Tuesday, June 29, 2004

Business digest

High court to hear securities fraud case

Enquirer news services

WASHINGTON - The Supreme Court agreed Monday to consider the standard for proving securities fraud, in a case involving a maker of asthma and allergy medicines.

The stock of Dura Pharmaceuticals Inc. had plummeted 47 percent in one day after the company announced in February 1998 that it expected lower revenues because of slower-than-expected sales of the antibiotic Ceclor CD.

People who bought stock before the announcement sued, accusing the company of misleading them about the sales of the drug and the development of a separate medical device.

A judge dismissed the lawsuit, but the 9th U.S. Circuit Court of Appeals reinstated it. At issue in the appeal is the standard for stock owners to prove that they suffered a loss.

The Bush administration urged justices to consider the appeal. Administration lawyers said about 190 such cases are filed each year.

The case is Dura Pharmaceuticals v. Broudo, 03-932.

Insurance fund asks to collect surcharge

FRANKFORT - An insurance company is asking Kentucky to let it collect $49 million in retroactive premiums from customers to make up for a projected budget shortfall and beef up its reserves.

AIK Comp, which provides employers with insurance to cover doctor bills of injured workers, devised a plan that would assess employers an added premium for the years 1998 through 2001, with the bulk of the costs being borne by employers that have the highest percentage of claims.

Some employers estimated the proposed surcharge at $1,000 per employee.

The fund's managers say if it doesn't get that money, it would stop offering new coverage, forcing client employers to scramble for other insurance at potentially higher prices.

AIK is one of Kentucky's largest workers' compensation carriers, insuring more than 2,500 employers, ranging from Appalachian Regional Healthcare to the Christian Church Homes of Kentucky nursing homes to a one-man engineering firm in Louisville.

About 125 employers and insurance agents are expected to attend a public hearing Tuesday at the Office of Workers Claims headquarters in Frankfort about AIK's request for additional premiums.

Omnicare extends offer to buy rival

Kentucky nursing home operator Omnicare has extended its offer to buy shares of rival NeighborCare until July 30, even though investors have already bid up NeighborCare's share price by nearly $2 over Omnicare's bid.

Omnicare took its offer directly to Baltimore-based NeighborCare shareholders after the company's board of directors rejected its buyout offer of $30 a share. The tender offer was originally set to lapse July 7.

NeighborCare shares closed Monday at $31.82. Omnicare's shares closed at $41.27, down $1.23.

Consumer spending leaps ahead in May

WASHINGTON - Consumers boosted their spending in May by the largest amount in more than two years.

The Commerce Department reported Monday that consumer spending rose by 1 percent, a considerable pickup from the 0.2 percent increase registered in April. The increase in May was the largest since October 2001, when spending rebounded with gusto after being depressed by the Sept. 11 attacks.

"With the job outlook improving and income growing solidly, people are spending money like crazy," said economist Joel Naroff, president of Naroff Economic Advisors.

Americans' overall incomes went up by a strong 0.6 percent in May for the second straight month as did disposable incomes - what's left after taxes. The income and spending figures are not adjusted for price changes.

Pittsburgh steel maker to cut 650 jobs

PITTSBURGH - Steel-maker Allegheny Technologies Inc. said Monday it will cut 650 jobs over the next 2 1/2 years in a restructuring designed to save about $200 million a year.

The Pittsburgh-based steel maker also said it expects to return to a profit in its latest quarter, thanks to improving market conditions.

The company has about 8,800 employees worldwide.

It blamed the job cuts on a restructuring at its Allgeheny Ludlum stainless-steel production plant. The revamping at the plant is designed to increase annual capacity to 700,000 tons from 478,000 tons.

The cost savings will come from both the restructuring and from the transformation of Allegheny's stainless steel business by the second half of 2006, the company said.

For the second quarter, Allegheny said it will report earnings of 22 cents to 32 cents a share, helped by a gain from special items of about $39 million, or 48 cents a share.

Wall Street analysts had been anticipating a loss of 37 cents a share for the quarter. A year ago, Allegheny reported a loss of 32 cents a share.

The company, which was formed from the merger of Allegheny Ludlum and Teledyne, said demand for its flat-rolled products is strong.

It said it expects to record a second-quarter gain of $39 million, or 48 cents per share, from $71 million in savings after placing a cap on retiree medical benefits and $32 million in charges from pension payments and recent acquisitions in Ohio and Pennsylvania.

Allegheny said the items include a $71 million curtailment and settlement gain as a result of actions taken to cap, beginning in 2005, and then eliminate, beginning in 2010, certain retiree medical benefits not related to the new labor agreement.

The company will take a $25 million charge resulting from Transition Assistance Program incentives under Allegheny Ludlum's new labor agreement. The TAP incentives will be paid from the company's pension fund over the next two and a half years to 650 Allegheny Ludlum employees who decide to retire by 2006.

The company will also take a $7 million charge as a result of other costs associated with the new labor agreement and the acquisition of the Midland, Pa., and Louisville, Ohio, assets.

The number of production and maintenance employees at its recently acquired Pennsylvania and Ohio facilities is being reduced, during a short transition period in 2004, to 310 from more than 500. In addition, by integrating these assets into Allegheny Ludlum, the number of corporate staff and other salaried employees is being reduced to 85 from about 300.

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Business digest