Food suppliers to Wal-Mart Stores continue to struggle to improve market share despite a growing U.S. economy. However, a leading analyst with Credit Suisse said some struggles may persist but lower gas prices, industry changes and other factors should help the retail sector in 2015.

Robert Moskow, an analyst with Credit Suisse, said the benefits of lower prices and an overall healthier economy will be more broadly enjoyed by all demographics in 2015.

“While not a game-changer for U.S. food, we believe that the stronger economic backdrop will improve fundamental performance in 2015, especially in relation to the unusually weak 2014. Lower gas prices, a positive adjustment in SNAP benefits, and the slow but continuous improvement in employment should help improve consumer confidence, especially among lower-income consumers who have yet to enjoy any of the benefits of the broader economic recovery,” Moskow said. “Wal-Mart estimates that the SNAP cutbacks at the end of 2013 represented a 0.7% drag on its food sales in 2014, and lower gas prices are likely to boost U.S. disposable income by at least $80 billion. These factors aren't game changers, but they certainly must come as a relief for manufacturers and consumers alike.”

Based on 34 years of government data, Moskow said lower gas prices may not point to more sales for the packaged foods sector. He said when gas prices go down people eat out more often, and when gasoline prices rise, people tend to look for grocery savings.

Other trends in play in the food manufacturing sector include grocers seeking to expand private label and store brands to entice value-seeking shoppers. On the high-end, Moskow expects to see more consumers transitioning to organic foods while they also demand more transparency in labeling and a move toward healthier nutrition.

The following observations are from Credit Suisse analysts who provide updates on several food companies that are major suppliers to Wal-Mart Stores. These companies also run large sales office in Northwest Arkansas.

CAMPBELL 
Moskow said the acquisitions of Bolthouse, Plum Organics, and Kelsen have added $1 billion of sales from faster-growing health-and-wellness categories and, in the case of Kelsen, emerging markets. The divesture of the struggling European soup business will help Campbell because the moves reduced the exposure of the portfolio to canned soup, which is arguably in structural decline.

He said judging food is an inherently subjective process, but the improvements at Campbell are noteworthy. Adding quality back to the soup formulations and backing away from sodium reduction has improved consumer testing to over 60% preferred versus competition, the report stated.

“In addition, we give credit to CEO Denise Morrison for upgrading the talent of the people around her. In total, 6 out of 11 of the top leaders are new to their roles or to the organization. As an example of the company's emphasis on performance, Ed Carolan was promoted to run U.S. Retail after successfully driving up soup sales in fiscal year 2013. Morrison strengthened the company's marketing capabilities by hiring Michael Senackerib as chief marketing officer,” Moskow said.

CONAGRA 
Late last year CEO Gary Rodkin announced his intent to retire effective May 2015. A successor has not been announced and management recently said there was no update on the search. Moskow said the company’s consumer foods division appears to be stabilizing.

Last year management said it had decided to reduce efforts to attract Millennials to its top brands and adopt a "fix and grow" strategy targeted at its core consumers. This strategic change appears to have stabilized the business, at least for now. Moskow said Chef Boyardee is turning around, gaining share and posting volume and dollar sales growth, albeit on an easy comparison. The company launched new innovation in the second quarter under the Healthy Choice brand that management thinks will help drive growth. Lastly, he said, Orville Redenbacher is seeing "positive developments" and management intends to duplicate the success they saw with the Act II brand by revamping the packaging graphics.

“We believe Lamb Weston has a better growth profile than investors realize.The Lamb Weston foodservice business has a leading market position in Japan, China, Korea, and the Middle East. It makes a high quality product and is known as a quality innovator and product developer, well-equipped to suit customers' needs,” Moskow said in the report.

GENERAL MILLS
Credit Suisse noted that General Mills has dominant positions in two of the fastest growing categories in the U.S. – snack bars and yogurt. Moskow said the U.S. is still an emerging market for the yogurt category with per capita consumption rates growing rapidly as consumers look for healthier meal and snack products. In snack bars, the company has developed an “outstanding franchise” for its Nature Valley granola brand and Fiber One.

The company has realigned the U.S. retail business into five operating units: cereal, yogurt, snacks, meals, and baking products. As part of this, sales of natural and organic brands will be folded into their respective units which will allow for the smaller brands to benefit from increased sourcing, manufacturing, and R&D resources as part of a larger operating unit. 

Moskow is not optimistic about future growth for General Mills. He said the food maker is “clinging to unrealistic long term growth objectives in an environment where consumers keep shifting to more organic, natural, and less processed food solutions.”

He said approximately 22% of General Mills’ sales are in ready-to-eat cereal and this is a category that has struggled for some time. Cereal has consistently underperformed overall food sales since 2009. In that time period, cereal volume was down 3% annually compared to overall food that was flat.

HERSHEY
Moskow said Hershey has taken back some lost market share it lost to Mars and Nestle last year. He expects Hershey sales growth of 7.6% in 2015, driven primarily by pricing and acquisitions, and partially offset by modest volume declines.

Hershey announced an 8% price increase in July 2014, when main input costs peaked. Since this increase was announced, cocoa prices have fallen 4% and sugar has dropped 2%. 

“We expect continued declines in these costs in the near term, and we think dairy prices could fall 15% in 2015. We expect total company pricing to increase 6% in 2015,” Moskow noted in the report.

KELLOGG
Last year Kellogg's percent of sales from breakfast cereal fell to 45% from 50%. Given the declining demand profile of breakfast cereal, Credit Suisse analysts think Kellogg is taking appropriate steps by cutting its manufacturing capacity in North America and adding capacity in lower-cost countries like India. 

Moskow expects more plant closures for U.S. cereal makers going forward and he makes a bearish case for Kellogg in 2015.

“Breakfast cereal lands in the cross-hairs of several dietary movements at once: gluten-free, lactose-free, and the backlash against ‘added sugars’ and ‘empty carbs.’ Just about every nutritionist, dietician,and athlete seemed to have something negative to say about carbohydrates in 2013 and 2014 and something positive to say about protein and ‘good fats. In the past, we too would have considered these issues faddish rather than structural. But the sustainability of these trends has been shocking,” Moskow noted.

KRAFT FOODS
CEO John Cahill’s recent ascension indicates that the board likely wants to accelerate the pace of change, according to Moskow.

“He may take a more aggressive stance than his predecessor to selling brands to streamline the portfolio. Selling Oscar Mayer and Maxwell House, for example, could unlock a fair degree of value for shareholders if they fetch the similar multiples that Tyson and JAB paid for meat and coffee business in 2014. However, selling these on-trend businesses would probably dilute Kraft's growth, and therefore pose an even bigger challenge to the remaining portfolio,” Moskow noted.

He expects Kraft’s gross margin will expand in 2015 to some degree amid lower commodity prices. The report also noted that Kraft is also still in the middle innings of reducing its overhead costs and improving supply chain efficiency. 

“At the time of its spin from Mondelez, management said it lacked cost leadership in almost every one of its categories despite its size and scale. Overhead as a percent of sales has significantly improved to 7.6% in 2013 from 12% in 2010. However, its supply chain ran into some significant start-up problems and quality control issues in 2014 as it tried to consolidate manufacturing lines,” Moskow noted.

He said Kraft has not been able to engage Millennials with its media spends despite moving more dollars away from television and more to social and digital platforms.

MONDELEZ
Moskow said Mondelez – the company with products that include Cadbury, Chips Ahoy!, Oreo and Ritz crackers – is ripe for untapped pricing power this year as the company is poised to see gross operating margins improve thanks to a leaner supply chain.

“Mondelez can likely achieve an extra 1% of margin leverage from making better pricing decisions. This includes raising price or reducing promotion modestly in the markets where its market share is 70% or higher than its nearest competitor and making more conservative decisions in markets without clear leadership,” Moskow noted in the report.

Business leaders in Northwest Arkansas raised the bar for regional growth and economic performance expectations over the next three years, according to data shared at the Northwest Arkansas Council’s annual winter meeting held in Rogers on Tuesday (Jan. 27).

Mike Malone, president of the Northwest Arkansas Council, said the lofty goals set for the next three years are an important layer to the groundwork the region has accomplished since 2011 when the first strategic plan was announced. (Link here for a copy of the new plan.)

Northwest Arkansas completed the five-year plan in just four years but there’s no time to rest as the region has now set its sights on competing with the larger metro areas of Austin, Texas, and Madison, Wisc. Ted Abernathy, president of Economic Leadership LLC., and the consultant for the regional plan, said competitiveness is a journey rather than a destination. 

GOALS SURPASSED
Abernathy was the keynote speaker at the meeting. He shared the “Area Development Rankings” for Northwest Arkansas which far outpaced peer cities that were outlined in the last plan period 2011-2014.

Overall rankings of 379 metro areas
NWA 69
Tulsa 183
Kansas City 148

Workforce Rankings
NWA 32
Tulsa 175
Kansas City 174

Year-to-Year Growth 
NWA 45
Tulsa 233
Kansas City 176

In the past four years Northwest Arkansas grew its population by 7.5% to 505,000. Employment is up 9.3% since 2010 and average wages grew 9.7% since 2009. Unemployment fell to 3.9%, and the regional gross domestic product increased to $28 billion, up 29.8% since 2009. The stellar economic performance led much of the nation and was twice the national GDP for the same period.

Northwest Arkansas also increased the number of people 25 or older how have a bachelor’s degree from 21.5% in 2010 to 27.9% in 2013. Add in the quality of life investments in trails and the additional Interstate highway miles and the region was able to check all the boxes in its former plan.

“The five-year plan was an incredible win for the region,” Abernathy said. 

Looking ahead, he said outpacing the benchmark peer cities over the next three years represent a big challenge – even for a successful region like Northwest Arkansas. When compared to its new peers Northwest Arkansas is an underdog of sorts. 

Overall rankings of 379 metro areas
NWA 69
Austin 15
Madison, Wisc. 45
Raleigh-Durham, N.C. 55

Workforce Rankings
NWA 32
Austin 63
Madison, Wisc. 2
Raleigh-Durham, N.C. 43

Year-to-Year Growth 
NWA 45
Austin 42
Madison, Wisc. 130
Raleigh-Durham, N.C. 102

WORKFORCE CHALLENGE
Abernathy said the biggest challenge for economic developers across the country today is qualified workforce shortages. Northwest Arkansas is not immune. The region is working with local school districts like Springdale to get me more workers in the pipeline sooner by offering skills and workforce training to high school students.

The new plan calls for work with high schools to expand and be adopted across the region. Abernathy said the region must continue to develop a pipeline of workers and continue to retract and retain other talent. He said in a perfect world every high school graduate would have had a work experience.

Malone said workforce shortages are a challenge going forward, not just in skilled manufacturing but also technology and medical professions. 

“There’s a lot of good work already being done. We need to transfer that on a broader scale and there is a communication opportunity to let people know what is working well so that it can be adopted elsewhere,” Malone said. “The shortage of available workforce at our low unemployment levels is an area of vulnerability for this region going forward.”

