The GMI Blog

Small Print

 By Paul Hodgson - CCO and Senior Research Associate

COLA Grande

Events Analyst Dovid Muyderman spotted this “cost of living adjustment” in a May 29^th 8-K filed by East West Bancorp. Why is it only CEOs and other executives who get COLAs of 233 percent?

On May 22, 2012, East West Bancorp, Inc. (the “Company”) held its 2012 Annual Meeting of Stockholders (the “Annual Meeting”). At the Annual Meeting, the stockholders of the Company approved the following changes to the Company’s Performance-Based Bonus Plan, as amended (the “Amended Bonus Plan”):

• Add additional permissible metrics for the establishment of performance
  goals;
• Provide for the establishment of multi-year performance goals;
• Change the maximum bonus that may be earned from $3 million to $10 million
  per year.

So much for moderation in banking pay.

Pre-regulation Maneuvers

Dovid also found this in a May 29^th Rigel Pharmaceuticals’ 8-K.

At the 2012 Annual Meeting of Stockholders (the “Annual Meeting”) of Rigel Pharmaceuticals, Inc. (the “Company”), held on May 22, 2012, the Company’s stockholders approved the amendment of the Company’s 2000 Equity Incentive Plan (the “2000 Plan”) to:

• extend the term of the 2000 Plan to May 22, 2022;
• provide that the number of shares available for issuance under the 2000 Plan shall be reduced by one share for each share of common stock subject to a stock option or stock appreciation right and by 1.4 (instead of 1.7) shares for each share of common stock subject to any other type of award issued pursuant to the 2000 Plan; and
• increase the maximum number of shares of common stock that may be granted pursuant to performance stock awards under the 2000 Plan from 166,666 to 1,500,000 shares.

OK, now I’m all for increasing the amount of performance-related pay that executives can earn, but if you’re going to increase it by that order of magnitude, less than 200K to a million and a half shares, you have to reduce the maximum amount that can be earned from non-performance-related pay like stock options and time-restricted stock. I mean, come on.

Mind Boggling and Brain Hurting

Dovid also found this May 29^th 8-K from PG&E, and I bet it wishes it hadn’t had to file this one. It’s a long one for Small Print, but persevere, otherwise you won’t get to the Mind Boggling and Brain Hurting bits.

On May 25, 2012, the Consumer Protection and Safety Division (“CPSD”) of the California Public Utilities Commission (“CPUC”) submitted its investigative report in the CPUC’s pending investigative proceeding pertaining to the operations and practices of Pacific Gas and Electric Company’s (“Utility”) natural gas transmission pipeline system in or near locations of higher population density. Under federal and state regulations, the class location designation of a pipeline is based on the number and types of buildings, population density, or level of human activity near the segment of pipeline, and is used to determine the maximum allowable operating pressure (“MAOP”) up to which a pipeline can be operated. In response to the CPUC’s November 2011 order instituting the investigation, the Utility reported that it had determined that 159 miles of pipeline (comprising 898 segments) had a current class location designation that was higher than reflected in the Utility’s Geographic Information System…

Come on, come on, what are you waiting for “Geographic Information System (“GIS”)…

… and that most of these misclassifications were attributable to the Utility’s failure to correctly identify development or well-defined areas near the pipeline. The Utility also reported that it had determined that it had not timely performed a class location study for certain segments and did not confirm the MAOP of those segments for which the Utility had not timely identified a change in class location. The Utility also reported that it could not confirm that all transmission lines were patrolled as required by the Utility’s procedures. Citing the Utility’s admissions, the CPSD report concludes that the Utility’s failures to classify pipeline segments properly and document past patrols resulted in a total of 3,062 violations of state and federal standards, the durations of which in total exceeded 15 million days.

What? Three thousand and sixty-two violations over fifteen million days?! Keep going, keep going. I know it’s tough, but they’re going to tell us how much this might cost in a paragraph or two.

The report urges the CPUC to levy significant penalties on the Utility. The report does not recommend a specific penalty amount. The Utility’s response to the CPSD’s report is due on July 23, 2012 and evidentiary hearings are scheduled to be held in August 2012.

The CPUC can impose penalties of up to $20,000 per day, per violation, for violations that are considered to have occurred after January 1, 1993 and prior to January 1, 2012. For violations that are considered to have occurred on or after January 1, 2012, the penalties may be as high as $50,000 per day, per violation. Violations that took place prior to January 1, 1993 are subject to a daily penalty of $2,000 per day.

