The Wendy’s Co. returned to a first-quarter profit as it recorded a large gain on the sale of an investment.
The casual dining chain reported net income of $12.4 million, or 3 cents per share for the period ended April 1. That compares with a loss of $1.4 million, or breakeven results, a year ago.
Excluding items, earnings were 1 cent per share. Analysts expected earnings of 3 cents per share.
Revenue rose 2 percent to $593.2 million. That missed Wall Street’s estimate of $608.1 million.
Its shares fell 22 cents, or 4.5 percent, to $4.65 in premarket trading.
Company-run restaurant margin fell due to increased commodity costs, particularly for fresh beef.
The Dublin, Ohio company cut its 2012 earnings forecast mostly because of weaker-than-expected sales and the company-run restaurant margin.
It’s barely a rounding error in their multimillion-dollar pay packages, but America’s imperial CEOs are losing some of the trappings of power.
Companies that once paid for their leaders’ cars and club memberships – and sometimes handed them extra cash to pay the taxes on those goodies – are now taking a principled stand against perquisites.
Among St. Louis firms, Olin and Spartech eliminated their executive perks at the beginning of last year. Express Scripts, Reinsurance Group of America, MEMC Electronic Materials and a few others already had no-perks policies.
Spartech used to give auto allowances of more than $10,000 to some executives. Olin provided company cars along with financial planning services to help executives manage their millions. As of last year, those goodies are gone.
Pay consultant Steven Hall says Olin and Spartech are part of a trend. “In the last few years, companies have been eliminating these kinds of benefits,” he said. “In some cases, the amounts are not meaningful at all, but companies are saying it’s a matter of principle.”
Hall, managing director of Steven Hall & Partners in New York, was speaking about the largest U.S. companies, which tend to be trendsetters in pay practices. St. Louis CEOs, especially at smaller companies, have been slower to give up their perks.
Among 40 St. Louis companies that have made their pay disclosures for 2011, three-fourths offered special benefits to top executives. A car allowance was the most common perk, offered by 17 companies. Fourteen firms let the boss and/or a spouse take personal flights on the company dime, and 12 paid for club dues. Six gave the boss extra cash to pay taxes on the benefits, a practice that shareholder-advocacy groups frown upon.
One of the longest lists of perks went to payday loan.stltoday.com/business/columns/david-nicklaus/smaller-bonus-shrinks-pay-total-for-viasystems-ceo/article_84c7c0e0-7384-11e1-b7ba-0019bb30f31a.html” target=”_blank”>Viasystems Chief Executive David Sindelar: a $33,994 car allowance, $15,337 worth of financial consulting, $31,296 in club dues, $61,603 for entertainment, $6,110 worth of continuing education and $1,000 in charitable contributions. Some of those amounts were grossed up to cover taxes.
The biggest single perk, though, belonged to David Farr, chief executive of Emerson. Farr took $304,007 worth of personal flights on company aircraft, a practice that Emerson justifies on security grounds.
Other frequent fliers included Energizer CEO Ward Klein, who took $176,478 worth of free flights; Brown Shoe Chairman Ronald Fromm ($165,365) and Monsanto CEO Hugh Grant ($124,665).
Free flights seem to be the one perk that isn’t going away, Hall says. Companies justify it based on security – Emerson and others actually require their CEOs to use company planes for all trips – and efficiency.
For watchdog groups, though, such perks are a red flag. They are indicators of an entitlement mentality and a situation in which the board is subservient to an imperial CEO.
As the Corporate Library, a governance-research firm that’s now part of GMI Ratings, said in a 2010 study, “If the board cannot set appropriate limits for the CEO in this regard, will it be able to do so in matters of greater strategic consequence?”
China
The bulls weren’t bullish enough.
The stock market just had its best first quarter in 14 years. The surge has sent Wall Street analysts, some of whose forecasts seemed too sunny three months ago, scrambling to raise their estimates for the year.
“That it’s up isn’t surprising. It’s the magnitude,” says Robert Doll, the chief equity investment manager at BlackRock, the world’s biggest money manager.
Doll says stocks could rise 10 percent more before the end of the year. That would be enough to push the Dow Jones industrial average to an all-time high and the Standard & Poor’s 500 close to a record.
