A new regional wayfinding sign system to guide people to key destinations in seven Northwest Arkansas cities will begin going up in Eureka Springs this week, according to a press release from the Northwest Arkansas Council.

While Eureka Springs will be the first city where the signs will be installed, similar-looking signs will be put up in Bella Vista, Rogers, Lowell, Springdale, Fayetteville and Siloam Springs this month. Each community’s signs will have their own unique aspects, but they are similar enough that they’ll give the region a consistent system to guide people to destinations.

“What I love about the regional wayfinding project is that it unites Northwest Arkansas in a visual way,” said Rogers Mayor Greg Hines, a member of the regional wayfinding steering committee. “The signs will make tourists feel like insiders, and they’ll remind local residents of the great places right here that are perfect for weekend outings.”


Officials at the University of Arkansas and Bentonville first raised the idea of a regional wayfinding system a few years ago, and the region’s first wayfinding signs went up in Bentonville a few months before the 2011 opening of Crystal Bridges Museum of American Art.


The signs going up now and being used by the other seven cities are patterned after the Bentonville system, but each city’s signs will have their own unique qualities.

A grant from the Walton Family Foundation to Endeavor Foundation, in partnership with the Northwest Arkansas Council, is covering the cost of the first phase, which is considered the pilot project. Those signs are intended to guide people to one key destination in each community.


“The wayfinding project is a terrific example of regional cooperation,” said Mike Malone, president and CEO of the Northwest Arkansas Council. “We had so many partners ... working together on a project that required coordination, agreements, collaboration and funding. They all did a great job of ensuring that this moved from a concept to a reality.”


An appeals court in Milwaukee overturned a lower court decision on donning and doffing protective clothing filed by six workers at Tyson Foods in Wisconsin.

Tyson will have to pay its workers at the pizza topping processing facility in Jefferson, Wis., an estimated $1 million in back pay, according to the plaintiff’s council.

The courts have been split on these decisions as numerous cases across the meat industry have occurred over the past few years.

This time the 4th District Court of Appeals sided with the plaintiffs citing “preparatory and concluding" activities were an integral part of their jobs.

The case went back to the lower court to determine the payment due. Plaintiff’s council asked for class-action status, so the decision is expected to benefit all workers in the plant.

Tyson said it is re-evaluating its options for further defense in the case.

Back in 2010 the company settled with the Department of Labor over worker pay as a result of donning and doffing compulsive protective gear.

Tyson agreed in 2010 to pay its poultry processing workers for all hours that they work in overtime back wages for its employees. The $500,000 in back pay was distributed among 3,000 workers at Tyson's Blountsville, Ala., processing facility on whose behalf the government launched the suit in 2002.

In accordance with the 2010 agreement, Tyson said then it would gradually phase in changes to its timekeeping practices at its poultry and prepared food plants over the next two-and-a-half years. As an interim measure, Tyson also agreed in 2010 to provide eight or 12 minutes of extra pay per shift to some hourly processing line workers.

The values of building permits issued in Fort Smith, Greenwood and Van Buren were a combined $14.515 million in July, up by more than $5 million from the same period last year and nearing the July 2011 values of $14.864 million.

The uptick in building permit values represents a 60.31% increase over July 2012. The increase is consistent with the numbers throughout the year from the three cities. Total permit values equal $107.017 million for the first seven months of 2013, an increase of 41.5% compared to the $75.627 million during the same seven months in 2012.

FORT SMITH
During July, 156 permits were issued at a value of $13.82 million. Construction remains strong in the residential sector, with 97 of the permits relating to home construction or remodeling.

Comparing July 2013 to July 2012, Fort Smith saw less permits issued, though the collective value was 97.54% higher than the $6.996 million issued last year. More than $3.4 million of that was tied to an expansion at Graphic Packaging at Chaffee Crossing.

GREENWOOD
Just like last month, five permits were issued in Greenwood, though the collective value of $443,920 was 69.57% lower than the $1.459 million in permits issued in June.

Compared to July 2012, Greenwood's numbers were still lower. Three permits were issued for a total valuation of $758,795.

VAN BUREN
Van Buren had the smallest valuation of the three cities, bringing in only 28 projects worth $251,000, down 80.68% from July 2012.

While the permit for the new Van Buren Fire Department dominated June's valuation report, a single home valued at $185,000 dominated July's report, with the remainder being small projects instead of new home or commercial construction.

2012 RECAP
Combined values in the three cities during 2012 were $157.32 million, compared to $201.079 million during 2011. The 2012 value is above the $149 million in 2010, but below the $164 million during 2009.

Fort Smith closed 2012 with the largest share of valuations, logging $136.428 million (a one-year decline from $179.288 million of about 23.9%), while Van Buren was the next largest with $12.282 million (a one-year decrease from $12.39 million of approximately 0.87%). Greenwood posted an additional $8.609 million, which was down slightly from last year’s $9.461 million (down about 9%).

The 2012 figures were compared against a $28.5 million permit for the construction of a Mitsubishi wind-turbine assembly plant at Chaffee Crossing. The plant has been mothballed by the company. Even without that permit, the Fort Smith metro area lagged when compared to 2011 showing a decrease of around 8.8%.

Residents who have been going through cinnamon roll withdrawals will not have to wait much longer as Ryan Kirk, manager of Calico County, announced today (Aug. 1) that the restaurant would re-open Aug. 6, a little more than eight months after a kitchen fire caused hundreds of thousands of dollars in damages to the legendary Fort Smith eatery, forcing its temporary closure.

During the closure, restaurant regulars and casual diners alike have shown an outpouring of love to the restaurant that has been a staple of the Fort Smith food scene since it opened in 1984 and was made world famous after a visit from television host Oprah Winfrey and her gal pal Gayle King in June 2006.

Kirk said customers have offered to paint, clean up, move furniture and donate memorabilia in order to get the store restaurant open again after spending an estimated $840,000 to not only gut and re-build the restaurant, but to furnish it with tables, chairs, cash registers and kitchen equipment.

"We even had members of the community calling us, asking if they could help," he said. "It was really telling of our community and the kind of people that live in Fort Smith. We didn't realize, we knew that we were a staple of Fort Smith, but we didn't really realize, you know, how much the community backed us. The amount of support that we've gotten from everyone via Facebook, e-mails, phone calls, has just been tremendous."

As a way for the restaurant to say thank you to the community, Kirk said Calico County is hosting two premier nights that will benefit non-profits in the area.

"We haven't done anything like that before, but again we were just so impressed with the amount of support we got from the community, we felt like there was no better way to re-open than to give back some of the support that we had received."

The events, which will be held on Sunday, Aug. 4, and Monday, Aug. 5, will raise money for the Community Services Clearing House, Good Samaritan Clinic and Girls Inc. of Fort Smith.

Amanda Daniels, executive director of the local Girls Inc. chapter, said she was taken aback when she got the call from Calico County.

"Of course, we were very excited when they reached out to us to ask if we were interested," she said. "And of course, I didn't hesitate. I thought it was a great opportunity. I know everyone loves Calico County and is anxiously awaiting their re-opening, just as my family has been."

The tickets, which Daniels said cost $60, purchase four meals and four drinks. Kirk added that all of the profits from the premier nights will benefit the three chosen charities.

In addition to the tickets, which Daniels said have been selling at breakneck speed, customers are also able to purchase raffle tickets for a sweet, warm prize, according to Kirk.

"We're also selling raffle tickets for $1 apiece. The winner of that raffle will receive the first dozen cinnamon rolls on grand opening day (Aug. 6). And again all of that money goes to the charities as well," Kirk said.

