2001 Capsule Critiques
(Of 2000 Annual Reports)
2001 Capsule Critiques
(Of 2000 Annual Reports)
| Astoria Financial | The good news is that Astoria Financial Corp. warned readers of its 2000 annual report they weren't getting the full Monty. Theirs, to be sure, is the legalistic Form 10-K, with a few color (if poorly printed and designed) pages as palaver. Not all that surprising, here's an outfit that can't decide what its theme is. Is it, as proclaimed on the cover, "Putting people first"? Or is it, as is indicated on Page one: "Leadership in a profitable market"? For sure, the "people" approach rings hollow, since the company didn't bother identifying any of those pictured. In fact, only person with a name, other than apparent customers, is the CEO. What graphs would you run in a bum year? If you're the kind that employs Curran & Connors (the weakest link indeed!) to print and design (sic!) its report, you pick any that appear positive to the scanners, so they'll come away feeling pretty good about their investment. A measly 52 points of a potential 135. They don’t get much worse than this.
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| ALFA | Perhaps it's not all that surprising that a Montgomery, Alabama-based company's board of directors is comprised solely of 11 lily-white old duffers. ALFA's 2000 annual report is pretty awful, despite its 11-year
financials and solid letter to shareholders—its score, but 54 points, accompanied by a rating of -19.4%, a decided negative. What makes it worthy of note isn't the lily-white male board (of the one in three companies this year to picture directors, but one in eight is seen to exclude women and/or minorities). It's that its director listing indicates that qualification for the board of five of the directors is: farmer. That's right, farmer, certainly a first.
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| E.ON | There’s a new corporate entity abroad: In June 2000, VEBA and VIAG became—are you ready for this?—E.ON, complete with new corporate logo. Two men jointly function as chairman/CEO. Signatures of both are affixed to the letter to shareholders in the new entity’s 2000 annual. I'm betting on the German guy whose signature is on the left, the more important/prominent position. Not only that, but five photos appear, by actual count, of the "signature-on-the-left" chap, one fewer of the man whose signature is on the right—clear indication to at least one observer of
what’s in the offing, the edge given one chap over the other. The report, despite its bold, attractive appearance graphically, scored but 80 of a potential 135 points. Its positive index, indicating presence or absence of the 36 indicators of a report's positive or negative nature, at 5.6 percent is half that of the world's 2000 reports so far. What’s equally awful: the
never-ending report contains 146 pages, a record. That’s going on three times the current worldwide average – without excluding such excesses. Longer is better? I don’t think so.
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| Cash America International |
Someone tell the company it needs schooling in the concept of "items in parallel." To wit: On its 2000 cover, it has three sets of words: "customers first" (in lower case), then, "professional and talented," and, to confuse matters more, "industry leaders." They just don't get it. Neither does this outfit (1) identify the host of people pictured, presumably employees, indicating they're
disposable, little more than cannon fodder, and (2) indicate awareness that it's dirty pool to devote a marvelous two-page letter to shareholders while neglecting to address one nagging little detail: earnings fell out of bed. A loss of 7 cents a share, off from a profit of 48 cents a share two years prior, if a third that much last year. A -11.1% Cato Positive Index (very much a negative) for this report, accompanied by a minuscule 42 points—out of a potential 135. A bunch of Texas long horns. And you can bank on that.
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| Magellan Health Services |
There may be worse annual reports lurking in dark alleys and garbage dumps somewhere, but none we've seen to compare with the 2000 report of this outfit into "behavioral health business," whatever that means. (That typifies the entire project—its CEO, a physician, using such esoteric language.) Magellan calls its document, 16 pages in length, an "annual report." Not by my standards it isn't—it's truncated to the max, joins the other 17 on the year that are equally slippery...that is, play loose with its stockholders without so warning them in advance its document is incomplete. That's not the worst of it: It runs 13 photographs of its chief operating officer, who appears to be champing at the bit as he waits for the CEO to move on or out. In some he's pictured sans suit jacket, some with jacket on (indicating, I suppose, his flexibility). Not least, one with his three fellow executive VPs. Despite the somewhat-positive tone of the letter to shareholders, the operations statement shows Magellan went from a 15-cent-a-share profit to a $2.15 loss. By our standards, its report warranted a measly 45 points, accompanied by a flat, 0.0 percent positive-negative rating. The very WEAKEST link, indeed!
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| American International Group |
Proving once again that nobody's all bad, AIG, the billion-dollar behemoth, hasn't sunk to the depths of its year-earlier "world's-worst" report. Its 2000 edition—though the CEO's letter at 10 pages (again) is three times the worldwide average—is six pages shorter. Still, at 136 pages, it's far more than twice the worldwide average. A year ago, its letter was awarded no points for writing (none, either, for honesty). This time, it lost but a point for writing, its average words per sentence an excessive 18.5. And where a year earlier, its rating was a negative, that is, –13.9 percent, this year’s ends up at 5.6 percent, a positive. Its year-earlier 29 tiny points were bested, one could say, this time: 53 points, still an insurmountable 47 away from "world-class" status.
