Gift cards are personal, practical, and they come with a price tag that matches anyone’s budget. That's why the National Retail Federation expects 80% of shoppers will add gift cards to their basket this holiday season.

But as time is ticking down, the rise in gift card popularity may not be enough to save face for the nation’s retailers this holiday as they are forced to discount high levels of inventory amid a lackluster holiday shopping season, according to Wall Street retail analysts.

NRF expects shoppers will dole out an average $163.16 on gift cards ahead of the holidays, up 4% from what they spent last year and the highest level in the federation’s 11-year survey history. Total spending on gift cards will reach $29.8 billion, during the holiday season alone. For the full year, gift card purchases are expected to surpass $118 billion in sales, an 8% increase over 2012 as they have become a popular year-round gift, according to CEB Tower Group Advisory.

“Shoppers today recognize gift cards as the perfect fool-proof option for friends and family,” said NRF President and CEO Matthew Shay.

CARD PREFERENCE
Consumers like Brandy Arena, a first year law suit at Loyola University in New Orleans, prefer getting gift cards and request them when asked what they might want for Christmas.

“My favorite cards to get are Visa, Amazon or Barnes & Noble,” Arena said.

Peggy Knight of Rogers said her adult kids love getting gift cards so they can shop after Christmas sales and get more "bang for their buck" and she likes receiving them for the same reason.

“We all like Visa gift cards and I love Amazon,” Knight said.

The NRF survey said gift cards are welcomed by consumers of all ages, while those over age 65 are the most likely to give them out. Department stores remain the most popular gift card choices among those surveyed by NRF garnering 40.3% of the vote. Restaurants also are popular with 34% but nearly one in five (19%) will give the gift of a hot cup of coffee – up from 13% in 2009. Another  20.1% will purchase gift cards from an electronic store and 12.7% will head to an online merchant.

“Gift givers know that many of their loved ones may have been holding back on spending on themselves all year long, and would love nothing more than to receive a gift card that allows them to purchase whatever they want,” said Prosper’s Consumer Insights Director Pam Goodfellow.

Despite the rising popularity of gift cards, roughly one in four still thinks they are too impersonal.

CHALLENGING CLIMATE
Economist agree that gift card popularity and increased online shopping won’t likely be enough to save the holiday for retailers facing fierce competition, high inventory levels, inclement weather and wobbly consumer confidence.

Despite massive promotions from the nation’s largest retailers, this holiday season is shaping up to be rather challenging. It began with a 2.9% drop in sales during the Thanksgiving/Black Friday weekend. Retail estimates of $57.4 billion in sales were rang up in the four-day period by the 141 million people who shopped. The number of shoppers rose by some 2 million more than last year but the average consumer spent $407, roughly 4% less than last year, according to a NRF survey.

Retailers didn’t get what they wanted from Black Friday and they will need to make it up in the next few days, forcing some panic sales, according to Poonam Goyal, an analyst for Bloomberg.

Nearly one-third of all consumers are expected to spend less in 2013 than they did in 2012, according to a recent survey from global research consultancy TNS.

“We believe retailers have to go the extra mile this holiday season with compelling pricing, promotional strategies, and delayed payment options to attract the level of shoppers they are custom to seeing,” said Danica Konetski, author of the study.

Konetski reports 34% cited increased living expenses and their lack of disposable income for the reason why they are scaling back this holiday.

Consumers who rely on government programs such as SNAP and WIC are facing even tougher choices this holiday season, as the 16-day partial U.S. government shutdown and recent expiration of increases in the aid programs take their toll. Of those who are on the program, nearly 44% are looking to spend less this holiday season. Kantar Retail said this is a telling number given nearly 8% of primary shoppers use the SNAP/WIC programs.

“We believe retailers have to go the extra mile this holiday season with compelling pricing, promotional strategies, and delayed payment options to attract the level of shoppers they are custom to seeing,” Konetski said. “Our research indicates shoppers with lower budgets tend to be more brand loyal, so it’s important for retailers to be proactive and do what is necessary for the consumer this holiday season. Their efforts will go a long way in engaging customers and generate long-term trust.”

CRUNCH TIME
With just eight shopping days until Christmas it is evident that consumers are ready to wrap up their shopping lists before it’s too late. NRF found that nearly half (49.9%) of holiday shoppers indicate they plan to do the remainder of their holiday shopping online, the highest percent in the survey’s 11-year history. As of December 9, before the most recent weekend, 32 million holiday shoppers had not even started shopping. 

“It comes as no surprise that Americans are eager to shop online in the coming weeks as busy schedules and a shift in the calendar have made the convenience offered by retailers’ mobile apps and websites even more attractive this year,” said Shay.

He said competitive prices and free shipping offers have helped win favor with consumers.

NRF said as crunch time begins 45% of consumers surveyed said they will wrap up their shopping at their favorite department store and 37% will head to discount stores, while 13.7% will be at close-out stores.

“Given all the outside factors that are impacting the holiday season, retailers have their work cut out for them, said Konetski.

Consumers who find the number of credit cards in their wallet stacking up over time are not alone, according to a new survey by CardRatings.com.

The survey found that Americans can be easily tempted into buying a new card with great rewards perks or a celebrity endorsement, but they’re even more likely to still be hanging on to their old credit card despite the new card in their wallet. More than two-thirds of the respondents have held one of their current credit cards for five years or more and 37.5% have had a card for at least 10 years.

Among the 50-to-64-year-olds age group – the oldest in the survey 76.5% held cards for five years or more, while 61% had the cards in excess of 10 years. Just because these cards are still in wallets, does not mean they are still getting used, as roughly half of the survey respondents said that they no longer use their oldest credit card.

Consumers said they are more apt to use the newer card. About 35% added a new card in the past year and more than half of consumers added a new card in the past two years.

While consumer confidence has been wobbly this year, credit markets have been a little more lax in hopes of wooing those with high credit scores. CardRatings.com found that consumers have a hard time turning down cash-back reward offers and low introductory interest rates that often accompany new cards. Roughly 28% said this was why they signed up.

When it comes to the incentive, women are more likely to be drawn to cards with non-financial benefits such as concierge services, while men tend to go for the cards with sign up bonuses, according to the survey.

Credit cards stack up over time in consumer wallets. About 9% of millennials have four or more credit cards in their wallet. That number rose to 21% by age 39. The survey found one-third of baby boomers are carrying four or more credit cards at any given time.

Siloam Springs-based Allens Foods could soon be gobbled up by Seneca Foods Corporation as the New York-based fruit and vegetable manufacturer entered into an asset purchase agreement for $148 million on Tuesday (Dec. 17).

The deal would give Seneca essentially all of the operating assets of Allens Foods, subject to a working capital adjustment, plus the assumption of certain liabilities, according to the release. The transaction would take place through a court-supervised process under Section 363 of the U.S. Bankruptcy Code and is subject to an auction and bankruptcy court approval.

On Oct. 28, Allens filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Arkansas. The purchase agreement will serve as the "stalking-horse bid" in the auction process.

Allens will seek bankruptcy court approval of Seneca's asset purchase agreement as the stalking horse bid and certain bid procedures at a hearing in the near future. The preliminary hearing for the bankruptcy scheduled for Dec. 16 was postponed until Jan. 17.

If Seneca is successful in its acquisition of these assets, they will fit with its long-term growth objective to expand the line of canned vegetable offerings to include sweet potatoes, southern vegetables, and broaden its offerings of dry beans and spinach.

Miller Buckfire & Co., LLC, a Stifel Company, is serving as the Seneca’s investment banker. Jaeckle Fleischmann & Mugel, LLP and Wright, Lindsey & Jennings LLP are serving as legal advisors.

SECOND TIME
This is not the first time these two food processors have tried to join hands. In July 2011 Seneca and Allens signed a memorandum of understanding in hopes of a merger of the two companies in an all stock transaction.

