Boring Portfolio

TCBY Melts
Thursday, June 11, 1998
by Greg Markus
(TMF Boring)

ANN ARBOR, Mich. (June 11, 1998) -- Major market averages extended Wednesday's decline as investors came to grips with the implications of weakness in Asian economies for U.S. companies. The S&P 500 fell 1.59% and the Nasdaq lost 1.33%.

The Asian financial flu made its presence known in the Boring Portfolio, as well. During the day, TCBY Enterprises (NYSE: TBY) reported second-quarter earnings of $0.15 per share, in line with analysts' forecasts, but warned that "sales and franchising revenues were adversely impacted by the economic challenges in Asia, which are expected to continue throughout 1998."

That news was enough to drop the stock by 10% almost instantaneously. TBY ended the session at $8 1/2, down $7/8.

TCBY's total revenues for the quarter were $30.9 million, down slightly from the $31.2 million the company reported in the year-ago period. The latter figure included approximately $1.2 million in sales from a subsidiary that was sold last July, however. So on a continuing operations basis, sales increased -- although perhaps not as much as some investors were hoping.

I admit to being unclear about the degree to which weakness in Asia could affect TCBY's overall results. Last year, only about 5% of total revenues came from abroad, and presumably only a fraction of that was from Asia.

I also noticed a couple of items in today's financial report that I want to find out more about. TCBY's trade account receivables increased to $14.9 million, versus $8.8 million a year ago. And inventories rose to $15.8 million as compared with $10.7 million last year. On the other hand, long-term debt declined to $4.6 million versus $6.3 million.

According to information I received earlier, TCBY does not hold conference calls following its releases of quarterly results. I've got a call in to the company, however, and as soon as I learn anything, I'll pass it along.

Wednesday's Borefolio recap discussed the possible ramifications for Carlisle Companies (NYSE: CSL) of spreading work stoppages at General Motors (NYSE: GM) plants. Carlisle's transportation segment makes and sells a variety of components -- mostly rubber and plastic parts -- to automotive OEMs, including GM.

I called Carlisle yesterday afternoon for their thoughts about the possible effects of the strike. This morning, a Carlisle spokesperson phoned me back (as I was leaving Phoenix for my flight back to Detroit).

He told me that GM and Delphi Automotive are both Carlisle customers. Delphi is a major GM parts producer where, as I write this, workers are preparing to walk off the job at 7pm EDT barring a breakthrough in negotiations.

According to the spokesperson, approximately 12% of Carlisle's transportation segment revenues come from GM and Delphi. Carlisle's transportation segment, in turn, brings in about 40% of Carlisle's total revenues. Everything from lawn mower wheels to aerospace wiring to plastic food utensils account for the other 60% of Carlisle's sales.

A little math -- 12% of 40% -- reveals that GM accounts for about 5% of Carlisle's total sales. So if the strikes in Flint, Michigan are prolonged, or their effects ripple to other plants around the nation, I infer that it could conceivably trim a few pennies off Carlisle's bottom line in the near term.

Let's not forget about the other 95% of Carlisle's business, though. Overall, Carlisle's operations are going just fine -- some parts a bit ahead of plan, some parts perhaps a bit behind, the company spokesman said.

That's the advantage of a diversified operation such as Carlisle's: when one aspect of the business hits a bump in the road, other parts can usually be counted on to pick up the slack. Carlisle's aerospace wire and communications cable facilities have been running flat out, for example. And after a period of softness, the company's refrigerated shipping container business was red hot last quarter.

Carlisle's stock was unchanged today -- hurrah! -- at $45 11/16.

Finally tonight, Borders Group (NYSE: BGP) has filed its 10-Q for the company's fiscal first quarter ending April 26, 1998, with the U.S. Securities and Exchange Commission. The filing will be available shortly at no cost from the SEC's EDGAR Website. (It typically takes a day or two for filings to show up on the EDGAR site after they're available at a charge from same-day proprietary sources.)

A quick perusal of Borders' 10-Q revealed little news that wasn't contained in the company's announcement of first-quarter results on May 13 or in the follow-up conference call. The 10-Q did provide an update on the company's share repurchase activity, however.

Borders currently has in place a program to repurchase up to $100 million of its stock, plus an additional amount to offset options that are exercised from time to time by insiders. No shares were repurchased during the first quarter, but so far in the second quarter Borders has repurchased $25.2 million in stock, bringing the total repurchased under the program to $87 million.

Borders stock closed down $1/16 to $30 15/16.

FoolWatch -- It's what's going on at the Fool today.

Stock  Change    Bid 
 ANDW  -  1/2   20.13 
 CGO   -  15/16 34.69 
 BGP   -  1/16  30.94 
 CSL     ---    45.69 
 CSCO  -  1/16  79.06 
 FCH   -  3/16  32.50 
 PNR   -  5/16  41.19 
 TBY   -  7/8    8.50 
                   Day   Month    Year  History 
         BORING   -1.10%  -2.42%  -1.25%  24.26% 
         S&P:     -1.59%   0.34%  12.79%  76.09% 
         NASDAQ:  -1.33%  -1.64%  11.42%  68.09% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     30.94   174.85% 
   6/26/96  150 Cisco Syst    35.93     79.06   120.03% 
   8/13/96  200 Carlisle C    26.32     45.69    73.55% 
    3/5/97  150 Atlas Air     23.06     34.69    50.43% 
   4/14/98  100 Pentair       43.74     41.19    -5.84% 
   11/6/97  200 FelCor Sui    37.59     32.50   -13.54% 
   5/20/98  400 TCBY Enter    10.05      8.50   -15.38% 
   1/21/98  200 Andrew Cor    26.09     20.13   -22.86% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  12375.00  $7872.51 
   6/26/96  150 Cisco Syst  5389.99  11859.38  $6469.39 
   8/13/96  200 Carlisle C  5264.99   9137.50  $3872.51 
    3/5/97  150 Atlas Air   3458.74   5203.13  $1744.39 
   4/14/98  100 Pentair     4374.25   4118.75  -$255.50 
   5/20/98  400 TCBY Enter  4018.00   3400.00  -$618.00 
   11/6/97  200 FelCor Sui  7518.00   6500.00 -$1018.00 
   1/21/98  200 Andrew Cor  5218.00   4025.00 -$1193.00 
                              CASH   $5511.82 
                             TOTAL  $62130.57