For the first three months of the year, the Dow was up 8 percent and the S&P 12 percent, in each case the best start since the great bull market of the 1990s. The Nasdaq composite index, made up of technology stocks, has had an even more remarkable run _ up 19 percent for the year, its best start since 1991.
“I don’t think anyone could have predicted this,” says Chip Cobb, a senior vice president at Bryn Mawr Trust Asset Management. For these gains, he says, “I thought it would take all year.”
The jump gives money managers like Cobb hope that ordinary folks burned by two deep bear markets in a decade will start buying again, propelling the indexes even higher.
In a remarkable act of self-restraint _ or foolishness, depending on your view _ they have mostly stayed out of the market. One reason they may jump in now is that fear of looming disasters, like a full-blown debt crisis in Europe or a second recession in the United States, has faded.
Bulls say investors will turn their attention to the only thing that really matters for stock prices in the long run _ corporate profits.
Another hopeful sign for gains is that those who have been buying stocks appear to be taking bigger risks than before, suggesting growing confidence.
Last year, investors put much of their money into so-called defensive stocks, such as utilities and health care companies, which make money in bad times as well as good. This year, it’s the risky fare that’s being scooped up.
Financial stocks are up 22 percent, the best among the 10 industry groups within the S&P. Technology companies are up 21 percent. Consumer discretionary stocks, like hotels and cable companies, are up 16 percent.
Utilities are down 3 percent for the quarter, the only group in the red.
Standard & Poor’s Capital IQ, a research firm, predicted at the beginning of the year that the S&P would hit 1,400 by the end of the year. By March 15, it had hit 1,403, and on Friday it was at 1,408.
“We were originally accused of being too optimistic,” says Sam Stovall, chief equity strategist at S&P Capital IQ. “It doesn’t mean we can’t have a 10 percent correction, but it’s unlikely we will.”
The Dow is less than 1,000 points away blow its all-time high of 14,164.53, set Oct. 9, 2007. The S&P is about 150 points from its record close of 1,565.15, set the same day.
The first day of the year set the tone. On Jan. 3, the Dow rose 180 points. Later that month, the Federal Reserve said it would probably keep benchmark interest rates near zero for almost three more years. That sent stocks to their highest levels since May 2011.
It was the best January for stocks since 1997. Skeptics pointed out that profits at U.S. companies, after jumping by double-digit percentages for eight quarters in a row, seemed to be growing much more slowly. They also worried that the number of shares of stock traded each day was low, which suggested a lack of conviction by buyers.
Stocks kept climbing anyway, passing two milestones in quick succession.
On Feb. 28, the Dow rose above 13,000 for the first time since May 2008, four months before the financial crisis hit that September payday loan lenders. Two weeks later, it was the Nasdaq’s turn. It crossed 3,000 for the first time since the dot-com frenzy a dozen years earlier.
Even a few duds got caught in the upswing. The stocks of Microsoft and Cisco have barely budged this century. This year, they have have risen 24 percent and 17 percent, respectively. Dell, which has languished for years, is up 13 percent.
Some of the big winners of 2012 are perhaps less surprising: Apple has risen 48 percent. Lions Gate Entertainment, the company behind the hit movies “The Hunger Games” and “Twilight,” is up 67 percent.
As if the surge weren’t enough, the markets impressed long-time stock investors with the way it climbed _ slowly and steadily, without the wild swings of bravado and panic that characterized the market much of last year.
The gap between the daily high and low for the S&P has averaged about 0.9 percentage points. It was three times that early last fall, when the market was obsessed with debt problems in Europe and at home, among other fears.
Investor attention turns next to corporate earnings announcements, which begin when aluminum maker Alcoa, one of the 30 stocks that make up the Dow, reports April 10.
Companies in the S&P 500 are making more money than ever, an impressive feat in a tepid economic recovery.
Those who are bullish on stocks note that the S&P 500 trades at 12.9 times expected earnings this year, somewhat cheap compared with its 10-year average of 14.6.
The so-called forward earnings multiple is generally higher than the long-term average during bull markets. If it rose to 16 or 18 this year, stocks would be significantly higher than they are now, even if corporate earnings failed to grow at all.
