A
U.S.
investor
won
an
unusual
remedy
in
his
fight
against
a
Chinese
company
under
an
accounting
cloud:
A
judge
gave
a
court-appointed
official
the
power
to
seize
company
assets
needed
to
buy
back
the
investor’s
shares
for
far
more
…
SeaWorld Entertainment launched its initial public stock offering on Friday, and among the lead underwriters was Goldman Sachs,
the great vampire squid.
With SeaWorld firmly in its tentacles, Goldman is sucking up millions in investment-banking fees. It’s also redeeming some of the $300 million in senior subordinated debt instruments it holds on the big corporate fish tank.
Orlando-based SeaWorld runs 11 theme parks, including Busch Gardens in Tampa and SeaWorlds in Orlando, San Diego, and San Antonio. None of the more than $700 million raised in its IPO will go to Shamu the whale, Puck the penguin or anything else that swims in the parks. The money is going to retire debt and pay some enormous fees.
Buyout firm Blackstone Group
flooded SeaWorld with debt when it purchased it from Anheuser-Busch for $2.3 billion in December 2009. Blackstone put down $1 billion in cash and financed the rest.
Friday’s opening IPO price of $27 a share valued SeaWorld at about $2.5 billion. The company has more than $1.8 billion in long-term debt. Or as it warned in its IPO registration statement, “We are highly leveraged.” Nevertheless, the IPO did very well, rising more than 25% to nearly $34 a share on its first day of trading.
Blackstone will use IPO proceeds to pay itself $47 million for terminating its 2009 advisory agreement with SeaWorld. In March 2012, Blackstone paidâmostly to itselfâ a $500 million dividend from SeaWorld’s coffers. This was on top of a $110 million dividend in September 2011. Andâget thisâafter bagging millions more in Friday’s IPO, Blackstone will remain SeaWorld’s controlling shareholder.
It has recouped its cash and more than doubled its initial investment in three years.
In one of the deepest downturns U.S. consumers have faced, Blackstone has turned profits at SeaWorld and managed to raise ticket and concession prices. Along the way, it garnered a few citations from the Occupational Safety and Health Administration and some negative publicity in 2010 when an orca whale killed a trainer in front of a live audience in Orlando.
Anyone who buys SeaWorld stock is likely attracted to the promised 3% annual dividend, but they are also making a bet that the economy is really improving and that this debt-laden company will be able to finance future improvements needed to stay competitive.
I’d rather be on Blackstone’s side of the bet. It’s great being in business with a vampire squid.
Rolling Stone magazine writer Matt Taibbi gave Goldman this nickname in 2010, complaining that it was “relentlessly jamming its blood funnel into anything that smells like money.”
When I mentioned this in a column a few weeks ago, I was soon informed that attaching this term to Goldman was extremely insultingâ¦to vampire squids.
“Vampyroteuthis infernalis aren’t bloodsuckers,” one reader emailed with a link to a 2011 news release from the Monterey Bay Aquarium Research Institute.
The Latin term means “vampire squid from hell,” but these animals just look scary. They only grow to about the size of a football. They don’t have blood funnels. They’re actually near the bottom of the food chain. “Vampire squids eat mostly ‘marine snow’âa mixture of dead bodies, poop, and snot,” the institute’s news release says, citing published research by its senior scientist Bruce Robison.
Sounds more like the kind of fish who’d be buying, not selling, SeaWorld stock.
Al Lewis is a columnist for Dow Jones Newswires in Denver. He blogs at tellittoal.com; and his email address is al.lewis@dowjones.com
(The following statement was released by the rating agency)
NEW YORK, April 17 (Fitch) Fitch Ratings has affirmed the
ratings on the
Interpublic Group of Companies, Inc. (IPG) including its Issuer
Default Rating
(IDR) at ‘BBB’. The Rating Outlook is Stable. A full list of
rating actions
follows at the end of this release.
Key Rating Drivers:
–IPG’s ratings reflect its position in the industry as one of
the largest
global advertising holding companies, its diverse client base,
and the company’s
ample liquidity.
–The ratings incorporate the cyclicality of the advertising
industry and
potential top-line volatility due to client wins or losses in
any given year.
IPG has reduced its U.S. exposure to U.S. advertising cycles by
diversifying
into international markets and marketing services businesses.
Roughly 45% of
IPG’s revenue is generated outside of the U.S. In 2012, IPG
faced organic
revenue headwind challenges of roughly 3% due to the loss of
clients in 2011.
Going into 2013, Fitch expects the headwinds to be minimal and
is projecting
organic growth of 2%-3%, slightly above Fitch’s current U.S. GDP
forecast of
1.9%.
–The risk of revenue cyclicality is balanced by the scalable
cost structures of
IPG and the other global holding advertising companies.
