1 Thing Worth Watching at UGI

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on UGI (NYSE: UGI  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, UGI generated $368.3 million cash while it booked net income of $199.4 million. That means it turned 5.6% of its revenue into FCF. That sounds OK.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at UGI look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 15.1% of operating cash flow coming from questionable sources, UGI investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 9.3% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 48.0% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Can your portfolio provide you with enough income to last through retirement? You'll need more than UGI. Learn how to maximize your investment income and "Secure Your Future With 9 Rock-Solid Dividend Stocks." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

• Add UGI to My Watchlist.

B of A, UBS Settle Derivatives Dispute With Italian Region

Lombardy, a region in Italy, has reached separate settlements with Bank of America's (NYSE: BAC  ) Merrill Lynch and UBS (NYSE: UBS  ) in a long-boiling dispute over derivatives tied to a $1 billion bond issue, according to a statement from the region obtained by The Motley Fool and reports from Bloomberg and Reuters. The banks had entered into a swap arrangement with the region that allowed it to repay the 2002 issue in a series of installments, as opposed to a one-time payment on maturity in 2032. The region alleged that the lenders had committed fraud in hiding their fees.

B of A and UBS brought suit in a London court against Lombardy to uphold the swap arrangement.

In its statement, the region said that, without an admission of liability from either party, it and Merrill Lynch had agreed to put aside their differences and continue their collaboration. It said neither party would comment further.

According to Reuters, the region's agreement with UBS ends the dispute. The news agency said the region did not elaborate on precisely what that entailed.

Best Buy Expands Apple iPad Sales to All Stores

Best Buy (BBY) this afternoon announced it will expand sales of Apple’s (AAPL) iPad from the current 673 U.S. stores to all 1,093 stores, starting September 26th.

The announcement comes a week after Best Buy announced it would start selling Amazon’s (AMZN) Kindle e-book reader this fall at all its stores.

Shares of Best Buy spike this morning after the company reported fiscal Q2 profit per share comfortably ahead of estimates. In the report, Best Buy said a lack of iPads at the start of the quarter hurt the company’s overall mobile computing market share.

Gundlach Likes Gold Miners, and He’s Not Alone

ReutersOnly for the brave

While gold itself is having a rough time recently, at least it’s still up 9% this year. The same can’t be said for gold-miner stocks, which have been moving in the opposite direction — the Market Vectors ETF Trust Gold Miners (GDX) is down 8% this year.

It’s a trend we at Barron’s noticed earlier this month. While the sector carries risks, there is a� notion that it’s getting too cheap to ignore, as Michael Kahn wrote:

Out of destruction comes opportunity. And for investors with enough nerve to handle the volatility, gold-mining stocks make sense.

He’s not alone in his thinking. In a profile of fund manager Jeffrey Gundlach today, Bloomberg reports that the noted bond buyer is upping his holdings of natural-gas producers and, yes, gold miners. Gundlach’s argument? They’re cheap, he says.

Earlier this week, I spoke with money manager David Steinberg and he told me much the same thing. Steinberg, a deep value investor, named Barrick Gold Corp. (ABX) and Kinross Gold Corp. (KGC) as two gold-mining stocks that offer value. Barrick is down 37% in the past year while Kinross has fallen 28%.

But even if they’re cheap, that doesn’t make them a slam-dunk investment, as Kahn noted:

Nothing is guaranteed and it is always possible that shares of miners will continue to fall. All we can do is line up the evidence we have and right now it still favors the long-term bullish case for the miner.

The are plenty of problems for gold-miners: little free cash-flow, increasingly expensive extraction costs and working in some of the world’s most unstable regions, to name a few. That’s not enough to put off the likes of Gundlach and Steinberg, but there’s a reason why few others are jumping in.

Mentor Graphics Beats on Both Top and Bottom Lines

Mentor Graphics (Nasdaq: MENT  ) reported earnings on Nov. 29. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Oct. 31 (Q3), Mentor Graphics beat slightly on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew and GAAP earnings per share grew significantly.

Gross margins dropped, operating margins increased, net margins increased.

Revenue details
Mentor Graphics recorded revenue of $268.8 million. The seven analysts polled by S&P Capital IQ predicted revenue of $265.2 million on the same basis. GAAP reported sales were 7.3% higher than the prior-year quarter's $250.5 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.32. The six earnings estimates compiled by S&P Capital IQ predicted $0.28 per share. GAAP EPS of $0.27 for Q3 were 23% higher than the prior-year quarter's $0.22 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 82.0%, 260 basis points worse than the prior-year quarter. Operating margin was 14.4%, 370 basis points better than the prior-year quarter. Net margin was 11.4%, 180 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $346.7 million. On the bottom line, the average EPS estimate is $0.59.

Next year's average estimate for revenue is $1.10 billion. The average EPS estimate is $1.39.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 108 members out of 142 rating the stock outperform, and 34 members rating it underperform. Among 31 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 23 give Mentor Graphics a green thumbs-up, and eight give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Mentor Graphics is buy, with an average price target of $20.43.

Software and computerized services are being consumed in radically different ways, on new and increasingly mobile devices. Many old leaders will be left behind. Whether or not Mentor Graphics makes the coming cut, you should check out the company that Motley Fool analysts expect to lead the pack in "The Next Trillion-dollar Revolution." Click here for instant access to this free report.

• Add Mentor Graphics to My Watchlist.

Hedge Fund Billionaires Are Hoarding These 5 Stocks

Hedge fund billionaires are known for two things: Making highly profitable investments that frequently outperform market averages and pushing stocks higher behind huge trading size and volume.

So when the top names in the industry make bold moves into new investment ideas, legions of big and small investors across the world follow very closely to try to catch a little bit of that hedge fund magic.

And that's exactly what happened in early November, when the latest batch of 13F filings hit the Street. The 13F is a quarterly report of equity holdings that financial institutions with at least $100 million in assets under management are required to file with the Securities and Exchange Commission (SEC). The report is an incredibly valuable tool offering great insight into portfolio adjustments the most powerful hedge funds in the world make.

In the latest iteration of these closely-watched reports, more than a few central themes have emerged and a handful of companies are gaining attention. Here are five stocks that saw huge capital inflows from the biggest hedge funds in the world during the third-quarter, making them prime candidates for big gains in coming months.