But after several months of due diligence by both parties the deal was terminated in September 2011. Seneca said it had hoped at that time that Allens would become a subsidiary of Seneca Foods, but no terms were ever disclosed.

Seneca Foods is the nation's largest processor of canned fruits and vegetables. The company reported weaker net earnings for the fiscal six months ended Sept. 28 of $8 million, this compared to $22.7 million for the same period in the prior year. However, net sales increased $20.1 million, or 3.7% to $568.8 million in the first six months of fiscal 2013.


SPINNING DOWN

In March 2012, Allens sold off four of its six frozen vegetable operations to the French company, Bonduelle Group.

Both companies called the deal a “win-win,” but no terms were released.

Then CEO Rick Allen, said at the time the move was consistent with a renewed focus on Allens core business. He expected then to expand in the areas it was most passionate about, canned Southern style vegetables.

Allens entered the frozen vegetable segment by acquiring the Birds Eye brand products in 2006.

Researchers at the University of Arkansas have developed a risk-assessment tool to help retailers implement mobile point-of-sale technologies, according to a UA statement issued Tuesday (Dec. 17).

Their study identifies the challenges of such mobile systems as  customers checking out with their smartphones and employees processing transactions on the sales floor with tablets and other mobile devices.

“Only a few years ago, these technologies and the world they created were considered utopian,” said John Aloysius, associate professor of supply chain management in the Sam M. Walton College of Business. “But today, in many scenarios, what was once considered utopian has become very real. The technology is ready – retailers such as Walmart, Nordstrom, and Stop & Shop have already rolled out different versions. Eighty percent of all retail is considering using one form of it or another, and 30 percent have already deployed at least pilot projects.”

Mobile point-of-sale technologies include current and emerging systems that allow customers to register bank accounts and credit card accounts with stores, so that they can use smartphones to scan items and, upon leaving the store, have those items automatically charged to their accounts. According to UA officials, such technology would provide greater freedom and convenience for the customer and both marketing and cost-saving opportunities for retailers.

With support from the Retail Industry Leaders Association, Aloysius worked with Viswanath Venkatesh, distinguished professor of information systems in the Walton College. They identified asset risks associated with these emerging technologies and to gauge consumer attitudes about them. The researchers studied 26 different retail scenarios and found that there is no “one size fits all” system.

For retailers, solutions to asset-protection challenges posed by mobile, point-of-sale technologies must be highly individualized and tailored to fit the specific needs of each retail business. Customers adopt these technologies at varying levels and speed, based on age, gender and income, the researchers found. The main inhibitors to their adoption are privacy and security.

To address the needs of retailers, the researchers developed a risk-assessment matrix that provides a framework through which stores can find solutions uniquely suited to their business and customers. The retail association representatives said the study is the most comprehensive of any on a retail innovation, and that the matrix is a useful and practical tool available to retailers to help them decide which technology they want to deploy and how to design processes around the technology.

The matrix focuses on five risk areas – technology, employee, retailer/store, product and customer risk – within the three main stages of retail transactions – scanning, payment and validation. Validation refers to exit inspections and other control audits to confirm that the person using the technology and smartphone is the same person tied to the account charged.

The researchers paid special attention to privacy. They found many customers dislike collection of personal and credit card information via their mobile devices and are worried that retailers’ databases could include errors and inaccuracies related to this information. Customers are also concerned that unauthorized employees or hackers could access their personal and credit card information. Customers also do not want their personal and credit card information used by retailers for secondary purposes, such as marketing campaigns and promotional messages.

Identification of these concerns indicates that it may take significant time to fully adopt these technologies, Aloysius said. But, if and when these concerns are addressed, there are significant advantages to be gained from the technology.

“There are tremendous benefits associated with mobile shopping, including the ability to engage with customers while shopping and influence purchasing decisions,” Aloysius said. “But the associated privacy issues need to be carefully examined because they could cause strong customer rejection.”

Ernst & Young and Checkpoint Systems also supported the study.

Venkatesh holds the George & Boyce Billingsley Endowed Chair in Information Systems.

Officials with Epoxyn Products announced Tuesday (Dec. 17) plans to expand its manufacturing facility in Mountain Home and create 50 new jobs.

Epoxyn is a Hamilton Scientific company and a leading manufacturer and fabricator of high-performance work-surface solutions for research, educational and health-care laboratory environments.
 
“As the industry leader in laboratory casework, workstations, fume hoods and epoxy resin tops, we are focused on investing in our business to provide our global customers with the most innovative and highest quality products in the industry.” Jack Roberts President and CEO of Hamilton Scientific, said in a statement issued by the Arkansas Department of Economic Development.

Epoxyn Products is part of Hamilton Scientific, a 132-year-old laboratory furniture and equipment supplier with corporate headquarters located in De Pere, Wisc. Epoxyn offers epoxy and phenolic resin, the two premier laboratory work surface materials. The company’s resin products include chemical-resistant, laboratory-grade epoxy work surfaces, sinks, balance tables, pegboards, fume hood tops and other components.
 
"Epoxyn's success is Mountain Home’s success," Gov. Mike Beebe said in the statement. "An Arkansas-based company with a good product, combined with a good local workforce, often results in the creation of more jobs and more investment. That's what we're seeing in Baxter County, and hope to see more of throughout Arkansas's manufacturing centers."

The nominees for the 2014 Henry Awards have been announced, with several cities and groups from the Fort Smith and Northwest Arkansas areas making the list.

The celebration, which honors individuals who have made significant contributions to the tourism industry in Arkansas, will take place at the Governor’s Banquet on Tuesday, March 11, 2014. The award ceremony will mark the conclusion of the 40th Annual Arkansas Governor’s Conference on Tourism, being held at the John Q. Hammonds Convention Center in Rogers.

The Henry Awards honor Henri de Tonti, the 17th century explorer considered one of the first “Arkansas Travelers.” The Arkansas Department of Parks and Tourism recognizes outstanding efforts in eight categories each year.

The nominees:
The Media Support Award, presented to a distinguished individual or organization for extraordinary attention to and/or support of Arkansas’s tourism industry through the use of media:
• KY3 TV, Springfield, Mo.
• Paula Morell, North Little Rock
• Southwest Times Record, Fort Smith

The Bootstrap Award, presented to an individual, organization, or community that has achieved significant success “on a shoestring,” having limited means to work with, either in resources or finances.
• Altus Veterans Memorial
• Eureka Springs Historical Museum
• Miller’s Mud Mill, Dumas

The Arkansas Heritage Award, presented to an individual, organization, or community that has made a significant contribution toward the preservation of some aspect of Arkansas’s natural, cultural, or aesthetic legacy.
• Arkansas Historic Preservation Program, Little Rock
• Arkansas Inland Maritime Museum, North Little Rock
• Hot Springs Historic Baseball Trail

The Grand Old Classic Special Event Award, presented to a festival, fair, or other special celebration which has “stood the test of time” and become an established example to follow.
• Enchanted Land of Lights and Legends, Pine Bluff
• Frisco Festival, Rogers
• Old Fashioned Square Gathering, Ozark

The Outstanding Volunteer Service Award, presented to a community, individual, or organization that, through outstanding volunteer spirit, has made a substantial contribution to Arkansas’s tourism industry.
• Central Arkansas Master Naturalists, Little Rock
• Garland County Historical Society, Hot Springs
• Twyla Gill Wright, Batesville

The Community Tourism Development Award, presented to an individual or organization which has achieved substantial success in the enhancement of its local resources through imaginative and innovative development efforts.
• Eureka Springs Arts Council
• Fort Smith Convention and Visitors Bureau
• SoMa District, Little Rock

The Natural State Award, presented to a community, organization, special event, or attraction which “stands out in the crowd” because of its unique appeal, media coverage, creative approach, and/or enhancement of community pride, thus benefiting the state’s quality of life.
• Grant County Museum, Sheridan
• Terra Studios, Fayetteville
• Wakarusa Music Festival, Ozark

The Tourism Special Achievement Award, presented to an individual or organization that has contributed to the tourism industry through leadership “above and beyond” the normal requirements of their jobs.
• Andy Thomas, Russellville
• Joe Harper, Heber Springs
• The Johnny Cash Music Festival, Jonesboro

During the ceremony, the Tourism Person of the Year will be announced, along with inductees into the Arkansas Tourism Hall of Fame. Selected by former honorees, the Tourism Person of the Year award is presented annually to an individual who has been actively involved in tourism and who has made a substantial contribution, within the past year, to the industry as a whole. Individuals who have been actively involved in tourism for many years and who have made sizeable contributions to the betterment of the industry are considered for induction into the Arkansas Tourism Hall of Fame.

