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VOL. 7 | NO. 23 | Saturday, May 31, 2014

Change on Tap for Many Local Public Companies

By Andy Meek

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Here’s a snapshot of recent news and developments at some of the publicly traded companies based in Memphis, reflecting the influence these companies have and the shadows they cast both in Memphis and beyond, in industries that range from bioscience to banking.

FedEx (FDX)
FedEx announced recently it’s going to change the way it prices items – by size now, instead of just weight alone. That’s being regarded as a major shift for the e-commerce industry, with the Wall Street Journal expecting it to mean a price increase on more than a third of U.S. shipments and an expectation that FedEx rival United Parcel Service will follow suit. The two companies, the paper notes, have tended to match each other’s price increases rather than use it to the other’s competitive advantage. FedEx’s new pricing is being targeted at large but light packages – things like toilet paper and clothes. “People are being spoiled with the notion that having delivery to the home doesn’t cost any more than the store,” Satish Jindel, president of ShipMatrix Inc., told NBC News. “You drive a truck down the road and you fill it up with Ping-Pong balls, you will lose money.” On the earnings front, FedEx’s most recent quarter saw profit up 5 percent from a year ago despite storms that also forced the company’s costs to go up.

AutoZone has enjoyed double-digit earnings growth for 31 straight quarters. 

(Memphis News File/Brandon Dill)

AutoZone (AZO)
Weather is a critical factor for several Memphis companies – at AutoZone especially. The nation’s biggest auto parts retailer can sell more parts that break or fail, for example, as a result of harsh or extreme weather, and in light of that fact company chairman, president and CEO Bill Rhodes once half-jokingly lamented to analysts that “It seems I’ve spent a career talking about how weather, particularly extreme weather, drives positive trends for us.” The company spent 2013 making major “investments and enhancements” to its technology, per Rhodes, to allow AutoZone to better capture data about customer shopping patterns across all platforms. The company, he said, needs to get better at toggling between the in-store and online experiences to meet customer needs, and AutoZone is working to get better at the latter in a variety of ways, including with things like its robust video library of how-to’s and repair walkthroughs.

Weather has cut into International Paper’s most recent earnings. 

(Memphis News File/Lance Murphey)

International Paper (IP)
Weather also can take a toll on International Paper, a global leader in the paper and packaging industry, which has manufacturing operations around the world. Indeed, IP chairman and CEO John Faraci attributed a first-quarter loss of $95 million to severe weather affecting North American operations and an “uneven environment” elsewhere, with the company estimating the weather’s impact on operations at $60 million. It was offset in part by higher prices in North America as well as higher paper prices in Latin America. International Paper’s net sales for the quarter were $7 billion, compared with $7.1 billion a year ago. Faraci termed the earnings for the quarter solid “despite the unusual combination of multiple severe weather events.”

First Horizon National Corp. (FHN)
First Horizon is the parent company of the largest bank based in both Memphis and Tennessee – First Tennessee Bank. FHN also operates a capital markets unit, FTN Financial, that’s also based in Memphis. This year marks the company’s 150th anniversary, and it’s doing a handful of significant things to celebrate. On March 25, for example, the bank kicked off an effort called 150 Days of Giving during which the First Tennessee Foundation will give away $5,000 a day, every day, to a different nonprofit. Also, from March 25 through the end of the year the company’s Downtown Memphis headquarters will glow in blue, the first time the building has been lit in a single color. The Downtown headquarters is home to a permanent interactive exhibit on display that celebrates the bank’s history, and First Tennessee financial centers are carrying signage promoting the anniversary, with colorful banner stands that tell the company’s story in every location.

Fred’s Inc. (FRED)
Fred’s is a discount retailer with hundreds of stores across the Southeast that sell general merchandise, including items like snacks and pharmacy goods. The company has been expanding its number of in-store pharmacies and adding to its stores’ products mix of late. Earlier this year, following less-than-stellar holiday shopping season results, Fred’s said it would seek “strategic opportunities” and implemented a shake-up of its merchandising and marketing team. The news service DealReporter said in recent days that Fred’s is in talks with suitors, and the company reported that its April sales were down 2.3 percent compared with an increase of 1.2 percent one year ago.

EdR (EDR)
The Memphis-based student housing developer and manager said a few weeks ago that it’s on track for a strong and successful 2014, following its most recent earnings announcement. The company said April 28 that core funds from operations in the first quarter was $19.4 million, or 17 cents per share, up from $16.4 million, or 14 cents per share, over the same period last year. EdR is a self-administered and self-managed real estate investment trust (REIT) publicly traded on the New York Stock Exchange

Biopharmaceutical company GTx Inc. has undergone upheaval in recent months.

(Memphis News File/Lance Murphey)

GTx Inc. (GTXI)
GTx is a biopharmaceutical company working on drugs to treat cancer and other serious conditions. Recent upheaval at the company has included Dr. Mitchell Steiner resigning as CEO and vice chairman. GTx also laid off 53 non-executive employees, or 60 percent of its workforce late last year. And the day the company’s board announced the layoffs, GTx’s chief financial officer resigned. The developments underscore the volatility of the drug market, where testing, funding and regulatory approvals can assure success – or crisis.

Verso Paper Corp. (VRS)
Verso makes coated paper and a variety of specialty paper products. Verso’s net sales for the first quarter of 2014 were down 10.2 percent compared to the first quarter of 2013, reflecting a 1.9 percent decrease in average sales price per ton and an 8.5 percent decline in total sales volume. According to the company, volumes and operating costs “were negatively impacted by significant downtime taken during the quarter, weather-related increases to energy, wood, and operating costs as well as a planned capital spending related outage at our Androscoggin mill.”

Wright Medical moved its corporate headquarters from Arlington to Memphis.

(Memphis News File/Andrew J. Breig)

Wright Medical Group Inc. (WMGI)
Wright Medical Group Inc. is an orthopedic medical device company. After bringing its corporate headquarters to Memphis, the company announced in recent months that it’s planning a major expansion of its manufacturing and distribution operations in Arlington. Wright is adding about 52,000 square feet of warehouse and office space next door to an existing industrial and office location at 11564 Memphis Arlington Road, according to a building permit. Wright moved its headquarters to the office campus at Park Avenue and Cherry Road in East Memphis but kept its manufacturing and distribution operations in Arlington. Wright is investing in Arlington following the sale of its hip- and knee-implant business, along with a host of other Arlington facilities, to MicroPort Scientific Corp. of China, a $290 million deal that was finalized in January.

Mueller Industries Inc. (MLI)
Mueller makes copper tube and fittings, as well as aluminum, plastic and brass fittings used in commercial and residential construction. The company saw its earnings for 2013 increase 13.8 percent, but the fourth quarter saw net income and sales drop because of a decrease in copper prices. Mueller reported net income of $86.4 million or $3.06 per diluted share for fiscal 2013, compared to $75.9 million or $2.12 per diluted share for fiscal 2012.

MAA (MAA)
MAA is a real estate investment trust that focuses on the acquisition, development, redevelopment and management of multifamily homes. The company’s earnings results April 30 showed MAA reporting $1.21 earnings per share for the quarter, beating a consensus estimate of $1.18.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 66 153 14,870
MORTGAGES 64 144 19,474
FORECLOSURE NOTICES 0 22 3,817
BUILDING PERMITS 0 142 35,472
BANKRUPTCIES 56 118 14,152
BUSINESS LICENSES 24 86 5,077
UTILITY CONNECTIONS 71 170 21,603
MARRIAGE LICENSES 0 37 4,594

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