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A while ago, I wrote in Slate about how gift cards are generally bad news for consumers, good news for corporations, and somewhat inefficient means of giving gifts. Yesterday, Williams-Sonoma proved me right. In this filing (scroll down to the earnings guidance release), the company notes that it plans to record:
"a benefit of approximately $12 million before tax or $0.062 per diluted share associated with unredeemed certificates. During the second quarter of fiscal 2006, we completed an analysis of our historical gift certificate and gift card redemption patterns, which included an independent actuarial study. Based on this analysis, we concluded that the likelihood of our gift certificates and gift cards being redeemed beyond four years from the date of issuance is remote. As a result, we have changed our estimate of the elapsed time for recording income associated with unredeemed gift certificates and gift cards to four years from our prior estimate of seven years. This change in estimate will result in income recognition of approximately $12 million before tax in other income in the second quarter of fiscal 2006."
Translation: $12 million spent on Williams-Sonoma gift cards and gift certificates was utterly wasted because the recipients lost them or decided not to use them. What a great business!
Posted by dan at 08:11 AM
And give cheap money to Barry Diller to build upscale buildings. Terry Pristin reports in the New York Times on the Liberty Bond program.
A milestone was reached yesterday in the federal Liberty Bonds program, which was created to help Lower Manhattan and the New York economy recover from the Sept. 11 terrorist attacks by giving developers access to billions of dollars in low-cost tax-exempt financing.Once officials issue the bonds that were earmarked yesterday, the $8 billion designated for the program will be depleted, ending a program that critics say has benefited developers and high-profile corporations at the expense of ordinary New Yorkers.
As part of an agreement reached with the developer Larry A. Silverstein in April, the city Industrial Development Agency gave preliminary approval to using all but $50 million of its remaining bond authorization for projects at the World Trade Center site, including $702 million for the Freedom Tower and the retail portion of the office buildings, which will be owned by the Port Authority. (Mr. Silverstein’s recently opened 7 World Trade Center received $475 million in Liberty Bonds; three additional towers on the site will receive $2.6 billion, provided that Mr. Silverstein meets his deadlines.)
The other $50 million in bonds was tentatively approved for a 220-room luxury hotel to be developed by the Moinian Group, a New York developer, on a site south of ground zero adjacent to the Deutsche Bank Building, which is scheduled for demolition. . .
Authorized by Congress in 2002, the Liberty Bonds program is unusual in that it awards bonds exempt from federal, state and city taxes to commercial projects that are not in blighted areas. The city and state were authorized to issue $4 billion worth of bonds each, with up to $1.6 billion to be used for residential rental projects and up to $2 billion for commercial buildings outside the so-called Liberty Zone, below Canal Street.
New commercial projects receiving Liberty financing had to be 20,000 square feet within the Liberty Zone and 100,000 square feet in other neighborhoods. The bonds are issued by four city and state agencies, which follow different procedures.
From the outset, residential developers were eager to take advantage of the program. In all, Liberty Bonds went to 13 residential buildings with 4,468 market-rate units, including one that was already in the works before the attacks. Two additional projects, with at least 500 apartments, are awaiting final approval.
Bettina Damiani, a project director for Good Jobs New York, a nonprofit organization that has monitored the Liberty Bond program, noted that firefighters, police officers and teachers would not be able to afford to live in the market-rate housing built with public subsidies. “All the brilliant minds we have in New York couldn’t find a way to develop housing that would benefit everyone,’’ she said. “They are going to use federal funds to help create an economically gentrified area.’’ . .
If developers of residential projects were quick to embrace the Liberty Bond program, commercial developers were much slower to respond. So early on, officials awarded the low-interest financing to other projects that they believed would benefit the city’s economy. A division of Forest City Ratner got $90.8 million worth of financing to build a new office tower in downtown Brooklyn for the Bank of New York, which suffered heavy losses on Sept. 11. (Forest City Ratner, The New York Times Company’s partner in the development of a new headquarters building on Eighth Avenue, applied for Liberty Bond financing for that project but was turned down.)
In a more controversial move, the city awarded $650 million worth of bonds for the 51-story Bank of America Tower at One Bryant Park, which the Durst Organization and the bank are building at 42nd Street and the Avenue of the Americas, in what is now one of the hottest real estate markets in the country.
In the only other successful Liberty Bond application for a project outside downtown, the IAC/InterActiveCorp, an Internet company founded by Barry Diller that owns TicketMaster and Ask.com, received $80 million for a new headquarters building designed by Frank Gehry along the West Side Highway at 18th Street.
