1. Reinvest Your Profits: When you first make money, you may be tempted to spend it. Don't. Instead, reinvest the profits. Warren Buffett learned this early on. In high school, he and a pal bought a pinball machine to pun in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Warren Buffett used the proceeds to buy stocks and to start another small business. By age 26, he'd amassed $174,000 -- or $1.4 million in today's money. Even a small sum can turn into great wealth.
2. Be Willing To Be Different: Don't base your decisions upon what everyone is saying or doing. When Warren Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not Wall Street, and he refused to tell his parents where he was putting their money. People predicted that he'd fail, but when he closed his partnership 14 years later, it was worth more than $100 million. Instead of following the crowd, he looked for undervalued investments and ended up vastly beating the market average every single year. To Warren Buffett, the average is just that -- what everybody else is doing. to be above average, you need to measure yourself by what he calls the Inner Scorecard, judging yourself by your own standards and not the world's.
3. Never Suck Your Thumb: Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Warren Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking "thumb sucking." When people offer him a business or an investment, he says, "I won't talk unless they bring me a price." He gives them an answer on the spot.
4. Spell Out The Deal Before You Start: Your bargaining leverage is always greatest before you begin a job -- that's when you have something to offer that the other party wants. Warren Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Warren Buffett was horrified that he performed such backbreaking work only to earn pennies an hour. Always nail down the specifics of a deal in advance -- even with your friends and relatives.
5. Watch Small Expenses: Warren Buffett invests in businesses run by managers who obsess over the tiniest costs. He one acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only on the side of his office building that faced the road. Exercising vigilance over every expense can make your profits -- and your paycheck -- go much further.
6. Limit What You Borrow: Living on credit cards and loans won't make you rich. Warren Buffett has never borrowed a significant amount -- not to invest, not for a mortgage. He has gotten many heart-rendering letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you're debt-free, work on saving some money that you can use to invest.
7. Be Persistent: With tenacity and ingenuity, you can win against a more established competitor. Warren Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator. To Warren Buffett, Rose embodied the unwavering courage that makes a winner out of an underdog.
8. Know When To Quit: Once, when Warren Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick -- he had squandered nearly a week's earnings. Warren Buffett never repeated that mistake. Know when to walk away from a loss, and don't let anxiety fool you into trying again.
9. Assess The Risk: In 1995, the employer of Warren Buffett's son, Howie, was accused by the FBI of price-fixing. Warren Buffett advised Howie to imagine the worst-and-bast-case scenarios if he stayed with the company. His son quickly realized that the risks of staying far outweighed any potential gains, and he quit the next day. Asking yourself "and then what?" can help you see all of the possible consequences when you're struggling to make a decision -- and can guide you to the smartest choice.
10. Know What Success Really Means: Despite his wealth, Warren Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He's adamant about not funding monuments to himself -- no Warren Buffett buildings or halls. "I know people who have a lot of money," he says, "and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life."
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Tuesday, December 29, 2009
Tuesday, December 22, 2009
Fund Boss Made $7 Billion in the Market Crash
In this comeback year for investors, David Tepper may have scored one of the biggest paydays of all.
Mr. Tepper's hedge-fund firm has racked up about $7 billion of profit so far this year—with Mr. Tepper on track to earn more than $2.5 billion for himself, according to people familiar with the matter. That is among the largest one-year takes in recent years.
Behind the wins: a bet worth billions of dollars that America would avoid a repeat of the Great Depression.
Through February and March, Mr. Tepper scooped up beaten-down bank shares as many investors were running for the exits. Day after day, Mr. Tepper bought Bank of America Corp. shares, then trading below $3, and Citigroup Inc. preferred shares, when that stock was under $1. One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks
"I felt like I was alone," Mr. Tepper recalls. On some days, he says, "no one was even bidding."
The bets paid off. A resurgent market has helped Mr. Tepper's firm, Appaloosa Management, gain about 120% after the firm's fees, through early December. Thanks to those gains, Mr. Tepper, who specializes in the stocks and bonds of troubled companies, manages about $12 billion, a sum that makes Appaloosa one of the largest hedge funds in the world.
Mr. Tepper, whose office overlooks the parking lot of a Hilton hotel in Short Hills, N.J., across from an upscale mall, now is taking aim at a new target. He's purchased about $2 billion of beaten-down commercial mortgage-backed securities. Among his purchases are bonds backed by chunks of the debt of Peter Cooper Village & Stuyvesant Town and 666 Fifth Ave. in New York, two high-profile real-estate deals that have fallen in value over the past two years.
Some experts predict more bad news for commercial real estate—and say that if Mr. Tepper's move doesn't pan out, it could jeopardize a chunk of his recent gains. Mr. Tepper says he remains optimistic.
Hedge funds, once darlings of well-heeled investors, suffered dearly in 2008, dropping 19%. Nearly 1,500 funds, or 16% of the total, shuttered last year. This year, hedge funds are clawing back, with gains of 19% through November, on pace for their best annual gains in a decade, according to Hedge Fund Research Inc.
A handful of funds—including Everest Capital's emerging-market funds and the stock-focused Glenview Capital—have racked up fat gains this year. In sheer dollars, though, none appear to have come close to matching Appaloosa's winnings.
Mr. Tepper grew up in a middle-class neighborhood in Pittsburgh, the son of an accountant who worked seven days a week and once won a $715,000 lottery payout. In the late 1980s, he helped run junk-bond trading at Goldman Sachs. Mr. Tepper wears jeans and sneakers to work, and can be self-deprecating, playing down his successes. He claims to have popularized on Wall Street the phrase "it is what it is" to explain the need to adjust a portfolio if facts on the ground shift.
After he was repeatedly passed over for a partnership, Mr. Tepper left Goldman to start Appaloosa in 1993. By 2008, he had a track record of annual gains averaging about 30% and a net worth estimated at about $2 billion.
Mr. Tepper lives in a two-story home in New Jersey he bought in 1990 for $1.2 million. He recently purchased an ownership stake in the Pittsburgh Steelers football team, and flies to every home game. In 2004 he gave $55 million to Carnegie Mellon University's business school, his alma mater, which renamed itself the Tepper School of Business.
The husky, bespectacled trader laughs easily, but employees say he can quickly turn on them when he's angry. Mr. Tepper keeps a brass replica of a pair of testicles in a prominent spot on his desk, a present from former employees. He rubs the gift for luck during the trading day to get a laugh out of colleagues.
His biggest scores over the years have come from buying large chunks of out-of-favor investments. When Asian markets crumbled in 1997, Mr. Tepper added Korean stocks to a portfolio laden with Russian debt. The moves led to hundreds of millions of dollars in profits when markets rebounded two years later. He scored big on junk bonds in 2003, and his 2007 wager on steel, coal and other resource companies paid off in 2008 when commodity prices soared.
But because he sometimes places more than half of his portfolio in a single trade idea, Mr. Tepper also is prone to brutal, abrupt losses.
That approach cost him more than $1 billion last year. In January 2008, Societe General SA trader Jerome Kerviel was revealed to have lost €5 billion ($7.2 billion), one of the world's largest trading loss. Mr. Tepper sold large chunks of his holdings, fearing a market tumble. Prices held up, though, hurting Appaloosa. In the spring of last year, he turned bullish on large-company stocks and did some buying, but suffered as markets declined.
Mr. Tepper made a big wager on Delphi in 2006. But in April of last year he and a group of investors withdrew from a deal to inject as much as $2.6 billion in the bankrupt auto-parts supplier, sparking a nasty legal battle that was resolved this summer. Appaloosa lost almost $200 million on its investment in Delphi.
Mr. Tepper's largest fund dropped 25% for 2008, worse than the industry's 19% average decline.
"Investing with David is like flying, with hours of boredom followed by bouts of sheer terror," says Alan Shealy, a client of more than 18 years. "He's the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach."
Mr. Tepper entered 2009 cautiously, with more than 30% of his firm's assets in cash, or more than $2 billion. He itched to do some buying. Mr. Tepper explains his investment philosophy with a line from Allan Meltzer, a professor at his alma mater: "Trees grow." In other words, growth is the natural state of economies, so optimism usually is rewarded.
On Feb. 10 of this year, Mr. Tepper read that the Treasury Department was introducing the so-called Financial Stability Plan. It included a commitment by the government to inject capital into banks by buying their preferred stock, or shares that carry less chance of reward but also less risk than common stock.
At the time, investors worried that the government ultimately would have to nationalize big banks. U.S. officials said they had no intention of such a move, which could wipe out common shareholders, but investors were dubious.
The news from the Treasury Department struck Mr. Tepper as proof that the government would stand behind the banks. He directed his traders to begin buying bank stock and debt.
Few investors were feeling as optimistic. The Dow Jones Industrial Average fell more than 382 points on the day Treasury Secretary Timothy Geithner introduced the plan, nearly 5%. Bank shares continued to tumble in the days that followed. Bank of America shares fell as low as $2.53 on Feb. 20. By March 5, Citigroup traded as low as 97 cents.
"This is ridiculous, it's nuts, nuts, nuts!" Mr. Tepper recalls saying to Michael Lukacs, one of his partners, on the firm's small trading floor. "Why would the government break its word? They're not going to let these banks go under, people aren't being logical!"
Mr. Tepper huddled with Mr. Lukacs and Jim Bolin, another top Appaloosa executive. Mr. Tepper insisted that stimulus spending and low interest rates would boost the economy. He said he estimated there was only a 20% chance that the U.S. would nationalize banks such as Citigroup.
Mr. Bolin, who people at the firm say tends to be more conservative than Mr. Tepper, was bullish about banks, but still thought it safer to stick to bank debt than to riskier shares. Mr. Tepper says he listened to the arguments, but said it was time to place a big bet.
Over several weeks, Mr. Tepper's team bought a variety of bank investments, including debt, preferred shares and common shares. Just months earlier, the government had injected billions of dollars to keep companies such as American International Group Inc. going, much as they were now doing with the banks. But that didn't prevent shares of those companies from tumbling.
At one point in March, the firm was down about 10% for the year, or about $600 million. Mr. Tepper got on the phone to make more trades, something he often left to subordinates. This time, he wanted to talk directly to Wall Street brokers to test how bad things really were.
The answer: really bad. Mr. Tepper says he was told that he was the only big investor doing much buying.
"Clients were nervous that the game had changed and capitalism wouldn't be the same. There was real fear," recalls Timothy Ghriskey, chief investment officer at Solaris Asset Management, a $2 billion investment firm, who says he only bought a small amount of bank shares during this period.
One day in late winter, Mr. Tepper heard from a skeptical client of his own, Mr. Shealy.
"This thing is far from over," Mr. Shealy recalls saying, referring to the bank problems. Still, Mr. Shealy, who runs an investment firm in Boise, Idaho, stuck with Mr. Tepper. "I figured the positions were fairly liquid, so if he was wrong, he would get out."
Mr. Tepper hadn't paid his investors' nerves much heed since 2000. That year, he bet that the tech-heavy Nasdaq index would fall. But so many investors complained that Mr. Tepper was straying from his roots in debt investing that he canceled his bets. When the Nasdaq collapsed months later, Mr. Tepper fumed.
By late March of 2009, Citigroup shares had tripled, and Mr. Tepper's other holdings, including junk bonds, were rising. He and his team bought more, spending more than $1 billion, when various banks conducted share sales. Mr. Tepper says his average cost for shares of Citigroup was 79 cents; for Bank of America it was $3.72.
At one point in the summer, Mr. Tepper had recorded about $1 billion of profits in shares of just Citigroup and Bank of America, and his overall gains soared past $4.5 billion, or 70%, since January.
After Mr. Bolin, the Appaloosa executive, urged caution, Mr. Tepper did some selling to lock in gains. But the firm remains a big holder of both Bank of America and Citigroup shares, which now trade at $15.03 and $3.40, respectively.
Mr. Tepper remains upbeat. He says he expects interest rates to stay low, and argues that stocks and bonds are reasonably priced.
This belief is driving another risky bet. At the end of each quarter this year, Mr. Tepper noticed that investors were dumping holdings of troubled bonds backed by commercial properties. He had never dabbled in these investments, but he and his 10-person team did some research and judged them attractive, with some seemingly safe debt trading at yields above 15%.
Mr. Tepper slowly spent more than $1 billion to gain ownership of between 10% and 20% of highly rated slices of commercial mortgage-backed securities, or CMBS. He focused on debt backed by loans of properties including Stuyvesant Town and 666 Fifth Ave. in New York.
His bet: If the economy improves, he'll earn hefty interest payments on the bonds. But if the properties can't make their payments, Mr. Tepper believes he owns so much of the debt that he'll have a big say in how the properties get restructured. That means he could ultimately end up ahead.
He's taking a big risk, some analysts warn. The value of commercial real estate continues to fall. Owners of debt classes don't always have much power to influence a commercial real-estate restructuring. And because the debt of these big properties was carved into many pieces, and many investors are involved, any battle for control will be complicated.
Mr. Tepper says the worrywarts have it wrong: "If you think the economy will be fine, as we do, then we're going to do very well."
from the wall street journal
Mr. Tepper's hedge-fund firm has racked up about $7 billion of profit so far this year—with Mr. Tepper on track to earn more than $2.5 billion for himself, according to people familiar with the matter. That is among the largest one-year takes in recent years.
Behind the wins: a bet worth billions of dollars that America would avoid a repeat of the Great Depression.
Through February and March, Mr. Tepper scooped up beaten-down bank shares as many investors were running for the exits. Day after day, Mr. Tepper bought Bank of America Corp. shares, then trading below $3, and Citigroup Inc. preferred shares, when that stock was under $1. One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks
"I felt like I was alone," Mr. Tepper recalls. On some days, he says, "no one was even bidding."
The bets paid off. A resurgent market has helped Mr. Tepper's firm, Appaloosa Management, gain about 120% after the firm's fees, through early December. Thanks to those gains, Mr. Tepper, who specializes in the stocks and bonds of troubled companies, manages about $12 billion, a sum that makes Appaloosa one of the largest hedge funds in the world.
Mr. Tepper, whose office overlooks the parking lot of a Hilton hotel in Short Hills, N.J., across from an upscale mall, now is taking aim at a new target. He's purchased about $2 billion of beaten-down commercial mortgage-backed securities. Among his purchases are bonds backed by chunks of the debt of Peter Cooper Village & Stuyvesant Town and 666 Fifth Ave. in New York, two high-profile real-estate deals that have fallen in value over the past two years.
Some experts predict more bad news for commercial real estate—and say that if Mr. Tepper's move doesn't pan out, it could jeopardize a chunk of his recent gains. Mr. Tepper says he remains optimistic.
Hedge funds, once darlings of well-heeled investors, suffered dearly in 2008, dropping 19%. Nearly 1,500 funds, or 16% of the total, shuttered last year. This year, hedge funds are clawing back, with gains of 19% through November, on pace for their best annual gains in a decade, according to Hedge Fund Research Inc.
A handful of funds—including Everest Capital's emerging-market funds and the stock-focused Glenview Capital—have racked up fat gains this year. In sheer dollars, though, none appear to have come close to matching Appaloosa's winnings.
Mr. Tepper grew up in a middle-class neighborhood in Pittsburgh, the son of an accountant who worked seven days a week and once won a $715,000 lottery payout. In the late 1980s, he helped run junk-bond trading at Goldman Sachs. Mr. Tepper wears jeans and sneakers to work, and can be self-deprecating, playing down his successes. He claims to have popularized on Wall Street the phrase "it is what it is" to explain the need to adjust a portfolio if facts on the ground shift.
After he was repeatedly passed over for a partnership, Mr. Tepper left Goldman to start Appaloosa in 1993. By 2008, he had a track record of annual gains averaging about 30% and a net worth estimated at about $2 billion.
Mr. Tepper lives in a two-story home in New Jersey he bought in 1990 for $1.2 million. He recently purchased an ownership stake in the Pittsburgh Steelers football team, and flies to every home game. In 2004 he gave $55 million to Carnegie Mellon University's business school, his alma mater, which renamed itself the Tepper School of Business.
The husky, bespectacled trader laughs easily, but employees say he can quickly turn on them when he's angry. Mr. Tepper keeps a brass replica of a pair of testicles in a prominent spot on his desk, a present from former employees. He rubs the gift for luck during the trading day to get a laugh out of colleagues.
His biggest scores over the years have come from buying large chunks of out-of-favor investments. When Asian markets crumbled in 1997, Mr. Tepper added Korean stocks to a portfolio laden with Russian debt. The moves led to hundreds of millions of dollars in profits when markets rebounded two years later. He scored big on junk bonds in 2003, and his 2007 wager on steel, coal and other resource companies paid off in 2008 when commodity prices soared.
But because he sometimes places more than half of his portfolio in a single trade idea, Mr. Tepper also is prone to brutal, abrupt losses.
That approach cost him more than $1 billion last year. In January 2008, Societe General SA trader Jerome Kerviel was revealed to have lost €5 billion ($7.2 billion), one of the world's largest trading loss. Mr. Tepper sold large chunks of his holdings, fearing a market tumble. Prices held up, though, hurting Appaloosa. In the spring of last year, he turned bullish on large-company stocks and did some buying, but suffered as markets declined.