Some investors say the bulls are fooling themselves if they think big profits this year are assured. Indeed, first-quarter profits for the S&P 500 are expected to fall 0.1 percent from a year earlier, according to a survey of analysts by FactSet, a provider of financial data.
That would be the first time in more than two years that earnings will not have grown. For the full year, analysts are expecting profits will rise a healthy 9 percent, but those predictions depend on a surge of 16 percent in the last three months.
“The idea that we’re going to have a huge rebound at the end of the year is unrealistic,” says Barry Knapp, head U.S. equity strategist at Barclays Capital.
Knapp says he’s bullish on technology stocks but the rest of the market has “overshot the fundamentals.” He says he’s sticking with his target for the S&P this year: 1,330, which would be a drop of about 6 percent from Friday’s close.
Other skeptics of the surge point to the role of central banks around the world in lifting markets by printing money, lending at near-zero rates and buying bonds and other securities.
The fear is that once that support is removed, stock prices could fall, and all the talk about profits could prove beside the point.
The same day the Nasdaq broke through 3,000 earlier this month, Michael Hartnett, chief global equity strategist at Bank of America, published a report with a curious chart showing how stocks reacted to programs by the Federal Reserve to buy bonds, or big announcements about lending rates.
In every case since the market hit a 12-year low in March 2009, prices jumped on the Fed moves, then fell when the programs ended. A question above the chart asked whether it was time to move more money into stocks.
Hartnett’s answer was no. The bank expects the S&P to end the year at 1,400, almost exactly where it is now.
Egypt
It should be a no-brainer: a popular bill with bipartisan support that bans insider trading by members of Congress.
The legislation is known as the Stop Trading on Congressional Knowledge Act, or the Stock Act. It gained momentum last year after an explosive 60 Minutes report that accused several prominent representatives of insider trading using government information. President Obama urged the bill’s passage in his State of the Union address last month.
Now, however, the bill is stuck in part due to a disagreement over a provision that requires so-called "political intelligence" professionals to register with the government and disclose their activities in the same way that lobbyists do.
The disagreement puts the spotlight on an industry that has previously escaped the notice of most Americans. But despite its relatively low profile, political intelligence is big business.
Political intelligence professionals get paid big bucks to gather information about government policy and pending legislation, often through lawmakers or other public officials. Their clients include hedge funds, mutual funds, pension funds and wealthy individuals who use the information to guide investment decisions.
Under one version of the Stock Act, political intelligence practitioners would have to reveal who their clients are, how much they get paid for their research, and what issues they’re hired to gather intelligence on.
"If you seek information from Congress in order to make money, the American people have a right to know your name and who you’re selling that information to," Senator Chuck Grassley of Iowa said in congressional debate earlier this month.
The idea is that shining a light on the industry will help ensure that such firms are confined to objective research and analysis and are not simply providing insider trading tips based on government knowledge.
Amazingly, there are no clear prohibitions on these kinds of insider tips at the moment.
The Senate passed a version of the Stock Act by a margin of 96-3 that included the registration requirement. The House version sailed through last week with similar support — a 417-2 vote — though it scrapped the registration requirement and called only for a government study of the political intelligence industry.
Even without the political intelligence provision, the Stock Act would prohibit Congressmen and other federal employees from exploiting non-public government information or using it to tip off others, and would require them to report investment transactions within 30 days.
Rep. Louise Slaughter told a congressional committee in December that the political intelligence industry brings in $100 million a year in the U.S., and Mayhew estimated that there are roughly 300 firms worldwide providing political intelligence and policy research.
"Political intelligence firms have increasingly become an issue — they have proliferated — and I think part of the issue here is that until the Stock Act, most Americans didn’t even know about the political intelligence industry," said Melanie Sloan, executive director of the progressive watchdog group Citizens for Responsibility and Ethics in Washington.
The political intelligence field bears some similarities to so-called "expert networking" firms in the corporate world, which connect hedge funds and mutual funds with consultants who provide insight about particular companies.
While such firms offer legitimate market research, some have also been accused of passing non-public, inside information to clients as part of the government’s ongoing crackdown on insider trading at hedge funds.
