The four largest Northwest Arkansas cities reported solid 6% gains in their fourth quarter hospitality tax receipts, compared to the prior year. Fayetteville, Rogers, Springdale and Bentonville collected $1.31 million in hotel and food taxes during the months of October, November and December. This is compared to $1.235 million collected in the same quarter of 2012.

While October and November were strong months, inclement weather has since prompted cancellations and lackluster traffic among business and leisure travelers, said Roger Davis, general manager of the Springdale Holiday and Convention Center.

Davis said 2013 was a very good year as his hotel revenue rose 25% from strong group travel and through the first nine months of last year. The four cities reported $5.32 million collected in hospitality taxes for the full year, up from the $4.99 million during 2012.

Each of the cities in this report collect a 2% tax on lodging and meeting space, while Fayetteville and Bentonville also each collect a 1% tax on prepared food.

POSITIVE ANNUAL RESULTS
For the year, collections were up 11.4% in Bentonville, up 4.4% in Fayetteville, up 2.21% in Rogers and up 8.53% in Springdale. Following are the annual comparisons for each city.
Hospitality Revenue (January through December)
• Bentonville
2013: $1.672 million
2012: $1.5 million
11.4%

• Springdale
2013: $338,302
2012: $311,710
8.53%

• Fayetteville
2013: $2.633 million
2012: $2.522 million
4.4%

• Rogers
2013: $680,077
2012: $665,358
2.21%

FOURTH QUARTER RESULTS
In the fourth quarter, Springdale hotel taxes receipts totaled $102,012, up 6.39% from the last year’s period.

Bentonville reported an 11.8% uptick its fourth quarter hospitality receipts, collecting $409,409, compared to $365,934 reported a year earlier. While hotel taxes rose 8.96% in Bentonville, it was the food tax increase of 18.8% that really made the difference the fourth quarter gains from a year ago.

“We continue to hear good reports from our restaurants and look forward to three new venues on tap in the coming months — Cracker Barrel, Chipotle Grill and Joe’s Italian,” said Kalene Griffith, executive director for the Bentonville Visitors and Convention Bureau.

Fayetteville reported $643,996 in hospitality receipts — food and hotel taxes collected — in the last quarter of 2013. The hospitality revenue increased about 1.37% from the same time in 2012.

Marilyn Heifner, executive director for the Fayetteville A&P Commission, said November was strong month in the quarter with hotel and restaurant taxes rising 10% from the year before. She said meetings and conventions in November had an economic impact of $302,649. Definite bookings in November had an economic impact of $4.884 million in value, she noted in the January commission meeting minutes.

Rogers collected $154,915 in hotel taxes in the fourth quarter, with four hotels not yet paid through December. Allyson Dyer, executive director for Visit Rogers, said fourth quarter results are up 2.19% from the record numbers posted last year.

Dyer said after strong October and November results, winter weather in December and January hindered corporate business travel, which is a big part of the city’s hotel bookings this time of year.

STR REPORT
Hotel operators across Northwest Arkansas have recorded revenue in excess of $128.564 million during 2013. Revenue rose 10.7% over 2012, according to a Smith Travel Research.

The data in the STR report reflects 77% of the hotels in the region. Hotel revenue was particularly strong in the third quarter and the month of October, thanks to business and leisure travel, but revenue flattened out in November and December, in part from inclement weather throughout much of the country.

The room census for the fourth quarter included 8,269 rooms, up 104 rooms from the same period last year. Occupancy rates in the fourth quarter averaged 45.86%, down slightly from the year-ago period. The full year occupancy rates averaged 52.7%, up from 51.4% and 49.9% in the two prior years.

Higher occupancy rates have give hotel operators some pricing power for the first time several years. Average daily revenue per room was $81.08 in the fourth quarter, up 4.5% from the same period in 2012. STR reports room revenue averaged $80.68 for the full year, compared to $76.93 in 2012.

Dyer said she is happy with the 2% to 3% gains Rogers posted in 2013, after banner gains in 2012.

“We continue to have an abnormally large number of groups that stay more than 30 days, which negates them having to pay the 2% tax,” said Dyer.

Griffith said the 21c Museum Hotel in downtown Bentonville helped hoist the city’s 2013 hotel tax collections 18% for the full year, when compared to 2012. She said the 21c has been a popular choice for meeting and lodging space as it made up 12% of the city’s 2013 hotel tax collections.

2014 OUTLOOK
Davis said there are two new hotels coming online this year, the Sheraton Four Points to be located in the former Clarion space in Bentonville, and a new $12 million Hilton Garden Inn near Interstate 540 exit 64 and Wedington Drive in west Fayetteville.

“There is still an excess room capacity in this market and both of these hotels will also add meeting space — 20,000 square feet combined estimate. Right now 2014 is off to a very slow start, but we expect when the weather clears that leisure and corporate business travel will pick back up. Even so, these two new venues will add to the excess room capacity,” Davis said.

The Hilton Garden Inn will have 115 rooms and the Sheraton Four Points will have 105 rooms. Both venues are expected to open later this year.

Griffith said this weekend 29 NCAA softball teams will be in town for the Bentonville Classic. 

“This is a great draw for our hotel and restaurants as the number of teams has grown from 13 to 29. We are looking forward to the warmer weather so our local residents can come out and watch these games as well,” Griffith said.

Dyer and Davis each said they expect traffic to pick up in the spring as they have had groups recently reschedule their travel for later in the year.

The city of Greenwood is hosting the Arkansas Economic Development Commission this week as state’s development arm holds its monthly meeting in the city Wednesday and Thursday. It’s the first time for the commission to be in the Fort Smith region in about three years.

Commissioners and AEDC staff spent much of Wednesday exploring the region on a guided tour led by various Sebastian County natives, including Justice of the Peace Phil Hicks.

According to Commissioner Lee Webb, who also serves as chairman of the Sebastian County Election Commission, the meetings held each month in different parts of the state are a way for the commission to connect with communities and send a clear message to residents and business leaders.

"It shows the support statewide every time the Arkansas Economic Development Commission goes to a city," Webb said. "It shows the state has the community's back. If they ask for something, we're there willing to help."

Bryan Scoggins, AEDC's director of business finance, said the meetings allow "the commissioners to go out and see what's going on in all the various corners of the state."

"When we have these meetings and they get to go to the various communities, they do tours like this to see what's going on in the community, what's the vibe like? What are the needs, even. It doesn't always coincide that the projects that we're looking at are in the meetings, but you still get a feel for the area."

Scoggins said it is visits to communities, such as Greenwood, that illustrate how important the work of the commission is as cities across the state continue to recover from the economic collapse of 2008 and the exodus of jobs that followed.

"The primary things we do is work with the local area economic developers to try to find out what is the vision for how we are going to replace these positions that we lost or who would be target companies to go talk to. Or even if you have targeted companies, then we have meetings with them to try to figure out is there a way for us to make a new project happen?"

As part of those discussions, he said AEDC promotes not only the infrastructure available in certain communities or special financing available through AEDC, but also the workforce available to take jobs should a company locate a facility somewhere within the state.

It is those types of conversations that AEDC started when Gov. Mike Beebe made the trip to Orlando, Fla., in August 2013 to meet with companies looking to relocate manufacturing jobs to the United States as part of a push by Wal-Mart to increase its purchase of American-made goods by $50 billion in the next decade. Scoggins said discussions with companies have continued since then.

"There's been a tremendous amount of interest and activity and trying to work together with and through Wal-Mart to try to identify those opportunities. We've had a couple of announcements along those lines and plans continue."

He said while AEDC is not able to announce anything directly related to Wal-Mart's onshoring effort, talks with manufacturers and suppliers continue. As for how many jobs any new manufacturing facilities could provide the state, Scoggins said that would be impossible to know.

As of November 2013, 1.226 million jobs existed in the state, a 5.64% decline from the state's highest ever level of 1.299 million in March 2008 — or 73,564 fewer jobs. Scoggins said while everyone would like to see those jobs return, the sluggish recovery taking place across many sections of Arkansas is simply "a jobless recovery."