In an age of computerized inventories and modern technology that are a part of nearly all businesses, one Fort Smith hardware store is bucking the trend with a pencil and some paper.

Walrod's Hardware, located at the intersection of Midland Boulevard and Division, has been a staple of the community since 1987, when owner Jerry Walrod set up shop at the store's original location at Fresno and Jenny Lind.

The original Walrod's Hardware stood at that intersection from Oct. 1, 1987, until Sept. 13, 1992, when Walrod said the building owner wanted to tear the building down and allow a grocery store to be built at the back of the property, meaning he had to move and move quick.

"I had 15 adult volunteers, I had three kids, two ladies that worked for me part-time and a blind man and I told him he couldn't drive the truck. I told him I already had a truck driver," he said with a grin.

The merchandise was all moved in one day, establishing Walrod's as the north side's neighborhood hardware store for the last 21 years.

EXPERIENCE BENEFIT
And in those more than two decades, Walrod has established his store as not only the go-to place for anything a customer may want or need, but he has also established his store as the place to go when a customer is seeking knowledge and experience. Walrod said it is not a slight to his competitors, but instead points to his knowledge versus that of possibly younger and more inexperienced staffers at other hardware stores.

"Customers should be assured of finding some quality merchandise and definitely some help that they can utilize," he said. "A lot of the stores that they go to today – a lot of them are younger folks. They just don't have the experience yet and you end up being discouraged because you can't get any real help."

Walrod said customers have come to respect not only the level of knowledge he brings to the store, but also that of his one full-time employee, C.J. Blair.

"CJ's been with me 17 years and I mean, I'm not afraid to leave him here by himself and do frequently."

Blair, who came to work for Walrod during his senior year of high school, explained that it's not only knowledge that customers seek from him and Walrod, but also follow-through.

"When we start with a customer, we stay with them. We get them what they want. We get them in and get them out, you know?"

Walrod and Blair know where every hammer, wrench and screw are located in their store by heart and keep the store's books by hand, itself an impressive feat.

"We pretty well know when we've got to have something," Walrod said. "When I forget something, he (Blair) remembers. If he forgets, I remember. It just seems like we play off of each other all the time. No, it's not a computerized system. …I had a computerized system when I first started and it seemed that with the amount of customers I had at the time, I was wasting a lot of time and paperwork."

SYSTEM CHANGES
And while Walrod's system may have simplified the inventory and accounting for the store, it has become more and more of a challenge when he attempts to place orders with his various suppliers, the largest of which is True Value.

"What I'm having trouble with now is my suppliers are high tech. I'm low tech. And my suppliers are saying the computers are telling them no, we don't need to stock this item any more because it's not selling well, it's not making us money. So it is making it more difficult for me to obtain merchandise."

But it is becoming increasingly harder for small mom and pop outfits like Walrod's to keep up in the digital age and the age of big retail.

A September 2013 report from IBISWorld says the U.S. hardware market is a $22 billion  industry, with an estimated 16,386 businesses and more than 140,000 employees.

And while IBIS says the recovering national housing market will boost business for hardware stores, consumers are turning more toward the big-box outlets.

“The industry will continue to face challenges, despite an improving economy. Competition from big-box home improvement stores will threaten operators, with consumers choosing to make purchases from stores that offer a large variety of products and convenience,” noted the IBIS report.

The report also notes that no single company has more than 5% of the U.S. marketshare.

‘AIN’T NO MUSEUM’
For the uninitiated, Walrod's may look like a store with a lot of merchandise and even more memorabilia, stacked in every nook and cranny imaginable. But Walrod himself pointed to a sign in his store that reads "This ain't no museum. Everything's for sale."

And everything means everything.

"And I have in fact had to sell a few things because I've got that sign up there that I had really intended to keep. But it's been good and people enjoy it."

With so much merchandise placed in every free spot in the store, it can be a challenge to navigate the narrow aisles. But Walrod said there is no safety problem, having passed fire inspection each year, though he admits the fire department will just let the store burn should it catch fire.

"I try to follow the rules. You've got to have your fire extinguishers where they will work. I have been told by the fire department, though, that if this place ever catches on fire, they're just going to shoot water at it. They're not coming in because it is so tight. If something catches on fire, it can fall and hurt them. But we've not had any accidents like that at all. We've not had any accidents. I know it's packed up in here high, but we try to make it as secure as possible."

NO PLANS TO RETIRE
As for how much longer Walrod, who did not disclose his age, would keep chugging along at his little hardware store on the north side of town, he hopes to work until he meets his maker, though he admits his work pace has slowed since having a heart attack just a few years ago.

"Well, I've told customers this for years. I think it's been written before, too. I hope to live to be 102 and fall dead waiting on my next customer. But now I have this defibrillator, and it won't happen because momentarily I'll be gone, and a minute later this thing is going to hit me real hard and I'll be back to say, 'Have a good day.'"

Whenever he does go, it is anyone's guess as to what will happen to the hardware store. Walrod said he is open to possibly selling it to one of his grandkids if they're interested. Granddaughter Ella has taken an interest in the store and has helped her grandpa ring sales on Saturday mornings. But there's one other person who may be interested in the store, as well.

"One of these days I might even own the store," Blair said.

The cash burn at Tulsa-based Syntroleum Corp. could soon be over as Iowa-based Renewable Energy Group Inc. announced plans to acquire the Tulsa-based energy company, pending shareholder approval. Syntroleum is a 50% partner with Tyson Foods in a large diesel fuel production plant in Louisiana.

Renewable Energy has agreed to buy substantially all of Syntroleum’s assets and assume all the material debt as well. The terms call for Syntroleum to receive 3.976 million shares of REGI common stock worth an estimated $42 million.

“Today’s announcement marks the culmination of our comprehensive process to review Syntroleum’s strategic alternatives to enhance shareholder value,” said Syntroleum President and CEO, Gary Roth. “We are extremely pleased to have found a great partner to provide our stockholders with the opportunity to participate in a company with significant upside potential.”

Shares of Syntroleum closed Tuesday (Dec. 17) at $2.46, down 12 cents. Following the announce of the buyout shares soared 52.44% to $3.75 in aftermarket trading.

Aside from the 101 patents Syntroleum has acquired for its Fischer-Tropsch gas-to-liquids and renewable diesel fuel technologies the past few years the firm has been heavily involved in a joint venture with Tyson Foods. These two partners each own a 50% interest in Dynamic Fuels, a 75-million gallon renewable diesel production facility in Geismar, La., which has been inactive for the past year.

Tyson Foods CEO Donnie Smith told The City Wire earlier this year that the plant would likely remain idle as long as its partner was shopping its interest. He said Tyson would be willing to work with a new partner if one is presented. Tyson did not immediately return a request for comment regarding the pending buyout by Renewable Energy Group.

Each month the Geismar plant sits idle the cash burn is roughly $1 million for each partner. Aside from the monthly cash burn, Syntroleum execs estimate the venture has lost out on roughly $20 million in potential sales since July because the partners can’t reach amicable restart terms.

REGI owns and operates eight active biodiesel refineries in four states with a combined production capacity of 257 million gallons. The firm also distributes biodiesel through a national network.