1. Yahoo! Inc.

Yahoo! (Nasdaq: YHOO) is in full turn-around mode after poaching top Google Inc. (Nasdaq: GOOG) executive Marissa Meyer for the CEO position in July. There's no doubt Meyer will be sharing and implementing Google's highly effective search and growth strategies at Yahoo!, which has generated huge interest from the hedge fund community. That includes David Einhorn of Greenlight Capital, the billionaire hedge fund manager who has made headlines after scoring huge gains shorting Chipotle Mexican Grill (NYSE: CMG) and Green Mountain Coffee Roasters (Nasdaq: GMCR). Einhorn initiated a stake in Yahoo! during the third-quarter, with Greenlight's 13F filing revealing the fund had purchased 5 million shares ranging between $14.65 and $16.23 a share.

 

2. Facebook

Facebook (Nasdaq: FB) was also a common buy among some of the biggest names in the hedge fund world, led by Charles Coleman's $8 billion Tiger Global Management. Coleman has earned the reputation as a master Facebook trader, after creating a venture capital vehicle to accumulate shares of the social networking giant at discount prices long before its IPO in April of 2012. He then proceeded to unload one-third of his holdings on the day of Facebook's IPO for a hefty $715 million profit. Now, Coleman's latest move, revealed through Tiger Global's third-quarter 13F filing, was to pump up his Facebook position from 2 million to 11 million shares. There's no doubt that had a lot to do with Facebook's stock dropping as much as 50% since its IPO, enticing fellow hedge fund master Paul Tudor Jones II to buy 100,000 shares of his own.

 

3. General Motors

Warren Buffett is largely considered the greatest investor in modern history, accumulating a fortune valued more than $50 billion by investing in U.S. blue chips like Coca Cola (NYSE: KO) and General Electric (NYSE: GE). But according to his company's latest 13F filings, Buffett recently boosted his stake in another iconic U.S. brand, carmaker General Motors (NYSE: GM), increasing his shares held by 50% to 15 million. Fellow hedge fund billionaire David Tepper, who ranks 59 on Forbes' 2012 list of the richest people in the United States, wasn't far behind, increasing his stake in General Motors by 26% to 6 million shares.

 

4. American International Group

American International Group (NYSE: AIG) was one of the most controversial companies in the financial implosion of 2008, requiring $182 billion in government bailouts to be able to remain operational. But now that a few years have passed, the company is once again turning a profit and the hedge fund crowd is recognizing opportunity. This had George Soros, the billionaire manager and co-founder of the legendary Quantum fund, buying 15 million shares during the third quarter, making the resurgent insurance and financial company his largest holding. AIG was one of the most active stocks in the hedge fund community during the third quarter, with total filers climbing 80% to 110 from the previous quarter, according to Insider Monkey.

 

5. Priceline.com Inc.

Priceline (Nasdaq: PCLN) has been red hot in the past two years, with shares up a market-beating 55%. But it's clear the hedge fund community still sees plenty of upside in this online travel agent leader, with four billionaire hedge fund managers taking big positions during the third quarter. That includes Lone Pine Capital, managed by billionaire Stephen Mandel, increasing its stake by 26% from July to September to a total of 1.4 million shares. That lifted the fund's total investment in Priceline to $850 million, its single largest position.

Risks to Consider: The most popular stocks with hedge funds can be volatile if managers cool on any individual stocks. This is what's driving Apple's (Nasdaq: AAPL) decline, the most widely held stock with hedge fund managers for most of the year, currently suffering a sharp drop of 13% in the past three months, as hedge fund managers rotate into fresh ideas.

Fed Survey: U.S. Economy Growing at a Steady Pace

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - A pickup in consumer spending and steady home sales helped lift economic growth in October and early November in most parts of the United States, according to a Federal Reserve survey released Wednesday. The one exception was the Northeast, which was slowed by Superstorm Sandy.

Growth improved in nine of its 12 the Fed's regional banking districts, the Fed survey said. Growth was weaker in New York, Philadelphia and Boston - areas where Sandy caused widespread disruptions.

The survey noted that growth improved despite nervousness about the "fiscal cliff." That's the name for automatic tax increases and spending cuts that could kick in next year if Congress and the Obama administration can't reach a budget deal before then.

Hiring increased in more than half of the districts. But manufacturing shrank or slowed in seven regions and was mixed in two others.

The report, called the Beige Book, provides anecdotal information on economic conditions around the country from October through Nov. 14. The information collected by the regional banks will be used as the basis for the Fed's policy discussion at the Dec. 11-12 meeting.

Many economists believe the Fed could announce plans to buy more Treasury bonds at that meeting to replace a program set to expire at the end of the year. The goal of the program is to lower long-term interest rates and encourage more borrowing and spending.

The purchases would come on top of the Fed's mortgage bond buying program, which is intended to lower mortgage rates and make home-buying more affordable.

Recent government and private reports show the economy improved in October and early November, even as Sandy halted business activity along the East Coast.

Employers added 171,000 jobs last month and hiring in September and August was stronger than previously thought.

Rising home values, more hiring and lower gas prices pushed consumer confidence in November to the highest level in nearly five years. A better mood among consumers appears to have encouraged businesses to invest more in October after pulling back over the summer. And it could point to a stronger holiday shopping season.

There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites over the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.

Still, if lawmakers and the Obama administration fail to reach a budget deal soon, the threat of tax increases could make consumers more cautious in the final weeks of the year.

Many economists say worries about the fiscal cliff could be among a number of factors that keep growth in the October-December quarter below an annual rate of 2 percent. That's too slow to make much of a dent in unemployment and could prompt the Fed to take further action at its next meeting.


Gallery: Quiz: The Economy and the Tax Gap in the United States

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Futures flat, Yum and Zumiez Plunging

Stock index futures (SPY) (DIA) are mostly flat ahead of the bell Friday, after the Commerce Department said consumer spending fell 0.2% in October, the first decline since May and worse than analysts’ expectations.

Among the big fallers in premarket trades is Yum! Brands Inc. (YUM) which late Thursday delivered weaker-than-expected earnings outlook for next year. Particularly hurting the Taco Bell, KFC and Pizza Hut parent was a fall in sales in China. Analysts reacted badly to the news, with Susquehanna and UBS cutting the stock to Neutral and Raymond James cutting it to� Underperform. The stock is down 8.3% at the latest.

Also falling are shares of Zumiez Inc. (ZUMZ), after the retailer’s latest quarterly revenues missed analyst expectations and it gave a gloomy outlook for the fourth quarter. Zumiez said November same-store sales declined 4.2%. The stock is down 8.1% right now.

