All posts by brianbaker2018

Dairy Farmers Struggle With Economic, Health Challenges

By Brian Baker
Medill Reports

Andrews University opened its dairy farm in 1907. For more than a century, the private college in southwest Michigan used the farm for educational purposes and relied on it for financial income. But after three consecutive years of losses, the university’s board voted in early June to close its dairy operations next summer.

“After three bad years you lose heart and say, ‘let’s face reality,’” said Larry Schalk, the university’s vice president for financial administration.

The dairy farm had typically generated about $100,000 in annual profits for the school’s budget, but over the last three years had losses between $750,000 and $900,000 due to low milk prices and rising production costs, Schalk said. The finance committee had been urging the board to close the dairy operations for the past year.

Dairy farmers across the country are facing similar situations as a downturn in milk prices hits its fourth year, leaving most farmers unable to breakeven. The financial difficulties can leave farmers feeling depressed and hopeless, a dangerous combination for an industry with the highest suicide rate in the country, according to a 2016 study by the Centers for Disease Control and Prevention. The rate of suicide for people in the farming, fishing and forestry occupations was 85 individuals per 100,000 people, according to the study.

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Berkshire Hathaway’s Governance Unique Among Public Companies

By Brian Baker
Medill Reports

Todd Combs, an investment officer at Berkshire Hathaway Inc., received $376,750 in total compensation last year for serving on the board of directors at JPMorgan Chase & Co. That’s nearly 140 times what Bill Gates earned as a director on the board of Berkshire.

“No Berkshire director is in it for the money,” said Charles Munger, vice chairman of Berkshire during the company’s 2017 annual meeting. “It’s a very old-fashioned system.”

Despite Berkshire’s wide following and general admiration for CEO Warren Buffett, its approach to corporate governance remains an anomaly. As the day when Buffett is no longer running Berkshire gets closer, some are beginning to question whether that governance can continue without him.

Brian Tayan, a corporate governance researcher at Stanford University, said Berkshire’s challenge when Buffett is gone will be to shift its governance strategy from being built around Buffett to being built around the company. Although he doesn’t expect immediate changes, Tayan said he expects Berkshire will look more like other businesses in the future.

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Your Senator Filled Out An NCAA Bracket – You’ll Never Guess Who They Picked

By Brian Baker
Medill Reports

Shortly before the NCAA Tournament tipped off last Thursday, Virginia U.S. Senator Mark Warner sent a tweet that included a picture of his bracket. “Just filled out my #MarchMadness bracket. @UVA’s going all the way,” it read. The University of Virginia did not go all the way.

Millions of Americans participated in the annual ritual of filling out a bracket for the NCAA Tournament last week. By the weekend, many were ripping them up.

On ESPN’s website alone, 17.3 million brackets were submitted. The reasoning behind selections can vary from school mascots to favorite team colors. For politicians, who are increasingly joining in on the bracket fun, the rationale seems clear: pick the school from your home state.

Senator John McCain, from Arizona, picked the University of Arizona. Former President George H.W. Bush, who lives in Texas, picked Texas A&M. Indiana Senator Todd Young picked Purdue University. Nevada Senator Catherine Cortez Masto picked Nevada.

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Weekly jobless claims rise off lows as market awaits Friday’s Jobs Report

By Brian Baker
Medill Reports

Initial weekly jobless claims rose during the week ended March 3 after hitting the lowest level since December 1969 in the previous week.

Jobless claims, which measure the number of Americans filing for first-time unemployment benefits, rose 21,000 to a seasonally adjusted 231,000 during the most recent week, according to the Department of Labor. Economists polled by Reuters were expecting initial claims of 220,000.

The four-week moving average, which is viewed as a more stable measure, increased 2,000 to 222,500 from the previous week’s average.

Continuing claims declined 64,000 to 1.87 million during the week ended Feb. 24. Continuing claims are released with a one-week lag and measure the number of people receiving benefits beyond the initial week.

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Japan’s top e-retailer hopes sports sponsorships increase U.S. awareness

By Brian Baker
Medill Reports

When the defending NBA Champion Golden State Warriors arrive for practice, they arrive at the Rakuten Performance Center in Oakland. When they put on their game jerseys, they put on a jersey with a Rakuten logo.

