It’s not every day you meet a chief executive officer named "Punkass." Especially one who runs a $200 million company.
The heavily tattooed, bandana-wearing CEO fits right in at TapouT, a 140-employee clothing company in Grand Terrace, Calif., that caters to athletes and fans of mixed martial arts, a combat sport known for its brutality.
Apart from the name, what makes Punkass and his co-founders unique is the commitment they made more than a decade ago to a sport that was then virtually unknown. They took a gamble on a market that barely existed.
The risk? If the market didn’t grow, TapouT would have nowhere to go. The reward? If the market exploded, they would be the first ones in.
Back in 1997, TapouT’s three co-founders — Dan "Punkass" Caldwell, Charles "Mask" Lewis and Tim "Skyskrape" Katz — had no college degrees and little money. But all three had trained in mixed martial arts and were ardent fans of the sport. They were confident that someday, the sport would be accepted — even embraced — by a mainstream audience.
So they took the kind of leap that would make little sense to anyone but their fellow true believers: They maxed out their credit cards to start a small operation selling t-shirts at underground mixed martial arts competitions.
Back then, mixed martial arts was still a fledgling movement, well under the radar of other apparel companies. Today, it’s almost as mainstream as boxing — and TapouT’s block-letter logo has become synonymous with the sport.
The company sponsors well-known fighters like Vladimir "The Janitor" Matyushenko and Thiago "Pitbull" Alves. (Along with tattoos and bulging biceps, nicknames are a must-have for practitioners of mixed martial arts). TapouT also sells clothing, mouth guards, nutritional supplements and other branded goods online and at retail chains including Macy’s and Champs Sports.
All those t-shirts and vitamins add up fast. Last year, TapouT raked in $200 million in annual revenue — more than 16 times its $12 million revenue in 2006.
So how does TapouT keep the mixed martial arts market in a headlock? Customers say it’s the early relationship the company developed with both fighters and fans.
"They’ve been right in the mix from the beginning," says Andrew Lang, co-owner of Lightning MMA, a mixed martial arts gym in Laguna Hills, Calif. "Those three guys were at all the events — they have this presence, this rapport with the fighters."
In the late ’90s, TapouT sponsored fledgling fighters for $300 a pop. Nowadays, sponsorships cost anywhere from $3,000 to $1 million.
"We have a full team dealing with our fighters and their managers 24/7," says Punkass. "We’re worried about their personal lives, too. How’s their new baby? How do they feel after a fight?"
The goal is to get fighters to wear TapouT gear in and out of the ring. That, in turn, has given the company mass appeal among fans — which come mainly from the sought-after 18- to 34-year-old male demographic guaranteed payday loans.
"I don’t know who’s more fanatic, mixed martial arts people or NASCAR people," says Marshal Cohen, chief industry analyst at the NPD Group, a market research firm. "But in either case, when you’re that fanatical there is a tremendous allegiance to a brand, and it’s all about the lifestyle. It’s almost like a club."
To make sure that club keeps growing, Punkass, Mask and Skyskrape brought a seasoned entrepreneur, Marc Kreiner, on board in 2006. Kreiner had a varied background — he launched disco bands in the ’70s and more recently started an infomercial company — but he helped bring TapouT products to over 20,000 stores worldwide. He also inked a handful of licensing agreements, including a line of TapouT-branded supplements with Champion Nutrition.
"We’re licensing a nutrition line, energy drinks and TapouT gyms," says Kreiner, now the president and chairman of TapouT. "The motto is ‘Grow big or go home.’"
But TapouT’s evolution had its low ebbs. In 2009, co-founder Mask — known for his big personality and signature face paint — died in a car crash. Kreiner, Punkass and Skrape were leveled by the loss of their friend and colleague. Many TapouT employees got commemorative tattoos in Mask’s honor with the word "believe."