The Easiest Way I Know to Make Money in Stocks

I call it the "apple tree" loophole. I think it's one of the best ways I know to make money in the market, especially if you don't want to fuss over your investments every day.

But before I tell you what the loophole is, let me first tell you what it's not...

It's not illegal. It's not confusing. And it's not a get-rich-quick scheme.

When used properly, this loophole can greatly reduce the risk of losing money in any market.

  But before I go on, I must say that there are a few caveats to how you use it. First, you have to follow this simple strategy exactly as I'll outline below. Second, it only works with high-yield stocks and funds.

It all started with a simple saying I heard years ago…

"The best time to plant a tree was 20 years ago. The second-best time is today."

That saying has stuck with me. And if you hadn't noticed, it's talking about a lot more than planting a couple of apple trees in your backyard and enjoying the fruit later.

The real lesson here is this: It's the moves we make today that deliver the greatest payoff down the road.

And that's the perfect analogy for investing in consistent, high-quality dividend payers. I firmly believe the high-yield stocks we buy today -- those with steady and increasing dividend payments -- are the ones that will end up paying us the most in the long run.

Just imagine if you had bought no more than a handful of the market's top dividend payers just 10 years ago.

• Altria (NYSE: MO) pays 5.9%, has increased the dividend 41% in the past three years, and has returned 331% in the last 10 years thanks to all the dividends paid.
   
• Realty Income (NYSE: O) brags of being the "Monthly Dividend Company" and returned 347% in ten years, thanks in part to its 5.5% yield.
   
• Magellan Midstream Partners (NYSE: MMP) has returned 504%, thanks in part to its 5%-plus yield and the fact that it has increased payments 437% since 2001.

As you can see, thanks to dividends each of these investments easily returned triple digits in the past decade. Compare that with the paltry 28% return by the S&P 500 in the same period, and the power of dividends becomes apparent.

But the benefits don't stop there. If you were to hold those stocks for a longer period, then the difference would be even more pronounced.

And that's the premise for the loophole. Every time you're paid a dividend, the risk of losing money on that position gets smaller. And over time, those steady -- and increasing -- dividends can add up to unlikely returns, even from "boring" companies. Hold your stocks for long enough and eventually you're collecting pure profit with each dividend payment.

Of course, because it takes a while to make any dent if you're only being paid 2-3% a year, this strategy works best with high-yield stocks that pay 5% or more.

Now, with investing there is never a surefire thing. I can't guarantee success with the "apple tree" strategy, or any other investing strategy. But one thing you can't deny is that every dividend you receive makes it that much more likely that you will see a winning position.

> And in a market that's keeping investors up at night, I can't think of a better way to make money without worrying over your investments every day.

This Well-known Value Stock is Now About to Be a Growth Stock

The investing phrase "Growth at a Reasonable Price,"  or GARP for short, likely sums up the ideal backdrop for many investors. Yet many stocks right now appear to possess fairly dim growth prospects and really only appeal to value-oriented investors. Indeed, I added toy maker Hasbro (NYSE: HAS) to my $100,000 Real-Money Portfolio last month largely on the basis of a very cheap valuation.

Yet, the real appeal for me is that investors were mistakenly seeing this as a company that has moved past its heyday. "Shares are a bargain now simply because Hasbro has hit another speed bump on its path to long-term growth," I wrote a few weeks ago, adding that an upcoming investor presentation would help investors see just how much growth still lies ahead.

Netflix: Hulu Plus Means Big Trouble, Or, Well, Maybe It Doesn’t

There sure is some dividend opinion on the Street about how the unveiling of Hulu Plus could affect Netflix (NFLX). In case you missed it, Hulu yesterday said it will launch a $9.99 a month pay service with a much broader collection of TV episodes than what it available on Hulu’s free service. Netflix, of course, has been seeing impressive subscriber growth, thanks in no small measure to user enthusiasm for its streaming� video service. The question on the Street is whether or not Hulu Plus is going to eat into the Netflix subscriber base.

Here’s a look at what the bulls and bears on NFLX are saying about the issue this morning:

It’s not an issue!:

• Eric Wold, Merriman Curhan Ford: He contends there is no real competitive risk from Hulu Plus, noting that it really would only appeal to Netflix customers who stream only TV shows, and don’t make use of the DVD portion of their subscriptions, and watch TV shows, but not movies.
• Michael Olsen, Piper Jaffray: “Given this is one of the first internet video subscription services with strong content and device partnerships, it will no doubt be perceived by some as competitive to Netflix Watch Instantly,” he writes. “For Netflix subscribers solely focused on TV, the Hulu service may be an alternative, but we believe the services are complementary: Hulu Plus for TV and Netflix for movies. We believe Hulu’s announcement may accelerate the consumer transition to internet-delivered video and push some consumers to question the value of cable/satellite subscriptions.” He keeps his Overweight rating and $140 price target.
• Steven Frankel, Brigantine Advisors: “We do not believe Hulu Plus is a Netflix killer,” he writes. “The inclusion of commercials in the paid service may turn-off some consumers. Netflix�s Watch Instantly does not have as many TV shows and doesn�t carry the current season. However, the service includes access to many popular shows including Lost, Desperate Housewives, and 24 as well as cable fare not available on Hulu, such as Dexter and Weeds. Watch Instantly also includes movies and the Netflix subscriber gets the Watch Instantly content as well as full access to the complete Netflix DVD library for as low as $8.99/mo.” Keeps a Buy rating and $136 target.
• Justin Patternson, Morgan Keegan: He finds little to worry about, and keeps his Outperform rating. “Netflix still offers far more content (DVDs + streaming movies) and its entry level plan ($8.99) is less expensive than Hulu Plus. Worst case, we expect the services to be complements rather than direct substitutes given the minimal overlap.”

It’s a big issue!:

• Daniel Ernst, Hudson Square Research: He downgraded the stock today to Hold from Sell. “We believe yesterday�s Hulu Plus announcement combined with the recent announcement of Google TV demonstrates that Netflix will likely face increasingly digital video competition,” he writes. “While we expect that Netflix will grow its subscriber base 37% in 2010, we forecast that growth rate will slow to 12% in 2011.” He sets a price target of $78, well below the current level, noting that the stock as of yesterday’s close traded at 44.8x 2010 estimates, versus 18x for consumer technology stock peers.
• Douglas Anmuth, Barclays Capital: “While we do not expect Hulu Plus to materially impact Netflix subscriber growth, we believe it is the first credible competitive subscription offering and we think it can win some subscribers that are heavily focused on TV content,” he writes. “Hulu Plus’ early distribution to the TV is also better than we anticipated.” He maintains his Equal Weight rating and $91 target.
• George Askew, Stifel Nicolas: He likewise keeps his Hold rating on the stock. “We believe many recent Netflix subscribers primarily use only the streaming service, and those subscribers may view the Hulu offering as a substitute for Netflix, potentially impacting Netflix� subscriber growth rate,” he writes. Askew keeps his Hold rating on the stock.

