Finance Blog number 1

Long-term care provider Assisted Living Concepts Inc. of Menomonee Falls continued to boost revenue in the second quarter by increasing occupancy at its assisted living homes by more profitable private-pay residents.

Total revenue increased to $58.3 million from $56.7 million over the second quarter of 2009.

Assisted Living Concepts (NYSE: ALC) reported a decline, however, in net income for the quarter with $2.9 million, or 25 cents per share, compared with $3.9 million, or 33 cents per share, in the same period the year before.

The decline is the result of one-time charges totaling $1.7 million related to income tax benefits and expenses associated with the realignment of divisions, said John Buono, senior vice president and chief financial officer.

Net income would have been $4.6 million, or 39 cents per share, without those one-time charges, Buono said during a conference call Tuesday with investors.

Staffing needs have decreased because of the lower number of Medicaid residents the company is accepting and general economic conditions have allowed Assisted Living to hire employees at lower wage rates, Buono said.

At the same time, general administrative costs increased $800,000 compared with the last year.

Assisted Living increased average private-pay occupancy by 122 and eight units over the second quarter of 2009 and the first quarter of 2010, respectively payday loan.

The company does not expect to renew Medicaid contracts in 2010, which will reduce Medicaid occupancy by about 40 people in the third quarter of 2010, Laurie Bebo, president and CEO, said in a conference call.

Assisted Living gets less money in reimbursements from Medicaid residents than it does from private-pay residents and has made a conscious decision to decrease the number of Medicaid residents and replace them with private-pay residents.

The company has been offering discounts such as no new residency fees or one-month free after six months to make its facilities more attractive to private-pay residents, Bebo said.

Private-pay residents increased from 92.3 percent in 2009 to 97.1 percent in 2010. Revenues from those residents increased from 93 percent to 98 percent in 2010.

“Our strategy of reducing our reliance on government funding continues to increase our margins,” Bebo said.

Assisted Living Concepts and its subsidiaries operate 211 senior living residences comprising 9,280 residents in 20 states.

The company is looking at the acquisition of other properties, but was not ready to discuss details, Buono said.

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Smurfit-Stone Container Corp. reported Tuesday adjusted net income of $2 million for the second quarter, compared with a loss of $21 million a year earlier, excluding $1.4 billion in income and tax benefits from the company's emergence from bankruptcy.

Including the impact of the bankruptcy income, Smurfi reported net income attributable to common stockholders of $1.41 billion for the second quarter, compared with a net income of $155 million a year earlier.

The company reported sales of $1.6 billion for the three months ended June 30, up 14 percent from $1.4 billion in the prior-year quarter.

Smurfit, which is dually headquartered in Creve Coeur, Mo., and Chicago, exited from Chapter 11 bankruptcy in June. Smurfit has nearly all of the firm’s executives based in St. Louis. The company operates corrugated container, folding carton, recovered paper and recycling services facilities. Smurfit-Stone has 30 recycling plants in the U.S. The company reported $5.57 billion in 2009 revenue.

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The CEOs of top performing local public companies received much bigger pay raises in 2009 than the CEOs of top performing companies in 10 major cities nationwide, according a new study.

The study by BDO USA LLP, a professional services firm, looked at the relationship between the change in total CEO compensation (including salary, bonus, stock options, etc.) between 2008 and 2009 and the total shareholder return of the company over the same year.

It found that the 25 top performing D.C.-area companies posted a median increase in shareholder returns of 85 percent, significantly lower than the median for top performing companies nationwide of 98 percent. Yet the CEOs of those local companies got a 37 percent increase in compensation, compared to just a 5.5 percent increase for CEOs of top performing companies nationwide. Local CEO pay hikes were second only to those of Atlanta CEOs, who received a 45 percent bump in compensation.

The CEOs at the 25 worst-performing public companies in the D.C. area also fared a bit better than their under-performing brethren nationwide.

