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- 2017 - February - 13th -

CSX extends proxy deadline amid rumors of potential takeover by Hunter Harrison

By Mark Basch, Contributing Writer

As rumors persist that CSX Corp. is negotiating with former Canadian Pacific Railway Ltd. CEO Hunter Harrison to possibly take over the Jacksonville-based company, CSX on Friday extended the deadline to nominate directors to its board.

The deadline to nominate directors for election at CSX’s annual meeting was Friday, but the company announced it is extending the deadline until Feb. 24.

That seems to confirm reports that CSX has been negotiating with Harrison to avoid a proxy fight.

Harrison retired from Canadian Pacific last month and the Wall Street Journal reported he was seeking to replace Michael Ward as CSX chief executive officer.

Ward has not given any indication he is ready to leave CSX.

Even if he doesn’t become CEO, Harrison could be looking to nominate new directors to CSX’s board.

He has a reputation for cost-cutting and improving operations at Canadian Pacific and in his previous role as CEO of Canadian National Railway Co.

The Harrison rumors have sparked a jump in CSX’s stock price, with investors speculating his involvement could increase CSX’s earnings.

FIS monitoring Trump impact on banks

Many businesses remain in a wait-and-see mode trying to assess the potential impact of President Donald Trump’s policies, including Fidelity National Information Services Inc., or FIS.

Jacksonville-based FIS provides technology services for banks. During the company’s quarterly conference call last week, one analyst asked how Trump’s rollback of bank regulations in the Dodd-Frank Act will impact the business.

“That’s a good question and, frankly, we don’t know what the outcome’s going to be and what the impact’s going to be overall for FIS,” CEO Gary Norcross said.

He said FIS is being conservative in its forecasts and predicting no impact this year.

“We do believe that if some regulatory reform did occur that you could see some improvement in IT spending in financial institutions, but also keep in mind (with) the nature of our sales cycles, the nature of our implementation windows, you really wouldn’t start seeing any of that impact really until 2018,” he said.

FIS reported adjusted earnings of $1.14 a share for the fourth quarter, up from 93 cents in the fourth quarter of 2015.

“Our results were underpinned by the strongest sales quarter of the year and despite ongoing financial institution consolidation, we built on the positive momentum established in the prior three quarters allowing us to exit the year with solid sales performance,” Norcross said.

The company is projecting adjusted earnings to reach $4.15 to $4.30 a share this year, up from $3.82 in 2016.

“Our outlook for 2017 is positive, despite increased disruption from new market entrants and uncertainties posed by potential governmental policy changes, including potential changes to regulations, interest rates, or corporate taxes,” Norcross said.

However, FIS’ forecast of 1 percent to 2 percent revenue growth this year may have disappointed some investors. The stock fell $2.05 to $77.30 Tuesday after the earnings report.

Credit-Suisse analyst Paul Condra saw the stock drop as a buying opportunity. He upgraded his rating on FIS from “neutral” to “outperform” after Tuesday’s drop.

“With expectations a bit more subdued, we see a favorable set up for the rest of the year and a decent entry point to own the stock,” Condra said in a research note.

“Despite top-line softness (which shouldn’t be so surprising given the macro backdrop), we expect continued margin expansion will drive strong cash flow and believe share repurchases could be increasingly material in coming years as leverage returns to normal levels,” he said.

FIS rebounded Wednesday, rising $2.54 to $79.84 after Condra’s upgrade

Dick’s Wings owner buying Yobe

ARC Group Inc., operator of the Dick’s Wings & Grill restaurant chain, is expanding with an agreement to acquire Yobe Frozen Yogurt.

Yobe has 34 self-serve yogurt locations in Florida, Georgia, Louisiana and New Jersey. The company generated about $900,000 in revenue last year, ARC Group said.

ARC Group is paying $1.4 million plus a potential $900,000 performance-based payment to buy Yobe.

“Our proposed acquisition of Yobe is significant because it represents an expansion of our business into a new segment of the quick service restaurant market,” CEO Richard Akam said in a news release.

“Yobe is a proven and successful brand that provides a variety of options beyond traditional company-owned and franchised locations, such as convenience store islands and end caps that require a minimal investment by the store owner,” he continued.

“These additional sales channels can provide ARC Group with additional revenue sources that have high growth potential in our current markets and additional states,” Akam said.