Posted by dan at 07:56 AM
There's some good stuff buried in Sheryl Gay Stolberg's generally upbeat story about President Bush and the economy in today's New York Times
First, President Bush visits a shoe factory.
The factory, Allen-Edmonds, specializes in high-quality men’s dress shoes, including some owned by Mr. Bush.By visiting, the president sought to draw attention to a company that has resisted industrywide pressure to move its operations overseas.
The company president, John Stollenwerk, gave Mr. Bush a pair of red, white and blue wingtip shoes, which the president promptly put on.
Mr. Bush said Allen-Edmonds had benefited from his tax cuts, calling it “an American-based company making good American products.”
Make that good, really expensive American products. Take the good-looking Bradley model. It retails for $425.00, about two third what an average worker earns in a week.
And then there's this great bit from clueless Bush adviser Al Hubbard, who probably has a large collection of Allen-Edmonds shoes.
In addition to Mr. Bush’s appearances, other administration officials, including Rob Portman, director of the Office of Management and Budget, and Al Hubbard, director of the National Economic Council, were also giving interviews and making public appearances.“Obviously, it’s frustrating to us that the American people don’t recognize how well the economy is doing,” Mr. Hubbard said.
Posted by dan at 07:50 AM
Something tells me next year's television network upfront ad sales period will be contentious. Brian Steinberg and Brooks Barnes report in the Wall Street Journal (Note the characteristic Jeff Zucker bravado):
Nielsen Media Research, the firm that calculates national television ratings, plans to answer one of advertising's most pressing questions: How many people actually watch TV commercials?In November, Nielsen will begin for the first time to provide formal ratings for commercial breaks, a move with far-reaching implications for the fast-changing media world. . .
Both TV networks and advertisers expect the new Nielsen ratings will show that viewership declines noticeably when a program breaks for commercials. A particularly big drop could fuel advertisers' push for changes in how ads are incorporated into shows, reinforcing demands for fewer or shorter ad breaks and lower ad rates. It could also accelerate the flow of advertising dollars out of television to the Internet and new digital media.
"Prices should go down," says Bruce Goerlich, executive vice president and director of strategic resources at Publicis Groupe SA's ZenithOptimedia, a firm that buys advertising time on behalf of corporate clients and other marketers. "If I was a buyer, I would be taking the stance of, 'Quite frankly, what you said you were delivering, you weren't.' "
Television executives aren't likely to roll over, though. Jeff Zucker, chief executive of General Electric Co.'s NBC Universal Television Group, says there's "no reason to believe" the new ratings will put pressure on prices. "The bottom line is that there is still no better way to reach a mass audience," he says.
Posted by dan at 11:00 AM
Alan Beattie reports in the Financial Times on the latest twists and turns in the Doha trade agreements.
President George W. Bush called a meeting of senior US administration officials yesterday to discuss the "Doha round" of global trade talks, amid accusations from the European Union and many developing countries that US intransigence was blocking a deal.The administration did not give details on the White House talks, but officials from other leading countries in the Doha negotiations said they were hoping the US would offer to cut farm subsidies by more than its original proposal.
Pascal Lamy, director-general of the World Trade Organisation, has been trying to broker a deal between the six leading partners in the talks - including the US and EU - ahead of an end-July deadline for an outline agreement.
Strong indications from Mr Bush three weeks ago that he wanted to do what was necessary to save the talks have not been reflected in US officials offering unilateral concessions. This resulted in the almost complete isolation of the US at an abortive meeting of trade ministers in Geneva 10 days ago.
Posted by dan at 10:32 AM
Stephany Griffith-Jones and Robert Shiller make the case for GDP-linked bonds in the Financial Times.
Posted by dan at 10:30 AM
Question for the day. If there's nothing wrong, inappropriate, or unseemly about backdating options, why has CNET announced that it plans to restate financial statements for several years?
Posted by dan at 10:22 AM
Rep. James Sensenbrenner of Wisconsin is what passes for an expert in domestic policy, primarily because of the number of domestics he employs. Mark Leibovich reports in the New York Times:
Representative F. James Sensenbrenner Jr. has no tolerance for illegal immigrants, either in his political life or personal life.“My housekeeper in Wisconsin was born in Wisconsin,” says Mr. Sensenbrenner, the Republican congressman and chairman of the House Judiciary Committee. “My housekeeper here is a naturalized U.S. citizen from Nicaragua.”