Shareholder returns at the lowest-performing local companies decreased by a median of 5 percent, while their CEOs took a 4 percent pay cut — equivalent to 80 percent of the decline in shareholder returns. Nationally, the bottom-performing companies saw shareholder returns drop 10.5 percent, while CEO pay fell 9 percent — equivalent to 86 percent of the decline in shareholder returns. This means local under-performing CEOs didn’t receive as big a pay cut, relative to their performance, as underperforming CEOs nationwide.

“Tying pay to company performance is critical now more than ever given the increased scrutiny both from regulators and shareholders,” said Randy Ramirez, Northeast regional leader of the compensation and benefits practice at BDO in a statement. “Our analysis shows that top performing companies in Washington, D.C., are more rigorous than their poor performing counterparts when it comes to developing a performance-based strategy for CEO compensation. However, there are still some notable gaps. Performance cycles do not coincide with changes in company tactics and performance measures do not accurately reflect changes in operational focus.”

The Washington Business Journal conducted a smaller compensation study in May which found that CEO compensation at local financial services companies declined 39 percent in 2009, despite an improvement in company performance.

Here are the breakdowns on CEO pay for performance at companies in the 10 largest cities nationwide, according to the BDO study:

Top 25 performing companies

City / shareholder return / CEO pay increases

1. New York / 243 percent / 10 percent
2. San Francisco / 155 percent / -14 percent
3. Houston / 152 percent / 5 percent
4. Dallas / 135 percent / 6 percent
5. Miami / 109 percent / 2 percent
6. Boston / 86 percent / 1 percent
7. D.C. / 85 percent / 37 percent
8. Atlanta / 74 percent / 45 percent
9. Chicago / 63 percent / 4 percent
10. Los Angeles / 58 percent / 10 percent

Bottom 25 performing companies

City / shareholder return /CEO pay increases

1. San Francisco / 4 percent / -9 percent
2. Miami / -1 percent / 0 percent
3. D.C. / -5 percent / -4 percent
4. Atlanta / -7 percent / -25 percent
5. Chicago / -10 percent / -9 percent
6. LA / -11percent / 2 percent
7. Dallas / -13 percent / 0 percent
8. Boston / -13 percent / -10 percent
9. Houston / -19 percent / -10 percent
10. New York / -27 percent / -17 percent

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Kevin Landry had to give up his San Diego apartment because he couldn’t afford the rent after his federal unemployment benefits were cut off in early June.

Since then, Landry and his cocker spaniel, Curley, have been sleeping in his 1991 Dodge Dakota in a church parking lot. He sold his possessions and applied for food stamps in order to survive.

And even though President Obama signed a measure Thursday that extends benefits through November, Landry knows he won’t get his $475 weekly check anytime soon.

The last time Congress allowed the benefits to lapse, it took a month for him to start getting payments again.

"I’ll just have to scrape by," said Landry, who lost his job as a credit manager for K2 Skis in September 2008. "There’s nothing I can do about it. I’ve learned to deal with it."

Though Congress has finally pushed the deadline to file for federal extended insurance through Nov. 30, it could take weeks before the jobless start getting their checks again.

Nearly 2.9 million people ran out of benefits in the nearly two months it took Congress to extend the filing deadline beyond June 2.

But just when the checks start hitting bank accounts and mailboxes again depends on the state.

The long delay wreaked havoc on the state unemployment insurance technology that process the payments. States often have to call in experts to reprogram the computer systems, which are an average of 22 years old.

And state officials have to make sure that the unemployed were eligible to receive benefits during the interim. If the jobless stopped looking for work or earned income during June or July, they may not qualify.

"States will move as quickly as possible to resume [federal unemployment] payments, but it will not happen overnight," said Rich Hobbie, executive director of the National Association of State Workforce Agencies. "Because the program has lapsed for over a month, state workforce agencies need to ensure that claimants qualify for all retroactive payments."

The unemployed should check their state agency’s website for updates or wait for a letter with instructions on restarting their payments and claiming the retroactive sum, said Judy Conti, federal advocacy coordinator at the National Employment Law Project Low fee payday loans.