“Combining Syntroleum’s renewable and synthetic fuel technologies with REG’s expertise in biodiesel production, sales, marketing and logistics should be a positive outcome for investors in both companies,” said Daniel Oh, CEO of Renewable Energy Group. “This will help us grow our advanced biofuel business, enhance our intellectual property portfolio, expand our geographic footprint and launch REG into new customer segments.”

He added that the 50%-ownership in Dynamic Fuels represents an attractive entry for his firm in the renewable diesel sector.

Syntroleum’s board of directors unanimously approved the deal and recommends that its shareholders also vote in favor of the acquisition when presented a ballot.

Executives with Syntroleum will discuss the deal in more detail during its annual meeting of stockholders, which will take place at 2 p.m. on Dec. 18, 2013. The meeting will be held via live webcast. A link to a digital archive of the annual meeting webcast will be available on Syntroleum’s website 24 hours after the annual meeting has concluded.

Renewable Energy Group shares closed at $10.56, down 5 cents, but rose to $10.81 in after market trading following the announcement.

The City Wire will update this story as more details become available.

The Occupational Safety and Health Administration (OSHA) recently cited Tyson Foods for four workplace violations in its Hutchison, Kan., facility following a June 17 accident. The meat giant faces $147,000 in proposed fines.

The federal report notes that a worker's hand was severed by an unguarded conveyor belt as four workers were cleaning conveyor equipment at the end of their shift. In the cleaning process the guarding on the conveyor was removed. The injured worker’s garment and arm were pulled into the gears of the conveyer which had not been properly locked out to prevent unintentional operation, OSHA noted.

The company received two willful violations for failing to train workers on lockout/tagout procedures. One serious violation was issued for failing to provide fixed stairs to reach work areas on the plant's upper platform. OSHA issued a citation for one other-than-serious violation involved illegible markings on forklift levers.

This particular plant was inspected five times the past decade by OSHA and received 7 violations.

OSHA said the severity of the violations warranted placing Tyson Foods in its 
“Severe Violator Enforcement Program,” which mandates targeted follow-up inspections to ensure compliance with the law.

Tyson said it is reviewing the citation and will work cooperatively with OSHA to resolve these concerns.

"Workplace safety is very important to everyone at our company," Tyson spokesman Worth Sparkman noted in an email. "We expect our employees to perform to the highest safety and health standards across Tyson Foods operations at all times. Our efforts include safety policies and training, and the involvement of workers in our safety committees.”

Consumers may not be freely spending money on non-tangibles, but 2013 marked a turnaround year for investments in the old homestead, with an uptick in renovations that some economists say has been precipitated by the rise in U.S. home prices.

The tell-tale signs of consumer spending in the home renovation projects can be seen in the do-it-yourself big box retail sector with Home Depot. Fitch Ratings recently issued a note on Home Depot and the home renovation sector indicating a projected 5% growth in home improvement activity that has already taken place this year. Fitch expects home improvement spending will increase another 6% in 2014.

“The continued improvement in the housing market, as well as strong home price appreciation seen so far this year, are likely to drive higher spending on home renovation projects in 2014,” Fitch noted.

Steve Abshier, president of Abshier Construction in Rogers, said the back half of 2013 has been busy and he continues to get calls nearly every day for room additions as well as kitchen and bath upgrades.

“Most of my clients want to add square footage. I had a call today from a lady who is retiring and wants to add 600 square feet to her home. Right now I am finishing up another master bedroom suite addition,” Abshier said.

He said the jobs range from the low six-figures down to $400 and there is really no common patterns about what people are wanting. But the majority of his customers have paid in cash, with just one or two this year using home equity lines of credit.

Economists note that near 0% interest rates and record high stock valuations have consumers sitting on mounds of cash which they have steadily been pumping back into their homes nearly all year long. Fitch said retailers like Home Depot have benefited from that cash spend posting strong comparable sales growth since the spring, up 10.7% in the second quarter and 7.4% higher in the third quarter. Meanwhile Fitch expects comp sales to grow in the low mid-single digits over the next two years.

FINANCE OPTION
As real estate values continue to rise, homeowners will have more opportunity to secure home equity lines of credit. Median home sale prices across Northwest Arkansas have risen 24% in the past two years, according to MountData.com.

“We’ve begun to see demand grow at a modest but increasing rate for home equity lines of credit over the last year," said Thomas Hay, loan product manager at BOK Financial, parent company of the Bank of Arkansas.

He said approximately half of the demand for equity products is related to home improvement.

“Often, our clients use their home equity lines of credit for multiple improvement projects over the course of time. Common projects are the build out of a swimming pool, refinish an attic space, or upgrades to kitchens or master baths,” he added.

A large survey of homeowners done earlier this year by Houzz.com found that the average bathroom remodels cost $10,442, while kitchen makeovers tallied $28,030.

Hay said as home equity rises, the amount which can borrowed also improves. Most home equity lines of credit are based on 80% loan-to-value ratio. For example, a consumer who owns a home valued $200,000 and owes $100,000 would have a 50% loan-to-value ratio. Under a contract with a maximum loan-to-value of 80%, this particular client would be eligible to borrow up to $60,000 to improve their home.

HOMEOWNER MOTIVATION 
Abshier said most of the customers he has completed projects for in the past year where planning to stay put.

“They needed more space or wanted updates for their own comfort level,” he said.

The Houzz.com survey indicated the motivation behind renovation and redecorating projects is still about improving the look, feel, flow or layout of the home. However, more people said this year they were also investing to increase the home’s value versus last year.

Roughly 40% of 100,000 homeowners surveyed said they plan to remodel or add an addition in the next two years, and 84% said they planned to redecorate by 2015. The survey found that 53% thought the time was right for starting a home renovation.

POTENTIAL HEADWINDS
Fitch notes several challenges that could still derail the sustained rebound in home remodel spending in 2014.
• Lingering high unemployment

• Tighter consumer credit standards
, and
• Rising interest rates


Spending for big-ticket remodeling projects will continue to lag the overall growth in the home improvement sector somewhat, as credit availability remains relatively constrained and homeowners remain cautious in their spending, according to Fitch. However, there are signs that homeowners are somewhat more willing to undertake larger discretionary projects and purchases.

Less than six months after around 500 layoffs at their Conway facility, Hewlett-Packard on Wednesday (Dec. 18) announced plans to establish a “regional industry development center” that would add approximately 200 jobs to that same site during 2014.

The Palo Alto, Calif.-based computer firm opened its Conway service center in 2010. News of the state landing the Hewlett-Packard facility in Conway was heralded as game-changing for the state’s economic reputation. The city’s two colleges and one university were to be a feeder for the tech jobs the center would field. At the time, as many as 1,500 jobs were expected.

John Herzog, Hewlett-Packard account executive, said Wednesday that “these new employees will fill important technical roles in software engineering, business analysis and management in support of HP’s growing government and commercial healthcare business across the United States.”

Gov. Mike Beebe said the announcement represented the resiliency of Arkansas’s growing technology workforce.

“The skill level of these jobs, the salaries and the field of expertise all prove that Arkansas’s workforce can compete for high-quality jobs and adjust to the changing demands of HP’s market,” Beebe said in a statement issued by the Conway Development Corp.

Hewlett-Packard cited the presence of three colleges and universities, high-quality workforce and hundreds of existing HP employees working locally as the key drivers for the project. The “Industry Development Center” is a centralized group of highly skilled HP staff that builds, enhances and implements HP’s healthcare industry solutions for many commercial and state clients.

Conway Mayor Tab Townsell said the news should re-affirm Conway citizen’s faith in the strength of the community’s relationship with the tech giant.

“The fundamental reasons we were excited about this project five years ago have not changed.  Conway has a quality workforce.  HP has the wherewithal to withstand the ebbs and flows of the global economy. Today is a great example of Conway and HP succeeding together.”

A shareholder-derivative lawsuit against Wal-Mart Stores and key officers of the global retailer may move forward, according to an opinion issued Wednesday (Dec. 18) by a three-judge panel with the 8th U.S. Circuit Court of Appeals.