"A lot of the projects that we're working have smaller numbers associated with them because people are having to make such efficiency moves that require more automation and that sort of thing associated with them. So I'm guessing that because of the employment base drop, some people left the workforce or some people even moved for the workforce, so it's going to be hard to pull them back in. I think that what we're going to end up focusing on probably is not so much growing the workforce as it is shrinking that unemployment rate."

The most recent jobless numbers in Arkansas show an unemployment rate of 7.4% in December 2013, up from 7.1% at the same time a year earlier. The unemployment rate statewide was as high was 7.9% in 2011.

AEDC Commissioner Chester Koprovic, a Fort Smith native whose background is in manufacturing, said changes in the economy over the years has shown a movement away from manufacturing jobs. He said that shift also is reflected on the membership of the commission.

"When I first went on the commission, probably the majority of it was manufacturers. And I'm one of the few manufacturers left on the commission. A lot of them are developers, attorneys, finance people, but everyone brings their own perspective on what economic developments all about. So it's a really good mix,” Koprovic explained.

And while he and the rest of the commission are bound by confidentiality agreements about any closed door business it conducts, he said the Fort Smith region should be encouraged by the work AEDC has done on the region's behalf.

"Yes, there has been some talk about some different growth in Fort Smith. Some of it's going to happen fairly soon."

Fort Smith Mayor Sandy Sanders, who attended an AEDC reception at Chateau on the Greens in Greenwood Wednesday night (Feb. 12), confirmed what Koprovic had said.

"We're anticipating hopefully an announcement in the next couple of weeks of some new jobs in Fort Smith. An existing company adding some jobs," he said.

AEDC meetings will continue in Greenwood Thursday (Feb. 13) at Greenwood City Hall, located at 30 Bell Road. The meetings will begin at 8:15 a.m. with breakfast and a general meeting, followed by a closed to the public bond guaranty committee meeting at 8:30, an open to the public executive committee meeting at 10:30 and lunch at 11:30.

The nation’s foreclosure market continued to shrink in January, posting 40 consecutive months of declines on an annual basis, according to Calif., based RealtyTrac. Arkansas foreclosure filings were down more than 41%.

There were 124,419 foreclosure filings across the country last month, down 18% from a year ago. One in every 1,058 U.S. households had a foreclosure filing in January. 

Statewide there were 594 properties with a foreclosure filing last month, down 41.5% from the prior year. Northwest Arkansas and the Fort Smith metro area each posted lower filings year-over-year.

In Benton County there were 85 new filings, 33 of those were half way through the pipeline and slated for trustee sale, while another 55 were listed as bank-owned properties. Total filings declined 29.7% from January in 2013.

Washington County reported 35 new filings last month, the majority of those (25) were notices of trustee sale, while 10 others were bank-owned properties. Foreclosure activity is down 63.9% year-over-year, according to RealtyTrac.

Crawford County reported 15 new filings in January. All but four of those were notices of trustee sale. Total foreclosure activity fell 48% in January, when compared to year-ago period.

Sebastian County was a near mirror image of its neighboring county with 19 new foreclosure filings, with all but four being properties halfway through the lengthy foreclosure process. In the Fort Smith area foreclosures are 40% from a year ago.

Jim Long, an agent with Crye-Leike Realty in Northwest Arkansas, said there were 301 foreclosure properties listed for sale in the multiple listing service which includes all four counties in this report. He said the winter weather in recent weeks has cut down on the number of showings. The foreclosure properties declined from 322 reported in December.

The number of local foreclosure properties peaked at 373 in August of last year and has steadily declined each month.

One interesting note in the RealtyTrac report was the increase in new filings from December 2013. Statewide the number of filings rose 20% from December to January. Benton County posted a 60% increase month-over-month, while filings rose 128% in Washington County. 

Crawford County filings rose 15% month-over-month, while filings in Sebastian County were down 5% from December to January.

“The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust,” Daren Blomquist, vice president at RealtyTrac, said in the report.

A recent report to Congress (Jan. 24) indicates that there is active mortgage loan modifications being made to help stem foreclosures.

As of Dec. 31, there were 894,410 active permanent modifications granted through the Home Affordable Modification Program (HAMP Tier 1). About 88% of those modifications will have a rate increase after 5 years. The median payment increase after all rate increases will be around $200 per month, according the analysis of Treasury’s HAMP data.

Analysts believe some homeowners will be vulnerable to foreclosure when the rate resets. Of the 894,410 modifications, 28% have redefaulted on the mortgages and fell at least three months behind. In Arkansas there were 1,825 homeowners with active modifications, and 81% of those are subject to payment increases within five years of their original modification.

Treasury reported that of the homeowners with redefaulted loans, 27% of homeowners who redefaulted received an alternative modification, usually a private sector modification; 21% of homeowners moved into the foreclosure process; and 12% of homeowners lost their home via a short sale or deed-in-lieu of foreclosure.

Also, as of Nov. 30, there were 97,315 homeowners (11% of active HAMP permanent modifications) who had missed one to two monthly mortgage payments and are at risk of redefaulting out of the program.

Scott Hancock, NWA division president for Centennial Bank, announced the promotion of Bryan Smith as senior vice president of retail operations for all the Northwest Arkansas branches.

He moved to this region in 2005 and has served in several capacities after joining Liberty Bank in May 2002. He has managed all aspects of operations with excellence, said Hancock.
 
“Bryan is an excellent leader, and Centennial Bank is a great bank and will only get better because of employees like him. Bryan Smith’s efficiency yet, to detail is outstanding, allowing him to coordinate numerous projects simultaneously, while maintaining the highest regard for our employees and customers,” Hancock said.
 
Smith has served 18 years in the financial services industry. He earned his bachelor’s degree in business from Arkansas State University.

A resident of Fayetteville, Smith is married to Amy, and has one son, Brooks. Smith will office in Centennial Bank’s Joyce Branch at 1400 East Joyce Blvd., Fayetteville.

He has served on NWA Miracle League board where he was a buddy and coach, past member of Fayetteville Kiwanis, and current member of TeamWorks.

Casey’s General Stores has signed an asset purchase agreement to acquire 24 Stop-n-Go locations, with 20 of the stores located in North Dakota and four located in Minnesota.


“We are excited about the opportunity to acquire the Stop-n-Go chain as they are a well-managed and established group of stores in a relatively new market area for Casey’s,” said Robert Myers, President and CEO. “This acquisition will be accretive to earnings in the first year of operation and will provide future earnings enhancements as we realize operating efficiencies and integrate our prepared food operations.”


The acquisition is subject to certain regulatory approvals and other customary closing conditions, including the company’s receipt of satisfactory inspection reports related to the stores. The transaction is expected to close in May 2014, and will be funded by a combination of existing cash and operating cash flow
.

“We hope this acquisition serves as a springboard for more Casey’s locations in the area as we continue to look for opportunities to build and buy stores in the upper Midwest,” Myers said.


Casey’s first expanded into Northwest Arkansas more than two years go. The convenience store chain has 16 stores in Benton and Washington counties.

Consumers pulled back on post-holiday shopping and spending in the beginning of the year with severe winter weather in much of the country partially to blame, according to a report from the National Retail Federation.

The trade group reports January retail sales, excluding automobiles, gas stations and restaurants, were seasonally flat month-to-month, but sales rose 3% on an adjusted basis year-over-year.

“Following a solid holiday sales season, it seems that many consumers decided to take a break from the stores and shopping malls this January in an attempt to avoid winter weather,” NRF President and CEO Matthew Shay said in the statement. “While the dip in retail sales was somewhat anticipated, it is concerning that both jobless claims came in above projections and that consumer spending were flat in January – it’s not the way to kick off a new year.”

Congress did increase the debt ceiling this week, but Shay said more is needed to spur consumer confidence and spending, which is closely tied to employment data and economic opportunity.