However, IPG still lags
its peers in consolidated EBITDA margin. As of Dec. 31, 2012,
Fitch calculates
EBITDA margin of 12.5%, which compares to 15.2% for Omnicom
Group, Inc. Fitch
expects EBITDA margin of roughly 13% by year-end 2013. Fitch
also expects IPG to
achieve peer-level margins over the next four to five years,
assuming low- to
mid-single-digit organic revenue growth over this timeframe.
– The ratings reflect Fitch’s expectation that IPG will manage
unadjusted gross
leverage to a level below 2.5x.
Leverage
Debt and leverage at Dec. 31, 2012 included $800 million in
senior notes issued
in November 2012 ($300 million due 2017 and $500 million due
2023). Use of
proceeds from these notes was the planned redemption of the $200
million in
convertible notes and $600 million 10% notes:
–In March 2013, holders of the 4.75% convertible notes elected
to convert to
common equity. The company announced a $200 million increase in
its share
repurchase authorization to offset the dilution from the
conversion.
–The company intends to exercise its early redemption option
(in July 2013 when
it becomes callable at 105%) on its $600 million 10% senior
notes due 2017.
While these transactions are leverage neutral, IPG will benefit
from the
materially reduced interest costs (approximately $44 million in
savings).
IPG’s total debt outstanding at Dec. 31, 2012 was $2.4 billion
($1.6 billion pro
forma for the $800 million in 2013 redemptions). IPG has $221.5
million in
preferred securities that receive 50% equity credit under
Fitch’s criteria.
Fitch calculates unadjusted gross leverage, pro forma for the
2013 redemptions,
at 2.0x.
LIQUIDITY
Fitch views IPG’s liquidity as solid.
IPG’s liquidity position is supported by a cash balance of $2.6
billion as of
year-end 2012, in addition to $985 million of availability under
its $1 billion
revolving credit facility due May 2016. Free cash flow (FCF) for
2012 was $73
million, which included a working capital drain of $297 million.
Working capital
has led to a drain of approximately $300 million for the last
two years. This
drain has been driven in part by working capital timing, organic
revenue
declines in the U.S. region (particularly in business lines that
generate
positive working capital) and organic growth in international
regions. Fitch
expects continued working capital drain in 2013 at levels
similar to the past
two years. Fitch expects IPG to maintain sufficient liquidity to
handle seasonal
working-capital swings.
Fitch expects 2013 FCF in the range of $150 million to $200
million, which
incorporates capital expenditures of $150 million. In addition,
IPG increased
its quarterly common dividend to $0.075/share, which will have a
$20 million to
$25 million negative effect on FCF in 2013 (for total annual
cash dividend
payments of $125 million).
IPG’s U.S. pension plan was $25 million underfunded as of the
end of 2012. IPG
should have no issues meeting any required U.S. pension plan
funding.
In February of 2013, IPG announced an additional $300 million
share repurchase
authorization. In April, it announced an additional increase of
$200 million to
offset the converted notes mentioned previously. The rating
incorporates Fitch’s
belief that the company will deploy liquidity, including FCF,
toward share
repurchases and acquisitions in a disciplined manner.
Rating Sensitivities:
–A public commitment by the company to maintain gross
unadjusted leverage below
2.0x coupled with peer level EBITDA margins could warrant
upgrade consideration.
–Fitch is comfortable with management’s willingness and ability
to maintain its
‘BBB’ rating; however, a change in the company’s posture toward
maintaining
adequate bondholder protection over the near and long term could
affect the
rating negatively.
Fitch has affirmed the following ratings:
IPG
–IDR at ‘BBB’;
–Senior unsecured notes at ‘BBB’;
–Bank credit facility at ‘BBB’;
–Cumulative convertible perpetual preferred stock at ‘BB+’.
Contact:
Primary Analyst
Rolando Larrondo
Director
+1-212-908-9189
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Secondary Analyst
Shawn Gannon
Associate Director
+1-212-908-0223
Committee Chairperson
David Peterson
Senior Director
+1-312-368-3177
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Email:
brian.bertsch@fitchratings.com.
Additional information is available at ‘www.fitchratings.com’.
Applicable Criteria and Related Research:
–’Corporate Rating Methodology’ Aug. 8, 2012;
–’Rating Advertising Holding Companies’ Aug. 9, 2012;
–’Treatment and Notching of Hybrids in Nonfinancial Corporate
and REIT Credit
Analysis’ Dec. 12, 2012.
Applicable Criteria and Related Research
Treatment and Notching of Hybrids in Nonfinancial Corporate and
REIT Credit
Analysis
here
Rating Advertising Holding Companies
here
Corporate Rating Methodology
here
Additional Disclosure
Solicitation Status
here
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
LINK:
here. IN ADDITION,
RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE
ON THE AGENCY’S
PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. PUBLISHED RATINGS,
CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S
CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE ‘CODE OF
CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH
WEBSITE.