The lawsuit is the combination of several similar lawsuits filed by Wal-Mart shareholders after it was revealed in 2012 that Bentonville-based Wal-Mart and key officers were under investigation for bribery and other violations of the Foreign Corrupt Practices Act related to operations in Mexico. The investigation was later expanded to allegations of FCPA violations in China, Brazil and India.

Plaintiffs in the case are John Cottrell, the Louisiana Municipal Police Employees’ Retirement System, Elizabeth Tuberville, Kathryn Johnston Lomax, William Cottrell and Andrew Richman. John Cottrell is the lead plaintiff who derivatively and on behalf of Wal-Mart Stores filed his action.

Wal-Mart officials have estimated that spending related to FCPA and internal compliance efforts will top $310 million this fiscal year. Through the second fiscal quarter, the company spent $155 million in FCPA and compliance matters.

Wal-Mart voluntarily disclosed internal investigative findings to the U.S. Department of Justice in November 2011. The entire world became aware of the allegations in April 2012 when the New York Times made the bribery investigation public.

In late 2012, Wal-Mart and other defendants in the shareholder-derivative lawsuit asked the U.S. Federal Court for the Western District of Arkansas to delay the action until a similar proceeding in Delaware courts received a ruling. The federal judge granted the defendants’ request based on the “Colorado River” precedent. That precedent, set by the U.S. Supreme Court, “held that exceptional circumstances may permit a federal court to refrain from hearing a case and instead defer to a concurrent, parallel state-court proceeding.”

The 8th Circuit Judges said Wal-Mart’s “argument is persuasive” in suggesting that the Arkansas and Delaware actions are similar and should be held to the Colorado River rule. But it wasn’t persuasive enough.

“Nevertheless, we reject the Defendants’ argument because it ignores the formal differences between the two proceedings after the threshold demand determination,” noted the opinion.

The opinion explained that the outcome of the Delaware proceeding may not address issues in the Arkansas lawsuit. Also, the federal Securities Act claims in the Arkansas case are to be heard in a federal court and not a state court. The Delaware case awaits a ruling from the Delaware Supreme Court.

“The resulting divergence of the Federal and Delaware proceedings, and the practical elimination of the Securities Act claims, casts doubt on the parallel nature of the two proceedings,” noted the opinion. “In conclusion, we join the Second, Seventh, and Ninth Circuits and hold that the Colorado River doctrine may not be used to stay or dismiss a federal proceeding in favor of a concurrent state proceeding when the federal proceeding contains a claim over which Federal courts have exclusive jurisdiction.”

Wal-Mart issued the following statement about the 8th Circuit ruling: “We are reviewing the 8th Circuit Court’s ruling and our understanding is that the court has not ruled out a stay. We are considering our options.”

The Appeals Court case is 12-3871, John Cottrell v. Michael Duke. Link here for the PDF of the 8th Circuit opinion.

Shareholders of Tulsa-based Syntroleum Corp. were encouraged Wednesday (Dec. 18) to approve the proposed $40 million acquisition by Renewable Energy Group. They were told to expect a payout equaling $4.04 per share, a 37% premium over the company’s 10-day average price.

The stock price rose 36% to $3.34 in active trading on Wednesday (Dec. 18.) with more than 1.08 million shares trading hands, roughly 10% of it’s total outstanding diluted shares.

CEO Gary Roth told shareholders at the company’s annual meeting Wednesday that after extensive review the pending deal with REG will provide the best value proposition for investors given the upset potential of the combined operations.

During the meeting company execs fielded several questions from investors about the fairness of the price offering at this time. Just five months ago on July 17, the Syntroleum shares were trading at $7.55, as there was great hope the company’s joint venture with Tyson Foods Inc. would restart their renewable fuels plant in Geismar, La.

The Dynamic Fuels plant in Geismar has been idle since November of 2012, costing each partner $1 million a month as it sits in standby mode. Syntroleum execs estimated the plant has lost out on roughly $20 million in potential sales given the two partners could not agree on restart terms.

Ron Stinebaugh, senior vice president of finance at Syntroleum told shareholders that this deal was the best offer on the table and together the companies could benefit from the marriage.

The proforma company would have a capacity of 294.5 million gallons of production next year, which would include 50% of the Dynamic Fuels facility should it be up and running by then. Together the firms have patented technology and a sound refining and distribution channel for a wide range of feedstocks.

Stinebaugh said once the deal is approved, the Dynamic Fuels parties will sit down and discuss possible restart strategy. The cost to restart the Geismar plant is an estimated $20 million, based on feedstock prices.

Tyson Foods has no comment on the plant restart or the sell of Syntroleum at this time.

SPIN DOWN
Stinebaugh once the sale is approved by shareholders sometime early next year, Syntroleum will begin its spin down of operations and it will be retaining some $5.3 million to retire existing obligations, not being acquired.

He said if for some reason, more money is required that could impact the actual payout to investors. At this time, Syntroleum investors are expected to receive a 0.3809 shares of REG stock in exchange for each of their Syntroleum shares.

Stinebaugh said the share conversion would take place late in the first quarter of 2014, after a proxy vote and share offering from the two companies.

POTENTIAL UPSIDE
Syntroleum has a market cap of roughly $33 million with 10 million outstanding shares. REG has a market cap of $404.6 million with 37 million shares outstanding. REG closed Wednesday at $11.10, up 5%.

Analysts at Cannacord Genuity called the deal “positive, but risky.” The all-stock deal would diversify Renewable Energy into the “next generation” of renewable diesel. Production at Dynamic Fuels, the joint venture with Tyson, has been hampered by feedstock, catalyst, and equipment failures, the analysts said.

Cannacord has a price target of $14 on REG.

Analysts with Raymond James & Assoc. said the deal is a rare instance of corporate M&A in the U.S. biofuel industry. Buying individual plants and strategic partnerships have been far more common.

Some of the revenue from the 2009 purchase of Fort Smith-based Sparks Health System could be used to help build and operate a medical school in Fort Smith and generate an up to $100 million a year economic impact.

When Naples, Fla.-based Health Management Associates (HMA) acquired Sparks in a deal valued at $138 million, part of the money was used to create the Fort Smith Regional Healthcare Foundation. Foundation initiatives include supporting scholarships for individuals seeking advanced medical training, the Community Dental Clinic in Fort Smith, health education programs in area schools, and other medical training options.

According to Foundation Chairman Kyle Parker, the foundation now has around $50 million and the board is investigating the feasibility of an osteopathic medical school that would, once fully operational, serve 600 students. Osteopathic medicine, according to the American Osteopathic Association, the practice is “a complete system of medical care with a philosophy that combines the needs of the patient with the current practice of medicine, surgery and obstetrics; that emphasizes the interrelationship between structure and function; and that has an appreciation of the body's ability to heal itself.”

Not all of the $50 million would be available for the school, but enough of it to make the concept worth pursuing, Parker said.  The Commission on Osteopathic College Accreditation (COCA) has been contacted by the foundation, which is the first step in the process. COCA requires several steps to happen before any mention that such a school will open. To announce a certain plan prior to a COCA review is considered “recruitment of students” and is verboten in the industry.

The foundation has hired two consultants who will be in Fort Smith in early January to begin work on a feasibility study. Parker said the study should be complete no later than April. If the foundation board moves forward with the plan, they then seek approval to gain accreditation with COCA and they hire a chief academic officer/dean. Within six months of hiring the dean, the foundation could technically break ground on the school.

Parker would not say where the school may be built, but did acknowledge that the school could open by the fall of 2015 barring any surprises in the feasibility study and based upon COCA approval. Parker acknowledged two false starts with other groups on a school plan, but is confident this latest effort has legs.

“We’ve talked to some medical schools ... and we’re not closing any doors from that standpoint. But with each of our visits, we have become more and more confident about our abilities, if it’s feasible, and I have to stress that we’re merely working to see if it’s feasible at this point ... but we are confident that if it is (feasible) then we have the people or know where to get the people to make this a success,” Parker said.

