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At last nights SFWIN I saw something novel...A web 2.0 solution that doesn't use an ajax-y web service. I know, it sounds crazy, but Collanos is doing it with their collaborative work tool...and guess what...it runs on Windows, Mac, and Linux.
Oh happy day!
While I haven't tested it myself yet, I have to say the demo I saw impressed me. Using Peer to Peer technologies wrapped around a localized app, this tool does one thing many online services fail to...they let you work offline. From what I saw last night, not only can you collaborate back and forth, but if a team member goes offline, the application will hold any changes until they pop up again, and then sync those changes between all clients. It is a nice twist on a market seemingly convinced that anything worth doing is only worth doing through a web service. Now if only I can find someone to work with...snif.
The application is in beta at the moment, but I'd love to hear from anyone who has actually used this application.
A product tour can be found here.
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Last week, Magellan Midstream (NYSE:MMP) released its 2015 fourth-quarter earnings which revealed quarterly and full-year net income that came in lower than a year ago. Revenue shrank 7.3% and profit fell 2.4% for 2015 but on the other hand, the company reported record distributable cash flow and expects continued distribution growth in the future despite projecting lower distributable cash flow for 2016. So just what is going on at Magellan?
Operating Margin by Segment Segment % Total Segment Operating Margin Refined products 60.8% Crude Oil 29.8% Marine Storage 9.3% Click to enlarge
Magellan Midstream is an MLP concentrated in the transportation and storage of refined petroleum products, although more recently it has begun to expand more into crude oil. While it is also involved in sales of these products, that part of the business accounts for less than 15% of operating margin. This structure is both good news and bad news for investors in MMP. The good news is the vast majority of the company, the core transportation and terminals business, is posting solid gains, growing operating margins by 9.9% in 2015. The bad news is that with the collapse of energy and refined product prices, the product sales portion of the company has performed so dismally that it had a major impact on both the top and bottom lines despite its smaller size.
Revenue by Source Source Full-Year %Change % of Total Revenue Transportation and Terminals +5.9% 70.6% Products Sales -28.3% 28.8% Affiliate Management -37.3% 0.6% Total Revenue -7.3% 100% Click to enlarge
The true measure of an MLP for investors comes from the amount of distributable cash flow the company can generate and the distribution coverage ratio. Distributable cash flow is the amount of cash generated which is available for the company to return to investors through dividends. The coverage ratio is distributable cash flow divided by the amount actually paid to investors. It conveys how safe the company's distribution is in a downturn and whether it has room for growth during better times. Magellan posted a record $943 million in distributable cash flow in 2015 with a coverage ratio of about 1.4 meaning there is some safety and even room for expansion of the distribution. It has some room to manuever and it appears it is going to use it. A 10% distribution increase is planned for 2016 and 8% for the year after, all while distributable cash flow is projected to fall 4.5% to $900 million in 2016. This raises the question as to how safe that distribution will be in the future. Management of course, has assured that it is. They have targeted a coverage ratio of greater than 1.2 which is still better than many of the company's peers. So while products sales have had a definite and significant effect on earnings, it appears for the time being that the remaining 85% of the business can shoulder the load and propel Magellan through a low energy price environment while supporting its distribution growth.
Click to enlarge
Until there's signs of a rebound in the energy market, products sales will suffer but the transportation and terminals business continues to grow regardless. $666 million was spent on organic growth projects in 2015 and another $800 million is anticipated in 2016. During this year, 3 projects are expected to begin operations: the Little Rock pipeline, Saddlehorn pipeline, and a condensate splitter in Corpus Christi. Magellan has plenty of runway left when it comes to growing its core business even with products sales languishing. However, should there be a recovery in energy prices, it could push revenue and earnings palpably higher and as long as the transportation and terminals business continues to crank out the cash, there's no threat that Magellan will start to look like some of its less fortunate peers. While it is hurt by the chaos in the energy market, it is in no real danger as of yet.
For those who are ready to pour some money into the distressed energy sector, Magellan has proven to be a fast-growing outperformer and as far as MLPs go, it appears to be better positioned and financially stronger than many of its peers. The caveat is this results in a lower yield. Still, 4.9% in a low interest rate environment is nothing to sneeze at, especially when lower risk and the potential distribution growth are taken into account.
Disclosure: I am/we are long MMP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Trinity Industries, Inc. (NYSE:TRN)
Q4 2015 Earnings Call
February 19, 2016 11:00 am ET
Executives
Gail M. Peck - Treasurer & Vice President of Finance
S. Theis Rice - Chief Legal Officer & Senior Vice President
Timothy R. Wallace - Chairman, President & Chief Executive Officer
William A. McWhirter - Group President-Construction Products & Senior VP
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
James E. Perry - Chief Financial Officer & Senior Vice President
Analysts
Matt Elkott - Cowen & Co. LLC
Allison A. Poliniak-Cusic - Wells Fargo Securities LLC
Justin Long - Stephens, Inc.
Gordon Johnson - Axiom Capital Management, Inc.
Bascome Majors - Susquehanna Financial Group LLLP
Art W. Hatfield - Raymond James & Associates, Inc.
Matt S. Brooklier - Longbow Research LLC
Kristine Kubacki - Avondale Partners LLC
Mike J. Baudendistel - Stifel, Nicolaus & Co., Inc.
Steve Barger - KeyBanc Capital Markets, Inc.
Operator
Good day, and welcome to the Trinity Industries, Inc. Fourth Quarter Results Conference Call. Currently all phone lines are in a listen-only mode. Later, there'll be an opportunity to ask questions during a question-and-answer session. Please be advised, today's program maybe recorded.
Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking.
Participants are directed to Trinity's Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.
It is now my pleasure to turn the program over to Ms. Gail Peck. You may begin.
Gail M. Peck - Treasurer & Vice President of Finance
Thank you, Aaron. Good morning, everyone. Welcome to the Trinity Industries' fourth quarter 2015 results conference call. I'm Gail Peck, Vice President, Finance and Treasurer of Trinity. Thank you for joining us today.
Similar to the format we have used on our recent earnings call, we will begin with an update on the Highway Products litigation matter. We will then follow with our normal quarterly earnings conference call format.
Today's speakers are Theis Rice, Senior Vice President and Chief Legal Officer; Tim Wallace, our Chairman, Chief Executive Officer, and President; Bill McWhirter, Senior Vice President and Group President of the Construction Products, Energy Equipment, and Inland Barge Groups; Steve Menzies, Senior Vice President and Group President of the Rail and Railcar Leasing Groups; and James Perry, our Senior Vice President and Chief Financial Officer.
Following their comments, we will then move to the Q&A session. Mary Henderson, our Vice President and Chief Accounting Officer is also in the room with us today.
I will now turn the call over to Theis Rice.
S. Theis Rice - Chief Legal Officer & Senior Vice President
Thank you, Gail, and good morning, everyone. In my comments today, I will refer to Trinity Industries and Trinity Highway Products together as Trinity. As previously reported, Trinity has appealed to the Fifth Circuit, the June 2015 False Claims Act judgment involving the ET Plus guardrail end terminal system. We will file our opening brief next month with full briefing by the parties to follow. We expect the Fifth Circuit will not issue a ruling in this case earlier than late 2016.
I would like to reiterate a few points related to this appeal. First, Trinity believes strongly in its appellate arguments, we are confident that no fraud was committed and we believe there are strong legal grounds for the Fifth Circuit to overturn the judgment.
Second, we stand 100% behind our product, the ET Plus System, and we are selling it today. In the fall of 2015 after completing what the Federal Highway Administration termed the most thorough evaluation of a roadside device ever conducted, the FHWA reconfirmed yet again that the ET Plus Systems in use today, on the nation's roadways meet all federal testing criteria and performance evaluation standards. And that the system has been and remains fully eligible for Federal-aid reimbursement.
We have also previously reported that the Commonwealth of Virginia has intervened in the state court action under the Virginia Fraud Against Taxpayers Act filed by the same party who filed the Federal False Claims Act case. In an order entered by the Virginia court on January 27, 2016, the commonwealth's case was stayed pending resolution of the Federal False Claims Act case currently on appeal.
The same party who filed the Federal False Claims Act case and the Virginia case, has also filed six other state False Claims Act cases under each states law. Each of these six states has declined to intervene in or join the case filed in their state and all six cases are currently stayed.
Please refer to www.etplusfacts.com/virginia for more information on the Virginia litigation. Our 2015 10-K will be filed today. In Note 18 of the 10-K, we provide additional information on the foregoing and other company legal matters. For information and details on the company's positions on these and related issues, please refer to www.etplusfacts.com.
I would like to conclude my comments today by sharing a few very important facts and making a brief statement. For over 80 years, Trinity has operated with the highest level of integrity. Our reputation for honesty and ethical business practices has beyond question and underscores the rock solid foundation on which we have built the market leading positions we earned and maintained year after year.
Trinity's Highway Products business unit has played an integral role in bringing innovative life-saving products to market. We have aligned our sales with world-class researchers and engineers, who share our vision for highway safety. We employed dedicated workers, who manufacture products like the ET Plus System to the highest levels of craftsmanship. And we deliver market-leading products that meet rigorous standards.
I believe accusations of fraud against Trinity are unwarranted and erroneous, and we will pursue every legal avenue to reverse the False Claims Act judgment.
Thank you. I will now turn the call over to Tim.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Thank you, Theis, and good morning, everyone. I'm very pleased with Trinity's financial performance during 2015. For the third straight year, we established records for revenues, net income and earnings per share. Our business has created value by leveraging their combined expertise, competencies, and manufacturing capacity to produce high-quality products for broad range of industrial market.
The most recent quarter completes an impressive five-year period in which our company has demonstrated a solid track record of growth. During that five-year time period, revenues more than tripled, going from $1.9 billion to $6.4 billion. In 2015, earnings per share and net income were 11 times greater than in 2010. From 2010 to 2015, net income increased from $67 million to $797 million and earnings per share grew from $0.43 per share to $5.08 per share.
Our financial performance during the last five years is a great example of the potential we have as a company. Our company is on a transformational journey and has made significant progress during the past five years towards our vision of being a premier diversified industrial company. We've added new businesses to our portfolio with long-term growth potential and we have invested in our manufacturing footprint to increase efficiency and flexibility.
Pre-tax profit from our Railcar Leasing and Management Services operations has more than tripled since 2010. We have also enhanced our company's earnings and cash flow through the development of the RIV platform. Our guidance for 2016 reflects the weakening in the industrial economy that again broadly impacting our businesses late last summer.
As I stated in our third quarter conference call, most of the industrial companies we serve are continuing to take wait and see approach to capital investment. At this time, it continues to be difficult to predict when demand will improve. Our 2016 earnings guidance assumes that the economic conditions will continue throughout the year.
In this environment, we're placing a high priority on cost containment and various initiatives to enhance our performance. We will continue to reposition and streamline our manufacturing operations as business conditions fluctuate. Over my 40-year career at Trinity, I participated in a number of business cycles.
Our business leaders have a proven track record for balancing staffing levels and all types of markets. I'm confident, our businesses will respond to the shift in demand for our products. Historically, we have made strategic investments during downturn. Our liquidity position and balance sheet strength have never been better.
In summary, I'm extremely proud of our team's accomplishments during 2015 and throughout this up cycle. Trinity's corporate business model is built on the premise that we enrich companies we own by leveraging to strengths contained within our enterprise as a whole. Trinity's employees do a fabulous job of collaborating as they manufacture high-quality products for our customers, while creating value for our shareholders.
Our operating and financial flexibility enabled us to pursue a variety of opportunities, as well as successfully confront market challenges. I'm confident that Trinity will emerge from a current period of uncertainty as a stronger company. Our goal is to continually improve upon the superior products and services we provide to our customers and the returns we generate for our shareholders.
I'll now turn it over to Bill for his comments.
William A. McWhirter - Group President-Construction Products & Senior VP
Thank you, Tim, and good morning, everyone. The Barge Group's fourth quarter performance reflects several factors. The competitive dynamics occurring within the industry, a less favorable product mix, and the closure of one of our facilities. Our Barge team is doing an outstanding job of maintaining production efficiencies and reducing costs as we align our production footprint with current demand. The Barge Group received orders for $190 million during the quarter resulting in a backlog of $416 million at the end of December. Replacement needs for dry cargo barges drove fourth quarter orders.
Current inquiry levels indicate lower barge demand and subsequently lower manufacturing levels in the near-term when compared to the past few years. The investments in our Barge business in recent years have increased this group's production efficiencies and positioned our Barge team to respond effectively to changes in market demand. We are prepared to make additional adjustments to our manufacturing footprint as needed.
The Construction Products Group improved quarterly profitability year-over-year despite the slowdown that typically takes place during the winter months. At the end of the year, the Federal Government passed a five-year $305 billion funding bill for highways and other related transit programs. The FAST Act authorizes funding through 2021 and will provide much needed stability for public agencies charged with planning transportation projects.
Our Highway Products business anticipates an improvement in market demand over the next few years. Demand for Aggregates remains robust in the markets we serve in the South Western United States, repositioning our Construction Products business during the last few years and continuing to expand our Aggregates business has benefited this group's overall performance. We are committed to finding opportunities to expand our product portfolio and grow our market positions.
The Energy Equipment Group reported another strong quarter and ended the year with record revenues and operating profit. The wind tower business continues to deliver solid results. At the end of the fourth quarter, the wind tower backlog totaled $371 million, most of which will be delivered in 2016. This level of production essentially fills the manufacturing space currently dedicated to this business.
At the end of 2015, the Federal Government passed a five-year spending bill that includes a tax incentive for the wind industry through 2019. In recent years, legislation for wind power tax incentives was unpredictable and short in duration, causing volatility in the wind industry.
The multi-year federal incentive provides developers and their supply-chain partners the necessary time needed to plan and develop wind projects. We are prepared to adjust our capacity should demand increase significantly.
The current market for utility structures remains highly competitive and continues to experience some capacity rationalization. We expect revenues for this business to decline further in 2016. Over the long-term, investment forecast are positive. The recently passed federal tax incentive for wind power is expected to drive the development of additional transmission infrastructure to bring new wind power to market.
In closing, our business is responding effectively to changing demand conditions. We believe these businesses have significant growth potential as our long-term outlook for energy and infrastructure investment in North America remains positive.
And now, I'll turn the presentation over to Steve.
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Thank you, Bill, and good morning. The TrinityRail team completed another record quarter in terms of railcar deliveries, profit and operating margin, as well as its second consecutive year of record revenues, profit and railcar deliveries.
In 2015, our Rail Group achieved a 20.9% operating profit margin on deliveries of 34,295 railcars. Our Leasing Group grew year-over-year revenue and profit from operations by 11% and 15%, respectively, while generating significant income and cash flow from the sales of these railcars through the railcar investment vehicle platform.
TrinityRail's outstanding performance reflects the strength of our integrated railcar manufacturing, leasing, and services business model. Our operating and financial flexibility and leading market position give us confidence, we can effectively adapt to rapidly changing market conditions.
The weakness in the industrial sector of the economy, along with declining railcar loadings, improved rail cycle times, and increasing numbers of railcars and storage is creating a challenging set of market dynamics. We are aligning our production footprint to a lower rate of production, while meeting our scheduled railcar backlog delivery requirements.
Our Rail Group received 2,455 orders during the fourth quarter. The orders we receive represent a mix of tank cars, covered hoppers, flat cars, and autoracks. Industry orders for the fourth quarter affirmed a weaker demand trend that began in the third quarter. In total, more than 53,000 orders were placed in 2015, a healthy level by historical standards. However, industry orders in the second half of 2015 declined approximately 50% compared to the level of orders in the first half of 2015, indicating a significant shift toward a weakening demand trend.
First quarter 2016 inquiry levels continue at a weakened level. We are seeing pockets of demand, however, the level of automotive related activity remains favorable. The outlook of new petrochemical capacity coming online during the next few years is positive. We remain optimistic regarding long-term railcar demand fundamentals as third-party independent forecast project industry deliveries in 2016 and 2017 above historical averages, albeit below the strong 2015 levels.
During the fourth quarter, TrinityRail delivered 8,835 railcars, a favorable product mix, extended production runs, high levels of productivity, and declining material costs contributed to a record 23.6% operating margin during the quarter for our Rail Group. I'm very proud of our team's ability to maximize operational performance on a record level of railcar deliveries.
Our backlog of approximately 49,000 railcars valued at $5.4 billion at the end of 2015 provides good visibility for 2016 production planning. Our current expectations for deliveries in 2016 is approximately 27,000 railcars, of which approximately 90% are already in our backlog. We project operating margins of approximately 15% for 2016, reflecting a significant shift in our planned 2016 product mix, weak pricing for orders taken in Q4 2015 scheduled for production in 2016, and projected pricing for our unsold production backlog, as well as cost and efficiencies associated with reducing our production footprint to align with current demand.
I am confident our operations team will execute in this environment with the same level of skill that produced record results. Our projections assume no significant improvement in market conditions in 2016. We're closely monitoring the industry's implementation of HM-251 tank car regulations.
Several factors including the continued low price of crude oil, the reduced utilization of railcars transporting crude oil and the extended timeline for the mandated schedule for modifications have caused customers to postpone decisions pertaining to modifying railcars, use inflammable commodity service.
As we have indicated previously, our first priority is to ensure regulatory compliance within our lease railcar fleet. Modifications to our lease fleet are currently in process. I am pleased with the flexibility of our expanded maintenance service facilities, which are making HM-251 modifications, while also providing regulatory compliance services for our owned and managed lease fleets.
We continued to engage in dialogues with our customers, a number of whom appeared to be finalizing the fleet modification plans. The Leasing Group's performance during 2015 was also impressive, reflecting solid railcar market fundamentals during the year. High lease fleet utilization, favorable lease rate pricing, and new lease fleet additions contributed to annual revenue and profit from operations growth.
The leasing company ended the year with 97.7% utilization in the total of 76,765 railcars in our wholly-owned and partially-owned lease fleets. Our total managed fleet including our wholly-owned, partially-owned, and investor-owned fleets now exceeds 94,800 railcars. We expect our committed lease railcar backlog of $1.5 billion to generate further growth of our lease portfolio.
Lease expirations in 2016 reflect a broad diversification of our lease fleet, as roughly 15% of our total portfolio remains up for renewal in 2016. The weaker market environment is placing pressure on these rates and may adversely impact lease fleet utilization.
During the last several years, we sold a significant number of lease railcars through the railcar investment vehicle platform. These sales demonstrate the value we have created in our leasing business and have contributed significantly to Trinity's financial flexibility and earnings performance.
Railcar investment vehicles, or RIVs, are discrete investments in lease railcars, developed and managed by TrinityRail, for institutional investors, who desire to invest capital on lease railcars. Lease railcars are viewed by institutional investors as stable, hard asset investments with an inflationary hedge component. We continue to engage with institutional investors, interested to invest in lease railcars. Through scale of our leasing platform and our lease origination capabilities combined with our cradle-to-grave asset expertise attracts institutional investors to the RIV platform.
To meet the specific investment objectives of varied investors, Trinity develops diversified lease railcar portfolios by selecting lease railcars from our wholly-owned lease portfolio, or from railcars and our lease order backlog. Further, Trinity manages the asset on behalf of the investors, providing administrative and maintenance services. We have successfully developed the RIV platform over the last 10 years comprised of over $5 billion in lease railcars at original sale prices.
The RIV platform provides TrinityRail financial capacity to enhance our lease origination capabilities and lease portfolio funding diversification and provides Trinity with additional financial flexibility. We expect to grow this platform by facilitating additional RIVs for institutional investors.
During 2016, we currently plan to expand the RIV platform by selling approximately $500 million of lease railcars to institutional investors. We have inquiries from institutional investors to acquire railcars through the RIV platform that exceeds $500 million, as such we will evaluate the possibility of additional lease railcar sales through the RIV platform during 2016 as we balance investment demand from institutional investors with the size of our wholly-owned lease fleet.
In summary, the Rail Group and Leasing and Management Services Group delivered exceptional results during the fourth quarter and throughout 2015. As we move into 2016, we are focused on controlling cost, maximizing our production efficiency on reduced production levels, and maintaining high fleet utilization. We will continue to build out the RIV platform. Our operating and financial flexibility continue to differentiate TrinityRail, enhancing our position as a premier provider of railcar products and services.
I will now turn it over to James for his remarks.
James E. Perry - Chief Financial Officer & Senior Vice President
Thank you, Steve, and good morning, everyone. Yesterday, we announced our results for the fourth quarter and full-year 2015. For the quarter, the company reported earnings per share of $1.30 and revenues of $1.55 billion, compared to EPS and revenues of $0.86 and $1.66 billion, respectively for the same period last year. During the fourth quarter, our EPS reflected strong operating performance by our businesses and the continued expansion of the railcar investment vehicle platform, which we refer to as the RIV platform.
For the full year, we reported revenues of $6.39 billion and EPS of $5.08, both records for Trinity. We ended the year with $871 million of cash on hand and have access to additional capital through our committed lines of credit at both the corporate and leasing levels. At the end of the year, our liquidity position was more than $2.1 billion.
During the fourth quarter, we invested $51 million in capital expenditures across the number of our manufacturing businesses and at the corporate level. For the full year, this figure totaled $196 million. During the fourth quarter, we invested approximately $338 million in lease railcar additions to our wholly-owned lease fleet.
This number included new originations as well as some secondary market purchases. This investment was offset by $395 million of lease railcar sales from our lease fleet. I would like to add as a background on our RIV platform that Steve provided. The RIV platform provides Trinity with a level of financial flexibility that is unique among diversified industrial companies.
The cash flow generated from this platform provides flexibility to reinvest in our railcar leasing and management services platform. Our portfolio of diversified industrial businesses and in other opportunities that enhanced shareholder returns. Expanding this platform is a core element of our strategy, with the associated earnings and cash flows enhancing our financial flexibility.
In addition to financial flexibility, we garner other benefits when we sell a lease railcar to the RIV platform. When we do so, we maintain the management of the railcar. This generates recurring management fees for Trinity that are expected to grow as we continue to expand the platform.
This management role allows us to maintain closed relationships with the end users of the railcars, giving us real time information on the markets we serve and our customer's ongoing needs. As managers we also coordinate the maintenance of the railcars through our maintenance facilities and facilities owned by third parties. The accounting treatment for sales of lease railcars can be complex and difficult for our investors to understand.
When railcars are manufactured by Trinity and sold to our leasing company, they're transferred at market pricing levels. The revenue and profit are recorded in the Rail Group. When we consolidate Trinity's financial statements, the revenue from the railcar sale is eliminated and the profit is deferred.
If a railcar is later sold from our lease fleet to an RIV or another third party, the remaining deferred profit on our balance sheet for particular railcar is recognized as income at that time. In addition, we recognized the gain on the sale as compared to the book value of the railcar.
There is another accounting treatment that applies to the revenue recognition for railcar sold with leases. This is determined by how long the railcar was in the lease fleet. For railcars that have been in our lease fleet for one year or less, revenues recognized in the leasing group. For railcars in the lease fleet for more than one year, no revenues recognized.
The profit on the sale of the lease railcar is fully recognized, no matter what the length of time the railcar was in our fleet.
During the fourth quarter, we sold $470 million of lease railcars to the RIV platform, including $85 million sold directly from the Rail Group. For the full year, we sold approximately $1.1 billion of lease railcars to the RIV platform. Over the last decade, we've placed approximately $5 billion of lease railcars at the time of the sale to various RIVs.
In 2015, we sold almost $1.2 billion of lease railcars to RIVs and other third parties. Of this total, $260 million was sold directly from our manufacturing business. This figure was included in the Rail Group's revenue.
Another $405 million worth of railcars were sold from the lease fleet and has only been in the fleet for one year or less, so we're including in the Leasing Group's revenues. The final $515 million of lease railcar sales where railcars that have been in the fleet for more than one year, so no revenue was booked. These proceeds were shown on our cash flow statement.
Now, I will move to our guidance for 2016. This year is expected to be more challenging in terms of the demand in the markets we serve. Historically, we achieve high levels of operating leverage as our volumes rise in the strong economic cycle. The last few years are prime example of our ability to achieve record earnings during the solid industrial demand environment.
On the other hand, we historically lose some of the operating leverage and efficiencies we gained during the up cycle as we begin the cycle down. When this occurs, we're focused on preserving as much of the momentum and benefits that we gain from the previously strong demand environment. We have costs associated with the shifts in our product mix and rationalization of our footprint. As a result, our margins are impacted and it's difficult to precisely predict how much. Our businesses have been highly focused on responding to the current economic conditions and have been taking the appropriate steps.
In our October conference call, we mentioned that we're seeing a slowdown in the industrial markets we serve and thus hesitancy from our customers to place orders. This trend has continued into early 2016. When we experienced several months of persistent economic conditions, we incorporate that trend into our guidance and provide our insight accordingly. It's difficult for us to provide guidance in such a challenging environment.
At this time, our guidance does not assume that economic conditions improve in 2016. In our press release yesterday, we provided EPS guidance of $2 to $2.40 in 2016. This represents several factors. Our current firm backlogs, expectations for our operations against the weak industrial outlook, and a lower level of lease railcar sales to the RIV platform. We expect our Rail Group to deliver approximately 27,000 railcars in 2016. This is a decrease of over 7,000 railcars from 2015. We expect revenues in the Rail Group of approximately $3.1 billion, this is a decrease of almost $1.4 billion year-over-year.
Our operating leverage will decline due to the lower level of production and certain costs associated with aligning our manufacturing footprint with demand, resulting in an operating margin of approximately 15%.
In 2016, we expect to eliminate approximately $1.1 billion of revenues related to railcar sales for our leasing company and defer approximately $215 million of operating profit. These revenue eliminations and profit deferrals result from the accounting treatment I just reviewed for sales for our manufacturing company to our leasing company.
In 2016, we expect our Leasing Group to record operating revenues excluding lease railcar sales of approximately $700 million with profit from operations of approximately $300 million. In 2016, our forecast includes approximately $500 million of sales of lease railcars to RIVs with a profit of approximately $100 million. As these sales are dynamic, we've yet to identify which cars will be sold to the RIVs, so we cannot provide guidance as to the group in which the transaction will be recorded for the accounting treatment related to the revenues and profits.
Our guidance at this time assumes the sales occurred from the lease fleet. The demand for lease railcars among institutional investors remains high. So, we may have the opportunity for a higher level of lease railcar sales this year, as we balanced the strong level of demand with our owned ownership of lease assets and market demand for new lease railcars.
We expect our Energy Equipment Group to have 2016 revenues of approximately $1 billion with an operating margin of approximately 12%. We are pleased with the $371 million backlog we have in our wind towers business, which essentially fills our production facilities dedicated to that product line during 2016.
We expect our Construction Products Group to report 2016 revenues of approximately $560 million with an operating margin of approximately 11%. As Bill mentioned, the country now has a federal highway build, which provides some longer-term benefits to this group as projects began. We continue to be pleased with the performance and opportunities within our Aggregates businesses.
Our Inland Barge Group is expected to generate revenues of approximately $445 million in 2016 with an operating margin of approximately 10%. Low commodity prices and the strong U.S. dollar have reduced demand for products transported in barges. Combining these factors with lower steel prices, we expect revenues and profits in this group to be lower than in the last few years. We continue to monitor demand and line our production footprint accordingly in this group as we do in all of our businesses.
Our annual EPS guidance also includes the following assumptions. A tax rate of approximately 36%, corporate expenses of $130 million to $150 million, which include ongoing litigation-related expenses. The deduction of approximately $20 million of non-controlling earnings due to our partial ownership in TRIP and RIV 2013. A reduction of approximately $0.07 per share due to the two-class method of accounting compared to calculating Trinity's EPS directly from the face of the income statement. And no dilution from the convertible notes based on the current stock price.
As it pertains to cash flow, we expect the annual net cash investment in railcars added to our lease fleet to be approximately $385 million in 2016. Our guidance incorporates the guidance we discussed for 2016 from the sales of leased railcars from the Leasing Group.
Full year manufacturing and corporate capital expenditure for 2016 are expected to be between $150 million and $200 million. Our share repurchases in 2015 totaled $115 million with no repurchases occurring during the fourth quarter. In December, the board authorized a $250 million share repurchase program through 2017 and we expect to be in the market repurchasing shares this year. At this time, we expect for our total cash flow to be positive in 2016.
In conclusion, we entered this economic down cycle with the strong balance sheet and $2.1 billion of liquidity. We continue to seek organic and acquisition investment opportunities that enhance shareholder value. We are confident that Trinity will respond appropriately to the weak industrial markets this year as we continue to pursue our vision to be a premier industrial diversified company.
Our operator will now prepare us for the question-and-answer session.
Question-and-Answer Session
Operator
Certainly. And we can take our first question from Matt Elkott with Cowen & Company. Your line is open.
Matt Elkott - Cowen & Co. LLC
Good morning. Thank you for taking my question
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Good morning.
Matt Elkott - Cowen & Co. LLC
I want you guys to help me understand, dig deeper into the guidance here. I know you guided for a 20% decline in deliveries in 2016, which is I don't think anyone was expecting flat deliveries or up deliveries, maybe slightly worse than expectation, but it's in line with the industry. But your margin assumption for the Rail Group is almost 600 basis points deterioration in the operating income. And then the midpoint of the EPS is about 57% down from 2015. So there seems to be discrepancy between the delivery decline and the earnings and margin decline. Can you put more color into why margins are going to be so pressured?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Sure, Matt. This is Steve. I'll start with the answer. Margin is ultimately a reflection of the product mix produced in the quarter and the productivity we're able to achieve through operational efficiencies. We are experiencing a significant shift in our product mix with the expected railcar deliveries in 2016. Our margin guidance includes the costs and efficiencies associated with the aligning a smaller production footprint with lower demand. And we also are assuming weaker market prices on unsold railcar production slots.
While down from our most recent margin performance, our current projections for 2016 margins compare quite favorably to prior peak margins in 2007 and 2008. For example, our 2007 annual margin was 14.6% at approximately the same level of production.
(37:24)
Timothy R. Wallace - Chairman, President & Chief Executive Officer
The decline in shipments?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
And decline in shipments, yes, from the prior year.
Matt Elkott - Cowen & Co. LLC
All right. So, now that you guys have set the bar – reset the bar much lower for 2016, I know you – this is the first time you gave guidance, but I think most people are expecting a bigger EPS number, but the bar has been reset. As you kind of look out to 2017, is 2016 looking now more like the year where pricing bottoms out, because a lot of the weakness in the level of orders may be stemming from kind of wait and see attitude by customers, because of all the uncertainty in the industrial markets.
So should we look for 2016 for – 2016 may being kind of the bottom for pricing, which could spur some opportunistic buying from large investors? And what does that mean for deliveries in 2017? Does this mean that we're not going to see a decline or not as big of a decline in deliveries in 2017 off of this lower number?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
This is Steve again, it's really difficult to start to talk about 2017. Again, we're looking at macroeconomic environment with significantly lower railcar loadings, lower industrial output, higher U.S. dollar, all impacting our business, and typically, when those – a large number of idle railcars are in storage, you have to wait for those railcars to be absorbed in the system before we see any meaningful increase in demand for new railcars and maybe pricing traction associated with that market. With that said, as I mentioned in my comments there are several pockets of our markets that show good demand. And we'll concentrate and focus on those, but it's really difficult to talk about 2017 this early in 2016.
Matt Elkott - Cowen & Co. LLC
Okay. Fair enough. And then just one last question. What are – do you have certain macro assumptions that are – that your guidance for 2016 is based on as far as oil prices, maybe rail traffic? And when you were doing your forecast for 2016, did you have multiple scenarios, and if so did you pick the kind of average scenario, did you pick the more conservative scenario for your guidance?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Matt, Steve again. I think we've said that our guidance as well as our plans assume no material improvement in the economic circumstances that we're under right now. So we'll continue to monitor those economic drivers for our business and adjust our plans as those drivers might change over the course of the year.
Matt Elkott - Cowen & Co. LLC
Okay. Great. Thank you very much.
Operator
And we will take our next question from Allison Poliniak with Wells Fargo. Your line is open.
Allison A. Poliniak-Cusic - Wells Fargo Securities LLC
Hi, guys. Good morning.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Good morning.
Allison A. Poliniak-Cusic - Wells Fargo Securities LLC
Going back to that Rail Group margin, I think mix and pricing and sort of that reduction of footprint were highlighted. Anyway to rank those and obviously, as everything mix it sounds like is most important maybe. And sort of the cadence as we go through 2016, I mean, are we substantially dropping in Q1 or do we sort of trend back or below that sort of year-end number?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Yeah. Good morning, Allison. This is Steve. Clearly, the significant shift in our product mix, and the pricing associated with that product mix is having the biggest impact on our decline in margins. I think, we would expect that our cadence over the course of 2016, both our deliveries and margins will probably be better in the first half than it will in the second half.
Allison A. Poliniak-Cusic - Wells Fargo Securities LLC
Okay. That's helpful. And then just touching on the secondary market, I know you guys talked about sort of you guys selling equipment, but thoughts maybe from history, opportunities maybe for you guys to buy some equipment at some of these newer players in the leasing market besides they really don't want to be here anymore. I mean, how does that sort of play out in your mind?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Sure, Allison. Steve again, we have been active in acquiring railcars in the secondary market as an important component of our RIV platform to show investors, our interest in acquiring those cars, along with cars that we produced new. With the amount of institutional capital and active participants in the market, it is highly competitive. And we want to be disciplined in the railcars that we acquired to put into our RIV platform.
Allison A. Poliniak-Cusic - Wells Fargo Securities LLC
Sure. And then I guess, James, this one is for you, $2 billion of liquidity, you touched a little bit on share repurchases, but maybe talks on capital deployment here in this environment, do you think the properties start becoming more attractive through year-to-year, maybe you layout your priorities for 2016?
James E. Perry - Chief Financial Officer & Senior Vice President
Allison, thanks. This is James. I appreciate you being on the call today. In terms of priorities, we certainly maintained a strong balance sheet, strong liquidity, and as Tim mentioned, as we go through down cycles, we've strengthened the company through strategic investments. As I said, we'll look at organic opportunities through building our businesses from within, acquisition opportunities as we look at the pipeline evaluations of companies that would add to our diversified industrial portfolio, enhance our shareholder value through that.
And then as we've talked about, we've historically looked at share repurchases as a component of that as well. So we're not able to provide any specific guidelines we have or outline what our plans out for the year, but we really look at this as an all the above type strategy as opportunities for us as we look at different opportunities and valuations as we have those conversations with our board of directors.
Allison A. Poliniak-Cusic - Wells Fargo Securities LLC
Great. Thanks, guys.
Operator
And we can take our next question from Justin Long with Stephens. Your line is open.
Justin Long - Stephens, Inc.
Thanks, and good morning. So, you mentioned about 15% of your lease fleet is renewing this year, but could you talk about the assumption that you have baked into the guidance in terms of the change in renewal rates and utilization as well?
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Steve?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Yeah. Justin, this is Steve. Well, first of all our guidance does include our assumptions for renewal percentages as well as lease rates. And no, there's no question that there's downward pressure on lease rates given the number of available cars in certain markets. And we would expect utilization could be adversely affected as well. We've been very successful historically maintaining high fleet utilization in our business. We are also be adding a number of fully utilized cars. So I would expect that we'll have a reasonable year as far as utilization is concerned.
Justin Long - Stephens, Inc.
Okay. And in terms of renewal rate change, is there any way you could speak to that in terms of the general magnitude, I know it varies by car types, so it's a tough question?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
It is, Justin, but our expirations are diversified amongst the number of different markets and car types. So, we don't have any specific industry concentrations that would concern me. And I believe our sales and marketing team would be successful in remarketing our lease renewals.
Justin Long - Stephens, Inc.
And Steve, you have a fairly elaborate business planning process that you go through in order to identify the cars that are coming up for renewals, you make assumptions of what you think the renewals are going to be, and those all get incorporated into the guidance that we provide.
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Yeah, we do Tim (sic) [Justin] (45:38) – we really do a bottoms-up analysis on our lease renewal. We really look at each individual car and each individual rider and do our prognostications, so we don't make general macro assumptions in our lease renewals that falls into our forecast, we really do it very deep dive on a car-by-car, lease-by-lease basis.
Justin Long - Stephens, Inc.
Okay, great. That's helpful. Secondly, one of the questions that have come up a lot in this environment is the potential for residual value risk for the railcar lessors, especially when you look at the tank car fleet. I'm just curious do you see this as a potential headwind? Or is your residual value assumption so low that it really won't be an issue?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Steve again, Justin, interesting question. I think it's so easy for us to be influenced by near-term economic conditions. But we're talking about railcars that we expect to have 35-year life, 40-year life, and perhaps even 50-year life. So, we really look at these assets over a much longer-term and I think we're comfortable with the residual positions we've taken in our lease fleet.
Justin Long - Stephens, Inc.
Okay, great. I'll leave it at that. Thanks for the time today.
Operator
And we can take our next question from Gordon Johnson with Axiom Capital Management. Your line is now open.
Gordon Johnson - Axiom Capital Management, Inc.
Thanks for taking my question. Good morning.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Good morning.
Gordon Johnson - Axiom Capital Management, Inc.
So, first, I guess with respect to the Element deal in 2013, I thought that the guarantee was $2 billion in sales through the end of 2015. That looks like roughly $133 million worth of lease railcars are sold in Q4 when we thought the number was going to be $400 million. Are we thinking about that right? Is that just a push out? Can you guys help us understand that?
James E. Perry - Chief Financial Officer & Senior Vice President
Gordon, this is James. When we announced the alliance in late 2013 we said that through 2015 we were looking at about $2 billion. I think it's strong to call that a commitment on either side. From that perspective, we were a little short to the $2 billion, but we in the fourth quarter announced a new $1 billion agreement over the next several years. So that's very fluid in our relationship with Element. And looking at that is good dialogue.
Gordon Johnson - Axiom Capital Management, Inc.
Okay. That's helpful. And then I guess with respect to your shipment guidance, 27,000 cars assuming the market share at 40% that's just roughly 17,000 cars for the industry. If we look at 17,000 cars per quarter rather for the industry, if you look at the last down cycle, I guess shipments of cars averaged about 5,400 (48:19) cars, that's in 2009. So clearly, maybe they don't get as bad as 2009, but shouldn't the guidance be slightly worse than you guys are projecting or are we thinking about that incorrectly?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Gordon, this is Steve. I think the difference in your comparison is the backlog when we entered previous downturns. We did not have the extended backlog that we currently have today. And so I think the planning and the insights that we have in the 2016 are better than what we had at that time.
James E. Perry - Chief Financial Officer & Senior Vice President
And Gordon, this is James. As Steve mentioned our 27,000, about 90% of that is already in our current backlog, out of the total 49,000 in our backlog.
Gordon Johnson - Axiom Capital Management, Inc.
Okay. That's helpful. And then lastly just looking at the lease business the margin this quarter, I think a little weaker than we expected. Was that due to maintenance expense? And was that due to the retrofit of the tank cars? And if so, how long does that take? And thanks, again for the questions, guys. Good luck.
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Gordon, thanks. This is Steve. Maintenance expense in our lease fleet isn't necessarily smooth over quarters. And then particularly, in the fourth quarter, we probably incurred some initial expenses and trying to make sure that annual regulatory compliance is completed. So that may have an inordinate influence on maintenance expense in any one quarter.
Operator
And we can take our next question from Bascome Majors with Susquehanna. Your line is open.
Bascome Majors - Susquehanna Financial Group LLLP
Good morning. So, on your call in October, you said about 85% of the 27,000 cars that you're expecting to deliver this year. They're already in the backlog. And I would assume that there was still very attractive pricing on most of what you build in that 85%.
And on the call today, you're pretty candid about the challenges with pricing that you already took in 4Q, and the slots are still opened to be ordered for next year, but only 15% of what you're going to deliver, it would seem that the pricing and the margins on those orders must have fallen really dramatically to get you to the outlook that you provided on margins here. So it's a longwinded way to kind of get into – to how competitive is pricing now? Are we looking at breakeven like levels on some of the orders that are being placed today? Or is that just getting too dire?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Yeah, Bascome, it's Steve. First of all, I think I said 80% of our 2016 production was in our backlog during our last conference call. That is now 90%. I would tell you that pricing is extremely competitive in the marketplace. Some of our competitors have much less backlog than we have, working very hard and the pricing to fuel their production capacity during the year. So, the orders we took in the fourth quarter had – I would say lesser margins than what we have in our backlog. And again, we have forecast that our unsold production plants will also be a weak margin.
Bascome Majors - Susquehanna Financial Group LLLP
I mean, is the delta so big that we can be talking single-digit margins on some of the stuff that's being ordered today?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
I don't know that I can be that specific, but also keep in mind, I'm highlighting a very significant shift in our product mix for 2016, a very significant shift.
Bascome Majors - Susquehanna Financial Group LLLP
Okay. Understood, thanks for the color there. Another margin question here, how much of the decline we're looking at in your rail margins for 2016? Are part of the cost of aligning the production with lower demand? So this question specifically, trying to dig out what kind of restructuring type costs could be in there or other cost related to workforce adjustments that may not repeat once capacity gets level with demand?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Sure, Bascome, Steve again. The significant reduction in our margins from 2015 and 2016 is related to pricing and product mix. Certainly, we have costs associated with rightsizing our production foot print to meet a lower level of demand. And again, our teams are very adapt in how we handle labor issues and utilizing our facilities efficiently.
Bascome Majors - Susquehanna Financial Group LLLP
Okay. And following-up on our earlier question on the cadence of the margins, I mean you closed out 4Q 2015 with around 23% in the Rail Group, maybe get a 15% for full year 2016 in sequentially declining market, which you implied to the other question. And it feels like you'd have to start the year close to 20% and end it closer to 10% or even below. And that's such a wide delta in margins in such a short amount of time. Are we thinking about that right, is that spread too wide or would you expect to kind of a tighter range around 15% that you're guiding throughout the year on a quarter-to-quarter basis?
James E. Perry - Chief Financial Officer & Senior Vice President
Bascome, this is James. Yeah. We're not at this time giving detailed pricing. Steve talked about the cadence of deliveries stepping down. So we wouldn't comment on the specific quarterly margins that they were projecting at this time.
Bascome Majors - Susquehanna Financial Group LLLP
Okay. One more on margin and then I'll run. Looking at the implied margin and what you're eliminating. I know there is always a bit of a differential between that and what you're reporting for the entire Rail Group, but the spread I think was about four points or five points higher margin in your eliminations than what you're guiding for the Rail segment as a whole. What's driving that?
James E. Perry - Chief Financial Officer & Senior Vice President
Yeah, Bascome. This is James. It can be a number of things, primarily it's product mix. The cars that are in our lease backlog versus the manufacturing backlog, the external direct customers without leases. There are certain costs that don't come through with the transferred to the leasing company with that market pricing, but primarily is the mix on pricing of the specific cars that are currently identified to go to our leasing company.
Bascome Majors - Susquehanna Financial Group LLLP
Understood. Thanks for the time this morning, guys.
James E. Perry - Chief Financial Officer & Senior Vice President
Thank you.
Operator
And we will take our next question from Art Hatfield with Raymond James. Your line is open.
Art W. Hatfield - Raymond James & Associates, Inc.
Hi. Thanks for taking the time this morning. Hi, Steve, you had a lot of questions thrown at you about pricing and margin, but if I could just ask one last one regarding that, obviously pricing and margin contend to be cyclical in this business. But would you say the environment is rational or irrational at this point in time with regards to what competitors are doing?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
I think, rationale is in the eye of the beholder. Isn't it?
Art W. Hatfield - Raymond James & Associates, Inc.
Yes. No, absolutely, but I feel that you guys have always been very rational in how you view things, so your comment should be well taken actually?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Sure, well, I mean, clearly we've got a period of weaker demand. I think the rationality scale probably changes based upon the type of backlog you have as the manufacturer. So hopefully we will continue to be disciplined and rational in our approach to the marketplace given our backlogs.
Art W. Hatfield - Raymond James & Associates, Inc.
Okay. That's helpful. A quick question on the RIV platform. I mean, when you talk to institutional investors about the opportunities here, what are they looking for, how do they view the platform, are they indifferent to assets, are they just very focused on the type of yield that they can accrue over time? How do – and I ask that, so that I can think about what their decision making process is in allocating capital with this type of investments.
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Yeah, thanks, really good question, I appreciate you're focusing on the RIV platform. I think institutional investors, first and foremost, do have their yield requirements, they're looking at this asset class and how it fits in their overall stack of different types of investments. They really like the long-term nature of these assets and I mentioned the inflationary hedge component of the nature of these assets as well.
I think the other critical components they're looking at is diversification. They want to make sure they have a diversified portfolio and so Trinity with our broad product line is able to provide that type of asset diversification in a lease railcar portfolio. I think the other thing they're looking at is the quality of the servicer, the quality of the manager, someone who has, as I mentioned greater degree of capabilities, which from engineering through servicing the railcars and all points in between. I think we've established that TrinityRails are a premier provider of those services.
And I guess, to add, they want to have confidence in our ability to be able to market and remarket the railcars over the long-term life of these assets. And we've clearly demonstrated a strong capability in our field sales organization to maintain high-fleet utilization for these type of assets.
Art W. Hatfield - Raymond James & Associates, Inc.
That's very helpful. When you – when I – when we think, and I know it's a small portion of kind of – or a small number in the grand scheme of things. But does management fee vary by potential investor based on what they ask you to do or if they can take on any of the stuff themselves?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Good question. We're pretty disciplined in the services that we're offering. I think our institutional investors see the value we provide in the broad array of services that we provide. And I think the fees that we charge are – reflect the value that we provide and the service we provide.
Art W. Hatfield - Raymond James & Associates, Inc.
Great. Thank you. Last question, and it's kind of a big picture question and that – and I'm asking everybody I can. And I really appreciate your thoughts on this. I respect your knowledge of the industry and kind of how you see these cycles and being an observer from the outside, sometimes it's tough to see what's really going on, but as I sit back and look at the turn in direction here and where this down cycle may settle out. I go back and think about the – having been an observer of three or four of these cycles. One of the things that strikes me as we kind of enter this period, we're probably seeing an end of a global commodity super cycle, and that's having, going to have an effect on rail volumes. Additionally, we have this issue here in the U.S. of secular decline in coal. And over the long haul, that may drive better asset productivity, better utilization of assets within the rail network.
Just – I'd like to get your thoughts on how to think about this as we move forward and how these changing dynamics could change the demand within your industry and what may or may not need to occur within the industry to make things a little bit more matched, I guess as we go over time from a supply demand standpoint and maybe get some players who maybe have shown a propensity to be a rational to get that rationality factor up. And as you do so, I would just ask that given the fact that I mentioned I've seen three of four of these cycles, if you can comment without commenting on my age?
Timothy R. Wallace - Chairman, President & Chief Executive Officer
This is Tim, you've asked real loaded question there. And our portfolio is diversified enough that our business leaders see a wide variety of market, and we get together once a month with the business leaders in our company and we have lunch, and then we go around the room and everybody talks about their margins and what they're seeing and what they're hearing and this could be the barge markets, the electric utility markets, the railcar markets and the rail's has got a real broad spectrum of it.
And one thing that we've really focusing on is the demand and the inquiry levels from our customers and then the build rate of what our customers are looking on their horizon of where they're going to be putting their capital.
So we have a very robust dynamic dashboard of inputs that we've received, and we try to receive it more or so from the customers' mouth and deal with their demand and where they're going in their various businesses.
And so it's not really – we take in consideration the macro global economic situations, but since the customers we deal with, most of them, a lot of them have global footprints. We're able to get it distilled down through their people of to what their needs are for our products.
So, basically that's what gets incorporated into the guidance that we give to reflect like the statement that we made that this year, we're assuming the markets going to stay at the same pace that it has been for the last six months for the next 12 months.
Once we start seeing and hearing from our customers that demand is on the horizon, and you always have customers that want to do some bottom fishing and come in, and make strategic purchases during down cycles, and we negotiate really well with them, and we align ourselves well with them. And they usually will come to us first and say, hey we're thinking about acquiring some of these products, what kind of deal would you cut with us, and we'll get into a negotiation with them.
That usually happens during the bottom type part of the cycle, and then you end up having kind of the herd effect that other people will jump on at a later point. So for us it's not so much a large global macroeconomic analysis, it's a touch and feel, and listen and hear what the customers have to say. Steve, do you want to add anything?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Well, yes, more specific to rail, I agree everything Tim said there. It's not only the commodity super cycle we enjoyed, but right now we're also suffering from the value of the U.S. dollar, and those things aren't going to stay in the position they are forever. When we had the boom in ethanol demand, I'm not sure anybody really saw that coming in 2004 and 2005. And I don't think anybody forecasted the shale boom when we were in the doldrums in 2009 and 2010.
So what's the next big driver's going to be for demand for railcars, may not be visible to us today, but as Tim said, we stay very, very close to our customers. We're adept at managing through these type of cycles. And I'm confident that over the long-term, we'll be very successful.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Bill, do you have anything to add?
William A. McWhirter - Group President-Construction Products & Senior VP
I would echo, Steve's, comments and say that certainly many of the products that we sell to our customers are large durable goods that can be deferred for a period of time, but that builds up demand ultimately. And I think you're seeing just some general uncertainty in the market where companies are reducing their CapEx budgets for a period of time. And I think ultimately that doesn't mean they don't need the product, but just means they don't need the product necessarily today. And they don't want to take that liquidity off their balance sheet at this point in time.
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
No. That's a really good point, Bill, and something we haven't talked about today is we still have an aging North American rail fleet that will require replacement over time. And so we'll always be well positioned to work with our customers in that regard, still looking after that for new drivers of growth, but you do have an aging replacement opportunity that I think that is good for our business too.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Yes. And we are well suited to serve our customers' needs for replacement as well as be partners with them when they're going to expand and be able to move with them. And our manufacturing flexibility is designed to take advantage of opportunities when growth is there as well as, while like Bill was saying his wind power production right now is at capacity based on his current allocation. But if he gets some demand that has been spurred from the new legislation that was passed and the production tax credit then we can easily convert some of our facilities to move in that direction. James, do you have anything to offer?
James E. Perry - Chief Financial Officer & Senior Vice President
No, I think, Art, your question is a very big picture one and the good thing is we see the big picture in talking to the customers. We certainly watch the macroeconomic factors, but we have a much finer lens in having those day-to-day conversations.
Art W. Hatfield - Raymond James & Associates, Inc.
I think all your comments and how you approach it was very, very helpful and I appreciate the transparency and candor in a difficult environment that you offered us today. Thanks.
James E. Perry - Chief Financial Officer & Senior Vice President
Thank you, Art.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Thank you.
Operator
And we can take our next question from Matt Brooklier with Longbow Research. Your line is open.
Matt S. Brooklier - Longbow Research LLC
Hey, thanks, good morning. I'll try to be quick here. Are you providing any color in terms of your expectations for Element sales in 2016?
James E. Perry - Chief Financial Officer & Senior Vice President
Matt, this is James. We're not breaking down the sales of RIVs other than $500 million in total, we're not providing allocations or where those railcars may go.
Matt S. Brooklier - Longbow Research LLC
Okay. Is it fair to assume though that the billion dollars, the extension, we should be thinking about that being spread out kind of ratably over the next four years, or is there a potential for some of that to get pushed out just given we're in a much more challenging environment currently.
James E. Perry - Chief Financial Officer & Senior Vice President
Yeah. Again Matt, this is James. Hard to – as I said we've not specifically identify the cars or the humps (66:29) for those cars, there are strong institutional investor demand, Elements among those of course. The $1 billion over four years gives us both flexibility and we'll see as we – as the year progresses, what our desires are and their desires are to match up cars that go to them and cars that go to other third parties including the new fund that we've talked about in our press release earlier today.
Matt S. Brooklier - Longbow Research LLC
Okay. That's helpful. And then my last question here, I'm trying to get a sense for how much of the margin headwind this year within railcar is a function of the cycle, i.e., building less tank cars and less sand cars and building more free cars and kind of the ASP and the mix there to how that changes and it's a natural margin headwind.
And then how much of the margin headwind is potentially a function of shifting some of the backlog for these energy cars out further and maybe pulling forward some freight cars in the meanwhile just given current environment we're looking at currently?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Matt, I think I've said. This is Steve – a couple of times today that really the significant shift in our production mix and the margins associated with that production mix really is the big headwind in our margin decline. And I think that's much detail, we'll get into on that but that's – when I say a significant shift in mix I mean it's a very significant shift.
Matt S. Brooklier - Longbow Research LLC
Okay. That's helpful. Thank you.
Operator
And we can take our next question from Kristine Kubacki with Avondale Partners. Your line is open.
Kristine Kubacki - Avondale Partners LLC
Thank you for squeezing me in. I just wanted to piggyback on Art's question a little bit about RIV. I guess I am surprised that the secondary market is hanging in there so strong and you talked about that you had inquiries over the $500 million and I was just wondering what would keep you or prevent you from selling more cars at this point, is it a function of what the cars are actually in demand?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
Well, thank you Kristine. This is Steve Menzies. We will evaluate opportunities to sell more railcars through our RIV platform beyond the $500 million we've talked about. Institutional investors, in my opinion, the conversations that we had with them are shunning financial instrument investments and really looking for hard assets like lease railcars. They like the asset class, they like the risk profile, and we're working with the number of institutions to continue to express an interest in aligning with our RIV platform.
James E. Perry - Chief Financial Officer & Senior Vice President
Now, I think, Steve said it well, I think as Steve said part of it is the level of interest out there remains strong. We continue to balance our own portfolio needs with those of the third party investors. So we and our investors have diversified portfolios and as we look at the order volumes, our backlog and what's in our existing wholly-owned fleet, we're able to select cars, so be sure both of those portfolios and all of those with the investors who are well diversified.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
This is Tim. We're in a strong position because we've got a large reservoir, when you take our backlog and our existing wholly-owned fleet to be able to select and choose from.
Kristine Kubacki - Avondale Partners LLC
Okay. That's helpful. And then my question – I know, you'll hate this on the margin, I guess, but I'm going to come out a little different way. Can you talk – can you just answer the question about the mix shift was so dramatic this year and then going back a quarter ago, it seems like we had a lot more visibility. And I guess I'm wondering is why the shift so dramatic, is it because car buyers have come back in and changed what car types? And can they renegotiate the price on that? Or are those energy cars or the tank cars that are getting pushed out, are they going to be eventually build as a tank car or so, how should we think about the backlog, is it more fluid than we all expected, I guess.
James E. Perry - Chief Financial Officer & Senior Vice President
And this is James. Kristine, I don't think it's fluidity as much. Steve talked about it in our last couple of conference calls that a lot of our crude oil tank cars specifically would pretty much to be out of the backlog by the end of 2015, that's the case. So that's one of the significant shift that he talks about as you're moving more from tank to freight and you're moving from those high value crude oil cars and certainly the pricing environment in the last two quarters. Your average sales price comes down and then on top of that the compounding effect of operational leverage coming down with a lower volumes as to the lower overall margins.
Kristine Kubacki - Avondale Partners LLC
Okay. That's very helpful. Thank you for squeezing me in.
Timothy R. Wallace - Chairman, President & Chief Executive Officer
Thank you.
Operator
And we can take our next question from Mike Baudendistel with Stifel. Your line is open.
Mike J. Baudendistel - Stifel, Nicolaus & Co., Inc.
Thank you. The eliminations you expect in 2016 related to leasing segment were a little bit higher than I was anticipating. I was just wondering if you could talk a little bit about how much equipment you expect to put in your leasing fleet in 2016. And I know it's a little bit up in the year with RIV situations, or maybe if you could talk about how much of the 90% of the cars – 90% of the deliveries you have booked for 2016 are going to go into the lease fleet?
James E. Perry - Chief Financial Officer & Senior Vice President
Sure. Mike, this is James. Thank you. Yeah, the guidance we gave was $1.1 billion of eliminations. So that would be the value of the cars going into the lease fleet. We had about a little more than that in the backlog for leasing at the end of the year. So the vast majority of that's in the backlog. We've talked about selling about $500 million from the lease fleet to RIV is how we have that guided right now. So that would add a net of $600 million of market value of railcars during the year. So, we would expect at this time for the fleet to grow based on that guidance.
Mike J. Baudendistel - Stifel, Nicolaus & Co., Inc.
That's helpful. That's all I had. Thank you.
Operator
And we can take our next question from Steve Barger with KeyBanc Capital. Your line is open.
Steve Barger - KeyBanc Capital Markets, Inc.
Hi. Thanks for sticking around guys. Just one quick one from me. You've been clear, you're projecting recent weaker demand trends through the rest of the year. I'm curious if you've booked any railcars or barges in the first six weeks of the year? Is there really any activity out there?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
This is Steve. Steve, thanks for your questions. Yes. We have booked orders through the first six weeks of this year.
William A. McWhirter - Group President-Construction Products & Senior VP
Yes, Steve, this is Bill. On the barge side, we have booked orders, although, I would say very few at this point in time.
Steve Barger - KeyBanc Capital Markets, Inc.
Super. And just one follow-up, for the orders that you are booking, are they for delivery in 2016?
D. Stephen Menzies - Senior Vice President and Group President of the Rail and Railcar Leasing Groups
This is Steve again. Yes.
William A. McWhirter - Group President-Construction Products & Senior VP
And this is Bill. Yes as well.
Steve Barger - KeyBanc Capital Markets, Inc.
Okay. Thanks very much.
Operator
And ladies and gentlemen, this does conclude today's question-and-answer session. I'd like to turn the program back over to Gail Peck for any closing remarks.
Gail M. Peck - Treasurer & Vice President of Finance
Thank you, Aaron. That concludes today's conference call. A replay of this call will be available after 1 o'clock Eastern Standard Time today through midnight on February 26, 2016. The access number is 402-220-2686. Also, the replay will be available on the website located at www.trin.net. We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.
Operator
Thank you for your participation. This does conclude today's program. You may disconnect at any time.
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Symantec Corporation (NASDAQ:SYMC)
Q1 2009 Earnings Call
July 30, 2008 5:00 pm ET
Executives
Helyn Corcos – VP, Investor Relations
John Thompson – Chairman & CEO
James Beer – Executive VP & CFO
Enrique Salem – COO
Analysts
Sarah Friar - Goldman Sachs
Heather Bellini - UBS
Brett Thill – Citigroup
Adam Holt – Morgan Stanley
Philip Winslow - Credit Suisse
Israel Hernandez - Lehman Brothers
Daniel Ives - Friedman Billings Ramsey
John DiFucci – JP Morgan
Katherine Egbert - Jefferies and Company
Robert Breza - RBC Capital Markets
Walter Pritchard – Cowen & Company
Todd Raker - Deutsche Bank
Tim Klasell - Thomas Weisel Partners
Garrett Bekker – Merrill Lynch
Philip Rueppel - Wachovia Securities
Rob Owens - Pacific Crest Securities
Steven Ashley – Robert W. Baird & Co.
Operator
Good day and welcome to Symantec first quarter 2009 earnings conference call. At this time I would like to turn the call over to Ms. Helyn Corcos, Vice President of Investor Relations; please go ahead.
Helyn Corcos
Good afternoon and thank you for joining our fiscal first quarter 2009 earnings conference call. With me today are John Thompson, Chairman of the Board and Chief Executive Officer of Symantec; Enrique Salem, Chief Operating Officer; and James Beer, Executive Vice President and Chief Financial Officer.
In a moment I will turn the call over to John. He will provide high level comments on the company, Enrique will follow with quarterly highlights and James will wrap it up with the review of the financials and our guidance as outlined in the press release. This will be followed by a question and answer session.
Today’s call is being recorded and will be available for replay on Symantec’s Investor Relations homepage at www.symantec.com/invest. A copy of today’s press release and supplemental financial information are available on our website and a copy of today’s prepared remarks will be available on the Investor Relations website shortly after the call is completed.
During the June, 2008 quarter we reclassified the Altiris Services revenue from Security and Compliance to the Services segment. We have provided the corresponding historical comparisons in our press release and supplemental information which has been has been posted on our website.
Before we begin I’d like to remind everyone that some of the information discussed on this call, including our projections regarding revenue, operating results, deferred revenue, cash flow from operations, amortization of acquisition-related intangibles, and stock-based compensation for the coming quarter contain forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. Additional information concerning these risks and uncertainties can be found in the company’s most recent periodic reports filed with the US Securities and Exchange Commission. Symantec assumes no obligation to update any forward-looking statements.
In addition to reporting financial results in accordance with generally accepted accounting principals or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results which can be found in the press release and on our website.
And now I would like to introduce our CEO, Mr. John Thompson.
John Thompson
Thanks Helyn and good afternoon everyone. I’m excited by the team’s ability to execute our operating plan and deliver solid June quarter results. Performance was strong in all geographies with international growth remaining robust and with North America posting strong double-digit results.
The sales force continues to focus on up-sell and cross-sell opportunities resulting in record June quarter large transaction volumes. Healthy spending on storage management solutions continued during the quarter as growth in data volumes continues for our customers around the world. In addition our investments in higher growth areas like archiving and data protection are paying off.
As an example, the integration of our de-duplication technology with Net Backup has ignited an important growth opportunity for us and our archiving business continues to build on its market leading position.
The June quarter results highlight the critical nature of our product portfolio to customers around the world. In addition we saw CIOs of large enterprises purchase more products from Symantec as they strive to reduce the number of vendors they much manage. This is a trend we expect to continue particularly during these more challenging economic times.
In addition to strong revenue and earnings results our deferred revenue and strong cash flow generation during the June quarter underscored the financial strength of our company. This performance is a terrific start to our fiscal year. Looking ahead we believe the pipeline for September is strong and visibility continues to improve.
We intend to leverage our core strengths in endpoint security, data protection, storage management and our consumer franchise to accelerate new growth opportunities. We will continue to up-sell new functionalities and drive incremental business across our global customer base. And we will continue to invest in areas such as software as a service and virtualization.
At our Financial Analyst Day we provided an update on our endpoint virtualization strategy as one of our emerging growth areas. Additionally according to IDC the X86 server virtualization market is growing in excess of 25% annually and is expected to exceed $3 billion by 2011. We made a number of important moves over the last few years to position our company to be able to take advantage of these opportunities. They include the purchase of Altiris with its software virtualization solution; that acquisition of AppStream to compliment the SVS solution as well as the recent announcement of our Veritas Virtualization Infrastructure Solution.
So let me put our strategic intent around virtualization in context for you today. At the endpoint our strategy is based on freeing valuable information from the underlying systems functions. Today important enterprise information is scattered across a broad range of devices from PDAs to storage arrays. This valuable information is deeply entangled with other data such as operating systems and application code, which is far less valuable to any enterprise.
We believe that virtualization when properly applied can decouple information that matters from the rest of IT environment so that it can be independently secured and managed. To help our customers achieve this benefit Symantec is infusing virtualization capabilities across our portfolio from server management and high availability to security.
For instance in the data center, server and storage virtualization coupled together can separate unique information from redundant copies of an application or operating system, dramatically lowering storage costs. In June we announced the Veritas Virtual Infrastructure as the only product that can provide a total server and storage management solution for both virtual and physical environments.
Available on the X86 platform this will allow us to leverage our customers’ interest in Linux and Windows service consolidation. On the endpoint the user experience can be separated from the OS and application to provide better portability in today’s highly mobile environment. Together Symantec’s application streaming technology and our client software virtualization solution provides end users with the applications they require on demand allowing IT managers to optimize the cost of delivery of critical applications without impacting the users’ experience.
We believe customers will use virtualization technologies to help them simplify their environments by separating out the information that matters from that which does not and we believe Symantec is well positioned to help them secure and manage that information by putting virtualization to work across our portfolio.
With enterprise data volumes doubling every two years we believe we have the right products right now with additional enhancements and innovations planned to meet the critical need to secure and manage the information explosion. We will continue to strengthen our position in both our consumer and enterprise customers around the world as this opportunity represents a significant growth catalyst for our company.
With that I’ll turn it over to Enrique who will provide some details on the June quarter highlights.
Enrique Salem
Thanks John and good afternoon everyone, I’m very pleased with the strong performance or our team during the June quarter. Sales activity continued to improve around the world with all regions posting double-digit revenue growth. In addition all key product areas generated strong growth.
The sales force executed well, effectively up-selling and cross-selling the broader Symantec portfolio. This was evident in our large transactions. During the June quarter we generated a total of 336 transactions valued at more than $300,000 each, up 35% compared to 249 transactions in the year-ago quarter.
We generated 85 transactions worth more than $1 million each, up 77% compared to the 48 transactions in the June, 2007 quarter. In addition nearly 80% of all large transactions included multiple products or services driven by the trend that large enterprises prefer to deal with fewer vendors.
During the quarter we generated strong sales and revenue performance across all of our segments and geographies. Within our storage and server management segment our data protection business posted outstanding results as we continue to extend our leadership position by gaining market share from our competitors.
The revenue from our backup business grew by more than 20% year-over-year. Sales of Net Backup 6.5 were driven by our unique capabilities around virtual machine protection, disk data protection, and by our de-duplication technology in pure disk. During the quarter we launched a Beta version of our new Continuous Data Protection Technology. This innovative technology dramatically reduces IT risk and improves backup and recovery service levels.
At the same time it minimizes infrastructure costs through advanced disk space protection and more efficient usage of server and storage resources. This product has already garnered interest from our customer base.
Backup Exec 12 which launched in mid-February continues to perform extremely well in the small and mid market segments. We also continue to leverage technology between Net Backup and Backup Exec in order to deliver innovation across our product portfolio across all market segments.
We protect more than half the world’s data and we will continue to bring next generation technology to the market in a timely manner. On the data center side of the business our storage foundation products their best result in years. The performance was driven by our customers’ desire to simplify their data center infrastructure and reduce costs by standardizing the storage management software across their heterogeneous environments.
In our security and compliance segment our market leading endpoint security franchise posted strong results and generated double-digit year-over-year revenue growth. Customers value Symantec endpoint protection’s superior feature set and smaller footprint. We continue to garner new customers and have won a number of competitive displacements.
Our endpoint management business generated strong sales activity and posted year-over-year revenue growth in the high teens. We continue to see strong win rates against our competitors. In the June quarter we announced the release of new Symantec Endpoint Management Suite. This suite defines the next generation of integrated best-of-breed systems management, endpoint security, and backup and recovery.
The Suite uniquely differentiates Symantec versus others in this marketplace. We believe our integrated approach provides organizations with the visibility into and control of an entire endpoint environment thereby minimizing the exposure of security and compliance risks. Looking ahead one of our key product deliverables this year is Altiris 7.0 built on the Symantec open collaborative architecture.
It provides us the opportunity to integrate other Symantec solutions such as our endpoint products within this new architecture. Now moving on to our archiving business we continue to win against our competition in the archiving space. Enterprise Vault had another outstanding quarter with revenue posting 30% year-over-year growth.
We believe Enterprise Vault has become the de facto standard for addressing the ever increasing regulations around E discovery. Once again Gardner positioned Enterprise Vault in the leaders quadrant of the 2008 Magic Quadrant for Email Archiving. In addition for the fifth consecutive time we are the only, the only vendor positioned in the leadership quadrant.
Our Vontu team had the best quarter in their history. The continued momentum of our data loss prevention business demonstrates the successful integration of our teams. During the quarter we closed our largest DLP deal ever and we won our largest international deal to date. Gardner recently positioned us Vontu Data Loss Prevention 8 in the leaders quadrant for constant monitoring, filtering and data loss prevention.
DLP is a key component in Symantec’s product strategy to secure and manage the world’s information. Now moving to the consumer business, we continue to enhance our leadership position by delivering the most innovative products and services that address the evolving needs of customers today.
Our Suite products, Norton Internet Security and Norton 360, continue to perform well increasing their share of total consumer sales and driving ASPs higher. Norton 360 now represents almost 25% of our consumer revenue and more than 35% of consumer sales. During the quarter we closed the Swap Drives acquisition. With the explosion of digital information such as photos, music and videos consumers have more files on their computers than ever before.
Adding Swap Drives technology into the Norton portfolio gives consumers access to a world class service to help secure and manage their information. While we already leveraged swap drives online backup service in Norton 360, this acquisition allows us to enhance operating results for this product and gives us the capability to utilize Swap Drives online backup and storage platform in our other consumer offerings.
Our consumer services continue to generate strong customer interest. Our most popular services such as PC Tune-up, PC Installation and Green PC are finding that these services lead to higher customer satisfaction levels and build even greater loyalty for the Norton family of products.
We also recently launched the public Betas of the 2009 editions of Norton Anti Virus and Norton Internet Security. The 2009 products have been designed to be the fastest security products in the industry. This is supported by more than 300 improvements that span nearly every aspect of the product from the scanning engines to the user interface.
Examples include an install time of one minute or less with one click; the industry’s fastest update capability and memory usage reduced to less than 50% of our nearest competitor. Our Beta users are consistently giving us high marks for performance and usability and finally we expect these products to ship during the usual September timeframe.
Looking ahead the September quarter pipeline looks strong and I believe security and storage are priority areas for IT spending even in this environment.
And with that I’ll hand the call over to James.
James Beer
Thank you Enrique and good afternoon everyone. It is very encouraging to see the combination of consistent execution, further margin expansion and solid cash generation driving better results in each of our four key financial metrics.
First I’ll review with you the financial details of the June quarter which as a reminder included 14 weeks of activity versus the normal 13 weeks. GAAP revenue came in at $1.65 billion, non-GAAP revenue grew 16% over the June, 2007 period to $1.66 billion driven by both our success in selling more to our installed base as well as new customers around the world.
Our June quarter revenue included approximately $75 million of one-time benefit generated from the extra week. Foreign currency movements positively impacted non-GAAP revenue by seven percentage year-over-year. The June quarter’s fully diluted GAAP earnings per share were $0.22, non-GAAP fully dilute earnings per share for the quarter were $0.40, up 38% year-over-year reflecting that even as our top line growth strengthened we continued to judiciously manage expenses.
Our June quarter EPS included approximately $0.03 of one-time benefit generated from the extra week. International non-GAAP revenue of $866 million grew 19% versus the year-ago period with all regions posting double-digit growth. International revenue accounted for 52% of total non-GAAP revenue.
We are also particularly pleased with the Americas performance which grew 13% year-over-year. Now I’d like to move on to non-GAAP revenue by segment. The consumer business generated record revenue of $473 million up 12% versus the June, 2007 quarter. Electronic distribution grew by more than 20% year-over-year reaching a new high of nearly 80% of our total consumer revenue.
Online sales were driven primarily by strong subscription renewals, ISP and OEM activity. In the enterprise arena the competitiveness of our security, availability and services solutions along with excellent sales execution drove the improved top line growth. Storage and server management segment generated revenue of $616 million up 20% as compared to the June, 2007 results driven by strong data protection and storage management performance.
Our security and compliance segment generated revenue of $449 million up 12% versus the year-ago period. Our endpoint security products generated record revenue during the quarter growing approximately 10% year-over-year. We were also pleased with the performance of our endpoint management team for posting another very solid quarter.
In addition we continued to see strong double-digit growth from our industry leading archiving solutions. Our services segment generated revenue of $117 million, up 35% year-over-year representing 7% of our total revenue. We continue to focus on improving the cost efficiency of our services operations and we are pleased with the contribution improvements that the group has made during the past couple of quarters.
Please note that we have reclassified the Altiris services revenue from security and compliance to the services segment. We have provided the corresponding historical comparisons on the Investor Relations website.
Non-GAAP gross margin increased 170 basis points to 86.5% for the June, 2008 as compared to the year-ago period. This is as a result of our cost of goods sold remaining approximately constant year-over-year while revenue grew by more than $230 million. Improved revenue production and a focus on cost management have also increased non-GAAP operating margins for the June quarter to 29.3% up 360 basis points year-over-year.
This is the third consecutive quarter in which operating margins have increased strongly versus the prior year. As I mentioned at our Financial Analyst Day strong top line performance can lead to operating margin improvements above our planned annual goal of 100 basis points year-over-year.
GAAP net income was $187 million for the June, 2008 quarter. Non-GAAP net income was $342 million, up 30% year-over-year. We excited June with a cash and short-term investments balance of nearly $2.3 billion. During the June quarter we repurchased 9.7 million shares at an average price of $20.55. This $200 million repurchase volume is consistent with our annual target of spending half of our cash flow from operations on share buybacks.
Our net accounts receivable balance at the end of the June, 2008 quarter was $652 million. Days sales outstanding or DSO was 36 days, in line with normal seasonal trends. Cash flow from operating activities for the June quarter was up 18% to $414 million as compared to the June, 2007 quarter primarily due to strong collections and the benefit from prior period litigation settlements offset by increased cash tax payments.