NEW YORK |
NEW YORK (Reuters) – When Roger Simmermaker went shopping for clothes at a Florida mall in the mid-1990s, he wanted to buy American, but to his frustration, he couldn’t find anything made in the U.S.A.
The experience motivated Simmermaker, an electronics technician by trade, to write “How Americans Can Buy American” – a guide to finding products manufactured in the United States, which were a scarce commodity at the time.
Nearly 20 years after writing the book, he has seen a big change, with the pendulum in full swing back toward a wider choice of American-made products. They are often available without the expected higher price tag.
“It’s definitely easier,” says Simmermaker, 47, who lives in Orlando and works for a defense contractor. “Especially in the last year or so, things have really changed.”
Those who believe in buying American-made goods from U.S.-owned companies say it creates jobs and boosts the economy through reinvested profits and taxes.
Profit-driven U.S. companies have their own reasons for locating factories, but manufacturers of goods ranging from refrigerators and dishwashers to laptops and tablets are starting to bring some of their production home, affording more opportunities for consumers with the patriotic conviction that Americans ought to buy American.
Better still, that “Made in the U.S.A.” label may no longer carry such a premium price tag. That’s because production and shipping costs in China and other foreign manufacturing centers are rising. Shifting some manufacturing back to the United States doesn’t necessarily mean manufacturers have to raise prices to compensate for higher labor costs.
To be sure, many industries are still dominated by imports – toys and textiles, for example. Still, Simmermaker and others who believe in buying American are seeing a broad shift.
“Reshoring” advocates were thrilled earlier this year when Wal-Mart Stores Inc., the world’s largest retailer, announced it was throwing its weight behind the movement. In January, the chain – known for its extensive selection of imported goods – said it would spend an additional $50 billion over the next 10 years on American-made products, “helping to onshore U.S. production in high-potential areas like textiles, furniture and higher-end appliances.”
Likewise, Apple Inc. said it planned to build some of its iMac line in the United States instead of China. Ford Motor Co., Coleman Co. (part of Jarden Corp.) and Master Lock Co. (part of Fortune Brands Home & Security Co.) all have said they’re returning some manufacturing to the United States. The list goes on.
WHAT IT MEANS FOR CONSUMERS
While few companies will move production for patriotic reasons alone, the public relations boost that goes with a decision to bring jobs back to the United States is gravy.
“They run the numbers and say ‘We can deliver just as cheaply from a U.S. operation as we can from, say, China.’ It has some nice extra benefits,” says Dan Seiver, chief economist for Reilly Financial Advisors, a wealth management firm in San Diego, California. “Whatever credit goes with it is fine”
With little pricing difference, the impact on U.S. consumers might not be that obvious. But Simmermaker and other advocates also contend that products made in the United States are often higher-quality and safer than those made elsewhere.
There is a decided upside for the companies, too. Making products closer to their end-market allows them to be more nimble in terms of customizing and delivering products.
That was the case with Spreadshirt, a Germany-based custom shirt maker that recently opened a plant in Nevada to supplement the output of its existing facility in Pennsylvania.
In 2011, the company was running its Pennsylvania plant around the clock. To keep up with holiday demand, it was forced to send some work to a plant in Poland, said Mark Venezia, vice president of global sales and marketing for North America.
But the company quickly realized that the distance hurt overall costs and speed – to the tune of about $2 more per unit. “We didn’t lose money, but, obviously, it hurt our bottom line,” Venezia said.
Hunting for a new location led Spreadshirt to Henderson, Nevada, where facilities that met specifications were available at favorable terms, along with a pool of prospective workers.
“We just got this incredible deal that provided us so many benefits,” Venezia said.
(Follow us @ReutersMoney or here. Editing by Beth Pinsker, Frank McGurty and Dan Grebler)
These days, a tough competitor could end up being a good partner.
With companies under tremendous pressure, some small businesses are deciding that it can be in their best interest to join forces with industry rivalsâwhether it’s subcontracting jobs, trading leads and information about the industry, or teaming up to win a contract they couldn’t land on their own.
But the practice comes with plenty of caveats. It can be tough to build trust with rivals. When you do form a relationship, you must be careful not to give away too much inside information about your business. And if a rival does a shoddy job on a mutual project, you could end up losing face with customers.
“During tough economic times, it may be the only way to get workâbut it is a risky way to get work,” says Dennis Ceru, an adjunct professor of entrepreneurship at Babson College.
One of the most common ways to join forces is a subcontractor setup. Companies don’t want to turn away work these days but often can’t handle it all themselves without investing in staff or equipment. Farming the work out to a rival can be a good way to keep the customerâand get referrals in return.
Raluca Bucur
Walker Lunn, head of a food-waste composting business, gets benefits from teaming up with rivals.