‘LET’S ALL GET MOVING’
The Council also plans to work on a 25-year look at infrastructure needs such as highways, added multi-modal mobility, preservation of the region’s drinking water as well as pricing improvement and options for the regional airport. Thirdly, the new plan seeks to promote itself as a region to attract targeted job opportunities.

Abernathy said the region has to think like a metro area if its going to compete at a higher benchmark. But he also said it’s vitally important that individual towns continue to invest and redevelop their own downtowns.

“Downtown is what attracts young people to a region. ... We are becoming a downtown nation,” he said.

Abernathy said the regional council has got to develop its next class of leadership as he starred out upon the mostly gray-haired membership. The plans calls for promoting citizen engagement on boards, elected positions and leadership training. The group also seeks to promote racial and cultural ethnic diversity by supporting quality of life enhancements that appeal to a variety of demographic groups.

Rosalind Brewer, CEO of Sam’s Club, also serves as co-chair of the Council board of directors. She told the group she embraced the shorter plan and while the region is already outpacing Santa Rosa Calif., and Lexington, Ky., there is plenty of work to get the region into the top 100 performing metro areas.

Susan Barrett, president of Mercy Health System, told the membership that the region has come such a long way in four years because they had a strategic plan from which to work. Without this plan, Barrett said the region would not have known it needed a task force to call on local businesses to retain and and help them with expansion, a plan that has been successful in protecting the local job base. She also attributes many of the downtown strategies to the ongoing work that came from the plan the group followed for the past four years.

Malone said this new plan is more narrow and a deeper dive on just a few of the items where there is the most need.

“We don’t have to recreate the wheel here. We just need to draft more organizations to the cause to help pull off these goals which will be reviewed in just 1,068 days. Let’s all get moving,” Malone said.

The Northwest Arkansas Council will celebrate its 25th anniversary at its next meeting scheduled for July 20.

Arkansas’ labor market is showing signs of stability, but the jobless rate for black teenagers in Arkansas hovers at or below 40%, and has in recent years been as high as 53.9%.

The jobless rate for Arkansas during December fell to 5.7% compared to 7.4% in December 2013, and down from 5.9% in November, according to figures released Tuesday (Jan. 27) by the U.S. Bureau of Labor Statistics. The December numbers are subject to revision.

Arkansas’ annual average jobless rate fell from 7.9% during 2011 to a revised 7.5% during 2012. The annual average jobless rate for Arkansas during 2013 is 7.5%, with the annual average jobless rate likely to fall to around 6.4% in 2014.

The size of the Arkansas workforce – 1.324 million – fell by 0.2% compared to December 2013, but was better than the 1.315 million in November. The peak for Arkansas’ labor force was 1.367 million in May 2008.

The number of employed in Arkansas during December was 1.248 million, above November employment of 1.238 million, and up an estimated 19,586 jobs compared to December 2013. The number of unemployed was an estimated 75,757 during December, below the 77,001 in November, and more than 23% below the 98,484 in December 2013.

The closely watched nonfarm payroll number was 1.207 million in December, the second consecutive time the category topped 1.2 million since September 2008. The nonfarm category does not include farm workers, private household employees, non-profit employees and “general government” employees. Investopedia estimates that the nonfarm category represents about 80% of the total workforce that contributes to national GDP.

Nonfarm payroll during December was better than the 1.203 million in November and up over the 1.185 million in December 2013. Nonfarm jobs reached a high in Arkansas of 1,209,800 in February 2008.

MINORITY EMPLOYMENT
The labor market trends are better unless you are a black teenager. The jobless rate for blacks age 16-19 was 37.4% in November – the most recent month data is available. That is down from 39.7% in October, and just below the 37.9% in November 2013.

The November jobless rates were much lower for white (9.1%) and hispanic (8.3% teenagers. The jobless rates for white and hispanic teenagers have seen big drops in recent years, but that has not been the case for black teenagers. Following is a five-year track of the jobless rates for the three demographics.

November 2014
Black: 37.4%
White: 9.1%
Hispanic: 8.3%

November 2013
Black: 37.9%
White: 32%
Hispanic: 47.9%

November 2012
Black: 40.2%
White: 23%
Hispanic: 7.8%

November 2011
Black: 42.9%
White: 17.7%
Hispanic: 12.4%

November 2010
Black: 38.3%
White: 27.5%
Hispanic: 30.9%

Greg Kaza, executive director of the Arkansas Policy Foundation, said the persistent high unemployment among black youth is “scandalous.” He said part of the blame is on an education system failing minorities with respect to providing workforce skills.

“It’s a sign that the education system isn’t working,” Kaza said.

Jeff Collins, an economist with The City Wire, said education is one of “numerous and complicated” reasons the jobless rate remains high in the black community. Collins said the “structural element” has changed in recent years in which an erosion of the manufacturing base has shifted job opportunities to the service sector.

“So what you have is more competition for jobs that require less experience and education. So the people who are going to be left out are those who are least prepared for employment and those who are least able to get to a job,” Collins said.

He also said “discrimination is clearly still an issue” among employers when it comes to hiring teenagers and black teenagers. In addition to racial discrimination, Collins said employers are more likely to hire older workers – non-teenagers – who have a job experience than a teenager looking for that first job.

As for a solution, Collins said there are no easy answers. He said governments and the private sector could do more to provide career opportunity lessons – resume building, interview skills, etc. – and skills training. He also said entrepreneurial lessons learned through “micro-loan” efforts in third-world countries should be considered.

“Could we create that (micro-loan entrepreneurism) in our communities? ... We might look at that, and fund small enterprises that would provide employment experiences,” Collins said. “That’s a more positive way, I would think, of intervening in those communities with high jobless rates.”

ARKANSAS SECTOR NUMBERS
In the Trade, Transportation and Utilities sector — Arkansas’ largest job sector — employment during December was an estimated 244,200, down from 244,600 in November and unchanged compared December 2013. Employment in the sector hit a high of 251,800 in March 2007.

Manufacturing jobs in Arkansas during December totaled 157,200, unchanged compared to November and above the 151,800 in December 2013. Employment in the manufacturing sector fell in 2013 to levels not seen since early 1968, and is down 22.5% compared to December 2004. Peak employment in the sector was 247,300 in February 1995.

Government job employment during December was 215,800, up from 215,400 in November and unchanged compared to December 2013.

The state’s Education and Health Services sector during December had 177,100 jobs, down from 177,300 during November and up from 173,500 during December 2013. Employment in the sector is up 22.1% compared to December 2004.

The construction sector employed an estimated 51,700 in December, up from 50,300 in November and above the 45,900 in December 2013. November was the first time the sector was above 50,000 since June 2010. The sector is off the employment high of 57,600 reached in March 2007.

Arkansas’ tourism sector (leisure & hospitality) employed 113,900 during December, up from 110,400 during November, and above the 106,900 during December 2013. The December number, if it stands, marks a new record for employment in the sector.

The U.S. meat industry got off to a good start in 2015 and Tyson Foods is one of several meat companies expecting strong earnings this year behind higher demand for chicken and better pork profits. The beef market is likely to remain tough for processors.

Fitch Ratings recently noted the positive trends expected for the meat industry, citing “good demand and lower costs for feed. The analysts said the gains will be offset by a tepid beef market as ranchers are in the midst of rebuilding their herds. The growing consumer bias toward protein-rich foods and improving U.S. economy are likely to support the meat industry this year, the rating company analysts noted in their report.

“However, near-term uncertainty exists for exports due to a strong dollar, China’s ban on U.S. chicken, and disruptions at West coast ports,” Fitch added. “The smaller freezer stocks for chicken, beef and pork all remain down compared to the prior year leaving no immediate backup in supply and the potential for stronger prices for proteins in 2015.”

Tyson Foods has already completed its first quarter of fiscal 2015 and is now about a third of way through the second quarter. The Springdale-based meat giant will report its first quarter earnings before the market opens on Friday (Jan. 30).

Wall Street expects 73 cents per share of net earnings, a penny over the year-ago profits. That would be total net income of about $280 million for the quarter compared to $254 million in the same period of 2014. Sales revenue is expected be $10.35 billion for the quarter, up compared to $8.76 billion a year ago. The revenue boost of 18.1% largely from new revenue from the $8.5 billion acquisition of Hillshire Brands last fall. Tyson Foods’ execs expect 2015 revenue to top $42 billion.

HIGHER MEAT PRICES
Also working in Tyson’s favor is the added disposable income bump in consumer pockets from lower gasoline prices. The U.S. Department of Agriculture expects Americans will dole out 3% to 4% more this year for the meat, chicken and fish they purchase.

The higher prices are expected despite increased production by the poultry and pork industries as they seek to fill the market opening with reduced beef processing.

Steve Kay, publisher of Cattle Buyers Weekly, said consumers will likely pay more for chicken and pork even though production and supplies will be up. He said beef production will be down and prices will rise, although not likely to record levels of 2014. The USDA  forecasts beef prices will increase 4.5% to 5.5% this year, less than the 11% to 12% increase it forecast for prices in 2014 versus 2013.

Kay said this should be positive for fed-beef processors like Tyson Foods as they might have to pay record prices for live cattle in the first half of the year and will need to get higher boxed-beef prices as a result.

Kay said the chicken and pork markets are set up to bring higher profits for processors in 2015, but beef profits will be light.

“Fed-beef processors have just come off their toughest fourth quarter in years, with operating margins negative by $80 per head at times. The first quarter may be a repeat of this, as occurred in 2012’s first quarter,” Kay said.

He expects Tyson’s chicken segment to achieve a 10% operating margin in 2015 as the company projects to save an additional $350 million in grain costs this year compared to  2014.

PRICES, CONSUMPTION
Consumers may see between 4.5% and 5.5% price increases in pork this year according to the USDA. The government expects chicken prices to increase 2.5% to 3.5% despite an anticipated 3% jump in chicken production.

The average national price of a wholesale broiler is expected to be flat around $1.05 per pound this year. Broiler exports will be 7.4 billion pounds down slightly from versus from 7.319 billion pounds in 2014.

Consumption expectations also favor chicken and pork in 2015. The USDA forecasts that consumers will eat about 2 pounds less beef per person this year. The government projects chicken consumption will rise to an average 85.3 pounds per person, a gain of 1.9 pounds. Consumers will also eat 45.3 pounds of pork, 1.3 more pounds this year according to USDA projections. Turkey consumption is expected to be flat at 0.9 pounds per person.

TYSON FRESH MEAT
With U.S. pork production heading up this year to 23.62 billion pounds, Kay expects live hog prices to drop to $65 per hundredweight. A year ago the prices were $76 per hundredweight.

“Last year, Tyson Foods had its second-best pork year since it acquired I.B.P. in 2001. Margin for the year was 7.2% versus 6.1% in 2013. Tyson expects its pork margin in fiscal 2015 to be in its normalized range of 6% to 8%,” Kay noted.

He expects Tyson will take a cautious approach to increased production in 2015.

The USDA expects beef production to dip to 23.665 billion pounds this year, a drop of 3.47% from 2014. The average live price of a fed steer will be $154 to $165 per hundredweight versus $154 to $155 in 2014.