For customers not certain whether their favorite waiter or waitress will still be around to serve them, Kirk said there was no need to worry.

"Yes, (insurance) covered (the cost of re-building) and covered the cost of employees' wages throughout the time that we've been down, so we were pretty happy about that. We were definitely worried right before it happened because it was right before the holidays, but fortunately our policy covered everyone."

Some well-known memorabilia (at least well-known to regulars) was salvaged from the fire and can be seen on the walls. Those elements, along with a nearly identical layout as before the fire, will make the restaurant feel almost exactly as it did before the fateful night on Nov. 25.

An argument could be made that the layout and memorabilia were far from the most treasured items to be salvaged and be seeing a comeback next week. But fear not, Kirk said, for the store's treasured recipes were found safely stowed away in a lockbox, meaning favorites like Calico County's distinctive pigs in a blanket and other recipes will make their triumphant return bright and early at 6:30 a.m. on Sunday.

And should the worst happen again and the recipes get lost to a fire or tornado, Kirk said there is now no need to worry.

"We have digital copies now, yes. ... We do have backups of them now and even if had lost the recipes, we have employees that have been here for 20 plus years that know them by heart. So we would have been able to salvage them, but we did save the physical copies."

Asked if he was ready for what is sure to be lines of customers waiting to get into the restaurant and fulfill eight months of cravings, Kirk said he was ready.

"It's going to be pretty epic, but we're ready."

A state liquor law in Arkansas that limits liquor store permits to one per person and forbids franchising or multiple minority ownership interests could be overturned by a federal court. A lawsuit filed in the U.S. District Court in Little Rock seeks to level the playing field among liquor store operators.  

If overturned the law could have statewide implications because as it would reverse the protection it gives to a few owners such as Jim Phillips of the Springdale Liquor Association, which are exempt from the law because of a “grandfather clause."

Gild Holdings and Steven Cherry of Bentonville filed suit against the state’s Alcoholic Beverage Control Division in May claiming the law as it stands “substantially interferes” with interstate commerce and violates the “Commerce Clause of the U.S. Constitution.”

Cherry sought to open a Macadoodles store in Bentonville, which would have been a franchise issued by Gild Holdings, who owns the trademark and operates stores in Springdale and Jane, Mo. The lawsuit states that the ABC denied Cherry's application for a liquor store permit because the proposed store was to be a Macadoodles franchise, which state law prohibits.

The complaint also states that the law passed in 2011 and interpreted by the ABC “unreasonably restrains and interferes with commerce” as it prohibits any person, firm or corporation from doing business with or receiving benefits from more than one retail liquor store, including franchises.

Critics of the law agree that it was written in way that allowed a few players to operate multiple stores and the criteria used to determine the exemption was customized for a select few. For example the 2011 law gives an exemption to any company that was active on July 19, 1971 and help more than one permit as of Aug. 13, 1993.

The state recently asked the federal court to dismiss Gild’s lawsuit as the plaintiffs failed to state a claim.

The plaintiff’s council, Jim Lyons, filed a 26-page response to the Motion to Dismiss on July 26. Lyons said he did not have an estimate for how long it might take this case to play out, if they are granted the right to proceed. Neither side will comment on pending litigation and the last filing on the case docket as of Thursday (Aug. 1) was the July 26 response filed by Lyons on behalf of the plaintiffs, urging the court not to dismiss.

Rep. Dan Douglas, R-Bentonville, said state liquor laws are a “major can of worms” for lawmakers who very seldom want to tamper with the status quo. He proposed a bill earlier this year he hoped would expand the law to allow franchising, but it died in committee.

“In retrospect, the bill as it was written did not offer a broad enough scope to get the support it needed,” he said. “Mom and pop distributors around the state, particularly in smaller areas, tend to support their legislators, who then have a hard time re-evaluating the liquor law.”

Douglas and other insiders agree that some mom-and-pop operators don’t really want the store limit lifted because they fear larger retailers will could corner the market if they are also allowed to expand their reach. The law already gives retailers, large and small, unlimited permits to sell beer and wine, but that competition is not available for liquor, according to Douglas.

“Alcohol is alcohol and free enterprise is free enterprise, but right now it’s not a level playing field. The current law limits free enterprise for some people. But if the law gets changed, I think it will have to be in federal court,” Douglas said.

He said it doesn’t make sense that a dad who owns a liquor store can’t help one of his adult children get started in a like venture of their own with a shared interest, but that’s the law.

Wal-Mart has made no secret that it supports a level playing field in the business it conducts around the globe and at home. The retailer did not respond to a request for comment on the state liquor law or the pending ligation. But Wal-Mart is bound to the 2011 law restrictions and has just one liquor store permit in Arkansas — Sam’s Club in Fayetteville.

When Benton County was voted “wet” in November of last year much of the financial support in the initiative was generated by Steuart and Tom Walton, grandsons of Wal-Mart founders Sam and Helen. Wal-Mart and numerous other retailers from Casey’s to Harp’s took advantage of the county’s “wet” status and got the necessary permits to sell beer and wine.

Benton County was granted up to 55 liquor store permits following the election. To date, 39 have been awarded. Robert McCurry of Bentonville was one of 15 lottery winners to have their permit application denied because he too, planned to open a Macadoodle's franchise.

Wal-Mart Stores Inc. wants to be known as solution provider, not just a destination for socks and bananas, which is likely why it continues delve into entertainment media.

It’s been more than three years since Wal-Mart purchased Vudu, a video-streaming service based in Silicon Valley, and while the retailer does not breakout sales from its services, analysts said Vudu, like most of the other players in the space, is gaining subscribers.

Target Corp. announced in May that it was testing a video on-demand in a service called Target Ticket with its employees, with instant access to 15,000 titles, new releases and next-day television programs.

A Target spokeswoman said in May, “During this phase, we are gathering valuable information that will help shape future plans. We will share additional details when they become available.”

Unlike Target and Amazon, Wal-Mart’s video streaming business is not tied to its namesake brand and Vudu maintains a separate website from Walmart.com.

Revenue from streaming and downloading services in the U.S. are expected to top $4.5 billion this year, according to Juniper Research and it’s clear that brick and mortar retailers want some of that share, given their competitor Amazon is well ahead of the curve.


Insight Corp. said the market has grown at a compounded rate of 29% since 2010 as consumers have illustrated their willingness to pay for content going back to the success of iTunes and the 29 million subscribers that Netflix has garnered.


Carol Spieckerman, CEO of New Market Builders in Bentonville, said being in the streaming space gives the mammoth retailers some leverage when negotiating exclusive release rights.


“Since Wal-Mart became a player in licensing Disney, several other brand houses have hung a shingle in Bentonville to be near the retailer’s home base,” she said.


Wal-Mart’s entertainment endeavors are part of the journey the retailer is taking to accomplish other things like exclusive releases and digital data gathering and analysis, according to Spieckerman.


Retail consultant Jason Long with Shift Marketing Group, said brick and mortar retailers are likely delving into streaming media as a defensive strategy focused on regaining lost revenue and blunting Amazon.
 
“Think about what could happen if Wal-Mart didn’t get into streaming, they cedes eyeballs and engagement opportunities to Amazon and others, and they would be out of the DVD movie business in 3-5 years, also losing leverage with major movie studios,” Long said.


Wal-Mart said in June that over the past two years, consumers have made Wal-Mart a destination for TV series on video purchases, especially during the first quarter whether in-store and streaming through Vudu.


CROSS MERCHANDISING

Long said if consumers had to go elsewhere to find the DVDs they want, that studios who cater to the retailers today would have less incentive to do so.


He said popular releases also give Wal-Mart the opportunity to cross-merchandise that could led to incremental sales.