Walker Lunn, chief executive of EnviRelation LLC, a food-waste composting company based in Washington, D.C., says he works with competitors in a number of these situations.
Sometimes they come to him with jobs that are outside their service area but inside his. Other times, they turn to him because he provides less-expensive service, and they want to give customers a discount. He might also take on work for competitors if they’re having trouble finishing a job for a mutual contractor, “because everyone wants the client to maintain a perfect service record, since it benefits all of us.”
Likewise, if Mr. Lunn’s business is growing faster than he can get equipment, he might pay to use his competitors’ facilities or farm out work to them.
Still, “the competitor has their own priorities, objectives and things going on,” he says. “The opportunity to do a little bit of work to help with [our] growing pains may not appear like a good use of their time; they may prefer to spend the time getting permanent work or trying to snatch the customer from us.”
So, he says, it’s important to present the work in a way that motivates competitorsâshowing, for instance, that it could be an opportunity for them.
Other times, small companies don’t hand off workâthey join together to get something done. Businesses might team up to negotiate a volume discount, lobby for regulatory changes or land contracts neither would be big enough to get independently, says Gregory Fairchild, E. Thayer Bigelow associate professor of business administration at the University of Virginia’s Darden Graduate School of Business.
But the terms of these partnerships should be spelled out in advance, he warns. Among other things, he says, companies should agree on how to divide up work, who will lead and how the compensation will be split. If those issues aren’t addressed, they could derail the job.
Also bear in mind that if you are the prime contractor, you face increased exposure or liability and potential damage to your reputation or brand if anything goes wrong, Dr. Ceru says.
There’s also the matter of sharing too much. While the project is going on, Dr. Fairchild says, the other party gets a look at your technique, your technology, your customers and your people.
In some cases, though, a relationship between rivals is based on sharing informationâsometimes formally, sometimes not.
Joe Giacalone, owner of Arch Painting Inc., Woburn, Mass., started a dialogue with a competitor by warning him of a subcontractor who didn’t live up to expectations. “This began some dialogue, which led to us having lunch and striking up a relationship,” says Mr. Giacalone.
The two entrepreneurs started to discuss their operations and get an idea of each other’s industry niche. Eventually, both decided to branch out into the other’s specialty.
“We both realize the market is open, and we try to take the high road,” Mr. Giacalone says. “I am sure in time as we get more of the same clients, we may not be as free sharing of information, but to date our relationship hasn’t changed.”
R.J. Lewis, founder of eHealthcare Solutions LLC, Ewing, N.J., which sells ads for health websites, struck up a relationship with a rival to explore a new niche: mobile devices.
“We found a competitive but complementary business in that space who works with the same kinds of customers that we do,” he says. “Until we have an offering in that space, we’ve struck a relationship by which we can get a referral fee if we introduce them to an opportunity.”
Doing so lets eHealthcare see the size of the market and what customers like and don’t like. The company also gets a look at who the decision makers are at client companies.
“This may be a long-term solution, or it may go away and we may compete more head-on as we launch our own offerings. Either way, we learn a lot through the process,” he says.
Ms. Haislip is a writer in Chatham, N.J. She can be reached at reports@wsj.com.
A version of this article appeared April 29, 2013, on page R6 in the U.S. edition of The Wall Street Journal, with the headline: If You Want to Beat ‘Em, You Might Try Joining ‘Em.
Ratings agency Fitch upgraded Greece's credit rating, citing progress in cutting its budget deficit and the risk of a eurozone exit receding.
Fitch up-rated Greece by one notch from CCC to B-, which is still junk status.
But Greece, seen by many last year as likely to leave the eurozone, recently won praise from the International Monetary Fund for progress in putting its finances in order.
Fitch also forecast a milder recession in Greece this year.
The agency said that problems remain and recognised the unpopularity of austerity measures being pushed through by the government.
Fitch said: "The price has been high in terms of lost output and rising unemployment and the capacity for recovery is still in doubt.
"Nonetheless, sovereign debt relief and an easing of fiscal targets have lifted central bank measures of economic sentiment to a three-year high and the risk of eurozone exit has receded."
The Fitch move comes after Standard & Poor's also raised Greece's rating to B-minus with a stable outlook from selective default in December.
The third big ratings agency, Moody's, has a C rating on the credit. All three ratings are still deep in junk territory, however.
Fitch said it expected Greece to have a milder recession this year of 4.3%, and a weak recovery in 2014.
The country is in its sixth year of recession and unemployment has topped 27%.
On Tuesday, Greek borrowing costs fell to their lowest since April 2011 in a sale of 1.3bn euros (£1bn) worth of government Treasury bills.
Last week, the IMF said that debt-laden Greece has made "exceptional" progress in improving its finances. But the IMF said that Greece must do more to tackle its "notorious" tax evasion problem.