Kay said beef exports will be slightly lower at 2.525 billion pounds this year.

“Tyson, the industry’s largest fed-beef processor, had its best beef year in 2014 as sales were a record $16.177 billion versus $14.400 billion,” Kay wrote.

He expects beef margins in 2015 will be slightly below last year’s levels noting that Tyson expects cattle supplies to decline 4% in fiscal 2015 from 2014.

On the agenda was sex, violence and toxic water. Nope, it was not the latest original show from Netflix, but Tuesday’s study session of the Fort Smith Board of Directors.

Consuming a majority of the board discussion in a meeting that went well beyond its typical one-hour format was discussion of a zero-tolerance policy for domestic violence. The discussion, which briefly included review of the city’s nepotism policy, went somewhat off-agenda when City Director Keith Lau asked Fort Smith Human Resource Director Richard Jones if city employment policies include guidance for “letting police officers fondle prostitutes.”

The question stems from the controversial firing of Fort Smith police officer Don Paul Bales who made public an April 2013 arrest report in which an undercover police officer allowed a prostitute to begin to masturbate him prior to making an arrest. Bales was later fired for what Fort Smith Police Department leadership said was a violation of policy in making known the arrest report. Bales is suing to get his job back.

Fort Smith Police Chief Kevin Lindsey told Board members Tuesday that he could not guarantee something like that would happen again, but the department has taken steps to avoid missteps in such undercover work.

As to fraternization among employees, Jones said the city does not have a policy because people – even those working in the same work place – have a constitutional right to associate.

“But they shouldn’t have sex on the job,” Lau interjected.

Jones and City Administrator Ray Gosack were quick to reply that the city policy addresses appropriate behavior on the job and is typically quick to address such problems.

“We’ve been pretty consistent with that the last four years,” Jones said.

Rick Wade, an attorney with Daily & Woods, the city’s law firm, cautioned against a zero tolerance policy for domestic violence or other behavior. He said such rules can be legally “complicated” and may inadvertently limit response options by the city.

Jones said a review of the city’s employment policies indicates that the policies are comprehensive and standard, but said the Board might consider adding a policy to protect employees who are victims of domestic abuse. He also said the “words we have are appropriate” in addressing nepotism.

Input from Directors included Don Hutchings suggesting the city conduct a more thorough background check on all employees, and Tracy Pennartz and Kevin Settle recommended annual “sign off” by all employees of personnel policies.

WHIRLPOOL REPORT
Jeff Noel, Whirlpool’s corporate vice president of communications and public affairs, and Mike Ellis, an engineer with Environ, told the Board that TCE levels have decreased around Whirlpool’s plant in Fort Smith. Environ is consulting Whirlpool in the clean up effort.

The company closed the refrigerator manufacturing plant in June 2012, and later that year it was made public that trichloroethyclene – a cancer-causing chemical – was found in and around the plant. Whirlpool has been working to monitor and remove the chemicals, with oversight of the work handled by the Arkansas Department of Environmental Quality. ADEQ issued its first remedial action plan December 2013.

Noel said 83% of monitoring wells installed in 2014 show that the TCW plume is stable or decreasing. The 2014 work also indicates that no health risk is immediate, and the company has also worked with a majority of property owners to resolve property devaluation issues. Noel also said the company has done more than the ADEQ required, including monitoring the entire property boundary and increased monitoring inside the building.

According to Whirlpool’s annual report to the Board, the company has installed 202 “membrane interface probes,” 62 soil probes, 86 monitoring wells, and five temporary boundary wells.

As to the reuse of the former manufacturing part of the Whirlpool site, Noel said the company has two “very formal proposals” from companies interested in “strategic demolition,” “repurposing,” and “advanced manufacturing” uses for the site. He told the Board he hoped to provide more info on the redevelopment prospects “in the near term.”

Noel also said the company would present in April its first quarter report on TCE monitoring and remediation.

DIRECTOR CONCERNS
However, several Directors were ready with tough questions. Director Settle said he fears past pollution exposure that may have been underneath adjacent property used by the Fort Smith Boys & Girls Club. It was recently learned that part of the TCE plume was near the property, with TCE found in some wells on club property. Settle reminded Noel and Ellis that they initially said TCE was not near the club property.

“I am even more concerned today than I was a year and a half ago,” Settle said about his confidence that those who swam in a pool that was once on the club property were not exposed to TCE. “I was one of those kids there (in that pool).”

Ellis said he could not guarantee “nothing was there,” but said there are now no health risks on club property.

Director Lau noted that ADEQ recently questioned the pace at which Whirlpool was removing contaminated soil in a high TCE zone on Whirlpool property.

“I’m concerned because ADEQ is concerned,” Lau told Noel and Ellis.

Noel replied by saying that ADEQ is simply questioning the pace rather than demanding Whirlpool do more. He said the company and ADEQ have worked well together to set the plan or make changes “based on the science and facts submitted.”

“It’s part of the adaptive response process,” Noel said.

Noel nor Ellis would provide a yes or no answer when asked several times by the Board if Whirlpool had plans to accelerate removal of contaminated soil from the property.

Director Pennartz expressed concern that the recent info from Whirlpool is only a “point in time” report, and may not reflect what could happen to the pollution in future months. However, Pennartz said she is “somewhat reassured” with Whirlpool’s work because of ADEQ oversight.

Link here for details on the personnel policy discussion and the Whirlpool report.

Budget projections, Whirlpool, the 2015 Personnel Project, and a resolution approving ArcBest Corporation for the Tax Back Program were among the highlights of the Sebastian County Quorum Court’s inaugural meeting for 2015 on Tuesday (Jan. 27).

Sebastian County Judge David Hudson started off with a review of 2015 budget projections. The county finished 2014 with a surplus of $462,997 with revenues ($22.695 million) outpacing expenditures ($22.232 million). The 2015 adopted budget plans for a shortfall of $2.219 million, but Hudson noted that these are based on conservative projections for revenues and expenditures.

Expanding on this, he provided a breakdown of adopted budgets versus actual budgets for 2009 through 2014.

Each year, the actual budget always ended with a surplus with the exception of 2012. That year, the county saw a deficit of $975,130. However, 2009 had a surplus of $1.1 million; 2010, a surplus of $1.2 million; 2011, a surplus of $2.2 million; and 2013, a surplus of $1.4 million.

On the topic of Whirlpool, Sebastian County Tax Assessor Becky Yandell confirmed that the county will be included as plaintiffs in a class-action lawsuit against Whirlpool over the stability of a toxic plume of potentially cancer-causing trichloroethylene (TCE) that caused the county to slash property values for property owners in the area.

As a result, Yandell claims, Whirlpool owes the county back taxes on what those properties would have been worth had the environmental hazard not been introduced. Once cleanup of the affected areas can be confirmed, Yandell said the county would start raising those property values again.

Also Tuesday night, the quorum court approved a $9,900 software license renewal to complete the 2015 Personnel Project by June.

Personnel Project updates will be given on a monthly basis throughout 2015 until completion. Judge Hudson previewed the issues this project will detail in the coming months. These include the following:
• Which markets Sebastian County personnel will be compared to on salary surveys — the Fort Smith labor market, counties of similar size and circumstance to Sebastian County, etc.;

• Frequency of salary range updates;

• Whether key position salaries should be set as market-based pay for minimum salaries based upon duties and responsibilities;

• Merit and/or cost-of-living increases; and

• Other policies and procedures needed to maintain the system and stay current to other markets.

Finally, the court unanimously approved ArcBest Corporation for the Tax Back Program. The measure is a formality in providing state incentives to assist in a $30 million expansion of the ArcBest corporate presence in Fort Smith. That expansion is expected to add just under 1,000 jobs.

With Arkansas’ housing market on the mend in recent years, homeowners may be tempted to take out a home equity loan and banks and other financial institutions are likely eager to capture that business. But the equity gains are not across the board in Arkansas.

Housing prices in the U.S. are up 3.9% in the third quarter of 2014 compared to the same quarter five years ago, according to the latest information from the Federal Housing Finance Agency. Home prices are up 1.2% in Arkansas during the same five-year period, but not all areas of the state enjoy a price appreciation.

January-October data from the Arkansas Home Sales Report shows that the average home price ($165,527) in the state’s four largest markets was down 0.96%. The average price during the 10-month period was down 3.8% in central Arkansas compared to the same period in 2013; up 0.59% in the Fort Smith metro; down 2.75% in the Jonesboro area; and up 4.15% in Northwest Arkansas. Northwest Arkansas’ average home sales price was also up 8.95% compared to the same period in 2012.

AVERAGE PRICE CHANGES
The average sales price in Benton County for the first 11 months of 2014 was $195,443, ahead of the $184,991 for the same period in 2013, and 9.12% more than the same period in 2012.

Washington County’s average price for the first 11 months was $180,637, up over the 2013 period average of $176,676, and better than the $166,666 in the 2012 period.

The average price in Sebastian County for the first 11 months was $136,888, below the $137,571 for the same period in 2013 and below the $137,716 in the 2012 period.

The average price in Crawford County for the first 11 months was $118,812, better than the $111,667 for the same period in 2013, but below the $119,127 in the 2012 period.

“Relative to the nationwide house-price peak at the beginning of 2007, prices are higher or unchanged in most of the state’s metro areas,” noted a recent report from the Institute for Economic Advancement at the University of Arkansas at Little Rock. “For example, prices in Northwest Arkansas declined by nearly 20% from the beginning of 2007 until mid-2011, but have since recovered to the point of being only 9% below the 2007 peak.”

Total home sales in the four large Arkansas markets between January-October hit 18,342, up 4.08% compared to the same period in 2013, and up 18.53% compared to the same period in 2012.

HOME EQUITY PUSH
According to a press release from Arvest Bank, consumers often obtain a home equity loan to improve their home instead of selling it and buying a higher-priced home. Home equity loans are also used to pay for tuition, vehicles and other big-ticket items.

"Since these loans are on a portion of your home’s value, they are considered mortgage payments, which in some cases gives consumers the possibility of the interest being tax-deductible depending upon their specific situation,” Jack Farley, a vice president with Arvest Bank in the Fort Smith region, said in a statement. “With that potential benefit comes the need to remember that a home equity line is using your home as collateral, so they have to be approached intelligently and responsibly."

Scott Jeffus, a senior loan officer at Bank of Arkansas in Bentonville, said average consumers are likely to be cautious about borrowing against their home given the drop in home prices of a few years ago is still in their memories. He said Bentonville and parts of Rogers have certainly seen home prices come roaring back in many neighborhoods and are somewhat bucking the statewide trend.

Jeffus does see opportunities for added home equity lines of credit in 2015. He said credit score qualification has become more stringent but there has been a slight loosening in the home-to-value ratio requirements for well-qualified borrowers.

According to Arvest, a homeowner can use up to 85% of the home’s value, minus the balance of the mortgage for a home equity loan. If a home is worth $500,000 and $250,000 remains on the mortgage, the homeowner could take out a $175,000 loan.

