Paw Print Rewind #013: May 18, 2015

Editor’s Note: This is the Paw Print Rewind, a daily look at the top news headlines.

Sharp gains $1.9 billion bailout

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Sharp has secured a $1.9 billion bailout, its second major bank-led rescue in three years, after falling deep into the hole as its smartphone display business was battered by competition from Asian rivals.

New restructuring measures will include cutting 5,000 jobs (10% of its global workforce) as well as selling their headquarters.

The company wasn’t considering the spinoff of its troubled display business, according to CEO Kozo Takahashi, and will continue making TVs in Japan.

“The current business model is not convincing. It has cutting-edge display technology, but it’s not profitable.”

-Mitsushige Akino, Ichiyoshi Asset Management chief fund manager

Under the deal, main lenders Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ will communally inject $1.7 billion in a debt-for-equity swap.

Corporation turnaround fund Japan Industrial Solutions, which is owned by a consortium that includes the two aforementioned banks, will also provide $209.5 million in return for preferred shares.

Honda increases Takata air bag recalls, increasing tally to 36 million

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Honda has recalled close to five million vehicles fitted with potentially faulty Takata air bag inflators, as investigators believe that the auto safety crisis could be more widespread than previously thought.

The latest move by Japan’s third largest automaker brings the overall global total count for vehicles recalled because of Takata-related air bags to around 36 million since 2008, and comes after Toyota and Nissan recalled 6.5 million vehicles worldwide.

Honda decided to recall the cars after finding that some Takata bag inflators weren’t sealed properly, according to the company, allowing moisture to seep into the propellent casing, which potentially could cause the air bag to explode with excessive force, shooting shrapnel inside the vehicle.

Six deaths have been linked to these defective air bags, all on Honda-made vehicles.

“While we are not able to determine the cause of the problems, there is a possibility there will be more recalls.”

-Teruhiko Tatebe, Honda spokesman

The recalls were precautionary, according to Honda, and there were no reports of accidents of injuries.

DuPont wins board proxy fight against Peltz

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DuPont has repelled a board challenge from activist investor Nelson Peltz after shareholders backed all 12 directors nominated by the chemical conglomerate’s management.

Peltz’s Trian Fund Management sought four seats on the board, including on for himself, and pushed the 213-year-old company to split its businesses to unlock more shareholder value.

The company spent several months explaining to investors how they are retooling their business, according to DuPont CEO Ellen Kullman, with a key focus on the planned spinoff of its performance chemicals business, which supplies titanium dioxide products and Teflon coatings, in the coming weeks.

“We don’t tell our story well enough and have undergone a lot of change.”

Ellen Kullman, to reporters at DuPont’s annual meeting in Wilmington, DE

DuPont, which spent $15 million on its shareholder campaign, also reached out to its retail investor base, which accounts for more than a third of company shares.

“They normally don’t vote as often as they should, but apparently we got their attention this time, and they were active.”

-Ellen Kullman

“We don’t believe these things would have occurred without our involvement.”

-Nelson Peltz

Cisco profits up despite weak telecom spending

A Cisco Systems sign is shown at Cisco Systems headquarters in San Jose, Calif., Tuesday, Feb. 3, 2009. Cisco Systems releases quarterly earnings after the market close Wednesday, Feb. 4. (AP Photo/Paul Sakuma)
A Cisco Systems sign is shown at Cisco Systems headquarters in San Jose, Calif., Tuesday, Feb. 3, 2009.

Cisco’s quarterly profit was up as demand for new switches, routers, wireless gear and servers made up for sluggish spending by telecom customers and weak emerging markets sales.

The network equipment company is transitioning towards high-end switches and routers as well as investing in new products like data analytics software and cloud-management tools.

“We are a cash and profit machine.”

-John Chambers, outgoing Cisco CEO

Cisco expects an adjusted profit of 55-57 cents per share for the current quarter.

The company also forecast one-three percent revenue growth.

“We are modeling the volatility in emerging markets to continue for several more quarters.”

-John Chambers

Russia revenue fell 41 percent in the third quarter that ended April 25, according to the company. Revenue from Brazil declined 10 percent and 20 percent from China.

Total revenue increased 5.1 percent to $12.14 billion.

On an adjusted basis, the company earned $0.54 per share.

The company’s net profit rose to $2.44 billion ($0.47 per share), from $2.18 billion ($0.42 per share) a year earlier.

J.C. Penny posts narrower first quarter loss, lifts margin target

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J.C. Penny reported a smaller-than-expected quarterly loss and lifted its annual gross margin target, helped by solid demand for women’s apparel and home goods.

The company posted a $167 million ($0.55 per share) loss in the first quarter that ended May 2, compared with a $352 million ($1.15 per share) net loss a year earlier. Excluding items, the loss was $0.57 per share.

Sales at store open more than a year rose 3.4 percent in the first quarter, slightly below guidance for 3.5-4.5 percent growth, according to J.C. Penny.