Some states asked the jobless to continue sending in the forms certifying they were eligible for payments. The unemployed in those places will likely see their checks sooner.

But it will still take time, said Steve Meissner, a spokesman for the Arizona Department of Economic Security, which told its 64,000 claimants who were affected by the lapse to keep filing.

"We will do it as quickly as we can," he said, adding the state is still waiting to receive official guidance from the federal Department of Labor. "There are always some ambiguities because unemployment law is pretty complicated."

The checks, however, can’t come too quickly for the jobless. For many, it’s the only way they can afford housing, utilities, food and car payments, Conti said.

Vicki Wolf of Lebanon, Pa., is anxiously awaiting her $393 weekly check so she can pay her rent and buy essentials, such as shampoo. The former call center supervisor, who continued sending in her forms to the state, is behind on all her bills because she hasn’t had any income since June 5.

Pennsylvania officials said in a statement that those who kept filing their paperwork should receive payment within two weeks. The rest of the more than 200,000 state residents who lost their benefits should submit their claims online as soon as possible.

Wolf, at least, is one of the luckier ones. She starts a new job at a trucking company on Monday, though she won’t see her first paycheck until mid-August. Until then, she’ll have to walk 45 minutes to work from her home.

"I don’t have money to buy gas to put in the car," she said. 

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The city of Scottsdale will hold funeral services June 8 for City Councilman Tony Nelssen, who died May 26 after a battle with cancer.

The services will be start at 9 a.m. Tuesday at the WestWorld center in North Scottsdale.

The city is reminding those attending the services that temperatures could reach 110 degrees, so they should dress appropriately. The event is being held outdoors.

Nelssen, 59, had served on the council since last June.

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The U.S. Department of Commerce’s Economic Development Administration has awarded Jacksonville $1.32 million in federal funding to repair Lake Fretwell.

The investment will fund repairs and expansion of Lake Fretwell, an existing storm water retention facility located at the former Cecil Field Naval Air Station. The storm water retention lake was damaged by flooding from Tropical Storm Fay in 2008.

The improvements to the lake will allow a major expansion of Cecil Commercial Park to create future jobs and attract private investment. The project will also protect residential neighborhoods downstream, prevent roadway and property flooding damage such as occurred in 2008, and stop further erosion of the lake’s levy.

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Stocks got pummeled Thursday, with the Dow, Nasdaq and S&P 500 losing enough to fall into "correction territory" - marked by a drop of more than 10% off the rally highs.

Worries about how the European debt crisis and slump in the euro will impact the global recovery fueled the selling, extending the month-long declines.

The Dow Jones industrial average (INDU) fell 376 points, seeing its biggest one-day point loss since February 10, 2009. Thursday’s point loss was equivalent to 3.6%, the biggest one-day percentage loss since March 5 of 2009.

The loss was bigger than that in the so-called "flash crash" earlier this month in which the Dow lost nearly 1000 points during the session, but ended up closing down just shy of 348 points or 3.2%.

The Nasdaq (COMP) fell 94 points, seeing its biggest one-day point loss since December 1, 2008. The point loss Thursday was equivalent to 4.1%, its biggest one-day percentage loss since Feb. 17, 2009.

The S&P 500 (SPX) declined 43 points, its biggest one-day point loss since January 20, 2009. It was equivalent to a percentage loss of 3.9, the S&P’s worst since April 20, 2009. Thursday’s point and percentage drops for the Nasdaq and S&P were bigger than those made on the day of the flash crash.

The CBOE Volatility index, the VIX (VIX), Wall Street’s fear gauge, spiked 30% to a 14-month high of 45.48.

Stocks slumped in the morning, trimmed losses in the afternoon as the euro turned positive and then resumed the selling, ending just above the lows of the day. The afternoon selloff intensified after the Wall Street reform bill cleared a key hurdle in the Senate. The bill is expected to pass the Senate. Investors also kept an eye on the escalating conflict between North Korea and South Korea.