During a Wal-Mart Store Tour in June, company officials told the media that one of the most popular brands in the store was anything linked to the popular cable series Duck Dynasty.  


It just so happens the No. 2 and No. 3 DVDs sold by Wal-Mart in the first quarter were Duck Dynasty Series 1 and 2.
 Duncan McNaughton, chief merchandising officer for Walmart U.S., said the Duck Dynasty tee shirts were the best selling in that category for men, women and boys. From lunch boxes to band aids the Duck Dynasty brand is a big seller at Wal-Mart, so it’s no coincidence the DVD sales were so high.


Long said the retailer also had a recent tie-in with the Superman movie launch, which in streaming the movie, you might also want to purchase a tee shirt or action figure.


STAYING RELEVANT

Analysts said Wal-Mart and other retailers increasingly need to provide streaming media so they don’t lose their edge in the electronics category.


Long said as a major player in the device space, by owning Vudu they can ensure the devices they sell are wired with that service.


Spieckerman said Wal-Mart continues to do a great job taking their customers where they want them to go, which is quite different from meeting them where they are.


She said Vudu is just one important entertainment vertical for Wal-Mart, but tying that to exclusive releases and licensing deals adds more layers of opportunity to drive revenue and brand recognition to a demographic who may or may not shop a physical store.


Long added that like Amazon Prime customers, consumers who spend more on electronics and media streaming tend to shop more frequently and may represent a higher income demographic over Wal-Mart's core customer.

“Even though Netflix, Apple, Hulu Plus and Amazon Prime own streaming right now, there’s a place for a trusted retail brand to take share in this category in the years ahead. Especially with Vudu’s competitive advantage of converting DVDs to digital,” Long said.


He said Wal-Mart and other retailers largely sat by as Apple co-opted their revenues derived from music.  


“These retailers are bound and determined not to let that happen again with streaming video,” he added.


Long wouldn’t be surprised to see Wal-Mart make a larger acquisition in the fragmented streaming sector if they are to enjoy a larger slice of the pie.
 

Wall Street has heaped lofty goals upon Tyson Foods, forecasting a net income per earnings increase of 18% and revenue growth of 4% in the company’s third quarter results which will be reported on Monday (Aug. 5) ahead of the market opening.

The street consensus is 59 cents a share in net income earned from April 1 through June 30. A year ago the Springdale-based meat giant pocketed 50 cents a share, before a 29-cent charge related to early debt retirement totaling $167 million.

Revenue predictions for the third quarter top $8.66 billion, up from $8.31 billion a year ago.

Tyson also is coming off of a quarter where net income for sank nearly 43% as Tyson pocketed $95 million in profits, compared to $166 million a year ago. This equated to 26 cents a share, falling short of the 44 cents earned a year ago and the 45 cents Wall Street expected.

CEO Donnie Smith was upbeat last quarter telling analysts the rest of the year would be better and so far the metrics are lining up to prove him right.

SEGMENT METRICS
In the chicken segment, processors have been making solid profits thanks to strengthening in breast meat prices above the $2 mark per pound wholesale price.

A competitor, Pilgrim’s Pride, reported stellar profits this week linked to the better wholesale pricing, thanks to the disciplined fundamentals the industry has embraced to keep supplies in check with demand.

“We are seeing discipline across the industry in managing average live weights. Additionally, demand for chicken in the U.S. is solid to excellent at retail and improving at foodservice due to its value compared to beef and pork,” said Pilgrim’s CEO Bill Lovette.

He said U.S. Department of Agriculture data shows that declines in red meat for May and June provide additional support for the confidence seen in the chicken market.

On the grain front, prices have settle back in recent weeks as the prospects of bumper U.S. corn and soybean crops and abundant crop production out of South America have eased speculator activity.

Analyst agree Tyson will report healthy profits in its chicken segment and it will be needed to offset lackluster results likely in pork and beef. Tyson, while a iconic name in chicken, depends heavily on its beef segment for its gross profits as beef represents more than 40% of the company’s total revenue each year and typically carries a higher overall profit margin relative to chicken and pork.

Sterling Beef Profit Tracker reports that pork packer margins have been in the red for much of the quarter.

Steve Kay, publisher of Cattle Buyers Weekly, said recently that packers like Tyson will see some pork profits in the quarter because of their extensive value-added bacon, ham and lunch meat business in the retail segment, which gives them a thicker cushion against the wholesale commodity prices.

Beef packer margins averaged between $65 and $79 per head through the recent quarter, having turned positive after being in the red for the first several months of this year.

Jim Lochner, chief operating officer for Tyson Foods, said in May that the overall demand and consumption for beef is down amid the higher prices, relative to chicken and pork.

In the previous quarter, Tyson incurred a net operating loss of $26 million in its beef segment. It was the worst second quarter since 2007. But, Lochner told analysts that the beef segment should remain positive for rest of this fiscal year, although he expects results below the normalized growth range of 2.5% to 4.5%.

INVESTOR PAYDAY
Tyson shareholders have seen a 99% gain in the stock price over the past year. Shares were trading just above $28 a share in Friday’s morning session (Aug. 2). Analysts remain somewhat bullish on Tyson, despite the lofty gains this year.

The analysts peg the one-year target price for Tyson Foods at $30.36, which is not a tremendous upside from current levels.

There has also been some investor speculation with Tyson Foods, given that one of its competitors Smithfield Foods is in the process of being acquired by a massive meat player in China.

Tyson’s primary poultry competitor, Pilgrim’s Pride, was acquired by Brazilian beef giant JBS in recent years

In November 2011, Fort Smith-based O.K. Industries was acquired by Industrias Bachoco. Combined, Industrias Bachoco and O.K. Industries is now the third largest chicken producer in North America, behind Tyson and Pilgrim’s.

Unlike Pilgrim’s and Smithfield, Tyson has a dual-class stock system that gives the Tyson Family control over any potential takeover.

Insiders don’t see Tyson as takeover candidate and the company is already spreading its own wings throughout China and Latin America. And with its cash holdings and relatively healthy balance sheet, it’s more likely that Tyson would be the one shopping for a potential acquisition.

The Arkansas Department of Environmental Quality has called into question a claim made by Whirlpool in their 2012/2013 Groundwater Monitoring Report, dated June 24 of this year.

In the report, Whirlpool had made claims that the plume of cancer-causing trichloroethylene (TCE) that had leaked from its now-shuttered facility in south Fort Smith was either stable or shrinking.

"Overall the on-site TCE concentrations are stable to decreasing, as discussed above," the report to the ADEQ read.

On-site, as defined by Whirlpool's environmental consultants, referrs to areas "within Ingersoll Avenue and south past the main manufacturing building on the Whirlpool site. …The general boundary of the plume on-site has not changed significantly since the 2011/2012 annual report."

But a letter dated yesterday from ADEQ to Whirlpool directly challenged the claim.

"The southern boundary wells of the on-site plume located some distance from the property boundary, exhibit increasing TCE concentrations which is an indication so the continued expansion of the southern plume," the letter read.

The agency has asked that in "the upcoming reports, please include discussion pertaining to the monitoring wells in the southern segment of the plume."

The latest exchange between Whirlpool and ADEQ follows a July 16 submission by Whirlpool of its final remedy work plan, which has not yet been approved by ADEQ. If approved, a public comment period would likely begin later this month that would allow for public input on the final Whirlpool cleanup.

Arkansas revenue officials said the state’s first month of its fiscal year saw an increase in corporate and sales tax revenue, while individual income taxes were off the mark.

July net available general revenues – the amount after mandatory earmarks are accounted for – totaled $410.2 million, a 1.6% increase over last July and 1.9% above forecast.