* FTSE 100 down 0.2 percent, snaps 7-day winning streak
* StanChart falls on negative hedge fund comment
* Travel and leisure led down by airlines on virus concerns
By Alistair Smout
LONDON, May 13 (Reuters) – Banks led Britain’s blue chip
shares down on Monday, with Standard Chartered among the top
fallers, pushing the FTSE 100 index from 5-1/2 year highs after
seven straight sessions of gains.
At 1045 GMT, the FTSE 100 index was down 13.05
points, or 0.2 percent, at 6,611.93. Financials alone took 20
points off the index and all of the five major banks were in the
red. Banks fell 2.2 percent, having gained 11.33
percent since April 18.
Standard Chartered dropped 3.7 percent after a
report that a U.S. hedge fund Carson Block has bet against the
company because of the perceived health of its loan book.
“Carson Block is shorting Stan Chart debt because of
“deteriorating” loan quality. Basically the bank is a play on
China and emerging markets, so he is bearish on that region,”
Ronnie Chopra, strategist at TradeNext said.
HSBC, which like Standard Chartered is the other
heavily Asia-focused UK-listed bank, also fell 1.6 percent,
taking nearly 9 points off the index. Investec downgraded the
bank to “reduce” from “buy”.
A much-anticipated rate-cut that the European Central Bank
delivered on May 2, has helped the FTSE 100 index up from
mid-April lows, and expectations of continued monetary easing
kept shares at multi-year highs.
“The markets have factored in more than just an interest
rate cut by the ECB, but additional proactive measures … so we
are waiting for more comments on this to push on from here,”
Alastair McCaig, analyst at IG Index, said.
“Bearing in mind the rally we’ve seen in the FTSE over the
last two weeks, it’s no surprise that we’re taking a bit of a
breather today.”
Also weighing on the index was the travel and leisure sector
, down 0.8 percent, on concerns of the spread of a
SARS-like virus, following news over the weekend that it can
probably pass person to person.
Airlines were worst hit, with International Consolidated
Airlines Group down 4 percent even though UBS, Credit
Suisse and Natixis increased their target prices for the
company.
(Additional reporting by Francesco Canepa. Editing by Jane
Merriman)
There is still confusion over the way VAT is charged on the sale of Cornish pasties a year on from when the so-called "pasty tax" was announced.
"Some customers think they shouldn't be paying VAT on pasties.
"Something that was meant to iron out an anomaly has just created another anomaly.
"Businesses are still finding their way with it… and are trying different things."
Rob Vingoe, from Berryman's Bakery, a family-run business which has four shops in Cornwall, said: "We bake at different times of the day and sell our pasties regularly so the tax has had no effect on us.
"Initially customers were confused about what was going on but only for the first few days."
The manager of a pasty shop in South East Cornwall, who did not wish to be named, said the company had chosen to keep prices the same and absorb the VAT into its costs.
But she said prices would have to rise at some point.
Avice Gill, who runs Aunt Avice's Pasty Shop in St Kew Highway, said the rising cost of ingredients was far more of a problem than VAT.
She said: "A bag of potatoes which cost £5.50 last year now costs £14.
"Being a small business it does hurt."
According to the survey, the combination of the VAT change and rising cost of ingredients has cut pasty sales by between 10 and 30%.
Ms Huxley said: "The timing was terrible because of the cost of ingredients going up and people's spending power being reduced.
"VAT on food of 20% is an enormous amount for people to take out of their takings on foods."
Businesses which took part in the survey said they did not object to VAT on the sale of hot food but said they would like to see it reduced to about 5%.
BEIJING |
BEIJING May 15 (Reuters) – The parent of Dongfeng Motor
Group Co, China’s second-largest automaker, will take
an over-40 percent stake in Fujian Motor Industry Group, a local
newspaper said on Wednesday, the latest consolidation in the
country’s fragmented auto market.
A deal, expected to be signed on Thursday, will allow
Dongfeng to acquire Fujian Motor’s passenger car business, China
Business News said, citing an unnamed source at Dongfeng.
Fujian Auto’s bus business and its three-way van
manufacturing venture with Daimler AG and China Motor
Co will not be affected, it said.
Officials at Dongfeng, which operates car ventures with
Nissan Motor Co, Honda Motor Co and PSA
Peugeot-Citroen, and Fujian Auto could not be reached
for comment.
Fujian Auto, which is 25 percent held by Taiwan’s China
Motor, is a tiny player with annual capacity of 150,000
vehicles, according its website.
However, it has been an acquisition target of several
Chinese automakers, including BAIC Group, eager to establish a
presence in southeastern China, where the firm is based.
For years, the central government has been pushing for
consolidation in the country’s auto industry. However, it has
been met by little success so far due to strong opposition by
local governments which are eager to boost their local economy.