So which side is right? Today, the market is leaning toward the bears. NFLX is down 97 cents, to $111.61.

Best Stocks To Invest In 2012-1-12-1

 

Sales up 12.0% to $13.5 Million

Net Income from Continuing Operations up 81.3% to $1.2 Million

Earnings Per Share from Continuing Operations Up 66.7% to $0.05

O�FALLON, MO –12/12/11 (CRWENEWSWIRE) — Synergetics USA, Inc. (NASDAQ:SURG), a medical device company that designs, manufactures, and markets innovative surgical devices for ophthalmic and neurosurgical applications, today reported growth in sales, gross margin, income from continuing operations and net income for the first quarter ended October 31, 2011.

The Company reported first quarter fiscal 2012 sales rose 12.0% to $13.5 million and net income from continuing operations increased 81.3% to $1.2 million, or $0.05 per diluted share, compared with the first quarter of fiscal 2011. Loss from discontinued operations for the first quarter of fiscal 2012 was $382,000, or $0.02 per diluted share. Net income increased 21.8% to $771,000, or $0.03 per diluted share, compared with the first quarter of fiscal 2011.

�Our record first quarter results benefited from the continued demand for Synergetics� ophthalmic and neurosurgical products across all major market segments,� stated Dave Hable, President and CEO of Synergetics USA, Inc. �Sales of ophthalmic products rose 10.0% to $8.8 million and OEM sales were up 26.4% to $4.5 million compared with the first quarter of last year. New product sales, including the VersaPACK� that was launched in fiscal 2011, continued to gain sales momentum. Our disposable product sales were also a major contributor to the quarter�s growth and accounted for 82% of total first quarter sales.�

First Quarter Results

First quarter sales increased 12.0% to $13.5 million compared $12.1 million in the first quarter of fiscal 2011. The increase in first quarter sales from last year was due primarily to growth in sales of ophthalmic disposable products and OEM sales.

Ophthalmic sales rose 10.0% to $8.8 million compared with $8.0 million the first quarter of fiscal 2011. The growth in ophthalmic sales benefited from higher volume of disposable products, including procedural kits, laser probes and cannulas to domestic and international customers.
Total OEM sales rose 26.4% to $4.5 million compared with $3.6 million in the first quarter of fiscal 2011. OEM sales beginning in fiscal 2012 includes sales to our marketing partners. The increase in OEM sales benefited primarily from increased shipments of disposable ultrasonic tips during the latest quarter. OEM sales also included deferred revenue of $398,000 recognized in the first quarter of fiscal 2012.
Disposable product sales grew 11.2%, or $1.1 million, to $11.1 million in the first quarter of fiscal 2012 compared with the first quarter of fiscal 2011. Disposable sales accounted for approximately 82% of total sales in the first quarter of fiscal 2012.
Capital equipment sales totaled $2.0 million in the first quarter of fiscal 2012 compared with $2.1 million in the first quarter of fiscal 2011.
Backorders totaled approximately $500,000 at the end of the first quarter of fiscal 2012.

�We experienced a temporary increase in backorders at the close of the first quarter as we rebalanced inventories as part of our lean manufacturing initiatives,� continued Mr. Hable. �We expect to reduce our backorders and improve customer fill orders on a more timely basis as we fully implement our lean initiatives across our production, inventory management and shipping processes. We also implemented a new ERP system during the quarter that will enhance our real-time information for inventory levels, shipments, sales information and production costs. Our goal is to provide our customers with world class products and services levels to match.�

Gross profit for the first quarter of fiscal 2012 rose to $7.9 million, or 58.6% of sales, compared with $7.0 million, or 58.2% of sales, in the first quarter of fiscal 2011. The growth in gross profit and gross profit margin benefited from higher sales, improved product mix and increased manufacturing efficiencies.

�We discontinued our plastic injection molding operations during the first quarter and transitioned this production to an outside vendor,� stated Mr. Hable. �We believe this change will allow us to focus on our core manufacturing operations and will result in improved gross profit margins associated with plastic injection molded products in the latter half of fiscal 2012.�

Research and development expenses rose 9.9% to $790,000 in the most recent quarter compared with $719,000 in the first quarter of fiscal 2011.

�We showcased our newest products, the VersaVIT� and UVE (Ultimate Vit Enhancer�) for use in the vitreoretinal operating rooms at the Annual Meeting of the American Academy of Ophthalmology in October,� continued Mr. Hable. �These products represent our latest R&D projects and extend our product line into the vitrectomy machine market that currently generates $150 million in annual sales. We plan to allocate approximately 5% to 7% of sales for R&D to fund key programs that will contribute to new product introductions and expansions of our ophthalmic and neurosurgical product lines.�

VersaVIT is Synergetics� first product for the vitrectomy machine market and represents a new concept in retinal surgery with its highly portable design. It is ideally suited for ambulatory surgery centers, as a traveling unit for satellite offices and potentially for in-office procedures. UVE is a high-speed vitrectomy enhancement system that is designed to boost significantly the cutting speed of the market�s leading vitrectomy machine. UVE is priced at a fraction of the cost of the latest generation of high-speed vitrectomy machines and utilizes existing surgical packs for the market leading vitrectomy machine, including Synergetics� VersaPACK�.

Sales and marketing expenses increased to $3.1 million, or 22.8% of sales, for the first quarter of fiscal 2012 compared with $3.0 million, or 25.0% of net sales, for the first quarter of fiscal 2011. The increase was primarily due to higher direct sales of ophthalmic products.

General and administrative expenses increased by approximately $286,000 to $2.5 million, or 18.8% of net sales, in the first quarter of fiscal 2012, compared with $2.3 million, or 18.7% of net sales, for the first quarter of fiscal 2011. The increase in general and administrative expenses as a percentage of net sales was primarily due to additional employees required to manage the implementation of our lean manufacturing and quality improvement initiatives.

