Bought 100 SBSI at $20.4/Select Medical/Earnings: GTN RRD FBSS MTOR

Intel increased its quarterly dividend by 7% to 22.5 cents. This brings the annual dividend rate to 90 cents. Based on my average total cost of $17.82, my dividend yield will become 5%. I own 273+ shares and have ceased reinvesting the dividend after the 2011 third quarter (snapshot of purchases at Intel)

The I.R.S. has extended the date for cost reporting for debt and options from January 1. 2013 to January 1, 2014. www.irs.gov.pdf Brokerage firms will now have to report the cost basis for bonds bought after 1/1/14. Adjustments to the cost basis for bonds is a complex topic.  

The Trader column in this week's Barrons had some favorable comments about Xerox (own as Lottery Ticket). Lottery Ticket Purchases: Links in One Post; Lottery Ticket Basket Strategy

Michael Santoli argues in his Barrons column that the emphatically unloved Supervalu stock could double from its current price. I own SVU as a LT and two Albertson's senior unsecured bonds as part of my Junk Bond Ladder Strategy, after selling 4 bonds.

I have become uncomfortable buying anything at the current levels, other than minor and inconsequential positions, particularly given the developing recession in Europe, their ongoing sovereign debt crisis, the slowdown in China, and the anemic U.S. recovery with a stalling job recovery. Personally, I would like to see a further decline of at least 10%.  I prefer a sharp decline rather than the piecemeal variety.

I never thought the Greeks would slow down for long on their perceived inherent righs to spend other people's money without any concern about repayment. In the recent election, the two parties that agreed to the EU's austerity proposals will no longer be able to form a government. NYT  Bloomberg With another large refinancing due this month, it is just a matter of time before the Greek government defaults again on its restructured finances.

Select Medical announced yesterday a tender offer for any and all of its outstanding 2015 senior subordinated note. I own just one of those bonds. The company also announced the commencement of a private offering of $365 million in senior notes. The 2015 bond did rise yesterday to a price slightly in excess of its par value. I also received an email notice that Moody's had upgraded the 2015 bond to B3. The common shares, SEM, rose 56 cents, or 6.67%, in trading yesterday to close at $8.95.


1. Bought 100 Southside Bancshares (SBSI) at $20.4 Last Tuesday (Regional Bank Basket Strategy)(see Disclaimer): When I developed this basket strategy back in 2009, I decided to devote anywhere from $40,000 to $50,000 to it. That range is not set in stone.

Last year, the exposure declined to almost $30,000 due to profit taking. Over the past couple of months, I have increased my exposure selectively, and have only sold one position to harvest a quick profit. Bought 60 HBNC at $17.55 (3/29/12 Post)-Sold 60 HBNC at $24.96 (4/30/12 Post). Along with other recent additions, the purchase of 100 SBSI shares last Tuesday took me close to the $40,000 minimum commitment again 

The other recent purchases include the following: Bought 50 BHLB AT $21.66 (March 2012 Post); Bought 50 FISI at $15.55 (April 2012 Post); Bought 50 BHB at $30 (February 2012 Post); Bought 50 FCBC at $12.5 (February 2012 Post); Bought 50 UVSP at $15.1 (March 2012 Post); Bought 50 SYBT at $21.84 (March 2012 Post); and Bought 50 MBVT at $26.25 (May 2012 Post). Of the recent purchases, three stocks were bought back after being sold: MBVT, FCBC and SBSI. 

SBSI is based in Tyler, Texas and has 48 branches in 17 cities in Texas. The locations are set forth in this document: southside.com/branch.pdf

Southside Bancshares will pay a 5% stock dividend on May 9th. The bank has been paying that 5% stock dividend since at least 1997. Southside Bancshares Stock Splits and Dividends In the same announcement as the stock dividend, the Board increased the quarterly cash dividend to 20 cents from 18 cents per share. Assuming a continuation of that rate, the dividend yield would be about 3.92% at a total cost of $20.4 per share.

Cash dividends have been paid at least since 1995. Southside Bancshares Cash Dividend History 

For 2011, the bank reported net income of $2.38 per share. This was basically unchanged from an E.P.S. of $2.37 in 2010. As shown at page 34, gains on securities available for sale have been an important component of this bank's earnings. Those gains totaled $33.446 million in 2009; $25.789 million in 2010; and $11.795 million in 2011. 

Capital ratios as of 12/31/11 were good:

Capital Ratios for Holding Company and Bank Subsidiary

For the Q/E 3/31/12, reported shortly after my purchase, Southside Bancshares reported net income of $10.1 million or 58 cents per share.  The bank had income of $5.972 million from security sales, up from $1.551 million in the first quarter of 2011.

The consensus was for 48 cents per share.

As of 3/31/12, the end interest margin was 3.52%; the efficiency ratio was at 57.18%; NPAs stood at .43% of total assets; the allowance for loan losses to NPAs was 144.32%; the allowance for loan losses to nonaccruing loans was 181.04%; and the return on average assets was 1.26%.  

A potential downside for the shares is that the consensus E.P.S. 2012 estimate is $1.91 per share and $1.92 for 2013. SBSI Analyst Estimates Three analysts contributed to those estimates. The lack of growth in earnings is a potential negative, assuming that the consensus estimates prove to be accurate. A mitigating factor would be for operating earnings to increase with less income derived from security sales.

I have previously bought and sold SBSI shares. Bought 50 SBSI at $19.49 (July 2010); Bought 50 SBSI @ $18.73 (October 2010); Sold 107+ SBSI at $20.5 (July 2011). I did not adjust purchase prices for a 5% stock dividend received in 2011 and included in the shares sold last July.

Southside Bancshares rose 59 cents in trading yesterday to close at $20.52.

2. Fauquier Bankshares (own 153+ Shares: Regional Bank Basket Strategy): Fauquier Bankshares, a very small bank operating in Northern Virginia, reported net income of $954,000, or 26 cents, for the 2012 first quarter, up just one cent from the 25 cents reported in the 2011 first quarter.

As of 3/31/12, the net interest margin was 3.89% (down from 4.12% for the 2011 first quarter); the efficiency ratio is too high at 72.88%; the total risk based capital ratio was okay at 13.31%; the tier 1 leverage ratio was 8.9%; NPLs to total loans stood at 1.06%; the allowance for loan losses to NPLs was at 141.91%; and the return on average assets was an uninspiring .64%.