“Results in July were mixed, as Individual Income tax fell slightly below forecast, Corporate Income tax and Sales tax slightly exceeded, and income tax refunds contributed to gains by detracting from revenue growth less than expected,” said John Shelnutt, economist and chief of the Department of Finance and Administration’s Economic Analysis and Tax Research division.

“Monthly timing factors contributed to the mixed pattern, as individual withholding was below forecast and below year ago results. Payday timing effects on collections cause monthly swings and added volatility that is not present in the Official Annual Forecast. It is a short-term factor for collections,” Shelnutt added.

He also said sales and use tax collections “were encouraging” at 4.5% growth compared to last year. The results include high growth from the motor vehicle portion of sales tax, he said.

DF&A provided the following data and analysis related to the major revenue categories that account for nearly 90% of total state tax revenues:
• July Individual Income Tax collections totaled $206 million. Collections decreased by $6.2 million, or down 2.9% compared to last year. With respect to the forecast, collections were $1.5 million or 0.7% below forecast. Individual withholding declined 3.8% compared to last year, as a result of monthly payday timing differences.

• July Sales and Use Tax Collections totaled $186 million, an increase of $8.1 million or 4.5% from last year. Collections were also above monthly forecast levels by $1 million or 0.5%.

• July Corporate Income Tax collections totaled $26.9 million, an increase of $1 million from year ago, and $0.5 million or 1.9% above forecast.

Tyson management expects better food service demand, strong retail sales and improving international metrics to propel profits higher in 2014, building momentum in this last quarter of 2013.

The meat giant’s third quarter profits soared past expectations on Monday morning, (Aug. 5) with net income of $249 million, three times better than the $76 million earned in the same period of last year.

Tyson earned 69 cents per share in the fiscal third quarter period ending June 30. These results were above the 59 cents that Wall Street analysts predicted, and better than 51 cents recorded a year ago — on an adjusted basis.

Investors approved as shares rose $1.50 to $29.70 in heavy trading on Monday morning following the announcement.

"As expected, we are delivering robust results in the second half of our fiscal year." said Donnie Smith, Tyson's president and CEO. "We see a tremendous amount of opportunity in our business. I am very proud of the team because I'm seeing good long-term decision making to sustain us in the future, and that gives me confidence.”

Sales revenue topped $8.73 billion in the quarter, helped by a 2.2% gain in volume and a 3.7% improvement in prices. A year ago, Tyson rang up $8.261 billion in sales.

Through nine months in fiscal 2013 Tyson’s sales total $25.48 billion, compared to the $24.74 billion in the same period of the previous fiscal year. Net income in the first nine months is $517 million, up almost 30% compared to the $398 million in the same period of last year.

Smith said in the company’s earnings call that Tyson’s move toward growing value-added sales 6% to 8% this year is on track with 5% gains made through three quarters of 2013. He said the recent WTO ruling against tariffs in China will likely have a positive impact to U.S. chicken exporters like Tyson Foods, but a likely appeal will mean those benefits are delayed another full year or more.

The company also reported that it sold Weifang, one of its smaller chicken operations in China during the quarter. Weifang is a partially integrated operation acquired in 2009 as part of a joint venture. Tyson assumed full ownership in 2011. Smith said the investment needed to bring Weifang inline with Tyson’s operational goals was too great and the best alternative was to sell it.

Smith told analysts that roughly 50% of its chicken business in China is vertically integrated at this point, and by the end of 2014 it should reach 100%.

Tyson expects sales to top $34.5 billion in fiscal 2013, increasing to $36 billion next year.

Company officials said capital expenditures of about $550 million by the end of the 2013 fiscal year, much of which is for plant renovations and expanding operations in China. Tyson expects fiscal 2014 capital expenditures to approximate $650 to $700 million.

Tyson said it continues to look for acquisition possibilities inline with growing its value-added sales. Value-added sales refer to higher margin food products that have been trimmed, deboned, marinated, breaded and are partially or fully cooked.

BIG CHICKEN
Chicken was the big ticket item for Tyson Foods in the recent quarter, returning $220 million in operating income, up from $159 million a year ago. The operating gains were attributed to strong demand — domestic and international — as well as a healthy increase in pricing.

Smith said just 8% of its food service contracts were on the longer, 1-year pricing adjustment schedule. By going with shorter pricing adjustments Tyson has been able to pass along higher costs as they are incurred.

Sales totaled $3.158 billion, rising 38% from a year earlier. The higher revenue related to improved wholesale poultry prices and disciplined production across the industry. 

Breast meat prices averaged $2 per pound in the quarter, up from $1.50 per pound in the same period last year. Tyson said it spent $105 million extra on grain in the quarter over a year ago.

Smith expects the chicken segment to remain strong well into 2014 given it’s lower price to beef and consumers opting for leaner meat options. He said almost all of Tyson’s food service offerings have reformulated as part of an eat healthier initiative.

Grain prices are now moving down, which helps Tyson Foods as it continues to stay close to the market on its grain purchases. Tyson said it sources corn to its chicken complexes on a buy local basis, when it can. But it has and will continue to import corn from Brazil if needed, as long as the price and logistical costs make it worthwhile.

Looking ahead Tyson expects U.S. chicken production to increase 2% to 3% in fiscal 2014. Tyson said its chicken segment should be in or well above its normalized range of 5% to 7% through fiscal 2014.

BETTER BEEF
Tyson’s beef segment returned $114 million in its third quarter operating profits, improving over the $71 million in the year-ago period.

Beef sales totaled $3.723 billion in the quarter, 24% higher than a year ago. Fed cattle supplies decreased which drove up average sales prices and livestock cost in the quarter, but Tyson said better demand for premium beef products helped push sales volumes up 3.8% from a year ago.

Tyson benefits from having its beef slaughter plants located in areas where there is ample supplies of cattle, said Jim Lochner, chief operating officer. Lochner said fourth quarter operating income should be on par with the recent results.

LEANER PORK
Tyson’s pork operating profits totaled $67 million, down from $69 million in last year’s quarter. Total segment revenue was $1.332 billion, compared to $1.344 billion a year ago.

Too many pigs going to market in 2013 continues to drive down average sales price and livestock cost. Tyson said a 6% decline in pork exports added to the domestic oversupply problem.

Fresh pork processing margins continue to run in negative territory because of the depressed pricing, according to Sterling Beef Report.

“We expect industry hog supplies to be flat and exports to improve compared to fiscal 2013. For fiscal 2014, we believe our pork segment will be in its normalized range of 6 to 8.0%,” said Lochner.

PREPARED FOODS
Operating profits for the “prepared foods” segment totaled $24 million, down 48% from the prior-year.

Tyson said it took a hit in its lunch meat business because of a major plant renovation ongoing in its Houston facility that has thrown the operational efficiencies off balance.

The segment sales revenue totaled $797 million, helped by better pricing increase and a slight increase in total volume. A year ago, Tyson reported $764 million sales in its diverse “prepared foods” segment.

Tyson’s diverse “prepared foods” segment is a major part of the company’s valued added game plan.

A recent report by an auto industry organization says that fuel efficiency standards in new cars are at their highest numbers in years, but that is not necessarily translating into a change in local consumer preference for new car sales.

According to a report released today (Aug. 5) by WardsAuto, 2012 models reached an average fuel efficiency of 24 miles per gallon, the highest ever previously reported, driven in part by new technologies and consumer buying standards, the company said in a press release.

But Larry Throckmorton, new car sales manager at Toyota of Northwest Arkansas in Rogers, said fuel efficiency only drives car sales at certain times for his dealership.