Operating income for the first quarter of fiscal 2012 increased to $1.5 million compared with $1.0 million in the first quarter of fiscal 2011. The increase in operating income and operating margin benefited from higher sales, growth in margins, and improved leverage of manufacturing costs and administrative expenses. In addition, the increase in operating income highlights the leverage the Company achieved by utilizing its marketing partners to sell and distribute its neurosurgical products.

Income from continuing operations rose 81.3% to $1.2 million, or $0.05 per diluted share, compared with $636,000, or $0.03 per diluted share, for the first quarter of fiscal 2011. Loss from discontinued operations for the first quarter of fiscal 2012 was $382,000, or $0.02 per diluted share. Net income increased 21.8% to $771,000 in the first quarter of fiscal 2012 compared with $633,000 in the first quarter of the prior year. Net income per diluted share was $0.03 for the first quarter of fiscal 2012 and 2011, respectively. Basic weighted-average shares outstanding increased from 24,782,913 at October 31, 2010, to 24,971,034 at October 31, 2011.

The Company used its strong cash position to pay down debt during the first quarter of fiscal 2012. Total debt at October 31, 2011, was $898,000. The Company expects to pay off the remaining debt in the third quarter of fiscal 2012. Cash-on-hand at the close of the quarter was $13.7 million after a tax payment of $5.7 million paid during the first quarter primarily arising from the settlement payment from Alcon, which the Company received in the third quarter of fiscal 2010.

Conference Call Information

Synergetics USA, Inc. will host a conference call on Tuesday, December 13, 2011, at 10:30 a.m. Eastern Time. The toll free dial-in number to listen and participate live on this call is (800) 588-4973, confirmation code 31244011. For callers outside the U.S., the number is (847) 230-5643. Participants are encouraged to email questions to investorinfo@synergeticsusa.com. The conference call will also be simulcast live at http://www.synergeticsusa.com. An online replay will be available on the Company�s website for approximately 30 days.

About Synergetics USA, Inc.

Through continuous improvement and development of our people, our mission is to design, manufacture and market innovative surgical devices, capital equipment, accessories and disposables of the highest quality in order to assist and enable surgeons who perform surgery around the world to provide a better quality of life for their patients.

Synergetics USA, Inc. (the �Company�) is a leading supplier of precision surgical devices. The Company�s primary focus is on the disciplines of ophthalmology and neurosurgery. Our distribution channels include a combination of direct and independent sales distribution organizations and important strategic alliances with market leaders. The Company�s product lines focus upon precision engineered, disposable and reusable devices, procedural kits and the delivery of various energy modalities for the performance of less invasive surgery including: (i) laser energy, (ii) ultrasonic energy, (iii) radio frequency energy for electrosurgery and lesion generation and (iv) visible light energy for illumination, and where applicable, simultaneous infusion (irrigation) of fluids into the operative field. The Company�s website address is http://www.synergeticsusa.com.

Forward-Looking Statements

Some statements in this release may be �forward-looking statements� for the purposes of the Private Securities Litigation Reform Act of 1995. In some cases forward-looking statements can be identified by words such as �believe,� �expect,� �anticipate,� �plan,� �potential,� �continue� or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company�s Annual Report on Form 10-K for the year ended July 31, 2011, as updated from time to time in our filings with the Securities and Exchange Commission. The Company is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.

Source: Synergetics USA, Inc.

Contact:
Synergetics USA, Inc.
Pamela G. Boone, 636-939-5100
Chief Financial Officer

 

Synergetics USA, Inc. and Subsidiaries Condensed Consolidated Statements of Income Three Months Ended October 31, 2011, and 2010 (Dollars in thousands, except share and per share data)
			Three Months Ended October 31, 2011				Three Months Ended October 31, 2010
Net sales			$	13,505			$	12,057
Cost of sales				5,589				5,030
Gross profit				7,916				7,027
Operating expenses
Research and development				790				719
Sales and marketing				3,076				3,023
General and administrative				2,538				2,252
				6,404				5,994
Operating income				1,512				1,033
Other income (expenses)
Investment income				14				32
Interest expense				(18	)			(80	)
Miscellaneous				(2	)			(7	)
				(6	)			(55	)
Income from continuing operations before provision for income taxes				1,506				978
Provision for income taxes				353				342
Income from continuing operations				1,153				636
Loss from discontinued operations, net of income tax benefit of $193 in 2011 and $1 in 2010				382				3
Net income			$	771			$	633
Earnings per share:
Basic
Income from Continuing Operations			$0.05				$0.03
Loss from Discontinued Operations			($0.02		)		$0.00
Net Income			$0.03				$0.03
Diluted
Income from Continuing Operations			$0.05				$0.03
Loss from Discontinued Operations			($0.02		)		$0.00
Net Income			$0.03				$0.03
Basic weighted average common shares outstanding				24,971,034				24,782,913
Diluted weighted average common shares outstanding				25,136,727				24,862,420

Synergetics USA, Inc. and Subsidiaries Condensed Consolidated Balance Sheets As of October 31, 2011 (Unaudited) and July 31, 2011 (Dollars in thousands, except share data)
			October 31, 2011				July 31, 2011
Assets
Current Assets
Cash and cash equivalents			$	13,743			$	18,399
Accounts receivable, net of allowance for doubtful accounts of $289 and $282, respectively				10,436				11,148
Inventories				12,298				12,082
Prepaid expenses				892				961
Deferred income taxes				824				792
Assets held for sale				406				868
Total current assets				38,599				44,250
Property and equipment, net				8,825				8,561
Intangible and other assets
Goodwill				10,661				10,660
Other intangible assets, net				11,664				11,792
Deferred income taxes				4,717				4,915
Patents, net				1,123				1,050
Cash value of life insurance				82				82
Total assets			$	75,671			$	81,310
Liabilities and stockholders� equity
Current Liabilities
Current maturities of long-term debt			$	898			$	1,053
Accounts payable				1,906				1,567
Accrued expenses				2,798				3,193
Income taxes payable				351				6,233
Deferred revenue				375				540
Total current liabilities				6,328				12,586
Long-Term Liabilities
Deferred revenue				17,827				18,060
Total long-term liabilities				17,827				18,060
Total liabilities				24,155				30,646
Commitments and contingencies
Stockholders� Equity
Common stock at October 31, 2011 and July 31, 2011, $0.001 par value, 50,000,000 shares authorized; 24,975,474 and 24,970,884 shares issued and outstanding, respectively				25				25
Additional paid-in capital				25,708				25,598
Retained earnings				25,723				24,952
Accumulated other comprehensive income:
Foreign currency translation adjustment				60				89
Total stockholders� equity				51,516				50,664
Total liabilities and stockholders� equity			$	75,671			$	81,310