Farley said homeowners will need to determine what equity is available and also investigate what makes sense for the family budget – such as the choice between a lump sum loan or a line of credit.

“It’s also recommended to limit your overall debt risk and avoid putting your family’s shelter at risk for nonessential purchases,” noted the Arvest statement.

The new, modern and unused 200,000-square-foot Mitsubishi manufacturing facility at Chaffee Crossing that once promised to be home to 400 good-paying jobs has officially been put on the sale block.

Rodger Brown, who represents Mitsubishi Power Systems Americas, said the property will be listed for sale even though the company is still looking for the “right use” for a Mitsubishi product.

“We are continuing to explore all possibilities to bring jobs to Fort Smith and Arkansas. This has included looking for the right use of this quality facility within the Mitsubishi family of companies,” Brown said in a statement issued Wednesday (Jan. 28). “While we continue to seek the right use of the plant within Mitsubishi, we have listed this property for sale in the event another company is interested in purchasing this plant and creating jobs in Fort Smith.”

Mitsubishi nor officials with the Fort Smith Regional Chamber of Commerce would discuss a sales price or a price range.

Mitsubishi Heavy Industries announced Oct. 16, 2009, plans to build the $100 million, 200,000-square foot wind-turbine manufacturing plant on 90 acres at Fort Chaffee. The plant was expected to employ up to 400 once fully operational, and Mitsubishi officials initially said full production of nacelles for the 2.4MW wind turbine and the 400 jobs could be in place within the first quarter of 2012.

The city of Fort Smith and the Fort Smith chamber in 2010 bet almost $1.8 million in incentives and infrastructure support that Mitsubishi would open and operate a wind-turbine assembly plant at Chaffee Crossing. While a safe bet at the time when the U.S. wind energy market was on the upswing, few now are willing to bet Mitsubishi will operate the facility that has been mothballed since April 2012.

In December 2009 it was learned that legal and trade disputes between Mitsubishi and GE would delay the opening of the Chaffee Crossing plant. The GE legal dispute, concerns about the long-term availability of a federal tax credit and a slowing economy caused the company to idle the plant before a screw was turned on the assembly floor. The legal dispute was eventually resolved, but the lack of federal production credits and other market factors curtailed production across the industry sector.

Ivy Owen, executive director of the Fort Chaffee Redevelopment Authority, said in January 2014 that Mitsubishi had several offers to sell or lease the building but refused. To Owen, that was a sign Mitsubishi officials were interested in using the building.

Tim Allen, president and CEO of the Fort Smith Regional Chamber of Commerce, said the interested parties will work through the chamber. Allen, who before coming to Fort Smith, spent 11 years with the  Arkansas Economic Development Commission as a project manager and 17 years with CenterPoint Energy in a variety of sales and marketing roles. Allen said his job is to collect and “filter” the proposals.

“We will look at those and see if they need to be sent to the real estate company that is handling this for them (Mitsubishi),” Allen said Wednesday.

He declined to name the real estate company but said it is a prominent firm with a “solid reputation” in economic development circles.

Any manufacturing jobs at the plant would be welcome in the regional economy.

The Fort Smith area manufacturing sector employed an estimated 17,800 in November, unchanged compared to October, and below the 18,400 in November 2013. Sector employment is down more than 37% from a decade ago when November 2004 manufacturing employment in the metro area stood at 28,600. Annual average monthly employment in manufacturing has fallen from 28,900 in 2005, 19,200 in 2012, and to 18,300 in 2013.

A bill that would seek to eliminate a dual status for a state holiday fell short in committee Wednesday, and the Governor’s private option plan was approved by a Senate committee.

The House State Agencies and Governmental Affairs Committee voted against a bill by voice vote Wednesday that would seek to eliminate a dual status for a holiday honoring Dr. Martin Luther King Jr. and Confederate general Robert E. Lee.

Rep. Nate Bell, R-Mena, sponsored House Bill 1113 after media reports of a sign posted at the state Capitol and state offices noted that state offices would be closed in honor of Dr. Martin Luther King Jr. and Robert E. Lee.

The bill was amended Monday to address issues with the bill on both sides, Bell said Tuesday.

The amendment would have removed a state holiday honoring Confederate president Jefferson Davis on June 3 and would instead create a “Patrick Cleburne-Robert E. Lee Southern Heritage Day” on Nov. 30.

“The state of Arkansas has a very proud and distinguished southern culture and heritage; and the state should maintain and celebrate its culture and heritage, including its military leaders, while continuing to recognize and celebrate other events and days of state and federal historical significance,” the amended bill from Bell noted. “It is the intent of the General Assembly by the enactment of this act to maintain and celebrate the state southern culture, heritage and military leaders while continuing to honor, observe and celebrate other days and events of state and federal historical significance.”

Rep. Charles Blake, D-North Little Rock, who co-sponsored the bill, said the new bill would have given residents a chance to honor the state’s southern heritage by honoring both King and Lee.

Blake said the holiday has been a “tool of division and conflict.”

Rep. Eddie Armstrong, D-Little Rock, said he believes the bill “is chasing a non-problem in search of a solution.” However, Rep. Chris Richey, D-West Helena, said a celebration of Cleburne’s life in Helena each year and other Civil War event bring people to the Mississippi River town. Richey said the tourism has helped his community economically in recent years.

Several people spoke against the bill.

Former State Rep. Loy Mauch said the current law honors “true Southern heroes”, while Kay Tatum of Little Rock said the current law is a symbol of unity that honors both men’s sacrifice.

FOR AND AGAINST
Rep. Charlotte Douglas, R-Alma, a member of the House committee, said she was not able to attend the meeting but would have voted against the bill.

“My philosophy is that you can't respect one man by disrespecting another man. They only fall on the same day about every 7 years I am told. I would be for finding a way to see that they aren't celebrated on the same day. That would allow groups to celebrate both days without conflict,” Douglas told The City Wire.

Rep. Bob Ballinger, R-Hindsville, is also a member of the House committee and co-sponsored HB 1113. He voted for the bill. Although the bill was defeated, Ballinger said he was not necessarily upset with the result.

“It gave an opportunity for both holidays to have a focus and the attention that each one deserves,” Ballinger said.

However, he found no fault with the argument that having both men celebrated on the same day is a “symbol of unity,” as bill opponents said.

“I can’t argue with that. It seems reasonable as well,” Ballinger told The City Wire.

He also said defeat of the bill would not put Arkansas in a bad light with respect to race relations. He said “rude people” who are always looking to say something “mean and derogatory about our state” will use the vote for their purposes, but that will be a small audience.

PRIVATE OPTION VOTE
The Senate Public Health, Welfare and Labor Committee passed a bill Wednesday that would extend the private option through the end of 2016 and create a task force that would consider overall health care reform. It voted against a bill that would kill the private option outright at the end of this year.

Senate Bill 96, the Arkansas Health Care Reform Act by Sen. Jim Hendren, R-Sulphur Springs, passed 6-1. Voting yes were Sen. Cecille Bledsoe, R-Rogers, the committee’s chair; Sen. Stephanie Flowers, D-Pine Bluff, the vice chair; Sen. David Sanders, R-Little Rock, one of the private option’s architects; Sen. Missy Irvin, R-Mountain View; Sen. Scott Flippo, R-Bull Shoals; and Sen. John Cooper, R-Jonesboro. Sen. Gary Stubblefield, R-Branch, voted no. Sen. Keith Ingram, D-West Memphis, was not present for the vote.

Bledsoe, Irvin, Cooper, Flippo and Hendren all have been private option opponents.

Senate Bill 144, presented by Sen. Linda Collins-Smith, R-Pocahontas, failed 3-3. It would end the program at the end of this year. Voting yes were Bledsoe, Flippo and Stubblefield. Voting no were Sanders, Flowers and Cooper. Irvin and Ingram did not vote.

Collins-Smith said after the meeting that she was somewhat surprised by the outcome but that she will talk to legislators “to see what concerns they might have and see if we can’t bring them back to the table to repeal bad policy.”

Hendren’s bill would extend the private option, which uses federal dollars through Medicaid to purchase private health insurance, through the end of 2016 but no further without legislative action. It would create a task force to consider a range of alternatives to the program.

The bill mirrors proposals made by Gov. Asa Hutchinson in a speech last Thursday at UAMS.

“I think after the governor’s speech, I think everybody realized that he’s charted probably the only path that could avoid a meltdown, so I’m glad, and it’s about what I expected,” Hendren said after the meeting.

Hendren said that legislators have a disagreement about how best to end the private option.

“The governor has expressed a desire to look at all alternatives,” he said. “I think all of us would prefer to find some way that those people don’t just get kicked to the streets, but what that’s going to look like, it’s going to have to be something that’s affordable. So what that might be? That’s what the task force is going to have to try to determine.”

The private option now enrolls about 200,000 Arkansans. Hendren was asked by Stubblefield how many more were expected to enroll. Hendren said independent actuarial firms had estimated the total number will rise to 220,000-250,000. He said that his chairmanship of a school and state employee health insurance task force had taught him that data-based projections by independent analysts are normally accurate.

Tyson Foods is certainly not the regional company it was 40 years ago or the large national company it was just a few decades ago. It’s now a global meat processing and distribution company, and you probably didn’t know that 90% of the pepperoni on frozen pizzas comes from a Tyson company.

Following are some other things you probably didn’t know about the company founded and based in Springdale, Ark.

GOVERNMENT BUSINESS
The Fortune 500 food company does big business with the federal government, garnering more than $4.7 billion in government contract business since 2000.

$500 million
That’s the value of a contract business between Tyson Foods and the U.S. government that could be in jeopardy if the company is found guilty in an ongoing criminal probe by the Environmental Protection Agency over toxic chemicals released by a plant in Monett, Mo., last year. Tyson Foods recently settled a civil suit with the Missouri’s Attorney General agreeing to pay $530,000 for that unlawful dumping that killed 100,000 fish.

$2.096 million
Tyson Foods spent just short of $2.1 million on federal lobbying efforts in 2014. That’s a little more than Kellogg ($1.88 million) and slightly behind General Mills ($2.47 million) who led the pack among food processing companies.

Under CEO Donnie Smith’s watch, spending on lobbying efforts has been reduced from $5 million in 2010 to just under $2.1 million in 2014. Last year Tyson’s lobby funds went toward tax issues, trade around opening and expanding markets for U.S. beef and pork, Country of Origin Labeling, the federal farm bill, propane prices, agricultural interests, comprehensive immigration reform, labor and workforce issues surrounding the Office of Federal Contract Compliance Programs, according to OpenSecrets.org and FollowTheMoney.com.

ELECTIONEERING
Tyson Foods spent $226,649 on political contributions in 2014. The Republican candidates received $128,200, while $61,200 went to the Democratic candidates and $30,000 to independents.

The top PAC (political action committee) recipients were the National Republican Senatorial Committee for $30,000 and Ready for Hillary at $25,000. The largest individual recipient was former U.S. Sen. Mark Pryor, D-Ark., who got $30,650 from Tyson Foods.

