NationStates Jolt Archive

Background: Third Enterprises is the largest automobile manufacturer in The Captain. It is run by a very wealthy Thaddius T. Third V, and the company has been his family's for generations. Some of you may know Third from the Billionaire's Club (http://www.nationstates.net/forum/viewtopic.php?t=115582&highlight=). For interests of my simplicity, Third Enterprises uses current models of cars (GM, MB, BMW etc.) and a limited version of new designs.

Now:Until recently, The Senate had forbidden the sale of stock to any international citizens. The measure was to protect Third Enterprises from being taken over by a foreign power, but Mr. Third has acquired enough of the company to ensure that nothing of the sort would happen. With the promise of new "contributions," The Senate agreed to open Third Enterprises open to the intenational stock market.

The price of Third Enterprises (TE) skyrocketed when the news was announced, but it was timed nicely with a split. The current value of Third Enterprises stock is $41.89 (US dollars for ease of transaction). There are currently 1,950,240 shares of stock outstanding, and orders cannot exceed more than 4.25% of that.

A letter to all stockholders from Senior Vice President and Managing Partner Jack Noonan will be released shortly, along with a statement of company finances.

Dear Stockholder:

One auto columnist recently wrote, "Whoever says Third Enterprises is not radically different than it was just five years ago simply isn’t paying attention."

Third Enterprises is a different company. We are changing the way we do business and it is paying off for our stockholders.
If you ask analysts what they think is the most encouraging figure in our 1997 results, they will tell you cash flow. And I agree with them. Comparing two five-year periods, 1991-1996 and 1997-2002, it is clear we see two very different Third Enterprises. The increase in cash flow from operating activities was almost $27 billion between these two periods.

A quick look at three other financial measurements demonstrates we are changing the way we do business. Five years ago our pension funds were underfunded by $12 billion; we had no net liquidity; and in that year alone we posted a loss of $2.6 billion. Today, our pension funds are essentially fully funded; our cash position is strong at $17.5 billion; and our 2002 income from continuing operations amounts to a record $6.7 billion, or $8.70 basic earnings per share, with increases in net sales and net profit margin.

The influx of cash has given us the flexibility and the opportunity to strengthen our balance sheet and to create value for our stockholders. While you can find details elsewhere in this book, I’d like to provide a few highlights of our efforts to create stockholder value:

·We began 2002 with an increase of 10 cents to the quarterly dividend, raising it from 40 to 50 cents per share of TE $1-2/3 par value common stock.

·In 2002, our strong cash flow from operating activities of $13.9 billion allowed us to spend $3.8 billion to repurchase $1-2/3 common stock, as well as invest $9.8 billion in capital expenditures. We expect strong cash flow again in 1998, and have announced a third stock repurchase program for $4 billion. When we complete the newest program, Third Enterprises will have spent $9 billion to repurchase approximately 20 percent of the shares that were outstanding when we started the repurchases of TE $1-2/3 par value common stock.

·At year-end, we incurred charges against income totaling $4.0 billion after tax resulting from TE’s ongoing studies of the competitiveness of its business. The after tax charges against income related to underperforming assets, capacity reductions, assets held for disposal, and other items you will see detailed in the financial section.

While cash flow is a traditional way to measure progress, also crucial to TE’s progress is "idea flow," which is the currency that ensures future success. Today, we are managing the company’s flow of both cash and ideas to beat the global competition. For example, at the 2001 The Captain International Auto Show, Third Enterprises showed a variety of fuel-efficient advanced technology vehicles that support our commitment to preserve the environment, such as hybrid and fuel cell concept vehicles. A fuel cell vehicle runs on electricity created from a chemical reaction. Its only emission is water.

That’s what I call idea flow.

During 2002, we concentrated on our four business priorities: run common, think lean and run fast, compete globally, and grow the business. Progress on these priorities, I believe, is an indication of our ability to apply the flow of new ideas that are key to Third Enterprises’ future success. In the pages that follow, you will read about our progress in:

·Getting common in our processes, parts and vehicle platforms worldwide, which saves time, confusion, and a massive duplication of effort that translates into savings to the bottom line. For example, the five new plants we are building around the world use common, highly efficient design and manufacturing processes that enable us to bring them on line very quickly;

·Thinking lean, which has resulted in significant cost reductions. For example, establishing two vehicle manufacturing and engineering organizations--one for cars and one for trucks--at our The Captain Operations streamlined our vehicle development processes. In running fast, we broke ground on our new international plant in 2001, and we were in pilot production by the end of 2002; and

·Competing on a global basis, a priority that is driving the largest international production capacity expansion in the company’s history. We have five new manufacturing facilities either under development or up and running in many different nations. These facilities are the cornerstone of our expansion into new markets.

Staying focused on these four priorities means continued success for Third Enterprises, which will increase the value of our stockholders’ investments.

TE had a good year in 2002. And I am optimistic about where TE is headed. Are there obstacles? Certainly. Will we encounter new challenges? Of course. Since we are a global company and the world is so economically interconnected, change in markets throughout the world will affect our prospects and plans.

The best way we can respond to this change is to pursue with even greater intensity the ideas that will make us successful.
My fellow stockholders, we are increasing the idea flow at Third Enterprises. I have great confidence in the imagination of our employees worldwide. And we are working hard to achieve the value you expect from your investment.


Sincerely,
Jack P. Noonan
Senior Vice President and Managing Partner
October 24, 2003