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Companies dress up annual reports


We are the world.

If you aren't careful, you might just get smacked in the head by a twirling globe as you examine the latest annual reports from the nation's businesses.

Every company seems to be stressing its international potential, which means countless color illustrations of that great big beautiful planet of ours in 1994 annual reports.

Though the world has been somewhat erratic lately in both economic and financial terms, firms understand how their future bread will be buttered. The mature U.S. economy can no longer provide explosive growth.

"Because of the new global business environment, it's significant if a company doesn't have foreign operations, particularly if it's encountering foreign competition on its own turf," said Richard Jacobson, partner with the Grant Thornton accounting firm. "Increasingly, annual reports in their notes, narrative or illustrations talk about what a company's doing in various geographic regions of the world."

Annual reports are more attractive this year, and not simply because supermodel spokeswoman Cindy Crawford is featured in PepsiCo's report. More companies are using color because the economic revival means they're slightly more optimistic and well-heeled, according to "Sid Cato's Newsletter on Annual Reports."

This year's reports seem either beautiful or austere, with little in between. Some bare-bones examples look more like proxy statements than the company's No. 1 love letter and reality check for current and prospective shareholders.

"We did a survey on our annual report last year and received more criticism about it being stark in black-and-white than we did about content, so we went to a more colorful one this year," said Barbara Reynolds, senior communications manager for the St. Paul Cos., a property and casualty insurer.

Beyond being colorful, the St. Paul Cos.' 1994 report, with the theme "Building Shareholder Value in a New World," was recently ranked second in the land in terms of quality of presentation and content by Cato's newsletter. Cato is the guru of annual reports, rating hundreds that cross his desk.

Best '94 annual report is that of Ameritech Corp., according to Cato. Rather than coming across as a big, impersonal telecommunications firm, Ameritech's cover features a mother with adorable child seated in front of a computer.

Chief Executive Richard Notebaert is shown in shirtsleeves, logo illustrations depict each business unit and smiling business customers are pictured everywhere. This 52-page report features 11 years of financial data so the investor can calculate a 10-year compound growth rate.

"We tried to look at Ameritech as an investor would and also wanted warm photographs of real customers to show what drives our business," explained George Stenitzer, Ameritech's director of financial public relations.

"We initiated a one-page summary of what the company does, and it's also possible to log on to our report on the Internet."

The average 1994 annual report is 44 pages and cost $2.80 a copy to make, according to Cato. Eighty-six percent are in four colors vs. 78 percent a year ago.

"An annual report must make the recipient become a reader, have economy of words, explain what management is all about and show financial highlights up front with a percentage-change column," related Cato, whose newsletter, costing $197 annually, can be contacted at P.O. Box 19850, Kalamazoo, Mich. 49019-0850. "I also want clear captions on all graphs and photographs."

Best 1994 annual reports from more than 300 graded by Cato are:

1, Ameritech Corp. 2, the St. Paul Cos. 3, Phillips Petroleum Co. 4, Mosinee Paper Corp. 5, Southern Co. 6, SBC Communications. 7, AT&T; Corp. 8, Baltimore Gas & Electric. 9, Chevron Corp. 10, ARCO Chemical. 11, Sonoco Products. 12, Unisys Corp. 13, Armco Inc. 14, Bruncor Inc. 15, Monsanto Co.

"A report's letter to shareholders and operating highlights are important in putting the best foot forward and giving quick-and-dirty results," concluded Bruce Beardslee, managing director at Smith Barney. "But an investor must really spend time looking at financial data, such as revenue and earnings trends and ability to grow the dividend."

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