GAAP deferred revenue at the end of June, 2008 was approximately $3.01 billion. Non-GAAP deferred revenue grew 12% year-over-year to $3.02 billion assisted by strong selling activity particularly at the end of the quarter. Foreign currency movements positively impacted non-GAAP deferred revenue by seven percentage points year-over-year. Our deferred revenue included a one-time negative impact of approximately $5 million from the June quarter’s extra week.
As you may recall in May, 2006 we paid $130 million of additional US taxes associated with repatriation of offshore funds by Veritas in 2005. Earlier this month we reached a settlement with the IRS which we expect will result in our obligation being only 10% of the original $130 million at issue.
Now I’d like to spend a few minutes discussing our expectations for the September quarter which as I noted earlier contains only 13 weeks. We expect GAAP revenue to be in the range of $1.52 billion to $1.56 billion. Non-GAAP revenue is estimated to be in the range of $1.525 billion to $1.565 billion as compared to $1.437 billion in the September, 2007 quarter.
GAAP earnings per share are forecasted to be in the range of between $0.15 and $0.17. Non-GAAP earnings per share are estimated to be in the range of between $0.34 and $0.36 as compared to $0.29 in the year-ago period.
At the end of the September quarter we expect GAAP deferred revenue to be between $2.865 billion and $2.965 billion. We expect non-GAAP deferred revenue to be between $2.875 billion and $2.975 billion as compared to $2.62 billion at the end of September, 2007.
We expect about 64% or approximately $990 million of our September quarter revenue to come from the balance sheet. This percentage once again illustrates the degree of predictability that we have built into our income statement during the last few years.
This guidance assumes a common stock equivalents total for the quarter of approximately 860 million shares. We have also assumed an exchange rate of $1.53 per euro for the September quarter.
In closing we are very pleased with the June quarter results and are encouraged with the prospect of building on this momentum during the September quarter.
And now I’ll turn it back to Helyn so we can take some of your questions.
Helyn Corcos
I’d like to announce that Symantec plans to attend the Pacific Crest Conference on August 5th, the Citi Conference on September 3rd, and Deutsche Bank Conference on September 11th. Finally we will be reporting our fiscal second quarter results on October 29th. For a complete list of the investor related events, please visit our events calendar on the Investor Relations website.
Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Sarah Friar - Goldman Sachs
Sarah Friar - Goldman Sachs
On the enterprise security side, could you talk about the penetration of SEP 11 to date and what’s next there, what keeps driving the enterprise security business from here?
Enrique Salem
I think when you look at our success rate with SEP we continue to see adoption by the larger customers. As you know when you initially ship a product, what happens is some of the larger customers are putting it in pilots and Beta testing. We are starting to see movement in the high end of the market. Now as you know some of the things that we’ve added to the product are not only the [NAC] functionality but also our encryption option that we partnered for and so that allows us to continue to drive the ASPs up for the per node sale of our product.
The other piece that we’ve done that I think is more interesting and I touched on it is that we are positioning to ship Altiris 7.0 where we bring together the management capabilities that we acquired when we bought Altiris and that allows us to further deliver on our vision of the only way you have a secure endpoint is it has to well managed. And so we feel very confident that it’ll continue to strengthen our position at the endpoint.
Sarah Friar - Goldman Sachs
You talk about the ASP going up on a per node basis, can you give us a sense for what that uplift is and then in particular if you can get someone to take the Altiris piece, are they paying double, effectively 100% again or what is it as a percent of what they would pay per node?
Enrique Salem
I think it varies on the contract size. If you look at it each segment is going to be a little bit different but definitely it enhances it because if you think about it, it’s a significant new functionality. Systems management is a whole category onto itself that we’ve not successfully integrated and quite frankly I think folks have got to start looking at it from the perspective of if you don’t deliver both security and management, you’ve only got half the solution.
Operator
Your next question comes from the line of Heather Bellini - UBS
Heather Bellini – UBS
I was wondering if you could give us an idea, you are seeing great results in cross-selling and I was wondering how much of this would you say is due to the change in the sales force compensation and do you think you’re getting the full benefit from the changes you made on that front as of yet?
Enrique Salem
When you look at it, these changes have been in the works through last fiscal year and this fiscal year and it’s still early to get the what I would say the full effect of the changes we made at the beginning of this new fiscal year. So I expect that the change will take effect as we go through the year and so there’s more benefit to be derived from those changes.
Heather Bellini – UBS
So does that mean that you expect the average sale of ASPs of your sales to increase over the course of the year if this plays out as expected?
Enrique Salem
I don’t know that it has as much of an effect on the ASPs, what it does is it--
Heather Bellini – UBS
In terms of the average revenue per customer.
John Thompson
It will drive higher license content if anything as opposed to affect the ASP because the focus in the operating plan is for the team to try to drive net new licenses or new placements within an enterprise. So in that context perhaps you could translate that into higher ASP but in our view it’s much more about license content.
Operator
Your next question comes from the line of Brett Thill – Citigroup
Brett Thill – Citigroup
On the deals over a million, last year in the first half those deals seemed to stall out and obviously you’re showing a complete reversal of that trend with 85 up 77% year-over-year, can you just walk through what you’re seeing, I know you mentioned there’s an attach of additional multiple products but can you tell us what’s being attached and if you look at product lines or it you look at seats?
Enrique Salem
I think you’ve got it exactly right and that is we are seeing multiple products being part of these larger transactions. I also think you’re starting to see a little bit more of products that are not just either storage or security but the combination of the two. I think those are probably the two biggest factors plus I think as we mentioned, our storage foundation business had its best quarter in many years so I feel very good about some of our core data center products performed very, very well. So the combination of those three factors I think drove the large deal volume.
Operator
Your next question comes from the line of Adam Holt – Morgan Stanley
Adam Holt – Morgan Stanley
On the storage and server management business, you seem to have had a complete reversal or at least a real strengthening on the foundation business over the last several quarters you noted more broad based buying into the foundation consolidation vision, but can you talk about what you think is behind the recent strength in foundation and do you think its sustainable mid to high single-digit grow from here going forward?
Enrique Salem
I think when you look at the success there is folks are trying to manage down the costs of managing their infrastructure and when you look at what we’re able to do there the combination of having a common storage management layer that works across a heterogeneous environment absolutely helps folks reduce their costs.
The second thing is that we’ve added some new capabilities in products like Command Central storage where you can get much better utilization of your storage. So for example if you look at the Gardner data, 37% of storage is currently utilized in the enterprise. When you take a product like Command Central you can help customers drive down their costs of acquiring more storage which is an important aspect of this business. And quite frankly that’s why we feel that we continue to do an even better job of driving more products into the data center.
The other aspect that I think is important is we’ve had tremendous sales force stability. I think if you look across last year compared to this year, our geographic leaders have been in place now for over a year, we also have our leadership team across all geographies being very, very stable and that translates into more affective and better results in our entire product line but specifically in storage and server foundations.
Adam Holt – Morgan Stanley
On operating margins, even if you back out the impact of the extra week for the quarter you still had quite strong margins, better than we were looking for, you noted cost control and headcount in your commentary but are you also starting to see any potentially favorable impact from some of the consumer distribution deals starting to get more productive and more profitable?
James Beer
That is absolutely part of the equation. I think we’ve discussed in the past as to how the accounting for those new consumer OEM arrangements is the toughest in the earliest part of the contract and so we are starting to see now, now that the trial wave period has passed, now that we’ve been able to build our [take] rates and so forth, a better top line impact to go along with what had previously been a substantial cost line impact.
Adam Holt – Morgan Stanley
So is it too early to say margins are stabilized there or are we comfortable that margins should be more stable in the consumer business going forward?
James Beer
Well we’re sticking by our long-term goal of 100 basis points improvement on margin year-over-year so I think I’ll just leave it at that. We’re obviously always going to be looking to over perform as we have done in this past quarter and that’s going to be a combination of revenue growth and maintaining the discipline around the cost line.
Operator
Your next question comes from the line of Philip Winslow - Credit Suisse
Philip Winslow - Credit Suisse
Just on the sales force side, I wonder if you give us a sense for just attrition in sales force and how that’s been trending over the past several quarters I know it seemed to hit a high point in the year-ago quarter, and then also we recently just saw an announcement of [Sofo’s] intent to acquire [Udimacko]. This is now your second competitor to move into the hard disk encryption market I know you have an OEM relationship there but does this affect your plans there at all?
Enrique Salem
When you look at attrition definitely its trending down in the sales force and that is to the point of having stability not only in the leadership team but also at the various levels of management. I think that definitely has a positive affect on our overall sales performance.
John Thompson
We’ve been quite pleased with the relationship with Guardian Edge. Obviously as the pipeline continue to build that represents a good opportunity for both of our companies. We’ve made no decisions about changing that relationship or any other as I might add to purchase something in the encryption space. And so when we have something to say other than what we’re doing we’ll talk about it then.
Operator
Your next question comes from the line of Israel Hernandez - Lehman Brothers
Israel Hernandez - Lehman Brothers
On the large deals, obviously a lot of success closing those during the quarter and over the last couple of quarters, any risk as we go into a more challenging macro environment that we could start to see some of these deals slip, how are you gauging the pipeline for these large deals and the predictability around those?
John Thompson
I think its fair to say that there are a number of customers out there that are cautious in their view of what their spending plans are for the second half of this calendar year and so we can’t be unmindful of that but by the same token we happen to have key product portfolio items in security and storage management which are almost un-deferrable expenditures for them as their data volumes continue to grow. So as data volumes grow so will our business independent of perhaps the broader macroeconomic environment. While we’re not immune we think we do have some degree of insulation from that problem.
Operator
Your next question comes from the line of Daniel Ives - Friedman Billings Ramsey
Daniel Ives - Friedman Billings Ramsey
In regards to acquisitions especially on the private side, can you talk to being in an environment like this both on acquisitions and probably there are a lot of pickings out there, just how are you going through them and what’s your thought process in regards to bolt-ons and what specific areas?
John Thompson
Most of the things that we’ve done of late have been small transactions, actually small private company transactions. I think as the liquidity opportunities for private companies continues to be challenging it would make it much more attractive for them to consider a strategic purchase by a buyer like Symantec. We believe that that will create an opportunity for us for the next few years because there are forecasts that would suggest there’s going to be a tight IPO market for probably 12 to 18 months and so as we said at our Analyst Conference, we intend to continue to be acquisitive around the notion of securing and managing the world’s information content.
And to the extent that there’s something out there that compliments that vision for us, you should expect to see us be active acquirers.
Operator
Your next question comes from the line of John DiFucci – JP Morgan
John DiFucci – JP Morgan
On guidance this quarter the numbers look really strong even if you back out that extra week and the guidance although looks decent at 7% revenue growth and calculated bookings and realizing some of the revenue comes off the balance sheet but with the deferred revenue anticipated sequentially to go down a little bit, about 5% calculated bookings growth foreign exchange is probably going to benefit you by about that much anyway, are you, just given the economic backdrop is it—are you just trying to be prudent and what’s happening out there in the world or was there something this quarter that perhaps you may see fall off a little bit like even in the backup business you said you were up about 20% year-over-year again yet the extra week but you had two big product releases and you think that’ll sort of maintenance catch-up things might fall off or just trying to understand looking forward here?
James Beer
We’re very optimistic about the September quarter. We feel as though we’ve got a strong pipeline coming into the quarter. The product portfolio if in terrific shape. We’ve got important new products in late stages of development so we feel as though we have a lot of momentum as really has been evidenced by the results of recent quarters. As to how we set guidance, I wouldn’t say that we have tried to take a different approach this quarter to the way we do it each quarter and obviously now it’s about doing our best, work hard to beat that guidance. But we have set it, we feel good and it very much reflects the momentum of the business.
Operator
Your next question comes from the line of Katherine Egbert - Jefferies and Company
Katherine Egbert - Jefferies and Company
On the IRS settlement it looks like you’re going to pay a lot less then what you thought, are you going to reverse the reserve on that and is it going to have an impact on cash flow this quarter?
James Beer
Well in terms of cash flow we wouldn’t expect it to have an impact. We have another large tax issue that has just finished at trail that I suspect you’re aware of and so I wouldn’t see us having any refund necessarily. We’ll likely leave that money on deposit at the IRS so I wouldn’t look for any particular cash flow impact and we’ve paid the taxes a couple of years back and so there’s no particular reversal of any reserves to take care of either.
Katherine Egbert - Jefferies and Company
You talked about the Analyst Day that you had a very good coverage ratio for the June quarter can you give us any indication what it looks like for September?
John Thompson
Its equally strong for September, I don’t think we quoted a specific number in June for the June quarter but I would tell you that as we look at the statistics that we review weekly on salesforce.com we feel very, very strong about, are solid about what’s going on this quarter and how deals greater than 50% [odds] the coverage for those are in our pipeline so we’re feeling good about the quarter.
Operator
Your next question comes from the line of Robert Breza - RBC Capital Markets
Robert Breza - RBC Capital Markets
On the consumer side, the new service offerings, can you give us a sense for volume that you saw in the quarter and maybe tell us about typical ASPs on some of those services?
Enrique Salem
The typical ASPs are anywhere from $49.00 to $69.00 and the products, as we mentioned, we’re getting some good take rates on the Tune-up service and given what’s going on the Green PC service where we tune your PC to be more energy efficient is of interest to folks who are trying to do the right thing for the environment and conserve costs. So we’re where we would expect it to be with consumer services.
Operator
Your next question comes from the line of Walter Pritchard – Cowen & Company
Walter Pritchard – Cowen & Company
On the products, it seems like data protection is strong, its been strong for your competitors as well, is there some sort of recent up swell in this market or do you think you did mention you’re taking share but it seems like everybody in this space is seeing pretty good growth?
John Thompson
I think what’s driving this is data volumes for all of our customers are growing and to the extent that they have made a choice of a provider or a platform, that certainly gives you as the platform option the opportunity to grow as their volumes grow. In our particular case I think what you’re seeing is the results of the team being very, very focused on integrating innovative technologies into the core Net Backup or Backup Exec products and with de-duplication now integrated into that backup with a number of really, really snazzy features in our Backup Exec product you’re starting to see the market leader take share as it should always.
Walter Pritchard – Cowen & Company
On the seasonality I know you’re not guiding for the rest of the year, the seasonality is a little strange this quarter and next just because of the 14 weeks, should we expect sort of a return over the next couple of quarters to normal seasonality for the company?
James Beer
Yes you should, the only difference in seasonality for this fiscal year versus the norm is really driven by the June quarter having that extra 14th week.
Operator
Your next question comes from the line of Todd Raker - Deutsche Bank
Todd Raker - Deutsche Bank
We’ve seen in software some of the very large vendors starting to take pricing up on their installed base, if you look at your business especially on the storage side, do you think you have any kind of pricing power if you look out over the next two or three years?
John Thompson
It’s hard to even think about pricing power when our customers are hurting economically and so I think we look at new functions and capabilities that we want to deliver into the marketplace and I think the best way to exercise price power if you want to call it that is through new innovation. Customers are certainly willing to pay for new innovation; they’re less willing to pay for across the board price increases. We just don’t think that’s the smart thing to do particularly in challenging economic times.
Todd Raker - Deutsche Bank
On the consumer side, I recognize that the revenue is very visible coming off of the balance sheet but if you look at it from a bookings perspective how much visibility do you have on the consumer business and what kind of expectations or concerns do you have if we get a general macro slowdown and the consumer business decelerates?
John Thompson
Clearly with 80% or more of the activity being online we have very, very solid visibility into daily if not weekly activity in the online channel. We operate with a sell through and a reporting structure that allows us to understand what’s going on at retail and if anything we worry about a continued decline in retail as a part of our overall consumer business.
Operator
Your next question comes from the line of Tim Klasell - Thomas Weisel Partners
Tim Klasell - Thomas Weisel Partners
Have you seen any change in the behavior of the consumer i.e. swapping out products, renewal rates, anything like that?
Enrique Salem
Actually we’ve seen consistent behavior in our online business as we noted, a combination of strong performance in online and weakening in retail has now become 80% of our overall business and as John stated we have good visibility into how many users come back to our sites, renewal rates haven’t been affected from what we can tell and our products are necessary for anyone who wants to go online and uses a PC so we haven’t seen any changes there.
Operator
Your next question comes from the line of Garrett Bekker – Merrill Lynch
Garrett Bekker – Merrill Lynch
I know you had mentioned awhile ago that heading into June the pipeline was maybe the strongest you had seen in quite awhile so could you talk a little bit about the linearity and also on maybe the close rates that you’ve seen and how your close rates, maybe you’ve thought about that as you’ve looked ahead with your guidance?
John Thompson
Well if I were to reflect on the June quarter what I would say is because our quarter closed on July 4th it was a much smoother quarter close then we have historically had. And so we did not have the back end loaded last day, last 48 hour kind of activity in the June quarter that we’ve seen in other quarters. Ironically enough as we move forward to this quarter we have a similar situation where the quarter will close on October 3rd I think, which should give us a chance to kind of smooth things out because of normal behavior if you will of our customers who would tend to look to the last day of the quarter as the last day in which we would be looking to book a deal.
In terms of visibility as I had mentioned earlier, we opened this quarter with very, very good pipeline coverage. As you look at deals in the pipeline with 50% or greater odds, look at deals with total odds, all of those things are very solid consistent with similar metrics as we entered the June quarter. So we feel good about our business and we feel even better about quite frankly how the team is executing around the world.
Operator
Your next question comes from the line of Philip Rueppel - Wachovia Securities
Philip Rueppel - Wachovia Securities
We talked a lot about how the strength in big deals was a key contributor to the revenue outperformance, can you talk about the other end of the spectrum, SMB, were there any changes there, was that also strong, and looking forward is that a segment that might be more at risk due to the economic headwinds or does it have a similar characteristic as your large customers?
Enrique Salem
While we saw good traction in our large deals, I think in some ways it’s easier to highlight what’s happened at the high end of the market or the larger deals but we did see performance across all product lines and all segments and across the geographies. And so what that means to us is that we are getting the benefit of our broader portfolio and that our products are necessary in this current environment.
The other thing is we mentioned that our Backup Exec business in our backup business was growing at 20%, a lot of the success of that product line is in the SMB segment where you get a lot of folks who are using the Windows platform and we’re clearly the market leader in backup and recovery for the small and medium sized companies so we haven’t seen any changes there and don’t expect anything to be different in the September quarter.
Philip Rueppel - Wachovia Securities
The strength in DLP the Vontu deals, are they still primarily standalone or are you starting to see them be part of the big deals, part of the overall Symantec solution?
Enrique Salem
I think that what we’re getting right now is while we continue to do large standalone deals you are seeing the benefits of the other parts of the security portfolio and what’s important in DLP that initially it was DLP at the network level, now what you’re seeing our customers say is they want the benefit at the endpoint and so given our strong position at the endpoint with Symantec Endpoint Protection, the Altiris client management suite, we think that the combination of DLP, systems management and our core endpoint security products gives us a very strong position and we can definitely see DLP becoming part of more and more of our security deals.
John Thompson
The typical sell cycle for a DLP deal will range in the six to nine month range, closer to nine then six, and so what we are seeing is really, really good cooperation at the field level between the Vontu team and the established Symantec account managers and I think as time goes on as those relationships continue to build and get stronger I don’t know that we’ll improve the sell cycle but I think we can expect to see much, much broader deal coverage of very large deals given the nature of the technology itself.
Operator
Your next question comes from the line of Rob Owens - Pacific Crest Securities
Rob Owens - Pacific Crest Securities
Can you talk about your revenue yield on billings business, if I look at the overage on revenue and the overage on deferred relative to guidance it seemed like your in period revenue realization was a little bit better then you had forecasted, is that a function of product set or is there something else going on there?
James Beer
I think there are a few different things going on here, I think as we’ve said a few times, the product set is strong, we’ve seen good traction behind new recent releases like NBU 6.5, SEP 11 obviously been very important as well. At the same time we have continued the theme of the last year and a half or so now of really close cooperation between those out there on the front line doing the selling and the back office so that we get cleanly written contracts, contracts that allow us to take some of our selling activity into revenue during the period in which the deal is booked.
In addition Enrique alluded to earlier the new comp model, so it’s a variety of different things that are allowing us to see a better revenue yield in period and that’s particularly encouraging when you remember that in the June quarter last year we had strong revenue performance. So a relatively tough year-over-year revenue comp for us. So very pleased with that overall result.
Rob Owens - Pacific Crest Securities
If we look at that extra $75 million that impacted the quarter is the mix pretty consistent which is the general mix of business or was there one area that benefited more from the extra week?
James Beer
No I’d say it’s pretty much a mix of the overall business; I wouldn’t call out anything in particular there.
Operator
Your final question comes from the line of Steven Ashley – Robert W. Baird & Co.
Steven Ashley – Robert W. Baird & Co.
On the continuous data protection feature that you’re going to be offering, in terms of timing is that something that we might see this quarter and is that an add-on feature to both the Net Backup and the Backup Exec products?
Enrique Salem
That feature is very important because as John has highlighted as data volumes go up folks are struggling to complete their backups and given the amount of data that needs to be backed up so this new technology, the new improvement allows you to continue to backup all of the critical information without having to worry about is the backup not going to complete in the backup window. The functionality is going to be obviously part of both our high end Net Backup product and our Backup Exec technology. It’s definitely going to be included or definitely going to be an add-on to the Net Backup 6.5 platform and it is a for-fee offering. Meaning it’s an up-sell for the customer.
Steven Ashley – Robert W. Baird & Co.
Is Altiris 7 in Beta use right now?
Enrique Salem
Absolutely.
Steven Ashley – Robert W. Baird & Co.
Is there any feedback by people using that and integrating it with the SEP 11 product?
Enrique Salem
I think the feedback we’re getting is positive because one of the great things that we’ve added is a new work flow engine that allows us to do a better job of not only managing the existing environment but also integrating with the other applications that the customer has and so feedback has been positive. We have deliverables this quarter to some of our partners and as we said this product will be available this fall.
Operator
There are no further questions; at this time I would like to turn the call back over to management for any closing remarks.
John Thompson
Thank you very much for joining in this afternoon. I’m quite proud of our teams’ performance in the June quarter. We have a very solid pipeline and very strong visibility as we head into September. Execution is improving, our product portfolio is quite strong and so I think we’re starting to hit our stride and I’m quite proud of our team and thanks for doing another great job guys.
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In the hit HBO series Silicon Valley, six young geeks found a software company and, with their inexperience, make huge and often hilarious mistakes.
Related: 5 Fatal Startup Mistakes -- and How To Avoid Them
The series resonates for me because I know what it's like to be a rookie at entrepreneurship. I was 24 and a college music major when I started my software company. Thirteen years later, we have nearly 450 employees and more than 5,000 customers.
Trust me, I’ve had a few "Richard" moments during this journey -- Richard being the shy programmer on Silicon Valley who is so worried in his role as startup CEO that he suffers night sweats. But as the Japanese author Haruki Murakami wrote, “Everybody has to start somewhere. You have your whole future ahead of you. Perfection doesn't happen right away.”
The first time you do anything big in life can be scary, and that’s especially true for fledgling entrepreneurs, who are putting their dreams, reputations, futures and finances on the line. Follow these six tips, however, and you just might make it after all.
1. Have crazy confidence in your product or service.
When my company JAMF started in 2002 and focused on Apple users -- we now help more than 5,000 businesses and schools manage their iPhones, iPads and Mac computers -- Microsoft’s Windows was still the dominant desktop computing platform. Apple was a niche product for artists, musicians and teachers. Many people thought we were nuts for targeting such a narrow market. They said we had to add Windows support to be successful. But we believed in our strategy. So, be like us: Don’t be afraid to defy conventional wisdom.
2. Make your own good luck.
I was studying music at the University of Wisconsin-Eau Claire around 2000 and working at a sandwich shop. When the eatery closed, I took a job at the university, providing tech support for professors’ Macs. (I had fooled around with Macs in high school and was minoring in computer science.) Then, my boss got transferred to another department and I took over his job. I got an idea for an automated software tool that could make the task of managing Macs easier, and thought I could make a business out of it.
I started putting in 100-hour weeks -- mind you, I was still a student, still had the tech-support job and was spending virtually all my spare time developing the software tool. By 2002, however, JAMF had been incorporated, so our business was in a good position when Apple introduced the iPhone in 2007 and the tech giant's fortunes began to soar.
You could say luck was a factor, and I wouldn’t disagree. But you can make your luck through hard work and correct sensing of a market.
3. Focus on your product or service, not running the business.
First-time entrepreneurs often struggle with the dual responsibilities of building the product and operating the business. But the more you can focus on the first and outsource or postpone the second, the better. You can easily find people capable of, say, keeping your books. Only you know best how to build value for your offerings.
Customers won't be attracted to you because you run your business well, but because of your great product.
Related: Don't Make These 10 Startup Mistakes
4. Operate on a shoestring.
When it’s time to hire employees, making payroll will become the No. 1 thing you lose sleep over. Your employees have families to support, mortgages to pay. They entrust you with their livelihood.
So, put off hiring until you’re absolutely certain that that move is necessary to maintain and grow the business. Then, set a goal of six months’ payroll in the bank. Do whatever it takes -- make sales, rent cheap office space, keep expenses to a bare minimum -- to reach it. Obtain a bank line of credit for immediate, urgent needs, assuming you have confidence you can repay the loan.
5. Stop talking, and just listen.
A rookie mistake that new entrepreneurs often make is yapping to customer prospects about how great their solution is before giving those customers a chance to talk about the problems they need solved.
So, truly listen to and empathize with your customers. You'll stand a much better chance of making the sale and building a long-term relationship.
6. Appreciate what your life experiences bring to the entrepreneurial table.
I didn’t set out to be an entrepreneur. I was a music major, specializing in classical piano. Yet music training had fostered an intense concentration and focus that have served me well as a startup founder. Music theory has helped me understand how to break down large challenges into more manageable pieces. Everyone has a unique background, and it’s only natural to apply past life experiences to the entrepreneurial journey.
Laughing at the characters on Silicon Valley is fun. So, enjoy. But in the real world, you can avoid those characters' mistakes even if you’re starting a company for the first time.
Related: What 9 Successful Entrepreneurs Wish They Had Done Differently
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Scientists say a stone knife and other artifacts found deep underwater in a Florida sinkhole show people lived in that area some 14,500 years ago.
That makes the ancient sinkhole the earliest well-documented site for human presence in the southeastern U.S., and important for understanding the settling of the Americas, experts said.
The findings confirm claims made more than a decade ago about the site, some 30 miles southeast of Tallahassee. At that time, researchers reported evidence that humans were there some 14,400 years ago. But in an era when such an old date was widely considered impossible, other experts disputed the evidence, said Mike Waters of Texas A&M University in College Station.
The sinkhole was "just politely ignored," he said.
Waters was among a new team of scientists who excavated there from 2012 to 2014. They report finding the knife and stone flakes in a paper released Friday by the journal Science Advances. The new work offers "far better" evidence for early humans than the earlier research did, he said.
The sinkhole is nearly 200 feet wide. In ancient times, it had a shallow pond at the bottom. That offered fresh water and a gathering point for animals, which "probably would have been easy pickings" for hunters who saw them trapped in the deep depression, Waters said.
Today, the sinkhole is filled with about 30 feet of water, and it took divers equipped with head-mounted lights to look for artifacts. It was "as dark as the inside of a cow, literally no light at all," said Jessi Halligan, the lead diving scientist and an assistant professor of anthropology at Florida State University in Tallahassee.
They found the knife while digging with a trowel. It's a couple of inches long and about an inch wide, sharpened on both sides.
To determine its age, the researchers used nearby mastodon dung, which contained twigs that could be analyzed. The twigs, and therefore the knife, were found to be about 14,550 years old.
Man-made stone flakes were found to be about the same age. The scientists also examined a mastodon tusk recovered in 1993, and confirmed that its long, deep grooves were made by people, probably as they worked to remove the tusk from a skull.
The first people in North America are thought to have crossed a now-submerged land bridge from Siberia to Alaska. From there, people spread southward. Waters said the age of the sinkhole artifacts adds to evidence that people may have migrated south from Alaska as early as 16,000 years ago by boat along the coast, because inland Canada was blocked by ice sheets until 2,000 years later.
Halligan said the ancient visitors to the sinkhole could have been the Southeast's first snowbirds, moving south for the winter and north for the summer. They could have followed mastodons, whose remains have been found as far north as Kentucky, she said.
"They were very smart about local plants and local animals and migration patterns," she said.
In American archaeology, sites showing signs of human presence more than about 13,000 years are called "pre-Clovis," since they predate the Clovis era of widespread human occupation.
Dennis Stanford of the Smithsonian Institution's National Museum of Natural History said that he ranked the sinkhole with two locations in Pennsylvania and Virginia as "the best-dated and oldest pre-Clovis sites yet found in North America."
While the other two sites are older, "the Florida site has a major role to play in learning the story of the peopling of the Americas," said Stanford, who didn't participate in the research.
Another expert, James Adovasio of Florida Atlantic University in Boca Raton agreed, saying it promises to shed light on "early Native American lifestyle in an environment where these lifestyles are very poorly defined."
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Science writer Seth Borenstein in Washington contributed to this report.
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Online:
Texas A&M video of sinkhole exploration: http://bit.ly/1rVAYEe
Science Advances: http://advances.sciencemag.org
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Follow Malcolm Ritter at http://twitter.com/malcolmritter His recent work can be found at http://bigstory.ap.org/content/malcolm-ritter
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Food Fanatic
This ribboned fudge Bundt cake has a surprise cream cheese layer that will knock your socks right off! Just try to eat one slice at a time.
My name is Kristan and I’m addicted to big Bundts.
It’s true. I love a good Bundt cake. Especially if it’s chocolate. I don’t stand a chance against a chocolate Bundt. If you ever want to convince me to run a marathon, just dangle a chocolate Bundt cake on a string in front of my face the whole way. I promise you, I’ll make it at least half a mile before I give up.
Add cream cheese to said Bundt cake, and I’m basically a goner. For real, there is just no hope. I made this cake while I was on a diet and it was the worst decision of my entire life. Even worse than my bangs in the sixth grade, rigid with Dep gel and Aqua Net. And that’s saying a lot, people. Those bangs are etched in history.
This ribboned fudge Bundt cake is kind of magical in that the cream cheese layer begins at the bottom of the cake and somehow works it’s way up. HOW exactly that happens is beyond me. Hello, I’m not Dumbledore, that’s for darn sure. I’m kind of thinking of inventing a clear Bundt pan just so I can watch the magic happen first hand. But until that happens, this cake will remain shrouded in mystery and sorcery.
Regardless of how it happens, it’s delicious. And easy! I love how it looks like a perfectly unassuming cake until you cut into it and reveal that gorgeous cream cheese layer. Does it get any better than surprise cream cheese?
No, friends. No, it does not.
Make this cake as soon as humanly possible. You won’t regret it!
Want more ways to get your Bundt cake on? You've absolutely got to try Kristan's banana pudding Bundt cake and chocolate cherry Bundt cake too!
Get the Ribboned Fudge Bundt Cake Recipe on Food Fanatic now!
--
About Kristan
Kristan is known for her candy creations and hilarity on Confessions of a Cookbook Queen. We know where her true genius is, though: fanciful fanatical cupcake creations!
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Business
National
Breaking News Business
Australia's only combined ports and rail operator Asciano plans to more than double dividends by 2016 as it frees up cash.
Chief executive John Mullen expects lower capital expenditure and other cuts to free up cashflow by fiscal 2016, despite the challenges presented by slowing economic growth.
Asciano's 5.75 cents a share payout for the first half of the current financial year was just 32 per cent of earnings, but that would be increased to a more normal range of 60 to 70 per cent, he said.
The company also said it was on track to achieve underlying profit growth in the 2013/14 financial year in the low single digits.
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That growth rate is well down on recent years, which has seen Asciano's profit rise from $38.4 million to $348 million in five years, and its market value grow to around $5.3 billion.
"Clearly the economy is still tough out there ... we're seeing it across the board," Mr Mullen said on Tuesday.
"We don't see it as disastrous as the company is taking measures necessary to offset flatter top lines than we would like.
"Moving the dividend ratio payout to normal industry levels is on target as well."
Using the expected extra cash for acquisitions was not a priority, he said, although the company has lodged an initial bid to operate a proposed freight terminal at Moorebank in Sydney's south west.
Asciano hauled 40.8 million tonnes of coal during the three months to the end of March, up 22 per cent on a year ago.
There was a 12 per cent fall in other bulk rail freight, including export grain volumes, due partly to drought in northern NSW and Queensland.
Volumes in its intermodal business - moving freight across Australia - declined 4.7 per cent as the West Australian economy has slowed.
Car imports in Australia are also down, reflected in falls in its automotive division.
The trend could only be up though, Mr Mullen said, with Australia's car manufacturing industry winding down.
Asciano shares outperformed the market, dropping only half a cent to $5.395.
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Nikita went into a tailspin last week, largely because it jettisoned much of what made it a good show. Put the pieces back together, and the show gets good again. Who'd have thought?
"My boss doesn't need caffeine, she's high on life," Birkhoff tells a pretty girl named Allison - who happens to be Senator Madeline Pierce's aide - in a coffee shop, as he's putting a tracker in the Senator's coffee. Will Traveler would approve.
Nikita's hoping to get the drop on the remaining members of Oversight by crashing the emergency meeting they've called to discuss her. Division knows she's coming, however, and they're prepared. While Sean pursues Nikita through Washington D.C. in broad daylight to no avail, Birkhoff is kidnapped by Division agents. For the first time in the history of the series, our title heroine has to go it alone. She flips out, knocking over some furniture while calling Michael to scream at him for not being there, having forgotten that she's the one who left him, but in the course of that conversation, they concoct a plan to trade Birkhoff for the black box and discover Sean's parentage. They're efficient!
Birkhoff's interrogation gives Melinda Clarke a chance to follow in Alberta Watson's disturbingly watchable footsteps one more time. She starts with unceremoniously breaking a few fingers, and then we start talking about needles. After a slow start, Clarke has gradually built up Amanda to be almost as scary as Madeline. While I'm glad for that, I like the scenes more for what they allow Aaron Stanford to do. Birkhoff has mostly been reserved for comic relief, but Stanford played a pretty tough and occasionally chilling protagonist in Traveler, and I'd always felt like his Birkhoff could have more edge to him. The interrogation gives him the opportunity to show that tougher side, and he does so.
Nikita offers Amanda the black box in exchange for Birkhoff, but only if Sean makes the switch. There has to be a catch, right? Well, there is. Sean destroys the box rather than give it to Amanda, and Nikita almost seems to take pity on him before she and Birkhoff make her escape. Perhaps she's starting to see parallels between Sean and Michael the way we have for a few episodes now; the guy doesn't exactly have a great poker face. Once Birkhoff is back safely, she sets off to find Owen (Devon Sawa), who is himself looking for another black box.
While all this is going on, Alex is determined to go to Russia in order to kill Semak, who has creepily rebuilt her childhood home after its destruction by Division and is now living in it. Sean doesn't like her plan to make the trip the same way she got out - via sex trafficking - but he does her the favor of keeping his mouth shut. Alex's plan brings her in contact with Oksana (that's The Good Guys' Angela Serafyan) and an ICE agent who takes bribes (Alphas star Malik Yoba). When the situation disintegrates, Alex shoots the ICE agent and is left responsible for Oksana and the rest of her friends. She makes sure the girls can start new lives before heading off to finish her mission. It's decision time for Sean, whose mom wants him to turn on Alex, but who seems like he's hesitating.
"Fair Trade" is an obvious improvement over last week's jaw-droppingly bad "London Calling," but it's also a pretty good episode in its own right. There was some legitimate suspense and there were also some cringe-worthy moments (raise your hand if you got really uncomfortable at that needle up the nose!) as we head toward Nikita's midseason hiatus. The actors who were wasted last week are back in their best form this week, particularly Aaron Stanford and Melinda Clarke.
And after screwing up Sean's character last time out, "Fair Trade" seems to set him back on track for the most part - thankfully, because Dillon Casey has been growing on me with every episode. He's no Shane West, but he doesn't have to be. Speaking of Shane, absence definitely makes the heart grow fonder, because this certainly felt like a different show with his limited appearance. It didn't quite pop like it does when he's on screen, but that's just fine, because we know he'll be back.
Season two of Nikita has had its ups and downs. One week I like it, the next I can't believe it. Still, with episodes like this, I'm interested in seeing where the show leaves off at midseason, which should give us a better indication of the show's long-term prognosis. "Fair Trade" has earned my loyalty for another week.
(c)2011 Brittany Frederick/Digital Airwaves. All rights reserved. No reproduction permitted.
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T-Mobile, one of the largest mobile networks in the United States, lost 50,000 customers in this second quarter alone.
This quarter, though not as dire as the previous reports from Q1 2011 and Q2 2010, where it lost 99,000 and 93,000 respectively, still presents a negative picture for the U.S. wireless giant.
Overall, the total revenues were down slightly compared to the previous quarter; with just over $5 billion generated this quarter, down from $5.4 billion from the same quarter last year.
While contract customers were dropping in their thousands, T-Mobile partly made it up in sales of pre-paid sales, as the pre-paid customer segment is rising in the company's portfolio.
Still with over 33.6 million subscribers, though losing 281,000 contract users, it had gained 231,000 pre-paid customers this quarter.
T-Mobile has lost nearly 150,000 customers this year.
But as contract customers are a fixed and regular source of income, it is worth mentioning that contract customers are far more valuable to T-Mobile and other mobile networks than unreliable, revenue dripping pay-and-go customers.
Citing reasons that the "United States remains a difficult market" for Deutsche Telekom -- the German parent company of T-Mobile USA, CEO René Obermann said that the company would stay with its current strategy, saying that T-Mobile will "see improvements compared to the previous quarter".
AT&T is still pushing ahead with the merging of T-Mobile USA, despite these losses, in a bid to increase its overall network capacity.
All in all, though the figures may not necessarily spring joy to the hearts of investors, overall the picture is not as bad as it seems. Nearly 50,000 lost customers compared to its 33.6 million subscribers is only a fraction compared to the combined effort of T-Mobile and AT&T put together.
The figures and subscriber numbers could be greatly improved by T-Mobile's high-speed 4G mobile data rollout, as well as the iPhone -- expected later this year.
However, the merger will no doubt spring problems for smaller, competing firms like Sprint, which has already aired its concern at a 'super-giant' mobile network that AT&T and T-Mobile will end up to be.
Related content:
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Boston Scientific Corporation (NYSE:BSX)
Q2 2009 Earnings Call
July 21, 2009 8:00 am ET
Executives
Ray Elliott – President & CEO
Sam Leno – CFO
Larry Neumann – VP IR
Analysts
Robert Hopkins - Bank of America Securities
Michael Weinstein - JPMorgan
Larry Biegelsen – Wells Fargo
David Lewis – Morgan Stanley
Tao Levy – Deutsche Bank
Rick Wise – Leerink Swann
Kristen Stewart – Credit Suisse
Bruce Nudell – UBS
Matthew Dodds – Citi
Joanne Wuensch – BMO Capital Markets
Tim Lee – Piper Jaffray
Glen Novarro – RBC Capital Markets
Sara Michelmore – Cowan and Company
Operator
Welcome to the Q2 2009 Boston Scientific earnings conference call. (Operator instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Larry Neumann; please go ahead.
Larry Neumann
Good morning everyone. Thank you for joining us. With me on the call today are Ray Elliott, Chief Executive Officer; Sam Leno, Chief Financial Officer; and Jeff Capella, Corporate Controller and Chief Accounting Officer.
We issued a press release yesterday afternoon announcing our second quarter. Key financials are attached to the release and we have also posted support schedules to our web site, which you may find useful as well.
The agenda for this call will include a review of the second quarter financial results as well as third quarter and updated full year 2009 guidance from Sam, an update of our business performance in the quarter from Ray, as well as his overall perspective on the quarter. We'll then open it up to questions.
As this is the start of Ray’s seventh day on the job, he’ll also be joined during the question-and-answer session today by Fred Colen, head of our CRM business; Hank Kucheman, head of our cardiovascular business; Steve Moreci, head of our endosurgery business; Joe Fitzgerald, head of our peripheral intervention business; Michael Onuscheck, head of our neuromodulation business; David McFaul, head of our international businesses; and Dr. Donald Baim, Chief Medical and Scientific Officer.
Before we begin, I'd like to remind everyone on our safe harbor statement. This call contains forward-looking statements. The company wishes to caution the listener that actual results may differ from those discussed in forward-looking statements and may be affected by, among other things, risks associated with our financial performance, our restructuring plan, our programs to increase shareholder value, new product development and launch, regulatory approvals, litigation, our tax position, our competitive position, our growth strategy, the company's overall business strategy, and other factors described in the company's filings with the Securities and Exchange Commission.
I will now turn it over to Sam for a review of the second quarter financials.
Sam Leno
Thanks Larry, I’m pleased to report excellent results for the second quarter on a number of fronts. We delivered top line growth for the quarter on a constant currency basis excluding divestitures of 7% with US growth of 10% and international growth of 5%.
This results in year to date constant currency growth of 6% which is at the mid point of the 2009 full year guidance that we provided to you at the beginning of the year. Adjusting for the impact of sales transition reserves related to the US launch of our Taxus Liberte stent in the second quarter of last year top line constant currency growth was still 6% for the quarter or at the middle of our guidance.
These results were highlighted by outstanding performances across most of our businesses. We continued to see impressive growth in our CRM division and our worldwide DES business, as well as solid performances in our endoscopy, urology, gynecology and neuromodulation businesses.
We also saw neurovascular continue to hold solid share despite a delay in our new product launches worldwide and our peripheral interventions business showed a slight upturn. Its also noteworthy that 41% of our revenue for the second quarter came from new products introduced in the last 24 months.
While we continue to monitor the potential negative effects of external economic conditions around the world, to date we have seen very little impact on our businesses overall. We have maintained our gross profit margin rate in spite of the US mix shift between Taxus and Promus and some modest DES share loss in Japan with the second quarter launch of Endeavor by Medtronic.
Our ability to maintain our gross profit margin rates is directly related to the gross profit margin improvements in our CRM division as well as value improvement programs throughout all of our manufacturing plants. And over the next several years we will look to improve our gross profit margins through the continued implementation of our multi year plant network optimization program and the launch of our Promus element stent in Europe in the fourth quarter of this year and in the US and Japan in the middle of 2012.
Our expense and headcount controls have been firmly in place for the past seven quarters and as a result of the success of these programs we continue to reinvest some of our savings into additional direct sales headcount as well as new product development related positions both of which are targeted to driven incremental profitable sales growth for us.
A combination of good sales growth, stable gross profit margins, and controlled expenses all contributed to delivering both sales and earnings per share at the high end of the guidance range that we provided during our first quarter earnings call.
Now let’s turn to the operating results for the second quarter, consolidated revenue for the second quarter was $2.074 billion and at the top of our guidance range of $1.960 billion to $2.080 billion. This represents a 2% reported increase from the second quarter of last year but included in our reported results are a negative 4% contribution from foreign currency and a negative 1% contribution from divested businesses.
Excluding the impact of these two items second quarter revenue was up 7% in constant currency. Compared to the contribution assumed in our second quarter guidance range, foreign exchange contributed an additional $29 million to our second quarter sales results. So without this additional currency tailwind our sales would have been $2.045 billion and that’s still approaching the upper end of our guidance range.
Overall the contribution of foreign currency to sales growth for the second quarter of 2009 was a negative $83 million. Compared to the second quarter of last year excluding divestitures US revenue increased 10% while international revenue decreased 4% on a reported basis but up 5% in constant currency. Ray will provide a broader overview of our businesses by major product category but I’ll address our sales results for all of our businesses at a higher level here.
Worldwide drug eluting stents came in at $441 million at the top end of our guidance range of $400 to $440 million and up 16% from the second quarter of 2008 which represents a 21% constant currency increase.
Our worldwide DES revenue includes $269 million for Taxus and $172 million for Promus and this represents a 61/39 split between Taxus and Promus. We continue to sustain our worldwide drug eluting stent leadership during the second quarter but an estimated global market share of 42% and that’s more than 20 percentage points higher than our next nearest competitor.
Geographically US DES revenue was $238 million at the top end of our guidance range of $220 to $240 million and 36% higher than the second quarter of last year. Recall that in the second quarter of last year we recorded a sales transition reserve which reduced our sales by $22 million. And excluding this impact our US DES revenue still increased 21% over the second quarter of last year.
This includes $111 million of Taxus and $127 million of Promus revenue and represents a 47/53 mix of Taxus and Promus in the US compared to 54/46 mix in Q1 of 2009. This change in the mix of our Taxus Promus sales is not surprising given the very positive Taxus impact that we saw in the first quarter following the launch of Taxus Liberte late in the fourth quarter of last year which continued into the first quarter of this year.
In addition we are seeing new business gains from a major customer that we contracted with earlier this year which is resulting in incremental Promus volume. While our drug eluting stent average selling prices in the US declined in the quarter by about 10% compared to last year and the slightly greater than expected the selling and service abilities of our commercial team continue to produce a commanding 50% total US market share in the quarter with 23 share points of Taxus and 27 share points for Promus.
This compares to a US market share of 45% in the second quarter of 2008 excluding the impact of the sales transition reserve that I mentioned earlier. We remain the only company in the industry with a two drug strategy offering our physicians greater choice in treating their patients.
With our two drug offering coupled with the strength of our commercial team we have demonstrated our ability to maintain significant leadership in the competitive US drug eluting stent market with 23 more market share points or almost twice the market share of our next nearest competitor and based on our estimate of the US market for the second quarter, we believe that [inaudible] market share of approximately 27% while J&J and Medtronic achieved approximately 13% and 10% respectively.
International drug eluting stent sales were $203 million exceeding the top end of our guidance range of $180 to $200 million and represents a decrease from prior year of 2% on a reported basis but were up 7% in constant currency. This includes $158 million in Taxus and $45 million in Promus sales and represents a 78/22 mix of Taxus and Promus internationally. Boston Scientific’s drug eluting stent market share in EMEA is estimated to be 32% which is down 2% sequentially from the first quarter and flat compared to the second quarter of 2008.
Taxus market share was approximately 21% with revenue of $54 million and Promus market share was 11% with revenue of $29 million. Together this represents a Taxus Promus mix in EMEA of 65/35. Our drug eluting stent share in Japan was down 1% in the quarter to 53% with revenue of $68 million.
This outstanding performance was driven by our successful launch of Taxus Liberte despite the competitive launch of Endeavor in May. During the quarter we estimate that Endeavor gained 13% market share points and while our sales in Japan today are 100% Taxus we still anticipate approval of Promus Xience during the fourth quarter with a fourth quarter 2009 or first quarter 2010 launch.
We estimate our Asia Pacific DES share remains steady at about 19% during the second quarter split 12% Taxus with $16 million in revenue and 7% Promus with $10 million in revenue or a Taxus Promus mix of 63/37.
Drug eluting stent sales in our Americas international region was $26 million representing approximately 58% market share with 45% or $20 million in Taxus revenue and 13% or $6 million in Promus revenue. This represents a 77/23 mix of Taxus Promus. So in summary our 42% global DES market share gives us clear worldwide drug eluting stent leadership.
Now let’s look at the drug eluting stent market dynamics during the second quarter, we estimate that worldwide DES market in Q2 at approximately $1.049 billion and down about 2% versus the second quarter of last year including a negative contribution from foreign currency of about 5%.
This includes a worldwide unit volume increase of approximately 11% offset by a worldwide market decline in average selling prices of approximately 13%. Excluding the impact of foreign currency we estimate the worldwide DES market increase approximately 3% including the impact of our second quarter 2008 new product sales transition accruals.
The US DES market is estimated to be about $480 million representing an increase of about 9% over the second quarter of last year and again, this excludes the impact of our sales transition accruals from last year. This represents a unit volume increase of about 17% offset by an 8% decline in US average selling prices for the entire industry.
In the US Taxus stent pricing was down approximately 8% from prior year and that was in line with our expectations. US PCI volume in the quarter was approximately 256,000 procedures and that’s up 2% compared to both last quarter as well as the second quarter of 2008.
We estimate that US DES penetration remained at 75% in the quarter and that’s a nine percentage point increase over the second quarter of 2008. So combined with the stability and stented procedure rates and stent’s [per] procedure we estimate that the total unit market of US stents in Q2 was approximately 342,000 units including 256,000 units of drug eluting stents.
The international DES market remained strong for the quarter with 324,000 PCI procedures in EMEA, 55,000 procedures in Japan, 92,000 procedures in Asia Pacific, and 63,000 procedures in the Americas. Penetration rates in international markets remained consistent with EMEA at 52%, Japan at 67%, Asia Pacific at 76% and the international Americas at 32%.
Turing to our CRM business we continued to see very good progress driven by the launch of several new products in the back part of 2008. Most notably we began the launch of our Cognis and Teligen platforms. That launch is continuing and we expect to receive approval for Cognis and Teligen in Japan in the fourth quarter of this year. We will begin the launch in Japan upon approval.
Once we have launched in Japan we will be competing with Cognis and Teligen in all of our major markets around the world. Reported worldwide second quarter CRM revenue was $609 million and that represents a reported increase of 5% and a constant currency growth of 10% over the $578 million reported in the second quarter of last year.
US CRM revenue was $405 million and that represents an 11% increase over the prior year and the fifth consecutive quarter of double-digit year over year growth. International CRM sales of $204 million represents a reported decrease of 5% from prior year but up 8% in constant currency.
Worldwide ICD sales of $454 million were in the lower half of our guidance range of $445 million to $480 million. This still represents a reported increase over the second quarter of last year of 9% and a constant currency increase of 13%. ICD sales in the US were $315 million representing a 14% increase over last year and international ICD sales of $139 million represents a 2% reported decrease from last year but up 10% in constant currency.
Excluding sales from our five non core divested businesses, our non DES and non CRM worldwide revenues decreased 2% compared to the second quarter of last year to $1.022 billion and were up 1% in constant currency. This includes constant currency increases of 7% in our urology/gynecology business, 6% increase in endoscopy, 18% increase in neuromodulation, and a 2% increase in our peripheral intervention business.
Our neurovascular business remained flat versus last year due to the delayed launch of Target, our new coil which is now expected to be launched in the fourth quarter of this year. In our non stent interventional cardiology business and in our electrophysiology business we saw constant currency decreases of 4% and 1% respectively.
As we continue to develop our new product pipelines for these businesses we expect the growth in these divisions to accelerate and begin to exceed market growth rates. We should see these benefits for our non stent interventional cardiology business in the next 18 to 24 months and in our electrophysiology business in the second half of this year.
Ray will talk more about some of the new product launches in these businesses in just a few minutes.
Reported gross profit margin for the quarter was 69.6% and adjusted gross profit margin for the quarter excluding restructuring related charges was 70.2% which was 10 basis points lower than both last quarter and the second quarter of 2008. The change in the volume and mix of our DES revenues between Taxus and Promus contributed to a gross profit margin reduction of about 190 basis points compared to the second quarter of last year.
We expect to begin earning back this gross profit margin during the fourth quarter of this year with the launch of Promus Element in EMEA. Partially offsetting the reduced gross profit margin due to DES product mix was the strengthening US dollar and the resulting settlement of our foreign currency hedge contracts and costs of sales which improved our gross profit margin by about 130 basis points compared to the second quarter of the prior year.
Our gross profit margin also improved by 40 basis points compared to last year as a result of the sales transition accruals that were recorded during the second quarter of last year. The remaining positive contributors to our gross profit margin came from a number of other smaller items with no single item being significant.
Our expectations for our gross profit for the full year 2009 remain in the range of 70% to 71%. We expect further gross profit margin improvements going into 2010 as we continue to launch Promus Element in Europe which will help to offset the negative gross profit impact of launching Promus in Japan in the fourth quarter of this year and spilling into the first quarter of next year.
Additionally we will begin to realize cost reduction benefits from our plant network optimization program and our continuing value improvement programs in all of our plants throughout 2010 and into 2011.
Our reported SG&A expenses in the second quarter were $671 million, and adjusted SG&A expenses excluding restructuring related items were $667 million which was 3% higher then both the last quarter as well as the second quarter of last year. The increase is primarily due to the addition of direct selling expenses including the previously discussed targeted increases to our worldwide CRM field sales force and expenses related to the large number of congresses and trade shows that occurred in the second quarter of the year.
We also have a $5.5 million of interest associated with legal judgments that are included in our SG&A this quarter, $3.5 of which will cease when the pay the nearest debt judgment which we believe will be in the second half of this year. While we continue to manage our expenses conservatively to ensure that we stay aligned with our top line performance, we will continue to make investments in additional customer facing positions, targeted to drive incremental profitable sales growth.
Reported research and development expenses were $263 million for the quarter and adjusted R&D expenses of $262 million and 12.6% of sales were consistent with last quarter and represent a 40 basis point increase over the second quarter of last year. Our annual R&D investments will remain somewhat consistent at about $1 billion per year.
These investments together with pursuing strategic acquisition opportunities will continue to support our commitment to advancing medical technologies. Operating expenses in total remain well controlled and our headcount management and approval process provided us with the tools necessary to maintain tight control over expenses in the future.
We continue to make targeted investments in customer facing field forces and R&D programs to drive profitable revenue growth in the future. Based upon our results for the first half of this year combined with our external forecast for the balance of the year we expect to spend approximately $3.650 billion for the full year 2009 in a combination of SG&A and R&D expenses.
Our reported GAAP operating income of $275 million for the quarter on an adjusted basis excluding acquisition and restructuring related charges, certain intangible asset impairment charges and amortization expense adjusted operating income for the quarter was $458 million and 22.1% of sales.
That’s down 100 basis points from last quarter, down 140 basis points from Q2 2008. This reduction in operating income margin in the quarter relates to a $16 million loss associated with an R&D program cancellation which reduced our operating margin by approximately 80 basis points.
This charge relates to future liability obligations that we are contractually bound to regardless of the status of the cancelled R&D programs. We also increased the level of spending in R&D by 40 basis points year over year as we continue to focus on developing new technologies that will contribute to profitable sales growth in the future.
I’d like to highlight the GAAP to adjusted operating profit reconciled items in a bit more detail. First we recorded acquisition related charges of $17 million both pre and after tax associated with asset acquisitions during the quarter.
Second we recorded intangible asset impairment charges of $10 million pre-tax or $8 million after tax associated with certain previous acquisitions. Third, total amortization expense was $126 million pre-tax or $103 million after tax and this was $9 million lower than the second quarter of 2008 and going forward our quarterly amortization expense should remain at this level.
Fourth we recorded $30 million pre-tax or $22 million after tax of restructuring related charges in the quarter which are primarily related to the production transfer cost as well as retention and certain other costs in connection with our previously announced plant network optimization program and our expense in headcount reduction initiatives.
These charges were all in line with our previous estimates. The cumulative effect of all these items was $103 million pre-tax and $150 million after tax. Interest expense was $92 million in the quarter and was $26 million lower than the second quarter of 2008 primarily as a result of our $1 billion in debt repayments during the last 12 months to get lower interest rates.
Interest expense in the second quarter was also $10 million lower than the first quarter of this year due to our $500 million debt prepayment in the first quarter together with lower interest rates. Our second quarter 2009 average interest expense rate was 5.5% and that compares to 5.9% in the second quarter of last year as well as the first quarter of this year.
Other net expense was $3 million in the quarter and includes $2 million of interest income. Interest income was $9 million lower than the second quarter of last year and $2 million lower than the first quarter of this year primarily due to a lower rate of return on our cash investments and as a reminder, our other net expense in Q2 2008 included approximately $96 million of losses related to the monetization of non strategic investments, a process that was completed in the first quarter of 2009.
The reported GAAP tax rate for the second quarter was 12.2%. On an adjusted basis our tax rate was 18% for the quarter including discrete tax benefits of $2 million which have a 60 basis point favorable impact on our second quarter effective tax rate. Our adjusted tax rate excludes the current tax effect of any item that has been excluded from our adjusted pre-tax earnings.
Our adjusted taxes also exclude an $11 million deferred tax benefit recorded in GAAP earnings resulting from a state tax law change. Our operational tax rate on an adjusted earnings basis for the remainder of 2009 is expected to be approximately 18% to 19%. And this change from our previously expected 21% adjusted tax rate is driven largely by the decrease in global interest rates required to be applied to the tax reserves carried on our balance sheet.
GAAP earnings per share for the second quarter were $0.10 per share compared to income of $0.07 in the second quarter of last year. GAAP results for the quarter included acquisition and restructuring related charges, intangible asset impairment associated with a prior acquisition, amortization, and the discrete tax benefit that I mentioned earlier.
Our adjusted earnings per share in the second quarter which excludes these items was $0.20 and at the high end of our guidance range of $0.16 to $0.21. This compares to $0.20 in Q2 2008. As a reminder the second quarter of 2008 adjusted earnings per share excluded $0.07 per share related to amortization and also excluded $0.01 per share of acquisition related charges, $0.04 per share of divestiture related losses and $0.01 per share of restructuring related charges.
Stock compensation was $33 million and all per share calculations were computed using 1.5 billion shares outstanding. Days sales outstanding were 63 days, a one day improvement over the second quarter of last year but a two day slippage compared to last quarter.
Continued strong cash collections in Japan and US were partially offset by a deterioration related to slower collections in our European operations. Slower collections are largely related to southern Europe where we are monitoring this situation closely and are taking steps to improve collections going forward.
Our days payable outstanding for the quarter were 31 days which was seven days lower than the first quarter of this year and two days lower than the second quarter of last year. This reduction is generally related to lower trade accounts payable balances in the US and IC regions as well as a large tax payment made during the quarter.
Days inventory on hand were 127 days, relatively flat with the first quarter of this year and up five days from June of 2008. The increase in days over last year were mainly a result of the introduction of Promus to support our dual drug strategy as well as inventory builds in support of product transfers related to the plant network optimization strategy.
Reported operating cash flow in the quarter was $419 million, which was $160 million higher than the second quarter of last year. Q2 2009 reported operating cash flow includes $74 million in payments related to legal settlements while Q2 2008 included $189 million in taxes related to divested businesses.
So excluding these items Q2 2009 adjusted operating cash flow was $493 million which is $45 million higher than Q2 of last year. Second quarter 2009 reported operating cash flow was also $158 million higher than the first quarter of this year. Q1 2009 reported operating cash flow included $36 million in legal settlements.
So excluding these items Q2 2009 adjusted operating cash flow was $196 million higher than the first quarter of this year primarily due to the timing of our annual bonuses and royalty payments as well as a net tax refund partially offset by higher accounts receivable balances.
Capital expenditures were $74 million in the quarter which was $5 million lower than Q2 2008 and $14 million higher than the first quarter of this year. Capital expenditures for the full year are expected to be approximately $375 million and reported free cash flow was $345 million in the quarter compared to $180 million in the second quarter of 2008 and $201 million in the first quarter of 2009.
We closed the quarter with $6.250 billion of total debt and $1.2 billion of cash on hand resulting in net debt of $5.1 billion. Total debt is $1 billion lower than the second quarter of last year as a result of our debt repayments during the last 12 months. Net debt is approximately $600 million lower than the second quarter of last year reflecting net cash flow generation.
We continue to focus our strong free cash flow on debt pay down and we expect to refinance a portion of our 2011 debt maturities by the middle of next year. We currently have access to approximately $2.6 billion of liquidity consisting of $1.2 billion of cash on hand, and approximately $1.4 billion through our revolving credit facility and our accounts receivable securitization facility.
At the end of the second quarter our debt to EBITDA credit facility covenant ratio was 2.9x which is well below the maximum permitted level of 4x providing us with $600 million of EBITDA cushion. This covenant as a reminder steps down to 3.5x at the end of the third quarter this year.
Fitch rating services raised our rating outlook one notch to positive from stable. This follows Moody’s and S&P’s outlook upgrades in the first quarter of this year. Fitch also confirmed our corporate credit rating at BB plus.
Our upward ratings momentum reflects the progress that we are making in strengthening our financial fundamentals, simplifying our business, driving profitable sales growth, and the overall improvements in our operations. We continue to work on improving our profit margins, increasing cash flow, paying down debt, as well as continuing to instill financial discipline.
Turning to the sales guidance for the third quarter of 2009 reported consolidated revenues are expected to be in a range of $2 billion to $2.1 billion and that’s a range that would give us an increase of 2% to 7% over the $1.966 billion of revenue recorded in the third quarter of 2008 excluding divestitures.
And if foreign currency exchange rates continue constant throughout the third quarter the negative contribution from FX should be approximately $30 million or approximately 1% relative to Q3 of last year. On a constant currency basis Q3 consolidated sales growth should be in a range of up 35 to up 8%.
For drug eluting stents we are targeting worldwide revenue to be in a range of $390 million to $430 million with US revenue of $220 to $240 million and OUS revenue of $170 to $190 million. For our defibrillator business we expect revenue of $445 million, $475 million worldwide with $310 to $330 million in the US and $135 to $145 million outside the United States.
The strength of our renewed product pipeline across all of our businesses is resulting in solid top line performance even during turbulent economic climates around the world. And as we indicated earlier we saw 41% of our second quarter revenues come from new products and we expect that trend to continue throughout this year.
The good news for us is that only a small portion of our business is considered [elective] and we are seeing only limited effects of the economy on the results of those franchises. Additionally the sales growth and strength that we are seeing across our diversified portfolio of businesses is more than offsetting any broad economic effects.
For the third quarter adjusted earnings per share excluding charges related to acquisitions, divestitures, restructuring, and amortization expense are expected to be in a range of $0.17 to $0.21 per share. This includes and effective tax rate on adjusted earnings of 18% to 19% in the third quarter of 2009 as a result of the change in published interest rates that I discussed previously.
The company expects earnings per share on a GAAP basis for the third quarter of 2009 to be in a range of $0.08 to $0.13 per share. Included in our GAAP earnings per share estimate is approximately $0.01 to $0.02 per share of restructuring related costs and $0.07 per share of amortization expense.
During the third quarter we will see the anniversary of last year’s transition in the DES business and the shifting of market share from Taxus to Promus. As we have previously disclosed the profit contribution of a Promus stent is 50% of the $1.00 contribution of selling a Taxus stent. So the bad news is is that we have an adverse mix of Promus and Taxus compared to our expectations of a year ago, but the good news is is that we have more total US market share than anyone outside of Boston Scientific ever expected.
And this reduced profit contribution will be restored over time beginning with the launch of Promus Element in Europe in the fourth quarter of this year. The strength of our Taxus drug eluting stent franchise along with our improvement in DES market share helped to offset some of this impact and we anticipate this beneficial mix continuing.
We’re also seeing the benefits of our CRM acquisition with significant improvements in operating profit margins that are helping to offset the impact of the shift and the profitability of our DES franchise. With the first half of 2009 behind us we are tightening our guidance range for the full year and we are now expecting revenues to be in the range of $8.1 to $8.4 billion.
We are also now expecting to achieve adjusted earnings per share for the full year between $0.82 and $0.86 excluding acquisition, divestiture, major litigation and restructuring related charges as well as large discrete tax items and amortization expense.
Included in this estimate is an effective tax rate of 18% to 19% on an adjusted earnings basis for the last half of the year. The company now expects net income on a GAAP basis of between $0.47 and $0.53 per share. So that’s it for guidance. Our third quarter earnings call will be at 8:00 am Eastern Standard Time, on October 20, 2009.
Now let me turn it over to Ray for a more in depth review of our businesses.
Ray Elliott
Thanks Sam, Boston Scientific is apparently the only institution in creation where you don’t get to rest on the seventh day. Let me begin with both a qualitative and strategic review of our businesses starting with CRM and then I’ll share some impressions on the quarter overall and where I believe we can and should go over the next 100 days or so.
Since this is my first opportunity as CEO to report on the CRM business I want to acknowledge the excellent work done by thousands of CRM employees over the past few years. They have revitalized this business from top to bottom, transforming quality, realigning R&D priorities, and developing a pipeline capable of impressive results.
Our CRM business is in solid shape today thanks to their efforts. The second quarter results show continued positive momentum from our recent product introductions particularly Cognis and Teligen. As Sam said we have delivered steady overall growth in CRM revenues due mainly to the strength of our US defib sales which grew at 14% for the second straight quarter.
This is more importantly the fifth consecutive quarter of double-digit sales growth in our US CRM business. We also saw the highest US pacer revenue in four years supported by the growing adoption of our advanced Altrua platform.
International defib sales were up double-digit as well at 10% on a constant currency basis and we anticipate accelerating international performance in the second half of the year as we begin to roll out our Latitude patient management system in Europe happening as we speak.
CRM sales this quarter both worldwide and in the US were at their highest levels since we purchased Guidant. Its also important to note that our CRM business reported sequential quarterly growth across every major product segment both worldwide and in the US.
While de novo implantations in the US market have been flat to down since 2006 replacement [cans] have increased by more than 30% per year. We expect to sustain these positive trends on the strength of our new products which remain on track to generate an amazing two thirds of CRM sales in 2009.
Cognis and Teligen the world’s smallest and thinnest high energy devices achieved 100% full field inventory levels during the quarter, importantly up from only 70% in the first quarter. They continue to be very well received. Since their recent launch we believe that we have gained almost three share points in the US.
In May we announced European approval and the first implantations of our Endotak Reliance 4-Site Defib Lead System which combined the 3 lead connections into a single pin to port connector.
Last week we announced CE Mark approval for the Latitude Patient Management System and we began a phased rollout in 14 European countries. The introduction of Latitude in Europe will build on our experience in the US where we already have astonishingly more than 130,000 patients enrolled on the system.
Since 2006 Latitude has been the most rapidly adopted remote cardiac device monitoring system in the industry. We fully expect to extend this success as we introduce its demonstrated benefits to patients and physicians all over Europe. We would aspire to document and prove its economic benefits to the healthcare system coincident with its clinical significance.
In the second quarter we also launched our first RF wireless ICD system for programming purposes in Japan with the introduction of [Comfia]. Turning to clinical trial updates, there were several highlights from the second quarter that underscore our long standing and continuing commitment to clinical science.
Most notably less than a month ago on June 23, the landmark Madit-CRT trial reached its primarily end point. Preliminary results indicate that CRT-D therapy significantly reduced the relative risk of all cause mortality or first heart [inaudible] intervention by 29% when compared to traditional ICD therapy.
This result comfortably exceed the target reduction goal of 25% and clearly demonstrates that early intervention with CRT-D therapy can slow the progression of heart failure. Boston Scientific is the sole sponsor of this trial, the world’s largest device trial for high risk modally symptomatic heart failure patients.
US reimbursement for CRT-D in patients who fit the Madit-CRT criteria is already in place and we believe this trial has the potential to significantly expand CRT-D indications. We estimate that over the next few years Madit-CRT could expand the CRT-D market by as much as $250 million in the US and $400 to $500 million worldwide.
We expect to file for label indication around year end and anticipate FDA approval in mid 2010. additional data from the Altitude clinical science program which analyzed nearly 86,000 patients monitored by the Latitude system, showed that real world survival rates for ICD patients exceeded rates from the clinical trials confirming and enhancing the benefits of ICD and CRT-D device therapy.
An analysis of long-term data from Madit II clinical study was presented at the HRS demonstrating that the life saving benefits of ICD therapy actually improved over time. At eight years, one life was saved for every six patients who received an ICD; a dramatic improvement over the two year Madit II data which showed one life saved for nearly every 17 patients.
This was the first time long-term data were presented on the life saving benefits of ICDs in a primary prevention population. We are confident the results from these two studies will reinforce the clinical effectiveness of ICD and CRT-D therapy and this alone could ultimately help grow the market.
We should also benefit from the potential impact of the joint commission referred to as Core Measure for ICDs and sudden cardiac death. Let me give you a quick update on our EP business, this quarter we launched our Blazer DX-20, steerable diagnostic catheter in the US and early sales are exceeding expectations.
We anticipate a European launch in the third quarter. Additionally the Blazer Prime, an improved version of the Blazer ablation catheter which enhances torque ability, track ability, tip control, and durability, is on target for launch in the US in the third quarter, pending FDA approval.
Looking to the fourth quarter we anticipate the launch of Blazer [open irrigate] ablation catheter in Europe with US clinical trials beginning around the same time. Overall EP market growth continues in the double-digit range and we plan to maximize our share of this growth by leveraging our historic strengths, our current product line, and the new [crial] core technology platform.
With respect to [crial] core we anticipate the A fib portion of the market to grow at rates in excess of 20% per year for the foreseeable future. Our CRM strategy is working and with additional Madit-CRT data to be presented in September this market is poised for substantial expansion. Our CM business is now and will continue to be a major growth driver for Boston Scientific.
Now let me turn to the cardiovascular business with an equally public hats off to our CV group. Its hard for me to believe that anyone other than ourselves going back a year ago, and with knowledge of anticipated competitive releases we could be sitting here today with a 50% share in the US in DS market but in fact we are.
We also report another strong quarter of DS results with 42% worldwide market share. We maintained our US leadership in part due to the launch of our Taxus Liberte atom stent late in the quarter. Taxus drove 23% of the market share with Promus at 27%. Over the remainder of the year we expect gains in our US Taxus share position as we complete the Taxus Liberte atom launch and introduce the Taxus Liberte long stent.
As previously announced we received FDA approval for Taxus Liberte long on July 13 and expect to begin launching later this quarter. We gained incremental Taxus share at a premium price especially with Taxus Liberte long. We also saw a continued strengthening of the stent market during the quarter.
US PCI growth year over year was approximately 2% while penetration held steady at the solid first quarter level of 75%. We believe that in the US Xience had a 27% share for the quarter while Cypher and Endeavor were at 13% and 10% respectively giving us a 23 share point lead over our nearest competitor.
In Europe DES penetration was up to approximately 52% and our DES share was estimated at 32% split approximately 21% Taxus and 11% Promus. In Japan the launch of Taxus Liberte has continued to go very well with a second quarter share estimated at 53%, all of which is Taxus.
Our Taxus Element and Promus Element product introductions are progressing as planned. Taxus Element has already been launched in unregulated markets with extremely positive feedback. Both Promus Element and Taxus Element are on target for CE Mark approval and launch in the fourth quarter of this year, coinciding nicely with the recent announcement by Abbott with respect to the launch of Xience Prime in Europe.
The Promus Element US and Japan launches are on target for mid 2012 with Taxus Element US launch on target for mid 2011 and in Japan in late 2011 or early 2012. Also slated for launch in the fourth quarter of this year or the first quarter of 2010 is Promus in Japan which is consistent with Abbott’s announcement of Xience/Promus timing there.
Finally our Platinum trial is progressing very well throughout the world with the workhorse portion of the studies enrollment far exceeding our own internal plan. The Element platform will provide a noticeable improvement for physicians in terms of deliverability. We are confident that our Element launch cadence will be highly competitive with Xience Prime on a worldwide basis. We are pleased with our progress on the integration of Labcoat which we view as true next generation DS technological platform, beyond both Taxus Element and Promus Element respectively.
Looking briefly at other CV product lines, our US leadership in PCTA balloon catheters continued with a 57% share. We continue the launch for a new imaging catheter iCross, and our are planning a number of additional new product launches over the next four quarters including the Apex platinum pre-dilatation balloon catheter for improved radiopacity, the [NC] Quantum Apex post-dilatation balloon catheter and [connetix] guidewires.
In our peripheral interventions business we maintained a strong worldwide position in a growing market. We continue to hold the number one position in multiple product categories. The US launches of the Sterling ES PTA balloon catheter, the carotid Wallstent, and the Express renal SD stent as well as the international launch of the Epic vascular stent continue to drive positive momentum for this business.
With these launches we expect to expand our PI leadership. In summary our cardiovascular business continues to be very well positioned with the unique two drug offering, a long list of leading franchises, improving market fundamentals, and a robust product launch cadence for 2009 and beyond.
We firmly believe our overall cath lab leadership will increase over the next two years. Our neurovascular business continued to maintain its global leadership position recording another quarter of strong sales in spite of new competitive product offerings. Our Access business catheters and guidewires, grew 10% as our customer base continued to expand and convert to our Synchro 2 guidewire technology.
Our Icad, intracranial atherosclerotic disease stent business grew 16% worldwide and of note experiencing a record 68% growth in China. Despite some softening in our coil business as a result of competitive launches in both coils and injunctive stemming, we maintained approximately 42% market share and approximately 60% share respectively.
We are looking forward to providing you with more details on the launch of an outstanding new coil and stent later this year. The endosurgery folks have continued their string of steady performance, its up 6% constant currency for the quarter with endoscopy growing 6% and urology/gynecology growing 7%.
