Last week, the SEC mandated that CEOs and CFOs certify their company's financial results, but apparently some execs didn't get it. According to, many company leaders have been signing names, but not their own. Among 700 oaths filed so far, signers included Elvis, Yoda, Capt. Jean Luc Picard, and Clifford the Big Red Dog.... No, we're not serious. Head on over to for a laugh.

There was more positive traction in the market today, with all the major indices steaming ahead. The Motley Fool 50 was on track to add 2% at the time of publication.

In today's Motley Fool Take:

Race to Refinance?

As soon as interest rates dipped to historic lows last week, yields crept back up. While the borrowing-cost moves certainly aren't immaterial for house hunters, the impact of falling and rising mortgage rates has been partly offset by the inverse swing in real estate prices. In other words, while rates have fallen to give your mortgaged dollar more power, the value of the house you were pining for has probably inched up accordingly.

However, for those who are more than happy in their present homes, the race to refinance has been fierce. According to the Mortgage Bankers Association of America, refinancing now accounts for 68.9% of all mortgage loans. A year ago, refinance deals were just 46.4% of the mortgage loan market.

The boom is natural. As long as the numbers line up attractively, it's found money in lower monthly payments at a time when money is tight all over. Stocks that stood to benefit from the refinancing boom have performed well. Lenders such as Countrywide Credit Industries(NYSE: CCR) posted record quarterly results, and homeowners are reinvesting the savings into their houses, given this morning's healthy report by home-improvement retailer Lowe's(NYSE: LOW).

Homeowners know the low rates won't last forever, which is why locking into them is critical. Last week may have been the bottom for mortgage rates. Either way, folks aren't expecting to see the welcome mat much longer.

Shameless Plug: Refinance and Save

Does saving potentially hundreds of dollars per month on your mortgage sound good to you? Mortgage rates remain historically low, so now might be the time to refinance and save yourself some dough. Our Home Center can help.

Lowe's Nails Q2

No. 2 home-improvement center Lowe's(NYSE: LOW) announced bang-up Q2 results this morning, boosting the stock as much as 10%.

The company reported Q2 EPS of $0.59, versus $0.42 in the year-ago period, beating consensus Street estimates of $0.54. The 40% earnings vault came on a 22% jump in revenues. The company raised its full-year EPS forecast to $1.74-$1.75 from $1.66-$1.69.

Lowe's earns brownie points for releasing all three financial statements at once -- yup, even the cash flow statement that tells how much cash the business itself generates -- and only 17 days after the end of its quarter. Why can't everyone do that?

Unfortunately, that very cash flow statement shows the company's Q2 free cash flow merely lumbered in, after a rich Q1:

                              Q2 2002     Q1 2002
Net cash from operations $455 mil. $1,173 mil.
Capital expenditures
 (fixed-asset purchases)($408 mil.)($ 501 mil.)
Free cash flow           $ 47 mil.  $ 672 mil.  

Normally we don't like to see earnings growing much faster than free cash flow, but it's fair to give some latitude to an expanding retailer like Lowe's, which aims to increase its 806 store count and compete with as many of Home Depot's(NYSE: HD) 1,386 stores as possible. But our indulgence lasts only as long as operating cash flow funds the store buildout and other key metrics are in line. They are.

Operating cash flow has been more than sufficient for three quarters. Debt is stable. Lowe's cash conversion cycle (how long it takes to buy and pay for materials, sell the products, and collect the amount due from a customer) is 34 days, its lowest in six quarters. Its Flow Ratio is calm at 1.20.

But about that debt. One possible warning, and the main difference between the two home-improvement powerhouses, is that Lowe's $3.7 billion long-term debt is about three times that of Home Depot. Furthermore, Home Depot can brag about four times cash to long-term debt, while Lowe's reports only about 0.4. Home Depot can fund its entire $2 billion stock-buyback program announced last month, pay off its entire long-term debt, and still have plenty of bucks left over. Not so for Lowe's, which must grow stores about 70% to compete against No. 1 in all markets.

Long term, Home Depot has more ammunition to withstand the price pressure that will accompany more Lowe's stores, but neither company offers the potential for growth to provide an attractive return at current valuations. Interestingly, our Home Depot discussion board is much more lively than Lowe's. Does that mean Home Depot is the more familiar brand for the "buy-what-you-know" investor?