In Spain, FC Barcelona, one of the world’s most recognizable soccer teams, also wears the Rakuten name across its uniform.

These sponsorships have not come cheap for the Japanese e-commerce giant–each reportedly running into the tens of millions–but the company hopes they will help it reach a more global audience.

Rakuten Inc. was founded in 1997 by Hiroshi Mikitani, a graduate of Harvard Business School, who grew the company to more than ¥944 billion in sales during 2017, or about $8.8 billion.

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Shares of Hanesbrands Fall After Outlook Disappoints Investors

By Brian Baker
Medill Reports

Shares of Hanesbrands Inc. fell nearly 11 percent Thursday after the company reported disappointing fourth quarter operating results and its 2018 guidance fell short of analyst estimates.

The Winston-Salem, N.C.-based company reported a $384.6 million loss for the quarter ended Dec. 30 or $1.06 per diluted share, compared with net income of $157.1 million or 41 cents per share in the same quarter a year ago.

Adjusted diluted earnings per share, which excluded a $457 million charge related to U.S. tax reform and other items, were 52 cents during the quarter, compared with 53 cents in the same quarter last year. Adjusted earnings per share matched the consensus estimate.

Sales during the quarter increased 4 percent to $1.65 billion from $1.58 billion driven by a 15 percent increase at the company’s Champion brand.

Hanesbrands revenue has steadily increased over the past five years.
(Brian Baker/MEDILL)

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Tax Reform Boosts AutoNation Results

By Brian Baker
Medill Reports

AutoNation Inc. reported quarterly results that beat analyst estimates due to strong profit growth on used vehicles, benefits from recent U.S. tax reform and business divestitures.

Nevertheless, the stock dropped nearly 4 percent.

The Fort Lauderdale, Fla.-based auto retail chain reported net income of $151.3 million or $1.64 per share for the quarter ended Dec. 31, compared with $115.3 million or $1.14 per share in the same quarter a year ago.

Excluding a 45 cent per share benefit related to U.S. tax reform and a 17 cent per share boost from business divestitures, the company earned $1.02 per share compared with the consensus estimate of 92 cents per share.

Revenues increased 4 percent to $5.68 billion from $5.48 billion in the same quarter in 2016.

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Caterpillar Reports Strong 4th Quarter Results

By Brian Baker
Medill Reports

Caterpillar Inc. reported strong quarterly earnings driven by improving end markets, particularly in North America, where demand for construction equipment and onshore oil and gas equipment boosted results that outpaced analyst estimates.

The Deerfield, Ill.-based manufacturing giant reported adjusted earnings per share of $2.16 for the quarter ended Dec. 31 compared with 83 cents in the prior year’s quarter, beating estimates of $1.79 per share.

Adjusted earnings exclude a $2.4 billion tax charge related to repatriation of foreign earnings under the recent U.S. legislation, and other items including restructuring costs.

On a GAAP basis, the company reported a loss of $1.3 billion or $2.18 per share, compared with a loss of $1.2 billion or $2.00 per share in the fourth quarter of 2016.

Revenues increased 35 percent in the quarter to $12.9 billion versus $9.6 billion in last year’s quarter. North American sales grew 46 percent in the quarter due to strong demand for equipment and aftermarket parts.

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Chicago Community Catalyst Fund Still Waiting to Make First Investments

By Brian Baker
Medill Reports

More than a year after it was first announced, the Chicago Community Catalyst Fund has not yet hired investment managers who will be charged with finding investment opportunities–mainly loans to existing small businesses–in underserved Chicago neighborhoods.

Even then the rollout will be slow. The fund will deploy its first capital to investment managers over the next six months and funding should reach Chicago businesses in low-income neighborhoods by the end of the year, according to City Treasurer Kurt Summers.

The city expects to allocate $50 million to the fund this year and $25 million in each of the following two years. The money will be managed by professional investors who will have discretion over where investments are made.

“I don’t want a single politician to be responsible for these investment decisions,” Summers said Wednesday.

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