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Technology Stocks : HS - CHS Electronics -- Ignore unavailable to you. Want to Upgrade?

To: goinbrk who wrote (630)	5/26/1998 8:52:00 AM
From: Carmine Cammarosano	Read Replies (2) \| Respond to of 1494

What Osorio didn't say, and what most analysts and investors apparently failed to realize, was that the company's earnings per share weren't really what they appeared. If they had taken a look at CHS' 10-Q, filed May 19, they would've seen that the company disclosed that -- oh, and by the way -- it also had a currency transactions gain of $3.8 million in the quarter. A simple calculation shows that the gain added 6 cents to CHS' quarter; without it the company would've missed the quarter by 2 cents. Companies usually go out of their way to point out losses caused by currency transactions, because they are usually nonrecurring and don't reflect the company's ongoing business. Good ones also point out the gains. Shouldn't CHS have disclosed the currency gain along with the earnings, and by not doing so, didn't it mislead its investors? "We can't appreciate the value of that comment," a spokesman says. "Currency can go back or forth in any given quarter -- plus or minus. Investors oughta be looking in the longer term." Indeed, by taking the long view investors would see that for the second straight quarter CHS' actual operations grew at a slower rate than analysts had been expecting. And while we're comparing CHS' earnings release with its 10-Q: You can't help but wonder whether anybody noticed how several line items on its balance sheet weren't what was reported in the earnings release. "Prepaids and other current assets" actually fell by $12 million to around $100 million. The spokesman says such discrepancies are common, and merely reflect "minor reclassified items" that change as the company collects data from its far-flung operations. Some critics, however, wonder whether the changes suggest a lack of controls at CHS, which has made 26 acquisitions over the past two years, and which prides itself on a decentralized management structure. Meanwhile, last year Osorio earned $750,000 plus a bonus of more than $1 million. The bonus, in part, is tied to earnings per share. (Hmmm.) If CHS ever has trouble making its quarters, Osorio can always turn to himself. According to CHS' proxy statement, Osorio is also president of Comtrad Holdings Inc., which last year was in hock to CHS for $17.4 million. Interest charged to Comtrad last year was $684,000. But wait, there's more: Carsten Frank, a director, officer and shareholder of CHS, also serves as a director of an unidentified company that has ownership interests in other companies that do business with CHS. Last year, when CHS' sales topped $4 billion, sales to those quasi-related companies were $102.7 million. A drop in the bucket? Sure, but a drop here and a drop there and pretty soon you've got what appears to be a flood of earnings when, in reality, it's just a trickle.