Punkass says that Mask’s death has been the company’s biggest challenge to date. But TapouT has other, less tragic troubles. While mixed martial arts has toned down the violence a bit in recent years — the rules, for example, no longer permit biting and eye-gouging — some lingering controversy about the sport’s roughness could limit the growth of its fanbase, which is TapouT’s main audience.
A handful of smaller companies have also entered in the mixed martial arts apparel industry, including Dethrone Royalty Clothing and Hitman Fight Gear. But when it comes to the competition, TapouT’s main threat is much bigger players, like Nike and Adidas.
So could TapouT be the next sports apparel giant, akin to Under Armour?
It’s unlikely, suggests Cohen, the NPD Group analyst. But for the moment, at least, the company doesn’t have significant competitors vying for a share of the same market, he notes. And there’s plenty of room to grow: The overall sports apparel market rakes in $12 billion a year in the United States alone.
As TapouT lends its name to more and more products, the company runs the risk of diluting its brand and losing "street cred" with its loyal fan base. But Punkass isn’t worried about that.
"I don’t see ourselves making TapouT Ken and Barbie dolls anytime soon," he says. "We won’t make a product unless it connects to our core audience. We stay true to the brand."
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The official in charge of the $20 billion fund to compensate individuals and businesses hurt by the oil spill in the Gulf of Mexico pledged Friday to quickly create a system for processing claims.
"We will have a very transparent methodology in place," said Kenneth Feinberg, who was appointed earlier this week by President Obama to manage the compensation fund. "We’ll set up a protocol very quickly so that everybody can examine what’s expected."
BP agreed to establish the $20 billion fund Wednesday after company executives met with Obama in Washington. The company has said repeatedly that it will pay all legitimate claims related to the spill, which has become the worst environmental disaster in U.S. history.
Feinberg, an attorney who served as special master of the 9/11 victims fund and advises Obama on Wall Street pay issues, asserted that the fund will be independently managed. He emphasized that he is not aligned with the government or BP.
"I will be running an independent claims facility," he said. "It is my program as an independent force."
Feinberg made the comments after meeting with Mississippi Governor Haley Barbour in Jackson. He plans to meet with Governor Bobby Jindal of Louisiana later Friday.
He stressed that time is of the essence, saying that properly completed claims could be paid within 30 to 60 days of filing, once a protocol for processing them is complete.
But he acknowledged that there are challenges involved in verifying that damages are legitimately due to the spill. Larger claims may require more time for evaluation.
"Long-term payments will require sufficient corroboration so we can validate the claim," he said. Short-term, emergency payments will continue to be paid promptly.
BP deserves some credit for the steps it has already taken to process claims, Feinberg said, though it’s his job to improve the process.
The company has opened about 25 claims offices, and said this week that it has issued about 25,000 claims checks totaling $63 million.
Feinberg said the protocol for handling claims is still being hammered out and that critical decisions need to be made about where to draw the line as the damage from the spill ripples across the Gulf economy.
Another issue that has yet to be decided is whether to exempt BP from lawsuits once full payment of a claim has been made, he said.
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The Wichita City Council will hold a public hearing Tuesday to consider a proposal for STAR bond financing for the Bowllagio mixed-used entertainment district in west Wichita.
The development is seeking $13 million in STAR bonds.
The 40-acre area on West Kellogg on both sides of Maize Road would be known as the Bowllagio Star Bond Project District, according to a memo prepared for the council by the city’s Office of Urban Development.
Developer Jay Maxwell has proposed to the council that the district include a world-class bowling alley and training facility and a museum dedicated to the history of bowling. Other aspects of the plan would be a restaurant, bar and hotel.
Maxwell says he has secured an agreement with Atlanta-based NYLO Hotels to build a boutique hotel on the site.
The council already took the first step toward possible approval of the STAR bonds at its May 4 meeting by setting up the hearing.
In its memo, the office of urban development recommended that following Tuesday’s hearing, the council should schedule a vote on whether to move forward with approval of the development for STAR bonds. The Kansas Secretary of Commerce also has to sign off on the project before the bonds can be finalized.
