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Jax Daily Record Monday, May 15, 201712:00 PM EST

Regency unconcerned about retail closings

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by: Mark Basch Contributing Writer

Regency Centers Corp. last week reported better-than-expected first-quarter earnings as it completed its merger with Equity One Inc., and CEO Hap Stein said he expects the company to thrive even as some retailers struggle.

Jacksonville-based Regency, which operates shopping centers mainly anchored by supermarkets, reported core funds from operations of 90 cents a share, 10 cents higher than the first quarter of 2016 and 7 cents higher than the average forecast of analysts, according to Zacks Investment Research.

Funds from operations are basically earnings excluding noncash charges such as depreciation and amortization expense, and are a key indicator of a real estate investment trust’s performance.

Regency operates 429 retail properties across the country after adding Equity One’s portfolio.

“The team has made extraordinary progress integrating the companies. The combined portfolio is demonstrating its exceptional quality with another quarter of being 96 percent leased and producing over 3.5 percent same property NOI (net operating income) growth,” Stein said in Regency’s conference call with analysts.

“Our developments and redevelopments continue to perform well. Substantial synergies are already being realized. These collective achievements are reflected in our increased earnings guidance,” he said.

Regency increased its guidance for core funds from operations for all of 2017 from a range of $3.44 to $3.50 a share to a range of $3.60 to $3.68.

SunTrust Robinson Humphrey analyst Ki Bin Kim said in a research note that it was a “strong start” in the first quarter for “our new favorite shopping center REIT.”

Kim is estimating the Equity One deal will increase funds from operations by 3.4 percent next year.

While some retailers are closing stores, Stein said in the conference call he doesn’t expect a big impact on Regency.

“Although we will certainly not be immune, there are compelling reasons why I feel that the sky is not falling and why I remain optimistic that well-conceived, well-located and well-merchandised retail real estate will succeed in this environment, and Regency’s outlook remains extremely bright,” he said.

“When disruption causes retailers in our portfolio to rationalize their store count, we have often found that our locations are must-keep, or if the user vacates, bad news is typically good news as we are able to attract a better user at higher rents,” he said.

Kim said he is impressed by Regency’s list of top 25 tenants. “It appears so much stronger versus the REIT peer set,” he said.

“Now, we’re sure Regency has some of these retailers below the ‘Top 25’, but the concentration is much lower, hence the risk is lower, in our view,” Kim said.

No impact from Coach deal

Coach Inc. announced a major acquisition last week but said the deal will have no immediate impact on its Jacksonville distribution center.

The maker of handbags and accessories agreed to buy rival Kate Spade & Co. for $2.4 billion in cash.

“The combination enhances our position in the attractive global premium handbag and accessories, footwear and outerwear categories, bringing product, brand positioning and customer diversification to the portfolio, and establishing scale in key functions with the resources to invest in talent and innovation,” Coach CEO Victor Luis said in a news release.

“In addition, we believe the Kate Spade brand will benefit from our best-in-class supply chain and strong corporate infrastructure,” he said.

Coach’s infrastructure includes an 850,000-square-foot warehouse at the Jacksonville International Tradeport that handles all of its North American distribution.

Kate Spade also has a single U.S. distribution center, a 601,000-square-foot facility in West Chester, Ohio, according to its annual report.

Coach spokeswoman Andrea Shaw Resnick said by email that the company expects no impact on those facilities at this time.

“Our current expectation is to leave their distribution facility as is, and we’ll review opportunities for consolidations once we are on the same system,” she said.

Coach Chief Financial Officer Kevin Wills said in the news release that the company does see cost-cutting opportunities from merging the operations.

“Due to the complementary nature of our respective businesses, we believe that we can realize a run rate of approximately $50 million in synergies within three years of the deal closing. These cost synergies will be realized through operational efficiencies, improved scale and inventory management, and the optimization of Kate Spade’s supply chain network,” he said.

Resnick said Coach will not disclose the number of employees in Jacksonville, but the company did say a year ago it had about 250 workers at the facility.

Advanced Disposal reports loss

Advanced Disposal Services Inc. reported a first-quarter net loss of $7 million, or 8 cents a share.

The loss was expected for the Ponte Vedra-based waste services company in its first full quarter since its initial public offering in October.