Synergetics USA Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows Three Months Ended October 31, 2011 and 2010 (Dollars in thousands, except share data)
		Three Months Ended October 31, 2011				Three Months Ended October 31, 2010
Cash Flows from Operating Activities
Net income		$	771			$	633
Plus: Loss from discontinued operations � net of tax			382				3
Income from continuing operations			1,153				636
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			290				262
Amortization			162				196
Provision for doubtful accounts receivable			22				4
Stock-based compensation			98				70
Deferred income taxes			166				(75	)
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable			677				7
Inventories			(231	)			(1,353	)
Prepaid expenses			59				265
(Decrease) increase in:
Accounts payable			369				55
Accrued expenses			(262	)			63
Deferred revenue			(398	)			–
Income taxes payable			(5,688	)			243
Net cash (used in) provided by continuing operating activities			(3,583	)			373
Net cash used in discontinued operations			(15	)			(153	)
Net (used in) provided by operating activities			(3,598	)			220
Cash Flows from Investing Activities
Purchase of property and equipment			(802	)			(226	)
Acquisition of patents and other intangibles			(105	)			(50	)
Net cash used in continuing investing activities			(907	)			(276	)
Net cash used in discontinued operations			–				(50	)
Net cash used in investing activities			(907	)			(335	)
Cash Flows from Financing Activities
Principal payments on revenue bonds payable			–				(29	)
Principal payments on long-term debt			–				–
Payment on debt incurred for acquisition of trademark			(155	)			(146	)
Tax benefit associated with the exercise of non-qualified stock options			8				43
Proceeds from the issuance of common stock			5				69
Net cash used in financing activities			(142	)			(63	)
Foreign exchange rate effect on cash and cash equivalents			(9	)			28
Net decrease in cash and cash equivalents			(4,656	)			(150	)
Cash and cash equivalents
Beginning			18,399				18,669
Ending		$	13,743			$	18,519

 

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

The Dastardly Demise of Patriot Coal

Over the past year, this commodity-stock-picking Fool has suffered some truly exquisite failures as the entire resource complex has careened into a black hole of rampant value destruction that's mindful of the 2008 post-Lehman implosion.

Last summer, I tried to issue a wake-up call to investors to pay more attention to the notably unpopular coal sector, citing an "enticing outlook" for coal stocks and touting "unmistakably bullish long-term investment opportunity." Looking over the devastation in the group since that time, I find myself hoping that my calls fell upon deaf ears. A month later, I discussed what I saw as "The Rising Star of Patriot Coal," but this week's bankruptcy filing by the eastern U.S. miner drove plenty of nails into that coffin.

If you want to see what a slice of humble pie looks like on a one-year chart, here you go:

PCX data by YCharts

The failure of Patriot Coal is a snapshot of an industry in crisis as successive blows were dealt by weather, regulators, unsupportive economic conditions at home and abroad, and widespread switching to natural gas for electricity generation. Natural gas actually matched coal for the first time in April in terms of the amount of electricity generated from the competing fuels, which may help explain why some analysts view gas and coal producer CONSOL Energy (NYSE: CNX  ) as one of the less risky stocks in the industry.

Mining equipment manufacturer Joy Global (NYSE: JOY  ) reports that U.S. coal mines operated at just 73% of capacity during the first quarter, and the latest government forecast sees 2012 coal consumption down more than 120 million tons from 2011!

Furthermore, although conditions are extremely challenging throughout the domestic market, the bankruptcy reinforces the relative advantage of miners operating in the western coal fields rather than the more severely impaired market for Appalachian thermal coals. By spinning off its eastern assets into Patriot Coal back in 2007, Peabody Energy (NYSE: BTU  ) appears to have dodged a strategic bullet. Then again, Peabody shares themselves have plummeted more than 60% over the trailing year, so perhaps it's more accurate to state that Peabody was struck by a bullet, but simply escaped without a mortal wound.

With $3 billion in remaining debt after acquiring Massey Energy near the peak in the medium-term cycle, Alpha Natural Resources (NYSE: ANR  ) has found little love from investors as the stock has slipped into single digits for the first time since its 2005 IPO. Hoarding $700 million in cash as of the end of the first quarter, Alpha doesn't look destined for the chopping block just yet, but all the struggling miners need market conditions to improve before these stocks can be considered even remotely safe for intrepid bottom pickers.

In my own view, which you are free to take with a bituminous grain of salt given my tattered trailing track record here, Peabody Energy continues to offer the finest value in the sector, as well as the most attractively positioned asset portfolio with respect to fulfilling the still-anticipated long-term demand growth from the likes of China and India. Although the position is well underwater at present, I will retain my long-term bullish CAPScall on Peabody Energy, just as I intend to keep the stock as a core holding for many years to come.

• Add Peabody Energy to My Watchlist.
• Add Alpha Natural Resources to My Watchlist.
• Add Joy Global to My Watchlist.
• Add CONSOL Energy to My Watchlist.

Campaign domain squatters look to 2020

NEW YORK (CNNMoney) -- If Joe Biden wants to run for president in 2020, he may have to cut Harris Swindell a check. Swindell, a computer programmer, registered Biden2020.com and Edwards2020.com after he saw a story about the sale of the domain WhiteHouse.com. At $12 a pop, Swindell's holding on to them until 2020.

"If Joe Biden were to approach me about purchasing Biden2020.com...I certainly would listen to any kind of proposal he would make and I would be fair about it. If it was a couple thousand dollars, I would be ecstatic," Swindell told CNNMoney.

Fetching thousands for a once-inexpensive domain name isn't outside the realm of possibility. Shardule Shah, a Ph.D. student at Emory University, collected four figures for HuntsmanForPresident.com in 2011. He'd purchased the site three years earlier.

Shah now has 11 political campaign domains registered with an eye toward the 2016 elections, including BobbyJindal2016.com and DevalForPresident.com, a nod to Massachusetts Governor Deval Patrick. Shah doesn't consider himself a domain squatter -- just an avid news-watcher trying to become "a player in the [political] process."

