Western Digital Delivers New Hard Drive

Against a backdrop of dwindling demand, credit difficulties for customers, and too much inventory, Western Digital (WDC-$14.68) is introducing a 2-terabyte hard drive with 3 1/2 inch platters, the largest capacity hard drive in the industry. Is this an opportune time to introduce a next generation product? Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Icahn vs. Amlyn Pharma: Round One

Activist investor Carl Icahn is readying for a proxy battle with the management of Amylin Pharmaceuticals (AMLN-$11.03), the drugmaker best known for its diabetic treatment Byetta. The move raises questions about whether Icahn plans to push Amylin for a management shakeup or position the company for a sale. What’s Icahn’s interest in Amylin? Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Something Stinks at Pilgrim's Pride: Management!

On December 1, 2008, Pilgrim's Pride (PGPDQ-$0.60) voluntarily filed for financial relief under Chapter 11 of the U.S. Bankruptcy Code after losing $820 million in 2008 and failing to renegotiate its debt agreements with lenders. In conjunction with the Chapter 11 filing, the company sought—and received approval—to enter into a $450 million debtor-in-possession financing facility arranged by Bank of Montreal as lead agent (the "DIP Financing").

It is worth noting, too, that the $450 million debtor-in-possession financing facility involves financial performance guarantees. Pilgrim must meet minimum monthly levels of EBITDA. For the three-month period ended April 25, 2009, the company must show EBITDA of $57,200,000, according to the amended 10-K filing. With the same management and board in power at Pilgrim, however, it is difficult to imagine how the poultry producer will emerge from the down cycle…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Timing of Fuel Systems Alt-energy Solutions Entry Into U.S. Auto Market Questionable

Fuel Systems Solutions (FSYS-$26.15) recently announced it would begin manufacturing its innovative alternative fuel solutions for the U.S. automotive market during the first-quarter of 2009 at its U.S. subsidiary, IMPCO Technologies, Inc. Given the current U.S. regulatory environment, dearth of a viable refueling infrastructure, and current price of conventional gasoline prices in the U.S., are prospects still healthy for alternative fuels to displace petroleum as a consumer fuel of choice? …. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Egalitarianism Prevails at Whole Foods Market

In fiscal 2008, the compensation and benefits program of organic grocer Whole Foods Market (WFMI-$11.48) continued to reflect the company’s philosophy of egalitarianism. Cash compensation (salary and non-equity bonuses) for executives remains capped at a multiple of 19 times the average annual wage of hourly workers, or $652,400 and $34,334, respectively…. Read More…

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Trader Demand For Energy Tankers To Benefit Aegean Marine

Given a ban of a significant portion of single hull bunkering tankers, Aegean Marine Petroleum Network (ANW-$16.54) believes that the number of bunkering tankers worldwide will decline significantly. In addition to filling a portion of the market currently serviced by single hull vessels, Aegean will likely be able to leverage its earning power by capitalizing on the growing demand for marine fuel deliveries to traders storing oil in tankers at sea…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Who Put the Pea in Sealy's Mattress?

During the fourth quarter, Sealy Corp (ZZ-$2.05) successfully amended its credit agreement to increase the maximum leverage ratio under its financial covenants. The amendment increased the maximum permitted leverage ratio of total debt to EBITDA to 5.85 times through the third quarter of 2009; then stepping down to 5.50 times through the second quarter of 2010. Nonetheless, with the company not expecting to see year-over-year sales comps improvement until the second half of 2009, the bedding manufacturer might still trip up its debt covenants…. Read More….

"…the old Queen went into the bedroom, took all the bed clothes off and laid a pea on the bedstead: then she took twenty mattresses and piled them on top of the pea, and then twenty feather beds on top of the mattresses. This was where the princess was to sleep that night. In the morning they asked her how she slept.

'Oh terribly bad!' said the princess. 'I have hardly closed my eyes the whole night! Heaven knows what was in the bed. I seemed to be lying upon some hard thing, and my whole body is black and blue this morning. It is terrible!'