The U.S. Census Bureau also released its January sales data, which includes automobiles, gasoline stations, and restaurants. The Census data indicates a 0.4% decrease in January sales on a seasonally adjusted month-to-month basis. Sales rose 2.6% adjusted year-over-year.

“Harsh winter weather is masking the performance of the broader economy,” NRF Chief Economist Jack Kleinhenz said. “Extreme temperatures and severe ice and snow are making it increasingly difficult to assess if the retail sales slowdown is temporary or a telling sign of a longer lasting weakness in the consumer-fueled economy. No one can jump to any solid conclusion until we shovel out of the snow.”

Earlier this month, NRF forecast a 4.1% increase in retail sales in 2014.

Other findings from the January retail sales report (year-over-year) include:
• Building material and garden equipment sales increased 3.3%.
• Clothing and accessory sales increased 1.4%.
• Electronics and appliance sales decreased 4.9%.
• Furniture and home furnishing sales decreased 2.1%.
• General merchandise sales increased 1.4%.
• Health and personal care sales increased 3.1%.
• Online sales increased 6.5%.
• Sporting goods, hobby, book and music sales decreased 1.5%.

A relatively higher price and the continued production of natural gas from existing wells resulted in a record of $62.685 million in Arkansas’ gross natural gas severance tax revenue during 2013. The tally was up more than 53% compared to 2012 collections and up more than 6.4% over the previous high set in 2011.

Also, a recent report from the Bureau of Economic Geology at the University of Texas says Arkansas’ Fayetteville Shale Play will produce natural gas out to 2050, but production in the Play could decline beyond 2015 if natural gas prices remain low.

Even with 80% fewer active rigs in Arkansas compared to the boom days of 2008, a wellhead price flirting with $5 per MCF – the price recently hit $4.824 MCF according to the federal Energy Information Administration – is supporting demand for natural gas produced in Arkansas, said Kelly Robbins, executive vice president of the Arkansas Independent Producers & Royalty Owners.

The winter weather and the continued growth in liquified natural gas (LNG) exports also is supporting the recent price increases in natural gas, Robbins said.

“The colder weather has obviously created greater demand, which as we know, whether for natural gas or widgets, will generally always increase the market value. This coupled with new or increased demands such as exportation of Liquefied Natural Gas (LNG) to other countries, increased usage of natural gas for the production of electricity, and even closer to home, the expansion of Compressed Natural Gas (CNG) stations via a state rebate program that will hopefully help encourage the building of up to 6 stations” in Arkansas, Robbins said in a note to The City Wire.

The U.S. Department of Energy has authorized energy companies to export up to 8.5 billion cubic feet per day of LNG to non-free-trade partners. That represents about 13% of daily LNG production.

RECENT TAX HISTORY
In 2009, the first year of the severance tax hike, Arkansas joined the list of the nation’s top marketed natural gas producers when sales of Arkansas natural gas spiked 57.5% to 690 billion cubic feet (Bcf). Arkansas natural gas sales rose another 36.1% to 939 Bcf of annual production in 2010, according to figures from the Arkansas Department of Finance and Administration and the federal Energy Information Administration.

A portion of the severance tax collections since 2009 are used for road and other infrastructure support in the counties seeing the increased natural gas production.
With production in Arkansas’ Fayetteville Shale Play diminished in the past few years, the price of natural gas does have more of an impact on severance tax collection levels.

In 2005 the price approached $15 per million BTU, which began a push by producers to use fracking and other innovative and unconventional drilling methods to find and produce natural gas.

But activity in the Fayetteville Shale Play – located in north and central Arkansas – began to diminish in recent years as the price dropped and as other gas plays emerged that produced a “wet” natural gas. Arkansas’ natural gas is dryer, meaning fewer products can be refined from the raw commodity. A wet natural gas may also be associated with areas in which oil is present, which presents a richer target for energy companies.

Robbins said there are about 12 rigs active in Arkansas, with 8 to 9 operating in the Fayetteville Play. That is compared to more than 55 rigs about six years ago, and down from 22 just two years ago. The monthly average for natural gas rigs in Arkansas during 2010 was 39.

However, the energy sector in Arkansas recovered in 2013 from a big drop in revenue in 2012. Following are the past five years of gross severance tax collections in Arkansas.
2013: $62.685 million
2012: $40.96 million
2011: $58.905 million
2010: $54.485 million
2009: $27.725 million (partial year of collections)

In 2008, the year before the severance tax was increased, collections were $1.314 million.

FUTURE PRODUCTION
Prospects for 2014 look promising with respect to staying at 2013 levels for the natural gas industry in Arkansas. Houston-based Southwestern Energy, one of the largest players in the region, expects production from the Fayetteville Shale Play to be “essentially flat” in 2014 compared to 2013.

“In the Fayetteville Shale, our well performance continues to improve, evidenced by a well we recently placed on production at over 12 MMcf per day, and our efficiencies created by our vertical integration are also expected to continue to improve keeping our well costs low,” noted a Dec. 10, 2013, company report on guidance for 2014.

The company plans to make capital investments of $900 million in the Fayetteville Shale Play during 2014, or almost 39% of the company’s combined $2.325 billion in capital investments in 2014. The company projects between 460-470 gross operational wells in the Fayetteville Play during 2014, just above the 441 in 2013.

The University of Texas report, issued in January, predicts the Fayetteville Shale Play will deliver 18 trillion cubic feet (TCF) of “economically recoverable reserves” by 2050, with production declining from about 950 billion cubic feet (BCF) a year to around 400 BCF by 2030. The report indicates there may be 38 TCF of “technically recoverable” natural gas, but notes that not all gas reserves make economic sense to produce.

However, without a gain in the price of natural gas, production in the Fayetteville Shale Play is predicted to moderate.

“In the pricing scenario of $4/mcf natural gas, production from the Fayetteville Shale reaches a plateau during the period of 2012-2015 and begins a gradual decline as the annual well count decreases,” according to the UT report.

Crystal Bridges Museum of American Art recently acquired the Jeff Koons sculpture, Hanging Heart (Gold/Magenta), which was installed in the museum this week ahead of Valentine’s Day.

The bright gold heart, which measures some 9.5 feet wide, surmounted by an enormous magenta stainless steel ribbon, in now suspended from the ribbed ceiling of one of the museum’s eponymous glass-walled bridges.

Hanging Heart (Gold/Magenta) is a massive, high chromium mirror-polished stainless steel heart sculpture, which is one of five unique versions created by Koons, each with a different transparent color coating. It is the only one, however, that was retained by the artist until sold directly to Crystal Bridges in 2013.

"Hanging Heart, ultimately, is a symbol of warmth, humanity, spirituality, and romance," Koons said. “I’m thrilled to have this major piece in a location in the U.S. where the sculpture will interact with the public. It offers an opportunity for many people to view the work in a space that has a sense of not only romantic but also spiritual transcendence.”

Crystal Bridges President Don Bacigalupi said many think of Koons as the heir to the Warhol legacy, advancing the tradition of Pop Art in taking everyday imagery into a much different realm.

“We're pleased to be able to share this sculpture with our guests,”Bacigalupi said.

Chris Sultemeier leads about 80,000 employees in Walmart’s logistics division. He oversees the massive supply chain operations for more than 180 distribution centers, fulfillment centers and import warehouses. It’s a safe editorial assumption to suggest he knows a few things about leadership.

“He makes sure all those products get to where they are supposed to be on the shelves at Wal-Mart so we can continue to buy them at everyday low prices,” Andy Wilson, a former Walmart executive and now the leader of ministry and operations at Cross Church, said Thursday in his introduction of Sultemeier, the executive vice president of logistics for Walmart U.S.

Sultemeier was the featured speaker for Cross Church’s weekly Summit Luncheon. He was called in to speak when following an unexpected death in the family of Walmart U.S. Chief Operating Officer Gisel Ruiz, who was the scheduled speaker.

Sultemeier outlined a few leadership rules during his speech, but was quick to point out that he in no way has yet perfected them all.