The CPUC is conducting two other investigations pertaining to the Utility’s natural gas operations.

More?

In addition, the Utility has filed reports notifying the CPUC that the Utility has identified instances in which the Utility did not comply with various regulations and CPUC orders applicable to the Utility’s natural gas operating practices. As reported in PG&E Corporation’s and the Utility’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, PG&E Corporation and the Utility believe it is probable that the CPUC will impose penalties of at least $200 million on the Utility as a result of these investigations and the Utility’s self-reports, and have accrued this amount as of March 31, 2012 and December 31, 2011. PG&E Corporation and the Utility are unable to estimate the reasonably possible amount of penalties in excess of the amount accrued, and such amounts could be material.

And guess who will eventually foot the bill? Yes, shareholders. Then again, executives’ annual bonuses are based on a whole range of safety tests and if they get any kind of bonus next year, that will prove to be an absolute farce. And this kind of report and fines might even affect the company’s TSR on which the performance shares are based, but don’t worry, the execs can still receive some of these even if they underperform nine of their 12 peers….

Who Needs a Pension When You've Got This In Lieu?

Thank goodness for Compensation Analyst Manager Scott Patterson, this was turning into a Dovidfest, but Scott found this wonderfully generous retirement benefit for BE Aerospace’s CEO (and founder) Amin Khoury, in the company’s 2012 proxy statement.

In lieu of retirement benefits, we provide Mr. Khoury with annual payments equal to 150% of his base salary. These payments are made on a quarterly basis in arrears. In addition, we make an annual payment in lieu of retirement benefits equal to the product determined by multiplying the annual increase in salary by 150% times the number of years since he founded the Company. This payment is made in the quarter following the change in salary. All such payments are made to a grantor trust for the benefit of Mr. Khoury, such payments are taxable to Mr. Khoury when paid, and historically have been distributed to Mr. Khoury at the time of payment as provided pursuant to the terms of the trust agreement. These payments are reported in the “All Other Compensation” column of the Summary Compensation Table above.

With respect to Mr. Khoury, the amount reported for 2011, 2010 and 2009 as “All Other Compensation” includes payments made in lieu of retirement benefits of $3,296,800, $3,101,054 and $2,600,396, respectively.

You’d have thought, what with being the founder of the company and all, he’d have a few shares put by and that, but that doesn’t seem to be the case, so maybe he does need the retirement benefits.

GMI Ratings Governance Issue | Vestas Wind Systems A/S

Vestas Wind Systems A/S shares have plunged in the year to date and it will be deleted from the MSCI Denmark Index at this Thursday’s close. The Danish wind turbine maker has already battled a host of challenges, including allegations in 2011 that it misled investors about its finances, but the air smelled of trouble for longer.

Vestas, which delivered its first wind turbines in 1979, has been losing money in recent quarters in the face of tougher competition. In October 2010, it announced plans to let go of around 3,000 employees and shut five business units in Europe, according to news reports.

The company said its inventory amounted to 2.74 billion euros in the year ended Dec. 31, 2010, up from 1.66 billion euros in the prior year. This reflects that Vestas expected its supplies to be worth significantly more than in the past – once they sold. During the same time frames, the cost of making those supplies merely edged up to 5.75 billion euros in 2010 from 5.20 billion euros in 2009, according to regulatory filings.

Due to this red flag as well as others, Vestas’ financial statements showed an AGR score of 28 as of June 2010, indicating higher accounting and governance risk than 72% of comparable companies.

In August 2010 Vestas said that it had been expecting to recognize the revenue from hundreds of millions of euros of wind system contracts in that year, but it would need to defer the money from those sales until later. As a result Vestas lowered its revenue forecast for 2010 by one billion euros to 6.0 billion euros. Then in October 2010, the company said it had failed to adopt new international accounting rules effective in January that year, so its statements would likely require correction. Investors filed a class action lawsuit in the Colorado District Court in March 2011, alleging the company improperly accounted for its revenue by failing to do so in a timely manner, according to the complaint.

The company said at the time that the complaint is without merit, and it planned to defend itself “vigorously.”

The stock has fallen since June 1, 2010 by nearly 87% to around $38.22 per share intraday on Thursday. Meanwhile Vestas' AGR score has sunk to a 2 as of March this year.