Two closed end funds that I own, RVT and RMT, are the largest owners of this stock. FBSS Major Holders; SEC Schedule 13G filed by Royce & Associates.

Fauquier Bankshares declined seven cents yesterday to close at $12.83.

3. R.R. Donnelley (own bond: Junk Bond Ladder Strategy): RRD reported adjusted earnings of 44 cents per share, 8 cents better than the consensus estimate on a 2.3% year-over-year decline in revenues to $2.52 billion, which was less then the consensus estimate. The GAAP E.P.S. number was 21 cents per share which included restructuring charges, a loss on extinguishment of debt and acquisition related expenses.

Gross margin declined to 23% from 24.3% in the 2011 first quarter. The company reaffirmed guidance of an adjusted E.P.S. between $1.84 to $1.92 for 2012. SEC Filed Press Release Net sales for the U.S. Print and Related Services declined 3.1%. Adjusting for acquisitions, net sales decline in that business segment by 3.6%

On the day of the earnings release (5/2/12), the RRD common shares declined 6.86% to close at $11.81. I thought that the report reinforced the perception that RRD is operating in a declining business, similar in that regard to Pitney Bowes, which also pays its shareholders to much in dividends. The RRD common shares closed at $11.17 yesterday.

Bought 1 R.R. Donnelley 6.125% Senior Bond Maturing 1/15/2017 at 89

I recently flip a 100 shares of RRD stock, holding it long enough to clip one quarterly dividend. Sold 100 RRD at $12.24 (5/2/12 Post)- Bought 100 RRD at $11.6 (4/12/2012 Post). I may nibble on the common again at below $11.

I also recently flipped one of its bonds: Bought 1 R.R. Donnelley 8.875% Senior Bond Maturing 5/14/2021 at 92.69 (2/13/12 Post)- Sold 1 RRD Senior 8.875% Bond Maturing 2021 at 100 (4/11/12 Post).

4. Meritor (own 100 shares of the common and two bonds as part of the Junk Bond Ladder Strategy): For its second fiscal quarter ending 3/31/12, Meritor reported adjusted net income from continuing operations of 33 cents per share, beating the consensus estimate by seven cents. Revenues declined 1.4% year-over-year to $1.16 billion. MTOR reported an increase in adjusted EBITDA margin to 8.2% from 7% in the year ago quarter. Free cash flow was a negative $69 for the quarter. That poor results was "primarily driven by the reduction in European factoring balances associated with declines in European revenues". The company reaffirmed its fiscal 2012 guidance of an adjusted E.P.S. of $1.08-$1.39. The company retired $84 debt maturity as planned in March. As of 3/31/12, the company had $109 million in cash and $954 million in long term debt. SEC Filed Press Release

I currently own 100 shares of the common and two senior unsecured bonds. Added 50 MTOR at $6.55; Bought 1 ArvinMeritor 10.625% Senior Bond Maturing on 3/15/2018 at 96; Bought 1 ArvinMeritor 8.125% Senior Bond Maturing 9/15/2015 at 93.5

MTOR shares initially popped last week in response to the earnings release, hitting $6.92 on 5/2, and thereafter skidded to close at $6.04 yesterday.

5. Gray Television (own 2015 2nd Lien Senior Bond: Junk Bond Ladder Strategy): GTN reported first quarter net income of $2.192 million or 4 cents per share on revenues of $80.674 million. SEC Filed Press Release That result compared favorably to the 9 cent per share loss on revenue of $69.742 million in the 2011 first quarter.

The one analyst following the company estimated break-even for the quarter on revenues of $77.43 million.

As of 3/3112, Gray had $822.366 million in long term debt. Of that amount, the company had borrowed $461.763 million on the senior credit facility. This was more than $10 million less than on 12/31/12. (10-Q at page 11). The senior credit facility has priority over the second lien bond which had an outstanding balance of $365 million. The company had available $40 million on its credit facility.

On the day of the earnings release, the common stock, GTN, rose 7.87% to close at $1.92 (5/2/12). The shares have since retreated some to close at $1.83. I do not own the common. The purchase of common shares could only be accomplished under the Lottery Ticket strategy. I am close to being full on that strategy, given the rule that my total exposure can not exceed my realized gains to date.

Bought 1 Gray Television 10.5% Second Lien Bond Maturing 6/29/2015 at 95 

JOBS/Secular Decline Labor Participation Rate/ EARNINGS: SU, MWA, GABC/Sold 30 PEP at $66.58/Bought 1 Quicksilver Resources 9.125% Senior Bond Maturing 2019 at 97-ROTH IRA/

The Labor Department reported last Friday that the U.S. economy added 115,000 jobs in April, significantly below the consensus expectation of a 160,000-163,000 increase. This number is subject to revision. Private companies added 130,000 while governments shed 15,000 jobs.

The job gains for March and April were revised higher. The gain for February was revised to 259,000 from 240000, while March was revised to 154,000 from 120,000. Employment Situation Summary

The U-6 number was unchanged from March at 14.5%. Table A-15. Alternative measures of labor underutilization

The unemployment rate fell to 8.1% from 8.2%, but 350,000 people dropped out of the labor force. The participation rate fell to 63.6%, down from 64.2% a year ago, as more Americans become discouraged and drop out of the labor force.  The 63.6% participation rate is the lowest since December 1981.

The labor participation rate appears to be in a long term decline, indicating a structural problem in U.S. job creation:

This is what the labor participation chart looks like from 1948 to date:

Bureau of Labor Statistics Data 

While there appeared to be a leveling off between 2004-2008 before the onset of the Great Recession, that may have been a temporary phenomenon caused by job creation connected with temporary factors, including the housing bubble and the parabolic rise in household and government debt creating demand for products and services. What Will Produce Growth after the Age of Leverage? (September 2009 Post). Those jobs would soon be lost in 2008-2009 and will be slow to return.

Anyone who asks whether a junk rated bond is safe needs to immediately cease and desist managing their own money. Is this Bond Safe? The mere asking of that question indicates a lack of the most basic information about bond investing. My Junk Bond Basket Ladder Strategy is easily my riskiest strategy. After suffering a number of defaults, my best case scenario will be to break-even on the bonds, while collecting interest payments at close to a 8% spread over a BBB rated corporate bonds with a similar maturity schedule.

If anyone asks LB whether a junk bond is safe, it will send the Nerd Machine into apoplexy.

