Consumer confidence came in lower than expected…perhaps we need a nation of surfers.
Comments »Monthly Archives: January 2013
The U.S. Will Expand its Military Role in Africa
“The U.S. signed an agreement Monday with the West African country of Niger that clears the way for a stepped-up American military presence on the edges of the conflict in neighboring Mali.
The U.S. and France are moving to create an intelligence hub in Niger that could include a base, near Mali’s border, for American drones that could monitor al Qaeda-linked militants in Mali’s vast desert north, U.S. officials said.
The moves show the extent to which the U.S. and France are girding for what could be an open-ended campaign against the militants in North and West Africa.
U.S. and French officials said they see Niger as a logical hub for intelligence-collection operations nearby in Mali, where France has deployed warplanes and ground troops to drive Islamist militants from cities and towns they have held for months. War planners say small air strips in Niger could be used as launching pads for spy missions and strikes.
The signing of the so-called status-of-forces agreement with Niger was a necessary precursor for American military operations there, officials said. U.S. officials said discussions with Niger on a drone base were at an early stage….”
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A Pared Down $TYC Reports a 49% Drop in Profits
“Tyco International Ltd.’s TYC -1.70% fiscal first-quarter net profit sank 49% as the company faced a tough comparison with a year-earlier period buoyed by discontinued operations, but core earnings improved, and revenue climbed.
The industrial conglomerate spun off its North American security business in September to create ADT Corp. ADT -0.18% It also split off, then merged, its pipe-and-valve business with pump-filter manufacturer Pentair Inc. PNR -0.79% What remains of Tyco is focused on fire-suppression systems for commercial buildings and safety equipment.
On Tuesday, Tyco Chief Executive George Oliver said the new Tyco is “off to a great start,” adding that revenue growth was driven partly by its acquisition strategy. “I am especially pleased with the traction we are getting from our productivity and sourcing initiatives, and the positive impact we are seeing from our increased investments in research and development,” he said, calling the first-quarter results “a solid beginning to fiscal 2013.”
For the period ended Dec. 28, Tyco reported a profit of $163 million, or 34 cents a share, compared with $322 million, or 69 cents a share, a year earlier. Excluding one-time items, however, adjusted earnings from continuing operations rose to 40 cents a share from 26 cents.
Revenue rose 4.9% to $2.6 billion, including what Tyco said was a 3% benefit from acquisitions….”
Comments »$VLO Kills Street Estimates, New Highs Expected
“Valero Energy Corp. (NYSE: VLO) reported fourth-quarter and full-year results before markets opened this morning. For the quarter, the oil refiner posted adjusted diluted earnings per share (EPS) of $1.82 on revenues of $34.69 billion. In the same period a year ago, the company reported EPS of $0.08 on revenues of $34.67 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.18 and $31.01 billion in revenues…”
Comments »$BRK-A Files to Raise Capital
“Berkshire Hathaway Inc. (NYSE: BRK-A) is about to raise some new debt financing. An SEC filing S-3ASR from Warren Buffett and friends was filed on behalf of the Berkshire Hathaway Finance Corporation unit to be sold as guarantee of Berkshire Hathaway Inc. of debt securities of Berkshire Hathaway Finance Corporation. The formal dollar amount was not shown but that will be out in the coming days. It is not that common for Berkshire Hathaway to be tapping the public bond market, but it is not all that uncommon either.
Berkshire Hathway’s S-3ASR filing said:
We will issue senior debt securities on a senior unsecured basis under an indenture, dated as of February 1, 2010, by and among Berkshire, Berkshire Hathaway Finance Corporation and The Bank of New York Mellon Trust Company, N.A.. BHFC may also issue debt securities under this indenture; however, the debt securities described herein are solely issued by Berkshire Hathaway Inc.
As far as the use of proceeds…..”
Comments »Gapping Up and Down This Morning
In Play and On the Wires
Case Shiller 20 City Price Index Rises 5.5%
$AAPL Announces New iPad With Huge Memory Cache
As reported yesterday, sources confirmed a new iPad with 128 gigs of memory space…
Comments »$DHI Profit More Than Doubles as Housing Market Rebounds
“D.R. Horton Inc. (DHI), the largest U.S. homebuilder by volume, said fiscal first-quarter profit more than doubled as demand for new houses climbed in a recovering real estate market.