Endoscopy’s second quarter results were driven by the US launch of the WallFlex Biliary stent and continued commercialization of the WallFlex Esophageal stent. The WallFlex family is our third generation of market leading stents for the treatment of GI obstructions. Endoscopy continues to see strong global market and technical adoption of our resolution clip for GI bleeding.
These types of improved technological adaptions in such areas as homeostasis and esophageal stemming continued to expand the footprint of the endoscopy market, now approaching $2 billion. We will enhance our expansion of the GI market with future product launches into enterable feeding.
Neurology/gynecology’s growth for the quarter was based on strong performance in our growing women’s health business which was offset by slower momentum in our urology business. Our women’s health business continued to deliver double-digit growth of 15% on the strength of several new product launches.
The urology business maintained its leadership position and grew in line with the market at 4%. Momentum continued in our pelvic floor franchise with the recent launch of our Solyx single incision sling system and our Uphold pelvic floor repair kit. In addition we executed two new women’s health launches during the quarter with our second generation ProCerva HTA procedure set as well as our new Pinnacle Posterior Pelvic Floor Repair Kit.
We expect these launches to continue to drive growth in our women’s health business third and fourth quarters. Based on our current growth trend in pelvic floor products versus the market growth at 10%, we should overtake Johnson & Johnson for the number two position by year end.
The endosurgery pipelines will continue to be productive in the third and fourth quarters. We will begin to commercialize the WallFlex esophageal fully covered stent which received FDA clearance last month along with new RX Biliary catheters, expanded sizes of our market leading radial jaw 4 biopsy forceps, along with Duet for pelvic floor and the next generation laser fiber for kidney stone removal.
Finally our worldwide neuromodulation team delivered a constant currency sales growth of 18% in the second quarter with the US growing at 17%, that’s good work. As we said earlier trial implants, a significant leading indicator for permanent implantation procedures were up 20% in the first quarter so the strong performance in the quarter was as expected.
Trial implants in the second quarter were also up more than 20% leading us to expect a strong third quarter as well. As a demonstration of our commitment to strengthening clinical evidence for spinal cord stimulation we’re initiating a trial to access the therapeutic effectiveness and cost effectiveness of spinal cord simulation compared to reoperation in patients with failed back surgery syndrome. The trial is called Evidence and it is the first randomized controlled multi center trial using rechargeable devices.
The study will enroll 128 patients at 20 sites in the US, Canada, France, and the United Kingdom. In the important age of comparative effectiveness and cost justifications, we believe this trial will become a seminal study that could initiate consideration of spinal cord stimulation much earlier in the continue of care.
During the second quarter we successfully launched our lead adapter the M-1 which allows a precision plus system connect to the previously implanted leads of a primary cell, non rechargeable competitive system. This gives us access to an otherwise captive replacement market.
As well as offering an alternative it doesn’t require removing and replacing the previously implanted leads. Let me finish in the next few minutes with some overall perspective on the following. First some thoughts on what we liked about the quarter and whether its sustainable, what we didn’t like or at least feel we could do better and then a few hot topics or takeaways from the quarter.
Second I’d like to share a few more thoughts on strategy, tactics and areas of focus over the next 100 days or so. Likes and dislikes, let’s begin with what we liked about the quarter. Number one solid and diversified sales performance across almost all product and geographic segments, 7% growth despite worldwide recession and strong product competition with the associated price pressure.
I can see no reason at this point of time to alter our 2010 and 2011 aspirations of 5% to 7% constant currency sales growth. My confidence in no small part is based upon what I believe is the finest and clearly on a per person basis the most productive sales forces in the business. We just need more of them.
Number two, if what I said about our sales forces is true, and it is, then we much given them new products and patient solutions to sell and we are. The pipeline build and new product flows are very strong from Taxus Liberte Atom and Long to Latitude in Europe, to a vast new array of both PI and endoscopic stents.
In the second quarter new products were 41% of sales, exceeding our own internal goals. Number three, those new products have a great deal to do with both our CRM and DES momentum. CRM is growing double-digits, had a dozen new product approvals last year, is taking share points, and improving profit margins; the fifth consecutive quarter of double-digit defib growth and the highest pacer growth in four years in the US.
DES has market leadership with a 23 share point lead over our nearest US competitor, a unique two drug strategy, four different platforms, and a robust pipeline that we will try to share a little more with you about as we plan for our prior to year end analyst day.
Number four, new product momentum without leadership in clinical science would carry dramatically less weight. It is particularly relevant with the potential for seminal ground breaking trials that marry together both advanced patient care and cost effectiveness.
We have this strength in spades with recently reported or in process trial results such as Madit-CRT, Madit II, Altitude, Syntax, [Sampress], Maps and Platinum to name only a few. And number five that we liked in the quarter, innovation in the aforementioned academic and clinical sciences are fundamental to our beliefs and a core strength but we are not an academic institution. We are commercial.
Our sales growth, new products, CRM-DS momentum and clinical science strength are producing cash and this free cash flow generation year to date at $546 million is allowing for an accelerated debt repayment and the important potential return to investment grade status sooner rather than later.
How about what we didn’t like in the quarter, or at least those areas that we could do better. In some cases of course these are just inverses of the things we liked. Number one, while we liked the new product flow in the CRM-DS momentum we are less enthusiastic about our time to market.
We need to improve our processes even in a difficult regulatory environment and we need to rethink our funding and project prioritization. Endosurgery must get more resources and we must restore healthy growth to the non DES portion of our cardiovascular business. A common belief would be that the vast majority of this funding must come from CRM and DES reductions. I disagree.
We have made substantial one time investments in for instance quality, while we must maintain our enhanced and hopefully best in class status in quality systems we must also learn to convert in this case one time non repeating remediation dollars to innovation dollars.
Number two, while no one could deny the exceptional nature and outputs of our clinical science and study programs the heath care reform world is changing around us, rapidly and as we speak. We have to build the infrastructure and communication systems. This should include an internet where appropriate and not just traditional [inaudible] publications, which should make a stronger case for Boston Scientific’s product benefits, both comparative clinical effectiveness and cost efficiency.
Not just to customers but also to patients, healthcare systems, payers, governments, and society at large. And number three I said previously that we liked the cash in the quarter but we were less enthusiastic about both the leverage drop through to operating profit and the resulting conversion to cash ratios.
One could argue that in this quarter operating expenses including substantial investments for worldwide CRM and neuromodulation field force expansion, accrued interest for the [inaudible] case and a $16 million loss on an R&D program termination but we all know there is always something.
Suffice it to say that I would intend to have a laser like focus on quality of earnings. I’ll talk more about that subject under go forward strategies and tactics. And finally on this portion of the wrap up, what about our own hot topics or at least takeaways that we would like you to think about relative to our second quarter. Here are mine.
There are many industry studies and trials but Madit CRT is a landmark. It could conceivably change the markets face and size through significantly expanded indications. Next, CRM sales for the quarter were at their highest level since we acquired Guidant and despite all the competitive buzz in the US we are 23 share points in DES above the next player in the US.
Sometimes a single sentence is self-explanatory. Next we have no reason not to believe and every reason to believe that Promus Element and for that matter Taxus Element will receive a CE Mark and be launched in the fourth quarter. Once again during the upcoming Q&A period we will not disadvantage ourselves by disclosing the ins and outs of our European regulatory pathway strategy.
Next we have very real confidence in our sales and EPS guidance ranges for the second half and the splits between the quarters. We have less visibility and confidence in the eventual detailed outcome and current uncertain status of healthcare reform legislation however that we are heavily involved and firmly believe we have been in the past and will be in the future part of the solution and not part of the problem.
Let’s go now to strategies, tactics, and areas of focus for the next 100 days or so and assuming they are correct for well beyond that timeframe. First let’s think about the likely strategic formula or at least at this stage the thesis of that formula and then we can talk about the tactics that may help us arrive at a successful conclusion.
That strategic formula is likely a three step process and frankly a playbook that Sam and I are both very familiar with. Step one, drive sales and marketing growth with both new product and new market expansion. Correspondingly drive margin expansion with volume effects on standard costs, mix, and active COGS based efforts towards being the low cost provider not just the low cost manufacturer.
We use price sophistication as a key tool not just price increases which may or may not be available to us in the near term or further out. Our research has already shown that price leakage is also a significant opportunity. Shift to true marketing, i.e. needs creation for mostly sales support tactics.
Step two structure the business with increased capability to produce a leveraged or positive drop through effect from sales to operating profit. Improve the intra company internal rate of return on our expense base, zero base budget the non sales base functions and shift costs where possible to areas of greater direct return. Use our expert knowledge of the fixed variable components of costs for an improved construct. Allocate our costs to fully loaded top to bottom managed businesses.
Verify that our various country models and international structures support profitable sales growth while maintaining the current set of channel options. Target a minimum 30% consolidated adjusted operating profit to sales ratio over the first strategic planning period and a minimum 15% compound annual growth rate in earnings per share.
Step three, take the improved operating profit and tax rate focus along with increased working capital attention and metric to translate net profit to cash with a higher conversion ratio. The accelerated cash production could obviously be used selectively for acquisitions but job one must be increased velocity of debt pay down and the recovery of our investment grade rating.
The debt financing obligations for 2011 will be targeted for mid 2010 completion. At the beginning of our formula, I will start with our focus on and attention to sales and marketing. What might that look like. Here’s a sampling of a few out of many tactics for real focus over the next 100 days.
Appropriate and inter divisional cross selling efforts and fully integrated cardiovascular product offerings to healthcare systems and GPOs will be executed. We will need to be certain of uncluttered and non duplicated common primary call points. No one has the strength of share or current CRM and DES platform to do it better if at all.
Our Boston Scientific offering will be trademarked and branded cross care. Number two, pricing sophistication gains through integrated price volume mix analysis at the SKU level, finer segmentation, strategy driven and disciplined negotiation, tiered marketing of our broader offerings, and validation of the need for a close correlation between field force size, compensation, and corporate profitability.
An initial thesis would suggest that we could benefit handsomely from an additional 300 to 500 feet on the street during 2009 and 2010 combined. Next, structure our best in class comparative effectiveness functional group in our company that merges our clinical science and evidence based outcomes with healthcare economics that will be usable on a global basis. With the digitization of healthcare, the internet, e-marketing and remote monitoring along with other linked in tools, become a necessity.
We have governments around the world focused on increased coverage, efficiency and transparency. We will need to advocate, educate and engage. Where necessary we’ll need to change our business models. I was tempted to do a more definitive piece here on healthcare reform scenarios, but as it relates to Boston Scientific the lack of clarity currently and the need to collectively understand and execute our [inaudible] in that position, I decided to postpone that discussion from today’s earnings call.
And as a final example of a detailed focus for the next 100 days or so the issue of R&D and innovation superiority, the initial thesis is to focus our intensity more with fewer projects and a reallocation of resources that should help us to accomplish a number of goals. First more targeted intellectual horsepower behind each product.
Diversify our base through both buy and build philosophies. Target diseases not subsets with where possible integrated and more complete patient solutions. Next extend our viewpoint to early intervention as much as possible in addition to both quality of life and longevity. Next manage the PDP or product development process better through disciplined return capital invested and internal rate of return tracking.
Post mortem analysis for learning, increased speed to market techniques, [inaudible]] divisional application of core technologies and if applicable, centers of excellence. Disease areas are subset solutions for strong consideration would certainly include disruptive advancements in CHF congestive heart failure, A fib, structured heart, the high mortality issues of acute ischemic stroke, and sudden death cardiac arrest, a broad array of GI track changes or needs including both [gert] and enteral feeding, women’s health and the potential even for our current end plant technologies to address the obscenity, diabetes, and migraine worlds.
In closing I would be remiss if I didn’t mention that it is a great privilege and an honor to return to working with both friends on the Board and in management of Boston Scientific. It is a company with great promise for which we will create a new value proposition for both patients and stakeholders.
I would be equally remiss if I didn’t mention that its exciting times as always to be back working with Sam, my colleague and friend for as of next month, believe it or not, 38 years. With that I’ll return it back to Larry to star the Q&A.
Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Robert Hopkins - Bank of America Securities
Robert Hopkins - Bank of America Securities
Just to be clear, the commentary that you just made sounds like you’re reiterating the long-term guidance that Boston Scientific has in place today so is that correct, that you’re comfortable with the 5% to 7% constant currency top line and 15% bottom line growth that exists today and in part is that a function of your enthusiasm towards Madit-CRT and are you seeing any signs of acceleration here in the near term post those trial results.
Ray Elliott
I comment on the first part and ask Fred to jump in on the CRT because I haven’t had the chance to go beyond the review if it as you heard, I wouldn’t say reiterate, again what I said in the script and its not long-term guidance obviously, its two year guidance, I would suggest that based on everything I’ve seen at this point in time from the date of review, I am comfortable with what I’m seeing.
If additional factors come into play then obviously we would inform you and there is a range to it so obviously we’re not arguing that 7% is the magic number for the next two years. We’re simply saying that based on the data that range I’m comfortable with as I see it at this point in time.
Fred Colen
We are very, very optimistic about Madit-CRT. Obviously the Madit-CRT executive committee is working feverishly to prepare for the presentations and as well figuring out how the data can be presented as soon as possible in some medical journals. I can tell you that the Madit-CRT data will be presented at the European Society of Cardiology meeting in Barcelona on September 1 as well as the Heart Failure Society meeting in Boston about two weeks later.
I think that you will see at that point in time that this is in deed a very exciting clinical study and we believe its going to be marked in deed as a landmark trial in the treatment of heart failure patients. We are very excited about this upcoming event and we believe that the industry at large but we in particular will benefit from the positive outcomes of this study.
Robert Hopkins - Bank of America Securities
And then on the gross margin side, you have talked about this plant network optimization and the $100 million potential benefit is the right way to think about that $100 million as the majority of that will accrue in 2010 or is there some that accrues in 2009 and also on cardiac rhythm management margins would you say they were 70% of the way there in terms of your goal or is more like 50 or is closer to 90.
Sam Leno
In terms of the plant network optimization, where we are on that is we started the process. We have about a three year program underway. We have said before that we’ll see very little of that in 2009. We’ll begin to see it showing up early in 2010. It will continue on through 2010 and we should be complete with that somewhere in the middle to the end of 2011 timeframe. So we’ll see the vast majority of that show up in 2011 with the full year impact ultimately taking place in 2012.
CRM margins overall we made very good progress in CRM margins. I won’t quote an exact number but as you know we said that last year overall operating profit margins for CRM were about 15%. We thought we’d add about 12 points of margin to that business this year with a target to be at 30% overall operating profit margins going in or sometime in 2009. And we’re on track to do that.
The margins are driven a lot by new products, they’re driven my better management of scrap which had been a historic issue for that business as you know and we’re also focused maybe for the first time ever at the serious value improvement programs that will be taking place throughout this year and forever more.
So bottom line is we’re on track to accomplish those previously stated goals.
Ray Elliott
I didn’t mean to skip over your 15%, as you heard in the script we’ll be focusing a minimum goal of both a 30% ratio on operating to sales and the 15% compound on EPS so to the extent of what I know at this point in time and to the extent that those are going to become absolute internal goals as minimums for the company, I would suggest we keep those where they are.
Sam Leno
We’re also in the midst as we always are this time of the year, of updating our strategic plan. We’ve also launched beginning of our operating plan for 2010. Those will continue on the balance of the year and we typically have those presented and approved by the Board very late in the year. That would give us the ability to firm up our go forward view of the world when we close out the year in January.
Operator
Your next question comes from the line of Michael Weinstein - JPMorgan
Michael Weinstein - JPMorgan
On the drug eluting stent market, the pricing market environment took a step down this quarter I think your pricing was down 10% on a year over year basis and I think you said the market was down 8%, so I would appreciate any additional color on what’s transpiring there and then on the guidance for the tax rate, when we started the year was 21%, it looks like for the year its going to average now around 18%. And so contribution from a lower tax for the full year would be about $0.03 to the bottom line so if I adjust your new guidance, $0.82 to $0.86 for the $0.03 tax guidance it would suggest for the year you’re closer to the low end of the range then maybe the higher, the middle of range where you started off the year, and would just appreciate any thoughts on that and why that might be versus maybe where you thought you were back in January.
Sam Leno
Let me address then in reverse order, the tax guidance you said 18% and 19% operationally we also have also discrete items that go up and go down. We’ve been blessed most recently last several quarters with favorable discrete items but we don’t know what they are which is what makes them discrete items. So the reason we give an operational range is because we don’t know exactly what the source of earnings will be.
And the reason that we don’t give full credit to even that improvement is we don’t know for sure if we’ll get tagged with any negative discrete items that do happen from time to time. So I think you’re a bit heavy with your assumption that its an additional $0.03 based on how we look at the world.
What we don’t know is if the tax rate going forward in 2010 will prevail at those rates, our operating plan process will shake that out. But clearly we’ve been helped by the benefits of a lower effective tax rate for this year. We gave a range to start the year of $0.80 to $0.90 so I don’t know that that would conclude that we’re operating at the low end of the range because we haven’t finished the year out but going against us is still heavy Promus mix versus Taxus and that’s a drag on our as you know on our gross profit margins.
If we see some continuous improvement in our tax this year with long for example that’s just been recently approved that may help our gross profit margin going forward. So I think in the aggregate the range we gave I think we’re probably hovering close to the mid point of that range, maybe a tad below it but I don’t think we’re operating at the bottom part of the range.
On the pricing, I thought we said we were declining at 8% in US stent Taxus pricing compared to prior year. I did make one reference to 10% but it wasn’t our pricing decline, it was 8% for us in Q2.
Ray Elliott
I think it’s the other way around. I think we’re 8% and I think we anticipate the market being 10%.
Michael Weinstein - JPMorgan
But that would be an acceleration from your prior comments in the first quarter in market pricing.
Sam Leno
About the same.
Ray Elliott
It may be 1% difference but I think its pretty close to the same.
Michael Weinstein - JPMorgan
On this discussion, you’re endorsing this idea of 15% long-term earnings growth, you’re quasi endorsing the 5% to 7% top line growth for the next couple of years, the street is a little bit below that, but let’s say the 5% to 7% is right, to get from 5 to 7% top to 15% plus bottom, in addition to the de leveraging the company would have, you’d obviously would have to have margins expand and potentially some benefit from tax so part of my question is one, how do you go from 5 to 7 to 15% plus and is there some implied assumption that the tax rate is going to continue to come down that’s going to help you to get there.
Ray Elliott
The quasi support I would state as affirming the work that has been done to date prior to being here and then reviewing the data feeling comfortable with that, so its strong support relative to time here I guess if you want to call that quasi. Its got a lot to do with as I mentioned in the commentary on new products and the continuing flow of new products, new markets, taking a look at the structures of how we run the business, the cost structures, the shifting of costs into things that give more immediate returns back.
In many cases to the extent those are COGS related, there’s opportunity for margin expansion. I think often times people focus on margin expansion as are you selling your stuff for more. And as opposed to doing what you know we’ve done in the past and that’s work every line of the COGS and make sure that as Sam commented everything from scrap rate and all the other variables we’re focused on.
The other thing I would take a very close look at is there’s a high fixed component here at least higher fixed component that I’ve traditionally probably liked in med device businesses and one of the ways of getting at that is the cause shifting making your business more variable. Of course it works as well on the way up as the way down so you’ve got to make sure you’re selling more.
So there’s a lot of, as good a business as this is and as good as the improvements have been made here and they are good improvements, I’m amazed by the opportunity here and I think we’ll all get after that. So again on a week’s worth of data and time as a director, I’m comfortable with the opportunity and with laying out those kind of targets.
Sam Leno
I would also say that we have a lot of leverage points clearly in sourcing Promus Element. We said that Promus as a mix issue has taken away about $220 million of gross profit and we’ll claw about 20% of that back starting in the middle of the fourth quarter of 2009 this year and that will go into next year. So that will be a big recovery.
We’re also as you know have routinely been able to drive $0.03 to $0.05 cost reductions through our VIP focused improvements and part of this year we never saw any of that really in the CRM business and now we have the CRM businesses and plants focus as well so we do expect to see those improvements that will, are always there with some capital investments to help drive available for the taking to help shore up margins.
Ray mentioned in his comments that its also an opportunity for us to look at what we have invested in quality without losing our focus on quality to conduct our quality programs more cost effectively and that should help us as well as when you’re a company our size with that kind of margins, its easy to stop paying attention to the details and what we found in a recent focus on how we price product, we do have some profit leaks that we can shore up and we are in the process of shoring them up now and those all effect gross profit margin improvements.
And then we have operating expense leverage and significant leverage in interest expense as we continue to pay down debt pretty rapidly.
Ray Elliott
And I mentioned it just in passing and its one of many points I made so it may have got lost in the shuffle, but I’m also fascinated and excited by the opportunity of that cross care and the cross selling opportunity we have. We have an amazing product line up when you start putting all of those products together for call point focus and if you compare it to the other companies where yes they have strength in one and probably a little less in the other, the combined strength and in some cases obviously people don’t have both product lines but as you combine those together and then you add in the ability in endo and other things obviously broadly service hospital areas but are a different call point, the opportunity there is huge and I have some early data which I’m not going to share right now, but some early data on the impact of the programs in terms of sales growth versus when they were individual sales there against the combined sale.
When you do that, and the opportunity to growth volume profitably is really outstanding.
Operator
Your next question comes from the line of Larry Biegelsen – Wells Fargo
Larry Biegelsen – Wells Fargo
On Madit-CRT you said reimbursement is already in place, could you give us a little bit more color on that and should we start to see an impact immediately following the result at ESC this summer and the dollar impact you provided on the call, what does that assume for growth in de novo implants.
Fred Colen
As it relates to the reimbursement, so first and foremost the reimbursement for CRT-D patients is largely in place. When you look at the details, I’m talking about the United States now, that is in place in 47 of the 50 states. It is basically an indication for treatment for heart failure and so from that standpoint we don’t think there’s a lot that needs to be done on the reimbursement side.
Its more a matter of creating the confidence in the mind of the physicians that this is indeed the right therapy for heart failure patients. As it relates to when that will happen I think that will happen over time. It will not be a one time event. I think that confidence will continue to rise. That certainly will be the case once the world will see the results as presented on September 1 and then I think that will go on with continued analysis of the data and further publications of the data and I think over time we will see an up tick in penetration as well as obviously an improvement because of the fact that there will be an implant of the CRT-D device versus an ICD so there is benefit on both penetration as well as on the system opportunity.
So I think that’s largely the answer I would have on that. As it relates to numbers our estimate I think we said is that our estimate is that in the next three years we believe that this could be an opportunity in the United States for about $250 million and on a worldwide basis as it relates to the overall market impact of about $400 to $500 million worldwide. So those are the dollar numbers that we have estimated that this would in total drive at.
Larry Biegelsen – Wells Fargo
Does that imply any improvement in the flat to slightly down de novo implant growth that you mentioned earlier in the call.
Fred Colen
Yes, it takes all of the effects into account, so it takes into account the current situation around de novo market scenarios, it takes into account a further improved market growth penetration as well as an improved system price opportunity.
Ray Elliott
Let me just add a little additional comment just to make sure we’ve got it dead accurate, it is covered by Medicare, it is covered if its considered medically necessary so just to make sure we’re giving you the fullest information and then if you really care about minutia, Idaho, Tennessee and North Carolina are the three states that don’t cover it.
Larry Biegelsen – Wells Fargo
And the de novo implant question, but can you quantify that, what if its flat to slightly down how much you expect that to improve. It sounds like its incorporated in that dollar amount but you’re reluctant to say by how much its dependent upon de novo implant growth.
Ray Elliott
Well the trends catch up and I can’t remember I don’t have the data in front of me and I think its something like 2012 or 2013 and this has been going on for three years so you’ve got a five or six year period where the lines start to cross again and what will happen is replacement cans were in fact reverse position over time with de novo and I think its 2012 2013.
Fred Colen
Yes, I think that is right and we’re looking at a time window of 2009 to 2012, so that’s the three years we’re talking about.
Larry Biegelsen – Wells Fargo
And then on drug eluting stent in Japan if the 13% number you gave for Endeavor was calendar year it assumes they probably exited above 20 for the quarter in June, and if that’s the case who are they taking share from.
David McFaul
I think the 13% that was mentioned was the worldwide number or US number it wasn’t mentioned specifically for the Japan market. I think if we look at the Japan market we’ve been very fortunate with having such a strong team there hold on to market share with the introduction of a third player into that market and I think we could safely say that there exit percentage is around 20 to 21 I think is what we estimate it at and far lower than we would have expected from the launch of a third player.
So in terms of where is that, most of that market share coming from and when we do the analysis because our team has held on to share at the 47% level on an exit and over 50% for the quarter we believe that most of that share is coming from the other competitor.
Larry Biegelsen – Wells Fargo
And just lastly have you heard back from the European trade commission on an extension to the supply agreement for Promus.
Ray Elliott
We’re in discussion and have constant contact with them, but we wouldn’t comment on the call back at this point in time.
Operator
Your next question comes from the line of David Lewis – Morgan Stanley
David Lewis – Morgan Stanley
Just a quick clarification, would you say that given the existing cost initiatives that there would be CRM leverage or anniversarying QA, QC spending in the next two years, 2010 and 2011 you have a significant amount of visibility and be able to drive that 15% but if we take it out past 2011, some of the initiatives that you talked about this morning and gave that great detail on, those things would have to play out to sustain those levels, do you see that as two discrete components.
Ray Elliott
I don’t but because we’re going to, I don’t want to say redo strategic plan but we’re going to rework the strategic plan. I haven’t got data that suggests my ability to answer that. That’s the problem so that would be one answer and therefore it is focused on the two years at this point in time.
Secondly at least in the past I’ve been hesitant other then with a major acquisition or something where its important to communicate the out years for people to understand what may happen I’ve been hesitant to go beyond a couple of years at the most and preferably just the next year in medical devices just because our world, there’s a lot of variables in that and I want to make sure that we’re giving people the best we can.
So at this point its focused on the timeframe as stated.
David Lewis – Morgan Stanley
And given the various managers we have on the phone, I wonder if you could comment on two areas, one just specific European strategies to fix holes in distribution that have been talked about here at the company in the last four to six quarters, and then secondarily on neurostimulation it looks like if share losses continue a little bit on an incremental basis and when can we expect share stabilization in neurostimulation.
David McFaul
I wonder if I can ask a little more clarification in terms of what you’re specifically meaning in terms of holes of distribution.
David Lewis – Morgan Stanley
Specifically on CRM outside the US.
David McFaul
You’re looking more worldwide in terms of not just Europe because in Europe we’ve added a large number of feet on the street and I believe that we’re direct in a lot of smaller places around Europe that give us good coverage. We’re enhancing that so I think Europe is in very good shape as far as coverage goes and any place that we see an opportunity to add more feet on the street to give us more coverage we’re certainly aggressively pursuing that.
I think around the world when you look at certain markets when you look at for instance the emerging markets like Brazil or China, we’re certainly taking very good steps in order to make sure that we’re able to penetrate those markets in a way that we’ve never been able to before.
Ray Elliott
I think too the comment of adding feet on the street that I put in place between 300 and 500, a chuck of that is obviously in Europe, its not all in the US but I think there is a feeling on all of our parts and certainly on mine at looking at the new product opportunity and the level of productivity we have on a per rep basis. There’s an opportunity here to grow the sales force and therefore particularly in CRM fill in a lot of the gaps that may be perceived.
Michael Onuscheck
First thing I would say is that we actually came off a pretty good quarter. Q1 for us was very soft but domestically we’ve reestablished ourselves in this marketplace and we won’t really know whose gaining share or lost share in this quarter until both St. Jude and Medtronic report. When we look at the domestic market we did a ton in this division last year in terms of doing a quality system upgrade and a move into a new facility.
And so we felt a little bit of that impact in the early part of this year but we did launch a new product in the first quarter. We’ve got new products that are actually submitted to the FDA right now which will help us accelerate our growth in both the domestic and international markets. We’re feeling pretty confident right now that we’ve got the right strategy in place to get back on what we’ve done traditionally in the pain segment.
And we’re really pretty pleased with the results in the quarter. Our expectations are that we’re back to being healthy again in our top line growth.
David Lewis – Morgan Stanley
In terms of your internal plans related to the conversion of Promus Element do plans call for a high degree of conversion let’s say 80% or do they call for a full 100% conversion by the second or third quarter of next year.
Sam Leno
We won’t comment on the second or third quarter of next year but our plans do call for a very high rate of conversion. We won’t give a precise number. We have an opportunity not only to convert the vast majority of Promus Element but also with Promus Element to take additional share. We haven’t disclosed what our plans are but the upside is pretty significant.
Operator
Your next question comes from the line of Tao Levy – Deutsche Bank
Tao Levy – Deutsche Bank
On the operating expense side I think you mentioned it looks like its going up a little bit versus a prior comment, and is that related to the additional folks you want to add on the sales forces or CEO transition costs imbedded in there.
Sam Leno
There’s no real CEO transition costs as notable, primarily it’s a focus at adding more sales and sales related personnel as we talked about in previous calls. And we think that’s an investment worth making so its primarily that. It’s a few other odds and ends that are more timing related from one quarter to the next but in general we were not surprised at our level of operating expenses but we wanted to do and my comment was lay an expectation on for the full year which is why I said a combination of SG&A and R&D expenses would be approximately $3.650 billion, just so there’s no confusion.
Tao Levy – Deutsche Bank
And will that still allow you to achieve the I think you had mentioned in a prior call the 150 basis points of operating margin improvement with the added expense.
Sam Leno
Can you help refresh my memory on where I made that comment and what it was about.
Tao Levy – Deutsche Bank
I think you were just talking about annual improvements of around at least 150 basis points of operating margin, you made it in the last couple of conference calls. I think it was not specific guidance but just a big picture outlook of how you manage your expenses.
Sam Leno
I think what we said was that over the next several years if we go back to 2007 when we announced our restructuring plan we had targeted to be at 30% operating profit margin in 2010 but as a result of doing much better with total market share driven by a bigger proportion of Promus then we had originally thought, that 30% target would go up by a year, maybe a little more than a year as we now have to overcome the margin gross profit and operating profit margin pressure that that much Taxus has provided to us.
So we’re still improving our operating profit margin year on year, that’s our expectation. A lot of it is driven by the improvements that we’re expecting, 12 points of margin improvement coming from our CRM business which is 30% of our total portfolio.
Tao Levy – Deutsche Bank
And then just on the gross margin you talked about 70 to 71% is that going to be in tact also for the back half of the year just because obviously the hedging benefits are going to probably be a bit lower in the back half of this year so I wasn’t sure if your comments were just on full year basis or also in the back half of the year.
Sam Leno
My comments were for the full year as well as for the back half of the year. It’s a pretty broad range, 70 to 71% so that gives us the ability to have different mix contributions especially on the Taxus side but also with the expected continued market share movement that we ought to get from Cognis and Teligen, that should help our gross profit margins as well.
So it pertains to the back half just as much as the front half.
Operator
Your next question comes from the line of Rick Wise – Leerink Swann
Rick Wise – Leerink Swann
Maybe I’ll start with the a strategic question you very emphatically made the point that you’re anxious to drive innovation maybe talk to us about your early thoughts about driving innovation outside Boston via acquisition, is this a priority you highlighted a lot of interesting market when, how, where, how big, how soon can we see some external initiatives.
Ray Elliott
Do you want a list of targets.
Rick Wise – Leerink Swann
I’m taking names right now.
Ray Elliott
Those are the target areas subject to further review. In all those areas I mentioned we also have internal projects so it is a buy versus build or a buy and build in many cases where we’re acquiring technology from the outside to merge with existing programs inside but there’s nothing on that list even as you get into obesity, diabetes and other areas that is not being worked on as well internally with some really interesting technology.
So the question becomes what portion of the disease or subset or if you can get after the whole disease are we targeting and we have databases here in our medical group and in our clinical science group that focus very carefully on disease indications and portions thereof or the entire disease.
My preference is to lean more to start to finish disease profiles, continue of care and therefore if I did send you a copy of which I never would, our plans that combined acquisition and internal technology you would see that kind of approach. The problem we have today is bless everybody here there’s just too many, too much, and too many multiples of things so what we want to do is tighten that down to some very specific diseases and then you will see a blend, you’re not going to see big acquisitions.
In start we can’t afford it, don’t want to do it and we’re focused on investment grade rating return and secondly there’s nothing big to buy in most cases in those areas anyway. They tend to be a combination of smaller technologies and we have the ability to merge those together in here to target specific diseases.
Rick Wise – Leerink Swann
Post the Madit-CRT data maybe just talk a little bit about your strategy to drive the penetration you’re envisioning, is this is ET or heart failure doc oriented [inaudible] and maybe just help us understand how you’re going to make it happen.
Fred Colen
First of all I think that once the data is going to see the day of light, there’s going to be a lot of enthusiasm in the medical community and obviously that is important not only for the implanting physicians but also for the referring physicians and the heart failure specialists.
And I think in the heart failure space this is actually going to be a pretty big stimulus for heart failure treatment and probably one of the most important things that has happened in the last five years or so as it relates to treatment of heart failure patients.
So I believe that once the data will the day of light and all of the detailed analysis gets done over time, all that’s better understood, obviously with our goal to make people understand the data as best as possible in terms of education and marketing events that we will obviously undertake I believe that the in particular the heart failure physicians will be very enthusiastic about this opportunity and I think that’s going to be a big stimulus in the referring chain to get more patients to electro physiologists for implant.
Typically the bottleneck has been with the referring docs with understanding of the benefits of the therapy and I think this is clearly going to be I believe a major step forward in improving to the also referring docs and the general cardiologists that this is an excellent treatment for heart failure patients also in a very early stage to prevent worsening of the ongoing disease. So I think there’s going to be a lot of buzz and interest in this.
There hasn’t been a lot of new innovative approaches in the heart failure space in the last several years and so I believe that this will indeed provide that kind of fuel to drive that engine a lot better. And then I think you have to look at not just Madit-CRT but you have to look at all the other things that we are working on, the Madit II data as well as our work that we are doing on the Latitude database in terms of the Altitude initiative is creating a lot of enthusiasm in the medical community at large, you’ve seen it at HRS.
So we clearly are working on the designs that matters and that will indeed prove that this is an effective therapy and that over time we can also prove that this is going to be a more cost effective strategy for the treatment of heart failure in particular.
Rick Wise – Leerink Swann
If I’m doing the numbers right your nine months reported for this year, nine months reported and guided third quarter GAAP numbers suggest $0.18 to $0.23 for the first nine months of GAAP EPS, that implies given your full year guidance a fourth quarter of $0.29, $0.30 something like that again if I’m doing it right. I assume that’s part tax rate, is the big driver since the fourth quarter sales don’t seem to be dramatically different then the first nine months quarterly rate, is that all about Promus mix or is that the biggest element in making that dramatic fourth quarter.
Sam Leno
In the GAAP numbers we have an Abbott milestone payment that’s coming in that we expect to get later on this year and that’s a big number, its $250 million so that throws off any reasonable comparisons of the first nine months to the last three months of the year. And the tax rate is largely the benefit is coming from two areas, most significant of which is we’re obligated to approve interest under FIN 48 based on published government rates and they went down by about two points.
And as a result it gave us a pretty significant improvement in the effective tax rate for the year. There’s always a mix shift issue on an operational basis that take place from one quarter to the next but the principal reason that you’re seeing us with a different number is because of the interest rates.
Those interest rates could bounce right back again three or six months from now, right back at 21%.
Operator
Your next question comes from the line of Kristen Stewart – Credit Suisse
Kristen Stewart – Credit Suisse
I was just wondering if you could give us any more details around this program termination, what specifically it was.
Sam Leno
What I will say is that we cancelled an R&D project and with an R&D project came a liability that if we had stayed with it liability would be experienced and expensed over time. But as a result of mothballing the R&D project we are still obligated to pay that liability over time but under GAAP because we no longer have an expectation of the benefit that comes with an R&D and the related commercialization of the project, we’re obligated to [recrue] that liability up front.
Kristen Stewart – Credit Suisse
Was that more in the CRM or endosurgery or—
Sam Leno
We won’t disclose exactly where it was, that would be a competitive disadvantage to us but that happens from time to time. This one happened to be a bit unusual and it cost us $16 million in the quarter.
Kristen Stewart – Credit Suisse
In your ASP commentary I think you said worldwide ASPs were down 13% is that including the negative effect of currency.
Sam Leno
We don’t include currency in our ASP calculations. So its without that. I’m going to go back also and make a correction in a comment that Michael Weinstein had asked, he had picked up on the fact that I did make a statement that the US DES average selling price declined 10%. That was wrong, its 8%. Its in line with the market also which declined at 8%.
Kristen Stewart – Credit Suisse
I guess thinking about the DES market we’ve now seen penetration in the US stay stable around 75% I think you said volume growth was around 2%, where does the market go from here if you’re facing 8% headwinds, is there anything at all that you foresee that could perhaps drive higher volume growth or perhaps a decelerate in terms of the ASP declines and have you seen our would you expect to see any impact on the Bari 2D trial.
Sam Leno
We’ve been pretty consistent in our expectation that the DES market is a flat market and will continue to be a flat market for as far as we can see.
Kristen Stewart – Credit Suisse
And I guess you had mentioned healthcare you were going to hold back some of your comments but I was just wondering if you could share with us what do you see as the major area of concern facing Boston Scientific going forward from a reform standpoint.
Ray Elliott
I think it depends where it comes out, that’s the problem trying to speculate at this point but I think as we, what we want to make sure is that we don’t have backdoor taxing is a major concern. What I mean by that is we don’t want to end up with in the period we’re in in this country to ensure that corporate taxes in our case as we reinvest higher portions back into the business that we don’t end up with a financing process initiated by the government that in effect does not enhance innovation and patient outcomes and it becomes an in effect a backdoor tax.
That would be one large area. There are so many things on the table right now. The reason I didn’t frankly put it in because its and interesting subject that effects all of us is I would have returned to my history of two hour earnings reports because right now the number of things of the table but the big one or I would say the one that caught my most attention would be trying to stay away from that kind of financing to the government and focus on innovation and development.
I think we also, I don’t know whether we did it intentionally but I think the Bari 2D trial I think we skipped over that.
Dr. Donald Baim
I think the important about the Bari 2D trial was it was really a study as to whether preemptive revascularization using either in an non randomized way PCI or surgery would improve the outcome of patients with diabetes and there are very few situations where preemptive revascularization in people with minimal symptoms actually do improve outcome. This was an other example of that. So we shouldn’t move to preemptive revascularization but it doesn’t change the current management strategies of people with either symptoms or large areas of myocardial ischemia nuclear testing have been referred for whichever revascularization treatment if most appropriate.
Ray Elliott
That trial wasn’t randomized anyway.
Dr. Donald Baim
No, in terms of revascularization it was not between surgery and MPCI.
Kristen Stewart – Credit Suisse
And then just on the diabetic population what risk do you really see from the [spirit 4] what level of confidence do you have that Taxus will in fact prove to be better than or equivalent to Xience.
Dr. Donald Baim
Spirit 4 removes the [inaudible] reflex of routine and geography but still includes the fact that it’s a trial again Taxus Express not Taxus Liberte so therefore without the benefits that we know Taxus Liberte has in small vessel [resenosis] and long lesion peri procedural myocardial infarction which are all part of the composite end point.
With that said the Spirit 2-3 pool data point to an advantage of Taxus in diabetics and it will be interesting to see we have no reason to think it wouldn’t be extended in the Spirit 4 data but we won’t know until September.
Operator
Your next question comes from the line of Bruce Nudell – UBS
Bruce Nudell – UBS
It was interesting to hear that 47 of 50 states basically allow CRT-D to be extended to class 2 patients with [inaudible] today do you feel that the patients who are coming into, who are in the device funnel as it were who have very low ejection fractions, I think the sweet spot in reverse, was 25% or lower and the sweet spot was 150 milliseconds QRS, do you think that they’re not getting CRT today and when you take your $250 million estimate that either equates to 10,000 CRT-D units that you wouldn’t have gotten otherwise so in other words more patients in the funnel, versus 50,000 upgrades and where is the balance in where you think those $250 million are coming from.
Fred Colen
As it relates to the reimburse
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The Food and Agriculture Organization (FAO) of the United Nations publishes monthly both a Food Price Index and a Food Price Commodities Indices in which they isolate the main food groups. Included in the Food Price Commodities Indices is Sugar. According to the latest FAO publication - sugar is up 7.4% this month, continuing a trend of monthly increases that started in July.
Graphic source: FAO World Food Situation.
And to quote the FAO, their assessment is as follows:
"The increase in October was mainly attributable to harvest delays due to unfavourable weather condition in the center-south region of Brazil, the world's largest sugar producer and exporter. Also a fire that destroyed a major sugar warehouse at the Santos port in Brazil exacerbated the price surge."
The International Sugar Organisation (ISO) just published their latest amended forecasts on global sugar production and consumption. Currently, they indicate global sugar production will be 181.5 million tonnes for the 2013/14 season. Consumption is forecast to be 176.75 million tonnes leaving a surplus of 4.73 million tonnes.
Last years 2012/13 surplus was 10.2 million tonnes, so this is an indication that the surplus is moving in the right direction. Further evidence is supplied in this year"s numbers, with production being down 1.2% from last year and consumption increasing 2.2%. ISO is currently forecasting that the market will be in balance for the 2014/15 season.
Another factor contributing to the balancing is the continued closure of sugar mills in Brazil. According to UNICA - the Brazilian Sugarcane Association - up to 50 sugar mills have closed since 2007 and another 60 of the 330 now active mills have been identified for closure.
As mentioned in the FAO report there are also some non-systemic events currently taking place affecting the sugar market.
The fire at the Santos port damaged six warehouses owned by Copersucar SA and destroyed 300,000 metric tons of raw sweetner. While the shiploading and loading equipment survived the fire, the initial estimate on a best case scenario, is that the 10 million tonnes a year facility will not be in action until the later half of Q2 in 2014.
Adjacent port facility owner Cosan Ltd. (NYSE:CZZ) has offered to help take up some of the lost capacity but has given no indication at this point in time on how much they will be able to do.
Another recent event affecting sugar production is the recent typhoon that impacted the Philippines. Recent reports indicate that this storm ravaged their main cane growing areas that produce approximately 150,000 tonnes a year. The Philippines account for about 1.3% of global output but most of this is consumed domestically. How long it will take the Philippines to reestablish their infrastructure is unknown at this time but it does create additional global demand in the interim.
All of this takes us to Rogers Sugar Inc. (OTC:RSGUF), one of two sugar refiners in Canada. The Company is the result of the corporate conversion of Rogers Sugar Income Fund in 2011. The Company holds all the common shares of Lantic Inc. Together they operate a cane sugar refinery in Montreal, Quebec, a cane sugar refinery in Vancouver, British Columbia and a sugar beet processing facility in Taber, Alberta.
The only other operator in Canada is Redpath Sugar - a subsidiary of the ASR Group.
Source: Canadian Sugar Institute.
The Company has a September 30th year end and recently reported their 4th quarter results. The stock reached its high for the year in mid-March and has been declining ever since and is likely currently being effected by tax loss selling.
The stock had a partial run-up in the first quarter mainly because it offered a Special Dividend on February 8th of $0.36 a share. The Company also pays a quarterly dividend of $0.09 CDN. At current prices of $5.02US or $5.24CDN it is yielding approximately 7.2%.
Revenue for the Company is composed of industrial consumption, consumer consumption and occasional sales on the world market.
While Rogers doesn't breakout its sales volumes, the Canadian Sugar Institute indicates that 85% of Canadian sales are to Industrial consumers.
Click to enlarge
From a consumer perspective, per capita consumption of sugar in Canada has been declining since the 1940's and according to filings by the Company, have remained in the 31-33kg range for the last 5 years. This means that consumer consumption is likely limited to the growth of the Canadian population, which according to Wikipedia is 1.28% per annum.
Click to enlarge
Source: Canadian Sugar Institute.
The other source of income is world sales. This is sporadic at best because of foreign trade barriers. However, when they do occur they can be lucrative for the Company.
For example, in 2012 the Company was able to sell approximately 27,000 tonnes to the USA when the US Department of Agriculture sought one time bids for 136,000 tonnes from the global world market.
Tonnage sold by Rogers over the last three years was 2013 - 649,274, 2012 - 641,573, and 2011 - 649,078 which infers that volumes are relatively consistent. Volumes increased in 2013 by 7,700 tonnes which the Company attributes to new industrial demand.
With the high yield that Rogers is currently offering, the natural concern is coverage of the dividend. With consistent tonnage, the remaining variables are sugar pricing and operating costs.
One of the primary costs for processing sugar is natural gas. Recent declines in natural gas prices has allowed the Company to keep refining costs down.
Capital Expenditures are relatively modest with these types of operations and have averaged $8.8 mm over the last two years. Interest and taxes have averaged $24.5 mm during this period as well.
Cashflow after adjustments was in 2013 - $64,433 and for 2012 - $59,090. With approximately 94.1 mm shares currently outstanding, the Company needs to generate $33.9 mm. When the dividend amounts are added to the amount required for interest, taxes and capital expenditures the cash requirement comes to approximately $67.2 mm. This means assuming a similar year the Company would have a shortfall of $2.8mm in cash flow generated. (Source: Rogers SEDAR Filings)
However, this is the point of the article, sugar pricing looks to be recovering and with some key non-systematic risks hitting the sugar industry, Rogers looks to be well positioned to take advantage of both the increase in sugar pricing and perhaps some more one-time global sales on the world market. Given this scenario, the year end sell off of the stock would seem to be an opportune time to take a position in this company.
Disclosure: I am long OTC:RSGUF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Updated
A Federal parliamentary committee is continuing to look at the proposed Korea-Australia Free Trade Agreement, which is promising a 73 per cent increase in agricultural exports.
The committee held public hearings in Sydney and Brisbane this week to examine the pros and cons of the deal, and heard from a number of industry groups.
Korea is Australia's third-largest export market. It's also Australia's fifth-largest market for agricultural exports.
The committee chair, MP Wyatt Roy, says there are substantial gains to be had if the KAFTA is ratified sooner rather than later.
"If we can ratify this treaty before the end of the calendar year, the tariff cuts come into effect much sooner," said Mr Roy.
"For the beef industry, if we can ratify the treaty this year instead of next year, that's an extra $408 million going to the beef industry."
When, and if, the agreement is ratified, it will eliminate tariffs on Australian agricultural exports including beef, wheat, dairy, wine, horticulture, seafood, and sugar.
A free trade agreement with Korea will see the three per cent raw sugar duty scrapped.
Dominic Nolan, CEO of the Australian Sugar Milling Council, says Australian raw sugar exports are worth two billion dollars a year and the FTA is very important.
"One of our main competitors, the Thai sugar industry, is also moving to a zero tariff position.
"If we were left with a tariff in place, it would put us at such a disadvantage that it could have threatened the entire viability of that market for us."
The nut industry will be a big winner from a free trade agreement with Korea.
Australia's largest horticultural export, nut exports were worth $600 million last financial year.
Chris Joyce from the Australian Nut Industry Council says that figure is expected to become reach $1 billion in a few years.
"With almonds, the Americans already have a free tariff into Korea and we haven't sold any almonds into Korea since that occurred," Mr Joyce said.
Australian almonds currently face an eight percent tariff, while macadamias have a 30 per cent duty.
"The Australian macadamia industry is investing significant marketing dollars into Korea to explain to Koreans what a macadamia is.
"We believe, with the removal of the tariff over the next five years, the Korean market may reach 2,000 tonnes which is about $30 million."
Addressing the public hearings this week, the Australian Manufacturing Workers Union reiterated its opposition to the treaty that it calls 'a disaster for manufacturing' and a 'cows for cars deal'.
MP Wyatt Roy admits that there are always 'trade-offs' in trade negotiations.
But he says Australian consumers will benefit.
"Korea has something to gain in terms of its exports into Australia.
"While that's a win for Korean exporters, it's also a win for Australian consumers," said Mr Roy.
"We'll have cheaper cars, cheaper electronic products."
Not everyone's a winner though.
Rice has been left out of the agreement, and while the nut industry will see significant tariff reductions for macadamias and almonds under KAFTA, the Koreans don't don't want Australian walnuts or chestnuts.
"The tariffs won't be removed," said Chris Joyce.
"You don't get everything you want in trade agreements, but we really should focus on the positives because the benefits to the macadamia and almond industries will be substantial."
Topics: trade, agricultural-subsidies, agricultural-crops, money-and-monetary-policy, brisbane-4000
First posted
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strong>ORLANDO, Fla. — While several of his Republican rivals have criticized President Obama's strategy to defeat the Islamic State following the terrorist attacks in Paris, France, Ohio Gov. John Kasich took a more somber tone Saturday during remarks to Florida voters.
"Today is not a day of politics or promoting a candidacy. I wouldn't be comfortable with that today," the GOP presidential hopeful told a crowd at the 2015 Sunshine Summit.
Related Story: http://www.washingtonexaminer.com/article/2575923
"What we saw last night, what we observed on 9/11, what we observed at Fort Hood, what we witnessed in Chattanooga, and what we saw of the murderers who invaded Charlie Hebdo … we need to understand that these attacks really represent an attack on Western civilization," Kasich said.
He continued, "I don't know that this is the time for political criticism or the blame game."
"But I must say that we as a nation, the United States of America, have not shown leadership. We've had an unwillingness to lead," he said.
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In the 13th century, Kublai Khan—grandson of Genghis Khan—conquered China, effectively ruling over all of it from Beijing. The Mongolian bestowed upon his dynasty a Chinese name, Yuan, and built a palace that Marco Polo described as "the greatest ... that ever was," with a vermilion, yellow, green, and blue roof and a dining hall with a capacity of 6,000, per the BBC.
But Polo's writings have been among the best remains of the imperial palace, which effectively disappeared sometime after the Yuan dynasty's 1368 end—until, perhaps, now. The South China Morning Post reports that archaeologists believe they know where the Yuan palace was built.
The Forbidden City served as the palace for the Ming and then Qing dynasties, and the Post reports that it's long been thought the Yuan palace stood near there.
A little closer than "near," it turns out: Archaeologists found a 10-foot-thick "rammed earth and rubble foundation" beneath three previous layers of construction done under early and late Ming and Qing rulers.
Wang Guangyao, the deputy director of the Palace Museum's Institute of Archaeology, tells the Post the style of the foundation is identical to the ruins of another capital of the Yuan dynasty.
Wang adds that the size of the foundation is atypical of Yuan buildings and suggests it could have been part of a massive hall. It's not the only recent Kublai Khan-related find: Last July archaeologists found a portion of the hull of a ship he sent as part of an armada that tried in vain to invade Japan, the Telegraph reported.
(Another recent, "truly miraculous" find: the original Alamo?)
This article originally appeared on Newser: Palace Marco Polo Called 'Greatest Ever' May Have Been Found
More From Newser
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The same tides that affect ocean waves can trigger earthquakes along California's San Andreas Fault, and scientists unexpectedly find that these quakes are more likely to happen as tides are strengthening, not when they are at their strongest.
The rise and fall of the seas, tides are caused primarily by the gravitational pull of the moon and sun on Earth. These gravitational tugs not only influence the seas but also stone, alternately stretching and compressing Earth's crust.
Previous research found that the tidal effects on Earth's crust could trigger both tremors and earthquakes. When this shaking occurs, it can reveal details about the deep roots of faults, which, in turn, could enrich models that might illuminate when earthquakes will happen. [50 Interesting Facts About Earth]
The study?s scientists were interested in how the planet's tides might affect small, deep seismic events known as low-frequency earthquakes. They focused on 81,000 catalogued low-frequency earthquakes that struck along California's San Andreas Fault between 2008 and 2015. These quakes are no larger than about magnitude 1 on the Richter scale, said study lead author Nicholas van der Elst, a seismologist and geophysicist at the U.S. Geological Survey's Earthquake Science Center in Pasadena, California.
"We looked at a part of the fault that's weak, and so responds to tiny forces exerted by tides," van der Elst said.
Tidal strength varies over a two-week, or "fortnightly," cycle. The strongest "spring" tides occur when the moon and sun are aligned, while the weakest "neap" tides happen when the sun and moon are perpendicular to one another with respect to Earth.
Surprisingly, the number of low-frequency earthquakes did not spike at the strongest point of the fortnightly cycle. Instead, they peaked as the fortnightly tide was waxing, or strengthening.
Specifically, these quakes were most likely to happen on the days where tides "were larger than the previous day's tides by the greatest amount," van der Elst told Live Science. "That tells you something about how fast the fault is loaded — how long it takes for the fault to recharge before you can trigger these earthquakes on it, how quickly this patch of fault is accumulating stress."
The deep sections of the San Andreas Fault that the scientists investigated are separate from the shallow portions of the fault most likely to produce major earthquakes, van der Elst said. Still, "every little thing we learn about the way faults work may ultimately contribute to a better understanding of the earthquake cycle and when and where big earthquakes are likely to happen," he said. "The hope is that looking at low-frequency earthquakes that happen deep in the fault will ultimately shed light on how shallow parts of the fault accumulate stress."
The scientists detailed their findings online July 18 in the journal Proceedings of the National Academy of Sciences.
Original article on Live Science.
Copyright 2016 LiveScience, a Purch company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Now that the Colorado Rockies are going with a four-man rotation, manager Jim Tracy has limited every starter to about 75 pitches. That gives them added incentive to keep their pitch counts down.
Alex White threw 80 pitches in four innings Tuesday night, allowing one hit and five walks before he was lifted for a pinch-hitter. Josh Roenicke took over and threw three scoreless innings, while rookie Josh Rutledge drove in all of Colorado's runs in a 3-1 victory over the Los Angeles Dodgers.
"We know what we've got. We've got 75 pitches, and our job is to get as far as we can," White said. "That's what we did the last two nights. But that's the reason why we've got a good bullpen."
It was the fifth straight game in which a Rockies starter didn't reach the fifth. In the series opener Monday night, Drew Pomeranz threw 84 pitches over four innings and was lifted with a two-run lead before Adam Ottavino and the bullpen closed out a 2-0 victory.
"It's a little different, that's for sure," Dodgers manager Don Mattingly said. "It's a little bit more like a spring training game, because you're not getting the same type of look from the second guy that you got from the starter. But we've seen this White a couple of times, we've seen Roenicke, we're seen Pomeranz and (Ottavino). So you can prepare. There's plenty of video and preparation to be able to know what a guy's throwing."
Roenicke (4-0) has a 2.21 ERA in 45 appearances, compiling 43 strikeouts over 69 1-3 innings.
"He continues to have a terrific season for us," Tracy said. "I think what's noteworthy is that he's done a much better job of pounding the strike zone. His stock just keeps improving."
Rutledge had three doubles among his career-high four hits, one of which drove in two runs in the seventh after Shawn Tolleson relieved Dodgers starter Aaron Harang.
The 23-year-old shortstop, getting a chance to play because of Troy Tulowitzki's groin injury, has 18 RBIs in 22 games since his promotion from Double-A Tulsa right after the All-Star break. His total includes home runs in four consecutive games last week.
"He has played tremendously for us," Tracy said. "When this guy squares a ball up, I can tell you it makes a different sound. It gets off the bat in a hurry."
The Dodgers scored in the eighth when Hanley Ramirez reached on a two-out infield single against Rex Brothers and came all the way home on James Loney's double against Matt Belisle. Rafael Betancourt, the fifth Colorado pitcher, worked a perfect ninth for his 19th save in 23 attempts.
The Dodgers are 0 for 13 with runners in scoring position in the last two games against a pitching staff that entered the series with a major league-worst 5.51 ERA — in addition to allowing the most runs, hits and homers in the majors.
"They're playing well and they're battling us," Harang said. "I've been on teams like that where you have nothing to lose, so they've been coming out hard. They're scraping runs together and their pitching's been holding us down."
Harang (7-7) was charged with three runs and six hits in six-plus innings. The right-hander escaped bases-loaded jams in the first and fifth — the latter on an inning-ending double play by rookie Jordan Pacheco. But that came three batters after Rutledge doubled home the first run of the game.
The Dodgers had a scare in the second when Ramirez fouled a ball hard enough off his left foot that Mattingly and a trainer came out to check on him. Ramirez completed his at-bat after limping back to the plate and grounded a single through the left side of the infield — hobbling all the way to first base.
Los Angeles loaded the bases with one out in the third on three walks, including a two-out intentional pass to Andre Ethier, but Ramirez flied out.
NOTES: The cap-slamming, profanity-laced rant that got Tracy ejected by umpire Mike Everitt on Monday has become an Internet sensation — thanks mostly to Dodgers Hall of Fame broadcaster Vin Scully, who did some priceless lip-reading in a blow-by-blow account of Tracy's 5-plus minute tirade while substituting all the curse words with cleaner synonyms. "That was brought to my attention," said Tracy, who managed the Dodgers for five seasons and sat next to Scully on the team charter during road trips. "My wife told me: 'You might want to take a peek at that.' He did a pretty good job, didn't he? But nothing surprises me with the way Vin does his duties — nothing. He is one of the most beautiful people that I've ever had the pleasure of being around. He's so articulate and so well-spoken and such a gentleman." ... The Rockies had eight runners on base during Pacheco's three at-bats, but none of them scored. ... White is 0-3 with three no-decisions and a 5.96 ERA since beating the Dodgers 3-2 on June 3 at Coors Field. He also walked five batters in that game. ... Harang is 0-3 with a 5.14 ERA in four starts this season when pitching on at least six days' rest.
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The last time Mississippi State faced Arkansas, the Bulldogs were a mediocre 4-6 football team trying to figure out a way to become bowl eligible.
Things have changed quite a bit over the past year.
Starting with that overtime victory over the Razorbacks, No. 1 Mississippi State (7-0, 4-0 Southeastern Conference, No. 1 CFP) has won 10 straight games and is now among the front-runners to win a national title.
While the Bulldogs are rolling, the Razorbacks are still struggling. Arkansas (4-4, 0-4) has lost 16 straight conference games, dating back to 2012. The teams meet again on Saturday at Davis Wade Stadium.
Arkansas right tackle Brey Cook said Mississippi State's rise could be used as a model for what the Razorbacks hope to accomplish in the near future.
"Just goes to show the power of our conference," Cook said. "Anybody can do anything on any given weekend, and we're excited to go out there and play a good football team on Saturday."
Four of the SEC's top seven rushers will be on the field — Mississippi State's Dak Prescott and Josh Robinson and Arkansas' Jonathan Williams and Alex Collins.
It's no secret both teams love to move the ball on the ground. Robinson had a career-high 198 yards rushing last weekend in Mississippi State's 45-31 victory over Kentucky.
Arkansas counters with a mammoth offensive line that has no starter under 314 pounds. Mississippi State coach Dan Mullen compared Arkansas' ground-based approached to LSU, but also said that every school has a slightly different formula for success.
"We play a wide variety of teams in the SEC, and everyone is different," Mullen said. "Even all of the spread teams are a little bit different from each other. We will be a little different on defense than we were last week."
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Things to watch on Saturday when No. 1 Mississippi State hosts Arkansas:
HEALTHY PRESCOTT: Mississippi State quarterback Dak Prescott took some hits in the victory over Kentucky last weekend and was wearing a walking boot on his left foot at times during the week. The junior says he's healthy and hasn't been limited during practice, but the Razorbacks will likely try to test his mobility early.
THE DIFFERENCE A YEAR MAKES: About this time last season, Mississippi State came into its game against Arkansas as a 4-6 football team with fading hopes of even becoming bowl eligible. Since then, the Bulldogs have won 10 straight games and are the No. 1 team in the country.
ON THE OTHER HAND: Arkansas comes into Saturday's game mired in a 16-game conference losing streak that dates back to 2012. The Razorbacks have played a lot of competitive games — most notably against Alabama and Texas A&M — but haven't figured out a way to come through with an SEC victory. Knocking off the Bulldogs in Starkville could certainly be a program changer.
RAZORBACK REINFORCEMENTS: Arkansas should get a little extra help on the defensive end to help try and stop Mississippi State. Linebacker Brooks Ellis and cornerback Henre' Toliver are expected to return this week after missing time with injuries. Toliver sat out last week with a sore back, while Ellis missed the last two games with a bone bruise on his knee.
BORN TO RUN: Four out of the league's top seven rushers will be on the field in Starkville on Saturday, including Mississippi State's Prescott and Josh Robinson and Arkansas' Jonathan Williams and Alex Collins. Robinson ran for 198 yards against Kentucky last weekend, which was a career high. Williams also set a career high last week with 153 yards rushing against UAB.
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AP Sports Writer Kurt Voigt in Fayetteville, Arkansas, contributed to this story.
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Follow David Brandt on Twitter: www.twitter.com/davidbrandtAP
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You can read a lot from what the Apple iPhone will do, and surely there are a lot of glaring deficiencies. What can we read of them?
And what should we make of the iPhone's company on stage at this week's Macworld? Google, Yahoo, and Cingular. The best of the Internet, and arguably the worst of the cell and broadband wireless providers, albeit with some AT&T heft yet to be leveraged.
What this tells me is that Jobs and company are forging a bold stroke, and forcing a major confrontation. Ultimately, in the long run, would you as a business user and consumer rather have ubiquitous Internet access and VOIP, or the current piss-poor assemblage of mangled handset (but it's sleek and pretty!), hopscotch cell networks, analog-to-digital dreck, call drops and poor customer service, bad software, bad billing, and lack of integration to your PC and content?
The fact is that the needed convergence between handset makers, network providers, content aggregators, and software third-parties (including Microsoft, screwing around with Vista) have failed miserably -- at least in the U.S. This has left a huge hole open through which Apple will drive the iPhone.
It's a longshot in the short-term, but if they succeed the cell industry will be soon shrinking rapidly into irrelevancy. All that wasted money! Too bad because all things will be Internet Protocol-based -- the best true convergence. The Wi-Fi spots today will burgeon and blossom via new WiMax meshes, and later via satellite-based Internet canopies (for higher "roaming" cost, for sure). Your PC and iPhone (using the same guts and GUIs) will hop along an IP constellation, with certain "visitor" fees applied but no single-provider lock-in.
Connection costs should drop away; advertising-oriented services will pick up the economic slack. The true cost will be in buying the best devices, and pay-per-view content. You know, the Apple way plus the Google way.
The trick, as Apple well knows is to provide enough stick and enough carrot to drag the users to this inevitability. The design and feature set of the Apple iPhone as described is that combination of stick and carrot, and that best describes its odd selection of strengths and weaknesses. If successful the iPhone could destroy massive global industries while advancing the newer Internet-based companies, largely to the users' benefit.
Because if the software-hardware-UI designs are so compelling, as they seem ... And if the voice capabilities can be good enough to just keep up with an existing mediocre cell service ecology ... And if Google and Yahoo can provide the compelling content and services (and ad-based financial support) ... Well, then the tug of the user may be enough to drag the telcos and others in the colliding industries along -- or into the dust. The iPhone may be able to finally push all the convergence over to the top to all IP/VOIP/OS X all the time, everywhere.
And so what remains to sew up are the essential missing ingredients: the VOIP and sufficient WiFi/WiMax mesh. I expect that Google will soon unveil a beta VOIP offering. If they were smart they would share it with Yahoo, but not MSN. You recall that Google collects cell phone numbers when one signs up for certain Google "free" services, such as Gmail? These call numbers are convertible.
While I have been less then wowed by VOIP as a replacement for a landline, I expect that VOIP on a mobile device such as an iPhone would be an amendable transition from cell service, as long as I have sufficient mobile broadband. Google has most everything in place to do VOIP right, and, by the way, integrate its advertising and location capabilities right in there. Talk about a killer application.
Cisco will do quite well allowing these networks to work together well. They should get out of the way on the iPhone trademark and focus on the iRouter instead. One should know when they are a pick and shovel.
One corporation missing but not unfelt on the stage at Macworld was Intel. My blue-sky musing here would be pie in the sky without Intel as a behind-the-scenes kingmaker. Intel forges together the disparate architectures of the end point with the mesh. I'm thinking of the massive investment in time, clout and partnerships needed to bringing about the continental WiMax capabilities for the major metro markets. Perhaps the governments would like to weigh in? Would general productivity be in the national interest?
If this all somehow works out in near the fashion I envision then the U.S. approach could spread around the globe. That's right, no G3. No G3 ownership! Auction it all back and write off the loss. It all goes IP, and the same BRIC countries that like Linux may also like state-managed WiMax. The once-nationalize telcos will follow, no doubt.
So in June, vote with your dollars and drop your cell phone and pick up an iPhone. It's the Internet. It's the future.[poll id=12]
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Real estate investment trusts, or REITs, are a wonderful investment option for income seekers, especially in a low-yield world that hasn't gone unnoticed, with investors pushing the asset class materially higher in recent years. With the broadly diversified Vanguard REIT Index ETF (NYSEARCA:VNQ) off some 10% from its recent highs for the second time this year, though, you might want to reexamine your REIT risks - just in case 10% is only the start of a bigger downturn. Here are a few niches to worry about.
Relying on the government
For years Washington REIT (NYSE:WRE) was a slow and steady grower focused exclusively on the Washington D.C. area. The logic being that the government being run from D.C. would always support the region's occupancy and rents. Only that didn't work out as planned, with Washington REIT ending up selling assets, revamping it business profile, and cutting its dividend after the U.S. government went on a cost-cutting binge. With the fractious nature of politics today, I'd be worried about any company that's focused on D.C.
Or on the exclusive service of government renters like Government Properties Income Trust (NYSE:GOV). The whole purpose of this particular REIT is to rent to the government. True, it's more diversified, with properties in some 30 states or so. However, it still has one main customer, Uncle Sam. If there's financial issues at the government level, perhaps because of unfunded pension liabilities or something minor like that, Government Properties Income Trust could find its niche isn't what it hoped it would be.
Farming the land
Another niche that's worth taking a second, risk focused, look at is farms. There's really only two public players in the space right now, Farmland Partners (NYSE:FPI), which just agreed to buy smaller rival American Farmland (NYSEMKT:AFCO), and Gladstone Land (NASDAQ:LAND). There's nothing inherently wrong with owning farms, but Farmland Partners and Gladstone Land are both young and currently in growth mode.
In other words, there's little history to back up their stories. Maybe this asset class will work out just fine over the long term, but maybe it won't. So far investors have been pretty tentative about putting their money to work here, noting that farmers are facing material headwinds today in the form of low commodity prices. At this point the only investors that should be putting their money in either of these REITs are ones that have a good handle on farmland.
Back to school
Another niche that should be watched carefully is college housing. The big names here are American Campus Communities Inc. (NYSE:ACC) and Education Realty Trust Inc. (NYSE:EDR). Another REIT, Campus Crest Communities, wound up selling itself to a private equity firm because things weren't going as well as planned.
On the one hand, owning dorms is kind of like running an apartment building. So you can say that these are simple investments. However, there's a lot more going on, including seasonal leases, school reputations, and potentially limited growth opportunities. And the big story relies on the continued belief that every high school student in the United States should end up in college. Those are a lot of question marks in my mind.
A big wager
Then there's gambling REITs like relatively new Gaming and Leisure Properties Inc (NASDAQ:GLPI) and even younger MGM Growth Properties LLC (NYSE:MGP). The first risk here is that a REIT owning casinos is an untested story. On the surface it sounds great, but we haven't really seen what happens in a downturn. Perhaps gamblers stop gambling and rent coverage gets a little tentative.
But there's a potentially bigger issue over the long term. Despite MGM Growth Properties including the word growth in its name, I'm not sure how much growth potential there really is in the space. Great properties are going to be concentrated in select areas and how many companies are going to willingly part with truly great assets? For example, MGM Growth Properties' parent held back its best properties when it spun the REIT off. That said, a great property could come up for sale if its owner is suffering through trying times, which means maybe the casino operator isn't such a great tenant to have. Once again, I don't think this story has proven itself yet.
Going to jail
Another big question mark for me is prison REITs like Corrections Corp. of America (NYSE:CXW) and GEO Group Inc. (NYSE:GEO). For starters the main customer is the government, which can cause all sorts of problems, as I noted above. For example, both of these REITs took a big tumble recently when the U.S. Justice Department announced it would no longer be using third parties to run its jails. Although neither of the REITs was really going to be impacted too much by the DOJ's move, at least not right away, it's pretty clear that investors in the space don't understand what they own by the reaction to the news.
So not only is there heavy customer concentration in the government, there's a misunderstanding about what these REITs really are in the market. That's a recipe for disaster. I'm also not sure just how much growth potential there is in running jails for profit. My two cents is the risks outweigh the benefits.
The middle
One last question mark to throw out is CorEnergy Infrastructure Trust (NYSE:CORR). This REIT owns midstream energy assets. That's not a big problem in and of itself, after all limited partnerships have owned such things for years. However, putting them in a REIT is something new. It changes the model from a fee for service to rent. In some ways this is better, but CorEnergy is the only REIT of its kind and, well, it's being put to the test today.
There's no way to candy coat what's going on - the company's two largest customers are working through bankruptcy. These two customers account for around 90% of CorEnergy's rental revenue. Although both remain current on their rent, if something should go awry CorEnergy's unique approach to the midstream space could turn out to be a failed model. It's just not worth the risk for most investors.
Think now before it's too late
I'm not suggesting that anyone should sell out of a REIT they understand and believe in. However, the REIT niches I've highlighted are a few that stand out to me as riskier than they might have appeared when investors were clamoring for REITs. If the recent 10% decline in the broader REIT space starts to snowball, each of the companies noted above could find they don't have the market support they used to. Which is why now is the time to think through your risks before you end up acting based solely on emotion.
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Move aside supermodels, the runway belongs to the dogs now-- at least for one night-- in New York City.
The annual Paws for Style Charity event, benefiting the Humane Society, had a star-studded turnout on Tuesday night. FOX411 spoke to some of the pet-loving celebs and found out that some treat their furry friends better than they treat people.
“Real Housewives of New Jersey’s” Melissa Gorga dished that she gets particularly generous with her pets around the holidays.
“Christmas is as extravagant as it gets; bones, presents, the T-bone from the steak,” she said.
Meanwhile, fellow “Housewives” cast member Dina Manzo said she doesn’t wait for a holiday to spoil her special-needs dog.
“She doesn’t have any arms,” Manzo explained. “She gets whatever she wants. She’s treated like a queen 24/7.”
But when it came to spoiling her pet, event organizer, Animal Fair Magazine’s Wendy Diamond, took the cake-- the wedding cake to exact.
“My dog had the most expensive pet wedding in history, and she got a Guinness World Record for it,” Diamond revealed. “So Baby is a Guinness World Record bride. It was all for charity so we raised a lot of money, and we actually created a wing at the Humane Society from that event.”
Fox News.com Reporter and FOX411 host Diana Falzone covers celebrity news and interviews some of today's top celebrities and newsmakers. You can follow her on Twitter @dianafalzone.
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Three consumer groups petitioned the Food and Drug Administration on Tuesday to subject a new genetically engineered salmon to a more rigorous review process than is now in place before the fish can be approved as safe to eat.
The fish at issue, AquaBounty Technologies' AquAdvantage salmon, is currently classified as a new animal drug for the purposes of FDA review.
The FDA considers any genetically altered animal a new animal drug for approval purposes. The petition calls for the salmon to be classified as a food additive instead, which would require a more rigorous FDA review.
AquaBounty is seeking U.S. approval to market its engineered Atlantic salmon, which contains a gene from another fish species, the Chinook salmon, to help it grow twice as fast as normal.
The consumer groups' petition says the way these salmon are created substantially alters their composition and nutritional value, and so they should be treated as a food additive. Under this standard, they said, the company's data would have to overwhelmingly prove AquAdvantage salmon are safe to eat.
The consumer groups -- Food & Water Watch, Consumers Union, and the Center for Food Safety -- said in a statement the "new animal drug" designation is insufficient to protect public health. The review process for food additives offers greater protection, they said.
AquaBounty had no comment on the petition.
The FDA did not comment specifically on the petition, but confirmed that the company's application for FDA approval for AquAdvantage salmon is under review, and that genetically engineered animals are evaluated under the new animal drug provisions of U.S. law.
AquaBounty has said in the past that it sees these genetically modified salmon as a potential solution to environmental concerns associated with salmon aquaculture, and discounted fears they might accidentally escape into the wild and affect other fish.
However, Food & Water Watch Executive Director Wenonah Hauter said the company's own study showed that genetically engineered salmon may contain increased levels of a hormone linked to breast, colon, prostate and lung cancer.
The petitioners said a proper review would require genetically engineered salmon to go through comprehensive toxicological studies to ensure the fish are safe to consume and properly labeled.
If approved, AquAdvantage would be the first genetically altered animal for human consumption in the United States.