1. SUNCOR (SU)(own): Suncor Energy reported earnings of 93 cents per share for the first quarter, eight cents better than the consensus estimate. Downstream activities contributed 30 Canadian cents to those results. Production for the first quarter averaged 562,300 barrels of oil equivalent per day, down from 601,300 in the year ago quarter. The decline in production was due to the divestiture of non-core assets and the suspension of activities in Syria due to political unrest and sanctions against that country.

Cash flow from operations was $2.426  billion or $1.55 cents per share for the first quarter.

Oil sands production contributed an average of 305,700 barrels of oil equivalent per day.  Annual 2012 production from oil sands is estimated at 325,000 to 355,000 barrels of oil equivalent per day.

This report is discussed in an article published at Reuters.

Suncor also increased its quarterly dividend to 13 Canadian cents from 11 cents. 

Morningstar has a five star rating on SU with a consider to buy target at $34.30 or less.

Suncor Energy declined $1.25 last Friday to close at $30.35. Crude oil fell almost 4% last Friday.

Bought 50 SU at $28.67 

2. German American Bancorp (own 50 shares: Regional Bank Basket Strategy): German American Bancorp reported net income of $5.6 million, or 44 cents per share, for the 2012 first quarter, up from 37 cents per share in the 2011 first quarter. The estimate was for 40 cents.

The Board also declared the regular quarterly dividend of 14 cents per share. 

As of 3/31/12, the net interest margin was 3.88% (up from 3.76% as of 12/31/11); the efficiency ratio was 57.79%; NPLs stood at 1.49% of total loans (down from 1.63% as of 12/31/11 and 1.73% as of 3/31/11); and the return on average assets was 1.19% for the quarter. 

I did not see the capital ratios spelled out in the GABC press release. Several of the smaller banks do not estimate those ratios until the SEC Form 10-Q is filed shortly after the earnings announcement. 

GABC did recently filed its 2011 Annual Report with the SEC. As of 12/31/11, the coverage ratio was 83.83%, page 35. The capital ratios at that time were in excess of the minimum required to be considered well-capitalized:  

GABC Capital Ratios as of 12/31/2011

German American Bancorp declined 44 cents last Friday to close at $18.77.

Bought 50 GABC at 17.05 (May 2011)

3. Mueller Water (own 2017 senior sub bond: Junk Bond Ladder Strategy): Mueller Water Products (MWA) reported a loss from continuing operations of 6 cents per share on revenues of $215.5 million. During the Q/E 3/31/12, the company agreed to sell its U.S. Pipe operation for $89.8 million in cash, subject to working capital and other adjustments and reimbursement of certain liabilities up to $10.2 million. The company announced the completion of that transaction on 4/2/12.  SEC Filed Press Release

The adjusted net loss for the quarter was 1 cent per share. Adjusted EBITDA was reported at $26.7 million for the quarter. The consensus E.P.S. estimate was for a 4 cent per share loss.  If that number is based on the adjustments proposed by MWA, then the company beat by 3 cents.

Subsequent to 3/31/12, the company repaid $48 million that was outstanding on asset based lending agreement and redeemed $22.5 million in principal amount of its 8.75% senior unsecured notes. The 8.75% senior note was issued in an original amount of $225 million and matures in 2020. The 2017 subordinated senior note was issued in the original principal amount of $425 million. {The debt amounts shown in the last filed 10-Q for the Q/E 12/31/11 was $221.8 million for the 2020 senior note;  $420 for the 2017 subordinated note; and $34 million for the asset based lending agreement (page 7)}

Prior to the recent debt extinguishment, the company had $692.5 million in outstanding debt, of which $.7 was classified as current debt.  

I own just one senior subordinated note. Bought Back 1 Mueller Water 7.375% Senior Subordinated Bond Maturing on 6/1/2017 at 94.5 June 2011 If I could sell that one bond at par value or higher, which would be difficult, I would likely do so.

I had previously bought and sold this bond before buying it back. Bought 1 Mueller Water Bond at 94.5 December 2010 Sold 1 Mueller Water Sen Sub Bond at 100.625 May 2011

Corporate Website: Mueller Water Products - Home

4. Bought 1 Quicksilver Resources 9.125% Senior Bond Maturing 8/15/19 at 97-ROTH IRA Last Tuesday-ROTH IRA (Junk Bond Ladder Basket Strategy)(see Disclaimer): This bond was previously bought in a taxable account. Bought 1 Quicksilver Resources 9.125% Senior Bond Maturing 8/15/2019 at 99 (January 2012 Post)

The bond details are provided in this snapshot taken just before I placed the order. Since I am a Voyager customer at Vanguard, my commission for this purchase was $2.  My current yield will be close to 9.4%. 

Prospectus: Prospectus

FINRA Information: FINRA

This bond is currently rated at B2 by Moody's and B by S & P. 

As previously discussed, KWK is a highly leveraged production company whose production is unfortunately weighted in natural gas. 

I have not yet assigned a risk rating for this bond. Personal Risk Ratings For Junk Bonds I am leaning toward giving it a 6. I want to see how much progress KWK makes this year with its emerging oil plays, and whether it is successful in monetizing some of its natural gas assets in a limited partnership IPO. 

I did review the S & P bond report available at Fidelity. The Moody's report is available at Charles Schwab. I will generally print these reports and examine them during the evening. 

I also own the common shares as a Lottery Ticket: Bought 50 KWK at $5.3-LT Category As previously noted, anyone buying the common will need a lot of patience and a long term perspective. KWK

5. Sold 30 PEP at $66.58 Last Thursday (see Disclaimer): For the reasons given in when I sold 50 shares of PEP in the ROTH IRA Sold 50 PEP at $66.48-ROTH IRA), I decided to completely liquidate my position by disposing of the 30 shares held in a taxable account.

2012 Pepsico 30 Shares +$182.9

Bought 30 PEP at $59.95 (October 2011 Post)

I am sticking with my 132+ shares of KO.

PepsiCo Board announced a 4% dividend increase. The new quarterly rate will be $.5375 per share. The new annual rate will be $2.15 up from $2.06 per share. The author of this article at Investopedia argues that PepsiCo looks like a better investment than KO based on growth prospects after such an anemic 2012 year.

Morgan Stanley upgrade PEP shares to overweight this morning.

PepsiCo shares lost $1.01 last Friday to close at $65.9.

I am not likely to buy back shares north of $60.  During the Near Depression period, I was able to buy PEP shares for as low as $49.6 (May 2009). 