Mr. Tepper made a big wager on Delphi in 2006. But in April of last year he and a group of investors withdrew from a deal to inject as much as $2.6 billion in the bankrupt auto-parts supplier, sparking a nasty legal battle that was resolved this summer. Appaloosa lost almost $200 million on its investment in Delphi.
Mr. Tepper's largest fund dropped 25% for 2008, worse than the industry's 19% average decline.
"Investing with David is like flying, with hours of boredom followed by bouts of sheer terror," says Alan Shealy, a client of more than 18 years. "He's the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach."
Mr. Tepper entered 2009 cautiously, with more than 30% of his firm's assets in cash, or more than $2 billion. He itched to do some buying. Mr. Tepper explains his investment philosophy with a line from Allan Meltzer, a professor at his alma mater: "Trees grow." In other words, growth is the natural state of economies, so optimism usually is rewarded.
On Feb. 10 of this year, Mr. Tepper read that the Treasury Department was introducing the so-called Financial Stability Plan. It included a commitment by the government to inject capital into banks by buying their preferred stock, or shares that carry less chance of reward but also less risk than common stock.
At the time, investors worried that the government ultimately would have to nationalize big banks. U.S. officials said they had no intention of such a move, which could wipe out common shareholders, but investors were dubious.
The news from the Treasury Department struck Mr. Tepper as proof that the government would stand behind the banks. He directed his traders to begin buying bank stock and debt.
Few investors were feeling as optimistic. The Dow Jones Industrial Average fell more than 382 points on the day Treasury Secretary Timothy Geithner introduced the plan, nearly 5%. Bank shares continued to tumble in the days that followed. Bank of America shares fell as low as $2.53 on Feb. 20. By March 5, Citigroup traded as low as 97 cents.
"This is ridiculous, it's nuts, nuts, nuts!" Mr. Tepper recalls saying to Michael Lukacs, one of his partners, on the firm's small trading floor. "Why would the government break its word? They're not going to let these banks go under, people aren't being logical!"
Mr. Tepper huddled with Mr. Lukacs and Jim Bolin, another top Appaloosa executive. Mr. Tepper insisted that stimulus spending and low interest rates would boost the economy. He said he estimated there was only a 20% chance that the U.S. would nationalize banks such as Citigroup.
Mr. Bolin, who people at the firm say tends to be more conservative than Mr. Tepper, was bullish about banks, but still thought it safer to stick to bank debt than to riskier shares. Mr. Tepper says he listened to the arguments, but said it was time to place a big bet.
Over several weeks, Mr. Tepper's team bought a variety of bank investments, including debt, preferred shares and common shares. Just months earlier, the government had injected billions of dollars to keep companies such as American International Group Inc. going, much as they were now doing with the banks. But that didn't prevent shares of those companies from tumbling.
At one point in March, the firm was down about 10% for the year, or about $600 million. Mr. Tepper got on the phone to make more trades, something he often left to subordinates. This time, he wanted to talk directly to Wall Street brokers to test how bad things really were.
The answer: really bad. Mr. Tepper says he was told that he was the only big investor doing much buying.
"Clients were nervous that the game had changed and capitalism wouldn't be the same. There was real fear," recalls Timothy Ghriskey, chief investment officer at Solaris Asset Management, a $2 billion investment firm, who says he only bought a small amount of bank shares during this period.
One day in late winter, Mr. Tepper heard from a skeptical client of his own, Mr. Shealy.
"This thing is far from over," Mr. Shealy recalls saying, referring to the bank problems. Still, Mr. Shealy, who runs an investment firm in Boise, Idaho, stuck with Mr. Tepper. "I figured the positions were fairly liquid, so if he was wrong, he would get out."
Mr. Tepper hadn't paid his investors' nerves much heed since 2000. That year, he bet that the tech-heavy Nasdaq index would fall. But so many investors complained that Mr. Tepper was straying from his roots in debt investing that he canceled his bets. When the Nasdaq collapsed months later, Mr. Tepper fumed.
By late March of 2009, Citigroup shares had tripled, and Mr. Tepper's other holdings, including junk bonds, were rising. He and his team bought more, spending more than $1 billion, when various banks conducted share sales. Mr. Tepper says his average cost for shares of Citigroup was 79 cents; for Bank of America it was $3.72.
At one point in the summer, Mr. Tepper had recorded about $1 billion of profits in shares of just Citigroup and Bank of America, and his overall gains soared past $4.5 billion, or 70%, since January.
After Mr. Bolin, the Appaloosa executive, urged caution, Mr. Tepper did some selling to lock in gains. But the firm remains a big holder of both Bank of America and Citigroup shares, which now trade at $15.03 and $3.40, respectively.
Mr. Tepper remains upbeat. He says he expects interest rates to stay low, and argues that stocks and bonds are reasonably priced.
This belief is driving another risky bet. At the end of each quarter this year, Mr. Tepper noticed that investors were dumping holdings of troubled bonds backed by commercial properties. He had never dabbled in these investments, but he and his 10-person team did some research and judged them attractive, with some seemingly safe debt trading at yields above 15%.
Mr. Tepper slowly spent more than $1 billion to gain ownership of between 10% and 20% of highly rated slices of commercial mortgage-backed securities, or CMBS. He focused on debt backed by loans of properties including Stuyvesant Town and 666 Fifth Ave. in New York.
His bet: If the economy improves, he'll earn hefty interest payments on the bonds. But if the properties can't make their payments, Mr. Tepper believes he owns so much of the debt that he'll have a big say in how the properties get restructured. That means he could ultimately end up ahead.
He's taking a big risk, some analysts warn. The value of commercial real estate continues to fall. Owners of debt classes don't always have much power to influence a commercial real-estate restructuring. And because the debt of these big properties was carved into many pieces, and many investors are involved, any battle for control will be complicated.
Mr. Tepper says the worrywarts have it wrong: "If you think the economy will be fine, as we do, then we're going to do very well."
from the wall street journal
Monday, November 16, 2009
Thursday, November 5, 2009
WWE(R) Reports 2009 Third Quarter Results
STAMFORD, Conn., Nov 05, 2009 (BUSINESS WIRE) -- World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial results for its third quarter ended September 30, 2009. Revenues totaled $111.3 million as compared to $108.8 million in the prior year quarter. Operating income was $14.5 million as compared to $7.9 million in the prior year quarter. Net income was $8.9 million, or $0.12 per share, as compared to $5.3 million, or $0.07 per share, in the prior year quarter.
"We are pleased with our solid performance. During the quarter we achieved an 84% increase in our operating income and managed a 26% increase for the first nine months of the year," stated Vince McMahon, Chairman and Chief Executive Officer. "Entering the year, we established clear goals to reduce our cost structure and to improve our operating efficiency. Our results to date, including significant and sustained improvement in our profit margins, demonstrate our ongoing commitment in meeting these objectives."
"Looking ahead, we believe WWE can achieve meaningful growth by taking advantage of our strategic opportunities and maintaining our focus on managing costs. Our portfolio of businesses exhibit significant operating leverage and, through disciplined cost management, we expect that leverage to drive future earnings growth."
Results by Business Segment
The following charts reflect net revenues by segment and by geographical region for the three months ended September 30, 2009 and September 30, 2008. (Dollars in millions)
Revenues from outside North America increased 17% led by the timing and performance of our live events in Asia Pacific.
Net Revenues by Segment
Three Months Ended
September 30,
2009
September 30,
2008
Live and Televised Entertainment $ 77.9 $ 68.7
Consumer Products 23.0 26.6
Digital Media 7.4 7.9
WWE Studios 3.0 5.6
Total $ 111.3 $ 108.8
Net Revenues by Region
Three Months Ended
September 30,
2009
September 30,
2008
North America $ 81.3 $ 83.2
Europe, Middle East & Africa (EMEA) 14.4 17.1
Asia Pacific (APAC) 12.5 6.8
Latin America 3.1 1.7
Total $ 111.3 $ 108.8
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $77.9 million for the current quarter as compared to $68.7 million in the prior year quarter, representing a 13% increase.
Live Event revenues were $27.2 million as compared to $20.3 million in the prior year quarter. Revenues increased 34% primarily due to higher average attendance and an increase in the number of international events.
There were 94 events, including 17 international events, during the current quarter as compared to 89 events, including 12 international events, in the prior year quarter.
North American events generated $16.6 million of revenues from 77 events as compared to $15.5 million from 77 events in the prior year quarter. North American average attendance increased 9% to approximately 5,800 from 5,300 in the prior year quarter. The average ticket price for North American events was $36.26 in the current quarter as compared to $38.21 in the prior year quarter.
International events generated approximately $10.6 million of revenues as compared to $4.8 million in the prior year quarter. The quarter-over-quarter increase reflected five additional events in the current quarter and a 38% increase in average attendance to approximately 9,100 fans. These factors were partially offset by a 19% reduction in average ticket prices to $65.59, in part due to changes in foreign exchange rates.
Pay-Per-View revenues were $14.5 million as compared to $16.4 million in the prior year quarter reflecting a 10% decline in total pay-per-view buys and a higher percentage of international buys, which are generally lower in price. For the comparable pay-per-view events which occurred in both the current and prior year periods, pay-per-view buys declined 22% in the quarter and 9% on a year-to-date basis.
The details for the number of buys (in 000s) are as follows:
Events (in chronological order)
Three Months Ended
September 30, 2009
Three Months Ended
September 30, 2008
The Bash(TM) - 196
Night of Champions(R) 267 -
SummerSlam(R) 369 477
Breaking Point(R)/Unforgiven(R) 169 211
Prior events 31 42
Total 836 926
Venue Merchandiserevenues were $4.3 million as compared to $4.2 million in the prior year quarter, as higher average attendance and the impact of five additional international events was offset by an 11% decline in lower domestic per capita merchandise sales to $8.71 in the current quarter.
Television Rights Fees revenues were $28.3 million as compared to $24.4 million in the prior year quarter. This increase was primarily due to fees received from our new WWE Superstars television show and contractual increases from our existing programs.
WWE Classics On Demand(TM) revenues were$1.2 million as compared to $1.4 million in the prior year quarter.
Consumer Products
Revenues from our Consumer Products businesses were $23.0 million versus $26.6 million in the prior year quarter, representing a 14% decrease.
Home Video net revenues were $11.2 million as compared to $11.0 million in the prior year quarter. The increase reflects the performance of our new releases and catalog titles.
Licensing revenues were $7.9 million as compared to $10.6 million in the prior year quarter. The decrease primarily reflects the reduction in royalties earned on the sales of toys and videogames, particularly in international markets.
Magazine publishing net revenues were $3.4 million as compared to $4.7 million in the prior year quarter. The decrease primarily reflects a reduction in subscription revenue and the publication of one fewer issue of WWE Magazine in the current quarter.
Digital Media
Revenues from our Digital Media related businesses were $7.4 million as compared to $7.9 million in the prior year quarter, representing a 6% decrease.
WWE.com revenues were $4.5 million as compared to $4.0 million in the prior year quarter, reflecting increased sales of online advertising and expanded licensing of our website for international markets.
WWEShop revenues were $2.9 million as compared to $3.9 million in the prior year quarter. The number of orders declined by 21% to approximately 55,000 and the average revenue per order decreased by approximately 8% to $50.46 from the prior year quarter.
WWE Studios
During the current quarter, we recorded revenue of $3.0 million related to four previously released films, including Behind Enemy Lines: Colombia as compared to $5.6 million in the prior year quarter related to See No Evil, The Marine, and The Condemned. In the prior year quarter, we recorded a $1.9 million charge related to revised expectations for our film See No Evil. During the first quarter of 2009, we released our fourth feature film, 12 Rounds, as well as a Direct-to-DVD film, Behind Enemy Lines: Colombia. 12 Rounds generated approximately $12.2 million in gross domestic box office receipts and was released on DVD on June 30, 2009. We participate in revenues generated by the distribution of these films after the print, advertising and distribution costs incurred by our distributors have been recouped and the results have been reported to us. As such, no revenues have been recorded for 12 Rounds to-date.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution increased to $51.2 million in the current quarter as compared to $42.5 million in the prior year quarter. Gross profit margins increased to 46% as compared to 39% in the prior year quarter, reflecting increased efficiencies in our Live and Televised Entertainment segment. Improved margins were driven by continued cost reductions in marketing and TV production, and by the impact of the staff reduction at the beginning of the 2009 year.
Selling, general and administrative expenses
SG&A expenses were $33.1 million for the current quarter as compared to $31.3 million in the prior year quarter, reflecting an increase in accrued incentive compensation, partially offset by decreases in advertising, travel expenses, as well as legal and professional fees.
EBITDA
EBITDA was approximately $18.1 million in the current quarter as compared to $11.2 million in the prior year quarter, primarily due to the improved efficiencies discussed above.
Investment and Other Income (Expense)
The decline in investment income of $0.6 million in the current quarter reflects lower interest rates. Other income of $0.2 million, as compared to other expense of $1.4 million in the prior year quarter, reflected changes in realized foreign exchange gains and losses and the revaluation of warrants held in certain licensees.
Effective tax rate
In the current quarter the effective tax rate was 42% as compared to 32% in the prior year quarter. The effective tax rate reflects differences between the taxes provided for as compared to actual amounts calculated on returns for both periods.
Summary Results for the Nine Months Ended
Total revenues through the nine months ended September 30, 2009 were $357.9 million as compared to $401.1 million in the prior year period. Operating income for the current period was $59.3 million versus $47.0 million in the prior year period. Net income was $39.1 million, or $0.53 per share, as compared to $31.8 million, or $0.43 per share, in the prior year period. EBITDA was $70.3 million for the current nine month period as compared to $56.5 million in the prior year period.
The following charts reflect net revenues by segment and by geographical region for the nine months ended September 30, 2009 and September 30, 2008. (Dollars in millions)
Net Revenues by Segment
Nine Months Ended
September 30,
2009
September 30,
2008
Live and Televised Entertainment $ 251.2 $ 255.3
Consumer Products 77.0 102.4
Digital Media 22.2 23.9
WWE Studios 7.5 19.5
Total $ 357.9 $ 401.1
Net Revenues by Region
Nine Months Ended
September 30,
2009
September 30,
2008
North America $ 268.6 $ 298.3
Europe, Middle East & Africa (EMEA) 55.8 69.5
Asia Pacific (APAC) 25.1 28.4
Latin America 8.4 4.9
Total $ 357.9 $ 401.1
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $251.2 million for the current period as compared to $255.3 million in the prior year, a decrease of 2%.
September 30,
2009
September 30,
2008
Live Events $ 79.6 $ 80.2
Pay-Per-View $ 63.7 $ 75.5
Venue Merchandise $ 15.2 $ 15.0
Television Rights Fees $ 81.5 $ 73.1
Television Advertising $ 5.5 $ 5.3
WWE Classics On Demand
$ 4.2 $ 4.8
Consumer Products
Revenues from our Consumer Products businesses were $77.0 million versus $102.4 million in the prior year, a decrease of 25%.
September 30,
2009
September 30,
2008
Home Video $ 29.0 $ 43.5
Licensing $ 36.7 $ 45.8
Magazine Publishing $ 9.9 $ 11.9
Digital Media
Revenues from our Digital Media related businesses were $22.2 million as compared to $23.9 million in the prior year, a decrease of 7%.
September 30,
2009
September 30,
2008
WWE.com $ 12.9 $ 12.5
WWEShop $ 9.3 $ 11.4
WWE Studios
We recorded revenue of $7.5 million in the current period related to four of our releases, See No Evil, The Marine, The Condemned, and Behind Enemy Lines: Colombia as compared to $19.5 million in the prior year period, which was led by the performance of The Marine. During the first quarter of 2009, we released our fourth feature film, 12 Rounds, as well as a Direct-to-DVD film, Behind Enemy Lines: Colombia.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution increased to $165.6 million in the current period as compared to $158.4 million in the prior year period, as improved efficiencies essentially offset the impact of revenue declines as discussed above. Total profit contribution margin increased to approximately 46% as compared to 39% in the prior year period, reflecting increased efficiencies in our Live and Televised Entertainment segment.
Selling, general and administrative expenses
SG&A expenses were $95.3 million for the current period as compared to $101.9 million in the prior year period, reflecting decreases in advertising, legal and professional fees and travel expenses, offset by an increase in accrued incentive compensation and bad debt expense. Current period expenses include the impact of our corporate restructuring of approximately $2.2 million in severance costs while expenses in the prior year included $3.5 million associated with our McMahon's Million Dollar Mania brand awareness campaign.
EBITDA
EBITDA for the current period was approximately $70.3 million as compared to $56.5 million in the prior year period.
Investment and Other Income (Expense)
The $2.0 million decline in investment income in the current period reflects lower average interest rates. Other income of $0.3 million as compared to other expense of $3.7 million in the prior year period includes the revaluation of warrants held in certain licensees.
Effective tax rate
The effective tax rate was 37% in the current period as compared to 33% in the prior year period. The prior year rate reflects tax benefits related to previously unrecognized tax positions.
Cash Flows
Net cash provided by operating activities was $92.8 million for the nine months ended September 30, 2009 as compared to $17.7 million in the prior year period. The increase was driven by the timing of feature film investments, favorable changes in working capital and reduced capital expenditures. Capital expenditures were $3.7 million for the current period as compared to $19.8 million in the prior year period as the prior year reflected an approximate $11.5 million investment in High Definition broadcasting equipment.
