Decoding Wall St.: What a CEO is REALLY Saying

Hotshot CEO says:

“Now for some highlights from each of the segments and a discussion of our advancements in 4 strategic areas, extending into critical industries, building in emerging markets, enhancing the franchise network and expanding in the repair garage. We've identified these runways as being decisive for our future, and we made solid progress in each of them during the quarter and, for that matter, throughout 2011. In the Commercial & Industrial segment or C&I, organic sales increased almost 5% in the quarter. That growth was somewhat higher than the past couple of periods. So while C&I was where we see the most impact from the challenges of Europe due to our large hand tool operation in the region, SNA Europe, we actually saw better year-over-year comparisons than we've been posting recently. That progress was due to the gains in our Industrial business and to our continued growth in emerging markets, both in C&I. The C&I segment margin for the quarter of 11.2% was down from last year's 12.6%, largely reflecting the $2.9 million in additional restructuring charges and some challenges to the profits at SNA Europe, as that part of the world is obviously not yet recovering. That margin rate, however, was improved from what we saw in the past couple of quarters, reflecting the relative strength of our Industrial businesses, which posed double-digit growth and reached new performance highs.”

Decoding Wall St. says:

Thought that Wall Street legends were the only ones to keep a hidden language from the masses? Think again. CEOs of publicly traded companies are arguably worse financial literacy offenders than traders because they develop quirky abbreviations for business segments and internal programs. They do these things to throw sharp Wall Street analysts off the analytical scent, and simply to sound smarter than people making more money than them in many instances. Above was a passage from a CEO as he led his earnings conference call…imagine trying to understand if you were a shareholder of the company and decided to access the hour-long live webcast presentation. For purposes of simplicity, we focused our decoding efforts on terms likely to appear throughout Wall Street rather than company-specific jargon.

• Strategic areas: Where management places most of its attention to grow the business to make money for shareholders and their families (bonus time is always a big motivation people!).
• Runways: There are NO actual runways, it’s management trying to emphasize that it’s focused on industries that have room to grow financially…or take off like a plane.
• Organic sales: Sales produced by existing businesses, excluding acquired businesses and currency fluctuations (sound smart: weak U.S. dollar brings in more sales, opposite for a strong U.S. dollar).
• Better year over year comparisons: Sales grew 7% in the third quarter of 2011, but 9% in the fourth quarter versus the fourth quarter of 2010. 9% is better than 7%!
• Emerging markets (sound smart: EMs): Countries that are not emerging like plants in the technical sense, it’s that their economic growth is super strong. Examples: China and India.
• Segment margin: How much a business segment earned on each product it pushed out the door to customers.
• Restructuring charges: Close down a worthless manufacturing plant that you thought was worth $1 million, and your accountant would say you have to write the value of it down…triggering a negative hit to earnings.