"Americans For Prosperity" and the KOCH Family/Edison Mission Energy//Earnings: PVR LEAP Colt Defense/Bought 100 HTGZ at $24.63/Sold 50 SLGPRC at $25.5 Roth IRA

The ISM services index for April was reported yesterday at 53.5. The forecast was for 55. The new orders component declined from 58.8 to 53.5. Employment declined from 56.7 to 54.2.

PolitiFact has so far rated four claims for accuracy made by the self-styled conservative  "Americans for Prosperity" PAC, giving two of them its infamous "Pants on Fire" rating, one a "false" rating and the remaining one a "mostly false" rating. Telling the truth and being accurate with factual assertions are apparently no longer conservative values.

The Democrats view this PAC to be a front organization for the billionaire members of the Koch family. NYT The elder Koch, Fred C. Koch,  was one of the founding members of the extremist John Birch Society, and his sons make dad look like a liberal. An article written by Jane Meyer, and published in The New Yorker magazine, explores how the Koch brothers are attempting to extend their political influence in the U.S. with their abundant cash. I thought that it was humorous to see an interview with T. Boone Pickens, one of the main contributors to the Swift Boat Veterans for the Truth, where he blamed Koch Industries for a lack of a U.S. energy plan, claiming that the brothers want to keep natural gas prices low for their fertilizer and chemical businesses, according to T. Boone.

(see FactCheck.org analysis of claims made by Swift Boat Veterans)

SandRidge Energy reported adjusted net income of $21.2 million or 4 cents per share, two cents better than the consensus estimate.

1. Penn Virginia Resource Partners. L.P. (own 1 2018 senior bond: Junk Bond Ladder Basket Strategy): PVR Partners reported first quarter earnings of 20 cents per unit, down from 48 cents in the year ago quarter. Revenues declined 3% to $246.5 million reflecting lower natural gas prices and coal royalty volumes.  

Bought 1 Penn Virginia Resources 8.25% Senior Bond Maturing 4/15/2018 at 98

2. Leap Wireless (own 1 2020 Senior Bond: Junk Bond Ladder Basket Strategy) LEAP reported a net loss of $96.2 million in the 2012 first quarter on a 5.9% increase in revenues to $825.6 million. Service revenue increased 14.1% The churn rate for the quarter was high at 3.3%, and the company predicted a 4.2% churn rate for the second quarter. The company reported a 258,000 net gain in customers. LEAP generated $35.4 million in cash flow for the first quarter. As of 3/31/2012, LEAP had $636.7 million in cash and marketable securities. Total debt was $3,222.5 billion. SEC Filed Press Release

Investors reacted negatively to this earnings report, driving the stock down from $7.71 close on 4/25/12 to $5.84 last Friday. LEAP Historical Prices The 52 week high was $17.66. The earnings report is discussed in articles at the Motley Fool and Zacks. 

Morningstar has a four star rating on the common stock. I have no interest in the stock even as a LT.  

Bought 1 Cricket Communications 7.75% Senior Note Maturing on 10/15/2020 at 96.5

3. Sold 50 SLGPRC at $25.5 Last Monday-ROTH IRA (see Disclaimer): As previously noted, I am not going to hold a REIT cumulative preferred stock for very long when the security is bought near par value. I view the upside as limited, and the downside risk is shown by their prices during the Near Depression period. On a few occasions, I was able to buy SLGPRC at less than 50% of its $25 par value:

2010 SLGPRC 30 Shares +$377.63 Realized Gain Regular IRA

2010 SLGPRC 50 Shares +$697.02 Realized Gain Roth IRA

The last 50 share purchase was made near par value last year. Bought 50 SLGPRC at $24.4-Roth IRA October 2011

SL Green Realty Corp. 7.625% Cum. Redeem. Pfd. Series C, (SLG.PC) rose 8 cents in trading yesterday to close at $25.58.

REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

4. Bought 100 HTGZ at $24.63 Last Monday (see Disclaimer): HTGZ is a new exchange traded bond. The issuer is the Business Development Corporation Hercules Technology Growth Capital. I also own the common shares in the ROTH IRA. Bought 100 HTGC @ $9.7 (1/26/12 Post).

I attempted to buy the bond in my ROTH IRA, but Vanguard would not accept online orders for this security last Monday which was its first day of trading. In the ROTH IRA account, the security would be, in effect, a tax free bond.

Rather than fooling with a call to a broker, I elected instead to buy the shares in a taxable account where I have too much cash earning nothing. I say nothing, which is not technically accurate, but correct in a substantive sense. For the week ending 4/24/12, the Fidelity Cash Reserves money market fund was paying .01% or about $100 per year on one million USDs. Taxable Money Market Mutual Funds  Another way to look at that number is that $100 will fill my gas tank up twice, provided the tank is not entirely empty and I use regular gas.  

HTGZ is a senior bond, with a 7% coupon on a $25 par value. The bond matures in about seven years on 4/30/19. Prospectus  Interest payments will be made quarterly. 

While I view Hercules to be one of the better BDCs, there is an inherent risk in buying even senior bonds issued by BDCs and REITs. In both cases, the corporation maintains its tax status by distributing at least 90% of its income to common shareholders. This avoids double taxation on the amounts so distributed but the disposal of so much income to the common shareholders obviously disadvantages bond owners who would prefer to see capital kept to insure timely payment of interest and principal at maturity. 

Other limited protections provided in the bond's indenture are discussed at pages S-14-15 of the Prospectus. 

My current and YTM yields will slightly exceed the 7% coupon due to purchasing this bond at a discount to its par value.

Hercules Technology Growth Capital Inc. 7% Sr. Notes due 2019 (HTGZ) closed at $24.95 yesterday.

5. Colt Defense (own one 2017 bond: Junk Bond Ladder Strategy): Colt Defense reported a net loss for the Q/E 4/1/12 of $6.61 million on revenues of $44.577 million. Form 10-Q The loss for the the Q/E 4/2/11 was much less at $1.759 million. The cash balance decreased to $29.28 million as of 4/1/12 from $38.236 million.

I own just one bond, and would not buy another one. Bought 1 Colt Defense 8.75% Senior Bond Maturing on 11/15/2017 at 85.24 I am not optimistic about the company surviving to pay par value in 2017.

