REGIONAL

TOYS ‘R’ US HAS PROFIT ON TAX GAIN; SALES DECLINE Toys “R” Us Inc., the world’s largest toy-store chain, said it had a second-quarter profit of $61 million after a tax gain. Sales dropped at the retailer, which is seeking to sell its toy stores. Net income of 28 cents a share compared with a loss of $11 million, or 5 cents, a year earlier, the Wayne, N.J.-based company said in a statement. Sales in the quarter ended July 31 fell 3.9% to $2.02 billion.

Toys “R” Us would have had its 12th loss in 16 quarters without the benefit of $200 million released from income tax reserves after a government review of adjusted filings. Sales declined as demand for video games fell in America, where the company lost its position as no. 1 toy retailer to discounter Wal-Mart Stores Inc. six years ago.

“The toy business has been a very difficult business to be in the last decade,” said Marc Ravitz, who helps manage about $650 million at Grace & White Inc. in New York, including about 515,200 Toys “R” Us shares.

Sales at the company’s American toy stores open at least a year fell 7.7% after a 20% drop in video-game sales. Sales and profit at the toy stores, which produced about 56% of total revenue last year, have declined since at least 2001 as Wal-Mart, the world’s largest retailer, sometimes sold toys at a loss to attract shoppers.

Toys “R” Us didn’t take analysts’ questions on a conference call today, citing “disclosure restrictions” after the announcement this month that it plans to separate its toy and baby products businesses. Chief Executive John Eyler said further decisions won’t be made for “a number of months.”

– Bloomberg News

RCN FILES PLAN TO EXIT BANKRUPTCY BY YEAR’S END RCN Corp., a provider of cable television, phone, and Internet service, filed a plan to exit bankruptcy that will exchange $1.2 billion in unsecured debt for all of the equity in the company by the end of the year.

The Princeton, N.J.-based company will give unsecured creditors, mostly bondholders, equity worth between $620 million and $820 million, according to the plan filed in bankruptcy court in New York.

That would give them between 52 cents and 68 cents on the dollar for their holdings.

RCN filed for bankruptcy protection in May after failing to lure enough customers to pay debts amassed while expanding its networks. The company listed $1.49 billion in assets and $1.82 billion in debts in court documents.

“This plan of reorganization is a win for all of us,” David S. McCourt, RCN’s chairman and chief executive, said in a statement. “As many telecom companies have done before us, we are restructuring our debt so we can remain a strong and innovative competitor in the marketplace.”

The company doesn’t foresee any service disruptions, RCN said.

RCN will fully repay its banks, including JPMorgan Chase Co., $432.5 million. All current stock in the company will be canceled. Shareholders will receive warrants to purchase up to 2% of the common stock in the company,according to court documents.

– Bloomberg News

NATIONAL

FEDEX BOOSTS EARNINGS VIEW ON HIGHER DEMAND FedEx Corp. boosted its forecast for quarterly and fiscal-year earnings yesterday, citing strong customer demand.

But the company and Wall Street analysts cautioned that there is a chance that favorable market conditions for FedEx and other transport firms won’t persist.

FedEx said it now expects to report earnings of $1 to $1.10 a share for its fiscal first quarter ending August 31. It had previously predicted earnings of 90 cents to $1 a share for the quarter.

Analysts surveyed by Thomson First Call, on average, expected FedEx to post earnings of 95 cents a share for the fiscal first quarter.

In the year-earlier first quarter, FedEx earned 42 cents a share, including onetime items. Excluding these items, it earned 61 cents a share.

Also, FedEx boosted its earnings forecast for the fiscal year ending May 31, 2005, to a range of $4.40 to $4.60 a share from a previous range of $4.20 to $4.40 a share. The First Call mean estimate was $4.47 a share. For fiscal 2004, FedEx earned $2.76 a share, including items. Excluding items, it earned $3.52 a share.

Wall Street analysts said FedEx’s news was a sign of recent strength in the freighttransport market. But they were more cautious about the longer-term outlook.

