Archive for April, 2011

NJ voters approve 80 percent of school budgets

Thursday, April 28th, 2011 | Finance News

EVESHAM, N.J. – A year after an anti-tax revolt took its toll on school budgets, New Jersey voters have returned to their more generous ways in the state's one-of-a-kind school tax elections.

According to an unofficial but complete tally by the New Jersey School Boards Association, 429 of the 538 budgets up for a vote — or 80 percent — were adopted in elections statewide Wednesday as a rigid new cap was put in place to control tax hikes.

Most years, fewer than one-fifth of the state's voters participate in school elections. Besides voting for school board candidates, citizens in most towns can vote up or down the property tax bill for their school districts. It's the best chance New Jersey citizens have to have a direct say on their property taxes, which average more than $7,000 a year — by far the nation's highest.

Even though grumbling about the property taxes is practically the state's pastime, the majority are usually approved. Those that are rejected are trimmed by municipal governing bodies.

Last year, the norms were turned around. Gov. Chris Christie, a budget-cutting Republican, urged voters to reject spending plans in districts where teachers unions did not accept voluntary pay freezes and hikes in health insurance payments. The governor, who is in a long-running war of words with the state's teachers unions, argued that educators weren't doing enough to share the sacrifice of a lousy state economy that was forcing cuts to many government services.

The voters largely agreed with him, rejecting nearly 6 in 10 budget plans — the most in at least 34 years.

This year, Christie didn't take a major role in school budget campaigning, but there was another shift. Christie and the Democrat-controlled state Legislature imposed a new cap limiting property tax increases to 2 percent, with some exceptions. The previous limit was 4 percent — and had broader exceptions.

Last year, the state's subsidy to schools was also reduced by $1 billion. Districts across the state laid off teachers, cut extracurricular programs or imposed fees on their participants. This year, Christie's state budget plan calls for increasing aid to schools by $250 million. Lawmakers have not approved his budget plan.

But the promise of more money made planning a bit easier for school districts.

Only 11 school boards across the state asked voters a second budget question Wednesday seeking permission to exceed the new limits. Voters granted the approval in eight of those communities.

"What we take away from the results is that the new cap law worked as intended, keeping local spending under control and predictable and giving voters who pay the taxes final say on whether to exceed the cap," said Michael Drewniak, a spokesman for Christie.

Christie has said that his goal is to hold property taxes in check and increase state payments to schools when the economy improves and income and sales tax collections increase.

In Burlington County's Evesham Township, the proposed budget called for a cut in the total amount of taxes to be collected and layoffs of some teachers. Even though the total amount raised by taxes will be down, most homeowners will pay a bit more because property values have decreased.

Officials warned that if the spending plan was rejected, the Florence V. Evans Elementary School would have to be closed and its students dispersed to other schools nearby. The district's budget, rejected in the last two years, was passed. A sign in front of the school read, "Thank you Evesham voters."

Bryan Ward, the father of a third-grader at the school, said his neighborhood next to the school was relieved.

"I'm hoping that people start to realize you can only cut so much before you're going to have an impact on services," he said.

Dan Cirucci, a conservative blogger who lives in Cherry Hill, lamented Wednesday's result. "New Jersey has reverted to norms," he said.

On his blog, he encouraged voters throughout New Jersey to reject spending plans. "I really believe that we have so few opportunities to get the message to these people in Trenton and all public officials," he said Thursday. "Every chance we get, we ought to say, 'enough.'"

Also Wednesday, some municipal governments asked voters to approve budgets that would hike the towns' share of property taxes by more than 2 percent. Twelve of the 14 failed.

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Kodak posts 1Q loss on weaker sales

Thursday, April 28th, 2011 | Finance News

ROCHESTER, N.Y. – Eastman Kodak Co. said Thursday it lost $246 million in the first quarter — its third quarterly loss in the last year — on weaker sales of digital cameras and film.

The results missed Wall Street expectations and its stock fell almost 10 percent to a 20-month low in afternoon trading.

Vigorous sales of inkjet printers, however, offered glimmers of hope that the picture-taking pioneer remains on course to recast itself into a profitable player in digital photography and printing.

"Overall, if you look at Kodak's reported numbers, it looks horrible," said Ulysses Yannas, a broker for Buckman, Buckman & Reid in New York. "If you start analyzing it, it looks better, especially on the increased sales in consumer inkjet."

But others see only a perilous road ahead.

"It's at the point where you start to look at (whether) you could sell various parts of the business, or break it up," said analyst Shannon Cross of Cross Research in Livingston, N.J.

Kodak said its loss in the January-to-March quarter amounted to 91 cents a share. That compares with net income of $119 million, or 40 cents per share, a year earlier when results were swelled by $550 million in one-time revenue from a digital-imaging patent-litigation triumph.

Excluding items, Kodak said it lost $1.13 per share in the latest quarter.

Revenue dropped 31 percent to $1.32 billion from $1.9 billion a year ago.

Analysts surveyed by FactSet expected an adjusted loss of 48 cents a share on revenue of $1.41 billion.

Its shares fell 31 cents, or 9.8 percent, to $2.86 in afternoon trading. They last traded that low in July 2009.

