275  7TH Ave  7th floor New York , NY 10001                                                                                                                dcullinanecpa@yahoo.com

​                                                                                                                                                                                                     Chelsea / Lower Manhattan​​

​Daniel Cullinane CPA                                   p 848-250-9587                                                                                                                                     

TANKER DELIVERIES DELAYED


The newspaper industry has too many newspapers and too many chains to look at it as a whole to determine its health. However, there is no question its health has gotten much worse over the past 20 years as online news has crippled what has been, until recently, a print business. To see what is happening to the newspaper industry currently, observers have to consider it almost property by property.

The most visible trouble in the industry is the battle between Digital First Media and its employees. The company is either the third or fourth largest chain, depending on the yardstick. Alden Global Capital is its majority owner. The investment firm has continued to chop the number of employees. Oddly, the financial results from the papers are fairly good, because they are, in many cases, handsomely profitable, which might be a sign the newspaper industry is still a financially healthy one. Ironically, the health is due to substantial layoffs.

A more direct way to look at the industry is two recent developments. The Chicago Sun-Times, the second paper in the nation’s third-largest city, asked consumers to throw it a lifeline. It said its survival was at risk and asked people to pony up $7.49 a month for online subscriptions. The action cannot be viewed as other than an appeal to keep the paper from foundering soon.

At another of the largest chains, McClatchy Co. (NYSEAMERICAN: MNI), its flagship property, the Sacramento Bee, laid off 15 editorial workers. That may not seem like many, but in an already thinned out newsroom, it is a lot. The layoffs were also the third in just over a year. There were reports that McClatchy also laid off workers at its other West Coast properties.What is notable about McClatchy is that it is one of the largest chains in America. Despite resources, restructurings and fairly robust digital resources, it continues its retreat.

In just a few weeks, the largest publicly traded newspaper companies will post their first-quarter results. Other than New York Times Co. (NYSE: NYT), which has had success selling digital subscriptions, last year’s typical results were revenue drops of 5% to 10%.

The early writing on the wall for the past month is that the financial problems at newspapers have not abated. It will be another very rough year.

BEST PERFORMING STOCK IN 2018

​BLACK UNEMPLOYMENT

​When Boeing Co. (NYSE: BA) won the U.S. Air Force contract to replace aging KC-135 refueling tankers, the original delivery date for the first plane was in the second quarter of 2016. Following a number of delays, the first new tanker will be delivered late this year, according to the Air Force, and the first 18 likely will be delayed further from October 2018 until May 2019.

According to a Boeing announcement Thursday, the 767-2C aircraft on which the new tanker is based has completed the necessary flight tests to receive a supplemental type certificate (STC). The tests encompass the military systems installed on the 767-2C and the results will be submitted to the Federal Aviation Administration (FAA) for review. Last December the 767-2C received its FAA amended type certificate.

Air Force Under Secretary Matt Donovan told Bloomberg News after a March visit to Boeing’s Seattle plant, “I found that they were very pressurized to get this the last ten yards.” Donovan’s visit was designed to light a fire under Boeing to get the new tanker into the air.

One of the last two primary flaws with the KC-46A has been corrected with a software fix that presumably will be only temporary until Boeing develops, certifies and deploys an automated monitoring system. Here’s how FlightGlobal described the problem and the solution last week:

The software flaw affects the aircraft only when the KC-46A is on-loading fuel in-flight into the centre fuel tank.

In Boeing’s view, the problem is highly unlikely to cause a safety hazard. As fuel is onloaded into the tank, three separate functions embedded in a fuel flow controller must fail at the same time and continuously. If they do, however, an overpressure could develop in the centre fuel tank with catastrophic results, Boeing says.

… The certification problem for the 767-2C is based on a small detail. All three software functions that could fail operate on a single processor, according to Boeing.

The FAA’s certification rules mandate that such an aircraft use an automatic and independent system for monitoring fuel onloading to prevent an overpressure condition, Boeing’s document says.

