Goodwill Savannah GA http://goodwillsavannahga.org/ Fri, 02 Apr 2021 08:44:51 +0000 en-US hourly 1 https://wordpress.org/?v=5.7 http://goodwillsavannahga.org/wp-content/uploads/2021/04/cropped-goodwill-32x32.png Goodwill Savannah GA http://goodwillsavannahga.org/ 32 32 Goldman’s “Non-Profitable” Tech Index Is Not Vindicated By Volatility http://goodwillsavannahga.org/goldmans-non-profitable-tech-index-is-not-vindicated-by-volatility/ Tue, 09 Mar 2021 08:49:22 +0000 http://goodwillsavannahga.org/?p=2418

With the S&P 500 and Dow Jones Industrials near all-time peaks, some recent Wall Street analysis has stoked the fear there is a massive speculative bubble in the market, one that is about to pop.

This time, it’s Goldman Sachs that has created a monstrosity for bad market signaling and unnecessary headline grabbing. It’s called “The Non-Profitable Technology Index” and it’s often referred to as the “negative earnings” company index.

One particular chart has been paraded around that shows a scary, exponentially rising indexed price of a basket of high-flying tech names. If the chart’s steep rise wasn’t enough to scare the investor, the basis for choosing the stocks certainly would: all of the companies in the basket have negative earnings, according to the Goldman report.

That’s enough to send the financial media into a tailspin about the stock market highs being in an unsustainable bubble. The recent sell-off and volatility in many of those same stocks has helped to sound the alarms for an oncoming bear market as this supposed bubble may be coming to an end.

The major problem is that Goldman’s analysis, like most all of Wall Street research, hinges completely on the published, as-reported, “official” earnings number for each company. 

That unfortunately-calculated number is published in every Wall Street research report, then reinforced with every quarterly earnings release and analyst estimate. Too bad it is based on GAAP accounting, or Generally Accepted Accounting Principles. That is the crux of the problem. 

What Would Warren Say?

No investor worth their salt would ever rely on an as-reported GAAP earnings number. No investor ought to provide more than a passing glance at Goldman’s new index. The chart in particular doesn’t provide any useful insights as to what it purports.

Under Generally Accepted Accounting Principles, the basis of “profitability”, as-reported net income, simply doesn’t represent what’s really happening in the business.

That last sentence almost perfectly combines and summarizes the exact comments Warren Buffett made in the first ten minutes of his opening remarks at both his 2018 and 2019 Berkshire-Hathaway shareholder meetings. Check it out for yourself in the videos of those events. 

Buffet is not alone in openly challenging the reliability of as-reported numbers. At one point or another, many of the greatest investors on the planet have taken similar shots including Charlie Munger, Seth Klarman, Shelby Davis, and the father of value investing himself, Ben Graham. Adding to that list, in the words of the late, great Marty Whitman, “GAAP is not truth or reality.”

Wall Street research ignores the greatest stock pickers in history, in part, because it’s awfully difficult to fix GAAP’s problems. More importantly; however, it’s because fixing GAAP doesn’t support the raison d’etre of the Street. 

It’s hard for a banker to stay loyal to a corporate client if said banker is forced to reveal the truth about their clients’ business. GAAP-based numbers provide tremendous wiggle room for bankers to come up with whatever narrative they desire.

In this case, the below chart measures the performance of the aforementioned index. From 2015 to 2020, the index had modest gains. Then, this index showed an exponential spike in 2020 and into 2021, soaring from March 2020 lows.

The price of this particular basket of stocks shows growth of more than 400% from the market bottom to early February. That’s more than 5x greater than the S&P 500 return of 75% during that incredible rebound. Even after the choppiness in recent days, this return dwarfs the tech-heavy Nasdaq composite, which has recovered by over 100%.

Another Dot-Com Bust in the Making?

Many in the financial media have drawn a direct comparison between this chart (and thereby the current stock market) to the dot-com boom and bust of the late 1990s. At that time, so many “new economy” companies lacked earnings. 

Back then, the U.S. experienced an incredibly strong bull market, heavily fueled by the rapid growth of technology stocks. With the widespread adoption of the internet, it seemed anything internet-related, or just with a “.com” in its name, could soar in market valuation.

From 1995 to 2000, the Nasdaq rose approximately 500%. During the height of the craze, in 1999, there were 457 IPOs, mostly new technology stocks. A great number of those were banked by my alma mater, CSFB, Credit Suisse First Boston, which at the time was the “800- pound gorilla” of investment banking for technology firms. 

Many of those dot-com firms not only lacked profit, they also lacked revenue. Valuations were being surmised and evaluated based on ethereal concepts like “multiples of eyeballs” or sheer employee growth rates. There often was no cash flow data to even consider.

Firms such as Pets.com, Webvan.com, and Flooz.com were raising billions of dollars from exuberant investors desperate to get in on the action. Wall Street’s research reports on those stocks were found to be not only incredibly inaccurate, but also in violation of many kinds of securities laws. 

In case after case, sell-side research analysts were found publicly cheering stocks with comments like “back up the truck” to induce the purchasing of initial public offerings. Meanwhile, those exact same analysts were privately telling co-workers, junior analysts, and friends not to touch said IPO with a ten foot pole. 

Companies with no revenue, no earnings, and sometimes mountains of debt, skyrocketed in price while, in reality, they did not and could not warrant their hundred million-dollar and billion-dollar valuations. 

There were a few notable winners such as Amazon. It actually did have positive earnings… when GAAP distortions were removed using Uniform Accounting numbers. However, most of these firms were shown later to be next to worthless. The stock market collapse was swift and severe and many investors still remember and feel that pain to this day.

Now, the blistering performance of this set of supposedly non-profitable technology firms in the Goldman Sachs index has some investors fearing an imminent repeat of the tech bust twenty years ago. Unfortunately, poorly constructed indexes and sorely lacking research are supporting that fear.

The Economic Reality of Some Supposedly Negative Profit Firms

Today is a different situation as shown by the economic reality of these firms. The high-flying tech companies today not only have revenue and earning potential, many are showing current and strong earning power. Power that GAAP-based, as-reported numbers, and Wall Street fail to reflect – and maybe don’t even comprehend. 

Note the following firms that are included in the non-profitable technology index.

GAAP distortions are misleading some research analysts into thinking all the stocks in the index are start-up-esque, money-burning, “.com-like” companies. It suggests that they are all hemorrhaging investor money. 

It’s a totally different picture when these companies are viewed using Uniform earnings and other UAFRS-based performance metrics. In other words, what is the real earning power of these firms when the as-reported, GAAP accounting distortions are removed?

There is a stark difference between as-reported earnings and economic reality.

Shopify (SHOP), Spotify (SPOT), Roku (ROKU), Peloton (PTON), Pinterest (PINS), and Teladoc (TDOC) have all been posterchildren of the “non-profitable tech” run. In reality, these firms have positive earnings and earning power trends which GAAP and Goldman fail to capture.

Under Uniform Adjusted Financial Reporting Standards (UAFRS), investors see the reality of a business’s corporate performance. To “get to Uniform,” more than 130 adjustments are made to GAAP-based financial statements. 

These adjustments clean up highly distorted GAAP-accounting issues like stock-based compensation, R&D investments, and terribly misguided lease capitalization rules.

A Few of the Profitable “Non-Profitable” Technology Firms

The father of value investing, Professor Ben Graham, spoke of the importance of “earning power” throughout his books, Intelligent Investor and Security Analysis. This concept is seldom, if ever, mentioned in Wall Street research.

Earning power, as represented by return on assets (ROA), provides a far more accurate view of the health or a business. As-reported ROA, as seen in almost every financial database from Bloomberg to Factset to Yahoo Finance, provides a GAAP-based metric, shown in the table below. This is compared against the same metric based on Uniform Accounting.

Once the consistent rules of Uniform Accounting are applied, companies’ true colors are revealed. 

Highlighting one example from above, Teladoc Health (TDOC) is a telemedicine and virtual healthcare pioneer. On an as-reported basis, Teladoc Health appears to have no earning power at all, supposedly a highly negative number, over recent years, as shown by the orange bars below. 

This early stage company actually did show a negative return on assets in 2017. That is not uncommon for start-ups. The real concern is how fast the firm can shift its profitability upward and enter positive earnings territory. 

Uniform Accounting metrics, the blue bars, highlight how the firm has ramped up operational performance incredibly, generating an impressive 26% return on assets in 2019.

Teladoc’s stock has risen from $37.50 to well over $200 per share since 2018. It’s a significant contributor to the rise of the questionably developed Goldman index. The Uniform-based performance metrics show this is entirely justified.

This impressive inflection in profitability, coupled with massive growth in the business, demonstrates that markets are not baselessly investing into a fad. There is fundamental value driving exuberance in Teladoc and many other current tech stocks.

Another point is the trend and trajectory. Firms that are ramping up their investments could appear to have decreasing earnings. A multi-year comparison of earnings is even more telling under Uniform Accounting.

While valuations may still seem extreme for some, these recent stock price movements are not a repeat of the dot-com bubble from 20 years past when bad companies were getting worse.

Certainly, some of the players in the Goldman basket have issues in generating a positive return as of right now. For instance, Uber Technologies (UBER) and Lyft, Inc. (LYFT) seem to have a long runway to traverse before they start demonstrating healthy earning power. 

Even then, these companies are a far cry from the non-revenue generating dot-coms of decades past. In the late 1990s, I never bought a toy from etoys.com nor any groceries from Webvan. Yet year over year, I’ve used Uber and Lyft more often than I could possibly count.

The Devil is in the Details

This is a detailed earnings calculation discussion that Goldman and most Wall Street analysts and bankers fail to cover. However, any investor relying on earnings per share or price to earnings has to grasp these issues. Otherwise, that investor ought to just buy a real index, like Vanguard’s VOO for the S&P 500, and stay away from the individual stock game.

One major adjustment made under Uniform Accounting is the treatment of R&D, research and development expenditures. Here, GAAP fundamentally violates its own most basic and foundational “matching principle” which is taught in every college student’s Accounting 101 class.

In the U.S., R&D is treated as a current cost against revenue. In reality, it is an investment in the long-term cash flow generation of a firm. Of course it should be capitalized and expensed over time, just like a machine or any other capital expenditure. That’s the matching principle. 

More novice or misguided proponents of GAAP will often pose the question, “What if management is spending R&D on bad or useless innovations? Should it then still be capitalized?” 

Yes, of course. Companies make bad investments all the time. At least we as investors can see it characterized as such in the financial statements and then draw our own conclusions as to management’s prowess or lack thereof.

If the investment in research is recorded as an expense, then earnings can go up or down simply because of a change in a company’s investment levels. Imagine if a company reports that EPS has risen, and later the investor finds that the sole reason was management reduced spending in research. It sounds silly, yet, that exact distortion can happen in any given earnings period.

It ought not be the job of accountants to predict and determine the quality of a particular machine, or a plant, or a plot of land, or research spend. In fact, accountants are particularly bad at those tasks because it’s not their job. Accountants ought to stick to accounting – i.e. record-keeping – not valuation. Valuation is the job of the investor.

On the buy-side, and specifically at the top investment management firms in the world, there is widespread use of performance and valuation metrics which adjust for all of the distortions of GAAP.  This framework for adjustments is also known as  Uniform Adjusted Financial Reporting Standards, Uniform Accounting. (Our reports alone are read by investors at 200 of the top 300 money managers.) 

Meanwhile, Uniform Accounting metrics are almost non-existent in research analyst reports and missing from investment bankers’ pitch books. 

Wall Street has proven that it is good at neither accounting nor valuation.

Another big issue for the firms included in Goldman’s basket of “non-profitable” companies is stock-based compensation. Right now, imputed stock compensation is interpreted under GAAP to be an operating cash outflow for the firm.

In other words, GAAP-calculated operating cash flow includes a theoretically-calculated non-cash item, concocted by GAAP. It is not now and never will be an operating cash outflow. Companies issue stock in lieu of cash for the very purpose of conserving operating cash. It ought not be reported as the very opposite of what the company is actually doing!

Even worse, the GAAP-approved calculation of said expense is based on the wildly fluctuating results of methods like Black Scholes. The computed, imputed cash compensation, which is not actually cash spent, is based partly on share price volatility and the time until stock award expiration. It goes up and down every quarter.

In my management consulting past, I remember advising a very nice and capable CFO who was ultimately fired for providing a bad estimate of earnings to the Street. Too bad for him, a large part of the miss in reported earnings was not because of unexpected operational missteps. Instead, his team had not correctly forecasted how the imputed stock-based compensation would fluctuate under the Black Scholes calculation model. 

High stock volatility and an increasing stock price led to an imputed compensation cost for options which caused earnings to fall below guidance. Of course, this increasing stock price did not increase the cash cost to the company for compensating employees. The increased GAAP-expense had no impact on the cash generating ability of the firm. 

The volatility piece of the Black-Scholes model simply skyrocketed far beyond what the CFO could have estimated. Today, as-reported earnings completely distorts one’s understanding of an early stage company’s real “burn rate.” GAAP rules shove non-cash expenses into earnings that could otherwise be better and more sensibly calculated simply as dilution for earnings per share. 

Does any accountant or everyday investor really understand the limitations of Black Scholes for calculating the value of stock options, a model which Fischer Black himself later cited as problematic? 

On the other hand, the Uniform Accounting alternative, to calculate dilution on earnings for its impact on earnings per share is straightforward. It requires nothing more than an estimate of shares that will be outstanding for which earnings will have to be shared over a greater shareholder base. That method distorts neither cash flows nor earnings from non-cash items.

In combination, these distortions can materially understate or overstate the true profitability of a firm. For these tech companies in particular, GAAP and Goldman have completely missed the mark.

Some of the firms have negative earnings because they are truly unprofitable. Others have very positive earnings and are using those earnings to reinvest into the company… and so they look bad when they actually are not.

Fundamentals Have Not Gone Away

Solid companies have high returns or trajectories headed for high returns. Extraordinary companies have high returns accompanied by high reinvestment rates. 

GAAP earnings distorts investment growth, particularly in early stage companies. Wall Street and followers of GAAP accounting can easily misinterpret those firms as bad businesses, as Goldman’s new index does. Many of the companies in this particular index seem to be taking greater shares of their respective industries, and the economy as a whole. Their Uniform metrics show that. 

On the other hand, great companies aren’t always great stocks. Valuations fluctuate daily from the ongoing voting machine and sentiment of short-term market trends. On any given day, a company can be trading well over or well below its intrinsic value. The valuations of early stage firms fluctuate widely, as do their prospects for future earning power, so one ought not simply run out and buy them, even if Uniform-based metrics show something better than expected.

The point is, this new Goldman index is another reason to relinquish any faith in Wall Street research and recommendations, if you haven’t already. It tells us nothing about the real valuation levels of the firms or the market as a whole. It’s just a basket of high-flying stocks, of which many companies fully deserve to be.


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Does Matrix IT (TLV: MTRX) have a wholesome observe report? http://goodwillsavannahga.org/does-matrix-it-tlv-mtrx-have-a-wholesome-observe-report/ Tue, 09 Mar 2021 08:47:28 +0000 http://goodwillsavannahga.org/does-matrix-it-tlv-mtrx-have-a-healthy-track-record/

Some say volatility, quite than debt, is one of the simplest ways to consider danger as an investor, however Warren Buffett mentioned “volatility is much from danger.” So it is likely to be apparent, then, that that you must consider debt, when you concentrate on how dangerous a given inventory is as a result of an excessive amount of debt can sink a enterprise. Like many different firms Matrix IT Ltd. (TLV: MTRX) makes use of debt. However the true query is whether or not this debt makes the enterprise dangerous.

What danger does debt entail?

Typically talking, debt solely turns into an actual downside when a enterprise can not simply repay it, both by elevating capital or with its personal money stream. In the end, if the corporate can not meet its authorized debt compensation obligations, shareholders may stroll away with nothing. Whereas it is not too widespread, we frequently see indebted firms regularly diluting shareholders as a result of lenders are forcing them to boost capital at a tough worth. By changing dilution, nevertheless, debt could be a excellent device for firms that want capital to spend money on development at excessive charges of return. Once we have a look at debt ranges, we first have a look at money and debt ranges, collectively.