The hearing, set for 9:30 a.m. Tuesday, will be a part of the council’s regular meeting, which starts at 9 a.m. in the city council chambers at 455 N. Main.
The state has established STAR bonds, or sales tax and revenue bonds, for special economic development projects throughout the state.
Clifton Gunderson said it has acquired U.S. Tax Advantage LLC (USTA), an international tax consulting services firm.
Through the acquisition, which was announced Tuesday, Wauwatosa-based Clifton Gunderson will add 14 tax professionals, including partners Mark Gasbarra and Lester Fuwa. USTA has locations in New York, Boston, Chicago, Milwaukee and Houston.
Terms of the transaction were not disclosed.
The acquisition strengthens the talent and resources of Clifton Gunderson’s tax practice, said CEO Krista McMasters payday advance lender. USTA partners and staff have assisted many mid-market and Fortune 500 companies with their international tax requirements, she said.
Clifton Gunderson is the 14th largest U.S. accounting firm and the largest member of HLB International, one of the world’s largest networks of independent professional accounting firms and business advisors.
Schnitzer Steel Industries Inc. CEO Tamara Lundgren on Thursday said Portland is uniquely positioned to profit from the nation’s economic rebound.
In a keynote speech at the Portland Business Journal’s annual Women in Business Awards luncheon, Lundgren said exports and sustainability — both strengths of the Portland economy — will be the “dominant drivers” as the U.S. emerges from recession.
Oregon is the ninth-most trade dependent state in the U.S., Lundgren said, but only accounts for 1.4 percent of the national export total, giving it significant room for economic growth.
“With demand from Asia expected to continue, our region is well-placed to grab a bigger portion of the American export pie,” Lundgren said.
Lundgren also said the city’s reputation as a sustainabilty mecca will continue to provide the region economic opportunities.
“This is not a passing fad that will evaporate at the first sign of an economic rebound,” Lundgren said.
Lundgren also weighed in on a controversial plan to limit development on the north reaches of the Willamette River, where Schnitzer owns a scrap metal export facility.
“I don’t intend to wade into the thicket of the city’s River Plan debate, except to say that in the city’s push to make a short-term political decision, it risks the long-term economic and environmental benefits of a balanced plan.”
More than 700 business executives attended the event. Lundgren was also honored as the Woman Executive of the Year for Large Businesses.
European Central Bank Governing Council member Athanasios Orphanides said the bank will continue to support the economy even as it unwinds its emergency lending measures, suggesting interest rates may remain at a record low for some time.
“The phasing out of some unconventional measures should not be misinterpreted as a desire to remove policy accommodation from the economy,” Orphanides, who heads the central bank of Cyprus, said in an interview in Nicosia on Feb. 12. “Policy accommodation continues to be needed in light of the very subdued inflation outlook and the unevenness and weakness of the economy.”
The Frankfurt-based ECB has started to withdraw the measures it used to fight the financial crisis and economists last month predicted it would raise the benchmark rate from 1 percent in the fourth quarter. Still, the euro-area economy barely expanded in the final quarter of last year and the fiscal crisis gripping the region may weigh on growth and inflation as governments cut spending to reduce budget deficits.
Orphanides’ comments “confirm our call that the ECB will not raise rates this year,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “He sounds very concerned about the outlook for both growth and inflation.”
The euro eased to $1.3613 after the interview was published from $1.3622.
‘Subdued’ Inflation
Orphanides, a former U.S. Federal Reserve economist, said the “evolution of the economy and the associated risks to price stability are the key” to the rate outlook.
“If events over the next several months are consistent with inflation remaining subdued and considerably below our price-stability objective, that would indicate that the accommodative policy should remain in place,” he said.
The ECB in December predicted growth of 0.8 percent this year and 1.2 percent in 2011. Inflation was projected to average 1.3 percent this year and 1.4 percent next year. The ECB aims to keep the rate just below 2 percent.