“It’s a journey for me,” he said.

BACK STORY
He grew up in Fort Stockton, a small west Texas town about 80 miles south of Odessa. He credits much of his work ethic to his father, his faith to his mother and his grit and gumption to his older identical twin brothers whom he said wrestled him night and day.

Sultemeier said he wanted to play football after high school, but after an earlier injury the only college that looked his way was Army. In 1980, he entered West Point, where he would earn a degree in mechanical engineering.

“I had the opportunity to observe many different leadership styles at West Point and one early lesson I learned was that motivating your team through threats and intimidation doesn’t work,” he said. “Humble yourself and lead by example. Today we call it servant leadership and that’s the most effective way to lead your team.”

LESSONS FROM SAM
Sultemeier joined Walmart in 1989 following his military service. He said the lessons he learned from Sam Walton in those early years helped shape his career. He said Walton has been gone for 22 years but the lessons are as relevant today as there were 50 years ago. Sultemeier noted the three rules under which he tries to operate.

• Rule No. 3: Be a servant leader.
He showed a brief video clip of Walton talking about the importance for executives to interface and know their store employees. Walton taught executives to never miss an opportunity to sit down with store employees to discuss what was on their minds.

• Rule No. 2: Leaders must have integrity.
Sultemeier shared a recent quote attributed to recently retired CEO Mike Duke: “Integrity is the foundation for everything. If you have integrity, you can be trusted. And when you can be trusted you can build those relationships with your associates that bear fruit. If you don’t have integrity you simply won’t be able to lead.”

Sultemeier said the integrity rule was straight out of Walton’s book of leadership knowledge.

• Rule No. 1: Leaders never stop learning.
Sultemeier shared a couple of personal stories about Sam Walton and how he witnessed this retail master craving more learning, even in his final days.

Around 1990, Sultemeier was a project manager in logistics tasked with opening a new distribution center in Indiana. He was coached by Lee Scott – who would eventually become the Wal-Mart CEO – about exactly how to go about the process of site selection and how to make the recommendation to the executive committee ,which included David Glass and Don Soderquist.

Sultemeier made the presentation and said it went very smoothly, no questions were asked and the project was approved. But just as they were about to leave, a grey-haired Sam Walton came in and asked what what they were doing.

“We told Mr. Walton that we were planning to build a new distribution center. He said, ‘Great, I’d like to hear about it.’ We sat back down ... literally an hour later I finished the presentation. He must have asked me 50 questions. He wanted to know every nuance and detail about the project. He taught me a lesson that day: No matter how high he was in the organization as chairman of the board, and no matter how weak his health was at the time, he still wanted to know those details,” Sultemeier said.

Sometime later, Sultemeier said his dad was visiting from Fort Stockton, and attended the Wal-Mart Saturday morning meeting as his guest. Guests at that time were asked to introduce themselves. When the meeting was over, Sultemeier said they ran into Sam Walton in the hallway.  

“He immediately engaged my dad in a long conversation wanting to know all about Fort Stockton. He asked my dad what kind of community it was, what kind of people lived there, what the retail competition was like. The questions just kept coming. Two years later Wal-Mart built a store in Fort Stockton,” Sultemeier said. “Mr. Sam was constantly learning, probing and digging into the business.”

GIVING BACK
Sultemeier said being a great leader should also encompass giving back to the community. He referenced a book he is reading for a second time, “Half Time”, by Bob Buford. Sultemeier said moving from a state of success to one of significance is the subject of the book.

He challenged the business professionals at the luncheon to look for opportunities in their own lives where they can take their gifts and talents honed in professional careers and put them to work somewhere else within the community. He asked the business professionals how they might be using their gifts and talents to give back to the local community.

“One program that has inspired me as much as anything is a program started by the Walmart fleet drivers called Walmart Heart. These drivers after long hours on the road still find time to volunteer in this program that caters to children with disabilities or long-term illnesses.” he said.

Walmart Heart began about 12 years ago when a young boy named Jake had a wish through “Make a Wish Foundation” to be truck driver. The program took off from there and just kept going with sponsored Walmart Heart events that take place when a need is brought to their attention.

One sector that has come roaring back from recessionary lows is the U.S. auto industry. While Americans are driving 7.2% less than they did before the 2008 recession, they are still spending more on their vehicles.

The average household allocates 6.2% of its total annual spending, or $3,200 per year toward the purchase of automobiles, according to the U.S. Bureau of Labor Statistics. In addition, the average household spends another $223 on auto finance charges each year, and $6,600 annually on fuel and vehicle repairs.

A recent report from the consumer finance site Wallet Hub analyzed auto financing offers from 137 lenders from community banks and credit unions to national banks and car manufactures in search of useful benchmarks and new finance trends. The report compares rates buyers can expect to pay on financing obtained from banks, credit unions, and car manufacturers. Following is how the different areas compare on interest rates. (All rates based on 36-month term.)
• Community banks
New car: 4.53%
Used car: 5.51%

• Regional banks
4.6%
5.28%

• National banks
3.52%
4.22%

• Credit unions
2.24%
2.54%

• Auto makers
new loan: 2.46%
new lease: 4.35%

LOANS, LEASES & RATES
The report found car manufacturers offered lower interests on average than banks or credit unions. But, researchers note, buyers should be aware that car dealers may inflate the “lowest available interest rate” for a bigger payoff on the back end of the loan. Car manufacturers charge 7% lower interest rates, on average, than banks and credit unions.

Car manufacturers charge 43% lower interest rates for a 36-month loan than for their average lease program. The report notes at 81% of the dealerships surveyed consumers who planned to keep their new car for three years were better off financing the car, than leasing it.

Wallet Hub also notes that the spread between new and used car finance options has widened to its broadest gap in two years. Consumers will pay 15% less interest over the life of a loan on a new car compared to a used car.

Credit unions are popular financing options and recent data indicate the rates were 40% lower than traditional banks for new car loans. Used-car loans were 44% less expensive at credit union, compared to banks.

The report also notes that interest rates among smaller banks were about 60% more expensive that national banks or credit unions. Term loans are usually capped at 72 months at traditional banks, while credit unions extend loans to 96 months for new models and 84 months for older ones. Interest rates of bank car loans have fallen by 10% since early 2012, having stabilized in recent months.

GLUT OF USED CARS?
“We’re projecting an increase in auto sales in 2014 as consumers’ needs align with a buyer’s market,” said Rich Porrello, director of Huntington Bank’s auto finance division. “And we’re witnessing tremendous consumer enthusiasm at sponsored auto shows across the Midwest in response to the increasing sophistication among manufacturers that are pushing to define a whole new generation of cars and trucks on the road today.”

Porrello said 55% of its survey respondents said they will buy or lease a new car in 2014, up from 52% last year. The Huntington survey also noted that 30% of respondents said they will choose a used car in 2104, versus 32% a year ago.

Edmunds.com reports a glut of vehicles hitting used car lots will drive down prices as much as 2% this year. While that might be good news for those in the market for a used car, Edmunds.com said the trend will likely cause a ripple effect, influencing shoppers of new and used cars.

“Many car shoppers might not realize how much the new- and used-car markets feed off each other," Edmunds.com Sr. Consumer Advice Editor Philip Reed said in a statement. "The boom in new car leases, for example, is leading to a higher number of lease returns, which adds to the growing inventory of used cars, forcing their prices down."

Reed cautions the drop in used-car values could raise the monthly payments of new car leases. Softer "residual values"— a decline in what a car is worth at the end of the lease – are likely to cause higher monthly payments to make up the difference.

A potential contract with an outside law firm which could lead to steep fines against Whirlpool Corp. for its admitted contamination of a large area on and around its former south Fort Smith manufacturing facility has been made public and will be voted on at Tuesday's (Feb. 18) meeting of the city's Board of Directors.

The contract, first discussed by the Fort Smith Board Feb. 11, would give the Sims Law Office of Princeton, Ill., and the office of Baron and Budd PC "the right to review and investigate possible environmental claims on behalf of the City of Fort Smith, Arkansas," according to a letter labeled "Confidential Communication" from attorney Melissa Sims to City Administrator Ray Gosack.