Try our newest evaluation for Matrix IT

What’s Matrix IT’s web debt?

As you’ll be able to see under, on the finish of September 2020, Matrix IT had 950.6 million euros in debt, up from 838 million euros a 12 months in the past. Click on on the picture for extra particulars. Then again, it has 540.9 million in money, which results in a web debt of round ₪ 409.7 million.

TASE: Historic debt / fairness MTRX March 9, 2021

A have a look at the obligations of Matrix IT

We will see from the newest steadiness sheet that Matrix IT had liabilities of 1.42 billion euros due one 12 months and commitments of 890.2 million euros past. In return for these obligations, he had money of 540.9 million in addition to receivables valued at 1.20 billion ₪ inside 12 months. It subsequently has liabilities totaling € 574.3 million greater than its money and short-term receivables mixed.

Contemplating that Matrix IT has a market cap of ₪ 4.74 billion, it is exhausting to consider that these liabilities pose a major risk. Having mentioned that, it’s clear that we should proceed to watch his report lest it worsen.

We use two principal ratios to inform us about leverage versus earnings ranges. The primary is web debt divided by earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA), whereas the second is the variety of occasions its revenue earlier than curiosity and taxes (EBIT) covers its curiosity expense (or its protection of curiosity, for brief). Thus, we contemplate debt versus earnings with and with out amortization prices.

Matrix IT’s web debt is just one.3 occasions its EBITDA. And its EBIT simply covers its curiosity prices, which is 10.4 occasions the scale. We may subsequently say that he’s no extra threatened by his debt than an elephant is by a mouse. The excellent news is that Matrix IT elevated its EBIT by 7.4% 12 months over 12 months, which ought to allay considerations about debt compensation. The steadiness sheet is clearly the world to concentrate on when analyzing debt. However it’s the income of Matrix IT that may affect the steadiness sheet sooner or later. So if you wish to know extra about its earnings, it is likely to be price testing this chart of its long run development.

Lastly, a enterprise can solely repay its money owed with money, not guide income. The logical step is subsequently to look at the proportion of this EBIT that corresponds to the precise free money stream. Over the previous three years, Matrix IT has generated a really sturdy 89% free money stream of EBIT, greater than anticipated. This positions it effectively to repay debt whether it is fascinating.

Our perspective

Happily, Matrix IT’s spectacular conversion of EBIT to free money stream means it has the higher hand over its debt. And the excellent news does not finish there, as a result of its curiosity protection additionally reinforces that impression! Zooming out Matrix IT appears to be utilizing debt fairly moderately; and it nods at us. In any case, cheap leverage can enhance returns on fairness. When analyzing debt ranges, the steadiness sheet is the apparent start line. Nevertheless, not all funding dangers lie on the steadiness sheet – removed from it. For instance, now we have recognized 2 warning indicators for Matrix IT that you just want to pay attention to.

On the finish of the day, it is usually greatest to concentrate on companies with no web debt. You possibly can entry our particular listing of those firms (all with a historical past of revenue development). It is free.

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What does Jiangxi Copper’s (HKG: 358) returns imply for the long run? http://goodwillsavannahga.org/what-does-jiangxi-coppers-hkg-358-returns-imply-for-the-long-run/ Tue, 09 Mar 2021 08:06:08 +0000 http://goodwillsavannahga.org/what-does-jiangxi-coppers-hkg-358-returns-mean-for-the-future/

To discover a multi-bagger inventory, what are the underlying developments to search for in a enterprise? A standard method is to attempt to discover a enterprise with Return on capital employed (ROCE) which is rising, in parallel with a quantity capital employed. This exhibits us that it’s a compounding machine, able to regularly reinvesting its earnings into the enterprise and producing larger returns. With that in thoughts, we have observed some promising developments at Jiangxi copper (HKG: 358) so let’s look slightly deeper.

What’s Return on Capital Employed (ROCE)?

For many who are uncertain of what ROCE is, it measures the quantity of pre-tax revenue a enterprise can generate from the capital employed in its enterprise. To calculate this metric for Jiangxi Copper, right here is the formulation:

Return on capital employed = Earnings earlier than curiosity and taxes (EBIT) ÷ (Whole property – Present liabilities)

0.074 = CN ¥ 5.6b ÷ (CN ¥ 146b – CN ¥ 70b) (Based mostly on the final twelve months as much as September 2020).

Subsequently, Jiangxi Copper has a ROCE of seven.4%. By itself, the return on capital is low, but it surely corresponds to the trade common return of seven.5%.

See our newest evaluation for Jiangxi Copper

SEHK: 358 return on capital employed March 9, 2021

Within the graph above, we measured Jiangxi Copper’s previous ROCE in opposition to its previous efficiency, however the future is arguably extra necessary. In case you are , you possibly can view analyst forecasts in our free analyst forecast report for the corporate.

What can we are saying about Jiangxi Copper’s ROCE pattern?

We’re blissful to see that the ROCE is on course, though it’s nonetheless weak for the time being. The figures present that over the previous 5 years, the returns generated on capital employed have elevated considerably to 7.4%. The quantity of capital employed additionally elevated by 53%. Rising returns on an rising quantity of capital are frequent amongst a number of baggers and that’s the reason we’re impressed.

Apart from, Jiangxi Copper’s present liabilities are nonetheless fairly excessive at 48% of whole property. What this truly means is that suppliers (or short-term collectors) fund a big portion of the enterprise, so simply bear in mind that this could introduce some parts of threat. Whereas this is not essentially a foul factor, it may be helpful if this ratio is decrease.

What we will be taught from Jiangxi Copper’s ROCE

To sum up, Jiangxi Copper has confirmed that he can reinvest within the enterprise and generate larger returns on capital employed, which is nice. And traders appear to anticipate extra of that sooner or later, because the inventory has rewarded shareholders with a 75% return over the previous 5 years. In mild of this, we predict it is value taking a more in-depth have a look at this title, as a result of if Jiangxi Copper can preserve these developments, it might have a vibrant future.

If you wish to know extra about Jiangxi Copper, now we have noticed 4 warning indicators, and 1 of them makes us slightly uncomfortable.

Though Jiangxi Copper doesn’t obtain the best yield, take a look at this free checklist of firms that obtain excessive returns on their fairness with sturdy steadiness sheets.

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This Merely Wall St article is common in nature. It doesn’t represent a advice to purchase or promote any inventory, and doesn’t take note of your targets or your monetary state of affairs. We purpose to deliver you long-term, focused evaluation based mostly on basic information. Word that our evaluation could not take note of the newest bulletins from value delicate firms or qualitative data. Merely Wall St has no place in any of the shares talked about.
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Is GlobalSat WorldCom (GTSM: 3499) a dangerous funding? http://goodwillsavannahga.org/is-globalsat-worldcom-gtsm-3499-a-dangerous-funding/ Tue, 09 Mar 2021 07:35:40 +0000 http://goodwillsavannahga.org/is-globalsat-worldcom-gtsm-3499-a-risky-investment/

Some say volatility, slightly than debt, is the easiest way to consider threat as an investor, however Warren Buffett stated “volatility is way from threat.” It’s pure to think about an organization’s steadiness sheet when contemplating how dangerous it’s, as debt is usually concerned when a enterprise collapses. We discover that GlobalSat WorldCom Company (GTSM: 3499) has debt on its steadiness sheet. However ought to shareholders be fearful about its use of debt?

What threat does debt entail?

Usually talking, debt solely turns into an actual downside when a enterprise can not simply repay it, both by elevating capital or with its personal money movement. Within the worst case situation, a enterprise can go bankrupt if it can not pay its collectors. Nonetheless, a extra widespread (however nonetheless expensive) scenario is the place an organization has to dilute its shareholders at an inexpensive inventory worth simply to get its debt underneath management. By changing dilution, nevertheless, debt could be a excellent software for firms that want capital to put money into progress at excessive charges of return. Step one in inspecting an organization’s debt ranges is to think about its money movement and debt collectively.

See our newest evaluate for GlobalSat WorldCom

What’s GlobalSat WorldCom’s debt?

You possibly can click on on the graph under for historic figures, but it surely reveals that as of September 2020, GlobalSat WorldCom had a debt of NT $ 422.8 million, a rise of NT $ 397.8 million over one yr. . Nonetheless, he has NT $ 500.0 million in money to compensate for this, resulting in a web money place of NT $ 77.2 million.

GTSM: 3,499 Debt / Fairness Historical past March 9, 2021

How wholesome is GlobalSat WorldCom’s monitor document?

In line with the most recent revealed steadiness sheet, GlobalSat WorldCom had liabilities of NT $ 579.3 million due inside 12 months and liabilities of NT $ 35.5 million past 12 months. Then again, he had money of NT $ 500.0 million and NT $ 49.6 million in receivables due throughout the yr. Thus, its liabilities whole NT $ 65.3 million greater than the mixture of its money and short-term receivables.

After all, GlobalSat WorldCom has a market cap of NT $ 634.9 million, so these commitments are most likely manageable. Having stated that, it’s clear that we should proceed to watch his document lest it worsen. Whereas it has commitments to notice, GlobalSat WorldCom additionally has additional cash than debt, so we’re fairly assured it may well deal with its debt safely. There isn’t any doubt that we study essentially the most about debt from the steadiness sheet. However it’s the income of GlobalSat WorldCom that may affect the steadiness sheet sooner or later. So when you think about debt, it is actually price trying on the revenue pattern. Click on right here for an interactive snapshot.

Over the previous yr, GlobalSat WorldCom incurred a loss earlier than curiosity and taxes and in reality decreased its income by 42%, to NT $ 439 million. It makes us nervous, to say the least.

So what’s the threat of GlobalSat WorldCom?

Though GlobalSat WorldCom recorded a lack of earnings earlier than curiosity and taxes (EBIT) for the previous twelve months, it generated optimistic free money movement of NT $ 67 million. So taking this at face worth, and given the online money place, we do not suppose the inventory is just too dangerous within the brief time period. Till we see optimistic EBIT, we’re a bit cautious on the inventory, particularly given the slightly modest income progress. The steadiness sheet is clearly the world to deal with when analyzing debt. Nonetheless, not all funding dangers lie on the steadiness sheet – removed from it. We have now recognized 3 warning indicators with GlobalSat WorldCom (a minimum of 1, which is a bit disagreeable), and understanding them needs to be a part of your funding course of.

On the finish of the day, typically it is simpler to deal with companies that do not even want debt. Readers can entry a listing of progress shares with zero web debt 100% free, at current.

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This Merely Wall St article is common in nature. It doesn’t represent a advice to purchase or promote any inventory, and doesn’t keep in mind your targets or your monetary scenario. We purpose to deliver you long-term, focused evaluation based mostly on elementary information. Observe that our evaluation might not keep in mind the most recent bulletins from worth delicate firms or qualitative info. Merely Wall St has no place in any of the shares talked about.
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Pacific Development (TPE: 2506) has debt however no revenue; Must you be nervous? http://goodwillsavannahga.org/pacific-development-tpe-2506-has-debt-however-no-revenue-must-you-be-nervous/ Tue, 09 Mar 2021 07:35:40 +0000 http://goodwillsavannahga.org/pacific-construction-tpe-2506-has-debt-but-no-profit-should-you-be-worried/

Legendary fund supervisor Li Lu (whom Charlie Munger supported) as soon as mentioned, “The most important threat in investing just isn’t worth volatility, however whether or not you’ll endure a everlasting lack of capital. After we take into consideration the chance degree of a enterprise, we all the time like to take a look at its use of debt as a result of debt overload can result in chapter. We discover that Pacific Development Co., Ltd (TPE: 2506) has a debt on its steadiness sheet. However ought to shareholders be nervous about its use of debt?

When is debt harmful?

Debt and different liabilities change into dangerous for a enterprise when it can’t simply meet these obligations, both with free money move or by elevating capital at a gorgeous worth. Within the worst case situation, a enterprise can go bankrupt if it can’t pay its collectors. Nonetheless, a extra widespread (however nonetheless expensive) scenario is the place an organization has to dilute its shareholders at an affordable inventory worth simply to get its debt underneath management. After all, many corporations use debt to finance progress with none detrimental penalties. After we consider a enterprise’s use of debt, we first take a look at money move and debt collectively.

Take a look at our newest overview for Pacific Development

What’s the debt of Pacific Development?

As you possibly can see under, Pacific Development had NT $ 4.38 billion in debt as of September 2020, which is roughly the identical because the yr earlier than. You’ll be able to click on on the graph for extra particulars. Nonetheless, as a result of it has a money reserve of NT $ 765.0 million, its internet debt is much less, at round NT $ 3.62 billion.

TSEC: 2,506 Debt / Historic Capital March 9, 2021

How wholesome is Pacific Development’s steadiness sheet?

We will see from the latest steadiness sheet that Pacific Development had commitments of NT $ 5.36 billion maturing in a single yr and commitments of NT $ 2.22 billion past. In return for these obligations, he had money of NT $ 765.0 million in addition to receivables valued at NT $ 141.1 million due inside 12 months. It due to this fact has liabilities totaling NT $ 6.68 billion greater than its money and short-term receivables mixed.

This deficit casts a shadow over the NT $ 3.59 billion firm, like a colossus towering over mere mortals. We might due to this fact monitor its report carefully, definitely. Finally, Pacific Development would seemingly want a significant recapitalization if its collectors demanded reimbursement. The steadiness sheet is clearly the realm to give attention to when analyzing debt. However it’s the earnings of Pacific Development that can affect the steadiness sheet sooner or later. So if you wish to know extra about its earnings, it is likely to be price trying out this chart of its long run development.

Prior to now yr, Pacific Development recorded a loss earlier than curiosity and taxes and really lowered its income by 46%, to NT $ 848 million. To be frank, that does not bode properly.

Caveat Emptor

Whereas Pacific Development’s decline in income is about as comforting as a moist blanket, arguably its earnings earlier than curiosity and tax losses (EBIT) are even much less enticing. Certainly, he misplaced NT $ 174 million in EBIT. Whereas, together with the duties talked about above, we’re nervous in regards to the firm. It must enhance its operations shortly for us to take an curiosity in it. Notably as a result of it has recorded a detrimental free money move of NT $ 7.2 million over the previous twelve months. So suffice it to say that we think about the inventory to be dangerous. The steadiness sheet is clearly the realm to give attention to when analyzing debt. However on the finish of the day, each enterprise can comprise dangers that exist off the steadiness sheet. These dangers may be troublesome to identify. Each firm has them, and we have noticed 2 warning indicators for Pacific Development it is best to know.

If, in any case of this, you are extra keen on a fast-growing firm with a rock-solid steadiness sheet, then take a fast take a look at our record of cash-growing shares.

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Do you’ve gotten any feedback on this text? Involved in regards to the content material? Get in contact with us straight. You may as well ship an electronic mail to the editorial workforce (at) simplywallst.com.


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Kazakhstan’s government is determined to enhance engagement with civil society http://goodwillsavannahga.org/kazakhstans-government-is-determined-to-enhance-engagement-with-civil-society/ Tue, 09 Mar 2021 07:33:46 +0000 http://goodwillsavannahga.org/?p=2361

In the context of the economic relationship between China and Central Asian countries, mostly Chinese officials emphasize relations as a win-win cooperation. In the context of the win-win cooperation, Central Asian countries export their products and raw materials to China and attract investment and financial assistance from China for improving their infrastructure. In return, China exports its products to these countries, gain new market, diversify its export-import and energy routes and expand its economic influence through Central Asia. With regard to the Sino-Kyrgyz relations, we analyze their economic relations in order to see whether the two countries’ relations bases on win-win cooperation or zero-sum cooperation. If both of them relation basis on win-win cooperation, we may see that in the long term, two countries benefit from economic relations, increase their interdependency and improve their economy. In contrast to win-win, if the basis of the relations on zero-sum cooperation, we see that one side benefits from economic relations in the long term and increase its economic influence, but other side increase its dependency to another side and only benefit economic relation in the short term rather than the long term.