Orphanides said preventing inflation from dropping too far below the ECB’s goal is as important as keeping a lid on price increases.
‘Symmetrical’ Policy
“The most important element is to be symmetrical in the pursuit of our price-stability objective,” he said. “I am concerned that if HICP inflation stays significantly below our definition of price stability for an extended period, this deviation could become embedded in longer term inflation expectations business cards. This would be an unwelcome development.”
In its latest quarterly survey of professional forecasters published on Feb. 11, the ECB said five-year inflation expectations stayed at 1.9 percent. However, forecasters lowered their 2011 inflation prediction to 1.5 percent from 1.6 percent.
Orphanides said he would be “more comfortable” if 2011 expectations “moved closer to our definition of price stability rather than a little bit away from it.” The current inflation rate of 1 percent also “confirms the appropriateness of continuing with an accommodative monetary-policy stance,” he said.
The 16-nation economy grew just 0.1 percent in the fourth quarter from the third, the European Union’s statistics office said Feb. 12. Economists had forecast 0.3 percent growth.
Weaker Growth
Growth “was a little bit weaker than the baseline scenario,” said Orphanides. “We are monitoring the improvements in the economy overall, but at the same time we also note the weakness in the money figures as well as the weakness in credit growth. Those are in my view consistent with the recovery not being very strong at the moment.”
The ECB’s 22-member Governing Council will decide at its next policy meeting on March 4 whether to further scale back its emergency lending measures. It has already announced the end of its 12 and 6-month loans to banks and indicated it may return to an auction procedure in some of its refinancing operations as a next step.
“The longer our interventions remain in effect, the more dangerous the side effects become,” ECB Executive Board member Juergen Stark told Germany’s Spiegel magazine in an interview published today.
Orphanides indicated he favors leaving full allotment in the main weekly refinancing operation in place for the time being.
“In the circumstances we are in at present, with very low short-term nominal interest rates, it’s very hard to assess precisely what the demand for liquidity in the banking sector is,” he said. “For that reason it is entirely sensible to have a procedure that can flexibly meet variations in the demand for liquidity, and that is what our fixed-rate, full-allotment policy is doing.”
Aircraft makers such as EADS’s Airbus and Boeing Co. are counting on Asia to pull the industry out of a slump and spur growth for years to come, executives said Wednesday.
Fueled by a growing middle class eager to travel, the region will need about 8,000 planes costing $1.2 trillion by 2028, France’s Airbus estimates. Passenger traffic in Asia is likely to grow an annual average of 5.9 percent in the next 20 years, overtaking the United States and Europe to become the largest air transport market, said Airbus, the world’s biggest airplane maker.
"We’re very optimistic this region will play a leading role in global economic growth and particularly aviation," Airbus Chief Executive Tom Enders said at the Singapore Airshow.
Global passenger traffic dropped about 2 percent last year amid a recession in most developed countries. Most Asian countries, meanwhile, continued to expand in 2009, and growing populations and vibrant economies are making the region the center of the aviation business.
Domestic air travel in China rose 21 percent last year, and Boeing estimates the Chinese market will need about 3,800 airplanes costing $400 billion over the next 20 years.
Aircraft makers are targeting local carriers such as Garuda Indonesia, which will receive 23 planes from Boeing and one from Airbus this year, part of a plan to boost its fleet by three quarters to 116 planes by 2014.
Niche players also are eyeing Asia. EADS unit Eurocopter, which says it has about half of Asia’s helicopter market, expects demand to grow at least 10 percent a year for the next decade.
If regulations that limit helicopter use in China and India are lifted, demand will explode further, said Eurocopter CEO Lutz Bertling.
"The Asian market is for sure the fastest growing," Bertling said. "It’s going to be bigger than the U.S. by 2020."
President Obama walked a financial tightrope in his State of the Union address on Wednesday.
