Maybe you're not overly concerned about the pending "fiscal cliff," but the prospect of higher tax rates in 2013 apparently is creating some anxiety in the boardrooms of public companies.
Two weeks ago, Stein Mart Inc.'s board of directors declared a special $1-a-share cash dividend to shareholders payable on Dec. 24.
Last week, Landstar System Inc.'s board decided to replace its next eight quarters of dividends, which had been 6 cents a share, with a special 50-cent dividend payable on Dec. 27.
The two Jacksonville-based companies join a growing number of corporations that are scurrying to pay out excess cash to shareholders before the end of this year.
Why the rush? Under current tax law, Americans pay federal income taxes on qualified dividends at a top rate of 15 percent. However, if that special dividend rate expires at the end of the year, or even if a compromise is reached by congressional negotiators, those dividends may be taxed as ordinary income in 2013 instead of receiving special treatment.
That means the wealthiest Americans could be paying taxes on their dividends at a rate of 39.6 percent or more. You can be sure that many of the people in those corporate boardrooms will fall into that category.
So the race is on to pay special dividends before Jan. 1.
Stein Mart has not been paying quarterly dividends and its one-time $1 dividend is the third time in the past six years the company has declared a special cash dividend for shareholders. The company said it is paying the dividend because of its strong cash flow.
Landstar made no bones about it. The company said in its news release that it was altering its dividend policy to allow shareholders to beat the tax hike.
"With the anticipated increase in the federal tax rate on dividends expected as of Jan. 1, 2013, the Landstar board approved the acceleration of what amounts to two years' worth of quarterly dividend payments," CEO Henry Gerkens said in a conference call.
The special 50-cent payment replaces all quarterly dividends through the third quarter of 2014. Landstar said it would reevaluate its dividend policy in the fourth quarter of 2014.
Shoe Carnival Inc. joined the act Friday by declaring a special $1 dividend, in addition to its quarterly 5-cent dividend, payable on Dec. 28.
Former Jacksonville Jaguars owners Wayne and Delores Barr Weaver are the largest Shoe Carnival shareholders with about 3.3 million shares, so the move will pay them an extra $3.3 million which will be taxed at the lower rate.
A number of large U.S. corporations have announced
similar moves in the past couple of weeks. For example, Costco Wholesale Corp., which has been paying a quarterly dividend of 27.5 cents a share, declared a one-time $7 dividend payable this month.
Computer technology giant Oracle Corp. decided to take its next three quarterly dividend payments of 6 cents a share that would have been payable in 2013 and make a one-time 18-cent payment on Dec. 21.
Oracle CEO Larry Ellison owns more than 1.1 billion shares, so he will take in about $200 million from this special dividend that will be taxed at the 15 percent rate. You can assume he falls into the upper income bracket that may be taxed at the 39.6 percent rate next year.
Oracle did say that Ellison did not participate in the board's discussion or vote on the special dividend.
Wal-Mart Stores Inc. took the simple step of moving up its next quarterly dividend payment of 39.75 cents a share, which had been scheduled for Jan. 2, to Dec. 27.
The family of founder Sam Walton owns more than 1.6 billion Wal-Mart shares, which translates into more than $600 million in dividends that will be taxed at the 2012 rate. There are two Waltons on the company's board of directors, but Wal-Mart did not make a statement on whether or not they participated in the decision.
Landstar says earnings on track
Landstar's conference call on Thursday was actually its regularly scheduled mid-quarter call to update investors on the trucking company's business.
When Landstar announced its third-quarter earnings in October, Gerkens said demand for its services in the first few weeks of the fourth quarter had been sluggish.
In last week's call, he said trends improved in November. So, assuming the trends continue through December, Gerkens said he remains "comfortable" with Landstar's projection that it will earn 63 cents to 68 cents a share in the fourth quarter.
That's lower than the 70 cents a share Landstar earned in the fourth quarter of 2011, but Gerkens said two special factors added about 9 cents a share to last year's earnings.
Analysts have been projecting Landstar will earn between 64 cents and 68 cents in the quarter, according to Thomson Financial.
"Our fourth quarter EPS estimate remains at the top of the company's guidance range. We note that the company has met or exceeded the top of its mid-quarter guidance range for the past three quarters," Stifel Nicolaus analyst John Larkin said in a research note.
Patriot earnings affected by special factors
Patriot Transportation Holding Inc. last week reported lower earnings for the fourth quarter and full fiscal year ended Sept. 30, but there were special factors affecting its results.
