Many Annual Reports
Now Available on the Internet
by Andrew Leckey
 Each
of the more than 12,000 corporate annual reports now pouring into mailboxes
and the Internet has a story to tell.
This
year, most corporations have reduced the number of printed copies. Since
the information is now made available on the Internet, they reason non-shareholders
such as job seekers, vendors and potential investors can read it there.
In
addition, reports for 1998 include explanations of efforts to deal with
the potential year 2000 computer glitch problem. Don't expect too much enlightenment,
however, since most firms simply say they've identified it, are looking
into it and will keep auditors informed, without really telling how much
they're spending to confront the issue.
Not
all corporations tell their year's story accurately, in full or cleverly.
With so many firms being taken to task for misrepresentation these days,
annual reports that excel at informing shareholders are noteworthy.
For
example, "SO" in giant black letters on a red background is all
that's on the cover of the 1998 annual report of the Southern Company, which,
in recent years, has been considered to be among the best in communication
and innovation.
On
subsequent pages, these two letters (the company's ticker symbol) kick off
section headings such as "SO here's what we do," "SO what's
important to Southern Co.?" and "SO what's up?"
Smiling
William Dahlberg, chairman, president and chief executive officer of that
Atlanta-based energy firm, is depicted holding up a big "SO" button.
That's more low key than last year, when he was shown wearing a shiny silver
space suit in a report emphasizing the future.
"If
there are 100 annual reports on a table, we want the person to pick up ours
because our key messages are communicated in a unique way," explained
Michael Klodnicki, head of Southern's shareholder communications. "The
messages are that we're a very reliable, low-cost producer of electricity
with customer satisfaction numbers that are the best in the business."
Southern's
annual report is tied for third place in quality among the 1998 annual reports
now being sent out, based on a scale formulated by Sid Cato's Newsletter
on Annual Reports, P.O. Box 19850, Kalamazoo, MI 49019 (www.sidcato.com).
It takes into account factors such as presentation, clarity, attractiveness,
writing, information and CEO involvement.
"I've
given reports coming in this year higher honesty ratings than in the past,
which could be because more companies have had better years and don't have
to lie," speculated Cato, publisher of that newsletter, which has already
analyzed 154 corporate reports.
Ameritech
Corp.'s 1998 annual report, produced by its director of corporate positioning,
George Stenitzer, notched a perfect score of 135 on Cato's rating scale
for the third year in a row. A sliver behind is Armco Inc. with 134, while
Bruncor Inc. and Southern Co. are tied with 132.
Other
reports rated highly by Cato, in order, are RLI Corp., Dana Corp., Chevron
Corp., The Manitowoc Co., Reuters Group plc., Unisys Corp., National Service
Industries Inc., Andrew Corp., Ecolab Inc., Lucent Technologies, Inc., Conoco
Inc., BellSouth Corp., Wells Fargo & Co., Universal Foods Corp., Quaker
Oats Co. and Walgreen Co.
Lucent
made the biggest yearly point jump on Cato's list, offering a theme that
focuses on its role "at the center of the communications revolution."
"Our
industry is growing so fast and is so complex that it's important for the
2.3 million people that receive our annual report that our message is as
concise and compelling as we can make it," pointed out Steve Aaronson,
vice president of global corporate communications for Lucent Technologies
in Murray Hill, NJ. "The report is virtually a year-long process that
we begin about a month after the previous report goes out."
Although
dealing with a high-tech concept, Lucent's report is loaded with personable
color photographs of employees and customers. But financial figures are
in plain black-and-white, not hidden beneath splatters of color.
"People
should be able to read an annual report in 10 minutes or less and be able
to get the real essence of what they're looking for," asserted Jim
Milner, director of The Annual Reports Library, 369 Broadway, San Francisco,
CA 94133 (www.zpub.com/sf/arl), which has 2 million annual reports on file,
some from the 1940s. "The report should tell if the company was profitable
last year, if there is sales growth and where the stock price has been going.
Here,
according to the Annual Reports Library, are sections to scrutinize in every
annual report:
Chairman
of the board letter, which should cover changing conditions, goals and actions.
Is it written well, and, reading between the lines, what is it apologizing
for?
Sales
and marketing, which should cover what the company sells, how, where and
when. Is it clear where it makes most of its money and what the scope is
of lines, divisions and operations?
Ten-year
summary of financial figures, which should give a candid and accurate discussion
of significant financial trends the past two years.
CPA
opinion letter, written by the CPA firm as an opinion on the company's financials.
Financial
statements, which track sales, profits, research and development spending,
inventory and debt levels over time. Read footnotes carefully!
Subsidiaries,
brands and addresses, which should include brand names and overseas distribution.
List
of directors and officers, worth examining to determine how many outside
versus inside directors there are and qualifications of those directors.
Stock price history, showing the general price trend over time, where the
stock is listed, the stock symbol and the bonus/dividend history.
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