They saw at once that she must be a real princess when she had felt the pea through twenty mattresses and twenty feather beds. Nobody but a real princess could have such a delicate skin." ~ "The Princess and the Pea," by Hans Christian Andersen

Human Genome Science 2009 Product Updates

Human Genome Sciences (HGSI-$2.04) had a working capital shortfall of $57.0 million at September 30, 2008, but the company expects 2009 net cash burn of less than $25 million, compared with approximately $245 million in 2008. Although revenue for the next two years will likely be limited to ABthrax sales, the company could receive milestone payments and/or R&D reimbursement(s) under terms of collaborative and licensing agreements currently in place with Novartis and GlaxoSmithKline (GSK) for Albuferon and Lympho-stat-B, respectively, as both products are rapidly progressing toward commercialization…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Marathon Oil Expanding Presence in U.S. Shale Plays

Ignoring the current depressed price of natural gas, Marathon Oil (MRO-$28.46) is focused on increasing its exposure to unconventional natural gas assets. Whereas smaller players are retreating from unconventional resources in the U.S., the company has added to its holdings in emerging plays in the Haynesville Shale (LA), Marcellus (PA, WV), and Woodford Shale (OK)…. Read More…

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Pep Boy's Balance Sheet Lacking Pep

Pep Boys (PBY-$3.42) may be a great place to go to get great prices on tires, oil changes, and automotive maintenance—but the auto parts retailer’s dependence on sale-leaseback transactions of owned properties to access funds vital for capital expenditures, inventory purchases, and store renovations should give investors pause for concern…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Micron In Need of Bailout, too!

Is Micron Technology (MU-$2.90) in merger talks with its DRAM manufacturing partners Nanya Technology and Inotera Memories? The ongoing glut in memory chips combined with weakening demand is depressing DRAM prices and straining Micron's balance sheet, as reported in the company’s first-quarter 2009 regulatory filing…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Scholastic Babies CEO Robinson

During the six months ended November 30, 2008, book publisher Scholastic Corp (SCHL-$12.00) repurchased approximately 800,000 shares on the open market for $20.1 million (at an average cost of $24.83 per share). Of interest, 100,000 of these shares were bought directly from its Chairman and Chief Executive Officer, Richard Robinson, in a private transaction…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Charter Rates To Fall at Frontline Ltd

Crude oil transporter Frontline Ltd (FRO-$29.91) said oil traders have chartered 25 vessels and may take as many as 10 more in order to store crude for future sales at sea, according to Bloomberg Press. The news suggests that average world oil production is still exceeding demand, which will likely weaken spot charter rates over the next twelve months…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Undeclared Writedowns at Jabil Circuit?

Jabil Circuit Inc. (JBL-$6.56) recorded a $318 million impairment charge in its fiscal first quarter 2009 ended November 30. The electronics-components maker wrote-down goodwill in its consumer division—focused on products such as cell phones, telephones, PC peripherals, and set-top boxes—due to the deteriorating economy, tight credit markets and a drop in its stock price. Surprisingly, although its electronics manufacturing services (EMS) segment is more sensitive to the slowing economy, the company concluded that the fair value of the division continued to exceed its carrying value and no impairment was assessed…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Unhealthy 2009 Outlook at Healthways

Ben Leedle, Chief Executive Officer of Healthways (HWAY-$12.76), acknowledged on the first-quarter 2009 earnings call that the health-management program administrator lost $70 million in revenue due to terminated contracts, renegotiations at less favorable terms, and delayed purchasing decisions by certain customers. Healthways, which runs wellness and disease-prevention programs targeting fitness, weight management, alternative medicine and smoking cessation, failed to mention on the call, however, that it could also be forced to reverse millions in already-booked performance-contract fees, according to the 10-Q regulatory filing… Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Minkow Shows Wherein Homebuilder Lennar Wronged

In an interview on CNBC today, Stuart Miller, Chief Executive Officer of Lennar Corp (LEN-$9.15) responded to allegations the homebuilder used money from joint ventures to build up its balance sheet, saying it was "just not true." Barry Minkow, of the Fraud Discovery Institute, posted information on his website earlier in the day claiming—among other allegations—that Lennar "continues to provide vague and less than transparent responses to SEC inquiries about off-balance sheet, joint venture debt," and improved its cash reserves to $1.1 billion [year-end 2008] through less-than ethical means. Irrespective of the veracity of either Minkow’s assertions or Miller’s response, there are some disconcerting transparency issues—or lack thereof—in the company’s recent 10-Q filing… Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Linn Energy Gushes Red Ink

At current production levels (average production of 227.4 MMcfe/day), Linn Energy (LINE-$15.75) has derivative contracts in place covering a 100% of forecasted production volumes through 2011. For 2009, the Company’s natural gas production is hedged at a weighted average price of $8.32 per Mcf and oil and NGL production at $102.21 per barrel. For 2010, the Company’s natural gas production is hedged at a weighted average price of $8.05 per Mcf and oil and NGL production at $99.68 per barrel.

