Business briefs for April 19, 2002

Friday, April 19, 2002 | 9:49 a.m.

Debt deal lifts stock of Nevada insurer

SANTA ANA, Calif. -- PacifiCare Health Systems Inc. shares rose as much as 17 percent today after the biggest operator of Medicare health plans said it won a two-year extension on $735 million in debt.

Shares rose $3.64 to $25 in trading before U.S. markets opened. The shares have more than doubled since closing at $11.06 on Sept. 21.

PacifiCare, a big insurer in Nevada, said its lenders agreed to extend the debt until January 2005, giving the company more time to restructure as it battles rising medical costs and problems related to physician bankruptcies in Texas. The agreement requires PacifiCare to cut $250 million from its debt by Jan. 2, 2003, the company said after U.S. markets closed Thursday.

"We believe that the debt extension announcement begins to partially remove one of the major, dark clouds hanging over the stock," Morgan Stanley analyst Christine Arnold, who has an "underweight/inline" rating on the shares, said in a note to investors.

Experts see firm's demise as talks end

CHICAGO -- Arthur Andersen LLP's attempt to survive and Paul Volcker's proposal to change the firm and accounting industry probably will fail after Andersen ended settlement talks with the Justice Department, experts said.

Andersen, Enron Corp.'s auditor for 16 years, and the U.S. broke off talks Thursday to settle an obstruction-of-justice charge over shredding of Enron documents, and the government is preparing for a May 6 criminal trial. A guilty verdict probably would prohibit Andersen from auditing U.S. companies. Even the prospect of a trial may scare off remaining clients, accountants said.

Andersen is selling tax and consulting businesses as part of former Federal Reserve Chairman Volcker's rescue plan to refocus the firm on auditing. A trial victory may not be enough to avoid a bankruptcy filing as civil lawsuits loom, some of its U.S. auditors discuss joining rivals and the firm's global network crumbles.

Merger approved

Stockholders from both banks on Wednesday unanimously approved Bank of Nevada's plan to acquire Mesquite State Bank.

Federal and state regulators have already approved the merger plan, said John Gaynor, president and chief executive officer of Bank of Nevada. His Las Vegas-based community bank is scheduled to take control of Mesquite State Bank on April 27.

The 6-year-old Mesquite State, with assets of $50.5 million, will continue to operate under its current name as a division of Bank of Nevada.

Bank of Nevada reported assets of $53.5 million at the close of last year, the FDIC said.

Sears profit down

CHICAGO -- First-quarter net income tumbled 62 percent at Sears, Roebuck and Co. due to new accounting rules, but the retailer's efforts to improve margins and trim expenses paid off in a big leap in operating earnings.

The results released Thursday were consistent with a preliminary version issued last week which far surpassed Wall Street's expectations and sent Sears' stock soaring to a four-year high.

With results already factored in and Sears confirming a 0.6 percent decline in retail sales, shares declined 91 cents to $52.80 in afternoon trading on the New York Stock Exchange.

Net earnings were $110 million, or 34 cents a share, down from $176 million, or 53 cents a share, a year earlier.

The decline resulted from $190 million in charges, primarily for an accounting rule change that eliminates goodwill amortization. Sears also took charges for converting Eaton's stores to the Sears Canada name and for selling part of its investment in Advance Auto Parts.

Excluding the charges, Sears said operating earnings rose 107 percent to $300 million, or 93 cents a share, matching the number it previewed last week.

Revenues rose to $9.04 billion from $8.86 billion, thanks to a 26 percent increase from credit and financial products. Merchandise sales and services, which account for 85 percent of revenues, slipped to $6.77 billion to $6.81 billion.

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