Tuesday, September 29, 2009

Pork Producer Smithfield Foods Needs a Cash Cow

Smithfield Foods (SFD-$13.46) will continue to raise hogs and produce fresh pork, but management is intent on changing the cyclical nature of profits. Going forward, packaged-meats sold under the Armour, Butterball, and LunchMakers (among other) brands, will playing a larger role. Uncertainty exists at to whether CEO Larry Pope & his current management can “get the job done. ” In the first-quarter of 2010, packaged-meat sales of pork products actually declined two percent, as increases in average selling prices could not offset a 9 percent decline in volumes. Read More at BNET Food Industries….

Monday, September 28, 2009

Rig Count to Rise at Chesapeake Energy

To further develop its Big 4 shale leaseholds, Chesapeake Energy (CHK-$28.14) plans to operate an average of approximately 101 rigs in 2010 to drill up to 795 wells. The current operating rig count is 83. The company has had some success in raising cash - and lowering its own drill bit costs - by selling investment interests on some of this acreage. For example, the company expects that its joint venture partner, StatoilHydro, will pay 75 percent of drilling costs in the Marcellus for 2010. If weak natural gas prices persist during the next two years, can the company live within its cash resources? Read More at BNET Energy….

Sunday, September 27, 2009

Shipping Rate Increases at FedEx Corp

Lower yields resulting from declining fuel surcharges are expected to hurt 2010 sales at FedEx Corp (FDX-$73.38). The package-delivery giant plans to increase shipping rates in January 2010. Continue Reading at BNET Travel….

Monday, September 21, 2009

Chesapeake Energy Drilling for Investment Grade Rating

With only about 21 percent of anticipated 2010 gas production hedged, Chesapeake Energy (CHK-$28.11) is gambling that an economic recovery will push demand for natural gas – and prices – higher in coming quarters. The largest domestic producer of natural gas currently carries a Ba2 bond rating by Moody’s. Higher energy prices, however, could change the company’s credit rating picture…. Continue Reading at BNET Energy….

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

More Worries For Jet-Lagged Cephalon Shareholders

The health of Cephalon (CEPH-$58.49) going forward could be influenced by more than just the drugmaker’s initial success in switching sleep-disorder patients from its blockbuster Provigil (modafinil) to long-term Nuvigil (armodafinil) users prior to the patent clock running down on its flagship drug. Adding to an already restless sleep for stockholders, the 10-Q Detective has identified potential intangible assets sitting on the balance sheet whose value is questionable.

At June 30, goodwill and intangible assets, totaling $1.14 billion, accounted for 25.4 percent of total assets. In my opinion, Cephalon has been ‘less-than’ transparent in adjusting the carrying amounts of certain assets, including the anticipated useful lives of certain products:

  1. Cephalon is carrying $26.0 million in Actiq marketing rights, which is a fentanyl lollipop used to treat “breakthrough” pain in opioid-tolerant cancer patients. The company has estimated the drug has a useful life in the range of 10 – 12 years—even though generic alternatives have been available since June 2006. A price increase of 15 percent did little to offset a year-on-year 32 percent decline in sales.
  2. Net carrying amount of the anticonvulsant Gabitril is $41.6 million in product rights. In the second-quarter ended June 30, sales of Gabitril in the U.S. decreased 25 percent from the prior year period, as prescriptions declined 19 percent. A late-stage clinical trial failure in patients with generalized anxiety disorder lessens the likelihood that the drug will find greater acceptance among primary care physicians who treat anxiety. Throw in the fact that two key patents expire in 2011 and 2012, and estimated useful life of between 9 – 15 years is obsolete.
  3. $374.4 million in Ception Therapeutics product rights—but should its most promising drug candidate, a humanized monoclonal antibody (mAb) against interleukin-5 (IL-5), reslizumab, disappoint in clinical trials as an effective treatment for eosinophilic esophagitis in pediatric patients, expect asset impairment charges to follow.
  4. The company is amortizing the $46.2 million intangible assets of its Durasolv orally disintegrating tablet (ODT) technology, a delivery system that permits the medicine to dissolve quickly in the mouth without chewing or the need for water, over an estimated economic life of 14 years. SPI Pharma’s Pharmafreeze ODT, Catalent Pharma Solutions’ Zydis ODT, and FlashDose (Fuisz Technologies) —a multitude of competing mouth dissolving options are flooding the market. That fact, combined with ongoing litigation against KV Pharma’s OraQuick tablet formulation [not going in Cephalon’s favor], suggest Cephalon might not be successful in protecting its intellectual drug delivery property—raising the risk a test of the useful life of this asset is coming (read charge-off).

Although impairment charges of such intangibles are non-cash in nature, such write-downs do affect stockholder equity and possible debt covenants—and could signal deteriorating fundamentals lay ahead. As if jet-lagged Cephalon stockholders donot have enough worries to keep them up at night.

Web Buzz: A working capital surplus of $1.07 billion and cash flow from operations of $313.5 million for the first six-months will not throw off enough cash sufficient to repay $750 million of convertible notes (if presented) and other cash obligations coming due in the next 12-18 months. Read More at BNET Pharma….