The trouble has flared into a turmoil in recent months. After the board received “a thorough briefing on the conditions which during the last months have led to profit warnings,” its CFO Henrik Nørremark resigned, Vestas said February 7. The next day it announced that its chairman Bent Erik Carlsen and deputy chairman Torsten Erik Rasmussen would not stand for re-election when the board met the next month. In April Vestas said it appointed Dag Gunnar Andresen its new CFO, soon after announcing that Bert Nordberg is its new board chairman and Lars Olof Josefsson its new deputy chairman.

On May 15 MSCI said it would delete Vestas from its index tracking major stocks in Denmark as of this Thursday’s close. That will affect investors who had tied their choices to the benchmark.

Meanwhile, Vestas’ new managers have plenty of work ahead of them.

Region: Western Europe
Industry: Industrials
Sector: Heavy Electrical Equipment
Market Cap: DKK 8,901.9mm (Mid Cap)

ESG Rating: B
AGR: Very Aggressive (2)

 

Facebook: We Told You It Wasn’t Going to Turn Out Well

GMI Ratings doesn’t rate IPOs. The information contained in their S1s, the document filed with the SEC describing the public offering, is either incomplete for our purposes or subject to change, or both. That’s not to say that we don’t write about IPOs. We’ve written about this one on Forbes, twice. And on the GMI Ratings blog.

None of what we had to say redounded much to Facebook’s reputation as a potentially well-governed company.

But now we have an official rating.

D.

Not a good start.

So, apart from the dual class stock, the controlling shares, the monotone board, the bizarre compensation for CEO Mark Zuckerberg – yes, he does get compensation – as if that weren’t enough, what was it that ground out that D rating?

Red flagged key metrics include:

• Board is not majority independent
• Related party transactions
• Overboarded non-executive directors
• Discretionary incentives
• Evergreen equity plans
• Excessive severance and perks
• Long list of shareholder rights abuses

French Government to Impose Pay Cap on CEOs

By Paul Hodgson - CCO and Senior Research Associate

The new socialist government in France – leading the way by taking a 30 percent pay cut itself – promised to impose pay limits on executives at companies in which it owns a majority stake, according to the Financial Times today. Pay will be capped at 20 times that of the lowest paid worker in the company and will lead to substantial pay cuts for CEOs, whose earnings are, frankly, already far lower than typical CEO pay levels in the US.

Pressure will also be exerted on other companies in which the government owns shares, but not a controlling share.

According to the FT, the government will also vote against the severance package for the former CEO of Air France-KLM, which is laying off thousands of workers, because it considers it unfair and excessive.

The only company in the US to limit pay in such a way is, of course, Whole Foods. There the CEO’s cash compensation is limited to 19 times the average employee wage. While no such limit applies to equity compensation, such awards continue to be moderate, and total compensation for the co-CEOs at Whole Foods is much lower than at equivalent national food retailers.

GMI Ratings Governance Issue | Wells Fargo & Company

Wells Fargo & Co. just settled a lawsuit alleging that the San Francisco financial services firm targeted African-American borrowers for predatory lending in Memphis and Shelby County. The development, which isn’t the only one of its kind, warns of a disregard for fairness that can also impact investors.

Memphis and Shelby had filed a claim in December 2009, alleging that 43.2% of Wells Fargo’s foreclosures were in predominantly African-American neighborhoods while only 21.5% were in predominantly white neighborhoods. At the same time Wells Fargo had allegedly granted the majority of its loans to whites. The claim also alleged things such as the drafting of marketing materials for the lowest quality mortgages in what the bank had defined as African-American language.  

Wells Fargo promised to make $425 million in mortgages available to Memphis and Shelby residents within the next five years, nearly a third of which shall go to low- and moderate-income borrowers. It will also invest $7.5 million toward helping the neighborhoods recover from the housing crisis by providing grants for things such as home renovations, down payments, and financial literacy programs. “We agreed that it was in the best interests of everyone involved to work together rather than to continue to be involved in a protracted legal fight,” said Leigh Collier, Wells Fargo regional president for the Mid-South, in a statement Tuesday.

To give credit where it’s due, Wells Fargo has put some effort toward battling racism. For example, CEO John Stumpf says on the company’s website that diversity allows his firm to better serve the needs of its diverse customers, which in turn leads to more value for stockholders. Wells Fargo has also established groups such as its Enterprise Diversity Council, whose tasks include creating strategies for earning more business from minorities and making recommendations for the development of staff. With more than a third of his team consisting of minorities and 59% of it women, Stumpf has to treat them fairly in order to lead a ship with a fully willing, loyal and effective crew. 