The company did report an increase in its backlog to $212.3 million as of 4/1/12 from $176.7 million as of 12/31/11. (10-Q at page 19)

See discussions of Colt Defense in the following posts: S & P Downgrade Colt Defense Senior Unsecured Bond (5/1/12 Post); Colt Defense (2/27/12 Post);  Colt Defense (8/24/11 Post)

Based on this last report, I am raising my risk rating to 8- from 7-. Personal Risk Ratings For Junk Bonds The bond has declined several points since this earnings release. FINRA

6. Edison Mission (own 1 2016 senior unsecured bond: Junk Bond Ladder Strategy): EME announced that it was shutting down the Fisk and Crawford coal plants in 2012, earlier than previously estimated by the company. In addition, EME is in the process of turning over the Homer coal units to GE.  Reuters

As previously discussed, I have sold 4 out of 5 EME bonds due to concerns about the impact of new environmental regulations on EME's operations and other matters including the persistence of low merchant power prices. Sold 2 Edison Mission 7.75% Senior Bonds Maturing in 2016 at 73.25; see also Item # 3  Edison Mission Bonds

EME also released its quarterly report for the first quarter. EME 2012 Q1 EME reported a first quarter loss of $84 million and a core loss of $60 million. (page 25).

Earnings: UBSI CLGX BYD/Decline in Sandridge Energy Shares/SOLD 3 United Refining 10.5% Senior Secured Bonds at 104.125

I noticed that Edward Munch's painting "'The Scream" sold for $119.9 million. I did not know that Munch painted four versions of that painting, and consequently I do not know now which one that I saw at the Frist Center for the Visual Arts in Nashville.

S & P raised its rating on Huntsman debt to BB. TEXT-S&P

Fitch raised Macy's senior unsecured debt to BBB from BBB-. TEXT-Fitch

Markit reported yesterday the final April European PMI numbers for manufacturing. The index hit a 39 month low at 45.9. Any number below 50 indicates contraction. The German PMI hit a 33 month low. The PMI numbers for Spain and Greece were 43.5 and 40.7 respectively.

The unemployment rate in the 17 nation Eurozone hit 10.9% in March, the highest level since the launch of the Euro. eurostat.ec.PDF Spain's unemployment rate hit 24.1% in March.

I suspect their will be a mounting backlash among most other Eurozone countries to Germany's austerity push.

ADP reported yesterday its private payroll numbers for April. According to that report, private payrolls increased by 119,000 in April. The consensus forecast was for 177,000. The March number was revised down to 201,000 from 209,000. adp.pdf ADP estimated that large businesses added just 4000 jobs, whereas small businesses, defined to mean businesses with 1 to 49 employees, added 58,000. Large corporations will generally be the first to fire and last to hire, preferring to hoard their cash and to do more with less.

The forgoing data points may cause me to tweak my stock allocation some.

I thought that the 9.6% decline in Sandridge Energy shares yesterday on extremely heavy volume was due mostly to a new revelation about the activities of Chesapeake's (CHK) CEO Aubrey McClendon, who allegedly was actively involved in a hedge fund called Heritage Management for at least four years between 2004-2008, according to Reuters. This fund invested in energy futures which raises all kinds of legal and conflict issues, since CHK would also be involved in the same type of contracts.  Forbes

CHK shares declined $2.86 yesterday to close at $16.74. Lower than expected results for the first quarter did not help. WSJ The Reuters' article points to Tom Ward being involved in the same hedge fund at a time when both Ward and McClendon ran CHK. Ward is now the CEO of Sandridge. I would not even consider buying CHK shares until McClendon is removed from any position of responsibility. I have a LT position in SD.

1. United Bankshares (own: Regional Bank Basket Strategy): UBSI reported net income of $21 million or 42 cents per share for the first quarter, up from 41 cents in the first quarter of 2011. SEC Filed Press Release

The consensus estimate, originating from 10 analysts, was for 43 cents.

As of 3/31/12, the net interest margin was 3.78%; NPLs to total loans stood at 1.23%; the coverage ratio was 97.1%; and the return on average assets was 1% during the quarter.

The capital ratios are good:

                                

Bought 50 of UBSI at $16.65 (November 2009).

United Bankshares closed at $26.18 yesterday.

2. Sold 3 United Refining 10.5% Senior Secured Bonds Maturing 2/28/18 at 104.125 Last Friday (Junk Bond Ladder Strategy)(see Disclaimer): The three United Refining bonds were bought in two lots. Bought 2 United Refining 10.5% Senior Secured Bonds Maturing 2/28/2018 at 94.5 (January 2012); Bought 1 United Refining 10.5% Senior Secured Bond Maturing 2/18/2018 at 97.25 

Due to a higher than anticipated default rate in my junk bonds, I have elected to harvest gains in several positions, purchased at discounts to par value, when the price pops over par value. I hope to use those profits to offset losses from the defaults. The goal of this strategy is simply to have a total return equal to the interest payments received and to break even on the bonds. If I am able to accomplish that result over the life of this strategy, the total annualized return will exceed 10% due to the high yields. 

Besides profit taking, another reason for selling this bond was the lackluster results for the Q/E 2/29/12,  recently reported by the company. Form 10-Q

I received $54.25 in accrued interest from the buyer. The realized gain, as presently computed by my broker, was $232.4:

Realized Gains Junk Bond Ladder Strategy

3. Sold 100 SGL at $10.672 Last Friday-Regular IRA (see Disclaimer): SGL is a low yielding bond CEF that pays monthly dividends. I purchased the shares at at $10.03.

Strategic Global Income Fund closed at $10.78 yesterday.

4. Corelogic (own 1 2028 senior bond: Junk Bond Ladder Strategy): CLGX reported net income from continuing operations of $29.1 or 27 cents per share for the 2012 first quarter. SEC Filed Press Release for Period Ended March 31, 2012 Revenues rose 13.2% to $358.1 million.  As of 3/31/12, the company had unrestricted cash of $256.4 million, and total debt was $856.7 million, down $51.6 million from 12/31/11. The available capacity on CLGX's credit facility was $498.3 million. Free cash flow for the first quarter was $49.2 million.

5. Boyd Gaming (own 1 senior 2018 bond: Junk Bond Ladder Strategy and the common as part of the Lottery Ticket Basket Strategy): BYD reported first quarter net income of $5.8 million or 7 cents per share, up from a loss of $1.2 million in the 2011 first quarter. Revenues increased 12.1% to $633.1 million. Q1-2012 8-K I was just label this one another lackluster report from Boyd. I do have an unrealized gain on this bond: Bought 1 Boyd Gaming 9.125% Senior Bond Maturing on 12/1/2018 at 89 The bond is now trading several points above par value and consequently may be sold at anytime.

