course, receive—discounts on cabinet purchases made by each executive.

1. Mr. Gosa received a $6,144 discount on cabinet purchases made for the FY ended April 30, 2004;
2. Mr. Sole received a $2,762 discount on cabinet purchases made for the FY ended April 30, 2004; and,
3. Mr. Wolk received a $4,885 discount on cabinet purchases made for the FY ended April 30, 2006.

Not disclosed is if each man also received a tax-gross-up adjustment for the 5.0% sales tax paid for the cabinets?
The 10Q Detective welcomes nominations for future Golden Fleece awards from our readers.

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