Business briefs for May 13, 2004

Thursday, May 13, 2004 | 10:41 a.m.

Wal-Mart, Target earnings increase

Wal-Mart Stores Inc. and Target Corp., the two largest U.S. discount retailers, said today first-quarter profit rose as shoppers spent larger tax refunds on clothing. Gas price increases may hurt sales this year, Wal-Mart said.

Net income climbed 16 percent to $2.17 billion, and sales in the quarter ended April 30 rose 14 percent to $64.8 billion, the biggest gain in more than two years, Bentonville, Ark.-based Wal-Mart said in a statement. Target, based in Minneapolis, said profit increased 26 percent to $438 million, the biggest jump in more than a year. Sales rose 12 percent to $11.6 billion.

Sales of clothing, which is more profitable than groceries, benefited both retailers. Wal-Mart Chief Executive H. Lee Scott said on a conference call that he is "optimistic" as employment and incomes rise. Consumer spending may be muted by rising gas prices, which the company estimates takes about $7 more a week from shoppers.

SEC shuts down LV transfer company

The U.S. Securities and Exchange Commission has shut down a local transfer company and fined its owner $25,000 for violating provisions of federal securities laws.

The SEC revoked Silverado Securities Transfer Inc.'s registration as a transfer agent and barred owner Shannon L. Baldino from association with any transfer agent after instituting administrative and cease-and-desist proceedings Monday.

Silverado was a registered transfer agent based in Las Vegas. Baldino was Silverado's sole owner, officer, director and employee.

The SEC said it found Silverado and Baldino violated provisions of federal law requiring transfer agents to keep records of transactions and provide them to SEC staff on request.

Citi buying Principal mortgage operation

NEW YORK -- Citigroup Inc., the world's biggest financial services company, said Wednesday it agreed to buy Principal Financial Group Inc.'s residential-mortgage business for $1.26 billion as rising interest rates increase the value of servicing mortgages.

Citigroup and Principal both do business in Las Vegas, but officials couldn't immediately be reached for comment on whether either company's Southern Nevada operations would be affected by the deal.

Citigroup will pay $290 million more than the book value of the assets and take on liabilities of $970 million, Des Moines, Iowa-based Principal said in a statement. The mortgage unit, which make loans, collects payments and sends statements to homeowners, had assets of about $6.9 billion as of April 30.

The New York-based bank is betting that fewer refinancings, which tend to erode the value of mortgages held by investors, will make the business of servicing existing mortgages more profitable. Mortgage-interest rates have increased about three-fourths of a percentage point in the past six weeks, leading to a slowdown in the number of applications to refinance.

Earnings rise a relief for Eisner

LOS ANGELES -- The Walt Disney Co. easily beat earnings expectations for its second quarter, a much needed win for Chief Executive Michael Eisner, who has staked his future at the media conglomerate on delivering a turnaround.

Disney's theme parks led the company's second fiscal quarter, helped by an increase in international travelers. Disney reported net income of $537 million, or 26 cents per share for the quarter ended March 31, compared with $314 million, or 15 cents per share for the same period last year.

Revenue ncreased 11 percent to $7.189 billion, compared with $6.5 billion in the same period last year.

Separately, Miramax Films chiefs Bob and Harvey Weinstein plan to buy Michael Moore's controversial film "Fahrenheit 9/11" back from The Walt Disney Co. and distribute it themselves, the studio announced.

Disney had blocked its Miramax unit from distributing "Fahrenheit" saying the film, which is said to be highly critical of President George W. Bush's handling of the terrorist attacks and their aftermath, is too politically charged in an election year.

Miramax spent about $6 million on the film. Terms of the reacquisition have yet to be determined, but the Weinsteins will likely have to repay Disney the production costs.

New media giant looking at MGM

NEW YORK -- General Electric Co., which on Wednesday merged its NBC unit with studios, cable channels and theme parks previously owned by Vivendi SA, may consider buying Metro-Goldwyn- Mayer Inc., NBC Universal Chief Executive Robert Wright said.

Wright said that he had waited until the deal was done to consider Metro-Goldwyn-Mayer, owner of a 4,000-film library.

"We're going to look at the MGM transaction," Wright said when asked about potential acquisitions in an interview in New York. "That's our business, so we should take a look at" Metro- Goldwyn-Mayer.

MGM, the film studio controlled by Kirk Kerkorian, is in negotiations to be bought by Sony Corp. and two buyout firms for $5 billion, people familiar with the matter said last month. Sony reached an agreement last week with MGM setting a 15-day period of exclusive talks regarding a possible takeover offer.

Sony spokeswoman Susan Tick declined to comment. Metro- Goldwyn-Mayer spokeswoman Janet Janjigian declined to comment.

Former CEO signs new plea deal

HARRISBURG, Pa. -- Rite Aid Corp.'s former Chief Executive Martin Grass agreed to serve up to 10 years in prison for pleading guilty to conspiracy, after a judge's rejection of an earlier prosecution agreement as too lenient.

Grass and U.S. prosecutors filed the agreement today in federal court in Harrisburg, Pa., where he pleaded guilty last June to conspiring to inflate earnings and plotting to obstruct U.S. investigations of a four-year accounting fraud at Rite Aid. Last month, U.S. Judge Sylvia Rambo said the eight-year maximum prison term in that agreement wasn't long enough.