I may need to give the LT a few years before categorizing it as a failure. Given the small amount of capital devoted to each LT, it is possible for even the OG to be sanguine about the success or failure of a LT selection. 

Lottery Ticket Basket Strategy Table/Sold 100 RRD at $12.24/Bought 50 MBVT at $26.25/Earnings HUN BC VLY EMR TEX PCS PAR

I watched Monday night a movie called The Greatest Game Ever Played, which is the kind of movie that Disney does extremely well. The film takes some liberty with the facts, but it is nonetheless an interesting true story. It primarily involves golf's 1913 U.S. Open won in a playoff by a U.S. amateur, Francis Ouimet, who had to beat in that playoff two of the best professional golfers of that generation, Harry Vardon and Ted Ray, both from Britain. Ouimet was a young American who could not afford to pay a caddy. A ten year old boy by the name of Eddie Lowery (see photo) caddied for Ouimet for all four rounds plus the 18 hole playoff. Ouimet and Bobby Jones were the best American amateur golfers of their generation.

PAR Technology, a LT selection, reported earnings last week. PAR shares rose 3.77% last Thursday in response to that report. The estimate, made by one analyst, was for an E.P.S. of 3 cents on $56.95M in revenues. The company reported earnings at 7 cents per diluted shares on revenues of $55.6M  

Huntsman, a LT selection, reported net income of $163 million for its first fiscal quarter ending 3/31/12, or 68 cents per share, up from 26 cents in the year ago quarter. Adjusted E.P.S. rose to 74 cents from 45 cents. The consensus estimate was for 40 cents. Adjusted earnings exclude losses from discontinued operations and other one time items. Revenues increased 9% to $2.91 billion. Huntsman shares rose 8.9% to close at $15.42 yesterday. Recent Lottery Ticket Transactions: Bought 30 HUN @ 9.91 and 30 FCE/A at 11.58 & Sold 40 VCBI at 7.64 (1/11/12 Post).

Yesterday's release of the ISM's manufacturing index for April caused the market to jump. The index was reported at 54.8, up from 53.4 last month, and better than the consensus estimate of 52.9. The new orders component jumped to 58.2 from 54.5.

I found the earnings report from Emerson Electric to be somewhat disconcerting. It was not surprising to see order softness in Europe. The disconcerting comment involved a slowdown in orders from China ("softer than anticipated"). EMR shares fell $3.36 yesterday to close at $49.18. I no longer own shares, but would consider buying some at less than $45. I do not recall selling the shares, though I found one post where I noted a pare at $53.61, (9/29/2010 Post), and an elimination @ 55.42 in November 2010. I noted the purchase of shares in a November 2008 post at $33.33. I have not repurchased the shares since those 2010 dispositions.

Today, I am going to discuss earnings reports from companies where I only own a bond. I view it important to review the earnings reports when my position is solely in a firm's bonds.  

1. MetroPCS (own 1 2018 Senior: Junk Bond Ladder Strategy): The market reacted negatively to the first quarter earnings report, sending the common shares (PCS) down 10.83% to close at $7.08. I have no interest in the common shares.

MetroPCS reported a net income for the 2012 first quarter of $21 million, down from $59.9 million in the year ago quarter. The consensus estimate was for 17 cents. PCS gained 131,654 subscribers during the first quarter. Revenues declined by 7% to $1.27 billion.

Morningstar has a four star rating on the stock. I would consider buying no more than 50 shares below $6 per share as part of my Lottery Ticket Basket Strategy. 

Bought 1 MetroPCS 7.875% Senior Bond Maturing 9/1/2018 at 98

2. Terex (own: 1 2017 Senior Sub: Junk Bond Ladder Strategy): Terex reported income from continuing operations of $20.5 million, or 18 cents per share, for the 2012 first quarter. Net sales increased 16% year-over-year excluding acquisitions. Including  acquisitions, net sales increased 44% to $1.8194 billion. Terex completed a large acquisition of a European company called Demag Cranes AG.

Bought: 1 Terex 8% Senior Subordinated Bond Maturing on 11/15/2017 at 96.947 (August 2011) 

3. Brunswick (own 1 2023 Senior:  Junk Bond Ladder Strategy): BC posted a net profit of $39.7 million or 43 cents, up from $27.5 in the year ago quarter. SEC Filed Press Release This was 4 cents better than the consensus estimate of 39 cents. Brunswick also raised the low end of its guidance for 2012 to $1.3 per share from $1.2. The high end remained at $1.5. Revenues for the first quarter were higher than expected at $974.2 million, but were 1.2% below the year ago results. 

  

Moody's raised its rating to Ba3 from B1 on 4/20/12.

Bought 1 Brunswick 7.375% Senior Bond Maturing 9/1/2023 at 94.2  (April 2011)

4. Sold 100 RRD at $12.2435 Last Thursday (see Disclaimer):  I am not a fan of RRD, though I have traded the senior bonds and have just flipped the common stock for a small profit. I bought the 100 shares sold last Thursday at $11.6 (4/12/2012 Post). 

I will receive a $26 quarterly dividend on 6/1/12. 

After selling most of my RRD bonds, I still own 1 senior maturing in 2016. Bought 1 R.R. Donnelley 6.125% Senior Bond Maturing 1/15/2017 at 89 (August 2011); FINRA. If the 1st quarter earnings are satisfactory, scheduled to be released before the market opens today, I may buy back one of the bonds.

R.R. Donnelley & Sons Co closed at $12.68 yesterday. 

5. Bought 50 Merchants Bancshares at $26.25 Last Thursday (Regional Bank Basket Strategy)(see Disclaimer): I decided to buy back MBVT shares after reading the last earnings report. I had previously bought 50 shares at $22.9 and sold those shares at $26.5:

2011 MBVT 50 Shares +$160.1

That transaction occurred in one of my satellite brokerage accounts where preservation of capital is the paramount concern.