Since gaining independence in the 1990s, economic relations with China play an important role in the Kyrgyzstan economy. Kyrgyzstan was the first country among Central Asian countries that it was a member of WTO. Membership of WTO created a range of opportunities to country improve its economic relations with China. When China became a member of WTO in 2001, two countries’ trade flows increased quickly (Omuralieva, 2014: 81). Kyrgyzstan located strategic geography for China because it plays an important role in diversifying China’s export-import routes and provide a wholesale market for Chinese goods. Chinese officials always argue that Sino-Kyrgyz relations are mutually beneficial and base on win-win cooperation. In this essay, we especially pay attention to China-Kyrgyz economic relations in the context of trade, investment, and aid policy in order to explain the relations between two countries whether base on win-win or zero-sum cooperation.

Trade

Trade and economic cooperation play important role for the development of Kyrgyz-Chinese relations. Cooperation in this direction is carried out in the framework of the signed intergovernmental Agreements on trade and economic cooperation in 1998 and the establishment of the Kyrgyz-Chinese intergovernmental Commission on trade and economic cooperation in 1994.  China is the main trade and investment partner of Kyrgyzstan. China took the first place in trade and investment in the economy of Kyrgyzstan at the end of the 2016 and 2017. Trade between China and Kyrgyzstan is inherently unbalanced. Trade turnover between China and Kyrgyzstan was accounted for 1.597 billion US dollars in 2017. Export was 97.5 million US dollars, import – 1.500 billion US dollars(Embassy of the Kyrgyz Republic in the People’s Republic of China, 2018).Chinese exports to Kyrgyzstan consist of cloths, agricultural products, and light machinery while Kyrgyzstan’s exports toChina agriculture products and natural resources(Reeves, 2015: 122).

Besides, Chinese merchants play a dominant role with the trade network of Kyrgyzstan. Both Dordoi and Kara Suu bazaar are the large wholesale and retail market in Bishkek. Both bazaars due the low taxes and location plays key role for Chinese merchants. 75% of the goods of Dordoi bazaar and 85% of goods of Kara Suu bazaar come from China. Kyrgyzstan import China’s goods and re-export these goods to other regional countries. The monthly turnover of both Dordoi and Kara Suu bazaars were 331 million US dollars and 90 million US dollars respectively in 2012. We may say that these bazaars are the main motor of the Kyrgyzstan’s economy (Omuralieva, 2014: 86-87). Furthermore, China’s import of Kyrgyz products and raw materials also help to Kyrgyzstan to alleviate the impact of inflation (Tian, 2018).

In the context of the trade between two countries, despite the Kyrgyzstan’s gains as an importer and transporter of goods, Sino-Kyrgyz relations consist of the asymmetrical trade relationship. Firstly, last years, Kyrgyzstan textile and apparel sectors grow so fast and China play a key role in these sectors (Reeves, 2015: 122). Because cotton and wool are produced in Kyrgyzstan and export mainly China. In addition, due the lack of modern standards low quality clusters, Kyrgyzstan do not export these goods to developed countries or cannot compete other regional exporters such as China, Turkey and Korea but export to less developed western China’s cities, predominantly (Birkman, 2012: 24-25). Secondly and more importantly, Kyrgyzstan relies on China’s good for its commercial service sector because Kyrgyz traders has developed its commercial sector around the China’s imports which they re-export these goods to other regional countries, that is why, without Chinese imports, country’s service sector would collapse or lose its main sources for economic growths (Reeves, 2015: 122-123). According to Marlène Laruelle and Sébastien Peyrouse, Beijing has transformed Kyrgyzstan into a China-dependent economy that can survive mainly by re-exporting Chinese products (Omonkulov, 2020: 76).

Investment and Finance

China also play dominant role in Kyrgyztan economy in terms of investment and finance. Since 2001, China was the main source of the all FDI investment (Reeves, 2015: 123). Between 2006-2017, cumulative gross of Chinese FDI flow as equal to 2.3 billion US dollar and for this period China provided 25-50% of total FDI of Kyrgyztan, which is equivalen to 2-7% of the country’s GDP (Mogilevskii, 2019: 09).

Since 1990s, China mostly has been preferring to invest Kyrgyztan’s mining and oil sector. For example, in 2011, a Chinese company namely Zijin Mining purchased mine, which is located in Talas province in Taldy- Burak region and Chinese Full Gold Mine Company operated Ishtamberdy mine in Jalalabad province in the south part of Kyrgyzstan in the summer of 2011(Omuralieva, 2014: 90-91). In 2012, Chinese company purchased old paper factor and 20 hectares of land in order to construct oil refinery. The company will invest 70 million US dollars for constructing factories.  Furthermore, Chinese companies operate some 10 medium-sized mines producing gold-copper concentrate which is exported for refining to China(Mogilevskii, 2019: 10). In addition to mining sector, China also invests oil sector in Kyrgyzstan. For example, China financed two refineries in Kyrgyzstan, namely Kara-Balta and Tomok oil refineries. These refineries are supplied by CNPC-operated oil fields in neighboring Kazakhstan and produce 1.35 million refined products per year (Pradhan, 2018: 10). Moreover, China announced that it would provide $1.4 billion in FDI for constructing Kyrgyzstan-China oil pipeline (Reeves, 2015: 123).

In the context of the Belt and Road Initiative (BRI), China also prefers to invest infrastructure and energy project in Kyrgyzstan. In terms of infrastructure projects,the planned China-Kyrgyzstan-Uzbekistan railway and the North-South Highway, for which China’s Exim Bank has lent 400 million dollars for the construction of its first phase, are considered as one of the most ambitious transportation projects in Beijing’s Kyrgyzstan (Omonkulov, 2020: 72; Toktomushev, 2016: 02). By the help of the China-Kyrgyzstan-Uzbekistan railway, China has a chance to diversify its export and imports routes and also secure its energy routes. For Kyrgyzstan side, officials in the country hope that attract Chinese investment. In addition, Kyrgyzstan will gain 261 million US dollars per year as a transit country. However, the project has been postponed for years due to government debt and domestic political concerns in Kyrgyzstan. That is why, China and Uzbekistan introduced combined road-rail corridor – freight from China will be unloaded in Kyrgyzstan to reach the Uzbek section of the railway by road (CHOICE, 2021).Apart from railway project, China gave 60 million Yuan unreturned credit to Kyrgyzstan for the construction of China-Kyrgyzstan-Uzbekistan highway in 2011(Omuralieva, 2014: 83-85).

With regard to the energy projects, China has financed the construction of the Datka electricity substation and the 405-kilometer Datka-Kemin transmission line. These projects help to improve country’s energy system and reduce its dependence from regional countries (Toktomushev, 2016: 02; Mogilevskii, 2019: 09). For securing its energy security, China also try to diversify its energy routes. From this perspective, Kyrgyzstan play a strategic role for China. In the context of the China-Central Asia gas pipeline energy project, China decided to construct one of the routes, namely gas line D, through theKyrgyzstan. Construction of the gas line started in 2018. By the way of the this project, Kyrgyzstan take a benefit as a transit country (Akıncı, 2019: 88; Omuralieva, 2014: 88).

China’s investment in Kyrgyzstan have both positive and negative effects to country’s economy. From the positive sides, firstly, some of the Chinese project is under the construction and some of the is completed recently, that is why we cannot expect major impact on the countries production capacity but  we see these projects effects via comparison of the average annual GDP growth rates. A comparison of the average annual GDP growth rates in 2011-2017 and in 2000-2010 shows some increase from 4.2% per annum (2000-2010) to 4.8% per annum (2011-2017)(Mogilevskii, 2019: 12).There is no doubt that other factors also contribute the GDP growth but most Chinese investment increases share gross domestic products in Kyrgyzstan and affect positively to GDP. Secondly, improving the relationship with China contribute to Kyrgyzstan’s developing country’s total factor productivity (TFP) and help to country to develop an export-oriented economy, better market linkages. Moreover, China’s investment creates new jobs for local people.Furthermore, China’s investment inindustry of Kyrgyzstan inject energy to landlocked country’s economy and promote flexible and innovative entrepreneurial development in Kyrgzystan. One of the example is emerging sewing industry in Bishkek (Tian, 2018).Finally, Chinese investment contribute to improve Kyrgyzstan’s infrastructure.

Aid and Loan policy

Most of China’s assistance to Central Asian countries mostly consist of the soft loans (i.e. concessional or low-interest loans below market rates, which do not contain grant elements – and government- backed or subsidized investments in infrastructure and natural resources). Compare to the Western assistance, China’s assistance gives a great advantage to donor such asincreased access to energy resources and lucrative contracts for Chinese companies. Due the bad governance, poverty and instability, Kyrgyzstan is one the country that receive largest share of Chinese assistance. China is the one of the most important for Kyrgyzstan in terms of concessional loans and grant aid. China is the largest concessional loans provider to Kyrgyzstan which is account for more than 60% of the country’s planned funding between 2013 and 2016. Most of China’s loans and aid design to improve infrastructure projects, such as North-South highway or China-Kyrgyzstan-Uzbekistan railway. For example, China pledged 3 billion US dollar loans for infrastructure development. China is also main sources for the Kyrgyzstan in the context of the aid. For instance, China gives 16 million US dollar to Kyrgyzstan between 2000-2007 (Reeves, 2015: 123-124). In addition to the assistance for improving infrastructure, China also sends aid for building school and hospital, as a result of which, new and existing schools and hospitals benefit from improvement and upgrading of specialist equipment, technology and logistics. Finally, China also sends aid to Kyrgyzstan for reconstructing of the residential areas of Southern Kyrgyzstan which were affected violent ethnic riot in 2010 (Bossuyt, 2019). 

Firstly, China’s aid to Kyrgyzstan help to country improve its infrastructure and break landlocked geography. Furthermore, improving of infrastructure also create a chance to Kyrgyzstan diversifies its export and import routes. Secondly, sending aid for modernizing or building new hospital and school may increase people’s lifestyle and contribute to education of younger people. Finally, China’s aid also helps to country upgrade its electricity generation plants and transmission line. Developing electricity system contribute to the energy independence of Kyrgyzstan.

The fast development of Kyrgyz infrastructure by the way of the massive inflow of resources resulted in the growth of Kyrgyzstan’s debt burden. China also main creditor of Kyrgyzstan. Kyrgyzstan’s debt to China reached 1.7 billion dollars or 44% of its total foreign debt (3.8 billion dollars) as of February 2018. At the same time, Kyrgyzstan borrowed a total of $ 4.5 billion from China’s credit line under the Belt-Road Project (Omonkulov, 2020: 75). Despite the positive impact of aid on Kyrgyzeconomy, growing debt also increase country’s dependency on China and lead vulnerable position versus China.

Conclusion

In the context of the Sino-Kyrgyz trade relations, despite Kyrgyzstan’s gains as an importer and transporter of Chinese goods, Sino-Kyrgyz relations consist of an asymmetrical trade relationship. Kyrgyzstan export mainly textiles and raw materials to China and import technological and manufactured products. Maybe Kyrgyzstan benefits from trade relations in the short term but, in the long term, Kyrgyzstan’s dependence on China increases. In addition, exporting mostly export raw materials to China, Kyrgyzstan does not improve its human capital and high skilled labor force. With regard to the trade relations, Sino-Kyrgyz relations seem to bases on zero-sum cooperation in the long term rather than win-win cooperation.

With regards to the investment, despite the contribution of Kyrgyzstan’s annual GDP growth rates and improve the total factor productivity and export-oriented economy, Chinese investment has different negative effects on the Kyrgyz economy. One of the main purposes of the Chinese investment in the mining, oil, and infrastructure sector is to increase the country’s extraction and export of natural resources. This creates a range of problems for the Kyrgyz economy. Firstly, these sectors provide fewer employment opportunities to the local population and increase short-term employment in the country, and most of the time Chinese companies prefer to use their own people for working compared to the local people.  Besides, the job creation of China’s companies is limited and they mostly avoid technology transfer to the country. This situation also prevents the improvement of domestic industry. Secondly, extraction of the natural resource improves the certain sector and contribute corruption and unequal distribution of the wealth in the country. Furthermore, Chinese companies also violate the environmental standard. Finally, these sectors vulnerable the external shocks and increase the state’s dependency on China. As trade relations, in the long term, China’s investment affects Kyrgyzstan negatively and only let to improve the specific sector, especially mining and oil sectors, and this situation prevent the country to diversify its industry. With regard to the investment, as a trade relation, Sino-Kyrgyz relations seem to the basis of zero-sum cooperation rather than win-win cooperation. 

Finally, in terms of the aid and loan policy, despite China’s aid and loans help to improve Kyrgyzstan’s infrastructure and develop its industry, it used to try to secure access to mining sites such as gold, ore deposits, and rare earth elements. Furthermore, it tries to involve in the exploration and development of gold deposits in the country. Despite the high unemployment rate in Kyrgyzstan, Chinese loans also promote Chinese firms for using Chinese equipment and laborers. Besides, China’s cheap and handy loans increase Kyrgyzstan’s dependency and vulnerabilities on China. This situation also causes to enhance China’s political and economic influence.

To sum up, in the context of the trade, investment, and aid and loan policy, despite the different positive impacts, Sino-Kyrgyz economic relations basis on asymmetrical economic relations and in the long term give the advantage of China over Kyrgyzstan in the context of the economic influence. As a result, take the example of the trade, investment, and aid and loan policy, we think that two countries’ economic relationship basis on zero-sum cooperation in the long term, rather than win-win cooperation, in contrast to China’s officials’ claims.

Reference

  • Birkman, Laura. (2012), “Textile and Apparel Cluster in Kyrgyzstan”, Boston: Harvard Business School.
  • Embassy of the Kyrgyz Republic in the People’s Republic of China. (2020), Trade and Economic Cooperation, https://mfa.gov.kg/en/dm/Embassy-of-the-Kyrgyz-Republic-in-the-Peoples-Republic-of-China/Menu—Foreign-/–uslugi/Trade-and-Economic-Cooperation/RC
  • Mogilevskii, Roman. (2019), “Kyrgyzstan and the Belt and Road Initiative”, University of Central Asia Institute of Public Policy and Administration, No. 1, p. 1-25.
  • Omonkulov, Otabek. (2020), “China-Central Asia Relation in the Context of the Belt and Road Initiative”, BölgeselAraştırmalarDergisi, Vol. 4, No. 1, p. 45-115.
  • Omuralieva, Alia. (2014), China-Kyrgyzstan Relations, Hacettepe University Institute of Social Sciences, Master’s Thesis, Ankara.
  • Pradhan, R. (2018). The Rise of China in Central Asia: The New Silk Road Diplomacy. Fudan Journal of the Humanities and Social Sciences, 11(1), 9-29. doi:10.1007/s40647-017-0210-y
  • Reeves, Jeffrey. (2015), “Economic Statecraft, Structural Power, and Structural Violence in Sino- Kyrgyz Relations”, Asian Security, Vol.11, p. 116-135.
  • Toktomushev, Kemel. (2016), “Central Asia and the Silk Road Economic Belt”, University of Central Asia Institute of Public Policy and Administration, No. 1, p. 1-5.
  • Emil Avdaliani. (2021, January 20). How China is Breaking Central Asia’s “Geographic Prison”. Retrieved January 29, 2021, from https://chinaobservers.eu/how-china-is-breaking-central-asias-geographic-prison/
  • Tian, Hao. (2018). “China’s Conditional Aid and Its Impact in Central Asia”, (Laruelle, M.), China’s Belt and Road Initiative and its impact in Central Asia. Washington, D.C.: The George Washington University, Central Asia Program, p. 21-34.
  • Bossuyt, Fabienne. (2019). The EU’s and China’s development assistance towards Central Asia: Low versus contested impact. (n.d.). Retrieved January 30, 2021, from https://www.tandfonline.com/doi/full/10.1080/15387216.2019.1581635


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Notice to the Annual General Meeting of Swedish Match AB (publ) http://goodwillsavannahga.org/notice-to-the-annual-general-meeting-of-swedish-match-ab-publ/ Tue, 09 Mar 2021 07:25:43 +0000 http://goodwillsavannahga.org/?p=2347

STOCKHOLM , March 5, 2021 /PRNewswire/ — The shareholders of Swedish Match AB (publ), Reg. No. 556015-0756, are hereby notified of the Annual General Meeting (AGM) to be held on Tuesday, April 13, 2021. In light of the continued COVID-19 pandemic, the AGM will be conducted pursuant to so called mail-in procedures, meaning that no shareholders will attend the AGM in person or through proxy. Instead, shareholders can participate in the AGM by voting and submitting questions in advance pursuant to the instructions described below.