"There is an increasing problem with Wall Street recognizing that they can get inside information not just from corporate insiders, but from the government," Sloan said.
Some in Congress worried that the political intelligence registration requirement was drafted too broadly and required further study. Laena Fallon, a spokeswoman for House Majority Leader Eric Cantor, said in an email that it could affect a range of people from "local rotaries to national media conglomerates."
But Grassley, who added the registration requirement to the Senate bill, called it "astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision." Grassley’s amendment passed the Senate by a vote of 60-39, and included an exception for journalists "disseminating news and information to the public."
"If Congress delays action, the political intelligence industry will stay in the shadows, just the way Wall Street likes it," the senator said in a statement.
Why three senators said no to an insider trading ban in Congress
Looking ahead: A spokeswoman for the Senate’s Governmental Affairs Committee said staffers were unsure of when the two congressional chambers would resolve their disagreement and when the Stock Act might be finalized.
Should the registration requirement go into force, hedge funds and other political intelligence customers who don’t want their identities disclosed may pull back from such services, Mayhew said.
Yet even if it passes without the registration requirement, the Stock Act will still likely have an impact on political intelligence firms, as it will become illegal for them to pass on non-public information gleaned from government officials.
Just as they did during the expert networking crackdown, Wall Street firms will have to beef up their internal regulations to make sure they don’t receive non-public information in the guise of legitimate research, Mayhew said.
"The information will continue to be extremely important, but ultimately, they’re going to be a lot more careful about how they use it," he said.
A coalition of labor and trade activists joined Democratic lawmakers from industrial states Tuesday to push the Obama administration to take action against the growing imports of auto parts from China.
The push to limit Chinese auto imports comes a week after President Obama announced in his State of the Union address that he was creating a trade enforcement unit to bring cases against countries, mentioning China by name.
It also comes two weeks ahead of a Washington visit by Chinese Vice President Xi Jinping, seen as likely to become president of China when Hu Jintao’s term ends next winter.
Criticism of China’s currency valuation and other trade practices are likely to be a point of contention between the two major trading partners at the Obama-Xi meeting, especially as the U.S. election season heats up.
Those who participated in the Capitol Hill news conference had praise for the Obama administration’s rescue of General Motors (, Fortune 500) and Chrysler Group in 2009, as well as its past trade cases against China. (GM back on top in global sales race)
But they argued that unless there were new cases brought against Chinese parts imports that even more jobs were at risk, since 75% of those employed in the auto industry work for parts suppliers rather than the automakers themselves.
"We’re very proud of the turnaround in the Big Three, but we can’t sit back and celebrate their comeback as long as China unabashedly steals jobs from small businesses who make up the majority of the American automobile industry," said Sen. Debbie Stabenow, a Democrat from Michigan.
The Democratic lawmakers who spoke Tuesday came from Michigan, Ohio and Pennsylvania, all expected to be key battleground states in this November’s general election.
Experts who spoke Tuesday argued that when China targets an industry, it can quickly come to dominate sales.
"If these policies are not stopped, by the end of this decade, China could seize 50% of more of our auto parts market, costing additional hundreds of thousands of U.S. jobs" said Terrence Stewart, an attorney who has won trade cases against China in the past. "The last 15 years of watching other industries will tell you that’s not (just) a possibility but a high likelihood if there is not something done."
The critics say China’s improper support comes in the form of direct subsidies, as well as restrictions on U.S. operations in its market. China has become the largest market for auto sales in the world, and U.S. suppliers’ limited access gives Chinese parts manufacturers an unfair advantage, the critics argued.
Among those joining the presentation Tuesday were the Alliance for American Manufacturing, a trade group supported by small manufacturers and the United Steelworkers union, as well as the Economic Policy Institute, a liberal think tank, and the United Auto Workers.
But missing from the presentation were officials from GM, Ford Motor (, Fortune 500), Chrysler or their suppliers, many of whom have their own plants in China and don’t want to risk alienating Chinese officials by calling for tough trade actions.
"At this point, all the major auto parts producers are invested in China," said Robert Scott, international economist with the Economic Policy Institute. "Not only do they want these subsidies, they’re afraid to complain that they will lose share in China."
