BottomFeeder - Nov. 2006

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BottomFeeder              November 2006

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EDGAR (Electronic Data Gathering Analysis and Retrieval)

The SEC has awarded a $48 million contract to Keane Federal Systems to modernize EDGAR and make it interactive and easier to use. The improvements will show up over the next few years.

It was also just announced that Lexis/Nexis will be offering access to the services of EDGAROnline which provides enhanced searching capabilities for corporations trying to more efficiently search for EDGAR filings. While this capability is now available to corporate customers, it will be early in 2007 before EDGAROnline is provided on Lexis/Nexis Academic (the version we have).

We will let you know when EDGAROnline is available on L/N. For now, we provide direct links to both EDGAR and SEDAR on the Business Library page devoted to "Annual Reports". EDGAR and the annual reports for U.S. corporations (as well and international ones) are also found by using MergentOnline.

Profile No. 2.

"Ivey's mission is to develop business leaders who think globally, act strategically and contribute to the societies within which they operate".

This is the second profile in a series dedicated to individuals in the business world who are exemplars of that portion of the Ivey mission statement that focuses on the social contributions made by business leaders. The first profile appeared in the March 2006 issue of The Bottom Feeder and the subject was J. Irwin Miller.

Bob and Ellen Thompson
Thompson-McCully Asphalt Paving Company
Belleville, Michigan

Robert and Ellen Thompson

The choice of a paving company may seem like a rather pedestrian one for profiles such as these, but we can assure you that this story is well suited for our purpose, which is to provide positive portraits of people who do good things in the world of business and commerce.

The story begins just about the turn of this century when Mr. Thompson sold Thompson-McCully to the Oldcastle Materials Group which is part of the Irish firm CRH plc. The company had been established in 1959 by Mr.Thompson and his uncle with support and seed money provided by Mrs.Thompson. By the time it was sold in 1999, it was the largest road construction company in Michigan with over 500 employees. The sale price was well over $400 million. Unlike most such stories, this one has a happy ending and leads to the creation of many new millionaires in Michigan.

First, the buyer was carefully chosen to ensure that as many employees as possible would keep their jobs if they chose to do so. Mr. Thompson indicated that "Oldcastle was selected for more than price considerations. Their culture and demonstrated history of preserving existing management and business practices was of primary importance. I'm confident Oldcastle will continue the Thompson-McCully tradition of excellence."

Secondly, the good news that Thompson-McCully employees would not lose their jobs was followed by the even better news that most of them would not have to worry about it if they did -- since they were sharing in the proceeds of the sale. According to most accounts, more than 80 Thompson-McCully employees received cheques ranging from $1 to $2 million. Some retired employees and widows also received payment as the Thompsons distributed $128 million among the workers. Mr. Thompson stated: "I'm particularly pleased that this agreement will allow the employees of Thompson-McCully and a charitable trust I have established to share the proceeds of the sale. Our company's success has been due in large part to dedication and hard work of the men and women who have worked here over the years, and they deserve to be recognized"….You realize that the people around you have gone through all the pain and suffering with you….I wanted to pay them back".

The story does not end there. The Thompsons provided $100 million to establish the Thompson Foundation which is largely used for educational scholarships for the underpriviliged in the Detroit area. As well, Mr. Thompson's alma mater, Bowling Green, has benefitted from his generosity, as have the University of Michigan Cardiovascular Center and the Kellogg Eye Center.

During its years of operation Thompson-McCully was also a well-respected company. Mr. Thompson served as Chairman of the National Asphalt Paving Foundation and was often honored by industry. In 2000, the Engineering News-Record( ENR) awarded Mr. Thompson its "Annual Award of Excellence" and noted: "Bob Thompson's generosity for his employees is only overshadowed by his commitment to excellence in the world of construction, and exemplifies the best that our business has to offer, said Howard Stussman, editor-in-chief of Engineering News-Record. "This award gives ENR the opportunity to recognize the inspirational and pioneering individuals who are top role models within our industry, and salutes their dedication and exceptional achievements that will continu to propel our industry to record heights".

To learn more see the following resources: "Paved in Gold: Bob Thompson Sold His Asphalt Company, But His Employees Shared a $128 million Piece of the Pie," People Magazine, Sept. 6, 1999; " Engineering News-Record Awards Bob Thompson 35th Annual Award of Excellence," Business Wire, April 14, 2000; "Sharing the Wealth," The Salt Lake Tribune, Jan.18, 2000. The web site for the Thompson Foundation is here: www.thompsonfdn.org.