– Dow Jones Newswires

EL PASO SEES COSTS OF $3.7 BILLION IN RESTATED RESULTS El Paso Corp., the largest American pipeline company, said it will record $3.7 billion in pretax costs as it restates results dating to 1999 to correct improper booking of oil and natural-gas reserves and accounting errors.

The restatements, which the company signaled in earlier announcements, will include $2.7 billion for a cut to El Paso’s oil and natural-gas reserves, announced in February, the Houston- based company said in a statement. El Paso is reviewing its accounting for past periods prior to publishing belated 2003 results, which are slated to be filed by the end of September.

“This is going to give them and their investors a base to understand” earnings in future periods, said John Olson, an analyst at Sanders Morris Harris in Houston who owns an undisclosed number of El Paso shares. He doesn’t rate the stock. “For the last 12 months,in effect,we’ve been dealing with some very fast and loose numbers and concepts.”

The restatements will cut past earnings by $2.4 billion after taxes, Chief Executive Douglas Foshee said on a conference call with analysts and investors. That will include pretax costs of $1.6 billion to correct the way the company accounts for long-term energy sales and a $600 million gain from a change in the company’s rate of depletion, depreciation and amortization, a figure used in calculating oil and gas earnings, El Paso said.

The costs will be reflected in reductions to shareholder equity, the company said.

– Bloomberg News

FOREIGN

VOLKSWAGEN TO SEEK WAGE FREEZE IN CONTRACT TALKS Volkswagen AG,Europe’s largest carmaker, wants German workers to agree to a two-year wage freeze to cut costs amid a stagnating market, dismissing a union demand for a 4% yearly raise.

Volkswagen plans to reduce spending on labor 30% by 2011 while preserving 176,544 jobs in Germany, the carmaker’s personnel chief, Peter Hartz, said at a press conference in Wolfsburg, Germany. Contract talks will begin September 15.

The company’s chief executive officer, Bernd Pischetsrieder, last month cut the carmaker’s 2004 earnings target because of “weak demand” and rising oil prices. IG Metall, Germany’s second-biggest union, agreed in July to scaled-back pay raises and longer work hours at DaimlerChrysler, the world’s fifth-biggest carmaker, and Siemens AG, the country’s biggest engineering company.

The carmaker wants a bonus system based on the company’s financial performance to replace the annual 1,200-euro ($1,460) Christmas payment, and overtime would be paid after 40 hours of work a week instead of the current 35 hour limit, Mr. Hartz said.

The union called Volkswagen’s proposals “extreme, unrealistic, and poorly thought out” and said in an e-mailed statement that it’s sticking to the 4% raise demand.

Shares of Volkswagen in Frankfurt rose 87 cents, or 2.8 percent, to 31.76 euros in the biggest one-day jump in more than five months.The stock is down 28% this year, making Volkswagen the worst performer on Germany’s DAX index.

– Bloomberg News

YUKOS CUTS OIL OUTPUT TARGET, CAPITAL EXPENDITURE ON TA X BILL

OAO Yukos Oil Co., Russia’s biggest oil exporter, cut its 2004 production target to 1.72 million barrels a day of crude because payments on the company’s tax bill forced it to spend less on drilling and maintaining wells.

Yukos had planned to pump 1.8 million barrels of crude a day this year.The new target will represent a 6% increase from last year’s production level, the Moscowbased company said in an e- mailed statement.

“Yukos is blocked from using about half of its monthly revenue,” the company’s chief executive, Steven Theede, said in the statement.”The company doesn’t have any other choice but to reduce capital and operating expenditures and to delay some of its current tax payments.”

The company is struggling to meet a $3.4 billion tax bill for 2004. It said it has paid $1.5 billion of the bill, of which $700 million was paid voluntarily and the rest was taken by Justice Ministry officials from company bank accounts that have been blocked. Yukos will have paid $1.7 billion of the bill by the end of August, the company said.

Capital expenditure will be cut by some $700 million this year,Yukos said in the statement.

– Bloomberg News