The letter clearly spells out the terms of the contract to be voted on Tuesday, where the Sims Law Office would seek to use municipal code, namely anti-littering ordinances, to fine Whirlpool not only for the initial pollution it caused when it admittedly spilled potentially cancer-causing trichloroethylene (TCE) at its facility in the early 1980s, but also for all the off-site locations it can be proven the pollution has migrated to since the spill.

“As the agreement explains, if we determine that there exists a viable claim, we would represent your city for a one-third contingent fee of amount recovered pursuant to said claim (40% if the matter is appealed). If we do not determine that a viable claim exists, we would not be in the position to represent the city."

The 10-page document also explains that the city will not front any costs associated with the lawsuits and will not owe any money should the attorneys from both firms lose a potential case or determine that pursuit of legal action would be unwarranted. The contract also spells out details on settlement proceedings, should the city and Whirlpool choose to engage in such discussions in the course of the city's potential legal proceedings against the Benton Harbor, Mich.-based corporation.

"The Client authorizes attorneys to enter into settlement negotiations, and to disclose the amount of its proposed settlement, the nature of its damages, and other factors relevant to the evaluation of settlement values to other clients in the Related Cases whose cases are included in the large number of cases," the contract reads, though failing to disclose if any other related cases are associated with a potential case by the city of Fort Smith.

In preparation for Tuesday's meeting and expected vote on the contract in question, Vice Mayor Kevin Settle asked Gosack in an e-mail whether the city would have to abide by state law by asking for requests for proposals, or RFPs.

"There’s 2 methods for selecting a professional service provider such as an attorney," Gosack replied. "The first method is to prepare a request for statements of qualifications, solicit interest from the legal community, and then select the best-qualified firm. This approach typically takes 6-8 weeks to complete. The second approach is to review the statements of qualifications already on file in the city clerk’s office and select the best-qualified firm. Ms. Sims’ statement of qualification is on file in the city clerk’s office. Hers is the only SOQ for environmental litigation on file. Under this second approach, a firm can be selected very quickly."

Settle also asked whether the case would delay existing homeowner lawsuits against Whirlpool? Gosack said he was unable "to answer this question. I believe the attorneys representing the homeowners would have to address this question."

Rick Woods, an attorney with Taylor Law Partners in Fayetteville who is representing residents in a lawsuit against Whirlpool, said in a telephone interview with The City Wire that he was worried any action by the city could impact settlement negotiations between his clients and Whirlpool.

"There is a worry that it will profoundly effect settlement negotiations. If you look at our lawsuit, one of the things we're asking for is the cost of cleanup," he said. "If you look at case law, landowners have a right to seek that out. If they start pursuing Whirlpool for this, we and some of our clients think it will profoundly effect any settlement."

Woods, whose federal lawsuit includes about 40 land parcels owned by more than 30 individuals, said even discussions about pursuing Whirlpool for municipal fines could impact cleanup, lawsuits and any number of other items associated with the Whirlpool contamination.

"This is the case of unintended consequences. No one knows how Whirlpool will react to this," he said. "It could really effect Fort Smith citizens, or it might not. No one can really predict. That's the basis of why we want this thing to wind its way through the courts."

Settle, who asked several question of Gosack, also asked whether pursuit of fines by the city of Fort Smith would slow down or speed up the cleanup process and why the Arkansas Department of Environmental Quality has yet to impose a fine on the company.

In an e-mailed response, Tammie Hynum of ADEQ said potential action by the city should have no bearing on cleanup efforts. She also explained the lack of fines, saying Whirlpool notified ADEQ of the TCE contamination voluntarily.

"Whirlpool approached ADEQ and self-disclosed the environmental conditions stating a voluntary willingness to clean up the environment. Under the current Consent Administrative Order (CAO) with Whirlpool ADEQ has the authority to fine Whirlpool for any non-compliance of the CAO."

In his first public forum as CEO of Wal-Mart Stores Inc. Doug McMillon challenged employees and suppliers to innovate, saying he would push the envelope in testing these new ideas that will drive the retailer’s future growth. McMillon and several top executives took the stage in Bentonville on Monday (Feb. 17) for the retailer’s annual Global Sustainability Milestone Meeting.

McMillon told the group that he was in the room 10 years ago when then CEO Lee Scott set three huge sustainability goals. He recalled several awkward conversations at the time as Wal-Mart first began it sustainability journey.

He said it was the first time he remembered the company focusing beyond its two major stakeholders — suppliers and customers. He said the sustainability initiative involved some awkward conversations at first when the retailer began asking other outside groups to critique the retailer’s performance in hopes of making Wal-Mart a better company.

“I remember going home and asking my kids at dinner one night if they thought Wal-mart should focus on being more sustainable,” McMillon said. “Spencer (then 7-years old) looked at me and said ‘duh, we’ll be here longer than you and we’ll need this earth.’”

In the past decade Wal-Mart has made big steps in the direction toward sustainability, but McMillon said the next leap will likely come from innovations that are aided by total-system thinking. He challenged suppliers and employees to figure out what they could do in their role to facilitate a more sustainable Wal-Mart.

BACK STORY
Peter Seligmann, CEO and founder of Conservation International, was in Bentonville for the company’s annual meeting on sustainability. He said the idea that Wal-Mart could be a huge player in sustainability first began years ago with a diving trip off the coast of Costa Rica between he and Wal-Mart board chairman Rob Walton.

He said Walton attended a meeting with him the following day with the President of Costa Rica about how the country was managing its fisheries.

“I told Rob that the president was going to look at me and see an environmentalist ... but, if he were to ask about opportunities for sustainable sourcing of fish for Wal-Mart, the conversation would go better. Within a few months there was a change in the way Costa Rica was managing its resources. I told Rob, who was a board member of (Conservation International) at the time, that if he really wanted to change the world, he had to get Wal-Mart involved,” Seligmann said.
 
He said Walton responded by saying, “Let’s go to Bentonville.” Seligmann said they met Lee Scott and other executives about the role Wal-Mart could play and the excitement became infectious as Wal-Mart “democratized” the broader conversation.

“Sustainability is a story about humanity, it’s a big conversation,” Seligmann said. “With climate shift and 80 million new births annually, the planet is stressed out. The biggest challenges for mankind will be how to take care of these new people with shrinking resources.”

WAL-MART PERFORMANCE
Charles Zimmerman, vice president of product innovation at Wal-Mart, said the three goals set in October 2005 by the retailer simple in theory, but lofty in scope for a 2020 target.
• Be supplied 100% by renewable energy;
• Create zero waste; and
• Sell products that sustain people and environment.

The first two, he said were aspirational goals, precise in nature.

Zimmerman said the energy piece involves sourcing renewable energy where it can, as well as generating renewable energy sources. The company reset its energy efficiency goal last year to reduce its energy consumption by 20% by the year 2020. He said through the third quarter of last year, the company reached a 7.4% reduction, well past the 3% needed at the time to be on track for the new 2020 goal.

“While I get excited about those percentages the real impact is financial. That 7.4% is a savings of $250 million in energy costs annually,” he said.

He said LED innovation is leading the way for these savings and it’s largely through products created with its suppliers, products that have revolutionized the entire lighting industry in the process.

Wal-Mart was quick to find lighting applications such as exit signage, freezer cases and parking lots, but the elephant in the room was the large supercenter sales floors which comprise 90% of the retailer’s lighting costs, according to Zimmerman. He said a year ago only 20% of the store planners had evolved their prototypes to be 100% LED. Today, that’s up to 80%. The technology is something its competitors will be using within two years, but in the meantime, Wal-Mart will build some 2,000 stores using the 100% LED lighting.

Touching on the renewable energy source efforts, Zimmerman highlighted the progress made in its Mexican business unit, where the company doubled the amount of wind turbines that power stores there. By the end of 2014, he said 60% of Walmart de Mexico’s energy needs will be met through renewable sources.