SHAREHOLDER CONTROL
Tyson Foods went public on the New York Stock Exchange in 1963 with shares opening at $10.50 and a market cap of $1 million. An investor who purchased 100 shares for a$1,050 total in 1963 could cash that investment in today for about $142,000. That’s a total return of 13,423% over the 52-year period. This growth is largely due to eight stock splits between 1968 and 1997. 

Tyson’s largest shareholder is the Tyson Family who controls 99.98% of the restricted Class B stock totaling 70 million shares registered to the Tyson Limited Partnership. These restricted shares carry a 10:1 voting advantage over the publicly traded Class Stock. The Tyson Family also owns 2 million shares of Class A Stock.

The largest shareholders of Class A stock is Vanguard Group who has 7.37% of the outstanding stock or 22.481 million shares, according to the company’s recent Proxy filing with the Securities and Exchange Commission. BlackRock Inc. holds a 6.59% stake in Tyson Foods controlling more than 20.113 million shares. 

Board Chairman and Tyson heir John Tyson owns 1.04% of the company’s Class A Stock, a position of more than 3.163 million shares with a street value of $130.5 million. CEO Donnie Smith holds 1.703 million shares worth an estimated $70.29 million. The entire slate of officers and directors at Tyson Foods controls a total of 7.503 million shares or 2.46% of the outstanding Class A stock.

OTHER STUFF TO CHEW ON
• In a year’s time Tyson’s Any’tizers chicken fries if laid end to end would circle the entire globe.

• Company’s owned by Tyson Foods make enough hamburger patties each year to cover 13,306 football fields.

• The company’s fresh meat division turns out enough hams annually to make a stack of breakfast sandwiches reach 7,357 feet high – or more than five times the height of the Empire State Building.

• Tyson Foods makes about half of all pepperoni used by the major pizza chains and about 90% of the pepperoni that ends up on frozen pizza.

• The meat giant is also the second largest manufacturer of flour and corn tortillas and chips in the United States.

• Tyson Foods buys more than seven million bushels of corn each week which is combined with soybean meal that make up the feed it distributes to about 5,500 contract farms that supply its 57 chicken plants.

• Tyson Foods will annually spend more than $1 billion on corn. Tyson said it takes 3.7 bushels of corn to produce 100 pounds of boneless, skinless chicken meat.

GIVING BACK
Food is Tyson’s business and its stand against hunger prevention has led to more 100 million pounds of food donations since 2000. Since 2004, the company has the equivalent of roughly 300 million meals, as part of its commitment to hunger relief.

The meat company also found other ways to help local charities in the towns where it operates. In the past 13 months Tyson Foods has donated more than $2 million in its own backyard to benefit downtown development in Springdale, Arkansas Children’s Hospital outreach in Lowell and the University of Arkansas. In Iowa, Tyson made two large contributions to the YMCAs in Council Bluffs and Sioux City totaling $350,000, while another $150,000 was awarded to charities in New Jersey and Mississippi and $100,000 more awarded to nonprofits in North Carolina, according to the company’s website.

Three technology companies announced plans to locate new facilities in downtown Conway, investing $2.5 million and adding 140 new jobs.

Metova Inc., a mobile app development company; Big Cloud Analytics, a predictive analytics software company; and Eyenalyze, a Conway-based company that has developed innovative software for use in the food service sector; will invest a combined $2.5 million and create 140 new jobs.

The announcement included Conway economic leaders and Gov. Asa Hutchinson.

“Conway continues to build on its reputation as a hub for technology companies,” said Hutchinson. “Metova, Big Cloud Analytics and Eyenalyze had the opportunity to locate these new facilities anywhere in the U.S. The fact all chose Conway is a testament to the strength of the local workforce. Thanks to each company for making the decision to make a significant investment in Arkansas. We look forward to working with you as you continue to grow.”

Metova, which has a facility in Cabot, recently acquired a radio-frequency identification (RFID) company in New Hampshire and is moving operations to Conway. As part of the move, the company is working to establish a wireless engineering degree at the University of Central Arkansas in an effort to sustain and grow new jobs. The company plans to invest $2.075 million and create approximately 60 new jobs in Conway.

“Conway offers a desirable combination of a skilled tech workforce, with a welcoming business environment and great living conditions,” said John Adams, CEO of Metova Inc. “We’re all very excited about opening offices here and look forward to working with central Arkansas’ universities to help bolster the region’s pool of engineering talent.”

Big Cloud Analytics provides technology enabled real-time marketing predictions through the use of “big data analytics,” a process of collecting, organizing and analyzing large sets of data to discover patterns and useful information. The company plans to invest $116,000 and hire up to 40 employees in Conway.

“We are simply thrilled to open a new location in Conway,” said Bryan Throckmorton, Big Cloud Analytics’ chief revenue officer. “The global analytics market is booming, and our growth plans require that we have access to the right kinds of talent. The combination of existing talent and new talent emerging through the three universities in Conway makes it an ideal place for us, and being downtown enables us to create a fun work environment to go along with the long days.”

Eyenalyze, a new player in the restaurant industry, hopes to give local, independent restaurants the same type of real-time profit analysis used by larger chain competitors. The company services restaurants, franchises, hotels, country clubs and caterers.

Eyenalyze is working with Metova to develop software that captures and compiles data from multiple sources to provide managers with sales information, labor costs, plate costing, and profit information along with day-to-day accounting. Eyenalyze has plans to employ 40 by 2016.

“Eyenalyze is meeting the hospitality industry’s demand for real-time profit analysis at a scale that wasn’t imaginable only a few years ago,” said Eyenalyze President Michael Rasmussen. “We’re excited to join these companies in establishing Conway, and its downtown, as a destination for big-data professionals.”

The staff and supporters of the U.S. Marshals Museum are likely hoping that commemorative coin sales are as successful recent sales by Umarex USA of a limited edition airgun connected to the museum effort.

Umarex USA, which is based at Chaffee Crossing in Fort Smith, teamed with the U.S. Marshals Museum to offer a limited edition U.S. Marshals Museum commemorative airgun of the Colt Single Action Army Revolver, also known as the "gun that won the west." The gun displayd a U.S. Marshals emblem in the grip and they were numbered consecutively one to 500. The airguns were sold on a first-come-first-served basis to dealers who placed an order at the Shooting Hunting & Outdoor Trade Show (SHOT Show), held Jan. 20-23 in Las Vegas. Dealers are limited to 30 guns and they are expected to sell out quickly.

The airgun replicas sold out in about four hours.

“All available U.S. Marshal Museum Commemorative Single Action Army revolvers were sold during the first morning of SHOT Show. 29 different orders were placed with Umarex USA. Orders accepted at SHOT Show 2015 for the replica revolver were allowed a minimum of three units and a maximum of 30,” Justin Biddle, director of marketing for Umarex USA, said in an e-mail exchange with The City Wire. "In addition to the publicity generated by the promotion for the museum, Umarex USA will also contribute over $2,500 to the U.S. Marshals Museum as a result of this project."

No proceeds from the airgun sales support the museum, but airguns numbered 1-10 were set aside for the museum to use in fundraisers, said Alice Alt, director of development for the museum.

In January 2007, the U.S. Marshals Service selected Fort Smith as the site for the estimated 20,000-square-foot national museum. The museum is to be built on 15.9 acres along the Arkansas River that is being donated by the Robbie Westphal family.

COIN SALES
The museum will host an event Feb. 7 in downtown Fort Smith for anyone who wants to purchase the United States Mint’s commemorative coins honoring the 225th anniversary of the U.S. Marshals Service, the nation’s oldest federal law enforcement agency. The coins were first unveiled to the public on July 23 during a ceremony in Washington, D.C.

The coins officially were placed on sale Thursday (Jan. 29), and can be purchased online through the museum website.

Physical coin sales on Feb. 7 will begin at 6 p.m. at the UAFS Blue Lion Building located at 101 N. Second St. in downtown Fort Smith.

The coins are part of the museum’s advance allotment. Local banking partners Arvest, the First National Bank of Fort Smith, Regions and BancorpSouth will handle transactions at the event. The evening will feature entertainment, refreshments, appetizers and a cash bar of wine and beer. Cash, check and credit card will be accepted.
 
“We are excited to be able to showcase and offer these coins to the public here in Fort Smith,” Jim Dunn, president and CEO of the U.S. Marshals Museum, said in a statement. “So much work has gone into getting to this point and based on initial reactions from the community, it appears people are ready and enthusiastic to be part of this.”

The coins may be purchased for an introductory price of $412.60 for the gold, $46.95 for the silver, and $14.95 for the clad-half dollar. The funds raised through surcharges on the coins will help construct the U.S. Marshals Museum. The U.S. Marshals’ commemorative coins are not intended for general circulation and are produced in limited quantities. The United States Mint is authorized to issue a maximum of 100,000 $5 gold coins, 500,000 silver dollar coins and 750,000 clad half-dollars.
 
MUSEUM WORK, FUNDRAISER
The planned $53 million museum's construction is a three-phase project, starting first with site work before moving to building construction and finally design and installation of exhibits to be housed at the museum celebrating the United States' oldest law enforcement agency.

A ceremonial groundbreaking was held in September, and museum officials hope to have the facility open by late 2017.

The museum will host its first ever “U.S. Marshals Stampede: Kickin’ Up the Dust” fundraiser on March 14, 2015, at Kay Rodgers Park in Fort Smith. The event will feature entertainers including the Austin, Texas-based headline act Asleep at the Wheel.

The petition drive seeking to change the form of Fort Smith city government is set to begin Friday (Jan. 30), with around 35 group supporters gathering Thursday night at the Fort Smith Public Library to hear the “nuts and bolts of how to organize” the petition effort.

Take Back the Fort 2015 first met Jan. 16 to begin the public discussion on changing city government, with Don Paul Bales leading the first meeting and Thursday’s gathering. Bales is a former Fort Smith police officer who was fired and is now suing the department to get his job back. The meeting was also attended by Frank Glidewell, a former state Representative and Sebastian County Judge, and Denny Altes, a former member of the Arkansas House and the Senate.

Fort Smith’s city administrator form of government has a city administrator who is hired and fired by the seven-member elected Board of Directors. Fort Smith has a mayor, but the position is largely ceremonial, with the primary duty to preside over Board meetings.

Bales told the group they need 2,517 signatures to force an election on the issue, but wants to collect “far more than necessary” because the effort will be “viciously fought” by city leaders.

“They are going to fight the legality of all of those (signatures) on each petition once they get it,” Bales told The City Wire, adding later that the group is “trying to anticipate their (city’s legal team) attack and shut it down.”

Prior to outlining numerous requirements of those who volunteer to collect signatures, Bales said the plan is to submit signatures to Fort Smith City Clerk Sherri Gard by March 2. He said that should provide enough time for certification so the issue can be placed on a city election already set for May 12.

The Fort Smith Board of Directors approved Jan. 20 a special election for May 12 seeking voter approval to renew the 1% sales and use tax for streets and drainage. Should voters choose to approve the 1% renewal, the ballot also would ask voters to consider an option for 5% to go from streets and drainage to help develop and maintain a citywide trails and greenways network.