"When gas prices rise for whatever reason, if they peak close to $4 per gallon, the trucks and SUVs go into a standstill and then we go into a mad dash for the hybrids," he said. "When prices come back down, people go back to the SUVs again. It's been a roller coaster the last couple of years."

Throckmorton characterized the ups and downs as cyclical, which has reflected the U.S. gasoline market during the last decade, according to the U.S. Energy Information Administration. The agency reported that a price for a gallon of regular unleaded was $3.49/gallon today, versus $3.61/gallon in 2012. In 2010, the price was only $2.78/gallon, though the price during 2008 was $3.24/gallon.

MARKET DIFFERENCES
Bradford Randall, general manager of Randall Ford in Fort Smith, said while gas prices may influence sales of new fuel efficient vehicles in Northwest Arkansas, it is not something he has seen in the Fort Smith market.

"On the fuel efficiency side of it, I'm not sure that that's the main motivation for vehicles right now. We thought that hybrids and electrics would take off more in the area, but they just haven't. In Northwest Arkansas and Central Arkansas, they are more likely to push hybrid, but for this area we haven't seen fuel efficiency as the driving force."

In Fort Smith, the biggest driver, Randall said, has been aging vehicles.

"The average age of vehicles (being traded in) is 11.4 years. That's been the big driver."

But he said industry watchers should not be fooled by the number of people moving from an older vehicle to a newer one. It has not translated into the sale of more new cars.

USED CARS ARE POPULAR
"Used cars are huge right now. People can get them in good condition with low miles for a fraction of (the cost of) new vehicles. Now the warrantees aren't as good as new vehicles, but they are in it for the price now. Used vehicles are the way to go right now. That's primarily what's selling,” Randall explained.

Sales of used cars have helped drive Randall Ford to its strongest sales for the first seven months of the year since 2007, he said. The rise in customer traffic that has pushed the company to the best sales numbers in years did not really begin until April, Randall added.

And while hybrid and electric vehicles have been weak sellers for Randall, he did say non-hybrid fuel efficient vehicles are doing remarkably well on the used car lot.

"Small fuel efficient vehicles don't stay on our lot any time at all. Small trucks, like the Ranger or Chevy Colorado, just move really quickly."

In order to keep up with demand, Randall has started to explore new ways to to obtain used cars and trucks in addition to the traditional methods the company has depended on for decades.

"For acquisition, we are getting about 20% of our vehicles from auctions. The rest come from people selling their cars in the paper, Craigslist and new vehicle trades. But it's still a challenge to get some new vehicles. And there's still some bad vehicles (on the road that are leftover) from Hurricane Sandy."

In order to keep damaged vehicles out of the hands of his customers, Randall said each car undergoes a thorough inspection and a CarFax report is obtained. Anything that has a red flag, he said, keeps the car from being acquired and then re-sold to his customers.

TRUCK SALES REMAIN STEADY
If there's been one surprise for Randall, it is that sales of regular-sized trucks have continued to hold steady, even with the uptick in sales of used, fuel efficient vehicles.

"The gas guzzlers are staying (on the lot longer) than anything, like Hummers. But not trucks. There is still a great demand for trucks."

Throckmorton said the reason truck sales have continued to stay high was because of what trucks can provide consumers.

"Trucks serve more of a purpose than fuel efficiency. If you can't afford a truck or that is a major concern, then buy something else. But we as Americans want a big vehicle and we'll buy it and pay for extra gas. We all want something that is more fuel efficient. And it will happen in time. But think of it this way - a gallon of gas is still cheaper than a gallon of water," he said. "You go into the Quick Mart and a small 16 ounce bottle of water is a dollar. So you buy two one liter bottles of water, you're spending $4."

Nearly 300 sales executives from across the United States who work for J.B. Hunt Transport Services Inc. attended the company’s supply chain forum July 30 - Aug. 1 on the University of Arkansas campus.


The forum was organized and hosted by the department of supply chain management in the Sam M. Walton College of Business.


“We are honored that the company chose the Walton College as the place to hold this event for their sales executives,” said Eli Jones, dean of the Walton College. “They recognize that our supply chain management department is doing some of the most advanced research in the field right here at Walton College, and we were thrilled to be able to share the insights from our distinguished faculty.”


The kickoff for the three-day forum featured Jones; John Roberts, J.B. Hunt president and CEO; Shelley Simpson, J.B. Hunt chief marketing officer; Chris Wyrick, vice chancellor for University Advancement; and Matt Waller, chair of the supply chain management department at the Walton College.


“We were pleased to partner with the department of supply chain management,” Simpson said. “As an alumna of the Walton College, I am confident that this forum was beneficial to both J.B. Hunt and the college.”


The forum sessions covered topics ranging from sales to logistics outsourcing to global trends in supply chain management. The format of the conference included large group presentations and small group breakout sessions. The sessions were led by Walton College faculty and senior-level executives from J.B. Hunt.
 

It is no secret that lending institutions have been forced to tighten requirements since the financial crisis of 2008. But a little-discussed financing mechanism known as owner financing, or seller financing, is a cause for concern according to a seller and a mortgage originator in the region.

This form of financing has the seller carrying all or a portion of the financing. The buyer and the seller agree on the interest rate, monthly payment amount, insurance obligations and other terms. The agreement is typically noted in public records to protect the parties.

It is something Fort Smith home owner Greg Pair Jr. has been hearing about a lot since he put his home on the market four months ago.

"We've had one offer, but it fell through because of financing. They could not get the financing (to purchase the home)," he said. "We've also had at least four or five calls to see if we could do owner financing because of the inability to get financing at the bank."

Pair and his wife Jamie were not comfortable with selling their home through owner financing.

"Owner financing would mean we would still have the loan on the house. It's essentially the same as a rent-to-own option. It would be paying us the monthly payment to pay off the loan. In turn, it would hurt us because we couldn't carry that loan plus the loan on the new house."

Walt Fenton, a mortgage originator at First Security Bank in Rogers, said Pair's views on owner financing were correct. According to Fenton, term owner or seller financing is not even an accurate depiction of the financial transaction taking place.

"He's doing a contract for deed where the contract remains in his name," Fenton said. "Owner financing is really where they own the property free and clear and the buyer puts down 20%. We'd count that whole mortgage against him unless he can prove that he's been receiving the payments for at least 12 months."

The risks associated with doing owner financing are many, Fenton said, adding that anyone who is asked to do owner financing, as Pair has been, should think long and hard about why they would need an alternative financing solution.

"If they're having trouble with their credit, why would I want to carry a note on them," he asked. "If they are a poor credit risk to a bank, why would the seller want to take that risk?"

While signs have been popping up across the Fort Smith region with messages about owner financing and more people have started talking about it, Long and Fenton say it is still rare in the Northwest Arkansas regions. Long, who said he has not yet sold a home through owner financing, said in his opinion, it would likely only be a good option for certain types of properties.

"Owner financing, I think, would be more (suitable) for mobiles (mobile homes) which are hard to finance or specific properties that are hard to finance for whatever reason. And I've heard of lease-to-buy, that's sort of owner financing. But I just don't know. I just haven't run across it much."

Fenton said all individuals who may be in the market for a home at any point in the near future need to get used to the more difficult lending procedures and be prepared for the rare, but still possible, rejection for a loan.

"We're back to the old days where their debt to income ratios should not be more than 28% of monthly income. We don't want that other debt to exceed 41% unless there are great compensating factors - high credit scores, long term job security," he said. "You need money, you need a job, you need good credit. It's back to the good old days."

Should a prospective buyer be denied, Fenton said it is not the end of the world and they don't necessarily have to resort to alternative financing options.

