I'll guess that Maggie's retirement package turns out to be worth around $75 mil. Since 2006 I believe her total comp reported on the Morningstar site was $55 mil -- all in including stock.
There is a vast difference of perspective between many long term individual stockholders and FTR's BOD.
While the VZ deal shredded FTR's former key metrics -- such as operating cash flow per share -- in my view if the VZ deal had not been done FTR's dividend would be zero by now -- FTR had been cobbled together thru acquisitions like the Commonwealth Communication purchase in 2009 -- and per published reports runoff was severe 2008 -6/2010 and then got much worse.
So the 25% divvy cut to pave the way for the VZ deal followed by the 47% divvy cut as a result of it saved FTR for the clique who run it at the expense of driving the stock sub $5.
I don't see a pay cut. Just the opposite regardless of FTR's share price.
"and the union was going along with the extensions."
I do not follow.
FTR has been meeting the low standard for contributions provided for by Congress in the 2012 Transportation Bill. The thinking was that bond yields were so low that it could force cash strapped corporations to pay in so much it would put them in danger of running out of working capital. The appeal was that lowering the standards would save jobs -- Google it. But to shift to the lower standards the fees to the Pension Benefit Guarantee Corporation go up about 3x the current fees if a corporation opted to underfund.
It's fool's gold -- it's exactly what a firm with a junk credit rating should not do. FTR, unlike a T, cannot issue a preferred stock and contribute it to the pension fund -- the PBGC would never approve that like it did for T. FTR's Q3 real estate contribution of property valued at $18.2 mil required FTR to agree to 15 years of $1.6 mil a year lease payments -- so FTR signs over $18.2 mil and then makes $24 mil of payments to get credit approved by the PBGC -- that's how it has to be with a junk credit rating. With $600k on the balance sheet you have to wonder why they would do an extremely expensive RE contribution. One thing it did was to keep FTR's presentation of Q3 cash flow in tact. I mean how much interest would FTR make in a year on $18.2 mil of corporate cash? Maybe 2%? The RE contribution is a red flag.
But -- even with the PBGC contribution rules relaxed FTR will need to put in about $100 mil this year.
Today's dip below the $.10 divvy is not unusual for FTR.
So if you were short yesterday going into the x-day you owe the $.10 but you could have covered (.$18) lower today than yesterday so your $.08 ahead if you covered this morning.
To those who expected a short squeeze -- this movement of the stock obviates the $.10 divvy.
It's the accelerating revenue losses this year even after the pick up of broadband sales that sends the signal of weakness ahead.
Pretty soon investors will see big infusions into the pension and retirement funds. FTR can't keep contributing real estate to avoid showing hits to cash flow.
It would not be prudent for FTR to buy back shares given the big YPOY quarterly drops in revenue like the 5,37% YOY fall in Q3.
If you take the time to review FTR's SEC filings you should note that FTR is back to contributing its real estate to the pension fund. During Q3 FTR contributed 3 buildings for which FTR received value of $18.2 mil. But in order to get credit for that $18.2 mil FTR had to sign a lease for a total of $1.6 mil a year for 15 years.
If you do a quick review paying $1.6 mil / $18.2 mil = 8.8% simple interest. However, after 15 years the pension fund owns the building so to get credit today for $18.2 mil FTR is making 15 payments of $1.6 mil and a final lump sum payment of $18,2 mil.
Ftr is doing this because people are opting for lump sum payouts -- I believe from memory FTR has had $195 mil of payouts YTD while fund earnings were only about $65 mil.
To be paying an effective rate north of 10% to fund its pensions brings into question FTR's motivation and management practices. Because FTR will not earn 10% on its corporate cash. However, funding the pension this way avoids having to report lower corporate cash flow. And it's a growing problem -- FTR will need to put in $100 mil this year per the Q3 10q.
FTR won't be buying back much stock, rather FTR needs to sell more services and bring in more cash to fund its obligations. I'll wager the CEO's retirement liability builds up to the $75 mil - $100 mil level in the next few years. At 12/31/12 -- before the lump sum payments picked up this year -- FTR was underfunded by $1.125b.
"Lots of churning before the next big run. Very healthy for moving higher.'
Churning occurs when a broker makes excessive trades in customer accounts to generate fees.
The concept of churning has nothing to do with stock price/volume analysis.