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| Bausch & Lomb |
The good news is that this myopic maker of eyeglasses and contact lens didn't bother mislabeling its 2000 document as an annual
report; rather, its print piece is identified as "2000 Year in Review." (A summary report by any other name...) Its theme is unique: "insight," the last five letters printed on the cover, the "in" visible through a series of die cuts—like, seven pages die cut. The bad news is that it trotted out, as opening of its letter to shareholders, the over-used Dickens' quote, "It was the best of times, it was the worst of times." That has appeared in at least half a dozen full-fledged annual reports over the last
two or three years, guys. Translated, that too often is corporate-ese for "We lost our shirts last year." All B&L's numbers are in deeply negative territory, not least, net income. It's off a whopping 81%. It's fair to say, if one must quote Dickens: "It was the worst of times." And leave it at that.
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| Sherwin-Williams |
There's one good thing about this 2000 report: its theme, "Ask." Otherwise, it's not worthy of mention—not favorable, that
is (insubstantial CPI percentage, poor score of but 58 points). Where it truly tripped up is not informing the reader who's who in the joint photograph of the chairman/CEO and the president/COO. One shouldn't have to assume.
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| A.O. Smith and TD Bank Financial Group |
Have a wild coincidence involving Wisconsin-based A.O. Smith and TD Bank Financial Group (whose real name is The Toronto-Dominion Bank): The report of each, evaluated at the same sitting, had a –19.4% Cato Positive Index. Each scored but 57 woeful points out of a potential 135. Both lost points for writing: A.O. Smith, three, its average words per sentence a high 23.2; TD, two points, its AWPS 20.2. Smith has no theme, declared or otherwise. TD has one proclaimed on the cover: "Be..." On its Pg. 1 is a hand-held device whose screen reads "Where banking is going..." On Pg. 4, start of the letter to shareholders, is the line "We are..." Not until Pg. 6 does the "Be..." theme begin to be supported. Also, talk about dishonesty: The Canadian bank says net income reached $2.018 billion. The letter proclaims "Our results make it clear that we've had a very good year." What's the back-of-the-book income statement say? It proclaims that net income—of $1.025 billion—is approaching a third of the year earlier. It shows, instead of $3.16 earnings per share, the figure is either $1.56 or $1.77, depending on whether or not goodwill amortization is included. One item is in agreement, though: Dividends per common share are shown, both on the income statement and up front on Pg. 2, as 92 cents. That's something.
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| Tyco International |
Tyco International, a Bermuda-based company, is managed from New Hampshire, according to The Wall Street Journal. Its CEO promised, among other things, to make the annual report "more user-friendly." Reportedly, "Some investors had faulted the conglomerate for burying complex but important financial-disclosure items in obscure footnotes in filings that many didn’t even peruse." Promises, promises. Tyco’s 2000 report didn’t do all that well from our standpoint. It scored but 79 points—of a potential 135, of course—though its four-page letter to shareholders did warrant all 10 points for writing. No six-year
financial data, let alone for the 11 years advocated here. Neither are graphs captioned fully for the scanners among us. And the
four-page letter to shareholders, while rated sufficiently forthright, only brought Tyco seven of a possible 15 points for CEO
articulation of what the company’s all about, and where he (in this instance) sees it headed. Insufficient details concerning directors and/or officers, no mission statement, no glossary of terms or special section. No management’s assumption of responsibility for the financials, either. And no employees peopled its pages. Other than the boss, that is. Also: No contents listing, let alone one that’s enlivened. And no financial highlights page. "More user-friendly”? I don’t think so.
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| Fluor Corp. |
Its 2000 theme, "Selling knowledge, delivering value," is intriguing. So is its artsy cover, though the reader is left to fathom its meaning. While no company description as such is provided, four pages into the book there's a company-at-a-glance spread. This report has sufficient pluses (despite losing two points for writing, its average words per sentence an excessive 20.3) to warrant a Cato Positive Index of 36.1%, light-years better than most early-arrivals. Its score, though, is a wanting 78 points. That said: There's a major flub: Accompanying detailed biographical data on directors is a group shot of the board. It would take a seasoned cartographer to fathom who's who; just when I thought I had the system figured out, I was thrust into the bramble once again. Two women directors exist, if no minorities. Trying to peg the positioning to the pair convinced me absolutely no thought was given to how the dozen are aligned, which hardly inspires confidence.
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| Tokyo Seimitsu Co. |
Its report, with a uniquely external orientation, becomes the second for 2000 to achieve "world-class" status, scoring an even 102 of a possible 135 points. Its size is smaller than usual, with a die-cut cover—and a unique theme, "Talking about..." strongly supported on inside pages. A feature is an eight-question interview with the CEO. Whose letter, by the way, warranted all 10 points for quality of writing. An overall 36.1% Cato Positive Index makes it one of the year’s more positive annuals to date.
