Archive | April, 2014

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GKN to sell 50% stake in Emitec for €46 million

LONDON–GKN PLC (GKN.LN) said Wednesday it has agreed to sell its 50% share holding in the emissions reduction technology business Emitec Gesellschaft fur Emissionstechnologie mbH to Continental AG (CON.XE) for 46 million euros cash ($63.68 million).

The automotive and aerospace components company said it will use the net proceeds to reduce group net debt. Following this transaction, Continental will have 100% ownership of Emitec.

Completion of the transaction is subject to regulatory approvals.

Shares of GKN at 1144 GMT were up 2 pence, or 0.5%, at 384 pence, valuing the company at 6.29 billion pounds ($10.58 billion).

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Glaxo profit slides by almost a third

LONDON– GlaxoSmithKline PLC’s first-quarter profits slid by almost a third, the company said Wednesday, a week after it announced a series of multibillion-dollar asset swaps with Novartis AG to bolster its consumer-health and vaccines businesses.

The U.K. drug maker’s profits were dented by asset disposals, currency pressures and falling sales of its established respiratory drugs in the U.S. They highlight the pressures facing Glaxo and the reasons behind its acquisition of Novartis assets to boost growth.

Chief Executive Andrew Witty refused to comment on any speculation that Glaxo could step in with a “white knight” offer for fellow U.K. drug maker AstraZeneca PLC, after the latter declined a takeover bid from Pfizer Inc. in January.

However, he said Glaxo’s strategy was firmly focused on closing the Novartis deal and on its own drug-development pipeline. Mr. Witty has in the past ruled out signing large traditional merger-and-acquisition deals.

“What we’re focused on is ensuring that our organization is not distracted in the core [research and development] business,” Mr. Witty said on a conference call Wednesday.

“We committed ourselves last week to a very, very major transaction with Novartis,” he added.

Sales at Glaxo fell 14% to GBP5.61 billion ($9.45 billion) from GBP6.47 billion in the same quarter of the previous year, missing market expectations. Sales were hurt by wholesalers and retailers destocking Glaxo’s asthma drugs after stocking up the previous quarter, and the exclusion of Glaxo’s best-selling drug–the asthma treatment Advair–from U.S. prescribing lists in January.

Respiratory drugs are Glaxo’s biggest profit driver, and the disposal of its cancer-drug business to Novartis will increase this reliance.

Sales of Advair–responsible for just under a fifth of Glaxo’s total sales–fell 15% at constant exchange rates in the first quarter, against increased competition in the U.S. and Europe.

“Inevitably, in the short run, we will have volatility,” said Mr. Witty, as Glaxo tries to boost sales of its new asthma treatments Breo and Anoro, the latter launched in the U.S. last week, to make up for falling Advair sales. Uptake of Breo in the U.S. has so far been disappointing.

Glaxo’s profit attributable to shareholders fell 30% to GBP668 million in the first quarter, from GBP961 million in the same quarter of the previous year. Its core earnings per share–a measure that excludes legal costs, asset impairments, profits on asset disposals and restructuring costs–fell to 21.0 pence from 26.9 pence in the same quarter of the previous year, in line with analysts’ expectations.

Mr. Witty said Glaxo was continuing to evaluate the options for its “established-products portfolio”–a collection of its older drugs facing generic competition, responsible for 14.5% of its total sales.

Glaxo last year announced the sale of a portfolio of thrombosis drugs for GBP700 million. Mr. Witty said it was “highly likely we’ll do more transactions,” although he said these would be more likely for its portfolio of drugs in the U.S. and Europe rather than its established drugs in emerging markets.

The deals signed with Novartis last week, worth more than $20 billion in total, will see Glaxo sell its high-margin cancer-drug business to its Swiss rival and bulk up its own businesses in consumer health and vaccines, both lower-margin businesses but with more reliable cash flows.

Glaxo reiterated its guidance for a 4%-to-8% increase in core earnings per share at constant exchange rates this year. Its shares fell 1.5% in afternoon trading in London.

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Viper Networks Inc – VPER

Viper Networks partnering with Apollo Metro has a full selection of intelligent LED lighting solutions that can easily be deployed into metropolitan areas, parking lots and warehousing facilities. LED Lighting is not only efficient but has the ability to incorporate a variety of technologies into a single design.

One of their strongest traits is system integration. There are many stand alone products available but only by bringing them together; a meaningful application will be created. Hardware and software engineering is the center of system integration using all kinds of interface protocols. Many single capabilities will form a new powerful and complex solution. The end product will usually generate new IP. They are ready for any challenges a customer may have.