Net income was $66.3 million, or 20 cents a share, for the three months ended Dec. 31, up from $27.7 million, or 9 cents, a year earlier, the Fort Worth, Texas-based company said in a statement today. The average estimate of 19 analysts in a Bloomberg survey was for earnings of 14 cents a share.
Low mortgage rates and a shrinking inventory of existing residences on the market are fueling sales of new houses. U.S. builders sold 367,000 homes in 2012, the most in three years, the Commerce Department said last week. Under Chief Executive Officer Donald J. Tomnitz, D.R. Horton has focused on using its size advantage to control costs and increase market share by accelerating land purchases ahead of smaller competitors.
“We experienced broad improvement in demand in most of our markets this quarter, and we significantly increased our investments in homes under construction, finished lots, land and land development to capture this increasing demand,” Chairman Donald R. Horton said in the statement.
Order Growth….”
Comments »$IP Beats by a Penny, Consumer Packaging Weak
“Jan 29 (Reuters) – International Paper Co posted better-than-expected quarterly profit on Tuesday as strong sales of corrugated boxes offset weakness in the consumer packaging unit.
IP became the largest North American producer of corrugated packaging with its 2012 buyout of smaller rival Temple-Inland , and profit in that unit jumped 10 percent. Amazon.com Inc is a key IP customer.
But in the consumer packaging unit, profit slumped 38 percent as overseas customers bought more domestically produced boxes for soap, medicine and other consumer items, causing a supply glut in the United States, IP Chief Executive John Faraci said in an interview. Roughly 20 percent of consumer packaging made in the United States is exported.
“We didn’t do as well as we could have in the fourth quarter,” Faraci said.
For the quarter, the company posted net income of $235 million, or 53 cents per share, compared with $281 million, or 65 cents per share, a year earlier….”
Comments »$HOG Misses by a Penny, Sales on the Rebound
“Harley-Davidson Inc. on Tuesday reported lower net income during its fourth quarter on lower revenue, despite higher sales of new motorcycles in the United States and abroad.
Harley-Davidson (NYSE: HOG), the Milwaukee-based motorcycle manufacturer, said net income was $70.6 million, or 31 cents per share, in the fourth quarter ended Dec. 31, down from $105.7 million, or 46 cents per share, in the same period last year.
Net income in the 2011 fourth quarter included an additional $51 million in earnings from discontinued operations.
Motorcycles and related products revenue was down 1.5 percent to $1.01 billion, from $1.03 billion in the fourth quarter of 2011. Consolidated revenue for the quarter, which includes revenue from Harley-Davidson’s financial services unit, was down nearly 1 percent to $1.17 billion, from $1.18 billion in the year-ago period.
Retail sales of new Harley-Davidson motorcycles increased 7.5% …”
Comments »U.S. Steel Posts a Smaller Loss Than Expected
“PITTSBURGH (AP) — United States Steel Corp. saw its fourth-quarter loss shrink to $50 million as the tough economy continues to produce volatile results in the steel industry.
The Pittsburgh-based steelmaker says it lost 35 cents per share for the most recent quarter. A year ago it lost $211 million, or $1.46 per share.
The loss would have been 41 cents per share if not for a favorable settlement of a contract dispute. Still, that was better than the loss of 70 cents per share expected by analysts surveyed by FactSet.
Revenue fell 6.9 percent to $4.49 billion. Analysts had been expecting revenue of $4.33 billion.
The company says it is still facing uncertain economic and steel market conditions. U.S. Steel expects shipments to rise in the first quarter compared with fourth quarter.”
Comments »Despite Generic Drug Competition $PFE’s Profits Quadruple
“NEW YORK (AP) — Pfizer Inc.’s fourth-quarter profit more than quadrupled, despite competition from generic drugs hurting sales, because of a $4.8 billion gain from selling its nutrition business.
The world’s biggest drugmaker said Tuesday that its net income was $6.32 billion, or 85 cents per share, up from $1.44 billion, or 19 cents per share, a year earlier.
Excluding one-time items, the Viagra maker would have had a profit of $3.51 billion, or 47 cents per share — 3 cents more than analysts surveyed by FactSet were expecting.