Faced with an unexpectedly high unemployment rate, he talked at length about the need to spur job growth and help ease the financial strains on the middle class through tax credits, targeted spending and other measures.
But he made one thing very clear: He also wants to address the unsustainable growth rate in U.S. debt.
"[I]f we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery - all of which could have an even worse effect on our job growth and family incomes," the president said.
Indeed, the Congressional Budget Office reminded policymakers this week that the U.S. government’s fiscal outlook is "daunting."
Here’s why: The interest on the debt and unfunded promises to future retirees in Medicare and Social Security are on track to consume an ever-increasing share of the federal budget. And that depletes resources for many of the basic functions Americans expect their government to provide.
To begin to tackle the problem, the president said he would create a bipartisan fiscal commission by executive order.
The commission would make recommendations to Congress for how to address the looming fiscal shortfalls. Deficit hawks have said such a commission should be allowed to put all spending and tax breaks on the table for consideration.
"This can’t be one of those Washington gimmicks that lets us pretend we solved a problem," the president said. "The commission will have to provide a specific set of solutions by a certain deadline."
Nevertheless, Obama’s panel is a weaker version of a commission that was voted down by the Senate on Tuesday because Congress won’t be required by law to consider the presidential commission’s recommendations or to vote on them.
And beyond the fiscal commission, many of the president’s deficit-reduction proposals were baby budget steps.
It’s not that they’ll be easy to accomplish given how deeply partisan lawmakers have become. But the actual savings achieved from the proposals relative to the accrued debt is very small.
Spending freeze: The president proposed a three-year freeze on non-defense discretionary spending, which accounts for $447 billion, or roughly 13%, of the 2010 federal budget. The freeze would start next year, he said, when the economy is stronger.
The estimated total savings from the freeze: $250 billion over 10 years. But that’s a fraction of the $9 trillion in debt the CBO projects the country could incur over the same time period.
"I think it is a small step," CBO chief Douglas Elmendorf told lawmakers on Wednesday. He added that there is no single step that can adequately balance the budget.
Pay for new policies: Obama has also thrown his support behind the push for statutory pay-go rules. Those rules would legally require lawmakers to pay for proposed tax cuts or spending increases by raising taxes or reducing spending elsewhere in the budget.
Pay-go rules don’t actually reduce the debt load already accrued, but they put the brake on future increases in the debt load, which is helpful first step, budget experts say.
The effectiveness of pay-go rules, however, depends on their parameters. The strongest form would not allow any policy to be exempt.
But the president has backed a proposal that would only apply to "any new non-emergency tax cut or mandatory spending expansion," according to a White House statement.
The problem: That would exempt Obama proposals that are not deemed "new" — for instance, the permanent extension of the 2001 and 2003 tax cuts for most Americans — which is estimated to cost federal coffers more than $2 trillion over 10 years.
Curbing some tax cuts: The president also reiterated some pledges he has made before but that have yet to be passed by Congress. He favors, for instance, taxing the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as a capital gain. That would subject it to much higher tax rates than the 15% capital gains rate currently imposed. Such a provision is estimated to raise roughly $24 billion over 10 years.
What’s really needed
Any credible long-term solution to the country’s fast-growing debt puts Obama in a tight political spot.
That’s because it would have to involve a combination of tax increases (sure to rankle Republicans) and spending cuts (certain to disturb Democrats).
To use just one would be economically prohibitive.
Just how prohibitive?
Suppose Obama and Congress wanted to rely solely on individual income tax increases to get annual deficits down to 3% of GDP by 2015. If they just raised taxes on high-income households — something Obama has promised — they’d have to more than double the top two tax rates.
And that would push the top rate above 75%, according to research by the Tax Policy Center.
If they relied only on spending cuts, they would have to slash the federal budget to the bone. That means they would have to cut much of the discretionary spending pot, including defense.
Elmendorf noted that lawmakers often object in general to "wasteful" discretionary spending.