Revenue for the quarter rose 4.1 percent to $347.4 million.

“The strong pricing and recycling tailwind, coupled with continuing demand in controllable costs, all aided bottom line results. We did, however, have some expected headwinds related to net increases in fuel costs, a non-reoccurring severance charge and startup costs,” CEO Richard Burke said in the company’s conference call.

“Q1 is historically our lowest profitability quarter for the year, driven by weather and seasonal volume trends that impact both productivity and disposal volume, as less than one-third of our disposal tons come from our Southern region,” he said.

Analysts are expecting Advanced Disposal to record a profit of between 7 cents and 18 cents a share in the second quarter, according to Yahoo Finance.

FNFV getting $330 million from deal

Fidelity National Financial Inc. last week agreed to sell its One Digital Health and Benefits business for $560 million in cash.

The Atlanta-based employee benefits company is part of Fidelity’s investment subsidiary, Fidelity National Financial Ventures. Fidelity is planning to spin off FNFV as a separate public company later this year called Cannae Holdings Inc.

FNFV expects to receive about $330 million in net cash proceeds from the sale.

Fidelity did not announce the name of the buyer, but One Digital said the buyer is New Mountain Capital LLC, a New York-based investment firm.

Duos enacts reverse stock split

Duos Technologies Group Inc. last week said it enacted a 1-for-35 reverse split of its stock to raise its trading price and seek a listing on the Nasdaq Capital Market.

The Jacksonville-based company was trading at about 17 cents a share before the split, in which shareholders will receive one share for every 35 they previously owned. The reverse split raised the trading price to about $6.

Duos, which has been trading on the OTCQB market, said Nasdaq requires a price of at least $4 to be accepted for listing.

Shareholders in February approved a measure to enact the reverse split at a ratio of at least 1-for-5 and as much as 1-for-500, at the discretion of the board of directors.

The stock is currently trading under the ticker “DUOTD” for 20 days after the split, after which it will revert to its previous symbol of “DUOT.”

Convergys rises on earnings beat

Convergys Corp.’s stock rose Tuesday after reporting higher-than-expected first-quarter earnings.

Cincinnati-based Convergys reported adjusted earnings from continuing operations of 52 cents a share, 2 cents higher than last year and 6 cents higher than the average forecast of analysts, according to Zacks.

Convergys also increased its quarterly dividend by a penny to 10 cents a share.

The company’s stock rose $1.48 to $24.45 Tuesday after the earnings report.

Convergys, which provides outsourced customer services, employs more than 1,000 people at its Jacksonville call center.

Graham TV revenue drops 1 percent

Despite acquiring a second Jacksonville television station and another station in Roanoke, Va., in January, Graham Holdings Co.’s broadcasting division reported lower revenue in the first quarter.

Total revenue fell 1 percent to $91.5 million and excluding the two acquired stations, revenue fell 6 percent.

Operating income in the broadcasting division fell 37 percent to $26 million.

Graham said results were affected by a decrease in political ads and lower network revenue.

Graham has owned Jacksonville independent station WJXT TV-4 for years and added CW network affiliate WCWJ TV-17 in January.

The Arlington, Va.-based company owns a total of seven television stations.

Tegna Inc., the other publicly traded company operating television stations in Jacksonville, reported a slight increase in revenue despite a drop in political advertising.

Tegna’s television stations increased revenue by 0.6 percent in the quarter to $446.3 million.

The company offset its decline in advertising revenue with a 24 percent jump in retransmission fees, the fees paid by cable and satellite companies for the right to carry stations on their systems.

McLean, Va.-based Tegna operates 46 stations, including WTLV TV-12 and WJXX TV-25 in Jacksonville.

LenderLive takes 235 PHH workers

PHH Corp. last week said its final count of employees transferred to LenderLive Network LLC was 235.

The mortgage banking company in March sold most of its Jacksonville operations and turned over the lease on its Baymeadows office to LenderLive, which said at the time it would take on 250 to 300 former PHH employees.

PHH on Tuesday reported a net loss of $67 million, or $1.26 a share, for the first quarter.

The company said its results included $9 million of severance and retention expenses for employees impacted by the sale to LenderLive and $4 million in facility-related costs from the move.

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