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   December 12, 2013 @ 6:46 AM EST
TODAY'S REPORTS
Investment Grade
Bank of Montreal  The end of the year comes early for Canadian banks. The fiscal year ends on October 31, so the past few weeks have seen a series of reports out of...
Wrapping Up The Year by Kathleen Shanley, CFA
Xcel Energy  (with Analyst's Data Sheet) Last week, Xcel Energy held an investor meeting at which the company provided updated five-year capital guidance, consistent with the company's updated "value...
Turning Up The Heat by Philip C. Adams, CFA
High Yield
Burlington Coat Factory Warehouse  (with Analyst's Data Sheet) Burlington Stores (formerly Burlington Coat Factory Warehouse) has evolved from a purveyor of discount coats and jackets to a $4...
De-Weathering by Kim Noland
WEDNESDAY'S COMMENTS (12/11/2013)
3:08pm Mohegan Sun Mohegan leaders have done some fancy footwork after Palmer residents voted down a casino in their...
Regulatory Development by Kim Noland
Mohegan leaders have done some fancy footwork after Palmer residents voted down a casino in their community (recall that Mohegan had purchased land near Palmer in hopes of being awarded a gaming license in western MA). Instead, Mohegan has teamed up with Suffolk Downs to try to win a different gaming license, this time in eastern MA. Suffolk Downs needed a new partner after the MA regulators found Caesars unsuitable and it was forced to exit the partnership. Subsequently Suffolk tried to get its casino approved by the voters of Revere and East Boston host communities. Although anti-gaming activists in East Boston defeated the proposed casino, MA regulators are giving Suffolk (and Mohegan) another chance by allowing a revote by Revere residents (the proposed casino was moved entirely into Revere boundaries). Although Wynn is also in the competition and has received approval from its host community of Everett, it is still awaiting a "suitability" determination as well as the second chance afforded to Suffolk. In the meantime, Mohegan is looking to possibly develop a casino in the Catskills --four licenses will be awarded in upstate NY after the voters approved an amendment to the State constitution in the past election. Stay tuned for more news on Mohegan's capital light strategy that makes its management capabilities available for participation or fees to investors providing capital.
11:58am Avon Products Avon sneaked a fairly major strategic reversal into an otherwise innocuous restructuring...
Corporate Development by Carol Levenson, CFA
Avon sneaked a fairly major strategic reversal into an otherwise innocuous restructuring announcement in an 8-K filing this morning. The company disclosed global headcount reductions of 650, including fourth quarter North American job losses. The restructuring charges will total $35-$45 million pretax, nearly all of which will be cash. But the company also said it was discontinuing its much ballyhooed service model transformation (SMT) project begun in 2009 and piloted in Canada in the second quarter with the expectation that it would be used worldwide. The adoption of this SAP software and associated business process revisions has been blamed for weak results and steep representative losses in Canada due to "disruption." The company will write down this capitalized software asset by as much as $125 million. Presumably these charges will be allowable under the company's revised debt covenants. The company had said it was analyzing the Canadian pilot but before today had not admitted that it was not showing a return on investment. The proper venue for discussing a major development such as this is in a conference call with investors, in our view, not in a regulatory filing. Another "big bang" change rolled out in 2011 (which has also been blamed for weak results and representative losses in the U.S.), called the One Simple Sales Model, has also been disruptive to business and may also be abandoned or rethought. These charges are not material to credit quality but do illustrate that Avon has been wasting money on misguided projects that not only don't help but actually seem to be hurting its business and its relationship with its representatives (as we discussed in our report dated November 1, 2013).
11:58am Phillips-Van Heusen PVH Corp.'s (PVH) fiscal 2013 third quarter revenue and adjusted EBITDA exceeded...
Earnings by Evan Mann, CFA
PVH Corp.'s (PVH) fiscal 2013 third quarter revenue and adjusted EBITDA exceeded consensus estimates and company guidance, driven by better than anticipated sales at Calvin Klein, Tommy Hilfiger, and the recently acquired Warnaco. Despite this solid performance, the company left its previous fiscal 2013 guidance unchanged as it expects the holiday season to be very competitive and highly promotional. For the quarter ended November 3, revenue increased 38% to $2.3 billion due to the acquisition of Warnaco as well as gains of 10% for Tommy Hilfiger and 19% for legacy Calvin Klein, partly offset by a decline of 6% a legacy Heritage Brands. The third adjusted EBITDA was up 24% to $353 million as higher revenue was partly offset by margin pressure from a higher level of promotional activity. For the latest twelve months, adjusted EBITDA of $1.1 billion covered interest 6.8x and leverage was 3.8x, deterioration from 7.8x and 2.6x in 2012. The company raised its previous fiscal 2013 term loan debt reduction goal by $50 million to $450 million. We will update our projections and review our rating shortly.
WEDNESDAY'S REPORTS (12/11/2013)
Investment Grade
Arrow Electronics  (with Analyst's Data Sheet) Arrow Electronics confirmed recently that it expects only seasonal growth in both business segments in the fourth quarter. But that seasonal growth is...
Less Risky Than You Think by Dave Novosel, CFA
AutoZone  (with Analyst's Data Sheet) AutoZone continues to experience sluggish sales despite positive industry factors. But it still managed to expand its operating margin in the first fiscal quarter...
Business As Usual by Carol Levenson, CFA
High Yield
Ingles Markets  (with Analyst's Data Sheet) Despite the difficult environment faced by most food retailers, Ingles Markets (IMKTA) had a decent fiscal 2013 fourth quarter.
Decent Quarter by Evan Mann, CFA
Express Scripts 12/10 
American Airlines 12/9 
Devon Energy 11/20 
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Dec 10, 2013 | The Wall Street Journal
VB on Toll Brothers Hits Limits of Luxury-Home Prices Q - "Toll's buyers have more discretionary income, but even they have decided that the pricing pace has been too aggressive. This sets the tone for the next two quarters in terms of pricing."
Dec 9, 2013 | Associated Press
VB on New American Airlines Emerges As Deal Closes Q - "He's at the peak of 'happy' right now. He's got to keep the unions happy; he's got to keep the computers running; he's got to keep the balloon in the air."
Dec 9, 2013 | DBR High Yield Weekly
EM on Discouraging Q - Sears report featured
Dec 8, 2013 | Philadelphia Inquirer
VB on Aramark lays groundwork for a third IPO Q - "We have expected Aramark to raise much more, potentially as much as $3 billion. Aramark still offers reasonable upside nevertheless via steady operating improvement over the next year..."
Dec 6, 2013 | New York Times
VB on A Tricky Airline Merger, but With Labor's Blessing Q - "AMR's creditors, employees, business partners, investors and even its competitors had remained distinctly concerned about AMR's dubious prospects as a stand-alone carrier..."
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