The New York-based company’s stock rose 4 cents to $2688 in premarket trading.
Revenue fell 7 percent to $15.1 billion, mainly due to generic competition to cholesterol blockbuster Lipitor. Analysts expected $14.35 billion.
Lipitor, which had reigned as the world’s top-selling drug ever for nearly a decade, got U.S. generic competition in December 2011 and now has generic rivals in many major markets. The drug had been bringing Pfizer nearly $11 billion a year before then, down from its peak of $13 billion a year.
In the fourth quarter, Lipitor sales plunged 91 percent in the U.S. and 71 percent worldwide, to $584 million. A dozen other medicines also had lower sales due to generic competition. But key newer drugs had double-digit sales increases, including fibromyalgia and pain treatment Lyrica, at $1.13 billion, painkiller Celebrex at $750 million, and the Prevnar 13 vaccine against meningitis and other pneumococcal infections, at $993 million….”
Comments »Bankruptcy Experts Warn About Companies in Media, Defense, and Coal Industries
“NEW YORK (Reuters) – Mid-market defense contractors as well as media and coal companies could be at risk of tumbling into bankruptcy in 2013, credit market guru and New York University professor Edward Altman said on Thursday.
With the U.S. government mulling significant cuts to the defense budget, smaller companies that contract with the government for defense projects could suffer, Altman told a group of restructuring professionals at his 12th annual Corporate & Sovereign Credit Market Outlook luncheon.
Altman is known for establishing the so-called “Z-score” method of predicting a company’s bankruptcy risk.
He did not name defense companies he thinks could be bankruptcy candidates, but he said the problems likely would hit smaller firms and that larger ones are not in danger.
In an interview with Reuters after his speech, Altman said the coal industry is expected to continue to suffer as natural gas remains a cheaper energy alternative. One major player in that industry – Patriot Coal Corp (PCXCQ.PK) – filed for bankruptcy last year, blaming in part the glut of natural gas.
Altman said media companies will also face challenges as specialized online media outlets gain strength.
“The Internet media world is getting very crowded,” Altman said in the interview….”
Comments »Report: Jobless Pay Unnecessary Fees to Banks Brought On by State Mandates
“WASHINGTON (AP) — Jobless Americans are paying millions in unnecessary fees to collectunemployment benefits because of state policies encouraging them to get the money through bank-issued payment cards, according to a new report from a consumer group.
People are using the fee-heavy cards instead of getting their payments deposited directly to theirbank accounts. That’s because states issue bank cards automatically, require complicated paperwork or phone calls to set up direct deposit and fail to explain the card fees, according to a report issued Tuesday by the National Consumer Law Center, a nonprofit group that seeks to protect low-income Americans from unfair financial-services products. An early copy of the report was obtained by The Associated Press.
Until the past decade, states distributed unemployment compensation by mailing out paper checks. Some also allowed direct deposit. The system worked well for people who had bank accounts and could deposit the check without paying a fee.
It also cost states millions of dollars each year to print and mail the checks.
Banks including JPMorgan Chase & Co., U.S. Bancorp and Bank of America Corp. seized on government payments as a business opportunity. They pitched card programs to states as a win-win: States would save millions in overhead costs because the cards would be issued for free. And people without bank accounts would avoid the big fees charged by storefront check cashers.
However, most of the people being hit with fees already have bank accounts. The bank-state partnerships effectively shifted the cost of distributing payments from governments to individuals. The money needed to cover those costs is deducted from people’s unemployment benefits in the form of fees….”
Comments »Generic Drugs Eat Into $LLY’s Profits
“(Reuters) – Eli Lilly and Co said on Tuesday that fourth-quarter profit fell as competition fromgeneric drugs, particularly for its once top-selling schizophrenia drug Zyprexa, drove revenue lower.
The U.S. drugmaker earned $827 million, or 74 cents per share, down from $858 million, or 77 cents per share, a year earlier.
Excluding special items such as asset impairments and restructuring, Lilly earned 85 cents per share, beating analysts’ expectations by 7 cents per share.
The better-than-expected results were due to cost controls as well as strong sales of key drugs, such as lung cancer treatment Alimta and antidepressant Cymbalta, Lilly spokesman Ed Sagabiel said.