In order to participate in the AGM, a shareholder must

a. be registered in the register of shareholders maintained by Euroclear Sweden AB as of Thursday, April 1, 2021, and

b. notify attendance at the AGM no later than Monday, April 12, 2021. The exercise of voting rights in accordance with the mail-in procedure will be considered as a notification from the shareholder to attend the meeting.

Shareholders whose shares are registered in the names of banks or other nominees must temporarily register the shares in their own name in order to be entitled to participate in the AGM via the mail-in process. Shareholders who wish to register their shares in their own names must request that the nominee make such registration. Voting rights registration that has been requested by the shareholder in such time that the registration has been completed by the nominee no later than Wednesday April 7, 2021 will be taken into account in the preparation of the shareholders’ register.

The shareholders may request in the advance voting form that a resolution on one or several of the matters on the proposed agenda below should be deferred to a so-called continued general meeting, which cannot be conducted solely by way of advance voting. Such general meeting shall take place if the Annual General Meeting so resolves or if shareholders with at least one tenth of all shares in the company so requests.

A. Overview of Mail-In Procedures for the AGM

Due to the continued COVID-19 pandemic and in order to ensure the health and safety of the Company’s shareholders, employees and other stakeholders, the Board of Directors of Swedish Match AB has resolved on extraordinary meeting procedures pursuant to Section 22 of the temporary act on general meetings (2020:198) (the “Temporary Act”). Specifically, the following procedures will apply:

1. The AGM will take place on Tuesday, April 13, 2021. However, no shareholders, proxy holders or other external persons will be able to attend in person.

2. Shareholders will only be able to participate in the AGM by voting on the matters and the proposals on the meeting agenda and submitting questions to the Company in advance. See Section B, below, for more details on how.

3. The Agenda for the AGM is as set forth below in Section C, with certain items being further explained in Section D.

4. There will be no webcast in connection with the AGM. A press release will be issued following the AGM informing of those material items that are approved by the AGM as soon as the outcome of the mail-in voting procedure has been finally established. Details of the actual voting results will be included in the minutes of the meeting and will be published within two weeks thereafter.

At the time of the issue of this Notice of AGM, the total number of shares in the Company amounts to 162,200,000 shares, corresponding to 162,200,000 votes in total. The Company holds 4,241,628 shares as of the date of this notice which may not be represented at the Meeting.

B. Process for Advanced Voting and Questions

A shareholder can exercise its shareholder’s rights at the AGM by in advance (A) voting on the items on the agenda of the AGM, and (B) submitting questions to the Company.

Any registered shareholder intending to participate in the AGM (via advanced voting or questions), must submit the following information in connection with their respective submissions:

  • the shareholder’s name,
  • personal or organization number,
  • postal address,
  • email address, and
  • telephone number.

The data received will be computerized and used solely for the purpose of the 2021 AGM. For information on how your personal data is processed, see www.euroclear.com/dam/ESw/Legal/Privacy-notice-bolagsstammor-engelska.pdf.

For shareholders wishing to participate through an authorized representative (i.e., where such authorized representative is the one submitting advanced voting or questions on behalf of such shareholder), the Company will provide power of attorney templates on the Company’s website. Shareholders participating through an authorized representative must submit the power of attorney together with the voting form or question. If the shareholder is a legal entity, a copy of a registration certificate or a corresponding document for the legal entity shall be enclosed.

B1. Advance voting

Advance voting will be available as of Friday, March 5, 2021 up until and including Monday,12 April 2021. A shareholder can vote in advance by any of the following three methods:

1. Website Voting: Voting may be done electronically through signing with BankID on the website of Euroclear Sweden AB https://anmalan.vpc.se/euroclearproxy

2. Email Voting: Voting may be submitted by completing the advance voting form available on the Company’s website www.swedishmatch.com/agm and then emailing such form to the following email address [email protected], together with any power of attorney and/or other authorization documents (See Section B, above).

3. Regular Mail: Voting may be submitted by completing the advance voting form available on the Company’s website www.swedishmatch.com/agm and after completion sending a physical copy (i.e., printed out) of such form, together with any power of attorney and/or other authorization documents (See Section B, above) to the following address, Swedish Match AB (publ), “Advance voting 2021 AGM”, c/o Euroclear Sweden AB, P.O.191, SE-101 23 Stockholm, Sweden.

A shareholder cannot give any other instructions than selecting one of the options specified at each point in the advanced voting form. A vote (i.e. the postal voting in its entirety) is invalid if the shareholder has modified the form to provide specific instructions or conditions or if pre-printed text is amended or supplemented.

The advanced voting form, together with any enclosed power of attorney and other authorization documentation must have been received by Swedish Match no later than on Monday, April 12, 2021. If received later, the vote will be disregarded.

For questions regarding advance voting, please contact Euroclear Sweden AB, ph.+46 (0)8 402 90 42 between 9:00 a.m. and 4:00 p.m. (CET) weekdays.

B2. Questions

Questions to the Company can be submitted to Swedish Match up until and including Saturday, April 3, 2021. Shareholders wishing to pose questions may do so by any of the following methods:

1. Email: Questions may be submitted by emailing to the following email address [email protected].

2. Regular Mail: Questions may be submitted by regular mail to the following address, Swedish Match AB, “AGM 2021”, Att: Group Communication, SE-118 85 Stockholm, Sweden.

The shareholder must include name of the shareholder and personal or organization number for the question to be answered. The shareholder should also state its postal address, email address and telephone number.

Questions submitted by shareholders must have been received by Swedish Match no later than on Saturday, April 3, 2021, and will be responded to and published not later than on Thursday, April 8, 2021. The questions and responses will be available at the Company, Swedish Match AB, Sveavägen 44, Stockholm, Sweden and on the Company’s website, www.swedishmatch.com/agm, and will be sent to the shareholder provided the shareholder’s address is known by the Company or provided by the shareholder together with the question.

The Board of Directors and the CEO shall, upon request of a shareholder, and provided that the Board of Directors deems this can be done without causing major harm to the Company, inform about matters which might affect the assessment of an item on the agenda or circumstances affecting Swedish Match’s or its subsidiaries’ financial situation or about Swedish Match’s relation to another Group entity, or in relation to the consolidated Annual Report.

C.   Agenda

1. Opening of the Meeting and election of the Chairman of the Meeting.

2. Preparation and approval of the voting list.

3. Election of one or two persons to verify the minutes.

4. Determination of whether the Meeting has been duly convened.

5. Approval of the Agenda.

6. Resolution on the Remuneration report.

7. Resolution on adoption of the income statement and balance sheet and of the consolidated income statement and consolidated balance sheet.

8. Resolution regarding allocation of the Company’s profit in accordance with the adopted balance sheet and resolution on a record day for dividend.

9. Resolution regarding discharge from liability in respect of the Board members and the President.

10. Resolution regarding the number of members of the Board of Directors to be elected by the Meeting.

11. Resolution regarding remuneration to the members of the Board of Directors.

12. Election of members of the Board, the Chairman of the Board and the deputy Chairman of the Board

a) Election of Charles A. Blixt (re-election)

b) Election of Andrew Cripps (re-election)

c) Election of Jacqueline Hoogerbrugge (re-election)

d) Election of Conny Karlsson (re-election)

e) Election of Alexander Lacik (re-election)

f) Election of Pauline Lindwall (re-election)

g) Election of Wenche Rolfsen (re-election)

h) Election of Joakim Westh (re-election)

i) Election of Conny Karlsson as the Chairman of the Board (re-election)

j) Election of Andrew Cripps as deputy Chairman of the Board (re-election)

13. Resolution regarding the number of auditors

14. Resolution regarding remuneration to the auditor

15. Election of auditor.

16. Resolution regarding:

a.    the reduction of the share capital by means of withdrawal of repurchased shares; and

b.    bonus issue.

17. Resolution regarding authorization of the Board of Directors to resolve on acquisitions of shares in the Company.

18. Resolution regarding authorization of the Board of Directors to resolve on transfer of shares in the Company.

19. Resolution regarding authorization of the Board of Directors to issue new shares.

20. Resolution on 

a.    amendment of the Articles of Association.

b.    a split of the Company’s shares (share split).

21. Resolution on amendment of the Articles of Association.

D. Proposals

Proposal for resolution under Item 1

Björn Kristiansson, attorney at law, is proposed as the Chairman of the Meeting, or if he is unable to attend the meeting, any other person proposed by Swedish Match’s Nominating Committee.

Proposal for resolution under Item 2

The voting list proposed to be approved is the voting list prepared by Euroclear Sweden AB on behalf of the company, based on the general meeting shareholders’ register and received advance votes, and verified by the persons assigned to check the minutes.

Proposal for resolution under Item 3

The Board of Directors proposes that two minute-checkers be elected, and that Filippa Gerstädt and Peter Lundkvist are elected, or, if someone or both of them are unable to attend the meeting, any other person proposed by Swedish Match’s Board of Directors.

Proposal for resolution under Item 7

Resolution on adoption of the income statement and balance sheet and of the consolidated income statement and consolidated balance sheet.

Proposal for resolution under Item 8

The Board of Directors proposes a dividend of 15.00 SEK per share and that the remaining profits are carried forward. The proposed record day for the right to receive the dividend is Thursday, April 15, 2021. Payment through Euroclear Sweden AB is expected to be made on Tuesday, April 20, 2021.

Proposal for resolution under Item 10

The Nominating Committee proposes that the Board of Directors shall be comprised of eight members and no deputies.

Proposal for resolution under Item 11

The Nominating Committee proposes that remuneration to the members of the Board of Directors will be awarded as follows for the period until the Annual General Meeting 2022 (2020 resolved remuneration within brackets). The Chairman of the Board will be awarded 2,252,000 SEK (2,165,000), the deputy Chairman will be awarded 1,040,000 SEK (1,000,000) SEK and the other Board members elected by the Meeting shall each be awarded 900,000 SEK (865,000). Furthermore, the Nominating Committee proposes that the Chairman of the Audit Committee will be awarded 364,000 SEK (350,000) and the other members of the Audit Committee will be awarded 156,000 SEK (150,000) each, and that the Chairman of the Remuneration Committee will be awarded 291,000 SEK (280,000) and the other members of the Remuneration Committee 146,000 SEK (140,000) each.

Proposal for resolution under Item 12

The Nominating Committee proposes re-election of the following members of the Board of Directors for the period until the end of the Annual General Meeting 2022: Charles A. Blixt, Andrew Cripps, Jacqueline Hoogerbrugge, Conny Karlsson, Alexander Lacik, Pauline Lindwall, Wenche Rolfsen and Joakim Westh. Conny Karlsson is proposed to be re-elected as Chairman of the Board and Andrew Cripps is proposed to be re-elected as deputy Chairman of the Board.

Proposal for resolution under Item 13

The Nominating Committee proposes the number of auditors to be one and no deputy auditor.

Proposal for resolution under Item 14

The Nominating Committee proposes that remuneration to the auditor is to be paid according to approved accounts.

Proposal for resolution under Item 15

The Nominating Committee proposes the re-election of the auditor company Deloitte AB as auditor for the period until the end of the Annual General Meeting 2022.

Proposal for resolution under Item 16 a)

The Board proposes that the Annual General Meeting resolves to reduce the share capital by way of cancellation of own shares. The purpose of the reduction is allocation to unrestricted equity to be used as resolved by the Annual General Meeting in accordance with Item b) below. The reduction of the share capital shall be made by cancellation of such own shares that are held by the Company three weeks prior to the Annual General Meeting. The reduction of the share capital may be made with no more than 10,806,531.30 SEK by way of cancellation of no more than 4,500,000 shares. The exact reduction amount and the exact number of shares proposed to be cancelled will be presented in the complete proposal, which will be held available no later than three weeks prior to the Annual General Meeting. The resolution to reduce the share capital under this Item a) may be effectuated without obtaining an authorization from the Swedish Companies Registration Office or, in disputed cases, a court of general jurisdiction, as the Company simultaneously effectuates a bonus issue, as set out under Item b) below, with an amount corresponding to no less than the amount the share capital is being reduced with, as set out above. Combined, these measures entail that neither the Company’s restricted equity nor its share capital is reduced.

Proposal for resolution under Item 16 b)

With the purpose of restoring the share capital after the proposed reduction of the share capital, as set out under Item a) above, the Board proposes that the Annual General Meeting simultaneously resolves to increase the share capital by way of a bonus issue with an amount corresponding to no less than the amount the share capital is reduced with by way of cancellation of shares, as set out under Item a) above. The bonus issue shall be carried out with the amount being transferred from equity without the issuance of new shares. The exact amount of the increase will be presented in the complete proposal, which will be held available no later than three weeks prior to the Annual General Meeting.

Resolutions by the Annual General Meeting in accordance with Items 16 a)-b) above shall be adopted as a joint resolution and require approval by shareholders representing no less than two thirds of the votes cast as well as the shares represented at the Annual General Meeting. The Board further proposes that the Annual General Meeting authorizes the Board to make such minor adjustments to the above resolutions as may be required to file the resolutions with the Swedish Companies Registration Office or Euroclear Sweden AB and to take such other measures required to execute the resolutions.

Proposal for resolution under Item 17

The Board of Directors proposes that it be authorized to resolve on acquisition of the Company’s own shares, on one or several occasions prior to the next Annual General Meeting, provided that the Company’s holding does not at any time exceed 10 percent of all shares in the Company. The shares shall be acquired on Nasdaq Stockholm, other regulated market or on a market equivalent to a regulated market outside the EEA after approval from the Swedish Financial Supervisory Authority at a price within the price interval registered at any given time, i.e. the interval between the highest bid price and the lowest selling price. The purpose of the repurchasing right is primarily to enable the Company to adapt its capital structure to its capital needs over time, and thereby contribute to an increased shareholder value.

The Board of Directors shall be able to resolve that a purchase of own shares shall be made within a repurchase program in accordance with the Market Abuse Regulation (EU) No 596/2014 (“MAR”) and the Commission Delegated Regulation (EU) No 2016/1052 (the “Safe Harbour Regulation”), if the purpose of the purchase only is to decrease the Company’s equity.

The resolution of the Annual General Meeting with regard to the Board’s proposal under Item 17 requires the support of shareholders representing at least two thirds of both the votes cast and the shares represented at the Meeting.

Proposal for resolution under Item 18

The Board of Directors proposes that it be authorized to resolve on transfer of the Company’s own shares, on one or several occasions prior to the next Annual General Meeting.

The shares may only be transferred in conjunction with the financing of company acquisitions and other types of strategic investments and acquisitions, and the transfers may not exceed the maximum number of treasury shares held by the Company at any given time. Transfer of own shares shall be made on Nasdaq Stockholm, other regulated market or on a market equivalent to a regulated market outside the EEA after approval from the Swedish Financial Supervisory Authority at a price within the price interval registered at any given time (i.e. the interval between the highest bid price and the lowest selling price) at the time of the decision regarding the transfer and in accordance with the rules of Nasdaq Stockholm or the relevant market. Transfer of own shares can also be made in another manner in conjunction with the acquisition of companies or operations, where transfer of own shares may be made with deviation from the shareholders’ preferential rights. Payment for shares transferred in this manner may be made in cash or through a non-cash issue or offsetting of claims against the Company, or on other specific terms. The reason for the authorization and deviation from the shareholders’ preferential rights is, where appropriate, to be able to transfer shares in conjunction with the financing of any company acquisitions and other types of strategic investments and acquisitions in a cost-efficient manner.