Revenue from the company's digital business plunged 36 percent to $955 million. But excluding the year-ago licensing payment from South Korea's Samsung Electronics Co., Kodak said digital revenue rose 2 percent and overall sales fell by just 3 percent.

Film group sales dipped 14 percent to $367 million, hit by industry volume declines and surging costs for silver.

Sales of Kodak's low-end cameras have been hurt by lingering weakness in discretionary consumer spending and stiff competition from smart phones and video cameras. Part of the decline can be attributed to its attempt to shift to pricier cameras with higher profit margins.

Analysts also pointed to stiff competition from Hewlett-Packard Co. in retailer kiosks, and a slump in movie-film revenue mirroring a migration to digital-cinema alternatives.

The 130-year-old company has been struggling to make headway in its nearly decade-long digital transformation. Since 2004, it has reported only one full-year profit — in 2007 — and expects more red ink this year before crossing back to profitability sometime in 2012.

It is investing heavily in four growth businesses — workflow software, packaging, home inkjet printers and high-speed inkjet presses — that generated a 23 percent jump in sales in the quarter. Through 2013, Kodak expects those revenues will reach nearly $2 billion, accounting for 25 percent of all sales.

Kodak is banking on replacing the huge profits it once made from film with ink revenue, which climbed 85 percent in the quarter. More than 3 million people already own Kodak home inkjet printers, and Yannas estimates that 5.3 million units will be installed by year-end.

"What matters to us is to keep building this installed base and then get this ink revenue that keeps growing year over year," CEO Antonio Perez told analysts in a conference call. "The profitability comes from ink."

Kodak expects to turn its first profit from home inkjet printers late this year, and its commercial line of printers is targeted to turn profitable in 2012.

The company is relying mightily on leaner costs to help see it through its transition. It has trimmed its work force to 18,800 from 70,000 in 2002.

Graphic communications sales rose 4 percent to $625 million, lifted by stronger demand for digital printing plates and scanner sales in its document imaging unit. But investments in commercial inkjet printing widened its operating losses to $71 million from $40 million a year ago.

Its consumer digital imaging division turned from a year-ago profit of $401 million to a $168 million loss as sales slid to $330 million from $884 million.

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Rosneft earnings beat expectations on rising prices

Thursday, April 28th, 2011 | Finance News

MOSCOW (AFP) – Russia's largest oil company Rosneft on Thursday handily beat analysts' expectations by reporting a 58.2 percent jump in quarterly profits that it attributed to rising energy prices and sales.

The state-held giant reported Q1 2011 net income of $3.942 billion and a jump in EBITDA earnings -- a pre-deductions indicator closely watched by analysts and investors -- of 49.7 percent to $6.653 billion.

"The price environment on the international market was very supportive in the first quarter, allowing us to achieve record high financial results," Rosneft President Eduard Khudainatov said in a statement.

"Strict cost control and further optimisation of business processes remained our priorities in the quarter and made their contribution to the growth rates. We also achieved further progress in upgrading our refining capacities."

Both figures easily beat market expectations.

The Metropol investment bank said in a research note that it expected Rosneft net income to rise 26 percent and the EBITDA figure 21 percent.

The company said it managed the more impressive results despite new-found ruble strength that washed away the impact of the dollar-denominated sales and a new wave of higher state sales and transport tariffs.

Rosneft said its oil output had increased 2.9 percent year-on-year -- a figure two percent higher than the company's own forecasts -- while sales volumes grew by a strong 4.9 percent.

It also attributed some of the gains to its executives' ability to slash administrative and refining costs.

Yet the company statement provided no outlook for the upcoming months and avoided any mention of the TNK-BP controversy most frequently associated with its name in recent weeks.

Russia's most important oil company has been embroiled in heated controversy as it seeks to complete a share swap and joint Arctic exploration agreement with the British giant BP that has been hung up in the courts.

The Russian shareholders of TNK-BP -- the British firm's local venture -- are trying to put a halt to the tie-up and take their parent company's place.

Rosneft and BP are now up against an extended May 16 deadline for the deal to close amid reports that a compromise may include a buyout of the Russian shareholders in TNK-BP.

"We ... do not think that either Rosneft or BP would like to walk away from this deal as this could have negative consequences beyond reputational risks," the Renaissance Capital investment bank said in a research note.

"For Rosneft, in particular, it would mean a loss of status, in our view. Besides, finding another suitable partner that would agree to a share swap and consider joint operations internationally could be problematic, if not impossible," the Moscow-based bank said.

One of the main stumbling blocks to the buyout idea has been a shortage of free cash available to Rosneft and the difficulties BP has been experiencing since the 2010 Gulf of Mexico oil spill.

Metropol noted that it would "closely look at free cash flow generation" ideas during a Rosneft conference call on Friday while Renaissance Capital said it felt nervous about the company's current growth strategy.

"We find Rosneft's capital-intensive strategy, aimed at boosting production rather than cash flow, too risky," Renaissance Capital said.

The bank also observed that half of Rosneft's EBITDA growth for 2010 was attributed to exemptions from crude export duties at one field -- a risky variable that made the company's profits subject to government whim.

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