Sorry jeff, any chruning you might be talking about is not "Very healthy for moving higher"
"FTR needs at least two more good quarters."
There were aspects of FTR's performance in Q3 that cannot be labeled "good".
FTR is all about revenue. Here's the way the FTR PR addressed Q3 2013 revenue, " ...third quarter revenue was $1,185.3m compared to $1190.5m for the second quarter and $1,252.5m for the third quarter of 2012."
The real comparison to make is YOY quarters -- FTR is in a service biz with contracts and customer relationships that are intended last for at least a year so the appropriate measure is to see how the book of biz FTR had in Q3 2012 did over 12 months not 3 months. That's why the comparison YOY and not Q to Q is standard financial analysis for everyone.
When you compare FTR's revenue for Q3 2013 of $1,185.5m to Q3 2012 of $1,252.5m you see a loss of $67,2 for a percentage loss of 5.37% which is slightly larger than the Q2 2013 YOU loss of about 5.3%, which was up from about a Q1 2013 YOY loss of about 5.1%. That YTD performance is worse than all of 2012 which came in with revenue down 4.4%.
While on the one hand FTR is selling more broadband, I think it's important to focus on the fact that even with the better YOY broadband performance revenue is going down faster than it did last yeear -- if you compare Q3 2013 down 5.37% to the average drop of 4.4% last year that's close to a 1% pick up in the rate of decline which is about a 20% faster runoff than last year.So even with better broadband sales the runoff of seasoned revenue has clearly gotten worse YTD compared to 2012.
Brother investors, don't let the way the data is presented lead to taking your eye off the ball. Many folks who used to post here seemed to be taken in by all the noise & fluff in 2011 about "synergy savings" and FTR's own brand of "FCF". That is, they seemed taken in until FTR's old CFO took the cash flow forecast down at a Goldman Sachs conference Sept 2011after Q1 & Q2 2011 saw big revenue runoff. The stock slid 60% on thru the 47% divvy cut.
"Garce, if I were CEO I would have never let you retire. I wasn't there of course but I just have a gut feeling that you were a "company man" and gave a 110 %."
I see that garce and I gave your post a thumbs up.
garce - do you think IBM's retirement medical benefits changes will have any adverse effects on you?
" I estimate that number of share should decrease by 1% per month."
The 1% per month share count reduction doesn't pencil out if you use the $15b announced as the add to the buyback authorization. I would not count the entire $20.6 bil balance of the allocation for buybacks as being spent in the next year. IBM does not have a practice of spending the entire allocation and IBM doesn't generate enough FCF to do $20 bil in a year without borrowing money to do it. I would also consider that acquisitions will compete for buyback dollars in the next year as well as post closing dollar investments in closed acquisitions like Softlayer. To do even $15 bil of buybacks IBM is going to have to increase debt -- the dividend and acquisitions/capital expenditures are going to leave less than $15 bil for buybacks in the next year. But no problem in my view with taking debt up when IBM can issue Euro debt for 10 yrs at 2%. But IBM is conservative so I can't see debt going up more than $2 - $3 bil which would probably be necessary to spend a gross $15 bil on buybacks. IBM will want to keep its current bond & debt ratings so debt won't go up a lot.
If IBM were to spend the $15 bil in the next year on buybacks the share count would be down by $15b less the employee option exercise money. Currently just about 10% of gross buyback dollars spent are coming back to IBM from employee option strike price cash. So $13.5b spent on $180 stock retires about 75 million shares.
So 75 mil divided by 1.09 bil is .0688 or just under 7% of IBM's outstanding shares at 9/30/13 of 1.09 bil.
So averaging the buyback by month, that would amount to about a gross $1.25 bil spent less option proceeds of $125 mil for net spent on share buybacks which at $180 would be 6,250,000 shares bought back each month or 75 mil retired from float. That's my guess -- should the share price start to rise so will the % of gross buyback dollars coming back as option proceeds -- it was about 25% in 2011.
Sorry to hear that granny is down $180k.
Why put Granny's money in one stock?
Isd she going to buy a flagship German sedan shortly?
Check out income funds for Granny.
"Line losses remain a problem. FTR boosting all other areas of business to make up for this lost revenue."