Zimmerman said a zero tolerance policy on waste with 11,000 stores is a huge goal, and many would say, “no way.” He said three of Wal-Mart’s largest markets have already achieved 80% no-waste — Walmart U.S., Seiyu in Japan and Asda in the U.K. 

LOGISTICS GAINS
Chris Sultemeier, executive vice president of Walmart U.S logistics, said his division is known far and wide for its efficiencies dating back to Sam Walton’s distribution methods that allowed him to put stores in rural areas. He said all distribution center warehouses and fulfillment centers are converting to LED lighting that will save $10 million annually in utility costs. The retailer also is using hydrogen fuel cells to power the fork lifts used in the warehouses. 

“We have 2,000 of these in use in our distribution centers in the U.S. and Canada, the largest fleet of its kind in the world,” Sultemeier said. “By doubling the fleet efficiency of our trucking operations we shipped 658 million more cases, driving 300 million less miles and saving 43 million gallons of fuel.”

But the more interesting part of Sultemeier’s presentation involved the forward look toward new technology and fuel innovations the retailer is testing with key suppliers. The company spotlighted efforts to collect waste grease from stores and Sam’s Club that is then used to create biofuel. The company also is working to build hybrid trucks that run more efficiently and create a new prototype for the semi-truck of the future — Walmart WAVE.

Wal-Mart said the new WAVE is still a few years away from mass production.

USED CARDBOARD BOXES
McMillon closed the meeting in a candid conversation with suppliers, employees and other groups attending the annual event. He asked anyone in the room who had stories to shares or suggestions that could help Wal-Mart further its sustainability journey to approach the microphone.

The last attendee to speak was Marty Metro, the CEO of UsedCardboardBoxes.com.

He pointed to a box baler on stage in the Wal-Mart home office auditorium and said that’s what everybody thinks is a sustainable effort, but it’s not.

“What really happens is that these boxes can be broken down and then shipped to China. Twelve years ago we set up a company and infrastructure to buy used cardboard boxes and then resell them to people who reuse them again. We buy millions and millions of boxes from General Mills, Nestle and McCormick Spices and instead of baling them, we break them down, inventory and inspect them, then resell them as used boxes. We do sell a tiny, tiny bit to Wal-Mart, but lots to Target, T.J. Maxx, Ross and Marshalls and all those competitors,” Metro said.

He told McMillon he made the trip from California, hoping to spark an interest from Wal-Mart, a huge venue that is shipping millions of boxes to China, in hopes they could work together in the future. 

“Working with Wal-Mart who gets boxes from the suppliers, we could buy those empty boxes and sell them back to suppliers creating a sustainable loop,” Metro said.

McMillon joked that Metro was the marketer among the group, but then quickly added that he figured out how to pay for the meeting.

“You made it to the right microphone,” McMillon said, before he asked his workforce who was going to be responsible for following up with UsedCardBoardBoxes.com.

Wal-Mart’s reverse logistics group answered the call and McMillion noted it. He then asked Metro if he had any other ideas. Metro smiled and said he can’t solve all the world’s problems, so he’s been focused on cardboard boxes for 12 years and his firm does that really well.

Old man winter is the blame for lackluster home sales across Northwest Arkansas in January and likely February as well, according to local agents. 

From Jan. 1 through the first two weeks of February homes sales across Northwest Arkansas totaled 463, with volume of $76.255 million, according to MountData.com. Unit sales are down 9.2% from a year ago, while total volume is off by 10%.

In the two-county area, there were a total of 393 homes sold during January, down slightly from 395 in the year-ago period, according to MountData.com. Total sales recorded last month was more than $65.778 million, flat against the same period last year.

Two of the region’s largest firms each reported flat unit sales in January. Coldwell Banker noted that its sales volume did increase 16.7% from a year ago and new business still pending is down from last year. 

“I think virtually all of that is weather related, as demand is still apparent, supply is still adequate for demand, and interest rates have decreased somewhat,” said George Faucette, CEO of the local Coldwell Banker franchise.

Crye-Leike's Northwest Arkansas sales for January totaled $14 million in volume with 117 properties. The firm also noted that bad winter weather has slowed sales and showings. The company will hold its annual sales goals meeting in Rogers on Wednesday (Feb. 19), and will provide more details at that time.

The larger market in region (Benton County) has stable unit sales, while smaller Washington County posted a slight decrease in units sold.

Agents sold 253 homes in Benton County last month, which was 18 more sales than recorded a year ago. Total sales volume in the county was $41.345 million, up just 1% from the same period in 2013, according to MountData.com.

Median home pricing dipped last month in Benton County to $128,200 or $77.3 per square foot. That compared to $140,000 or $76.20 per square foot in January of last year. Coming off of a stellar year in 2013 in terms sales volume, median prices rose 3.44% in Benton County to $150,000, or $82.60 per square foot.

In Washington County, agents sold 140 homes, 20 less than sold in the same month last year. Total sales volume was nearly flat year-over-year at $24.433 million in 2014.

Median prices in Washington County were $149,900 last month, or $84.5 per square foot. This is was an 8.66% price increase from a year ago. The higher median prices in Washington County help to keep the regional square foot price stable at $80 year-over-year, according to MountData.com.

Twice in recent days, Bloomberg has reported Tyson Foods’ interest in acquiring Michael’s Foods, an egg protein business controlled by Goldman Sachs private equity arm.

Tyson CEO Donnie Smith said recently the protein giant would continue to look for expansion opportunities that fit its long-term growth plans. Tyson recently acquired Bosco’s Pizza, and prior to that it was Don Julio Foods and Circle Foods, all three deals fit in Tyson’s plan to grow its value-added sales and ramp up operations in its prepared foods segment.

Tyson said it does not comment on rumor or pending deals.

Bids for Michael’s Foods are due in the next week for the private sale. The deal could be worth a reported $2 billion, according to a Bloomberg source.

Michael Foods Group Inc., based in Minnetonka, Minn., is a producer and food distributor of egg products, refrigerated potato products, cheese and other dairy-case items. Like Tyson the company serves the foodservice and retail segments.

In November, Michael’s reported net sales through three quarters of 2013 totaled $1.435 million, up 6.1% from the same period in the prior year. Net earnings for the nine months ended Sept. 28, were $34.5 million, compared to $16.4 million in 2012.

The company was acquired by Goldman from buyout firm Thomas H. Lee Partners LP for $1.7 billion in 2010, according to data compiled by Bloomberg.

The Fort Smith Public School Board of Education went against the urgings of school administration and a project architect to reverse its previous vote and instead award an almost $1.9 million contract to Turn Key Construction Management for work at Darby Junior High School.

Turn Key was the initial low bidder on work to expand the locker rooms and band room at Darby, but the Board approved a recommendation by project architect Galen Hunter to give the work to Beshears Construction after a subcontractor with Turn Key withdrew from the project.

At issue is a disagreement about a requirement that the plumbing subcontractor on the project have 10 licensed workers. Turn Key had listed Fort Smith-based Chamberlain Mechanical who at the time of the bid process had less than 10 qualified workers for work that includes moving a large “chiller” from the Darby roof.

Sandy Dixon, owner of Turn Key, told the board that Chamberlain handled a $5 million project at Woods Elementary and a $10 million project at Chaffin Junior High with no problems. Dixon said Chamberlain volunteered to withdraw from the project rather than run the risk of losing future business with the school district. Dixon said she soon realized that allowing Chamberlain to withdraw was a mistake because Hunter would then use that against Turn Key.

“I didn’t want to rock the boat. ... But I was blindsided. I didn’t expect this to happen,” Dixon told the board.

Hunter, who is a principal with Fort Smith-based MAHG Architecture, was the focus of questions from several board members who believed Turn Key and Chamberlain were not treated fairly. During the initial questions, Fort Smith Public Schools Superintendent Benny Gooden was quick to advise the board “against negotiating with individual contractors.” He suggested that “if we’re not going to follow our architect” and his guidance, then it did not make sense to pay a professional for their services.