Bales and Jack Swink, the treasurer for the group, will begin on Friday five weeks of “Fight for the Fort Fridays” in which they will work a signature table at the Sweet Bay Coffee shop near Creekmore Park and the Sweet Bay on east Rogers Avenue in Fort Smith. Bales, who will be at the Creekmore Park location, and Swink will set up each Friday between 4 and 9 p.m.

Bales said he hopes for 10 “mobile” volunteers to work the city to gather signatures, and 10 who will have set locations like the first two at Sweet Bay. As volunteers are assigned, Bales said information on where voters can sign the petition will be listed on the groups’s website and Facebook page. Volunteers receive organized notebooks that provides instruction on the correct way to gather signatures and other responsibilities of those who witness the signature gathering.

Ironically, Bales is not a Fort Smith resident and can only collect signatures. He does operate a business in the city.

During the one-hour meeting, Bales said he thought former City Directors Philip Merry Jr. and Pam Weber would support the effort, but was not certain. Merry and Weber served one term on the Board and did not seek re-election in 2014.

Merry was not willing to commit 100% to the effort because he says there are “multiple groups in town” that have talked about changing the form of government.

“But before I join any one group, I’d like to see if all the groups would sit down. I am just hopeful that all of these groups could work as one team,” Merry told The City Wire during a Thursday evening phone interview.

Merry does support a change in government, saying that the mayor-council forms of government in Fayetteville and Rogers are examples of what he would prefer.

“I am for a system that will improve transparency and accountability in city government, and I think that Fayetteville and Rogers have nailed it in that regard. ... This city, and our people deserve a (system) that is open and transparent and consumed with providing good public service,” Merry said.

It is indeed a happy new year at Tyson Foods. The Springdale-based global meat processing, marketing and distribution company reported record revenue of $10.817 billion for the first fiscal quarter, up 23.4%. The quarterly net income of $309 million was ahead of the $254 million in the same quarter of 2013.

Per share earnings of 77 cents also beat the consensus analyst estimate of 73 cents. Also, the $10.817 billion in revenue was well ahead of the consensus estimate of $10.35 billion.

The improved numbers largely reflect the integration of Hillshire Brands into the Tyson portfolio. Tyson Foods completed the $8.5 billion acquisition of Hillshire in August.

"Tyson's fiscal year is off to a great start with our first full quarter as a combined company producing record sales and adjusted operating income," Donnie Smith, president and CEO of Tyson Foods, said in the earnings report issued Friday morning (Jan. 30). "We used our strong cash flows to pay down debt by $650 million in the quarter.”

The debt move is likely to be well received in investor circles. The Hillshire deal came with concerns that the expensive deal would be a debt burden on Tyson Foods.

"We are proceeding with the integration of Hillshire Brands. I want to thank our team members for their ability to quickly focus on the business as we brought the two companies together. The first quarter was a crucial time, and the team handled it well,” Smith noted in the earnings report.

The company also stayed with a healthy fiscal year per share earnings guidance in the $3.30-$3.40 range – or around $42 billion. The company earned $2.94 a share in the recent fiscal year.

“We expect fiscal 2015 sales to approximate $42 billion as we integrate Hillshire Brands and continue to accelerate growth in domestic value-added chicken sales and Prepared Food sales,” the company noted.

BRIGHT CHICKEN
The chicken segment had a record quarter with sales revenue of $2.78 billion, up 4.66% compared to $2.656 billion in the same quarter of the previous fiscal year. Operating income rose 39% in the segment to $351 million during the quarter.

“Operating income increased due to higher average sales price and volumes in addition to lower feed ingredient costs which decreased $110 million during the first quarter of fiscal 2015,” the company said of its chicken segment.

Smith said during Friday mornings earnings call that there continues to be a push in consumer demand for fresh chicken that rose 8% across the nation and Tyson Foods saw the same uptick in its fresh chicken business for the quarter. 

“We are still a little short of supply in the fresh tray pack chicken for retail,” Smith said.

Hence the company has added lines of production in two of its chicken plants and recently announced a third plant expansion to meet the growing demand. Smith said food service sales were also strong in the quarter with some of the categories posting their highest gains since the recession. He said Tyson’s chicken sales growth to food service was double that of the nation on a sales basis.

The frozen chicken category sales are also strong as Tyson said it works to fill the pent-up demand from its supply glitches in recent quarters resulting from lower production levels following a plant fire.

Looking forward Smith said he’s not concerned about the uptick in industry production despite the fact that slaughter numbers were up 7% in the first quarter.

He said wing and breast meat prices held up just fine amid the higher production levels because the demand is there for the meat. 

BEEF CHALLENGES
As expected, the beef segment struggled. The company posted a $6 million loss compared to a $58 million gain in the first fiscal quarter of 2013. Total sales in the beef segment was $4.391 billion, up compared to the $3.734 billion in same quarter of 2013. The company said sales volume declined 2.7%, but average prices for beef jumped 20.9% in the quarter.

Smith said record high beef high prices in retail have shifted demand away from beef and compressed Tyson’s margins. He does not think that will change because 60% of consumers say high beef prices are causing them to shift to other meats.

“We are starting to see ground meat prices come down a little in recent weeks,” Smith said, but added that prices remain historically high.

The USDA forecasts beef prices will increase 4.5% to 5.5% this year from last. That’s far less than the 11% to 12% increase it forecast for prices in 2014 versus 2013. 

Steve Kay, publisher of Cattle Buyers Weekly, has said this should be positive for fed-beef processors like Tyson Foods as they might have to pay record prices for live cattle in the first half of the year and will need to get higher boxed-beef prices as a result.

FATTER PORK
The pork segment posted total first quarter sales of $1.54 billion, better than the $1.424 billion in the previous year’s quarter. Operating income was $122 million, just slightly higher than the $121 million in the first quarter of 2013. The company said higher demand for pork combined with a smaller supply of hogs allowed the company to boost average prices by 7% during the quarter.

“We expect further recovery from PED (hog virus) and it’s going to be another good year for the pork segment,” Smith said.

The consumption level for pork is relatively flat, but Smith said exports comprise 25% of the nation’s pork business. 

With U.S. pork production heading up this year to 23.62 billion pounds, industry analysts predict live hog prices to drop sharply to $65 per hundredweight. A year ago the prices were $76 per hundredweight. Tyson expects its pork margin in fiscal 2015 to be in its normalized range of 6% to 8%.

PREPARED FOODS
Bolstered by the Hillshire Brands business, Tyson Foods’ prepared foods segment had total quarterly sales of $2.133 billion, a big jump over the $907 million in the first quarter of 2013. Operating income in the quarter for the segment was $71 million, up 343.75% compared to the same quarter in 2013.

“We have streamlined our operations in this segment and the integration of Hillshire has gone extremely well,” Smith said.

He said lower gas prices are helping push food service sales higher with the casual dinning traffic recording its first positive results since the recession in 2008.

Smith said this segment will continue to improve as synergies are realized from the Hillshire merger.

INTERNATIONAL STALL
Tyson reported international sales of $305 million in the quarter, down 2.9% from the $327 million recorded a year ago. The decline resulted from the sale of Tyson’s business in Mexico and Brazil which netted the company $130 million in the quarter. Tyson still expects to receive $30 million more from the sale to be paid in the second quarter.

“We are still in a holding pattern in China as we wait for demand to improve. The international business is tough, but we reduced our loss,” Smith said.

The segment posted an operating loss of $14 million in the quarter, which was better than $28 million loss recorded a year ago.

FINANCIAL UPDATE
Tyson Food Chief Financial Officer Dennis Leatherby said the company had capital expenditures of $231 million in the quarter.

Tyson expects fiscal year capital expenditures to be approximately $900 million with the company execs focused on investments they believe will provide the highest return.

He expects fiscal 2015 net interest expense to be approximately $280 million as the company took on additional debt for the Hillshire acquisition. Leatherby said total liquidity which was $1.6 billion at Dec. 27, continues to be above the company’s benchmark goal of $1.2 billion. 

Wall Street took some profits selling off Tyson shares on Friday following the report. Shares of Tyson Foods (NYSE: TSN) were trading at $39.62 when the earning call concluded on Friday morning  Shares were down 2.16% in heavy trading. During the past 52 weeks, the share price has ranged from a $44.24 high to a $34.90 low.

Tyson Foods shareholders convened in Springdale on Friday (Jan. 30) for their annual no-frills meeting, but there was plenty to celebrate on the heels of a record 2014 and strong start to 2015.

Tyson Foods Chairman John Tyson, a third generation family member of the now global meat company, said there were three pivotal achievements over the past 80 years that have helped to propel the company to its global heights.

“My grand dad founded this company on a shoestring in the midst of the depression. But over the years Tyson Foods took control of its own destiny. There are three times that stand out in my mind,” he said.

• The acquisition of Holly Farms in 1989 propelled Tyson Foods from a regional chicken processor to the No. 1 market share position in the U.S.. 

• In 2001, Tyson Foods acquired IBP for $3.2 billion, elevating the chicken company to the top of all meat U.S. companies and gave it the diversified protein business model that it still uses.

• In 2014 the $8.5 billion acquisition of Hillshire Brands was equally as important because Tyson said it better prepares the company for the future.

“WIth Hillshire Brands Tyson has become a house of brands,” he added.

SHAREHOLDER BUSINESS
Friday’s event also marked the company’s 52nd annual shareholders business meeting. In routine business procedure the shareholders approved its slate of directors to another one-year team. One longtime director Al Zapanta retired from service after 10 years. With a majority vote of 98.8% the following directors were elected: John Tyson, Kathleen Bader, Gaurdie Banister Jr., Jim Kever, Kevin McNamara, Brad Sauer, Donnie Smith, Robert Thurber and Barbara Tyson.

Shareholders also ratified the election of PricewaterouseCoopers as its independent auditor for this year with a majority vote of 99.61%.

The three shareholder proposals each presented by Mary Gallagher a representative from various environmental group were overwhelming voted down.

Shareholder Proposal No. 1 asked for a policy to address water impacts of business operators and suppliers. The shareholder asked the company to implement a water stewardship policy that will improve water quality for all the company-owned facilities and those under contract to Tyson Foods.

For: 10%
Against 86.78%

Proposal No. 2 strikes at the heart of the dual stock system at Tyson Foods that allows restricted Class B shareholders, the Tyson Family, to get a 10 to 1 voting advantage over the Class A shares. Proposal No. 2 asks the board to give each shareholder an equal vote.

The Tyson family trust owns 99.98% of the class B shares and through the limited partnership control 72% of the Tyson Foods total votes, according to the Proxy proposal. The shareholders point out that the family — a select few — controls the company regardless of what might be best for the shareholders at large.

For: 21.56%
Against 78.09%

Proposal No. 3 involves asking asking the company to prepare a report on its use of Palm Oil and its efforts to source that commodity in a sustainable manner. This shareholder group wants to see the report by May. 1.

