Gov. Asa Hutchinson signed the funding bill for the state’s Private Option program securing spending authority for the state’s innovative and controversial Medicaid expansion program for another fiscal year.

Hutchinson had advocated for an extension of the funding and, in a separate bill, asked lawmakers to create a task force to study the program’s future fate in the context of larger health care reform. A spokesman for Hutchinson confirmed that the Governor signed SB 101, the funding measure for the Private Option, on Monday with little fanfare.

The bill to create the 16-member task force, SB 96, passed the Senate on Monday and is expected to be signed by Hutchinson on Tuesday.

LOCAL VS. STATE CONTROL
In other business, the State Senate approved several bills, while there was action in the House to amend a tax cut bill recently signed into law by Gov. Asa Hutchinson.

The Senate voted 24-8 to approve Senate Bill 202, sponsored by Sen. Bart Hester, R-Cave Springs. The bill, which now goes to the House, would create an Intrastate Commerce Improvement Act for the state. In the bill, Hester said its goal is to “improve intrastate commerce by ensuring that businesses, organizations and employers doing business in the state are subject to uniform non-discrimination laws and obligations.”

“A county, municipality or other political subdivision of the state shall not adopt or enforce an ordinance, resolution, rule, or policy that creates a protected classification or prohibits discrimination on a basis not contained in state,” the law read. “This section does not apply to a rule or policy that pertains only to the employees of a county, municipality or other political subdivision.”

The debate over the issue deals, in part, with an ordinance repealed by voters in Fayetteville in December. That ordinance would have barred discrimination in housing, work and public accommodations involving sexual orientation or gender identity.

The vote also drew the opposition of state Democratic Party leaders.

“This bill strips local control from our communities. Arkansas is home to some of the world’s most notable Fortune 500 companies, like Wal-Mart, who have adopted good business policies that prohibit discrimination in the workplace, and yet, some Republican legislators would prefer to move our state backwards with this overreaching bill,” noted the statement from party chairman Vincent Insalaco, 1st Vice Chair Joyce Elliott, 2nd Vice Chair Janet Johnson-Henderson and Treasurer Tyler Clark.

FLOOR ACTION
A bill that would have created enhanced penalties for crimes against people over 65 years old failed in the House. The House voted 46-29, with four present, on House Bill 1117. The bill was five votes short of passage. Rep. Mark Lowery, R-Maumelle, who sponsored the bill, said the bill would have protected the elderly who are vulnerable to crimes.

The bill would have covered felony charges, ranging from fraud to physical assault. A person convicted in the case would have faced between one and 10 years in prison in addition to the prison sentence they may have received for the crime, Lowery said. However, there was opposition to the bill due to concerns over creating a protected class of citizens.

Rep. Robin Lundstrum, R-Springdale, said she had worked as a counselor at a hospital, helping people ranging in age from 18 months old up to 73 years old. Lundstrum said she believed the age of the victim should not matter, noting, “It is the cruelty of the crime that matters.”

Rep. Michelle Gray, R-Melbourne, said while she believed the intent of the law was good, she could not support the bill due to concerns of violating the 14th Amendment’s Equal Protection Clause.

The House also voted 93-5 to approve a resolution, setting a recess date for the legislature. House Concurrent Resolution 1004, sponsored by Speaker Jeremy Gillam, R-Judsonia, would set an April 10 recess date for the legislature as well as a May 8 adjournment date. Rep. Bill Gossage, R-Ozark, said the legislature could leave earlier than the April 10 date if work is completed on time.

NEW BILLS
The House and Senate clerk’s offices were busy Monday as nearly 60 bills were filed by 4 p.m. Monday. Among them were bills to amend a tax cut bill signed into law Friday, the budget for the main campus of the state’s largest university and to reimburse counties that are housing state inmates.

Rep. Joe Jett, D-Success, and Sen. Jake Files, R-Fort Smith, filed House Bill 1291. Jett said the bill – now a shell bill that was referred to the House Journal Committee Monday – would seek to amend the capital gains portion of the law.

In the law signed by Hutchinson, legislators agreed to a 40% exemption rate on capital gains. The number was down from the previous 50%, but lower than a rate approved in a Senate amendment by Sen. Bill Sample, R-Hot Springs.

Jett said his committee and its counterpart in the Senate would look at putting the exemption rate back to 50% and return a $10 million exemption rate that was in the law as well. Setting the rate at 50% would have a $10.1 million impact to the state budget, while the $10 million exemption would have a $1.2 million impact, Jett said.

Sen. Missy Irvin, R-Mountain View, introduced Senate Bill 269, the appropriations bill for the University of Arkansas system, Monday. The $692 million budget, which would cover expenses from June 30, 2015 until July 1, 2016, has $250 million set aside for operating expenses as well as $121 million for capital improvements. Nearly $800,000 is set aside for the University of Arkansas School of Law, with another $250,000 for the Research and Technology Park on campus.

