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  • shouldofsoldshort shouldofsoldshort • May 11, 2004 4:14 PM Flag

    A closer look

    Although I do have an MBA, I believe another poster referred to me as a bean counter. Furthermore, the Nominating Committee of the BOD didn't consider me a worthy candidate for the BOD so I haven't reached the elite status ascribed to an MBA by another poster.

    I took a closer look at the paragraph I posted yesterday. Not sure the executive outlook is all that positive. "...grow earnings at a mid-single digit rate..." "...position the company to make new investments consistent with our strengths. In the near term, our new investments will focus on the utility..."

    I've reposted the quote below as well as the earnings guidance for 2004.

    If earnings are only grown at a mid-single digit rate, let's assume 5% on top of $.85 per share---that's only $.89 for 2005. I assume the investments the quote refers to is aside from normal fixed asset additions. So I question the ability to pay a meaningful dividend while at the same time making investments.

    Let's remember Mr. Whipple said the "ongoing" earnings for 2002 were $1.53 per share. Of course, that was incorrect because it included the earnings of Panhandle. Of course, the Panhandle related debt was eliminated but at a huge cost.

    The Company deposited $560 million into the Company pension funds in 2003. I sure most of these funds were requred to make up for prior investment losses. How much will pension expense be reduced by in 2004 and 2005?

    This company has a long way to go. Time for a change?

    From the 10-Q:
    "Our strategy involves rebuilding our balance sheet and refocusing on our core
    strength: superior utility operation. Over the next few years, we expect this
    strategy to reduce our parent company debt substantially, improve our debt
    ratings, grow earnings at a mid-single digit rate, restore a meaningful
    dividend, and position the company to make new investments consistent with our
    strengths. In the near term, our new investments will focus on the utility."

    From a Company Press Release:
    "The first quarter results are consistent with the Company's 2004 ongoing earnings guidance of $0.85 per share, up from $0.81 per share in 2003."

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    • roger29palms roger29palms • Jun 4, 2004 11:56 AM Flag

      The $560 million credited to the retirement fund; would you know the source of this sum? Is this a non-recuuring expense?
      I enjoy your posts.

      • 1 Reply to roger29palms
      • shouldofsoldshort shouldofsoldshort • Jun 4, 2004 2:34 PM Flag

        Hey Roger, the $560 million was a deposit into the pension funds. Management now claims the pension funds are fully funded.

        The $560 million is not an expense. There are a number of components of pension plan expense. One component is actually a credit or a reduction to expense. That's the projected earnings on assets held in the plan. Thus, the deposit will reduce the other components of pension expense such as servie cost.

        Unfortunately, the reduction to pension plan expense will never approach the after tax earnings of Panhandle. To be fair, CMS did recognize more than $560 million in cash from the sale of Panhandle. That said, the sale of Panhandle was a huge mistake. One that shareholders will pay for for years to come.