Daily Briefing

DAILY BRIEFING

December 23, 2008

Circuit City gets OK on $1.1 billion financing

RICHMOND, Va.: Circuit City Stores Inc. received final approval yesterday for $1.1 billion in financing to keep operating while the nation's second-biggest electronics retailer is in Chapter 11 bankruptcy protection. U.S. Bankruptcy Judge Kevin Huennekens approved the debtor-in-possession loans at a hearing in Richmond. The financing, which replaces a $1.3 billion asset-backed loan that the company had been using, will be used to stock merchandise and pay employees. Circuit City filed for bankruptcy protection last month. The company's Canadian operations filed for similar protection. Gregg Galardi, an attorney for Circuit City, said that since filing for bankruptcy, the company's sales have been hurt by the weak consumer spending environment and are down between 40 percent and 50 percent. Galardi called the financing and restructuring efforts a "bridge to somewhere," and he said the company is still pursuing the sale of all of its assets. Circuit City announced plans last month to close 155 of its more than 700 U.S. stores by Dec. 31 and lay off about 17 percent of its domestic work force, or up to 7,300 people. The affected stores are spread across 28 states, including three in Maryland.

Associated Press

Caterpillar to cut pay of executives, others

Caterpillar Inc., the world's largest maker of mining and construction equipment, said yesterday that it will cut executive compensation by up to 50 percent next year because of weakening demand triggered by the global economic downturn. The company also said it will reduce compensation for senior managers by 5 percent to 35 percent next year. Other management and support staff will see a reduction of up to 15 percent. Caterpillar, based in Peoria, Ill., said the cuts will come from reductions in its incentive program and equity-based compensation. It has instituted a hiring freeze and plans to suspend merit pay increases for managers and support employees. Caterpillar follows several other firms that have slashed compensation in recent weeks to lower costs. Earlier this month, Memphis, Tenn.-based FedEx Corp. said it will cut pay for senior executives and freeze 401(k) contributions for a year. AK Steel Holding Corp., based in West Chester, Ohio, plans to reduce pay for salaried employees by 5 percent, starting next year. Besides the compensation cuts, Caterpillar is also offering incentives to U.S.-based management and support employees to leave the company voluntarily. Eligible employees have until Jan. 12 to make a decision.

Associated Press

U.S. aims to cut flights at LaGuardia in N.Y.

NEW YORK : Federal aviation authorities yesterday said that they are trying to cut the number of flights at LaGuardia Airport in an effort to reduce congestion at the airport with the highest incidence of delays in the country. U.S. Transportation Secretary Mary Peters said that the government will lower the cap on flights at LaGuardia from 75 to 71 per hour. But the cap is voluntary, and requires participation by the three top airlines at the airport - Delta Air Lines, American Airlines and US Airways. The airlines have 10 days to comment on the proposal. If approved, the new hourly flight quota would take effect in April and end Oct. 24. LaGuardia is the smallest of the three major airports serving the New York City area, and Newark Liberty International Airport and John F. Kennedy International Airport both have caps, set at about 83 flights per hour, Gribbin said. LaGuardia ranks last among the 32 major U.S. airports in on-time arrival performance, according to the Transportation Department.

Associated Press

Walgreen profit falls 10% in first quarter

NEW YORK: Drugstore operator Walgreen Co. said yesterday that its profit fell 10 percent in its fiscal first quarter, short of Wall Street expectations, because of costs opening more than 200 stores. The company said it plans to slow the opening of stores to save $500 million. The Deerfield, Ill., company said it earned $408 million, or 41 cents per share, in the three months ended Nov. 30. That compares with $456 million, or 46 cents per share, a year ago. Revenue grew 7 percent to $14.95 billion. Analysts expected 46 cents per share and $15.08 billion in revenue, according to Thomson Reuters. Walgreen said its selling and general expenses grew 9 percent in the quarter as it opened 212 new stores, and profit margins dipped because of greater expense provisions. Sales at its older stores grew 1.7 percent, with prescription revenue in older stores growing 2.6 percent. In fiscal 2010, Walgreen said it will slow its organic store openings to a rate of 4.5 percent to 5 percent, with growth of 2.5 percent to 3 percent in fiscal 2011. In July, the company said it would slow the pace of store openings by 5 percent in 2011, from 8 percent. The reductions are expected to save the company a total of $1 billion in annual spending.

Associated Press

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