Both Shah and Swindell purchased these domains in the hope of selling them. Others who do the same thing don't always think of it as a business proposition.

For example, Joshua Linsk, who runs an online book publisher, registered HarryReid2020.com, Pelosi2020.com and every variation on Rick Santorum, Herman Cain and Chris Christie that he could lock up, but he has no intention of selling any of them. Buying them was a form of activism, he says.

A Democrat, Linsk says he'd hand the Reid and Pelosi domains over to the candidates if they wanted them, free of charge. If any Republicans wanted theirs -- and he's got a lot, including SantorumPaul.com, SantorumPalin.com, CainRomney.com, and CainBachmann.com, to name a few -- Linsk says he'd "laugh in their faces."

"You can buy domain names for $7 or $8. You would think that if these were serious candidates they would have secured domain names with every possible vice-presidential campaign," he says.

There are laws against "cybersquatting" -- the practice of buying and using a domain to infringe on someone else's trademark or other rights -- but intellectual property attorney Richard Roth says this kind of politically or commercially motivated activity is not illegal.

"It's not illegal unless you're doing it in bad faith," Roth says. "If I take a Joe Biden website and I intentionally go on and [say things] anti-Biden, and I do it to cause Joe Biden harm, then it could be deemed illegal." 

How Your Bank Account Could Disappear

With at least one out of every four bankers at U.S. Big Banks (that’s how many admitted to being crooks in the survey) thinking that stealing is part of their job descriptions, it’s very important for people to realize how little protection there now is between these thieves and your bank accounts. Based on the writing of a number of other individuals with more expertise in these markets, it is apparently an inherently fraudulent banking process known as “rehypothecation” which is allowing the mass-plundering of accounts at U.S. financial institutions, with other Western financial regulatory authorities also rubber-stamping this relatively new form of bankster crime.

Rehypothecation is a heinous practice permitted by the pretend-regulators of Western markets, where financial institutions are allowed to pledge their clients’ funds as collateral to cover their own gambling debts. I say “inherently fraudulent” since few of the clients of these financial institutions would ever knowingly enter into contracts with these gambling-addicts where their cash could be used to cover their bankers’ gambling debts.

Instead, what is happening here is that the rehypothecation clauses are being buried in the “small print” of these contracts and (obviously) never properly explained to these clients: seemingly textbook fraudulent misrepresentation. The only “advantage” to a client into entering into such a contract is a slight reduction in fees, or slightly improved interest rate – certainly not near enough to entice people into risking some near-100% loss insuring someone else’s gambling debts.

So we have our “regulators” (i.e. the only protectors of our funds in the hands of these admitted thieves) giving these fraud-factories the green light to enter into these inherently fraudulent contracts, putting any/all funds of these clients in permanent jeopardy. Thus it’s important to outline how this could happen with ordinary bank accounts.

First it must be noted that the Corporate Media (loyal friends of the Big Banks) are referring to this as a “brokerage” problem. Understand that a brokerage is nothing but a legal “bookie”, an entity which takes (and makes) bets, and which must hold the funds of its “customers” in order to do business. Apparently the principal difference now between a “legal” bookie and an “illegal” bookie is that an illegal bookie is much less likely to use his customers’ funds to cover his own bad bets.

What people must also understand is that the world’s biggest bookies, indeed, the biggest bookies in the history of the world are the Big Banks themselves (specifically U.S. Big Banks). Most  of their gambling is done in their own, rigged casino: the $1.5 quadrillion derivatives market.

Note that you won’t see that number quoted by the Corporate Media (any longer). As concern about the size of the bankers’ mountain of bets grew; the bankers asked the Master Bookie – the Bank for International Settlements – to change the “definition” of this market, and instantly the derivatives market shrunk to 1/3rd its former size.

As many know, the BIS is known as “the central bank for central banks”. What a smaller number of people know is that this is the world’s great money-laundering vehicle, an entity created just before World War II specifically to allow Western industrialists to continue to do a vast amount of business with Adolph Hitler. In other words, it’s not exactly a reliable source for information. So I choose to use the same numbers that the banksters previously used themselves, before they started getting defensive about the insane amounts of their gambling.

We are being led to believe by the Corporate Media (another unreliable source) that this problem is only a risk for all individuals with “brokerage” accounts, however as we piece together all the pieces of the puzzle (already revealed) this is what we see before us:

1) Our banking regulators knowingly allow financial institutions to engage in recklessly misleading (if not outright fraudulent) contracts with their clients, through the use of complex “small print” in their account contracts with clients.

2) The three largest U.S. “banks” by deposit (JP Morgan, Bank of America, Citigroup) have made bets in their own rigged casino, which total well in excess of $100 trillion, an amount which completely dwarfs their total, combined deposits (and assets).

3) A large portion of those bets occur in the $60+ trillion credit default swap market. Pay-outs in these markets can (and do) exceed 300 times the amount of the original bet. It is bets in this market which “blew up” AIG, requiring more than $150 billion in immediate government aid.

4) Following the Crash of ’08; these same banks mooched a package of hand-outs, tax-breaks and “guarantees” (i.e. future hand-outs) from the Bush regime in excess of $15 trillion, the last time their gambling debts went bad on them – and all of these banks have been allowed to dramatically increase the total amount of their gambling since then.

5) It would take only a minor change in the gambling contracts in which these bankers engage to allow their creditors to seize funds out of ordinary bank accounts.

6) The existing language for the bank accounts of these U.S. banks is possibly already so vague (and prejudicial to clients) that it would allow these banks to reinterpret the terms of these bank accounts – and allow rehypothecation to be used to rob the holders of ordinary bank accounts, people who themselves make no “bets” in markets whatsoever. Alternately, customers could be blitzed with an offer for “new and improved” bank accounts, where terms allowing rehypothecation are slipped into the contract, with the  banks knowing that the “regulators” will do nothing to warn account-holders of the gigantic risk they are taking.

The same media apologists who would scoff at this suggestion are the same shills who claimed “there could never be another MF Global”. Meanwhile we have the biggest gambler of them all, JP Morgan, just confessing to having made more of these bad bets – which continue growing larger by the $billion.

When we add-in the fact that the U.S.’s mark-to-fraud accounting rules mean that these banks are easily able to hide the level of their insolvency, the pretend-regulators apparently don’t have the slightest idea of the level of risk to which account-holders are being exposed. This is the charitable explanation for these facts. The alternative interpretation is that these “regulators” are direct accomplices of the criminal banking cabal.