Additional Information
Additional business metrics are made available to investors on a monthly basis on our corporate website - corporate.wwe.com.
Note: World Wrestling Entertainment, Inc. will host a conference call on November 5, 2009 at 11:00 a.m. ET to discuss the Company's earnings results for the third quarter of 2009. All interested parties can access the conference call by dialing 888-647-2706 (conference ID: WWE). Please reserve a line 15 minutes prior to the start time of the conference call. A presentation that will be referenced during the call can be found at the Company web site at corporate.wwe.com. A replay of the call will be available approximately three hours after the conference call concludes, and can be accessed at corporate.wwe.com.
World Wrestling Entertainment, Inc. (NYSE: WWE) is an integrated media and entertainment company headquartered in Stamford, Conn. Additional information on the Company can be found at wwe.com and corporate.wwe.com.
Trademarks: All WWE programming, talent names, images, likenesses, slogans, wrestling moves, trademarks, copyrights and logos are the exclusive property of World Wrestling Entertainment, Inc. and its subsidiaries. All other trademarks, logos and copyrights are the property of their respective owners.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, feature films, entertainment, professional sports, and licensed merchandise; acceptance of the Company's brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or anticipated. In addition to these risks and uncertainties, our dividend is based on a number of factors, including our liquidity and historical and projected cash flow, strategic plan, our financial results and condition, contractual and legal restrictions on the payment of dividends and such other factors as our board of directors may consider relevant.
World Wrestling Entertainment, Inc.
Consolidated Income Statements
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Net revenues $ 111,254 $ 108,782 $ 357,873 $ 401,072
Cost of revenues 60,077 66,279 192,264 242,655
Selling, general and administrative expenses 33,108 31,263 95,337 101,884
Depreciation and amortization 3,578 3,330 10,954 9,521
Operating income 14,491 7,910 59,318 47,012
Investment income, net 704 1,290 2,495 4,511
Interest expense (82 ) (110 ) (261 ) (324 )
Other income (expense), net 168 (1,356 ) 300 (3,649 )
Income before income taxes 15,281 7,734 61,852 47,550
Provision for income taxes 6,342 2,460 22,717 15,720
Net income $ 8,939 $ 5,274 $ 39,135 $ 31,830
Earnings per share - basic:
Net income $ 0.12 $ 0.07 $ 0.53 $ 0.44
Earnings per share - diluted:
Net income $ 0.12 $ 0.07 $ 0.53 $ 0.43
Shares used in per share calculations:
Basic 73,944 73,191 73,646 72,725
Diluted 74,419 73,735 74,207 73,469
World Wrestling Entertainment, Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of As of
September 30, December 31,
2009 2008
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 152,706 $ 119,655
Short-term investments 53,058 57,686
Accounts receivable, net 60,613 60,133
Inventory, net 2,847 4,958
Prepaid expenses and other current assets 23,691 37,596
Total current assets 292,915 280,028
PROPERTY AND EQUIPMENT, NET 85,990 92,367
FEATURE FILM PRODUCTION ASSETS 28,799 31,657
INVESTMENT SECURITIES 22,878 22,299
INTANGIBLE ASSETS, NET 339 1,184
OTHER ASSETS 1,734 1,875
TOTAL ASSETS $ 432,655 $ 429,410
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,062 $ 1,002
Accounts payable 21,192 18,334
Accrued expenses and other liabilities 35,647 27,121
Deferred income 12,538 11,875
Total current liabilities 70,439 58,332
LONG-TERM DEBT 3,068 3,872
NON-CURRENT TAX LIABILITY 15,431 7,232
STOCKHOLDERS' EQUITY:
Class A common stock 256 252
Class B common stock 477 477
Additional paid-in capital 323,056 317,105
Accumulated other comprehensive income 2,333 1,171
Retained earnings 17,595 40,969
Total stockholders' equity 343,717 359,974
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 432,655 $ 429,410
World Wrestling Entertainment, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended
Sept. 30, Sept. 30,
2009 2008
OPERATING ACTIVITIES:
Net income $ 39,135 $ 31,830
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization/write-off of feature film production assets 3,723 13,220
Revaluation of warrants 802 2,198
Depreciation and amortization 10,954 9,521
Realized (gains)/losses on sale of investments (863 ) 348
Amortization of investment income 805 384
Stock compensation costs 5,659 7,953
Provision for doubtful accounts 3,115 179
Provision for inventory obsolescence 1,745 2,316
Reimbursement of operating expenses by principal shareholder - 1,950
Provision (benefit) from deferred income taxes 6,000 (1,010 )
Excess tax benefits from stock-based payment arrangements (74 ) (1,091 )
Changes in assets and liabilities:
Accounts receivable (3,596 ) (12,177 )
Inventory 366 (3,721 )
Prepaid expenses and other assets 12,615 (3,138 )
Feature film production assets (1,496 ) (24,742 )
Accounts payable 2,859 (1,870 )
Accrued expenses and other liabilities 10,025 (6,539 )
Deferred income 1,033 2,084
Net cash provided by operating activities 92,807 17,695
INVESTING ACTIVITIES:
Purchases of property and equipment (3,640 ) (19,591 )
Purchase of film library assets (92 ) (212 )
Purchase of investment securities (41,489 ) (104,736 )
Proceeds from sales or maturities of investment securities 45,586 143,634
Net cash provided by investing activities 365 19,095
FINANCING ACTIVITIES:
Repayments of long-term debt (744 ) (688 )
Dividends paid (61,605 ) (60,929 )
Issuance of stock, net 864 771
Proceeds from exercise of stock options 1,290 6,251
Excess tax benefits from stock-based payment arrangements 74 1,091
Net cash used in financing activities (60,121 ) (53,504 )
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 33,051 (16,714 )
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 119,655 135,805
CASH AND EQUIVALENTS, END OF PERIOD $ 152,706 $ 119,091
World Wrestling Entertainment, Inc.
Supplemental Information - EBITDA
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Net income reported on U.S. GAAP basis $ 8,939 $ 5,274 $ 39,135 $ 31,830
Provision for income taxes 6,342 2,460 22,717 15,720
Investment, interest and other income (expense),
net
790 (176 ) 2,534 538
Depreciation and amortization 3,578 3,330 10,954 9,521
EBITDA $ 18,069 $ 11,240 $ 70,272 $ 56,533
Non-GAAP Measure:
EBITDA is defined as net income before investment, interest and other income, income taxes, depreciation and amortization. The Company's definition of EBITDA does not adjust its U.S. GAAP basis earnings for the amortization of Feature Film production assets. Although it is not a recognized measure of performance under U.S. GAAP, EBITDA is presented because it is a widely accepted financial indicator of a company's performance. The Company uses EBITDA to measure its own performance and to set goals for operating managers. EBITDA should not be considered as an alternative to net income, cash flows from operations or any other indicator of World Wrestling Entertainment Inc.'s performance or liquidity, determined in accordance with U.S. GAAP.
World Wrestling Entertainment, Inc.
Supplemental Information- Free Cash Flow
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Net cash provided by operating activities $ 17,778 $ 14,617 $ 92,807 $ 17,695
Less cash used in capital expenditures:
Purchase of property and equipment and other assets (820) (4,160) (3,732) (19,803)
Free Cash Flow $ 16,958 $ 10,457 $ 89,075 $ (2,108)
Non-GAAP Measure:
We define Free Cash Flow as net cash provided by operating activities less cash used for capital expenditures. Although it is not a recognized measure of liquidity under U.S. GAAP, Free Cash Flow provides useful information regarding the amount of cash our continuing business is generating after capital expenditures, available for reinvesting in the business and for payment of dividends.
SOURCE: World Wrestling Entertainment, Inc.
World Wrestling Entertainment, Inc.Media:Robert Zimmerman 203-359-5131orInvestors:Michael Weitz 203-352-8642
"We are pleased with our solid performance. During the quarter we achieved an 84% increase in our operating income and managed a 26% increase for the first nine months of the year," stated Vince McMahon, Chairman and Chief Executive Officer. "Entering the year, we established clear goals to reduce our cost structure and to improve our operating efficiency. Our results to date, including significant and sustained improvement in our profit margins, demonstrate our ongoing commitment in meeting these objectives."
"Looking ahead, we believe WWE can achieve meaningful growth by taking advantage of our strategic opportunities and maintaining our focus on managing costs. Our portfolio of businesses exhibit significant operating leverage and, through disciplined cost management, we expect that leverage to drive future earnings growth."
Results by Business Segment
The following charts reflect net revenues by segment and by geographical region for the three months ended September 30, 2009 and September 30, 2008. (Dollars in millions)
Revenues from outside North America increased 17% led by the timing and performance of our live events in Asia Pacific.
Net Revenues by Segment
Three Months Ended
September 30,
2009
September 30,
2008
Live and Televised Entertainment $ 77.9 $ 68.7
Consumer Products 23.0 26.6
Digital Media 7.4 7.9
WWE Studios 3.0 5.6
Total $ 111.3 $ 108.8
Net Revenues by Region
Three Months Ended
September 30,
2009
September 30,
2008
North America $ 81.3 $ 83.2
Europe, Middle East & Africa (EMEA) 14.4 17.1
Asia Pacific (APAC) 12.5 6.8
Latin America 3.1 1.7
Total $ 111.3 $ 108.8
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $77.9 million for the current quarter as compared to $68.7 million in the prior year quarter, representing a 13% increase.
Live Event revenues were $27.2 million as compared to $20.3 million in the prior year quarter. Revenues increased 34% primarily due to higher average attendance and an increase in the number of international events.
There were 94 events, including 17 international events, during the current quarter as compared to 89 events, including 12 international events, in the prior year quarter.
North American events generated $16.6 million of revenues from 77 events as compared to $15.5 million from 77 events in the prior year quarter. North American average attendance increased 9% to approximately 5,800 from 5,300 in the prior year quarter. The average ticket price for North American events was $36.26 in the current quarter as compared to $38.21 in the prior year quarter.
International events generated approximately $10.6 million of revenues as compared to $4.8 million in the prior year quarter. The quarter-over-quarter increase reflected five additional events in the current quarter and a 38% increase in average attendance to approximately 9,100 fans. These factors were partially offset by a 19% reduction in average ticket prices to $65.59, in part due to changes in foreign exchange rates.
Pay-Per-View revenues were $14.5 million as compared to $16.4 million in the prior year quarter reflecting a 10% decline in total pay-per-view buys and a higher percentage of international buys, which are generally lower in price. For the comparable pay-per-view events which occurred in both the current and prior year periods, pay-per-view buys declined 22% in the quarter and 9% on a year-to-date basis.
The details for the number of buys (in 000s) are as follows:
Events (in chronological order)
Three Months Ended
September 30, 2009
Three Months Ended
September 30, 2008
The Bash(TM) - 196
Night of Champions(R) 267 -
SummerSlam(R) 369 477
Breaking Point(R)/Unforgiven(R) 169 211
Prior events 31 42
Total 836 926
Venue Merchandiserevenues were $4.3 million as compared to $4.2 million in the prior year quarter, as higher average attendance and the impact of five additional international events was offset by an 11% decline in lower domestic per capita merchandise sales to $8.71 in the current quarter.
Television Rights Fees revenues were $28.3 million as compared to $24.4 million in the prior year quarter. This increase was primarily due to fees received from our new WWE Superstars television show and contractual increases from our existing programs.
WWE Classics On Demand(TM) revenues were$1.2 million as compared to $1.4 million in the prior year quarter.
Consumer Products
Revenues from our Consumer Products businesses were $23.0 million versus $26.6 million in the prior year quarter, representing a 14% decrease.
Home Video net revenues were $11.2 million as compared to $11.0 million in the prior year quarter. The increase reflects the performance of our new releases and catalog titles.
Licensing revenues were $7.9 million as compared to $10.6 million in the prior year quarter. The decrease primarily reflects the reduction in royalties earned on the sales of toys and videogames, particularly in international markets.
Magazine publishing net revenues were $3.4 million as compared to $4.7 million in the prior year quarter. The decrease primarily reflects a reduction in subscription revenue and the publication of one fewer issue of WWE Magazine in the current quarter.
Digital Media
Revenues from our Digital Media related businesses were $7.4 million as compared to $7.9 million in the prior year quarter, representing a 6% decrease.
WWE.com revenues were $4.5 million as compared to $4.0 million in the prior year quarter, reflecting increased sales of online advertising and expanded licensing of our website for international markets.
WWEShop revenues were $2.9 million as compared to $3.9 million in the prior year quarter. The number of orders declined by 21% to approximately 55,000 and the average revenue per order decreased by approximately 8% to $50.46 from the prior year quarter.
WWE Studios
During the current quarter, we recorded revenue of $3.0 million related to four previously released films, including Behind Enemy Lines: Colombia as compared to $5.6 million in the prior year quarter related to See No Evil, The Marine, and The Condemned. In the prior year quarter, we recorded a $1.9 million charge related to revised expectations for our film See No Evil. During the first quarter of 2009, we released our fourth feature film, 12 Rounds, as well as a Direct-to-DVD film, Behind Enemy Lines: Colombia. 12 Rounds generated approximately $12.2 million in gross domestic box office receipts and was released on DVD on June 30, 2009. We participate in revenues generated by the distribution of these films after the print, advertising and distribution costs incurred by our distributors have been recouped and the results have been reported to us. As such, no revenues have been recorded for 12 Rounds to-date.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution increased to $51.2 million in the current quarter as compared to $42.5 million in the prior year quarter. Gross profit margins increased to 46% as compared to 39% in the prior year quarter, reflecting increased efficiencies in our Live and Televised Entertainment segment. Improved margins were driven by continued cost reductions in marketing and TV production, and by the impact of the staff reduction at the beginning of the 2009 year.
Selling, general and administrative expenses
SG&A expenses were $33.1 million for the current quarter as compared to $31.3 million in the prior year quarter, reflecting an increase in accrued incentive compensation, partially offset by decreases in advertising, travel expenses, as well as legal and professional fees.
EBITDA
EBITDA was approximately $18.1 million in the current quarter as compared to $11.2 million in the prior year quarter, primarily due to the improved efficiencies discussed above.
Investment and Other Income (Expense)
The decline in investment income of $0.6 million in the current quarter reflects lower interest rates. Other income of $0.2 million, as compared to other expense of $1.4 million in the prior year quarter, reflected changes in realized foreign exchange gains and losses and the revaluation of warrants held in certain licensees.
Effective tax rate
In the current quarter the effective tax rate was 42% as compared to 32% in the prior year quarter. The effective tax rate reflects differences between the taxes provided for as compared to actual amounts calculated on returns for both periods.
Summary Results for the Nine Months Ended
Total revenues through the nine months ended September 30, 2009 were $357.9 million as compared to $401.1 million in the prior year period. Operating income for the current period was $59.3 million versus $47.0 million in the prior year period. Net income was $39.1 million, or $0.53 per share, as compared to $31.8 million, or $0.43 per share, in the prior year period. EBITDA was $70.3 million for the current nine month period as compared to $56.5 million in the prior year period.
The following charts reflect net revenues by segment and by geographical region for the nine months ended September 30, 2009 and September 30, 2008. (Dollars in millions)
Net Revenues by Segment
Nine Months Ended
September 30,
2009
September 30,
2008
Live and Televised Entertainment $ 251.2 $ 255.3
Consumer Products 77.0 102.4
Digital Media 22.2 23.9
WWE Studios 7.5 19.5
Total $ 357.9 $ 401.1
Net Revenues by Region
Nine Months Ended
September 30,
2009
September 30,
2008
North America $ 268.6 $ 298.3
Europe, Middle East & Africa (EMEA) 55.8 69.5
Asia Pacific (APAC) 25.1 28.4
Latin America 8.4 4.9
Total $ 357.9 $ 401.1
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $251.2 million for the current period as compared to $255.3 million in the prior year, a decrease of 2%.
September 30,
2009
September 30,
2008
Live Events $ 79.6 $ 80.2
Pay-Per-View $ 63.7 $ 75.5
Venue Merchandise $ 15.2 $ 15.0
Television Rights Fees $ 81.5 $ 73.1
Television Advertising $ 5.5 $ 5.3
WWE Classics On Demand
$ 4.2 $ 4.8
Consumer Products
Revenues from our Consumer Products businesses were $77.0 million versus $102.4 million in the prior year, a decrease of 25%.
September 30,
2009
September 30,
2008
Home Video $ 29.0 $ 43.5
Licensing $ 36.7 $ 45.8
Magazine Publishing $ 9.9 $ 11.9
Digital Media
Revenues from our Digital Media related businesses were $22.2 million as compared to $23.9 million in the prior year, a decrease of 7%.
September 30,
2009
September 30,
2008
WWE.com $ 12.9 $ 12.5
WWEShop $ 9.3 $ 11.4
WWE Studios
We recorded revenue of $7.5 million in the current period related to four of our releases, See No Evil, The Marine, The Condemned, and Behind Enemy Lines: Colombia as compared to $19.5 million in the prior year period, which was led by the performance of The Marine. During the first quarter of 2009, we released our fourth feature film, 12 Rounds, as well as a Direct-to-DVD film, Behind Enemy Lines: Colombia.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution increased to $165.6 million in the current period as compared to $158.4 million in the prior year period, as improved efficiencies essentially offset the impact of revenue declines as discussed above. Total profit contribution margin increased to approximately 46% as compared to 39% in the prior year period, reflecting increased efficiencies in our Live and Televised Entertainment segment.