There are still over 70 registered automakers in the
country, according to the China Association of Automobile
Manufacturers.
Consolidation is seen becoming more important as the market
has now settled for single-digit growth after years of breakneck
expansion.
Changan Automobile Group took over microvan maker Harbin
Hafei Automobile Industry Group in 2009 and Guangzhou Auto took
control of small pickup truck maker Gonow and Changfeng
Automobile, which has a 50-50 manufacturing and sales joint
venture with Japan’s Mitsubishi Motors Corp in Hunan
province in central China.
* Largest drug safety settlement with generic maker -U.S.
* Settlement includes $350 mln in civil claims payment
* Two Indian plants failed to meet safety standards
* Ranbaxy says money set aside sufficient to cover costs
May 13 (Reuters) – Indian generic drugmaker Ranbaxy
Laboratories Ltd pleaded guilty on Monday to felony
charges related to drug safety and will pay $500 million in
civil and criminal fines under the settlement agreement with the
U.S. Department of Justice.
The settlement is its largest-ever with a generic drugmaker
over drug safety, according to the U.S. government. It includes
$150 million in payments for a criminal fine and forfeiture and
$350 million in payments for civil claims.
The settlement has been in the works for some time. In
December 2011, Ranbaxy set aside $500 million to resolve the
potential criminal and civil liabilities related to the
investigation by the government into its manufacturing practices
and falsifying data.
The company reached a related settlement agreement with the
U.S. Food and Drug Administration in 2011.
“The financial provision Ranbaxy established in December
2011 will be sufficient to cover all material financial
obligations under the agreement,” the company said in a news
release announcing the conclusion of the U.S. investigation.
Ranbaxy USA pleaded guilty to three felony counts related to
the manufacture of drugs at two Indian locations that did not
meet safety standards and to four counts of making material
false statements.
In the civil settlement, Ranbaxy has agreed to pay $350
million to resolve allegations that drugs from the two Indian
plants did not meet specifications and that false claims were
submitted to U.S. government healthcare programs between April
1, 2003 and Sept. 16, 2010.
In 2008, the FDA banned the company from selling about 30
drugs in the United States after it found manufacturing
deficiencies at facilities in India. In 2009, the FDA had
accused the company of falsifying data and test results in drug
applications and halted reviews of drugs made at a plant in
northern India.
Dinesh Thakur, former Ranbaxy director and global head of
research information & portfolio management, is entitled to
$48.6 million as the whistleblower in the case, the Justice
Department said. It was Thakur who uncovered the unsafe
practices and violations at Ranbaxy.
“Ranbaxy’s management was notified of these widespread
problems. When they failed to correct the problems, it left me
with no choice but to alert healthcare authorities,” Thakur said
in a statement.
“It took us eight years to help government authorities
unravel a complicated trail of falsified records and dangerous
manufacturing practices that threatened to compromise the
quality and safety of Ranbaxy drugs,” he added.
Ranbaxy, majority-owned by Japan’s Daiichi Sankyo Co Ltd
, stopped selling drugs to the U.S. markets while it
fixed problems with its manufacturing procedures in the United
States and India.
“While we are disappointed by the conduct of the past that
led to this investigation, we strongly believe that settling
this matter now is in the best interest of all of Ranbaxy’s
stakeholders,” Ranbaxy Chief Executive Arun Sawhney said in a
statement.
“The conclusion of the DOJ investigation does not materially
impact our current financial situation or performance,” he
added.
The company has since grappled with other manufacturing
problems. In November 2012 it recalled some generic Lipitor,
known as atorvastatin, in the United States after certain
batches were found to contain glass particles.
It has since resumed manufacturing the widely used cholesterol
lowering medicine.
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Fernandes gleefully declared after Sundayâs nearly six-hour flight on his budget airline that Bransonâs skills as an attendant were ârubbishâ and that he was being immediately fired.
A cheerful Branson, who was tasked with pouring beverages, serving meals and making flight announcements, posed with Fernandes and popped champagne after stepping out of the plane at Malaysiaâs main low-cost carrier terminal south of Kuala Lumpur.
He said in brief remarks that he was âglad to have gotten the bet over with and (was) looking forward to getting back into my clothes.â
âI always wanted to be an air hostess, but it looks like I have to get back to normality,â Branson said. The flight helped raise money for an Australian foundation for hospitalized children.
Asked how Branson rated as an attendant, Fernandes quipped, âOut of 10, maybe one, for a bit of humour.â
âI wanted to kill him actuallyâ for spilling the juice, the Malaysian told reporters.
âHe looked at me, I said, âdonât you dare,â and the next thing I know, he tipped the whole tray on me,â Fernandes added. âHe and the girls mopped it up, but I was walking around the flight in my underwear for a while because I didnât bring another pair of trousers.â
As the credit crunch makes raising financing more difficult, small business owners are finding innovative ways to reel in extra cash.