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

Thursday, September 17, 2009

Pyramid Schemes -- "Main Street Bubble?"

In the opinion of the 10Q Detective, there is no better source to directly educate consumers on identifying and avoiding the deceptive and predatory income traps of multi-level marketing (MLM), pyramid, and Ponzi schemes than Robert L. Fitzpatrick, President of Pyramid Scheme Alert. Responding to our recent analysis on Medifast, “Ultimate Weight-Loss System or Pyramid Scheme,” we offer Mr. Fitzpatrick’s perspective on the financial consequences to self and our economy when the FTC and SEC fail to regulate or enforce existing laws against pyramid scams and Ponzi operators:

“Writing about pyramid schemes and stocks presents a strange dilemma. I have been asked to offer my views to various financial analysts regarding publicly traded pyramid selling schemes. Investors tend to view the pyramid scheme question with ambiguity. On the one hand, they don't want to be investing in a scheme that will collapse. However, given the pyramid's great capacity for rapid "growth", they do want to cash in on the revenue it generates. The issue of inherent fraudulence and harm caused is usually not on the table, only the question of timing for investment.

Pyramid selling schemes transfer money, causing losses to many and profits to a very few, without value being exchanged. In this sense, they cannot be called "businesses."

In the guise of selling products, they leave the victims with products they would not have normally bought, at prices they would never have paid in the open market, and with months or years of wasted time trying to make money from recruiting other
"salespeople." The schemes use the fraudulent "endless chain" proposition, a per se fraud, as their main "selling" tool to induce the purchases and the futile, misdirected and uncompensated marketing work of the "last ones in" (who are 80-95% of the total at all times).

It is sad to me to see that these fraudulent practices, which, by design, concentrate wealth and derail real entrepreneurship, have become imbedded in the economy. When they come to Wall Street, they gain new stakeholders who are betting on cashing in as they rise. They constitute a "Main Street Bubble" of perhaps $15 billion each year, causing losses to about 10 million Americans each year. Today, this bubble, much like our mortgage bubble a few years ago, has a large lobby in DC, in the Direct Selling Association. This Main Street Bubble can sustain itself longer than a Wall Street bubble, as long as it upholds a facade of a "legitimate business" and enough people believe they offer an "opportunity", which currently millions still do. Losses tend to be hidden and so while it causes enormous harm, the structure itself remains intact to continue preying on people (and so, as you noted, continue to reward shareholders.)

China is the only country that has banned them outright and is using the force of the state to keep them out of the economy. In the end, I see them as a self-destructive force in our country, hitting us at the grass roots where maximum damage is inflicted to the heart of the economy. They are sapping wealth, a form of economic cancer. Predators are feeding off the savings or debts of many others. Nothing is being invented, produced. No true growth is occurring and certainly true value is not being exchanged.”

Robert L. FitzPatrick, Pres.

Tuesday, September 15, 2009

H&R Block Copies Jackson Hewitt Playbook

H&R Block (HRB-$17.52) performed miserably in the 2009 tax season, handling 5.8 percent fewer in-store, retail tax returns, as clients sought lower-cost IRS filing alternatives due to difficult economic conditions. Can the largest provider of tax preparation services in the U.S, with almost 13,000 retail outlets, draw more customers to its stores for the 2010 tax season by re-focusing marketing and operational initiatives back towards its core, store-front business? … Continue Reading at BNET Finance Industries….

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

Monday, September 14, 2009

Medifast: Ultimate Weight-Loss System or Pyramid Scheme

Liquid protein drinks, raw foods, Scarsdale and Atkins — is the Medifast (MED-$19.44) Meal Plan an amazing weight-loss product, or just another in a long list of fad diets? Medifast meals are formulated with low-fat protein and fiber, and are supposedly “clinically proven” to help users lose weight quickly — up to an alleged 20 pounds a month — through a process called ketosis, a metabolic state where the body is tricked into burning its own fat reserves. A review of the clinical studies provided by the company online and in regulatory filings, however, finds a troubling theme underlying most of the treatment protocols… Continue Reading at BNET Health Care Industries.

The Take Shape For Life (TFSL) website boasts that becoming a health coach is a business opportunity that has a low cost of start-up, requiring no holding of inventory as all orders are shipped to the end consumer. Detractors allege, however, the company’s growth is attributable to nothing more than a twist of the notorious Ponzi postage stamp con of 1921 — a modern day, multilevel pyramid scheme…. Continue Reading at BNET Health Care Industries.

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

Thursday, September 03, 2009

Fossil Fuel Prices Depress Demand for Trinal Solar's Panels

With many positives developing for solar companies and the industry, such as subsidies offered by governments and plummeting prices of the key raw material poly-silicon, why are the solar stocks giving up their huge gains of the last three months? Could it be that “grid parity” is more dependent on the price of fossil fuels than previously hypothesized? Just check out the fortunes at solar panel maker Trina Solar (TSL-$26.00) for answers … Read More at BNET Energy….