Boeing now plans to develop, certificate and deploy such an automated monitoring system within a year. Until then, Boeing will require that the USAF assign a third crew member to monitor the fuel gauges when the aircraft is onloading fuel …

The other issue is that the KC-46A’s refueling boom sometimes scrapes other parts of the airplane being refueled. This could be an issue for stealthy aircraft if the boom removes some of the coating on the planes that gives them their stealth capabilities.

Boeing’s contract with the Air Force calls for a total of 179 new tankers.

Boeing stock traded down about 2.7% in the noon hour Friday, at $340.06 in a 52-week range of $175.47 to 371.60. The stock’s 12-month price target is $387.29.

​PROBLEMS

​Cisco Systems Inc. (NASDAQ: CSCO) held on to its ranking as the best-performing Dow Jones industrial average stock of the year to date with a modest 1.4% share price gain last week. Since the beginning of the year, Cisco’s stock is up 16.7%.

The second-best performer among the Dow 30 so far this year is Boeing Co. (NYSE: BA), which is up 15.6%. That is followed by Intel Corp. (NASDAQ: INTC), up about 14.2%, Microsoft Corp. (NASDAQ: MSFT), up 12.0%, and Nike Inc. (NYSE: NKE), up 11.2%. Of the 30 stocks comprising the index, just 12 have posted year-to-date gains as of Friday’s close.

The Dow dropped 151.75 points over the course of the past week to close at 24,311.19, down 0.6% for the week. The tech sector as a whole is up nearly 25% over the past 12 months, well ahead financials (up nearly 16%) and consumer discretionary (15.7%) among the S&P’s 11 sectors.

The past week was another quiet one for Cisco. No new 52-week low, nor a new 52-week a high. The stock continued to ride the wave that has carried the tech sector to its top ranking among equity sectors.

Cisco closes its third fiscal quarter at the end of this month and is scheduled to report results on May 16. Analysts are looking for earnings per share (EPS) of $0.65 and revenues of $12.43 billion. That would be a 12% year-over-year boost to EPS and more than 4% to revenues.

When the company reported second-quarter results in February, adjusted EPS rose 11% and revenues rose 3%. On a GAAP basis, Cisco posted a loss per share of $1.78 due to an $11.1 billion provision for income taxes. The company’s effective tax rate in the second quarter was 20%, and it expects a 21% rate in the third quarter.

Cisco’s shares closed up about 1.1% Friday, at $44.71 in a 52-week range of $30.36 to $46.16. The consensus 12-month price target on the stock is $49.62, up about $0.75 from the previous week, and the forward price-to-earnings ratio is 15.63.

​APRIL NEWSLETTER 4

​The economy added a very modest 108,000 jobs in March, and the unemployment rate remained at 4.1%. The rate of the increase was slower than it has been many recent months. One thing did not change much, however. Nearly twice as many black Americans as white Americans are unemployed, as measured on a percentage basis.

In March, the black unemployment rate was 6.9%. Among whites, the figure was 6.9%, or 92% higher. The only rate lower than whites was Asians at 3.1%. The only rate that approached the high black unemployment rate was Hispanics, at 5.1%.

The black unemployment rate was flat with February’s, but down from 8.1% in March a year ago. However, last April, the rate was 7.0%, so the level has fluctuated modestly over the past year. Among blacks, the group with the highest unemployment rate by far is those 16 to 19 years old, at 27.9%. This figure is approximately what it was across the nation during the Great Depression.

Among the other observations from the Bureau of Labor Statistics in the Employment Situation Summary for March:

In March, the unemployment rate was 4.1 percent for the sixth consecutive month, and the number of unemployed persons, at 6.6 million, changed little.

Among the major worker groups, the unemployment rates for adult men (3.7 percent), adult women (3.7 percent), teenagers (13.5 percent), Whites (3.6 percent), Blacks (6.9 percent), Asians (3.1 percent), and Hispanics (5.1 percent) showed little or no change in March.

At 1.3 million, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed in March and accounted for 20.3 percent of the unemployed. Over the year, the number of long-term unemployed was down by 338,000.

The labor force participation rate, at 62.9 percent, changed little in March, and the employment-population ratio held at 60.4 percent.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 5.0 million in March. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or because they were unable to find full-time jobs.