I have consistently referred to the U.S. financial sector as a “crime syndicate” for several years now, often drawing considerable criticism for supposedly hyperbolic rhetoric. Obviously I have been completely vindicated here. One quarter of these bankers are now confessed thieves. The pretend-regulators (notably the SEC and CFTC) on a daily basis rubber-stamp the banksters’ acts of fraud (where they are caught red-handed) – handing out totally trivial fines, and not even requiring these thieves to admit their guilt.

If there are any substantive differences between how the U.S. financial sector is allowed to operate versus any generic definition of a “crime syndicate”, it would be enlightening to hear what those (supposed) differences are. And now these thieves are closer than ever to simply reaching into peoples’ bank accounts and grabbing every dollar they can steal.

The principal reason why I and others have urged people to convert their banker-paper to gold and silver in the past was the 1,000 year track-record of these bankers’ paper, fiat currencies always going to zero (through the bankers recklessly diluting these currencies via over-printing). However, we can add to that a much more basic reason: every ounce of gold and silver which you purchase (and store in your own home “safe” or other secure location) is wealth which cannot be stolen by the banking crime syndicate. This is what commentators are really referring to when they speak of “counterparty risk”: placing your future financial security in someone else’s hands.

What the large financial institutions of the 21st century have taught us (through the cruel “lessons” of their serial crimes) is that there is no one in the world whom you can trust less with your money than a banker.

*Post courtesy of Jeff Nielson at Bullion Bulls Canada.

 

VIVUS, HP: After-Hours Trading (Update 1)

Shares of VIVUS(VVUS) doubled after Wednesday's closing bell as investors reacted to positive news about Qnexa, the company's proposed treatment for obesity in adults.

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See if (VVUS) is in our portfolio

The stock was last quoted at $21.12, up 100%, on volume of 2.6 million, according to Nasdaq.com. VIVUS said the committee voted 20-to-2 in favor of making the recommendation for approval based on a "favorable benefit-risk profile."The company noted that the recommendation doesn't guarantee the drug will receive approval from the FDA. Rather the guidance will be considered when the FDA reviews the company's new drug application for Qnexa, which was submitted in October 2011. A previous bid for approval of Qnexa failed because of health safety concerns. Even before Wednesday's news, VIVUS shares were on a roll, rising nearly 40% in the past year based on the regular-session close at $10.55, and hitting a 52-week high of $13.18 on Feb. 7. Wall Street had a bearish lean on the company ahead of the report with eight of the 14 analysts covering the stock at hold (6) or sell (2), although the median 12-month price target sits at $14. Limited Brands Shares of Limited Brands(LTD) fell in late trades after the fashion apparel retailer gave a below-consensus outlook for the current quarter. The Columbus, Ohio-based company, whose brands include Victoria's Secret and Bath & Body Works, sees earnings of 35 to 40 cents a share for its fiscal first quarter ending in April. That's below the current average estimate of analysts polled by Thomson Reuters for a profit of 44 cents a share in the three-month period. For fiscal 2012, Limited forecast earnings of $2.60 to $2.80 a share vs. the consensus view for a profit of $2.91 a share. The disappointing outlook comes despite the company saying it now sees same-store sales for February rising in the mid to high single digit range on a percentage basis, up from a prior forecast for an increase in the low single digits. The stock was last quoted at $44.12, down 3%, on volume of more than 260,000, according to Nasdaq.com. Based on Wednesday's regular session close at $45.48, the shares are up nearly 14% so far in 2012, and more than 40% in the past year, hitting a 52-week high of $46.70 on Feb. 16. For its fourth quarter ended in January, Limited reported an adjusted profit oif $1.50 a share, ahead of Wall Street's view for earnings of $1.46 a share. The company also said after the bell that it had completed a $250 million stock buyback program, and that its board has approved an additional $500 million repurchase authorization.The sell side had some reservations about Limited shares ahead of the report with 13 of the 24 analysts covering the stock at either hold (12) or underperform (1), and the stock was bumping up against the median 12-month price target of $46. In addition, the shares had made strong moves above both the 50-day and 200-day moving averages of $42.35 and $40.44, respectively. The forward price-to-earnings multiple stands at 15.6X at current levels vs. 12.8X for a competitor like Gap(GPS), which reports its quarterly results on Thursday, and 13.1 for the S&P 500.

Hewlett-Packard

Dow component Hewlett-Packard(HPQ) lost ground in the extended session after the PC and printer maker's financial outlook fell short of Wall Street expectations.

Although its latest quarterly profit topped the consensus view, HP said it expects earnings of 88 to 91 cents per share for the current three-month period ending in April, below the average estimate of analysts polled by Thomson Reuters for a profit of 95 cents a share. The stock, which was down more than 30% but had bounced 14% year-to-date, was last quoted at $28.56, down 1.3%, on late volume of 3.6 million, according to Nasdaq.com. Check out TheStreet's quote page for HP for year-to-date share performance, analyst ratings, earnings estimates and much more.Another big mover in after-hours action was Polypore International(PPO), whose quarterly earnings were light. The Charlotte, N.C.-based maker of filtration products that are used in lithium batteries and for medical and industrial applications also forecast a sequential decline in its results in the current quarter because of "some headwinds" that have cropped up. The stock was last quoted at $37.45, down 14%, on volume of nearly 600,000, according to Nasdaq.com. Based on Wednesday's regular-session close at $43.52, the shares were down around 13% for the past year, but they had bounced significantly since scraping a 52-week low of $36.60 on Jan. 31. Check out TheStreet's quote page for Polypore for year-to-date share performance, analyst ratings, earnings estimates and much more.And finally, Analog Devices(ADI) fell back in the extended session after the Norwood, Mass.-based chip maker came in light on both the top and bottom lines in its fiscal first quarter ended in January, reporting earnings of 46 cents a share on revenue of $648.1 million vs. the consensus view for a profit of 48 cents a share on revenue of $662.3 million. The shares were off 2.6% to $38.80 on volume of around 200,000 after the bell despite news that the company's board had approved a 20% increase in the quarterly dividend to 30 cents a share. Jerald Fishman, the president and CEO of Analog Devices, expressed some optimism about the second quarter as well. Late in the first quarter, order rates began to accelerate and have remained solid so far this quarter," he said in a press release. "This leads us to believe that the first quarter marked the bottom of this industry cycle and we expect our business will improve beginning in the second quarter." -->To contact the writer of this article, click here: Michael Baron.

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