As noted in prior posts, Merchants is a very small bank operating in Vermont. It has 34 branches in that state. Branch Listing | Locations | Merchants Bank It was organized in 1849 and took a national charter in 1865. About Us | Merchants Bank

MBVT did not participate in TARP, which is viewed positively here at HQ. www.sec.gov

It is also viewed as important that this bank remained profitable during the Near Depression period, with an E.P.S. of $1.77 in 2007; $1.96 in 2008; and $2.04 in 2009 (see page 47 of the 2009 Annual Report). That earnings history is stellar compared to most banks in the U.S. An additional positive is that the dividend was not cut during the recession, and remained at a $1.12 annual run rate.

For the first quarter of 2012, the bank reported net income of $3.61 million or 58 cents, up from 50 cents in the first quarter of 2011. SEC Filed Press Release

This bank is not managed by Masters of Disaster, always a comforting thought, as shown in the extremely low ratio of non-performing loans to total loans. That ratio is just .22%.

As of 3/31/12, NPAs to total assets was even lower at .16% as of 3/31/2012. The total capital ratio was 15.95%; the tangible capital ratio was 6.88%; the net interest margin was 3.34%; and the efficiency ratio was 62.16%.

The current quarterly dividend is 28 cents per share. A negative is that the dividend has not been increased since 2005. Dividends | Investor Relations | Merchants Bancshares At that rate, the dividend yield would be about 4.27% at a total cost of $26.25.

For this security, I would be satisfied to sell it anywhere north of $30 within the next two years. If I could sell it at $30 in exactly two years, the total annualized return would be over 10% which would be viewed favorably for this kind of investment.

MBVT went ex dividend  yesterday (5/1/12) for its quarterly distribution.

Merchants Bancshares Inc. (Vermont) closed at $26.41 yesterday.

6. Valley National (own 250 shares: Regional Bank Basket Strategy): Valley had a disappointing first quarter report, missing the consensus estimate of 19 cents by one cent.  SEC Filed Press Release dated April 26, 2012 Earnings for the first quarter of 2011 were 21 cents which included net gains of $3.9 million after tax, or two cents per share, from securities transactions. Even if I overlook that that trading gain, earnings still declined by 1 cent which is a poor result, particularly compared to other banks in this basket strategy. I will keep VLY shares, however, for their income generation. I am not reinvesting the dividend.  

As of 3/31/2012, the net interest margin was 3.7%; the efficiency ratio was 63.01%; the total non-accrual loans to loans stood at 1.12%; the allowance for non-covered loan losses to NPLs was 95.32%; and the total risk-based capital ratio was 12.27%.

Comments made during the earnings call sounded more upbeat about the future opportunities, particularly in Valley's expansion into the NYC Boroughs and Long Island with 44 full service branches. Earnings Call Transcript - Seeking Alpha

Valley National Bancorp closed at $12.61 yesterday.

7. Lottery Ticket Basket Strategy Table as of 5/1/12: I periodically post tables containing positions in one of my basket strategies. The gain from yesterday in this basket was primarily due to just two positions.

I have not decided what to do with one of those positions, Huntsman, while I intend to sell the other PLXT which will be a long term capital gain of close to 100%. The total exposure to LT positions can not exceed the realized gains from this strategy. Snapshots of the realized gains can be found in the Gateway Post linked above. 

Acquisition of PLXT by IDTI/Earnings: SUSQ UVSP HSE:TO UL STD/SEM SD SVU/Sold 50 PEP at $66.48-ROTH IRA

Integrated Device Technology has signed a definitive merger agreement to acquire PLX Technology (PLXT) for $3.5 in cash plus .525 IDTI shares. Based on the closing price of IDT's stock on 4/27/12, the transaction is valued at approximately $7 per PLXT share. PLXT shares rose over 68% in after hours yesterday in response to this announcement.

I own 70 shares of PLXT as part of my Lottery Ticket Basket Strategy. Bought 70 PLXT at $3.37-a LT (February 2011). I last discussed PLXT in a February 2012 Post, where I mentioned that a hedge fund had stated in a Schedule 13-D that the company needed to seek a buyer.  PLXT Most likely, I will sell this position and use part of the profit to buy another "black" chip.

As recently mentioned, I modified the Lottery Ticket Basket Strategy to permit the OG to play one blackjack hand with a $100 black chip for every $100+ realized gain in this basket strategy, starting in 2012. Item # 5 Modification of Lottery Ticket Strategy Last weekend, I played one hand with a $100 black chip representing part of the $708.86 profit realized from 30 shares of GRTPRF earlier this year. I won, but it took two hands. The first hand was a push with both the dealer and I having 19. I won the next hand, and $320 over the course of my total playing time of 3 hours. That sum will be reported to the IRS as gambling winnings without any offset for gambling losses, since I do not itemize. I now have two black chips for the year end push.

Fitch assigned a rating of BB to Meritor's senior secured credit facility. TEXT-Fitch

Andrew Bary argues in this week's Barrons cover story that the DJIA is in need of a makeover. I would certainly agree that Apple needs to be in that average, hopefully replacing the hapless and frequently embarrassing Hewlett-Packard. Alcoa needs to get the boot too, but I would like to see a successful industrial company replace it. Bary does not mention Emerson Electric Company, Honeywell International (a former component) or  Danaher Corporation as potential replacements.

As for Bank of America, Ken Lewis made one of the worst mistakes in the history of capitalism by acquiring Countrywide. Only Citigroup makes BAC look good, and Citigroup has already been ejected from the DJIA for good reason. BAC just has too many problems and simply does not deserve to be included in the DJIA anymore. The stock has gone from over $50 before the Near Depression to single digits now, and the quarterly dividend has been slashed to just a penny. That is not in a sign of excellence but of colossal stupidity. Wells Fargo would be a suitable replacement or possibly Berkshire Hathaway.

I have read at least two novels written by E. L. Doctorow, but have never heard him voice an opinion on political and constitutional issues. His opinion column published  in the NYT  is bursting with anger and justifiable criticism aimed at Bush Junior and the pseudo conservative  Supreme Court majority. I gather that he is a liberal, but his criticisms could just as easily be voiced by True Conservatives for many of the same reasons. There are no real conservative values manifested in any of the actions criticized by him. Instead, all of those actions were taken by those who claim to be conservatives but instead advance an agenda antithetical to True Conservative values and positions.

J.P. Morgan upgraded Sandridge Energy (SD), a LT selection, to overweight from neutral, and increased the price target to $13 from $9.5. There is also a recent article, published at Motley Fool, that argues that recent acquisitions will cause SandRidge Energy stock to "soar". SandRidge Energy shares rose 5.97% yesterday to close at $7.99.