The osteopathy school plan has some early supporters. The Community Health Centers of Arkansas, which provides medical care in Arkansas’ rural areas, supports the idea, according to Tom Webb, executive director of the foundation. The foundation press release issued Wednesday (Dec. 18) included this statement from the CHCA Board of Directors: “CHCA supports the development and implementation of the osteopathic school and residency program which will help build the pipeline of osteopathic physicians' availability for rural and underserved communities.”

The osteopathy notification sent to COCO includes endorsements from the Arkansas Osteopathic Medical Association (AOMA), the Arkansas Society of the American College of Osteopathic Family Physicians (ACOFP), and the Arkansas Osteopathic Foundation (AOF).

“FSRHF’s effort to establish an osteopathic medical school parallels our vision for improving health care in the state. The strong need in the area combined with community support contributed to sweeping osteopathic association support,” Frazier Edwards, executive director of the AOMA, said in the foundation statement.

Following are other notes in the foundation statement.
• There are 30 colleges of osteopathic medicine (COMs), offering instruction at 40 locations in 28 states. There is not an osteopathy school in Arkansas.

• Twenty-four of the COMs are private; six are public. Should the development of an osteopathic school in Fort Smith happen, it would be a private, non-profit institution and not dependent on continuous public funds from the state.

• Approximately 60% of practicing osteopathic physicians (DO) practice in the primary care specialties of family medicine, general internal medicine, pediatrics, and obstetrics and gynecology.

• Osteopathic physicians (DOs) could help fill a critical need by practicing in rural and other medically underserved communities.

• Arkansas is ranked 48th among states in physicians per capita based on the 2010 Healthy Workforce in Arkansas Study by the University of Arkansas for Medical Sciences (UAMS) Center for Rural Health.

• The latest data from Arkansas Department of Health’s Behavioral Risk Factor Surveillance System indicates the greatest percentage of adults 18 and older with no personal doctor reside on the entire western side of the state.

“If this happens, if we’re able to meet that feasibility line, I’m telling you that this will move the needle in the Fort Smith area” in terms of healthcare, Parker said.

He added that the school could eventually be a feeder school for hospitals and clinics in Northwest Arkansas and other adjacent metro areas.

Parker said the foundation is working with the Fort Smith Regional Chamber of Commerce, the city of Fort Smith and other groups on the medical school concept.

Bentonville is known across the region as a city on the rise – leading the metro area in new home sales, building permits and often sales tax revenue growth, while also having the smallest population among the four major cities situated along the Interstate 540 corridor.

That’s not by accident, according to Bentonville Mayor Bob McCaslin, who told several dozen residents and business professionals Wednesday (Dec. 18) that intentional planning on the city’s part is crucial for spurring on outside investment.

City officials unveiled a large redevelopment plan that encompasses the southeastern quadrant of the 18-acre downtown area. The plan prototypes were completed by Hight Jackson & Associates over the past three to four months. Community and economic development director Troy Galloway told The City Wire the approximate cost of the prototype planning was somewhere around $17,500.

“We felt like this plan was needed given the near-over capacity levels of the immediate downtown square area and this southeastern district is somewhat ripe for redevelopment as the new Razorback Greenway runs right through this area,” Galloway said.

There are three vacant industrial facilities in this area that were the former manufacturing plants for Tyson Foods, Kraft and the old Bentonville Ice House, which present some interesting options for investors.

“Our mayor has vision and allows us the creativity to be intentional about the communities we help create in Bentonville. That vision is all out creating communities where people want to be, where they want to spend their time,” Galloway said.

The plan has three main concepts:
• Experience Districts
• Residential Density
• Multimodal Connectivity

Within those three concepts there are sub plans for three distinct districts all within walking distance of one another and downtown square.

The Arts District would be flanked by the Bentonville Library on Main Street and encompass four or five blocks or so of redevelopment that caters to the Arts. Allie McKenzie, one of the architects who worked on the plan prototype renderings, said the vision for this area would include a public plaza, studio space, inexpensive living space for working artists, small cafe’s and a public arts center.

The Market District encompasses several blocks around the vacant Tyson Foods facility on 8th Street and the empty Kraft cheese plant on S.E. E Street. The Razorback Greenway runs through this district and should see more foot and bike traffic as the Greenway is completed next year. McKenzie said the Market District plan will center around the culinary arts and hopefully spawn new commercial development for restaurants, overflow plaza space for expanded Farmer’s Market as well as work; living  and educational space.

The two major streets that connect these two districts — Main Street and Southwest A  Street—would also need some redevelopment. The plan calls for denser multifamily development on the perimeter of the Market District as well as the Arts District, with single family homes, shops and mixed use space along both Main Street and Southwest A.

The third component of the overall plan is “Great Neighborhoods." McKenzie said for the businesses in these two districts to thrive, traffic is key, whether by foot, cycle or car.

Galloway said the plan is in no way intended for the city to acquire property, condemn property or develop property. It is a blueprint that the economic development team can show investors and developers who want to help create these districts where people want to spend their time and money. He said the Walton Arts Center that will come to Bentonville in the future is not part of these plan discussions.

“We would hope if these districts do develop the Walton Arts Center would be located as a major anchor,” Galloway added.

Mayor McCaslin said the city’s role in this process is to the put out vision which can be supported with infrastructure investment in roads, sidewalks and sewer. He said it will be private investment that will shape the final outcome, much like has happened on the town square.

“We continue to draw investment from inside and outside the region, today I attended an opening of a new restaurant (Taziki’s) in town. The owners are from Pulaski County, who spent some time in town and liked what they saw here. This makes their fifth restaurant in the state,” McCaslin said.

The proposed redevelopment plan is expected to be submitted to the planning commission in early January and if approved will go to the city council.

The first infrastructure phase related to this proposed plan is set to begin in January with sidewalks being constructed along 6th Street, one of the main arteries that runs through the proposed Arts and Market Districts. That project is being funded through a grant the city received this year from the Endeavor Foundation.

Galloway said there are no plans to widen Sixth Street as it should likely remain largely a residential street.

A little more than a month after the Arkansas Department of Environmental Quality presented its plan to address contamination caused by Whirlpool's admitted leak of trichloroethylene (TCE) into groundwater in the 1980s, action is being taken at the contamination site.

According to ADEQ Public Outreach and Assistance Division Chief Katherine Benenati, crews from ENVIRON will be in the area this week.

"Whirlpool’s consultants are in the field doing pre-design testing of the soils in preparation for implementing the RADD after the first of the year," she said in an e-mail.

The RADD, or Remedial Action Decision Document, was first released in October after months of discussions between the appliance maker and ADEQ on how best to clean up the TCE contamination. ADEQ recommended a variety of methods for cleanup, all of which were explained at a public forum ADEQ hosted in Fort Smith in November.

The primary method of clean up will consist of the use of chemicals to neutralize the TCE.

"ADEQ has determined containment of the soils and In-Situ Chemical Oxidation/Reduction coupled with Monitored Natural Attenuation (MNA) for the groundwater are the most effective remedial approaches at the Whirlpool facility," the document states.

The RADD also recommends covering part of the contaminated Whirlpool site with asphalt at a cost of $600,000.

"The cover will be designed to prevent the water from migrating through the contaminated soils. The cover will be coupled with an institutional control to prevent excavation of the on-site impacted soils. In addition, Whirlpool will implement a soil gas monitoring program to be sampled on a quarterly basis."

The RADD also calls for institutional controls to be put into place, such as bans on drilling groundwater wells in the contaminated area, generally in and around the Whirlpool site and immediately north of the facility. A previous attempt by Whirlpool to have the Fort Smith Board of Directors impose a ban on groundwater wells was defeated.
www.thecitywire.com/node/27060

In addition to ENVIRON conducting pre-design testing, ADEQ was at the contamination site Tuesday (Dec. 17) conducting their own sampling, according to Benenati. She went on to say the agency conducted "advancement and sampling of soil borings using Geoprobe. Soil samples were screened using PID and select samples were sent to laboratory for analysis. A grab groundwater sample was also collected for laboratory analysis."