The Joint Budget Committee also introduced House Bill 1316. The bill would appropriate $10 million to reimburse counties for housing state inmates. The issue was discussed Monday by Hutchinson during a meeting with county judges in Little Rock.

TUESDAY’S SCHEDULE
The following is a list of committee meetings set for Tuesday in the Arkansas General Assembly:
• Joint Committees
7:30 a.m. – JBC-Personnel, Room B, MAC.
9 a.m. – Joint Budget Committee, Room A, MAC.

• House Committees
10 a.m. – Education, Room 138.
10 a.m. – Judiciary, Room 149.
10 a.m. – Public Health, Welfare and Labor, Room 130.
10 a.m. – Public Transportation, Room B.
10 a.m. – Revenue and Taxation, Room 151.

• Senate Committees
10 a.m. – Agriculture, Forestry and Economic Development, Room 309.
10 a.m. – City, County and Local Affairs, Room 272.
10 a.m. – Insurance and Commerce, Room 171.
10 a.m. – State Agencies and Governmental Affairs, OSC.

The House and Senate will convene at 1:30 p.m. Tuesday.

The group seeking to change the form of government in Fort Smith collected just short of 400 signatures during their first full week of the petition process.

Take Back the Fort 2015 first met Jan. 16 to begin the public discussion on changing city government, and they met Jan. 29 to hand out petition forms and instruct volunteers on how to gather signatures.

Don Paul Bales is the de facto leader of Take Back the Fort. He is a former Fort Smith police officer who was fired and is now suing the department to get his job back.

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. Take Back the Fort wants to change to a form of government where the mayor is responsible for city operations and hires a manager to help with those duties. The new form would also have a city council serving in the normal legislative capacity. Take Back the Fort is also proposing that elected positions be established for the city clerk and city attorney.

According to Fort Smith City Clerk Sherri Gard, it requires 2,518 valid signatures to place the form of government vote on the ballot. That number comes from a requirement that a petition for a ballot action needs 15% of the number who votes in the previous mayoral election. The 2014 election saw 16,788 vote in the mayoral race in which Mayor Sandy Sanders ran unopposed.

Bales told The City Wire that after the first week they had 398 “firm” signatures. Bales has said the group wants to submit the signatures by March 2 in order to be placed on a municipal election already set for May 12. He said there could be more because he did not collect all forms as of Friday night.

“Happy with these numbers for week one, as we just picked up 6 more volunteers in the last few days. Expect good numbers next week from several events we have planned to grow awareness and increase involvement,” Bales wrote in a note to The City Wire.

Bales is confident they will get the signatures by March 2.

“I'm still confident we'll hit our goal by then. We are not bound by that deadline, but we really want to hit the goal by then to avoid the citizens the cost of another special election,” Bales explained. “We put it to the Board to forego that expense and just put it on the ballot, but not holding our breath that they will be fiscally responsible in the matter, as that would be out of character based on past patterns and practices.”

Any effort to change the city form of government is possible once every four years, according to the city’s municipal code. Specifically, the code notes: “When the question of the adoption of the city administrator form of government is submitted to, and approved by, a majority of the qualified electors of a municipality voting on the issue, the question of changing to another form of government shall not again be submitted to the electors of that municipality for a period of four (4) years.”

Just a day after a $692.175 million appropriation bill for the University of Arkansas system was filed in the Arkansas General Assembly, UA officials issued a report that the flagship university in Fayetteville had in 2014 a statewide economic impact of $1.2 billion.

The report said the impact had grown 66% from the $725 million in 2009.

Sen. Missy Irvin, R-Mountain View, introduced on Monday (Feb. 9) Senate Bill 269, the appropriations bill for the University of Arkansas system. The $692 million budget, which would cover expenses from June 30, 2015 until July 1, 2016, has $250 million set aside for operating expenses as well as $121 million for capital improvements. Nearly $800,000 is set aside for the University of Arkansas School of Law, with another $250,000 for the Research and Technology Park on campus.

Tuesday’s (Feb. 10) report on the university impact was conducted by UA researchers in the Center for Business and Economic Research at the Sam M. Walton College of Business. The center previously prepared an economic impact report for the university in 2009.

“Perhaps the most impressive finding is the return-on-investment that Arkansas taxpayers get from the state’s investment,” Kathy Deck, director of the Center for Business and Economic Research, and principal author of the study, said in a statement. “The state’s appropriation to the university in 2014 was $173.8 million. Arkansas is basically getting back almost $7 for every dollar the state legislature invests in the University of Arkansas.”

Deck said she and the research team carefully reviewed budgets and program funding formulas to determine how much money “really came to the campus.”

In terms of sustainable economic growth, the study finds that the university, one of the largest employers in Northwest Arkansas in 2014, had a total payroll of $317.9 million.

“The activities associated with the university’s annual operations more than add up to the total of $1.2 billion annually,” said Deck. “But the total impact is 2.7 times greater than the funds the university directly spends each year.”