Goldman Sachs started coverage of Supervalu (SVU) with a sell rating.  The stock was selling at below levels prevalent in 1985 before GS slapped that sell rating on it. SVU Interactive Chart

S & P raised its credit rating on Select Medical's senior and senior subordinated unsecured debt to B- from CCC+. TEXT-S&P I own 1 senior unsecured bond and the common as a lottery ticket. Bought 1 Select Medical 7.625% Senior Subordinated Bond Maturing 2/1/2015 at 98.21

1. Susquehanna Bancshares (own: common as part of the Lottery Ticket Basket Strategy  and 80 Shares of the TP SUSPRA): Susquehanna Bancshares reported net income of $23.5 million for the first quarter or 14 cents per share. As of 3/31/12, the net interest margin was 3.94% (+31 basis points from 2011 first quarter); the efficiency ratio improved to 61.39%; the total risk-based capital ratio ratio was 14.45%; the tangible equity ratio was 7.64%; and NPAs as a percentage of loans, leases and foreclosed real estate was 1.35% (down from 2.49% as of 3/31/11)

On the day of the earnings release, which was last Thursday (4/26/12), the common shares rose 49 cents or 4.97% to close at $10.25. SUSQ Historical Prices 

I own 80 shares of the TP SUSPRA in the Roth IRA. Susquehanna Capital I 9.375% Cap Secs. Series I (SUS.PA). I believe that this security will, more likely than not, be called when Susquehanna is legally capable of doing so. That date is on or after 12/12/12. Final Prospectus Supplement My last purchase of this TP was in September 2011. Bought 50 SUSPRA at $25.25 ROTH IRA

I have a small profit on the common purchased at $8.75 in my LT basket strategy. I had traded the common previously as a LT, with the first purchase made in October 2009 at $5.85.

Susquehanna Bancshares closed at $10.38 yesterday. The TP, SUS.PA,, closed at $26.39.  

2. Univest (UVSP)(own: Regional Bank Basket Strategy): Univest reported net income of $5.3 million or 31 cents per share for the 2012 first quarter, up from 23 cents per share in the year ago quarter. 

The estimate made by one analyst was for 32 cents. 

As of 3/31/12, the net interest margin was 3.95%; NPLs were at 3.02% of total loans; the allowance for loan losses to NPLs was 69.39%; the total risk based capital ratio was 15.76%; and the return on assets for the quarter was .97%.

Univest was a recent addition to this basket strategy. Bought 50 UVSP at $15.1 (3/6/12 Post) The purchase was based primarily on the dividend yield and the total return potential with a dividend yield in excess of 5%.

Univest Corp. of Pennsylvania closed at $16.1 yesterday.

3. Husky Energy (own 200 shares: Canadian Dollar (CAD) Strategy): Husky Energy reported net earnings of $591 million or 60 cents per share, a 22% increase on a normalized basis from the 2011 first quarter. Cash flow from operations totaled $1.2 per share down from $1.3 a year ago. Total production per day, excluding royalties, averaged 320,000 barrels of oil equivalent, up from 310,000. The Liwan Gas Project in the South China Sea is progressing according to plan with the first production expected in late 2013 or early 2014.

This earnings report is discussed briefly in a Reuters article.

The Husky Board declared a 30 Canadian cent quarterly dividend, payable 7/3/12 to shareholders of record on 5/22/12.

Husky Energy rose 44 cents on the Toronto exchange in trading yesterday to close at 25.77 CADs. The shares are available for purchase in the U.S. on the pink sheet exchange: HUSKF

4. Unilever (own: Large Cap Valuation Strategy at the time of purchase): After trading UL shares during the Near Depression period, I decided to keep my last purchase which was just 70 shares bought at $18 (March 2009):

Unilever Average Total Cost Per Share=$18.16 

Unilever PLC announced last week a 8% quarterly dividend increase to €.243 and better than expected results for the first quarter. Revenues rose 12% in the quarter to €12.1 billion or about $15.99 billion USDs. Excluding acquisition, disposals and currency movements, revenues rose 8.4%, compared to the consensus of 6.4%.

On the day of this earnings release (4/26/12), the UN shares rose 3.12% to close at $34.74. UL Historical Prices

The results from Unilever need to be contrasted with the recent dismal results posted by P & G.

5. Banco Santander (own 130 shares of STDPRB, an non-cumulative equity preferred floater): STD reported a decline in net income to €1.603 billion, below the consensus forecast of €1.64 billion, from €2.1 billion in the year ago quarter.  Loan loss provisions increased 51% to €3.13 billion. NPLs rose to 3.9% of total loans from 3.61% in the first quarter of 2011. santander.com

The results are discussed in this DJ newswire story and at MarketWatch.

My last two purchases of STDPRB were made in a satellite brokerage account. Bought: STDPRB at 13 Added 50 STDPRB at $15.44 Par value is $25.

I have snapshots of trades made in this asset category at the end of Advantages and Disadvantages of Equity Preferred Floating Rate Securities. I have three prior trades of STDPRD, all profitable, with the largest being a realized gain of $265.01 on 100 shares.  This security pays qualified dividends at the greater of 4% or .52% above the 3 month LIBOR rate on a $25 par value. www.sec.gov

Anyone purchasing the common shares may need a three to five year holding period.

Santander Finance Preferred S.A. Unipersonal Floating Rate Gtd. Pfd. Series 6  (STD.PB) closed at $16.7 yesterday.

6. Sold 50 Pepsico at $66.48 Roth IRA Last Thursday (see Disclaimer): While the poor results released by Pepsico had been telegraphed by the company, I was hoping that management was being unduly pessimistic for 2012 earnings, when the company announced in February that core earnings would decline 5% in 2012. Press Release on 4th Quarter Results

The earnings for the first quarter were so lackluster that I decided to jettison the fifty shares recently bought in the ROTH IRA. Bought 50 PEP at $62.69-ROTH IRA

2012 PEP 50 Shares +$175.42-ROTH IRA

I still own 30 shares in a taxable account bought at a lower price.

PEP reaffirmed its earlier guidance that adjusted net income would fall by 5% in 2012.  SEC Filed Press Release Net income was $1.3 billion or 71 cents per share, down from $1.14 billion in the year ago quarter. Excluding special items, PEP reported 69 cents per share. Operating profit for  Frito-Lay North American rose just 2%.

PepsiCo closed at $66 yesterday.