Residents may have also noticed crews and large equipment digging into the ground. Benenati said ADEQ was using a "Membrane Interface Probe (MIP). This device detects the presence of VOCs (volatile organic compounds) using a probe pushed into the soils."

Once ENVIRON begins to fully implement the RADD, it is estimated that the company will have spent about $5.4 million on chemicals associated with the in-situ chemical oxidation. That is in addition to the $600,000 spent on the asphalting of the contamination on site at Whirlpool's former manufacturing plant, bringing the total cost of cleanup to $6 million.

All the cleanup will be in addition to a restriction placed on the deed of the Whirlpool site, restricting some activities that can be performed at the site.

"A deed notification will be filed with appropriate land records office. The deed notification would identify the kinds of contaminants present, and describe activities that should not be conducted at the facility and grant site access to ADEQ. During the performance of routine groundwater monitoring at the facility, a facility evaluation will be conducted to ensure that there is no on-site use of the contaminated groundwater."

A new hotel is coming to the corner of Phoenix Avenue and McKennon Boulevard, bringing with it both an increase in occupancy and about 30 new jobs.

The Home 2 Suites will be part of the Hilton brand and will add a second hotel at the intersection for hotel developer Driscoll Properties.

President and CEO Marion Driscoll said adding the additional hotel will allow him to meet the increased demand he is seeing at his other hotel at the intersection, Homewood Suites.

"We're seeing our occupancy rise every year. Our demand ratio versus rooms ratio is stronger, to where I'm not able to fulfill all of my guests' needs at the Homewood. That will help the overflow."

The four story, 88 suite, 55,000 square foot hotel will be LEED certified, Driscoll said, and will be built on land owned by the Fort Smith Regional Airport.

Airport Executive Director John Parker said the lease was structured for 50 years, bringing in annual revenue for the airport of $27,000 for the first five years. The rate paid by Driscoll in future years will increase, with the airport netting $2.5 million in proceeds as a result of the lease agreement.

The lease, which does not include provisions for profit sharing, would be good for all airport patrons, Parker said.

"Any development that occurs on the airport (property), whether aeronautical or not, is actually good news for the airport itself. But a hotel development is very good because it stabilizes rates for non-aeronautical users of the airport."

While the new development will allow Driscoll to address his capacity issues at Homewood Suites, it also allows him "to market to a different clientele that I'm not able to market to right now."

"Made to be customized, our stylish suites are packed with perks and high-tech amenities that are just your style," is the message you see on the hotel brand's website. The types of amenities include a kitchen area, media hub, cook tops, saline pools, integrated laundry and fitness facilities, outdoor areas that include walking paths, and a business services area.

The final designs for the multi-million dollar hotel are not yet complete, but Driscoll expects a ground breaking sometime in February or March 2014 with a grand opening by February 2015.

The Federal Reserve affirmed its outlook for stronger GDP growth in 2014, and said Wednesday it will reduce – or “taper” – its injection of $40 billion into the U.S. economy through securities purchases.

The December GDP forecast of 2.9% to 3.1% is marginally better than the 2.8% to 3.2% estimate given in September by the Federal Open Market Committee (FOMC).

Wells Fargo economists project a 2.5% growth, not quite as optimistic as the Fed expectation, according to a brief note published by the bank’s economic team on Wednesday (Dec. 18) following release of the FOMC meeting.

However, the FOMC announced that in January tapering will begin as the committee will reduce its holdings of mortgage-backed securities from $40 billion per month down to $35 billion. Another $5 billion will be shaved from the Treasury notes purchased each month as well.

As for the unemployment rate, the FOMC members lowered their outlook for the to 6.3% to 6.6% for 2014 in December from 6.4% to 6.8% in September. This adjustment in the unemployment rate outlook was far greater that for made for economic growth, while the top end of the inflation outlook for 2014 was actually lowered.

Wells Fargo noted this suggests the lower unemployment rate was a key factor in shifting the balance toward tapering. The Fed’s statement suggests that the “cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions” was a basis for deciding to taper.

Also factoring into the FOMC’s decision was the extent to which fiscal “restraint may be diminishing.” As expected, the inflation outlook remains below the 2% long run target throughout the 2013 to 2015 period, with the 2014 outlook adjusted to 1.4% to 1.6%, down slightly.

Wells Fargo notes that while 1.4% inflation is still well below target, this marks a significant pickup from the 0.9% rate at which members expect inflation to register in 2013.

The FOMC strengthened its commitment to keep short-term rates low, 4% stating a rise in the fed funds target would not come until the 3.5% unemployment rate was “well past” the current threshold of 6.5%.

Wall Street reacted favorably to the taping announcement with the Dow Jones Industrials advancing 1.84% closing at 16,167 at the close of business Wednesday (Dec. 18). The S&P 500 also picked up 1.66% to close at 1,810. The NASDAQ followed suit rising 1.15% to 4,070.

The bond market yields also edged higher with 10-year Treasury Note yielding 2.87% as prices declined slightly. Gold, Crude Oil and the U.S. dollar slipped lower on the taper news.

It’s every shopper and retailer’s nightmare just ahead of the holidays, to find out customer name, credit or debit card number, and the expiration date plus three-digit security code of their cards are all potentially part of the data breach from hackers.

But that’s what has happened for shopper’s at Target during the busiest time of the year — pre-Thanksgiving through Black Friday out to Dec. 15.

Target sent a letter to its customers explaining the unauthorized access to its payment data, apologizing for any inconvenience the breach might cause.

“The privacy and protection of our guests’ information is a matter we take very seriously and we have worked swiftly to resolve the incident. We began investigating the incident as soon as we learned of it.,” Target noted in the letter.

The retail giant said it’s partnering with a leading third-party forensics firm to conduct a thorough investigation of the incident and to examine additional measures we can take that would be designed to help prevent incidents of this kind in the future.

Target said it also alerted authorities and financial institutions immediately after the breach was discovered and confirmed the unauthorized access.

“We are putting our full resources behind these efforts,” Target said.


The breach affects some 40 million credit and debit card accounts used during the two-week period at Target Stores across the U.S.

Target said it has resolved the threat so that its consumers can shop with confidence.

But the retailer urges anyone who shopped at Target between Nov. 27 and Dec. 15, paying with credit or debit cards should monitor those accounts very closely as well as order a copy of their credit report, which can be done once a year for free.

Target has not revealed exactly what happened to cause the unauthorized access but it is believed that the theft may have occurred through software installed at machines customers use to swipe their cards when paying.

Spokeswoman Molly Snyder said the company has been reaching out to customers via emails and social media with the news of the breach.

“This is a sophisticated crime,” she said, declining to be more specific. The intrusion didn’t affect Target.com or its Canada operations, she said.

Cyber security veteran Jim Stickley of TraceSecurity said because the criminals in this case have managed to capture the credit card “track” information, they could have access to more than just the credit card number.

“This changes everything,” Stickley said. “This breach gives criminals not only the credit card number, holder name and expiration date, but in some cases they could also have access to the pin and card code. With this data, they can basically make their own credit cards, exactly as the owner has them … and then go shopping. What’s worse is if they do gain access to the card code, they can remain completely anonymous by shopping online.”

It's unclear just how much this security breach will cost Target but the largest hacker invasion which occurred in 2007, cost TJX, parent of TJ Maxx, Marshall's and Home Goods, some $256 million. The TJX breach affected roughly 100 million consumers and dinged the company's earnings some 25 cents a share.

“The most important thing in such crisis management is maintaining customer trust and therefore longer-term loyalty,” said Greg Melich, analyst with ISI Group. He said the disruption and uncertainty hung for months over TJX after the security breach, putting significant pressure on the stock.

Target shares slid more than 2% Thursday (Dec. 19) to close at $62.15, while the broader markets traded higher.