Yet Wells Fargo’s obvious incentive to give its staff and customers equal rights hasn’t spared it from other lawsuits involving minorities. In July 2009 Illinois Attorney General Lisa Madigan sued Wells Fargo for allegedly targeting African-American and Latino borrowers for sales of the lender’s poorest quality and most expensive mortgages. In April 2011 the Securities and Exchange Commission fined  Wells Fargo Securities L.L.C., formerly known as Wachovia Capital Markets L.L.C., more than $11 million for charging undisclosed excessive markups in the sale of a collateralized debt obligation-related investment to the Zuni Indian Tribe and an individual investor.  And this April the National Fair Housing Alliance said it filed a federal housing discrimination complaint against Wells Fargo, alleging the bank maintained and marketed foreclosed properties in white areas much better than those in neighborhoods of color.

The recent lawsuits against Wells Fargo are one red flag among various others that contribute to an F on the firm’s corporate governance.  Its financial statements reflect an AGR score of 6, indicating higher risk than 94% of companies. That’s an improvement from an AGR of 1 in June 2010. 

CEO Stumpf said on Wells Fargo’s website that the firm’s progress on its “vision and values” has not been perfect. He also said companies are made up of human beings. They make mistakes, admit them, learn from them, and then keep moving forward with even more understanding.  “We learn just as much from failure (perhaps more) as we do from success,” he said.

Given that exemplary attitude, it’s interesting that Wells Fargo continues to deny the allegations Memphis and Shelby made. The company could indeed be innocent, but by settling and avoiding a protracted set of questions, they gave up their golden opportunity to learn whether the court also agrees. 

 

Region:  North America

Industry: Financials 

Sector:   Banks 

Market Cap: $ 177,006.7mm (Large Cap)   

ESG Rating:  F

AGR:   Very Aggressive (6) 

Will Wal-Mart listen to its public shareholders?

By Paul Hodgson - CCO and Senior Research Associate

Several high-powered institutional shareholders, such as CalSTRS, have indicated that they are going to vote against a number of Wal-Mart directors who, frankly, should have known better. While institutions such as CalSTRS do not often go public with their voting intentions, when they do, you know it is because they wish to gain both traction and support for their point of view.

Not only that but most of the major proxy advisory firms have recommended that shareholders vote against those same directors. These directors include Lee Scott, former CEO of Wal-Mart, who should not be on the board in any case, as he is not independent and there are few enough independent board members as it is. They also include Christopher Williams, the chairman of the audit committee. To my mind, given his fairly evident knowledge of the scandal, I would expect Lee Scott to be the prime target of negative voting, and he may even be a sacrifice the company is willing to make.

As most commentators have already noted, there is no way, assuming that the Walton family votes and the insider (director and officer) votes all vote with management, that any kind of shareholder revolt will result in a majority of the outstanding shares being cast against any of the directors, or, for that matter, for any shareholder resolution, or against any other management resolution (though watch out for that Say on Pay vote!).  The Walton family owns 49.81% of outstanding stock, according to GMI Ratings data, the insiders (offices and directors who are not Walton family members) own an additional 0.31% of stock. So the majority is theirs. On the other hand, that leaves just under 50% of publicly held shares that could be voted either way. If even half of those are voted against directors or against management (25% of the outstanding stock), then that would represent a majority of public shareholders.

After all, Wal-Mart is not News Corp, another controlled company to face serious shareholder dissent, but one which ignored what its shareholders thought through depriving them of any voting power. Wal-Mart does not have multiple classes of stock with different voting rights, currently it does not need such an anti-shareholder provision. Also Wal-Mart seems much more chary of its reputation and good name, despite all the social problems it has encountered recently, and even if a majority of "public" shareholders vote against certain directors - although not an absolute majority - this may be enough for the company to seek to come to some compromise.

We’ll see.

UK Boards: How Good Are We?

By Paul Hodgson - CCO and Senior Research Associate

Law Debenture has just published a review of the first year of “compulsory” board evaluations.

The 2010 UK Corporate Governance Code requires companies in the FTSE 350 to comply with, or explain why are they are not complying, a regulation that calls for a triennial board evaluation. While there is still time for boards to comply, the report found an immediate increase in the proportion of companies conducting external board evaluations. For the FTSE 100, for example, 42 companies conducted external evaluations, as against 35 in 2010.