The resolution of the Annual General Meeting with regard to the Board’s proposal under Item 18 requires the support of shareholders representing at least two thirds of both the votes cast and the shares represented at the Meeting.

Proposal for resolution under Item 19

The Board of Directors proposes it be authorized to, for the period until the next Annual General Meeting, to issue new ordinary shares on one or more occasions, with or without deviation from shareholders’ preferential rights and against payment in cash, in kind or by set-off. The number of shares that may be issued may not exceed a maximum dilution effect of 10 percent of the share capital and votes at the time of the Annual General Meeting 2021. The reasons for the authorization and deviation from shareholders’ preferential rights are that the Board wishes to increase the Company’s financial flexibility and to allow the Company to issue common shares as payment in connection with acquisitions the Company might make. The subscription price shall be determined according to prevailing market conditions at the time the shares are issued.

The resolution of the Annual General Meeting with regard to the Board’s proposal under Item 19 requires the support of shareholders representing at least two thirds of both the votes cast and the shares represented at the Meeting.

Proposal for resolution under Item 20 a)

With reference to the Board of Directors proposed share split under Item 20 b) on the agenda, the Board of Directors proposes that the Annual General Meeting resolve the limits for the number of shares in article 5 of the Articles of Association be changed so that the number of shares is limited to a minimum of one billion (1,000,000,000) and a maximum of four billion (4,000,000,000) shares. The Board of Directors further proposes that the Annual General Meeting resolve the limits for the Company’s share capital in article 4 of the Articles of Association be revised to a minimum of two hundred million (200,000,000) SEK and a maximum of eight hundred million (800,000,000) SEK. A resolution on an amendment of the Articles of Association in this respect is contingent on the general meeting resolving to approve a split of the Company’s shares in accordance with Item 20 b) on the agenda.

It is proposed that the Chief Executive Officer (“CEO”), or such person as the CEO may designate, be authorized to make such minor adjustments to the resolution as may prove necessary in connection with the registration of the resolution.

The resolution of the Annual General Meeting with regard to the Board’s proposal under Item 20 a) requires the support of shareholders representing at least two thirds of both the votes cast and the shares represented at the Meeting.

Proposal for resolution under Item 20 b)

The Board of Directors proposes, in order to achieve an appropriate share price for a listed company, that the Annual General Meeting resolve to authorize a split of the Company’s shares whereby one existing share of the Company will be divided into ten shares of the same class of shares (10:1 share split). A resolution on the proposed split is contingent on the general meeting resolving to approve change of the Company’s articles of association in accordance with Item 20 a) on the agenda. After the completion of the split, based on the current number of shares in the Company, the number of shares of the Company will increase from 162,200,000 to 1,622,000,000. The number of votes will increase from 162,200,000 votes to 1,622,000,000 votes. The quotient value of each share after the split will be approximately 0.24 SEK. The Board of Directors proposes that it be authorized to set a record date for the share split. However, the specified record date may not fall before the resolution on the share split has been registered with the Swedish Companies Registration Office.

It is proposed that the CEO, or such person as the CEO may designate, be authorized to make such minor adjustments to the resolution as may prove necessary in connection with the registration of the resolution.

Proposal for resolution under Item 21

The Board of Directors proposes that the Company’s Articles of Association be amended as follows:

Article 1

Present wording

Proposed wording


The Company’s trading name is Swedish Match AB. The company is a public limited company (publ).

The name of the company

                                    (Swföretagsnamn) is Swedish Match AB. The company is a public limited company (publ).

Article 3

Present wording

Proposed wording


The object of the Company’s operations is to directly or indirectly conduct business relating to the development and manufacture of and trade in tobacco products, matches and lighters, and to carry out other activities that are related to the business.

The object of the Company’s operations is to directly or indirectly conduct business relating to the development and manufacture of and trade in tobacco products, nicotine products, matches and lighters, and to carry out other activities that are related to the business.

Article 10

Present wording

Proposed wording


Shareholders wishing to take part in the proceedings at general shareholders’ meetings shall be registered as shareholders in such print-outs or other versions of the entire shareholders’ register as are stipulated in chapter 7, § 2 , first paragraph of the Swedish Companies Act and as relate to the circumstances prevailing five weekdays prior to the general shareholders’ meeting. They must also notify the Company of their intention to attend no later than 16.00 on the day specified in the notification of the shareholders’ meeting. This day may not be a Sunday, another public holiday, a Saturday, Midsummer’s Eve, Christmas Eve or New Year’s Eve and may not fall before the fifth weekday prior to the general shareholders’ meeting. Shareholders wishing to be accompanied by one or two assistants at a general shareholders’ meeting shall notify the Company of this fact within the period mentioned above.

In order to participate in a shareholders’ meeting, a shareholder shall notify the company not later than the day stated in the notice. This day must not be a Sunday, public holiday, Saturday, Midsummer’s Eve, Christmas Eve or New Year’s Eve, and must not fall earlier than the fifth weekday prior to the meeting. Shareholders wishing to be accompanied by one or two assistants at a shareholders’ meeting shall notify the Company of this fact within the period stated in the notice.

Article 13

Present wording

Proposed wording


The Company’s shares shall be registered in a record-day register pursuant to the Swedish Financial Instruments Act (1998:1479).

The Company’s shares shall be registered in a central securities depositary register pursuant to the Swedish Central Securities Depositories and Financial Instruments Accounts Act (Sw. lagen (1998:1479) om värdepapperscentraler och kontoföring av finansiella instrument).

Article 14

Present wording

Proposed wording


The Board of Directors may collect powers of attorney at the Company’s expense pursuant to the procedure stipulated in chapter 7, § 4, second paragraph of the Swedish Companies Act (2005:551).

The Board of Directors may collect powers of attorney at the Company’s expense pursuant to the procedure stipulated in chapter 7, § 4, second paragraph of the Swedish Companies Act (2005:551). The Board of Directors has the right before a shareholders meeting to decide that shareholders shall be able to exercise their voting rights by post before the shareholders meeting.

It is proposed that the Chief Executive Officer (“CEO”), or such person as the CEO may designate, be authorized to make such minor adjustments to the resolution as may prove necessary in connection with the registration of the resolution.

The resolution of the Annual General Meeting with regard to the Board’s proposal under Item 21 will be valid only if it is supported by shareholders holding at least two thirds of the votes cast as well as the number of shares represented at the meeting.

Other information

The financial statements, the auditor’s report and the Board of Directors’ complete proposal including the Board of Directors’ statement pursuant to Chapter 18, section 4 of the Companies Act, as well as other documentation, which, according to the Companies Act, shall be made available at the Annual General Meeting will be made available at Swedish Match headquarters (Legal Department) at Sveavägen 44, Stockholm, Sweden, no later than Tuesday, March 23, 2021. The documents will be sent to shareholders upon request, provided that such shareholder states its address. All the above documents will be available on the Company’s website, https://www.swedishmatch.com/ and be presented at the Annual General Meeting.

The share register will be available at Swedish Match AB, Sveavägen 44, Stockholm, Sweden.

Proxy form

Proxy forms are available upon request and on the Company’s website https://www.swedishmatch.com/

Stockholm, March 2021

Swedish Match AB (publ)

The Board of Directors

Contact:

Emmett Harrison, Senior Vice President Investor Relations
Office +46 70 938 0173

This information was brought to you by Cision http://news.cision.com

https://news.cision.com/swedish-match/r/notice-to-the-annual-general-meeting-of-swedish-match-ab–publ-,c3300841

The following files are available for download:

SOURCE Swedish Match


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Big Lots Inc (BIG) Q4 2020 Earnings Call Transcript http://goodwillsavannahga.org/big-lots-inc-big-q4-2020-earnings-call-transcript/ Tue, 09 Mar 2021 07:15:41 +0000 http://goodwillsavannahga.org/?p=2334

Image source: The Motley Fool.

Big Lots Inc (NYSE:BIG)
Q4 2020 Earnings Call
Mar 5, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good morning, and welcome to the Big Lots Fourth Quarter 2020 Conference Call. [Operator Instructions] On the call today are Bruce Thorn, President and CEO; and Jonathan Ramsden, Executive Vice President, Chief Financial and Administrative Officer.

Before starting today’s call, the company would like to remind you that any forward-looking statements made on the call involve risks and uncertainties and are subject to the company’s safe harbor provisions as stated in company’s press release and SEC filings and that actual results can differ materially from those described in forward-looking statements. The company would like to also point out, where applicable, commentary today is focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP adjusted results are available in today’s press release.

I would now turn the call over to Bruce Thorn, President and CEO of Big Lots. Mr. Thorn, please go ahead.

Bruce ThornPresident & Chief Executive Officer

Thank you, and good morning, everyone. 2020 was a remarkable year for Big Lots, and I am proud of our strong finish, which is reflected in the results we reported this morning. Comparable sales for the fourth quarter increased 7.9% and our diluted earnings per share were $2.59. This resulted in our strongest ever sales and earnings for fiscal year with the comp up 16.1% and $7.35 per share in adjusted earnings.

Along with these results, I’ve been amazed by the evolution of our entire organization, which has been strongly aligned around our Operation North Star goals, while working extremely hard to navigate what has been a very difficult external environment. For that, I want to say a big thank you to all of our associates across our stores, distribution centers and corporate headquarters. Our accomplishments in 2020, which I will talk more about in a moment, were truly a team effort.

As we enter 2021, there are reasons to be hopeful that the global pandemic that has upended so many things well received and that we will be on a path to greater stability as the year progresses. However, we will not take our eye off the ball with regard to making our stores and workplaces as safe as possible. And we will continue to work with clear and rigorous safety standards, social distancing and cleaning protocols in all of our stores and workplaces.

During the course of 2020, we incurred more than $50 million in COVID-related expenses, including health and safety measures as well as incremental pay bonuses to stores and distribution center associates. We expect to incur further expense in 2021, albeit at a lower level. In addition, we are encouraging, supporting and facilitating our associates to get vaccinated as soon as they have the opportunity.

Coming back to the fourth quarter, we saw two distinct levels of performance; strong performance in November and in January, and we had more appropriate inventory levels. And what I would refer to as a solid performance in December where we continue to see underlying strength in our business, but we’re too sold through on our Christmas seasonal assortment to maintain the double-digit comps that mark the balance of the year.

Traffic was also clearly softer in December, driven by COVID-19-related stay at home orders and different consumer shopping patterns caused by the pandemic. However, our core business continued to perform well. And following Christmas, for the balance of the quarter, comp growth returned to double-digit levels, benefiting from broad-based category strength and new stimulus payments that began to flow in early January.

As our inventory levels were sold through, we were able to navigate through the holiday period with fewer promotions than last year. This reduction in markdowns significantly mitigated the pressures felt from increased spot freight rates in higher supply chain charges we incurred. Across all categories other than Food and Seasonal, we saw double-digit comps for the quarter as a whole.

Furniture sales increased 15% versus last year with strong growth in upholstery, ready-to-assemble and mattresses. The home office trend continued throughout Q4, doubling year-over-year. Upholstery delivered a 20% increase and mattresses grew 11%. The Broyhill brand had a strong impact on furniture, representing 17% of total furniture sales in the quarter. Upholstery was particularly strong for Broyhill, driving 30% of total upholstery sales.

Soft Home had a double-digit comp increase, led by strong trends within the window, home organization and basic bedding categories. Window continued strong performance for the year and was up over 35% for the quarter with curtains up over 40%, driven by incremental Broyhill and national brand offerings. Home organization saw 25% growth, driven by plastic storage and closet organization. Basic bedding was driven by strong performance in throws, pillows and mattress toppers, all delivering 20% comp or greater. Broyhill bedding, bath, window and decor also delivered strong results, delivering 20% of division sales in the quarter.

Our Seasonal business started the quarter off with strong double-digit comps. However, given the reduced buy of Christmas merchandise and the stronger early sell-through, we saw lack of inventory to drive sales during the key selling weeks leading up to Christmas, resulting in a sales decline versus last year for the quarter of 12%. This negatively impacted the sales growth, but we saw a quick rebound in our spring, summer and patio businesses in late January and early February.

Apparel continue to grow in sales penetration with nearly a 50% comp fueled by recognizable branded close-out in key value items throughout the season. We saw strong sell-through in graphic tees, fashion tops, cold weather fleece and sports apparel. As our customer is responding strongly to our well curated assortment, we will continue to lean into apparel, a category that is margin accretive and highly productive. We are targeting another year of strong double-digit apparel growth in 2021.

Hard Home comps were up nearly 20% to last year with all departments delivering double-digit increases. Key areas such as kitchen appliances, cookware, dinnerware and drinkware delivered over 30% comps in part due to the cook and dine at home trend. With this trend we saw excellent performance from our keurig pods and keurig brewers, and momentum has clearly continued into 2021.

We’ve launched pantry optimization in third quarter of 2020. As a reminder, this involves repositioning footage from food staples to food entertainment as well as expanded space for consumables, including cleaning products and health and beauty, combining competitively priced national brands with an expanding assortment of close-outs. This creates a significant value differentiation from the competition. With the increased intensity of the pandemic during the colder winter months, this strategy outperformed our expectations. Customers were surprised and delighted to find more items on their shopping list at tremendous values. These categories drove repeat traffic and conversion, lifting total sales productivity for food and consumables, while driving margin dollar expansion.

Consumables had 15% sales growth. With key changes in laundry household chemicals and health and beauty, these departments grew at 23% and 19% respectively. Food was up 1% in the quarter, a very good result considering we reduced and redistributed space in September. Our holiday gift set helped drive a 6% comp increase in the candy gift area. We also saw a nice 6% increase across our beverage, baking and coffee departments, thanks to the new assortments implemented during the pantry optimization initiative.

Across all categories, close-out sales in the fourth quarter were up 50% over the same quarter in 2019. Close-outs are an important part of our heritage and a significant reason why she shops us. In the quarter, she was able to find close-out, including brands such as Reebok, Black & Decker, Nautica, Scott Brothers Bedding, Ann Taylor and Sealy. Given our expanding range of close-outs and strong heritage, we see continued growth here as a clear opportunity, especially as we strengthen our buying relationships and take advantage of the space made available through our Queue Line project, identified through space planning and optimization in store.

Our active rewards membership reached an all-time high in Q4 with positive 9.5% growth year-over-year. Rewards customers spent 21% more than last year in Q4 and 11% more per customer. Big Heroes continued in Q4 with our now always on 10% discount for military investments. 25% of participants were new Big Rewards members. We also successfully ran a targeted campaign to reactivate lapsed customers in at risk of lapsing shoppers.

Enrollment was another great growth story, up 38% to Q4 2019. We enrolled 9 million customers to Big Rewards for the full year, our biggest enrollment year ever. With all of these strong drivers, rewards attached sales exceeded 70% of our total sales for the quarter, representing more than 700 basis points in penetration expansion to last year. Rewards has been on incredible trend, up around 10% per year for each of the past three years.

Throughout the quarter, we saw significant benefits from our Operation North Star strategies. These include our expanded e-commerce capabilities, Broyhill, the Lot and our front end Queue Line initiative. All of these initiatives have been successful and position us well to drive further gains in 2021, as we also accelerate additional close-out investments and depth in our apparel assortment.

Our e-commerce business was a huge success story throughout 2020 with the pandemic increasing customer expectations to be able to shop how, when and where they want. To that end, we have focused heavily on removing purchase friction and creating better customer experiences. During 2020, we introduced curbside pickup, same-day delivery in partnership with Instacart and same-day delivery with biglots.com with pickup, allowing customers to order any item available at their local Big Lot store. Our Instacart and pickup delivery services continue to accelerate during the fourth quarter, making a significant contribution to our overall e-commerce-driven growth.