One thing's for sure: Whichever company first offers stores where you can actually get help on weekends will have a leg up.

Home Depot reports tomorrow.

Quote of Note

"It is unfortunate we can't buy many business executives for what they are worth and sell them for what they think they are worth." -- Malcolm Forbes, 1919–90, American publisher

Not Ready for Subprime Time

Despite a rise in bankruptcies, credit card companies mailed 5 billion solicitations over the 12-month period ending on March 31, 2002, according to the Consumer Federation of America (CFA). That's almost 50 solicitations per household.

These are the same companies that pushed for new legislation to stem the increase in bankruptcies, which reached an all-time high of 1.5 million in one year, according to In a press release, CFA Legislative Director Travis Plunkett said, "Credit card issuers are shamelessly escalating their marketing and available credit to stratospheric levels while demanding that Congress give them relief by making it harder for consumers to declare bankruptcy. Can any of them explain why they need this relief when their profits are increasing... ?"

One of the criticisms of the legislation is that it does nothing about the credit card industry's aggressive lending policies. According to today's Wall Street Journal, however, federal regulators may be taking up the cause.

Last month, the Federal Financial Institutions Examinations Council issued new guidelines that will require credit card issuers to rein in the issuance of "subprime" debt, i.e., credit offered to people with spotty credit records or low income. The proposed rules would also change accounting procedures and require companies to keep higher reserves to offset bad loans.

According to the Journal, MBNA(NYSE: KRB) and Capital One(NYSE: COF) have already begun increasing their reserves by $200 million to $300 million. That's money that comes straight out of the bottom line -- meaning lower earnings per share. It also means reduced earnings power in the future, because the money will earn government bond rates rather than higher rates as loans to customers.

As for the broader economy, the Journal article suggests that a decrease in the amount of credit extended to high-risk borrowers would hurt consumer spending and, therefore, the economy in the short term. If that's the price of reducing the amount of debt taken on by people who are already maxed out -- 37% of credit card debt is subprime, according to credit agency Equifax -- then that's a price we must pay.

Discussion Board of the Day: Consumer Credit/Credit Cards

With rates at record lows, cheap money for everything from a new car to remodeling your home is ripe for the taking. What are the best deals out there? When is something too good to be true? All this and more -- in the Consumer Credit/Credit Cards Discussion Board. Only on

Quick Takes

AstraZeneca (NYSE: AZN) has some bad news -- for its shareholders and all of us who long for progress in the fight against cancer. Its new cancer drug, Iressa, when paired with chemotherapy, doesn't seem to help lung cancer patients live longer. Europe's No. 2 pharmaceutical company still believes in the drug's effectiveness against lung cancer and other tumors and it will seek approval for those treatments.

In earnings news, Toys "R" Us(NYSE: TOY), the country's second-largest toy vendor, reported a second-quarter loss of $17 million, better than last year's $29 million loss. Credited with the improvement are a 5% boost in core toy sales and slimmer inventories.

According to a Wall Street Journalarticle (subscription required, free trial available to Fools), the troubled and cash-poor French conglomerate Vivendi Universal(NYSE: V) "is considering selling piecemeal its entire [very profitable] publishing subsidiary, which encompasses businesses ranging from French news magazines to educational publishers and videogames." Vodafone(NYSE: VOD) is reportedly considering buying Vivendi's stake in their joint-venture Internet portal, Vizzavi, while others are eyeing properties such as Vivendi's Houghton Mifflin unit.

Warren Buffett has snapped up another company. CTB International(Nasdaq: CTBC), an Indiana-based farm equipment leader, becomes the latest wholly owned subsidiary of Berkshire Hathaway(NYSE: BRK.A). It is being acquired for about $140 million, plus about $40 million in assumed debt. CTB CEO Victor A. Mancinelli echoed the sentiments of many companies to join Berkshire: "As a small-capitalization, public company with limited research coverage, we were not widely followed by public market investors. Berkshire Hathaway, one of only eight AAA rated companies, will provide us improved access to capital to support our longer-term growth strategy."

And Finally...

Today on Check out our brand-new Teens and Their Money area... Bill Mann continues with suggestions for how corporate executives can rebuild shareholders' trust.... How do you know if cash flow will find its way back to shareholders?... In Fool's School, what's a holding company?

Bob Bobala, Robert Brokamp, Jeff Hwang, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Jackie Ross, Reggie Santiago, Dayana Yochim