The group noted that Tyson competitors such as Hormel, ConAgra and General Mills have already announced commitments to eliminate deforestation and human rights violations from their palm oil supply chain and to regularly report on their progress.

For: 9.51%
Against: 88.42%

OUTLOOK
Tyson Foods is a “cash machine” and that’s not expected to change in 2015, according to Chief Financial Officer Dennis Leatherby.

The company expects to earn $3.30 to $3.40 per share this year, which would be a 12% gain year-over-year. Leatherby said earnings have grown 19% over the past three-year period. 

“We expect fiscal 2015 sales to approximate $42 billion as we integrate Hillshire Brands and continue to accelerate growth in domestic value-added chicken sales and Prepared Food sales. The synergies of the Hillshire merger will will exceed the $225 million synergy target for this fiscal year,” CEO Donnis Smith said.

Less than 18 months after the Fort Smith Board of Directors granted the City Administrator broader authority to hire and fire department heads and other key personnel, City Director and Vice Mayor Kevin Settle is acting to repeal that authority.

In August 2013 the Board voted 5-2 to reverse the city policy in place more than 45 years and shift hire and fire authority away from the Board and to the City Administrator/. The only positions not under the city administrator authority are the internal auditor and district court clerk. The Fort Smith police chief and fire chief fall under the city administrators new authority.

On Friday (Jan. 30), Settle asked Fort Smith City Clerk Sherri Gard to place an agenda item on the Boards’ Feb. 3 voting session. Placing an agenda item requires the consent of at least four Directors. Gard, operating under a city ordinance that allows her to call other Directors, attempted to contact the other Directors. According to Gard, Directors George Catsavis, André Good, Keith Lau and Mike Lorenz agreed to the agenda item. Responses were not heard from Directors Don Hutchings and Tracy Pennartz.

Directors Good, Lau and Lorenz voted for broader hire-fire authority in 2013. Directors Catsavis and Settle voted against the 2013 ordinance.

“I wasn’t a fan then, and I’m not a fan today,” Settle told The City Wire when asked why he chose to revisit the issue.

Settle also explained that he “wanted to give the new board” a chance to decide on the issue. Directors Hutchings and Pennartz were not on the Board in August 2013. Settle said there is not a particular incident or concern of an impending firing or hiring driving the action.

Settle also said he called City Administrator Ray Gosack Friday morning to inform him of the action. Gosack has not used the authority to fire a department head. City officials are in the process of hiring a new director of Parks and Recreation.

HIRE-FIRE HISTORY
The first attempt to change the hire-fire authority was in 2009 when it was proposed by then-City Administrator Dennis Kelly.

The issue remains a sensitive political topic following an early 2008 attempt by then-City Administrator Randy Reed to fire Fort Smith Police Chief Kevin Lindsey. The resulting controversy resulted in a quasi-demonstration at a city board meeting, Reed’s resignation and the resignation of City Director Velvet Medlock. Lindsey retained his job and remains the city’s top police officer.

You know the economy is bright when a local entrepreneur can take the stage in front of nearly 1,000 business professionals and announce his plan to establish a $100 million venture capital fund in Northwest Arkansas. 

That is precisely what Dr. John James, founder of Acumen Brands, did as the moderator for the University of Arkansas’ Annual Business Forecast Luncheon held Friday (Jan. 30) in Rogers. James, a professed tech junkie at heart, recently stepped away from the day-to-day management of Acumen to focus on the capital fund as well as establish a new residency program for startups and entrepreneurs.

“This $100 million (capital funds) venture, that’s a stake in the ground. It’s a first step, not the step, because I think there is a series of $100 million funds that we can raise and put to work and provide great return for the investors. Perhaps even a better return for Northwest Arkansas and (the state) of Arkansas,” James said following the event.

He’s wasting no time in getting started. James officially starts his new gig next week and said nearly 30% of the funds have been pledged as he and others have actively worked behind the scenes for the past 18 months.

James reflected on his own successful venture to say when he and partner Terry Turpin decided to launch Acumen Brands a few years ago, the doctor and lawyer, both with successful track records for startups, could not raise $100,000 in Northwest Arkansas. He said the father of one of his early employees wrote them a check for $350,000, which ended up delivering a 50-times return on investment.

While there’s money to made in the local entrepreneurial sector, there is also plenty lost. James said his new residency program modeled after a medical residency protocol is designed to give the mentorship and guidance that could mean the difference between failure and success. 

CONFERENCE PRESENTATIONS
During the question and answer session following the prepared economic remarks, John Silvia, chief economist with Wells Fargo Securities, warned against regulations that could stifle market disruptors. He appealed to state and local lawmakers to think hard before they enact laws to protect against disruptors like Uber, which is now grown to a $40 billion company. He said the early success stories that founded the region, Sam Walton, J.B. Hunt and John Tyson were also disruptors. 

James agreed, saying that the future of Arkansas depends on whether it can be a disruptor, because the alternative is being disrupted.

Kathy Deck, director for the Center for Business and Economic Research at the University of Arkansas, said entrepreneurship is important to the future growth of the local region and the state at large. She said while the big engines that drive the local economy are responsible for massive growth in Northwest Arkansas and largely the improving economic employment metrics for the state, the times are changing as the world becomes a smaller place.

GLOBAL OUTLOOK
Carl Tannenbaum, chief economist for Northern Trust, said for the first time in a long time the U.S. economy is moving at a faster pace while other economic powerhouses around the globe aren’t following.

For much of the past decade companies looked to China for growth investing heavily there, including two local companies, Wal-Mart and Tyson Foods. Tannenbaum said China’s slowing is the reality for several years to come as they wrestle with environmental pollution and unraveling from corruption and credit issues.

He said India holds some promise because they are more of a service industry and have not been impacted from falling commodity prices. Japan is again in a recession following years of deflationary prices. Russia is far too dependent on oil and will remain under economic pressure this year, Tannenbaum said.

As oil prices remain low this year, Tannenbaum expects U.S. consumers to fare well with an added $750 in additional per capita income. He said importers like Japan and India also benefit from lower oil prices. Some manufacturers will also benefit as do logistics companies like J.B. Hunt Transport. Lastly the lower prices also create a buying opportunity for more investors.

On the downside, he said the fracking industry is stalling as they have higher breakeven costs. Russia, Venezuela, Nigeria and Iran also will see lower revenue because of the falling oil prices. Tannenbaum warned that political and civil unrest is more likely when these affected nations face economic distress.

U.S. EXPECTATIONS
Silvia spoke about the U.S. economy in terms of failed expectations noting that “what you get is not always want you expect” which has been case this past year.

He said when governments print money inflation is an expected consequence, but inflation remains modest even with the $4.4 trillion the Fed has purchased in its bond buying stimulus program. Silvia said this was not the expected result.

Silivia said interest rates kept low by the Fed have created a flat yield curve that is compressing margins for lenders. With the reduction in Fed purchases, interest rates where expected to rise, but in fact the 10-year treasury rate has declined in recent months. That also was not the expected result, Silvia said.

He said oil has plummeted and the global markets have suffered which has pushed more investors into U.S. treasury bonds which is keeping the yields down. At the same time the U.S. dollar continues to strengthen not whats expected given the high U.S. debt levels. 

The impact of these “not expected” results has meant less pricing power for goods producers and it’s meant lenders are now venturing into more subprime areas chasing yield.

He warns that chasing yield into the subprime markets can be a slippery slope that must be dealt with gingerly.

Another shift at play in the U.S. economic picture is housing. He said with unemployment improving and consumer confidence strong the single family home building sector should be better, but it is not roaring back on a national level. Instead, multifamily home building is a robust market — not the expected result.

Looking ahead Silvia expects sustained U.S. growth, he is a little cautious on the consumer overall noting the recovery has not been equal among the various income demographics. He expects to see governments - state and local — continue their restructuring. 

Silivia sees the country’s long term fiscal policy as unsustainable.

STATE, LOCAL OUTLOOK
Northwest Arkansas is expected to lead the state in low employment but projected job growth is expected to slow this year.

Deck said the 3.9% unemployment rate is problematic at a time when employers’ number one concern is lack of qualified workforce. She said Northwest Arkansas is expected to add just 3,000 jobs in 2015, which is a downward departure from the 5,000 jobs added in each of the past years. One of the biggest problems for this region is that employers with open jobs say they can’t find qualified candidates with the necessary skills.  

“I often wonder if they can’t find these people or if they don’t want to pay the wages to attract them, because I know our schools have worked diligently for some time to ready a workforce,” Deck said.

She said construction is a hot industry across the state largely because of the roads being built. Locally, she said commercial, residential and multifamily building is on the rise, which is somewhat conflicting against declining workforce and job growth estimates.

With the Razorback Greenway and the Amazeum opening this year, Deck expects Northwest Arkansas to attract more tourism dollars which is helping to fuel the hospitality industry.

In Fort Smith, Deck expects to see an improving economy albeit from a low baseline as the city added no new jobs between 2011 and 2014. 

“The recession came to Fort Smith and never left,” Deck said. “There is just recently some investment and new opportunities springing up there that should help the city’s economy move slowly forward this year.”

With the early session push to approve Gov. Asa Hutchinson’s signature tax cut plan and the challenge of pushing the private option’s fate to a task force eyeing end of the year recommendations, two state lawmakers said prison reform will likely be the next big agenda item for the state Legislature.

Sen. Missy Irvin, R-Mountain View, and Rep. Joe Jett, D-Success, appeared on this week’s edition of Talk Business & Politics, which airs Sundays at 9 a.m. on KATV Ch. 7 in central Arkansas. Irvin is the vice-chair of Joint Budget Committee, chairs the Senate City, County & Local Affairs, and is a member of the Senate Public Health Committee. Jett chairs the House Revenue & Tax Committee and serves on Joint Budget.

Where the prison reform debate heads is anyone’s guess, Jett said.

“I think at the end of the day, you have 135 of us and right now I think you’re going to have 135 different opinions,” he said.

Gov. Asa Hutchinson’s proposed budget allocated more money for county jail reimbursements, where an overflow of many state prisoners are housed, and he offered about $1 million for drug and veterans’ courts.

The state is nearly 39% overcapacity with prisoners, some housed beyond limits in state prisons and most taking space in county jails. Hutchinson and lawmakers have been reluctant to build a new $100 million state prison facility and have said they want to explore other options before resorting to new prison space.

“There’s 600 beds that we could probably open up in existing prisons and find money to staff that,” Jett said of one option.

Irvin sees a way to bring private sector experience into the prisons to generate revenue and provide job training for inmates.

“There is some cooperation with businesses where businesses have gone into different prison systems in different states that we’re looking at and they’ve utilized that workforce. So you’ve got a job training-type program going on so when prisoners leave prison they actually have a job skill,” Irvin said.

Hutchinson has been mum on where the money would come from for prison overcrowding options while the discussion occurs behind closed doors on possible alternatives, such as revisions to Act 570 (which altered sentencing guidelines), possibly contracting with out-of-state or private prison operators, and exploring more re-entry and intervention programs.