Not only are evaluations being conducted at a higher rate, but more companies are disclosing action plans that discuss issues arising from the evaluation. These include:

• Impact on board strategy
• Improve effectiveness and clarify board and committee effectiveness
• Improve succession planning

Where companies have not conducted any evaluations, the reasons given in explanation range from new board membership, recently listed companies without a full public fiscal year, or other board preoccupations. Prior evaluations were also referred to.

Was Sanjay Jha’s Pay a Good Return on Investment?

By Paul Hodgson - CCO and Senior Research Associate

[This post first appeared on Forbes.com]

The news that Sanjay Jha is stepping down after successfully negotiating the sale of his company Motorola Mobility Holdings to Google confirms the fact – once again – that compensation committees do not understand the terms “long-term” and “incentive”. Included in Jha’s $65.7 million severance package – the one he will get now that he has ceased to be CEO – is $52.4 million worth of long-term equity incentives.

See what I mean?

It’s “you’re joking, surely” #3.

Even disregarding the mega grant of stock options (4,608,099 of them) granted to him as an inducement to join Motorola as co-CEO prior to the demerger, Jha was awarded 647,804 stock options and 80,251 shares in 2010 and 318,792 restricted shares, and 2,869,131 stock options in 2011.

And these were long-term incentives? Or were they incentives to encourage Jha to find the best buyer for the firm at the best price?

Well, they were structured to be long-term incentives, to vest over three years, or sooner for some of them if the stock price increased by 10 percent during the vesting period, and to vest immediately on a change of control of the company.

So there are two questions here. With 4.6 million stock options, did the company need to award additional equity compensation at all to incentivize Jha to do what he had been hired to do in the first place? And if it felt it did, why was this equity not structured to reward him simply when that sale was arranged? Why the lengthy vesting periods, why not vest them immediately and restrict their sale until after the change in control had taken place, or – even better – restrict them according to a schedule of sale prices for the company. If it sells at $35 a share, they lapse, if it sells at $40 a share, 50 percent vest, if it sells at $45 a share, 100 percent vests.

Wouldn’t that be simpler and more honest?

But to return to that $65.7 million in severance, that just includes the unvested, accelerated equity. Not included is the equity that had already vested and that at the closing price was worth $24.6 million. And he vested in $8.6 million shares during 2011. In any case, the total walk away package is likely to be just shy of $100 million for 2012 alone, not counting compensation earned in prior years.

Who’s paying for this? Motorola Mobility’s former shareholders and Google’s current.

Value for money for shareholders? Or an insufficient return on their investment?  

GMI Ratings Governance Issue | The Talbots, Inc.

Sycamore Partners just decided not to buy The Talbots, Inc.  But even before the private equity firm began negotiating about a possible deal with Talbots months ago, the women’s clothing store was undergoing organizational upheaval and tough for investors to predict.

After Sycamore offered to buy Talbots for $3.00 per share on December 6, 2011, the stock price jumped from $1.56 to $2.65 the next day. Talbots nonetheless refused within weeks, explaining that the proposal “substantially” undervalued it. 

Sycamore came back with a $3.05 per share offer early this month, only to later walk away from the negotiations according to a Talbots announcement on Friday May 25. The retailer added that it remains open to pursuing a deal at $3.05 per share if supported by firm debt and equity financing. Now the stock is trading at $1.35 per share intraday on Tuesday May 29. The company plans to hold a conference call on its earnings after the market close.

Talbots is struggling as it tries to recast itself as a place for women over 35, despite its legacy of serving an older, conservative crowd with items such as brass buttoned blazers, cabled sweaters and spectator pumps.  Meanwhile, it announced a plan in December to let go of 9% of its corporate headcount, or around 100 people, according to news reports. The company also said in a December regulatory filing that it will shut down around 110 stores. 

That overhaul followed other game-changing deals such as Talbots’ merger completed in April 2010 with BPW Acquisition Corp., a company formed in 2008 for the purpose of doing transactions including business reorganizations. The complex agreement included the buyback of shares from Talbots’ former majority stockholder, Aeon (U.S.A.), Inc. and restructuring hundreds of millions in debt. 