As we detailed in our third quarter call, we now have shipped from store capabilities in 47 stores, strategically identified to ensure two day delivery to 90% of our customers across the country. Last, over the past year, we have expanded payment type choices available on-site to now include gift cards, the Big Lots credit card and lease online pickup in store, each of which have driven incremental volume.

As you know, all of these achievements resulted in us being ranked number one in Total Retail’s Top Omnichannel Retailers’ Report. In total, ecom and omnichannel sales grew over 130% versus Q4 last year, contributing close to 300 basis points to the overall company comp. KPIs were strong across the business with site traffic up close to 40% and conversion more than doubling. Even with our increased demand, we were able to offer improved delivery times to two day shipping, same-day delivery and curbside pickup, all new compared to holiday 2019. While we are pleased with ecom’s success in 2020, we still have a long way to go on our omnichannel journey and this will be a key area for our future investment, as I will detail in a moment. We believe there is a tremendous runway as we reach new customers and drive incremental growth beyond 2020’s performance.

Our Broyhill line, which launched in the spring, far outperformed our expectations in 2020. The line expanded beyond core home furniture to include area rugs, bedsheets and decorative pillows. The customer reaction to the entire offering of this iconic brand remains very favorable. And we remain extremely excited about our 2021 extension of Broyhill into housewares and kitchen textiles.

Broyhill generated over $400 million in first year’s sales, and we firmly believe it is on track to being a $1 billion brand. Broyhill customers spend twice as much as non-Broyhill customers and 10 times as much as non-furniture customers. This dynamic is driven both by basket size and visit frequency. One-third of Broyhill customers are new to Big Lots and 50% of Broyhill customers have already returned to make a second purchase, either in stores or through biglots.com.

Likewise, the Lot and the Queue Line strategies were very successful in 2020. We rolled these strategies out to 750 stores, which performed well upon launch and accelerated in the fourth quarter, driving close to three incremental comp points across these stores. Based on this success, we are now increasing our anticipated Lot and Queue Line conversions to 550 additional stores in 2021, most rolling out in spring. Meaning that by mid-year, over 90% of our stores will feature the Lot and Queue Line footprint features and assortments.

Another key aspect of Operation North Star has been a keen focus on our expense architecture. Through our Fund the Journey initiative, I’m proud to announce that we have secured $130 million of SG&A reductions today, including savings baked into our 2021 operating plan. Additionally, through partnerships with our vendor base and through more thoughtful in-store markdown activities, we’ve expanded margins approximately $30 million. Our efforts to drive more savings will continue in 2021 and beyond.

As we turn to 2021, a key focus will be to make investments in our supply chain to increase throughput, improve efficiencies and support omnichannel demand. Late this summer, we will open two third-party operated forward distribution centers. One in Northeast and one in the Southeast to help process bulk items, primarily our furniture offerings in palletized goods such as bottled water.

In addition, we will invest in centralized repacking capabilities in our DC in Columbus that will allow for more efficient and cost effective picking on a per store basis of less than a full case of items, even as our store count and demand grow. These capabilities will help make our other regional distribution centers more efficient as they can focus on case picking. These investments will enable us to get merchandise to our stores more quickly, efficiently and responsibly, improving our insights in many items. In addition, forward distribution centers will provide a scalable platform to support our future growth, and we expect to stand up additional FDC locations beyond 2021.

Another 2021 prioritization is to enhance the customer experience in our stores, particularly to those stores that did not go through a full remodel under our Store of the Future program. Starting in 2021 and extending over the next few years, we will invest in the store refresh program, encompassing new exterior signage, internal repainting and updated floors and bathrooms. This program will be much less expensive on a per store basis than our prior Store of the Future program that will deliver a more consistent brand experience across our stores.

We’re working 2021 to further strengthen our e-commerce capabilities and customer data insights. We will invest to improve user experience, omnichannel capabilities to ship through store and personalization capabilities through expanded use of customer data platforms, online customer panels and more advanced segmentation. We are excited by new merchandising initiatives in 2021. These include the strengthening of our value-driving assortment with close-outs across our merchandise categories, the aforementioned apparel expansion, additional Broyhill growth into adjacent departments, expanding our pet offerings given the acceleration of pet adoptions during 2020 and the trend of the humanization of pet and the productivity of pet products. Also, our Big Buy initiatives that will increase our value pricing impressions throughout the main aisles and featured end cap presentations.

Finally, Seasonal is a key area of opportunity for us as we know we left sales on the table with depleted inventory levels in 2020. We continued to enhance our value-focused proposition. Our newly launched Wonderland program offers a selection of products pricing $1 to drive conversion and excitement. Additionally, we are transforming how we work. As an example, in 2021, we will launch data-driven space planning capabilities for the first time in the company’s history.

Focusing on safe productivity, we will have better analytical tools to impact future buy cycle, optimize floor plans per store, further optimize allocation and replenishment and improve store compliance for planogram execution. We expect that these capabilities will greatly enhance our productivity store-by-store and category-by-category with the focus on shelf availability of relevant products. Most importantly, it will create a more relevant customer assortment to increase sales and increase customer satisfaction, fueling return visits. We are excited to be adding this tool to our merchandise program as we transform the way we work.

As a result of all these initiatives, we are entering 2021 with momentum and excitement about the opportunities ahead of us this year. While unusually cold and snowy winter weather impacted traffic trends mid-February, the year is off to a strong start. Comps will moderate in March as we lap the stock-up period during the first phase of the pandemic last year and again from mid-April and we were up against the first stimulus-driven sales period. However, we expect to end with positive comps for the quarter and growth in EPS on top of a strong growth quarter last year.

Overall, while comparatives will be challenging throughout this year and especially in Q2 and Q3, we expect to continue driving significant improvement in our underlying performance and shareholder value creation. Over the past year, we have clearly benefited from government stimulus and from the nesting trend that resulted from the pandemic. However, we are very confident that our performance is also being driven significantly by our Operation North Star strategies, and that week-by-week we are becoming a stronger company.

I’ll now turn the call over to Jonathan for more insight on our financial results for the quarter and our outlook for 2021.

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Thanks, Bruce, and good morning, everyone. I would like to add my heartfelt thanks to the entire Big Lots team for their amazing efforts and commitment over the past year. And the team is pulling together as we enter 2021 to continue the great progress we made in 2020.

Net sales for the fourth quarter were $1.738 billion, an 8% increase compared to $1.607 billion a year ago. The growth was driven by a record fourth quarter comparable sales increase of 7.9%. Comps were driven by strong growth in basket across both channels. Transactions were down slightly driven by store traffic, which was impacted by stay-at-home orders, particularly on the West Coast as well as the generally softer traffic we have seen on peak shopping days during the pandemic.

As Bruce mentioned, in terms of cadence through the quarter, the underlying trend by month was strongest in November and January with relative softness in December given slower traffic and lower levels of seasonal inventory. Our strong fourth quarter comps drove us to record annual sales of $6.2 billion, an increase of $876 million from 2019. Net income for the fourth quarter was $98 million compared to $93.8 million in Q4 of 2019. Diluted EPS for the quarter was $2.59, $0.09 above the high end of our guidance range provided in early January. As a reminder, we reported EPS of $2.39 last year.

For the full year, we achieved adjusted diluted earnings per share of $7.35, more than twice what we reported for 2019 and resulting in record earnings on both the GAAP and adjusted non-GAAP basis. Gross margin rate for Q4 was 39.4%, down slightly from last year’s fourth quarter rate, with freight headwinds offsetting a significant reduction in markdowns. Our gross margin rate was essentially in line with expectations at the beginning of the quarter, although the freight impact and markdown benefit were both somewhat greater than expected.

Total expense dollars for the quarter, including depreciation, were $554 million, up from $508 million last year, a gain essentially in line with beginning of quarter expectations. Drivers of the increase were $12 million of additional expense from the sale and leaseback of our distribution centers, $11 million of additional store and corporate bonus expense, $6.5 million of higher non-cash equity comp expense, ongoing COVID-related cleaning cost and supplies of approximately $5 million and some expense flex on higher sales.

Interest expense for the quarter was $2.6 million, down from $3.2 million in Q4 last year, primarily as a result of paying off the balance on our unsecured line of credit earlier in 2020, partially offset by notional interest associated with the gain deferral on our sale leaseback transactions. The income tax rate in the fourth quarter was 24.6% compared to last year’s adjusted rate of 23.2%, both impacted by the resolution of discrete items. The impact of favorable discrete items was similar in value in 2020 compared to 2019, but the impact on the tax rate was less significant due to much higher pre-tax income. Prior to discrete items, this year’s income tax rate was 25.9% compared to last year’s adjusted rate of 26%.

Moving on to the balance sheet. Inventory on hand was down mid-single-digits, but total inventory was up 2.1% to $940.3 million, driven by higher in-transit inventory as we work to have products shipped prior to the Lunar New Year, drive replenishment after strong fourth quarter sell-throughs and to match underlying stronger business trends versus the close of 2019.

During Q4, we had no new store openings and closed three stores, leaving us with 1,408 stores and total selling square footage of 32 million. For the full year, we opened 24 stores and closed 20. Our new store openings were impacted by decisions we made at the beginning of the pandemic to defer some openings into 2021, but we were pleased to still achieve net store count growth. This was aided by our new store performance intervention program along with successful lease renewal negotiations, which reduced the number of store closures. We expect to accelerate net store count growth in 2021 and most significantly beyond, and continue to believe that unit growth can be a major driver of our performance.

Capital expenditures for the quarter were $32 million compared to $33 million last year. Full year capex was $135 million versus $265 million last year with the reduction driven by our evolution away from Store of the Future as well as fewer new store openings and lapping investments in our new California distribution center. Depreciation expense in Q4 was $33.6 million, approximately $3.8 million lower than the same period last year.

We ended the fourth quarter with $560 million of cash and cash equivalents and $36 million of long-term debt. This represents a $750 million year-over-year increase in our net cash position, driven both by tremendous free cash flow and the net proceeds from the sale and leaseback of our distribution centers completed in June. As a reminder, at the end of 2019, we had $53 million of cash and cash equivalents and $279 million of long-term debt.

We repurchased 1.6 million shares during the quarter for $73 million at an average cost per share of $46.38 under our previously announced $500 million share repurchase authorization with $327 million remaining as of the end of the quarter. Share repurchases remain an important part of our capital allocation strategy going forward, in particular, given our significant excess liquidity. In total, we returned $219 million to shareholders during 2020. As announced in a separate release, our board of directors declared a quarterly cash dividend for the first quarter of 2021 of $0.30 per common share. This dividend is payable on April 2, 2021 to shareholders of record on the close of business on March 19, 2021.

Turning to 2021. Based on currently available information, for the first quarter, the company expects to achieve diluted earnings per share in the range of $1.30 to $1.45 compared to $1.26 per diluted share in 2020. This guidance is based on a low-single-digit comparable sales increase and the total sales increased approximately 80 basis points higher than the lift in comparable sales. This guidance considers our strong start to ’21 — 2021, but anticipates comp pressure as we lap strong stock up comps from the first phase of the pandemic in March of last year and particularly from mid-April when government stimulus significantly accelerated sales in 2020. The guidance does not incorporate any share repurchases we may complete in the first quarter.

We expect gross margin rate for the first quarter to be flat to slightly up to last year as a year-over-year markdown benefit early in the quarter is largely offset by continued higher freight costs and the mix impact of pantry optimization, which launched in Q3 of last year. From an SG&A perspective, at our projected sales levels, we expect some deleverage in the quarter. However, excluding approximately $12 million of expense impact from the sale and leaseback in June 2020, expenses would lever slightly.

With regard to the full year, we expect that our financial performance will be significantly affected by the ongoing pandemic, including the continued evolution of consumer shopping behaviors, potential additional stimulus and other macro-driven factors. As a result, at this point, we do not believe we have sufficient visibility to provide full year guidance on sales or EPS.

We do expect to face ongoing pressure from higher freight cost for the year as well as some adverse mix impact from our pantry optimization strategy. This will be partially offset by lower shrink and other mix effects, but with the net result that our gross margin rate is likely to be slightly down. We expect SG&A expense dollars for the year to be down with benefits from lower COVID-related expense, normalization of bonus expense and structural expense savings, offset by incremental expense from the sale leaseback, higher non-cash equity comp expense, higher new store expense due to increased openings, higher wage levels and investments in our new forward deployment centers and other strategic investments. The forward deployment center investment for this year will add approximately $10 million to SG&A beginning mid-summer.

Our SG&A expectations for full year incorporate around $30 million of incremental structural expense savings across store labor, our supply chain and general office. By the close of 2021, we will have reduced SG&A by at least $130 million versus the start of 2019. And supported by our ongoing culture of frugality, we expect to drive this figure higher.

Capital expenditures for 2021 are expected to be in the range of $180 million to $190 million with the focus on strategic investments to strengthen and accelerate the business. These investments include the aforementioned Lot and Queue Line store conversions, omnichannel capabilities, space planning technology and customer analytics capabilities. In addition, we expect to open 50 to 60 stores in 2021, of which around 20 will be relocations.

As we think about inventory levels throughout 2021, it is important to note that we will be up against some very depleted 2020 inventory levels, which we know caused us to miss sales and adversely impact our customers’ in-store experience. In addition, we expect to flow some receipts earlier to mitigate freight costs. As a result, we expect headline inventory levels to be up significantly over 2020, especially at the end of Q2 and Q3. However, on a two year basis, inventory levels will reflect strong turn improvement.

For Q1, including in-transit, our ending inventory will be up around 15% as we lap depleted inventories at the end of the first quarter last year, but approximately flat to 2019 against a two year double-digit sales increase. We expect that inventories will continue to run close to flat on a two year basis through the balance of the year.

We expect interest expense for the year to be approximately flat with lower interest on borrowings offset by notional interest expense related to the sale leaseback gain deferral. Overall, 2021 headline numbers will reflect challenging comparisons to 2020, but we believe we will — will reflect strong underlying performance and excellent growth versus 2019. We have great momentum coming into the year and a strong plan aided by Operation North Star.

I’ll now turn the call back over to our moderator so that we can begin to address your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question today is coming from Greg Badishkanian from Wolfe Research. Your line is now live.

Spencer HanusWolfe Research — Analyst

Good morning. This is Spencer Hanus on for Greg. Can you talk about what gets you comfortable with the low-single-digit comp for the first quarter? And then how are you guys thinking about the benefit from stimulus during 1Q? And then I guess on a two year stack basis, it implies comps up roughly low-teens. Is that a good way to think about comps for the full year, a good starting point?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. Hey, Spencer. I’ll be happy to take that and then maybe Bruce will want to add a couple of comments. So obviously, Q1 is a very complex quarter because there are a lot of moving parts and we’re up against some significant variability by week as we went through Q1 last year when February started off fairly soft and then we saw the stock up benefit in March then had a little bit of a dip before we saw the first 10 of the stimulus in mid-April, which drove comps a lot higher.

So we’re modeling gains there and we’re looking at each of those weeks. We’re factoring in the impact of the timing of tax refunds, which are coming out later this year. The stimulus effect from the December stimulus, which is still having some impact on the stores and dollars to drop on there. We haven’t at this point baked in the next stimulus which appears likely to pass in the near future. I would say, what we’ve seen over time is a little bit of a diminishing return on those stimulus injections. The benefit we got from the December stimulus was less than the April stimulus, and we’re assuming that will probably go a little further, partly because people are saving more of the stimulus payments than they were at the beginning of the pandemic with the first round.

So there’s a lot of moving parts. We’re modeling it out based on all is moving parts, and we’re obviously close to five weeks into the quarter. So we’ve seen where we’ve been quarter-to-date, and that gives us some comfort about where we’re trending for the quarter as a whole. I think the key point is our underlying business is very strong. When you sort of bracket out some of those timing and stimulus-driven differences, we’re seeing really strong comps across most of our categories, not surprisingly, food and consumables is a little light right now given what we’re starting to come up against. But we feel good about the trend and we feel that the guidance we’ve given on comps makes sense given everything we’re seeing.

