This past week’s news from www.ocbj.com and other sources
ECONOMIC INDICATOR
Mixed: The outlook on home mortgages in Orange County, with 7.15% more than 90 days delinquent in September, up by nearly half a percentage point from a year earlier, according to Santa Ana-based CoreLogic Inc. The number of homes in foreclosure dropped by about the same amount to 2%.
TOP STORIES
San Juan Capistrano-based Nielsen Expositions shut down its biannual Action Sports Retailer Trade Expo, a major marketing event for local makers of clothes inspired by surfing, skateboarding and snowboarding. The show was the biggest of its kind on the West Coast and typically drew upward of 800 exhibitors, thousands of retailer buyers and significant media attention. Nielsen Expositions, part of New York-based Nielsen Co., held two annual editions of ASR in San Diego.
Irvine-based Lantronix Inc. urged shareholders to back its candidates in an upcoming board election as it faces a challenge by its founder and longtime board member Bernhard Bruscha, who owns nearly 40% of the company. Lantronix, which makes small electronic devices that allow vending machines, thermostats and other machines to be accessed via the Internet, has offered board seats to Bruscha and two others on his slate. But Bruscha is pressing for more, including the ouster of Chief Executive Jerry Chase and Chairman Lew Solomon as well as changes to the company’s business strategy.
APPAREL
Shares of Costa Mesa-based apparel maker Volcom Inc. slumped after it warned of a profit shortfall for the current quarter. Volcom, with a market value of $415 million last week, said it expects a fourth-quarter profit of $988,000 to $1.7 million, less than half its earnings a year earlier. Analysts on average had been expecting a fourth-quarter profit of $2.7 million. Profits will sag because of price cuts on leftover inventory, charges for returns of unsold merchandise and discounts for retailers placing early orders, according to analyst Mitch Kummetz of Milwaukee-based investment bank Robert W. Baird & Co.
HEALTHCARE
A private equity firm agreed to buy a majority stake in Smile Brands Group Inc., an Irvine-based dental services company that withdrew plans for a public offering earlier this year. New York-based Welsh, Carson, Anderson & Stowe plans to acquire the bulk of a 73% stake held by Freeman, Spogli & Co., a private equity investor in Los Angeles that will retain a minority share. Smile provides various support services for more than 1,100 dentists and hygienists who practice in about 325 offices nationally. The company dropped a plan to go public and raise $130 million earlier this year.
HOTELS
San Clemente-based Sunstone Hotel Investors Inc. reported improved third-quarter results but warned of a shortfall in a key profit measure for the current quarter. Sunstone reported funds from operations—a measure of profit for hotel and other real estate owners—of $13.7 million, up 33% from a year earlier and matching what analysts expected. Revenue rose 4.5% from a year earlier to $177.7 million, topping the $157.8 million expected by analysts. For the fourth quarter, Sunstone forecast funds from operations of $15.2 million to $19.3 million, below the $22.4 million analysts had been expecting. Sunstone owns all or part of 30 hotels across the country.
RESTAURANTS
Irvine-based Claim Jumper Restaurants LLC was acquired by Houston-based Landry’s Restaurants Inc. for $76.6 million. Claim Jumper has 45 restaurants spread over eight states. Landry’s runs 174 restaurants across the U.S. and Canada and also owns and operates casinos, including the Golden Nugget in Las Vegas. Claim Jumper filed for bankruptcy protection in September.
REAL ESTATE
An ownership group including developer Hadi Makarechian has filed for bankruptcy protection on a 21,000-acre, 75,000-home project called Banning Lewis Ranch south of Denver. The filing appears to be the result of an impasse between a company controlled by Makarechian’s Makar Properties LLC and investors Greenfield Partners LLC and Farallon Capital Management LLC. The ownership group cited “uncertain economic and financial conditions” for the filing.
Foothill Ranch-based mall retailer Wet Seal Inc. reported a smaller decline in same-store sales in October than analysts expected and said it sees profits for the recently ended quarter to come in higher than earlier forecast. Wet Seal, which runs 522 stores selling clothes for teen girls and young women, reported a 0.7% decline in October same-store sales from a year earlier. Analysts had been looking for a 3.8% drop in sales at stores open for at least year. Wet Seal said it now expects profits for the three months through October coming in at $4 million. Analysts on average had been expecting a profit of $3 million.
OTHER NEWS
Santa Ana-based vocational school operator Corinthian Colleges Inc. warned of a big profit shortfall and drop in student enrollment for the current quarter. Corinthian, which runs more than 100 campuses in the U.S. and Canada that offer degrees in healthcare, criminal justice and other areas, projected a profit of $17.4 million to $20 million for the three months through December. Analysts had been expecting $30 million in profits. Corinthian also warned of a 15% to 17% adjusted drop in enrollment at its schools as the company stops enrolling riskier students. The company and others are under fire for students who took on more debt than they could afford and for defaults on federally backed student loans.