But that did not quiet the board.

Board members Deanie Mehl and Susan McFerran said they doubted it was made clear to all in the bidding process that having the 10 qualified plumbers was an immediate requirement. They noted that five of the seven general contractors used Chamberlain in their bids.

“If this is so clear, then why did five of seven miss it,” Mehl quizzed Hunter.

Hunter responded by saying it was made clear in a pre-bid conference, and that he could not answer as to why the majority of general contractors listed Chamberlain as a subcontractor.

Board member Rick Wade said he did not think it right that the Board require a subcontractor to staff up to a certain number just to bid on a job. His understanding was that companies will staff up to meet the requirement once they get a contract. Wade asked Hunter that if Chamberlain came back with a list of 10 qualified workers, would he accept the bid.

“I have no problem with Chamberlain,” Hunter responded. He noted several times during the meeting that he had no problem with Chamberlain, but was just trying to ensure that the process was fair to all general contractors who submitted bids.

A few minutes later, Sandy Dixon, owner of Turn Key, asked a more pointed question.

“Can 10 work on that chiller at one time,” Dixon asked Hunter.

“No,” he quickly responded, adding that “I think the 10 number was pretty much just arbitrary.”

Wade moved that the Board reconsider its vote to award the Darby work to Beshears. That motion was seconded by David Hunton and approved unanimously. Wade then moved that the work be awarded to Turn Key. That motion was seconded by Mehl and also was unanimously approved.

After a wild January ride, cattle and beef markets are settling into somewhat more stable levels moving forward, according to Derrell Peel, livestock marketing specialist with Oklahoma State University.

He notes that the onslaught on winter storms have affected beef consumption and distribution as well as feedlot production.
 
Through the first six weeks of 2014, beef production is down 8.6% with cattle slaughter down 9%, according to the U.S. Department of Agriculture stats. As a result, Peel said beef margins continue to adjust with relative winners and losers among the various industry sectors. 

“Wholesale boxed beef cutout had the wildest ride with Choice cutout spiking up to $240 per hundredweight, up 20% from the beginning of the year, and retreating to current levels under $208 per hundredweight,” Peel notes.

He said packers benefitted partially from the short-lived price increase because the values represented a limited spot market for wholesale beef and many packers had a significant portion of their beef production forward priced at lower values.

Peel said packer margins continue to be squeezed by higher fed cattle prices and their limited ability to recoup those costs for the processed meat at high spot prices because of forward contract deals. Packer margins have been further squeezed as boxed beef prices have fallen more than fed cattle prices, he said.

The winner in the recent volatile market swing is the fed cattle market as prices have retained more than half of the January gains. Peel reports fed cattle prices of $135 per hundredweight for the first week of January, dropping to levels of $142 after peaking at $150 about three weeks ago. 

He said feedlots are breaking even or doing slightly better at this time. Peel said that could mean they are limiting losses more than gaining profits, but it is still well above earlier expectations for the market at this time.

A series of winter storms continues to pummel the northern half of the country and winter weather impacts on fed cattle performance will continue for some time, Peel said.

Arvest Bank and its employees in Northwest Arkansas raised $146,466 in donations for the United Way to help serve individuals and organizations across the region in its 2013 campaign.


The bank said area efforts helped increase donations by $40,000 from the 2012 campaign. The money represents a combination of Arvest employee contributions and corporate donations.


“The United Way’s workforce campaign is a lifeline to thousands of families in our region and contributing to it is one of the most powerful ways we can serve the community,” said Roger Holroyd, president of Arvest Bank in Siloam Springs and a former board of member for the United Way of Northwest Arkansas. “It gives our Arvest family the chance to help our neighbors.”


The United Way of Northwest Arkansas supports 75 programs in the region operated by organizations that feed, educate and care for children, families and adults. It serves four counties: Benton, Madison and Washington in Arkansas, and McDonald County, Missouri.

January home sales in Crawford and Sebastian Counties posted increases from the same period last year, with both counties posting values more than 40% higher in January 2014 than in January 2013.

Crawford County saw an increase in home sales volume from $2.711 million on 27 homes in January 2013 to $3.89 million on 38 homes in January 2014. That helped the county post a 43.5% increase in volume.

Sebastian County posted a 44.63% increase last month, going from $6.346 million on 52 homes in January 2013 to $9.179 million on 74 homes in January 2014.

According to Owner/Broker Kevin Clifton of Kevin Clifton Real Estate in Van Buren, the driving force in Crawford County home sales was the possible loss of the Rural Development Loan offered by the United States Department of Agriculture.

"We were initially up against a deadline for Rural Development loans to be finalized. It was set to expire (if the Farm Bill was not renewed by Congress)," he said. "A great number of people buying in that time only had 30 days (to get rural development loans in process)."

As a result of what appeared at the time to be a probable loss of the loans, nearly 80% of the 38 homes sold in Crawford County were sold in the city of Van Buren.

Besides Van Buren driving sales, the crunch on buyers getting approved for the loans before they were set to expire may have also driven up home prices, Clifton said. In Crawford County, average sale price on homes sold increased by 1.96%, while Sebastian County only increased 1.63%.

Clifton said the market was simply responding to supply and demand.

"On average, the homes in Crawford County are approximately $3 to $4 per square foot higher in asking price then they were this time last year," he said. "So the sale price typically follows suit with the asking price. The bulk of that is supply and demand. The amount of homes now versus last year plays into that final sale price. If there's less homes to choose from, then the sale price can be a little more."

While the year is off to a good start in both counties, Clifton warned that surprises may be around the corner and it has to do with rules on mortgages. For borrowers who do not put 20% down on a mortgage, the government requires the purchase of mortgage insurance, also known as PMI (a mortgage insurance premium). Clifton said the cost of PMI could impact home sales throughout the rest of this year, potentially taking some buyers out of the market, at least for the short term.

"The FHA (Federal Housing Administration) requirements bump the consumer's payment so much higher (with PMI)," Clifton said. "They may want to wait a little longer and save more down, but the payments will be cheaper on the life of the loan."

As a result, "that particular market may not see as much of an increase in sales as the Rural Development loans, if the buyer that can qualify for the rural development loan."

HOME SALES DATA
• Crawford County
Unit Sales
January 2014: 38
January 2013: 27

Total Sales Volume
January 2014: $3.89 million
January 2013: $2.711 million

Median Sales Price
January 2014: $89,500
January 2013: $89,500

• Sebastian County
Unit Sales
January 2014: 74
January 2013: 52

Total Sales Volume
January 2014: $9.179 million
January 2013: $6.346 million

Media Sales Price
January 2014: $112,000
January 2013: $114,900

Fort Smith could soon be home to Arkansas’ first osteopathic medical school and one of just 31 in the U.S., thanks to a more than $58 million investment from the Fort Smith Regional Healthcare Foundation (FSRHF) and a grant of 200 acres from the Fort Chaffee Redevelopment Authority (FCRA).

Officials with the FSRHF, the FCRA and area cities made the announcement during a Tuesday (Feb. 18) afternoon press conference at the River Valley Nature Center at Chaffee Crossing. More than 85 people attended the press conference.

The possibility of such a medical school estimated to have a $100 million annual economic impact on the region was first reported by The City Wire in December 2013. At the time, Foundation officials were in the feasibility phase of the project.

FSRHF Chairman Kyle Parker told The City Wire that a fully operational school would serve about 600 students, and employ around 65 (full-time equivalent jobs) with an average salary of $103,000. That impact does not include adjunct professors that will be needed for the school, he said.

The school is targeted to accept its first cohort of students in the fall of 2017.

PROJECT HISTORY
Revenue from the 2009 purchase of Fort Smith-based Sparks Health System could be used to help build and operate the medical school. 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.

The osteopathy school plan has has 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 FSRHF. Endorsements also have come 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).

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.”

RECENT MOVES
On Tuesday, the FSRHF Board of Trustees voted to move forward with the project and hire a CEO and chief academic officer for the school.