China has recently imposed its own tariffs on U.S. vehicle exports to China that would significantly raise the price of any vehicles exported there. It alleges that the U.S. industry is itself benefiting from unfair subsidies.
But even though GM now sells more cars in China than it does in the United States, the Chinese duties will have little impact on its sales there, since less than 0.5% of its Chinese sales are cars built in the United States.
Asked about the move at the Detroit auto show earlier this month, GM CEO Dan Akerson refused to criticize the Chinese action against U.S. exports, saying "All countries, including the United States, have tariffs."
An Italian coast guard official vehemently demanded that the captain go back to his crippled cruise ship to oversee its evacuation, but the captain repeatedly resisted, according to a shocking audiotape made public Tuesday.
Prosecutors have accused Capt. Francesco Schettino of manslaughter, causing a shipwreck and abandoning his ship before all passengers were evacuated during the grounding of the Costa Concordia cruise ship off the Tuscan coast on Friday night.
The death toll nearly doubled to 11 on Tuesday when divers extracted five more bodies from the ship’s wreckage. All were adults wearing life jackets and were found in rear of the ship near an emergency evacuation point, according to Italian Coast Guard Cmdr. Cosimo Nicastro. He said they were thought to have been passengers.
Prior to that discovery, the coast guard had raised the number of missing to 25 passengers and four crew. Italian officials gave the breakdown as 14 Germans, six Italians, four French, two Americans, one Hungarian, one Indian and one Peruvian. But there was still confusion over the numbers, with the German Foreign Ministry in Berlin listing 12 Germans as confirmed missing.
The Costa Concordia was carrying more than 4,200 people when it hit a reef off the Tuscan island of Giglio after Schettino made an unauthorized deviation from the cruise ship’s programmed course, apparently as a favor to his chief waiter, who hailed from the island.
Schettino has insisted that he stayed aboard until the ship was evacuated. However, a recording of his conversation with Italian Coast Guard Capt. Gregorio De Falco indicates he fled before all passengers were off _ and then resisted De Falco’s repeated orders to return.
“You go on board and then you will tell me how many people there are. Is that clear?” De Falco shouted in the audio tape.
Schettino resisted, saying the ship was tipping and it was dark. At the time, he and his second-in-command were in a lifeboat and the captain said he was coordinating the rescue from there. He also said he was not going back on board the ship “because the other lifeboat is stopped.” Passengers have said many lifeboats on the exposed port side of the ship didn’t winch down after the ship had capsized.
De Falco shouted back: “And so what? You want to go home, Schettino? It is dark and you want to go home? Get on that prow of the boat using the pilot ladder and tell me what can be done, how many people there are and what their needs are. Now!”
“You go aboard. It is an order. Don’t make any more excuses. You have declared ‘Abandon ship,’ now I am in charge,” De Falco shouted.
At one point, De Falco vowed “I’m going to make sure you get in trouble. …I am going to make you pay for this. Go on board, (expletive)!”
Schettino was finally heard agreeing to reboard on the tape. But the coast guard has said he never went back, and had police arrest him on land.
The 52-year-old Schettino, described by the Italian media as a genial, tanned ship’s officer, has worked for 11 years for the ship’s owner and was made captain in 2006. He hails from Meta di Sorrento, in the Naples area, which produces many of Italy’s ferry and cruise boat captains. He attended the Nino Bixio merchant marine school near Sorrento.
Schettino recounted his version of events before prosecutors and a judge at a preliminary hearing Tuesday as to whether he should stay jailed, as requested by prosecutors. The judge deferred an immediate decision. The captain could face up to 12 years in prison on the abandoning ship charge alone free online credit report.
Schettino’s attorney, Bruno Leporatti, said in the hearing, the captain had insisted that after the initial crash into the reefs, he had maneuvered the ship close to shore in a way that “saved hundreds if not thousands of lives.”
Passengers, however, described the evacuation as chaotic.
Steve and Kathy Ledtke, who live in Fort Gratiot, Michigan, said they were sitting down to a late dinner Friday when they realized something had gone wrong. Kathy Ledtke told WDIV-TV that it seemed no one was in charge.