"We do see some people with poor credit and we do some counseling with them. They may have to come back in six months, a year or two years. But in the grand scheme of things, two years goes by relatively quickly."

If a seller does choose to extend financing themselves to a buyer, Century 21 advises that the seller take measures to fully protect themselves.

"You should run a full credit check on the borrower, require hazard insurance on the property and include a due-on-sale clause. There also are financing, disclosure and repayment-term requirements that need to be met. Again, it is wise to consult an attorney when considering this type of transaction."

As for Pair, he is hoping his home sells quickly through traditional financing so he and his family can purchase their next home.

"The bad part for us is we wouldn't be able to purchase the other house, we couldn't officially go through on the house. We're (in a contract to purchase our next home) contingent on selling our (current) house. We need the equity in our house to pay the down payment on the new house."

U.S. Secretary for Veterans Affairs Eric Shinseki made a quick stop in Northwest Arkansas on Tuesday (Aug. 6) to talk jobs with Wal-Mart’s Bill Simon, perhaps one of the nation’s biggest cheerleaders for hiring veterans.

Simon, president of Walmart U.S. and a veteran, first announced the company’s commitment to hire up to 100,000 military veterans returning from war over the next five years. It’s been 60 days since Wal-Mart kicked off its “Welcome Home” commitment to the nation’s veterans. During that time the retailer has processed 30,000 applications and offered jobs to 3,100.

“This is a five-year commitment and just one of several programs we have in place to support veterans. Wal-Mart already employs 100,000 veterans,” said retired Brigadier General Gary Profit, who heads up the company’s military programs.

He said the company is pleased with the 60-day progress report but told the group there is still plenty of work to do.

Shinseki thanked Wal-Mart for their effort to provide job opportunities to any veteran within 12 months of an honorable release, calling it a “tremendous initiative” as he addressed a small group of media at the retailer’s home office in Bentonville. Shinseki said other companies are also actively pursuing veterans as they return from active duty, with about 290,000 veterans and their spouses hired by numerous companies since April. He said they have pledged to hire another 435,000 veterans and spouses by 2018. The Veterans Administration employs 100,000 veterans, roughy 32% of its workforce.

He said in July the unemployment rate among veterans was 6.4%, well below the national rate of 7.4%. For post 9-11 veterans, Shinseki said the unemployment rate is 7.7%, shrinking from 12.1% in 2011.

Shinseki said the Post 911 GI Bill and the IRS tax credit for businesses hiring veterans have helped bring the unemployment rate down among this military demographic. He also credits Wal-Mart and others who are extending a hand and opportunity for employment saying they recognize the character, discipline and sense of purpose that military veterans possess.

Shinseki said the discussions he has had with Wal-Mart and others are a meaningful start in reaching out to an important demographic that can put their talents to work in the private and public sectors as they are reintroduced into the civilian workforce.

Simon has said veterans who return home after fighting for their country should not have to fight for a job as well.

Profit said Wal-Mart does a good job assimilating its new veteran hires into the fold. One military tradition Wal-Mart has adopted for it new veteran hires is the challenge coin. Traditionally, challenge coins that bear military insignia are given to prove membership when challenged and to enhance morale. Challenge coins date back to World War I and provided soldiers with a way to identify themselves as part of a squadron or military branch, when they had been stripped from the uniforms.


Profit said the Wal-Mart challenge coin is given to new veteran hires and by tradition signifies their belonging to the Wal-Mart family.

Earlier in the day Shinseki said he toured the VA in Fayetteville and met with a few Arkansas legislators. These meetings were closed to the media.

Northwest Breast Imaging Center at Willow Creek in Johnson, announced it recently began offering digital tomosynthesis, which relies on three-dimensional imaging to screen for breast cancer.

A new study published online in the journal Radiology indicated digital mammography is the gold standard for breast cancer screening, but it can yield false positives associated with a high recall rate in which additional imaging or biopsy is performed at added costs.

Digital tomosynthesis has been shown to reduce the recall rates for false positive, especially in younger women with dense breast tissue.

Tomosynthesis allows for 3-D reconstruction of the breast tissue, which can then be viewed as sequential slices through the breast.

The addition of tomosynthesis to conventional digital mammography resulted in a 30% reduction in the overall recall rate, according to a study by Yale University of Medicine

Bankruptcy Judge James Mixon is accepting bids for the sale of Metropolitan National Bank from its insolvent holding company, Rogers Bancshares.


The stalking horse bidder, Ford Financial, proposed to the court a $74.2 million capital equity infusion and $16 million in cash if it’s allowed to acquire the Little Rock-based bank.
 Ford Financial is run by Texas banker Gerald J. Ford and partner Carl Webb who placed their bid for Metropolitan National.


Judge Mixon is accepting bids through Sept. 3. The court will award the bank in a hearing on Sept. 12, following an auction process.


In a recent filing, Rogers Bancshares said it needed to sell its bank, which is subject to deterioration and the loss of 440 jobs, unless the proposed buyer can inject significant capital, which the Ford Fund is willing to do.


As of June 30, Metropolitan National had $62.177 million in equity capital and reported earning $1.944 million in net profits for the first six months of this year. 
The bank’s key capital ratios showed improvements from a year ago, but remain below the ordered minimums by federal regulators.


A capital infusion of $74.2 million would restore the bank to sound financial footing with $136 million in equity for a $1 billion bank.


Creditors of Rogers Bancshares asked the court to stall the sale of the holding company’s only real asset, but Judge Mixon ruled the sale will happen and he reduced the bidder’s fee from $3.25 million to $640,000.

Metropolitan reported $69 million in real estate on its books at the end of June. Much of that property is in Northwest Arkansas, where the bank aggressively loaned more than $500 million to developers between 2005 and 2007.


The bank reported $28.977 million in nonaccrual loans at the end of June. Nonaccrual loans shrunk from $66.615 million a year ago, according to the bank’s recent filing with the Federal Deposit Insurance Corp. 


Metropolitan has roughly 5.82% of the deposit market share in the Little Rock metro area. It ranks seventh, behind Bank of America, Regions, Centennial, First Security, Arvest and Bank of the Ozarks, according to FDIC reports as of June 2012, the last data  available.

In Northwest Arkansas the bank has less than 1% of the deposits, ranking 22nd in market share.

Wal-Mart Stores Inc. is reportedly considering a bid for a Hong Kong supermarket chain ParkNShop valued at $4 billion, by owner Whompoa Ltd., according to Reuters.

The deadline for bidding is set for Aug. 16, sparking interest from corporate suitors and private equity buyers.

Wal-Mart announced earlier this year it would open 100 new stores in China by 2016. 
Acquisition is the quickest way for the retail giant to accomplish that goal as there are formidable infrastructure costs and logistics challenges with building from the ground up in China.

The Bentonville-based retailer already operates 380 stores in China and continues to transform those operations into its “productivity loop” that allows for everyday low prices for consumers and everyday low costs of goods for the retailer.

Wal-Mart declined to comment on the proposed bid.

Wal-Mart Stores Inc. agreed to improve the safety conditions in 2,857 U.S. Wal-Mart and Sam’s Club stores following health hazards uncovered by the federal inspectors during a routine safety audit in 2011.

The settlement agreement with the U.S. Department of Labor announced today (Aug. 7) resolves two enforcement cases that began in 2011, and includes provisions for the Bentonville-based retailer to enhance safety and health practices and training related to trash compactors, cleaning chemicals and hazard communications
corporate-wide.


The retail giant has also agreed to pay a $190,000 fine to fix hazards discovered during an Occupational Safety and Health Administration inspection at a store in Rochester, N.Y.


