UCP Issues Amended 10-K. Cortney, Bogue, Lori, Pirrello & Wade Feed At The Trough.

No Alternative Facts For Andy

Esteemed institutional investor, Andrew “Andy” Shapiro, portfolio manager of Lawndale Capital Management, released his PICO Holdings‘ voting intentions on May 1. See Mr. Shapiro’s voting selections and rationale here.

Great minds think alike and we are happy to report that, except for one small discrepancy, RPN’s card and Andy’s card are the same.

Andy has been a friend to PICO owners. He has asked insightful and penetrating questions at last year’s Annual Meeting and on the earnings calls. His inquiries have provided all investors with better information about PICO. When you see Andy at the Annual Meeting, thank him for his dedication to shareholders.

We encourage other investors to take an active role in their PICO investment and ask difficult questions of the PICO Board at the Annual Meeting. Andy can’t do it all, ya know.

UCP’s Amended 10-K & Amended Future

On April 28, UCP issued a 10-K/A, or an amended 10-K with the Securities Exchange Commission. Under SEC rules, the information contained in Items 10-14 of the 10-K must be provided to shareholders annually. Firms can provide this information in either the 10-K or the Proxy Statement, but if they elect the Proxy Statement, the 10-K must reference Items 10-14 and the Proxy Statement must be issued within 30 days of the 10-K.

Items 10-14 pertain to:

Item 10: Directors, Executive Officers and Corporate Governance
Item 11: Executive Compensation
Item 12: Security Ownership
Item 13: Relationships, Related Transactions and Director Independence|
Item 14: Accountant Fees and Services

Once UCP signed its deal with Century Communities, there was no need for an Annual Meeting and a 2017 Proxy Statement. But UCP was still required to provide Items 10-14 to the investing public. To comply with this requirement, UCP amended its 10-K to include Items 10-14.

The 10-K/A is rife with interesting information. As we implied earlier, UCP does not anticipate holding an Annual Meeting.  The next time shareholders will opine on anything related to UCP will be at a Special Meeting of Stockholders to vote on the Century-UCP deal – or any other deal that may arise (hopefully at a higher price).

Assuming UCP is acquired by someone, UCP will not adopt the corporate governance improvement proposals advanced by PICO and formalized in the March 29, 2017 Agreement. PICO’s nominee for the Board of UCP, Keith Locker, will not stand for election or occupy a UCP Board seat. UCP owners will not vote on Mr. Bogue’s pay or execute a symbolic protest vote against Kathleen Wade.

Both the Merger Agreement and the 10-K/A reveal that UCP can shop assets, provided that such assets represent less than 20% of the balance sheet or less than 20% or of earnings power or revenues. UCP doesn’t have any earnings power, so assets and revenues are the relevant categories here. This would appear to give UCP the right to sell off the operation in Washington State. UCP doesn’t break it out separately, but we are pretty sure it represents less than 20% of assets or revenues. UCP should test the market for its Washington State operation. The Century-UCP merger price can be adjusted if it is sold.

Of course, this should only be done with Century’s blessing. Given UCP’s bleak future as a standalone and the upcoming tidal wave of debt maturity, UCP’s first priority is to get sold to a stronger, more competently run, enterprise.

Amended (Augmented) Compensation

Although this 10-K/A is supposed to provide the same information as the Proxy Statement, it avoids all specifics about the UCP Compensation Committee and the Corporate Governance and Nominating Committee. There is information about the Audit Committee and the Special Committee (which was established to address PICO’s corporate governance proposals), but nothing about the CGN Committee or the Comp Committee. Recall that the dubiously configured Comp Committee, comprised of only Michael Cortney and Peter Lori, fortified CEO Dustin Bogue‘s Employment Agreement and golden parachute.

The lack of detail on the Comp Committee does not hide the ineptitude of Messrs. Cortney and Lori – both lackeys to Mr. Bogue. These gentlemen have dug unjustifiably into shareowners’ pockets once again.

The ethically challenged Messrs. C0rtney and Lori awarded Mr. Bogue probably the most undeserved bonus in homebuilder history. For 2016, Messrs. Cortney and Lori gifted Mr. Bogue a bonus of $182,639. He was also gifted $525,000 in stock awards. The man who we have labelled “America’s Worst Homebuilder CEO,” has been rewarded by his supplicants as if he created value in 2016. Shareholders will pay the price.

UCP’s dishonest communication with owners continues. In last year’s Proxy Statement, UCP revealed that it paid Mr. Bogue a “Bonus” of $200,000 – the merits of which we leave undiscussed. This year, Messrs. Cortney and Lori did not pay Mr. Bogue a “Bonus”; instead, they paid him “Non-Equity Incentive Plan Compensation.”

Hmmmmm. The $182,639 payment appears in the table entitled “Summary Compensation,” just like last year’s “Bonus.” Beneath this year’s figure of $182,639, we see the $200,000 payment from 2015, which was labelled “Bonus” back then. Yet somehow, last year’s “Bonus” is this year’s “Non-Equity Incentive Plan Compensation.”

Mr. Bogue was paid a shameful total compensation of $1,267,027 for 2016.

Clown Bogue Counting Money

Dustin Bogue – Doing What He Does Best

The 10-K/A indicates that CFO James Pirrello was paid “Non-Equity Incentive Plan Compensation,” in other words a Bonus, of $163,363. We are not sure how this Bonus is justified. Perhaps it was the “Core Earnings” of $.84 cents or the “6.5% Core ROE” Mr. Pirrello disingenuously highlighted in Q4.