Genetically modified vegetables such as corn have long been on the U.S. market, and the FDA allows modified animals as pets or to help produce biologic medicines.
There is no timeline for an FDA decision. As a matter of policy, the FDA does not comment on citizen petitions.
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Ohio voters rejected a ballot proposal Tuesday to legalize marijuana for both recreational and medical use.
The proposed state constitutional amendment failed after an expensive campaign, a legal fight over its ballot wording and an investigation into the proposal's petition signatures.
The measure known as "Issue 3" would have allowed adults 21 and older to use, purchase or grow certain amounts of marijuana.
The constitutional amendment would have established a regulatory and taxation scheme while creating a network of 10 growing facilities -- a target of opponents, as well as a separate ballot question aimed at preventing monopolies from being inserted into Ohio's constitution for the economic benefits of a few.
The pro-legalization ResponsibleOhio campaign spent at least $12 million on ads. But it faced opposition from a well-organized, diverse coalition of opponents that includes children's hospitals, business organizations and farmers.
Critics said the proposal's arrangement would amount to an economic monopoly designed for personal gain.
The proposed amendment sparked huge political battles and made the Buckeye State ground zero for the cannabis controversy.
"We spend all our time trying to tell kids to stay off drugs, and to legalize this drug sends such a mixed message," said Ohio Gov. John Kasich, a Republican presidential candidate and one of the initiative's biggest foes. "We can't afford mixed messages to our kids. So I'm totally opposed to this."
Turnout was low as early presidential politicking largely overshadowed campaigns and exacerbated voter disinterest that generally accompanies an off-year election.
At an elementary school in the northern Cincinnati suburb of West Chester, Beth Zielenski, told the Associated Press she voted no on the marijuana question, citing concerns about how marijuana and edible pot products would be regulated.
Timothy Shearer, 47, said he voted for the initiative. "I don't think it will cause more problems," he said.
Colorado, Washington, Oregon and Alaska, along with the District of Columbia, have legalized recreational marijuana.
The Associated Press contributed to this report.
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The offensive concept of pace-and-space was nearly an unbeatable combination for the Miami Heat, the plan of surrounding LeBron James with multiple shooters good enough to net two straight NBA titles.
Plenty of teams are having success with the approach.
None more than the San Antonio Spurs, who ended Miami's championship reign with their pace-and-space attack.
Shooters might be valued more now by NBA teams than ever, particularly those who can connect from beyond the 3-point line. More than 86 percent of those who played in the league tried at least one 3-pointer last season, and the most attempts in the history of the league were taken from that distance — continuing a trend and smashing the previous mark that was set just one year earlier.
And no one seems to believe the fascination with movement, passing and plenty of 3's will end anytime soon.
"The teams that are playing with the pass and shooting seem to be doing really well," said Atlanta's Kyle Korver, one of the league's best shooters. "I think the Spurs are the model that a lot of teams are understanding that not everyone gets to have LeBron James on their team. Not everyone gets to have one of the few super-dominant, all-pro, superstars in this league and so playing with the pass and playing with space and playing quick is a really good backup."
The Spurs led the league in 3-point accuracy last year, making more shots from deep than ever before.
In the playoffs, their percentages got even better, and in the NBA Finals against the Heat they shot a wildly good 47 percent from 3-land.
"I hate it," Spurs coach Gregg Popovich said.
No, he wasn't kidding when he said that in June. Popovich detests the 3-pointer, but in this NBA, it's a prerequisite.
"It's changed the game," Popovich said. "It makes it tougher to cover that much room defensively on the court, so you do have to pay attention to it defensively. It's a heck of a weapon. ... To me it's not basketball but you've got to use it. If you don't, you're in big trouble."
To wit: Of the 14 teams that made 600 attempts or less from 3-point range last season, 10 didn't make the playoffs. The other four combined to go 14-21 in the postseason.
"All the analytics guys have looked at it and they see the value of the 3-point shot, especially the corner 3-point shot," Heat forward Danny Granger said. "Teams are obviously game-planning to get those shots and to get shooters to space the court."
It's not accurate to say everybody in the NBA is shooting 3-pointers.
It just seems that way.
Kevin Love, Kevin Durant and Paul George were all among the 10 most prolific 3-takers last season — and they're all listed at 6-foot-9 or taller. James made eight straight 3's in a game against Charlotte, on his way to a 61-point night. Spencer Hawes and Chris Bosh combined to take more than 500 shots from past the arc — and they're both 7-footers, give or take an inch.
Hawes actually shot a smidge better from long range last season than San Antonio's Danny Green — who just happens to have record for most 3's in an NBA Finals.
Now the Cavaliers are surrounding James with shooters in Cleveland, including Love.
"It's more of a skilled league," Orlando coach Jacque Vaughn said. "Just the way fouls are called, the way the offense and the freedom of movement is, if you're a skilled basketball player there's a place for you. And skill is shooting the basketball. I think we're seeing that across the board in our league now."
When Vaughn played, the game was more physical, defenders allowed to do more things within legal limits. Vaughn said the first time he ever had a pick set against him was by longtime league strongman Charles Oakley, and he laughed at saying that he's "still recovering" from that hit.
Suffice to say, there aren't many Oakleys in today's game.
Finesse is in, force is out.
"The game has definitely changed," Vaughn said.
Preseason numbers show more of the same. The Heat took nearly 50 shots from 3-point range in a team scrimmage earlier this month. Corner 3's seen to tax teams defensive rotations more than anything else, and offenses aren't going to take away that weapon anytime soon.
In short, 3's are wild in this NBA.
"The game that we play today is a different game that was played 10 years ago, 15 years ago, 20 years ago," Korver said. "Rules are different, philosophies are different, and shooting is a big part of the game. I think for a while people thought that shooting was a lost art in the NBA and I feel like it's made a huge comeback recently and the trend is that it's probably going to keep going."
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(STATS) - Youngstown State played its annual spring game on a beautiful April night on Friday - with the Red team beating the White, 10-7.
The Penguins hope to get the job done seven months from now in the cold of November.
Youngstown State won three of its first four games in coach Bo Pelini's first season last year, but slumped to a 5-6 finish. A fast start and slow finish is familiar to the Penguins, who are 3-8 in November over the last three seasons.
This year, they again seek their first FCS playoff bid since 2006.
"I thought overall we had a good spring," Pelini said. "We identified some things. I think we made some progress in some areas. We identified some other areas where we have to make progress."
The Red team took a 10-0 lead on Zak Kennedy's 22-yard field goal with 4:37 left in the second quarter and quarterback Ricky Davis' 67-yard touchdown pass to Isiah Scott with 3:50 remaining to play.
Following the Red touchdown, the White answered quickly with a score. Nathan Mays (5 of 12 for 104 yards) completed a 35-yard pass to Joe Alessi and scored on a 40-yard keeper at the 3:10 mark.
The White had one more possession which advanced inside the Red team's 10-yard line, but was kept out of the end zone.
Youngstown State has 14 returning starters. Quarterback Hunter Wells and highly productive running backs Martin Ruiz and Jody Webb are among eight back to the offense. On defense, the top returnees are pass-rushing end Derek Rivers and safety Leroy Alexander.
The Penguins open their 2016 schedule on Sept. 1 by hosting Duquesne, the defending Northeast Conference champion.
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Now that hip-hop is about as commercial as Coke and Pepsi, it's no great shock that a gorgeous hip-hop star would get her own sitcom.
What's shocking is that the show "Eve," starring superstar Eve, is not shocking - nor even all about someone named Eve.
Eve's character's name is Shelly, actually.
Starting tonight on UPN, the sitcom is based on the exploits of a beautiful young woman who opens up a fashion design business/retail store with two of her best friends in Miami. Sort of like a combination of a younger "Designing Women," an integrated "Friends" and a tropical "Sex and the City" - but with bad writers.
Shelly's buddies/business partners, Rita (Ali Landry), an unmarried, stick-thin former model, and Janie (Natalie Desselle-Reid), a happily married chubbette, are not only in business with Shelly, but also in life with her, so to speak.
Where Shelly - a dead ringer for Whitney Houston - goes, they all go.
Bringing up the rear are the men: J.T. (Jason George), the single, handsome guy (who appeared with Eve in "Barber Shop"); Nick (Brian Hooks), the single, funny guy; and Donovan (Sean Maguire and a dead ringer for Hugh Grant) who plays the handsome, single, white guy who owns a hot, local club.
If the show lasts, clearly there will be all kinds of opportunities for dating and mating - à la "Friends" - to play around with.
What's great about the show are: 1) the fact that it is totally racially integrated, unlike most shows on the tube, and 2) the clothes.
While the fashion isn't up to "Sex and the City" standards, the women are, after all, working in Miami, where haute couture is defined by as little as legally possible with beading.
While that might not seem like much (no pun intended), fashion can help make a show a hit and extensive racial integration is actually still sort of ground breaking, incredible as that may seem in 2003.
In "Eve," the whites and blacks all have important parts and there isn't, for once, a whole lot of fall-back racial humor.
In tonight's episode, Eve, meets J.T. at Donovan's club, Z Lounge, and they plan a date. Unfortunately, she takes him to his first- ever viewing of "Casablanca" (search) at a local movie theater and he makes the fatal mistake of breaking down in tears.
Truth is, most women hate to see a man cry and act all sensitive - despite the millions of dollars made with ridiculous, sissy-encouraging advice from guys like John Gray and his book, "Women are from Mars, Men are From Venus."
When they all go to the wedding of a mutual friend (well, not exactly a mutual friends since Shelly has made the wedding dress of the fatso bride and J.T. was the groom's college roommate), he breaks down again, which then ends in maybe the most ridiculous speech in recent sitcom history.
The actors are all talented and, even if gorgeous Eve is not a comic genius, they do deserve better writing than this.
Hell, my uncle with the amateur Italian theater company in Bensonhurst had better writing than this.
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The Prophet Muhammad cartoon contest that exploded in violence over the weekend in Texas was organized by Pamela Geller, a New York activist who rails against Islam with such ferocity that one of the nation's top civil rights groups lists her in its "extremist files."
WHO IS PAMELA GELLER?
Geller, 56, is head of an organization called the American Freedom Defense Initiative, whose mission, according to tax records, is to act against "capitulation to the global jihad and Islamic supremacism."
Through websites, books, ad campaigns and public events, Geller has been warning for years about the "Islamic machine" that she says threatens to destroy the U.S.
She famously led the campaign in 2010 — under a different group, called Stop the Islamization of America — to prevent the opening of an Islamic community center blocks from the World Trade Center site. She called it the "ground zero mosque."
The Southern Poverty Law Center, a nonprofit organization that tracks hate groups, keeps a dossier on her in its "extremist files," calling her "the anti-Muslim movement's most visible and flamboyant figurehead."
The law center describes her as "relentlessly shrill and coarse in her broad-brush denunciations of Islam" and notes some of her more sensational claims, including that President Barack Obama is the "love child" of Malcolm X.
The weekend contest in Garland, Texas, was offering $10,000 for the best cartoon of Muhammad.
LEGAL ACTION
Geller has been involved in numerous lawsuits across the U.S. in recent years, many of them related to her attempts to display incendiary ads in public transit systems.
Most recently, New York City's transit authority banned all political advertising after a judge upheld Geller's right to run bus ads that said, "Killing Jews is worship that draws us close to Allah."
In 2012, the transit authority was forced to run Geller ads that read: "In any war between the civilized man and the savage, support the civilized man. Support Israel. Defeat Jihad."
She paid for similar ads in San Francisco, Detroit and Washington.
In June 3013, Geller and a colleague were barred from entering Britain to attend a march that ended in the London neighborhood where a British soldier was killed by Islamic extremists.
FINANCIAL BACKING
American Freedom Defense Initiative took in nearly $160,000 in 2012 and $960,000 in 2013, according to tax filings. It did not list any donors.
Its 2013 tax form also lists a related tax-exempt organization called Jihad Watch, with an address listed in Manchester, N.H., whose primary activity is "civil liberties advocacy." Robert Spencer, a fellow activist who runs the blog Jihad Watch, was listed as vice president, with a salary of $24,461.
Geller herself earned $192,500 in 2013, records show. Three other employees — James Lafferty, Pamela Hall and Richard Davis — are described as board members who were not paid a salary.
A recent report by the Center for American Progress, a think tank in Washington, said Geller's top donor included the Fairbrook Foundation, which gave $253,250 to Jihad Watch. The Fairbrook Foundation supports a number of mainstream conservative groups.
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Entrepreneurship is a demanding profession. Once you get involved in a business you own a stake in, most of what you do will ultimately have a reflection on your self-image and long-term reputation. Successful entrepreneurs learn how to figure out ways to make a positive impact on the world around them.
Having started over 10 companies and innovating within each, I have identified the six critical factors, or the six C's, that when considered can significantly increase the odds of success.
1. Courage
Courage is the foundation of entrepreneurship. Without courage there is no start and no surmounting of the many obstacles that will undoubtedly surface in the early days of a new venture. Courage is also required to make the key and tough decisions about what strategic direction to take, what team members to hire and who to fire. It's all about making the tough decisions at the right time.
Related: The One Thing That Pushes People to Succeed
2. Conviction
Without conviction you can't muster the energy required to relentlessly work towards your mission, energize those around you and form the type of culture you want to build. These priorities probably will not shift much, as they are at the core of your purpose and belief system.
It is important to realize that to achieve your goals, you must test hypotheses frequently and modify your strategy. To navigate effectively, rely on evidence, listen intently and adjust. Avoid the common failure of entrepreneurs taking the wrong path and ignoring all signals by denying facts and staying the course of their initial misconceived conviction.
3. Capabilities
As an entrepreneur, you must have vision, but how can you carry it out it to win the hearts of customers and beat your competitors? Execution is all about having the right capabilities and that’s strongly correlated to the team you assemble and your modus operandi. There is nothing more important then having the right people, creating the right environment and constantly building the right capabilities by developing people and establishing processes and systems to support execution. Also make sure you've got all the required organizational capabilities between you and your senior management team. Any weak link can have an adverse impact on execution.
Related: 7 Attributes of an Extraordinary Entrepreneur
4. Collaboration
Effective collaboration is one of the most difficult principles to implement. It is akin to team sports. It requires that you have the right players, in the right position, seamlessly coordinating with other team members to achieve the intended results. To win, a team must be carefully selected, spend time training and helpful feedback should be provided to members in the spirit of driving continuous improvements. It's the same in business. Entrepreneurs need to provide high velocity feedback and build the right processes to maximize collaboration.
5. Capital
A lot of ventures fail not because the idea behind them is not viable but because the company did not have enough cash to continue finding its way in the market place. Too much capital can make management prone to recklessness and lead to poor decisions and overspending in unnecessary areas and too little can impact the team’s execution capabilities and decrease the odds of competing effectively. What is certain is that most ventures underestimate the amount of capital they require because their projections always end up being too optimistic. Stay focused on how to raise or generate enough capital to build a sustainable business.
6. Consciousness
Entrepreneurs need to be extremely sensitive about where they are today, what they've learned from the past and have a clear vision about what their next best step should be going into the future. They also need to be conscious about the obstacles they are facing now, anticipate the next likely challenges ahead and understand the associated risks with each. Proper planning, reflecting and pre-empting is the best way to increase the odds of success.
Related: What Determines the Winners and Losers in Entrepreneurship?
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Even as observers blame Iranian influence for the collapse of Lebanon’s coalition government Wednesday, the mullahs in Tehran seem to be extending their reach into the fledgling government in Iraq.
When Moqtada Al Sadr landed in the southern Iraqi city of Najaf last week after three years of self-imposed exile, he was greeted with adulation and cheers by his followers. His anti-American rhetoric remained apparent at his first public rally this weekend.
The Shiite Muslim cleric who had led a violent insurgency against U.S. forces and the one-time public enemy number one for the U.S. military was given a hero’s welcome after playing a key role in helping Iraq’s Prime Minister Nouri al Maliki form a government last month.
Fox News has now learned that some members of the U.S. military worked for more than a year to get Sadr back from Iran.
“Although his rhetoric is disruptive, it is better he is in Iraq than Iran,” a senior military commander told FOX News. “From Iran he is controlled and used by Iran.”
But even with him home, Sadr ties to Iran’s regime are still cause for concern for many.
Sadr’s political party won 40 out of 325 seats in recent parliamentary elections, and his political allies have been given eight seats in Maliki’s cabinet.
The Sadrite militia, the Mahdi Army, called a ceasefire with the Iraqi Army in 2008, and there are signs that it has splintered and Sadr’s followers have moved on.
“I think he recognized that after three years in Iran, he was out of the game. The movement was proceeding without him,” said former U.S. Ambassador to Iraq Ryan Crocker in an interview. “They've made some decisions that obviously he would have been involved in. The most important one being to behave like a political party rather than a gang of thugs. I would expect some tension within the movement because of his return, you may even see some splits, and that, of course, from the U.S. perspective would be no bad thing.”
The cleric, still in his 30s, fled to Iran just months after the “surge” began in 2007 to avoid arrest or assassination. It was also seen as a bid to bolster his religious bona fides by going to the city of Qom to study with some of the same clerics who reportedly serve as spiritual advisers to Iranian President Mahmoud Ahmadinejad.
Iran’s embrace of Sadr and its former use of the Mahdi Army as proxy fighters against U.S. troops and the Iraqi government of Nouri al Maliki is similar to its use of Hezbollah in Lebanon. Hezbollah, like the Mahdi Army, eventually entered politics. But Hezbollah was allowed to keep a well-financed armed wing as part of a power-sharing agreement..
Hezbollah used its political clout to bring down the government of Prime Minister Rafiq Hariri today as he met with President Obama at the White House. The move is likely tied to the expected release of a U.N. report linking Hezbollah leaders, and in turn its Iranian and Syrian benefactors, to the assassination of Prime Minister Rafiq Hariri, father of the current prime minister.
Middle East experts worry that through Sadr, Iran has could have the same power over al Maliki’s new government in Iraq. Maliki travelled to Qom in October and was photographed embracing Sadr before convincing Sadr’s party to help him form a government. Some argue Sadr has played the role of kingmaker in the current government and could topple the fragile coalition if his demands aren’t met.
One looming point of conflict is the scheduled withdrawal of all U.S. forces from Iraq by the end of this year. Sadr is unlikely to tolerateany extension, even a temporary one, if the security situation won’t allow a full withdrawal.
“My prediction is that there will be some U.S. force level remaining in Iraq under some auspices,” Crocker told FOX News. “That is my prediction.”
That may not be good enough for Sadr, who along with his Iranian benefactors, wants all U.S. troops to leave on time. Iran’s rising role and influence in Iraq was seen this week as the Iranian foreign minister visited Maliki in Baghdad.
But there is some disagreement about just how much influence Iran will have over the fledgling Maliki government.
“I think there is sometimes a tendency to overstate just how great that influence is. The harder the Iranians push in Iraq, the more the Iraqis tend to push back,” Crocker said. “They have got a long bloody history. They fought an eight year war….So while the Iranians can cause trouble, Iraqis are tough customers and they can push right back as they have done.”
The return of Sadr to Iraq and the assertion of power by Hezbollah in Lebanon, others argue, should provide a cautionary tale for U.S. diplomats and the Obama administration which came into office talking of engaging Iran but has made no concrete progress in doing so. Iran, meanwhile, continues to move stealthily with proxies such as Hezbollah and Sadr to exert its influence throughout the region.
Jennifer Griffin currently serves as a national security correspondent for FOX News Channel . She joined FNC in October 1999 as a Jerusalem-based correspondent. You can follow her on Twitter at @JenGriffinFNC.
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In an apparent flip-flop, Palestinian investigators looking into Yasser Arafat's death said Thursday they want to review reports from a Swiss lab before deciding whether to exhume the leader's remains.
Earlier this week, a senior West Bank official said a final decision was made to examine Arafat's bones. That development followed an announcement by Switzerland's Institute of Radiation Physics, which said it found unexplained, elevated traces of a radioactive agent, polonium-210, on clothing and personal items Arafat used before his Nov. 11, 2004 death at a French military hospital.
The lab said the results were inconclusive and that Arafat's remains would have to be tested to learn more.
Since Arafat's death, several senior Palestinian officials have alleged that Israel poisoned the Palestinian leader, a charge Israel vehemently denied. At the time of his death, Israel had accused Arafat of complicity in the second Palestinian uprising.
Testing Arafat's bones could offer the last chance to get to the bottom of Palestinian claims that their leader was poisoned, though some experts cautioned it may already be too late for conclusive answers.
Earlier this week, a top Palestinian official, Saeb Erekat, said President Mahmoud Abbas decided to exhume the body and would invite a team from the Swiss lab to come to the West Bank to perform the tests.
In an apparent reversal, members of a Palestinian committee set up to investigate Arafat's death suggested Thursday the final word has not been spoken on whether to dig up the remains.
Arafat's remains are housed in a mausoleum in Abbas' walled government compound in the West Bank town of Ramallah.
Justice Minister Ali Mohanna, a member of the committee, told a news conference Thursday that Palestinian officials first want to review the Swiss lab report. After such a review, "we will decide what testing we need to do," he said.
Nasser al-Kidwa, an Arafat nephew and custodian of the late leader's legacy, has contacted the lab in hope of obtaining the full test records, said Mohanna.
He offered no explanation for the apparent U-turn. An autopsy could offend cultural sensibilities of conservative Palestinians, but at the same time the Palestinian leadership is under domestic pressure to do everything necessary to investigate the latest findings.
Arafat's widow Suha, last week demanded that her husband's grave be reopened. Mrs. Arafat has cooperated closely with the Arab satellite TV station Al-Jazeera, giving the broadcaster some of her husband's belongings and his medical file. The Swiss lab reports were first published by Al-Jazeera, at the end of a nine-month investigation.
Former Palestinian intelligence chief Tawfik Tirawi suggested Thursday that the widow decided to let the committee take the lead in deciding whether to conduct an autopsy. Tirawi said he spoke to Mrs. Arafat two days ago. He did not elaborate, and it was not clear if he meant she would withdraw her request for exhuming the remains if the committee made such a decision.
On Thursday, one of Arafat's physicians, Dr. Abdullah Bashir, reiterated the claim that Arafat was poisoned, without specifically blaming Israel. Bashir said poison experts contacted by the committee agreed with that assumption, but he did not identify the experts or explain how they reached that conclusion.
Arafat had spent the last three years of his life under Israeli siege at his Ramallah compound, now used by Abbas.
In October 2004, the 75-year-old Arafat fell violently ill and was airlifted to France.
French doctors said he died of a massive stroke and suffered from a blood condition known as disseminated intravascular coagulation, or DIC. But the records were inconclusive about what brought about the DIC, which has numerous possible causes, including infections and liver disease.
Bashir said the French medical records were incomplete.
"We have sent questions and received answers from the French hospital, and we consider the French report in regards to (possible) poisons to be weak," he said.
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A powerful bomb blast in India's restive northeast -- plagued for decades by separatist violence -- has killed nine labourers and injured about 21 other people, police said Saturday.
The explosion took place late Friday in a busy area on the outskirts of Imphal, capital of the state of Manipur, which borders Myanmar.
"The bomb was planted in a makeshift tent and was of high intensity," Manipur police chief M.K. Das told AFP by telephone.
"Nine people have been killed and about 21 injured. The injured have been shifted to local hospitals with multiple wounds."
Doctors said two of the injured were in critical condition.
Police officials said the victims were migrant workers employed by a Kolkata-based company.
The motive for the explosion was not immediately known. No rebel group has yet claimed responsibility.
The remote state has long been affected by insurgent violence and is home to dozens of tribal groups and small guerrilla armies fighting New Delhi's rule.
They often compete against each other in turf wars for dominance in the state.
At least 50,000 people have lost their lives in insurgency-driven violence in six of India's seven northeastern states since the country's independence from Britain in 1947, authorities say.
The militants say the northeast has been largely neglected by India's political leaders, accusing them of focusing only on the development of the country's relatively wealthier eight northern states.
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Ann Coulter sent a controversial tweet about President Bill Clinton and Georgetown law student Sandra Fluke during the Democratic National Convention on Thursday.
Clinton and Fluke will speak during the second night of the convention in Charlotte, North Carolina. Shortly after 8:00 p.m., Coulter tweeted:
Coulter later re-tweeted one of her followers, adding, "They're spicing things up with a live abortion on stage!"
Coulter has gone after Fluke in the past. She called her a "hysterical drama queen" in a March 2012 interview after Rush Limbaugh attacked the student for advocating for insurance-covered contraception.
View the slideshow below for more tweets about Fluke.
Conservatives Fume Over Sandra Fluke
Conservatives Fume Over Sandra Fluke
1 of 14 Ann Coulter Share this slide:
— @
Also on HuffPost: Obama Rocks Democratic Convention Obama Rocks Democratic Convention
1 of 250 President Barack Obama laughs with his wife Michelle and his daughters Malia and Sasha after his speech to the Democratic National Convention in Charlotte, N.C., on Thursday, Sept. 6, 2012. (AP Photo/Lynne Sladky) Share this slide:
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ASSOCIATED PRESS
Days after Nebraska lawmakers approved a bill that would repeal the death penalty in their state, Republican Gov. Pete Ricketts followed through on his promise to veto the legislation.
Lawmakers last Wednesday voted 32-15 on LB268, a bill that would replace the death penalty with life without parole as the state's highest penalty. The legislature is expected to override the governor's veto, which requires 30 votes.
"Capital punishment and the death penalty are important for public safety," Ricketts said in a press conference for the veto letter signing Tuesday. Ricketts said the death penalty is essential for protecting law enforcement, and pleaded with senators to sustain his veto and not side with the bill's sponsor, Sen. Ernie Chambers (I).
Ricketts contended that repealing the death penalty "sends a message to criminals that Nebraska is soft on crime" and that the punishment is used in Nebraska "judiciously and prudently."
“Prosecutors need [the death penalty] as a tool when they prosecute these murderers," Nebraska's attorney general, Doug Peterson, said during the conference.
Vivian Tuttle, whose daughter, Evonne, was killed during a bank robbery, echoed the sentiments of the governor and the attorney general.
“I’ll never forget September 26, 2002. There was a camera inside that bank and I watched my daughter get down on her knees and get shot," Tuttle said during the conference. "I want justice for my grandchildren, I want justice for all the other families, so we need to keep the death penalty."
Ricketts didn't address the fiscal aspects of maintaining the death penalty but repeatedly pressed its necessity for maintaining public safety and justice. When asked by a reporter, the self-professed Catholic governor said he believes the death penalty is also in step with religious teachings.
"As a Catholic, I'm confident that this aligns with Catholic catechism and that this aligns with public safety," he said.
Father Jason Emerson, an Omaha-based Episcopal priest, would disagree. Last Wednesday, Emerson started a petition urging Ricketts not to veto the death penalty repeal; the petition has since gathered nearly 26,000 signatures from around the world.
"The faith community has been upfront on this," Emerson told The Huffington Post Tuesday, referring to leading Catholic publications and faith leaders like Pope Francis publicly opposing the death penalty.
"Nebraska is definitely a conservative state. And we have a conservative legislature as well -- but it’s a pragmatic conservatism," Fr. Emerson told HuffPost. "I think maybe the legislators -- surely some coming to this decision from moral and religious reasons -- many are coming at it from a pragmatic point of view. It’s not a deterrent to crime; in Omaha where I live, murder rates are not decreasing. It’s not working and it’s costing a ton of money."
Stacy Anderson, the executive director of Nebraskans for Alternatives to the Death Penalty, said in a statement:
A diverse group of Nebraskans from across the state have come together to support repeal of the death penalty. Leaders of all the major faith groups and their constituencies, murder victim's families, members of law enforcement, innocence experts and the wrongfully convicted, former and current Republican, Liberty and Libertarian leaders and progressives have joined together to call to an end this failed policy. We have joined together from a variety of perspective including, respect for life, knowledge that a system run by human beings is fallible, concern for victims’ families and the desire to end a failed government program.
Emerson said he would be disappointed in a veto, but also confused.
"I wouldn’t understand it," Emerson said. "The governor is a very successful businessman. He’s made decisions based on data in the practice of business. And the data doesn’t show any positive gain from having the death penalty. It’s shocking that he would go against the data."
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Title: Jerusalem: A Neighborhood Street Guide
Author: Chanoch Shudofsky
Publisher: Devora Publishing
A fact-filled guide to the highways and byways of Jerusalem (and there are lots of byways here), Jerusalem: A Neighborhood Street Guide informs readers of the history behind eponymous streets. The people for whom Israeli roads are named are fascinating parts of Jewish history.
Colorful photos throughout the text, maps in the back of the book, and blank pages to be filled with the reader’s notes round out this helpful paperback. If you’ve ever wondered if you’re on the same road you’ve headed towards, or why a specific road has its curiosity-arousing name, this book will probably answer your questions quickly and capably.
A good resource for hikers and history lovers, Jerusalem: A Neighborhood Street Guide belongs in the hands of new olim and the libraries of educational institutions.
Title: The Streets of Jerusalem: Who, What, Why
Author: Ronald L. Eisenberg
Publisher: Devora Publishing
Ronald L. Eisenberg’s guide to the history of street names throughout the Holy City is an alphabetically arranged guide to Jewish history. Succinct entries provide data in a non-conversational manner, informing readers right away of the Biblical, Talmudic, medieval or modern-day figure for whom a given street is named.
A city map of Jerusalem appears inside the front cover. It enables readers to match street names with locations and landmarks so that they can orient their discoveries and recollections into one cohesive “I am here (or there)” picture.
This 407-page hardcover can amuse trivia experts and make curiosity-seekers well informed. Easy-on-the-eyes text plus black and white photos of persons, places and things round out the educational endeavor.
Readers will find it fun to experience the “Ah-ha” effect of making a connection, as they wend their way through the book, and looking up recognize and appreciate the alleys, byways and highways on their way to destinations.
Thanks to The Streets of Jerusalem: Who, What, Why even the average layman will be able to perform as a bit of a tour guide with this fact-filled reference work.
Yocheved Golani
About the Author: Yocheved Golani is the author of highly acclaimed "It's MY Crisis! And I'll Cry If I Need To: EMPOWER Yourself to Cope with a Medical Challenge" (http://booklocker.com/books/3067.html). It addresses and solves many needs of disabled, ill and recovering readers.
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Braves-Gamecock Sine Die view from Stone Mountain of Georgia
Speaker David Ralston the star of Georgia’s annual Forty Days and Forty Nights
Sine Die is the Latin term for the end of a legislative session that the Peach State employs to signal its constitutionally-mandated end of not one minute more than 40 days of lawmaking.
The conservative, yet easily subverted, time limit didn’t die with sine, but the new Speaker of the Georgia House of Representatives did kill the corrupt poison that previously occupied his chair and emerges as a coalition builder, problem solver, competent leader of character this state sorely needed.
Speaker Ralston (R-Blue Ridge), we applaud you for balancing the budget without major tax increases, despite a huge ObamaDem great recession-caused revenue shortfall of over 20%; the passage as an amendment of one of only two Democrat-sponsored bills, the Karla Drenner (Avondale Estates) unnatural tanning regulation bill (HB 853); killing a silly race-based abortion criminalization bill; and, especially for restoring honor and integrity to the Speakership.
DeVine Law acknowledges that the “sick tax” aka hospital bed fees may have been necessary to fill an unfunded, federally-mandated Medicaid gap, but we were not happy with the lack of public college and university cuts. But we mainly blame Governor Sonny Perdue for caving to the “bleeding-hearts (but not our wallets) for low income would be students” education lobby, especially given the tuition hikes announced today.
Everyone has to suffer except government employees. The only jobs “saved” by ObamaDems stimulus were unnecessary state government jobs that We-the-ravaged by the recession-People still have to pay for.
We are happy that Grady Memorial Hospital made its first profit in many years.
Kasim Reed emerging as strong conservative Mayor of Atlanta
This conservative Republican endorsed former Democratic Party state legislator Kasim Reed for Mayor last year.
Not only are we are not disappointed, in fact, we are pleasantly surprised to see the union-backed former candidate stand up to city employee unions in demanding reductions in tax-payer funded benefits; demanding pension reform; laying off unnecessary airport workers; putting his own pre-budget deficit crisis plans for more cops on hold; and demanding that the city reduce the size of government by saying:
“We’re doing too many things in Atlanta,” Reed said in an interview. “We’re going to run our government in a radically different fashion.”
GA-9 and Jimmy’s Grandson
If we have to have a liberal Democrat representing people in Decatur in the state senate (and we do, given the handful of Republicans residing there), they could do much worse than Jason Carter, the former President’s son. Congrats on his special election day win.
But this rooster really crows for Tea-Partier-backed Republican Tom Graves in making the run-off to fill the Northwestern Georgia congressional district formerly held by Nathan Deal who resigned to seek the GOP nomination for Governor. Graves, the sponsor of the only JOBS Bill to pass before sine die, faces state senator and fellow Republican Lee Hawkins in the June 8 runoff.
Perfect Gamecock, Glaus-House gang’s Braves vision and Lebron
It is exceedingly rare for a starting pitcher to retire 27 batters in a row. It has happened only 22 times since 1880, and in only 19 of those did the starting pitcher pitch the complete game and win.
A former South Carolina Gamecock caught the latest last Sunday when Dallas Braden and the Oakland A’s beat the Tampa Bay Rays 4-0.
John Montgomery Ward pitched the first perfect game on June 17, 1880 before establishing department stores across the Fruited Plain.
Unofficial perfect games:
Harvey Haddix pitched 12 perfect innings for the Pittsburg Pirates, only to lose 0-1 to the Milwaukee Braves in 1959.
Ernie Shore pitched a perfect relief game in 1917 after Boston Red Sox starter Babe Ruth was ejected from the game after arguing with the home plate umpire over a walk to the lead-off hitter for Washington. Shore retired 26 batters in a row after his first pitch resulted throwing out the runner trying to steal second base.
The Troy Glaus-House Gang
Yes, Jason Heyward is still the phenom. Every at bat of the J-Hey Kid is a happening, but does everyone remember the boo birds a few weeks ago directed at Atlanta’s first baseman? Now Glaus is 12th in the NL in RBIs.
An all-star every full year he has been in the big leagues, Brian McCann has struggled with vision problems before and after two Lasix surgeries. His struggles have brought home to me just how important is eyesight acuity to success in the National Past-time.
Lebron
Finally, a question: Was Lebron James’ woeful performance in the Cleveland Cavaliers’ Game 5 loss to the Boston Celtics in last night’s conference semi-final NBA play-off game due to:
Dialing it in to make statement to management about threats to move to the New York Knicks unless they bring in Orlando Magic-like co-stars; Continuing elbow pain; Celtic defense so tight he was prevented from driving the basket; or Did he just CHOKE?
P.S. The Next Episode
Mike DeVine Law Gamecock is overwhelmed with issues that can be seen from DeKalb County’s Mound-o-Lith but with only so much time to crow, and so asks his readers to comment on which of the below subjects they would like to hear crowings upon:
Elena Kagan SCOTUS nomination emphasizing White Harvard, un-Free Speech and ROTC
A Christian perspective on why we suffer and have physical bodies
Dodd Financial Regulation Bill and why an independent FED must still be audited by representatives of We the People
The problems with VAT and FAIR taxes, even if the 16th Amendment’s income tax was repealed
Two Americas under ObamaDems (or is it four): Union America vs. Non-Union America and Government Employee America vs. The Rest of Us
The Greece-ian formula for a permanent recession in America
ObamaDem policies brewing Tea Partiers that unite libertarians, social conservatives as part of a coming 60%-participation handshake of Jeffersonians, Hamiltonians, and most other -onians that ousts ObamaDems from power come Election Day 2010
King Barack Obama as a stranger in our midst and his Camel-Not reign over Haiti (Nashville, not so much)
P.S.S. No matter what, Braves-Gamecock will be pulling against Los Suns.
Mike DeVine’s Charlotte Observer, Atlanta Journal-Constitution and Minority Report columns
“One man with courage makes a majority.” – Andrew Jackson
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Mark Steyn’s recent column has Barack Obama creating a new religion à la Henry VIII. Henry is definitely more well-known than most other English monarchs, but there is another English king the President is emulating, King Charles I (Charles is on my list as one of the 10 worst kings of England and the U.K.). The reason is, Obama’s religion is already in place, having been established by seven Supreme Court Justices in Roe v. Wade (and perhaps earlier by another seven Justices in Griswold), just as Henry’s religion was already in place (established in 1534) by the time Charles became king in 1625. What I wonder and worry about is if history is going to repeat itself; Charles’ tyranny led to the English Civil War.
Below is a primer on Charles and how many of his actions are being repeated by our own tyrant Barack Obama.
The Anglican Church, the Church of England, was formed by England’s King Henry VIII officially in 1534. Henry did this so that he could annul his marriage to find a wife who could bear him a son and successor; Henry’s wife Queen Catherine (of Aragon) had one daughter Mary but no sons and was past the age of bearing any more children. With the Act of Supremacy, as mentioned by Steyn, Henry became the Supreme Head of the new Church of England. Henry eventually found a wife who did bear his son Edward (by Henry’s third wife, Jane Seymour, who died shortly afterwards from the complications of Edward’s birth in 1536). The new church expanded through the rest of Henry’s and Edward’s reigns (Henry died in 1547, and Edward died in 1553 at the age of 15). Henry’s daughter Mary succeeded her half-brother Edward, restoring Catholicism as the faith of the land; this lasted the five years of her reign, which ended in 1558. Henry’s second daughter, Elizabeth (by Henry’s second wife, Anne Boleyn), succeeded her half-sister Mary. A year later in 1559, the Anglican Church was restored in a modified version; the faith was to be less stringent than during Henry’s and Edward’s reign, and Elizabeth was given a title as head of the church, Supreme Governor, a title still in use today. After a long and mostly prosperous 44-year reign, the unwed and childless Elizabeth was succeeded by the King of Scots James VI, who was crowned in England in 1603 as King James I. Having been raised as a Protestant in the Scottish (Presbyterian) Church, he slowly modified his own faith to conform with the Anglican Church. James maintained separate governments for each land, each of which had its own Parliament, and maintained the separate religions of each country. He was also King of Ireland, but the rule of that land remained solely in the hands of the English government, as it had been since the mid-1150s. (James was also King of France, a residual claim for English monarchs, albeit with no authority or power in France itself, that had been in place for most of the previous 300 years; the title would remain until 1801 when King George III finally dumped it.)
Born in 1600, Charles was the second son of James. Charles’ older brother Henry, Prince of Wales, was groomed to succeed James and was loved and nurtured by his parents; Charles, on the other hand, was seen by James as a disappointment and was often neglected. Here we see one aspect of Charles’ life with that of Obama’s, the neglected child who was abandoned by his father early on and later sent by his mother to live with his grandparents. Anyway, things went bad for James as the Prince of Wales died in 1612 at the age of 18, and Charles was invested as the new Prince of Wales and heir apparent. However, James never loved, encouraged, or trained Charles in any manner similar to how James worked with Henry. James more or less lingered as king for another 13 years, dying in 1625. The Prince of Wales was crowned King Charles I of England, Ireland, Scotland, and France.
A little more about James. His rule was somewhat benevolent for a 17th Century king. He promoted the Anglican faith to such a point that it drove both Catholic and non-Anglican Protestants in England (including those known as Puritans) to practice their faith in the shadows, although he didn’t do this with non-Anglican Protestants in Scotland and Ireland. But James strove for a union of his kingdoms, seeking to bring them into one fold but recognizing the differences to avoid an unnecessary confrontation. This is what he taught his eldest son Henry about ruling such disparate lands and people. But because James didn’t train Charles to rule in this manner, Charles ended up ruling with a different mindset. Uniformity and conformity were to be the hallmarks of Charles’ reign. We see this today with Obama’s attempts to tyrannically promote uniformity to his rule over 300 million people spread over an area 30 times the size of the lands Charles ruled over. As you’ll see, Charles’ incompetent tyranny led to his reign ending in miserable failure for himself and his people. Considering how Obama has ruled incompetently thus far, it’s not hard to imagine the possibility of history repeating itself, although it doesn’t have to be that way.
The first few years of Charles’ rule was one of increased conflict between the crown and Parliament, similar to what we’ve seen with Obama and Congress. Things got so bad that in 1629, Charles dissolved Parliament, with the intent of never calling it again. Obama himself has promulgated policies without a mandate from Congress, going so far as to appointing officials completely outside of what is required in the Constitution.
During the next twelve years, Charles sought to put his policy of uniformity in place. It was a disaster. In Ireland, he managed to avoid confrontation with the majority Catholic population, but upset those adherents to the Protestant Church of Ireland who were not succumbing to Charles’ attempts to replace it with the Anglican Church. Charles attempted to do the same in Scotland. But because Scotland had a separate government from the one in place for England and Ireland, the Scottish Parliament had a fit. This wasn’t a problem for Charles; he ignored it. In 1639, the Scottish Parliament had had enough and rebelled against Charles. Charles sent an army north, but it was defeated. Not learning anything, Charles repeated his mistake and invaded Scotland again a year later; his troops were beaten so badly, Scotland was able to put occupation troops in much of northern England. The subsequent treaty he signed with the Scottish Parliament in 1640 required a recall of the English Parliament to grant a subsidy to maintain those Scottish troops on English soil! A new English Parliament was installed in 1641, one that was just as hostile to the king as it had been a dozen years earlier.
In the meantime, the Irish Protestants had also begun a rebellion against Charles’ rule. But by this time, Charles was out of money and he needed Parliament to grant a new tax. Instead, Parliament called for the impeachment of most of Charles’ ministers. To counter this move, Charles attempted to have members of Parliament in the House of Lords and Commons arrested and tried for treason; this failed as the accused MPs had fled from London. Parliament raised and armed troops for a potential battle with the king; their forces were able to take London without a struggle in early 1642, and the king fled north to raise an army. Further negotiations proved futile, and the English Civil War began later that year.
Obama’s “religion” didn’t start with him, just as Henry VIII’s religion didn’t start with Charles I; the “religion” in this country was established with Roe v. Wade nearly 40 years ago, and Obama is attempting to force the people to adhere to it through Obamacare, just as Charles attempted to force his religion upon his disparate kingdoms. I have no doubt Obama doesn’t believe he is trying to provoke a civil war in this country. But his attempt to spend the taxpayers’ money into oblivion and his unconstitutional and tyrannical attempts to press for uniformity, with the people yielding to his “religion”, are leading this country down a path that wasn’t even seen in the years before the Civil War. As was the case with Charles and other tyrants, control can be illusory; if we’re lucky, Obama may learn this before it is too late. But it is good for everyone to be prepared for anything.
While not a preview, the history of the English Civil War was not a happy one for pretty much everybody. After four years, the king was soundly defeated and captured by the Parliamentary forces that were primarily led by Oliver Cromwell, a member of the House of Commons. Following the end of hostilities, negotiations were going on to figure out how to have Charles remain as king but with greatly reduced powers. Being impatient, Charles arranged in the middle of 1648 to have a Scottish army invade England and restore his rule. They did; Parliament beat them. Subsequent negotiations with Charles by Parliament were eventually ended by Cromwell, who had demanded the king be tried for treason. Cromwell won out; Charles was found guilty and beheaded in January, 1649, and Cromwell declared an end to the monarchy in England, Scotland, and Ireland. Charles’ sons Charles, Prince of Wales and heir to the throne, and James, Duke of York, fled overseas.
The attempt to rule England through a quasi-republican government was a disaster. Factions were so hostile Cromwell ended up as a near-dictator for much of the 1650s. After he died in 1658, and the rejection by Parliament to have Cromwell’s son Richard succeed him, Parliament commenced negotiations with the Prince of Wales to restore the monarchy with severely restricted powers, a constitutional monarchy. After two years, the negotiations were complete, with the Prince of Wales subsequently returning to England and being officially crowned King Charles II of England, Ireland, Scotland, and France.
To end this on a positive note, it should be said that while the republican “experiment” failed in England and was never repeated there or following 1707 with the establishment of the United Kingdom, it did succeed somewhat with one of its lands, Ireland. And, of course, republicanism succeeded spectacularly with one of England’s former colonies, the country that is now the United States of America. Let us hope the current President remembers that.
Cross-posted at Scipio the Metalcon.
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AFL News
Breaking News Sport
Sport
National
AAP
St Kilda are yet to decide whether to stand down Stephen Milne after the AFL veteran was charged with four counts of rape.
The Saints board was meeting on Monday night to discuss the crisis, which stems from an alleged incident in 2004.
Police on Tuesday said the decision to lay charges followed the extensive review of the case by specialist detectives in the sexual crimes squad.
An Office of Police Integrity report had previously found there were reasonable concerns among officers that the case was subject to undue interference and recommended a review.
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"As we have previously made clear, it is a matter of regret that this review found the initial investigation to have been substantially inadequate," a Victoria Police statement said.
The 33-year-old Saints star will face court on July 5.
He and teammate Leigh Montagna were cleared after an initial investigation into the alleged incident, which happened soon after a club family day in the 2004 pre-season.
The club and the AFL released statements late on Tuesday afternoon, giving little detail ahead of the Saints' decision on how to react to the charges.
St Kilda's next match is a twilight fixture on Saturday against Melbourne at the MCG.
"The club acknowledges that any reopening of the matter will cause distress for all parties," the Saints said.
"The club is gathering details of this reinvestigation and intends to make further comment tomorrow."
The league said it was seeking more information from the club.
News of Milne's charges overshadows the 250-game milestones this week for star teammates Nick Riewoldt and Nick Dal Santo.
Riewoldt and Dal Santo were due to hold a media conference on Wednesday morning, but it is understood that will be rescheduled.
News of Milne's charges came on the same day that South Sydney prop George Burgess received a two-game NRL suspension after being charged with wilful damage.
On Monday the NRL suspended Blair Ferguson after he was charged with indecent assault over an alleged incident on Sunday at a bar in Sydney.
The NRL also cited repeated behavioural issues involving the abuse of alcohol and he was dumped from the NSW State Of Origin squad.
James Tamou was dropped from the NSW team last week after he was charged with serious driving offences.
The Saints indefinitely suspended Andrew Lovett on Christmas Eve 2009 after it emerged he was under police investigation and sacked him two months later when he was charged with rape.
They said he made multiple breaches of his playing contract in his short time at the club.
Lovett was subsequently found not guilty of two rape charges.
Last October, the Saints also sacked Jason Gram because of his off-field behaviour.
Late last month, Milne called on fans to stop abusing players.
"It's a bit of a touchy subject. Nothing really changes with me," Milne said.
"I cop a few words which aren't good for anyone.
"I've got a couple of kids and they go to the footy and my family and parents have to cop the abuse.
"So the sooner we can stamp it out the better."
Milne is a two-time All-Australian small forward who has kicked 564 goals in 268 games since his 2001 senior debut.
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Apple has emerged from a nine-hour global iTunes maintenance period to reveal new pricing for Australian apps, which brings Australian prices in line with those in the US.
Apple users shopping on Australia's iPhone and iPad App Stores are set to feel the benefits of a better exchange rate against the greenback as Apple revises almost all of its local app prices down.
Prices on Apple's own apps like the productivity app Pages, presentation app Keynote and video app iMovie have all been slashed, and even the wildly successful game Angry Birds has seen a drop in price.
iMovie is down from $5.99 to $5.49, Pages and Keynote are both down from $12.99 to $10.49 and Angry Birds has dropped from $1.19 to $0.99.
Federal Labor MP and long-time Apple pricing advocate Ed Husic today praised the pricing move after railing against the gadget maker in March for charging a premium on Aussie users.
"Good work Apple — they've listened to their loyal customers and begun lowering their prices.
"Hats off to the company, and congrats to the customers. Now look forward to their formal response to my issues, which I'm told I can expect next week," Husic wrote on his Facebook page.
According to Apple-centric blog site 9to5Mac, App Store prices have also dropped in the UK.
Apple Australia hasn't yet responded to questions from ZDNet Australia about the possibility of lower prices for other products like laptops, desktops and the iPad.
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Developer EuroSmartz on Thursday released a major update to PrintCentral, the company's printing utility for iPads and iPhone/iPod Touch. Version 1.5 better supports Wifi printing and lets users print DropBox documents. In addition, the company offered software to support USB printers.
By the time the computer reached the 21st Century there was supposed to be no paper. And certainly not for wireless Internet devices such as the iPad and iPhone. However, the real world decides "different," as we say in the Apple community.
WiFi Direct PrintCentral v1.5 also contains leading advancements in the way iPad & iPhone users can print directly to WiFi printers. This major leap in functionality means that a device owner can either be part of, or join a WiFi network and they will see all of the printers available along with the capabilities and quality of each printer. This is ideal for any environment including home or office printing, but it also means that customers who are traveling on business can now easily use Hotel or internet cafes for printing without additional setup. No WiFi - No problem With all these new features customers with Bluetooth and USB printers are not forgotten, they can still use their printers via the free print server software that is loaded onto their computer. Also iPad & iPhone owners that do not have access to corporate WiFi networks can use the 3G printing capability and still be able to print at their offices.
The app costs $9.99 and Version 1.5 is a free upgrade to owners of previous versions.
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Korn/Ferry International (NYSE:KFY)
Q1 2014 Earnings Call
September 05, 2013 5:00 pm ET
Executives
Gary D. Burnison - Chief Executive Officer, President, Treasurer and Executive Director
Robert P. Rozek - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Gregg Kvochak
Analysts
Kevin D. McVeigh - Macquarie Research
Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division
Timothy McHugh - William Blair & Company L.L.C., Research Division
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Korn/Ferry International First Quarter Fiscal Year 2014 conference call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. We've also made available on the Investor Relations section of our website at kornferry.com, a copy of the financial presentation that we will be reviewing with you today.
Before I turn the call over to your host, Mr. Gary Burnison, let me first read the cautionary statement to investors. Certain statements made in the call today, such as those relating to future performance, plans and goals, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, which are beyond the company's control. Additional information concerning such risks and uncertainties can be found in the release relating to the presentation, in the company's annual report for fiscal 2013 and in the other periodic reports filed by the company with the SEC. Also, some of the comments today may reference non-GAAP financial measures, such as constant currency amounts, EBITDA and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most direct comparable GAAP financial measure, is contained in the financial presentation and release relating to this call, both of which are posted on the company's website at www.kornferry.com.
With that, I'll turn the call over to Mr. Burnison. Please go ahead, Mr. Burnison
Gary D. Burnison
Okay. Well, hello, everybody, and thank you for joining us, and a happy new year. First, start out with some overall comments. I'm very, very pleased with our momentum, our operating results for the quarter, as well as the strategic progress we've made on integrating our acquisitions. Fee revenue in the quarter grew. It was about $228 million, which is up 23% year-over-year. That's up 8% on an organic basis, measured at constant currency, and that's with growth in all of our major operating segments. So today, it's a company that is at an annualized first quarter run rate of about $920 million, with about $128 million of EBITDA.
As we talked about last quarter, we anticipated continued integration activities. And so in the quarter, we did complete those activities. Our adjusted EBITDA margin was 14%, and that's up substantially from the prior year. We'd like to see that be 15% to 18%, as an organization, that's what we're shooting for. Our adjusted EPS was $0.33, and that's up $0.11 from the prior year. And our balance sheet continues to be very strong.
I think we've effectively balanced growth and investment. And particularly, as efficiencies and growth come from our recent acquisitions, and with our leadership team around the world effectively driving our strategy, we've improved profitability but we've also increased revenue, not only within our flagship heritage Search business, but also our broader talent management offerings year-over-year, with strong margin expansion and earnings per share growth in the quarter, on an adjusted basis.
And so as a result, we're making this company more relevant. We're making our brand more elastic with, in the quarter now, 40% of the revenue mix was generated from our broader talent management offerings. And the interesting thing, I think, too, is that it also represents 40% of our EBITDA today.
The assimilation of last fiscal year's acquisitions has proceeded as planned. The outcome of which is an expanded and richer set of offerings to bring to market in an integrated fashion. And in the context of that integration plan, we're also on pace with a major initiative, kind of bottoms-up, to develop and train our consultants on our broader base of solutions. And that's going to continue during the course of this fiscal year.
But while we've experienced top line growth year-over-year, and over the last few months, we've seen a steady increase in new business in almost all regions across all of our lines of business. We all know, just looking at the computer, that market volatility, overall, is still very present in the world. And our assumption is that this volatility is going to continue to impact global organizations for quite some time. But with that also comes opportunity for Korn/Ferry. And as a result of today's uneven environment, clients are increasingly borderless, their knowledge-based, they're asking their workforce to do much more with much less, and yet, irrespective of industry or geography, when you talk to a CEO, talent is the ultimate driver of business success. And so we're transforming Korn/Ferry, not away from a monoline company, but to a unified talent solutions organization. The world's most relevant talent in leadership organization. A Korn/Ferry that helps boards and CEOs navigate this complex environment by more effectively linking their business and talent strategies.
So in the quarter ahead, we're going to focus on 5 key elements of our strategy. First and foremost, driving an integrated, solutions-based, go-to-market strategy, leveraging our IP. Secondly, continuing to extend and elevate our brand. I'm enormously proud of how we have elevated and differentiated our search offering, as evidenced by the more key engagements we've secured and our average fee per assignment. Number three, we're going to build, develop and harvest the intellectual property from the Korn/Ferry Institute to feed both our products business, as well as our services businesses. Number four, we're going to advance Korn/Ferry as the premier career destination, developing and training our consultants on our broader base of solutions and furthering our meritocracy, creating the Korn/Ferry that has a lifetime of career opportunities. And finally, continuing to execute a pragmatic approach to M&A that accelerates our reach and further extends our footprint and offerings.
So with that, I'm going to turn it over to our Chief Financial Officer, Bob Rozek.
Robert P. Rozek
Thanks, Gary, and good afternoon, everyone. You could feel the pride in Gary's comments in terms of our quarter. We're all very proud of what we've done these past 3 months and I'm pleased to announce another quarter of strong results. The privacy [ph] made in the first quarter of fiscal '14 is in line with our previously discussed expectations, and is another important step in the process of accomplishing our strategic vision of creating a leading, most innovative, profitable firm in the evolving talent management industry.
As the worldwide labor market gradually recovers, market demand for our firm's industry-leading talent management solutions continues to improve. As Gary indicated, in the first quarter of fiscal '14, our consolidated fee revenue grew to $228.4 million, with year-over-year growth in all of our major operating segments. Measured on a constant currency basis, fee revenue grew $2.9 million or 1.3% sequentially, and was up $43.5 million or 23.3%, compared to the first quarter of fiscal '13.
Additionally, on an organic basis, excluding the impact of our recent acquisitions, both Global Novations and PDI, consolidated fee revenue in the first quarter grew $14.9 million or 8%, on a constant currency basis, year-over-year. In the first quarter of fiscal '14, 40% of our consolidated fee revenue was generated in services outside of our core Executive Search offering. And our overall growth continue to outpace many of our major industry competitors.
Executive Search new business awards in the first quarter continued on an upward trend and we did start to see some narrowing in the volatility on a month-to-month basis. Confirmations were sequentially up in both May and June and slightly seasonally weaker in July, with new business in the first quarter up 16% compared to the first quarter of fiscal '13, and 5.6% compared to the fourth quarter.
In LTC, our new business awards really gained momentum through the quarter, with June confirmations 13% higher than May, and July confirmations 15% better than June.
And in Futurestep, our backlog remains steady in the quarter, while our pipeline for potential new RPO and project assignments improved considerably, reflecting some of the investments we made in the sales force there.
We're very pleased with the firm's profitability, which improved in the first quarter, as we began to realize the benefits of our ongoing integration initiatives. Excluding all restructuring, integration and separation charges in the current prior periods, adjusted EBITDA improved, both sequentially and year-over-year, growing $4.1 million or 14.7% sequentially, and 11.5 or 57% year-over-year, reaching $31.9 million in the quarter.
Adjusted EBITDA margin was 14% in the first quarter, compared to 12.2% in the fourth quarter of fiscal '13, and 10.9% in the first quarter. Sequentially, profitability improved in all of our major operating segments in the first quarter, with the exception of Futurestep, where investments in the additional global sales website referred to earlier and ramp-up associated with new business activity in Germany and India tempered first quarter margins.
On a GAAP basis, including all restructuring, integration and separation charges, fiscal '14 first quarter operating earnings were $16.7 million with a 7.3% margin, compared to $15.4 million and a 6.8% margin in the fourth quarter of fiscal '13, and $17 million and a 9.1% margin in the first quarter of fiscal '13.
As discussed on our last earnings call, in the first quarter, we continue to take actions to integrate our recent acquisitions and rationalize the firm's consolidated infrastructure. In the first quarter, we eliminated approximately 60 positions and really concluded our office co-location with Atlanta, Dallas and Paris offices. The total cost of these actions in the first quarter was approximately $3.7 million, and these actions are expected to result in annual savings of approximately $5 million, a portion of which was recognized in the first quarter.
Additionally, as we discussed in our last call, for the rest of fiscal '14, we're making investments to drive common and enabling technology systems. And once these systems are fully implemented and operational, we expect the remaining cost synergies to be realized from our FY '13 acquisitions.
Our financial position remains strong in the quarter. Our total cash and marketable securities were $280 million, down $86 million compared to the fourth quarter of fiscal '13, and down $53 million compared to the first quarter of fiscal '13. Excluding cash and marketable securities reserved for deferred comp arrangements and for accrued bonuses, the current investable cash balance is approximately $132 million, down about $25 million versus the fourth quarter. And that's primarily due to the funding of first quarter long-term incentive awards and the payment of the contingent purchase price for the PDI acquisition. After considering our working capital needs, our net investable cash is about $32 million.
And finally, excluding all restructuring, integration and separation changes -- charges in the current and prior quarters, our first quarter adjusted diluted earnings per share were $0.33, an improvement of $0.01 sequentially and $0.11 year-over-year. On a GAAP basis, including the impact to net income of those items, fiscal '14 first quarter diluted earnings per share were $0.24, compared to $0.25 in the fourth quarter of fiscal '13 and $0.22 in the first quarter of fiscal '13.
And with that, I'll turn it over to Gregg to provide a little more detail on our operating segments.
Gregg Kvochak
Okay. We’ll start with our Executive Recruitment segment. In a slowly improving global labor market, new business confirmations in our Executive Recruitment services showed signs of growth in the first quarter. Consolidated Executive Recruitment fee revenue in the first quarter was $136.7 million, flat sequentially and up $9.2 million or 7.2% year-over-year. Measured at constant currency, first quarter consolidated Executive Recruitment fee revenue was up 1% sequentially and up 8.2% year-over-year. Regionally, also at constant currency, Europe was up 7.2%; Asia-Pacific was up 13.7%, while North America and South America were down 4.1% and 5.2%, respectively, on a sequential basis.
Year-over-year, also on a constant currency basis, North America grew 3.1%; Europe grew 15%; Asia-Pacific was up 25.3%, while South America was down 8%. Growth in our Executive Recruitment specialty practice was primarily positive in the first quarter. On a sequential basis, at actual rates, the financial services practice grew 5%, the industrial practice grew 8%, life sciences and healthcare and Consumer Goods were flat, while the technology practice was down 12%. Financial services accounted for approximately 17.5% of all Executive Recruitment fee revenue in the first quarter, up approximately 80 basis points from the fourth quarter of fiscal '13. Year-over-year, also at actual rates, all of our specialty practices grew in the first quarter, with the exception of the technology practice. Life sciences and healthcare was up 16%, financial services was up 13%, Consumer Goods was up 11% and industrial was up 6%. Worldwide, the technology practice was down 2% year-over-year in the first quarter.
The total number of dedicated executive recruiting consultants worldwide at the end of the first quarter was 416, up 1 year-over-year and up 17 sequentially. The 17 consultant additions in the first quarter includes 27 promotions and 10 net terminations. Annualized fee revenue production per consultant in the fourth quarter -- in the first quarter was approximately $1.34 million compared to approximately $1.37 million in the fourth quarter of fiscal '13, and $1.25 million in the first quarter of fiscal '13.
The number of new search assignments opened worldwide in the first quarter was 1,216, which was down 1% sequentially and essentially flat year-over-year. Excluding all restructuring charges, consolidated Executive Search adjusted EBITDA improved in the first quarter, measured both sequentially and year-over-year. Consolidated executive search adjusted EBITDA was $31.8 million in the first quarter, up $5.1 million or 19.1% sequentially. On the same basis, when compared to the first quarter of fiscal '13, consolidated Executive Search adjusted EBITDA in the first quarter of fiscal '14 was up $6.9 million or 27.8%, driven primarily by higher fee revenue across a stable, more efficient cost base.
The worldwide consolidated executive search adjusted EBITDA margin was 23.3% in the first quarter of fiscal '14, compared to 19.6% in both the first and fourth quarter of fiscal '13.
Now turning to our Leadership & Talent Consulting segment. In the first quarter of fiscal '14, worldwide fee revenue for L&TC was $60.1 million, and flat sequentially. Year-over-year, on an organic basis, excluding the fee revenue in the first quarter of fiscal '14 from the recent acquisitions of both Global Novations and PDI Ninth House, L&TC fee revenue grew $3.1 million or 11%. Regionally, North America accounted for approximately 67% of the total L&TC worldwide fee revenue in the first quarter compared to 71% in the fourth quarter of fiscal '13. Sequentially, on a constant currency basis, fee revenue growth was strongest in Europe and Asia Pacific, which were up 10% and 29%, respectively. At the end of the first quarter, there were 134 dedicated L&TC consultants compared to 133 in the fourth quarter of fiscal '13 and 48 in the first quarter of fiscal '13.
Professional staff utilization was 65% in the first quarter, down 200 basis points sequentially, but up 100 basis points compared to the first quarter of fiscal '13. Excluding restructuring charges, L&TC's fiscal '14 first quarter adjusted EBITDA was $8.4 million, up $2.1 million or 34% sequentially, and up $3.5 million or 71% year-over-year. Core sequential earnings growth was driven by the realization of cost savings from our ongoing business integration initiatives across a stable fee revenue base. Adjusted EBITDA margin in the first quarter was 14% compared to 10.4% in the fourth quarter of fiscal '13 and 17.2% in the first quarter of fiscal '13.
Finally, turning to Futurestep, which generated a record $31.7 million of fee revenue in the first quarter. Measured on a constant currency basis, Futurestep's first quarter fee revenue was up $1 million or 3.4% year-over-year and up $1.3 million or 4.1%, sequentially. Measured sequentially on a constant currency basis, Europe was up 3.1%, Asia Pacific was up 20.5%, while North America was down 3.9%. Approximately, 58% of Futurestep's fee revenue in the first quarter was generated from RPO and project engagements compared to 59% in the fourth quarter of fiscal '13, and 55% in the first quarter of fiscal '13. Excluding restructuring charges, Futurestep's adjusted EBITDA margin was 14.7% in the first quarter compared to 14.7% in the fourth quarter of fiscal '13 and 11.3% in the first quarter of fiscal '13.
I will now turn the call back over to Bob to discuss our outlook for the second quarter of fiscal '14.
Robert P. Rozek
Thanks, Gregg. As I said earlier, new orders remained seasonally strong in the first quarter with a little bit -- a little more consistency in the month-to-month trends. As is usually the case, July new orders were lower than May and June. And August new business also decelerated, but primarily due to seasonality. But, for example, in our Executive Search, it was still 6% to 7% greater than what we saw last year in the month of August.
And looking ahead to the second quarter of fiscal '14, we expect new orders towards the end of the quarter to rebound back to a pace and trajectory similar to that of the beginning of the first quarter. Assuming worldwide economic conditions, financial markets, foreign exchange rates remain steady, fiscal '14 second quarter fee revenue is likely to range from $225 million to $237 million and diluted earnings per share are likely to range from $0.32 to $0.38.
With that, I'll conclude our prepared remarks and we will be glad to take any questions you may have.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question will come from Kevin McVeigh with Macquarie.
Kevin D. McVeigh - Macquarie Research
I wonder, Gary, it sounds like the LTC business is really contributing a nice percentage of the revenue now. As we think about that sustainable kind of adjusted EBITDA target of 16% to 18%, how are we thinking about kind of the different components and how would they contribute to that in terms of the Search versus LTC?
Gary D. Burnison
Well, we're very pleased that the non-Search business has been very persistent [ph], and we -- the Futurestep business is going to have lower margins, for sure, but that's going to be a component of how much RPO activity we have. So as an organization, we are targeting 15% to 18%, and we would expect our LTC business to contribute those kinds of margins. The Search would be maybe a little bit more and Futurestep would be a little bit less.
Kevin D. McVeigh - Macquarie Research
Got it. And as you think about LTC at 40%, does that continue to climb here? Or -- and just on the back of that, it sounds like you're, if I heard it right, pushing kind of out that initiative across all your consultants. Are going to kind of tweak the compensation structure as a result to that at all?
Gary D. Burnison
Well, we've continued, over time, to evolve our compensation structure and we will continue to do that. But today, it's all about being relevant and differentiating yourself and fighting for growth. And so, although, compensation is important, it's not #1. And we have to be more relevant to our clients. And we think by going to market is one. Bringing a richer, deeper set of offerings, we will, indeed, drive the top line, and our employees and colleagues will be further differentiated. And just as a point of clarification, the 40%, it not only includes the LTC business, but includes the Futurestep business as well. LTC is about 26% of the top line, Futurestep's 14%.
Kevin D. McVeigh - Macquarie Research
Got it. And then one last question, if I may, margins overall, it's a real nice expansion, particularly in Europe and Asia Pacific. Any thoughts on -- is that just kind of in better revenue trends, cost actions or, really, what drove that outperformance?
Gary D. Burnison
It's both. We've seen a nice broad-based uptick in activity. And, secondly, I think that we have really taken the right balance on the seesaw between investment and growth. And we've -- I think, we've actively managed the business over the past few quarters, and I think it's showing.
Operator
Our next question in queue will come from the line of Tobey Sommer with SunTrust.
Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division
Gary, over the last year or so, you've deployed some capital, expanded and diversified the business and the cash balance is getting closer to -- back to the prior level. How do you feel, in terms of deploying more capital, to kind of further provide separation between yourselves and the rest of the market versus other alternatives at your disposal?
Gary D. Burnison
That's a great observation. Our first priority would always be to invest and grow. And that we really think that there's a multi-hundred million dollar opportunity for us here, incrementally, from where we are today, and we see ourselves as a couple billion-dollar company. And we also believe we need to continue to arm our organization with deeper, richer offerings. We think we have a good opportunity on the product side to grow that business through intellectual property and technology. Having said that, we are -- we're not necessarily proud with our return on capital this quarter, which is kind of 7.5%. We're very, very mindful of that as a leadership team. And so, I'm not going to comment other than I certainly recognize the question, our board recognizes the question, and our priority would be to first deploy it in the business. But we're very, very mindful of the alternatives with that capital.
Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division
And your headcount was up sequentially in the quarter but, I guess, primarily as a result of promotions. What do you think you'd do with it throughout the fiscal year? And I asked that because the tone of the way demand was characterized in the prepared remarks of various people seemed to demonstrate some improvement. And I just wonder if you're confident enough in that trend to plan on adding to meet that demand?
Gary D. Burnison
Well, we -- again, look, Tobey, we continually are looking to promote from within, first and foremost, within the organization. And also to add talent from the outside, like our clients do. So we're not going to change our modus operandi. And we're going to continue to be aggressive in trying to bring people that not only can drive the top line but they can drive change that can be forward leaning and that can help us continue to move our culture.
Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division
Just one quick numerical question and one after that as well. If you gave the spendable cash balance, I didn't catch it, so if I can get that. And then, Gary, could you talk a little bit more and expand about upon what your plans are and the opportunity to capitalize on the IP resident within the firm and monetize that through perhaps kind of more lucrative channels?
Gary D. Burnison
I'll comment on that, and then, Bob, you can...
Robert P. Rozek
I'll pick up the...
Gary D. Burnison
Yes. As a CEO in just about any company or any industry, any business, there is an incredible fight for growth right now, and at the same time, you're asking more from less people. So with that as a backdrop and this fight for growth, organizations spend anywhere from $400 to $1,000 per employee on development, and on motivation and stimulation. And so we think that there is an opportunity to license our intellectual property to help that CEO, to help him or her drive that growth, create that excitement, create that motivation. And so today, we've got what we would characterize as a $50 million, essentially $50 million, products business, either paper-based or software-based, where companies use our intellectual property to engage a workforce, develop a workforce, stimulate a workforce. And so we are thinking up in ways in which we can take that intellectual property and capture some of that spend of, say, $500 or $1,000 per seat around development. So one of the things, as an example, is around this concept of learning agility, which we think, in the environment today, is critical, this kind of borderless growth. And so, we are developing product that can be licensed for companies to use with kind of knowledge transfer that doesn't require an army of consultants to really stimulate and motivate a workforce.
Robert P. Rozek
And then, Tobey, this is Bob. On the cash, I'll just run through the numbers quickly with you. So our total cash and marketable securities position at the end of the quarter is $280 million. And when you back out amounts for deferred comp and bonus, that goes down to about $132 million. And when you adjust that down further for our global working capital needs, that's about -- we're left about $32 million.
Operator
Our next question in queue, that will come from the line of Tim McHugh with William Blair & Company.
Timothy McHugh - William Blair & Company L.L.C., Research Division
I guess, just at a high level in the Executive Search business, can you characterize to us how it feels different than a year ago, when there's kind of downward pressure on you and others in the industry? It clearly seems to have improved, but if there's 1 or 2 factors that you would point to, what would they be?
Gary D. Burnison
Well, I think, number one, we're 1 year further out from the great train wreck, so we're now 4 years into a cycle versus 3 years. I think that people are becoming very, very accustomed to the new normal. So I think that there's a sense of more normalcy for our clients. The second thing is that financial services, as you very well know, Tim, was very, very challenged. Going back several years, it historically represented 22% of this company. Today, on a consolidated basis, it's 15%. So it's still off where it was. And so, you're seeing again more normalcy there, more people accustomed to the re-regulation, a shift from investment banking to commercial banking, asset management, wealth management, we're adjusting to that trend. And the third area is life sciences and healthcare, and that continues, even from a year ago, to be a very, very buoyant market across -- whether it's pharma or biotech. So those are the headlines. Our average search fee over a year is probably up just slightly, I guess. It just held its own and it's up a little bit. That's probably what I would characterize as the big-ticket item.
Robert P. Rozek
Yes. And I would just interject, Tim, a little bit. If you go back, because we looked at our new business activity over the past 12 months and 0it's like January 1 hit and there was a step change in the level of new business activity. We saw almost an average of 10% consistent growth from the second half of that 12-month period versus the first half.
Timothy McHugh - William Blair & Company L.L.C., Research Division
The numbers in Europe and Asia seem a lot better, just, at least, on a year-over-year basis. Does that environment feel sustainably different? And is that macro related or more individual or company-specific?
Gary D. Burnison
Well, it'd probably be unfair to say just company specific. Yes, it’s both, but, when you -- if you were to talk to 2 of our great leaders in both those businesses and you ask them the difference, there'd be 3 words. And that would be, our-integrated-offering. So our differentiated platform, I think, is making a huge difference in Europe and Asia. But look, it's clearly both. It's a more stable environment, but it's also the offerings that we're putting together here.
Timothy McHugh - William Blair & Company L.L.C., Research Division
And then on the leadership and talent side, the organic growth looked good but the revenue run rate that, coming out of PDI and Global, remained a little lower, I guess, than the historical. How do you -- you talked about organic -- or kind of, I guess, new business trends improving, how do you feel about the underlying organic growth potential as, in a couple of quarters, they'll get dropped then to that calculation, at least?
Gary D. Burnison
Yes, well, we -- there was organic growth year-over-year in that business. I think that 248 days into this, we have done an awful lot, in terms of bringing together, essentially, 2 equal-sized organizations. We've co-located or relocated a large percentage of our workforce. We've done some things around technology, intellectual property and culture. And we had a very planned approach that we would focus on those areas, as well as profitability. So, for example, for the PDI investment, when we made the acquisition, we said that we would pick up somewhere between $86 million and $96 million of revenue, it was running at a 8% margin. We want to add 10 percentage points to that. And I think we've essentially delivered on that. But our expectation, and it may not be in this next quarter, or the quarter after, but our expectation is that the growth rate on this business better be well north of 10%. That's our own expectation. So it's -- I think we're very pleased with where we are, but we're certainly not where we want to be.
Robert P. Rozek
Yes. And Tim, I would just add a couple of thoughts. And that one is, as you look at those businesses, it's really -- it's almost impossible today to continue to pick them apart and focus solely on PDI or Global Novations as we continue with the integration of our products and offerings and so on. Coming out with a more common uniform set of assessments and competencies and so on. I think, second, if you look at the new business, in both of PDI and Global Novations, you really start to see us exiting the quarter with some real momentum. And just to give you one point of fact. In Global Novations, for example, if you go back and look at where they were in the fourth quarter of last year, and there was their backlog relative to where they are today, it's up 2x. So we're starting to see some of the top line momentum as we exit the quarter.