Mr. Sensenbrenner is so loath to risk dealing with illegal immigrants that when his Cadillacs need cleaning, he prefers do-it-yourself car washes that require tokens. “They don’t have Montezuma’s picture on the front of them,” Mr. Sensenbrenner says of the tokens.
Are we to presums, as well, that Sensenbrenner avoids eating in Washington restaurants, where his table might be cleared by an illegal immigrant? Or that he doesn't eat lettuce, or fruit that has, more likely than not, been picked by an illegal immigrant? Clearly, he's not lacking for food.
Posted by dan at 10:18 AM
My latest in Slate, on the latest kerfluffle over the monthly jobs numbers.
Posted by dan at 10:08 AM
From the National Review's editorial on immigration today.
Throughout this debate we have argued that our national experience with immigration has been, on balance, a positive one because we have assimilated immigrants.
On balance? That's a little like saying that humankind's experience with, say, water, is on balance a positive one. Discussion question for the know-nothings and nudniks at National Review and elsewhere: without immigration, precisely what would our "national experience" have consisted of?
Posted by dan at 12:08 PM
Excellent cover story in Business Week by Ben Elgin on Direct Revenue, the sleazy purveyor of pop-up ads and spyware--and the blue-chip brands and institutions that enable it.
Posted by dan at 09:41 AM
Has Jesse Jackson been given a column in the Sunday New York Times business section? Nope. It's just Ben Stein, going all raging lefty on us. From his column in the New York Times.
Life in America in 2006 for an upper middle-class person like me — who, although overweight, still has decent health — is just paradise. There is no place like this place, a shining city on a hill, a gift from God every moment of every day.But still, with all of that, something is seriously wrong. I could put it into statistics, and in a small way, I will, but I'll mostly put it in layman's terms.
When I was a lad, the chief executive of a major public company was paid about 30 or 40 times what a line worker was paid. Now the multiple is about 180. What did they do in the executive suite to become so great? Upon what meat do they feed? Why, as we are being killed by foreign competition, do we need to pay our executives so much?
We have investigators looking into whether some corporations paid their executives with stock options whose strike price was retroactively determined to be the lowest price of the quarter, so that the options were "in the money" from Day One. After opening investigations into the remarkable timing of some of their own option grants, several companies restated their financial reports, which makes it straight-up fraud in my book. Not one person has been charged with any crime, while young black men and women who sell a tiny amount of drugs on a street corner do hard time. How can this be right?
We have immense corporations that cry the blues all day long about how their pension costs are ruining them and how they have to freeze pensions or lay off workers or end pensions altogether (can you say "Friendly Skies?") and turn over the pension liabilities to the taxpayers. And the same corporations set aside many millions for the superpensions of the top executives.
Even at my own beloved General Motors, whose Cadillacs I love so much — precisely because I think of them being made by the sons and grandsons of men who fought in Vietnam and at Peleliu and other bloody World War II battlefields — there is severe action to have workers quit and to lower their pensions.
At the same time, however, spectacularly large executive pensions, coming straight out of profits, keep G.M.'s retired top dogs happily playing golf at the Vintage, while the men who actually made the cars are saying: "Welcome to Wal-Mart. How can I help you?"
As I endlessly point out, taxes for the rich are lower than they have ever been in my lifetime. (To be fair, taxes for the nonrich taxes are very low as well.) And this is occurring as we accumulate government liabilities that will kill us in the long run. (And cutting spending will not work. Most federal and state spending is for items that are untouchable, like Medicare, education, the military — and, most cruelly of all, interest on the national debt. Every president promises to cut spending and not one of them does it unless a war comes to an end.)
We are mortgaging ourselves to foreigners on a scale that would make George Washington cry. Every day — every single day — we borrow a billion dollars from foreigners to buy petroleum from abroad, often from countries that hate us. We are the beggars of the world, financing our lavish lifestyle by selling our family heirlooms and by enslaving our progeny with the need to service the debt. . . .
Is this America, where far too many of the rich endlessly loot their stockholders and kick the employees in the teeth, the America that our soldiers in Ramadi and Kirkuk and Anbar Province and Afghanistan are fighting for? Is this America, where we will end up so far behind the financial eight ball we won't be able to see because of mismanagement by both parties, the America that our men and women are losing limbs for, coming home in boxes for?
Posted by dan at 09:36 AM
Gretchen Morgenson fillets the Business Roundtable's remarkably dishonest "study" on executive compensation. (It should be noted that Alan Murray of the Wall Street Journal fell for it hook, line, and sinker last week.)
