Archive for April, 2009

Ford shares rise as Q1 loss smaller than expected (Reuters)

Friday, April 24th, 2009 | Finance News

DETROIT (Reuters) –
Ford Motor Co posted a smaller-than-expected first-quarter loss and said it was on track to at least break even in 2011 and did not expect to seek U.S. government loans, sending its shares up as much as 20 percent.

The company also said on Friday that it had burned through $3.7 billion of automotive sector cash in the first quarter, a sharp drop from the second half of last year, and ended March with $21.3 billion in gross cash.

Investors have been more focused on Ford's liquidity and its ability to navigate the economic downturn, as well as on the financial struggles of rivals General Motors Corp and Chrysler, than on the quarterly results.

Ford has not sought U.S. government aid, setting it apart from GM and Chrysler, which are operating on $17.4 billion of federal loans and have sought more to stave off bankruptcy.

"We think that Ford is successfully differentiating itself from its wounded domestic competitors in operating performance and with consumers," Standard & Poor's equity analyst Efraim Levy said in a note. "However, profitability remains challenged and we still see risks."

Ford posted a net loss of $1.43 billion, or 60 cents per share, for the first quarter, compared with net income of $70 million, or 3 cents per share, a year earlier.

The loss from continuing operations and excluding one-time items came to 75 cents per share. Analysts on average expected a loss of $1.23 on that basis, according to Reuters Estimates.

The results reflected the weak demand for autos around the world, with losses in each region. Revenue fell to $24.8 billion in the quarter, from $39.2 billion a year earlier.

Still, Chief Financial Officer Lewis Booth called the results encouraging and said the automaker expected the first quarter to have the worst cash burn of the year.

Booth said Ford risked being at a disadvantage if GM or Chrysler should file for bankruptcy, but the automaker has been preparing contingency plans should such a filing lead to disruptions in its parts supply base.

SOLID RESULT, CONSIDERING

Ford had burned through $21 billion of automotive cash in 2008, including more than $7 billion in both the third and fourth quarters of last year.

JP Morgan analyst Himanshu Patel said Ford's first-quarter results were solid on balance "given the current climate."

"We expect a positive reaction, and continue to believe Ford's recent rally is not unjustified but see only modest incremental upside potential in the equity at these levels," Patel said in a note to clients.

Merrill Lynch raised its rating on Ford to "buy" and set a $7.50 price target on Friday, saying that the easing of the automaker's cash burn rate made it more likely that it would make it through 2009 without need of government support, and with little risk of bankruptcy.

Ford posted a 2008 net loss of $14.7 billion, a company record, and has reported losses of about $30 billion over the past three years. The turnaround plan would have it at least break even in its pretax automotive operations in 2011.

The automaker borrowed more than $23 billion in late 2006 to support the restructuring in case of an industry downturn, using most of its remaining assets, including the familiar blue oval logo, as collateral.

In the first quarter, special items increased Ford's pretax profit by 15 cents per share, with a $1.32 billion gain from a debt restructuring more than offsetting a $664 million impairment charge for the Volvo car unit.

Ford classified the Swedish Volvo brand as held for sale, which implies that there is a probability of a sale in the next year. The charge pushes the book value of the business down to what Ford believes is the estimated fair market value.

Ford has been in discussions with potential buyers for the brand, the last one left from its former premier auto group. It previously sold Aston Martin, Jaguar and Land Rover.

The automaker also said it was raising its second-quarter production forecast by 10,000 units in North America to 435,000 vehicles. However, that is still down some 250,000 vehicles from its production a year earlier.

Ford shares were up 74 cents, or 16.5 percent, at $5.23 in early afternoon on the New York Stock Exchange, off an earlier high at $5.40. They have risen from a 27-year-low of $1.02 in November, when automakers were in the process of appealing for emergency loans.

(Reporting by David Bailey, Poornima Gupta and Ryan Vlastelica; Editing by Lisa Von Ahn and Matthew Lewis.)

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Stress test banks can turn to stakeholders (Reuters)

Friday, April 24th, 2009 | Finance News

WASHINGTON (Reuters) –
U.S. banks undergoing stress tests that need more capital will be encouraged to first go to their current stakeholders, possibly through conversions of preferred stakes to common equity, Federal Deposit Insurance Corp Chairman Sheila Bair said on Friday.

Bair said any banks deemed to need more capital under the tests for more adverse economic conditions should extend conversion offers to their current shareholders before seeking government funds.

"They just need to make some hard decisions and there should be some fair terms in the conversion offers," Bair said at the Reuters Global Financial Regulation Summit in Washington. "Nobody wants the government money right now so that might be a good lever."

She does not foresee administration officials having to ask Congress for more financial bailout funds after the stress test results are released on May 4.

The U.S. Treasury Department has about $100 billion left in the $700 billion financial rescue fund. Policymakers have said the banks will have six months after the stress tests to raise private capital if more is needed, or they will have access to more government capital.

Bair also said the FDIC plans to meet in late May to reduce its proposed emergency assessment fee on banks to as low as "single digits" from 20 basis points. That reduction is dependent upon Congress approving a proposal to increase the FDIC's borrowing authority with the Treasury, Bair said.

The FDIC proposed the emergency fee -- scheduled to be collected in the third quarter -- to replenish its deposit insurance fund, which has been dwindling due to a sharp upswing in bank failures. The bank industry has said the one-time fee would cost as much as $15 billion at a time when the institutions can least afford it.

Regarding any stress test banks that need more capital, Bair said regulators can talk with those institutions on how to structure conversion offers to their current shareholders.

Regulators have stress tested the largest 19 U.S. banks to see how they would fare if the recession proves to be deeper than expected.

Officials are due to release later on Friday a document that will describe in detail the bank regulators' method of evaluation, including the underlying concepts and variables. The results of the stress tests will be announced on May 4.

Bair said policymakers are still discussing how to release those results. She would not say if results from individual institutions will be disclosed.

(For summit blog: http://blogs.reuters.com/summits/)

(Reporting by Karey Wutkowski; editing by Tim Dobbyn)

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H&R Block prepares fewer tax returns this year (AP)

Friday, April 24th, 2009 | Finance News

KANSAS CITY, Mo. – H&R Block Inc. said Friday it prepared 3.1 percent fewer returns in the just-completed tax filing season, although tax preparation revenue rose slightly because of higher average fees and more complex returns.

In its final tax season update for fiscal 2009, the nation's largest tax preparer said it prepared about 21 million returns, down from nearly 21.7 million in the same period a year ago.

H&R Block's retail operations prepared nearly three-quarters of this year's returns, with most of the rest of the filings made using H&R Block's online software and other software.

Tax preparation fees from company-owned operations and franchise locations rose a total 0.5 percent to $2.82 billion, an all-time high. The average fee for retail returns was $187.17, up 6.7 percent from $175.45 a year ago.

Total retail returns fell 5.7 percent compared with a year earlier. H&R Block Online returns grew nearly 46 percent, while total digital returns prepared by H&R Block were up almost 22 percent.

A news release from Kansas City-based H&R Block didn't offer commentary on the reason for the decline in returns prepared. But the company said last month it believed the trend reflected economic pressures leading more people to do their own taxes to save money.

Chief Executive Russ Smyth said then his company was increasing marketing during the tax season's final month, and was targeting wealthier taxpayers whose tax returns are usually more complex and generate higher fees.

H&R Block plans to report its fourth quarter and fiscal 2009 results on June 23.

The company released end-of-tax-season numbers before markets opened Friday. In early trading, shares rose 8 cents to $15.77, near the bottom of the stock's 52-week range of $15.00 to $27.97.

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