The company now expects same-store sales to rise four-five percent in 2015, compared to a prior three-five percent range.

J.C. Penny’s gross margin improved 330 basis points in the first quarter to 36.4 percent of sales, according to the retailer.

The company now expects its gross margin to improve 100-150 basis points in 2015, up from a 50-100 basis point improvement under a February forecast.

Ford Venezuela to sell pickups, SUVs in dollars

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Ford’s Venezuelan division will sell pickups and SUVs in dollars, according to United Socialist Victorious Union of Ford workers president Gilberto Troya, part of a deal with the government to restart operations stalled for lack of hard currency to restart operations stalled for a lack of hard currency to import parts.

“We’re doing this to avoid closing the plant.”

-Gilberto Troya

Ford dealerships will sell the Explorer Limited and Ecosport SUVs, Lariat pickup, and three cargo trucks in USD, according to Troya. Economy cars like the Ford Fiesta will continue to be priced in the local bolivar currency, but consumers may struggle to find those models.

“Some would say this is only benefiting a privileged few, but it’s better than nothing.”

-Gilberto Troya

Troya also noted that few Venezuelans have access to US dollars.

The Explorer Limited will be priced at $69,000 including sales and luxury tax, according to figures provided by the union, the equivalent of 170 years of minimum wage using the weakest official exchange rate.

Dealerships will receive US dollars from clients and use them to finance the import of assembly kits, because Ford no longer wants to continue putting money in.

“Headquarters doesn’t want to have anything to do with this after years of not being able to generate profit. They are owed $400 million.”

-Gilberto Troya

Ralph Lauren suffers setback in U.S. trademark fight

Ralph Lauren has lost some ground in its trademark fight with the United States Polo Association over its logo depicting a horse-mounted polo player swinging a mallet.

Manhattan’s 2nd U.S. Circuit Court of Appeals cannot be held in contempt for selling sunglasses with a logo similar to the one emblazoned with the horseman, which is featured on products sold with the Polo Ralph Lauren brand trademark worldwide.

The disputed logo is known as the “double horsemen mark” and depicts two mounted polo players vying for a ball.

The Polo Association sold nearly a million pairs of sunglasses with the logo between 2009 and 212, when a lower court judge ruled that it could be held in contempt for violating an injunction against such use dating back to 1984.

The injunction barred the Polo Association from using the double-horseman mark and the word “polo” on its fragrances and beauty products, according to the ruling written by 2nd Circuit Judge Ralph Winter, among other merchandise.

“The parties bound by an injunction are entitled to clear notice of what specifically they may or may not do.

“USPA (United States Polo Association) argues that the underlying injunction did not enjoin all uses of the mark. We agree and vacate the contempt order and remand for further proceedings.”

-The injunction

UBS must pay $200K to Puerto Rico fund investor

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A Financial Industry Regulatory Authority (FINRA) arbitration panel in Washington ordered UBS to pay an investor $200,000 for losses incurred by its Puerto Rico closed-end bond funds, marking one of the first rulings in a flood of cases involving the risky securities.

The panel found two UBS units liable in the case, which alleged securities fraud, misrepresentation and other misdeeds, according to the ruling.

Many of the Puerto Rico funds sold by UBS were highly concentrated in the debt of Caribbean island’s government and related entities. UBS is defending against hundreds of arbitration claims filed with FINRA, collectively seeking over $900 million in damages.

Some of the funds lost half to nearly two-thirds of their value between March 2011 and October 2013, amid fears about the size of Puerto Rico’s debt of Caribbean island’s government and related entities. They have failed to recover since.

“UBS is disappointed with the decision to award any damages, with which we respectfully disagree.”

-A UBS spokesman

The spokesman added that the decision was not indicative of how other cases might play out, since it was based on the investor’s specific case.

Over 20 years, the funds provided excellent returns, according to the spokesman.

Yolanda Bauza, the investor, sought between $357,000 and $625,000 for her losses when filing the claim in 2013, according to the ruling. UBS pegged the losses at about $8,000 because of investment income she received before the funds soured in 2013.

Bauza invested money she received in a settlement from an auto accident, according to her attorney W. Scott Greco. She moved from Puerto Rico to Washington in 2011, according to Greco.

“The case is significant because it will make UBS reevaluate how they value these cases for settlement. It puts UBS on notice they are at risk for significant awards in favor or Puerto Rico investors.”

-Jeffrey Sonn, a Fort Lauderdale, FL lawyer

Sonn wasn’t involved in the arbitration, but he represents other investors in cases against UBS.

The arbitrator also denied UBS’ request to remove details about the case from the public records of two UBS Puerto Rico brokers who were advising Bauza.

In a separate ruling, another arbitrator denied an investor’s $8,000 claim against UBS. The investor did not have a lawyer, according to the ruling.

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