Just ask day-spa owner Eva Sztupka-Kerschbaumer, who says she recently raised $30,000 in a single day. Her Pittsburgh,-Pa. spa, ESSpa Kozmetika Organic SkinCare, needed a quick cash infusion when a $12,000 microdermabrasion machine and two $1,000 facial steamers conked out in April. However, the last thing she wanted to accrue was interest charges, so she didn’t go to a bank to raise funds. And to avoid missing out on future profits, she also didn’t tap a factoring company, which provides cash up front in return for a cut of her company’s future receipts.
Instead, she presold her spa’s services at a discount. She sent an email to her list of 8,000 subscribers and offered them free matching gift card on the purchase of any card worth at least $500. The advantage was clear. “This way I lock in my customer base, purchase equipment and get the cash flow,” Sztupka-Kerschbaumer says.
Of course, a matching gift card promotion may have undesirable consequences like providing discounts to customers who otherwise would have paid the full price and having less cash on hand when customers collect on their freebies. Still, if you’re in a bind and neither credit nor loans are an option, boosting your company’s cash flow can help bail you out, says Hermann Simon, chairman of Simon-Kucher & Partners, a pricing consultancy in Cambridge, Mass., and the author of several books on strategy, marketing and pricing.
Here are four other ways to raise (and save) cash quickly:
Another way to reel in cash fast is non-linear pricing — charging a higher price upfront with the promise of a discount or freebie down the road, Simon says. This method invokes the same basic idea as Sztupka-Kerschbaumer’s gift cards: using the customer’s affinity for a deal to guarantee future business. An example is a train ticket that is costly upfront but becomes less expensive with more use. “Customers like [this strategy] because [an item or service] becomes less expensive as they use it more, and businesses like it because they get cash up front,” Simon says. By charging a fee before services have been rendered, you’re able to apply that cash to growing your business — or just keeping it afloat.
Selectively discounting products or services can be more lucrative than offering a blanket discount on all your firm’s entire catalog, Simon says. Consider a restaurant discount promotion. A buy-one-get-one-free coupon without limits might be redeemed on a really busy day, overburdening the staff. Or worse, a restaurant might have to turn away customers who would have paid full price. Instead, add some restrictions to your discounts, he says. For instance, require a minimum purchase or specify particular times or days when discounts can be used.
If cash is tight, suppliers may allow you to sell merchandise before you pay for it, says Charles Thomson, in-house counsel for the Doall Company, an industrial supplies and machine tool distributor in Wheeling, Ill. Using so-called purchase money financing (basically, seller financing), borrowers give their vendors a Purchase Money Security Interest (PMSI), a lien against goods that the vendors agree to send your business. Once the items sell, the vendors will receive payment. Many vendors agree to this deal because they want to keep you as a customer and because the lien on the new goods trumps all other liens in a bankruptcy proceeding, Thomson says.
When possible, turn fixed costs into variable costs, says John Evans, a tax partner who specializes in small businesses at BDO Seidman, an accounting firm in New York. Variable costs may be lowered in tough economic times. For instance, instead of paying thousands of dollars for your own computer server you could use a hosted service, such as Hostway or Network Solutions for a monthly fee. The benefit of going this route is that you can more readily adjust your expenses in a volatile business environment. Variable costs often shrink when employees are laid off or production levels dip, Evans says.
The lucky break for Mark Curtis came early in life. He was born in Silicon Valley, just as the tech corridor was coming into its own, and he has never left. In fact, he lives in the same house outside Palo Alto where he grew up, and he has always worked in the Valley, always as a financial advisor. “I’ve spent my entire career in the greatest wealth-creation environment of the past 100 years,” says Curtis, 56.
Curtis, a top advisor with Morgan Stanley, has done more than soak up the Valley ethos. He has attracted as clients some of the nation’s wealthiest entrepreneurs. A few of Curtis’ very first clients, folks who signed up with him in the early 1980s, are now CEOs of major tech companies. As Silicon Valley start-ups went public, Curtis also found a lucrative practice advising companies on executive compensation.
Andy Freeberg for Barron’s
Made in America: Curtis has been favoring U.S. investments, saying, “Optimism almost always works.”
Result: He turns up on Barron’s list of America’s Top 100 Financial Advisors year after year. With some $24 billion under managementâsplit almost evenly between individual clients and institutionsâCurtis currently ranks No. 6 and shows no signs of slowing.
CURTIS BROKE INTO the business in 1981 soon after graduating from business school at UCLA. He joined an E.F. Hutton office in the Valley and then stayed put through a series of mergers and successor firms; Morgan Stanley is the last of those. He currently works in an office with a sylvan view and practically nothing on the walls (he says he will eventually decorate).