Irvin and Jett said the likeliest source of funding for the eventual price tag on these reforms would be from growth revenue, which is expected to be higher than previous projections when the next budget forecast is projected.

“I think growth revenue and being able to responsibly put that money aside to pay for anything moving forward,” are sources, said Irvin.

In other discussion on the show, Jett and Irvin predicted quick passage of the remaining hurdles for Hutchinson’s middle class tax proposal, which now includes a 40% capital gains tax exemption. The Senate must concur a House amendment early next week before sending to the Governor for signature.

Jett and Irvin also predicted passage of a Private Option plan that would secure funding through 2016 while creating a task force to make recommendations by the end of 2015 to end the Private Option and create broader health care reforms in Arkansas. A key piece of the task force’s work is a looming 1332 waiver, that allows the state great flexibility in redesigning aspects of the Affordable Care Act beyond the Private Option’s limitations.

There have been few major changes in the physical retail supply chain that has served big box retailers for more than three decades. But as more consumers shift to online shopping and the “omnichannel” retail model becomes the norm, experts say the old supply chain model is beginning to see fundamental changes.

E-commerce sales are growing at a healthy clip and are expected to account for more than 10% of total retail sales by 2016. As much as 60% of all retail sales originate online even though they may be completed at a brick-and-mortar retail store.

“Changes in retail are being driven by technology advancements and that we can’t control. Retailers, their vendors and third party logistics partners had better be aware of these changes and make better use of technology themselves,” said Anníbal Sodero, assistant professor supply chain management at the University of Arkansas.

Sodero said third-party logistics providers and those who can supply final mile services have a huge market opportunity as this shift continues. John Larkin, a transportation analyst with Stifel Nicolaus, recently spoke on the shift in the supply chain. Larkin predicts that transportation miles will be shorter as suppliers and retailers move individual item inventory closer to end-users versus stocking retail stores.

OMNI SHIFT
He and Sodero said there are also key advantages for suppliers as they shift to serve the growth of omnichannel – consumers using various methods and devices to research, purchase and receive goods – retailing.

“Search costs are lower in the virtual retail world and firms can position inventory somewhere upstream in the supply chain which helps them gain a lot efficiencies and the main reason they are able to offer lower prices,” Sodero said. “Better yet, the omnichannel model allows for larger assortment possibilities, endless aisles.” 

He said the Amazon model is becoming more mainstream for retail. Amazon has worked in recent years to balance its network and move product easily between fulfillment centers which are now located on the edge of major urban cities. He said this inventory consolidation has helped Amazon gain efficiencies and make use of fuller truck loads. But the retailer also slows down delivery in some cases when the consumer can afford to wait. 

“They are now giving bonus dollars back to the consumer if they can wait an extra day. They also have the capability to deliver in one hour in Manhattan given their closest fulfillment center,” Sodero said.

In a move toward this new model, Sodero said other retailers are playing catch up. He said Wal-Mart operates two separate inventory and delivery systems – one for physical stores and one for e-commerce. However, he sees the tests and trials underway at Wal-Mart from shipping to lockers to site to store, home grocery delivery and the in-store pickup for online orders as moves that allow the retail behemoth to leverage its physical size.

Sodero said the separate systems are the easiest way for Wal-Mart to balance its inventory, but to be true omnichannel the systems would need to be merged. In so doing, Sodero said there could be huge efficiencies gained. He said there is more risk in owning the inventory and storing it down the supply chain near the consumer, which is the present retail supply chain model.

DROP SHIPMENTS
Sodero expects more retailers including big box stores, to move toward drop shipments in the future which is a direct shipment from the supplier to the end-user. He said drop shipments are a “powerful weapon” for retailers.

“Instead of stocking inventory in a retail store you can keep inventory upstream which also provides for lower safety stocks and lowering the uncertainty that exists at the retail stores,” Sodero said. “The downside is the lack of inventory visibility and loss of control of the service to the end-user.”

He said there are opportunities for third-party logistics (3PL) providers to partner up and give the retailers the inventory visibility they need and guarantee quality service to the end-user.

Dan Sanker, CEO of CaseStack, a third-party logistics firm based in Fayetteville, recently told The City Wire that suppliers are already shifting inventory into multiple regions so they can be closer to the end-user. CaseStack uses technology to provide the inventory visibility and tracking the products through each phase of the supply chain.

Challenges for 3PL providers going forward are the cost of infrastructure expansion to service higher demands and sourcing the qualified tech talent, Sanker said.

FINAL MILE
Sodero said final mile of delivery is the costliest part of the supply chain, comprising about 25% of the total expense. He said the Uber model for the final mile holds much opportunity for new players in the supply chain. The Uber model uses crowd-sourced consumers to pick-up and drop-off ordered items to customers at a far cheaper rate than traditional courier and short-distance shippers.

Sodero said more retailers are signing on to the Uber-like final mile service and he expects to see more it in the future.

Larkin said final mile is also a challenge for transportation providers whose pricing models have been built on long hauls. He said the demand for final mile delivery will only increase and carriers need to figure out how to take advantage of the change.

INVENTORY INACCURACIES
Another area of concern voiced by Sodero is the inventory inaccuracies that exist with the traditional retail supply chain. Integrating big data should help, but Sodero’s research found that only a few retailers are integrating social media and other big data into their forecasting models. He said 25% have not yet begun to apply big data and a vast majority are just now starting to make initial investments in this area.

“Inventory inaccuracies are still a huge problem for the retailer and the suppliers and arguably a big problem for customer service. Using point of sale data (POS) has been the main source of inventory planning for a long time. But POS data is truncated and it depends on the ability one has to position inventory and then sell it. By bringing social media and other key factors such as weather events, the retailer and supplier should be able to do a more thorough job of forecasting and ultimately getting inventories in balance with demand,” Sodero said.

Wal-Mart’s new Retail Link 2.0 being slowly rolled out to suppliers over this year is the retailer’s attempt to do a better job of sales forecasting and keeping better track of its global replenishment systems.

Sodero said suppliers and other supply chain partners have to do their homework and they also must become more integrated as the supply chain of the future will be an open system dependent upon unique and advanced technology.

“Suppliers have to integrate from the top to bottom of the chain and then within their companies. It’s going to take more investment in technology for most if they are able to become more responsive and agile so that they can bring products fast to wherever they are required,” Sodero said.

The Kyya Chocolate story was born in 2012 when a nonprofit group traveled to a Uganda orphanage with the idea of building relationships and a chicken farm for a local orphanage.

For Northwest Arkansas resident Rick Boosey, the trip inspired bigger ideas that would lead to starting a company that would help grow communities, support orphans, and create chocolate that offers a unique flavor and story. He wanted to do something that would create a lasting impact on the children and their nation’s economy, which is supported by natural resources such as cotton, cocoa and coffee.

“I thought at first, ‘Why another chocolate company?’ Is it really needed?,” Boosey said. 

CHOCOLATE AND COMMUNITIES
The answer? Chocolate is a tool that supports local farmers and drives support to orphanages and communities. It also provides the opportunity to bring bean-to-bar, high-quality chocolate to Northwest Arkansas and beyond while giving users a different chocolate experience and exposing them to stories from across the world.

“Our chocolate is about storytelling,” Boosey said.

When they returned to the United States, Rick and his wife Cindy set out to learn the art of chocolate making. They founded Kyya with savings. The company has gone through several changes including a change in name and branding, and the dissolution of an early partnership. The Booseys now partner with Ben Butler, who joined the team in May 2014 and is largely responsible for the sales and marketing functions while Rick focuses on the production side. They’ve added another new employee every couple of months since that time. 

They also moved their production from Fayetteville to Elm Springs where they create all of their products. Kyya offers the bars, which are 2.8 ounces and have a suggested retail value of $5.95 each. In late 2014 they introduced baker’s chocolate, chocolate powders and chocolate syrups based on high customer demand.

“We’re able to reach different people in different ways,” Butler said. “People consume product lines very differently.” 

Kyya is the only chocolate maker in Arkansas to own a chocolate press, which means they can extract their own cocoa butter. Only about 10% of the chocolatiers in the country have their own press, Boosey said.

“There’s only a handful in the country who can make their chocolate from start to finish, from bean to bar,” he said.

Now that Kyya has its process perfected, they are ready to tell stories.

“In 2013 we spent the time learning how to make the chocolate, in 2014 we focused on roasting our own beans and all the front-end processes to getting the cocoa ready to make chocolate and building our shop,” Boosey said. “This is the year of the farmer.”

BEAN HUNT
Boosey and two of his daughters left for Guatemala and Ecuador Jan. 9 on what they call a “bean hunt.” The bean hunts will take Boosey and various family members to various parts of the world to meet individual cocoa bean farmers. Kyya already purchases some of their beans from small farmers and the rest are purchased in bulk from a fair trade, organic bean distributor in the United States. 

The hope is to eventually have relationships with at least 40 farmers and create single source chocolates from all over the world. That means that each kind of chocolate would come from the same cocoa plantation, giving it a more consistent and better quality. 

Kyya already donates at least 10% of its profits to orphan care and as relationships with farmers grow, they will utilize some of their profits to invest in the farmers’ individual communities. The projects will vary based on need. The company is funded through sales and a bank line of credit. 

While Kyya chooses to not be certified as a “fair trade” company, they offer better than fair trade prices to their farmers, according to Boosey and Butler. 

According to FairTrade International, there are 1.4 million farmers and workers in 74 countries who participate in fair trade (2013-2014 report). FairTrade is one of several organizations that promote the fair trade movement. Fair trade generally refers to the idea of paying farmers a fair rate for their goods and also paying that rate directly. Small farmers in developing countries are often paid a low rate for their goods which are then resold for a much higher rate to developed countries. Fair trade items include gold, cocoa, coffee, textiles and many other agriculture products. 

BUSINESS GROWTH
As Kyya moves into 2015, it will grow in several ways. For one, it will expand the number of farmers from which the company purchases beans. It is also poised to boost production with last year averaging 2,500 bars sold a month to a capability of 18,000 bars monthly in 2015.

Kyya is already in more than 20 retail locations throughout Northwest Arkansas and in larger markets such as Kansas City, Tulsa and Little Rock. They will expand their geographic reach to include more locations where their products are used or sold. Their locations include: Arsagas, Mama Carmens, Fresh Market in Rogers and Little Rock, Kennedy Coffee, Onyx Coffee Lab (Fayetteville and Springdale locations), Ozark Natural Foods, White Oak Station in Pinnacle Station, Pressroom, Hillcrest Artisan Meats in Little Rock, Andina Coffee Roastery in Little Rock, Stratton’s Market in Little Rock, Double Shot Coffee in Tulsa, and All About the Coffee in Kansas City. 

“We want to get into distribution channels that appreciate quality bean-to-bar chocolate,” Butler said.

The company focuses on small batch, hand-crafted chocolate. Butler said they also focus on their business model which includes four main ideas: Controlling production quality; consistency in sourcing of the cocoa; maintaining a competitive edge; and international diversity of its sources.

Kyya will also collaborate with more partners to find ways to incorporate their product with other food and drink products.