“This settlement will help to keep thousands of exposed Wal-Mart workers safe and healthy on the job,” said Assistant Secretary of Labor for Occupational Safety and Health Dr. David Michaels. “We hope this sends a strong message that the law requires employers to provide safe working conditions, and OSHA will use all the tools at our disposal to ensure that all employers follow the law.”


Under the settlement, trash compactors must remain locked while not in use, and may not be operated except under the supervision of a trained manager or other trained, designated monitor.

The assessed fine relates to safety citations pertinent to the corporate-wide trash compactor abatement, the settlement affirms one repeat lockout/tagout citation, two serious lockout/tagout citations, two serious confined space citations, and one serious machine guarding citation.


"We have long-standing policies and training requirements in our stores designed to ensure the safety of our associates. When we learned of concerns raised by OSHA at our Rochester, N.Y. store in 2011, we immediately addressed them and reinforced the company’s guidelines. We will continue providing training to our associates nationwide, including addressing the areas outlined in the settlement. We are pleased this resolves the issues that were raised," said Randy Hargrove, corporate spokesman at Wal-Mart.

According to the settlement, Wal-Mart agreed to improve its hazard communications training; and, for cleaning chemicals, will enhance its procedures to ensure that employees do not handle undiluted chemicals. Also, the company must ensure that a protective protocol is in place in case of any malfunctions with a store’s cleaning chemicals dispensing equipment.

Other citations affirmed in the settlement include one repeat electrical hazard citation, one serious citation for obstructed exit routes, two serious machine guarding citations, one repeat other-than-serious platform fall hazard citation, and 11 serious bloodborne pathogens citations.


A summary of the agreement will be posted in each affected store.
 The settlement agreement can be viewed here.

The $150 million renewable fuels plant co-owned by Tyson Foods and Syntroleum Corp. remains idle despite favorable operating conditions.

The Dynamic Fuels venture in Geismar, La., takes chicken fat or other low-margin greases and converts it into renewal fuel that can be used to fly jets or run trucking fleets. The plant was idled in November because of deteriorating market conditions and the partners anted up $7.3 million this spring to replace a catalyst in the facility that will increase production efficiency. That catalyst was installed on June 28 and the July 30 restart date has come and gone with no signs of plant activity.

Tyson Foods CEO Donnie Smith said this week the plant is ready to open, but restart has been postponed as its partner, Syntroleum, is entertaining offers to sell its 50% interest in the project.

Smith said the plant would not be restarted while Syntroleum is shopping its interest with potential buyers.

He said Tyson remains ready to work with Syntroleum or a new partner to get the plant up and running again, once the co-ownership issues are resolved.

POSSIBLE SALE
Syntroleum told investors today (Aug. 7) during its conference call that the Dynamic Fuels committee has not yet agreed on a list of criteria required to restart the plant. That criteria involves sourcing feed stock and risk planning for continued operation. Analysts peppered Syntroleum executives during the call with numerous questions as to why the Dynamic Fuels plant has not been restarted, given that the economic margins are as favorable as they have ever been since the plant was completed.

Syntroleum said it obtained unsolicited offers for its ownership interest in the plant in July and felt an obligation to its shareholders to explore the possibilities of raising shareholder value. The company has retained Piper Jaffray as a consultant to explore the sales opportunity.

Syntroleum investors remain concerned that the plant is sitting idle and they began selling off shares following Wednesday’s conference call. Syntroleum’s stock price fell 6.5% on Wednesday, closing at $6.46 per share.

The cost of sitting idle is about $2.5 million — roughly $2.1 million of that are cash expenses and $400,000 in depreciation, which is split equally between the two partners. Syntroleum said in May that it will cost about $20 million in working capital to restart the plant, most of which is the investment in feedstock.

At the end of June, Syntroleum had $19.7 million in free cash, which is more than enough for its half of the restart charge.

Gary Roth, CEO of Syntroleum, said in today’s conference call that the weak operating metrics which existed late last year have been resolved as the $1 per gallon tax credit was renewed by Congress in January. He said the profit margin per gallon if the plant were running now would be slightly above $1, and that includes government support.

Roth said the partners have ordered a new pump which will be delivered and installed in October to increase efficiency. However, the plant restart date has not been set.

PLANT HISTORY
Each of the partners committed $75 million toward the $150 million renewable fuels plant venture. They secured $100 million in low interest — 1.3% —  government bonds provided to ventures that created jobs in Louisiana. At the plant peak it was to employ 75 workers. The balance of the $150 million was contributed equally between the two partners.

There have been glimmers of hope since 2010, at one time providing test fuel for the U.S. military and a deal in February 2012 to provide renewable diesel to Norfolk Southern Corp.

During September and October 2012, the plant produced 8.8 million gallons of renewable fuel — running at roughly 71% capacity levels. Roth told investors that if the plant were to restart tomorrow it could run at near 100% capacity given the feedstock availability.

Syntroleum reported a net loss of $1.3 million, or 13 cents per share, in the quarter ended June 30.

There is three-month lag in reporting on Dynamic Fuels, but for the six months ended March 31, Syntroleum reported earnings from Dynamic Fuels of $5.2 million. This compares to a loss of $3 million in the same period last year.

During the six months ended March 31, the plant recognized revenue of $26.7 million from the re-instatement of the tax credits for the production of renewable diesel and qualified alternative fuels.

A NEW VENTURE?
Syntroleum is no longer putting all of its hopes in Dynamic Fuels. Company officials recently entered into memorandum of understanding with another energy company for a new venture. Syntroleum said it’s conducting a feasibility study that is looking at nine potential sites in which they are considering the construction of a plant that will convert gas-to-liquids.

He said Syntroleum was recently approached by the energy firm for another venture in which he sees ample opportunities, given the availability of and demand for natural gas, without the need of government subsidies.
 

Recent jobs data shows that Arkansas has not been able to maintain a rebound in manufacturing jobs like has been seen in the U.S. and most neighboring states.

Beginning in early 2010, the U.S. manufacturing sector began to show signs of life, with economists and other market watchers suggesting that gains in the auto and housing sectors were boosting manufacturing employment.

Arkansas’ manufacturing sector was hard hit when the U.S. housing market crashed in 2007-2008, said Grant Tennille, executive director of the Arkansas Economic Development Commission. The state, according to Tennille, was home to numerous forest products and home appliance manufacturers.

“A lot of that went dark during the worst of the housing crunch,” Tennille said of the forest products industry.

In May 2010 national manufacturing sector employment improved past 11.531 million jobs. The sector continued to grow, reaching 11.988 million in February 2013. However, the sector shed an estimated 13,000 jobs between February and July.

Historically, U.S. manufacturing sector employment has ranged between 19 million and 17 million. It reached a high of 19.553 million jobs in June 1979. Sector employment has been stuck below 12 million since May 2009. Prior to May 2009, the last time sector employment was below 12 million was May 1941.

Arkansas initially saw a similar pattern. In early 2010, the state’s manufacturing sector appeared to find a bottom and entered a 14-month period (April 2010-May 2011) in which employment remained above the 160,000 level. By early 2012, sector employment resumed its decline. May and June of 2013 marked the first time employment in the sector was consecutively below the 155,000 level.

The U.S. Bureau of Labor Statistics estimated there were 154,300 manufacturing jobs in Arkansas during June 2013. Employment in the sector is down 24.6% compared to June 2003, and is down almost 38% compared to the sector high of 247,300 set in February 1995.

Arkansas’ three largest metro areas have seen double-digit percentage declines in manufacturing job levels between June 2003 and June 2013. Jobs in the sector are down 23% in central Arkansas, down 34.16% in the Fort Smith region, and down 20.8% in Northwest Arkansas.