THE Business Roundtable published an 11-year analysis of pay practices at 350 of the nation's largest companies last week, aiming, it said, to set the record straight on executive compensation. Care to guess what this lobbying organization representing 160 chief executives of top United States companies concluded? That pay dispensed to those in the corner office is entirely justified by growth in the shareholder returns at the companies they run.Using the roundtable's figures, chief executives' compensation — up only 9.6 percent annually from 1995 to 2005 — has not even kept pace with total stockholder returns of 9.9 percent at the companies the executives stewarded during the same period.
"We wanted to try and promulgate a consistent set of facts because a lot of what we have seen in the media on executive pay we felt was misleading," said Thomas J. Lehner, the roundtable's director of public policy, in an interview last week. . . .
But wait. A closer look at the roundtable's data shows that it omitted a tidy pile of pay from its calculation. The study's figure for "total" executive compensation is anything but that. . .
For starters, the total pay figures exclude dividends paid to executives on their restricted stockholdings — not an inconsequential figure, in many cases.
The total shareholder return to which the roundtable compares executive pay does, however, include dividends. Apples and oranges.
The roundtable study also excludes what executives have made by cashing in stock options and restricted stock over the 11 years — enormous numbers, in many cases. Instead, the study counts only the value of the options and restricted stock received by the 350 executives on the dates the awards were made. Hide and seek. . .
That the roundtable doesn't consider options and restricted shares to be real money is reminiscent of Silicon Valley executives arguing that options shouldn't be accounted for as an employee cost because their precise value was hard to calculate. Cute, but not credible.
Pension benefits, deferred compensation and money received in severance packages — serious lucre all — are also missing from the roundtable's calculation. Finally, the study's total pay figure includes only the targeted value of all other performance-based cash or stock awards granted executives, in addition to the options and restricted stock already considered. These values, of course, can be much lower than what companies actually dispense. Shell game. . .
Frederic W. Cook, the founding director of a compensation consulting firm based in New York, who is considered to be an authority on executive pay, produced the roundtable's study. He used numbers provided by Mercer Human Resource Consulting, a unit of Marsh & McLennan.
Asked why he excluded dividends on restricted shares from his analysis, Mr. Cook conceded that it did make for an apples-and-oranges comparison. But they were excluded, he said, because not all companies pay them, and because those that do, don't disclose them. He offered a similar rationale about his exclusion of pension, severance and deferred compensation amounts from his analysis: such figures are not found in proxies, he said, so he couldn't include them.
As for using a target instead of an actual value on performance-based awards, Mr. Cook said: "We certainly weren't trying to make the number higher or lower because if the typical plan is three years, the target has a little bit of stretch in it, like a bonus: sometimes it earns more and sometimes less."
Why exclude the mountains of cash generated by executives' stock option exercises over the 11 years? "It's flawed to look at realized gains because they most often represent years of grants," Mr. Cook said. "We felt the critics of executive comp were falling into the trap of using the big gain numbers, which could represent grants earned over multiple years." . . .
Given all these omissions, how can Mr. Cook contend that total C.E.O. pay has lagged behind shareholder returns? "I felt it was a fair correlation, based upon the S.E.C. requirements as they now exist," he said.
This is not the first time that Mr. Cook has trotted out these numbers as evidence that executive pay today is both fair and fitting. They were also the basis for his testimony last May before a House Financial Services Committee hearing on executive compensation. "The media has been flooded with a multitude of distorted, misleading and oftentimes erroneous statistics to portray U.S. C.E.O.'s and board governance in a negative light," Mr. Cook said in his testimony. The roundtable recycled those exact, thunderous words in its study last week.
Posted by dan at 09:30 AM
Kirshna Guha and Holly Yeager have a very strange, large article in today's Financial Times on the expectations that new Treasury Secretary Henry Paulson will single-handedly revive the fortunes of the Bush administration and rescue its legacy of irresponsible fiscal policy and uneven record on economic issues. And what leads the FT's reporters to believe that? Why, a bunch of former administration executives--many of whom bear responsibility for the mess that Paulson is trying to clean up--said so. The only people quoted on the record were: Glenn Hubbard, Don Evans, John Taylor, Pam Olson, and Douglas Holtz-Eakin.
This is just silly stuff. Anybody who watched Paulson's performance at his confirmation hearings, and who paid attention to Bush's press conference last Friday can realize that while the personnel may be changing, the essentially story and the essential spin remain the same. Deficits? Hey, never mind the $4 trillion in debt we've piled on in six years, the deficit is manageable. Wages stagnating? We're hoping for improvement. And so on. Plus ca change.
Posted by dan at 09:16 AM