If you think about FTR's net revenue loss year-over-year in Q3 of 5.4% together with the much better performance of broadband Q3 2013 vs Q3 2012 you have to go to the logical step of expanding this net revenue loss into two components: 1. Total Gross Revenue runoff, 2. Total New Sales Revenue Addition. I don't have access to this separate data but since broadband customer count is up about 4x YOY and net revenue is also down from an average drop of (4.4%) last year to (5.4%) this Q3 it's clear that runoff of seasoned accounts is accelerating. The customers and revenue FTR is losing has to be due to increased cable co competition. This runoff is 3 years after the VZ deal was booked 6/10.
"Perhaps the shorts are in control...Yet the stock has risen from a year low of $3.71 in April to $4.48, a 20% rise. With a 6 month return of 20% (plus 2 dividend payments, for a 25% total return) while the "shorts were in control", what will happen to the price if the shorts lose control?"
That low price is one point in time. The stock was drivrn down to $3.71 on big short selling after the divvy was cut 47% after FTR said it was safe. You never use two points in time to draw general conclusions. FTR's share price has been artificial for a long time and it doesn't correlate with technical analysis -- which was recently shown by a Golden Cross followed by a Death Cross. Because FTR went from $3.71 to $4.48 or 20% does not mean it has to go higher.
FTR's total revenue was down about 5.4% for Q3 YOY -- it was down about 5.3% YOY for Q2 and 5.1% for Q1 2013. Compare that to FTR's revenue down 4.4% for all of 2012 and note the loss trend has accelerated.
So 28.5k or so broadband subs were added in Q3 and its been at that level all year and is a big improvement but even with that good relative performance in broadband, the losses of seasoned customers and revenue are swamping new sales. The old revenue was in place and the new sales require premiums and competative pricing as well as installation. The pick up of revenue losses over the 2012 rate is probably due to cable company competation.
"As the depreciation expenses winds down over time, the company will show a profit even if land line shrinks. Please look at my previous posts for the reasonings."
As depreciation goes down book income will rise but higher cash taxes will take cash flow lower.
The pension funding tab is coming due. It will take 20% of FTR's annualcash flow in the next 10 years to cover the net cash needs of the union and white collar retirement funds. That's based on the current funding gaps and they are growing. More retirements in the last year have pulled lump sums out of the funds -- clocking backwards with withdrawals currently exceeding fund account income + FTR's contributions. It's all nicely laid out in the 10q's.
" still expect 3Q earnings to be 7 cents."
You forgot to say why.
"The shorts (at least the smart ones) will start to cover."
I take it they will cover due to the riompen-stompen 7 cents? Doesn't sound too scary if that's the reach.
"Come on shorts: 40 cents a year to cover dividends? Are you convinced now that the dividends are safe?"
FYI -- you do not necesseraly have to pay the dividend if you are short -- you can either cover before the ex-divvy date or after it goes ex-divvy you can often cover $.10 lower or even lower as FTR will as often as not sink lower than $.10 on or shortly after the ex-divvy date. That's not to say that the future has to be the same as the past but FTR has not shown enough strength to force the shorts to cover on a spike yet.
As to the dividend being safe -- I am not convinced it's safe. i don't think it's safe because FTR is losing too much revenue to generate future free cash flows to satisify its future liabilities while paying out $400 mil a year in dividends. And you didn't state why you think FTR's divvy is safe so why do you think it's safe mr sfvip2319?
"One thing that bothers me as well is the inability to attract the best talent in pure computational sciences"
David Ferrucci and the other 50 or so people on the Watson team are very talented.
"jeez.. What a disaster.. And forbes calling for a bad q3. You know what? If you #$%$ come in bad AGAIN, it's not going to to be only that prevails, it's on YOU. I will be done with this stock.cd"
Now I lay me down to sleep,
I gave my Maggie capital to keep,
if FTR should rise but then dgo dead,
Help Maggie my balls are red,
I shoulda bought VZ instead.
"uh huh.. So if you are out of FTR why post GF [going forward] geez"
One could label the above an oxymoron, but that would be just for retorical effect.
Using direct language, it is a contridiction of logic i.e., twisted logic.
Investing requires decisions. Investors want to know about good investing decisions.
Deduction is key.
To be laughing, Buffet would have to be buying,
He started out adding about 1 mil shares per Q.
I do not believe he added last Q.
The analysts are looking for a big T deal in Europe.
And hey it's pay day today -- plus a nice cap gain -- so far. But the divvy is a sure thing today.