Revenue dropped by about 1 percent to $5.96 billion, but were above Wall Street expectations of $5.81 billion.
Zyprexa, now facing generic competition, saw sales slide 49 percent to $385 million from $750 million a year earlier. The company said the sharp drop was partly offset by gains in sales of other drugs and its animal health products….”
Comments »Japan Announces $1.2 Trillion Budget, Borrowing Costs at New Highs
“TOKYO (Reuters) – Japan’s government approved on Tuesday a $1.02 trillion draft budget for the next fiscal year that aims to nudge tax revenues above new bond sales for the first time in four years, but still relies on borrowing to cover 46.3 percent of its spending.
The first full-year draft budget compiled under Prime Minister Shinzo Abe, who led his Liberal Democratic Party back to power last month with promises of economic revival, marks symbolic improvement after years of deterioration.
With the 92.6 trillion yen ($1.02 trillion) in spending, the government effectively trimmed the size of its draft budget from the previous year for the first time in seven years, taking into accountgovernment funding for basic pension payouts.
Still, the budget size hovered around record levels, underlining the difficulty which Abe’s government is facing in striking a balance between economic stimulus and fiscal reform.
Taken together with an 10.3 trillion yen extra stimulus plan signed off earlier this month and financed in more than half by new bond sales, it drives borrowing to new highs, pushing Japan’s record high debt further into uncharted territory.
“We managed to make the annual budget slimmer than before,” Finance Minister Taro Aso told reporters.
“Without the extra budget, the economy would fall into a severe situation in April-June,” he added.
In fiscal year 2013/14 starting in April, the government plans to issue new bonds worth 42.8 trillion yen, below this year’s 44.2 trillion yen initial target. But combined with the extra budget borrowing of 5.2 trillion, Abe’s government will borrow 48 trillion yen, though technically the extra budget borrowing will be booked in the 2012/13 accounts.
Tax revenue is targeted to rise 750 billion yen to 43.1 trillion yen, mainly reflecting an expected pick-up in economic growth to 2.5 percent from 1.0 percent forecast for the current year.
FISCAL TARGETS
Within the 92.6 trillion yen general-account budget….”
Comments »UK Watchdog Will Not Pursue a Case Against Ernst and Young for Their Role in $LEH Accounting
“LONDON (Reuters) – Britain’s accounting watchdog said it won’t take any action against Ernst & Young (E&Y) over the way it checked the books of Lehman Brothers, the U.S. bank whose failure triggered a near meltdown in global markets in 2008.
The Financial Reporting Council (FRC) probe focused on how E&Y, one of the world’s “Big Four”accounting firms, audited the London-based European arm of Lehman.
“Following the conclusion of the investigation, the FRC’s executive counsel, Gareth Rees, has decided that no action should be taken against E&Y or any individuals in connection with their conduct in this matter,” the FRC said in a statement.
E&Y had no immediate comment.
Lehman’s collapse, along with bank rescues by taxpayers across Europe and in the United States, prompted policymakers to question why lenders had been given clean bills of health by their auditors in the run up to the 2007-09 financial crisis.
The FRC’s decision not to take action against E&Y was agreed despite its finding that administrators had identified a “significant shortfall in the pool of money held on trust for clients” after Lehman failed in September 2008.
UK rules in force at the time of the Lehman collapse already required banks to segregate funds that could be handed back to customers in the event of their failure and the watchdog said E&Y had signed off to the effect that Lehman had complied with these rules….”
Comments »$WMT’s Mexican Unit Documents Show Company Used Governor to Implement Bribery
“Wal-Mart Stores Inc.’s (WMT) Mexican unit used a current state governor there to facilitate $156,000 in bribes meant to help open stores, an ex-lawyer for the retailer told company officials in 2005, according to documents released by members of the U.S. Congress.
The payments were negotiated by Graco Ramirez Garrido Abreu, who at the time served as a federal lawmaker for the state of Morelos, a Wal-Mart summary of the accusations stated. It was released Jan. 10 by Democratic Representatives Henry Waxman of California and Elijah Cummings of Maryland, whose staff is investigating the lawyer’s allegations….”
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