Friday AM August 8th, 2008
by: Ed Mayberry, August 8, 2008 4:08:00 am
The government says the number of people signing up for jobless benefits climbed to its highest point in more than six years as companies cut back given the faltering economy. The Labor Department reports that new applications filed for unemployment insurance rose by a seasonally adjusted 7,000 to 455,000 for the week ending August 2nd. A government analyst says a program to locate people eligible for jobless benefits played a role in the increase. Economists were expecting claims to drop to around 430,000.
The Federal Reserve says consumers boosted their borrowing in June at the fastest pace in seven months. The Fed's report shows consumer credit increased at a brisk annual rate of 6.7 percent in June. That's up from a 3.8 percent growth rate in May. It marks the biggest increase since November when borrowing grew at a 8.2 percent pace. The Fed says debt rung up by consumers rose by $14 billion in June from the previous month to $2.59 trillion. That's more than the $6.4 billion over-the-month increase economists were forecasting.
Dunkin' Donuts is opening 107 new franchised restaurants in Houston, according to the Houston Business Journal. Kainos Partners Holding Company is opening 75 stores in Houston—ten are scheduled to open in 2009. Southern Donuts is opening 32 units with six opening in 2010. The Massachusetts-based chain also wants to sell at least 20 restaurants to a new or existing franchisee in the area north of Houston.
A new Marshall's has opened at Northline Commons at Crosstimbers and I-45 North. Conn's and Office Depot are expected to open in Northline Commons this fall.
The three-day 27th annual Houston Home Show gets underway at the George R. Brown Convention Center today. Direct Energy is demonstrating how they conduct home energy tests for detecting leakage and for calculating a home's projected carbon footprint based on energy use.
Fourteen conventions, trade shows and other events are booked in Houston in September by the Greater Houston Convention and Visitors Bureau. More than 15,000 attendees will spend an estimated $14.6 million in Houston during the month. The Turbomachinery Laboratory at Texas A&M University holds its 2008 Symposium and Short Courses September 8th through the 11th at the George R. Brown Convention Center. The National Baptist Convention of America holds is 2008 Fall Conference September 8th through the 11th at the Hyatt Regency. And the 18th annual Urban Network Entertainment Marketing Summit is set for September 24th through the 27th at the Hilton Americas and George R. Brown Convention Center.
If Marathon Oil splits itself in two, it could do more than create a new oil producer and a new refiner. Marathon could quickly become a takeover target for oil giants sitting atop massive piles of cash --but struggling to find new sources of crude and natural gas. From 2001 to 2007, Marathon's holdings more than tripled to 6.6 billion barrels of oil equivalent. More growth is forecast. Marathon Oil is the fourth-largest U.S. integrated oil company, meaning it's involved in exploration and production as well as refining and selling gasoline. The company said last week it may separate its exploration and production, natural gas and Canadian oil sands businesses from refining and marketing. That would create two independent publicly traded companies. Marathon said a decision could be made in the fourth quarter of this year, and the separation could happen early next year.
The Bennigan's down the street may be shuttered for now. But its doors could be open again if the franchisees of the distressed chain get their way. Bennigan's and Steak & Ale franchisees are hoping to buy between 40 and 60 restaurants closed by the chains' parent company when it filed for bankruptcy protection. That's according to Rob Carringer of CRG Partners Group. The financial restructuring firm is working with the franchisees to set up operations in the wake of the filing. Last week, parent company S&A Restaurant Corporation filed for Chapter 7 bankruptcy protection under pressure to repay its debts. S&A is owned by Metromedia Restaurant Group, a part of billionaire John Kluge's empire. The filing did not include 138 domestic and international franchisee-owned restaurants. Those locations remain open. New York-based CRG and private equity firm Atalaya Capital Management have been working with the franchisees.
Whole Foods Market still plans to develop a 78,000-square-foot store at Post Oak and San Felipe by 2010, although it will trim the number of new stores it plans to open next year. Whole Foods says its earnings have been hampered by its acquisition of Wild Oats Markets. Austin-based Whole Foods says it will limit the number of new stores it opens next year to 15. Whole Foods bought Wild Oats in a $565 million deal last year, but the Federal Trade Commission has been trying to block the acquisition. The case is now in the U.S. District Court for the District of Columbia.
A Texas business leader and activist says the state's public school accountability system fails students, parents and businesses. Bill Hammond, president of the Texas Association of Business, says the system allowed schools to hide high dropout rates and still be considered academically acceptable. Education Commissioner Robert Scott released school accountability ratings last week. They showed more schools with higher marks but did not include dropout rates in the calculations. Scott says schools were given a waiver as they transition into a new, more accurate method of measuring dropouts. Hammond is urging state officials to reverse the trend. Estimates show the state's dropout rate at about a third--and even higher among black and Hispanic students. TEA spokeswoman Debbie Ratcliffe says the waiver for counting dropouts will not be used again next year. The accountability system is based largely on the state's standardized test, the Texas Assessment of Knowledge and Skills.
Texas regulators are considering what action to take against a utility and a subcontractor over violations in a deadly gas-related explosion in McKinney. The May 16th blast destroyed two homes and sent three people to hospitals. The Dallas County Medical Examiner's Office ruled 71-year-old Nancy Foster's death last month was due to complications from burns. The Texas Railroad Commission documented eight violations, six by Atmos Energy and two by M.J. Sheridan of Texas, whose crew cut the pipeline. Atmos was cited for six violations in the areas of procedures, records, operator qualification, and drug and alcohol testing. The commission faulted Sheridan for shortcomings in damage prevention, totaling two violations. Atmos and Sheridan have 30 days to respond to the alleged violations before the agency decides what penalties to recommend. Each violation carries a maximum fine of $10,000. Atmos spokesman Ray Granado says company officials believe their employees took appropriate actions at the time of the incident. He says the company continues to review practices and protocols in the wake of the tragedy.