Integrity is of the utmost importance at Viper Networks, and their Board of Directors plays an integral role in overseeing the policies and procedures that insure their corporate integrity. The focus of their Board of Directors is to ensure the long-term success of Viper Networks while representing the interests of their shareholders. They have adopted principles of Corporate Governance that reinforce their stated values by promoting good corporate citizenship and ethical business practices. Ensuring that their financial results fairly reflect the results of their operations is of paramount importance to this company and their investors. Viper Networks remains diligent in maintaining compliance with their established financial accounting policies, which are consistent with requirements of Generally Accepted Accounting Principles (GAAP), and will report their results objectively and with the highest degree of integrity.

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Bank of America miscalculated its capital levels

Bank of America Corp. suspended a plan to buy back $4 billion of stock and boost its dividend after discovering an error in the way it calculated its capital levels.

Shares of Bank of America dropped 4.8% to $15.19 on Monday.

The second-largest U.S. bank by assets said it discovered the error and brought it to the attention of the Federal Reserve, which then required it to resubmit its capital plan. It has 30 days to do so.

The Fed on March 26 approved Bank of America’s proposal to increase its annual dividend to five cents a common share from a penny and expand its share buybacks. The Charlotte, N.C., lender said it now plans to request less than the previously approved plan.

Bank of America said the Federal Reserve asked officials to resubmit its capital plan after the bank discovered a mistake related to securities known as structured notes issued by Merrill Lynch & Co. before Bank of America bought Merrill in 2009.

The error means the bank has less high-quality capital than it previously reported, although it still has enough to meet regulatory requirements. Bank of America said the change has no impact on its previously announced earnings results.

The error was the latest hiccup in the process for assessing whether banks have enough capital on hand to withstand a severe recession. The Fed last month surprised Citigroup Inc. executives when it rejected its capital plan due to problems in the way it assesses the risk of its international operations.

Bank of America said it notified the Federal Reserve Board of the revisions it had to make on the values of the structured notes and has been in close communication with the board.

The misvalued structured notes were debt securities issued by Merrill Lynch. When the value of the underlying companies changed, the bank failed to readjust the value of the bonds as well.

This mistake happened when a unit within the bank didn’t report the correct value changes to the capital management group, which reports into Chief Financial Officer Bruce Thompson. A person familiar with the situation said the capital-management group asked the bank’s treasury group to deliver a certain number and the treasury group didn’t provide what was requested. There was a misunderstanding between the two internal units about what was being delivered, this person said.

When Bank of America acquired Merrill, it assumed some structured notes issued by that firm. When those matured, the bank sometimes realized a loss. At the same time, the bank would have been showing unrealized gains and losses from these notes in its earnings. Banks are required to back out such unrealized changes in the market value of their own credit when determining their regulatory capital.

The mistake occurred when bank officials inadvertently adjusted their capital by excluding the realized loss as well.

The bank said it discovered the problems after it released first-quarter results on April 16. As part of this process, Bank of America said it would engage a third party to review processes and the materials before resubmission.

Analysts said the expense of resubmitting the plan–and, probably, enduring higher scrutiny from the Fed–could tamp down the quarter’s results, and investors will be disappointed if the dividend isn’t raised as much as they had expected. It was a milestone last month when Bank of America announced it would raise its dividend, a sign that the bank was shaking off the long effects of the financial crisis–it hasn’t paid more than a one-cent dividend in upward of five years, after it was forced to take a double helping of bailout loans from the government in the depths of the financial crisis.

ISI Group analyst Glenn Schorr noted that the largest change in a ratio was just a 0.29 percentage-point decrease.

Mr. Schorr noted that Bank of America has said its new capital-plan requests will be smaller than before: “Probably a function of the lower [capital ratios], but also as an apology–note that the Fed didn’t catch this,” Mr. Schorr wrote.

Bank of America has stumbled before. In March 2011, Bank of America executives were taken aback when the Fed denied a modest dividend increase planned for the second half of that year. Top executives were under the impression the Fed wouldn’t reject the plan because the bank executives hadn’t asked for a more immediate or larger hike, people close to the company said. But the Fed already had decided it wasn’t going to approve an increase of any kind that year, according to a person familiar with conversations inside the Fed.

Bank of America’s shares dropped 4% after it disclosed the Fed’s decision that year, but as it turned out, two top finance and accounting executives weren’t consulted about the decision to make the “no” public. That communication miscue raised questions inside the company about the management style of Chief Executive Officer Brian Moynihan, who at the time had been in the job for little more than a year.

Ben Fox Rubin contributed to this article

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AOL discloses security breach of user accounts

AOL Inc. on Monday said it is investigating a security incident involving unauthorized access to a significant number of user accounts.

The information included email addresses, encrypted passwords, answers to security questions, postal addresses and address book information, AOL said. There was no indication that the encryption on the passwords or security questions was broken, AOL added.