As an aside, we suggest that Ivey case writers might want to have a look at CRH which is very active globally. Here is a sample from the Financial Times:
"CRH shrugged off recent gloom surrounding the US construction sector and delivered a 37 per cent increase in first-half pre-tax profit to Euros 526m (Pounds 355m). The Ireland-based company, which manufactures road-building materials, concrete and other products, increased sales 27 per cent from Euros 6.3bn to Euros 8bn in the six months to June 30. The results were ahead of expectations, prompting brokers to raise full-year forecasts, helping the shares rise 75 cents to Euros 26.55 yesterday. The company, which last week completed a Dollars 1.3bn (Pounds 687m) acquisition of APAC, a unit of Ashland, the large US chemicals company, said the outlook was "on the whole positive, despite some statistical evidence of a slower pace of US economic growth".
CRH derives about half its sales from its European units, which made operating profit of Euros 330m.
The Americas, which includes operations in Argentina, increased operating profit by 68 per cent to Euros 283m.
Brokers estimate about half the sales growth is organic, even though CRH has spent Euros 3bn on new businesses since last July and Euros 2bn already this year." ("CRH Bucks U.S. Gloom and Eyes Positive Outlook and Acquisitions," by John Murray Brown, FT, August 30, 2006.)
The company site is here: http://www.crh.com/

CAPM - Capital Asset Pricing Model

According to a recent article by Joel Chernoff, the CAPM concept is being revised by one of its originators who now “supports less complex simulation as a way to overcome the flaws of mean-variance analysis”. For details see: “Rethinking CAPM,” Pensions & Investments, Vol.34, No.20, October 2, 2006, p.1. Here is an abstract for the article which is available in print in the Business Library or electronically on ProQuest.

“William F. Sharpe says his pioneering work on the Capital Asset Pricing Model is ready for a makeover. The 42-year-old model is being revamped because Sharpe says he found a better way for portfolio managers and business-school students to learn about how portfolios are constructed and securities are priced. Sharpe's new book, Investors and Markets: Portfolio Choices, Asset Prices and Investment Advice, shows that a simulator based on the state/preference model can mimic market behavior and can be used where mean-variance analysis will not work. Unlike a mean-variance analysis, however, the simulator finds that it does make sense for some investors to take non-market risk.”

The book has just been released by the Princeton University Press and has been ordered. For other recent books related to the subject see: Financial Modeling of the Equity Market: From CAPM to Conintegration, by Frank Fabozzi; Financial Theory and Corporate Policy, by Thomas Copeland and The Cost of Capital: Intermediate Theory, by Seth Armitage.

Weather Futures for Selected Canadian Cities

The Chicago Mercantile Exchange announced that, starting in November, weather futures and options would be available for some Canadian cities. Here is part of their press release: " CME, the world’s largest and most diverse financial exchange, announced today that it will expand its weather futures and options product suite to include weather contracts on six Canadian cities. Beginning November 6, weather futures and options on futures will be available for Calgary, Edmonton, Montreal, Toronto, Vancouver and Winnipeg. “Weather is one of the largest variables impacting economic activity and business performance,” said Felix Carabello, Director, CME Alternative Investment Products.  “CME weather futures contracts provide the marketplace with important hedging tools that allow businesses worldwide, such as construction, energy, retail and transportation companies, to manage their exposure to the elements.”

The new Canadian listings will include Heating Degree Days (HDD) and Cooling Degree Days (CDD) on both monthly and seasonal index futures and options. Product specifications are identical to the existing U.S. and European cities with Canadian cities priced in Canadian dollars….CME currently lists weather contracts based on aggregate temperatures for 28 cities, including 18 throughout the U.S., eight in Europe and two in Japan. CME introduced weather derivatives in 1999.

For a report about this announcement see: "Making a Bet on Canada's Weather," David Parkinson, The Globe and Mail, , Oct.17, 2006, p.B16. In the article it was reported that the notional value of weather contracts traded on the CME in 2005 was $36 billion. To learn more about weather derivatives see the related chapter in Hull's Fundamentals of Futures and Options Markets. See also: Insurance and Weather Derivatives… and Eco-Finance: The Legal Design and Regulation of Market-Based Environmental Instruments. See also the graduate thesis done here at Western in the Applied Mathematics Department - Pricing Weather Derivatives.

Country Insights from Foreign Affairs and International Trade Canada

" Culture is vital because it enables its members to function one with another without the need to negotiate meaning at every moment. Culture is learned and forgotten, so despite its importance we are generally unconscious of its influence on the manner in which we perceive the world and interact within it. Culture is significant because as we work with others it both enables us and impedes us in our ability to understand and work effectively together."

The Government of Canada Foreign Affairs and International Trade department's Center For Cultural Learning has created a database - Country Insights - which will prove to be useful for business people and travellers alike. Found at http://www.dfait-maeci.gc.ca/cfsi-icse/cil-cai/home-en.asp, information about individual countries or specific regions can quickly be obtained.

The quotation above taken from the Country Insights site encapsulates the focus of the database. In a question and answer format, CI addresses ideas and perspectives on ways of life and on methods by which one should conduct oneself in countries around the world. Cultural topics covered range from Displays of Emotion, Dress, Punctuality & Formality to Conflicts in the Workplace.

One can find that, for example, in Chinese markets one might encounter loud shouting and even fights; that leaders can let their emotions be shown more than their workers.

This local perspective is then balanced by the Canadian perspective and the best method of presenting oneself in business and social situations is outlined: expressions of emotion are very important in China, especially within the context of well-established relationships (business or personal).

Sample: China and the question about Stereotypes

The database also provides links to sites and resources that provide statistical and country overview information.