MASSIVE INVESTMENTS
Tennille said several industries are returning to Arkansas and are making “fairly massive” investments to retool plants. The investments, which boost productivity by modernizing facilities, don’t always lead to more jobs.

“They are coming back but not with anywhere near the same number of people. ... We’re not getting the jobs back, which is frustrating,” Tennille said.

Also frustrated is Greg Kaza, executive director of the Arkansas Policy Foundation.

“The recovery, as I’ve said many times, is weak at best, and that shows up in the employment numbers,” Kaza said. “It’s better than being in a recession, but it’s nowhere near where it should be in an expansion.”

REGIONAL MANUFACTURING COMPARISON
Between June 2010 and June 2013, Arkansas lost 7,700 manufacturing jobs, a decline of 4.75%. Among Arkansas’ neighboring states, only Mississippi also saw a decline in manufacturing jobs in the same period, but that was just a 500 job loss, or a decline of 0.36%.

During the same three-year period, the manufacturing workforce grew by 3,600 jobs in Louisiana; grew by 9,500 jobs in Missouri; grew by 12,300 jobs in Oklahoma; and grew by an impressive 55,900 jobs in Texas. Nationally, there was a 3.7% gain in manufacturing employment between June 2010 and June 2013. However, all states have seen a manufacturing workforce decline when compared to the previous decade (June 2003).

Arkansas’ durable-goods manufacturing sector GDP has also lagged most of its neighboring states and the country. The GDP figure partially speaks to the value, or productivity, of the sector. The state’s manufacturing sector saw a 0.37% gain during 2012. The durable goods sector GDP was up 0.22% in Louisiana; up 0.68% in Mississippi; up 0.37% in Missouri; up 0.78% in Oklahoma; up 1.08% in Tennessee; up 0.72% in Texas and up 0.55% across the U.S.

FEWER JOBS AND CHANGING SKILL SETS
The dynamic of large capital investments with few jobs is not unique to Arkansas. A report issued June 19, 2013, by Congressional Research Service, indicates that recovery in the manufacturing sector will deliver more output, rising productivity, and fewer jobs.

“Although a variety of forces seem likely to support further growth in domestic manufacturing output over the next few years, including higher labor costs in the emerging economies of Asia, higher international freight transportation costs, and increased concern about disruptions to transoceanic supply chains, evidence suggests that such a resurgence would lead to relatively small job gains within the manufacturing sector,” noted Marc Levinson, report author and a section research manager for CRS.

Levinson also noted that manufacturing jobs included fewer “physical production” jobs and more managerial and technical skills jobs.

“These changes are reflected in increasing skill requirements for manufacturing workers and severely diminished opportunities for workers without education beyond high school,” according to Levinson.

Tennille said company officials considering expansion or relocation are asking more questions about skills and workforce quality. Financial incentives remain important, but if a company can’t find the people, the value of financial incentives diminish.

“A lot of it comes down to, ‘Can you get me the people?’” Tennille said of discussions in trying to recruit a company to Arkansas. “And, ‘What does your training environment look like?’”

‘VIGOROUS DISCUSSION’ NEEDED
Kaza said national economic factors have hit Arkansas hard, but notes that they hit all the states hard. He believes Arkansas’ overall business climate and economic development policies are also to blame for the state’s poor manufacturing numbers compared to nearby states.

He recommends a hard look at the state’s tax code, and specifically noted that Arkansas should more aggressively phase out the capital gains tax. The tax has fallen from 7% to 3.5% since 1995.

“Then you could say to business, ‘We’re one of only 10 states to not have a capital gains tax,’” Kaza said.

Kaza, who is a critic of the Quick Action Closing Fund program utilized by Gov. Mike Beebe to land large jobs projects, wants to see a “vigorous discussion about whether some of these programs are working” with respect to retaining and recruiting manufacturing jobs.

“What they’ve had in place for more than a decade isn’t working. ... Historically it should be producing more, and the sad reality is that we will likely continue to tread water and shed jobs,” Kaza said.

Arkansas legislators have in recent years moved to lower tax rates on manufacturing. Some of the changes include a lowering of the sales tax on utilities paid by manufacturers and exempting repair parts and labor for pollution control machinery and equipment from the state sales tax. The parts and labor exemption is scheduled to begin Oct. 1.

‘CHANGES NEED TO BE RADICAL’
Kaza believes some of the moves are not enough, and believes “radical” ideas should be tried. One of those ideas is what Kaza calls the “Razorback Production Zone.” The zone waives all or most taxes for qualifying manufacturing operations, with state revenues offsetting the loss of property tax revenue for school districts. It’s a concept the Arkansas Policy Foundation has encouraged the AEDC to consider.

“That would have been a powerful incentive to keep Whirlpool in Fort Smith. ... That was an idea we floated, but it didn’t go anywhere,” Kaza explained. “I would argue that we put them (new ideas) out there and see what happens. ... The changes need to be radical. There can’t be any tweaking around the edges.”

Benton Harbor, Mich.-based Whirlpool announced in October 2011 it would close its refrigeration production plant in Fort Smith. The move resulted in about 1,000 lost jobs when the plant closed in June 2012. However, Whirlpool, which employed more than 4,500 at the Fort Smith plant in 2006, moved production out of the plant for several years prior to the closing.

Tennille argues that Arkansas has been aggressive in its efforts. He points to the Big River Steel project as an example. Big River Steel, announced in late January 2012, will eventually be a $1.1 billion investment and provide a minimum of 525 jobs averaging $75,000 a year. It will be built in Mississippi County near Osceola.

Gov. Mike Beebe and AEDC officials pushed for incentives through Amendment 80, which Arkansas voters approved to provide bond financing for large economic development projects. The package was approved by the Arkansas General Assembly in the recent legislative session and provides a revenue stream for the $125 million bond package of incentives and loans for the superproject.

MANUFACTURING IMPORTANCE
Kaza also suggested that some in state government or other circles of influence may believe manufacturing should no longer be a primary focus for economic development efforts. In a state with 1.184 million nonfarm jobs (June 2013), the manufacturing sector is now just a little more than 13% of the job total. At its peak, Arkansas’ manufacturing sector represented almost 25% of all jobs.

“They may just say it’s only 155,000 jobs ... and that maybe the state should instead focus on knowledge-based industries,” Kaza said, adding that he believes it would be a mistake to reduce efforts to support the manufacturing sector.

Maintaining a focus on manufacturing is a point on which Kaza and Tennille agree.

Tennille admitted that he does talk to people “very much into the high-tech space who think they hold the keys to the kingdom.” But he believes manufacturing is an important part of a “diversified approach” to economic development. Tennille also believes a healthy middle class needs a healthy manufacturing sector.

“People making things is what built this country,” Tennille said. “The mechanism by which the middle class was built and sustained, was ripped out of this country” when manufacturing jobs were outsourced.

Levinson, in his Congressional Research Service report, provides an argument to those who might say manufacturing recruitment is not the best approach to increasing jobs.

“As manufacturing processes have changed, factories with large numbers of workers have become much less common than they once were. This suggests that promotion of manufacturing as a tool to stimulate local economies is likely to meet with limited success; even if newly established factories prosper, few are likely to require large amounts of labor,” Levinson wrote.

Kaza believes manufacturing can again be a larger part of the national and state economy. He thinks that will happen only if policy makers look beyond traditional economic development tools.

“I’d like to be positive. I think we can compete. ... We can do it. When people come in with this defeatist attitude that we can’t compete in the U.S., I respectfully disagree. We just have to be willing to try something different. ... The first step to addressing a problem is to admit that you have a problem.”