Timothy McHugh - William Blair & Company L.L.C., Research Division
And is there's still a deferred revenue impact weighing on in terms of write-off, of deferred revenue, and I guess, weighing on?
Robert P. Rozek
Yes, there is. And that's more relative to PDI than to Global Novations. Global Novations has a small amount of deferred license fees when we bought them, but PDI was up in the -- somewhere between $4 million and $5 million of deferred fees that we just -- we're not getting the benefit of, as we go into this year so...
Timothy McHugh - William Blair & Company L.L.C., Research Division
That was the aggregate, right? Or was that impact just in Q1?
Robert P. Rozek
No, that was the aggregate. So that we'll lap that January 1 of next year.
Timothy McHugh - William Blair & Company L.L.C., Research Division
Okay. And then, just one quick numbers question. The tax rate, it was a little higher than I expected. I guess, kind of at least what are you assuming for 2Q kind of going forward?
Robert P. Rozek
Yes. We've got this phenomenon with way that GAAP makes you do your interim tax rates that you'll end up, our rate is not going to change on a full year basis. But what ends up happening, because of the mechanics of the interim provision calculation, you end up with a little bit higher Q1 and Q2 and that reverses Q3, Q4. So I would say Q2, I'd hold pretty consistent with where we are now and then we'll see that come down Q3, before -- if you go back and look at FY '14, or I'm sorry, FY '13, you'll see probably a very similar pattern.
Timothy McHugh - William Blair & Company L.L.C., Research Division
So it's a 35% for the full year still?
Robert P. Rozek
Yes, I think 35% for the full year is probably a good number.
Operator
Our next question in queue, that will come from the line of art Mark Marcon with R. W. Baird.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
Can you talk a little bit more about LTC with regards to -- what is -- what you've learned over these 200 days, that those organizations have been put in place? What's a little bit -- what are the areas that are -- where you're finding the highest level of success? And as we think about that growth rate on an organic basis being north of 10%, how should we think about the incremental margins? In other words, what's the pace of getting to the targeted operating margin for that particular business?
Gary D. Burnison
Well, I think that, in terms of what we've learned, you don't know what you don't know. I think that, in so many of these acquisitions, what you find is you focus on strategy and numbers, but the ultimate trump card is people and culture. So I think that what we have learned is that the -- one of our reads, relative to the culture of, for example, Global Novations, or PDI, was that they were meritocracies, and it's turned out that we were right. But the amount of -- when you do an acquisition, the amount of uncertainty and questions are certainly pretty high. But we've also learned that when we really combine the firm as one, and not Search or Futurestep or LTC, but rather, when we go as one, and what, for example, Bernard is leading in Europe, we're having enormous success. So I think that is the big learning. Is that the brand has incredible permission. There is a real pull factor there and that, as an organization, we must go to market as one. So that's one learning that we have to continue to push forward.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
And then, as we think about the -- hitting the targeted level in terms of the margins, how should we think about that in terms of that?
Robert P. Rozek
I would think, Mark, that we'll, over the next couple of quarters, we should be relatively consistent with where we are now. As we've said, we've got some investing to do in our technology platform before we can fully realize all of the benefits. And as we've looked at the cut over time frame on that technology, given our Sarbanes-Oxley requirements and so on, that will probably be a May 1 cut over. So we would expect to hit our full stride probably starting next year. But like I said before, we're pretty proud of the progress we've made so far this year.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
Yes, I mean, it's been nicely consistent since the first quarter where it was fully integrated. And you mentioned the utilization rate, where would you expect that to go to?
Gary D. Burnison
Better be higher.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
I sense that.
Robert P. Rozek
I think, our target for them is about 70%. So it just is...
Gary D. Burnison
In the near term.
Robert P. Rozek
Yes, in the very near term. It's the summer time now, with vacations on our side, our clients' side and so on. And so, we saw a little bit of a dip there from -- we were running at about 67%, but we'd like to see that at closer to 70% very near term.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
And can you talk a little bit about both EMEA and Asia Pac, just in terms of the increase in the margins. You did mention that there was some reduction in cost. And obviously, the revenue ended up increasing. But was there anything else that contributed to the significant jumps in the margins on both sides?
Gary D. Burnison
Mark, again, if you would ask our leaders of those businesses, they both, independently, consistently, would tell you that it's the integrated offering and the value proposition. So I think that, that is certainly part of it. We've seen, we think, in Europe, I'm incredibly proud of the organization there. We saw, despite all the questions about Europe, just sequentially, we saw improvement in France, Germany, Switzerland, our business is incredible, and in the U.K. And in Asia, Australia was very, very solid. China was solid and Singapore was very good in the quarter. And so, some of that has been helped by a more normal financial services environment, for sure.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
So it sounds like the margins, in terms of where they currently are within your international search operations, should be sustainable?
Gary D. Burnison
At these revenue levels, we would think so.
Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division
Great. And then can you talk -- last question and then I'll jump off, can you talk a little bit about -- we always talked about the value add that comes from the core executive search. And obviously, the finding part has changed, as you've described. Do you think plans have kind of -- and I'm talking about in North America, have kind of normalized in terms of, here's what -- where we feel like we need somebody from the outside and here's where we think we can do as good a job inside. Do you...
Gary D. Burnison
I think so. I think that there was also, coming out of -- early into this recovery, a heavy focus on outsourcing, outsourcing all sorts of functions. I think that, that has normalized. And right now, there's just an incredible, incredible fight for growth for -- with our clients.
Operator
We do have a follow-up question in queue, that will come from Tobey Sommer.
Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division
My question's been answered.
Operator
It appears that there's no further questions in queue, Mr. Burnison.
Gary D. Burnison
Okay. Well, I want to thank our shareholders and we are very, very proud of where we are today, but we're not where we want to be. And just like our clients, we got to be limber and agile and driven to act always, all the time. And thank you for your time this afternoon and we look forward to speaking with you again. Thank you.
Operator
Thank you. And ladies and gentlemen, this conference will be available for replay for 1 week starting today at 7 p.m. Eastern Daylight Time, running through the day, September 12, at midnight. You may access the AT&T Executive Playback service by dialing (800) 475-6701 and entering the access code of 302040. International participants may dial (320) 365-3844. Additionally, the replay will be available for playback at the company's website, www.kornferry.com, in the Investor Relations section. That does conclude your conference call for today. We do thank you for your participation and for using AT&T Executive TeleConference. You may now disconnect.
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ADAM ADAM Inc. $8.43 $10.05
19.2%
84.0%
CNET CNET Networks Inc. $291.16 $352.95
21.2%
FCON Financialcontent Inc. $0.99 $1.28
29.5%
HOLL Hollywood Media Corp. $67.68 $89.51
32.3%
IVIL iVillage Inc. $66.90 $91.06
36.1%
JRJC China Finance Online Co. Ltd. $6.02 $7.48
24.4%
JUPM Jupitermedia Corp. $61.96 $124.58
101.1%
KNOT Knot Inc. $41.40 $51.41
24.2%
LGBT PlanetOut Inc. $24.96 $35.59
42.6%
LNUX VA Software Corp. $29.21 $32.89
12.6%
NAPS Napster Inc. $11.96 $46.73
290.6%
83.0%
PRM PRIMEDIA Inc. $843.61 $842.67
-0.1%
QPSA Quepasa Corp. $0.47 $0.77
64.5%
REDF Rediff.com India Ltd. $9.45 $12.63
33.7%
RNWK RealNetworks Inc. $266.72 $325.06
21.9%
SINA Sina Corp. $199.99 $193.55
-3.2%
SNDA Shanda Interactive Entertainment Ltd. $146.10 $205.49
40.6%
2.8%
10.5%
WBMD WebMD Health Corp. $134.15 $168.94
25.9%
47.1%
forof the company:Note:indicates data for that period is either not available or was $0.
Data: Capital IQ
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The U.S. Open is not meant to be easy. It's not supposed to be held at a pitch-and-putt course that pros tear up with scores in the neighborhood of 22-under. The U.S. Open is the toughest test in golf, and only the course it's played on can make that ring true.
This year, it will be held at Oakmont Country Club in Pennsylvania. And just as Chambers Bay did in 2015, Oakmont is going to frustrate the best golfers in the world, test their patience and award the steadiest player the championship. Tour players have been talking about the difficulty of Oakmont for several weeks now, but Phil Mickelson took that a step further after playing practice rounds this week.
"I've played Oakmont the last two days, and I really think it is the hardest golf course we've ever played," Mickelson said. "They don't know what the weather is going to be next week, if it's going to be dry or if it's going to be wet. So what they do is they let the rough grow long, and if it is wet, they'll leave it like that, and if it's dry they'll thin it out. So yesterday the rough was extremely long, I guess, and challenging."
Despite Oakmont being incredibly difficult -- the most difficult by Mickelson's standards -- Lefty calls it fair, which most players would say Chambers Bay wasn't a year ago.
"It's a very fair test, even though it's hard. But a lot of golf courses, when they challenge you tee to green the way Oakmont does, it usually has a little bit of a reprieve on the greens," he continued. "You really don't at Oakmont. They're some of the most undulating, fast, difficult greens to putt. It really is the hardest golf course I think we've played."
Mickelson will have extra weight on his shoulders next week as he looks to complete the elusive career grand slam. At the age of 45, it's not getting any easier by the year, but he's confident that he can break through and finally take home that trophy that's been dodging him for decades.
"The reason why I'm optimistic about Oakmont is that it doesn't require me to hit a lot of drivers," Mickelson said. "It requires me to get the ball in play off the tee, but when I'm not hitting drivers, if I'm hitting 3-woods, hybrids, I feel confident I'm able to do that a fairly high percentage of the time."
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The once-defiant former Iraqi information minister appeared humbled and evasive in a TV interview aired Friday, describing the fall of the Iraqi regime to coalition forces as an "earthquake" and refusing to blame Saddam Hussein (search) for the war.
During the fighting, Mohammed Saeed al-Sahhaf (search) gained fame for his bombast and transparently false claims of Iraqi victories. However, in a 30-minute interview with Al-Arabiya (search) satellite network he offered one-word answers, dodged queries, and said repeatedly that only history could judge what happened.
"If you want to say the truth, objectively and courageously, you must respect history," he said, adding it was "not the time yet" to determine that history.
He refused to blame Saddam or anyone else for the collapse of the Iraqi regime, saying the versions of events require "research and an in-depth look in order to come up with a composed answer."
Al-Sahhaf also avoided blaming Saddam for turning down offers of exile from friendly states to avert war, saying it was a matter between states.
"What happened was an earthquake -- a really big earthquake," he said.
"It was very painful. I am not revealing a secret if I said I felt pain when I saw U.S. tanks in Baghdad," he said.
In a segment of the interview released Thursday, he said he had turned himself in to coalition forces but was set free. "Through some friends, I went to the Americans," he said. "I was interrogated about a number of subjects related to my job. After that, I was released."
Al-Sahhaf is not on the list of the 55 most wanted Iraqi officials.
His appearances on Arab television Thursday -- in brief clips shown on Dubai-based Al-Arabiya and in a five-minute interview on Abu Dhabi television -- were his first return to the public eye since the collapse of Saddam's regime.
Al-Sahhaf had been a regular sight on TV before and during the U.S.-led war, sporting military garb and a beret with dark hair peeking out. He boasted of non-existent Iraqi military dominance and hurled insults at coalition forces and their leaders.
His outlandish claims and insults during the war bemused fellow Arabs and made al-Sahhaf a notorious figure in the West, where dozens of Web sites, T-shirts, and dolls ridiculed him.
One site, Baghdadbobs.com, even advertises al-Sahhaf hot sauce: The former information minister's photo and the quote "God will roast your stomachs in hell" are on jar. And last month, the London-based Baghdad Broadcasting Corporation released "Baghdad Bob," an uncensored DVD compilation of al-Sahhaf's most memorable remarks.
He disappeared the day Baghdad fell to coalition forces on April 9, and reports have said he was hiding in a relative's home in Baghdad, fearing revenge from angry Iraqis.
In the interviews, he wore civilian clothes, his thinning hair was white, and his feisty air had vanished.
Al-Sahhaf insisted on answering most questions with "yes" or "no," but said he would write everything he knew and has experienced in the future. He added that he was giving up work as a politician and would devote his time now to writing a book.
He rejected the idea of seeking asylum abroad, saying he would remain in Iraq.
Sahhaf said he was not aware if Saddam was dead or alive, had no comment about recent attacks on coalition forces, and would say little of the last days of the regime.
He also refused to say whether videos showing Saddam in the last days of the war had been pre-taped. "History will tell," he said.
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Spldiers fanned out to guard possible terror targets across Belgium Saturday, including some buildings within the Jewish quarter of the port city of Antwerp. It was the first time in 30 years that authorities used troops to reinforce police in Belgium's cities, and came a day after anti-terror raids netted dozens of suspects across Western Europe.
In an interview broadcast Saturday on Belgium's VRT network, Belgian Defense Minister Steven Vandeput said soldiers could be deployed to protect certain embassies and some buildings within Antwerp's Jewish quarter. Belgium has increased its terror warning to 3, the second-highest, following the anti-terror raids of Thursday which left two suspects dead.
In France, an official disclosed that Said Kouachi, one of the gunman who attacked the offices of the satirical magazine Charlie Hebdo, had been quietly buried.
After an initial refusal, the mayor of Reims was forced to backtrack and allow the burial.
Mayor Arnaud Robinet said the government had insisted he allow the elder Kouachi brother to be buried in Reims because according to French law residents of a town have the right to be buried there.
"He was buried last night, in the most discrete, anonymous way possible," Robinet said in an interview on French television channel BFM TV. Robinet said he didn't know where Kouachi was buried in the cemetery, which he didn't identify.
Kouachi and his brother Cherif were killed by French counter-terrorism police Jan. 9 after they killed 12 people at the offices of Charlie Hebdo. Cherif Kouachi is to be buried in Gennevilliers, a suburb of Paris where he lived, the city said in a statement Friday.
A third terrorist, Amedy Coulibaly, killed five people including four hostages at a kosher market in Paris before he was killed by police. There has been no word of plans for his burial.
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Chinese scientists say they have produced working mouse sperm from stem cells in the laboratory, a step that may lead to a treatment for infertile men.
The sperm they made were not mature, but they were mature enough to help make nine baby mice.
If the technique pans out in people, doctors might someday be able to turn skin cells from a man into sperm that can pass along his DNA to his offspring.
But experts warned that the technology would have to overcome some hurdles first.
The mouse work is reported by Chinese scientists in a paper released Thursday by the journal Cell Stem Cell. The technique is now being tested in monkeys, a senior author said.
Qi Zhou of the Chinese Academy of Sciences in Beijing added in an email that the research has "a long way to go" before it could be used for infertile men.
The scientists began with mouse embryonic stem cells, which are found in embryos and can develop into any kind of cell in the body. In the lab these cells were exposed to chemicals to nudge them toward becoming sperm. While previous research has also generated sperm precursors in this way, these precursors then had to be transplanted into the testicles of mice to develop further.
Related: Making Stem Cells From Ordinary Cells
The new technique is an advance, experts said, because it eliminates the need for transplants. Instead, the researchers put the sperm precursors in a lab dish containing testicle cells.
Although the precursors never became fully mature sperm, they developed far enough to fertilize eggs. They were injected into 379 eggs; nine baby mice resulted.
The results are convincing, said John Schimenti of Cornell University in Ithaca, New York, who didn't participate in the work. He said he thinks the major payoff will come in basic research into sperm development.
But he and another expert, Renee Reijo Pera of Montana State University, said they thought the technique might someday be adapted to more directly help some infertile men.
In that case, the process would begin with skin cells or other cells from the patient, which could be converted into stem cells bearing the patient's DNA. These stem cells would then be put through the process.
But there would be challenges in applying the mouse technique to people, such as finding an alternative to using testicle cells from newborns, Reijo Pera said.
She also said the mouse results would have to be confirmed by other labs first, a standard caveat for research. And given the practical limits on availability of eggs from women, the technique would have to be made more efficient in producing births, she said.
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He's got a Golden Globe win and an Oscar nomination for The Social Network, but he's not done yet. In a recent interview with BBC Breakfast, Aaron Sorkin revealed details of a project that's sure to sound familiar to any of his fans: a series set behind the scenes in television.
This time - his fourth television series - Sorkin is turning his eye toward cable news for HBO. "I've written the pilot episode and we're casting it right now," he says in the interview, though the premium network has made no official statement regarding a future project. Of course, writing and casting a pilot is no guarantee that it will be ordered to series, but with Sorkin's current critical acclaim, it seems unlikely that the network would pass on the venture.
Sorkin is no stranger to peering behind the curtain of television. He tackled what it takes to make a Saturday Night Live-type sketch comedy series in the short-lived Studio 60 on the Sunset Strip, which lasted only one season on NBC despite the presence of Matthew Perry and Bradley Whitford. His start, however, came on ABC with my favorite television series of all time - Sports Night, which introduced us to life behind the scenes of a nightly sports news program. It lasted only two seasons, but remains beloved in the hearts of critics and fans alike. Many of its cast went on to further success after its end: Peter Krause with Six Feet Under and now Parenthood, Joshua Malina taking a regular role on Sorkin's The West Wing, Felicity Huffman joining Desperate Housewives and Josh Charles in CBS' The Good Wife.
At face value, this as-yet-untitled series sounds an awful lot like Sports Night, just with a focus on cable news instead of cable sports. Nothing is going to be able to touch how great that series was, which makes me worry that this project may feel like an attempt to reproduce that show's brilliance. I'll watch anything that Sorkin writes, however, as he's still one of the best writers on television today, if not ever. I certainly hope this series fares better than Studio 60.
What do you think? Are you excited that Aaron Sorkin is coming back to television? Do you have high hopes for his return?
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A recent Gartner survey found that 85 percent of organizations anticipate their spending with external service providers (ESP) to increase or stay the same when the economy returns, pointing to a return to growth in the IT services market in 2010.
In a Monday report, the research firm said 76 percent of organizations surveyed were optimistic about the economic recovery time frame and had indicated in their business planning cycles that there were seeing recovery as early as 2009 or occurring in 2010.
The survey of 1,073 respondents was conducted from November to December 2009 across the US, Europe and Asia-Pacific regions to determine how economic changes have impacted IT services buying and decision-making. Respondents were taken from a range of company sizes and vertical markets, excluding government organizations.
Allie Young, vice president and distinguished analyst at Gartner, said the recession was clearly felt by organizations who reported increased contract renegotiations with ESPs as well as increased use of offshore services.
Organizations also saw greater influence from the chief finance officer (CFO) and procurement over IT services spending, she said.
The global recession in 2008 through 2009 was significant, and in some cases radically changed a vertical market or a company's competitive position, said Young. Buyers of services were impacted, making them more cautious when it came to IT spending.
However, Young noted that the majority of organizations will increasingly turn to ESPs to support IT strategies execution with the economic recovery. The results of the survey showed an overall positive market acceptance of ESPs, though regional and vertical differences will apply and must be factored into client needs.
Gartner said the overall mean average for spending with ESPs is predicted to increase to 7.13 percent. However, there is a great degree of variation in different countries. Indian users, for example, expect an increased spending of 17.4 percent, while Japanese users foresee a decrease of 1.5 percent.
Despite the positive signs of a return to growth, Young said providers will remain in a hypercompetitive IT services environment for some time to come. There will be more provider options for buyers to consider, with buyer considerations dominated by a focus on cost, and the likelihood of more providers pursuing the same opportunities.
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And you thought Beacon is (was) creepy.
Yesterday I had my first experience at a Build-A-Bear Workshop store. Build-A-Bear, if you're not familiar with it, is a publicly traded company headquartered in St. Louis, MO, with some 350 retail outlets worldwide. It's irresistible to boys and girls alike, if the birthday party we attended was any indication. Kids can choose one of over 30 different styles of animal, stuff it onsite using big yellow machines filled with flying fluff, carefully add a small heart to bring the animal "to life," and customize to their heart's content (and their parents' wallets' horror) from a stupefying collection of sounds, clothes, shoes, and accessories that include miniature skateboards and MP3 players.
All good, clean — if decidedly consumer-culture focused, and potentially bank-breaking — fun. Until you get to the last step in the process, which had me nostalgic for (egad) the Cabbage Patch Kids. Who as I recall were discharged from their mythical birthplace without asking for their new owner's home address.
You see, each Build-A-Bear critter is issued a "birth certificate," which is generated after the kids — and hopefully their parents, though that didn't seem to be making a bit of difference on the common sense front — visit a bank of computers. These are big orangey-purple affairs, sort of Dr. Seussian in presentation. The keyboard buttons include stars and other colored shapes to make data input all the easier and more intuitive for youngsters. In fact, the computer-plus-keyboard experience is very close (no doubt intentionally so) to something children and their parents might have experienced in a kids' museum, library, or school. Before their new friend can get its birth certificate, the kids are prompted to enter a host of very personal personal information: birth date, home address, gender, phone, and email among them. Along the way is the option to "skip" some of this input, but unlike what we're used to in the world of online retail forms, there's no effort to communicate what data is "required" for the transaction to proceed, and what's "optional." The overall effect is to sideline the privacy-savviness that might otherwise accompany the parent and/or child. I sat there and watched parent after parent prompt their kids to flex their memory muscles and practice their computer skills: "Ok Timmy, now, what's our address? What's your birthday? Do you remember our phone number? Good typing!!"
It's not until after the kids have given up all this data, most often with their parents help and lulled consent (though there's no requirement that parents participate at all), that Build-A-Bear gives its customers a copy of its privacy policy, which comes tucked away in the packaging folks take home.
I really don't have any problem with Build-A-Bear's privacy policy, or the tie-ins with the virtual world (Build-A-Bearville) the company hopes your child will visit with his or her new stuffed friend. But though the policy looks good on paper, this is a case where the execution stinks. Parents and kids should not be urged or encouraged to give up personal data, and when they're asked to do so there should be some up-front reminders as to what is happening.
Cory Doctorow likes to tell an anecdote about how today's children are becoming more and more inured to invasions of privacy. In his case, children in line at Disneyland thought it odd when he refused to supply a fingerprint. Here, kids are learning it's ok for a store to know quite a bit about them. Parents should make a stink about this sort of thing and be on the lookout for it.
(Bonus link: Kim Pallister, Can a stuffed bear hold the secret to game piracy?)
(Images by gitb and Brittany G, CC Attribution-2.0)
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Fitch Ratings is more positive than Standard & Poor’s on the impact on Japanese insurers of the earthquake and Tsunami.
Fitch affirmed nine Japanese life insurers’ Insurer Financial Strength (IFS) Ratings, following the agency’s ‘core’ & ’severe’ stress test of the impact of the Great East Japan Earthquake and tsunami as well as stock market volatility in its aftermath. The Outlook on all of the ratings is Stable.
The nine insurers are Nippon Life Insurance Company (IFS ‘A+’/Stable), Dai-ichi Life Insurance Company, Limited (IFS ‘A’/Stable), Meiji Yasuda Life Insurance Company (IFS ‘A’/Stable), Sumitomo Life Insurance Company (IFS ‘A-’/Stable), Daido Life Insurance Company (IFS ‘A+’/Stable), Taiyo Life Insurance Company (IFS ‘A-’/Stable), Mitsui Life Insurance Company Limited (IFS ‘BBB-’/Stable), Asahi Mutual Life Insurance Co. (IFS ‘BB’/Stable) and Fukoku Mutual Life Insurance Co. (IFS ‘A’/Stable).
The Fitch stress test results indicate that the Japanese life insurers’ capitalisation is more than sufficient to cover the expected loss estimates even under the Fitch ’severe’ scenario coupled with stock market volatility.
Fitch would expect the insured losses to be absorbed by the insurers’ annual core profits without negatively affecting capitalisation, unless the actual ultimate losses turn out to be materially larger than the amount assumed in Fitch’s ’severe’ stress scenario.
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If this is what saving your job looks like, I'm not sure Mack Brown wants to see what it'll look like when he loses it.
After Brown's Texas Longhorns squeaked out a 31-30 victory in the final minute against an Iowa State team that lost its season opener to an FCS school, DeLoss Dodds, the longtime athletic director who will retire in 2014 and who is Brown's biggest advocate, wandered onto the field, a look of relief on his face.
It was a road win against a Big 12 foe, and in college football, you take that any way you can get it. Still, the way the Longhorns got it on Thursday night was sloppy and ugly, at times baffling both in their play-calling and in their mental mistakes. Ask Iowa State coach Paul Rhoads and he'd tell you the Longhorns win was also helped by some blind referees, whose call on an apparent Texas fumble on the 1-yard-line led to the game-winning touchdown.
But for Brown -- who, after USC's Lane Kiffin was unceremoniously pulled off the team bus and fired last weekend after a loss to Arizona State, is now the head coach with the hottest seat in college football -- it wasn't exactly a win that inspires confidence from the Longhorn faithful. Iowa State outgained Texas by 100 yards. Texas needed a 44-yard Hail Mary touchdown pass at halftime to pull into the lead. Their defense blew a coverage and allowed a 97-yard touchdown pass in the third quarter.
It was a win, yes, but it wasn't a pretty one, especially going into the Red River Rivalry next weekend against 11th-ranked Oklahoma, which has beaten Texas three years in a row.
As Dodds crossed the field and hugged football players, he told me a win is a win, especially on the road. I asked him: Will Mack Brown continue to be your coach as long as you're the athletic director?
"He's always been my coach," Dodds replied.
Perhaps it's an obvious answer. The two are friends, and Brown has an impressive history in Austin: nine wins or more his first 12 years as coach, one national title and another appearance in a BCS title game, perhaps the best recruiter in the country. Why would Dodds fire the coach who brought him so much, especially when Dodds himself is now a lame duck?
But what Longhorn fans wonder is this: What has Mack Brown done for them lately?
The answer? Not much.
Since losing to Alabama in the 2010 BCS Championship Game, Alabama's head coach Nick Saban has gone in one direction -- toward perhaps becoming the greatest coach in college football history -- while Brown has gone the other. Since that loss, Brown's team have gone a middling 25-18. Non-conference blowout losses to BYU and Ole Miss have put Brown's job in jeopardy this season, and the near-loss to Iowa State won't help his cause.
Especially when the outcome was in doubt in the final minute, when Texas running back Johnathan Gray had the fumble-that-wasn't-a-fumble on the 1-yard line.
Though from Brown's postgame comments, however, you'd have thought the Longhorns just won the lottery.
"I'm so damn happy tonight," he said. "We played really hard. We didn't play well. A lot of things we messed up. But even better for us that we could not play our best, but we played so hard, and believed, and never gave up, and knew we could come back."
"I love comeback wins on the road more than anything in football," he said. "It just says something about your toughness and your team and believing. We're getting back something we lost. We couldn't have done this the last couple years. It was critical we came back and won this game because it tells them something about never giving up ... Everybody messed it up and we still won. That's pretty cool."
That can happen against a middle-of-the-pack, scrappy bunch like Iowa State.
But next week, against Oklahoma? That will be the game where we will get to see a clearer reckoning of Brown's future at Texas. That will be a game where playing hard but not playing well will not equal a victory, even with the help of referees.
"(We) don't worry about what the media says, don't worry about what anybody outside says, just play football," said Texas tight end John Harris, who caught the Hail Mary at the end of the first half. "We just wanted to win this just to win, so we could finally get that monkey off our back, get that monkey off (Brown's) back."
He paused for a second.
"We win next week? That monkey will be off his back."
It will. But after Thursday night's near-debacle, that sure doesn't seem likely.
Follow Reid Forgrave on Twitter @reidforgrave or email him at ReidForgrave@gmail.com.
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Philadelphia, PA (SportsNetwork.com) - We are almost a month into spring training and just like last year, the prevailing story has been the rash of injuries, especially among big-time pitchers.
Texas ace Yu Darvish has a torn elbow ligament and will likely need season- ending surgery, while Philadelphia left-hander Cliff Lee has a torn flexor tendon in his elbow and will try everything he can to put off surgery, which he says could end his career.
Just as devastating as those two, but a little more under the radar is the elbow injury to Kansas City lefty Tim Collins, who was a vital part of the Royals' vaunted bullpen a year ago that carried them to a American League pennant.
Like the Rangers and Phillies, the Royals are seeking out every option they can to avoid surgery, but, of course, are bracing themselves for the worst.
And there will sure to be more to come before the first pitch of the season is thrown by Jon Lester on Easter Sunday in Chicago.
The most disheartening injury, though, may have come Tuesday, as Toronto righty Marcus Stroman tore his ACL in his left knee while taking pitchers' fielding practice on the back fields. He went to cover first base on a bunt, felt a pop in his knee and later underwent an MRI, which revealed the damage.
Although the Jays haven't said how long he'll be out, the belief is Stroman will miss the entire 2015 season.
"Beyond devastated. Not being able to compete with my brothers each and every day is extremely disappointing," the 23-year-old Stroman wrote Tuesday on Twitter. "Still can't believe it."
Stroman was expected to be a key piece to Toronto's starting rotation this season after a strong rookie campaign. He was 11-6 with a 3.65 ERA and 111 strikeouts over 130 2/3 innings in 26 games, including 20 starts, in 2014.
After struggling at the outset, though, the former first-round pick added a sinker to his arsenal and was a completely different pitcher from that point on.
If you were looking for a breakout star in the American League this season, Stroman certainly would have been on a short list.
Now the Blue Jays are left scrambling heading into a season they thought would end with their first postseason appearance since 1993. It seems as if we say this every year about the Blue Jays, but with the AL East as wide open as it's been in recent memory, you certainly could have stated a case for them.
And you still may. Hear me out here.
Even before Stroman went down, the Blue Jays probably could have used another starting pitcher or two. The last time I checked, the New York Mets not only have an abundance of good, young arms, which, of course, is not a problem unless you have other holes.
And the Mets do, particularly at shortstop, preferably one who can leadoff.
Perhaps I am still out of my mind from the news that Darrelle Revis is coming back to New York, but why wouldn't the Mets offer up one of those pitchers for Jose Reyes?
The sticking point for the Mets could be that Reyes is owed $22 million a season over the next three years. The Jays would move him, though. For Reyes' own sake, he needs to get out of Toronto. That turf is taking a toll on those precious knees.
It's probably a longshot, but these are two teams who have done business in the past. And given the flurry of activity in the NFL this past week, why not throw some crazy MLB trade proposals out there.
Let's be honest, it's still better than talking about spring training games.
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Yasser Arafat's (search) body is being flown from Paris to Cairo, where a funeral service attended by foreign dignitaries will be held for him Friday morning.
Arafat's body will then be flown by helicopter to his Ramallah compound, called the Muqata, for services and burial in a mausoleum later in the day.
The Israeli military said it would restrict access to the burial, allowing only Palestinians with permits to attend, but would allow mourners to hold processions in towns and refugee camps.
The Palestinian leader always said he wanted to die as a martyr, but died instead of old age and a mysterious illness Thursday morning in a French military hospital.
Arafat's widow, Suha, wearing black coat and pants, stifled sobs as the Palestinian flag-draped coffin of her 75-year-old husband was carried off a military helicopter to an official French aircraft. The aircraft then left for Cairo, Egypt, where funeral services will be held Friday.
Arafat, 75, died at 3:30 a.m. Paris time, and as his passing was announced, a wave of grief swept across the West Bank and Gaza Strip.
Thousands of Palestinians ran into the streets, clutching his photograph, crying and wondering about their future without the man who embodied their struggle for statehood.
"He is our father," Namia Abu-Safia, 48, said sobbing in the Jebaliya refugee camp (search) in the Gaza Strip. "He is Palestine."
In a hurried effort to project continuity, the PLO elected former Palestinian Prime Minister Mahmoud Abbas (search) as its new chief, virtually ensuring that he would succeed Arafat as leader of the Palestinians, at least in the short term.
The Palestinian legislature also swore in Parliament Speaker Rauhi Fattouh (search) as caretaker president of the Palestinian Authority until elections could be held in 60 days according to Palestinian law.
Hundreds of mourners lining the streets near the Percy Military Training Hospital outside Paris shouted, "From Paris to Jerusalem, we are all Palestinians!," as Arafat's body was brought to a French army helicopter for a short flight to Villacoublay military airfield.
There, a band played somber music at a small ceremony involving French Prime Minister Jean-Pierre Raffarin, Palestinian officials and Suha Arafat. The coffin was borne by eight Republican Guard pallbearers past an honor guard.
Egypt frantically prepared for the funeral service in a military club north of Cairo followed by a short procession led by a horse-drawn carriage. Security forces at Cairo's airport and elsewhere were put on maximum alert for the arrivals of heads of state and other dignitaries.
Palestinians will remember him as an icon, a father figure and a symbol of resistance against the Jewish state.
But Israelis will remember him as an arch-terrorist — their nemesis for nearly 40 years.
His death marked the end of an era in modern Middle East history, and prompted calls from President Bush and other world leaders to seize the moment to spur new efforts at Israeli-Palestinian peacemaking.
Bush said Arafat's death was a "significant moment" in Palestinian history and expressed hope that the Palestinians would achieve statehood and peace with Israel.
"During the period of transition that is ahead, we urge all in the region and throughout the world to join in helping make progress toward these goals and toward the ultimate goal of peace," Bush said.
Israeli Prime Minister Ariel Sharon (search), who had shunned his longtime enemy as a terrorist and obstructionist, said Arafat's death could serve as an "historic turning point in the Middle East" and expressed hope that the Palestinians would now work to stop terrorism.
Sharon refused to mention Arafat by name.
Arafat's History
Arafat took over the Palestine Liberation Organization (search), until then controlled by neighboring Arab countries, after Israel's crushing defeat of combined Egyptian, Jordanian and Syrian armies in the 1967 Six Day War.
His Fatah movement had been founded in 1956 as an underground, indigenously Palestinian movement whose goal was to carry out armed struggle against Israel
Arafat then used a combination of showcase terrorism — dramatic, globally televised plane hijackings and hostage-takings in the 1970's and '80's — and persistent diplomacy to make the plight of the Palestinian people an issue the world could not forget.
He justified the use of violence: "As long as the world saw Palestinians as no more than refugees standing in line for U.N. rations, it was not likely to respect them. Now that the Palestinians carry rifles, the situation has changed."
But Arafat later found himself on the wrong side of history. In the post-Sept. 11 world, the more murderous form of terrorism practiced by Al Qaeda, the non-PLO Palestinian Islamic group Hamas (search) and Fatah's own Al-Aqsa Martyrs' Brigades (search) disgusted the world, leading the United States and Israel to refuse to deal with him.
In early 2001, at the conclusion of talks instigated by outgoing President Bill Clinton, Arafat rejected a deal offered him by then-Israeli Prime Minister Ehud Barak that would have given the Palestinians the entire Gaza Strip, 95 percent of the West Bank, Arab neighborhoods in East Jerusalem and control of the Temple Mount in the heart of the holy city.
Arafat reportedly balked because the offer did not give the estimated 2 million Palestinian refugees the right to return to ancestral homes inside Israel. He also said signing the deal would be akin to signing his own death warrant.
His crowning irony was that although he, more than any other individual, had put the Palestinians as a people on the map, he had failed to create a state to house them.
"I offer my condolences to Yasser Arafat's family, his partners in the PLO and to the Palestinian people who are grieving the passing of the man who symbolized their hopes and aspirations for so long," Clinton said in a statement. "However others viewed him, the Palestinians saw him as the father of their nation. I regret that in 2000 he missed the opportunity to bring that nation into being and pray for the day when the dreams of the Palestinian people for a state and a better life will be realized in a just and lasting peace."
On Thursday morning, black smoke from burning tires rose across the Gaza Strip and gunmen fired into the air in grief.
Palestinian flags at Arafat's battered compound in Ramallah on the West Bank were lowered to half staff. Somber music played on the radio, church bells rang out, and Quranic verses were played for hours over mosque loudspeakers.
Fearing the mourning could rapidly turn into rioting, Israel quickly sealed off the West Bank and Gaza Strip and increased security at Jewish settlements.
The death of Arafat, who ruled over squabbling Palestinian factions for nearly four decades, left Palestinians without a strong leader for the first time. It raised concern that the scramble to claim Arafat's mantle could fragment the Palestinian leadership or spark chaos and factional fighting in the streets.
Palestinians Want 'Road Map'
Sharon, insisting that it was impossible to discuss peace with Arafat, had over the past year pushed forward with his "unilateral disengagement" plan, under which Israel would evacuate the Gaza Strip in 2005, abandon some isolated West Bank settlements and finish a barrier to separate Israelis from Palestinians.
Nabil Shaath (search), the Palestinian foreign minister, called on Israel after Arafat's death to resume implementation of the U.S.-backed "road map" peace plan. He told The Associated Press that Israel had used its dislike for Arafat as an excuse for avoiding obligations to withdraw from West Bank towns.
"Now, the road is open, and we are telling the Israelis, welcome. If you want to implement the road map, then implement it," Shaath said. "It was the path of President Arafat, and we will go on the path of Arafat."
French President Jacques Chirac (search) eulogized Arafat as a "man of courage and conviction who, for 40 years, has been the incarnation of the Palestinians' combat for recognition of their national rights."
Arafat was flown to a French military hospital in Clamart, outside of Paris, on Oct. 29 after his health began deteriorating. It was the first time in nearly three years that he had left his compound in Ramallah.
Neither Arafat's doctors nor Palestinian leaders would say what killed him.
"He closed his eyes and his big heart stopped. He left for God but he is still among this great people," said senior Arafat aide Tayeb Abdel Rahim, who broke into tears as he announced Arafat's death.
The Palestinians had demanded Arafat be buried in Jerusalem on the Temple Mount, the disputed holy site that once held the biblical Jewish temples and where now stand the Al-Aqsa Mosque, Islam's third holiest shrine, and the Dome of the Rock, the universally recognized symbol of the city.
Israel refused, fearing a Jerusalem burial would strengthen Palestinian claims to a city envisioned as capital of a future Palestinian state.
In a compromise, the Palestinians agreed to bury Arafat at his compound in Ramallah, battered and strewn with rubble from repeated Israeli raids.
But they plan to line his grave with soil taken from the Al Aqsa Mosque compound, said Ahmed Ghneim, a Fatah leader, and he is to be interred in a cement box, so he can be moved to Jerusalem for burial when the opportunity presents itself.
Seldom seen in public without his military uniform and his checkered keffiyeh headdress folded into the shape of Palestine, Arafat kept the Palestinian cause at the center of the Arab-Israeli conflict. But along with other secular Arab leaders of his generation, he saw his influence weakened by the rise of radical Islam in recent years.
Revered by his own people, Arafat was reviled by many others. He was accused of secretly fomenting attacks on Israelis while proclaiming brotherhood and claiming to have put terrorism aside. Many Israelis felt the paunchy 5-foot, 2-inch Palestinian's real goal remained the destruction of the Jewish state.
'A Freedom Fighter's Gun'
Arafat became one of the world's most familiar faces after addressing the U.N. General Assembly in New York in 1974, when he entered the chamber wearing an empty holster and carrying a twig.
"Today I have come bearing an olive branch and a freedom fighter's gun," he said. "Do not let the olive branch fall from my hand."
Two decades later, he shook hands at the White House with Israeli Prime Minister Yitzhak Rabin (search) at the signing of a peace deal that formally recognized Israel's right to exist while granting the Palestinians limited self-rule in the West Bank and Gaza Strip.
The pact led to the 1994 Nobel Peace Prize for Arafat, Rabin and then-Israeli Foreign Minister Shimon Peres (search).
But the accord quickly unraveled amid mutual suspicions and accusations of treaty violations. A new round of violence that erupted in the fall of 2000 has killed some 4,000 people, three-quarters of them Palestinians.
"The biggest mistake of Arafat was when he turned to terror. His greatest achievements were when he tried to build peace," Peres said.
The Israeli and U.S. governments said Arafat deserved much of the blame for the derailing of the peace process. Even many of his own people began whispering against Arafat, expressing disgruntlement over corruption, lawlessness and the bad economy in the Palestinian areas.
A resilient survivor of war with Israel and Jordan, numerous assassination attempts by both Israel and other Arabs and even a deadly plane crash, Arafat was born Rahman Abdel-Raouf Arafat Al-Qudwa on Aug. 4, 1929, the fifth of seven children of a Palestinian merchant killed in the 1948 war over Israel's creation.
Arafat insisted he was born in Jerusalem, but most biographers think he was born either in Gaza or in Cairo.
Educated as an engineer in Egypt, Arafat served in the Egyptian army and then started a construction firm in Kuwait. It was there that he founded the Fatah movement, which became the core of the PLO.
FOX News' Jennifer Griffin, Paul Wagenseil and The Associated Press contributed to this report.
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The pitched battle over pre-Iraq war intelligence, leaks and the call for more investigations continued Tuesday on Capitol Hill, with congressional Democrats raising the bar by blaming Vice President Dick Cheney for just about everything but the weather and maybe even that.
"There's a dark cloud hanging over the White House. It's really a storm cloud," Senate Minority Leader Harry Reid, D-Nev., told reporters.
Click in the video box to the right to watch a report by FOX News' Jim Angle.
Reid charged the vice president with being in the middle of administration efforts to exaggerate pre-war intelligence. Though he cited no evidence, he also alleged the vice president was behind the leaking of national security secrets and pointed to former Cheney Chief of Staff Lewis "Scooter" Libby, who was indicted for misleading the grand jury over his conversations with reporters about the wife of ambassador Joe Wilson, who worked for the CIA.
On top of it all, Democrats are demanding that the president promise not to pardon anyone found guilty in the CIA leak case.
"Being a high official in the White House should not entitle you to a get-out-of-jail-free card, plain and simple," said Sen. Charles Schumer, D-N.Y.
Libby maintains his innocence and has yet to be tried. Asked Tuesday about the issue of pardons, White House Press Secretary Scott McClellan would not discuss it.
"I'm not going to speculate about any matters relating to it. This is something that is just beginning," he said.
Reid seemed to go even further Tuesday than he has in recent attacks, presenting as fact the idea that official comments about pre-war intelligence were fabricated by officials.
"Yellowcake, secret training of terrorists by the Iraqis, secret meetings in Europe, weapons of mass destruction was all manipulated, made up," he said.
Reid didn't offer any explanations why prominent Democrats, including Sen. Jay Rockefeller, ranking member of the Senate Intelligence Committee, made the same arguments as the administration before the war.
"I have come to the inescapable conclusion that the threat posed to America by Saddam's weapons of mass destruction is so serious that despite the risks — and we should not minimize the risks— we must authorize the president to take the necessary steps to deal with that threat," Rockefeller said in October 2002.
The idea that Saddam Hussein was flirting with Al Qaeda goes back years. CIA Director George Tenet told Congress of it. Sen. Hillary Clinton, D-N.Y., the former first lady, mentioned it during the debate over going to war.
Even Special Prosecutor Patrick Fitzgerald, who Democrats applaud for indicting Libby, told the Sept. 11 commission that during his investigation of the 1998 bombings of U.S. embassies in Africa, he found evidence that Al Qaeda and Iraq had been talking to one another.
Late Tuesday, Steve Schmidt, a counselor to the vice president, offered a blistering response to Reid, saying "Harry Reid's attack is unconscionable, personal and malicious." Schmidt also called it "beneath the office of the Democratic leader."
Senior White House officials and Republican strategists say over the course of the next few days, they will pursue a unified counter-attack against what they call "Democratic hypocrisy" regarding intelligence and the war in Iraq.
Sources say the Republican National Committee, key members of Congress and the White House plan to place particular emphasis on Democrats who voted for the war and/or participated in any one of the four investigations relating to Iraqi intelligence that have now been released. None of those reports concluded that the Bush administration intentionally twisted intelligence on Iraqi weapons of mass destruction.
FOX News' Carl Cameron contributed to this report.
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There was no glory for the United States at this year's World Cup, only frustration and failure.
The Americans were eliminated in the first round, losing to Ghana 2-1 Thursday in a game they had to win to advance to the tournament's knockout phase.
With thousands of red, white and blue-clad fans cheering them on in Franken-Stadion, the Americans fell flat against a Black Stars team that was stronger and faster. Surprising Ghana advanced along with Italy from Group E.
It was a bitter ending for the United States, which carried high hopes — and a No. 5 world ranking from FIFA — onto soccer's biggest stage. Four years ago, the Americans made the quarterfinals of the World Cup.
Haminu Draman put the Africans ahead in the 22nd minute, breaking in alone on goalkeeper Kasey Keller after colliding with Claudio Reyna, who crumpled to the ground in pain.
The United States, which has never won a World Cup game in which it trailed, tied it when Clint Dempsey scored in the 43rd minute with a smashing 10-yard shot off a perfect feed from DaMarcus Beasley. But Ghana captain Stephen Appiah converted a penalty kick in the second minute of first-half injury time after American defender Oguchi Onyewu was called for a foul in the penalty area.
Eddie Johnson entered in the 61st minute as the United States pressed, and Brian McBride nearly tied it again in the 66th, but his diving header inside the 6-yard box clanked off the near post. A minute later, Onyewu sent a header off Landon Donovan's corner kick just over the crossbar.
In order to advance, the Americans needed a victory and some help. They got the needed assistance when Italy defeated the Czech Republic 2-0 in a game played simultaneous in Hamburg. But the United States (0-2-1) didn't come through and finished the tournament with one point — its first in a World Cup played in Europe, but not enough to escape the basement in Group E.
Italy (2-0-1) won the group with seven points and Ghana (2-1), making its first World Cup appearance, advanced with six points.
Four years ago, the Americans became heroes with their best showing since 1930. But this time, in what probably marked the final World Cup appearances of Reyna, McBride and perhaps Keller, they reverted to their form of 1998 in France, when they finished last overall.
U.S. fans outnumbered the Ghanaians dressed in red, yellow and green, both in the cobblestone streets of Nuremberg's old town before the game and in the historic ballpark where Hitler Youth marched seven decades ago.
With Eddie Pope and Pablo Mastroeni suspended, the Americans used Jimmy Conrad to replace Pope at central defender and Reyna shifted back to Mastroeni's defensive midfield role. Beasley joined Donovan in the center of the midfield and Eddie Lewis, who started the opener at left back, took over in left midfield — his more familiar position — from Bobby Convey.
Draman scored after Dempsey played a back pass to Reyna, and the U.S. captain collided with the Ghanaian left knee to left knee. As Reyna fell, Draman took possession and rushed in one-on-one against Keller, putting the ball onto his right foot and sending it into the corner of the net beyond the diving goalkeeper from 10 yards.
Reyna was taken off the field on a stretcher, grimacing, but returned in the 26th minute, just about the time Italy went ahead of the Czechs. Still looking pained, he was replaced by Ben Olsen in the 40th minute and went to the bench, where the knee was wrapped.
Donovan, who failed to score after getting two World Cup goals as a 20 year old in 2002, had a great chance to tie it in the 35th. He had an open shot after Brian McBride dropped a header for him, but got under the ball and his volley attempt went way high — with U.S. coach Bruce Arena looking disgusted in front of the bench.
Dempsey then tied it.
Beasley, along the left flank just past midfield, battled Derek Boateng and John Pantsil and stole the ball. After a short run, Beasley sent a pinpoint left-footed cross in front of the goal. Racing ahead of Habib Mohamed, Dempsey one-timed the ball with his right foot from about 12 yards.
It was the first goal by a U.S. player in the World Cup in 338 minutes. Dempsey did his rap dance as Americans celebrated.
But moments later, the Americans fell behind again. For good.
Onyewu pushed down Razak Pimpong in the penalty area battling for a header, and Germany's Markus Merk — one of the world's top-rated officials — immediately pointed to the penalty spot as Arena buried his face in his hands. Keller dived left, but Appiah put the ball high to the goalkeeper's right.
Arena kept on talking in the referee's direction until an assistant coach pulled him away.
For full World Cup coverage go to FOXSports.com.
In Hamburg, substitute Marco Materazzi headed in a corner kick in the 26th minute to help Italy win Group E with a 2-0 victory over the Czechs and likely avoid a second-round matchup with Brazil.
Materazzi scored his first goal in 29 appearances with the national team and Filippo Inzaghi added a score on a breakaway in the 87th minute for Italy, which won the group with seven points.
"We played some good games and then also with the Czech Republic, which is also a good team that did not want to go home," Italy coach Marcello Lippi said.
The Czechs fell behind early when the 6-foot-5 Materazzi outleaped Jan Polak and Radoslav Kovac to head in a corner kick by Francesco Totti less than 10 minutes after replacing an injured Alessandro Nesta.
They were reduced to 10 men when midfielder Jan Polak picked up his second yellow card in first-half injury time and were unable to penetrate Italy goalkeeper Gianluigi Buffon, who made several strong saves.
"We had to play twice against strong opponents with only 10 men," Czech coach Karel Bruckner said. "It was almost impossible. We were troubled by a number of problems including our own mistakes."
Italy will face the second-place team from Group F on Monday in Kaiserslautern. Brazil leads the group with six points and can clinch first place with a draw Thursday night against Japan.
The Czechs pressed early on and Milan Baros, returning from a left foot injury, nearly connected on an excellent crossfield setup from Pavel Nedved in the ninth minute.
Buffon had to lunge to his left to stop an 18-yard shot by Nedved in the 12th. A few minutes later, Nedved intercepted a pass and sent the ball upfield to Baros, who earned a corner kick after a physical battle with Nesta, who rarely loses such duels.
Nedved sent another shot on goal from just outside the area in the 16th minute that Buffon stopped but couldn't quite gather, and the goalkeeper also had to block an attempt on the rebound from AC Milan's Marek Jankulovski.
Gennaro Gattuso's long header landed on top of the net for Italy's first shot in the 25th minute and Italy took the lead with its first shot on goal a minute later.
Polak received his first yellow for a foul on Mauro Camoranesi in the 35th, then fouled Totti from behind for his second card.
Italy took the initiative at the start of the second half, with two shots early by Totti. Nedved then got the ball on the counterattack and put a powerful shot on goal that Buffon punched away.
In the 56th minute, Italy showed off its skill on a free kick. Totti lofted the ball to Andrea Pirlo, who volleyed it to Fabio Cannavaro, who shot high.
Inzaghi got his first playing time of this World Cup when he replaced Alberto Gilardino in the 60th.
Buffon had to punch away another long attempt by Nedved in the 70th.
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Under a canopy of soldiers' drawn swords as church bells tolled, Prince Guillaume of Luxembourg and Belgian Countess Stephanie de Lannoy emerged smiling Saturday from the tiny duchy's Notre Dame Cathedral after wrapping up a two-day wedding gala with a religious ceremony.
Onlookers and well-wishers lined the super-scrubbed streets near the cathedral and roared with joy as the newlyweds looked down from a red velvet-covered palace balcony, and haltingly — but deeply — kissed for the crowd.
The church wedding of Prince Guillaume — the 30-year-old heir to the throne and Luxembourg's grand duke-to-be — and the Belgian countess drew top-drawer guest list. It came a day after a civil ceremony at Luxembourg City Hall.
The bearded groom and his 28-year-old blonde bride were trailed by a procession of well-known royals, including Queen Beatrix of the Netherlands, Princess Victoria and Prince Daniel of Sweden, Prince Naruhito of Japan, and Britain's Prince Edward — Queen Elizabeth's youngest child — and his wife, Sophie.
Stephanie plans to renounce her Belgian citizenship in order to — one day — become Luxembourg's grand duchess. The tiny country wedged between France, Belgium and Germany is an important financial center and continues to prosper despite Europe's economic trouble.
Stephanie wore a lace Elie Saab dress with a 5-meter-long wedding train during the ceremony, which was conducted in a mixture of French, German and Luxembourgish. It began with a minute's silence to honor her late mother, Countess Alix de Lannoy.
For the wedding banquet attended by 800 people, Bocuse d'Or-winning chef Lea Linster — herself from Luxembourg — whipped up a buffet medley including Riesling-marinated pork and veal pate, lobster in gelee consomme, and sea bass in salted crust and thyme stuffing; dessert included Madeleine cakes, choux a la creme pastries, and creme brulee.
Later in the evening, the royal couple walked through town, shaking hands with well-wishers before a fireworks show. Afterward, they drove off in a limousine with a sign on the back that read "Just Married" in Luxembourgish.
The nuptials gave tiny Luxembourg — a founding member of the predecessor of the European Union — a rare moment in the international media spotlight. With a population of just over 500,000, the trilingual duchy punches above its weight: Besides being an important financial center, it's home to the world's largest steel manufacturer and it boasts the second-highest gross domestic product per capita in the world, more than $80,000.
Luxembourg began as a Roman fortress. It has, at one time or another, fallen under the control of Spain, France and Austria. In 1839, it gained its independence from the Netherlands, but lost more than half its territory to Belgium. Germany overran Luxembourg twice in the 20th century despite its protests of neutrality.
The current grand duke, Henri, who is 57, is popular. People can greet him on the street without bowing down before him. His 31-year marriage to Grand Duchess Maria Teresa appears to be very happy.
The newlyweds seem to be happy too: In public appearances, including at the London Olympics, they have appeared besotted with each other.
After watching the ceremony on a big-screen on a public square near the cathedral, royal-gazing fans sensed the joy and historical importance.
"It was a really big moment — a really beautiful moment," said Claudine Als, clutching a glass of Champagne, seemingly awaiting a toast. "It is a historic day for Luxembourg, the country shines throughout the world."
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Whenever someone asked Kerry "what would the Israelis say?" Kerry said, "Stop listening to the Israelis."
At Iran briefing for significant U.S. senators, Kerry reportedly said to Ignore what the Israelis say
Photo Credit: Lori Lowenthal Marcus
In what was described as a “purely emotional” appeal that did not reveal the necessary specificity to assuage lawmakers’ concerns about a deceptive Iran on the brink of acquiring the ability to produce nuclear weapons, U.S. Secretary of State John Kerry met with members of the U.S. Senate banking committee on Wednesday afternoon, Nov. 13.
Kerry remained adamant that if congress ups the sanctions, it will push away Iranians from the negotiating table. And many members of congress seemed to be just as adamant that de-fanging sanctions at this stage of negotiations, when the Iranians remain unwilling to make major concessions, will mean any deal will be at great cost to the west and have little substantive effect on Iran’s nuclear abilities.
“Our hope is that no new sanctions would be put in place for the simple reason that, if they are, it could be viewed as bad faith by the people we are negotiating with,” Kerry said before entering a closed-door briefing with members of the Senate Banking, Housing and Urban Affairs Committee, according to CNN.
“It could destroy the ability to be able to get agreement,” he added, “and it could actually wind up setting us back in dialogue that’s taken 30 years to achieve.”
But after the meeting, the few congressmen who were willing to speak had harsh words both about the content of what was discussed, but also the atmospherics.
“It was fairly anti-Israeli,” Sen. Mark Kirk (R-IL) said to reporters after the briefing. “I was supposed to disbelieve everything the Israelis had just told me, and I think the Israelis probably have a pretty good intelligence service.” He said the Israelis had told him that the “total changes proposed set back the program by 24 days.”
A Senate aide told BuzzFeed that during the meeting, “every time anybody would say anything about ‘what would the Israelis say,’ they’d get cut off and Kerry would say, ‘You have to ignore what they’re telling you, stop listening to the Israelis on this.’”
“They had no details,” the aide said. “They had no ability to verify anything, to describe anything, to answer basic questions.”
Republicans and Democrats alike have questioned the sagacity of removing sanctions at this point in the negotiations, rather than ratcheting them up now, and then dialing them back down if an acceptable deal is reached.
Kerry’s approach, which placed the onus in exactly the opposite direction, was that the U.S. and the rest of the global community could “dial back up” sanctions later, if no agreement is reached with the Iranians.
“If this doesn’t work, we reserve the right to dial back up the sanctions. I will be up here on the Hill asking for increased sanctions, and we always reserve the military option,” he said. “Let’s give them a few weeks, see if it works, and we have all of our options at our disposal.”
In addition to Kerry, Vice President Joe Biden and State Department’s lead Iran negotiator Wendy Sherman were also present at the meeting. Bret Stephens held up a non-rose-colored lens to Sherman’s career in Monday’s Wall Street Journal.
Lori Lowenthal Marcus
About the Author: Lori Lowenthal Marcus is a contributor to the JewishPress.com. A graduate of Harvard Law School, she previously practiced First Amendment law and taught in Philadelphia-area graduate and law schools. You can reach her by email: Lori@JewishPressOnline.com
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Next week Honda Canada will start selling the 2012 Honda Civic, an all-new, ninth-generation version of Canada's best-selling car for the last 13 years.
Here's the question: Will it be for 14 years?
Details remain secret, but for months Honda has been promising a revolutionary ninth-generation Civic, one that will raise compact-car standards for innovative technology. It better be.
Honda needs a juicier Civic to beat back challenges from a growing array of very good competitors - new or refreshed ones such as General Motors' Chevrolet Cruze, Ford Focus, Hyundai Elantra, Toyota Corolla and Kia Forte. The worry for Honda is that its newer models have failed to find much traction in the market.
For instance, sales of the CR-Z sporty hybrid and Accord Crosstour crossover have been disappointing to say the least. The Accord Crosstour has seriously lagged the rival Toyota Venza, though Toyota Canada sells a far more comprehensive array of Venzas. Honda sells only expensive, V-6 Accord Crosstours. Honda's Insight hybrid has not touched the Toyota Prius hybrid in terms of sales success and the CR-Z has not established its niche so far.
"A lot of people have suggested that Honda is coasting," Aaron Bragman, a senior analyst with IHS Automotive, said during the Detroit auto show. "Recently, they haven't been the successful innovator they were once known for being."
Ouch.
The new Civic's job is to somehow bridge the expectations of older, existing Civic owners - baby boomer loyalists - with younger, newer buyers looking for a stylish compact car at an affordable price. Rumour has it that Honda Canada is planning to launch the new Civic touting a very comprehensive "value" story.
Honda will also launch multiple versions of the Civic, including a new hybrid variant that will use for the first time a lithium-ion battery pack. Also look for standard coupe and sedan versions, and a sporty Si. Four new Honda Civic models arriving almost at once is unprecedented and an indication of how serious Honda is with this launch.
This Civic will also answer another question: Does Honda still have the golden touch? Honda is hardly a disaster, but many feel the company has been drifting in recent years - losing ground to revived rivals such as Ford Motor with its new Focus and Hyundai with its new Elantra, to name two. Even Honda officials concede that recent "niche" models such as the CR-Z have failed to fire anybody's imagination.
"They need a hit," Ed Kim, director of industry analysis for consultant AutoPacific said in Detroit at the show. "Honda no longer has the edge. In efficiency, technology and design, they are no longer the leader."
The Civic is there to re-establish Honda as the leader in passenger cars in Canada. I expect Honda to come out swinging with the new Civic - to push hard touting every aspect of the car. Design, technology, performance, fuel economy and value will all be part of the story you'll hear from Honda Canada.
If there is a wild card in all this it is the earthquake and tsunami disaster in Japan that is limiting production of Honda vehicles around the world due to a number of factors, including parts shortages. Jerry Chenkin, Honda Canada executive vice-president, says Honda Canada dealers will have only about half the normal supply of Civics on the ground for an all-new model launch.
He also says Honda will do everything it can to ramp up Civic production as soon as possible and is counting on loyal Honda buyers to understand the desperate situation facing Japan and its industrial giants such as Honda. But these events are largely out of Honda's hands.
Meanwhile, Honda's competitors are poised to take advantage of a lack of Civic supply and that means a 14th year of the Civic being Canada's best-selling car may be in jeopardy. Honda is very competitive, though, and no one should expect this car company to give up without quite a fight.
For the new car buyer that can mean only one thing: lower prices as the various car companies duke it out for your money.
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Last November, Microsoft officials announced a plan to step up the company's commitment to enterprise security. Today, February 25 -- a week before the RSA Conference kicks off -- the company's Chief Information Security Officer, Bret Arsenault, provided a progress report on some of the products and initiatives related to that effort.
Here's what's new and coming soon.
Microsoft Cloud App Security, a new Microsoft cloud service that's based on technology Microsoft acquired when it bought Adallom, will be generally available in April 2016. Adallom's technology is all about protecting customer data inside third-party software-as-a-service apps like Box, SalesForce, ServiceNow, Ariba, in addition to Office 365.
On the Office 365 front, Microsoft Cloud App Security will provide advanced security alerts for notifying Office 365 admins of unusual or suspicious actions; cloud app discovery for analyzing to which cloud services their users are connecting; and app permissions, which provides the ability to approve/revoke third-party services connected to Office 365.
Read this Bluster, bravado and breaches: Today's 'terrorist' players in cybersecurity An emailed threat can send companies to their knees and propel individuals without so much as a parking ticket straight to a holding cell. Read More
Customer Lockbox for SharePoint Online and OneDrive for Business will begin rolling out in early Q2. In December, Microsoft announced general availability of Customer Lockbox for Exchange Online, which steps up the number of levels of approval within Microsoft required to troubleshoot a customer issue involving a mailbox or document contents. Now that capability is coming to SharePoint Online and OneDrive for Business.
Microsoft is adding the ability to use Power BI dashboard to reveal trends and attack patterns, as well as visualize and filter recommendations and security alerts from anywhere, including a mobile device. There are also new threat visualizations available in Microsoft's Operations Management Suite.
More security management and reporting options are coming to Azure Security Center, plus a revamped Security and Audit dashboard in Microsoft Operations Management Suite.
There will be a public preview next week of Azure Active Directory Identity Protection, which detects suspicious activities for end users and privileged identities based on data collected by Microsoft that is part of its "Intelligent Security Graph." This service, a feature of Azure Active Directory Premium, calculates user risk severity and configures risk-based policies to protect identities from future threats.
Azure Security Center Advanced Threat Detection is now integrated into Azure Security Center, offering users advanced threat detection when hosting virtual machines in Azure.
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Gartner Group is predicting Microsoft will control only four percent of the worldwide tablet market in 2012, trailing Apple and Google as a distant third player in the space.
Gartner estimates that Apple will sell 73 million tablets worldwide in 2012, and Android OEMs another 38 million. Tablet makers running Windows will sell 4.8 million devices, Gartner estimated in new data released this week. Gartner is expecting 119 million tablets to be sold worldwide in total this year.
It's not just because Windows 8, Microsoft's first truly touch-centric, tablet-optimized operating system, isn't expected to launch until later this fall that Gartner is bearish on Microsoft. Even by 2016, Gartner expects Microsoft's tablet share to hit only 11.8 percent, despite the fact that enterprise sales of tablets should be a major factor by that time. Gartner's take seems to be that Microsoft's offering won't appeal to consumers, who still will be the dominant customer audience for tablets.
TechCrunch has these new Gartner numbers and more in its post. Here's the Gartner tablet chart from their post:
I've said before and I'll say again that I'm increasingly convinced that Microsoft is going the Windows Phone route with Windows 8. By that, I mean Microsoft seems to be far more interested -- at least initially -- in building and selling a product that is aimed at consumers, rather than business users.
Yes, Windows 8 tablets running x86/x64 chips will be able to run existing Windows apps on the Desktop. But the Metro-style interface and new Windows app store -- the most noticeable new elements of Windows 8 -- so far seem to appeal a lot more to consumers than power users or business users who've dabbled with the Developer and Consumer previews of Microsoft's next-generation operating system.
What's your take? Do you agree with those like my ZDNet colleague James Kendrick who see the tablet market as basically the iPad market? Or do you think Gartner's off base here?
Update: I didn't notice this myself, but one of my Twitter buds (@mcakins) noted that Gartner mysteriously has Windows' share of the tablet OS market at 0 for 2011. They haven't been barn burners, but Windows tablets do exist already. I've asked Gartner for comment on what's behind its current 0 percent share claim for Windows tablets. No word back yet.
Gartner Research VP Carolina Milanesi responded with the following reason for the 0 percent:
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by In the news
by NW Spotlight
The Oregonian is reporting that Governor Kitzhaber has been “quietly and informally” meeting over the last six months to “find common ground among a broad swath of interest groups, including business, labor and local governments,” on restructuring state taxes.
The labor group mentioned in the article was SEIU, that combined with fellow public employee union AFSCME, contributed $750,000 to Kitzhaber’s 2010 gubernatorial campaign. The “business” organization mentioned was the Oregon Business Association (OBA). The OBA was founded to represent businesses with “more moderate to progressive views.” OBA supports the elimination of the personal and corporate kickers, and is headed by former Democratic state legislator Ryan Deckert.
Kitzhaber has been having state revenue officials analyze a number of tax scenarios, most of them looking at some form of a sales tax “against lowering Oregon’s highest-in-the-nation income taxes.”
According to the Oregonian, Republicans have been excluded over the last six months: “Republican House Co-speaker Bruce Hanna was surprised to learn about the talks, as was Rep. Vicki Berger, Republican co-chair of the House Revenue Committee.”
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The guy who tells Ukraine what plays to run speaks English. So does the guy who tells the Dominican Republic what their opponents will do.
Yet, not much is getting lost in translation at this international tournament — everyone at the Basketball World Cup speaks hoops.
"We know basketball terms," Ukraine point guard Pooh Jeter said.
And if that fails, there are other tried-and-true methods.
"I'm Italian. I use hand signals," Ukraine coach Mike Fratello said.
The Ukraine squad is symbolic of why nearly everyone in the sport is fluent in basketball.
Jeter is a California kid who briefly played in the NBA. Fratello is a New Jersey native hired by Ukrainian federation president Alexander "Sasha" Volkov, who played for him with the Atlanta Hawks.
Fratello got the language concern out of the way at his first meeting with players after taking over Ukraine's national team in 2011. If you didn't get what I just said, he told them, don't nod your head like you did.
"You can't be afraid to say, 'I don't understand,'" Fratello said.
Now it's left up to the two assistant coaches on the bench who speak both languages to make certain players can't mess up because of a mix-up.
"Their assignment is, if you don't think our guys understand what I'm saying, it's your job to tell them what I just said, and if we walk out and they don't do it and they don't understand, it's your fault," Fratello said.
Whether encouraging a teammate or trash talking an opponent, no one seems to have a problem — not even players who don't speak the language of the country on their jersey.
This should be advantage: U.S.
Besides superior talent, the Americans are one of the few teams that only have to worry about what to say, not how to say it, since everyone on their roster was raised in the United States.
Teams are allowed one naturalized player, many times ending up an American-born, raised or educated one who has gone overseas to play professionally. That's the case with Jeter, who formerly played for BC Kyiv in Ukraine and was later asked to join the national team.
Though not mandatory, a working knowledge of English is helpful at the tournament, where the public address announcer and entertainment acts speak it, as does the official conducting the postgame news conference for a coach and player from each team.
For a team such as Finland, whose players are taught English starting in the third grade, it's an easy adjustment.
But some creativity is needed when not everyone can understand it, such as the case with the Dominican Republic.
South Florida coach Orlando Antigua and two members of his staff are bilingual, as is most of the team. However, staff members Bill Bayno and Pat Zipfel only speak English, and players Juan Coronado and Victor Liz just Spanish.
So when Zipfel, a longtime NBA advance scout, goes over the opposition during meetings at the hotel, other team officials translate what he's writing on the board for Coronado and Liz.
"So if Zippy's talking, they're just whispering in their ear, 'this is what he's saying,' so it works pretty smoothly," said Bayno, an assistant with the Toronto Raptors.
They can do the same in the heat of a game, though things are more rushed.
"For those two, like if I have a teaching point, I'll tell one of the Spanish-speaking coaches, and I speak broken Spanish, so through the course of the three or four weeks we've been together I'll have the key words in Spanish that they understand," Bayno added. "But anything that's complex, I'll tell one of the Spanish-speaking coaches, or they'll just tell them themselves."
Spanish, Ukrainian, Portuguese, French, whatever the language, Fratello understands that it still all comes down to putting the ball in the basket, no matter where you're playing.
He traveled with the Hawks to the Soviet Union in the late 1980s and has been around international players for decades, so it's safe to assume TV's "Czar of the Telestrator" can handle a conversation. And even though Fratello and his point guard might learn some new lingo while they're in Spain, everything seems to come back to English.
"They try to teach me some Ukrainian words," Jeter said of his teammates, "but on the court we just speak English and understand."
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Follow Brian Mahoney on Twitter: http://www.twitter.com/Briancmahoney
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Ward Weaver (search), the man accused of killing two girls and hiding their bodies in his backyard, is fit to stand trial on murder charges, a judge ruled Wednesday.
The ruling came after Weaver spent four months in the Oregon State Hospital (search), where his mental fitness was evaluated.
A trial date is expected to be determined sometime in September, Judge Robert Herndon said.
"We will agree that Mr. Weaver has regained his ability to aid and assist," defense attorney Peter Fay said after the judge's ruling.
Prosecutors did not offer comment on the ruling.
Weaver, whose case fascinated Oregonians for months and attracted national attention, was in court on Wednesday, where he conferred with his attorneys but did not look at spectators.
The disappearance of the two Oregon City girls — Ashley Pond (search), 12, and Miranda Gaddis (search), 13 — in early 2002 prompted a nationwide FBI hunt that ended when their bodies were found in Weaver's backyard, a few hundred yards from their front doors.
Weaver's daughter had been friendly with both victims.
Weaver was arrested that August on unrelated charges of raping his son's girlfriend. He was indicted in October 2002 on charges including aggravated murder, rape and abuse of a corpse, and faces the death penalty if convicted.
His father, Ward Weaver Jr., on California's death row for murder, also buried a woman's corpse under concrete in the yard.
At a hearing in April, Herndon said psychiatrists agreed Weaver suffered from depression, and his attorneys revealed that he had been taking heavy doses of anti-depressant medications while in jail. Psychiatrists testified Weaver told them he was hearing voices and tried to kill himself.
The psychiatrist for the prosecution also said it was likely Weaver was faking symptoms of mental illness to avoid trial.
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A Merck & Co. (MRK) scientist Tuesday vehemently denied a Vietnam War veteran's claims the company put profits ahead of safety in marketing its popular pain killer Vioxx (search).
"I chose a career in research to try to save human life," Alise Reicin, vice president of clinical research at Merck Research Laboratories, testified in the second Vioxx civil case to go to trial.
"To suggest that I would put profit before human safety is really completely outrageous."
In marked contrast to the heated exchanges between the judge and a lawyer for the drug maker that in about the development of the drug.
Vioxx went on the market in 1999, but was pulled last year after studies showed increased heart risk after long-term use. The company faces about 5,000 Vioxx lawsuits.
Merck began presenting its defense in the trial last week, after lawyers for plaintiff Frederick Humeston rested their case. Humeston, an Idaho postal worker, briefly took Vioxx to treat an old Vietnam War wound and blames the drug for his 2001 heart attack. Merck says other factors, such as his age and weight, likely triggered the attack.
On Friday, New Jersey Superior Court Judge Carol Higbee threw out the testimony of Merck's first witness, prompting an unusual shouting match in the Atlantic City courtroom between the judge and Merck lawyer Diane Sullivan.
In her testimony Tuesday, Reicin said "nothing could be further from the truth" in regard to accusations the drug maker hid the safety risks of Vioxx for years to preserve its blockbuster sales.
Her comments came as she was asked about a February 1997 e-mail she wrote to other Merck researchers expressing concern about how tests on Vioxx would be perceived. In the e-mail, she said she was worried tests of Vioxx compared with other pain killers would be misinterpreted as showing Vioxx carried a higher risk of heart attacks.
Reicin told jurors that tests conducted on Vioxx before the company sought approval of the drug showed no evidence of increased heart risk.
She said that a total of 60 studies, covering about 10,000 patients, were conducted on the drug before it was submitted to the Food and Drug Administration (search) for approval in November 1998. The jury was shown the results of tests in which patients with osteoarthritis were treated with Vioxx and other drugs.
"There was not any data in the osteoarthritis study to suggest that there would be increased risk," Reicin testified.
A comparison of those patients who suffered heart attacks showed a rate of 0.27 percent for those taking Vioxx and 0.26 percent for those taking non-steroidal anti-inflammatory drugs (search), according to the study data presented to jurors.
Other tests showed that heart attacks were suffered by 0.13 percent of Vioxx users, less than half of the 0.28 percent rate experienced by patients taking a placebo, or dummy pill, according to the research displayed to the jury.
The trial began in mid-September and is expected to last several more weeks. In the first Vioxx trial, a Texas jury in August awarded the widow of a Vioxx user $253 million — but that amount is expected to be sharply reduced. Merck is appealing the case.