But when it comes to the specifics, individual programs have fierce defenders, he said. It is after all the pot that pays for everything from public schools, safe roads, health research, national parks, veteran benefits and the court system. To name a few.
James B. Lockhart III, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency, said the U.S. housing decline may not be over.
Lockhart said at a conference in New York that he’s concerned there may be “another leg down” because of the pace of foreclosures. Foreclosures will “spike” unless the Obama administration’s programs to spur home loan modifications do more to reduce homeowners’ debts, he said.
“We need to be more aggressive in writing down mortgages and reducing principal to keep people in homes,” he said. “A spike could be pretty big.”
Lockhart also said he expects that “hundreds of banks will be taken over.” The possibility comes from troubles in commercial real estate, which lags behind housing in finding a market bottom, he said payday loans.
“We are overbuilt in many areas,” he said.
Lockhart, 63, joined the distressed-investment unit of Atlanta-based Invesco Ltd. this year after serving as head of the FHFA. WL Ross was among nine asset managers chosen by the Treasury Department to take part in the $40 billion U.S. Public- Private Investment Program, under which taxpayer and private capital will be paired to invest in mortgage bonds.
WL Ross manages funds that own American Home Mortgage Servicing Inc. and made “substantial investments” in bond insurer Assured Guaranty Ltd., according to a statement in August announcing Lockhart’s hiring.
DUBAI, United Arab Emirates–Kuwait’s sovereign wealth fund said Sunday it booked a profit of $1.1 billion (U.S.) by selling the stake it took in Citigroup Inc. less than two years ago when the banking giant was strapped for cash.
The Kuwait Investment Authority said in a statement it sold the preferred shares after converting them to common stock for $4.1 billion. That works out to a gain of nearly 37 per cent on its $3 billion investment.
Calls to the Kuwait fund for further details went unanswered. A Citi spokesman declined to comment.
Gulf Arab countries’ sovereign wealth funds have been heavy investors in U.S. and European companies, using their oil wealth to buy large stakes in companies ranging from Citi to Germany’s Volkswagen AG and Mercedes-Benz parent Daimler AG.
The KIA joined other big investors – including the Government of Singapore Investment Corp. and long-time shareholder Prince Alwaleed bin Talal of Saudi Arabia – in pumping some $12.5 billion into New York-based Citi in January 2008. At the time, the bank was reeling from a huge drop in the value of its mortgage holdings.
At the same time it made its Citi investment the fund took a $2 billion stake in Merrill Lynch, which also needed cash as a result of the credit crisis.
Merrill was later bought by Bank of America Corp., which last week surprised investors by paying back $45 billion in federal bailout money. Analysts say that move puts pressure on Citi and other banks that tapped U.S. government aid to follow suit, even though they still could face further losses as consumers struggle to pay their bills.
The Kuwait fund’s move came as a surprise. In September, it said it had no intention of selling its holdings in either Citi or Bank of America in the short term because its investment policies are based "on a long-term vision."
Kuwait took its stake in Citi last year after another Gulf fund, the Abu Dhabi Investment Authority, paid $7.5 billion for a 4.9 per cent stake in the company.
ADIA’s holdings, known as "equity units," will begin to convert into ordinary shares starting in March next year.
A spokesman for the Abu Dhabi sovereign wealth fund, the world’s largest, declined to comment on plans for its Citi stake.
Kuwait’s fund is not the first major Gulf investor to cash in on the sharp rebound of western banks’ shares this year.
Abu Dhabi’s International Petroleum Investment Co. made a $2.5 billion profit in June by selling part of a stake it held in London-based Barclays. Then last moth, Qatar’s sovereign wealth fund, the British bank’s top shareholder, unloaded a stake worth about $2.25 billion.
Barclays turned to investors from Abu Dhabi and Qatar last November for a total injection of up to $12 billion to shore up its balance sheet rather than take on the British government as a major shareholder.
From the Star’s wire services
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