Lawyers have raised doubts about the quality of the company’s reporting. Investors filed a class action lawsuit against Talbots in February 2011 alleging things such as the company’s knowing that its forecasts were “illusory and unattainable.” For example, Talbots had said its fourth quarter sales would range between flat and the low-single digits, but then ended up reporting in January 2011 that they were down around 7% compared to the fourth quarter of the prior year, the plaintiffs alleged.

In part due to such developments, the company’s financial statements have reflected an AGR of 13 since December, indicating higher accounting and governance risk than 87% of companies. In September 2011 the score was a 21. The low AGR doesn’t mean that Talbots necessarily did anything wrong -- GMI gives the company a C on its corporate governance overall – but it does show that Talbots’ financial statements have grown less reliable as its future became tougher to predict. 

In the meantime, Talbot is actively exploring its options for a new strategy. Hopefully the next one won’t complicate the retailer’s finances.

Talbots did not immediately respond to a request for comment.

Region:  North America

Industry: Cyclical Consumer Goods / Services 

Sector:   Retail - Apparel / Accessories

Market Cap: $ 178.0mm (Micro Cap)  

ESG Rating:  C

AGR:   Aggressive (13)  

 

GMI Ratings Governance Issue | VeriFone Systems, Inc.

VeriFone Systems, Inc.'s CEO Douglas G. Bergeron is aggressively pushing to expand the electronic payments company by doing acquisitions. In the process, he's exposing his investors to the risk of surprises such as the stock's price drop on Friday.

Bergeron said Thursday that the San Jose-based company had earned 13 cents a share in the three months ended April 30th, down from 27 cents per share during the same period a year earlier.

VeriFone is in the middle of major transition. In August it said it completed its merger with the electronic payment company Hypercom Corp. for around $485 million. Then this January Bergeron announced that he finished his acquisition of Point, a payment and gateway services provider in Northern Europe, for around €600 million and the retiring of around €170 million in Point debt.

Taking out items such as the costs from its acquisitions, VeriFone would have made 64 cents a share in the quarter ended April, up from 46 cents in the second quarter of 2011. Bergeron said he expects between 68 and 70 cents per share in the next quarter this year.

Investors had hoped for more. VeriFone's stock plunged nearly 15% in value to trade at $38.26 per share intraday on Friday compared to Thursday's closing price.

Bergeron emphasized on a conference call with analysts Thursday that his decisions have already begun to show positive results. For example, his team kicked off its Point business plan expansion in in Germany, the Netherlands, Poland and Australia during the second quarter. McDonald's even signed on to an offering from Point that will enable customers to preorder and pay for food on the menu by clicking on their mobile devices.

But VeriFone's recent acquisitions are still in the early stages. In the meantime, Bergeron is betting a lot for the future. Since VeriFone paid more than book value for Point and Hypercom, its goodwill rose to $1.203 billion in the quarter ended January from $207.7 million in the July quarter. If the acquisitions turn out not to deliver as much as Bergeron expects, he'll have to surprise his investors down the line by adjusting those large numbers downward in a hit to earnings.

Meanwhile VeriFone's business is tied to the euro's value against the dollar, making it vulnerable to the unpredictability of currency fluctuations. Bergeron said in the conference call that the dollar's recent strength took away the increase he would have otherwise included in his forecast of between $2.60 and $2.66 per share in fiscal 2012.

In part due to its recent acquisitions, VeriFone's financial statements reflect an AGR of 8, indicating more accounting and governance risk than 92% of companies. In June 2011 the score was a 16. This doesn't necessarily mean that the company is doing anything wrong - GMI gives VeriFone a C overall on its corporate governance -- but it does show the uncertainty that goes along with Bergeron's aggressive bets.

Earnings numbers are complicated because they consist of many components, including expectations about what will happen in the future. Cash flow, on the other hand, is more along the lines of what a company actually makes. VeriFone's cash flow in the quarter ended April amounted to around $13 million, while it's adjusted net income was about $71 million.

Gil Luria, of the research division at Wedbush Securities Inc., asked Bergeron on the conference call when he expects to report a free cash flow number that's closer to the earnings announcement.

"The integration expenses are getting beyond us," Bergeron said. "Yes, over the next few quarters, we'll get it back to -- on track, so it will be relatively close."

How close is "relatively close?" Only time will tell.

Region: North America

Industry: Technology

Sector: IT Services / Consulting

Market Cap: $4,723.6mm (Mid Cap)

ESG Rating: C

AGR: Very Aggressive (8)