Selling, general and administrative expenses
SG&A expenses were $95.3 million for the current period as compared to $101.9 million in the prior year period, reflecting decreases in advertising, legal and professional fees and travel expenses, offset by an increase in accrued incentive compensation and bad debt expense. Current period expenses include the impact of our corporate restructuring of approximately $2.2 million in severance costs while expenses in the prior year included $3.5 million associated with our McMahon's Million Dollar Mania brand awareness campaign.
EBITDA
EBITDA for the current period was approximately $70.3 million as compared to $56.5 million in the prior year period.
Investment and Other Income (Expense)
The $2.0 million decline in investment income in the current period reflects lower average interest rates. Other income of $0.3 million as compared to other expense of $3.7 million in the prior year period includes the revaluation of warrants held in certain licensees.
Effective tax rate
The effective tax rate was 37% in the current period as compared to 33% in the prior year period. The prior year rate reflects tax benefits related to previously unrecognized tax positions.
Cash Flows
Net cash provided by operating activities was $92.8 million for the nine months ended September 30, 2009 as compared to $17.7 million in the prior year period. The increase was driven by the timing of feature film investments, favorable changes in working capital and reduced capital expenditures. Capital expenditures were $3.7 million for the current period as compared to $19.8 million in the prior year period as the prior year reflected an approximate $11.5 million investment in High Definition broadcasting equipment.
Additional Information
Additional business metrics are made available to investors on a monthly basis on our corporate website - corporate.wwe.com.
Note: World Wrestling Entertainment, Inc. will host a conference call on November 5, 2009 at 11:00 a.m. ET to discuss the Company's earnings results for the third quarter of 2009. All interested parties can access the conference call by dialing 888-647-2706 (conference ID: WWE). Please reserve a line 15 minutes prior to the start time of the conference call. A presentation that will be referenced during the call can be found at the Company web site at corporate.wwe.com. A replay of the call will be available approximately three hours after the conference call concludes, and can be accessed at corporate.wwe.com.
World Wrestling Entertainment, Inc. (NYSE: WWE) is an integrated media and entertainment company headquartered in Stamford, Conn. Additional information on the Company can be found at wwe.com and corporate.wwe.com.
Trademarks: All WWE programming, talent names, images, likenesses, slogans, wrestling moves, trademarks, copyrights and logos are the exclusive property of World Wrestling Entertainment, Inc. and its subsidiaries. All other trademarks, logos and copyrights are the property of their respective owners.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, feature films, entertainment, professional sports, and licensed merchandise; acceptance of the Company's brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or anticipated. In addition to these risks and uncertainties, our dividend is based on a number of factors, including our liquidity and historical and projected cash flow, strategic plan, our financial results and condition, contractual and legal restrictions on the payment of dividends and such other factors as our board of directors may consider relevant.
World Wrestling Entertainment, Inc.
Consolidated Income Statements
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Net revenues $ 111,254 $ 108,782 $ 357,873 $ 401,072
Cost of revenues 60,077 66,279 192,264 242,655
Selling, general and administrative expenses 33,108 31,263 95,337 101,884
Depreciation and amortization 3,578 3,330 10,954 9,521
Operating income 14,491 7,910 59,318 47,012
Investment income, net 704 1,290 2,495 4,511
Interest expense (82 ) (110 ) (261 ) (324 )
Other income (expense), net 168 (1,356 ) 300 (3,649 )
Income before income taxes 15,281 7,734 61,852 47,550
Provision for income taxes 6,342 2,460 22,717 15,720
Net income $ 8,939 $ 5,274 $ 39,135 $ 31,830
Earnings per share - basic:
Net income $ 0.12 $ 0.07 $ 0.53 $ 0.44
Earnings per share - diluted:
Net income $ 0.12 $ 0.07 $ 0.53 $ 0.43
Shares used in per share calculations:
Basic 73,944 73,191 73,646 72,725
Diluted 74,419 73,735 74,207 73,469
World Wrestling Entertainment, Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of As of
September 30, December 31,
2009 2008
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 152,706 $ 119,655
Short-term investments 53,058 57,686
Accounts receivable, net 60,613 60,133
Inventory, net 2,847 4,958
Prepaid expenses and other current assets 23,691 37,596
Total current assets 292,915 280,028
PROPERTY AND EQUIPMENT, NET 85,990 92,367
FEATURE FILM PRODUCTION ASSETS 28,799 31,657
INVESTMENT SECURITIES 22,878 22,299
INTANGIBLE ASSETS, NET 339 1,184
OTHER ASSETS 1,734 1,875
TOTAL ASSETS $ 432,655 $ 429,410
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,062 $ 1,002
Accounts payable 21,192 18,334
Accrued expenses and other liabilities 35,647 27,121
Deferred income 12,538 11,875
Total current liabilities 70,439 58,332
LONG-TERM DEBT 3,068 3,872
NON-CURRENT TAX LIABILITY 15,431 7,232
STOCKHOLDERS' EQUITY:
Class A common stock 256 252
Class B common stock 477 477
Additional paid-in capital 323,056 317,105
Accumulated other comprehensive income 2,333 1,171
Retained earnings 17,595 40,969
Total stockholders' equity 343,717 359,974
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 432,655 $ 429,410
World Wrestling Entertainment, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended
Sept. 30, Sept. 30,
2009 2008
OPERATING ACTIVITIES:
Net income $ 39,135 $ 31,830
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization/write-off of feature film production assets 3,723 13,220
Revaluation of warrants 802 2,198
Depreciation and amortization 10,954 9,521
Realized (gains)/losses on sale of investments (863 ) 348
Amortization of investment income 805 384
Stock compensation costs 5,659 7,953
Provision for doubtful accounts 3,115 179
Provision for inventory obsolescence 1,745 2,316
Reimbursement of operating expenses by principal shareholder - 1,950
Provision (benefit) from deferred income taxes 6,000 (1,010 )
Excess tax benefits from stock-based payment arrangements (74 ) (1,091 )
Changes in assets and liabilities:
Accounts receivable (3,596 ) (12,177 )
Inventory 366 (3,721 )
Prepaid expenses and other assets 12,615 (3,138 )
Feature film production assets (1,496 ) (24,742 )
Accounts payable 2,859 (1,870 )
Accrued expenses and other liabilities 10,025 (6,539 )
Deferred income 1,033 2,084
Net cash provided by operating activities 92,807 17,695
INVESTING ACTIVITIES:
Purchases of property and equipment (3,640 ) (19,591 )
Purchase of film library assets (92 ) (212 )
Purchase of investment securities (41,489 ) (104,736 )
Proceeds from sales or maturities of investment securities 45,586 143,634
Net cash provided by investing activities 365 19,095
FINANCING ACTIVITIES:
Repayments of long-term debt (744 ) (688 )
Dividends paid (61,605 ) (60,929 )
Issuance of stock, net 864 771
Proceeds from exercise of stock options 1,290 6,251
Excess tax benefits from stock-based payment arrangements 74 1,091
Net cash used in financing activities (60,121 ) (53,504 )
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 33,051 (16,714 )
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 119,655 135,805
CASH AND EQUIVALENTS, END OF PERIOD $ 152,706 $ 119,091
World Wrestling Entertainment, Inc.
Supplemental Information - EBITDA
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Net income reported on U.S. GAAP basis $ 8,939 $ 5,274 $ 39,135 $ 31,830
Provision for income taxes 6,342 2,460 22,717 15,720
Investment, interest and other income (expense),
net
790 (176 ) 2,534 538
Depreciation and amortization 3,578 3,330 10,954 9,521
EBITDA $ 18,069 $ 11,240 $ 70,272 $ 56,533
Non-GAAP Measure:
EBITDA is defined as net income before investment, interest and other income, income taxes, depreciation and amortization. The Company's definition of EBITDA does not adjust its U.S. GAAP basis earnings for the amortization of Feature Film production assets. Although it is not a recognized measure of performance under U.S. GAAP, EBITDA is presented because it is a widely accepted financial indicator of a company's performance. The Company uses EBITDA to measure its own performance and to set goals for operating managers. EBITDA should not be considered as an alternative to net income, cash flows from operations or any other indicator of World Wrestling Entertainment Inc.'s performance or liquidity, determined in accordance with U.S. GAAP.
World Wrestling Entertainment, Inc.
Supplemental Information- Free Cash Flow
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Net cash provided by operating activities $ 17,778 $ 14,617 $ 92,807 $ 17,695
Less cash used in capital expenditures:
Purchase of property and equipment and other assets (820) (4,160) (3,732) (19,803)
Free Cash Flow $ 16,958 $ 10,457 $ 89,075 $ (2,108)
Non-GAAP Measure:
We define Free Cash Flow as net cash provided by operating activities less cash used for capital expenditures. Although it is not a recognized measure of liquidity under U.S. GAAP, Free Cash Flow provides useful information regarding the amount of cash our continuing business is generating after capital expenditures, available for reinvesting in the business and for payment of dividends.
SOURCE: World Wrestling Entertainment, Inc.
World Wrestling Entertainment, Inc.Media:Robert Zimmerman 203-359-5131orInvestors:Michael Weitz 203-352-8642
WWE, Inc. Announces 2009-12 Business Outlook
STAMFORD, Conn., Nov 05, 2009 (BUSINESS WIRE) -- World Wrestling Entertainment, Inc. (NYSE:WWE) today issued a revised business outlook, targeting average annual earnings growth between 15% to 20% over the 2009 through 2012 period.1 The revised outlook is based on a comprehensive review of the Company's operations.
Vince McMahon, Chairman and Chief Executive Officer, said, "We believe we can achieve meaningful growth by strengthening our global expansion and television distribution, leveraging our new partnership with Mattel and continuing to improve operating efficiency. Through disciplined cost management, we expect our operating leverage to deliver outstanding earnings growth with even moderate increases in revenue."
George Barrios, Chief Financial Officer, added, "WWE's projected earnings growth reflects our focus on producing superior economic returns on the capital invested in our business and thereby creating value for our shareholders."
Additional information on World Wrestling Entertainment, Inc. (NYSE:WWE) can be found at wwe.com and corporate.wwe.com. For information on our global activities, go to http://www.wwe.com/worldwide/.
Notes:
1The outlook above does not include the impact of any future merger or unplanned restructuring charges, the impact from sales and acquisitions of operating assets and investments, or the impact of taxes on the above items, that may occur from time to time due to management decisions and changing business circumstances. The Company is currently unable to forecast precisely the timing and/or magnitude of any such amounts or events.
Trademarks: All WWE programming, talent names, images, likenesses, slogans, wrestling moves, trademarks, copyrights and logos are the exclusive property of World Wrestling Entertainment, Inc. and its subsidiaries. All other trademarks, logos and copyrights are the property of their respective owners.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, entertainment, professional sports, and licensed merchandise; acceptance of the Company's brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or anticipated. In addition to these risks and uncertainties, our dividend is based on a number of factors, including our liquidity and historical and projected cash flow, strategic plan, our financial results and condition, contractual and legal restrictions on the payment of dividends and such other factors as our board of directors may consider relevant.
SOURCE: World Wrestling Entertainment, Inc.
World Wrestling Entertainment, Inc.Investors:Michael Weitz, 203-352-8642Media:Robert Zimmerman, 203-359-5131
Vince McMahon, Chairman and Chief Executive Officer, said, "We believe we can achieve meaningful growth by strengthening our global expansion and television distribution, leveraging our new partnership with Mattel and continuing to improve operating efficiency. Through disciplined cost management, we expect our operating leverage to deliver outstanding earnings growth with even moderate increases in revenue."
George Barrios, Chief Financial Officer, added, "WWE's projected earnings growth reflects our focus on producing superior economic returns on the capital invested in our business and thereby creating value for our shareholders."
Additional information on World Wrestling Entertainment, Inc. (NYSE:WWE) can be found at wwe.com and corporate.wwe.com. For information on our global activities, go to http://www.wwe.com/worldwide/.
Notes:
1The outlook above does not include the impact of any future merger or unplanned restructuring charges, the impact from sales and acquisitions of operating assets and investments, or the impact of taxes on the above items, that may occur from time to time due to management decisions and changing business circumstances. The Company is currently unable to forecast precisely the timing and/or magnitude of any such amounts or events.
Trademarks: All WWE programming, talent names, images, likenesses, slogans, wrestling moves, trademarks, copyrights and logos are the exclusive property of World Wrestling Entertainment, Inc. and its subsidiaries. All other trademarks, logos and copyrights are the property of their respective owners.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, entertainment, professional sports, and licensed merchandise; acceptance of the Company's brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or anticipated. In addition to these risks and uncertainties, our dividend is based on a number of factors, including our liquidity and historical and projected cash flow, strategic plan, our financial results and condition, contractual and legal restrictions on the payment of dividends and such other factors as our board of directors may consider relevant.
SOURCE: World Wrestling Entertainment, Inc.
World Wrestling Entertainment, Inc.Investors:Michael Weitz, 203-352-8642Media:Robert Zimmerman, 203-359-5131
Disney, Reaches Another Major Milestone on Shanghai Theme Park Project
BURBANK, Calif., Nov 03, 2009 (BUSINESS WIRE) -- The Walt Disney Company today announced that the Project Application Report (PAR) for a Disney theme park in the Pudong district of Shanghai has received approval from the relevant authorities of the central government of China.
"China is one of the most dynamic, exciting and important countries in the world, and this approval marks a very significant milestone for The Walt Disney Company in mainland China," said Robert A. Iger, president and CEO of The Walt Disney Company.
The PAR approval will enable Disney and its Shanghai partners to move forward toward a final agreement to build and operate the park and begin preliminary development work. Upon completion of the final agreement, the project's initial phase would include a Magic Kingdom-style theme park with characteristics tailored to the Shanghai region and other amenities consistent with Disney's destination resorts worldwide.
About The Walt Disney Company China
The Walt Disney Company (DIS), together with its subsidiaries and affiliates, is a diversified international family entertainment enterprise with five business segments and is a Dow 30 company with revenues of nearly $38 billion in its most recently reported fiscal year. Our first animation screened in China in the 1930s and today our long association continues with offices in Beijing, Shanghai and Guangzhou with over 600 employees.
About Walt Disney Parks and Resorts
Walt Disney Parks and Resorts are where families experience and enjoy the magic of Disney's beloved characters and where dreams come true. More than 50 years ago, Walt Disney created a new kind of entertainment families could experience together, immersed in detailed atmospheres and vibrant storytelling. His vision now includes a collection of five of the world's leading family vacation destinations -- Disneyland Resort, Anaheim, Calif.; Walt Disney World Resort, Lake Buena Vista, Fla.; Tokyo Disney Resort, Urayasu, Chiba, Japan; Disneyland Paris, Marne-la-Vallee, France; and Hong Kong Disneyland Resort, located on Lantau Island. In addition, Walt Disney Parks and Resorts includes the world-class Disney Cruise Line; Disney Vacation Club, with 10 resorts and more than 400,000 members; Adventures by Disney, a guided group vacation experience to some of the world's most popular destinations; and Walt Disney Imagineering, which creates and designs all Disney parks, resorts and attractions.
from the wire
"China is one of the most dynamic, exciting and important countries in the world, and this approval marks a very significant milestone for The Walt Disney Company in mainland China," said Robert A. Iger, president and CEO of The Walt Disney Company.
The PAR approval will enable Disney and its Shanghai partners to move forward toward a final agreement to build and operate the park and begin preliminary development work. Upon completion of the final agreement, the project's initial phase would include a Magic Kingdom-style theme park with characteristics tailored to the Shanghai region and other amenities consistent with Disney's destination resorts worldwide.
About The Walt Disney Company China
The Walt Disney Company (DIS), together with its subsidiaries and affiliates, is a diversified international family entertainment enterprise with five business segments and is a Dow 30 company with revenues of nearly $38 billion in its most recently reported fiscal year. Our first animation screened in China in the 1930s and today our long association continues with offices in Beijing, Shanghai and Guangzhou with over 600 employees.
About Walt Disney Parks and Resorts
Walt Disney Parks and Resorts are where families experience and enjoy the magic of Disney's beloved characters and where dreams come true. More than 50 years ago, Walt Disney created a new kind of entertainment families could experience together, immersed in detailed atmospheres and vibrant storytelling. His vision now includes a collection of five of the world's leading family vacation destinations -- Disneyland Resort, Anaheim, Calif.; Walt Disney World Resort, Lake Buena Vista, Fla.; Tokyo Disney Resort, Urayasu, Chiba, Japan; Disneyland Paris, Marne-la-Vallee, France; and Hong Kong Disneyland Resort, located on Lantau Island. In addition, Walt Disney Parks and Resorts includes the world-class Disney Cruise Line; Disney Vacation Club, with 10 resorts and more than 400,000 members; Adventures by Disney, a guided group vacation experience to some of the world's most popular destinations; and Walt Disney Imagineering, which creates and designs all Disney parks, resorts and attractions.
from the wire
Wednesday, October 14, 2009
Disney will merge retail with entertainment
LOS ANGELES, Oct 13, 2009 (UPI via COMTEX) -- Walt Disney Co. said it would overhaul its 340 European and U.S. stores to include entertainment designed to keep customers shopping longer.