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Mandatory arbitration's winning streak continues.
Mandatory, or forced, arbitration clauses are an increasingly prevalent tool companies use to resolve disputes outside courtrooms. These clauses often bar class-action lawsuits, and the result of the arbitration proceeding is typically sealed, so other consumers in the same position won’t even learn about the case.
Arbitration decisions also are usually binding, with no appeal option available. Mandatory arbitration clauses are in the fine print of hundreds of millions of consumer contracts for products and services.
The latest decision involves DirecTV customers in California who claimed they were charged illegal cancellation fees of up to $480. The 6-3 decision means they can't join together to sue the company in court.
DirecTV, now part of AT&T, is the largest satellite TV provider in the U.S. with over 19 million customers. The lawsuit alleged that DirecTV's customers were forced to pay cancellation fees even if their equipment could not be installed, or they moved and DirecTV service wasn’t available in their new location, or the equipment simply stopped working.
California courts had routinely held that mandatory arbitration clauses with bans on class actions were “unconscionable.” Some companies, including DirecTV, had an extra condition in their contract terms that voided the entire arbitration clause “if the law of your state” did not permit agreements barring class actions. In 2014 the California Court of Appeals had ruled that DirecTV’s arbitration clause was illegal and therefore unenforceable under California contract law, and allowed a class action to proceed.
The Supreme Court didn’t rule on the merits of the complaint against DirecTV, but was instead asked to decide if the dispute had to be resolved through individual private arbitration or if the class-action lawsuit could move forward. The Supreme Court ruled that, under its earlier Concepcion and Italian Colors decisions, the Federal Arbitration Act overrode the “law of your state” on which the California court was relying. In other words, the state law no longer applied, the Supreme Court said, and the class-action ban, along with the entire mandatory arbitration clause, was valid and enforceable.
But in her dissent, Justice Ginsburg pointed out that the parties to the agreement had intended for the state law to apply. With this decision, the Supreme Court is reversing a state court’s interpretation of what the parties intended under state contract law, a legal issue traditionally left to state courts to decide. The majority of the Court has “misread” the Federal Arbitration Act to “deprive consumers of effective relief against powerful economic entities that write no-class-action arbitration clauses into their form contracts,” she wrote. Justice Ginsburg was joined in her dissent by Justice Sotomayor; Justice Thomas wrote a separate dissent.
DirecTV applauded the decision.
“The ruling affirms the strong federal policy favoring arbitration agreements that efficiently allow consumers and businesses to resolve disputes without further burdening our overloaded courts.” says DirecTV spokesman Robert Mercer.
But consumer groups see the decision as a further weakening of consumer rights under the law.
“This is another troubling day for American consumers who are ripped off by corporate greed and malfeasance, whether it’s a satellite TV system that doesn’t work, unlawful credit card fees, or a defective vehicle,” Harvey Rosenfield, founder of Consumer Watchdog and one of the lawyers who represented consumers in the litigation, said in a statement. “The Supreme Court has taken away Americans’ only right to obtain justice: Their day in court."
George Slover, senior policy counsel at Consumers Union, the policy and advocacy arm of Consumer Reports, concurs. "This decision hammers another nail in the coffin for consumer access to the courts and holding corporations accountable. Congress needs to act to restore these fundamental consumer rights."
What You Can Do
Look for mandatory arbitration clauses in the fine print of contracts before you sign up for a product or service. They’re in the terms for car loans and leases, credit cards, checking accounts, insurance, investing accounts, student loans, and even certain employment and nursing home agreements; you can be legally bound to mandatory arbitration by signing a contract or by clicking “I agree” on a website.
If you find an arbitration clause, see if you can opt out. A few contracts, such as certain nursing home agreements, allow it.
When you can, do business with companies that don’t use arbitration clauses. It’s difficult to find a credit-card, mobile-phone, or checking-account agreement where arbitration isn’t required. But according to a Consumer Financial Protection Bureau’s study on arbitration clauses in financial products and services, midsized banks and credit unions are more likely not to have forced arbitration clauses in their customer service agreements.
Copyright © 2005-2016 Consumers Union of U.S., Inc. No reproduction, in whole or in part, without written permission. Consumer Reports has no relationship with any advertisers on this site.
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A scorned Houston man allegedly created numerous fake online dating profiles for two of his ex-girlfriends, including one on a website for prisoners.
MyFoxHouston.com reports 30-year-old Carl Wayne McGraw, Jr. has been accused by two women of creating multiple fake dating profiles for them online, using their real names, e-mail addresses, home addresses and phone numbers.
The first woman says she discovered several fake profiles for herself online after dating McGraw for two months. One of the profiles said she was a "porn star," and included her home and work addresses.
The second woman says she dumped McGraw after five months of dating because she caught him in "multiple lies." She claims he hacked her e-mail and created an account for her on CellPals.com, a pen pal website for prison inmates. She says she also found a fake Facebook account.
Investigators say McGraw is a suspect in the investigation and they have charged him with online impersonation, according to MyFoxHouston.com.
Click for more from MyFoxHouston.com.
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A pilot and his passenger were injured Sunday afternoon after their single-engine airplane crashed on a residential street on Long Island.
Suffolk County Police Commissioner Tim Sini told reporters the Piper 28 went down at the intersection of Second Street and Third Avenue in Bayport shortly after 7 p.m. local time.
Sini said the aircraft had experienced engine trouble and was trying to return to the airfield when it clipped a tree and utility lines before going down.
Newsday reported that the plane caught fire after the crash, but the flames were soon doused with the help of local Bayport firefighters who happened to live nearby.
"I heard what sounded like a sputtering noise, like something happened to the engine,” local resident Jill Rogers told Newsday. "And then, it was deadly quiet, and then you just heard a loud bang and an explosion."
Sini said the pilot, 34-year-old Scott Clifford, was hospitalized in serious condition with two broken legs and a head injury. The passenger, identified as 65-year-old Michael Rome, was listed as being in fair condition.
No injuries on the ground were reported. The FAA is investigating.
The Associated Press contributed to this report.
Click for more from Newsday.
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Matti Golan, former editor of the left-wing Haaretz newspaper and now a columnist for the Globes business newspaper, wrote that “outrage” is an understatement when referring to the European Union’s new guidelines to boycott Judea and Samaria.
The guidelines require that Israeli companies signing agreements with the EU, such as those in the field of science, must sign in writing to the EU that they have no ties with Jewish agencies or companies in Judea and Samaria.
Noting that the companies must sign an agreement including a clause that Israel recognizes no sovereignty beyond the 1967 border, Golan wrote, “The Palestinians can already tell chief negotiator Saeb Erekat that his services to negotiate with Israel are no longer needed; EU High Representative for Foreign Affairs Catherine Ashton is doing his work…
“This is an attempt by the EU to determine issues that the parties should agree on in negotiations… What would prevent Ashton and her colleagues from demanding that Israel accept, in exchange for relations with the EU, the right of return, for example?”
Lest anyone worry that Golan has turned nationalist, he also called to task Housing Minister Uri Ariel for announcing plans for more residential units in Judea and Samaria. He called the announcement a “bomb aimed at destroying any possibility of drawing up a smart foreign policy.”
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SAP is going to spend roughly $400 million to $500 million over the next eight quarters over what amounts to be a big bet on mid-market customers.
SAP's fourth quarter results offered few surprises since the company had already flagged weaker-than-expected growth, but the outlook was telling.
In short, SAP sees 2007 software and software related services revenue--a rejiggered category that includes software, software support and subscription sales--growing 12 percent to 14 percent.
The company also said it will invest 300 million to 400 million euros (or about $400 million to $500 million at current exchange rates) on "growth opportunities in new, untapped segments in the mid-market." Specifically, SAP is investing in its mid-market product. SAP's focus on the mid-market isn't new, but this is the first time the company detailed the costs. The price for that investment is a about a point of operating margin.
So what's this development mean? SAP is finding application market for large enterprises saturated. To continue growing it is moving downstream.
Says William Blair analyst Laura Lederman:
"According to our SAP contacts, management has told employees that the company's future is in the middle market since the high end is relatively saturated. These costs signal to us that growing in the middle market will cost more than targeting SAP's current enterprise market."
The move makes sense since SAP says the mid-market represents a $15 billion market. SAP defines the mid-market as companies with up to 2,500 employees and $1 billion in revenue.
By 2010 SAP reiterated that it wants to get 50 percent of its orders from new products, have two thirds of its installed base on enterprise SOA and have 100,000 customers, up from 38,000. Smaller customers, who in theory would have an easier time implementing SAP, would quickly pad the company's customer count.
If successful, SAP's bet could redefine the company and give it a springboard into an even bigger opportunity--smaller businesses. Strategically, SAP's move works out.
Among other key takeaways:
--Lederman estimates that 85 customers in the fourth quarter migrated off Oracle software and services to SAP under its "Safe Passage" program. Lederman estimates SAP has landed about 485 customers under the program.
--SAP's move toward the mid-market could pose risks. Susquehanna Financial analyst Jason Kraft opines:
"Unlike SAP's traditional dominance in ERP, which was driven in large measure by partner dynamics with system integrators (such as IBM and Accenture), we believe that NetWeaver and the mid-market will be trickier to navigate, as these efforts complicate partner relationships."
Goldman Sachs analyst Rick Sherlund says:
"The mid market has traditionally been less profitable given higher selling costs and smaller deals."
In the end, SAP has outlined its 2007 plans, which largely consist of reloading for new initiatives. If SAP can win with the mid-market and be a SOA player the current worries about the company will seem shortsighted.
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Unlike metals and energy, weather can be the predominant determinant of prices and investing profits for agricultural commodities (disease and insects are the other major factors that can affect market behavior). Even then, this is not the situation across the board. One country or region must grow a disproportionate amount of the food or fiber, and that area must be prone to damaging weather patterns. Welcome to the coffee market and Brazil.
Coffee is a finicky plant that can only grow in the mountainous regions of countries with tropical or semi-tropical climates. Too much heat, and it doesn't do well. Too much cold, and the plants die. Plant death is a far more serious problem for coffee than other agricultural commodities, since coffee grows on bushes (sometimes referred to as small trees) that take around five years before they can begin producing a crop. Optimal production takes place in plants aged between seven and twenty years, although a coffee bush can live as long as one hundred years. Coffee plants also have an odd pattern of producing larger amounts of beans on alternate years and smaller amounts in the years in between.
Brazil has been the largest coffee producer for at least 150 years and can account for as much as 30% of global production these days. Vietnam, Colombia, and Indonesia are the next largest producers, but none of them come close to Brazil in output. Brazil's dominance in the market means that something that seriously impacts the coffee crop in Brazil also seriously impacts the global coffee market as a whole and can send prices skyrocketing.
Coffee, like most commodities last peaked in 2011. A confluence of events including insect and plant disease issues, along with weather problems in a number of countries restricted supply. At the same time, global demand was rising substantially because middle class Chinese and Indians were taking up coffee drinking. Increased supply then dramatically brought down the price until the end of 2013. A price spike followed afterwards because Brazil began experiencing its worst drought in 80 years - and that drought was centered in the coffee growing region in the southeast of the country. Since then, prices have come back down and gone to lower lows.
Coffee Prices (NYSEARCA:JO) 10 Years Monthly
The drought is still not over even though there were heavy rains leading to flooding in some places in the most of Brazil's coffee growing region this February. This bodes well for a better crop than in the previous two years once harvesting is over this May. Even before the recent rains, estimates in January for the final crop production were highly optimistic despite all the drought-induced stress to the plants. The Brazilian Conab agricultural bureau estimated that harvest would come in between 49.1-51.9 million bags, which could be better than the record 50.8 million bag harvest in 2012 (a bag is 60 kilograms).
Continued drought for another year would certainly take its toll on future coffee production. Heavy rains are also risky and can lead to mold infestations. There is, however, a far bigger risk, - frost. Most other country's coffee growing areas are not subject to frosts because they are too close to the equator and not at high enough an elevation. Brazil's coffee growing regions are an exception, being close to the Tropic of Capricorn. They have killer frosts that can destroy the plants and wipe out all production for five years (even borderline frosts that don't kill the plants can lower production for years). These frosts tend to come in approximately twenty year cycles, with the previous ones in the 1994 (with a secondary incident in 1999), 1975 (with a secondary incident in 1981), and the triple frosts of 1953/55/57. The next severe frost is due…soon.
The frost in July 1975 was particularly devastating. Prior to it, coffee was selling for as little as 50 cents per pound. By April 1977, the price had reached $3.25 per pound or more than six times as much. There Internet wasn't available back then and information about the damage to the coffee crop traveled slowly. It should be assumed that price would adjust much faster now-a-days.
Some think that the coffee crop in Brazil may not be as susceptible to frost today as it was in the past. Production has moved further north into warmer areas (which are more prone to drought) and the weather itself might have gotten warmer. This might be too optimistic a view, though, since in July 2013, there was a serious frost in the southern state of Paraná that caused significant damage to agricultural crops. This covered a much smaller area than the killer coffee frosts, but many of these smaller frosts are not uncommon.
Below is a 45-year chart showing the volatility of coffee prices over time:
Coffee, like other agricultural commodities, isn't mostly influenced by inflationary forces. Weather, plant disease and insects are more important in determining its price in the short term, and that price can be highly volatile. In the long term, its price of course moves with broad trends in supply and demand, but the real money is made based on the short-term moves. Currently, the price in on the low side, and it could go even lower, if production manages to continue to increase. However,If you hear about a cold front moving toward southern Brazil this July, you just might want to consider buying a coffee ETN such as JO.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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For the second consecutive game, the run inning -- this time in the seventh -- to 5, to sweep the three-game series at Target Field.
Cleveland starter Justin Masterson (12-10) lasted six innings, allowing three runs -- one earned -- on seven hits and one walk. He struck out three.
Minnesota starter Carl Pavano (8-13) picked up the loss. He went 6 2/3 innings, surrendering four runs -- one earned -- on five hits while walking one and fanning six.
The Twins jumped out to a 3-0 lead after six innings. Luke Hughes scored on a Joe Beason groundout in the second frame to start the scoring for Minnesota.
In the fourth inning, Hughes crossed the plate for a second time when Indians catcher Lou Marson committed a throwing error while Joe Benson attempted to steal second base. Hughes scored a third time in the sixth when Brian Dinkelman singled to right field.
The Indians exploded for six runs in the seventh, five coming with two outs. Shelly Duncan began the scoring with a home run to left. Jose Mijares relieved Pavano with the bases loaded. Mijares walked Jason Kipnis to bring home Ezequiel Carrera. Alex Burnett came on to pitch for Minnesota, and walked Carlos Santana to push across the tying run.
Twins manager Ron Gardenhire went to the bullpen once again, this time bringing in Glen Perkins, who allowed an RBI infield single to Jim Thome. Duncan came up for the second time in the inning and doubled to deep left to score two more and make it 6-3.
Minnesota tallied two bases loaded walks by Danny Valencia and Ben Revere off of Vinnie Pestano to trim the lead to 6-5 in the eighth.
Cleveland's Chris Perez closed things out in the ninth for his 34th save of the year.
Game Notes
The Twins and Indians finalized the Jim Thome trade from August 25 with Cleveland sending $20,000 to Minnesota...Dinkelman went 4-for-5 for Minnesota...The Indians are now 60-3 when leading after eight innings.
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Scott Gardiner has claimed a place back on the US PGA Tour for next season after finishing tied for second in the web.com Tour Championship.
But the news was not good for the other 10 Australians vying to join him as they all failed to earn the necessary money and will instead ply their trade on the secondary tour.
The 37-year-old Gardiner held the overnight lead at TPC Sawgrass' Dye Valley Course but was four-over in his opening six holes before clawing back to a two-over 72 to finish eight-under and two shots behind winner Chesson Hadley.
While missing the chance at victory stung, Gardiner still finished eighth on the money list for the four-event finals series, well inside the necessary top 25 to join the big stage.
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Having made just seven cuts from 23 events in his rookie season on the PGA Tour this year, Gardiner, the first Aboriginal to play on the top tour, found form in the secondary tour playoffs.
He opened the finals with a tie for third at the Hotel Fitness Championship, was tied 47th at the Chiquita Classic and missed the cut at the Nationwide Children's Hospital Championship before this week's effort.
"I was lucky enough to be pretty safe after the first event so I was able to just go out and play," Gardiner said.
"It is a short turnaround to the main tour starting and the good thing is my game has been turning around in the right direction of late so I'm excited to use what I've learnt in my second crack at it.
"I showed I was good under the gun in the finals series and that will hold me in could stead for next season plus I've been working well with a new coach and I'm confident going forward."
Rod Pampling, Nick O'Hern, Nick Flanagan, Nathan Green, Aron Price, Ashley Hall, Adam Crawford, Cameron Percy, Mathew Goggin and Alistair Presnell all failed to progress from the finals.
The new PGA Tour wrap-around - non calendar year - season officially starts at the Frys.com Open in California on October 10.
Adam Scott, Jason Day, Marc Leishman, Geoff Ogilvy, Matt Jones, Aaron Baddeley, John Senden, Greg Chalmers, Stuart Appleby, Robert Allenby, Steven Bowditch, rookie Bronson La'Cassie and Gardiner are the only Australians eligible for the season.
Jarrod Lyle may also return from his second bout with leukaemia on a medical exemption.
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Amarpaul Kalirai
Tori Amos has never been one to run from controversy. If anything, over the past 25 years, she's happily courted it in the name of good old fashioned truth telling.
The acclaimed singer-songwriter has used her songs to tackle everything from rape and miscarriage to religion and cunnilingus and the honesty and ferocity with which she's done it has amassed her the kind of following most cult leaders would pay -- or kill -- to have.
Now Amos, a former child prodigy who first began playing piano at the age of two and a half, is back with a new album, "Unrepentant Geraldines," which finds her courting a new muse: aging.
The Huffington Post caught up with Amos while she was in New York City last week to promote her new album and chatted with her about Taylor Swift, the trappings of fame and her mission to make menopause not such a dirty word.
The Huffington Post: Do you read your own press?
No.
So I can write whatever I want and you'll never see it?
Yeah.
I ask because there was a piece that came out a few months ago entitled "Where Would Music Be Without Tori Amos?" and in it, the author argues that many of the musicians who are working today "owe their careers" to you, including this little lady. [Pulls up video of Taylor Swift performing at the 2014 Grammys and watches it with Amos]
So now that you've seen that, let me tell you what the author had to say about it: "The Taylor Swift performance everyone is talking about is Taylor Swift imitating Tori Amos." When you see that video of Taylor, do you see Tori Amos somewhere in there?
I don't need to. I don't need to see that. I can see her being beautiful and lovely.
Right. But what about your legacy?
It'll be what it is, won't it? Meaning, as an artist, there's a force and when you work with that force and you bring it into the deepest part of your bones, the intention is very clear. I'm not the first person who's ever thrown her hair around [laughs]. But what you're getting is intention. I'm not just throwing hair around -- there's an energy that's being taken in to the core. It's not malevolent or benevolent -- it's force -- and you can put your hands on that 220 [voltage]. My mentors were Jim Morrison, Prince, [Jimi] Hendrix and I was very aware of the energy that they were possessing. That was what I was calling into my being -- that type of voltage. How other artists [today are performing] -- I could be their mom! I'm very respectful [of what they do] and hold a space for other artists to expand their expression. Wherever they get it or however they get it, that's exciting. Does that make sense?
It does. But when we talk about you having a legacy, is that something you're not interested in considering right now? When someone writes a 2,000 word article about the incredible effect you've had on popular music, does that not matter to you?
It's not that it doesn't matter -- people have talked to me about it. I can't really escape it -- from Berlin to Paris to London -- there's a journalist walking in and talking to me about it, but what I'd say to you is that I'm completely focused on the work and on the intention. That to me is where the focus has to be. And if it is, the rest will be what it is. In the past, you and I have talked a lot about how there are all kinds of moves that one can do -- you can shock the world, you can do things, but nursing a pig [as Amos did in the artwork for her 1996 album "Boys For Pele"], there was a very clear message there. It was the Madonna and Child, it was -- it wasn't just "How can I shock [my father] Rev. Ed?" He actually understood that picture -- he and my mother understand what I was going after.
You have fans who have taken the money they were going to use to go to college and instead spent it on following you around the world. You have fans who put off going to graduate school because you announced a tour. You have people who -- myself included -- have said, "I probably wouldn't be on this planet if I hadn't had your music when I was in high school. You saved my life."
No, you saved your life. You know how I feel about that.
OK, sure, but how does it make you feel to have that kind of adoration? Is it terrifying?
It's a responsibility. A huge one. There's no misunderstanding on my part but we go back to the original part of our conversation: intention. Once "Y Kant Tori Read" [Amos' critically maligned 1988 album made with a band of the same name] happened and then I [went solo and] made the commitment to serve the muses and be true to that no matter what, then that's my guiding light. That's what my commitment is. So everything else then, has to be secondary to that. Being a mom is different -- that's a different conversation. I'm talking to you about being an artist.
So when your attention is to that, to making the score for [Tori's first musical, 2013's] "The Light Princess," we're making the original cast recording while we're on [tour]. Because it's not OK to make the original cast recording in 24 hours or 48 hours. I don't care how much energy it's going to cost. It's costing so much effort from my team because it'll take weeks and weeks and weeks to do it but it has to fit in between the tour, we'll find the actors and it will take weeks to mix. But my bar is higher -- "Jesus Christ Superstar" and the impact of that record is my bar. So yes, you can tell me about the state of the music industry and the reason that no one makes records like that is because no one can afford to do it. Or they can but they don't choose to spend the money that way. But the commitment to me is to the work and the art and the responsibility to that. Because I have an opportunity to do this and to give it back to the world in a vision, does it take effort? My crew -- they love me but I work them hard. But I don't ask them to do anything I wouldn't do. And as the captain of this ship, I say, "C'mon boys. Let's go!" And they say, "If she can do it, we can do it." So, I'm focused on the work. I can't focus on the comments about the work and everything else.
There's such an emotional component of what you do, too. And much of that comes from your relationship with your fans. Is it like being a doctor in some ways? Do you have to just do your job and not let the emotional side seep in? Night after night you're hearing from people who are telling you about being raped, about wanting to kill themselves, about their eating disorders. That's heavy stuff to constantly be ingesting. Do you have to put up a wall to protect yourself?
You have to be very grounded when you're listening to these stories because they are real. They're real! This is one of the gifts of aging -- working with Native American people, working with people that have dealt with cancer -- nurses and doctors that I know and how they're able to ground themselves and hold a space while people are going through something traumatic. And I've learned from them. Therefore, I ground myself and take a moment to do that and then hold a place of neutrality. You cannot allow yourself to be confused about what that moment is. You're sharing something very intimate -- you're the listener -- and they are choosing to impart this to you. So it's not about a wall, it's the opposite. You bring the wall down. But in bringing the wall down, I'm grounded, almost in my mind I'm right there with Earth Mother. I ask for her support, her energy and I study nature sometimes and this energy that she contains. Sometimes I think, I can be calm, I can hold this for a few hours and then what you do is take these stories and this energy and you put your hands on the 220 -- that voltage we talked about -- and then whether that means, the head comes up or the leg goes back [while I'm performing], the moves aren't practiced -- not that any other artists' are -- but it's being so connected to the message that you become a container. It can't be the ego. So reading the press, thinking about my legacy -- that's Tori's ego. And that's very seductive and I've had to discipline myself because fame will win this game. Fame is the master seducer of any essence there is.
Was there a time in your career when fame seduced you? When you were in danger of falling for that seduction?
Yes.
When?
1993, 1994, 1995, 1996. You have to dance with it -- until you experience it, it's very hard to describe it. You either work with it or you don't. A certain point, that's when I started opening up to the Native American community and they were very much helpful teachers to me in the humbling, in understanding that you serve the Great Mother. The healers, the medicine women and men are really in alignment and understand what their role is. And it doesn't come from ego. We all have egos, there's a place for that, but it's understanding that it's human but it can't be driving the car. This takes conversations. It takes discipline. But if we talk about some of the master painters, they were devoted to their art. It doesn't mean they weren't competitive. Am I competitive? You bet your sweet ass I am! But competitive against what? Not necessarily against another female artist -- not now. Not at my age. I want to be in a place of compassion. No one can take anything from anyone else. I'll give it away! [mimics giving away her jacket]. Here! Take it!
Last night, before you played "Ribbons Undone," you did a short improv about menopause [see video below].
A taboo subject.
But one that you're not afraid of?
No. Not anymore. That changed in the last year.
What happened?
Women have been talking to me about aging and being different ages -- and all ages have been talking to me about the stresses of their particular age. I was working with Paule Constable -- one of the great lighting designers -- and Rae Smith -- they worked on "War Horse" -- and they were talking about the fact that [menopause] isn't discussed. I had long conversations with Rae, in stairwells, and with Paule, in the theater, and they would say to me, "You have to talk about it. You have to find a way to talk about it but in a way that makes it not about victimization." Ageism is a real thing. I had to get my head around how am I going to -- in the music industry, being in front of the camera at 50, it's not as if we -- women -- are seen as Johnny Depp and Brad Pitt where we're just coming into our hotness. They're leading men! There are leading women that are around my age but it's just starting to happen. You're just starting to see that happen in the movie industry. But coming to a rock concert -- [women] can't be doing granny rock. We're singing about emotions, we're singing about sexuality, we're singing about all these things. Whereas roles for Helen Mirren, who is the hottest thing I've ever seen -- try and find her equivalent in rock and roll. We are having to carve that out for ourselves because you don't go see some of my contemporaries, you don't go see the Chilies [Red Hot Chili Peppers] and think They need to be doing grandpa rock. No! They're virile men who are sensual and they can sing about anything. Our culture doesn't see it that way [for women]. There are certain things, if you start singing about them -- if you listen to the young girls, I hear them talk, "Oh! She looks desperate! That's so desperate!" Whether you're in your 20's looking desperate or you're in your 50's looking desperate -- desperate is desperate. But you don't hear them say that about the guys! So, I needed to get my head around how I wanted to carve out the next 50 years. In order to grab it with both hands -- to grab it! -- I had to first go all the way into the projection from the culture.
It felt like a part of the trajectory of what you've been involved in your entire life. It felt natural. The way you did it didn't seem like you were doing it to shock. I was surprised by it, but it made sense to me.
There's going to be more of that.
There should be.
[laughs]
But, because as you said, no one else is talking about this, do you feel an added pressure to take that on? Is this organic Tori Amos doing what she's going to do or is this you saying "I'm going to lead the menopausal charge!"?
No. You have to be organic. [That improv] wasn't rehearsed. Not that something that's rehearsed can't be organic, I'm not saying that, but I think with the tour looming, I really don't know what it's going to be from night to night. There has to be a place where songs will come, conversations will happen.
The thing that I loved about it was that you were making up this little song on the spot about needing your glasses and you didn't just sing about getting older, you used that specific word -- menopause. And I think that's such a scary word for so many people and it conjures up very specific things: no longer being sexually virile, no longer being a woman -- or at least being seen as useless in some ways in our culture. The fact that you went there --
In green leather pants... [laughs]
In green leather pants, no less! We don't ever see something like that. I'm impressed by that.
It's not an easy road. Menopause is a tough road and a tough teacher. Finding your own self-acceptance and sensuality within it is, well, sometimes it's a real hunt. You have to dive in there because of the feelings that you're having. All of the songs on this new record were written to deal with this stuff. There is a quiet, silent grieving that happens through menopause. It might happen in a way where you're not aware of it but you can begin to lose memory for a minute -- you can forget things -- and you're very aware that you're going through a different process, a different phase of life. Until you feel it and you're in it, you can't imagine what it is. Trust me -- until those chemicals are happening in you, you don't know what that is. It's easy to sit and feel quite confident about yourself, thinking about how you're going to be in menopause, but that's not how it hits you.
I believe it. As a 35-year-old gay man, there are 20-something-year-old gay guys who are ready to help me pick out my casket.
Yes. So, it becomes about how do you find empowerment through [aging]? That's been the reason I'm going out as a one-woman show. It's not because I don't love [my drummer and bass player] Matt [Chamberlin] and Jon [Evans] and it's not because I don't love the Polish quartet [that I toured with on my last tour], it's because my [13-year-old daughter] Tash looked at me and said, "OK, I get it. I get the 50 thing. I get that the frontline record deals at 50 and up are given more to men than to female singer-songwriters. What are you going to do mom? Because if you don't get your head around this, you're telling me that I've got nothing to look forward to when I'm 50. What are you telling me? That that's it? Because the message is avoid this at all costs and that's what you're telling me." And she said, "That's how you're going to deal with it?" And I said, "No." She said, "Go. Rock." And the earth moved! And I looked in her eyes and it was real! There were tears in her eyes -- "You've got to get this one, mom, like you've never gotten anything else!" Because this is a demon. This is a fucking demon.
That's not just empowering for your daughter, it's empowering for all of the people who have followed your work and who look to you as someone who is creating art that they find fulfilling and in some cases life changing. And I'm guessing the thought of you giving up that work is nothing short of devastating to a lot of people.
Menopause is a struggle. And it's a pejorative. I'm not here to try and make menopause sexy -- that's not my message. My message is to feel empowered -- and feel all these feelings while you happen to be going through menopause. It isn't sexy but you can be sexy. So look it in the eye.
And don't let it defeat you.
That's right. So, OK, if I'm playing a show, whatever I'm wearing that night, I might breakout in a hot flash during the show and it's not because of the lights. And what are we going to do? We're going to have towels on the side of the stage and we're going to fucking go with it. Because that's all we're going to do -- there's no other answer. If it's going to be embarrassing, it's going to be embarrassing. But to get to that point, you can't think you're going to defeat it -- I will forget the lyrics. I will have the wrong glasses because I'm not losing my mind -- it's not early Alzheimer's -- but other people going through it will say, these are the symptoms. You find ways to get through it. I have to take 50 by the hand -- hold hands and welcome it with every cell and say, "Show me 50 like I didn't imagine." Not that other people aren't going through it, but show it to me in a way that I didn't understand. It's about asking 50 itself to open up my understanding and then it's about just being alive -- being truly alive!
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As I’ve long suspected, MSNBC is a failed comedy that takes itself too seriously. Its trust rating as a news organization has been surpassed by Jon Stewart’s Daily Show. Here we have Comedy Central, a real comedy network, trusted more than MSNBC, a fake comedy network posing as news.
The survey by the Bookings Institution and Public Religion Research Institute is even more revealing about how Americans get their news.
A picture is worth a thousand words, and this one clearly shows which party claims “low information voters.” Getting the majority of your news from a 30-minute liberal spin cycle and recycled Obama talking points is guaranteed to wash even the most energetic of brain cells into a state of compliant somnambulance. Democrats should be able to cast every episode of The Walking Dead based on their news diet.
New Republic poo-poohs the study. Shilling for the liberal MSM, they contend that Fox News is an “echo chamber” and retreat to the safety of nervous laughter behind Obama’s 2012 presidential election victory as proof. That line is so frayed that even liberals find it useless.
The Heritage Foundation nails the truth in their response:
Geoffrey Lysaught, vice president of strategic communications at The Heritage Foundation, sees it differently. Too many news networks underestimate their audience, according to Lysaught. In his estimation, the success of Fox News and the failure of MSNBC should be attributed to the American people’s ability to “know the difference between credible, high-quality reporting and ‘spin’ presented as news.”
Even flaming liberal Jon Stewart knows that treating your viewers like morons is bad TV.
Maybe after seeing this, and the repeated ratings debacle day after day, GE will wise up and use that valuable 30 Rock real estate for something more useful, like a gym or a bike storage room to get some carbon credits. In the meantime, the new tag line will be MSNBC: No See TV.
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This December will provide moviegoers with a very eclectic and abundant selection of films to choose from. Regardless of your preferred genre or style of filmmaking, chances are there are at least a couple of movies you’ll be looking forward to.
The most-talked about and most highly anticipated release is unarguably “Black Swan” from director Darren Aronofsky. Speculation about the film’s plot as well as star Natalie Portman’s performance has been building for months. Aronofsky has described “Swan” as a sort of companion piece to his 2008 film “The Wrestler” in terms of the focus on the physicality of the performers in ballet and professional wrestling. Portman stars alongside Mila Kunis in a very dark look at the world of ballet and the great lengths dancers must go to in hopes of being the best. Aronofsky has been responsible for some of the most talked about films of the last decade and “Swan” is sure to continue his streak of controversial and thought-provoking work.
Having been jostled around for a release date for several months, “The Tourist” has finally landed a spot in the awards season. Directed by Florian Henckel von Donnersmarck (“The Lives of Others”), the film stars Johnny Depp as an American to travels to Venice, Italy after finding himself single. He meets a mysterious woman, played by Angelina Jolie, who is an Interpol agent that is has a few more secrets than she lets on. Depp never fails to impress audiences with each new role he takes on and Jolie has a natural movie star magnetism so the pairing should result in an engaging story set against a beautiful backdrop.
“The Fighter” will re-team Mark Wahlberg with director David O. Russell. The two worked together on “Three Kings” and “I Heart Huckabees” so with any luck, “The Fighter” will be another successful collaboration. The film stars Wahlberg as real-life boxer “Irish” Mickey Ward and Christian Bale as his brother who becomes his trainer. Wahlberg is clearly capable of pulling off physical performances, so here audiences will be hoping for depth more than sheer power. Bale is a chameleon who, similar to Depp, transforms in every performance. Without a doubt, Bale will be looking at an Oscar nomination for his role as Ward’s former drug addicted brother.
Fanboys across the country (as well as any child of the 80s) are gearing up for “TRON: Legacy” which is the long-awaited sequel to the cheesy 80s sci-fi flick which has become one of the biggest cult movies of all time. Jeff Bridges is back inside the game, but this time his role is a little different. The movie focuses on his son, played by Garrett Hedlund, who is transported inside the alternate reality to become a player in the most important game of his life. “House” star Olivia Wilde also stars in the movie which is sure to give fanboys an even bigger bang for their buck.
The Coen Brothers never fail to create the most entertaining and intriguing films that keep people talking for months. Their latest film, “True Grit,” is a Western, a genre at which the brothers are clearly adept. (Their film “No Country For Old Men” won them Best Director Oscars as well as Best Picture.) Though John Wayne starred in an adaptation of the book in 1969, the Coens assure moviegoers that their version is a different take and focus on the events in the book. With a cast that includes Jeff Bridges, Matt Damon and Josh Brolin, the Coen Brothers are sure to have yet another fantastic work as a part of their filmography.
Writer/director Sofia Coppola has been absent for several years, but her new film, “Somewhere,” is getting wonderful reviews and solid buzz leading up to its release. The film focuses on a burnt out actor, played by Stephen Dorff, who is suddenly confronted with having to raise his daughter, played by Elle Fanning. Coppola is a masterful writer who captures human emotion and relationships better than most screenwriters today so the story is sure to be a moving portrait of what it means to be a parent. Though some comparisons have already been drawn to Coppola’s masterpiece “Lost in Translation,” Dorff’s performance has gotten strong positive feedback which is sure to negate any negative attention that Coppola may be receiving.
Finally getting a release after receiving copious amounts of praise at Sundance, “Blue Valentine” is a small indie film starring Ryan Gosling and Michelle Williams. The two stars both earned terrific reviews when the film was first screened and Oscar potential has been attached to their performances since May. The film examines the troubled past and relationship of a couple and explores how people are able to stay together when faced with all of the difficulties life throws their way.
In addition to all these films, December will also have a handful of traditional Hollywood titles that are likely to make little impact on viewers or at the box office. “Little Fockers” is yet another unnecessary sequel in the “Meet the Parents” series and focuses on the birth of Ben Stiller’s child. Audiences would be wise to pass up this movie at the multiplex. Also being released is the Jack Black fantasy-adventure “Gulliver’s Travels” which is a re-telling of the tale in the vein of “Land of the Lost.” Though there are a few titles that are likely to be less than satisfying, overall December should be a terrific month for movies.
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In a special new column for coupon website RetailMeNot.com, actress Jennie Garth talks about her frugal upbringing.
On Wednesday, Garth debuted "The Real Deal" column and wrote about her poor past growing up with five siblings in a small town in Illinois.
She wrote, "My upbringing certainly influenced my relationship with money, as everyone's does. We grew much of our own food, and I can still remember flipping through the tattered pages of my mom's favorite cookbook, about feeding a family on $12 a week..."
Despite finding fame and fortune after landing the role of privileged teen Kelly Taylor on TV show "Beverly Hills, 90210," Garth's approach to money hasn't changed.
She added, "I'm no Beverly Hills socialite. I've only played one on TV... I'm nothing like Kelly Taylor. In fact, Beverly Hills is not my scene at all. Yes, I live in L.A. but I don't live in a mansion with a cook and a butler. I guess you could say I'm a little less fancy - and a lot more down to earth."
Following her split from husband Peter Facinelli last year, Garth has been adjusting to life as a single parent to three daughters and admits she is always on the lookout for a good deal.
The mom wrote, "When you're a single parent, finding a bargain becomes less of a nicety and more of a necessity. That's why, whether I'm ordering books on Amazon, clothes for my girls at Forever 21 or just random stuff at CVS, I try to shop smart. Please follow me on my journey all year long right here at retailmenot.com/blog. I promise to share all of my best bargain finds, some so fine I'm sure even Kelly Taylor would approve."
Garth is currently dating musician Jeremy Salken.
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A budding realization around Services Oriented Architecture (SOA) is that the chances of it succeeding rest not just with technology and even process, but with group organization and influencing how people behave. The good news is that SOA has the potential to transform how businesses build and adapt complex business processes using old and new IT applications and infrastructure.
The bad news is that in order to enjoy said transformation, the adjustments to adapt to SOA need to go very deep within large organizations, to change how groups inter-relate, and to newly manage how cultural barriers stand and fall. Anyone who has tried to change how organizations behave, even small ones, knows how daunting this can be. Those who have tried to change how software developers behave, well, once they have been weaned from the Thorazine ... .
So what to do? Apply more technology to the need to remake cultures, of course. And so it is with the debut this week of Coral from Mindreef. The connected hubs of department-level Coral servers and associated platform are designed to foster more collaboration among those most affected by SOA principles: the people. Most-affected groups include developers within their own application types (ie, COBOL programmers in CISCS on mainframes), line of business planners and analysts within their own process types (ie, supply chain managers), and the newer groups working to bring policy-based management and governance to the intersection of IT and business imperatives.
Indeed, various types of developers -- those who fulfill the role of service procurement from a variety of specific legacy environments -- need to be in process synchronization with their service procurer cohorts. Just as importantly, these service enablers must be in smooth collaboration with the line of business people who are trying to create process efficiencies -- with fluidity and quick response -- in alignment with the dynamic business goals of the day. Yes, so it's Tower of Babel time culturally for organizations, and the free-flow of warm mental love needs to happen among previously sequestered IT fiefdoms, not to mention across the chasm between IT and business managers.
It sure looks right now from what we see of SOA pilots, and the complexity that sprouts from only a handful of services, that SOA will not scale effectively unless groups of people who previously had nothing to do with one another make like Mr. Spock and assume the Mind Meld position. Indeed, so much effort has been devoted to figuring out how to establish and manage "contracts" between SOA services technically, it seems critical now to establish and manage conformance to how those people affected by services and repeatable SOA resources should react and behave anew. Collaborative tools like Coral strike me as a prerequisite to successful broad SOA implementation.
Coral aims to usher in process collaboration and methodologies for for SOA development and refinement for accelerating process lifecycle productivity amid a SOA. Mindreef is setting the stage for a governance dashboard on SOA lifecycle creation and management. Nice thing about it: It doesn't force the variables into a central repository (remember knowledge management?) but instead recognizes the virtues of metadata. Users can use Coral as a centralized repository for SOA governance if they wish, or as a distributed hub for federated management; take your pick.
I suppose we should now think of SOA lifecycle management as a new category. Just borrow the notion of application lifecycle management from Rational or Borland and apply it freshly to Web services, SOA, and cross-cultural collaboration tools that span IT and business process work, and there you have it.
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Mozilla's security chief Window Snyder has confirmed a proof of concept information leak flaw in Firefox--even fully patched versions.
Snyder confirmed the issue in a blog post. The proof of concept vulnerability was highlighted by researcher Gerry Eisenhaur on Jan. 19. In a nutshell, Firefox leaks information that can allow an attacker to load any javascript file on a machine.
Technically, it's a chrome protocol directory transversal. Snyder explains:
When a chrome package is "flat" rather than contained in a .jar the directory traversal allows escaping the extensions directory and reading files in a predictable location on the disk. Many add-ons are packaged in this way.
A visited attacking page is able to load images, scripts, or stylesheets from known locations on the disk. Attackers may use this method to detect the presence of files which may give an attacker information about which applications are installed. This information may be used to profile the system for a different kind of attack.
Some extensions may store information in Javascript files and an attacker may be able to retrieve those. Greasemonkey user scripts may be retrieved using this method. Session storage and preferences are not readable through this technique.
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Halliburton Company (NYSE:HAL)
Q3 2009 Earnings Call
October 16, 2009 9:00 am ET
Executives
Christian Garcia – Vice President Investor Relations
David J. Lesar – Chairman of the Board, President & Chief Executive Officer
Mark A. McCollum – Chief Financial Officer & Executive Vice President
Timothy J. Probert – President of Drilling and Evaluation Division & Corporate Development
Analysts
Bill Herbert – Simmons & Company International
Geoff Kieburtz – Weeden & Co.
Brad Handler – Credit Suisse
Alan Laws – BMO Capital Markets
Jeff Tillery – Tudor Pickering Holt & Co.
Ole Slorer – Morgan Stanley
Robin Shoemaker – Citigroup
Michael Urban – Deutsche Bank North America
Operator
Welcome to Halliburton’s third quarter earnings call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host today, Christian Garcia Vice President Investor Relations.
Christian Garcia
Welcome to the Halliburton third quarter 2009 conference call. Today’s call is being webcast and a replay will be available at Halliburton’s website for seven days. The press release announcing the third quarter results is available on the Halliburton website. Joining me today are Dave Lesar, CEO; Mark McCollum, CFO; and Tim Probert, President Drilling and Evaluation Division and Corporate Development.
I’d like to remind our audience that some of today’s comments may include forward-looking statements reflecting Halliburton’s views about future events and their potential impact on performance. These matters involve risks and uncertainties that could impact operations and financial results and cause our actual results to differ from our forward-looking statements. These risks are discussed in Halliburton’s Form 10K for the year ended December 31, 2008, our Form 10Q for the quarter ended June 30, 2009 and current reports on Form 8K.
Note that we will be using the term international to refer to our operations outside the US and Canada and we will refer to the combination of US and Canada as North America. Our comments include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures are included in the press release announcing the third quarter results.
David J. Lesar
Here’s a summary of our overall results for the third quarter. Total revenue for the third quarter grew 3% from the second quarter and represents the first sequential revenue increase we’ve experienced since the fourth quarter of 2008. Most of our product service lines registered sequential growth from the prior quarter with software and asset solutions and production enhancement showing mid to high single digit growth from second quarter levels.
Our international business registered an overall revenue increase of 3% despite a 1% decline in the rig count from the prior quarter. While there is a risk of further decline in international activity in the coming quarters I am more optimistic than I was previously that this downturn will not match previous cycles in terms of duration and depth. However, we believe operators will not materially increase their spending levels despite stable commodity prices without compelling evidence of recovery in hydrocarbon demand. As a result, they continue to reduce capital expenditures by deferring projects and exerting pressures on the oil service companies to improve their project economics.
In North America the market continues to be challenging. Natural gas fundamentals remain fragile despite the first signs of a supply response resulting from the severe curtailment in drilling activity. Weak domestic gas demand coupled with the productivity of the new shale resources has led to gas storage reaching record levels. We believe that a significant improvement in the natural gas market in the next few quarters is unlikely without the resurgence of a broad market economic demand in support of winter withdrawal and supply patterns.
While we suspect that the industry will see accelerating production declines in the coming months in response to reduced drilling activities, we don’t believe these declines will be adequate to provide a meaningful near term correction of the current supply and demand imbalance. Despite these challenges, we are continuing to successfully execute our strategy implemented at the beginning of the downturn to navigate through this environment by aligning our resources to those areas that best leverage our differentiated technologies.
Let’s discuss now in more detail the international and North American markets. The international revenue grew 3% sequentially and now represents 64% of our total business. We saw double digit sequential growth in the North Sea, the Northern Gulf and the Middle East and Russia. For example, our Russian revenues 18% sequentially and it is clear that the Russian market bottomed from the depressed levels in the first quarter.
Production has not declined as feared with production coming on stream from Greenfield areas such as [inaudible], Uvat and Bangor all of which were serviced by Halliburton. While we expect to see a slight increase in meterage drilled in Russia for 2010, operators continue to be challenged by lingering financial market issues that could restrain some of the strength of the recovery in Russia.
We also saw a 9% sequential revenue increase in Brazil in the third quarter. As you know, we’ve been awarded several new contracts that expand our market position with Petrobras and other participating IOCs. In addition to winning a package for drilling fluid services, we also secured additional contracts for wireline, drill bits and directional drilling all with Petrobras. We also continue to increase our exposure to the growing IOC market in Brazil with a new fluids contract.
Deep water Brazil is an important and growing segment. This expansion of our position there will be beneficial to our long term prospects. We expect solid revenue growth in to next year with a ramp up of these new contracts as well as overall higher upstream development activity being forecast for the Brazilian market.
Excluding our employee separation costs, international margins for the third quarter were a healthy 22% versus 20% for the second quarter. As we stated last quarter we continue to believe that international margins will be under pressure through 2010. This is based on our knowledge of the lower pricing and the recently competitive tendering activity that took place for work that will begin later this year and in to next year. That pricing would suggest downward risk to current margins which could be partially offset by a more significant rebound in upstream spending.
Also, unlike the US market where volume and pricing feel so rapidly that we could not keep our revenues in balance with cost, we have more visibility and time to proactively work on our cost structure and introduce new technologies in the international market and this may help mitigate some of this pricing impact. I’m very pleased with the progress we have made in the last few years in building our international franchise and I believe it will continue to pay dividends as we go forward.
Let’s turn to North America. Revenue grew 2% sequentially. While the overall US rig count increased from the prior quarter, the increase was predominately in oil directed rigs. With gas directed rigs declining 6% from the second quarter. In addition, most of the rig activity increase was vertical in nature and operated by the private E&P companies who are not our traditional customers and they are not as service and technology intensive.
Despite the lower service intensity and the 6% gas rig activity decline, we saw our first sequential revenue increase in North America since the third quarter 2008. We continue to see our market share increase across most basins as operators direct their work preferentially towards those providers that have broader offerings and better service quality. The Gulf of Mexico had a weak quarter due to the continuing decline in shelf activity with the offshore rig count down 33% sequentially from the second quarter. However, we continue to make progress in expanding our well construction businesses which will benefit from the influx of deep water rigs in the upcoming quarters.
We also benefitted somewhat from the seasonal recovery in the Canadian market. However, as you all know the proportionate of the Canadian market to our overall North American business is quite small. We continue to see significant pricing pressure during the third quarter for those product lines that have the most excess capacity in the market. However, improved activity as the quarter progressed help stabilize margins. During the quarter, pricing for our stimulation business stabilized in some basins and reservoirs but continues to decline in areas of robust activity like the Haynesville and Marcellus shales which are particularly competitive.
As we have stated in the past, in our view much of the industry’s existing stimulation equipment is unsuitable for the lower depths and pressures of the new shale plays. We believe that the continued use of suboptimal equipment by the oil service industry for these harsh shale environments is unsustainable. This will facilitate the absorption of this oversupplied equipment situation in the market as equipment is much more quickly used up particularly if our competitors are unwilling or unable to spend the appropriate funds to maintain their equipment.
So, while we see signs that pricing is stabilizing across all product service lines in certain basins, as I said, in others it is not. But, overall margins are bottoming out, they may be under pressure slightly in the fourth quarter due to the typical season weather factors, the environment stipulations that affect the operations in Iraqis and potential declines during the holidays when customers typically stop spending in an environment like this and send their people home.
In addition, in the third quarter we saw customers continuing to drill more wells than they completed. We now believe that there is an inventory of about 1,300 to 1,500 uncompleted wells in North America. Part of this is due to the low gas price and part of this is due to customers not wanting to grow their actual production until they have their 2010 hedges in place. While this will be very positive for us when this completion backlog is worked off in 2010, it clearly created a disconnect between demand for drilling related services versus completion related services in the third quarter. We expect this to continue in to the fourth quarter.
This disconnect can be seen in our third quarter results for our US land operations where our drilling related product service lines showed an 8% sequential increase in revenue and some actual margin expansion but our completion related product lines, primarily stimulation showed only a 1% sequential increase in revenue with some related margin contraction. This lower level of completion activity affected the product lines of course with the largest industry overcapacity and we believe this is another contributor that could pressure fourth quarter pricing.
All this being said however, we believe that margin expansion in 2010 is possible that it will result in activity increases rather than be pricing led and that further pricing erosion can be mitigated by a realization of our cost savings initiatives. We are also anticipating a structural shift in the US land market as unconventional resources become a more prominent component of the production profile. We expect to benefit from this trend as operators are drilling longer horizontals and increasing their fracture and stimulation treatment to enhance initial production rates.
This is why it is so important for us to direct our resources to those areas. We have expanded our facilities this year to support our growth in the Marcellus, Haynesville and Williston basins. We believe these investments and our differentiated technologies will ensure that we will retain our market share gains and accelerate our growth once the market recovers.
While the near term look for both North America and international continues to be challenging we have been executing against our strategy of improving our condition in key markets. Internationally our incremental capital spending has been geared disproportionately towards deeper water where we are well positioned. In North America we have seen our market share increase in a number of basins as operators prefer to rely on Halliburton’s broad offerings and service quality for their work.
The success of this strategy appears to be supported by the recent oil field market report by Spears & Associates that indicates that we have gained market share in all of our product lines on a worldwide basis and Tim will talk about this in more detail. Uncertainty about the timing and breadth of the recovery remains and various factors will influence the path of growth coming out of this downturn in the many markets we serve however, our strategic imperative has been to continue to identify and increase our exposure to the industry’s highest growth markets.
The underlying trend towards well complexity will drive increase service intensity and broad beneficial overtones to our business as we go forward whether it’s in increased reliance on unconventional resources or expansion of the deep water drilling activity worldwide. Let me turn the call over to Mark and he can go in to more detail on our financial results.
Mark A. McCollum
Let me provide you with our third quarter operational highlights and I’ll be comparing our third quarter results sequentially to the second quarter of 2009. Our revenue in the third quarter was $3.6 billion, up 3% from the second quarter. As Dave mentioned, this is the first time since the fourth quarter of 2008 that we have shown a sequential quarterly increase. On a geographic basis, most regions grew sequentially led by our eastern hemisphere regions, each with a 4% increase.
International revenue grew 3% versus an average international rig count decline of 1%. North America revenue grew 2% despite the challenging pricing environment. Total operating income for the third quarter of $474 million was essentially flat from the previous quarter as increased operating income in international markets offset continued weakness in North America. In addition, we’ve recognized $28 million in employee separation costs during the third quarter as we continue to execute our cost control program. Our second quarter 2009 results included $17 million in employee separation costs.
International margins in the third quarter were 22% excluding employee separation costs up from the second quarter due to strong completion tool sales in the Middle East Asia and pipeline service and vessel activity in Europe Africa CIS. These types of activities tend to be lumpy from a timing standpoint. In fact, our other international region, Latin America registered a margin decline from the second quarter due to lower activity in select markets and the impact of pricing pressures.
As Dave indicated, despite the overall strong margin results for Q3 we believe that our international margins are at risk to fall in to the upper teens over the next five quarters driven by lower pricing. The timing and the depth of the margin decline will be dependent on various project start ups which we expect to predominately occur in the first half of 2010. For North America, margins in the third quarter fell from the prior quarter consistent with our guidance at our second quarter earnings call.
Average pricing continues to deteriorate in the third quarter but we are now seeing pricing stabilizing for most of our product service lines. Overall, North American margins experienced a gradual improvement throughout the quarter driven by improved activity and cost savings so leading edge margins suggest to us that we are near the bottom. However, as Dave pointed out we still expect that we could see a slight margin decline in the fourth quarter due to the typical seasonal issues in the Rockies and operator’s holiday schedules.
Now, I’ll highlight the segment results and note we’ve excluded employee separation costs in the comparisons that follow. Completion and production revenue increased $69 million or 4% mainly due to increased activity in Russia, the North Sea and Angola. Production enhancement revenue grew 6% from the second quarter increased international activity. Overall completion and production operating income was flat as the flow through of increased international revenue was offset by continued pricing declines in North America.
Looking at completion and production on a geographic basis, North American revenue increased while operating income declined as higher US land activity was outweighed by price erosion. As Dave mentioned, we’re seeing strong signs that pricing is bottoming across most basins which may lead to the stabilization of margins in the next couple of quarters. In Latin America completion and production revenues slightly declined and operating income fell 14% driven by lower activity across all product lines in Venezuela and Argentina.
In addition, higher second quarter deliveries of completion tools in Mexico and Brazil also affected this segment’s results in the third quarter which is typical of this product service line since it often experiences irregular delivery patterns from quarter-to-quarter. In Europe Africa CIS completion and production revenue and operating income increased 10% and 57% respectively due to recovery in Russia and improved vessel and pipeline and processing services activity in the North Sea and West Africa. We expect to see vessel activity decline in the fourth quarter consistent with historical seasonal patterns.
In Middle East Asia, completion and production posted sequential increases in revenue and operating income of 6% and 17% respectively with higher production enhancement activity in Southeast Asia and increase completion tool sales in Saudi Arabia, China and India. In our drilling and evaluation division, revenue and operating income increased slightly on sequential growth in North America and Middle East Asia. We continue to see considerable improvement in our Baroid product service line which had operating income growth across all regions.
In North America, drilling and evaluations revenue and operating income each increased 3% as our well construction product service lines continued to benefit from the favorable mix towards horizontal drilling notably in the Haynesville and Marcellus shale. Growth in land operations was offset by decline in the Gulf of Mexico from lower shelf activity and deep water rig delays. Looking ahead, we see stronger Gulf of Mexico activity for the division as additional deep water rigs come online.
Drilling and evaluations Latin America revenue and operating income remain flat from the prior quarter. Lower revenue in Venezuela was offset by increased drilling in Mexico and wireline and testing jobs in Brazil. During the quarter we commenced our Chicontepec drilling project and are currently working on four rigs. The heavy rain that occurred in the last week of September had a minimal impact on our drilling operations in the field.
In the Europe Africa CIS region drilling and evaluation revenue was flat and operating income was up 15% from the prior quarter as a result of the strong flow through of the revenue increases in the Caspian and Russia as well as a better mix of higher margin directional drilling activity in Norway and Angola. Drilling and evaluations Middle East Asia revenue was up 3% but operating income declined 6% due to the mix of projects in Saudi Arabia and project start up costs in Southeast Asia.
Now, I’ll address some additional financial items. As a second part of our two pronged strategy of navigating through this downturn, we continue to generate positive cash flow and maintain our strong liquidity position while at the same time investing the necessary capital to improve our overall competitive position. By focusing on the management of our working capital we generated approximately $100 million of positive cash flow for the quarter and have $3.2 billion of cash and cash equivalents and investments in marketable securities at the end of September.
Our current net debt to total capitalization ratio has decreased to 11% at the end of the third quarter. We continue to hold $1.2 billion of unused borrowing capacity on our revolving credit facilities and continue to maintain our investment grade debt ratings. We anticipate that corporate expenses will be approximately $50 to $55 million for the fourth quarter. We continue to forecast our 2009 effective income tax rate for the full year of 2009 to be between 31% and 32%. Finally, we’re currently in the process of setting our capital expenditure plan for 2010 and will be providing more specific cap ex guidance in our fourth quarter call.
A key part of our capital strategy in 2009 has been to spend within our operating cash flows and at this point that strategy will continue to be our guiding principal for next year. However, if we see positive changes in activity or the industry outlook we’ll make adjustments accordingly. Further, we continually reassess the configuration of our tools and equipment based on our view of the market so for competitive reasons we’ll not be providing further updates on additions and retirements of our equipment.
Timothy J. Probert
Earlier this year we discussed the parallels of this cycle compared to previous cycles. This quarter provides the industry with additional reference points and with that in mind it’s a good time to revisit analogies from past downturns. Based on the familiar mix that we’ve discussed earlier in the call of supply, storage and demand, it’s our view that the North America cycle could be consistent with that of the 2002 recovery.
In 2002 gas directed recants rebounded from trough levels and were then range bound for around 33 weeks versus being range bound for around 17 weeks at this point in the 2009 cycle. If we follow this pattern, then drilling activity may remain at restrained levels in to the first half of 2010 before demonstrating a meaningful increase. Complicating factors in the recovery include shut in wells and the impact of the 1,300 to 1,500 wells which have been drilled and not completed as referenced by Dave earlier. The largest concentration of these appears to be in the Barnett. For reference, there are approximately 4,200 gas well completions in the second quarter, down sharply from last year. Accordingly, the inventory of wells is now becoming statistically significant and could represent 7,000 or more frac stages.
Internationally the ’97 cycle took about 84 weeks to reach trough and then rebounded sharply. Currently, we’re in the 48th week of decline but expect that this international downturn will be shallower in aptitude and shorter in duration than the previous cycle. In our view, the industry supply issues impacted primarily by accelerating decline curves are more pervasive today than they’ve been in the past. While operators are continuing to constrain incremental upstream spending, they’re taking advantage of lower service costs while keeping activity levels relatively steady. However, as prolonged under investment exacerbates supply concerns, this may lead to a robust rebound in international activity as the global economy recovers.
We’ve been working hard to execute our strategy and as Dave pointed out the current Spears oil field market report provides additional data points to support our progress. Halliburton participates in roughly 25% to 30% of all the oil field segments monitored by Spears. According to the latest report, Halliburton is growing share by 5% to 9% across all of our product lines except in directional drilling and testing where they report an approximate 15% in these businesses. We’re especially pleased that our directional drilling business has overtaken our closest competitor and garnered the number two spot. The same holds true for our drill bits product line where we’re now the number three player in that segment.
David J. Lesar
To summarize we’re seeing signs that pricing has bottomed in North America, though as we said margins may decline slightly in the fourth quarter due to the items that we enumerated. Our international market and outlook remains unchanged. Operators are currently not increasing their spending until they see evidence of broad based demand recovery. We believe margin degradation is possible over 2010 based on the competitive tendering we’ve seen although we may be able to mitigate some of this will cost controls and increased volumes from the recently awarded work we’ve gotten.
We are successfully expanding our market position in key markets during this down cycle and we believe that by deploying our resources where we think activity will be robust, we will retain the share gains that we’ve experienced and accelerate our growth once the industry rebounds. I think it’d be good to open it up for questions at this point. Christian do you want to lay down the rules?
Christian Garcia
We will entertain questions. Please be remind that we will just have one question and one follow up for each caller.
Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Bill Herbert – Simmons & Company International.
Bill Herbert – Simmons & Company International
Dave, you mentioned that you were more confident with respect to the international markets and you provided some commentary along those lines but you also mentioned that you were seeing continued reticence on part of the IOCs with regard to prosecuting spending increases due to a lack of confidence, demand, so forth and so on. How is your increased confidence internationally manifesting itself with respect to your international business?
David J. Lesar
I think Bill in a couple of ways, one if you look at commodity prices have bounced around a little bit in Q3 but it now seems to be settling sort of in the $70 to $80 range. Part of it is just due to a lot of the discussions that I’ve had with our customers in the international market place about their spending plans and the fact that some major projects like the Gorgon project and several of those have now been sanctioned and are going forward. I think as one IOCs sees other IOCs stake big projects forward, then I think that just tends to build on itself. So, I think it’s really been more based on discussions and my confidence level is therefore increased that this is not going to be maybe as hard a downturn as we thought or I thought a quarter or so ago.
Bill Herbert – Simmons & Company International
Secondly, with respect to the follow up, if you could provide just some brief commentary and outlook and insight with regard to two markets, Mexico especially Chicontepec as well as Iraq.
David J. Lesar
Let me handle Iraq first, actually I was recently in Bagdad and there’s clearly a lot of activity, a lot of people are going in and out of there. It certainly is a market that has a lot of reserve base that will support I think a large and diversified oil services industry going forward. I think it’s also going to be a market that really sort of calls for every type of philosophy of service work from an integrated packaging drilling market to traditional services to maybe even some risk taking. I think there’s really going to be some room for all of that in there.
That being said, there’s really not a lot going on in there other than people looking at building some infrastructure. We are in the process of staffing up in Iraq, we are moving equipment in but I really don’t see that we will have a significant revenue stream out of there certainly for several years. We will have revenue, we’ll have revenue this year, we’ll have more revenue next year but it’s not really going to be meaningful I don’t think for a couple of years but clearly it is a big prize out there for oil services. I think you see everybody trying to establish a base there and we’re no exception. Clearly, a great future there and one we will participate in, in a big way.
In Mexico, I think everybody has sort of been reading the news around Chicontepec, we obviously have some exposure in Chicontepec with some of the projects that we have won. We don’t have the exposure that maybe some of our competitors do. I think that there clearly is a rethink going on within Pemex on the contracting philosophy around Chicontepec. Right now the contract philosophy has been sort of drill the cheapest hole and really don’t worry about maximizing production. I think that concept is being rethought within the upper reaches of Pemex and we think that perhaps they would envision changing that contracting philosophy going forward to make it more of one that increases production versus just drilling the cheapest whole.
We are just getting started on our Chicontepec project and it really isn’t providing any meaningful revenue or operating income at this point in time so we continue to watch that market and see whether that philosophy is going to result in a change.
Operator
Your next question comes from Geoff Kieburtz – Weeden & Co.
Geoff Kieburtz – Weeden & Co.
First question on international margins, if I understand your comments correct it sounds like you’re still looking at a 300 to 500 point basis compression but it’s from the third quarter level of around 22% as opposed to let’s say the second quarter level. Is that correct?
David J. Lesar
I think Geoff that if you look at what we said last quarter, we thought it would be 300 to 500 basis points and our margins were lower. Our margins are a bit higher this quarter which is why I think we’ve adjusted our thinking in to the high teens from the mid to high teens so I think generally you would conclude that – let me just reiterate now that you sort of opened the door there. The issue is if you look at the pricing that we’re having to tender to work it would suggest and will result in lower margins going forward.
However, because of the length of time we have to prepare for these contracts we also can more easily adjust our cost structure to anticipate that revenue stream and therefore perhaps some of that pricing decline can get mitigated especially the more time you have to get ready. So, I’m not trying to be cute here it’s just that the more time you have to get ready for a project the better you can do to get your cost in line.
One of the silver linings I think of this slowdown has been even though a lot of this work has been tendered and we’ve been successful in winning it the delay in implementing these projects has in fact given us more time to work on our supply chain and to work on our infrastructure costs to try and offset some of the margin decline that you had to give up in pricing. That’s really why we believe the pressure is going to be there but the longer we have the less that impact is going to be.
Mark A. McCollum
Just to add some color on that Geoff, I calculate that probably about 50 basis points of the margin improvement in Q3 is due to cost savings.
Geoff Kieburtz – Weeden & Co.
As a follow up to kind of the comments you’ve made Dave are pretty broad and would apply across your international business in terms of supply chain and so on but as you look are there markets where you would expect to see perhaps no margin compression or markets where you would expect to see outsized margin compression? And, if you do see differentials would that be more because of mix, differential pricing pressure or really just the timing of projects?
David J. Lesar
I think Geoff I’m not going to be as foolish to say that there’s a market where we won’t have any compression or I guarantee our customers in that area will come straight at the service industry and want some compression of margins. But, there are markets like that but I’m certainly not going to enumerate them. There are markets that have gotten very, very competitive just because of the prizes that are out there, two that would come to mind. The first would be Brazil, we’ve been very successful in winning projects down there but that’s also a very big prize that our competition also sees and I think therefore the pressure on the tendering process has been pretty good.
West Africa and Angola would be another where you see big projects, long term projects, lots of dollars involved and those also have tended to get very, very competitive. Then, I would say the markets where activity is less robust but us and our competitors sort of have large embedded infrastructures like the North Sea where there is very little activity going on but a large fixed cost base so anything that comes up for tender in an area like that, and I’m talking about the UK sector of the North Sea, also tends to get very, very competitive in terms of pricing.
Operator
Your next question comes from Brad Handler – Credit Suisse.
Brad Handler – Credit Suisse
I guess the first question is the recontracting cycle often as you head towards the end of the year you end up recontracting with your clients, has the current market changed that? Did you do so much recontracting in the first half of the year and fixing your pricing basin out for a while that we’re not going to see or hear a lot about the recontracting now as we turn towards the end of the year?
David J. Lesar
I think yes, you will not hear much about it as we get to the end of the year mainly because that philosophy has essentially been tossed out the door by our customer base because of the over capacity, especially in the pressure pumping side of the business I wouldn’t quite say it is a job by job but certainly it’s maybe a 30 well program of 50 well program at a time and then the customer tends to go out and retender it or rebid it or in many cases with us renegotiate it. It doesn’t go out for tender but they try to renegotiate sort of based on the current market.
So the process that was in place over the last several years when things were a lot busier for the service industry was to try and tie up a service company for a year, negotiate a price and then sort of sit back and say, “Great now I have the resources.” With the excess capacity that’s available today customers fee no compunction about tearing up an agreement and basically taking it back out for tender. I don’t really see that that is going to change until some of this overhang of equipment goes out of the market.
Brad Handler – Credit Suisse
I guess another Q4 type of question, as it relates to what I’ll call the normal seasonal uptick in things like export sales and your wireline business and the tools business, often I assume you have some visibility about that. Where do you see that as it relates to this Q4 and what does that say about what the customers are willing to commit to regarding programs for the following year?
David J. Lesar
I would say that’s a thing that has changed also a bit. We have pretty good visibility in terms of backlog for traditional sales and we’re not seeing the buildup in backlog that we typically would this time of year. I think part of it is just our customers are also paying a great deal more attention to their inventory supplies, their supply chain. As our supply chain has gotten more efficient at being able to produce and ship stuff on a real time basis, our customers have started to draw down their own inventory stocking expectations.
Then of course, I think you’ve got the whole element of the projects that have slowed down and now knowing when they’re going to start up. So, I don’t think you’re going to see, and that’s part of what we’re trying to broadcast here, I don’t think you’re going to see the spike up of sales that we typically see in Q4, at least our order books wouldn’t support that at this point in time. That doesn’t really concern me greatly because as I said I think part of it is just more a sufficient supply chain all the way through the industry but certainly some of it is a reluctance on the part of our customers to spend what capital they have here the balance of the year. I would hope that we would see that backlog pop up as we get in to next year but we’ll just have to wait and see.
Operator
Your next question comes from Alan Laws – BMO Capital Markets.
Alan Laws – BMO Capital Markets
I have a couple of questions, the first one being on you seem to have gotten a lot of fluid contracts recently. Can you tell us what’s kind of changed or changing at Baroid? Is this just like a cluster or is your competitive position changed at all?
Timothy J. Probert
Alan, we’ve had as significant focus on Baroid over the last couple of years. Jeff Miller who leads that product line has been really very focused on developing a strategy to essentially rebuild and strengthen the franchise. It’s one which has been particular successful so I wouldn’t characterize this as sort of a flurry of activity around a sort of concentration of particular bids, it’s really more sort of a fundamental structural change in the way in which we do business and as a result of that we’re obviously looking for sustainability in terms of performance of Baroid.
Alan Laws – BMO Capital Markets
Is there a mix improvement as well and more deep water?
Timothy J. Probert
Very much so. I think that we’ve clearly been significantly more successful in deep water and that’s all about gaining confidence of our customers since deep water is something which they take very, very seriously in terms of service selection. So, Baroid’s success rate in deep water is clearly is a function of the confidence that they’ve built with major customers around the world.
Alan Laws – BMO Capital Markets
I have another question, more of a high level issues question, can you talk a little bit about the controversy this sector faces in respective to frac fluids and sort of the breadth wing that we have on the environmental side?
Timothy J. Probert
I think that clearly there has been a great deal of discussion around sort of the whole legislative process and not to sort of belabor the point I think that clearly studies that have taken place through the years have really detected no evidence that fracturing has any impact to drinking water sources which has been the primary focus of this discussion since its inception 60 years or so ago. So, we’re continuing to work and investigate opportunities within our technology to minimize exposure and as an example of that, at the SPE just last week in fact, we introduced something we call a chemical scoring index which provides a benchmark metric on sort of the relative environmental performance of our suite of fluids and enables our customers to really make a selection of treatments based on the balance between reservoir performance and environmental performance.
We certainly anticipate this becoming an industry benchmark which we hope will drive sort of an increased awareness in environmental issues and stewardship and at the same time provide us with an opportunity to continue to advance the science around improving our customer’s performance of their wells.
Alan Laws – BMO Capital Markets
Just sort of more of an educational issue for customers and politicians?
Timothy J. Probert
Yes, I think it will give our customers an opportunity to select the appropriate fluid that gives them the balance between environmental sensitivity and also reservoir performance.
Operator
Your next question comes from Jeff Tillery – Tudor Pickering Holt & Co.
Jeff Tillery – Tudor Pickering Holt & Co.
With regards to Russia, and you guys showed a really big sequential increase in that market. One of the industry kind of recount services showed a fairly significant drop off in September of activity. Is that something that you guys saw in the field or is Russia just kind of pushing forward ahead?
Timothy J. Probert
We’ve been very pleased with our performance in Russia. I think when we take a look at Russia overall I mean clearly 80% to 85% of the production today is coming out of Western Siberia which is a very, very mature province. As Russia looks to sort of try and maintain its leadership position if you’d like in terms of global production it’s going to force a great deal of incremental activity in to Eastern Siberia and other locations all of which are significantly more service intensive locations for companies like Halliburton.
All-in-all we’re very positive on the outlook though of course as Dave pointed out in his commentary there are sort of some financial overtones which still have to be resolved in order to perhaps allow Russia to achieve its full potential. But, we don’t think that the month-to-month data collection is probably a little bit iffy. We certainly didn’t see any significant change which would alter the picture which we outlined on the call here.
Jeff Tillery – Tudor Pickering Holt & Co.
Then an unrelated follow up question, just regarding some of the contracts that were negotiated earlier this year internationally I believe had some oil price escalation clauses in them. Presumably those oil prices are at a point where those clauses could potentially kick in. Could you just comment on how Halliburton is treating those and if you’re trying to push for higher pricing or increased scope on those contracts?
Timothy J. Probert
Yes, those escalators basically include in a number of cases oil price triggers for a period of time so it is necessary for those oil prices to be sustained above a certain level for a period of time. Clearly that gives us the right to have a discussion with our customers and we’re certainly having discussion with a number of our customers but we’re also in a very competitive environment Jeff so we’re reserving that right but the timing of improvement in pricing relative to those triggers is yet to be seen.
Operator
Your next question comes from Ole Slorer – Morgan Stanley.
Ole Slorer – Morgan Stanley
First of all back on the fluids situation again, would you say that you are clearly gaining market share given the announcements in your press release but are you gaining market share by replacing incumbent operators or are you gaining market share by winning new rigs that are coming in to the market?
Timothy J. Probert
I think the answer to that is really both and the deep water experience has been a function of both and that’s obviously one which everyone pays a great deal of attention to. I guess the short answer is both the combination of new rigs and also replacing incumbents.
Ole Slorer – Morgan Stanley
A little bit more specific, is it predominately – I mean Brazil is clearly replacement but on the other rigs are they new rigs, is it evenly balanced or is it predominately one of them?
Timothy J. Probert
I can’t really sort of give you a detailed breakdown of that Ole but it’s a combination of both of those elements. I think to sort of elaborate a little bit further, certainly the data would suggest that we have indeed been gaining market share and we’re obviously very proud of that.
Ole Slorer – Morgan Stanley
On the market outlook Tim, you gave a pretty robust outlook while the reference of previous cycles I don’t think we’ve ever had a cycle where $77 dollar oil is a trough. But, you seem pretty optimistic when you said a vigorous international recovery yet Mark you continue talking about your 300 to 500 basis point negative margins so there seems to be a little bit of a dichotomy between the way the two of you are describing the outlook. Could you clarify if you defer at all?
David J. Lesar
I think it’s important to understand that we have a pretty robust view of the international markets. We’ve seen the contracts that have been tendered so we know that there is a good revenue stream that is going to come off of those contracts but they are not going to be at the margins we saw at the peak in the last cycle because of the longer term nature of the international contracting market. Therefore, you could see the revenues kick up but they’re not going to bring with it initially the incremental margins that we would have seen two, three, four quarters ago because it will take us time as I said, to make sure our costs are in line, our supply chain is in line and then we can bring appropriate new technology in to those contracts and upsell from that opportunity.