ARC Group, which has its corporate offices in Jacksonville, has 24 owned and franchised Dick’s Wings restaurants in Florida and Georgia.

The company has been looking to expand with other restaurant concepts, including a 50 percent stake in Wing Nutz, which ARC Group acquired in 2014. It has 13 restaurants in the western U.S.

Web.com cites improved metric

Web.com Group Inc. reported stronger fourth-quarter earnings, according to the company’s preferred metric.

The Jacksonville-based company, which provides website development services for business, reported net income of just 4 cents a share, down from $1.48 in the fourth quarter of 2015. However, the 2015 results were helped by a large tax benefit.

Web.com says it is focusing on adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, as its primary metric. Adjusted EBITDA was $47.4 million in the quarter, up from $42 million the previous year.

“Web.com delivered solid fourth-quarter results that demonstrate good progress on our strategic initiatives. We have a multi-faceted plan to improve our operational performance and put the company on the path to reaching our long-term targets of mid to high single-digit revenue growth and high single to low double-digit adjusted EBITDA growth,” CEO David Brown said in the company’s conference call.

“In 2017, we will complete the integration of Yodle, return to growth and generate strong and growing free cash flow. We believe this is an attractive combination that can deliver significant value to shareholders over time,” he said.

Web.com a year ago acquired Yodle, a digital marketing company.

Regency results rise before merger

Regency Centers Corp. shareholders will meet next week to vote on its proposed merger with Equity One Inc. but before that deal is completed, the Jacksonville-based shopping center developer was feeling good about its 2016 performance.

Regency reported fourth-quarter core funds from operations of 86 cents a share, up from 79 cents the previous year.

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 officials said they could not take questions on the pending merger with Equity One during the company’s quarterly conference call, but CEO Hap Stein reiterated previous comments that he feels the merger will create the nation’s premier developer of grocery-anchored shopping centers.

Stein said the merger will give Regency “a more diversified cash flow stream with better NOI (net operating income), better earnings and better NAV (net asset value) growth potential. I cannot overstate our excitement and enthusiasm.”

Land sale helps Rayonier earnings

Rayonier Inc. reported fourth-quarter adjusted earnings of 5 cents a share, down from 9 cents in the fourth quarter of 2015. A large gain on the sale of 37,000 acres of timberland in Mississippi and Alabama increased final results in the quarter to 39 cents per share.

CEO David Nunes said in the timber and real estate company’s conference call that 2016 was a productive year for Rayonier, including the groundbreaking of the 261-acre mixed-use Wildlight development in Nassau County.

“We’re very pleased with the market interest we’ve seen for this project and we expect our first sales from this project in 2017,” he said.

Rayonier expects to relocate its corporate headquarters this summer from Jacksonville to a new office building under construction in Wildlight.

Staff in two other Rayonier offices will also relocate to the new building.

“We’re very excited about this change and believe it will generate significant efficiencies, improve communication and reinforce our One Rayonier culture,” Nunes said.

Andy Cheney in new Ameris role

Ameris Bancorp said in a Securities and Exchange Commission filing last week that Andy Cheney has been named chief banking executive of the company and its subsidiary, Ameris Bank.

Cheney had formerly been banking group president for the holding company and president of the bank.

Lawton Bassett, who had been executive vice president, is replacing Cheney as banking group president and president of Ameris Bank.

Advanced Disposal expands in Indiana

Advanced Disposal Services Inc. acquired an Indiana-based company called CGS Services Inc., which will expand the waste management company’s operations into a 14-county area in Indiana.

CGS has annual revenue of nearly $30 million.

Ponte Vedra-based Advanced Disposal, which operates in 16 states, had revenue of $1.05 billion in the first nine months of 2016.

Terms of the deal were not announced.

Genesee rail expands in south Georgia

Shortline railroad operator Genesee & Wyoming Inc. last week said it acquired the Heart of Georgia Railroad Inc., which operates 219 miles of track in southern Georgia.

Terms of the deal were not announced.

Connecticut-based Genesee expanded its operations greatly with the 2012 acquisition of another short-line operator, Jacksonville-based RailAmerica Inc.

Genesee now operates 115 railroads covering 13,000 track miles in 41 U.S. states and Canada.

mbasch@jaxdailyrecord.com

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