After weeks of selling, all three major gauges are now officially in a "correction," technically defined as a loss of more than 10% from the rally highs. The Dow is now down 10.2% from its April 26 high, the S&P 500 is down 12% from its April 23 high and the Nasdaq is down 12.9% from its April 23 high. The Nasdaq was already in a correction prior to Thursday’s selloff.

The correction does not reflect any change in the fundamentals of the U.S. economy or corporate profit outlook, but rather a confluence of events, said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

"I don’t think people are worrying about a double-dip recession in the United States," Ghriskey said. "But there is uncertainty about Europe’s economy and the sustainability of the euro."

In addition to being in a correction, the S&P 500 closed below the 200-day moving average, a key technical level market pros monitor. These events tend to have a big impact one way or the other on market direction, Ghriskey said.

Falling below these technical levels could put a floor under the selling, said Steven Goldman, market strategist at Weeden & Co. He said investors may be better able to tolerate all the uncertainty about Europe when the market has pulled back from the 2010 highs.

"If we are still in a bull market, these might be levels where someone would want to get in," he said. "But we’ve done a lot of damage technically and the pendulum hasn’t swung yet to where we’re seeing a healing."

Beyond the reaction to the immediate headlines, the stock market may have already been vulnerable to selling, said Brett Hammond, chief investment strategist at TIAA-CREF no credit check payday loans.

"The European debt issues and the euro are very important," he said. "But the market was already poised for a pullback after the enormous run up in the stock market since March of 2009."

He said that the historic rally was partly fueled by anticipation that an economic and corporate profit recovery would take hold and that the consumer would take over from the government as an engine of growth. While some of that has happened, market participants may have been betting on a bigger comeback.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 19 to one on volume of 2.13 billion shares. On the Nasdaq, decliners beat advancers 11 to 1 on volume of 3.37 billion shares.

Euro: The euro was little changed versus the dollar after falling in the morning and gaining through the late afternoon. The euro has seesawed over the last few days after plunging to a four-year low of $1.2234 on Monday. The dollar fell 0.2% versus the yen, erasing bigger morning losses.

Economy: Reports on jobless claims and leading economic indicators (LEI) disappointed, while the Philadelphia Fed index, a regional reading on manufacturing, topped forecasts.

The number of Americans filing new claims for unemployment rose last week to 471,000 from 446,000 the prior week. Economists surveyed by Briefing.com expected claims to fall to 439,000.

Continuing claims, the number of Americans who have been receiving benefits for a week or more, fell to 4,625,000 from 4,665,000 in the previous week. Economists thought claims would fall to 4,600,000.

After the start of trading, the Conference Board released its index of leading economic indicators. LEI fell 0.1% in April after rising 1.3% in March. The index was expected to have risen 0.2%.

The Philadelphia Fed index rose to 21.4 in May from 20.2 in April, topping predictions for a rise to 20.7.

After the mini-crash: New rules continue to be proposed in the wake of the May 6 stock market selloff, in which erroneous trading in hundreds of issues created a panic that dragged down the broad market. Since then, most of the trades have been cancelled, but regulators remain unclear as to what exactly caused the selloff.

Out-of-control computer trading may have caused the slump, Securities and Exchange Commission chairwoman Mary Schapiro told a Senate panel Thursday.

On Tuesday, the SEC proposed new rules that would impose circuit breakers, or a temporary pause, on individual stocks that experience extreme swings. There are already circuit breakers in place for the broad markets, but this would impact individual stocks.

World markets: Markets in Europe slumped, as the euro continued its slide versus the dollar. The British FTSE 100 fell 1.7%, the German DAX lost 2% and the French CAC 40 fell 2.3%.

Asian markets tumbled. The Japanese Nikkei fell 1.5%, while the Hong Kong Hang Seng fell 0.2%.

Commodities: U.S. light crude oil for June delivery fell $1.86 to settle at $68.01 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $4.50 to settle at $1,188.60 an ounce.

Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.24% from 3.36% late Wednesday. Treasury prices and yields move in opposite directions. 

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Charlie Dooley may not like the idea of a casino in north St. Louis County, but that’s not stopping the people who want to build one.

The day after the St. Louis County executive made public his opposition to the proposal to build a $350 million casino just south of the Columbia Bottoms Preservation Area, the developers’ attorney said his group plans to plow ahead regardless.

The site, in Spanish Lake along the Mississippi, is a good spot for Missouri’s 13th casino, said Ed Griesedieck, lawyer and spokesman for North County Development LLC. And it’s in a part of the region that sorely needs the jobs a casino would bring.

"Mr. Dooley spells out that he has a vague notion that people don’t want this," Griesedieck said Wednesday. "I think that comment is not in touch with the tens of thousands of out-of-work workers in that area."

Local environmentalists have argued that the project would harm fragile wetlands by the confluence of the Missouri and Mississippi, and on Tuesday, Dooley said he agreed. But Griesedieck notes that the project was previously zoned for industrial use and is not in a conservation area, just near one.

"There needs to be a distinction there," he said.

The project has strong support from labor unions and some elected officials. But it also has met with vocal opposition from various corners.

Dooley presented his stance in a letter to the Missouri Gaming Commission, which will ultimately decide where to put the casino. A "no" vote from the county executive would likely weigh heavily in their thinking.

Griesedieck said his group — which includes Madison County attorney Brad Lakin and Argo Products owner Kenneth Goldstein, among others — will try to prevail on Dooley to change his mind.

"We hope he reconsiders," he said.

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A "Smart TV" breakthrough is reportedly ready to be launched this week by Google Inc. Intel Corp. and Sony Corp.

Search giant Google (NASDAQ:GOOG) and chip giant Intel (NASDAQ:INTC) will unveil a deal to bring Web services to Sony's televisions at Google's annual developer conference this week in San Francisco, the Financial Times reported.

Central to the effort are the Android operating system from Google and the Atom microprocessor from Intel.

The Santa Clara chipmaker's CEO, Paul Otellini hinted at what is to come in remarks to analysts last week. "The revolution we're about to go through is the biggest single change in television since it went color."

Electronics manufacturer have been scrambling to find ways to integrate the Web with TVs, Blu-ray players and settop boxes. At their annual show in Las Vegas in January, a host of new equipment and services were announced including movies from Los Gatos-based Netflix Inc. (NASDAQ:NFLX), Internet radio from San Francisco-based Pandora Inc., and social networking from San Francisco-based Twitter Inc. and Palo Alto-based Facebook Inc.

The Android OS could be very attractive to equipment makers if it gives them a way to generate money from online advertising, Google's main money maker.

"Consumer electronics manufacturers want a piece of this pie and Google is the player in this very crowded space that can immediately offer them revenue share," Kurt Scherf, principal analyst at research firm Parks Associates, told the Financial Times.

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They’ve never seen a CEO at General Motors Co. quite like Ed Whitacre.

He wanders into small meetings unannounced and, before leaving, asks in stark terms what people can do to sell more cars. He urges them to take risks by making decisions; ask him whether he means it and he’ll probably say, yes, he means it.

Wearing jeans and a sweatshirt, he shows up unannounced at assembly plants — Lansing and Lordstown, Fairfax and Flint — and walks the line, stopping to talk with ordinary auto workers.

”My first impression was kinda ‘wow,’ ” says Ben Strickland, shop chairman for UAW Local 1112 in Lordstown, Ohio, home to the new Chevrolet Cruze compact. ”He definitely left the impression that he was no different than anyone else in that plant. And that went miles.”

Except that Whitacre, appointed chairman of GM’s board by President Barack Obama’s automotive task force, is different from everyone else — which is the point. In interviews with senior executives, union officials and midlevel managers, the CEO emerges as the antithetical GM boss: a serial delegator who loathes process and PowerPoints, who thinks GM’s historic reliance on data can be paralyzing, who cannily meets employees on their own terms.