The company is considering a turnaround that includes pumping about $1 million into each store in part to have children eager to visit, play and linger in the same location as the retail outlet that sells toys, games, plush animals and other retail items.
"The world does not need another place to sell Disney merchandise -- this only works if it's an experience," said Jim Fielding, president of Disney Stores Worldwide, The New York Times reported Tuesday.
Disney said it would begin the bold retail step -- pushing forward while many stores are retrenching -- in Southern California, Long Island and Madrid. It is also hoping to create a flagship store in Times Square in New York City, the newspaper said.
Disney plans to outfit stores with theaters for kids to select video clips to watch and install systems for kids to teleconference with Disney stars.
"It's time to take risks," Mr. Fielding said he told them. "When consumers are ready to spend again, we will be ready."
Copyright 2009 by United Press International
The company is considering a turnaround that includes pumping about $1 million into each store in part to have children eager to visit, play and linger in the same location as the retail outlet that sells toys, games, plush animals and other retail items.
"The world does not need another place to sell Disney merchandise -- this only works if it's an experience," said Jim Fielding, president of Disney Stores Worldwide, The New York Times reported Tuesday.
Disney said it would begin the bold retail step -- pushing forward while many stores are retrenching -- in Southern California, Long Island and Madrid. It is also hoping to create a flagship store in Times Square in New York City, the newspaper said.
Disney plans to outfit stores with theaters for kids to select video clips to watch and install systems for kids to teleconference with Disney stars.
"It's time to take risks," Mr. Fielding said he told them. "When consumers are ready to spend again, we will be ready."
Copyright 2009 by United Press International
Thursday, October 8, 2009
Strategists turn global
NEW YORK (MarketWatch) -- With signs of growth convincingly returning to parts of the globe, some U.S. strategists are turning their attention overseas, either by raising their exposure to global equities or by focusing on U.S. firms with a large chunk of international revenues.
Standard & Poor's Equity Research, which late Wednesday raised its 12-month target on the S&P 500 Index ($SPX) to 1,150 from 1,100, also decided to recommend investors add their exposure to worldwide equities.
"We see equity prices benefiting from an expected gradual rise in global economic-growth projections, a further weakening of the U.S. dollar and the expectation of a continued improvement in corporate [earnings per share]," wrote Sam Stovall, chief investment strategist at S&P, in a note.
On Thursday, the Dow Jones Industrial Average ($INDU) gained 72 points, or 0.8%, to 9,797. The S&P 500 rose 8 points, or 0.8%, to 1,066, while the Nasdaq Composite Index (COMP) advanced 18 points, or 0.9%, to 2,129.
Gains were fueled by aluminum-giant Alcoa Inc. (AA), often seen as a barometer of the economy, which kicked off the third-quarter earnings season by posting a surprise profit.
Alcoa's results were due to a mix of improved demand and aggressive cost cuts. Aluminum prices have risen since June and demand has ticked higher, mostly as China replenishes its stockpiles.
In its latest World Economic Outlook, the International Monetary Fund projected the global economy would grow by 3.1% next year, up from its 2.5% forecast in July. Asia is expected to lead the recovery, with the region expected to grow by 2.8% this year and by 5.8% in 2010.
Among the S&P 500's 10 sectors, S&P recommends overweighting three sectors with high exposure to global growth, such as energy, materials and industrials.
BNY Convergex's chief market strategist Nicholas Colas believes that weakness in the dollar should now benefit the Dow industrials over the S&P 500, given the higher percentage of multinationals represented in the blue-chip average. See full story.
According to Ed Yardeni, chief investment strategist at Yardeni Research, U.S. firms increasingly are trying to find more revenues and earnings overseas, especially among emerging economies.
from MarketWatch
Standard & Poor's Equity Research, which late Wednesday raised its 12-month target on the S&P 500 Index ($SPX) to 1,150 from 1,100, also decided to recommend investors add their exposure to worldwide equities.
"We see equity prices benefiting from an expected gradual rise in global economic-growth projections, a further weakening of the U.S. dollar and the expectation of a continued improvement in corporate [earnings per share]," wrote Sam Stovall, chief investment strategist at S&P, in a note.
On Thursday, the Dow Jones Industrial Average ($INDU) gained 72 points, or 0.8%, to 9,797. The S&P 500 rose 8 points, or 0.8%, to 1,066, while the Nasdaq Composite Index (COMP) advanced 18 points, or 0.9%, to 2,129.
Gains were fueled by aluminum-giant Alcoa Inc. (AA), often seen as a barometer of the economy, which kicked off the third-quarter earnings season by posting a surprise profit.
Alcoa's results were due to a mix of improved demand and aggressive cost cuts. Aluminum prices have risen since June and demand has ticked higher, mostly as China replenishes its stockpiles.
In its latest World Economic Outlook, the International Monetary Fund projected the global economy would grow by 3.1% next year, up from its 2.5% forecast in July. Asia is expected to lead the recovery, with the region expected to grow by 2.8% this year and by 5.8% in 2010.
Among the S&P 500's 10 sectors, S&P recommends overweighting three sectors with high exposure to global growth, such as energy, materials and industrials.
BNY Convergex's chief market strategist Nicholas Colas believes that weakness in the dollar should now benefit the Dow industrials over the S&P 500, given the higher percentage of multinationals represented in the blue-chip average. See full story.
According to Ed Yardeni, chief investment strategist at Yardeni Research, U.S. firms increasingly are trying to find more revenues and earnings overseas, especially among emerging economies.
from MarketWatch
Sunday, October 4, 2009
American moguls could buy some of the world's economies
Castles in France. Islands in the Caribbean. Private jets. With a collective $1.27 trillion at their disposal, the members of The Forbes 400 could buy almost anything.
How about a country? A quick glance at the CIA Fact Book suggests the individual fortunes of many Forbes 400 members are as big as some of the world's economies.
Bill Gates, America's richest man with a net worth of $50 billion, has a personal balance sheet larger than the gross domestic product (GDP) of 140 countries, including Costa Rica, El Salvador, Bolivia and Uruguay. The Microsoft (MSFT) visionary's nest egg is just short of the GDP of Tanzania and Burma.
Warren Buffett, who lost $10 billion in the past 12 months and is this year's Forbes 400 biggest dollar loser, still has a fortune the size of North Korea's economy at $40 billion. (The Oracle of Omaha probably would steer clear of that investment, though.)
One Forbes 400 member does actually run a small chunk of a state in an official capacity: Mayor Michael Bloomberg. While he is busy serving as the chief executive of New York City and grappling with its sluggish economy, his own personal balance sheet -- amassed through financial information services and media company Bloomberg LP -- equals the value of all the goods and services produced in South Africa's Republic of Zambia's ($17.5 billion).
Some say that land developer Donald Bren, whose assets throughout the vicinity of Orange County, Calif., include 475 office buildings, 115 apartment communities, 41 retail centers, resort properties and new housing, runs Orange County -- he certainly owns most of it. And with a net worth of $12 billion, he could, in theory, buy Haiti's economy, too.
Casino mogul Sheldon Adelson's $9 billion net worth is akin to the Bahamas' GDP ($9 billion). Pierre Omidyar, founder of eBay (EBAY), the world's biggest auction marketplace, could theoretically control Somalia's market with his $5.5 billion fortune.
George Lucas, the famed Hollywood director behind the Star Wars and Indiana Jones franchises and ILM, the world's most bankable special effects shop, has a $3 billion fortune, making him worth as much as the GDP of Guyana.
Hedge fund founder David Shaw's $2.5 billion net worth parallels Belize's marketplace.
Investor John Paulson amassed much of his fortune by exploiting the real estate bubble and shorting the subprime market in 2007. Today he has a net worth of $6.8 billion -- the equivalent of Montenegro's gross domestic product.
Although Eli Broad's fortune suffered because of AIG's (AIG) collapse last fall -- he's lost $1.3 billion in the last 12 months -- he still has a bank account that rivals Barbados' economy ($5.4 billion).
Forbes 400 members with net worths just under $1 billion still possess fortunes that could operate the economies of significant fractions of the globe. Gary Magness, who owns water rights in Colorado through his ranch holdings, has a net worth of $990 million, which barely exceeds Vanuatu's GDP ($988.5 million).
If this year's three poorest Forbes 400 members were to combine their wealth (a combined $2.9 billion), their amassed fortune would be worth more than the workings of Belize's entire economy.
from Forbes
How about a country? A quick glance at the CIA Fact Book suggests the individual fortunes of many Forbes 400 members are as big as some of the world's economies.
Bill Gates, America's richest man with a net worth of $50 billion, has a personal balance sheet larger than the gross domestic product (GDP) of 140 countries, including Costa Rica, El Salvador, Bolivia and Uruguay. The Microsoft (MSFT) visionary's nest egg is just short of the GDP of Tanzania and Burma.
Warren Buffett, who lost $10 billion in the past 12 months and is this year's Forbes 400 biggest dollar loser, still has a fortune the size of North Korea's economy at $40 billion. (The Oracle of Omaha probably would steer clear of that investment, though.)
One Forbes 400 member does actually run a small chunk of a state in an official capacity: Mayor Michael Bloomberg. While he is busy serving as the chief executive of New York City and grappling with its sluggish economy, his own personal balance sheet -- amassed through financial information services and media company Bloomberg LP -- equals the value of all the goods and services produced in South Africa's Republic of Zambia's ($17.5 billion).
Some say that land developer Donald Bren, whose assets throughout the vicinity of Orange County, Calif., include 475 office buildings, 115 apartment communities, 41 retail centers, resort properties and new housing, runs Orange County -- he certainly owns most of it. And with a net worth of $12 billion, he could, in theory, buy Haiti's economy, too.
Casino mogul Sheldon Adelson's $9 billion net worth is akin to the Bahamas' GDP ($9 billion). Pierre Omidyar, founder of eBay (EBAY), the world's biggest auction marketplace, could theoretically control Somalia's market with his $5.5 billion fortune.
George Lucas, the famed Hollywood director behind the Star Wars and Indiana Jones franchises and ILM, the world's most bankable special effects shop, has a $3 billion fortune, making him worth as much as the GDP of Guyana.
Hedge fund founder David Shaw's $2.5 billion net worth parallels Belize's marketplace.
Investor John Paulson amassed much of his fortune by exploiting the real estate bubble and shorting the subprime market in 2007. Today he has a net worth of $6.8 billion -- the equivalent of Montenegro's gross domestic product.
Although Eli Broad's fortune suffered because of AIG's (AIG) collapse last fall -- he's lost $1.3 billion in the last 12 months -- he still has a bank account that rivals Barbados' economy ($5.4 billion).
Forbes 400 members with net worths just under $1 billion still possess fortunes that could operate the economies of significant fractions of the globe. Gary Magness, who owns water rights in Colorado through his ranch holdings, has a net worth of $990 million, which barely exceeds Vanuatu's GDP ($988.5 million).
If this year's three poorest Forbes 400 members were to combine their wealth (a combined $2.9 billion), their amassed fortune would be worth more than the workings of Belize's entire economy.
from Forbes
Thursday, August 27, 2009
Three Stocks that are in Trouble
WASHINGTON – Investors are still trading common shares of Fannie Mae, Freddie Mac and American International Group Inc. by the billions, even though analysts say their prices are almost certain to go to zero.
All three are majority-owned by the government and are losing huge sums of money. The Securities and Exchange Commission and other regulators lack authority to end trading of stocks in such "zombie" companies that technically are alive — until the government takes them off life support.
Shares of the two mortgage giants and the insurer have been swept up in a summer rally in financial stocks. Investors have been trading their shares at abnormally high volumes, despite analysts' warnings that they're destined to lose their money.
"People have done well by trading them (in the short term), but when it gets to the end of the road, these stocks are going to be worth zero," said Bose George, an analyst with the investment bank Keefe, Bruyette & Woods Inc.
Some of the activity involves day traders aiming to profit from short-term price swings, George said. But he said inexperienced investors might have the misimpression that the companies may recover or be rescued.
"That would be kind of unfortunate," he said. "There could be a lot of improvement in the economy, and these companies would still be worth zero."
The government continues to support the companies with billions in taxpayer money, saying they still play a crucial role in the financial system.
Fannie and Freddie buy loans from banks and sell them to investors — a role critical to the mortgage market. They have tapped about $96 billion out of a potential $400 billion in aid from the Treasury Department.
Officials have said AIG's failure would be disastrous for the financial markets. Treasury and the Federal Reserve have spent about $175 billion on AIG and AIG-related securities. The company also has access to $28 billion from the $700 billion financial industry bailout.
But analysts say the wind-down strategies for the companies are almost sure to wipe out any common equity, making their shares worthless.
"There are some folks that believe that somehow that 20 percent (of the stock) that's out there in the public market might be worth something someday," said Daniel Alpert, managing director of the investment bank Westwood Capital LLC. But he said the three companies are doomed because they are "massively indebted," and the values of their assets are declining.
The stocks remain in circulation mainly for two reasons: They've violated no rules on the New York Stock Exchange, where they are traded. And no regulator has the power to suspend their trading without evidence securities laws are being violated.
Alpert said no regulations exist to deal with cases where the government props up unsustainable companies.
By contrast, regulators were able to warn investors about stock in the "old" General Motors, which also sits on a mound of government debt. The SEC and the Financial Industry Regulatory Authority, the brokerage industry's self-policing group, have issued alerts and taken other steps to prevent investor losses on that stock.
In that case, the SEC could act because GM acknowledged the stock was headed for zero in a restructuring plan filed with the SEC.
The SEC says it has no reason to suspend trading of stocks that still technically meet its standards, which include filing timely financial reports and disclosing events that could affect share values.
The NYSE's rules include maintaining minimum numbers of shareholders and market capitalization. But they give the exchange full discretion over which stocks are listed — regardless of whether a company meets those listing standards.
FINRA has jurisdiction over NASDAQ-traded stocks and over "pink sheet" stocks, which are worth too little to be traded on a major exchange. It has no jurisdiction over stocks on the NYSE.
Shares of Fannie, Freddie and AIG — along with their trading volumes — have jumped this summer, when activity normally fades as traders take vacations. Fannie shares have more than tripled since the end of July. Their volume soared to 360 million shares Thursday from 6.45 million shares on the last day of July.
Freddie and AIG shares have surged threefold since then. Freddie's volume jumped to 191 million shares from 4.5 million. And 148 million AIG shares changed hands on Thursday, compared with 5 million on July 31.
By comparison, the trading volume of General Electric Co.'s common shares fell to around 63.7 million shares Thursday, compared with 109 million shares July 31. The stock price rose 5.3 percent in that stretch.
AIG shares rose $10.15, or 26.9 percent, to $47.84 Thursday. Analysts speculated the company might be reconciling with former CEO Maurice "Hank" Greenberg, who could help bring private capital and other business benefits to the company.
A reverse stock split in early July raised the price by a factor of 20. In a reverse split, a stock price is increased, and the number of shares are reduced by a similar proportion. It has no effect on shareholders' equity.
Fannie shares closed up 3.8 percent at $1.92 Thursday; Freddie shares rose 10 percent to $2.24.
Fannie and Freddie's government owners haven't announced their plans for the companies. That means there's a possibility — however remote — that their shares could retain some value. But the administration is expected to announce in February that the companies will be wound down, merged into a federal agency or have their bad mortgage assets split into a new government-backed company.
All those possibilities are almost certain to eliminate any remaining shareholder equity, analysts said.
Lawrence J. White, a professor at New York University's Stern School of Business, said the higher trading volumes might reflect speculation about the government's February announcement.
With the share prices still so low, White said investors are willing to bet on the outcome of the government's announcement. He said trading volume is likely to grow further, with even sharper price swings, as February approaches.
Still, Freddie Mac Chairman John Koskinen said the price fluctuations were hard to understand.
"I have absolutely no idea what that represents," he said.
Representatives for Fannie, the SEC, AIG, FINRA and the NYSE declined to comment. Spokeswomen for Treasury, which owns most of AIG, and the Federal Housing Finance Agency, which holds Fannie and Freddie in conservatorship, also wouldn't comment.
by the associated press
All three are majority-owned by the government and are losing huge sums of money. The Securities and Exchange Commission and other regulators lack authority to end trading of stocks in such "zombie" companies that technically are alive — until the government takes them off life support.
Shares of the two mortgage giants and the insurer have been swept up in a summer rally in financial stocks. Investors have been trading their shares at abnormally high volumes, despite analysts' warnings that they're destined to lose their money.
"People have done well by trading them (in the short term), but when it gets to the end of the road, these stocks are going to be worth zero," said Bose George, an analyst with the investment bank Keefe, Bruyette & Woods Inc.
Some of the activity involves day traders aiming to profit from short-term price swings, George said. But he said inexperienced investors might have the misimpression that the companies may recover or be rescued.
"That would be kind of unfortunate," he said. "There could be a lot of improvement in the economy, and these companies would still be worth zero."
The government continues to support the companies with billions in taxpayer money, saying they still play a crucial role in the financial system.