The company also said there’s no indication at this point that users’ financial information was accessed during the breach.

AOL is the latest large company to report a broad security issue. Microsoft Corp. said Sunday that it had discovered a flaw in versions 6 through 11 of its Internet Explorer Web browser, as well as “limited targeted attacks” to exploit the flaw. Meanwhile, Target Corp. late last year disclosed that hackers compromised 40 million customer credit and debit card accounts.

AOL said it started a probe after it noticed a big jump in the number of spam emails appearing as “spoofed emails” from AOL addresses.

“Spoofed” messages don’t originate from a sender’s email account or the service provider, the company said. Rather, the addresses are edited to make emails appear that they have been sent from legitimate accounts, and are meant to trick recipients into opening the messages.

“We are working closely with federal authorities to pursue this investigation to its resolution,” AOL said. “Our security team has put enhanced protective measures in place and we urge our users to take proactive steps to help ensure the security of their accounts.”

The company said it is contacting users that may have been affected, while encouraging users to change their passwords and security questions.

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Weyerhaeuser profit up on one-time benefits

Weyerhaeuser Co. on Friday said its first-quarter earnings rose on benefits from special items and strong sales from its timberlands business, despite severe winter weather.

Earnings topped analysts’ expectations, while revenue fell short.

The forest-products company posted first-quarter earnings of $183 million, or 31 cents a share, up from $144 million, or 26 cents a share, a year earlier. Excluding net gains of $30 million from special items, such as an asset sale and an amendment to the company’s retirement plan, earnings were 26 cents a share for the quarter.

Net sales rose 1.7% to $1.98 billion.

Analysts surveyed by Thomson Reuters had projected a profit of 24 cents a share and revenue of $2.08 billion.

Weyerhaeuser’s increased focus on its core wood-products division has generally paid off recently, as the company has enjoyed strong results with the housing market on the mend. However, revenue in the segment followed the prior period’s decline with another drop during the first quarter, falling 9% to $898 million.

The company’s timberlands business was a bright spot, though, posting a 29% jump in net sales to $377 million, driven by higher selling prices for Western logs in domestic and international markets.

“Our Timberlands business is realizing increasing benefits from the Longview Timber acquisition and reported its highest quarterly earnings excluding land sales since 2006,” Doyle Simons, president and chief executive, said in a statement.

The cellulose-fibers division posted a 2.7% drop in sales to $461 million, as higher energy and maintenance costs weighed on results.

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Lear profit up 12%; raises outlook

Lear Corp. LEA -1.96% said first-quarter profit rose 12%, as the automotive-seating and electric-systems company posted strong sales growth in Europe, Africa and Asia.

The company increased its full-year revenue projections to $17.2 billion-$17.7 billion from its previous view of $16.9 billion-$17.4 billion.

Lear, which exited bankruptcy protection in late 2009, has posted mixed quarterly financial performances lately, as weakness in Europe has offset some of the positive effects of its cuts to debt and headcount. Yet the company has shown signs of gaining market share as automobile demand grows.

Overall, Lear reported a profit of $122 million, or $1.47 a share, up from $108.5 million, or $1.13 a share, a year ago. Excluding restructuring costs and other items, earnings grew to $1.84 a share from $1.30.

Net sales improved 10% to $4.36 billion.

Analysts surveyed by Thomson Reuters recently expected per-share earnings of $1.70 on revenue of $4.29 billion.

Sales jumped 17% jump in Europe and Africa to $1.79 billion. They grew 12% in Asia to $752.8 million and rose 5.7% in North America to $1.6 billion.

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Cheesecake Factory profit falls 11%

Cheesecake Factory Inc. CAKE -0.02% said its first-quarter earnings fell 11% on higher costs as severe weather and a holiday shift weighed on the casual-dining chain’s same-store sales growth.

Cheesecake Factory, which has roughly 169 namesake restaurants and 11 Grand Lux Cafes, has outperformed many of its competitors by using its broad menu and upscale decor to drive customer traffic. However, an uneven recovery and meager wage gains have led to cutbacks in spending among middle-class households, the Cheesecake Factory’s main customers.

In the latest quarter, same-store sales rose 0.9% but were negatively impacted by 2% owing to the weather and holiday-shift impacts.

Cheesecake Factory reported a profit of $22.5 million and 43 cents a share, down from $25.3 million, or 47 cents a share, a year earlier. The company had projected per-share earnings of 48 cents to 50 cents.

Revenue increased 4% to $481.4 million. Analysts polled by Thomson Reuters expected $479 million.

Total costs and expenses rose 5.2%. The company said expenses related to a pending legal settlement weighed on the latest period’s results but didn’t provide further details.