So, I really would think of it as sort of a dichotomy in the view. Clearly, we see a kick up on the revenue side but the margin side I think is going to lag and that’s what we’re trying to sensitize our investor base to is that we’re not going to have the kinds of incrementals you saw 12 or 18 months ago. It’s going to take some time to work our way back to those incrementals but as activity does increase then the margins will start to come up.
Ole Slorer – Morgan Stanley
So we’re led by a strong revenue growth and then margins follow later?
David J. Lesar
Exactly. That’s what we’re trying to say.
Operator
Your next question comes from Robin Shoemaker – Citigroup.
Robin Shoemaker – Citigroup
I wanted to ask you about the market share gains in North America that you referenced. I know you’ve had an initiative to try and bundle or package your products. A typical package might be bits, motors and mud. I wonder if that is having some success or if you can give us an update on that strategy?
David J. Lesar
I think it is having a success. What we’d like to do is package bits, motors, muds, frac and completions but as Tim has said and I have said we’ve been very successful at doing the bits, muds and motor piece but because of the really pretty amazing number of wells that are being drilled but not completed right now you aren’t able to sort of bring the full suite of services to bear. But, there clearly has been a push on our part to do that and in my view we’ve been very successful at it. When we get back to a more normal routine of basically being able to do what is essentially a turnkey well from the drilling all the way through completions, I think that strategy will pay even more but it certainly is paying even in this marketplace.
Robin Shoemaker – Citigroup
Just following up on your comments about the pressure pumping equipment supply relative to demand and I think you’ve cited that the wear and tear on pumping units have increased and I think we’ve seen examples in the Haynesville wells which are notorious pump eaters and I think you’ve experienced that as well as others. Predominately, where is the excess use and wear and tear coming from that is leading to perhaps a greater rate of decline in the pressure pumping unit supply?
Timothy J. Probert
Generally Robin I would say that the combination of sort of high pressures, high temperatures and long, long stages are really driving the sort of wear and tear equation. As we outlined before, and I think as many others have outlined in the industry, we’re certainly not alone in that factor that this is a source of potential using up of equipment if you like and restricting the amount of capacity that is ultimately going to be available. It really benefits those and certainly rewards those that have strong maintenance program and those that continue to invest in making sure that their technology is up to date to service these wells. In some respects it’s not a lot different with drilling equipment either. So, I think it’s just a general source of tougher more complex wells which require more service intensity than we have historically seen.
Mark A. McCollum
We’re seeing this particularly in the Haynesville. That’s an area where this situation is most acute and as we see our customers they might go and use equipment that is under power for it and they’ll walk away from it because of poor service quality and the inability to meet their requirements on getting those jobs done.
Operator
Your last question comes from Michael Urban – Deutsche Bank North America.
Michael Urban – Deutsche Bank North America
I wanted to talk about the margin dynamic you talked about a little bit in the US and some of the higher end shale plays were potentially coming under some pressure there. Presumably that is because you’re coming from a higher level there, the rest of the US has been pretty depressed for a while and I believe margins have held up a little better in that space and now you’re seeing competition come in. Is that reasonable?
David J. Lesar
I think it is two things, one is that as we’ve successfully our market share strategy a lot of our competitors, especially the smaller competitors have really concentrated their efforts in the two big shale plays that are robust today, the Haynesville and the Marcellus. I think if you look at where there is the most over capacity in the industry and pressure pumping today, it clearly is in those two basins. Then, you couple that with the very difficult frac conditions that Tim just talked about so you are having to bid fairly cheap to get work but then the work you are doing is very tough and consumes a lot of profit, it consumes a lot of pumping time, you have to take a lot of equipment to location so therefore you don’t get the efficiency that we typically would have in some of the other more established basins around the US. It’s pretty clear that as time went on in the other basins in the US we had figured out a way to sort of most efficiently frac wells. The level of activity to date in the Haynesville hasn’t allowed us to be able to get that model precisely where we want it. We certainly are making progress in that area but I think if you couple a relatively inefficient way of fracing right now with a way over capacity of competitors that are in those markets it really makes for a very, very fierce competitive situation. We’re well suited to fight in a market place like that and we very much are.
Michael Urban – Deutsche Bank North America
I think you basically just answered this but, going forward as you are able to drive those efficiencies as you have in the past, as the competitors presumably aren’t able to perform as well as you think you are or will be, that’s still going to be a very good market for you rather than a market for your customers?
David J. Lesar
I think that it will be a good market for both of us.
Christian Garcia
Before we close out our call we would like to announce that our fourth quarter 2009 earnings call will be held on January 25, 2010 at 9 am Eastern. Please mark your calendars and thank you for participating in today’s call.
Operator
Ladies and gentlemen thank you for your participation in today’s conference. This does conclude the conference. You may now disconnect.
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The Cardenas men from Camaguey, are part of a wave of migration unseen in at least a decade. On Sept. 14 of last year, nine Cuban men pushed their scrap-metal raft into the Florida Straits, started up its tractor-trailer engine and disappeared north into the night. A few days later the rumors started in Camaguey, leaving their family to wonder.
Jacinta Gonzalez, field director for Mijente, transferred to ICE after AZ Trump protest. https://t.co/PVNtfaKq4T pic.twitter.com/E8fJ0PLyp0 — #FeelTheBurghardt (@JAMyerson) March 20, 2016
Jacinta Gonzalez was arrested, along with Michael Cassidy and Stephany Laughlin, for locking herself by the neck to a van and blocking a highway leading to a Phoenix-area Donald Trump rally on Saturday.
Her colleagues were released by the Maricopa County Sheriff’s Office early on Sunday at 1 a.m., but Gonzalez was held overnight by officials, something she attributes to her last name.
A Mexican-born U.S. citizen who belongs to a immigration group called Mijente (a variation of “My People”), Gonzalez told Phoenix station, ABC15, that she was questioned by U.S. Immigration and Customs Enforcement (ICE) agents, unlike Cassidy and Laughlin. She told the station a “hold” was placed on her and she was transferred to ICE custody.
Maricopa County sheriff’s officials told the station that all three protesters were interviewed by ICE agents, and confirmed that a hold was placed on Gonzalez.
ICE issued a statement to ABC15 reading, "[Gonzalez] was recently released from U.S. Immigration and Customs Enforcement (ICE) custody after database checks determined she currently holds a valid United States passport. Under current ICE procedures, all foreign-born individuals who are booked into the Maricopa County Jail are interviewed by ICE personnel to determine alienage and removability and whether they would be an enforcement priority for the agency."
The Maricopa County Sheriff’s Office and its head, Sheriff Joe Arpaio, have been investigated and cited by federal agencies and courts on charges of racial profiling and targeting Hispanics in the past, charges Arpaio has consistently denied.
On Saturday, protesters blocked Shea Boulevard at two different locations in order to try to prevent people from reaching a Trump rally.
"That's the way to make your voice heard, to do something like this," Brianda Martinez, who supported the protesters, told ABC15.
"No, I am not surprised, we expected it," Jo Puma, a Trump supporter, told the station. "We are not going to stop, it's not going to make us give up."
The Republican presidential front-runner has built his primary lead by proposing building a wall along the Mexican border and deporting millions of undocumented immigrants.
It’s a theme that resonates with many people – both pro and anti – in this border state, where Arpaio, former governor Jan Brewer and other public officials have gained notoriety by talking tough on immigration.
When a reporter from the station noted to Gonzalez after her release that many people were upset by the group blocking traffic, she answered, “Many people were upset by that, but we’re also very upset that they’re talking about breaking up our families and communities.”
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In the end, this wasn't the way Jorge Posada wanted to go out as a New York Yankee in what could have been his final game in the pinstriped uniform.
An emotional Posada wiped his eyes and politely stepped away after talking to the press for almost four minutes after the Detroit Tigers eliminated the Bronx Bombers from the postseason with a 3-2 victory Thursday night.
If it was his last night in the Bronx, Posada went out in style, going 2-for-4. He nearly got a third hit when he just missed out on an infield single in his last at bat.
It may have been the last time Héctor Lavoe's “El Dia de Mi Suerte” blasted from the stadium speakers as he walked to the plate. It may have been the last time Posada was serenaded with the traditional 'Hip Hip Jor-ge!' chant that was carried over from the old house across the street.
“They've been awesome,” Posada said of the fans that had his back while the veteran went through some tough times earlier this season.
“The fans have been unbelievable to this team and to me,” added the 40-year-old Puerto Rican.
Right after a reporter asked if he had taken the loss harder than prior ones, Posada became emotional, saying that he was “sorry” and making a left turn as media members tried to squeeze a few more words out of him. Posada was perhaps walking away from his locker one last time – the one that stands a few feet away from his longtime teammate and close friend, Derek Jeter.
“Jorge's like a brother to me,” the Yankee captain said from his clubhouse chair.
“I don't know what the future holds,” he continued. “It's not something to talk about because our job is to try to win this year but, yeah, we have grown up together.”
After 16 seasons as the team's starting catcher, Posada was given designated hitter duties this year. Told that he could no longer be a catcher, he struggled in his new role.
“It's like being out of your house,” Posada confessed to Fox News Latino earlier this season.
He hit just .132 in April and didn't fare any better in May. And there was the night with the Boston Red Sox in town and a national audience watching when Joe Girardi penciled Posada into the ninth spot in the lineup.
He turned the switch on in June and hit at a .382 clip with three homers and 11 RBIs before struggling again in July and August. By the time the Red Sox visited New York again, Girardi informed him that he was no longer the starting DH.
Yet somehow Posada battled and was fortunate to get in the lineup frequently, due mostly to rainouts. He rounded into shape and found himself as the team's DH in the postseason, starting in all five games against the Tigers.
He managed to be one of the most consistent hitters on yet another disappointing October team, surprising many with his .429 average (6 for 14) and a .579 on base percentage.
Posada now has played 1,829 games in the regular season to go with 275 career homers, 1,664 hits and a .273 batting average. He showed that he could still hit in the end, but whether he returns to the Yankees for an 18th season remains to be seen.
Alex Rodríguez showed this year that he may no longer be the picture of health that he has been throughout his career. He and Jeter will need their rest and the DH spot in the lineup will most likely be used to give them some extra days of rest.
And, of course, there is Jesús Montero, who clearly demonstrated that he belongs with the big league club but who isn't necessarily viewed strong enough defensively to be the full-time starting catcher.
These realities make the chances of Posada wearing the pinstripes come February 2012 quite slim.
But count All-Star second baseman Robinson Canó as one who would like to see his friend and teammate return.
Canó said he could not imagine Posada being on another team except the Yankees. Posada was one of the players who Canó says he felt closest to and that he considered him family.
“That's something that's not in my hands. I will leave that up to the front office. But I will say he did a great job,” Cano told Fox News Latino. “You know he was benched for a long time and at the end he did his job. And in the playoffs he did his job.
“I'd like to have him, why not. A tremendous person,” Cano added. “A tremendous human being. He's helped me out a lot in my career. Those are people that you always want around you...a very humble person and a good person."
There is no doubt that Posada, like many Yankee fans, hopes to hear that Héctor Lavoe song a few more times as he strides to the plate in a Yankee uniform. For one more season, at least.
Adry Torres, who has covered MLB, NFL, NBA and NCAA basketball games and related events, is a regular contributor to Fox News Latino. He can be reached at elpiloto137@gmail.com or follow him on Twitter: @adrytorresnyc.
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Riot police broke up several gay rights demonstrations in Moscow on Saturday, hauling away scores of protesters hours before the capital hosted a major international pop music competition.
Activists had targeted Moscow, which was holding the finals of the Eurovision song contest, hoping to use the event's global popularity to draw attention to their claims that Russia officially sanctions homophobia.
Led by a mayor who describes homosexuality as "satanic," city officials had warned they would not tolerate marches or rallies supporting the rights of gays and lesbians.
Among those detained were British activist Peter Tatchell and American activist Andy Thayer of Chicago, co-founder of the Gay Liberation Network.
No injuries were reported. Most of the arrests took place at a hastily organized protest near Moscow State University in southwest Moscow, where about 30 protesters shouted "Homophobia is a disgrace of this country!" and "We are demanding equal rights!"
"This shows the Russian people are not free!" Tatchell yelled as he was being dragged to a police car. He was released a short time later.
Decades of official persecution of Russian gays ended in 1993 with the decriminalization of homosexuality, but opposition to gay rights remains widespread.
Moscow Mayor Yuri Luzhkov has described homosexuality as "satanic" and sought to justify official discrimination against gay people in Russia by claiming they help spread AIDS. Luzhkov has banned gay pride rallies in recent years, and attempted marches by gay activists have typically ended in detentions and attacks by nationalist groups.
City authorities had barred Saturday's rally.
Gay pride events "not only destroy moral foundations of our society, but also purposefully provoke disturbances that will threaten the lives and safety of Moscow residents and guests," City Hall spokesman Sergei Tsoi was quoted by the ITAR-Tass news agency as saying Saturday.
Police seized gay rights advocates as well as some members of religious and nationalist groups that staged counter-demonstrations. They also took away gay rights activists for talking to reporters, and ripped the bra and shirt off one female protester.
Moscow police spokesman Anatoly Listovetsky said 40 people were detained, but media reports said up to 80 were seized. None of the protests in central Moscow took place near the capital's Olimpiysky Sports Complex, where the Eurovision concert being held Saturday night.
Tatchell said Russian gay rights leaders had appealed to Eurovision contestants to denounce the police crackdown from the stage during the competition. The live contest, which pits finalists from 24 different nations against each other, has drawn up to 100 million television viewers previously and is Europe's most prestigious pop song competition.
"If ... the right to assemble is taken away from lesbian and gay people here in Russia, then other Russians have to fear for their own freedom," Thayer told reporters just before he was seized by police.
At a sanctioned rally near the Kremlin, about 50 demonstrators from nationalist and Orthodox Christian organizations denounced homosexuality. One man was detained when he alleged officials in the Kremlin were gay.
A half-dozen people protesting equal rights for gay people also were seized by police during a demonstration in Moscow's central Pushkin Square.
There are no official estimates of how many gays and lesbians live in Russia, and only a few big cities such as Moscow and St. Petersburg have gay nightclubs and gyms.
Several gay couples have attempted unsuccessfully to wed since the mid-1990s. Last week a lesbian couple were denied their application for a marriage license.
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For four decades, a multinational United Nations mission has quietly monitored the sleepy Golan Heights — providing a symbol of stability between bitter enemies as it enforced a truce between Israel and Syria.
But as Syria has plunged into civil war and the peacekeepers themselves have become targets of al-Qaida-linked rebels, the U.N. observer force has begun to fall apart, leaving its future — and the prospects for ever establishing peace in this rugged area of the Middle East — in doubt.
Since Israel seized the Golan Heights from Syria in the 1967 Mideast war, a withdrawal from the strategic plateau was seen as the key to any peace agreement. But as Syria continues to disintegrate, the odds of Israel giving up the Golan — never a popular prospect among Israelis — appear to be dimming by the day.
The downfall of the international mission known as UNDOF is a vivid illustration of the uncertain situation across the border — and in the eyes of many Israelis, it underscores why they can never relinquish the Golan.
The force suffered its latest blow earlier this month when the al-Qaida-linked Nusra Front seized the strategic Quneitra border crossing from UNDOF, sent a contingent of Filipino peacekeepers scrambling for safety in Israel and took 45 Fijian peacekeepers hostage.
Although the Fijians were released unharmed two weeks later, it was the fourth abduction of peacekeepers since March 2013, and several countries have withdrawn their troops from the mission.
The 1,200-strong U.N. force is now mostly huddled inside Camp Ziouani, a drab base just inside the Israeli-controlled side of the Golan Heights. Its patrols along the de facto border have all but ceased, the road to the nearby Syrian town of Quneitra is blocked by barbed wire, and the fields opposite the base are blackened by fires set off from wayward mortar rounds launched from the Syrian side.
With Syria in tatters, UNDOF's viability is now in question.
"Their mandate is just not relevant anymore," said Stephane Cohen, a former Israeli military liaison officer with UNDOF. "They are there to oversee an agreement between two countries — Israel and Syria — and in practice there is no Syria anymore."
That endangers a status quo that — despite a formal state of war between Israel and Syria — is widely regarded as convenient.
Since the aftermath of the 1973 Mideast war, the Golan has been the quietest of Israel's front lines, a place of hiking trails, bird-watching and winery tours. Constantly looming in the background was the prospect of the Golan eventually returning to Syria as part of a peace accord.
A plateau that looms over northern Israel, the Golan is considered by Israelis to be vital to their security. Lush and verdant for much of the year, it boasts the snow-capped Hermon mountain and the country's only ski resort. The attachment to the Golan is such that Israelis tend to hardly view it as occupied — and, indeed, the area, unlike the West Bank, has been formally annexed.
Despite this, the sides have been negotiating on and off for much of the past two decades, and even reportedly came close to a deal in 2000. Indirect talks between Israel and Syria took place as recently as six years ago.
Underpinning that ambition was the sense that peace with Syria would yield significant benefits in terms of Israel's legitimacy in the region — and that President Bashar Assad's government would be a strong partner capable of enforcing the peace.
That seems like ancient history now, with Assad's forces bogged down in an intractable civil war that has already killed at least 190,000 people.
Israel has largely stayed on the sidelines of Syria's conflict. But Israeli leaders appear increasingly nervous about the possibility of al-Qaida-affiliated rebels occupying the high ground over northern Israel.
That prospect has pushed the notion of a future Israeli withdrawal from everyone's mind, said Eyal Zisser, a Syria expert at Tel Aviv University. All Israel can do now is "sit quietly, keep our distance and hope," he said.
The Israeli military would not comment about its deployment, but officials say it is the most robust since 1973. The most obvious manifestation is a new 6-meter (20-foot) tall border fence topped with barbed wire and bristling with sophisticated anti-infiltration devices.
The traditional flock of tourists has slowed considerably and one of the main draws these days is a front row seat to watch the fighting taking place inside Syria. Atop scenic Mount Bental, Israelis and foreigners gawked one recent day as the sound of a large explosion echoed across the way, sending up a large plume of smoke in the distance.
Having abandoned their vulnerable positions inside Syria, U.N. observers have also retreated to the mountaintop lookout. A pair of uniformed soldiers observed the situation from the Israeli side using a long-range scope. U.N. officials say they remain committed to maintaining the force.
The new reality is perhaps most jarring for the Golan's 22,000 Druse residents, who have found themselves trapped in the middle. Followers of an offshoot of Islam, the Druse have mostly continued to identify as Syrian even after years of Israeli rule that has seen them become fluent in Hebrew.
They still have relatives in Syria, and the Quneitra crossing has served as a direct channel to Syria for students attending university in Damascus and for brides crossing over to marry fellow Druse. Those movements have slowed considerably as the fighting has increased.
The Druse have survived in a turbulent region by typically showing allegiance to their country of residence. Some 100,000 Druse from inside Israel are loyal citizens and have produced senior officers in its military.
Those on the Golan tread a fine line. Unlike their brethren in the rest of Israel, few have taken up citizenship — an option they were offered after Israel annexed the territory in 1981 — and at least in public have backed Assad's regime as their one-day savior.
But over the past three years, opinions have begun to fluctuate, with anger over the high death toll in Syria mixing with concern over the fate of their Syrian relatives and a new realization that their future looks brightest with Israel.
"Most of the residents support the rebellion against the Assad regime but do not support the terrorist groups that have been riding its wave," said Dolan Abu Saleh, the mayor of Majdal Shams, the largest of four Druse towns on the Israeli side of the disputed frontier.
"The truth is that people are happy to be living under Israeli rule and the Golan today is Israeli," he said. "If somehow there is a situation where Syria becomes a democratic state then the residents here will think about being a part of that dream."
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Follow Heller on Twitter @aronhellerap
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A series of attacks in Iraq, including an explosion at a booby-trapped house in a village recently retaken from IS militants north of Baghdad, killed 17 people on Friday, officials said.
The explosion at the house in Zalaya village, about 75 kilometers (45 miles) from Baghdad, took place as Iraqi troops were at the premises, carrying out an inspection of the house, said police officials.
The blast killed eight soldiers and wounded 12, they said. The village fell into the hands of Islamic State militants last year but was retaken by Iraqi security forces days ago.
Earlier Friday, mortar shells landed on houses in Baghdad's northwestern Shiite district of Shula, killing four people and wounding 13. Also, a bomb struck a commercial street in the capital's northeastern Shiite suburb of Husseiniya, killing three people and wounding 11 there.
Police officials said a bomb also exploded in western Baghdad, near a row of shops for spare parts for cars, killing two people and wounding nine others.
Medical officials confirmed the casualty figures from the attacks. All officials spoke on condition of anonymity because they were not authorized to talk to media.
No one immediately claimed responsibility for Friday's attacks.
Iraq has seen near-daily bombings and other attacks, mainly targeting Shiite neighborhoods and security forces. The attacks are often claimed by the Sunni extremist Islamic State group, which seized much of northern and western Iraq during a summer offensive.
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AP
Who else but Lou Ferrigno could stir up a project like The Liberator -- a perfect storm of awesomeness. A multi-media franchise with potential to burn, The Liberator focuses on Mr. Ferrigno as Ed Migliocetti -- a.k.a. "The Liberator," a scientifically-enhanced superhero who, after many triumphant missions, has been scapegoated and discarded, and seeks to reclaim both his own honor and the trust and transparency of the free world. A high-profile whistle-blower not unlike Edward Snowden (albeit significantly larger), the character of the Liberator is first and foremost a complex man of strong feelings, yet in the public eye he's become a traitor, the disgraced former leader of a government-backed superhero team who served outwardly as goodwill ambassadors -- and covertly as black-ops agents -- until a mission went bad and he took the fall.
Now he's back with an axe to grind and a world to save. Sure, growly Christian Bale tried to play the kinda-sorta senior "Dark Knight" -- frankly, to mixed results. Whereas legendary Lou Ferrigno -- from The Incredible Hulk to family man to licensed lawman -- has exactly what it takes to bring a new and complex yet pleasingly familiar elder champion of justice to a public hungry for a hero.
Screenwriter Jim Cirile; Superhero Lou Ferrigno
Premiering last year at Hollywood's esteemed HollyShorts film festival and continuing to Stan Lee's Comikaze convention and beyond, the crowdfunded, handsomely-produced presentation pilot Liberator, directed by Aaron Pope, is soulful, smart and action-packed. In addition to the fearless Ferrigno, it features the mighty Michael Dorn (Star Trek: The Next Generation), kickboxing legend Don "The Dragon" Wilson, and Peta Wilson (TV's La Femme Nikita) -- plus the politically-minded Ed Asner as a rather dubious President of the U.S. The short's success has led to it being picked up as a comic book. In August, BlueWater Comics will debut the first issues of the brand-new Lou Ferrigno: Liberator comic series.
Comic-Con 2013: Looking for Lou!
Mr. Ferrigno is at Comic-Con in San Diego this weekend, promoting the new production. Recently I sat down with him and screenwriter Jim Cirile to discuss their dynamic new project. A question about action work -- then and now -- was my opener, but Lou explained that Liberator delivers action yet much more.
"Liberator's got heart and soul; it's not a typical action movie," says the two-time Mr. Universe winner. "It's not just about an aging superhero -- it's a guy dealing with rejection, dumped by the government, a former agent. He lost his relationship with his wife, with his daughter; he has nothing. And now he wants to blow the whistle. It's like Snowden -- he's fed up and he wants to show the world all the corruption. I put my heart into it. It's not just 'I did another film' -- this is something that's very connected to me, part of my life."
Lou Ferrigno and Jessica Andres in Liberator
I remind Lou of 2009's wonderful comedy I Love You, Man -- in which he's featured as himself, with Jason Segel unwisely picking a fight with him -- and how much I love his hilarious scenes (dude's got range). He's pleased, and reports that, subsequently, fans request "sleeper-hold" photos at conventions. (Yes, I went for it. So did the publicist. Thanks, Lou! We love you, man.)
"But this story really speaks for itself," continues Mr. Ferrigno, evoking his green glory days. "It's very, very powerful, because it reaches all ages. It's like when you see The Incredible Hulk TV series, and every episode has a message. This one has a powerful message -- you're almost with this person, you're together with him, battling and fighting for justice."
Liberator: The Trailer
Chimes in Mr. Cirile: "We always knew that Lou would be ideal for this role. But as we developed the material, we kept throwing in things where we were like, 'Well, I hope Lou is gonna go for this, because it's a little bit personal! It might hit a little bit too close to home. Which might require him to dig a little bit more as an actor. How much is Lou willing to open a vein on film?'
"We were very much inspired by The Wrestler," Jim continues, "which is a similar sort of story. Ours is obviously set in a superhero world -- well, a real world I like to think, that just happens to have some superheroes in it -- but, you know, where Mickey Rourke was able to take a role like that, and just lay himself naked, you know, and just rip it up. And we were like: 'Is Lou going to be able -- is he going to want to do this?'"
Lou wants to do this. (Thwart him at your peril.) As do Liberator's other stars.
"When we had the cast together for the reading, before the film, it was beautiful," states Mr. Ferrigno with a gentle pride. "Michael Dorn is a wonderful actor. I was impressed when he read the scenes with me. I mean, he's done many, many Star Treks. I've seen him at conventions, I've talked to him briefly -- but on the set, I mean, the guy's like Shakespeare! He wanted to be involved -- that made me feel good, because you can't carry the movie yourself. Everyone did a wonderful job."
Michael Dorn in Liberator
Mr. Cirile -- a writer of substance who humbly describes himself as "a bit of a political wonk" -- turns the topic to sociological relevance:
"What we're really trying to do with this is create this character, this incredibly deep character for Lou, but one that will get everybody thinking, and talking. And all that research, and all these political questions and ideas and stuff, we wanted to get it all in there, so that at the end of it, people go: 'Oh, that was a fun action movie!' on one level. But on another level, maybe they're thinking: 'Huh, this kind of echoes what's going on right now -- you know, with Snowden, and obviously there've been others, Valerie Plame, other prominent whistle-blowers, who've come out, who've had very important things to say. And do we listen to them, or do we not listen to them? How do we treat these people, you know, should they be heroes? Should they be jailed? Or is it somewhere in the middle? Whatever the dialogue is that it starts is a good thing."
Looky! Lou! (He's kinda strong.)
I ask Mr. Ferrigno about the desire for physical perfection in his formative years -- and perhaps a hero of his youth.
"Well, as a kid it was my only path to survive. I had nothing, and I was dealing with severe hearing problems. I had a severe speech impediment. And I had nothing else, so that's why I was fascinated with getting empowered. It gave me a good feeling about myself; it connected me to the superhero."
Flashy! Lou also runs a fine fitness company.
And Lou's hero? No pause whatsoever:
"Sean Connery: James Bond. Besides Hercules, it was Sean Connery, because he was very suave, he was smart, he was a fighter, and he was all about justice. Sean Connery was my hero, because he was a man: he was very masculine, and you relate to him on all different levels -- as a man, as a hero, as an agent. I mean, he had all the elements. I looked up to him because he was the kind of person I wanted to be."
Lou further clarifies the parallel: "I've been a deputy sheriff for eight years: I work with gangs, I work with search and rescue. I see the other side of the wall. I see all the homicide, all the drugs, all the murder, everything -- sometimes I see so many individuals that are afraid to speak the truth. They're afraid to fight for justice. I'm not afraid to go beyond that line. And that's what the Liberator is like -- he goes over the line: like James Bond! Nothing's gonna stop James Bond."
I'd like to conclude by adding that it's also rather apparent that nothing's gonna stop the Liberator.
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Here is your laugh for the day.Because of Glenn Beck’s success in forcing out Van Jones, Keith Olbermann has run crying to Daily Kos. He has decided he wants all the dirt he can get on not just Glenn Beck, but also Roger Ailes and Stu, Glenn’s producer. Keith is obsessed with Glenn. Why? Because he is jealous.Keith, we can venture to say, also has some serious mom issues compounded by Glenn’s success. Why do you think he’s going after Stu? Clearly, Keith saw Stu dressed up as Linda Douglass. Like Norman keeping his skeletal mom in her rocking chair, seeing Stu in drag has done something to Keith’s already frail mental state.So he’ll target Stu.And Roger.And Glenn.There’s just one problem for Keith — no one watches his show. The ratings suck. It wouldn’t surprise me if more people hear about RedState and me each day than Olbermann. And he thinks he can take on Beck?The fact is Glenn Beck has a large television and radio audience — vastly larger than Olbermann’s. And Beck has done something with his audience. He’s turned them into engaged activists, while Olbermann is dumbing down his audience and treating the rest of America like Janet Leigh in the shower.Suck it up Keith.
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You know, it’s not like anyone didn’t see this deal coming. The liberals’ heads are exploding over Sarah Palin’s hot number one selling book: “Going Rogue, An American Life.”
Sales of this book have been called unprecedented. HarperCollins, the publisher ordered 1.5 million books for it’s first printing. Within hours of being available for pre-order, the book was number one in sales over at Amazon.com and Barnes & Noble.
Think about that, the book is still in final editing, won’t be available for a month and a half, and didn’t even have a finalized dust jacket at the time! By any measure one can think of, Sarah’s book is an unprecedented, incredible success.
Of course, like clockwork, liberal hatemongers, and GOP elites dragged out their same tired old ploys. Same tired Saul Alinsky style attacks that used to work before EVERYONE started reading that obscure, anti-American, liberal/communist “bible.”
But my favorite is “she didn’t write it.” The liberals and GOP elites use this same stupidity every time she writes an effective Op-Ed or Facebook post. It’s actually a pretty good complement if you look at it. Her writing is just that effective! It scares them so much, they have to make something up to explain it away to the uneducated and uninformed.
Supporters of Palin don’t even get mad at that silliness anymore, instead we laugh at the liberals and GOPers for being THAT stupid, and THAT petty.
Now what really has the liberals, communists (same thing really) and GOP elites chattering is the fact that Sarah used a COLLABORATOR to help her with her book. Oh the horror!
Truth is, pretty much everyone who isn’t a full time author, and many who are, work with someone to help them put their books together. Even the very best of writers have editors to deal with. It’s a simple fact of the publishing business.
Look at any book by a business leader or other popular figure, they are all written “with” someone. I’ve read dozens of great business books by top leaders like Lee Iaccoca, Jim McKay, and Bob Lutz, all were written “with” someone.
Then we get into the “ghostwritten” ones. Most politicians and celebrities go this route. Someone writes their books, for a fee. Some use notes from the person the book is about, some just make it up as they go. But “ghostwriting” is pretty common, in the business.
Here’s just a couple of very famous “ghostwritten” books. (There will be a third and fourth we’ll talk about in a few minutes!)
First we have the best selling “Profiles In Courage” the bio of President John F Kennedy. Although he is listed as author, we now know the book was written by his speech writer, Ted Sorenson. Sorenson was one of the Ford “whiz kids” who followed McNamara over to the White House.
Hillary Clinton didn’t write her big policy book “It Takes A Village.” Barbara Feinman did for a fee of $120,000.
“Ghostwriting,” however, is very different than having a collaborator. A collaborator means just what it sounds like. You have someone to help you structure it. To put it together. Again, even profession writers will have some help.
For this job, Sarah chose the very capable Lynn Vincent. A solid writer who shares a lot of Sarah’s philosophy.
Something else, unlike many, especially politicians and celebrities, Sarah and her publisher were up front about this deal. Everyone knew from day one who Sarah chose for this project.
Here’s the thing, and this also explains how this book came together so fast. As we all remember, when announced, the book wasn’t supposed to be out until the Spring of 2010. The book was done so far ahead of schedule because, for all practical purposes, Sarah has literally been writing it all of her life!
You see, Sarah is one of “those” people who has kept a daily journal for most of her life. Back in earlier days, many folks did this. It was a habit they got into at an early age, and stuck with. President Ronald Reagan was also someone who kept journals. Sarah is simply following that old tradition.
At any rate, Sarah’s book is based on these journals. I understand she kept these journals during the 2008 campaign. That will make for some interesting reading, for sure. It also explains why Steve Schmidt (the Bob Shrum of the GOP) and Nicole Wallace, the two McCain campaign turncoats are running for cover!
So you ask, what does this have to do with the liberals and communists? (Again, pretty much same thing these days) And why should they “think long and hard” before talking their usual nonsense about Sarah’s book?
Well, one of the things that was whispered during the 2008 campaign, but not covered by the fringe, Obama media was the fact that Barack Obama didn’t write his big “literary masterpiece” that has been heralded by the left as the greatest piece of writing eveh!
Of course, that is nonsense on many, many levels.
Now the fact that Obama didn’t write his book is a minor thing, at best, a “who cares” kinda thing. Maybe a “he lied!” kinda moment, but my God, we already have hundreds, if not thousands of those “he lied” moments from Obama, so this will just get lost in that sea of lies!
Except for this:
The real problem for liberals and communists (yeah, I know) is WHO wrote the book. And all of the other Obama lies this knowledge unravels.
Jack Cashill was the first to pick up on this deal. After reading Obama’s “Dreams From My Father” he happened to pick up a copy of terrorist William Ayers’ book “Fugitive Days.” In Cashill’s own words:
“My involvement in this occasionally harrowing literary adventure began in July 2008, entirely innocently. A friend sent me some short excerpts from Dreams and asked if they were as radical as they sounded. I bought the book, located the excerpts, and reported back that, in context, the excerpts were not particularly troubling. But I did notice something else. The book was much too well written. I had seen enough of Obama’s interviews to know that he did not speak with anywhere near the verbal sophistication on display in Dreams. About six weeks later, for entirely unrelated reasons, I picked up a copy of Bill Ayers 2001 memoir, “Fugitive Days.” Ayers, I discovered, writes very well and very much like “Obama.”
That’s right, Cashill is talking about unrepentant murdering domestic terrorist, William Ayers, co-founder of the ultra-violent Weather Underground, a violent group that spent several years going around the country blowing stuff up and trying to overthrow the government. They actually declared war on the United States. Ayers set bombs in the Pentagon, the US Capitol Building, and NY City Police Headquarters, just to name a few.
Cashill has a whole collection of articles on this that you really must read, here.
Even better, not only did terrorist William Ayers help his buddy Barack Obama out, Obama returned the favor by offering up a review for one of Ayers many screeds “A Kind And Just Parent: The Children of Juvenile Court.”
Oh and Obama’s “literary genius” well, let’s just say that as big of a bumbling fool as he is without his beloved teleprompter to feed him the words to say, he’s worse without his terrorist buddy to write those words for him!
Here is an example of Obama’s “literary prowess.” This “poem” is from his undergraduate period and is hilariously titled (in context) “Underground.” I kid you not!
Under water grottos, caverns Filled with apes That eat figs. Stepping on the figs That the apes Eat, they crunch. The apes howl, bare Their fangs, dance . . .
So lets see, the terrorist who Obama claimed was “just a guy in the neighborhood” wrote Obama’s first book. Doesn’t look good liberals and communists. (Do I have to say it?)
But this just opens the doors to more and more of Obama’s lies. Ayers wasn’t just “some guy in the neighborhood” he was one of Obama’s closet mentors after Obama left home in Hawaii.
This also brings Obama’s massive ties to ACORN out in the open. Obama claims to have once been their “attorney” in a voter fraud case. (Yeah, shocker, like voter fraud isn’t ACORN’s # 1 business) This of course was a lie on Obama’s part. Obama was a trainer for ACORN.
If there are any liberal/democrat/communists still reading this, stick with me to the bitter end,. Because the question of WHY you should think long and very hard before going after Sarah Palin and her book will be revealed at the finish.
It was Obama’s job to indoctrinate ACORN’s rent-a-mob workers in the finer points of anti-American communist, Saul Alinsky’s book, “Rules For Radicals.” Alinsky, a Chicago mobster, among other things, is considered the “father of community organizing.” Alinsky dedicated his book to Lucifer (the Devil) whom he called the “first radical.”
This was just Obama’s first ties to ACORN. Obama’s BFF, William Ayers hired Obama to work for him at a couple of his “education foundations” that were Marxist front groups to funnel money to un-American fringe groups, and criminal enterprises like ACORN, to fund “educational programs.”
You see Ayers and the rest of the Weather Underground terrorists realized they couldn’t destroy America by blowing it up, so they cut their hair, bathed, and found jobs in society. With “higher education” already infested with communists and anti-American radicals of all sorts (and that’s just the professors) the murdering, terrorist bomber Ayers was welcomed with open arms! Ayers is now considered a “respected educator!”
Terrorist Ayers’ gig is teaching teachers and writing books on “education” all the while infecting an entire generation of educators with Marxist theory and anti-Americanism.
Stanley Kurtz, Senior Fellow at the Ethics and Public Policy Center has written extensively about the Obama, Ayers, ACORN connections. He has built a portfolio of articles about this. These too are a must read, which you can do here.
You simply cannot mention ACORN without mentioning Obama. ACORN is now being investigated by many levels of government, from state and local, to federal. When all of this comes to a head, things will not end well for Barack Obama, or his failing presidency.
Remember when Sarah went after Obama on the campaign trail for “pallin’ around with terrorists?” Well, even she may not have known the full extent of just how right she was.
You see, murdering terrorist William Ayers was not the only Weather Underground terrorist that Barack Obama is intimate with. We have found that Weather Underground co-founder Jeff Jones and Obama have very close ties.
We have found that Jeff Jones helped write a significant portion of the $1 trillion failed stimulus package that Obama foisted on America through trickery and deceit.
You see Jones, like Ayers, realized he couldn’t destroy America and turn it into a communist Utopia by blowing it up. So Jones joined the so called “green” movement, and along with others co-opted the environmental movement, turning it into a vehicle to usurp the United States Constitution, and “back door” communism in the name of “saving the planet!
Jeff Jones is a member of the radical Apollo Alliance. BTW, so is Obama’s departed “Green Jobs Czar” Van Jones, who was forced to leave recently.
Like terrorists William Ayers and Jeff Jones, Van Jones is a radical communist (self avowed) and an anti-American, anti-white, trouble maker who jumped aboard the “green” movement seeing it as the perfect vehicle to use for his plans.
Think about it. Take a bunch of young idealists, already infected with Marxist (communist) teachings, thanks to the teachers William Ayers helped along, and prey on their hopes and dreams. Use their laudable goal of a cleaner world, and corrupt it with your anti-American, anti-capitalistic rhetoric, and voilB (!) you have a ready made army of wrongly educated environmental zombies to do your bidding for you!
Now I know this sounds like a bad plot from a James Bond type movie, but unfortunately this is reality here in America!
You throw in George Soros, the evil multi-billionaire and former Nazi collaborator, who is a real life Ernst Stavro Blofeld, and the self proclaimed “owner” of the democrat/communist party, and Barack Obama’s puppet master, and the picture starts to come together.
While it may have been different at one time, it seems clear that Barack Obama is “Number One” in this Bond screenplay, and people like Ayers and the Jones are bit players like “Odd Job” or “Jaws.” I ‘ll leave that casting to your imagination!
We’ve written about these connections before, and there is no greater example of the communist’s use of the “green” movement to destroy America as we know it, than the California water situation, that you can read about here and here.
The communists are using the excuse of a two inch minnow to shut off the water to almost one million acres of prime California farm land. Land that has literally fed the nation with fresh fruit, nuts, and vegetables for generations. This has led to unemployment numbers of over 40 percent, and created thousands of new people dependant on government handouts for survival. It’s also forced the United States to import billions of dollars worth of produce from foreign nations, re-distributing America’s wealth to poorer countries, a classic communist goal.
The communists use the same tactic on oil. We are not allowed to explore for oil in our nation anymore. Instead, we re-distribute somewhere between $700 billion and $1 trillion American dollars to other nations, sending serious treasure to many nations who not only hate us, but actively work against us on the world stage.
Why we do this is mind boggling. We have more oil than the Middle East, a century’s worth of clean natural gas, several hundred years worth of coal. And with our technology, we could have used the so-called stimulus dollars from the bill that terrorist Jeff Jones helped pen, to build 30 or 40 nuclear powerplants, and fix two problems. Nuclear is as clean as it gets, and cheap too.
We have capped wells off the coast of California, that could be up and running within months if the go ahead was given. California is beyond broke, they are about to become a failed state, and yet……
So imagine our surprise when we found out that only a few days after George Soros bought controlling interest in Brazilian oil company Petrobas, Barack Obama “loaned” Petrobas $10 billion dollars of taxpayer’s money! Evidently it’s fine to destroy another nation’s ecology, especially if it will make your evil master even wealthier!
Sarah Palin was right there to call Obama on this bit of chicanery too!
But, as always, the fringe Obama media, which has become nothing more than house organs for Obama and the democrat/communist party failed to do it’s job!
Still with me liberals? Communists?
So far we just talked about Obama’s first “ghostwritten” book. Of course, Obama, literary genius that he is, “produced” a second tome, “The Audacity of Hope” a thrown together piece that was obviously created to cash in on all of the hype surrounding Barack Obama at the time. This book claimed to be based on a sermon shouted by Obama’s racist, hateful anti-American “preacher” of over twenty years, the “Reverend” Jeremiah Wright.
Wright’s “church,” Trinity United, which preaches “Black Liberation Theology” a communist concoction, is a cesspool of racism, and anti-American hatred. Barack Obama set in the pews of this church for over 20 years. “Reverend” Wright married Barack and Michelle, and baptized their two children. Jeremiah Wright is clearly not just “some guy in the neighborhood.”
Jack Cashill who again has done yoemen’s work on this story reveals that “The Audacity of Hope” is more of a collaboration than just a “ghostwritten” book, but not a collaboration with Obama and a writer, but more of a collaboration salad of speech writers, seemingly headed by Jon Favreau. Of course, just as terrorist Ayers is not credited with “Dreams” (for obvious reasons) Favreau isn’t credited for his contribution. You can read Cashill’s report on book two here.
Now liberals, communists, fringe news media, hate bloggers over at the Huffington Post, and whoever, here’s the deal. Sarah Palin was up front and honest in her presentation of her new book, “Going Rogue, An American Life” from the minute the project was announced.
On the other hand, Barack Obama’s entire life, his entire public persona is built on one fantastic lie after another. Barack Obama has spent a lifetime marinating in communism and anti-American hatred courtesy of his mentors and friends.
Barack Obama has assembled a government of like minded communists, Chicago street thugs, and other assorted anti-American, anti-capitalist, anti-freedom, and anti-liberty radicals.
Here’s what you good folks from the anti-American democrat/communist party need to think long and hard about. You folks over at NBC, CNN, you left wing hate radio talkers, you need to remember this:
The American public has already turned on Barack Obama, and communism. They have awakened and realized they were lied to, big time. They are not pleased at all. They are ready to not only throw all of the democrat/communists in Congress in 2010, they have had their fill of Barack Obama.
For every one of your jabs, and hate filled stories lying about Sarah Palin, there are going to be a dozen stories like this one exposing Obama for the radical, psychopathic liar that he is.
As America sits around the breakfast table in the morning, and the dinner table at night, this story and dozens like it are going to be on the menu on a steady basis from now until Obama is finished.
So smear away at Sarah Palin at your own risk. We are not going to let those smears go unanswered. Just as Barack Obama told his thugs from SEIU to “punch back twice as hard” before they beat black man, Kenneth Gladney, so hard at a townhall meeting that he had to be hospitalized. We are going to “punch back” ten times as hard. Not with our fists, but with our pens, and with the help of tens of millions of Americans who have had all they are willing to put up with.
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Acer, the world's third largest computer seller, said today that it will offer a new, low-cost laptop targeted primarily at emerging markets. Little is known about the model aside from the fact that will have a 7- or 9-inch display, cost about $470, and ship sometime in the second or third quarter. The specs and price would put it in direct competition with other low-cost models such as the Asus Eee PC and the Everex CloudBook, and to a lesser extent OLPC's XO laptop.
Acer had previously said it would not compete in this growing niche, but Asus has had some success with its Eee PC. And back in December, the newswire DigiTimes reported that Acer had ordered 1 million low-cost laptops in 2008 from Wistron, a contract manufacturer.
Asus currently offers four models: the Eee PC 2G Surf (512MB and 2GB SSD) for $300; Eee PC 4G Surf (512MB and 4GB SSD) for $350; the Eee PC 4G (512MB, 4GB SSD, and Webcam) for $400; and the Eee PC 8G (1GB, 8GB SSD, and Webcam). The 8G is still not widely available, but it will likely cost about $500. All of them have a 7-inch display and run either a Linux OS or Windows XP. Asus has previously stated that it hoped to sell 5 million Eee PCs worldwide this year; more recently it said component shortages would limit Q1 sales to around 700,000 units.
Everex's CloudBook goes on sale at Wal-Mart starting this Friday (2/15/08), according to the company. It will cost the same as the Eee PC 4G, but it uses a standard 30GB disk drive in place of the smaller SSD. It runs the gOS operating system, which is based on the popular Ubuntu Linux distribution, and includes the usual open-source suspects (Mozilla Firefox, OpenOffice 2.3 and GIMP, an image editing program).
Earlier this week, Acer said in a conference call that it hopes to ship 40% more laptops this year.
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While the world waits as an e-book pricing settlement nears or not, Amazon is pushing full steam ahead with another e-book project that will greatly expand its Kindle audience base.
Amazon has introduced "eBooks Kindle en Español," a Spanish-language e-bookstore within Amazon's Kindle Store.
Targeted specifically towards Spanish speakers in the United States, the new digital bookstore has more than 30,000 titles and is boasted to offer the largest selection of Spanish-language bestsellers "available anywhere" in the country.
Beyond e-books, eBooks Kindle en Español also offers subscriptions to 14 leading Latin American newspapers, including El Universal and La Nacion.
Furthermore, Amazon touts that the $79 Kindle and many free Kindle reading apps can be customized for complete Spanish-language reading and navigation, including popular highlights and other social features.
Spanish is the second most commonly spoken language in the United States. Therefore, opening up a Spanish-language digital bookstore is a big step for Amazon. By expanding the wealth of its library, Amazon has an opportunity to get ahead of the competition to reach a much larger audience and draw them into the Kindle platform.
Related:
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Synopsys, Inc. (NASDAQ:SNPS)
Q1 2016 Earnings Conference Call
February 17, 2016 05.00 PM ET
Executives
Lisa Ewbank – Vice President-Investor Relations
Aart de Geus – Chairman and co-Chief Executive Officer
Trac Pham – Chief Financial Officer
Analysts
Krish Sankar – Bank of America Merrill Lynch
Andrew Masuda – D.A. Davidson
Darren Jue – JPMorgan
Jay Vleeschhouwer – Griffin Securities
Monika Garg – Pacific Crest
Gary Mobley – Benchmark
Srini Sundar – Summit Research
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Synopsys Earnings Conference Call for the First Quarter of Fiscal Year 2016. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] Today’s call will last one hour. Five minutes prior to the end of the call, we will announce the amount of time remaining in the conference. As a reminder, today’s call is being recorded.
At this time, I would now like to turn the conference over to Lisa Ewbank, Vice President of Investor Relations. Please go ahead.
Lisa Ewbank
Thanks very much. Good afternoon, everyone. With us today are Aart de Geus, Chairman and Co-CEO of Synopsys; and Trac Pham, Chief Financial Officer. Before we begin, I'd like to remind everyone that during the course of this conference call, Synopsys will discuss forecasts and targets, and will make other forward-looking statements regarding the company and its financial results.
While these statements represent our best current judgment about future results and performance as of today, our actual results and performance are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during the call, important factors that may affect our future results are described in our most recent SEC report and today's earnings press release.
The reconciliation of the non-GAAP financial measures discussed to their most directly comparable GAAP financial measures and supplemental financial information can be found in the 8-K, earnings press release, and financial supplements that we released earlier today. All of these items plus the most recent investor presentation are available on our website at www.synopsys.com. In addition, the prepared remarks will be posted on this site at the conclusion of the call.
With that, I'll turn the call over to Aart de Geus.
Aart de Geus
Good afternoon and thank you for joining us. Q1 was a very good start to the year. We delivered revenue of $569 million and non-GAAP earnings per share of $0.68. We entered into a $200 million accelerated share buyback program and are well on-track to meeting our revenue, EPS, and operating cash flow objectives for the year.
Trac will discuss these in more detail shortly. As most of you know well, Synopsys serves the broad Electronics industry all the way from Silicon to Software. Over the past five years this market has seen, and is seeing, dramatic changes as continued advances bring daunting complexity challenges, but also a fabulous wave of impact and business
opportunities.
Most notably, demand is expanding for mobile and cloud infrastructure to support the enormous potential of big data, which is accelerated by a wave of Internet of Things data generation. Internet of things, or IoT for short, itself is rapidly morphing into the next generation of smart everything meaning digitally intelligent devices using functions such as vision, learning, and reasoning, as we’re already seeing in assisted and autonomous driving.
The increase in complexity of these sophisticated hardware/software systems challenges the entire value chain. Whereas the race is on again along the traditional metrics of performance, power and cost, it’s also subject to growing concerns on how to deal effectively with systemic security issues.
Synopsys is uniquely focused on enabling our customers across three market segments:
Semiconductor companies, who design chips and increasingly embed software in them;
Systems companies, who develop products that incorporate chips while adding their own differentiating software; and Software developers across many industry segments, who focus on handling the increasing complexity and security of their code.
For Synopsys, “complexity” is in our DNA and we’re well equipped to enable the next generation of opportunities. Many years of investments have made us the market and technology leader in EDA; the second largest IP company in the world; and the emerging front-runner in addressing the critical new software quality and security space.
We’re consciously building our Silicon to Software market position with an objective to grow shareholder value through strong operating cash flow generation, solid revenue growth and expanding annual non-GAAP operating margins through a balanced capital allocation strategy featuring stock buybacks to maintain or shrink share count. And acquisitions to expand our SAM and TAM and through the most predictable recurring, time-based revenue model in the industry, supported by a large multi-year backlog.
Our objective thus remains to drive long-term revenue and earnings growth, while continually evolving the position of Synopsys towards the sweet spot of today’s and tomorrow’s electronics. Let me make a couple comments on the present landscape. In Semiconductors, the environment is essentially unchanged since we spoke in December.
While consolidations are a bit of a headwind for the EDA industry, as customers rationalize their combined businesses over time, Synopsys is faring quite well in these situations.
The mission critical nature and completeness of our solutions mitigate risks and our Q1 results are very encouraging. In Systems, our strong position and focus on the intersection of hardware and software have been particularly positive, and we’re seeing growth for Synopsys. For software developers, our rapidly evolving platform of quality and security solutions is getting attention, and we see increased calls to action, most notably from the security perspective.
Now to some highlights from the quarter, beginning with EDA. In Q1 we signed a significant agreement with Globalfoundries for design, verification and manufacturing tools. Synopsys is supporting their recently acquired IBM ASIC business by providing access to a full Synopsys flow, including IC Compiler II place and route and IC Validator physical verification.
In addition, a cornerstone memory supplier increased its business with us by more than 25% per year, with particular strength in analog simulation and manufacturing. Meanwhile, our next-generation physical design system, IC Compiler II, continues its rapid deployment as customers see excellent results. The solution is production proven, with nearly 150 production designs supporting 19 different silicon process nodes.
Demand is quite high as IC Compiler II continues the fastest ramp of the Synopsys product ever, with opportunity for further growth. Some visible successes include: November’s qualification of IC Compiler II by Samsung Foundry for its 10nm production work. A collaboration with Globalfoundries on the industry’s first 22nm FD-SOI process and reference flow that includes Synopsys synthesis, IC Compiler II, and signoff.
As the clear leader in advanced design tools, we are witnessing increased adoption of 16, 14, 10 and even 7nm FinFET technology. Of the 286 active FinFET designs currently being tracked, Synopsys is relied on for 95% of those chips. 100% of the 10nm and 7nm tape-outs completed thus far utilized Synopsys design tools.
Notable also is Samsung already providing 10nm qualified Synopsys physical verification run-sets. IC Validator, which works particularly well with IC Compiler II and on FinFET technologies, is seeing an increase in customer utilizing its full signoff status. We also experienced strong growth and business alignment this quarter with multiple silicon manufacturing partners in both lithography and TCAD at very advanced nodes.
Now to verification, an area where we’ve seen excellent growth as our vision is now being realized. A number of years ago, we recognized that existing verification approaches were woefully inadequate to deal with the upcoming complexity growth in hardware, and the systemic challenges of hardware and software.
We had a vision, anchored around our market-and technology leading VCS simulation, to
deliver a complete platform of interacting verification techniques which we called the Verification Continuum. This vision and its subsequent execution were right-on, and today we’re seeing excellent technical results, as well as business and market share growth.
A great example in Q1 was a major enterprise-level partnership and expanded commitment to Synopsys by one of the top mobile semiconductor companies, to drive state-of-the-art technology collaboration and broadened adoption of our solution. Both the hardware and software elements of our Verification Continuum did well this quarter.
Our emulation system, ZeBu, saw excellent growth and continues to demonstrate performance and cost advantages. In prototyping, we shipped a large number of our next-generation HAPS FPGA based systems. On the software side, our virtual prototyping solution is having solid success, particularly in the auto industry. As evidenced by a large Q1 agreement with a leading U.S. OEM, our automotive strategy is bearing fruit as the industry is massively increasing its investments towards opportunities such as Advanced Driver Assistance Systems.
We expect the verification business to do well this year. Now to our IP products, where a solid results quarter accompanied continued expansion of our already broad portfolio. Our distinct leadership in interface IP continues. This quarter we were first to market with the new USB Type C, which supports the connector that functions with either side up or down.
In Q1, we also announced our Data Fusion Subsystem for IoT devices. The many sensors on cell phones, tablets, and the like need to take data in and process it effectively. This first-of-its-kind integrated subsystem bringing together the processors, peripherals, memories, libraries and drivers necessary makes it easier, quicker, and lower risk for customers to build this functionality into their chips.
We also continue to innovate in our security IP portfolio. This quarter, we announced an enhanced security package, featuring data encryption, address scrambling, and data integrity checks aimed at providing protection from system attacks and IP theft. The theme of security naturally brings me to our Software Integrity business group. This new TAM, higher growth area is our most recent investment and holds great promise, as testing for defects and security vulnerabilities is now a necessity in virtually every market segment, ranging from automotive, to health, to energy, to financial markets.
Our objective is to provide both developers and users of software with tools to automatically check for quality and security issues, as the software is being developed or
used in larger systems. The size of this tools market is approximately $2.4 billion, highly fragmented, and growing about 20% per year.
Driven by a universe of 20 million plus software developers and a cost of failure that has gone up dramatically, particularly when human safety is at stake, this market is evolving rapidly. Last week you may have seen the President’s budget proposal, in which he asked for a 35%, $5 billion increase in the U.S. cyber security budget. Another good example is automotive, where, following some widely published hacking incidents, focused on software security and safety has become intense.
As we attract some world class experts, integrate technologies from the four software security companies acquired in last eight months, and closely collaborate with the automotive industry to help drive standardization efforts addressing cyber security, we’re garnering attention and building a strong brand in the new emerging area of software sign-off.
I hope you see from my comments that our Silicon to Software push is both well anchored and visionary. Last quarter we delivered excellent progress in virtually every area of our business. In summary Q1 was a very good start to the year, and we’re well
on-track towards meeting our annual financial targets
Our core business is solid with areas of promising growth; we continue to invest towards broadening our TAM; and our Silicon to Software vision aligns well with where the customer base is going, and opens up brand new markets.
Let me now turn the call over to Trac.
Trac Pham
Thanks, Aart. Good afternoon everyone. Q1 was an excellent start to the year. Building on the momentum from 2015, we continued to execute very well in a challenging environment.
Q1 business levels were strong. We met or exceeded all quarterly financial targets. And we returned $200 million to shareholders through our stock buyback program. With our strong Q1 performance, we remain confident in our ability to achieve 2016 revenue, earnings and cash flow objectives.
Now to the numbers: As I talk through Q1 results and 2016 targets, all comparisons will be year-over-year unless I specify otherwise. Total revenue was $569 million, with growth across all product platforms. Over 90% of revenue came from beginning of quarter backlog, and one customer accounted for more than 10% of revenue. The duration of new renewable customer license commitments averaged approximately 3.7 years, which reflects a couple of large, longer-term agreements. Duration will vary depending on customer requirements and we expect the full year 2016 to average approximately three years.
Total GAAP costs and expenses were $497 million. Total non-GAAP costs and expenses were $440 million, slightly below our target range, due largely to the timing of expenses which included some delayed hiring. Q1 non-GAAP operating margin was 22.5%, and for the year, we expect margin to increase over 2015. We will continue to drive global operational efficiency in order to expand non-GAAP operating margin to a solid mid-20s range.
GAAP earnings per share were $0.39, and non-GAAP earnings per share were $0.68, above our target range. Similar to prior years, Q1 had a net operating cash outflow. The $35 million outflow was due largely to the timing of 2015 annual incentive compensation payments. We expect this strong operating cash flow for 2016, with a target of at least $500 million.
We ended the quarter with cash, cash equivalents and short-term investments of $706 million, with 16% onshore – and total debt of $228 million. In 2016, we plan to increase buybacks to slightly reduce share count. In Q1, we initiated a $200 million ASR, which we’ll complete in Q2. There is $300 million remaining on our share repurchase authorization.
In addition, we closed a couple of small acquisitions in the software security space, adding key technology to support our strategy and drive long-term growth. DSO was 57 days, within our target range, but up from Q1 last year due to strong business levels. We ended Q1 with 10,290 employees, with more than one-third in lower-cost geographies. The increase in headcount was due to planned hiring and acquisitions.
Now to second quarter and fiscal 2016 guidance, which excludes the impact of any future acquisitions. For Q2, the targets are: revenue between $595 million and $610 million, as we communicated in December, we expect more variability and quarterly revenue due to the timing of our hardware and consulting business.
Total GAAP costs and expenses between $503 million and $522 million; total non-GAAP costs and expenses between $450 million and $460 million; other income between $0 million and $2 million. A non-GAAP normalized tax rate of 19%. Outstanding shares between 153 million and 156 million, GAAP earnings of $0.38 to $0.47 per share, and Non-GAAP earnings of $0.78 to $0.81 per share.
For 2016, revenue of $2.35 billion to $2.39 billion, other income between $0 million and $4 million, and a non-GAAP normalized tax rate of 19%. Outstanding shares between 153 million and 156 million, a reduction of 2 million shares versus our prior guidance range.
GAAP earnings of $1.64 to $1.79 per share, non-GAAP earnings of $2.93 to $3.00 per share, capital expenditures of approximately $80 million, and cash flow from operations of at least $500 million.
In summary, our priorities remain centered on managing the business to maximize long-term shareholder value; our predictable business model and strong cash profile provide a very solid financial foundation for this year and beyond and with our strong Q1 performance, we remain confident in our ability to achieve 2016 revenue, earnings and cash flow objectives.
With that, I’ll turn it over to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And first, we will go to the line of Krish Sankar with Bank of America Merrill Lynch.
Krish Sankar
Hi thanks for taking my question I actually joined a little late. The first question was Aart the Globalfoundries customers you mentioned, is it a new win or is it an existing customer what kind of margin profile do you expect for that business?
Aart de Geus
Krish if you don’t mind we never call into about specifics about a customer. But Globalfoundries be it through the Globalfoundries side or the IBM side were customers before and I can only say that we are very pleased with the results and the support from Globalfoundries. It has worked very well.
Krish Sankar
Got you, no worries. The second question I had was you know obviously you guys spoke about it last earnings call there have been a lot of chatter around impact about semi M&A on R&D? Kind of curious, have you actually started seeing any impact or what are your customers telegraphing to you either those that just finished the acquisition or those that are in the process of getting acquired?
Aart de Geus
So Krish, sorry you missed a little bit at the beginning. I tried to explain that we have really three customer categories the semiconductor ones the system houses and the software companies. When we are talking about consolidation in the semiconductor industry we are mostly talking about literally semiconductor companies, people that design chips, maybe embedding a lot of software, but nonetheless, are centered there.
And of course a number of the consolidations that occurred or that got started in the last 18 months have meanwhile progressed and closed in some cases, and we are engaged with all of these companies. As I mentioned in the preamble, we are very encouraged by the results that we have gotten, that we are faring quite well with this.
And I think one of the reasons is that as companies look for becoming more efficient, they also often rethink which suppliers they want to work with and how they want to work with them. And given both our vision from hardware towards software and our ability to deliver a very broad I think well-honed set of platforms, we are not only a leader in helping them differentiate themselves in technology, but also far and away the lowest risk. And so we have fared well with this.
Krish Sankar
Thanks, Aart. And just a final question either for you or Trac, you guys have done a great job in execution and, talking about a mid-20s operating margin profile. I'm kind of curious, is this a business that can be a 30% operating margin business, driven by any kind of like levers you can pull on the OpEx side? Or is this a business where Op margin expansion is just purely a function of drop-through from the top line?
Trac Pham
Well, Krish, I would emphasize we're focused on driving high single-digit EPS growth sustainably. I think reality is getting to a 30% ops margin. You can do it for a short-term, but not sustainably over time. The nature of our business is pretty technical. Long-term, though, to drive high single-digit EPS growth sustainably, it's really going to come through a combination of driving top line growth and margin expansion. And the benefit we have in terms of trying to grow margins, we'll really be looking at how we balance the portfolio between core EDA, IP, and software integrity.
And also as we look across our functional grids, whether that's R&D sales and marketing and G&A. I think typically you’ve referred to the 30 – folks will look at R&D spend, but from our side, we'll increase margins either from driving that top line or balancing our resources.
Krish Sankar
Okay. Thanks, Trac. Thanks, Aart.
Operator
And next we’ll go to the line of Tom Diffely with D.A. Davidson.
Andrew Masuda
Yes, it's Andrew Masuda asking a question on behalf of Tom. First one for Aart, just on the IP business, could you maybe update us on the percentage of IP that is outsourced today and, where do you see it going over the next year or two?
Aart de Geus
Well. First, it’s actually a difficult question to answer, because the definition of IP that's outsourcable has grown dramatically in the last few years.
For those that have followed us for many years, you recall that at some point in time we were proud to provide an adder and simple things like that. Today we are absolutely driving the state of the art of building blocks in terms of both complexity and some of the advanced [indiscernible] USBs and other interfaces are not only very complex on their own. They are also extremely complex as you put them into brand-new silicon technology, such as 10-nanometer or fin set.
We ourselves think that at best, 50% or so has been outsourced. I just want to give the honest caveat that it’s a little bit hard to estimate. But as a little side note the evolution in the market that we see both through some of the consolidations, but also through this move towards providing much more differentiation through the combination of hardware and software, makes a number of customers focus on the higher levels of abstraction. Meaning more and more of the software, and therefore an increased tendency to delegate or to outsource the hardware IP and we are in a certainly a very good position to benefit from that.
Andrew Masuda
Great. Thank you. And then next question is for Trac. Could you maybe just talk about your expectations on the linearity for operating cash flow as we move throughout the year?
Trac Pham
Operating cash flow. Let me describe the P&L and maybe that can help you. You probably expect that the second half revenues will be a little higher than the first half. Same thing with expenses, with EPS ramping up weighted towards second half. Lisa later on can probably give you more details in the after calls.
Andrew Masuda
Great. Thank you.
Trac Pham
You’re welcome.
Operator
And next we’ll go to the line of Sterling Auty with JPMorgan.
Darren Jue
Hi. It’s Darren is here on for Sterling. Thanks for taking the question. Just wondering about those large deals that drove the contract duration higher. Was there any sort of unusual level of discounting that had to be extended to get those customers to sign the long-term deals? Or was it sort of their desire to sign the longer term deals?
Aart de Geus
Well, the reason customers sign long-term deals is maybe financial, but in most cases it’s really because one is looking at a collaborative partnership that has the potential to create additional differentiating value for the customer. And over the years from time-to-time we have done very engaging – build very engaging relationships that have demonstrated that working closely together cannot only impact the way our tools are used presently, but also hone it for the specific situation that the customer has. And so although of course when you do a multi-year deal, you always make sure that it is balanced for both parties. You also make sure that one creates something that is beyond what would be just a customer supplier relationship.
Trac Pham
Darren this is Trac. I would stress that not only were the deals large, but they were quality deals. We did see run rate grow in Q1.
Darren Jue
Okay. And maybe just one other question for you, Trac. At least based on our model, looked like most of the upside in the quarter in terms of EPS actually came from the gross margin line. I was wondering if you could just talk about what drove that.
Trac Pham
Yes, the overachieve on EPS is really expense story. We were light on expenses. Typically we started the year behind in hiring and this year was probably more, more in common with that. We'll be catching – we'll try to catch up on our hiring for the rest of the year. If you look at our head count, it was pretty flattish versus the end of the year. That's where the upside came from.
Darren Jue
Okay. All right, thanks.
Operator
And next we’ll go to the line of Jay Vleeschhouwer with Griffin Securities.
Jay Vleeschhouwer
Yes, thank you. And couple of questions, Aart, about how your business is evolving and the end market and start with the most popular question, of course, having to do with consolidation. So it sounds as though so far it hasn't had an adverse effect on you in terms of post merger, budgeting versus premerger budgeting. The longer-term question is for you. Do you think that the concentration of your customer base, the top 10 or 20 will be up, down or sideways over time, at least in the core business? Do you think the top 10 to 20 will continue to account for half or more of your revenues, even taking into account some post merger cutting among some of your large customers? And couple other questions.
Aart de Geus
Well, by definition, when you have consolidation, that means that some customers are becoming larger, assuming that you continue the business relationship, which we have. And so I think that is not a new phenomenon and that will continue. At the same time, I've always been a believer that in times of consolidation, you can't look at it as a maturation of a market, or you can look at it as the beginning of a next phase. And the reason we're emphasizing and we're investing along the lines of working with both semiconductor systems and software developers is precisely, because we see an evolution in the market that we will continue to emphasize this increased role of the intersection between software and hardware.
And so we are well positioned for that. Obviously, on the hardware side, we go as deep as anybody down into the silicon. On the software side, we have put down new gamuts in the software sign-off, software integrity space.
And then in the middle, we have a large business that deals with the intersection of those two, be it in verification or even some in the IP side. So I think we're well balanced and I tried to express that by saying we're trying to sort of follow the sweet spot of the industry. And in that context, of course, the players do change over time. But I think we're – we have solid roots down and I think good opportunities looking up.
Jay Vleeschhouwer
With respect to the IP business, you said yourself that in the early days, the technology was, that you offered was fairly primitive compared to what you do now. But it's always been the case that IP has been a fairly fragmented business. In other words, lots of different categories, which historically had made it hard to scale as far as margins were concerned. You've done better over the years now with margins, but my question is, particularly now in having to meet the needs of the new IoT markets, your new automotive strategy, et cetera. Could you foresee that the portfolio for IP becomes even more fragmented again and if it is so, how might that affect your cost structure or the margin profile going forward in IP?
Aart de Geus
Well, I think it's a good question, although I must say we never use the word fragmented about our own position because we see it as broad. Meaning that having more products available, more IP titles is actually a good thing, given that it is relatively costly to build up the channel that is capable of both selling and supporting this. Secondly, given that it's important to build good relationships with the customers and if the trust the IP1 delivers, they are more likely to come back for other things. And so in that context, I hope that we will continue to actually broaden the portfolio.
But I also would say that we are deepening the portfolio because maybe to be more to the point, the difference between a USB 1, a USB 2, a USB 3 and now a 3.1 and a USBC are quite remarkable just in terms of the capabilities that go into that part. And then on top of that, you layer the evolution on the silicon side from I forgot when we started this, probably by 65-nanometer or so, and then down to 40, 28, 16, 14, 10, and now 7. That is a substantial evolution in terms of the complexity of what we deliver. And so all the more is a trust relationship, an execution relationship with customers essential. So if we can broaden it even more, that is good. But we also partner very well with some other key providers and our objective is to make sure that our customers are successful with this way of doing design. So far, I think it's proven to be true.
Jay Vleeschhouwer
One more for you, if I may, on strategy and then wrap up with Trac on Q1. So you've become quite enthused now about the automotive opportunity and the question there is how you see yourself positioned for that. In other words, do you think your play is largely at the IP and software integrity level, or do you think you can and should move up the supply chain into the automotive systems suppliers themselves, or even up into the OEM level that car companies themselves, as Mentor has done, for example, in some cases.
Lastly for Trac, for Q1, would it be fair to say that the substantial sequential increase in your IP business was correlated to the unusually large sequential increase in the Asia-Pac business? And then on the other hand, was your decline from Q4 North America largely correlated to a sequential decline in emulation? Thanks.
Aart de Geus
So let me start with your automotive question. The first reason why, of course, automotive is in so many discussions is because somewhat surprisingly so, almost overnight it has turned into the poster child of what digital intelligence can do. And this, I say surprisingly so, because automotive in the past has been a relatively slow adopter of silicon technology for many good reasons, because safety was absolutely paramount. And so it demanded a lot of very specific long-term design. I think this is changing radically, meaning that suddenly automotive is now on the clock tick of Silicon Valley, so to speak, of software combined with most advanced silicon. And therefore, many of the capabilities and tools and IP that we provide is front and center.
Now, to your specific question of our position in automotive, we have a remarkably complete set of capabilities that is well vested in a number of automotive-specific techniques, such as making sure that the chips are designed with proveable safety and verifiability in mind. So in that context, we I think are very well positioned and very engaged at by the way, all the levels that you mentioned. So semiconductor companies, Tier 1s, even some automotive companies specifically. I don’t want to go overboard with the enthusiasm here either. It’s an industry that doesn’t ship as many cars as their cell phones. So the numbers are somewhat moderated by that. But it is an industry that suddenly has caught the bug of how do they differentiate themselves in this new space and I think the race is very much on.
Trac Pham
So Jay, this is Trac. Your question regarding the geographic growth and the product growth, I wouldn’t read into any correlation between other geographic growth and product growth. We see both emulation and IP as growth areas for us long-term and that's pretty broad-based. We're not expecting that necessarily comes from any one geography. It would be broad-based growth.
Jay Vleeschhouwer
Right, but I was asking specifically if that was the case, however, in Q4 to Q1.
Trac Pham
In emulation, that would be partly the case, whether it's quarter on quarter, yes.
Jay Vleeschhouwer
Okay. Thanks very much.
Aart de Geus
You're welcome.
Operator
[Operator Instructions] And next we'll go to the line of Monika Garg with Pacific Crest.
Monika Garg
Hi, thanks for taking my question. I – First I have a follow-up on the questions he asked earlier. If you look at your closest feared Cadence they posted north of 26 points operating margin last year and we could see them going to at least 27 points in one or two years. Since you are still talking about mid-25% margins, my question is to understand it's not 30% of margin business, but could Synopsys be between 25 to 30 points.
Aart de Geus
Monika, we have said for a while that where we are heading is toward the mid-20s. So these numbers are all in that space. At the same time, one of the things that we decided to do a couple of years ago is to invest specifically in a new emerging area. And we did that with the belief and understanding that a lot of functionality would move into software, that the software was quickly going to reach the issue of complexity and then security issues that would become enormous, and we continued to invest in that. Of course such an area initially is not particularly profitable. But it has potential.
Secondly, we have seen that the investments that we've made recently through some of the acquisitions initially bring about a small hair cut and those are the small differences that would make up or explain what you were mentioning. Be it as it may, our objective is very clear. Our objective has always been how do we deliver shareholder value over the long-term with a fairly consistent pattern so the intent is not to surprise anybody, but at the same time, to also not be hesitant to put our chips down if we see some opportunity. And that is exactly what we are continuing to do. You have noticed that in the last couple of years we have not been hesitant to also utilize our balance sheet towards buybacks, as we found them to be appropriate and have done so again this quarter. So the balance of those things is how we're managing the company.
Monika Garg
Got it. Aart and then as a follow-up, how big do you think emulation market can become? And how are you thinking about growth of your emulation business this year?
Aart de Geus
Well, you know, the emulation business is difficult to characterize because they are multiple players with multiple sort of cycles of product and there is some degree of – I wouldn't say seasonality as just things go up and down from one quarter to another because it's somewhat lumpy. Lumpy was the word I was looking for. Having said that, the reason that we are bullish around emulation is actually a broader one, which is that we are strong advocates and we think we strongly deliver around a vision of a verification continuum that allows to use emulation in the context of many other tools as appropriate for the task at hand.