Fannie and Freddie buy loans from banks and sell them to investors — a role critical to the mortgage market. They have tapped about $96 billion out of a potential $400 billion in aid from the Treasury Department.
Officials have said AIG's failure would be disastrous for the financial markets. Treasury and the Federal Reserve have spent about $175 billion on AIG and AIG-related securities. The company also has access to $28 billion from the $700 billion financial industry bailout.
But analysts say the wind-down strategies for the companies are almost sure to wipe out any common equity, making their shares worthless.
"There are some folks that believe that somehow that 20 percent (of the stock) that's out there in the public market might be worth something someday," said Daniel Alpert, managing director of the investment bank Westwood Capital LLC. But he said the three companies are doomed because they are "massively indebted," and the values of their assets are declining.
The stocks remain in circulation mainly for two reasons: They've violated no rules on the New York Stock Exchange, where they are traded. And no regulator has the power to suspend their trading without evidence securities laws are being violated.
Alpert said no regulations exist to deal with cases where the government props up unsustainable companies.
By contrast, regulators were able to warn investors about stock in the "old" General Motors, which also sits on a mound of government debt. The SEC and the Financial Industry Regulatory Authority, the brokerage industry's self-policing group, have issued alerts and taken other steps to prevent investor losses on that stock.
In that case, the SEC could act because GM acknowledged the stock was headed for zero in a restructuring plan filed with the SEC.
The SEC says it has no reason to suspend trading of stocks that still technically meet its standards, which include filing timely financial reports and disclosing events that could affect share values.
The NYSE's rules include maintaining minimum numbers of shareholders and market capitalization. But they give the exchange full discretion over which stocks are listed — regardless of whether a company meets those listing standards.
FINRA has jurisdiction over NASDAQ-traded stocks and over "pink sheet" stocks, which are worth too little to be traded on a major exchange. It has no jurisdiction over stocks on the NYSE.
Shares of Fannie, Freddie and AIG — along with their trading volumes — have jumped this summer, when activity normally fades as traders take vacations. Fannie shares have more than tripled since the end of July. Their volume soared to 360 million shares Thursday from 6.45 million shares on the last day of July.
Freddie and AIG shares have surged threefold since then. Freddie's volume jumped to 191 million shares from 4.5 million. And 148 million AIG shares changed hands on Thursday, compared with 5 million on July 31.
By comparison, the trading volume of General Electric Co.'s common shares fell to around 63.7 million shares Thursday, compared with 109 million shares July 31. The stock price rose 5.3 percent in that stretch.
AIG shares rose $10.15, or 26.9 percent, to $47.84 Thursday. Analysts speculated the company might be reconciling with former CEO Maurice "Hank" Greenberg, who could help bring private capital and other business benefits to the company.
A reverse stock split in early July raised the price by a factor of 20. In a reverse split, a stock price is increased, and the number of shares are reduced by a similar proportion. It has no effect on shareholders' equity.
Fannie shares closed up 3.8 percent at $1.92 Thursday; Freddie shares rose 10 percent to $2.24.
Fannie and Freddie's government owners haven't announced their plans for the companies. That means there's a possibility — however remote — that their shares could retain some value. But the administration is expected to announce in February that the companies will be wound down, merged into a federal agency or have their bad mortgage assets split into a new government-backed company.
All those possibilities are almost certain to eliminate any remaining shareholder equity, analysts said.
Lawrence J. White, a professor at New York University's Stern School of Business, said the higher trading volumes might reflect speculation about the government's February announcement.
With the share prices still so low, White said investors are willing to bet on the outcome of the government's announcement. He said trading volume is likely to grow further, with even sharper price swings, as February approaches.
Still, Freddie Mac Chairman John Koskinen said the price fluctuations were hard to understand.
"I have absolutely no idea what that represents," he said.
Representatives for Fannie, the SEC, AIG, FINRA and the NYSE declined to comment. Spokeswomen for Treasury, which owns most of AIG, and the Federal Housing Finance Agency, which holds Fannie and Freddie in conservatorship, also wouldn't comment.
by the associated press
Monday, August 24, 2009
Oil hits $74 per barrel on economic optimism
HOUSTON — Oil prices approached $75 a barrel Monday for the first time in 10 months amid growing optimism that the world's economies are on the mend.
Benchmark crude for October delivery rose 73 cents to $74.62 a barrel on the New York Mercantile Exchange. Oil last topped $75 in October.
Natural gas rebounded strongly from new seven-year lows Monday, though prices remained well below $3 per 1,000 cubic feet.
Expectations that demand for energy will grow were spurred Friday by Federal Reserve Chairman Ben Bernanke, who said the U.S. economy is reviving. Bernanke's remarks and signs of improvement in the U.S. housing market sent stock markets higher, and that carried over into the new week.
Even before Bernanke spoke, however, prices had already begun to rise on a large and unexpected drawdown in U.S. oil supplies last week.
Equities appeared to follow energy prices, which took off midweek.
Asian and European markets were higher Monday, and the Dow Jones industrial average rose moderately in early trading.
This time, it appeared energy prices followed equities trading.
"No doubt about it, we're riding the wave of a strong stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "These bullish financial developments have forced a huge amount of passive capital into commodities, especially the oil space."
It's been slightly more than a year since a barrel of crude soared close to $150 a barrel. No one expects another run to those heights anytime soon, but even the prospect of increasing demand is sure to keep upward pressure on oil prices.
In a report Monday, trader and analyst Stephen Schork said once oil gets to $75, "there is not a hell of a lot to prevent it from going to $80 or $85."
Natural gas is another story. Prices are at seven-year lows and supplies continue to grow. Friday marked the 11th session out of 12 trading days in which gas prices fell.
"Demand prospects are the worst they have been in recent memory," said PFGBest Research analyst Phil Flynn.
It has been a very moderate summer and meteorologists are forecasting the same through the fall. That could drive prices down even further if people don't need as much heat for their homes.
Gasoline prices have flattened and few expect a major run on prices as the driving season winds down.
Retail gas prices were almost unchanged overnight, falling to a new national average of $2.626 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 14.5 cents more expensive than it was a month ago, but it's $1.062 cheaper than last year.
In other Nymex trading, gasoline for September delivery added 265 cents to $2.0221 a gallon and heating oil for September delivery rose about 2 cents to $1.9246 a gallon. Natural gas for September delivery rose 7 cents to $2.875 per 1,000 cubic feet after tumbling 14.1 cents on Friday.
In London, Brent prices rose 21 cents to $74.40 a barrel on the ICE Futures exchange.
by the associated press
Benchmark crude for October delivery rose 73 cents to $74.62 a barrel on the New York Mercantile Exchange. Oil last topped $75 in October.
Natural gas rebounded strongly from new seven-year lows Monday, though prices remained well below $3 per 1,000 cubic feet.
Expectations that demand for energy will grow were spurred Friday by Federal Reserve Chairman Ben Bernanke, who said the U.S. economy is reviving. Bernanke's remarks and signs of improvement in the U.S. housing market sent stock markets higher, and that carried over into the new week.
Even before Bernanke spoke, however, prices had already begun to rise on a large and unexpected drawdown in U.S. oil supplies last week.
Equities appeared to follow energy prices, which took off midweek.
Asian and European markets were higher Monday, and the Dow Jones industrial average rose moderately in early trading.
This time, it appeared energy prices followed equities trading.
"No doubt about it, we're riding the wave of a strong stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "These bullish financial developments have forced a huge amount of passive capital into commodities, especially the oil space."
It's been slightly more than a year since a barrel of crude soared close to $150 a barrel. No one expects another run to those heights anytime soon, but even the prospect of increasing demand is sure to keep upward pressure on oil prices.
In a report Monday, trader and analyst Stephen Schork said once oil gets to $75, "there is not a hell of a lot to prevent it from going to $80 or $85."
Natural gas is another story. Prices are at seven-year lows and supplies continue to grow. Friday marked the 11th session out of 12 trading days in which gas prices fell.
"Demand prospects are the worst they have been in recent memory," said PFGBest Research analyst Phil Flynn.
It has been a very moderate summer and meteorologists are forecasting the same through the fall. That could drive prices down even further if people don't need as much heat for their homes.
Gasoline prices have flattened and few expect a major run on prices as the driving season winds down.
Retail gas prices were almost unchanged overnight, falling to a new national average of $2.626 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 14.5 cents more expensive than it was a month ago, but it's $1.062 cheaper than last year.
In other Nymex trading, gasoline for September delivery added 265 cents to $2.0221 a gallon and heating oil for September delivery rose about 2 cents to $1.9246 a gallon. Natural gas for September delivery rose 7 cents to $2.875 per 1,000 cubic feet after tumbling 14.1 cents on Friday.
In London, Brent prices rose 21 cents to $74.40 a barrel on the ICE Futures exchange.
by the associated press
Cash for Clunkers program is ending
It was a race to the finish for dealers and customers alike as the government's Cash for Clunkers program headed into its final lap on Monday.
Over the weekend, car dealers across the country watched their lots grow empty as crowds rushed to trade in gas guzzlers after the government said that the $3 billion rebate program would end at 8 p.m. EDT Monday, two weeks earlier than expected.
Transportation Secretary Ray LaHood, speaking to reporters in Norristown, Pa., called the program an unprecedented success and a boon for car dealers, automakers, scrap yards and financial institutions.
"Once the program ends at 8 o'clock there will be 700,000 to 800,000 cars that have been sold, most of them fuel efficient," replacing gas-guzzling cars and trucks, LaHood said.
Transportation officials said through early Monday, dealers had submitted 625,000 vouchers totaling $2.58 billion and expected to work up to the deadline to submit the proper paperwork.
Adding to the urgency, some dealers said they would stop Cash for Clunkers sales even earlier to make sure the government reimbursed them for the rebates — or because they didn't have enough eligible cars left.
"We thought about it a couple weeks ago," said Annette Palmer, 51, at Town and Country Honda in Berlin, Vt., on Saturday with her husband. They hoped to trade in a 1999 Jeep Grand Cherokee for a Honda CR-V.
"We kind of dragged our feet. Then we heard it was closing and we picked up our feet and ran," she said.
Though short of some new models, such as the Ford Focus, Honda Civic, Toyota Corolla and Nissan Altima, many dealers were still selling as many cars as they could before Monday night's deadline.
Standing outside one of his Hyundai dealerships in Appleton, Wis., John Bergstrom said customers traded in 100 clunkers throughout his fleet of 20 dealerships on Saturday and 100 the day before. They were his two biggest sales days during the clunkers program.
"That's about as good as it gets," Bergstrom said. "It's going out with a bang."
In all, Bergstrom said his dealerships — whose brands include Ford, GM and Toyota — sold 800 cars during the program, boosting sales 30 percent. He had to bring in extra staff to deal with the paperwork, but the sales were worth the hassle, Bergstrom said.
Cash for Clunkers has been wildly successful in spurring new-car sales and getting gas-guzzling models off the road, though some energy experts have said the pollution reduction is too small to be cost-effective. Customers receive rebates of between $3,500 and $4,500, depending on the improvement in fuel efficiency from their old vehicle to their new one. As of early Friday, nearly half a million cars had been sold through the program.
But the new sales left many dealers worried about not being reimbursed by the government. As of Friday, dealers had been reimbursed for just a small fraction of the billions in sales.
Some dealers chose to stop participating over the weekend so they could have enough time to process and file the paperwork, including AutoNation Inc., the nation's largest auto dealership chain.
Martin Main Line Honda in the Philadelphia suburb of Ardmore stopped its Cash for Clunkers sales at noon on Saturday. But by late afternoon there were still groups of people wandering the lot.
General sales manager Michael Freeman said the program had been "overwhelming," with 115 clunker sales and big surges in customer traffic at the start and now at the end. He's aiming to get the final stack of paperwork filed before Monday's deadline.
"I have people upstairs, that's all they're doing — paperwork," he said. "The backlog is a nightmare, and it's starting to be a nightmare at the end."
by the associated press
Over the weekend, car dealers across the country watched their lots grow empty as crowds rushed to trade in gas guzzlers after the government said that the $3 billion rebate program would end at 8 p.m. EDT Monday, two weeks earlier than expected.
Transportation Secretary Ray LaHood, speaking to reporters in Norristown, Pa., called the program an unprecedented success and a boon for car dealers, automakers, scrap yards and financial institutions.
"Once the program ends at 8 o'clock there will be 700,000 to 800,000 cars that have been sold, most of them fuel efficient," replacing gas-guzzling cars and trucks, LaHood said.
Transportation officials said through early Monday, dealers had submitted 625,000 vouchers totaling $2.58 billion and expected to work up to the deadline to submit the proper paperwork.
Adding to the urgency, some dealers said they would stop Cash for Clunkers sales even earlier to make sure the government reimbursed them for the rebates — or because they didn't have enough eligible cars left.
"We thought about it a couple weeks ago," said Annette Palmer, 51, at Town and Country Honda in Berlin, Vt., on Saturday with her husband. They hoped to trade in a 1999 Jeep Grand Cherokee for a Honda CR-V.
"We kind of dragged our feet. Then we heard it was closing and we picked up our feet and ran," she said.
Though short of some new models, such as the Ford Focus, Honda Civic, Toyota Corolla and Nissan Altima, many dealers were still selling as many cars as they could before Monday night's deadline.
Standing outside one of his Hyundai dealerships in Appleton, Wis., John Bergstrom said customers traded in 100 clunkers throughout his fleet of 20 dealerships on Saturday and 100 the day before. They were his two biggest sales days during the clunkers program.
"That's about as good as it gets," Bergstrom said. "It's going out with a bang."
In all, Bergstrom said his dealerships — whose brands include Ford, GM and Toyota — sold 800 cars during the program, boosting sales 30 percent. He had to bring in extra staff to deal with the paperwork, but the sales were worth the hassle, Bergstrom said.
Cash for Clunkers has been wildly successful in spurring new-car sales and getting gas-guzzling models off the road, though some energy experts have said the pollution reduction is too small to be cost-effective. Customers receive rebates of between $3,500 and $4,500, depending on the improvement in fuel efficiency from their old vehicle to their new one. As of early Friday, nearly half a million cars had been sold through the program.
But the new sales left many dealers worried about not being reimbursed by the government. As of Friday, dealers had been reimbursed for just a small fraction of the billions in sales.
Some dealers chose to stop participating over the weekend so they could have enough time to process and file the paperwork, including AutoNation Inc., the nation's largest auto dealership chain.
Martin Main Line Honda in the Philadelphia suburb of Ardmore stopped its Cash for Clunkers sales at noon on Saturday. But by late afternoon there were still groups of people wandering the lot.
General sales manager Michael Freeman said the program had been "overwhelming," with 115 clunker sales and big surges in customer traffic at the start and now at the end. He's aiming to get the final stack of paperwork filed before Monday's deadline.
"I have people upstairs, that's all they're doing — paperwork," he said. "The backlog is a nightmare, and it's starting to be a nightmare at the end."
by the associated press
Tuesday, August 11, 2009
New Volt to Get 230 MPG
WARREN, Michigan – General Motors Corp. said Tuesday its Chevrolet Volt rechargeable electric car should get 230 miles per gallon (98 kilometers per liter) of gasoline in city driving, more than four times the current champion, the Toyota Prius.
The Volt is powered by an electric motor and a battery pack with a 40-mile (65-kilometer) range. After that, a small internal combustion engine kicks in to generate electricity for a total range of 300 miles (480 kilometers). The battery pack can be recharged from a standard home outlet.
GM is marketing the 230-mile (370-kilometer) figure following early tests using draft guidelines from the U.S. Environmental Protection Agency for calculating the mileage of extended range electric vehicles.
The EPA guidelines, developed with guidance from automakers, figure that cars like the Volt will travel more on straight electricity in the city than on the highway. If a person drives the Volt less than 40 miles (65 kilometers), in theory they could go without using gasoline.
Highway mileage estimates — which are generally higher than city ones — for the Volt have yet to be released using the EPA's methodology.
"We are confident the highway (mileage) will be a triple-digit composite," GM CEO Fritz Henderson said.
If the figure is confirmed by the EPA, which does the tests for the mileage posted on new car door stickers, the Volt would be the first car to exceed triple-digit gas mileage.
EPA said in a statement Tuesday that it has not tested a Volt "and therefore cannot confirm the fuel economy values claimed by GM." The agency said it applauded "GM's commitment to designing and building the car of the future — an American made car that will save families money, significantly reduce our dependence on foreign oil and create good-paying American jobs."
GM has produced about 30 Volts so far and is making 10 a week, CEO Fritz Henderson said during a presentation of the vehicle at the company's technical center in the Detroit suburb of Warren.
Henderson said charging the volt will cost about 40 cents a day, at approximately 5 cents per kilowatt hour.
Most automakers are working similar plug-in designs, but GM could be the leader with the Volt, which is due in showrooms late in 2010.
Toyota's Prius, the most efficient car now sold in the U.S., gets 48 miles per gallon (20 kilometers per liter) of gas. It is a gas-electric hybrid that runs on a small internal combustion engine assisted by a battery-powered electric motor to save gasoline.
Although Henderson would not give details on pricing, the first-generation Volt is expected to cost near $40,000, making it cost-prohibitive to many people even if gasoline returns to $4 per gallon.