Tuesday afternoon, the FCRA approved providing the school 200 acres near Chad Colley Boulevard, with the land valued at $4 million.

Working with the Arkansas Osteopathic Medical Association (AOMA), the FSRHF has developed several partnerships with regional medical providers. According to the FSRHF statement issued Tuesday, Mercy Health System, Sparks Health System, Cooper Clinic, the Choctaw Nation Health Services Authority and Community Health Centers of Arkansas “have indicated their desire to play integral roles in the clinical rotations and residency education of the proposed college.”

"The AOMA is extremely excited about the development of the proposed Arkansas College of Osteopathic Medicine to be located in Fort Smith,” Dr. James Baker, president of the AOMA, said in the statement. “We will continue to develop, partner with, and support those providing state-wide resources to help advance the Fort Smith Regional Healthcare Foundation's mission of establishing the school."

FCRA Executive Director Ivy Owen also said during the press conference that the FCRA has assisted “off and on for two years” with the project, and that the FCRA Board conducted “a lot of due diligence” before agreeing to provide the land.

Frazier Edwards, executive director of the Arkansas Osteopathic Medical Association, said the association was “extremely excited” to have this school planned for Arkansas, and that the association “will continue to develop and funnel resources” to the school.

Fort Smith Mayor Sandy Sanders called the school a “game changer” for the region.

THE PROJECT
In his remarks and media interview Tuesday afternoon, Parker said FSRHF Trustee Jim Walcott challenged the foundation to “move the needle” on the effort to “fill gaps in healthcare and provide care for the medically underserved regions in Arkansas and Oklahoma.”

The result of Walcott’s challenge could be a 200-acre campus built out in several phases. An initial layout drafted by Oklahoma City-based Crafton Tull shows the campus located immediately east of where a proposed third Fort Smith high school is located. The site is on both sides and just south of the Chad Colley Boulevard entrance into Chaffee Crossing. The plan calls for 87 acres on the west side of the boulevard and 113 acres on the east side.

The first phase of the medical school campus includes a 60,000-square foot building, several smaller buildings, a campus green, main entry, and a proposed pond. A second phase includes a “village green” area with more buildings.

Future development around the campus includes space for a medical office park and commercial and retail development.

Owen said the school is “highly compatible” with the Chaffee Crossing development goals.

“We are very excited to be a part of the plans to build this osteopathic medical university. Their plans dovetail nicely with our plans for this area. The wooded, open space, walkable-style campus is exactly what we want for Chaffee Crossing,” Owen said in the statement.

THE NEED
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, according to information provided by the FSRHF.

Arkansas ranks 48th in physician accessibility in the United States. The western side of the state, including the Fort Smith region, has been identified as the most underserved area in Arkansas, according to the FSRHF.

“FSRHF was presented the opportunity to increase availability of care within medically underserved areas of the state by addressing the severe shortage of physicians through the development of a college,” noted the FSRHF statement.

In his notes, Parker thanked the following individuals for helping during the research phase of the project.
• Mr. Doug Babb, CEO, Cooper Clinic
• Dr. Cole Goodman, President, Mercy Clinic
• Dr. Jason Hill, Chief Medical Officer, Choctaw Nation Health Services Authority
• Ms. Sip Mouden, CEO, Community Health Centers of Arkansas
• Mr. Charles Stewart, CEO, Sparks Hospital

A recovering economy, more lenders in the subprime auto space and higher charge-offs have thrown a monkey wrench into the operations of America’s Car-Mart, a large buy here, pay here auto dealer.

While the Bentonville-based company is poised for topline growth, the bottomline profits were a big miss in the recent quarter. Late Tuesday (Feb. 18) Car-Mart reported net income of $1.5 million for the third quarter ending Jan. 31. A charge of $4.9 million after tax related to higher than expected charge-offs weighed heavy on net income returns. Profits equated to 16 cents per share, down after the charge, plummeting 80% from the same period last year.

A consensus of five analysts who follow the company predicted Car-Mart would deliver 70 cents a share in net income profits in the quarter, which the auto dealer/finance company failed to do even before the taking extra 52-cent charge.

Revenue grew 3.3% to $122.58 million in the quarter, missing Wall Street’s estimate of $126.7 million.

“Despite the pressure we are feeling in the current competitive environment, we are continuing to see some good growth. We remain committed to growing our business the right way with the realization that so long as the competition does not share our same focus on customer success, our results could continue to be affected somewhat,” CEO Hank Henderson noted in the release.

He said the company is seeing some of its best customers lured away with deals that Car-Mart believes involve impractical terms.

“We will continue to do our very best to set our customers up to succeed so that we will be in a position to earn their repeat business in the future. Anything short of our customers successfully completing the terms of their individual contracts is not acceptable to us and not in line with how we believe this business should operate. Unfortunately, the current environment is contributing to higher levels of charge-offs and we will continue to work hard to reverse these trends," Henderson said.

COMPETITIVE ISSUES
Analysts recently polled by The City Wire noted that the heightened competition Car-Mart faces with each sale is not likely to soon subside as more subprime lenders continue to make credit available at perhaps lower interest rates than the 15% Car-Mart charges.

“Private equity firms and other initial public offering activity with companies like Springleaf Leasing are creating a lot of liquidity in the subprime auto and consumer credit space,” said Martin Kemnec, analyst with Jeffries, who rates America’s Car-Mart as a “hold” with a one-year target price of $38.

“While we believe in the strength of Car-Mart’s management team, they have some delicate balancing to do fending off the competition, growing sales and not incurring more risks in the process,” he said during a recent phone interview.

Jeff Williams, chief financial officer at Car-Mart, recently told The City Wire that the company believes the 15% interest rate charged to all of its customers is fair.

“We try to set everyone up to succeed and feel like the 15% is a good rate even for our very best customers,” Williams said.

That said, the company knows it stands to lose some of its better customers to other dealers willing to offer new cars at similar or even lower interest rates. More independent lenders are making new auto loans to credit challenged borrowers and then packaging the credit pools into portfolios and selling that debt instrument on Wall Street to investors seeking higher yields.

COMPANY EXPANSION CONTINUES
The company opened seven new dealerships in the past nine months with four more on tap before the company’s fiscal year end on April 30.

“Our new dealerships are performing well and we are excited to be adding great new towns to our footprint. We have added almost 4,400 active accounts and are working hard to make these new customers, and our existing customers, fans for life of America's Car-Mart," Henderson said.

WIlliams said because of the stubbornly high net charge-off levels, and the company’s expectation that tough conditions will continue at least over the short-term to mid-term, it was necessary for to increase the allowance for credit losses to 23.5% from 21.5%. 

This action is responsible for the $4.9 million ding to the company’s bottomline profits in the quarter. The last time Car-Mart adjusted its allowance was in April 2012 when it reduced the percentage to 21.5% from 22.0%.

“This non-cash charge will not in any way affect our efforts to help our customers succeed, and our cash on cash returns continue to be very attractive even with higher charge-off levels. We are focused on maximizing efficiencies on the operating expense side of the business and are committed to always being the lowest cost operator," Williams said. “We know we can do better, but the business model is certainly being stress tested by forces outside of our control. We are working hard to continue to grow in a healthy manner so that we are in a good position if conditions change in our favor.” 

Shares of America’s Car-Mart (NASDAQ: CRMT) closed Tuesday at $37.55, up 32 cents. The earnings were released several hours after the close of trading. For the past 52 weeks, shares of Car-Mart have ranged from a low $36.22 to a high $50.59.

Car-Mart management will hold a call with investors and analysts on Wednesday morning (Feb. 19). 

FAST FACTS (year-over-year)
Automobiles sold: 10,735, up 3.2%
Number of dealerships: 129, up 9.3%
Average sales price: $9,739, down 0.6%
Same-store sales: down 2.8% year-over-year
Accounts over 30 days past due: 5.8%, down from 6%
Finance receivables: $400.651 million, up 10.1%