Fourth-quarter earnings fell 23 percent to $1.4 million, or 14 cents a share.
The Jacksonville-based transportation and real estate company said fourth-quarter earnings were lowered by about $1.1 million, or 12 cents a share, because of an "environmental remediation expense" for one of its commercial properties in Washington, D.C.
Patriot said there are contaminants at that site "that we believe are a result of normal operations of our previous tenant," and the company is seeking to have that tenant pay the cleanup costs. But until that is resolved, it accrued the cleanup expense on its fourth-quarter results.
For the full fiscal year, earnings fell 36 percent to $7.8 million, or 82 cents a share. Patriot said earnings were lower than fiscal 2011 because of a special gain in 2011 from an exchange of property which increased earnings by about $5 million, or 53 cents a share.
"The comparison of both the quarter and the year were affected accordingly by these two non-operating events and cloud what I believe has truly been a year of significant progress for our company," Executive Chairman John Baker said during Patriot's quarterly conference call.
Patriot's revenue for fiscal 2012 rose 6 percent to $127.5 million.
Taylor Morrison plans IPO
Giving further evidence that the homebuilding industry is recovering, Taylor Morrison Home Corp. last week filed plans for a $250 million initial public offering.
Taylor Morrison is currently owned by a group of private equity firms. The company's filing with the Securities and Exchange Commission does not say how much of the stock will be retained by those firms after the IPO.
The Scottsdale, Ariz.-based company said it will be the sixth largest public homebuilder in North America, based on 2011 revenue, when it completes the IPO.
The company closed 2,586 homes in the U.S. and Canada during the first nine months of this year, generating $879 million in revenue and net income of $81.8 million.
Taylor Morrison said it operates in 10 of the 35 largest U.S. homebuilding markets, based on 2011 home closing data, including Jacksonville, which ranked 27th.
Taylor Morrison expects its stock to trade under the ticker symbol "TMHC."
The timing couldn't be better for the IPO because homebuilders have been some of the hottest stocks in the market this year.
Based on data through Wednesday of last week, when Taylor Morrison filed for its IPO, PulteGroup Inc. had risen by 166 percent this year, making it the best performer of all companies in the Standard & Poor's 500 index. Lennar Corp. was up 94 percent, making it the fifth best performer in the index.
Martin Marietta may try again for Vulcan Materials
Speaking of a comeback in construction, The Wall Street Journal reported last week that Martin Marietta Materials Inc. may try again to buy Vulcan Materials Co.
You will recall that after Vulcan rejected attempts by Martin Marietta to negotiate a friendly merger of the two construction materials firms a year ago, Martin Marietta launched a hostile $4.8 billion bid.
When last we left this saga in May, a Delaware judge blocked Martin Marietta's attempts to continue its hostile bid for Vulcan and issued an injunction preventing Martin Marietta from trying again for four months.
That injunction quietly expired in September and nothing has happened since then. However, the Journal story last week, citing "people familiar with the decision," said Martin Marietta intends to try again to negotiate a friendly deal.
The story said Martin Marietta hasn't approached Vulcan and doesn't even have a plan yet on how to proceed. So we'll have to wait and see.
News report claims Deutsche Bank hid losses
While Deutsche Bank was showing off its expanded Jacksonville offices last week, the Financial Times was reporting that the Germany-based banking giant hid $12 billion in losses from regulators to avoid concerns about its finances during the worldwide banking crisis a few years ago.
The story said three former Deutsche Bank employees have complained to U.S. regulators that the bank overstated the value of certain derivative trades.
Deutsche Bank on Thursday issued a statement saying the allegations were "wholly unfounded" and said it was cooperating with an investigation by the SEC into the matter.
Analysts upgrade EverBank
After a dinner with its management, Raymond James analysts Michael Rose and Kyle Oliver upgraded their rating on EverBank Financial Corp. last week from "outperform" to "strong buy."
"With continued diversification of its mortgage-heavy business model, superior hgrowth profile, ongoing positive operating leverage, and improving profitability, we see EverBank's against-the-grain fundamental performance driving further multiple expansion and fueling outperformance in the stock," the analysts said in their report.
"Plainly, we see EverBank's unique operating structure/strategy as a breath of fresh air amidst the current slow growth, net interest margin-obsessed banking environment and among the most compelling opportunities in our coverage universe," they said.
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