More unfathomable is Mr. Pirrello’s $993,247 in total compensation for 2016.

Bogue & Pirrello Miss Targets

According to a description of their Employment Agreements in the 10-K/A, Messrs. Bogue and Pirrello were to receive 2016 Bonuses targeted at not less than 50% of their annual base salaries.

Mr. Bogue’s Bonus – excuse us, “Non-Equity Incentive Plan Compensation” – amounted to 37% of his annual base salary. Mr. Pirrello’s Non-Equity Incentive Plan Compensation was 44% of his base salary. Even the UCP Comp Committee’s supplicatively low standards were not met.

Cortney & Lori Pay Cortney & Lori

Messrs. Cortney and Lori, the only two members of the UCP Comp Committee for 2016, shamefully increased their own compensation in 2016, by an average of about $50,000 or more than 60%.

In 2015, Mr. Cortney paid himself $85,000 – an amount that was unjustified given UCP’s poor performance and wanting corporate governance. In 2016, Mr. Cortney raised his own compensation to $135,000, an increase of 59%.

In 2015, Mr. Lori paid himself $95,000. In 2016, Mr. Lori paid himself $135,000, an increase of 42%.

In 2015, Mrs. Wade was gifted $71,217 in 2015, but was bestowed $130,000 in 2016 compensation, an increase of a ridiculous 83%.

For 2016, Messrs. Cortney and Lori raised Director compensation by an average of 61%. Some people are incapable of doing the right thing.

What Have U[CP] Done For Me Lately?

One glaring omission from the 10-K/A is an explanation and clarification of the UCP Executive Stock Ownership Guidelines.

The 2015 Proxy Statement made these Guidelines clear: UCP Executives had to own five times their base salary in UCP equity. Mr. Bogue failed to comply with the Guidelines for much of the last two years.

Recall that those Guidelines mysteriously disappeared from the 2016 Proxy Statement. We have been asking Mr. Cortney, as Chair of the Comp Committee, to clarify for owners the fate of the Guidelines. Mr. Cortney has deceived owners and clarified nothing. It appears UCP shareholders will never know what happened to the Guidelines.

We guess this is how Mr. Cortney runs a Board – promulgate Guidelines and when those Guidelines become inconvenient, deceptively rescind them. When caught red handed, keep silent.

May 4 – Hammer Time

May 4 will be a big day for owners of PICO and UCP.

The PICO Annual Meeting will take place. We expect PICO to report Q1 results that morning. PICO will update owners on several matters, including the $11 million in Juicer Termination Payments and return of capital to owners. We might even get lucky and learn about the status of UCP monetization bonus.

On May 4, UCP will report Q1 results. UCP has historically released earnings in the morning and hosted an earnings call a few hours later. Given that Q1 earnings will be released after market close, we assume that UCP will not hold an earnings call. This is typical of firms about to be acquired. And in UCP’s case, it is appropriate: Messrs. Bogue and Pirrello have been paid handsomely for creating no value for owners through operations. They should appropriately devote all their time and energy to providing owners with value the only way they can: by selling the firm.

On May 4, Century Communities, UCP’s future groom, will also release Q1 earnings. Root for a big number from Century. There is no collar on the share exchange ratio.

Don’t sleep in on Thursday. It’s gonna be a big day!

10 responses to “UCP Issues Amended 10-K. Cortney, Bogue, Lori, Pirrello & Wade Feed At The Trough.

  1. Thanks for the appreciation. Our difference on the right to adjourn vote was a balance that weighed in favor of our desire to pass THIS reincorporation proposal and not require separate costly process in a special vote or the risk of waiting another year for next year’s annual meeting to put in place NOL protection.

    PICO’s board and I engaged in detailed dialogue about what was wrong with the last several reincorporation proposals and what was required to gain our support. The new proposal has all of our ‘deal-breaker’ demands and almost all our ‘wish-list’ demands too.

    Moreover, there is visibility on gains to be protected and that visibility has already increased turnover in PICO shareownership and along with cash distributions and/or stock buybacks will likely to further increase turnover in ownership %’s such that the need to enact protections has increased from last year.

    • Thanks for the additional clarification, Andy. We laughed at your mention of “the last several reincorporation proposals…” This is not the first one shareowners have seen – Juicer tried to push through a couple others. We are curious about what “wish list demands” did not make it into the final Proposal.

      Enjoy the Annual Meeting!

  2. Press release today indicates 23,080,882 in outstanding shares as of of March 31, 2017. As of Feb 2017 company had 23,072,000 in outstanding shares. I am not sure if shares increased due to equity grants, increase due to the illicit hart severance agreement. However, I am not sure the company bought back too many shares in the past couple of months.

  3. oops missed the Webcast and trying to get back to listen to the webcast and there seems to be no way to listen to it now….there link does not hook-up…did they not before just leave it on the Pico website in the past…

  4. mmm again for everyone ..you must write in the address and it will take you there…..does not seem to work from Pico’s site…Thanks

  5. Hello….Just wondering how to listen to the Pico Annual Meeting….the website will not take me to the webcast? Any help would be appreciated…Thanks

  6. Can’t listen to webcast as Pico’s technology is horrible. Any color from meeting on how many shares they’ve bought back thus far?

  7. Looking at 10q pico had 52 million cash and cash equivalents as of march 31 2017. Then cash went out the door in April for hart and other obligations. I missed call yesterday. Did pico state how much cash it had on hand after what went out in april? Thx.

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