Despite a sound business strategy, there is a risk involved with Linn Energy. The Company is structured as a limited partnership, paying out quarterly distributions to unit holders. For the nine-months ended September 30, share-net from continuing operations was a loss of 55 cents…. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Slumping Shipments at Winnebago Industries

Going forward, given the tightening of credit standards by lenders, Bob Olson, Chairman and Chief Executive of Winnebago Industries (WGO-$7.25), said that the nation's top-selling motor home manufacture expects that repurchase activity will remain high—persisting for some time, possibly into early 2010. In addition, as motor home shipments for November plummeted 77 percent year-over-year to a multi-year low of 700 units, the company acknowledged that it may also be necessary to offer greater discounts in order to relocate returned vehicles to …. Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

IMAX Chief Eexcutive's Pay Experience

In January 2010, Richard Gelfond, Chief Executive Officer of IMAX Corp (IMAX-$4.53), will receive a 20 percent raise, increasing his cash compensation to $600,000 per year, according to his new service agreement. Profit performance at the entertainment provider of the large-format movie screens (up to eight stories high and 120 feet wide) has been erratic, and consensus estimates reflect continued net losses through the end of 2009. Is Gelfond’s new compensation arrangement too extravagant? Read More….

Reporting by contributor Debra Fiakas, who does not hold a financial interest in any stocks mentioned in this article. The 10-Q Detective has a Full Disclosure Policy.

Sinking Feeling at Hercules Offshore: Shelving Rigs

As market conditions continue to soften in the Gulf of Mexico, Hercules Offshore (HERO-$5.75), the world’s largest operator of jackup rigs in the shallow waters (water depth of 350-400 feet) of the region, is taking measures to reduce labor costs and limit its downside exposure. The company is stacking five inland barges and several rigs in the U.S. Gulf of Mexico, according to its December fleet status report. In addition, the company is aggressively pursuing international contracts… Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Demise of Washington Post Premature

The Washington Post (WPO-$421.98) is positioned to survive the shakeout rocking the print media landscape, for it has presciently diversified into education products and related services with its 1984 acquisition of Kaplan, a provider of college test preparation courses and post-secondary education programs. Education now accounts for more than 53 percent of total sales… Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Does Starwood Hotels & Resorts Need Sam Zell?

Sam Zell’s emergence as an investor of interest in Starwood Hotels & Resorts (HOT-$20.80) should not be taken as a portent that the commercial real estate market is poised for a turnaround. In addition to buying his Starwood stake before the recent bottom in the price of the stock, Zell had a less than stellar run as owner of the now bankrupt Tribune Company. Albeit to his credit, he only had to invest $315 million of his own equity in the $8 billion failure.

Although Zell is not infallible, he recognizes value. Starwood operates well-known brands such as Sheraton, Westin, Le Méridien, and St. Regis in some of the biggest cities, including Mexico City, New York, Paris, Shanghai, and Tokyo… Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

ConocoPhillips' Stake in LUKOIL Losing Billions

The 2006 acquisition of a 20 percent stake in LUKOIL by ConocoPhillips (COP-$54.85), initially applauded by energy analysts because it increased production growth prospects by opening access to the Russian market, could prove to be an expensive investment, and will likely lead to an asset write-down if oil prices and demand continue to weaken… Read More….

The aggregate market value of ConocoPhillips’ ownership stake in LUKOIL declined to $5.63 billion at year-end, or $$7.24 billion below the stated $12.86 billion book value. If the loss in the carrying value of the investment proves to be "other than temporary," the company would record a non-cash impairment of the holding.

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Did Philip Morris Seek to Influence World Health Org?

A new study of previously confidential tobacco industry documents concluded that a Philip Morris (PM-$44.12) scientist, Roger Walk, established close connections with a WHO Collaborating Center in Thailand, called the Chulabhorn Research Institute, and leveraged these relationships to help advance the interests of the cigarette maker in the country and across Asia. Although the purveyor of Marlboro, Parliament, and Virginia Slims showed cigarette volume growth of 15.5 billion units, or 2.4 percent, to 667.0 billion units for the nine-months ended September 30, the company is concerned that governmental and NGO actions will result in reduced industry volume and consumption in many of its markets… Read More….

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.