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| Aeroflex |
It's bad enough when the annual report producer obscures the executives' names in a dark color, making them unreadable, then fails
to indicate which guy is which. But what causes heads to roll is the three signatures on the short letter to shareholders, accompanied by the men's names typeset, contain a misspelling: President Michael Gorin's name is typeset as "Micheal." Poor producer's performance aside, the 2000 report has a hugely negative evaluation (-44.4%) accompanied by a measly 34 points.
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| Wallace Computer Services |
Printing on its 2000 report warrants a 10. The report scored 92 of a possible 135 points, with a Cato Positive Index of 33.3%. Three points were deducted for excessive average words per sentence (23.4, 16 being the limit professional writers aim for), four for financial disclosure (no fully captioned graphs, insufficient number of financial highlights items—11, two shy of the required 13.) With those elements alone present, Wallace would have scored 99 points—but one away from "world-class" status. Outstanding design to go along with the fine printing—by one of my favorite Chicagoland firms, Bruce Offset. And an honest letter, believably authored by the company's two top executives in a year that was, to be sure, "challenging."
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| DQE |
This Pennsylvania-based public utility's exceptional report got lost, somehow, in the shuffle. It increases to 44 the number of world-class reports for 1999—those to score at least 100 of a potential 135 points. The report is laden with positives, not least a direct, three-page letter to shareholders, followed by a substantive, five-question Q&A with CEO David D. Marshall, as fine a communicator as exists. Plus photos, individual, and biographic data on its officers as well as its diversified board. The report, if belatedly, richly deserves its 118 points—placing it 13th best worldwide. Its Cato Positive Index, 80.6%, indicates it's eight times more positive than the year's average. Kudos to the chef.
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| Comdisco |
A year ago, in its '99 report, this Chicagoland company offered up the theme, "Delivering on the promise of technology." This year's theme is a bit shorter: just, "Delivering the promise," which one would have to concede it does well—promise, that is. But deliver? Depends on how one looks at it: Did Comdisco deliver? Not if one looks at the 237% falloff, year to year, in profits. Granted, the company took an after-tax loss for discontinued operations of $322 million, or $1.99 per share. Regardless,
that $322 million writeoff wasn't smoke and mirrors; it involved real money, folks. Now that you mention it, its year-earlier theme rang a bit hollow, given that earnings per share from continuing operations were less than half the 1998 number. This year, to its credit, Comdisco footnoted its impressive turnaround—on the basis of earnings per share from continuing operations—of $1.58 a share, up from the year-earlier 44 cents...by explaining the improved showing "was primarily" a result of one unit's "pre-tax earnings increasing 246%." Almost forgot: Revenues declined 7% year-to-year, didn't exceed 1998 revenues by all that much. A
sub-par Cato Positive Index (CPI) of 8.3%, accompanied by an equally wanting 82 points, for this 2000 annual report. February 29, 2001, The Wall Street Journal reported the naming of a new CEO. He replaced son of the founder, who resigned because the company "needs seasoned leadership with decades, not years, of experience in growing businesses profitably." And, now, months after receipt of its 2000 annual report, its CEO was joined on the way out the door by several top officers, and newspapers are reporting the company's up for grabs. "High bidder," anyone? ...anyone?
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| Apogee Enterprises |
Years back, Apogee made our list of world's 10 best reports. Indeed, its current positive rating is 27.8%, about three times
more positive than early-arriving 2000s overall. But its score, 87 points, is 13 away from "world-class" status. I found its photographs falling into the category of "pickup pictures," a no-no. What's more, I didn't find its theme sufficiently forcefully supported. Indeed, to at least one reader it's not even sufficiently promulgated on the report cover itself! Let me explain: In perhaps 10% of black are some letters over which are superimposed several color photographs. The letters may spell "Clear," but
that's hardly—well, clear. That aside, Apogee didn't actually join Colgate-Palmolive, Cameco and Wal-Mart in presenting its shareholder letter in Q&A format. But it did follow its one-pager with three pages devoted to questions for CEO Russ Huffer to respond to. The three pages included (1) nine questions the CEO answered and (2) eight photographs of the immodest
chap. Add to that yet another picture of the chief appearing on the inside of an upfront gatefold cover. Those nine photos make him a candidate, at least, for our annual SCRAMMS (Sid Cato Rails Against the Mirror, Mirror Syndrome) Citation.
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| BankUnited |
What do you suppose possesses a company to send me its report, knowing how strongly I oppose (1) multi-part annuals, (2) summary reports and (3) inclusion of the Form 10-K? And then—a Florida bank, yet!—to plead poverty, and ask for "any comments you would be willing to offer (gratis)...as I strive to continually improve"? A corporate vice president, who surely ought to know better, sent the 2000 report "for your consideration as you review annuals for this year's best/worst list." If anything, it'll make the latter, its score a woeful 28 points, along with a hugely negative positive/negative rating—a -30.6%. Its CEO discusses the bank's "sustained earnings growth." Only if sustained means for the current 12 months; its 1999 profits were in
the tank.
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