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Basch Report
Jax Daily Record Thursday, Feb. 14, 201904:40 AM EST

The Basch Report: Some jobs safe in SunTrust, BB&T merger

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BB&T CEO promises that branch workers won’t lose their jobs, but not all positions will be spared.
by: Mark Basch Contributing Writer

SunTrust Banks Inc. and BB&T Corp. have not yet announced specific plans for their branch networks after the two banks merge, but they will have a lot of unnecessary office space.

During their conference call with analysts last Thursday after announcing the $66 billion merger agreement, BB&T Chief Financial Officer Daryl Bible said the two banks have almost 740 branches, or 24 percent of their combined offices, located within 2 miles of each other.

“This overlap is almost unparalleled in banking, particularly among larger institutions,” he said.

Of course, those overlapping offices include the BB&T Tower at 200 W. Forsyth St. and SunTrust’s Downtown Jacksonville office, which is moving from 76 S. Laura St. to the Bank of America Tower at 50 N. Laura St.

Federal Deposit Insurance Corp. data shows SunTrust has 24 branches in the Jacksonville metropolitan area and BB&T has 14.

In a video message to employees, BB&T Chief Executive Kelly King promised branch employees their jobs are safe even as some offices close.

“All of our client-facing associates at BB&T and at SunTrust will have a job,” he said, according to a transcript of the message posted by the companies.

“Let me say that again: if you’re a client-facing associate in the branches in any aspect — our corporate calling officers, business calling officers — if you’re a client-facing associate dealing directly with our clients, then you have a job. You don’t need to worry about it.”

However, other employees face uncertainty.

“In the back room — the support areas — It’s more challenging. There will be change,” he said.

No new Rayonier projects in sight

Rayonier Inc.’s 261-acre Wildlight mixed-use development in Nassau County is just a fraction of the 24,000 acres the company owns in the East Nassau Community Planning Area.

But the company, which moved its headquarters to a new building in Wildlight in 2017, is in no hurry to start additional projects in the region.

“Our thesis on Wildlight has always been if we owned these 260 acres in this geography and that was all we owned, we wouldn’t be doing this. We don’t aspire to be real estate developers,” CEO David Nunes told analysts in Rayonier’s quarterly conference call last week.

“We just own such a large land mass in this area that our ability to catalyze development in this region and let that enhance the value of the surrounding land is a pretty meaningful value opportunity for us,” he said.

Nunes suggested Rayonier already has its hands full with the Wildlight development.

“Wildlight in and of itself is a 10-year project with relatively modest cash flow and so, again, the value proposition for us in this project has always been to catalyze the value enhancement in the region,” he said.

The timber and real estate company reported 2018 earnings of 79 cents a share, up from adjusted earnings of 65 cents in 2017.

However, Rayonier is projecting earnings to fall to 46 to 53 cents a share this year.

“The projected decline in consolidated financial results versus 2018 is primarily driven by a much lower expected contribution from the real estate segment, following an extraordinarily strong year in 2018,” Chief Financial Officer Mark McHugh said in the conference call.

The company said it expects “more normalized” real estate sales this year.

The 2019 forecast was lower than the consensus forecast of 64 cents a share by analysts surveyed by Zacks Investment Research.

Rayonier’s stock dropped as much as $3.46 to $26.79 last Thursday morning after the earnings report, but it recovered to close the day at $28.98.

CSX Corp. raises dividend by 2 cents

CSX Corp. last week said its board of directors approved a 2-cent increase in its quarterly cash dividend to 24 cents a share.

The is the third straight year the Jacksonville-based railroad company raised the quarterly dividend by 2 cents. There was no dividend increase in 2016.

Express train firm hints at Jacksonville

Virgin Trains USA Inc., which began express passenger rail service in South Florida last year, has not announced plans to extend its service to Jacksonville.

However, the company’s registration statement for its initial public offering does drop hints that Jacksonville could be in its future.

The registration statement for the Miami-based company, formerly known as Brightline, lists several subsidiaries including one called AAF Jacksonville Segment LLC.

Virgin’s trains currently run between Miami and West Palm Beach on tracks owned by Jacksonville-based Florida East Coast Railway. The registration statement says the company has exclusive rights to use Florida East Coast’s right-of-way between Jacksonville and Miami.

“The Company is in the business of owning and operating an express passenger rail system connecting major population centers in Florida, with plans to expand operations further in Florida and elsewhere in North America,” it says.

The company said ridership increased from 75,000 passengers in the first quarter last year when it began service to 239,000 in the fourth quarter. It projects ridership can increase to 3.1 million passengers annually by 2023 on its service between Miami and West Palm Beach, with ridership increasing as the rail lines are expanded.

The IPO was scheduled to come to the market this week, but Virgin Trains called off the deal Tuesday. Bloomberg News reported the deal was expected to be priced below its hoped-for range of $17 to $19 per share.

Tapestry drops on disappointing earnings

Tapestry Inc.’s stock dropped sharply to a 52-week low last Thursday after a disappointing earnings report.

The operator of lifestyle brands Coach, Kate Spade and Stuart Weitzman reported adjusted earnings of $1.07 a share for its second quarter ended Dec. 29, unchanged from the previous year but below the consensus forecast of $1.11 by analysts surveyed by Zacks Investment Research.

Total sales of $1.8 billion, up 1 percent from last year, also were below the consensus forecast of $1.86 billion, Zacks said.

Tapestry’s biggest brand, Coach, increased total sales by 2 percent to $1.25 billion in the quarter and comparable-store sales (sales at stores open for more than one year) by 1 percent.

All of the distribution for Coach products in North America is handled through its 850,000-square-foot warehouse at the Jacksonville International Tradeport.

While Coach sales increased slightly, comparable-store sales for Kate Spade dropped by 11 percent in the quarter.

New York-based Tapestry forecast earnings for the full fiscal year of $2.55 to $2.60 a share, which would be down from $2.63 in fiscal 2018 and is below the consensus forecast of $2.78, Zacks said.

Tapestry’s stock dropped as much as $7.40 to $31.91 after the earnings report.

Dun & Bradstreet buyout complete

The $6.9 billion buyout of business data firm Dun & Bradstreet by a group of companies including Cannae Holdings Inc. and Black Knight Inc. was completed Friday.

Cannae and Black Knight are companies spun off from Jacksonville-based Fidelity National Financial Inc.

As previously announced, Black Knight CEO Anthony Jabbour is taking over the role of chief executive of Dun & Bradstreet while continuing to run Jacksonville-based Black Knight.

Fidelity Chairman Bill Foley, who also serves as executive chairman of Black Knight and chairman of Cannae, is taking the additional role of executive chairman of Dun & Bradstreet’s board of directors.

Besides Cannae and Black Knight, other partners in Dun & Bradstreet include CC Capital Partners LLC, Bilcar LLC and funds affiliated with Thomas H. Lee Partners L.P.

Embraer building planes for Nigeria in Jacksonville

Brazil-based Embraer S.A. last week announced a contract to deliver 12 A-29 Super Tucano light attack aircraft to the Nigerian Air Force.

The airplanes will be built at Embraer’s facility at Jacksonville International Airport, where it has been building the A-29 since 2013 along with partner Sierra Nevada Corp.

With the Nigeria deal, the A-29 will be in use by 14 air forces worldwide, Embraer said.

The value of the Nigerian contract was not announced.

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