“It was complete chaos and it was every man for himself,” Kathy Ledtke said. “Nobody knew where to go.”
Earlier Tuesday, Italian naval divers exploded holes in the hull of the grounded cruise ship, trying to speed up the search for the missing while seas were still calm. Navy spokesman Alessandro Busonero told Sky TV 24 the holes would help divers enter the wreck more easily.
“We are rushing against time,” he said.
The divers set four microcharges above and below the surface of the water, Busonero said. Video showed one hole above the waterline less than two meters (6 feet) in diameter.
Mediterranean waters in the area were relatively calm Tuesday with waves of just 12 inches (30 centimeters) but they were expected to reach nearly 6 feet (1.8 meters) Wednesday, according to meteorological forecasts.
A Dutch shipwreck salvage firm, meanwhile, said it would take its engineers and divers two to four weeks to extract the 500,000 gallons of fuel aboard the ship. The safe removal of the fuel has become a priority second only to finding the missing, as the wreckage site lies in a maritime sanctuary for dolphins, porpoises and whales.
Preliminary phases of the fuel extraction could begin as early as Wednesday if approved by Italian officials, the company said.
Smit, a Rotterdam, Netherlands-based salvage company, said no fuel had leaked from any of the ship’s tanks and that the tanks appeared intact. While there is a risk the ship could shift in larger waves, to date it has been relatively stable perched on top of rocks near Giglio’s port.
Smit’s operations manager, Kees van Essen, said the company was confident the fuel could safely be extracted using pumps and valves to vacuum the oil out to waiting tanks.
“But there are always environmental risks in these types of operations,” he told reporters.
The company said any discussion about the fate of the ship _ whether it is removed in one piece or broken up _ would be decided by Italian ship operator Costa Crociere and its insurance companies.
The Miami-based Carnival Corp., which owns the Italian operator, estimated that preliminary losses from having the Concordia out of operation at least through 2012 would be between $85 million and $95 million, along with other costs. The company’s share price slumped more than 16 percent Monday.
It was not yet clear if the ship _ which was completed in 2006 _ would ever be able to return to service.
Carnival said its deductible on damage to the ship was approximately $30 million. In addition, the company faces a deductible of $10 million for third-party personal injury liability claims.
Carnival said other costs related to the grounding can’t yet be determined.
Richard Cordray
Egyptian soldiers clashed with hundreds of rock-throwing protesters in central Cairo for a second consecutive day on Saturday, in a resurgence of turmoil just days after millions voted in parliamentary elections.
The clashes underlined simmering tensions between activists and security officers and threatened to ignite a new round of violence after two peaceful days of voting in balloting considered the freest and fairest in the country’s modern history.
Hundreds of protesters threw stones early Saturday at security forces that have sealed off the streets around the country’s parliament building with barbed wire. Soldiers on rooftops pelted the crowds below with stones, prompting many of the protesters to pick up helmets, satellite dishes or sheets of metal to try to protect themselves.
The violence first began early Friday morning after soldiers stormed an antimilitary protest camp outside the Cabinet building near Tahrir Square, expelling demonstrators demanding an end to military rule and an immediate transfer of power to a civilian authority. At least seven protesters were killed in the violence, activist said. Scores have been injured.
The military took over after longtime President Hosni Mubarak was ousted in a popular revolt in February. Rights groups and activists charge that the military is carrying on the practices of the old regime, including arresting and beating dissidents.
Mustafa Ali, a protester who was wounded by pellet shot in clashes last month, on Saturday accused the military of instigating the violence to “find a justification to remain in power and divide up people into factions.”
The young activists who led the protests against Mubarak have not translated that success into results at the polls, where Islamist parties won a clear majority of seats in the first round of voting last month over the more liberal parties that emerged from the uprising. Results from this week’s second round are expected in the coming days, with the rest of the country set to vote next month.
Images of troops protecting polling centers and soldiers carrying the elderly to the polls have served to boost the military’s image as guardians of the country. The military remains the ultimate authority on all matters of state in absence of a president.
The second round of voting took place Wednesday and Thursday in nine of the country’s 27 provinces. It covered vast rural areas where the religious stand of Islamist parties has strong support.
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