Connecticut has become the latest state to sue Countrywide Financial over its lending practices. State Attorney General Richard Blumenthal alleges Countrywide misled borrowers into taking on risky home loans they could not afford. He says hundreds and possibly thousands of Connecticut homeowners were affected. California, Illinois, Florida and the city of San Diego have made similar claims in their own lawsuits against the company. Countrywide was the nation's largest mortgage originator before a jump in bad loans ravished its business. It's been blamed for helping to cause the nation's mortgage meltdown.
New York Attorney General Andrew Cuomo says he's reached a settlement worth more than $7 billion with Citigroup that requires the company to buy back auction-rate securities from about 40,000 customers nationwide. Cuomo had threatened to charge the company with fraudulent sales of auction-rate securities and with the destruction of key documents. The settlement requires Citigroup to buy back securities from retail customers, charities and small to mid-sized businesses by November 5th. Citigroup will also have to pay New York state a $50 million civil penalty, and a separate $50 million civil penalty to the North American Securities Administrators Association.
The Massachusetts state attorney general's office has reached a $1.5-million settlement with Morgan Stanley. The company allegedly sold high-risk investments to cities and towns, but presented the investments as safe. Now it's agreed to repurchase $1.5 million in auction rate securities it sold to the city of New Bedford and the town of Hopkinton. It also has agreed to review its client list and fully reimburse any city or town that invested in auction rate securities. Auction rate securities have interest rates set periodically, depending on submitted bids. The securities were considered safe, but the market collapsed in February following turmoil in the credit markets. Morgan Stanley says in a statement it's pleased to settle the case without financial penalty.
Chrysler and Nissan reportedly are in talks to jointly produce midsize cars. The Wall Street Journal reports that Chrysler is discussing an agreement with Nissan under which the Japanese automaker would produce midsize sedans that Chrysler would sell in the U.S. under its own brand. The report cites people familiar with the discussions. Nissan spokesman Fred Standish notes that the two companies announced partnerships earlier this year. He told the Associated Press that Nissan is "continuing to explore opportunities to work with Chrysler," but said they have nothing to announce right now. A Nissan spokeswoman in Tokyo says the report is speculation, and a Chrysler spokesman has declined to comment.
Nine manufacturers of children's clothing have agreed to pay fines totaling $355,000 for failing to tell the government some of their clothes had hood and neck drawstrings. The hazard has led to dozens of strangulation deaths over the years. Most recently, a two-year-old boy in San Jose, California, was strangled in May when the drawstring of his sweatshirt caught in a play set at a daycare. Under federal regulations, children's jackets and sweat shirts cannot contain drawstrings at the neck, hood or the waist. The Consumer Product Safety Commission says the fines settle allegations that the companies knowingly failed to immediately report the drawstrings. Three other companies are recalling more than 8,000 pieces of children's clothing because the clothing contained inappropriate drawstrings.
A new survey suggests nearly half of U.S. residents would oppose allowing cell phone use aboard flights even if there were no issues with the phones interfering with aircraft communications systems. According to the Department of Transportation survey, about four out of 10 residents who were polled said cell phone use should definitely or probably be permitted. There appears to be a cell phone generation gap. Among residents aged 65 and older who were surveyed, about 60 percent opposed cell phone use in flight, while less than a third supported it. For people aged 18 to 34, nearly half supported cell phone use in flight, while a little over a third opposed it. The U.S. government currently bans passengers from making cell phone calls in-flight. The European Union is moving to allow it.
The Congressional Budget Office says the government will have generated about $400 billion worth of red ink when the 2008 budget year closes on September 30th. The Budget Office numbers confirm bleak estimates released by the White House last week that also said the new administration will inherit a record deficit for the upcoming 2009 budget year. Relative to the size of the economy, the deficits aren't as bad as those experienced in the 1980s and early 1990s. Still, the new figures are so eye-popping in dollar terms that it may restrain the appetite of the next president, who takes office January 20th, to add to it with expensive spending programs or new tax cuts.
The Postal Service has reported a net loss of more than a billion dollars in the third quarter of the fiscal year. Officials blame reduced mail volume in the slowed economy, coupled with rapidly rising transportation costs because of high fuel prices. Operating revenue for the quarter fell 2.4 per cent while operating expenses went up one per cent, compared with the same period last year. Operating expenses totaled $19 billion--an increase of $178 million, or one per cent--from the third quarter last year. Total mail volume was down 5.5 per cent from the same period last year. Meanwhile, the post office says on-time delivery reached record highs for all three categories of first-class mail that the Postal Service tracks. Overnight service was 97 per cent on time, two-day service was 95 per cent on time and three-day service was 94 per cent on time.
Dynegy is reporting a second-quarter loss after posting accounting losses on forward sales contracts. The Houston-based company says it lost $272 million compared with a profit of $76 million a year ago. Revenue is down to $323 million compared with $828 million a year ago. Thomson Financial says analysts expected revenue of $853 million. Those results typically exclude one-time charges. Dynegy operates 29 facilities in 13 states.
Blockbuster says its second-quarter loss widened even as sales rose 3.3 percent, as the company continued to restructure. The Dallas-based chain said its net loss expanded to $41.9 million the three months ended July 6th, from $31.4 million in the year-earlier period. The company says revenue rose to $1.3 billion from $1.26 billion last year. Analysts surveyed by Thomson Financial forecast revenue of $1.23 billion.