He grew up in the deal-making of AT&T Corp. and its precursors, not the noble decline of GM. He wants simplicity and accountability, not the contorted self-justifications and endless study of the Detroit auto business. Mindful that there are no third chances for GM, he isn’t likely to give longtime hands the benefit of the doubt that most of them have known too well.

”He can read people in five minutes,” says a ranking executive who requested, as did others, not to be identified when speaking about the boss. ”That’s one of his gifts. ”

It’s Big Ed’s GM now, a work in progress whose return to market credibility and sustainable profitability after a historic bankruptcy is by no means assured. He knows it. GM directors know it. And anyone with a stake in the company’s success should know it.

”Ed’s the first guy to tell you it’s not all figured out yet,” says another GM executive who works closely with him. ”There’s some fear in this company. People are nervous. They don’t know what it means — ‘I get to make my own decisions.’ ”

Simpler, faster answers

For a clue, look to Big Ed himself.

In a place that elevated bureaucracy and ponderous presentations to high corporate art, Whitacre is routinely moving in the other direction. Give him less data, he says, in favor of more facts, more answers and more solutions from the people closest to the problems.

It’s hard to overstate how challenging that turnabout can be to GM’s often-constipated culture, where studying something to death (products, business deals, whether to prepare for bankruptcy) too often was mistaken for actually getting things done. Not in what’s taking shape inside the GM of Whitacre, named CEO last December.

Monday meetings of his 13-member ”Executive Committee” are typically wrapped up in a couple of hours — unless Whitacre is on a tear — compared with the daylong ”Automotive Strategy Board” confabs of old that had a corporate ritual all their own.

Monthly sales reports have been simplified, and hourly updates on the final day of each month were abolished. Forward-looking production plans no longer are reported because Whitacre couldn’t understand why GM routinely aired such competitive information when many rivals did not.

Spending within GM’s multibillion-dollar capital budget now requires fewer approvals once the overall budget is approved. Operating executives, such as North American President Mark Reuss or product development chief Tom Stephens, are encouraged to tap resources already approved in larger budgets by Whitacre and the company’s board of directors.

The goal: Move quicker, empower management, push accountability deeper into the frozen middle of the salaried ranks unsure what to make of this newfound emphasis on autonomy and risk-taking.

Even board meetings are streamlined, according to several executives familiar with the changes. Approvals of routine capital spending have been reduced, as have the number of board actions required to green-light product programs.

Gone are the two-day sessions of old, replaced by crisper, half-day meetings intended to let Whitacre and his team run the company while the directors focus appropriately on big-picture issues. Those include corporate performance and the crucial timetable to sell GM shares to investors, the first step toward extricating the U.S. Treasury from GM.

Homegrown talent works

Whitacre’s GM is not the old GM, partly because he’s nothing like his predecessors.

Until congressional inquisitions prompted GM to dump its corporate jets, former CEOs crossed time zones like most people cross town. Whitacre dislikes travel; he hasn’t yet been abroad as GM CEO, though he and the company’s directors are scheduled to hold their June board meeting in China.

He’s neither a veteran of the auto industry, nor an engineer in the mold of Ford Motor Co. CEO Alan Mulally. But Whitacre does share his rival’s obvious preference to unleash homegrown talent instead of import it — primarily in the engineering, development and building of cars and trucks.

Sure, he’s wooed former AT&T colleagues (three of them, actually) to GM, in communications and government affairs. His CFO is a veteran of Microsoft and the new treasurer is coming from Wall Street. In the guts of the operations? Reuss, son of a former GM president; Stephens, a GM engineering veteran; Nick Reilly in Europe, a longtime GM executive; and Tim Lee at GM international.

Whitacre ”is an enormous delegator,” says another executive who has worked closely with him and echoes the assessments of others. ”He doesn’t spend a lot of time in operating meetings. He puts his team in place and they are responsible for doing the work.”

And delivering the results.

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