Business briefs for May 3, 2002

Friday, May 3, 2002 | 11:10 a.m.

Writedowns prompt huge loss for Nevada insurer

SANTA ANA, Calif. -- PacifiCare Health Systems Inc., the biggest operator of Medicare health plans and a big insurer in Nevada, said it lost $858.8 million as it wrote down the value of acquisitions.

The loss was $24.86 a share, compared with net income of $13.2 million, or 39 cents, a year earlier, the company said. Revenue fell 5.5 percent to $2.86 billion from $3.03 billion.

Profit would have been $30.1 million, or 87 cents, without a $897 million writedown related to a change in accounting for goodwill and $12.9 million in reserves released after PacifiCare settled a lawsuit with the U.S. Department of Justice, the company said. On that basis, PacifiCare was expected to earn 72 cents, the average estimate of analysts polled by Thomson Financial/First Call.

"We believe this was a very good quarter for PacifiCare and that the stair-step improvement we've been talking about has manifest itself," Chief Executive Officer Howard Phanstiel told reporters on a conference call.

PacifiCare has struggled to meet medical costs that rose when it renegotiated contracts with California doctors to pay them based on the cost of care. PacifiCare in January cut 1,300 jobs, or 15 percent of its workforce, to reduce expenses. The company also faces a lawsuit in Texas over unpaid medical claims.

The company had 3.3 million customers when the quarter ended, down 13 percent from the year-earlier quarter and 4 percent from the end of the year as PacifiCare closed some Medicare health plans.

Premiums rose 15 percent for employer health plans and 10 percent for customers in Medicare and Medicare supplement plans.

Second firm shows new home sales increase

The second local real estate research firm in a week released statistics showing first-quarter new home sales in the Las Vegas Valley are up more than 5 percent compared to last year's record levels.

Home Builders Research Inc. said valley builders sold 5,471 new homes in the first quarter, up from 5,169 homes in the same quarter a year ago.

Despite a solid first quarter, Dennis Smith, president of Home Builders Research, stopped short of predicting another record year for new home sales locally, saying in a statement that uncertainty in the stock market, slowed local job growth and the "overall vulnerability of the national and local economies" might still take a toll on new home sales.

Sales of existing homes in the valley totaled 8,430 units, an increase of nearly 19 percent in the first quarter when compared to the same quarter a year ago.

The firm said the median new home price has crept up to $180,000, up from $168,900 in the same month a year ago, while the median price of an existing home rose 5 percent from a year ago to $142,000.

Mortgage operator released

David Ferradino, the former operator of insolvent Interstate Mortgage of Las Vegas, was released from custody Wednesday after he cooperated with the Attorney General's office's demands for full financial disclosure of his assets.

Ferradino was sentenced to five years of probation and ordered to pay $4.2 million in restitution to some 90 investors after he pleaded guilty to stealing from them. Ferradino, who still owes $2.09 million to the investors, was jailed at the Clark County Detention Center on April 24 after the state found Ferradino withheld information about his ability to pay the defrauded investors.

Deputy Attorney General Matthew Dushoff said Ferradino is now "forthcoming" and has provided financial documents including tax returns, bank statements and audited financial holdings.

"We need to find out what is his ability to pay restitution and what his financial status was. If assets need to be attached, we'll inform the judge of it," Dushoff said. "If he refuses to pay restitution, it could result in jail time again."

Vegas mall operator's profit improves

Pan Pacific Retail Properties, the largest neighborhood shopping center REIT on the West coast, posted a 10 percent increase in funds from operations in the first quarter.

The San Diego-based REIT's funds from operations in the first quarter totaled $24.2 million, or 71 cents a share, compared to $22 million, or 66 cents a share, in the same quarter a year ago.

The company, which owns Sahara Pavilion, Sahara Pavilion North, Cheyenne Commons and Winterwood Pavilion in Las Vegas, also reported a nearly 9 percent rise in earnings per share in the first quarter year-over-year to 49 cents a share.

It said as of March 31, its portfolio has an occupancy rate of nearly 97 percent.

Northrop Grumman takeover offer rejcted

LYNDHURST, Ohio -- TRW Inc. said today its shareholders voted to block Northrop Grumman's $6.7 billion hostile takeover attempt of the company, rejecting the defense contractor's bid to acquire more than 20 percent of TRW's shares.

A vote total was not immediately available, but TRW Chairman Philip Odeen said, "I would characterize it as a clear cut victory."

Northrop Grumman spokesman Randy Belote said the company was analyzing the vote and would release a statement later.

At issue in the special shareholders' meeting was whether Northrop Grumman should be allowed to buy more than 20 percent of TRW stock.

The vote means that if Northrop Grumman still wants to take over TRW, it will have do so through negotiations with the TRW board.

The Los Angeles-based defense contractor has been attempting to go directly to shareholders after suburban Cleveland company's board twice rejected Northrop Grumman bids as inadequate.

TRW is a large, diverse company involved in aerospace, defense, automotive parts and information technology. Northrop Grumman's most recent offer amounts to $53 of Northrop Grumman stock per TRW share.

Northrop Grumman would sell off TRW's auto parts business. TRW has proposed its own breakup plan that the TRW board has said would be worth more than Northrop Grumman's current offer.

Reverse split announced

PurchasePro announced Thursday it plans a reverse split of its stock, a move that should end the immediate threat of delisting for the Las Vegas e-commerce company.

Shareholders will receive one share of new stock for every five shares they now own, effective May 14. The move will reduce PurchasePro's outstanding shares from 88 million to 17.6 million.

Nasdaq companies are typically required to maintain a share price of $1 or higher to stay on the exchange; PurchasePro's stock has been below this level since Jan. 22. In addition to helping the company stay on the Nasdaq, PurchasePro Chief Executive Richard Clemmer said he hoped the move would deter short selling in the company's stock, "activity that has been, we believe, detrimental to PurchasePro's stock performance."

PurchasePro's stock fell 3 cents to 46 cents this morning.

Entertainment executive joins Harrah's board

Harrah's Entertainment Inc. of Las Vegas announced the election to its board of directors of Frank J. Biondi Jr., senior managing director of WaterView Advisors LLC, a private equity fund specializing in media.

Biondi previously was chairman and chief executive of Universal Studios and was a director of the Seagram Company Ltd. He is former CEO of Viacom Inc. and chairman and CEO of Home Box Office Inc.

"His vision, energy and experience as the top executive of leading entertainment companies will be invaluable to Harrah's Entertainment," said Harrah's Chairman and CEO Phil Satre.

Biondi is one of nine outside directors on the 11-member Harrah's board. Satre and Gary Loveman, Harrah's president and chief operating officer, are the two company representatives on the board.