In a recent interview with Barron’s, Curtis stayed focused on the big picture. “My clients come to me because they want original thought and conviction,” he said from his Palo Alto office. “If they want an asset-allocation model, they can get it on Yahoo! Finance.”
Curtis worries little about day-to-day market conditions, and he’s not changing his approach because of the stock market’s latest highs. “A lot of our clients aren’t investing for 90 days, one year, or even three years,” he says. Instead of trying to match stock-market indexes, he’s focused on the clients’ cash-flow needs. Using the future withdrawals, or liabilities, as a benchmark, he can craft the necessary asset mix. “You are matching assets with liabilities, and that always keeps you long-term focused,” Curtis says.
“I’ve found over the years that if you can find risk and you can play defense, you tend to craft investment solutions that work fairly well,” he adds.
Curtis approaches new client meetings with a blank sheet of paper, not the type of questionnaire that many of his peers use. “I’ve always thought if I were a client and I had to fill out a questionnaire, I would think the advisor wasn’t listening.”
He cautions investors about chasing themes: “Don’t expect that there is something every day.” The last time he was pounding the table, Curtis says, was November and December when master limited partnerships looked particularly attractive. “I’m not selling them,” he says now, but the opportunity in MLPs is not as appealing as it was. “You can’t force the opportunistic [investments],” Curtis adds. “You have got to wait for the game to come to you.”
Curtis was reluctant to name specific investments, but he says, “Don’t overlook finding great investorsâI know that sounds obvious, but I think it gets lost sometimes.”
He and his team are constantly on the hunt for the best investment managers for clients, whether at Morgan Stanley or beyond. “Great money managers aren’t necessarily smarter than somebody else,” he says. “They just like doing it more. We try to find those people, and I think that’s where you get some marginal return.”
CURTIS EXUDES OPTIMISM, not only about his job but about the future of the country. He has overweighted U.S. investments for several years now. “In our business, optimism almost always works,” he says. Today, about 25% of his typical portfolio is made up of U.S. equities, with another 10% allocated toward domestic bonds.
Of course, there was a time when Silicon Valley was too optimistic. Thinking back to the dot-com crash, Curtis says that attitudes have changed for the better. “I do think that in the ’90s enough was never enough. Diversification is more important today than it might have been in the past.”
And yet, the area between San Francisco and San Jose is booming once again, and cars are clogging Highway 101. “What hasn’t changed is an openness to change and creativity,” Curtis says. “I think that’s been a long-term advantage in the strength of Silicon Valley.” Spoken like a true native.Â
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Its revenue rose 14 percent from a year earlier to $9.5 billion in the quarter, ended March 31, News Corp said on Wednesday. The company posted adjusted earnings of 36 cents per share, just beating the 35 cents expected on average by analysts, according to Thomson Reuters I/B/E/S.
News Corp shares rose 3.6 percent to $33.00 in after-hours trading, after closing at $31.86 on the Nasdaq.
One-time items, including the purchase of a controlling stake in German pay TV operator Sky Deutschland and the sale of an ownership stake in New Zealand’s Sky Network Television, helped lift net income to $2.85 billion, a jump from $937 million a year earlier.
The New York-based company said it is on track to separate its cable channels, movie studio and other fast growing entertainment assets from its newspapers, including The Wall Street Journal, near the end of its fiscal year in June.
Its entertainment assets helped boost revenue and earnings for the quarter, led by its cable networks business, which includes the Fox News Channel, FX and regional sports networks.
Operating income at the cable network programming unit rose 17 percent from a year earlier to $993 million, as channels in the United States and abroad commanded higher fees from cable operators and more advertising revenue.
News Corp Chief Operating Officer Chase Carey said the company will invest to build new cable networks, with the launch in August of Fox Sports 1, a competitor to Walt Disney Co’s ESPN, and FXX, aimed at young adults, in September. The company intends to spend “a couple hundred million and change” over the next year to build those channels and some international networks, Carey said.
The media company is also trying to improve the Fox broadcast network, whose ratings slid this fall as aging singing competition “American Idol” drew a smaller audience.
“We are clearly disappointed with this season’s ratings at the Fox broadcast network, and are taking steps now to improve next season’s lineup,” Carey told analysts on a conference call.
Lower advertising revenue for “Idol” dragged down the performance of the television unit, whose operating income still increased 15 percent, the company said.
The 20th Century Fox movie studio gained from the success of Oscar-winning film “Life of Pi,” which grossed $600 million at theaters worldwide, and home entertainment sales from thriller “Taken 2″ and animated hit “Ice Age: Continental Drift.”
Operating income at the publishing unit, which includes its newspapers and the HarperCollins book publishing business, declined to $85 million, from $130 million a year earlier.
The company recorded $42 million in the quarter for costs related to investigations of phone hacking at its newspapers in Britain.
(Reporting by Lisa Richwine; Editing by Steve Orlofsky)
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