Bruce ThornPresident & Chief Executive Officer

And Spencer, I’ll just add to what Jonathan said. Q1 definitely is off to a good start. We think the customers’ health issue is still valuing — value home, e-commerce and shopping on her terms. I think our Operation North Star initiatives are proving very well to be what she wants in Q1. And we’re entering 2021 with more reward customers than ever before. So feel good about how we’re starting the year.

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

And then, Spencer, just to come back on the last point of your question about two year comps. Yeah, I agree with your math on Q1. I wouldn’t necessarily take that as kind of hard and fast guide to where we’re going to be, every quarter is different. This year in Q1, we are still getting some benefit from the December stimulus. As we get to the latter part of the year, we’re assuming there will be a little or no stimulus or unemployment benefit that we are currently benefiting from. But there are lots of puts and takes in every quarter, including the fact when we get to Q4, We don’t have the — we’ll be lapping a seasonal headwind. So I think you have to look at every quarter differently. But I wouldn’t count on the two year comp being the same for the balance of the year.

Spencer HanusWolfe Research — Analyst

That’s really helpful. And then on your inventory, how comfortable are you with what — where inventory levels are today? And do you feel a little bit light? Are you good today? Thanks.

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. I think we feel pretty good. We have — our own hand has remained in negative territory and we are working to get that back to something that makes us more comfortable, closer to flat, a little bit higher on hand at the end of Q1. We’ve had some processing challenges, as we talked about, getting inventory through our DCs, which has impacted the on-hand levels, but we are on track. We are hopeful that we’re going to be back in a good position. Obviously, sales is an important dynamic in that. But we feel good about where we’re tracking to at the end of Q1.

Spencer HanusWolfe Research — Analyst

And then you talked about 50 to 60 new stores in 2021. How should we think about where those new stores will be located? Are they going to be in your core markets? Are they going to be in new markets? And then how does the store format differ from what your existing store looks like today?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. Spencer, these are mostly conventional stores, pretty much all in fact consistent with our existing store format. Some — about 20 of them are relos where we are in many cases taking more space, moving from a store, whether it was limited furniture penetration, for example, to a bigger store where we can have a full furniture assortment. But other than that, they are generally consistent with our existing boxes.

In terms of the geography, they’re pretty diverse in terms of where they are across the country. I wouldn’t say there’s any particular call out there. But to your point, we are continuing to explore different formats for stores going forward. Our priority this year is to return to healthy store count growth. We were slightly positive the last two years, we want to accelerate. But we do think there are a lot of interesting opportunities going forward, and that’s both with our existing format whether they’re filling opportunities in existing markets where we do well as well as a lot of white space in markets where we aren’t penetrated. And then there is an opportunity for different formats that we’re spending a lot of time evaluating right now.

Spencer HanusWolfe Research — Analyst

Great. Thank you.

Operator

Thank you. Our next question today is coming from Joe Feldman from TAG. Your line is now live.

Joe FeldmanTelsey Advisory Group — Analyst

Great. Thanks guys. Wanted to ask on the e-commerce business. Can you share a little more color on what’s selling? Like, our people starting to buy more of the furniture and bulky items? Is that kind of, I guess, sparking those new two forward distribution centers or are people still buying smaller ticket? Maybe just any complexion you could share on that would be helpful.

Bruce ThornPresident & Chief Executive Officer

Yeah. Joe, I’ll start this one-off. Thanks for the question. And we’re really pleased with our growth in e-commerce, as we stated before in our opening remarks. It’s grown significantly twice last year’s volume in Q4, and Q4 was nearly 5% of sales. And as it wasn’t so long ago when we were under $50 million in sales total, that was back in 2018. And now this channel looks like it could grow to $1 billion in a handful of years. So we’re really pleased with that.

The type of items that are selling are anything from an Instacart order that will fit in the back of a trunk, all the way up to a Broyhill sectional sofa that can be delivered same-day through pickup or on a two day ship from store out of one of our 47 stores. So we’re really pleased with that. We are seeing tremendous interest along with this home nesting trend to buy that furniture online, and so that’s been a nice addition. And we’re seeing a tremendous amount of new customer through this ecom channel that we didn’t have before.

So conversion rates continue to grow, in fact, doubled over last year, very strong traffic, nearly 40% up year-over-year. We’ve made it easy to shop with Instacart pickup, ship from store and direct vendor shipments as well. So seeing a lot of home type of products being ordered through the ecom channel.

Joe FeldmanTelsey Advisory Group — Analyst

Got it. That’s helpful. Thank you. And then you mentioned new customers, and that was something else we wanted to ask you about. With — I think you said with the rewards program, you saw 9 million new customers for the year. And I was just wondering, if what you’re seeing — are they behaving the same way as your historical customers or are they different at all, younger? Are they buying different things, spending more? And maybe if you could tie in the e-commerce new customers you’re seeing to that too, that would be helpful. Thanks.

Bruce ThornPresident & Chief Executive Officer

Yeah. Good question. The — first-off, a lot of our — in some months, half of our rewards customer sign-ups come through the e-commerce channel. And so that’s a nice way to pick up new customers. But you’re right, we added 9 million rewards customers. Our growth in rewards customers or new to our file has been roughly 10% for the last three years, so 21 million in total. We’re retaining these customers at a better rate than prior years. And these retained customers that we’re getting are spending more than 25% more in 2020 than they did in 2019. And the satisfaction scores across our network in stores has never been higher from a Net Promoter Score. So we’re happy to see that.

In terms of age, I can’t comment on that right now. We’ll look into that a little bit more and get back to you. But I do know that there’s a lot of a nesting trend going on in that furniture, improving the home space for work, for life is key, and we technically see a younger customer in that area. So I’m sure there’s some aging down, which is a good trend to have in that customer growth file. But this growth to 21 million and growing 10% a year is like a customer annuity pipeline for us and sets us up in nice way for ’21.

Joe FeldmanTelsey Advisory Group — Analyst

That’s great. Thanks, guys. And good luck with this quarter.

Bruce ThornPresident & Chief Executive Officer

Thanks, Joe.

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Thanks, Joe.

Operator

Thank you. Our next question today is coming from Chandni Luthra from Goldman Sachs. Your line is now live.

Chandni LuthraGoldman Sachs — Analyst

Hey, good morning, guys. Thank you for taking the question. I’d like to talk about share repurchase a little bit. So you guys repurchased $73 million worth of shares at $46 in the quarter. Stock’s obviously a bit higher than that right now, has been for the last couple of weeks. As we think about buyback going forward, could you perhaps throw some color as to how you think about it? Do you think about repurchase more opportunistically or is it based on a forward set plan typically? Thank you.

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Hey, Chandni. Good morning, and thanks for the question. I’ll be happy to take that one. So just as a reminder, we had a $500 million share repurchase authorized by the board last August. We’ve done — we did $173 million of that through the end of Q4, to the point of your question. When we authorized that amount, we felt confident that we would have, I would call it, excess liquidity available to fund that. And clearly, since then, we’ve continued to perform well. So that picture hasn’t changed. And we certainly think we have the liquidity to continue moving through that $500 million authorization.

The specific decision on execution is one we make quarter-by-quarter. We review with our board and capital allocation planning committee. And we certainly take into account where the stock is currently trading when we set the grid. Typically, we’re doing a 10b5-1 plan. We’re locking in at the beginning of the quarter. And those plans are structured to become more aggressive at lower stock price levels, but also to lock in a kind of base level of repurchases typically.

So again, it’s a quarter-by-quarter determination. We certainly don’t intend to carry the excess liquidity we have on the balance sheet on a long-term basis. So we want to deploy that capital in a more productive way. And we expect that share repurchases will remain the key way that we will do that in the near-term. And obviously, that takes into account the assumption that our capital expenditures in the business, which would be our top priority to invest within the business are going to be fully funded from operating cash flow, which we certainly expect to be the case.

Chandni LuthraGoldman Sachs — Analyst

Great. And if I could get a quick follow-up on gross margins for next year, especially as we think about the promotional environment that most retailers have talked about as we go beyond the first quarter. How do you think about the promotional backdrop vis-a-vis freight charges? And how do you think that sort of flows through the balance of 2021?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Go ahead, Bruce, yeah.

Bruce ThornPresident & Chief Executive Officer

Yeah. No, it’s a good question, Chandni. We expect that our promotional activity will be lower than 2019. We had a good lower promotional activity through 2020. With regard to freight impact, we’re doing things to mitigate that. We’re in negotiations. We’ve got a great ecosystem of vendors and freight carriers that we’re working with, smoothing out volumes to lower those rates and then get the capacity. But overall, just tremendous good work with less markdowns in 2020. We expected that in [Technical Issue]

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

You cut out a little bit, Bruce.

Bruce ThornPresident & Chief Executive Officer

Go ahead, Jonathan.

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Sorry, yeah. So yeah, Chandni, I would just add that I think — and sort of echo to really what Bruce said, that we we’ve got much more effective deploying promotions I think during 2020. So we used to do a lot of those big whole house friends and family events, which were a fairly blunt instrument. And as our rewards database has grown and we have more data and we learn more about what promos work, I think our ability to be much more targeted with our promotions has significantly improved. And then you look at a month like January this year where we were significantly less promotional and we still delivered a great comp. And we feel good about that. We made a lot more money in January than we have done in past years.

Chandni LuthraGoldman Sachs — Analyst

Great. Thank you so much.

Operator

Thank you. Our next question today is coming from Peter Keith from Piper Sandler. Your line is now live.

Peter KeithPiper Sandler — Analyst

Hi, thanks. Good morning, everyone. I hope you’re doing well. Maybe just to follow on that last regarding gross margin. There’s certainly a lot of investor concern around freight headwinds in ocean freight. And I was hoping you could provide maybe the shape of that headwind to your full year. Is that something that you think will run smoothly or equivalent across all quarters? Is it front-end loaded, back-end loaded? And maybe even any full year quantification of the impact would be helpful?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. I’ll be able to — good morning, Peter. I’ll be able to kick-off on that. Yeah, I mean we definitely think it’s going to be a full year headwind. There’s no reason at this point to think that it’s going to kind of abate in 2021. It will probably be in ’22 before we start to see year-over-year relief on that based on everything we’re seeing and hearing and talking to our partners. I would say in terms of the cadence through the year, probably relatively even at this point based on what we’re seeing. And we haven’t really quantified it, and it’s continuing to evolve, obviously. But it is a meaningful headwind throughout 2021.

Peter KeithPiper Sandler — Analyst

Okay. And but I guess — I think in the prepared remarks, Jonathan, factoring that in, you would still expect gross margin just to be down slightly?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Exactly. Yeah, we think we’ll make up some ground in other areas that will put us in that range.

Peter KeithPiper Sandler — Analyst

Okay, great. Moving on to a different topic. You did mention this new capability with data driven space planning capabilities. And I was hoping you could unpack that for us a little bit. Maybe give us a sense of the timing of when that starts to rollout and even qualitatively, what might we see at the store in terms of changes as this technology gets implemented?

Bruce ThornPresident & Chief Executive Officer

I’ll take that one, Jonathan. Good question, Peter. Space planning is something that, under new leadership, Jack Pestello, our merchandiser is something that we’ve already started working on. It’s our first tool into better utilizing our space in our stores. So it’s basically being able to planogram down to the store level and customize to every store because not all stores are equal.

The space, so that we can get better allocation, we can get better planning, better sell-through and getting in and out of sets better. We can also increase our ability to customize assortments to a store localization. And because of that, we believe we’re going to get improved sales per square foot and margin dollars per square foot in our stores. And so this has already started. This progress has been started. And by mid-year, we should start seeing some rollout of this and then extend it to our entire fleet. So it’s going to take some time, but we’ll see benefit starting in back half ’21 and then going into ’22.

Peter KeithPiper Sandler — Analyst

Terrific. Sounds good. Thanks so much.

Operator

Thank you. Our next question today is coming from Anthony Chukumba from Loop Capital Markets. Your line is now live.

Anthony ChukumbaLoop Capital Markets — Analyst

Good morning, and congratulations on a really strong year. Just wanted to — I had two questions. I guess, the first one is on lease-to-own and what you saw there in the fourth quarter and how much of a contributor that was to your strong furniture sales?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. I’ll be able to kick off on that. Hey, Anthony, good morning. Thanks for the congratulations. Yeah, what we see all year is that our leasing business has been down. Customers have had more cash available to purchase furniture. So year-over-year, the approval rates have been pretty consistent, but the leasing demand has been lower just because we’ve seen a tandem shift to other types of purchases.

Anthony ChukumbaLoop Capital Markets — Analyst

Got it. And then, I just wanted a little bit of clarification. So you said you’re going to open 50 to 60 new stores, but 20 of those are going to be relocations. So in terms of just sort of completely new stores, and you’re talking 30 to 40. And I guess, I was just wondering, what do you anticipate in terms of just sort of store closings?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. That’s a key part of the equation here, Anthony. We’re trying to get the closings down. So we’re anticipating something in the region of 15 outright closings for the year to drive a meaningful net store count increase. And that’s partly coming from what we refer to as our store performance intervention program, where we’ve spent a lot of time looking at underperforming stores, particularly those coming up for lease renewal, and really worked hard to improve their performance, and we don’t need to close them.

And then also, we had some good productive negotiations with landlords in 2020 that have helped with-from an occupancy standpoint to make it viable to keep more stores open. So it’s a constant process. I guess the other key point, again, just to reiterate, is beyond ’21, we do expect to continue to accelerate the openings. And we’re hopeful that we can keep the closures at a — the outright closures at a pretty low level, so we can continue to grow that net store count impact to our overall sales growth.

Anthony ChukumbaLoop Capital Markets — Analyst

Got it. Thank you so much. Keep up the good work.

Bruce ThornPresident & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question today is coming from Jason Haas from Bank of America. You line is now live.

Jason HaasBank of America Merrill Lynch — Analyst

Hey, good morning, and thanks for taking my questions. Can you talk about what you’re seeing with regards to close-out availability? We’ve heard some commentary from others that there may be some challenges, just given how strong sales have been in the inventory shortages. So curious to know what you’re seeing there. And then also related to that, can you provide some more color on just what you’re doing with regards to that department? Are you adding any sort of new merchants or any other sort of capabilities there? Thanks.

Bruce ThornPresident & Chief Executive Officer

Yeah, Jason. Good morning. Thanks for the question. I’ll tell you what; we’re really pleased with our focus on close-out and getting back to our roots, our DNA, being the deal place. But I’ll tell you, we grew 50% in terms of close-outs in Q4 across all categories. We continue to grow in these areas. We were trying to find the intersection, where quality and price intersect and availability. And we haven’t reached that yet, so it’s a good news. We still think there’s good, strong availability.

It’s a bit tougher in food and consumables, and that’s where we’ve lagged a bit because of the pandemic, things are tighter there. But across all other categories, we’re getting back into these things. So it’s all growth, and it’s all north, if you will, on that. We’re a deal store, close-outs, like I said, as a DNA, we’re starting to see great penetration in areas like apparel, where we mentioned in the opening remarks, having brands like Reebok, Nautica, Ann Taylor, Scott’s Brothers and Soft Home and Hard Home deals as well.

So we’re excited about our growth in these areas, and we know our customers are as well. And the vendors that are supplying these closeouts are happy to see us back in the business. Year-over-year, our close-out growth grew over — grew nearly 40%. So we see this as loads of opportunity as our team continues to reach out to our vendor base and grow. So food and consumables lagging a bit, everywhere else, it’s green and growing.

Jason HaasBank of America Merrill Lynch — Analyst

That’s great. Thank you. And then as a follow-up question. How are you thinking about the assortment as the country begins to reopen, vaccinations start to go out? Just what are you expecting in terms of how customer spending habits might shift? And any color on what you’re doing to retain a lot of the new customers that you’ve gained over the past year? Thanks.

