U.S. Jobless Claims Rise; Blockbuster Bankruptcy

Arthi Gupta
23 Sep, 2010
New York City

U.S. stocks slid after weekly jobless claims rose 12,000 to 465,000 and home prices fell more than expected in July. The U.S. Treasury raised $706 million on sale of Hartford warrants. Potash Corp sued BHP to prevent hostile takeover bid. Blockbuster reached agreement with bondholders.

[R]9:35 AM New York – U.S. stocks slid after weekly jobless claims rose 12,000 to 465,000 and home prices fell more than expected in July. The U.S. Treasury raised $706 million on sale of Hartford warrants. Potash Corp sued BHP to prevent hostile takeover bid. Blockbuster reached agreement with bondholders.[/R]

European markets traded lower and markets in China region, Japan and South Korea were closed.

Initial claims for unemployment benefits unexpectedly increased in the week ended September 18. Claims edged up to 465,000 from the previous revised week claims of 453,000.

The Federal Housing Finance Agency reported on Wednesday home prices fell by more than expected in the month of July. The FHFA said its house price index edged lower 0.5% in July following a revised 1.2% drop in June.

The U.S. Department of the Treasury raised more than $700 million on a public offering of 52.09 million warrants of insurer Hartford Financial Services Group. The $13.70 per share offering, which is subject to customary closing conditions, was expected to close on or about September 27.

The expected $706.26 million in proceeds from the offering will provide additional return to the American taxpayer apart from the dividend payments it received on the related preferred stock. The warrants were to expire on June 26, 2019.

The potential bidders for the warrants were to place bids at any price at or above the minimum bid price of $10.50 per warrant, in increments of $0.10. The minimum size for any bid is 100 warrants.

Potash Corp. of Saskatchewan, Inc., the Canadian fertilizer maker filed a lawsuit against mining giant BHP Billiton Group in an attempt to prevent it from proceeding with a hostile $40 billion takeover of the company.

In the lawsuit filed in the U.S. District Court of Illinois, Potash accuses BHP of violating federal securities laws and said BHP''s offer was built upon ""false and misleading statements and omissions"" relating to the background of its $130 per share offer, as well as its plans for Potash''s business if it acquires control.

BHP Billiton said that a lawsuit filed by Potash Corp against the company is ""entirely without merit"" and it would contest the lawsuit.

Blockbuster Inc, the movie rental chain today reached an agreement with a group of bondholders holding approximately 80.1% principal amount of the company''s 11 3/4% senior secured notes on the material terms of a plan to recapitalize its balance sheet.

The recapitalization plan would substantially reduce the company''s indebtedness from nearly $1 billion currently to an estimated $100 million or less when implemented.

To implement this ""pre-arranged"" recapitalization, the company and its domestic subsidiaries have filed voluntary Chapter 11 petitions with the U.S. Bankruptcy Court for the Southern District of New York. Blockbuster''s non-U.S. operations and its domestic and international franchisees, all of which are legally separate entities, were not included in the filings and are not parties to the Chapter 11 proceedings.

Blockbuster noted that it secured a commitment of $125 million in new ""debtor-in-possession"" financing from the senior note holders to help meet its obligations to customers, suppliers and employees in the ordinary course during the recapitalization process.

Earnings Review

Bed Bath & Beyond Inc. ((BBBY)), the home goods retailer second quarter stated net sales increased 11.6% to $2.137 billion from $1.915 billion in the same quarter last year. Comparable store sales rose 7.4%. Net earnings in the quarter soared 34% to $181.8 million or 70 cents per diluted share, compared with net earnings of $135.5 million or 52 cents per share in the prior-year quarter.

Copart, Inc. ((CPRT)), the junk car auctioneer said fourth quarter total revenues climbed 3.3% to $190.47 million from $184.33 million in the prior-year quarter. Net income in the quarter improved 4.6% to $36.23 million or 43 cents per diluted share, compared to net income o f$34.63 million or 41 cents per share in the year-ago quarter.

For the full year, the company reported net income of $151.63 million or $1.80 per share, compared to $141.10 million or $1.69 per share for the same period last year.

IHS Inc. ((IHS)), the information provider reported third quarter revenue increased 14% to $272 million from $239 million in the prior-year quarter. Net income in the quarter edged higher 0.3% to $34.6 million or 53 cents per diluted share, compared to net income of $34.7 million or 54 cents per share in the year-ago quarter.

Intuit Inc. ((INTU)), the accounting software maker reaffirmed its financial guidance for first quarter and its fiscal year 2011. The company reiterated its outlook for GAAP net loss for the first quarter in a range of $0.25 to $0.23 per share and revenue growth of 9% to 11%, or revenues in a range of $515 million to $525 million.

McDonald''s Corporation ((MCD)), the fast food restaurants chain reported its board declared a quarterly cash dividend of $0.61 per common share, representing an 11% increase and fourth quarter dividend payout to around $650 million.

For fiscal year 2011, Intuit continues to expect GAAP earnings in a range of $1.88 to $1.95 per share and revenue growth of 8% to 11%, or revenues in a range of $3.74 billion to $3.84 billion.

pSivida Corp. ((PSDV)), the developer of drug delivery products stated fourth quarter revenues edged higher 388% to $15.72 million from $3.22 million in the prior-year quarter. Net income generated in the quarter was $13.07 million or 68 cents per diluted share, compared to a net loss of $534 thousand or 3 cents per share in the year-ago quarter.

Red Hat, Inc. ((RHT)), the seller of Linux based software said second quarter revenue rose 20% to $219.76 million from $183.63 million in the same quarter last year. Net income in the quarter declined 18% to $23.7 million or 12 cents per diluted share, compared to net income of $28.9 million or 15 cents per share for the year-ago quarter.

Rite Aid Corporation ((RAD)), the retail drugstore chain reported second quarter revenues declined 2.5% to $6.16 billion from $6.32 billion in the prior year second quarter on same store sales fall of 1.5%. Net loss in the quarter widened 66% to $199.32 million or 23 cents per diluted share compared with net loss of $120.38 million or 14 cents per share in the year-ago quarter.

Starbucks Corporation ((SBUX)), the coffee house chain reaffirmed its previously announced fiscal year 2011 earnings forecast in a range of $1.36 to $1.41 per share.

Steelcase Inc. ((SCS)), the office furniture maker reported second quarter revenue climbed 3.8% to $599.8 million from $578.1 million in the previous year. Net income in the quarter rose to $2.8 million or 2 cents per diluted share from breakeven results last year.