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Citrix Systems earnings fall; outlook improves

Citrix Systems Inc.’s CTXS +4.73% earnings fell 6.3% in the first quarter as restructuring and other costs masked increased sales.

Shares rose about 3% after hours as the results beat the company’s own outlook and it raised the low end of its targets for the year.

“We saw growth in all our geographic markets, while delivering record cash flow from operations,” said David Henshall, the company’s chief financial officer and chief operating officer. “Our results were driven by balanced growth across all three of our primary businesses: mobile and desktop, cloud networking, and SaaS.”

Citrix also disclosed Wednesday plans to buy back up to an additional $1.5 billion in shares. As of March 31, the company had about $429 million outstanding for repurchases from previous authorizations.

The company–which specializes in virtualization, networking and cloud infrastructure–had posted quarterly double-digit revenue gains for more than three years as it benefited from increased demand for desktop visualization, a crucial step in cloud computing. Revenue rose 12% to $750.8 million in the latest period.

For the year, Citrix said it expects per-share adjusted earnings of $2.90 to $2.95 on revenue growth of 8.5% to 10%, raising the low end of its earnings view by five cents and the bottom of its revenue outlook by half a point.

For the current quarter, the company expects per-share adjusted earnings of 57 cents to 59 cents on revenue between $765 million and $775 million. Analysts most recently projected revenue earnings of 68 cents a share and revenue to grow to $785.1 million.

For the most recent period, which ended March 31, Citrix reported a profit of $55.9 million, or 30 cents a share, down from $59.7 million, or 32 cents a share, a year ago. Excluding compensation expenses and other items, per-share earnings rose to 64 cents from 62 cents.

The company in January had forecast adjusted earnings of 57 cents to 60 cents a share on revenue growth of 8% to 10%.

Revenue from product and licenses, or new product purchases, rose 7% to $207.4 million. Revenue from license updates and maintenance, which includes annuity revenue from subscriptions paid when new licenses are purchased, rose 9%. Software-as-a-service revenue was up 14%, while professional-services revenue rose 60%.

Gross margin narrowed to 82.1% from 82.9%. Operating expenses rose 8.62%.

The stock closed down at $55.99 Wednesday.

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SunTrust earnings rise 15% to top estimates

SunTrust Banks Inc. said its first-quarter profit increased 15%–beating market estimates–as the regional bank benefited from lower credit-loss provisions, offsetting a drop in revenue.

The Atlanta-based bank posted a profit of $405 million, up from $352 million a year earlier. Per-share earnings, which reflect the payment of preferred dividends, were 73 cents, up from 63 cents a year earlier.

Revenue declined 4% to $2.03 billion as mortgage production fell.

Analysts polled by Thomson Reuters expected earnings of 66 cents a share on $2.01 billion in revenue.

SunTrust, like other regional lenders, had benefited in recent years from a mortgage-refinancing boom prompted by low loan rates. But, as mortgage rates crept higher last year, refinancing demand died down, pressuring banks to trim costs to make up for weaker revenue.

For SunTrust, noninterest expense edged up slightly in the latest quarter to $1.36 billion because of higher salaries related to hiring in some businesses, the company said.

SunTrust, one of the largest lenders in the Southeast, has spent the past year trying to put to rest legal issues tied to mortgages made leading up to the financial crisis.

In October, the company said it would pay more than $1 billion under settlements with federal authorities over various home-loan practices. In February, it said in a regulatory filing that it was continuing to negotiate final terms for some of those agreements and noted it may not be able to reach a final agreement with the Federal Housing Administration over matters involving the agency.

Regional lenders have reported mixed results in recent days, as declining mortgage activity and low interest rates have constricted revenue growth. At the same time, some banks, including U.S. Bancorp, PNC Financial Services Group Inc. and BB&T Corp., have noted signs that demand for commercial loans is increasing, fueling optimism that loan growth could accelerate in the second half of the year.

SunTrust said its total loans increased 6.9% to $129.2 billion in the quarter, driven by growth in the company’s business and commercial real-estate loan portfolios. Provision for credit losses was $102 million, down from $212 million a year earlier.

SunTrust has been focused on expanding its corporate-banking services. In November, the company said its SunTrust Robinson Humphrey business was opening new offices in Dallas, San Francisco and Chicago to focus on midsize and large corporate clients in those markets.

Earlier this month, the company said it acquired Lantana Oil & Gas Partners, a firm that focuses on acquisitions and divestitures in the energy industry.

SunTrust’s shares were inactive premarket on Monday. The shares closed down 0.6% at $37.95 on Friday.

Ben Fox Rubin contributed to this article.

Corrections & Amplifications

The original version of this article misstated the provisions for credit losses in the prior year. The provision was $212 million, not $202 million.

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