Bruce ThornPresident & Chief Executive Officer

Yeah, and a great follow-up question. Our customer is all about value, home and shopping on her terms. So e-commerce, being an omnichannel retailer and all the work we’ve done there is really playing out. As well as our assortment fits that need very well and all the Operation North Star strategic work we’ve done is doing nicely. So we can see — we see even post-COVID the home nesting trend to continue. We think we’re well positioned with our growth in Broyhill and other brands in the home. Home office is going to continue to be a winner in an area for penetrating into that. We do believe that she’ll want to travel a bit more. So we’re looking into all things that help travel, luggage and things like that.

Our convenience, e-commerce, we’re going to continue to get better and better at that, making it safely and convenient. That’s going to be a trend that’s going to continue. And we’re going to add a lot more personalization and services this year that remove friction through that channel, making it easy to shop, seeing best sellers, more types of payments and personalization to really reach her. Value is going to continue to be huge. It never goes out of style. And so we’ll continue to grow our close-out deals, our engineered big buys, name brands like in our pantry optimization initiative that are competitively priced, but deals, deals, deals. So I think we’re well positioned for post COVID-19. And I think the customer is healthy. And those trends on value home and e-commerce are going to stay and be strong.

Jason HaasBank of America Merrill Lynch — Analyst

Great. Thank you.

Bruce ThornPresident & Chief Executive Officer

You got it.

Operator

Thank you. Ladies and gentlemen, in the interest of time, our final question today is coming from Brad Thomas from KeyBanc Capital Markets. Your line is now live.

Brad ThomasKeyBanc Capital — Analyst

Hi, good morning. Thanks for taking the question, and congrats on a great year. I wanted to ask two questions about how to think about 2020 at a high level, knowing you haven’t given full year guidance. The first, on sales, it seems to me you have a ton of opportunity still to grow in what you did last year, with elements like expanding a lot, things you’re doing with merchandizing and quarters where the inventory was right away where you wanted it. Is there any ability to maybe quantify what that opportunity is just from the blocking and tackling and the initiatives being a bit better here this year?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. I’ll be happy to take up — pass answering that, Brad. Again, there are a lot of moving parts as we think about our comps, the word quarter-by-quarter, many moving parts in 2020. And as we look to 2021, that will remain the case. I think a key point though is, when we came into 2020, we said we expected our comps to accelerate through the year, that in Q3, Q4, we would be posting pretty nice comps, reflecting the benefit of all of the initiatives, pantry op, Queue, Lot, Broyhill, ecom growth.

And that’s really what we believe happened. It’s masked a little bit by the stimulus and the nesting trend. But underneath that, our data says that we really did get the benefits and more that we expected from those initiatives, and we expect to continue that into 2021. And then on top of that, you’ve got the kind of one-time effect of stimulus and probably nesting will be a one-time effect eventually when things return to a level of normalcy. But we — the important point for us is we believe our underlying strategies are working and that when we kind of get back to normalcy, they will continue to move us forward.

Brad ThomasKeyBanc Capital — Analyst

That’s helpful. And then regarding SG&A, Jonathan, can you give us any more help of how to think about modeling SG&A for the year? I think you mentioned the $30 million savings, with the desire to get that higher for 2021 versus 2020. How should we think about where it might be if sales come on the stronger end of the spectrum versus if these prove to be tougher comps and you have a little bit more trouble against the really tough comparisons you have again?

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Yeah. I think I’m probably starting to sound a bit like a broken record with this comment, but it’s very complicated again in terms of expenses because of all the puts and takes year-over-year. I think what we learned in 2020 very clearly was that the expense flex as we delivered higher sales was very modest. So we got tremendous leverage from delivering higher sales. And again, over time, our objective is to grow our productivity significantly and harvest that leverage benefit.

If you look at some of the other puts and takes in 2021, you’ve got the-we had significant COVID expenses in 2020. A substantial portion of which, we don’t expect to lap, but we will continue to have some of those. We had full stretch bonus payments pretty much in 2020, and that will normalize in 2021. And then we’ve got the benefit of the structural savings you just talked about. Against that, we’ve got the full year impact on sale-leaseback expense. We’ve also got strategic investments we’re making, including with our new stores, with the forward distribution centers we talked about. And then there is a little bit of wage pressure we alluded to, and then various other puts and takes, including equity comp.

So that’s a fairly long-winded answer to say that there are a lot of moving parts. Our guidance for the year is that SG&A will be down in dollar terms. To the extent that sales are coming in higher than we-assuming in our internal plan, we wouldn’t expect to be adding a lot of SG&A dollars. There are some investments we might choose to make at that point.

On the contrary, if sales come below our plan, we certainly have the ability to take expense out, but we do have a lot of fixed expense in there, which-also on the downside limits, our opportunity is somewhat there. But again, we remain highly focused on trying to take structural costs out. We have savings opportunities, which we believe are there beyond what we have baked into our internal plan and into that guidance. And we’ll be working very hard to harvest those in 2021.

Brad ThomasKeyBanc Capital — Analyst

That’s really helpful. Thank you so much.

Bruce ThornPresident & Chief Executive Officer

Thank you, Brad.

Operator

Thank you. We reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today’s teleconference and webcast. A replay of this call will be available to you by 12 noon Eastern Time this afternoon, December 4 — I’m sorry, excuse me, March 5. The replay will end at 11:59 PM Eastern Time. You can access the replay by dialing toll-free 877-660-6853 and enter replay confirmation 13715962 followed by the pound sign. Toll number 1201-612-7415 and enter replay confirmation 13715962, followed by the pound sign.

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Bruce ThornPresident & Chief Executive Officer

Jonathan RamsdenExecutive Vice President, Chief Financial Officer & Chief Administrative Officer

Spencer HanusWolfe Research — Analyst

Joe FeldmanTelsey Advisory Group — Analyst

Chandni LuthraGoldman Sachs — Analyst

Peter KeithPiper Sandler — Analyst

Anthony ChukumbaLoop Capital Markets — Analyst

Jason HaasBank of America Merrill Lynch — Analyst

Brad ThomasKeyBanc Capital — Analyst

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Does Intertek Group (LON: ITRK) have a wholesome steadiness sheet? http://goodwillsavannahga.org/does-intertek-group-lon-itrk-have-a-wholesome-steadiness-sheet/ Tue, 09 Mar 2021 07:02:58 +0000 http://goodwillsavannahga.org/does-intertek-group-lon-itrk-have-a-healthy-balance-sheet/

Berkshire Hathaway’s Charlie Munger-backed exterior fund supervisor Li Lu does not care when he says, “The largest danger in investing will not be worth volatility, however whether or not you’ll undergo a everlasting lack of capital ”. Once we take into consideration the chance degree of a enterprise, we all the time like to take a look at its use of debt as a result of debt overload can result in chapter. We discover that Intertek Group plc (LON: ITRK) has debt on its steadiness sheet. However the actual query is whether or not this debt makes the enterprise dangerous.

When is debt harmful?

Debt is a instrument to assist companies develop, but when a enterprise is unable to repay its lenders, it exists at their mercy. An integral a part of capitalism is the method of “artistic destruction” the place bankrupt firms are ruthlessly liquidated by their bankers. Nonetheless, a extra widespread (however nonetheless expensive) state of affairs is the place an organization has to concern shares at cut price costs, consistently diluting shareholders, simply to strengthen its steadiness sheet. In fact, many firms use debt to finance development with none detrimental penalties. Once we consider a enterprise’s use of debt, we first have a look at money movement and debt collectively.

Uncover our newest evaluation for Intertek Group

What’s Intertek Group web debt?

You may click on on the graph beneath for historic figures, nevertheless it reveals that Intertek Group had a debt of £ 623.8million within the UK as of December 2020, in comparison with £ 856.8million within the UK , a yr in the past. Nonetheless, he has £ 203.9million in money, leading to web debt of round £ 419.9million.

LSE: ITRK Debt to Fairness Historical past March 9, 2021

How robust is Intertek Group’s steadiness sheet?

The newest steadiness sheet knowledge reveals Intertek Group had liabilities of £ 751.2million due inside a yr, and liabilities of GBP 860.9million maturing thereafter. Alternatively, he had £ 203.9million in money and £ 645.7million in receivables due inside one yr. Thus, its liabilities outweigh the sum of its money and (short-term) receivables of £ 762.5 million.

In fact, Intertek Group has a titanic market cap of £ 8.64 billion, so these liabilities are seemingly manageable. Nonetheless, we expect it is price maintaining a tally of the power of its steadiness sheet as it may change over time.

We measure an organization’s indebtedness relative to its incomes energy by its web debt divided by its earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) and calculating the convenience with which its earnings earlier than curiosity and taxes (EBIT ) cowl his pursuits. prices (curiosity protection). Thus, we think about debt versus earnings with and with out amortization prices.

Intertek Group has a low web debt to EBITDA ratio of simply 0.72. And its EBIT simply covers its curiosity prices, which is 11.4 occasions the dimensions. So we’re fairly relaxed about its extraordinarily conservative use of debt. However the dangerous information is that Intertek Group has seen its EBIT plunge 19% over the previous twelve months. If this price of decline in earnings continues, the corporate may discover itself in a tough state of affairs. There is no such thing as a doubt that we study essentially the most about debt from the steadiness sheet. However finally, the corporate’s future profitability will resolve whether or not Intertek Group can strengthen its steadiness sheet over time. So if you’re targeted on the longer term you may try this free report displaying analysts’ earnings forecasts.

Lastly, whereas the tax authorities love accounting earnings, lenders solely settle for money. The logical step is due to this fact to look at the proportion of this EBIT that corresponds to the precise free money movement. Over the previous three years, Intertek Group has recorded free money movement of a complete worth of 94% of its EBIT, which is stronger than what we normally anticipated. This places him in a really robust place to repay his debt.

Our perspective

The conversion of Intertek Group’s EBIT to free money movement suggests he can handle his debt as simply as Cristiano Ronaldo may rating a objective towards an Underneath-14 goalkeeper. However we now have to confess that we discover that its development price of EBIT has the other impact. All this thought-about, it appears like Intertek Group can comfortably handle its present debt ranges. On the intense aspect, this leverage can improve returns for shareholders, however the potential danger of loss is larger, so it is price watching the steadiness sheet. There is no such thing as a doubt that we study essentially the most about debt from the steadiness sheet. However on the finish of the day, each enterprise can comprise dangers that exist off the steadiness sheet. These dangers could be tough to identify. Each firm has them, and we have noticed 1 warning signal for Intertek Group you must know.

If, in spite of everything of this, you are extra fascinated about a fast-growing firm with a rock-solid steadiness sheet, then take a fast have a look at our record of cash-growing shares.

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This Merely Wall St article is normal in nature. It doesn’t represent a advice to purchase or promote any inventory, and doesn’t keep in mind your targets or your monetary state of affairs. We intention to carry you long-term, focused evaluation based mostly on basic knowledge. Word that our evaluation could not keep in mind the most recent bulletins from worth delicate firms or qualitative data. Merely Wall St has no place in any of the shares talked about.
*Interactive Brokers Ranked Least Costly Dealer By StockBrokers.com Annual On-line Evaluate 2020

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Epiroc (STO: EPI A) appears to be utilizing debt correctly http://goodwillsavannahga.org/epiroc-sto-epi-a-appears-to-be-utilizing-debt-correctly/ Tue, 09 Mar 2021 07:02:58 +0000 http://goodwillsavannahga.org/epiroc-sto-epi-a-seems-to-be-using-debt-wisely/

Some say volatility, slightly than debt, is one of the best ways to consider threat as an investor, however Warren Buffett mentioned “volatility is way from threat.” So it looks like good cash is aware of that debt – which is often linked to bankruptcies – is a vital issue while you assess the chance of a enterprise. We are able to see that Epiroc AB (publ) (STO: EPI A) makes use of debt in its actions. However does this debt fear shareholders?

When is debt harmful?

Typically talking, debt solely turns into an actual drawback when a enterprise can’t simply repay it, both by elevating capital or with its personal money stream. If issues actually go mistaken, lenders can take over the enterprise. Nevertheless, a extra widespread (however nonetheless expensive) state of affairs is the place an organization has to dilute its shareholders at an inexpensive inventory worth simply to get its debt beneath management. After all, debt may be an vital instrument in companies, particularly massive cap corporations. Once we have a look at debt ranges, we first have a look at money and debt ranges, collectively.

Uncover our newest analyzes for Epiroc

How a lot debt is Epiroc?

You possibly can click on on the graph under for the historic figures, however it exhibits that as of December 2020 the Epiroc had a debt of 8.12 billion kr, a rise of 6.40 billion kr, on a yr. Nevertheless, he has 15.7 billion kr in money which interprets right into a web money place of seven.61 billion kr.

OM: EPI A Debt to Fairness Historical past March 9, 2021

How wholesome is Epiroc’s observe report?

Zooming in on the most recent steadiness sheet information, we will see that Epiroc had kr 8.87 billion commitments due inside 12 months and kr 11.3 billion commitments past. In return for these obligations, it had money of 15.7 billion kr in addition to receivables valued at 7.65 billion kr and due inside 12 months. Thus, he can boast of three.24 billion kr of liquid belongings greater than complete Liabilities.

This means that Epiroc’s steadiness sheet seems to be fairly sturdy, with its complete liabilities roughly equaling its money. Subsequently, kr208.7b firm is very unlikely to be cash-strapped, however nonetheless price keeping track of the steadiness sheet. Briefly, Epiroc has a clear money stream, so it is honest to say that it does not have numerous debt!

In distinction, Epiroc’s EBIT plunged 10% in comparison with final yr. We consider that such a efficiency, if repeated steadily, might effectively trigger difficulties for the title. There isn’t any doubt that we be taught essentially the most about debt from the steadiness sheet. However it’s future income, greater than something, that may decide Epiroc’s capacity to take care of a wholesome steadiness sheet sooner or later. So if you’re centered on the longer term you possibly can try this free report exhibiting analysts’ earnings forecasts.

Lastly, whereas the tax authorities love accounting income, lenders solely settle for money. Epiroc might have web money on the steadiness sheet, however it’s all the time attention-grabbing to see how effectively the enterprise converts its earnings earlier than curiosity and taxes (EBIT) into free money stream, as this may affect each its want and its capacity to handle debt. Over the previous three years, Epiroc has produced sturdy free money stream equal to 72% of its EBIT, which we anticipated. This free money stream places the enterprise in place to repay debt, if any.

To summarize

Whereas it nonetheless is smart to analyze an organization’s debt, on this case Epiroc has kr 7.61 billion in web money and a good trying steadiness sheet. Better of all, by changing 72% of that EBIT into free money stream, which brings in 7.3 billion kr. We’re subsequently not involved with the usage of Epiroc debt. There isn’t any doubt that we be taught essentially the most about debt from the steadiness sheet. However on the finish of the day, each enterprise can comprise dangers that exist off the steadiness sheet. To this finish, you should concentrate on the 1 warning signal we noticed with Epiroc.

If you wish to spend money on corporations that may generate income with out the burden of debt, check out this free listing of rising corporations which have web money on the steadiness sheet.

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If you wish to commerce Epiroc, open an account with the most cost effective platform * accepted by professionals, Interactive brokers. Their shoppers from greater than 200 nations and territories commerce shares, choices, futures, currencies, bonds and funds around the globe from a single built-in account.

This Merely Wall St article is normal in nature. It doesn’t represent a suggestion to purchase or promote any inventory, and doesn’t keep in mind your targets or your monetary state of affairs. We goal to deliver you long-term, focused evaluation based mostly on elementary information. Be aware that our evaluation might not keep in mind the most recent bulletins from worth delicate corporations or qualitative data. Merely Wall St has no place in any of the shares talked about.
*Interactive Brokers Ranked Least Costly Dealer By StockBrokers.com Annual On-line Evaluate 2020

Do you may have any feedback on this text? Involved concerning the content material? Get in contact with us immediately. It’s also possible to ship an e mail to the editorial group (at) simplywallst.com.


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