The price is expected to drop with future generations of the Volt, but GM has said government tax credits of up to $7,500 and the savings on fuel could make it cost-effective, especially at 230 miles per gallon (98 kilometers per liter).
"We get a little cautious about trying to forecast what fuel prices will do," said Tony Posawatz, GM's vehicle line director for the Volt. "We achieved this number and if fuel prices go up, it certainly does get more attractive even in the near-term generation."
Figures for the Volt's combined city/highway mileage have not yet been calculated, Posawatz said. The combined mileage will be in the triple digits as well, he said, but both combined and highway will be worse than city because the engine runs more on longer highway trips.
The mileage figure could vary as the guidelines are refined and the Volt gets further along in the manufacturing process, Posawatz said.
GM is nearly halfway through building about 80 Volts that will look and behave like the production model, and testing is running on schedule, Posawatz said.
Two critical areas, battery life and the electronic switching between battery and engine power, are still being refined, but the car is on schedule to reach showrooms late in 2010, he said.
GM is simulating tests to make sure the new lithium-ion batteries last 10 years, Posawatz said, as well as testing battery performance in extremely hot and cold climates.
"We're further along, but we're still quite a ways from home," he said. "We're developing quite a knowledge base on all this stuff. Our confidence is growing."
The other area of new technology, switching between battery and engine power, is proceeding well, he said, with engineers just fine-tuning the operations.
"We're very pleased with the transition from when it's driving EV (electric vehicle) to when the engine and generator kick in," he said.
GM also is finishing work on the power cord, which will be durable enough that it can survive being run over by the car. The Volt, he said, will have software on board so it can be programmed to begin and end charging during off-peak electrical use hours.
It will be easy for future Volt owners living in rural and suburban areas to plug in their cars at night, but even Henderson recognized the challenge urban, apartment dwellers, or those that park their car on the street might have recharging the Volt. There could eventually be charging stations set up by a third-party to meet such a demand, Henderson said.
Chrysler Group, Ford Motor Co. and Daimler AG are all developing plug-ins and electric cars, and Toyota Motor Corp. is working on a plug-in version of its gas-electric hybrid system. Nissan Motor Co. announced last month that it would begin selling an electric vehicle in Japan and the U.S. next year.
The Volt is powered by an electric motor and a battery pack with a 40-mile (65-kilometer) range. After that, a small internal combustion engine kicks in to generate electricity for a total range of 300 miles (480 kilometers). The battery pack can be recharged from a standard home outlet.
GM is marketing the 230-mile (370-kilometer) figure following early tests using draft guidelines from the U.S. Environmental Protection Agency for calculating the mileage of extended range electric vehicles.
The EPA guidelines, developed with guidance from automakers, figure that cars like the Volt will travel more on straight electricity in the city than on the highway. If a person drives the Volt less than 40 miles (65 kilometers), in theory they could go without using gasoline.
Highway mileage estimates — which are generally higher than city ones — for the Volt have yet to be released using the EPA's methodology.
"We are confident the highway (mileage) will be a triple-digit composite," GM CEO Fritz Henderson said.
If the figure is confirmed by the EPA, which does the tests for the mileage posted on new car door stickers, the Volt would be the first car to exceed triple-digit gas mileage.
EPA said in a statement Tuesday that it has not tested a Volt "and therefore cannot confirm the fuel economy values claimed by GM." The agency said it applauded "GM's commitment to designing and building the car of the future — an American made car that will save families money, significantly reduce our dependence on foreign oil and create good-paying American jobs."
GM has produced about 30 Volts so far and is making 10 a week, CEO Fritz Henderson said during a presentation of the vehicle at the company's technical center in the Detroit suburb of Warren.
Henderson said charging the volt will cost about 40 cents a day, at approximately 5 cents per kilowatt hour.
Most automakers are working similar plug-in designs, but GM could be the leader with the Volt, which is due in showrooms late in 2010.
Toyota's Prius, the most efficient car now sold in the U.S., gets 48 miles per gallon (20 kilometers per liter) of gas. It is a gas-electric hybrid that runs on a small internal combustion engine assisted by a battery-powered electric motor to save gasoline.
Although Henderson would not give details on pricing, the first-generation Volt is expected to cost near $40,000, making it cost-prohibitive to many people even if gasoline returns to $4 per gallon.
The price is expected to drop with future generations of the Volt, but GM has said government tax credits of up to $7,500 and the savings on fuel could make it cost-effective, especially at 230 miles per gallon (98 kilometers per liter).
"We get a little cautious about trying to forecast what fuel prices will do," said Tony Posawatz, GM's vehicle line director for the Volt. "We achieved this number and if fuel prices go up, it certainly does get more attractive even in the near-term generation."
Figures for the Volt's combined city/highway mileage have not yet been calculated, Posawatz said. The combined mileage will be in the triple digits as well, he said, but both combined and highway will be worse than city because the engine runs more on longer highway trips.
The mileage figure could vary as the guidelines are refined and the Volt gets further along in the manufacturing process, Posawatz said.
GM is nearly halfway through building about 80 Volts that will look and behave like the production model, and testing is running on schedule, Posawatz said.
Two critical areas, battery life and the electronic switching between battery and engine power, are still being refined, but the car is on schedule to reach showrooms late in 2010, he said.
GM is simulating tests to make sure the new lithium-ion batteries last 10 years, Posawatz said, as well as testing battery performance in extremely hot and cold climates.
"We're further along, but we're still quite a ways from home," he said. "We're developing quite a knowledge base on all this stuff. Our confidence is growing."
The other area of new technology, switching between battery and engine power, is proceeding well, he said, with engineers just fine-tuning the operations.
"We're very pleased with the transition from when it's driving EV (electric vehicle) to when the engine and generator kick in," he said.
GM also is finishing work on the power cord, which will be durable enough that it can survive being run over by the car. The Volt, he said, will have software on board so it can be programmed to begin and end charging during off-peak electrical use hours.
It will be easy for future Volt owners living in rural and suburban areas to plug in their cars at night, but even Henderson recognized the challenge urban, apartment dwellers, or those that park their car on the street might have recharging the Volt. There could eventually be charging stations set up by a third-party to meet such a demand, Henderson said.
Chrysler Group, Ford Motor Co. and Daimler AG are all developing plug-ins and electric cars, and Toyota Motor Corp. is working on a plug-in version of its gas-electric hybrid system. Nissan Motor Co. announced last month that it would begin selling an electric vehicle in Japan and the U.S. next year.
by the associated press
Saturday, August 8, 2009
FHA loan holders could get help
WASHINGTON — Loans backed by the Federal Housing Administration will be eligible for payment reductions similar to the Obama administration’s loan modification program, the government said.
Effective Aug. 15, financially troubled homeowners who have an FHA-insured loan can apply for a modification under a program parallel to "Making Home Affordable” to help lower their payments and avoid foreclosure.
The program, launched in March, is designed to lower monthly payments for 3 million to 4 million borrowers, although only about 200,000 have been helped so far. Lenders have agreed to adjust 500,000 loans by Nov. 1.
The FHA, which backs about 5 million loans, is a government-run mortgage insurance program.
It became the main source of home loans to borrowers with poor credit and low down payments after the collapse of the subprime lending market.
The agency lets borrowers take out home loans with down payments as low as 3.5 percent, compared with 20 percent for a typical loan that doesn’t require mortgage insurance.
By law, FHA cannot offer borrowers interest rates as low as 2 percent, which are available under the Obama plan.
Instead, FHA will allow lenders to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. No interest will be charged on that amount.
Government officials did not have an estimate of how many borrowers would qualify.
"We’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Housing and Urban Development Secretary Shaun Donovan said in a statement.
Lenders who participate in the FHA program will receive an incentive fee of up to $1,250 and can be reimbursed for $250 in costs.
by the associated press
Effective Aug. 15, financially troubled homeowners who have an FHA-insured loan can apply for a modification under a program parallel to "Making Home Affordable” to help lower their payments and avoid foreclosure.
The program, launched in March, is designed to lower monthly payments for 3 million to 4 million borrowers, although only about 200,000 have been helped so far. Lenders have agreed to adjust 500,000 loans by Nov. 1.
The FHA, which backs about 5 million loans, is a government-run mortgage insurance program.
It became the main source of home loans to borrowers with poor credit and low down payments after the collapse of the subprime lending market.
The agency lets borrowers take out home loans with down payments as low as 3.5 percent, compared with 20 percent for a typical loan that doesn’t require mortgage insurance.
By law, FHA cannot offer borrowers interest rates as low as 2 percent, which are available under the Obama plan.
Instead, FHA will allow lenders to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. No interest will be charged on that amount.
Government officials did not have an estimate of how many borrowers would qualify.
"We’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Housing and Urban Development Secretary Shaun Donovan said in a statement.
Lenders who participate in the FHA program will receive an incentive fee of up to $1,250 and can be reimbursed for $250 in costs.
by the associated press
New appraisal code
CHICAGO — New rules aimed at making home appraisals more accurate are raising costs and prompting longer waits to get to the closing table, some in the mortgage industry say.
The new regulations— known as the Home Valuation Code of Conduct and in effect less than three months — have driven up the cost of home appraisals, said Keith Stewart, a mortgage consultant with NorthPoint Lending Group in Chicago.
An appraisal that once cost $275 to $300 now runs $375 to $500, Stewart said. That’s because under the new rules a third party, often an appraisal management company, must serve as middleman between a mortgage broker and the appraiser, said Drew Kessler, director of sales for Rand Mortgage in New City, N.Y.
A bill in the U.S. House of Representatives proposes a moratorium on the new rules, as some in the industry are concerned the code will slow a housing-market recovery.
But the Federal Housing Finance Agency disputes those claims and maintains that the new code is necessary to make sure homes are appraised correctly and fairly. The code was announced by Fannie Mae and Freddie Mac last year, went into effect in May and applies to conforming mortgages, which are those that are able to be sold to Fannie Mae and Freddie Mac, the troubled government-backed mortgage agencies.
"Unfortunately, during the 2005-to-2007 period, mortgage lending was much too aggressive and placed pressure on the appraisal process,” the FHFA said in a recent statement. "In some cases, that resulted in unrealistically high appraisals, hurting home buyers as well as investors. The HVCC is designed to promote professional appraisals free from inappropriate pressure from lenders, borrowers or brokers.”
What was at issue?
In short, the rules aim to address a serious problem faced by many appraisers: the pressure to produce a desired value on a property, said Bill Garber, director of government and external relations for the Appraisal Institute, an association of professional real-estate appraisers.
In some cases, appraisers were motivated to comply with the request because they didn’t want to risk losing business.
"Mortgage-broker pressure on appraisers was real during the past 10 to 20 years,” Garber said. "They are no longer able to order, select or compensate appraisers, and as such, some of that pressure has subsided.”
Added Jim Amorin, president of the Appraisal Institute: "Consumers were maybe paying more for a home than it was really worth because of undue pressure being applied” to the appraiser.
The FHFA also said that rising costs are not due to the new code, but instead can be attributed to lenders’ tightened underwriting standards and mortgage-security investors’ desire to reduce fraud. They’re increasingly requiring additional information or second appraisals, according to the agency.
Other costs increase
But the new rules cause other indirect costs, too, Kessler said. Under the new code, the appraisals are not "portable,” meaning a consumer’s mortgage broker can no longer use the same appraisal to apply for loans at different lenders. An appraisal done for a Bank of America loan, for example, can’t be easily used to apply for a Wells Fargo mortgage, he said.
"Previously, the broker owned (the appraisal). That has changed. Now, it’s in the name of the actual lender,” Kessler said.
If a borrower decides to pursue a mortgage with another lender — after an appraisal has already been procured through a different lender — the borrower may need to pay for a second appraisal. Even though the borrower typically pays for the appraisal, it is held by the person or firm that orders the appraisal, he said.
The FHFA disputes this complaint, too, saying that appraisals are transferable between lenders under the new rules, although — and this is key — whether a lender decides to make a transfer or accept another lender’s appraisal is up to that lender.
Reports of time delays are also common among mortgage brokers, and the FHFA acknowledges that the implementation of the code may have slowed the mortgage process a bit. But the agency also said there are other reasons for delays, including the efficiency of an underwriting staff or increased demands by lenders.
by the associated press
The new regulations— known as the Home Valuation Code of Conduct and in effect less than three months — have driven up the cost of home appraisals, said Keith Stewart, a mortgage consultant with NorthPoint Lending Group in Chicago.
An appraisal that once cost $275 to $300 now runs $375 to $500, Stewart said. That’s because under the new rules a third party, often an appraisal management company, must serve as middleman between a mortgage broker and the appraiser, said Drew Kessler, director of sales for Rand Mortgage in New City, N.Y.
A bill in the U.S. House of Representatives proposes a moratorium on the new rules, as some in the industry are concerned the code will slow a housing-market recovery.
But the Federal Housing Finance Agency disputes those claims and maintains that the new code is necessary to make sure homes are appraised correctly and fairly. The code was announced by Fannie Mae and Freddie Mac last year, went into effect in May and applies to conforming mortgages, which are those that are able to be sold to Fannie Mae and Freddie Mac, the troubled government-backed mortgage agencies.
"Unfortunately, during the 2005-to-2007 period, mortgage lending was much too aggressive and placed pressure on the appraisal process,” the FHFA said in a recent statement. "In some cases, that resulted in unrealistically high appraisals, hurting home buyers as well as investors. The HVCC is designed to promote professional appraisals free from inappropriate pressure from lenders, borrowers or brokers.”
What was at issue?
In short, the rules aim to address a serious problem faced by many appraisers: the pressure to produce a desired value on a property, said Bill Garber, director of government and external relations for the Appraisal Institute, an association of professional real-estate appraisers.
In some cases, appraisers were motivated to comply with the request because they didn’t want to risk losing business.
"Mortgage-broker pressure on appraisers was real during the past 10 to 20 years,” Garber said. "They are no longer able to order, select or compensate appraisers, and as such, some of that pressure has subsided.”
Added Jim Amorin, president of the Appraisal Institute: "Consumers were maybe paying more for a home than it was really worth because of undue pressure being applied” to the appraiser.
The FHFA also said that rising costs are not due to the new code, but instead can be attributed to lenders’ tightened underwriting standards and mortgage-security investors’ desire to reduce fraud. They’re increasingly requiring additional information or second appraisals, according to the agency.
Other costs increase
But the new rules cause other indirect costs, too, Kessler said. Under the new code, the appraisals are not "portable,” meaning a consumer’s mortgage broker can no longer use the same appraisal to apply for loans at different lenders. An appraisal done for a Bank of America loan, for example, can’t be easily used to apply for a Wells Fargo mortgage, he said.
"Previously, the broker owned (the appraisal). That has changed. Now, it’s in the name of the actual lender,” Kessler said.
If a borrower decides to pursue a mortgage with another lender — after an appraisal has already been procured through a different lender — the borrower may need to pay for a second appraisal. Even though the borrower typically pays for the appraisal, it is held by the person or firm that orders the appraisal, he said.
The FHFA disputes this complaint, too, saying that appraisals are transferable between lenders under the new rules, although — and this is key — whether a lender decides to make a transfer or accept another lender’s appraisal is up to that lender.
Reports of time delays are also common among mortgage brokers, and the FHFA acknowledges that the implementation of the code may have slowed the mortgage process a bit. But the agency also said there are other reasons for delays, including the efficiency of an underwriting staff or increased demands by lenders.
by the associated press
Bill will set lending rules, aid shoppers
WASHINGTON — Health care reform has drawn most of the attention on Capitol Hill lately, but for homebuyers, sellers and mortgage applicants the legislative ballgame will really get under way in September, when Congress begins serious work on the proposed Consumer Financial Protection Agency.
Legislation creating the new agency already is pending in the House, pushed by Financial Services Committee Chairman Rep. Barney Frank, D-Mass., who is its principal author. The Obama administration had outlined a similar plan at the end of June and considers passage of a bill a top priority.
Why should you care? What might the new agency do for you — or to you?
To begin with, you should be aware that the agency’s powers and oversight would extend far beyond mortgages and real estate — into all credit cards, debit cards, consumer loans, payday loans, credit reporting agencies, debt collection, stored-value cards and even investment advisory and financial advisory services, to name only part of the list.
The agency would be the dominant federal consumer protector in all home real estate settlements. It would regulate "affiliated” title, escrow and financing businesses connected with realty firms and builders. It would oversee equal credit opportunity and fair housing, and would set standards for all mortgage offerings, whether from the biggest national banks or the smallest local brokers.
Generally it wouldn’t seek outright bans on mortgage products that carry elevated risks — interest-only loans, for instance — but would require that lenders restrict such mortgages to well-informed applicants who can document that they understand the risks and afford the payments.
Within its first year, the agency would be tasked with creating consumer-friendly, uniform disclosures for all home purchase and financing transactions, starting with a combined "good-faith estimates” and truth-in-lending statement.
Banking and mortgage trade group leaders generally agree that the existing regulatory system failed badly, for consumers and the industry itself.
"Are reforms needed? Yes, absolutely. We’re in favor of better consumer protection,” said Anne Canfield, executive director of the Consumer Mortgage Coalition, a trade group that represents major mortgage originators and banks. How to go about achieving those reforms is where Canfield’s group and others part company with the administration and consumer supporters.
