Boring Portfolio

APC Call Q&A
Carlisle-Titan Monday

By Dale Wettlaufer (TMF Ralegh)

ALEXANDRIA, VA (August 6, 1999) -- Today, I'll finish up American Power Conversion's (Nasdaq: APCC) Q2 conference call with the question and answer session. I promised I'd review Carlisle Companies' (NYSE: CSL) agreement to acquire Titan International (NYSE: TWI), which I looked at briefly on Wednesday, but there was a glitch this morning with the phone center in New York, so I'm going to defer that until Monday.

APCC Q2 '99 Conference Call


"As time goes on, we are watching the science and practices that are used in the logistics area [of channel inventory management and supply] get better and better, and we don't see that it's a massive change, but slowly but surely, we see it to be pretty much a continuing trend."

The company has already implemented the sales force reorganization across the globe. "The fundamental analysis that led us to this change was really recognizing that there is a difference between the low end of our business, which is very much transactional in nature, where we're selling millions and millions of units a year to different businesses and consumers, and then the relationship end of the business, where we're selling much lower quantities of much bigger-ticket items. It's really just recognizing that there are different business models for those two pieces of business and different processes that really need to be focused on and improved."

"The overall financial model really hasn't changed a whole lot. We're still looking to throw off high-teens operating profitability, mid- to low-40% gross margin, low 20% operating expenses to sales ratios..."

In terms of the World Wide Web's influence on APC's business model, there are two fundamental impacts. "One is as a user of the Web in our business processes and the second is to actually use the Web as a new channel of our distribution system. If you go on our website today, you can purchase replacement battery packs and a couple different UPSs, but it's not at all a mainstream channel for us. Yet, we do see as the market evolves over time... a significant slice of our revenues should be coming from the Web over the next two to three years. Possibly as important is to deploy internally our business processes, linking ourselves with our channel partners and our customers as well as with our vendors. We see that as a great opportunity... but that is really going to take some time, probably on the order of a couple years to really get this done."

"If we take a look at European business... we will have a bit of drag on us from Russia, but if you take Russia Silcon out of the equation... in Western Europe, we're growing at over 20% year-over-year in the quarter, about 27%."

In many quarters, 40-50% of revenues will be booked in the last month of the quarter. That's what the company saw this quarter.

Jabil Acquisition

Electronics manufacturing services provider Jabil Circuit (NYSE: JBL) announced yesterday morning that it has agreed to acquire GET Manufacturing, an EMS company with 5,000 employees and six manufacturing locations -- four in China, one in Mountain View, Calif., and one in Tijuana, Mexico -- with a million square feet in manufacturing floor space and additional sales offices in the U.S. and western Europe. We'll have to wait to see the financials on the deal, but this again is a company that has shown good discipline in the past with regard to the financial and operating rationale behind capital allocation decisions. Jabil is very much in our sights, and I would suggest again that value investors take a look at this company and industry.

World Wrestling Federation

MSNBC invited me on yesterday to talk about World Wrestling Federation's plans to go public, so I took a look at the prospectus. Check out those numbers. Pretty interesting.

Costco July Same-Store Sales

Costco's (Nasdaq: COST) July results were smokin', as same-store sales increased 11%. And the stock price is coming in. I like both. I think we'll have to get back into tearing apart Costco's financials. I like cheap, but I don't mind buying at intrinsic value, either. If you're interested in what Costco is all about, I suggest checking out our message board on it. This has some of the most knowledgeable message posters on almost any company I've ever seen on the Internet, and it's nicely free of static.

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08/06/99 Close
Stock Change   Bid
APCC  -1 3/4   19.56
BRKb  -52      2040.00
CSL     ---    41.81
GTW   - 3/16   75.13

                  Day     Month   Year  History
        BORING   -2.10%  -3.54%   0.59%  35.06%
        S&P:     -1.02%  -2.14%   6.36% 117.04%
        NASDAQ:  -0.70%  -3.43%  16.20% 144.77%

    Rec'd   #  Security     In At       Now    Change
  8/13/96  200 Carlisle C    26.32     41.81    58.83%
  4/20/99  460 American P    14.48     19.56    35.13%
   2/9/99  100 Gateway 20    72.38     75.13     3.80%
 12/31/98   12 Berkshire   2276.17   2040.00   -10.38%

    Rec'd   #  Security     In At     Value    Change
  8/13/96  200 Carlisle C  5264.99   8362.50  $3097.51
  4/20/99  460 American P  6659.25   8998.75  $2339.50
   2/9/99  100 Gateway 20  7237.50   7512.50   $275.00
 12/31/98   12 Berkshire  27314.00  24480.00 -$2834.00

                             CASH  $18177.16
                            TOTAL  $67530.91