For the thirteen weeks ended January 31, 2015 ("the fourth quarter"), the Company reported adjusted net income of $7.5 million compared to adjusted net income of $5.9 million for the thirteen weeks ended February 1, 2014, and fourth quarter 2014 adjusted earnings per diluted share of $0.05 compared to adjusted earnings per diluted share of $0.04 in last year's fourth quarter. The fourth quarter adjusted results exclude EPS charges of $0.26 in 2014 and $0.04 in 2013, primarily related to Boston Proper non-cash goodwill and trade name impairment, as well as cost reduction and restructuring initiatives (the "Charges"), as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Charges, the Company reported a fourth quarter 2014 net loss of $31.8 million, or $0.21 per diluted share compared to a fourth quarter 2013 net loss of $0.3 million, or $0.00 per diluted share. For the fifty-two weeks ended January 31, 2015 ("fiscal 2014"), the Company reported adjusted net income of $104.0 million compared to adjusted net income of $137.0 million for the fifty-two weeks ended February 1, 2014 (fiscal 2013), and adjusted earnings per diluted share of $0.68 compared to adjusted earnings per diluted share of $0.85 in fiscal 2013. The adjusted results exclude EPS charges of $0.26 in 2014 and $0.44 in 2013, as presented in the accompanying GAAP to non-GAAP reconciliation. Including the impact of the Charges, the Company reported fiscal 2014 net income of $64.6 million, or $0.42 per diluted share compared to fiscal 2013 net income of $65.9 million, or $0.41 per diluted share.
American mutual funds estimate they spend more than $300 million every year chewing up 2 million trees to print and send investors 440 million densely written reports—which many recipients promptly toss out unread.
“If they were to come on days the trash cans were out, I wouldn’t even bring them inside the house,” said Ben Perlman, 35, an employee at Emory University in Atlanta, who invests in four mutual funds with his wife and receives eight such reports in the mail each year.
So last year, regulators proposed what to them was an obvious adaptation to the age of Venmo, bitcoin and mobile banking: make it easier for funds to provide certain records electronically.
But what was logical progress to some loomed as a menace to others—notably the American Forest & Paper Association and the Envelope Manufacturers Association. The two industries’ jointly funded group Consumers for Paper Options rallied retiree and consumer groups to join their campaign, decrying what they call the government’s “rush to digitize.” They persuaded a bipartisan coalition of politicians—especially from the paper-heavy state of Maine—to threaten legislation blocking the rule.
They prevailed, beating back the forces of the 21st century, at least for a few more years. At a mid-July public hearing on the issue, Mary Jo White, the chairman of the Securities and Exchange Commission, noted the proposal had drawn “considerable attention.” She ultimately decided to drop the plan, according to people familiar with the matter. A formal announcement is planned this fall.
“Millions of our fellow Americans will be left out in an information desert,” Rep. Bruce Poliquin, a Maine Republican leading the pro-paper faction, warned on the House floor July 6, should regulators curtail the mass dissemination of 1,000-page semiannual and annual reports detailing things like “Affiliated Broker Transactions” and “Basis for Approval of Investment Advisory Contracts.”
Republican Susan Collins, the senior senator from the Pine Tree State, earlier this month issued a statement warning of “confusion and potential financial discord among the Americans who receive these financial disclosures.”
Yet receipt of such disclosures can also foment confusion and discord.
Lee McGowan, a Concord, Mass., investment adviser, has to prod his customers to open the reports. “So many clients ask, ‘What do I do with this?’” he said.
As part of the research justifying the rule change, the SEC highlighted a 2011 survey in which 59.5% of respondents said they would look at their mutual fund’s annual report on its website, compared with 24.5% who said they would request a mailed hard copy.
It is easy to see why the average retail investor may choose not to delve into the thick documents stuffing their mailboxes. In February, AXA Equitable Life Insurance Co. sent out thousands of copies of a 1,463-page 2015 annual report (six months after mailing its 1,337-page semiannual report), including the requisite details of dozens of various combinations of investment products.
Mutual funds have sought to cut back the mailings to save costs. The SEC included a provision making it easier to do so in a broader package of rules requiring more industry disclosure. The paper part seemed modest, since current rules already allow funds to transmit reports electronically, and 43% of investors currently opt for that instead of paper reports, according to Broadridge Financial Solutions Inc., which distributes fund reports.
Under the SEC’s plan, investors would still have the option of receiving paper versions, but the default choice would have flipped from paper to electronic. Investors who don’t indicate a preference still would get a mailed notice every time a fund posts a new report online. Specifically, the SEC envisioned applying the switch to annual and semiannual reports, which detail fund performance, fees and asset holdings amid a sea of legalese.
But that flip was enough to rile up the forces of paper and envelope makers fighting the forces of digitization. Consumers for Paper Options got its start in 2010 battling banks charging fees to customers who chose to receive paper statements. In 2014, the group quashed an attempt by the Social Security Administration to scrap paper statements that calculate workers’ expected retirement benefits. They are now pushing legislation to force the Internal Revenue Service to resume mailing out 100-page tax-preparation guides it largely stopped sending in 2011.
During a public-comment period that began last summer, the SEC’s package of mutual-fund regulation changes generated more than 1,000 online responses. These included: A Kentucky Democratic congressman worried about harm to a commercial printer in his district; 12 from people identifying themselves as letter carriers; and 35 from employees and executives of Glatfelter, a York, Pa., maker of specialty papers. “Paper records of my personal investments have survived the crashing of hard drives,” wrote one of the company’s senior product managers.
Luann Waddell, an investor and retired letter carrier from Mesa, Ariz., wrote: “I am deeply concerned about the security of the internet,” citing recent government hacking cases.
“We still need to have a right to have something to read off of a computer screen,” wrote Kimberly Bennett, who didn’t identify her affiliation or location. “DO NOT TAKE THIS RIGHT AWAY FROM PEOPLE!”
As often happens in such Washington scrapes, the rhetoric turned overheated and high-minded. The pro-paper faction portrayed itself as the protector of the aging and indigent most vulnerable to being left behind in the technological rush.
“It’s easy to think the world has gone digital,” said John Runyan, a former lobbyist for International Paper Co. who now runs Consumers for Paper Options. “The trend lines are in that direction, but why do we want to disadvantage the people who are least likely to manage that transition?”
Mutual funds depicted themselves as progressives countering Luddites, and as ardent environmentalists. Paper mailings are a vestige of “a bygone era” when people used to go to stores to rent VHS tapes, David Blass, general counsel for the Investment Company Institute, an industry group, said in a March speech. “Count all the harmful compounds emitted during paper manufacturing—along with the massive amounts of waste that discarded paper produces,” he said, “and we’re absolutely crushing the environment here.”
In the end, big paper scissored big mutual funds. The SEC has decided that when it finalizes the broader package of industry disclosure rules in October, the digital default will end up on the cutting-room floor.