Canfield and other industry lobbyists are concerned about any radical shakeup of the way banks and mortgage companies traditionally have been overseen by the federal government. Currently the regulators responsible for checking on banks’ "safety and soundness” also are empowered to look for risky, discriminatory or anti-consumer practices and products at those institutions.
Handing over consumer protection and enforcement powers to a separate agency that might not understand the business side of the ledger could be burdensome for lenders, they argue, and could add extra layers of bureaucracy and nightmarish legal liabilities.
But proponents, such as Harvard Law School professor Elizabeth Warren, say the industry’s criticisms about stifling consumers’ choices and reshaping banking industry regulation are simply efforts to preserve the status quo.
"If the status quo is about choice,” asked Warren, an Oklahoma City native, "then explain why half of those (consumers) with subprime loans ‘chose’ high-risk, high-cost loans when they qualified for prime mortgages. The truth is no consumer ‘chose’ to accept the tricks and traps buried in the legalese of financial products,” she said — they were steered to those loans by lenders, brokers and Wall Street promoters who were not required by regulators to explain the risks to their customers.
→Outlook for the bill: Passage in the House appears likely. Count on the banks to mount their biggest battles in the Senate.
Washington Post Writers Group
Legislation creating the new agency already is pending in the House, pushed by Financial Services Committee Chairman Rep. Barney Frank, D-Mass., who is its principal author. The Obama administration had outlined a similar plan at the end of June and considers passage of a bill a top priority.
Why should you care? What might the new agency do for you — or to you?
To begin with, you should be aware that the agency’s powers and oversight would extend far beyond mortgages and real estate — into all credit cards, debit cards, consumer loans, payday loans, credit reporting agencies, debt collection, stored-value cards and even investment advisory and financial advisory services, to name only part of the list.
The agency would be the dominant federal consumer protector in all home real estate settlements. It would regulate "affiliated” title, escrow and financing businesses connected with realty firms and builders. It would oversee equal credit opportunity and fair housing, and would set standards for all mortgage offerings, whether from the biggest national banks or the smallest local brokers.
Generally it wouldn’t seek outright bans on mortgage products that carry elevated risks — interest-only loans, for instance — but would require that lenders restrict such mortgages to well-informed applicants who can document that they understand the risks and afford the payments.
Within its first year, the agency would be tasked with creating consumer-friendly, uniform disclosures for all home purchase and financing transactions, starting with a combined "good-faith estimates” and truth-in-lending statement.
Banking and mortgage trade group leaders generally agree that the existing regulatory system failed badly, for consumers and the industry itself.
"Are reforms needed? Yes, absolutely. We’re in favor of better consumer protection,” said Anne Canfield, executive director of the Consumer Mortgage Coalition, a trade group that represents major mortgage originators and banks. How to go about achieving those reforms is where Canfield’s group and others part company with the administration and consumer supporters.
Canfield and other industry lobbyists are concerned about any radical shakeup of the way banks and mortgage companies traditionally have been overseen by the federal government. Currently the regulators responsible for checking on banks’ "safety and soundness” also are empowered to look for risky, discriminatory or anti-consumer practices and products at those institutions.
Handing over consumer protection and enforcement powers to a separate agency that might not understand the business side of the ledger could be burdensome for lenders, they argue, and could add extra layers of bureaucracy and nightmarish legal liabilities.
But proponents, such as Harvard Law School professor Elizabeth Warren, say the industry’s criticisms about stifling consumers’ choices and reshaping banking industry regulation are simply efforts to preserve the status quo.
"If the status quo is about choice,” asked Warren, an Oklahoma City native, "then explain why half of those (consumers) with subprime loans ‘chose’ high-risk, high-cost loans when they qualified for prime mortgages. The truth is no consumer ‘chose’ to accept the tricks and traps buried in the legalese of financial products,” she said — they were steered to those loans by lenders, brokers and Wall Street promoters who were not required by regulators to explain the risks to their customers.
→Outlook for the bill: Passage in the House appears likely. Count on the banks to mount their biggest battles in the Senate.
Washington Post Writers Group
Exterminator warns of bee-killing ants
DALLAS — A species of ant that has ruined sewage pumps, fouled computers and made it difficult for homeowners to enjoy their yards has a new target: the honeybee.
The range of the so-called Rasberry crazy ant has more than doubled in the past year, swarming in 11 counties beginning near Houston and moving north, scientists say.
"It really is spreading at an alarming rate and we need to do research now,” said Danny McDonald, a Texas A&M University doctoral student who is examining the tiny creature’s biology and ecology. "There’s no time to wait.”
But serious research requires serious dollars.
The Texas Department of Agriculture and U.S. Department of Agriculture will fund in-depth research, but only if the ant gets the pest classification. And to do that, state officials say more research must be done. It’s a sticky Catch-22.
"This is absolutely idiotic,” said Tom Rasberry, the exterminator for whom the ant is named because he fought against them early on. "If killing honeybees does not put it in the ag pest category, I don’t know what does.”
Emerging by the billions during the warm, humid season, the reddish-brown insect is at its peak in August and September and appears resistant to over-the-counter ant killers. They are believed to have arrived in cargo through the port of Houston.
The ants — formally known as "paratrenicha species near pubens” — are called "crazy” because they wander erratically instead of marching in regimented lines. Although they eat stinging fire ants, they also feed on beneficial insects such as ladybugs and honeybees.
Apiculturists say the ants don’t appear to be interested in the honey; they’re after the brood. They invade the honeycomb cell, dine on larvae then lay their own eggs.
by the associated press
The range of the so-called Rasberry crazy ant has more than doubled in the past year, swarming in 11 counties beginning near Houston and moving north, scientists say.
"It really is spreading at an alarming rate and we need to do research now,” said Danny McDonald, a Texas A&M University doctoral student who is examining the tiny creature’s biology and ecology. "There’s no time to wait.”
But serious research requires serious dollars.
The Texas Department of Agriculture and U.S. Department of Agriculture will fund in-depth research, but only if the ant gets the pest classification. And to do that, state officials say more research must be done. It’s a sticky Catch-22.
"This is absolutely idiotic,” said Tom Rasberry, the exterminator for whom the ant is named because he fought against them early on. "If killing honeybees does not put it in the ag pest category, I don’t know what does.”
Emerging by the billions during the warm, humid season, the reddish-brown insect is at its peak in August and September and appears resistant to over-the-counter ant killers. They are believed to have arrived in cargo through the port of Houston.
The ants — formally known as "paratrenicha species near pubens” — are called "crazy” because they wander erratically instead of marching in regimented lines. Although they eat stinging fire ants, they also feed on beneficial insects such as ladybugs and honeybees.
Apiculturists say the ants don’t appear to be interested in the honey; they’re after the brood. They invade the honeycomb cell, dine on larvae then lay their own eggs.
by the associated press
Airspeed sensor failures
WASHINGTON — On at least a dozen recent flights by U.S. jetliners, malfunctioning equipment made it impossible for pilots to know how fast they were flying, federal investigators have discovered. A similar breakdown is believed to have played a role in the Air France crash into the Atlantic that killed all 228 people aboard in June.
The discovery suggests the equipment problems are more widespread than previously believed. And it gives new urgency to airlines already scrambling to replace air sensors and figure out how the errors went undetected despite safety systems.
The equipment failures, all involving Northwest Airlines Airbus A330s, were brief and were noticed only after safety officials began investigating the Air France crash — on a Rio de Janeiro to Paris flight — and two other recent in-flight malfunctions. The failures were described by people familiar with the investigation who spoke only on condition of anonymity because they were not authorized to comment publicly.
Air pressure readings
While a car’s speedometer uses tire rotation to calculate speed, an airplane relies on sensors known as Pitot tubes to measure changing air pressure. Computers interpret that information as speed. A car’s broken speedometer might be little more than an inconvenience, but many airplane control systems rely on accurate speed information to work properly.
Like the fatal Air France flight, the newly dis- covered Northwest incidents and the two other malfunctions under investigation all involved planes with sensors made by the European electronics giant Thales Corp.
The Air France crash called into question the reliability of the sensors and touched off a rush by airlines to replace them.
Many companies, however, simply replaced them with another Thales model. As it became clear the problem was more widespread, Airbus and European regulators told companies to replace at least two of the three sensors on each plane with models made by North Carolina-based Goodrich Corp. The planes are allowed to continue flying while the switch is made.
Thales officials declined to comment. The company has previously said its sensors were made to Airbus specifications.
Data found in merger
The Northwest incidents were discovered when Delta Air Lines, which merged with Northwest last year, reviewed archived flight data for its fleet of 32 Airbus A330s, the people close to the inquiry said. All the planes involved landed safely.
Aviation experts said the discovery could provide clues to what caused Air France Flight 447 to crash into the Atlantic June 1, and what might be done to prevent future tragedies.
French investigators have focused on the possibility that Flight 447’s sensors iced over and sent false speed information to the computers as the plane ran into a thunderstorm at about 35,000 feet.
Three weeks after the crash, the U.S. National Transportation Safety Board began investigating two other A330 flights that experienced a loss of airspeed data.
The most recent was on June 23, when a Northwest flight hit rain and turbulence while on autopilot outside of Kagoshima, Japan. According to an NTSB report, speed data began to fluctuate. The plane alerted pilots it was going too fast.
Autopilot and other systems began shutting down, putting nearly all the plane’s control in the hands of the pilot, something that usually happens only in emergencies.
by the associated press
The discovery suggests the equipment problems are more widespread than previously believed. And it gives new urgency to airlines already scrambling to replace air sensors and figure out how the errors went undetected despite safety systems.
The equipment failures, all involving Northwest Airlines Airbus A330s, were brief and were noticed only after safety officials began investigating the Air France crash — on a Rio de Janeiro to Paris flight — and two other recent in-flight malfunctions. The failures were described by people familiar with the investigation who spoke only on condition of anonymity because they were not authorized to comment publicly.
Air pressure readings
While a car’s speedometer uses tire rotation to calculate speed, an airplane relies on sensors known as Pitot tubes to measure changing air pressure. Computers interpret that information as speed. A car’s broken speedometer might be little more than an inconvenience, but many airplane control systems rely on accurate speed information to work properly.
Like the fatal Air France flight, the newly dis- covered Northwest incidents and the two other malfunctions under investigation all involved planes with sensors made by the European electronics giant Thales Corp.
The Air France crash called into question the reliability of the sensors and touched off a rush by airlines to replace them.
Many companies, however, simply replaced them with another Thales model. As it became clear the problem was more widespread, Airbus and European regulators told companies to replace at least two of the three sensors on each plane with models made by North Carolina-based Goodrich Corp. The planes are allowed to continue flying while the switch is made.
Thales officials declined to comment. The company has previously said its sensors were made to Airbus specifications.
Data found in merger
The Northwest incidents were discovered when Delta Air Lines, which merged with Northwest last year, reviewed archived flight data for its fleet of 32 Airbus A330s, the people close to the inquiry said. All the planes involved landed safely.
Aviation experts said the discovery could provide clues to what caused Air France Flight 447 to crash into the Atlantic June 1, and what might be done to prevent future tragedies.
French investigators have focused on the possibility that Flight 447’s sensors iced over and sent false speed information to the computers as the plane ran into a thunderstorm at about 35,000 feet.
Three weeks after the crash, the U.S. National Transportation Safety Board began investigating two other A330 flights that experienced a loss of airspeed data.
The most recent was on June 23, when a Northwest flight hit rain and turbulence while on autopilot outside of Kagoshima, Japan. According to an NTSB report, speed data began to fluctuate. The plane alerted pilots it was going too fast.
Autopilot and other systems began shutting down, putting nearly all the plane’s control in the hands of the pilot, something that usually happens only in emergencies.
by the associated press
27 reported ill in ground beef recall
VISALIA, Calif. — Health officials in three states say at least 27 people have reported illnesses tied to recalled ground beef that may be tainted with salmonella.
Thursday, Fresno-based Beef Packers Inc. recalled 825,769 pounds of ground beef produced from June 5 to June 23.
The U.S. Department of Agriculture’s Food Safety and Inspection Service says the beef was sent to retail distribution centers in Arizona, California, Colorado and Utah.
The department said Friday that California, Colorado and Wyoming have reported illness that may be linked to the recall.
Colorado health officials say 21 people there have been sickened. All are recovering.
California officials say five people have reported feeling sick. The total number of people ill in Wyoming is unclear.
The beef was repackaged and sold under different retail brand names, so customers are being urged to check with their local store to determine if they bought any of the beef.
A separate recall last month involved beef tied to the hospitalization of 12 people in a possible E. coli outbreak. That meat was produced in Colorado.
Thursday, Fresno-based Beef Packers Inc. recalled 825,769 pounds of ground beef produced from June 5 to June 23.
The U.S. Department of Agriculture’s Food Safety and Inspection Service says the beef was sent to retail distribution centers in Arizona, California, Colorado and Utah.
The department said Friday that California, Colorado and Wyoming have reported illness that may be linked to the recall.
Colorado health officials say 21 people there have been sickened. All are recovering.
California officials say five people have reported feeling sick. The total number of people ill in Wyoming is unclear.
The beef was repackaged and sold under different retail brand names, so customers are being urged to check with their local store to determine if they bought any of the beef.
A separate recall last month involved beef tied to the hospitalization of 12 people in a possible E. coli outbreak. That meat was produced in Colorado.
Twitter outage Linked to attacks on blogger
NEW YORK — The outage that knocked Twitter offline for hours was traced to an attack on a lone blogger in the former Soviet republic of Georgia — but the collateral damage that left millions worldwide tweetless showed just how much havoc an isolated cyberdispute can cause.
"It told us how quickly many people really took Twitter into their hearts,” Robert Thompson, director of the Center for the Study of Popular Television at Syracuse University, said Friday.
Tens of millions of people have come to rely on social media to express their innermost thoughts and to keep up with world news and celebrity gossip.
Twitter "is one of those little amusements that infiltrated the mass behavior in some significant ways, so that when it went away, a lot of people really noticed it and missed it.”
The attacks Thursday also slowed down Facebook and caused problems for the online diary site LiveJournal.
But Twitter, the 140-character-or-less messaging site used by celebrities, businesses and even Iranian protesters, suffered a total outage that lasted several hours.
Those attacks continued Friday from thousands of computers pummeling its servers, said Kazuhiro Gomi, chief technology officer for NTT America Enterprise Hosting Services, which actually hosts Twitter’s service.
Twitter crashed because of a denial-of-service attack, in which hackers command scores of computers toward a single site at the same time to prevent legitimate traffic from getting through.
The attack was targeted at a blogger who goes by "Cyxymu” — the name of a town in Georgia — on several Web sites, including Twitter, Facebook and LiveJournal.
But they could have just as well targeted Twitter itself. That’s because the effects were the same whether the excess traffic went to the "twitter.com” home page or to the page for Cyxymu at "twitter.com/cyxymu.”
Same with Facebook and LiveJournal.
"A denial of service attack like this one is a very blunt instrument,” said Ray Dickenson, chief technology officer at Authentium, a computer security firm. It’s as if a viewer who didn’t like one show on an entire television channel decided to "knock out the whole station.”
Or like fishing with dynamite: You’ll catch something, but the blast will kill dolphins, sharks and other organisms, too.
Just who was behind these attacks is not yet clear, but the dispute was probably related to the ongoing political conflict between Russia and Georgia.
Gomi said the attacking computers were located around the world and the source of the attacks was not known.
by the associated press
"It told us how quickly many people really took Twitter into their hearts,” Robert Thompson, director of the Center for the Study of Popular Television at Syracuse University, said Friday.
Tens of millions of people have come to rely on social media to express their innermost thoughts and to keep up with world news and celebrity gossip.
Twitter "is one of those little amusements that infiltrated the mass behavior in some significant ways, so that when it went away, a lot of people really noticed it and missed it.”
The attacks Thursday also slowed down Facebook and caused problems for the online diary site LiveJournal.
But Twitter, the 140-character-or-less messaging site used by celebrities, businesses and even Iranian protesters, suffered a total outage that lasted several hours.
Those attacks continued Friday from thousands of computers pummeling its servers, said Kazuhiro Gomi, chief technology officer for NTT America Enterprise Hosting Services, which actually hosts Twitter’s service.
Twitter crashed because of a denial-of-service attack, in which hackers command scores of computers toward a single site at the same time to prevent legitimate traffic from getting through.
The attack was targeted at a blogger who goes by "Cyxymu” — the name of a town in Georgia — on several Web sites, including Twitter, Facebook and LiveJournal.
But they could have just as well targeted Twitter itself. That’s because the effects were the same whether the excess traffic went to the "twitter.com” home page or to the page for Cyxymu at "twitter.com/cyxymu.”
Same with Facebook and LiveJournal.
"A denial of service attack like this one is a very blunt instrument,” said Ray Dickenson, chief technology officer at Authentium, a computer security firm. It’s as if a viewer who didn’t like one show on an entire television channel decided to "knock out the whole station.”
Or like fishing with dynamite: You’ll catch something, but the blast will kill dolphins, sharks and other organisms, too.
Just who was behind these attacks is not yet clear, but the dispute was probably related to the ongoing political conflict between Russia and Georgia.
Gomi said the attacking computers were located around the world and the source of the attacks was not known.
by the associated press
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