And without going too technically deep here, the reason this is important is because we are dealing with a space that goes all the way from verifying strictly some hardware to verifying some chips with embedded software all the way to people wanting to bring up entire operating systems and some application software on hardware that has not yet been built. And so in that context, the, the collection of technologies assembled in a platform that we have is truly quite amazing compared to where we were just five or six years ago. And we have seen that the take-up in system companies that are now hitting this intersection has been particularly positive and that was visible in some of the Q1 growth.
Monika Garg
Got it. The last one for Trac, Trac, at the midpoint you beat Q1 by almost $0.06 EPS and why not raise the yearly EPS guidance?
Trac Pham
Well, as mentioned, the overachievement was mostly on light expenses and, you know, most of that's timing, still early in the year. We are definitely focused on the full year, full-year EPS targets. At this point, we feel pretty good about the guidance.
Monika Garg
Got it. Thank you, so much.
Trac Pham
Thank you.
Operator
And next we'll go to the line of Gary Mobley with Benchmark.
Gary Mobley
Hi. Guys. Thanks for taking my question. Most of my questions have been asked and answered, but I did just have one question about the M&A environment. Given the equity Capital Markets turbulence and maybe some economic softness, more broad, has it become a buyer's market for cash-rich companies like you in what has been sort of a consolidation strategy?
And in other words, are you seeing more companies being shopped to you that are perhaps a good strategic fit, are companies potential acquisition targets more amenable to price terms and considering the answer to that, do you feel the best use of cash might be to decelerate M&A pace or stay on the same cash return strategy or like some dividends and share buybacks?
Aart de Geus
Okay, well, Gary, you probably know that we never respond to specific M&A questions. But in general terms, if you watch Synopsys, we have found a balance between using repurchase mechanisms and M&A as the two ways to leverage our balance sheet. When we look at M&A, invariably it's driven by two things. Either a mechanism to increase the strength of our SAM, meaning purchase companies that have either technology or market position that we think we can do better with or that strengthens our position, or just as importantly, maybe even more important is opportunities to create new TAM for us. And so in that sense, the last 18 months have been interesting because we've done a number of acquisitions, starting with a company in the software quality space.
And the reason that one was important is because that is the fundamental platform to analyze software. And then just in the last I think eight months or nine months or so, we've acquired four security companies that can all pretty swiftly be integrated into the overall software analysis platform. And so these are all good examples of how we utilize our cash on an ongoing basis.
Now, are there waves of these? Yes, they are. Sometimes they are driven by the state of the market. But in general, I would tell you that many of these things are often on the radar scope for many years and the moment has to just be right to be able to acquire something both from a seller point of view and a buyer point of view. And there's quite a bit of dating that goes around before marriage. So in that sense, we're always busy.
Gary Mobley
Understood. Appreciate the response. Thank you.
Operator
And next we’ll go to line of Srini Sundar with Summit Research.
Srini Sundar
Hi guys, thanks for taking my call. First question is on the mid-20% operating margin that others have also explored. My question is what do you propose will be the timing and how exactly will you achieve it? Meaning will it come from the gross margin line or R&D or a G&A? So if you could…
Aart de Geus
Sure. Well, in general, as Trac alluded to, at the end of the day, revenue growth is the single-best recipe to grow margins, and in that sense, we are heading there. And as mentioned, based on some of the past acquisitions and recent investments, we see that the haircuts will gradually fade away and our continued growth and diligent expense management will get us there. So to me the issue is not can we get there or not. Yes, we will. And we have been committed to that for quite a while.
Srini Sundar
Okay. And my next question is if you go down in the dimensions of the nodes, the number of products that the foundries, that the foundries will design will be reduced. So, for the industry as a whole right now, semiconductors form the bulk of the revenues. So maybe by 2020, what kind of revenue percentage will come from the difference, do you think?
Aart de Geus
Well, in general, I would observe two things. The most advanced nodes by definition are always the ones that get adopted by the people that have both the skills to use them, but most importantly, have the business opportunity to leverage differentiation of faster, much more dense, lower power chips. Initially, that is invariably a small number, as the foundries themselves hone these processes to gradually grow the yields, meaning bring down the cost per chip. The most advanced design companies spend most money because they have an economic return on that differentiation.
If you look back at only three years or four years, the belief was that FinFET would be the reality for only three or four companies. Well, that is most definitely not the case. We are seeing actually a rapid increase now, as the proof points of solid FinFET technology are there by a broader set of companies. And interestingly enough, a set of companies that one would never have thought about in the past, the automotive companies, are suddenly interested here as well, as they want to introduce digital intelligence in their products. So I think the push will continue, which is not to say that it gets easier or much cheaper, but the value of differentiation is quite high and we will continue to work with those most advanced customers.
But as said, we also work equally much with the system houses that integrate these chips and each would have an understanding of the insides of the chip and the software that runs on it. So it's actually a fairly broad field of companies that we touch that are deeply involved with FinFET.
Srini Sundar
Just one last question, your service revenues for Q1 seem to be the lowest among the last nine quarters. Any particular reason for that?
Aart de Geus
The services line? It's right in the range, Srini, so when you look at the services line, it's a relatively flat at 61 versus the last quarter. And the nature of that business, that's where a lot of our IP consulting business does flow through. So it can move around quarter-to-quarter depending on the revenue signature and the project schedules.
Srini Sundar
Okay. Thank you very much for taking my questions. Thanks.
Aart de Geus
You’re welcome.
Operator
And there is no one left in queue to ask a question. I would like to turn it back to the speakers for any closing remarks.
Aart de Geus
Well, again, thank you very much for attending our earnings release. I think the first quarter was particularly positive as a start to the year and I think many of the issues that were alluded to last year actually quite mitigated. And so we have a strong outlook going forward. Thank you again for your time and we'll be available after the call for the analysts.
Operator
And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and using AT&T Executive Teleconference. You may now disconnect.
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Another in an unscheduled series of short commentaries on current events
Setting the stage
Dr. Benjamin Carson ruffled some feathers with his speech at the National Prayer Breakfast a couple of weeks ago. You can’t blame the Left for being ruffled–the speech was a High Right Fastball under the chin. They didn’t like anything he said, and they didn’t like the way he said it. They didn’t like it that President Obama had to sit through it, and they really didn’t like the fact that it was delivered by a black man who had studied and worked and achieved his way up from the worst kind of poverty to become the director of pediatric neurosurgery at Johns Hopkins Hospital in Baltimore, Md.
Some on the Right ignored both the message and the messenger and concentrated on the event, choosing to be offended by the fact that Dr. Carson delivered a ‘political’ message at the prayer breakfast. To mention just one example, Cal Thomas, writing in syndication and online, sniffed that Dr. Carson’s criticisms of the President’s policies had been “inappropriate for the occasion.”
“If Carson wanted to voice his opinion about the president’s policies, he could have done so backstage. Even better, he might have asked for a private meeting with the man.”
He was joined in his opinion by several other Conservatives of repute. Technically, they were right, but that’s the kind of technicality that has been relegating Republicans to ‘back row, right,’ in pictures of important political and news events since Ronald Reagan left the White House.
Inspiration
The inspiring idea I want to point out has nothing to do with the content of Carson’s remarks, accomplishments, or his life, inspiring as they were and are. His inspiration was to do just what Thomas and the entire Left say he shouldn’t have done–use an ‘inappropriate’ venue to deliver a conservative message.
I’ve beaten this dead horse into glue before: If nobody hears our message, we might as well not have one. We must make our statements in ways and places that can’t be ignored or marginalized. Had Dr. Carson followed Cal Thomas’ advice, nobody would have known about it. More important, nobody else would have heard his conservative ideas.
I may be wrong, but I’d bet that Dr. Carson has given the same speech to local groups before, yet nobody knows it. If you Google search for ‘dr benjamin carson,’ you get about 12 million hits. Of those, about 5.5 million are references to his speech at the breakfast. Draw your own conclusions, but I believe there are a lot of people who now know not only who he is, but what he said that morning and that there is more to the story than simply what the President and all his men tell us.
Further, millions more heard him and heard about him on television and radio, and had a chance to hear his message without a media filter. Perhaps even more important, millions of people heard or saw a non-political, highly educated, brilliant and talented professional black civilian deliver a speech promoting conservative values in a reasonable and thoughtful manner, and he didn’t grow horns or fangs, and after it was all over the MSM didn’t even try to rebut his words or reasoning, only his location. None of that would have happened had he chosen an ‘appropriate’ venue for his presentation.
The end justifies the means
Most conservatives don’t like that phrase and we tend to oppose the idea, but it really depends on how distasteful the means are and how vital the end is. Dr. Carson balanced the two and delivered a speech that may have broken some rules but which was covered by most of the popular press, and the only spin they could generate was that it was “inappropriate for the occasion.”
I don’t suggest that Dr. Carson had any of these strategies in mind. There’s no reason to believe he did anything other than deliver a speech that he thought was completely apropos, and he says so.
Whether he intended to make two kinds of statements that morning or not, he gave us an example that should be inspiring to Republicans, conservative or not. Get your message ready and when you deliver it, make it count by forcing the the MSM to both report it and report it accurately. The truth is always appropriate, but if it’s spoken in a manner, time, and place that the MSM is forced to report it, it’s even better.
Needed next: Ways to make this happen every week.
For another take on the Cal Thomas column, check out Chicks On The Right.
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Drawing on streiff’s excellent post: there has been at least one nice repercussion that has come from the entire sordid 8-K affair. Thanks to it, you can pretty much filter out the ‘geniuses’ with no practical business experience; they’re the ones who have never seen an 8-K in their life, don’t know what one is for, don’t know when one needs to fill one out (or even why), and are especially startled to discover that there have to be fairly stringent penalties in place in order to convince corporations to fill out nitpicking paper-trail bureaucratic clap-trap without having to be nagged constantly for it.
You know. Idiots.
Megan McArdle is not an idiot – and miracle of miracles! – neither is most of her comments section, for a change. Gives you an idea of just how comprehensively Waxman – who has apparently never seen an 8-K in his life, doesn’t know what one is for, doesn’t know when one needs to fill one out (or even why), and is especially startled to discover that there have to be fairly stringent penalties in place in order to convince corporations to fill out nitpicking paper-trail bureaucratic clap-trap without being nagged constantly for it – mucked up this one.
Moe Lane
Crossposted to RedState.
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Photo: DPA
Currently best known for not very much, the north German state of Brandenburg could soon be catapulted into an economic boom - a drilling firm reckons there are 92 million tonnes of oil there and plans to start drilling in four years.
The economically depressed former east German state could benefit by nearly €7 billion, according to Central European Petroleum (CEP), which intends to start drilling in the Lausitz area, the Tagesspiegel newspaper reported on Thursday.
A German-Canadian consortium, CEP has found what it called deposits of "European significance" at two sites between Lübben and Lieberose in the Dahme-Spreewald region. It launched its plans to get the oil on Wednesday in Potsdam.
Thomas Schröter, CEO of the consortium said drilling could start in 2017, and could bring up at least 15 percent of what is there over the coming 30 to 50 years. This would be around 10 million tonnes of oil.
"It is of best quality, sweet and low in sulphur," he said of the oil. "It is no Persian Gulf, but despite that it is an absolute hit."
Currently around 2.5 million tonnes of oil are drilled in Germany each year, largely in Lower Saxony and off the Schleswig-Holstein coast, the paper said. And before reunification, drilling for oil was being carried out in Brandenburg. But this was dropped when East Germany ceased to exist.
CEP said the local authorities and the state would profit by around €6.75 billion over the whole period of the project - not only from taxes but also spending on things like road building and hotel stays for workers.
Story continues below…
The Local/hc
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Middleburg, VA-based Investment Adviser Akre Capital Management, LLC, headed by Guru Charles T. Akre, manages over $500 million in three investment vehicles. These include a no-load mutual fund, a long/short hedge fund and separately managed accounts for institutions and high net worth individuals. Akre was recently profiled by the Wall Street Journal as one of three star managers , and last year he was profiled as one of 25 great investors by CNN Money . Furthermore, he has also been interviewed extensively by financial media, including Morningstar , Businessweek , Bloomberg , and Kiplinger among many others. He was ranked in the top one percent of fund managers in his peer group as portfolio manager of FBR Capital Markets (FBCM) $1 billion FBR Focus Fund (FBRVX) that he resigned from in 2009 after serving 13 years in that capacity.
Akre Capital’s investment philosophy is based on investing over the long-term in companies that the fund perceives to be “compounding machines.” To identify and evaluate these companies, the fund follows a three-step process which includes seeking companies that (a) have delivered high rates of return and appear poised to continue doing so, (b) are run by business managers that act with integrity in the best interests of all shareholders, and (c) offer opportunities for managers to reinvest cash flow internally and drive considerable business growth.
The fund holds concentrated positions, investing over $500 million in only 38 equity positions. Over 50% of its holdings are in mid-caps, 30% in large-caps and the remaining 15%-20% in small-cap equities. The fund's portfolio turnover is between 20%-25%, implying a holding period of four to five years. Based on the most recent 13-F filing for the March 2011 quarter , we determined that Akre's portfolio is overweight in the financial and services sectors that account for 43% and 54% of its holdings respectively. The fund is underweight all other sectors.
Within sectors, on a more disaggregated level, my prior analysis of Akre's SEC 13-F filings for the December 2010 quarter had revealed that it was overweighted in the Insurance Industry, the retail industry, the commercial services industry group, and the telecommunications services industry. Based on a review of the most recent SEC 13-F filing for the March 2011 quarter, we determined that Akre has actually either slightly increased or maintained its holdings in each of the above groups and continues to be overweight in all of them.
Akre Capital Management did not initiate any new positions in the recently reported 13-F filing for the March 2011 quarter . The following summarizes its most significant picks, based on additions to its portfolio in the March 2011 quarter:
Dollar Tree Inc. (NASDAQ:DLTR) operates over 4,000 discount variety store in 48 states and Canada, offering merchandise at the fixed price of $1.00. Akre added $5 million to its position and now own $39 million worth of stock in this company. Akre initiated this position at the beginning of last year probably in the low $30s. The fund's willingness to accumulate even more shares at double those levels makes this a high conviction buy.
American Tower Corp. CLA (NYSE:AMT) operates cellular towers used by wireless service providers and TV and radio broadcast companies. Akre added $5 million to its position and now owns $72 million worth of stock in this company. The fund initiated this position in 2002 probably near $2 and Akre's willingness to accumulate even more shares at the current $15 price makes this a high conviction buy.
Ross Stores Inc. (NASDAQ:ROST) operates over 1,000 Ross Dress for Less and DD’s Discount retail stores in 27 states and Guam. This too represents another high conviction buy. Akre added more Ross stock in the March 2011 quarter to the already significant position that he initiated at the beginning of 2010 at much lower prices.
MasterCard Inc. CLA (NYSE:MA) provides global payment solutions in support of the credit and debit payment programs of 23,000 financial institutions. Akre added $5 million, bringing its current position to $40 million. The position was initiated in early 2010 at prices slightly lower than current prices.
OptionsXpress Holdings Inc. (NASDAQ:OXPS) provides online brokerage services for options, futures, stock, mutual fund and fixed-income investors. Akre added $5 million bringing its current holding to $12 million. The position was initiated in late 2009 at prices similar to current prices.
The following summarizes Akre's most significant pans, based on decreasing its positions in these equities in the March 2011 quarter:
MSCI Inc. CLA (NYSE:MSCI) provides investment decision support tools to institutions investing in equity, fixed income and other instruments. Akre's $6 million close-out of its position from the previous quarter is significant and represents a conviction sell as the position was initiated just at the end of 2009 at close to current prices.
Ninety-Nine Cents Only Stores (NYSE:NDN) operates 275 deep-discount stores in four states. The company on March 11, 2011 received a ‘Going Private’ proposal from members of the Schiffer/Gold family, together with Leonard Green & Partners, to acquire it.
The following table summarizes Akre's largest holdings that were mostly unchanged during the March 2011 quarter (including any Schedule 13D filings since the end of the quarter):
Markel Corp. (NYSE:MKL) offers specialty insurance products and programs like hard-to-place risks and loss exposures for niche markets.
Lamar Advertising Co. (NASDAQ:LAMR) operates over 285,000 billboard, logo signs and transit advertising displays in the U.S., Puerto Rico and Canada.
Enstar Group Ltd. (NASDAQ:ESGR) acquires and manages insurance and reinsurance in run-off covering activities such as claims administration.
O’Reilly Automotive Inc. (NASDAQ:ORLY) operates 3,570 automotive parts stores in 38 states.
Hartford Financial Services Group (NYSE:HIG) offers individual and group life, group disability and property and casualty insurance products, primarily in the U.S.
Factset Research Systems Inc. (NYSE:FDS) provides financial data from stock markets, newswires and data suppliers to investment professionals.
Carmax Inc. (NYSE:KMX) operates 100 used car dealerships in 26 states.
The TJX Companies, Inc. (NYSE:TJX) operates 2,859 off-price apparel and home-goods stores.
Penn National Gaming Inc. (NASDAQ:PENN) operates 17 gaming properties with 27,065 gaming machines and 533 table games.
Table
Company Ticker New or Increased or Decreased or Unchanged Position Market Value at end of March 2011 Quarter Change in Value from Prior Quarter New Picks and Pans MSCI Inc. MSCI Decreased $ 0 million $ 6 million Dollar Tree Inc. DLTR Added $ 39 million $ 5 million American Tower Corp. AMT Added $ 72 million $ 5 million Ross Stores Inc. ROST Added $ 45 million $ 5 million MasterCard Inc. MA Added $ 40 million $ 5 million 99 Cents Only Stores NDN Decreased $ 0 million $ 4 million OptionsXpress Holdings Inc. OXPS Added $ 12 million $ 4 million Largest Holdings Markel Corp MKL Decreased $ 46 million $ 1 million Lamar Advertising Co LAMR Added $ 46 million $ 1 million Enstar Group Limited ESGR Decreased $ 46 million $ 0 million O Reilly Automotive Inc New ORLY Added $ 29 million $ 2 million Hartford Financial Services Group Inc. HIG Decreased $ 20 million $ 0 million Factset Research Systems Inc. FDS Decreased $ 16 million $ 1 million Carmax Inc. KMX Added $ 16 million $ 0 million TJX Companies Inc. TJX Added $ 12 million $ 0 million Penn National Gaming Inc. PENN Decreased $ 11 million $ 0 million Click to enlarge
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my ‘opinions’ and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
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The House of Representatives has cleared the way to hold a vote next week on repealing the health care overhaul, while at the same time dealing with a parliamentary snag over the credentials of two GOP lawmakers.
In a test vote Friday, the House formally approved the rules for debate on the health law repeal. The procedural measure passed largely along party lines on a 236-181 vote.
"Today we are taking the first step in fulfilling a key promise to the American people," said Rep. David Dreier, R-Calif., who led the GOP side in the debate. "We are setting in motion a process to repeal President Obama's job-killing health care bill and replace it with real solutions."
The move sets up a rhetorical battle ahead of a full vote in the House Wednesday. That vote is seen as largely symbolic, since Senate Majority Leader Harry Reid has vowed to block it in the Senate -- and President Obama would surely veto anything of the sort that clears Congress.
But the repeal, one of the Republican House majority's first orders of business, has generated heated debate in Washington all the same. Democratic Rep. Jared Polis of Colorado said ahead of Friday's test vote that despite the bill's brevity -- it's only two pages -- it will "probably be the biggest bill we'll vote on this Congress."
Democrats slammed the GOP after a Congressional Budget Office report on Thursday estimated that the repeal would add $230 billion to the deficit over the next 10 years. House Minority Leader Nancy Pelosi issued a statement Friday saying the repeal would hurt the economy, hurt the budget and "put insurance companies back in charge of the health of the American people."
Democrats also charged that Republicans violated their own transparency pledge by bringing the repeal to the floor without committee hearings.
But Republicans countered that the health care legislation was debated extensively in the last Congress and that the party's large gains in November gives them a mandate to target the controversial package. The party dismissed the CBO figure and pledged to push forward, eventually with the goal of creating a new health care package to replace it.
House Speaker John Boehner said Thursday that his party wants to repeal the law because it's getting in the way of job creation.
But as the House battles anew over the health care bill, lawmakers were also engaged in a peculiar tiff on the sidelines over whether two GOP lawmakers were actually bona fide members of Congress earlier this week. The dispute centered on Reps. Pete Sessions, R-Texas, and Mike Fitzpatrick, R-Pa., who ducked out of the swearing-in ceremony in the House Wednesday. This might have been quietly corrected if not for the fact that Republicans led a ceremonial reading of the U.S. Constitution on the House floor Thursday. That opened the door to charges of hypocrisy.
"This is the day we read the Constitution. We don't want to be in violation of that," said Rep. Louise Slaughter, D-N.Y., ranking Democrat on the House Rules Committee. The Rules Committee adjourned abruptly Thursday after realizing the problem. Slaughter called for the committee, of which Sessions and Fitzpatrick are members, to start over on Friday.
But Republicans instead attached a provision to the health care test vote meant to resolve the conundrum. The resolution, approved on a 257-159 vote, invalidated the roll-call votes both lawmakers made before realizing the error, while counting as legitimate all other actions the members took.
Both members were formally sworn in Thursday afternoon. Fitzpatrick said this was done out of an "abundance of caution." Both he and Sessions attempted to take the oath Wednesday in front of a television in the Capitol Visitor Center, but that didn't satisfy some lawmakers.
Fox News' Chad Pergram and John Brandt and The Associated Press contributed to this report.
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A Senate committee voted along party lines Tuesday to approve the nomination of a former campaign adviser to President Obama for a top budget post.
Heather Higginbottom, who most recently served as a policy adviser for the administration, had drawn tough criticism from Republicans who claimed she didn't have the chops to become deputy director of the White House Office of Management and Budget.
Sen. Jeff Sessions, the top Republican on the Budget Committee, earlier said her experience for the job was "stunningly lacking."
The Senate Budget Committee cleared her nomination Tuesday on a 11-10 vote, with Republicans voting as a bloc against her.
Committee Chairman Kent Conrad, D-N.D., urged the Senate to quickly confirm her, defending her background.
"Ms. Higginbottom's service in the White House and the Senate has given her a broad knowledge of federal policy and the operations of the government," he said.
Afterward, Sessions called for Obama to withdraw her name, comparing the nomination to "installing, in the midst of a war, a battlefield general who has never had a day of military service."
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Resigning won't spare Eliot Spitzer from the heat of a criminal investigation — federal prosecutors must still decide what to do with the case of the disgraced New York governor and the prostitutes.
A law enforcement official said Spitzer's high-powered defense team was believed to be negotiating a plea deal with prosecutors over his connection to a high-end prostitution ring, but attorneys would not comment Thursday about the discussions.
"Corruption cases often pose a dilemma for the prosecutor," said Evan Barr, a private practice lawyer who once handled such cases for the same Manhattan U.S. Attorney's Office that is now weighing how to proceed with Spitzer.
"If you charge a public figure under an obscure or rarely used legal theory, the critics will say the prosecution is politically motivated; if you decline to charge under the same circumstances, the critics will say the prosecutor is going easy on the would-be defendant because he or she is a prominent person," Barr said.
• Click to view photos
The legal snarl was being untangled as Lt. Gov. David Paterson prepared to take over the state following Spitzer's spectacular fall from power. Paterson said he spoke to Spitzer on Thursday and "told him how sorry I was this happened."
"I promised the governor yesterday that I would commit myself to the people of this great state, that we would have stability and continue in these challenges that lie ahead," Paterson said. "Now we have to get New York back on track."
Paterson takes over on Monday, and will become New York's first black governor and the nation's first legally blind chief executive.
Spitzer, a married father of three teenage girls, faces a much more dubious future after he was accused of spending tens of thousands of dollars on prostitutes — including a tryst with a 22-year-old call girl in Washington the night before Valentine's Day. Officials said Spitzer initially drew the attention of authorities with suspicious money transfers that will be a key part of any possible criminal case.
Among the possible charges that could be brought against Spitzer: soliciting and paying for sex; violating the Mann Act, the 1910 federal law that makes it a crime to induce someone to cross state lines for immoral purposes; and illegally arranging cash transactions to conceal their purpose.
But legal experts said bringing charges and getting a conviction would be unusual, considering federal authorities rarely charge the customers in illegal sex or drug cases. A likely outcome could be what is called a "deferred prosecution agreement," which could leave Spitzer on probation with charges dropped if he did not get into any more trouble.
Gerald Lefcourt, past president of the National Association of Criminal Defense Attorneys, said criminal charges against Spitzer would be "stretching federal statutes to a place they've never been."
Edward J.M. Little, who worked in the public corruption unit of the Manhattan federal prosecutor's office in the 1980s, said it would be "piling on" to bring charges now.
"I think it would be outrageous if they went after him any further on this," he said. "Solicitation cases are typically pled down to minor charges and just because he was governor doesn't mean he should be treated any more harshly unless they impacted his duties as governor."
He added: "Even though I personally think it's reprehensible, it doesn't mean it's criminal. He's resigned which is probably the ultimate penalty in this case so we should let it be."
The most likely charge Spitzer could face is structuring — breaking sums of money down into smaller amounts to hide the true purpose of the funds — but it is rarely brought as a stand-alone charge.
Lawyers said they are usually brought in money-laundering cases or as part of some larger criminal activity such as drug dealing.
Also, such cases usually involve hiding the source of the money. There is no reason to believe Spitzer, a millionaire many times over, used illegal funds to pay for anything.
A Mann Act violation may be another stretch.
The law is not typically applied to buying sex from adult women, even if, according to court papers, the client identified as Spitzer by law enforcement officials managed to break almost every part of the law by arranging for the woman's train fare, hotel, right down to the mini-bar at the hotel. And do it all on tape for the listening feds, no less.
Some say a structuring case might be the most likely scenario.
Miami-based lawyer Gregory Baldwin said there is one basic principle to the crime — one that might still trip up Spitzer.
"A drug dealer, for example, is probably more concerned with hiding the source of his money. A terrorist, on the other hand, is probably more concerned with hiding the destination and purpose of his money," Baldwin said. "Whether it's the source, destination, or purpose, though, the structurer ... always wants to avoid one thing: being identified as part of the transaction."
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Bloomberg via Getty Images
If there's an upside to Gov. Mike Pence (R-IN) signing the pro-discrimination SB101 "Religious Freedom Restoration Act" (RFRA) into law last week, it's this: the bigots, homophobes and neo-segregationists have been coaxed out of the woodwork, exposing themselves for what they really believe. My Twitter feed is festooned with these people, now more than ever -- not even during the Hobby Lobby debate have they swarmed like they are today. Elsewhere, an audio recording has been circulating that a restaurant owner who called into an Indianapolis radio station and, despite the incredulity and shocked horror of the deejays, discussed how he's always discriminated against gay customers, and now this law will legitimize his anti-gay policy.
It seems the only anti-gay conservative who isn't currently owning his pro-discrimination position is Mike Pence himself. On ABC's This Week with George Stephanopoulos, Pence was asked eight times whether this law would allow businesses to discriminate against gay people -- "yes or no." Eight times in an 11-minute segment, and Pence refused to answer every time. By the sixth or seventh time, I expected Stephanopoulos to shout, "Don't wait for the translation! Yes or no?"
Instead, Pence droned on and on, suggesting that the press was "trying to make this something else." Actually, it was Eric Miller, the chief lobbyist responsible for the RFRA who explicitly defined the law as pro-discrimination:
Christian bakers, florists and photographers should not be punished for refusing to participate in a homosexual marriage!
Note the exclamation mark. When Stephanopoulos quoted Miller, Pence refused to respond and said that everyone who's making this about discrimination is engaging in a "gross mischaracterization." But it's not just the press or Stephanopoulos -- it's the guy who pushed the law through the Indiana legislature who defined it in these terms.
Pence went on to note that then-State Senator Barack Obama voted for an RFRA in Illinois, but Stephanopoulos called him on this ham-fisted deflection, noting that sexual orientation enjoys civil rights protections in Illinois. Indiana has no such protections. When Stephanopoulos asked Pence whether he'd support similar protections in Indiana, just to help clarify the intent of the law, Pence said he wouldn't -- that doing so isn't part of his agenda. Again, how is the discrimination motive a "gross mischaracterization" of the RFRA when Pence flatly refuses to carve out civil rights protections for LGBT citizens?
Then there was the big counterattack. Pence attempted to hit the opponents of the RFRA for, themselves, being intolerant of religious people, saying, "Tolerance is a two-way street." Tolerance for what? Discrimination? Homophobia? If so, sure -- I'm guilty. Likewise, I have zero tolerance for anyone who discriminates against mixed-race couples and weddings, irrespective of the litany of Bible verses opposing "miscegenation." While we're here, I also have very little tolerance for self-proclaimed Christians who cherry-pick and exploit the Bible to cynically conform to their antiquated biases.
Here's precisely why this is about discrimination. A baker or florist who exclusively objects to the alleged "sin" of gay marriage, while serving all other sinner weddings is by definition discriminatory. In other words, to not be discriminatory, a bakery or other business would have to refuse service to all sinners, not just the so-called sinners who happen to be gay. Otherwise, the baker is singling out one class of people, and that's precisely what discrimination is.
No one's forcing Jewish delis to sell ham, and no one's telling Christian bookstores they have to sell Bill Maher's Religulous film. But as long as businesses enjoy legal protections, tax advantages and public services paid for by straight and gay taxpayers alike, they ought to serve or not serve all customers equally. Feel free to enforce a strict "no shirt, no shoes, no sinners" policy as long as it applies to everyone, regardless of race, social status or sexual orientation.
To repeat: if a business-owner has issues with anyone they happen to define as a sinner, that business ought to expand its "no sinners" policy to include refusing service to coveters, adulterers, beardless men (Governor Pence?), obese people, egomaniacs, liars, greedy people, Pagans, witches, unmarried heterosexual couples, astrologers, anyone who says "God!" in vain, lazy people, and generally anyone who doesn't love others as they love themselves. I don't know, maybe have a questionnaire at the door. That's equality.
Matthew 7 teaches us: "Judge not, that you be not judged." Good Christians -- Christians who are concerned about not violating the word of God might want to take Matthew a little more seriously, rather than leaning too desperately and ignorantly on Paul's letters or the myriad rules in Leviticus (by the way, Jesus had a thing or two to say about Levitical law, and Paul wrote against judging others, too -- more on this later in the week). These Christians might also want to take a serious look at the real reason why they might not want to serve LGBT customers. Is it really the Bible, which says literally nothing about whether it's a sin to serve gay customers? Or is it about unfairly and extra-biblically judging and discriminating against those customers solely because these business-owners don't like gay people? And at the end of the day, if it's really about disapproving of gay people, and not religion after all, these alleged Christians ought to reflect on the severity of bearing false witness against their neighbors by citing religious objections. Not that I'm judging. Just suggesting.
Meanwhile, I have a question for Governor Pence: if I buy a farm in Indiana, how much will it cost me to purchase some slaves to work it for free, as authorized by Timothy 6:1, Ephesians 6:5, Titus 2:9 and 1 Peter 2:18?
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Everybody's a critic — including Bernie Madoff.
In an email to NBC News, Madoff took umbrage over ABC's portrayal in a recent mini-series of his life and crime. The 77-year-old pleaded guilty in 2009 to running a Ponzi scheme and stealing $17.5 billion from investors. He is serving a 150-year sentence.
"I'm sure it is fruitless to enumerate the numerous fiction and absurd mischaracterization (sic) in the ABC movie," he wrote. "However I have never been one to turn the other cheek. I will just cover those incidents that have drawn queries."
Bernie Madoff leaves Manhattan Federal court March 10, 2009 in New York City. Mario Tama / Getty Images file
First, "I have NEVER slapped my son Mark," wrote Madoff.
Mark Madoff hanged himself in 2010, two years after his dad was arrested for running the fraud scheme that wiped out the savings of thousands.
Madoff insisted his wife Ruth was never "an officer" in his shady firm and took issue with how his brother Peter came off in the series.
"My brother was improperly characterized as pathetic soul," he wrote. "In reality, Peter was a brilliant and important leader of our market making and proprietary division. His outstanding creation of our technology platform was the envy of wall (sic) street (sic)."
Peter Madoff is currently serving a 10-year sentence for his role in the scheme.
Madoff had other gripes. Once again he denied having an affair with the chief financial officer of a Jewish charity he swindled, dismissing the woman as a "stalker." He said he never bought his brother a car. He also said his parents were never the subject of gossip while he was growing up in Queens.
"In fact they were highly regarded in our community," he insisted in the email. "My father was the president of the temple."
Madoff took no issue with Richard Dreyfuss' portrayal of him in the mini-series, which aired earlier this month. Nor did he try to absolve himself of his crimes.
"Yes I made a disasterous (sic) business mistake that caused unforgiveable (sic) pain to my family, friends and clients, and will continue to do everything in my power to recover their lost investment principal," he wrote.
Madoff is incarcerated at the Butner Federal Correctional Complex in North Carolina where the captured conman now makes $40-a-month pushing a broom in the prisoners' common area. He is also a frequent emailer who has reached out to reporters in the past about how he has been depicted in the media.
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In a previous post, I've already rendered one opinion on why I think Dell doesn't quite get blogging. Today came more evidence of this.
In that previous post (which really has to do with virtualization), I noted that Dell's Direct2Dell blog is a single public-facing blog through which all Dell's executive blogs flow. I think it's good to have one place (like Direct2Dell) where Dell should aggregate other blogs. But I also think having just one blog robs potential subscribers of the opportunity to selectively tune into to specific executives that I respect or want to hear from (the categories helps narrow things down, but they're not executive-specific). In that post, I compared Dell to other companies like Sun where the executives and employees have their own blogs. Sun isn't alone. There are of course others like Microsoft, Red Hat, and EMC that understand this principle pretty well.
Another reason I don't think Dell understands blogging is how the company's PR department (or counsel) feels the need to blast the press with e-mail every time one of its higher placed executives actually publishes a blog. The last one of these came my way when Dell's director of enterprise solutions Reza Rooholamini wrote about virtualization (sorry, no link folks. It's to make a point). Using e-mail to notify some constituency that a new blog has been posted is so antithetical to everything that blogging is that emails like these make me want to puke on my PC.
One of the greatest promises of RSS is email reduction. When Dell first fired up its Direct2Dell blog, it probably made sense to let the press and others know via email. But after that, let me decide. For example, just supposing I found Direct2Dell to be interesting (I don't), I would have subscribed. And then what (if Dell feels it needs to send me an email every time an exec publishes something). I get notified via RSS and email? It's a waste of my time, my hard drive, and the Internet's bandwidth. God forbid this becomes a practice with all IT vendors. What's the difference between this and SPAM? Whosever idea this was at Dell, that first email is your chance to get people to subscribe to your RSS feed(s). After that, you should leave them alone.
Another problem when email gets used to do RSS' job, especially when it comes from some company's PR department, is that it smacks of a coordinated effort. I'm imagining strategy sessions around one post. First, someone decides a Dell exec needs to post something. They have meetings and come up with a plan. Then, the exec writes something up (perhaps with some help) but it goes to the team first. It goes back and forth for a few rounds of feedback and gets edited. Legal gets involved. Meanwhile, the PR team crafts language for the email that will go out at the same time the blog is published. Given PR's involvement, questions about the blog's timing are raised since it may conflict with other PR initiatives which means it could stress PR resources or dilute the impact of other "scheduled" press releases. Finally, it's all systems go. The blog is posted. A carefully crafted email for broadcast to a few thousand people (many of which already elected to subscribe to or ignore the blog's RSS feed) goes out at the same time. Mission accomplished.
This may not be exactly the way things went. But there are elements of my characterization that I'm sure those involved in the process at Dell will recognize. And what's more important is that this is the perception I get when I see such a coordinated effort. It makes me not want to read the blogs because my first thought is that this is going to be a prepared sanitized statement. Not a spontaneous stream of consciousness which is what I'm really interested in.
But wait, it gets worse.
Today, via email, Dell notified the press that an important conference call will be taking place tomorrow. The title of the email is Dell to host teleconference regarding electronic dialogue (blogs) intiative. The announcement is to come "in conjunction with Word of Mouth Marketing Assocation (WOMMA)." You bloggers must be laughing your asses off at this point. But I assure you, this is no joke. The email starts off with:
Please join us tomorrow for a discussion on Dell’s blog initiative in conjunction with the Word of Mouth Marketing Association.
Far be me to jump the gun and make any assumptions regarding what this announcement is about. But let's summarize. Just in case there are some people out there that don't recognize the word "blog," Dell is going to call it an "electronic dialogue" instead and uses parentheses to teach us that what this really means is "blog." Even worse, it's going to be some sort of marketing thing because of WOMMA's involvement (just what I really wanted... an electronic marketing dialog of some sort). But a press conference to talk about a Dell marketing blogging initiative?! Blech! I can see it now... everytime something new happens in the blogosphere, let's have a press conference (uh, you Dell-folk... that's what your existing RSS feed is for).
OK. Maybe I'm reading it wrong. If I am, then that's also part of Dell's problem.
Unsubscribed. Permanently.
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Gramercy Property Trust Inc (NYSE:GPT)
Q1 2013 Earnings Call
May 7, 2013 2:00 PM ET
Executives
Gordon DuGan – CEO
Jon Clark – CFO
Benjamin Harris – President
Analysts
Jonathan Feldman – Nomura Securities
Operator
Thank you, everybody for joining us and welcome to the Gramercy Property Trust’s First Quarter 2013 Financial Results Conference Call.
As a reminder presentation materials and a supplemental for the call are posted on the company’s website, www.gptreit.com in the Investor Section in the Events and Presentation’s tab.
At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.
The company would like to first remind the listeners that during the call management may make forward-looking statements. Actual results may differ from the predictions that management may make today. Additional information regarding the factors that could cause such differences appear in the MD&A section of the company’s Form 10-K and other reports filed with the Securities and Exchange Commission.
Also during today’s conference call the company may discuss non-GAAP financial measures as defined by the SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and a reconciliation of the differences between each non-GAAP financial measures and the comparable GAAP financial measures can be found in the company’s press release announcing first quarter earnings, a copy of which can be found on the company’s website, www.gptreit.com.
Before turning the call over to Gordon DuGan, Chief Executive Officer of Gramercy Property Trust we would like to ask those of you participating in the Q&A portion of the call to please limit yourself to two questions per person.
Thank you, and please go ahead, Mr. DuGan.
Gordon DuGan
Thank you very much. Welcome, everyone. Let me start by just saying the quick format for today’s meeting. I am going to make a couple of comments on the numbers included in the press release. Our CFO, Jon Clark will then talk more specifically about the results. After that we will go through a brief business plan update that we have filed along with the supplemental report for the first quarter. Ben Harris, our President and I will take us through that and we hope to be pretty brief, I was noting that it’s been 40 days since our, roughly our last business plan update. So some of the material is the same, most of it is hopefully just progress. So I won’t, I’ll try not to go over things that we went over 40 days ago too much.
I also was reflecting on the fact it’s been 10 months since Ben and I joined Gramercy. There has been an incredible amount accomplished in that 10 months. It reminds me little bit of the line about little kids that the days are endless and the years fly by, 10 months have flown by in some ways and we had lot of long days as well. So it’s been great. We just couldn’t be more excited about where we are today, and we thank all of you for your support.
Let me jump into it. Q1, as I mentioned in the press release, went as expected actually little better than expected. The income from operations, I’ll just touch on a few points and then I’ll flush them out when we get to the business plan update. The income from operations I think is somewhat depressed due to some non-economic things. We sold the CDOs and have made an enormous amount of progress getting a financial statement that reconciles to economics.
Probably the last piece that isn’t there yet but will get done this quarter is in our Bank of America JV, we purchased the entity that the Defeasance entity, in other words when we bought the $485 million property from KBS, KBS had to give us those properties free and clear of loan. They defeased the existing conduit loan and then we bought that entity for basically nominal value. And that entity is running through our books until we sell it, which we expect to sell it this quarter. We have an agreement and a buyer and we will sell it this quarter. So economically there is no negative to owning the defeasance entity but it does flow through our GAAP financial as Jon will describe in greater detail.
Our loss from just the defeasance entity within the JV is roughly $2 million. There is no economic effect. We are not losing $2 million but that is how it flows through. We bought the entity for basically nothing because there is value in the entity, we expect to realize around $4 million for the JV in value when we sell that entity, and again we expect to do that this quarter. So the defeasance entity shows a loss of $2 million. Plus we have $2 million of depreciation on our pro rata ownership portion running through that entity. And if you look in the supplemental you will see on page 15 of the supplemental we’ve broken out the BofA JV portfolio so that you can follow what the core property NOI was, what the held for sale property NOI was, and then the negative effect of the defeasance pool.
We expect that, that will go away this quarter. We did it solely because we could make a nice little bit of money risk free. And we will be hopefully rid of this quarter. So I wanted to point out that the income from operations in terms of how I think about it economically is better than it shows. And the NOI from the Bank of America portfolio has been great as you will see in the business plan update.
The second thing CDO sale, that was accomplished. You see the benefit in here. We talked quite a bit about that. So I won’t repeat that. I would just say I think we are just beginning to see some of the savings both in terms of just manpower and in cost which both of which will eventually be cost from a simpler more focused and understandable business. That closing occurred just about 45 days ago, and we are just now having moved a couple of billion dollar of collateral off our books getting the benefits of a much more simple and focused business plan. And I think we are just going to be happier and happier with that as year goes on.
Next, acquisitions expenses, I am going to cover that in the business plan update but I would expect to see an ongoing acquisitions expense line in our income statement because we are going to be active acquirers as we turn the cash into income producing property. Also segment reporting you see in the press release, we have a segment reporting section. We are going to flush that out a little bit more in the dashboard which I unveiled at the March call. We have an updated version of that showing how the Q1 numbers flow through that. And we will continue to update it as the year goes on and we make progress building up our recurring cash flow.
Couple of other things investment pace; obviously deals we close in mid or late March don’t really affect Q1 revenue very much. We will get the full effect of anything we closed in March in Q2, and we continue to close deals. We are more active now than we’ve been since we got here and we’ll talk a little bit more about that as we go through the business plan update.
The last thing I would say there is sale – there is an item in the press release on a sale to a related party. That was interest in the CDOs, that was a minority interest in a portfolio of suburban office buildings. So that was not sold by Gramercy directly but rather by Gramercy when we were managing the CDOs. We sold that as part of the process of selling the CDOs in whole.
So with that let me turn it over to Jon to give some detail on the first quarter and then Jon is going to turn it back to me and Ben to go through what will hopefully a little faster business plan update than our March meeting.
Jon Clark
Thanks, Gordon. I would like to take a few minutes just to briefly walk through our financial statements that were included in the press release filed this morning. And it’s also to reiterate the fact that we have returned to preparing a supplemental report available on our website which I am going to refer to and we hope you’ll find it helpful. We expect to continue the practice of preparing a supplemental for each quarter as investors find it useful to provide additional schedule and analysis on our business, that aren’t really conducive to put into a financial statement or press release. We will further file Form 10-Q later on this week.
To start I want to focus in on the disposal of the CDO finance business which was completed this quarter, which achieve a number of goals that we had communicated and specifically to simplify our business and our financial reporting. Note that our CDO business was consolidated on our books not because we own the subordinate tranches of non-investment grade bonds, preferred shared and common shares, many of which we’ve retained after the sale, but because we were collateral manager for the CDO that would the CDO to be consolidated in our books in the first place.
By being the collateral manager we can show the aspect of the CDO that were most important to its performance, specifically decisions that were related to the underlying collateral within the CDOs. We also received fees from being the collateral manager and that fee revenue represented substantially all of the economics that we were currently receiving from our finance business at the date of sale.
We were the collateral manager of the CDOs through March 15th is when the sale of the various management contracts, the CWCapital for $9.9 million was completed. It was approximately $6.3 million in cash to us after expenses.
We accounted for the assets and the liability of that finance business unit through the date of the sale and we expended the same efforts to manage those assets and account for them as we had done in historic periods. So the result of operations from the Gramercy Finance unit up to the date of sale has been reported in discontinued operations, and on our income statement you see that basically broken out in three lines. It’s just the income from discontinued operations as Gordon had mentioned before the gain on the sale of the JV to related party, that was in the CDOs, tax provisions and the net gain on disposal.
The most striking thing about the disposal of the finance business is the large gain that was generated from the day the collateral management agreements were sold. The gain was calculated based upon the difference between the proceeds received after expenses; the fair value of the routine CDO bonds of 8.5 million, which I’ll discuss in a little bit; the accrual for the reimbursement of past servicing advances at $14.5 million, which was recognized at the date of sale; and the net difference between the carrying value of the liabilities and the asset of the Gramercy finance unit as of the date of disposal.
Basically this gain is the result of required impairment taken over time on underlying assets in the CDO, while they were consolidated on our books. And it records the excess of the outstanding balance of the CDOs, it also takes into account the outstanding balance of the CDO liabilities that were consolidated on our books.
Over the years the non-recourse liabilities for the CDOs became larger than the carrying value of the asset that secured the CDOs due to these impairments and in turn our shareholder equity balance became negative. This is the accounting that was required and this was the accounting and complexity that we every historically live with. So this gain basically is the reversal of that complexity. And our shareholder’s equity balance is now positive as we would expect it to occur.
The gain from disposal of Gramercy Finance was $389.1 million or 663 per share. Excluding the gain from disposal of Gramercy Finance our net loss to common stockholders from continuing operations on a fully diluted basis was negative $0.10 with the first quarter as compared to $0.12 negative $0.12 for the same quarter of the prior year.
Continuing with the non-CDO portion of the statement of operations the company’s revenues primarily reflect now only the rental revenues generated from the company’s focus on deploying capital into income producing net leased real estate and the fee revenue generated from our asset management business.
Just like last quarter rental income is relatively small at this point as only the revenue from the Indianapolis industrial portfolio which was acquired in November 2012 and revenue from the three additional assets which were acquired after March 18 2013 are included here. So as Gordon mentioned you’ll see this figure grow next quarter with the full contribution of the assets acquired in the first quarter as well as the expected growth of the investment pipeline that Gordon will speak about in a bit on the business plan update.
We also earned fee revenue from managing real estate assets for third parties through our Gramercy Asset Management segment. We earn management fees, administrative fees and property management fees from our realty business. Asset management fees are generally fixed fee arrangements, management fees and administrative fees are variable, and decline as the overall portfolio declines.
The most substantive part of our asset management business today remains the management agreement with KBS which positively contributes to cash flow. We managed just under a 1 billion of real estate for KBS primarily comprised of 356 bank branches and 95 office buildings. The KBS portfolio aggregates approximately 8.2 million rentable square feet.
The building count and portfolio size of the KBS portfolio has declined from 522 properties and 12.3 million rentable square feet as of December 31, 2012. A portion of the decline was attributable to KBS property sales and in particular there is a portfolio of 40 assets that we now manage for the new equity owners which we expect to manage for hopefully a term of the year. The utilization of our platform to manage additional assets results in incremental asset management fees without U.S. substantially increases in operating costs.
We’re also entitled to asset management fees from our joint venture. We expect our joint venture will contribute approximately 1 million of base asset management fees annually. Actually a bit more than that in 2013 plus we have the opportunity to earn incentive fee from the joint venture.
During the first quarter we recognized asset management fees from the joint venture of about 536,000. The fee is calculated based on the weighted average of an agreed upon basis of the assets within the joint venture. So accordingly as property sales in the held for sale portfolio of the joint venture continue the asset management fee is going to be reduced. So basically it’s starting out – your asset management fees are starting out a little higher than 1 million that we expect and we will end that once the sales program is complete.
The asset management agreement with KBS also includes an incentive base fee, which are subject to a 3.5 million minimum and a maximum of $12 million. The incentive fees for the KBS portfolio is based on the portfolio equity value achieving a threshold over a 375 million in value with certain adjustments. We’re currently accruing for the minimum $3.5 million fee. Our JV which is also eligible to receive an incentive based fee we’re not yet accruing for.
Our Bank of America joint venture together with our Philips building JV resulted in a $1.2 million net loss for the quarter from joint ventures. As Gordon described earlier 2.1 of this loss is related to the defeasement securities or essentially a pool of treasury securities that defeased the mortgage loan that had previously encumbered the assets acquired. So although cash flows of the defeasance pool covers the necessary debt service payments and this is not a cash drag to our joint venture, on a GAAP basis, the income generated from the defeasance securities which are (T Bills) do not equal the amount of interest expense on the underlying loans so for GAAP purposes a loss is generated.
The defeased mortgage will mature pursuant to its terms in December of 2013 and is pre-payable beginning in August 2013. So once extinguished and as Gordon described which we expect actually to extinguish it early and hopefully second quarter, the contribution of GAAP income from the joint venture is going to increase significantly.
We included a chart in our press release to summarize the components of the income from the Bank of America joint venture in particular. And we also provided a more complete financial schedule for the joint venture in our supplemental report that’s on our website.
Jumping to property operating costs, these costs include the direct cost related to our asset management business as well as costs related to our own portfolio. However substantially all of it is related to the asset management business and only about 132,000 is related to owned portfolio. We also provided in the press release business segment information so that you can actually see these cost broken out by segment.
Our management, general and administrative expenses from continuing operations were $4.4 million for the quarter of which approximately $3.7 million was related to corporate or the owned portfolio that’s what we refer to as the core MG&A; 693,00 was related to Gramercy Asset Management. So the decrease in MG&A expenses from the $5.1 million that we recorded in the same quarter of the prior year is primarily attributable to our reduced salary and benefit costs and a reduction in professional fees.
Next up is acquisition costs which Gordon has spoken about that earlier many of these assets that we acquired, we acquired for accounting purposes to expense costs that lead up to the acquisition. As a general rule building acquisition is considered a business combination with an in place lease. It would not be if there a constructed building or a sale-lease backed transaction purchasing building from the existing tenant. So you should expect the fee based on our acquisitions today that these costs will continue in connection with just then the pipeline.
Okay now let’s take a quick look at the balance sheet to just review some significant changes from previous balance sheets which included our finance business. First the scale of the assets consolidated on our books has reduced significantly from the disposal of the finance business unit. As have the liabilities in fact the company has no debt obligations as of now in an aggregate total liability of 1841.3 million is on our financial statements of which 32.2 million is the accrued on paid dividends to preferred shareholders.
On the asset section of the balance sheet there’s two new items. The first is servicing advance receivable of 14.5 million and this represents the balance of cash servicing advances paid by the company on behalf of the CDOs. This accrual is actually always been there however previously it was eliminated in the consolidation of the CDOs on our financial statements.
We have no continuing obligation to make additional services advances so accordingly this balance is going to decline overtime as we receive payments from the CDO trustee. And these payments are going to coincide to the resolution of certain assets within the CDOs and although the timing is very uncertain these receivables are of high priority of the highest priority of the waterfall CDOs and we expect that collection is assured.
The other new item on the balance sheet is the retained CDO bonds. These are the non-investment grade subordinate tranches of the CDOs that we retained after the sale which had a carrying value of 8.6 million. And again these bonds have always been there but they were eliminated in the consolidation when the CDOs were on our financial statements.
We also have subordinate interest which have no carrying value. It’s is the non-investment grade subordinate bonds that we retain that are attributable to most of the carrying value. These non-investment grade CDO bonds are carried on our books based upon an expected cash flow that we expect to receive from these bonds discounted to the present date. This value is going to accrete over time to that expected cash flow. We cannot however guarantee that we will realize proceeds from the retained bonds, or what that timing might be.
We do expect that any cash flow that we would receive is going to be backend loaded near the end of the expected life of the CDOs. The accretion of these bonds will appear in our statement of operations as investment income. And we are required and we will re-evaluate these bonds periodically and make changes necessary to adjust for any changes in expected cash flows. These changes might be reflected either in the form of a perspective adjustment yield or maybe in the form of impairment depending on the facts and circumstances leading to any change in the cash flows of the underlying CDO.
Finally, regarding our real estate assets on our balance sheet, so we have three acquisitions from the first quarter, and the Indianapolis Industrial which was closed last year. And Gordon has spoken about these and we will speak about them more in the business plan update. So I would just like to note that due to the fact that the new acquisitions during the quarter which were made after March 18 and accordingly since that timing was so close to the end of the quarter we did not finalize our purchase price allocation on these three assets. Accounting rules permit one year to finalize that purchase price allocation. However we expect to have the allocation finalized by next quarter.
So for the three acquisitions the carrying value on our books is subject to change as we further allocate the purchase price between lease intangibles and other items that are attributable to real estate assets when they are acquired.
Finally, I’ll just point out that at the end of the quarter we had a $105 million of cash as compared to $105.4 million as of December 31, as proceeds that we receive from the disposal of CDOs were essentially deployed into income producing real estate investments during the quarter and essentially leaving our cash balances almost the same. And our cash balance today is also about the same maybe a little higher as it was after quarter end. As we have taken in the distribution from our Bank of America joint venture of about $10.2 million and as we reported in our press release this morning, we deployed $7.9 million of that in on acquisitions of the Atlanta Truck Terminal.
Gordon, that’s all I had on the financial statement. I will turn it to you then.
Gordon DuGan
Thanks, Jon. Let’s go through the business plan update. Again it’s been relatively short time since we went through it at last time, but I thought it was important that we track the business plan update as we go. There are couple of additions here and I well – I point what’s been covered previously and what’s in addition again as we go.
Page three jumping into it, business plan; this is the same slide you have seen since August of last year. The reason for that is the business plan remains the same. We have ticked off the first, we are executing on the others. The plan is to create durable growing dividends, and the steps above that are the steps we need to take to get there.
Page four, the CDOs are sold. As Jon mentioned we retained the J and K bonds, the value of those we have on our books. I would just say on small thing I think I said it last time but it is worth noting, it doesn’t take much for that value to be zero in terms of the – it’s lot collateral that’s fairly highly leveraged but it also doesn’t take a lot for that value to be significantly more than what we have it on our books for. So it’s a very interesting option on the potential increase in value of that collateral.
We changed the name and ticker to reflect the new business plan and reflect the fact that we are pure play equity REIT at this point.
Page six, I will turn it over to Ben Harris to walk us through the next few pages, – a couple, a number of these you have seen before, and a number of them you haven’t, and this is our unveiling of a number of the acquisitions that we’ve made. Ben?
Benjamin Harris
Sure, we’ve been very active on the investment side. We have done a market by market analysis, and have come up with what we are calling our target market this is where the majority of our investment equity will occur. These are markets that we believe have strong fundamental growth, business friendly environment, have strong trade linkages which we think are key to any future rent support or rent growth in an inflationary environment. Real estate is only an inflation hedge when rents track inflation and so we want to be in markets where there is the potential for rent growth and strong – most of these are strong logistics locations, so they have demand from a whole variety of users.
We’ve been focusing, as Gordon has mentioned primarily on industrial and office assets. We think that within the net lease space that presents the most interesting opportunity. If the relative value of retail and industrial and office changes over time we will allocate capital according but we think office and industrial offer the most compelling economics today, specifically on the industrial side. We think industrial offers the most, what I would call sort of heterogeneous opportunities. So there is – it’s less commoditized than other parts in the net leased space and we think that presents some interesting opportunities.
We had the benefit of an enormous platform when we joined. Gramercy had a team that had been constructed as the original AFR business. So we have in house property management acquisitions, asset management capabilities well beyond the size of our portfolio. So we are able to execute on both large and small transactions. We can move very quickly. I would put our acquisitions capabilities up against almost anyone in our space. So we are really looking to use that as an advantage as we construct the portfolio.
Just flipping forward to page 11, I just wanted to walk through a couple of the acquisitions that we have, just to give people a better feel for what we are focusing on. The Bank of America portfolio, we’ve talked a lot about it. The purchase price number has changed slightly from the numbers that you had seen. This is based on the refinement of our allocation value between the core portfolio and the held for sale portfolio based on realized and in contract prices for held for sale assets. So that 140 is basically the original purchase price less the assets that we’ve sold, less that the assets that we had under contract, less the assets at their expected sale prices.
So we are actually – we are outperforming our sales plan slightly but that’s subject to a lot of execution going forward. We will continue selling those assets over the course of the year. But what we really like about this and it really highlights what we are trying to focus on. This is a core portfolio of high quality office buildings at very attractive places with a 10 year lease to BofA, NA which is the bank entity so not only you have several layers of protection here, you’ve high quality real estate at a good basis that’s critical to BofA operations, are subject to long lease. So it’s not – we are not constantly really seeing and (paying) a tenant change.
So that’s the big takeaway here. This transaction is one of the best transactions I think that either Gordon or I have done. So we are still very excited about it. We apologize if always talk about it but it’s an exciting deal. The Indianapolis portfolio, this was from last year again this is a portfolio of high quality, bulk industrial building in Indianapolis. We think Indianapolis is – will be one of the strongest performing mid- western markets going forward. It’s got a great business friendly environment, more than 10 years of lease term to three grade tenants the largest being Nestle and this above the waterfall so there’s tremendous installed capital that they paid to put in, including permitting and water access rights. So we think this is a great portfolio with great tenancy and very stable characteristics which is one of the things that we are looking for and as we construct this portfolio.
The next one the all Olive Branch asset, this is again a class A (TDR) bulk distribution facility and Olive Branch is right over the border from Memphis where a lot of the big bulk warehouses are built due to tax arbitrage outside of Tennessee. We are in this asset little bit over $40 a foot and we have an excess land parcel which the lease has a provision if (five below) the tenant can exercise that option to expand. We have a zero basis in that land. So if the tenant does exercise that option we think it’s a significant improvement to the asset. But if they don’t we still own a great asset at a great basis with a growing tenant that we are very excited about.
The next transaction, this is a manufacturing and distribution facility in Garland Texas, Garland is a sub market of Dallas. This was an older class B industrial building that was just recently subject to $1.5 million renovation. Again we are in this building for just over $30 a foot with a 19 year lease and very high current return. So we have great stable tenancy for 19 years and a basis that we think offers some very attractive support for our equity.
The next one the Con-Way Truck Terminal in East Brunswick this is exit 9 off of that New Jersey Turnpike. This is an irreplaceable infill location in a very densely populated region with one of the largest industrial markets surrounding it. Truck terminals are very difficult to replicate. We acquired this asset significantly below replacement cost at a very attractive yield with one of the leading truck terminal bulk freight carrier in the country at Con-Way Freight and again at a high cap rate. In our view this is great example of an asset that sort of falls between the cracks. It is – these truck terminals have great tenant demand characteristics but they are not considered sort of classic real estates from a core investor standpoint. So they don’t trade that way.
And the next one, this is the asset that we closed yesterday, this is another freight terminal in Atlanta. It’s located right near the 285 Interchange within a couple of miles of the Atlanta airport in a sub-market that’s primarily truck terminals. So great logistics market won these assets at very low basis. This is actually a vacant asset that was leased up. So we have validation of not only the functionality of the asset but also the economics. FedEx signed a lease to lease this up at an arms-length transaction. So we have strong support for our basis and again well below replacement cost.
That’s the theme of what we are trying to construct with this portfolio, it’s a portfolio that generates attractive current cash returns but has strong protection of capital and the potential for capital depreciation over time given the location and the functionality of the assets. So with that I will turn it back over to Gordon.
Gordon DuGan
As you look at page 17 it is just an update on our investment activity. We have one small deal closing this week in the closing and commitments and perhaps larger deal closing this week. And then we also have deals backed up right behind it. So as I said our investment activity is very strong right now. And it’s always little bit lumpy in the investment business but right now is a busy time and we are finding lots of interesting things at attractive yields, even in what is admittedly competitive environment, and I think that’s a testament to the team that we have. We are very focused, we really have short (inaudible) approach and I think the benefit is for our shareholders in being able to find attractive deals.
Page 18, this is just to give a feel for what the portfolio ends up looking like as you take all of these disparate investments and combine them. With the deal that closed – this (inaudible) closes this week, it’s 21.8 million of real estate NOI which has a seven cap at $311 million. And why is this valuable as real estate. Well it’s valuable because we are constructing a portfolio that’s 99% occupied, has a roughly tenure average lease term, no lease rollover in the next five years with the high amount of investment grade tenancy, at very reasonable basis in both the office portfolio and the industrial portfolio. I believe that this portfolio that we are constructing is the best, it’s the premiere net lease portfolio of anybody based upon these metrics and I welcome anybody to point one they thing is better because I really this is –- we are constructing the best portfolio in this space.
Page 19 is exactly what it appears to break down both by NOI and by location. Let’s jump over the next piece of the business, maximize the asset management profit center, which we will see we have change in this is we are now grossing up both revenue and expenses for property management. The net contribution projection is the same. But we do both receive and spend our property – we receive property management revenue and have property management expenses. So we have grossed out the revenue and expense line, to track what our Q and press release will show. And I think that’s a little bit better information.
The final two bullet points BofA JV we have a promote that we think is very much in the money, just if you go back to the BofA page and look at the 10% cap rate, on good assets with good credit. It doesn’t take much imagination to figure out a 10% cap rate and a 4% borrowing rate that, the 10% promote over a 10 return is very much in the money. And you see that here.
KBS we have an ongoing agreement plus a backend interest that we expect to receive in 2014. We are refining that value but while we are carrying at 3.5 we expect it to be, our expectation today is significantly higher if not 12.
Page 22, just a couple of the other benefits we get has been that we are really able to close deals and move quickly because of our asset management team. It’s a terrific group based mostly in Jenkintown, Pennsylvania and it’s humming now and we are very, very happy with it.
And then it’s also been a source of some investment opportunity. The last thing I would say, Q2 we expect to derive more revenue from additional sources of or additional clients if you will. And we will have more disclosure on the amounts and those clients as we go through Q2 to generate incremental revenues from this business. So we are very happy with how that’s performing.
Let’s skip ahead to 24, you have seen this before. I won’t go through it in detail. I would say that I am optimistic that this $13 million number can be achieved and/or surpassed. As we have begun to dig into costs and we have literary gone through every item in the general ledger from a dollar to a million dollars to figure out where costs are and we will see more and more of that benefit as this year goes. So I am hopeful we can beat this number and we are keeping this number we showed in March but again I am hope we can do better.
Page 25 we covered this last time. The way to think about our existing MG&A is that it’s a growth platform, if there was absolutely no opportunity to grow which I think is more than a worst case scenario, but call it that we would find other cost – expense opportunities but we have a platform that’s really poised to grow and you hate to cut back and then have to hire later, just for the sake of doing so. So we like what we have and it gives us a capability to grow and grow much larger.
27 you have seen this before the net lease market by summary on 27 and 28. Simply put valuations for net lease companies are the best that I have ever seen. The capital raising is very strong. There is a fundamental reason that I will come to at the end that I think justifies that yield. The simple point is that yields never been more valuable in this world, if I said in our annual letter that everybody will receive, any (inaudible) of interest rate of any sort whether its risk within interest rate such as the ten year treasury, a CD or high yield bonds. We will show that it is very, very difficult to get yields. This is a point I am sure you are all familiar with. But that’s what driving very attractive valuations for these companies.
29 and 30 the numbers are actually little better than this. The valuations have increased since we put this together but what you see is implied cap rate for large net lease companies that are trading at very attractive levels. As we go to page 31, I think what we are proving is we can invest money at attractive cap rates. Those cap rates are significantly above where net lease comparable companies trade as they get larger and show a track record of dividends.
That arbitrage between where we can buy assets and where ultimately things are being priced at least for the better performing net lease companies is as wide as I have ever seen it. And I will just also say that the net lease business as opposed to most other REIT businesses is very scalable. The largest owner of commercial real estate in the United States as a class are corporations. They own roughly 40% of all commercial real estate. So as companies divest themselves of real estate that presents opportunities for companies like Gramercy to be the buyer of that real estate, and it’s very, very scalable business. Our intention is to show exactly how that works.
Skipping ahead to 33, I thought this is an interesting chart. We were the top performing REIT in Q1, as I said in the annual shareholders letter that you will receive. This is not in here to have us take a victory lap. Just the opposite. We are more focused than ever on the opportunities that are presented to us. But I thought that was an interesting slide. You will see that if there was a common theme there, there are smaller companies and a couple of net lease companies.
Page 34, the slide on 33 is really just to say that the rally that we have seen in smaller less institutional REITs we think it gives access to capital. We are working on a credit facility. We are targeting the end of Q2 or early Q3, the preferred stock and common stock are not paying dividends currently. I think I have been very clear about it’s when not if. At the same time the preferred in particular because we don’t pay interest or carry-on the accrued portion has a carrying cost of about 6% and that’s a very attractive cost of capital while we continue to repositioned Gramercy and create the portfolio of real estate assets.
Page 35, from the beginning the goal has been exactly this, create durable growing dividend.
In 36 is the business dashboard that I mentioned. As you look at this what you see is how we think about how the first quarter went. And all of these numbers what I like about this dashboard, every one of these numbers ties back to a GAAP number, either in our press release or the supplemental and eventually there will be further breakdown in the Q that we filed this week. But all of these are GAAP numbers. And they all tied to GAAP number. The net lease corporate NOI is the – if you go to the supplemental it’s a combination of the BofA core NOI, the Philips NOI, plus the NOI on our income statement in the press release from the existing assets.
The asset management revenue is the asset management revenue, GAAP based. The expenses, the net lease corporate that’s a combination of the entire corporate MG&A that has to be carried as well as interest expense on the assets we purchased. MG&A is 3.7 million of that. As we add assets obviously that stays fixed or decreases and we are able to drop more to the bottom line. The contribution is exactly what we expected, actually little better than we expected for the quarter between net lease and asset management. More and more as I will show you on the next page the contribution is going to come out of net leased.
As I think about property acquisitions expenses they are really onetime expenses that are expensed to generate the investments that will create recurring cash flow. So they are one-time expense if you will but we will show them here. Depreciation and amortization preferred dividends and taxes. So Q1 we were basically breakeven before depreciation amortization and acquisitions expenses.
If you go to 37 what will you see is the net leased NOI of the assets that we will have as closed as of this week with the small closing we have, is 21.8. So expect to see in the second quarter significant pick up in the net lease contribution. The pipeline is the expected NOI contribution from the deals that we have signed up. Again expect that to start to hit in the second quarter and more fully in the third quarter. And so the prior page contribution numbers will see very large increases on the net lease side. So that we are covering the G&A and other expenses.
Page 38 is our acquisition capacity. This is as of 415, net-net-net. It excludes CDO equity, it excludes any backend participations in the Garrison promote or the KBS promote. It’s just cash on hand plus what I call receivables which were the CDO advances and the asset sales we have teed up. And what you see is that in addition to the pipeline and the assets that will start to contribute to NOI contribution Q2, Q3, we still have a significant amount of net equity capacity to buy additional assets and continue to build the ongoing cash flows. All of this is to say that we are very much on track to building and creating growing durable cash flows, and therefore dividends. And we will analyze the dividend situation quarter by quarter.
With that my closing remarks; we are testing your patience with the length of this call but we have a lot to cover. This is a very, very big quarter of progress for us. In my 25 career I have not seen a more attractive case for net lease investing than today. Net leased companies are able to buy at attractive asset yields, and the value of those companies is being recognized by the market. I think we have the best investment team in the business led by Ben Harris. Ben and the team are in my view the top team in this business. And you will see that – you saw that as we went through these investments we’ve made, you will see it more and more as we go forward. And I couldn’t as I think I said earlier be more excited about the future.
Last thing, if you have any thoughts on our supplemental or any of this information also feel free to – if you think there should be something else that we can add to it that would be helpful, we would love to know about it. We can always improve our disclosure and lot of what we disclose is in reaction to shareholder questions.
Speaking of shareholder questions with that I’ll turn it over to the operator to take questions from all of you.
Question-and-Answer Session
Operator
(Operator Instructions). Thank you. Our first question comes from Jonathan Feldman from Nomura Securities. Please go ahead.
Jonathan Feldman – Nomura Securities
Good afternoon, couple of questions just in terms of deal pipeline, can you just talk a little bit more about that in terms of what you are seeing, competition for deals and whether there is a reference for large deals or small deals and from a diversification and other standpoints?
Benjamin Harris
Sure. I would say the – Gordon alluded to it, it is a very competitive environment today. I would say that it is intensely competitive for larger transactions where we’ve been finding the most interesting opportunities on the small asset side. We think that those are being overlooked by a lot of the big institutional investors who are really looking to aggregate a very large portfolio.
So if you look across the net leased space at short of acquisitions guidance for 2013, there are several very large REITs that all have over billion dollars of acquisitions, expected acquisitions this year. You can’t accomplish that with $5 million and $10 million and $15 million transactions. So that’s where we are spending a lot of our time in finding the most interesting opportunities. We are looking at a lot of large portfolios and remain in that deal flow. But we haven’t seen as compelling economics in lot of those. Does that answer your question or…
Jonathan Feldman – Nomura Securities
Yeah, I think so I am just trying to get sense of kind of what we should expect in terms of the pace of things like this may be too strong or what we should expect in terms of pace of deal activity because I think obviously the deals that start from the BofA deal that you entered into have been on the smaller side. So I am just trying to get sense of pace of capital deployment. What I (want is) the Chase deal but obviously the markets are pretty attractive at least as you guys presented it.
Gordon DuGan
I think Jonathan I would just add to that to say that our ability to do these small transactions is better than anybody else’s I have ever seen. So we are able to knock these things out and not just distract ourselves because we have just a terrific platform to do it. So we are finding the best relative value there. We are also working very hard on portfolio transactions. There are a very large number of private portfolios that we believe are sellers for either cash or stock, at the right price with the right company and those prices are today.
So I think theirs is going to be lot more the IPO market is not great and especially not great if you have a small portfolio. So it is getting better but it’s still not nearly as active as it could be. So we think there is real opportunity on the portfolio side. It’s big game hunting when you go after the portfolios but it’s one of our goals to find another big portfolio to complement the deal by deal.
Jonathan Feldman – Nomura Securities
And then just the last question would focus around the balance sheet and just was curious if you could update us may be in a little bit more detail on how you are looking at the balance sheet from a raising debt perspective whether it be property level debt, term debt, deferred unsecured bonds and the markets, clearly been continue to improve along with the rally in corporate (trend) and I am just kind of curious how you guys think about as part of your strategy
Benjamin Harris
Well, I would say that we are using deal by deal debt on occasion where there is specific reasons for having debt on that specific transaction. So the Bank of America deal we have $200 million mortgage against that in that, because it was just too large to do any other way. (Technical Difficulty) And there is reason for it but right now we are in the process of building up an unsecured pool that we will use to put in place the credit facility.
So these small deal by deal investments that you see are terrific for aggregating a pool with some diversity that will give us better execution on the credit side when we put in place a credit facility. So part of what’s driving our approach is diversification, both for the equity investor but also to give us the most flexibility in terms of credit facility. In terms of preferred and common, both markets are very, very strong right now, and when it’s an appropriate time we would expect to look closely at those but as of right this moment we are busy getting the money deployed.
Jonathan Feldman – Nomura Securities
Thank you. And then just on the lastly on the BofA portfolio, do you think you are at the point where it’s likely settled out in terms of you guys holding the assets so you want to hold or is there further pruning if you will contemplated.
Jon Clark
We are roughly half way through the sales process which were little (Technical Difficulty) but within sort of staying distance what the plan was. Demand for the assets has been better than what we were expecting. So we are from a proceed standpoint we are little bit ahead of plan but I think the last quarter the portfolio will be the most difficult to sell. I don’t want too optimistic at this point but it’s – we have sort of sold or accepted an under contract transaction for roughly half the portfolio.
Gordon DuGan
And I would just say that of the core portfolio Jonathan our expectations would be to hold that. We are going to hold that long term. It includes a lot of assets in California with $8 rent on Bank of America properties. They are probably three cap, two cap, four cap assets but for the time being we think they are great long term hold. You will be thrilled – I would have been thrilled if my parents had left me any one of those assets but they are the things to hold for generations, but we could achieve very, very low cap rates on those California assets.
Jonathan Feldman – Nomura Securities
And are you as confident as you were in the past that BofA is going to be staying on those assets not exercising termination rent.
Gordon DuGan
Yeah, they are – just to be clear that the lease allows them to only terminate a very small portion of the space going forward and we are confident that we are mission critical campus (Technical Difficulty) at the end if lease term. On some of those California and Florida assets it would be great if they left but there is no chance of it.
Jonathan Feldman – Nomura Securities
Got it, thank you so much for your time this afternoon.
Gordon DuGan
Thanks, Jonathan.
Operator
(Operator Instructions). At this time we have no further question, and I will turn the call back over to Gordon for any final remarks.
Gordon DuGan
Well, we kept everyone a long time this afternoon. I really appreciate everybody’s time and attention. Again we are always available if you have questions on how we can improve what we are doing. We really thank you for your continued support, and we look forward to the next call.
Operator
Thank you, ladies and gentlemen .This concludes today’s conference. Thank you for participating. You may now disconnect.
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