Analysts said while this search for the truth is happening, the issue damages the trust Target has gained. 

Brian Sozzi, CEO of Belus Capital Advisors said more importantly it calls into question how sales will trend in January.

Slight but continued improvements in economic trends for the Fort Smith region during the third quarter of 2013 has resulted in the best quarterly grade for the economy since the first quarter 2009 launch of The Compass Report.

A third quarter 2013 grade of C+ was improved over the C in the second quarter and the C- in the third quarter of 2012.

The quarterly Compass Report is managed by The City Wire and presented by Fort Smith-based Benefit Bank. The report is the only independent analysis of economic conditions in the metro area.

Joe Edwards, president of Benefit Bank, said it’s nice to finally see the region’s key economic metrics moving in the right direction.

“It was really encouraging. I find myself mainly looking at trend lines and you always hope they will go up dramatically. Obviously I don’t see that happening here, but what I do see is that we are moving in a positive direction,” Edwards said of The Compass Report.

Edwards also said the report mirrors what he sees and hears in the business community’s served by Benefit Bank.

“By and large, they (bank customers) are optimistic, but everybody seems to be guarded somewhat. It is improving, but we all know of the issues out there for 2014 that remain unsettled and uncertain. No one is going to throw a party, but what we are hearing is encouraging,” Edwards explained.

Economist Jeff Collins, who conducts the data collection and analysis for The Compass Report, said employment and other data indicate that the Fort Smith region “has performed reasonably well” during the first three quarters of 2013.

“Nonfarm employment was up a respectable 2.0 percent year-on-year (2,400 new jobs), with total nonfarm employment of 120,200 jobs in September. This marks the ninth straight month of positive employment growth. The statistical evidence suggests that the local labor market has stabilized after a prolonged period of decline,” Collins wrote in his analysis. “Data for the Fort Smith regional economy had been mixed for some time but now a clear trend appears to be emerging that the local economy is growing.”

However, Collins said the improvements will need to continue if the region is to return to employment levels seen prior to the recession.

“In September the total number of employed in the MSA was an estimated 123,871. By contrast, total employment in September 2006, prior to the recession, was 130,736,” Collins wrote.

He also noted that the regional manufacturing sector continues to lose jobs.

“Strong overall non-farm employment growth did not carry over to the manufacturing sector. September-to-September the sector lost 700 jobs or roughly -3.6 percent. In September an estimated 18,500 people worked in the sector,” he wrote.

Data collected for The Compass Report also suggest that state and national economic trends have been positive in the back half of 2013 – even with relative dysfunction within the federal government.

“Economic data, both at the local and national level in the third quarter was very encouraging, particularly the surprising growth in output. Even more encouraging was the rate of growth despite the lack of clear policy direction regarding federal spending. The primary concern continues to be weak labor markets,” Collins said.

Collins also provided an economic health summary of the state’s three largest metro areas.
• The Central Arkansas economy continues to underperform, in many ways reflecting the national economy.
• For the Northwest Arkansas economy, despite the rapid rate of growth there is no reason to believe that current growth rates are unsustainable. Look for momentum to continue for at least the four to six quarters.
• Despite continued erosion of manufacturing, the Fort Smith regional economy has been amazingly resilient. The uptick in growth bodes well for the regional economy.  Look for growth to continue through the next four quarters barring an unforeseen shock to the Fort Smith regional economy.

The 2013 third quarter economy in the central Arkansas area received a grade of C- meaning that economic conditions declined slightly compared to the third quarter of 2012 but were unchanged compared to the second quarter of 2013.

The third quarter 2013 grade of B+ in Northwest Arkansas was an improvement compared to the second quarter and unchanged compared to the third quarter of 2012.

Continued growth in Northwest Arkansas has the potential to alter the state’s political landscape, according to Collins.

“The geographic differences in economic performance have very real implications for the distribution of population and wealth in the state. The Northwest Arkansas economy is quickly approaching two-thirds of the Central Arkansas economy. The implications for relative population are obvious,” Collins wrote. “Moreover, population correlates with political power. Should the current differential growth rates continue, the 2020 Census will lead to significant changes in relative representation in state government.”

FORT SMITH REGION
OVERALL GRADES — Fort Smith regional economy (per quarter)
3Q 2013: C+
2Q 2013: C
1Q 2013: C-
4Q 2012: C
3Q 2012: C-
2Q 2012: C-
1Q 2012: C-
4Q 2011: C-
3Q 2011: C
2Q 2011: C
1Q 2011: C-
4Q 2010: C-/D+
3Q 2010: C-
2Q 2010: C-
1Q 2010: C-
4Q 2009: D
3Q 2009: D
2Q 2009: D-
1Q 2009: D+

DATA AND REPORT DOCUMENTS
Link here for the raw data used to prepare The Compass Report for the Fort Smith area, Northwest Arkansas and central Arkansas.

Link here for more narrative about regional and national economic conditions.

SECTOR DATA
CURRENT INDICATORS
Non-farm employment — C
Non-farm employment in the area has stabilized, with employment in the metro area at 120,200 in September compared to 117,800 in September 2012.

Goods-producing employment — C+
The decrease in manufacturing jobs as a percentage of the overall workforce helps diversify the economy. The percentage of manufacturing jobs in the overall workforce was 21.4% in September 2013, down from the 22.1% in September 2012.

This measure tells us about the risk to the local economy from being heavily weighted toward sectors that have been under economic pressure.

One of the fundamental principles of reducing risk is diversification. The Fort Smith economy has been based on manufacturing for decades, but this heavy reliance on one sector for employment and wealth creation has left the region vulnerable. For several years the manufacturing sector in the U.S. has shed employment as technology and international trade have redefined the production process.

As the economy of Fort Smith becomes more diversified the risk of a downturn in any one sector causing a catastrophic loss of employment diminishes.

Metro area Unemployment rate — B-
The area unemployment rate, an important gauge in the health of the metro labor market, posted a decline to end the third quarter. Unemployment in September was estimated at 7.2%, compared to 7.5% in September 2012.

Sales and Use tax collections — C
Sales tax collections in the region and the city of Fort Smith began to show weakness in the fourth quarter of 2009. That weakness began to improve in the fourth quarter of 2010, was on a stable pace, but began to cool in the third half of 2012 and has continued to show weakness in 2013. The tax collections, which are good indicators of regional consumer confidence, were down in Crawford, Franklin, Logan and Sebastian counties to $3.342 million during August 2013 — compared to $3.35 million in August 2012. However, during the June 2013 to August 2013 period, overall collections in the counties were up 4.6% compared to the same period in the previous year.

LEADING INDICATORS
Building Permit (housing) valuation — C
The total value of permits issued in the third quarter (measured in a three-month rolling average) were down 1.4% compared to the third quarter of 2012.

As new households are created they induce growth in retail, education services, health care services and other types of businesses that provide goods and services to households. Also, new construction provides employment and tax revenues.

Hospitality employment — B
Hospitality employment, which began trending downward in the third quarter of 2012, leveled off during the fourth quarter of 2012 and improved during the first quarter of 2013. September 2013 saw 9,400 jobs in the regional hospitality sector, up 300 jobs from September 2012.

Manufacturing employment — C-
Manufacturing employment in the Fort Smith region showed signs of stability in 2012, but began to dip again during the first quarter of 2013. Sector employment in September 2013 was 18,500, down an estimated 700 jobs from September 2012 employment.

For better or worse, Fort Smith remains a manufacturing town. That implies the near-term economy rises and falls on the performance of the sector. Growth in employment or even stable employment in the sector bodes well for the near-term outlook for the local economy.

Construction employment — B+
This sector, which includes mining/natural resources employment, saw employment reach 7,200 in September, up from 6,800 in September 2012.

The rationale for including construction employment is similar to that for building permits. The employment measure is influenced by changes in both the residential and commercial real estate markets.

Obviously, new space implies new residents and new businesses.