Wall Street, Oh Wall Street — What Have You Wrought?

Thursday, January 29, 2004
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Ahhh, be still this CPA’s heart…..4th quarter earnings have been rolling in, and the annual reports will be out shortly. Oh goody! There’s some notable stuff out there, but here’s a quickie slice-and-dice:

Halliburton: The politically corrupt Halliburton reported a net loss of $947 million for the 4th quarter, compared to its loss of $616 million a year earlier, with the 2002 results including a $214 million charge for an asbestos litigation settlement.

Last month, Halliburton’s DII Industries, Kellogg Brown & Root, and other subsidiaries filed a prepackaged bankruptcy for protection from creditors as part of a plan to resolve Halliburton’s asbestos and silica liabilities.

Halliburton said at the time that it planned to take a $1 billion pretax charge in the fourth quarter related to boosting its litigation reserves to reflect the full cost of the $4 billion settlement.

Yet Halliburton’s revenue increased 63% to $5.46 billion from $3.35 billion, due to the obvious — it’s Iraq windfall. For the full year 2003, Halliburton’s net loss was $820 million, while full year revenues went up 29% from last year.

Amazon: Reading Amazon’s financials has always given me heartburn. A company that I truly *love*, yes, but yet it’s another high growth-horrid business model company that teeters on the edge of decapitation because of its financial structures. But it made a full-year profit for 2003! Hooray! What a concept.

Amazon.com Inc. hit a milestone many skeptics several years ago would have called unattainable: a full-year profit.

The results emphasize the extent to which Seattle-based Amazon, once the embodiment of the dot-com ethos of growth without heed for profit, has transformed itself into one of the most powerful survivors on the Internet, along with Yahoo Inc. and eBay Inc.

Through an aggressive cost-cutting campaign during the past three years, Amazon has steadily improved its bottom line while restarting sales growth with a free-shipping offer that has proved popular with customers. The Internet retailer also has benefited from increased consumer acceptance of online shopping, which helped boost holiday Internet sales last year by 30% to $12.5 billion, according to estimates from comScore Networks Inc.

Ford: Ford continues to be less and less of an automaker, for once again, the 4th-quarter profits are coming from its financing arm, Ford Credit ($470 million profit), and not its auto manufacturing unit ($4 million loss). I’ve picked on Ford before in terms of its financial problems and possibilities for bankruptcy, as has Eric Englund.

Says the New York Times:

Both Ford and General Motors, which reported its earnings on Tuesday, continue to make money from lending to car and truck buyers and from other financial operations. They, along with Chrysler, are struggling to make money in their principal business – manufacturing cars and trucks – because of a continuing price war. The three big automakers are offering buyers discounted financing, rebates and other incentives that are cutting into profit margins yet failing to stem the loss of market share to foreign producers.

K-Mart: My other favorite company to pick at, K-Mart, apparently isn’t going to release its 4th-quarter earnings until the middle of March. It is expected to show a profit (huh?), and a reason cited is “strong inventory management.” The financials aren’t coming out until March 18th because of “accounting management,” where they will devise some clever way to show a profit. Stocks already shot up due to the announcement that a profit is expected. And any observant, long-time, K-Mart shopper knows that K-Mart does not have “strong inventory management,” but rather it has “no inventory management.”

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