Year's annual reports are modest, less upbeat

April 29, 1994|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Just when you thought you'd seen it all, along comes a genuine leather annual report.

The 1993 annual report of footwear firm Wolverine World Wide features a front cover made of the same tan pigskin as its most popular boot, with instructions to pour coffee on it to test its resistance to liquids. While this raised the company's production cost for its 17,000 individual reports by $1.35 a copy, management feels it's worth it.

"A lot of people don't realize pigskin leather can be waterproof, and we felt this was a way to use the report as a marketing tool and get the message across to shareholders," explained Jim Lovejoy, vice president of corporate communications with that Rockford, Mich.-based company.

"It cost us less than the price of two ads in trade magazines, so we feel it's cost-efficient," he said.

Meanwhile, the Bank of Montreal this year has included a videocassette tape with its annual report.

Most firms, however, aren't showing off. The average 1993 annual report cost about $2.70 to produce. That's virtually the same as last year's $2.71 figure, an indication that the effects of recession linger for most firms. Back in the booming economic year of 1989, companies spent a whopping $3.35 a copy.

Interestingly, this year's annual reports are a bit less upbeat in nature than last year's, featuring little effusive prose from chief executives, fewer special sections and a general downplaying of financial results.

Those are the findings of "Sid Cato's Newsletter on Annual Reports," which tracks and grades those important and costly messages sent out by companies to shareholders and the public at this time each year.

"I want to see the chief executive really involved in the report's letter to shareholders; I want to see the financial highlights listed up front with percentage changes; and I want to see honesty in the presentation," summed up Cato. "The cover of the annual report is imperative, for if it doesn't demand your readership, you should heave it in the wastebasket."

The best 1993 annual reports, ranked by Cato in order of their quality of content and overall presentation, belong to:

COMSAT Corp., Chevron Corp., Mosinee Paper Corp., Southwestern Bell, Apogee Enterprises Inc., Coca-Cola Co., Northwest Natural Gas Co., St. Paul Cos., American General Corp., AT&T, Bruncor Inc., Monsanto Co., Aluminum Co. of America, Southern Co., and Meridian Bancorp.

To liven things up, COMSAT employed colorful modern artwork and action photos, such as those of peacekeepers in Mogadishu using its mobile services. There are even candid photographs of executives at honest-to-goodness board meetings.

"We wanted a futuristic look at the convergence of all kinds of technology," said Elizabeth McLean, director of corporate communications for that Bethesda, Md., company.

"Our initial planning conference was in August, the cover and graphics were presented to the chief executive in November, and the text galleys were proofed in March," she said.

The most readable 1993 annual reports, Cato believes, are:

Mobil Corp., Chevron Corp., Mosinee Paper Corp., Monsanto Co., Hawaiian Electric Industries, DQE, Sprint Corp., Minnesota Power, Southern Co. and New York State Electric & Gas.

(An annual subscription to Sid Cato's Newsletter on Annual Reports, P.O. Box 19850, Kalamazoo, Mich. 49019-0850, costs $197.)

The chief executive's letter is one portion of the report that isn't dictated by the government. Also look at the auditor's opinion and make sure it is unqualified, meaning auditors agree with management. It's often best to look in the back of the report first.

"I focus on the financial section, which includes the management discussion and analysis of financial condition, the balance sheet, income statement, cash-flow statement, notes and auditor's report," said Bruce Beardslee, managing director of individual investor asset allocation for Smith Barney Shearson. "While a report may be written in an optimistic manner, numbers are numbers."

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