The report said the university has short-range and long-range effects on state and local economies by developing human capital, fostering a knowledge economy and providing a sustainable economic base for growth in Northwest Arkansas and the state as a whole.

During 2014, spending by students contributed $307.4 million to the economy in Northwest Arkansas, and spending by campus visitors added another $35.8 million. The student spending was determined through a survey of a representative sample of the student body – 2,600 of the 26,200 enrolled in the fall. While student spending is allocated to a variety of categories, the largest monthly expenses of students were rent, restaurants and bars, and motor vehicle-related purchases.

The impact also included economic contributions by UA alumni living in Arkansas. According to the report, there are more than 68,622 UA alumni living in Arkansas, about 2% of the state’s population and up from 60,000 alumni in 2009. Deck’s report said the alumni contribute $54.9 million in sales and use taxes to state and county governments and an additional $114.8 million in state income taxes. The researchers calculated that university alumni living in the state earn $2.3 billion in wages each year, significantly contributing as workers, business leaders and consumers in their local economies.

The university’s economic impact in Northwest Arkansas is estimated at $932.3 million in 2014, and includes $907.2 million in recurring annual economic impact and $25 million in one-time construction impacts. The annual business operations of the university contribute $522.2 million to the Northwest Arkansas economy, while student spending contributes $307.4 million.

“The University of Arkansas has been a key driver of Northwest Arkansas’ economic success these past two decades,” Mike Malone, president and CEO of the Northwest Arkansas Council, said in the statement. “The U of A contributes to our economy in so many ways – as one of our largest employers, through direct investment and purchasing, by preparing our future workforce and conducting innovative, job-creating research – these are just a few examples.”

Visitors to Razorback athletic events, the UA admissions office and students contributed $35.8 million in spending in 2014 and the economic impact generated by university-affiliated volunteers is $3.8 million.

The operations of tenants in the Arkansas Research and Technology Park add nearly $38 million to the regional economy.

The report was first commissioned in 2009 by Chancellor G. David Gearhart, and then again in 2014. The center researchers spent four months (September 2014 to January 2015) preparing the report. Deck joined the Center for Business and Economic Research in 2001, and has managed 99 economic studies for clients that include various counties and municipalities across Arkansas, Arvest Bank Group, Chesapeake Energy, the Jones Center for Families, the Arkansas Economic Development Commission, and Bikes Blues and BBQ.

P.A.M. Transportation Services was on course for record earnings to end 2014, but a recent $5.6 million lawsuit and anticipated settlement over minimum wage violations reduced profits for the fourth quarter. However, adjusted gross net income still rose 128% for the full year.

The Tontitown-based carrier reported annual net income of $13.491 million for the 2014, a steady bump up from the $5.914 million reported a year ago. On a per-share basis annual earnings were $1.68 per share, compared to 68 cents for the full year in 2013. 

Excluding the impact from a lawsuit settlement, adjusted net income and adjusted diluted earnings per share for the year ended Dec. 31, were $15.958 million and $1.99, respectively.

"We are very proud of the fact that the results for 2014 would have been the best in the Company's 35 year history were it not for the negative impact of the reserve for the lawsuit settlement. The continued strong demand for our services and favorable fuel prices are certainly encouraging as we set our sights on the remainder of 2015 for which we intend to focus on growth and continuous profitability improvements," CEO Daniel Cushman noted in the release.

Total revenue for fiscal 2014 was $410.937 million, up 2% from $402.813 million posted in the prior year.

"We have had an extremely satisfying year. Beginning with second quarter, we had very consistent operating profits which averaged in the $8 million range for each quarter when excluding the fourth quarter lawsuit settlement reserve. Our model, which consists of our Automotive Division, Expedited Division, Dedicated Division, Mexico Division and random Van Division, has been very consistent,” Cushman said.

Total miles in the truckload division rose slightly year-over-year to 209.99 million. Revenue per loaded mile also rose slightly to $1.39, from $1.38 a year ago. P.A.M. increased its total loads by 8.2% to 282,446 during 2014. The weekly revenue generated by truck averaged $3,250, compared to $3,165 during 2013.

"All of our key performance indicators, from an operating standpoint, have improved quarter over quarter as well as year over year. Empty miles improved 1.3% and revenue per truck each week improved 7.4% in the fourth quarter. For the year, empty miles improved 7.2% and revenue per truck each week improved 2.7%. We continue to see an increase in our base rate per mile although the increase is skewed lower due to our largest customer switching to a different rate structure. Under this new rate structure, a portion of the base rate has been pushed into the fuel surcharge category which reduces the per mile base rate reported,” Cushman said.

FOURTH QUARTER
P.A.M. reported total fourth quarter revenue of $101.714 million, up 5.3% from the same period in 2013. Net income totaled $2.132 million, offset sharply by the $5.6 million expected settlement which was set aside in the quarter. 

Net earnings per share totaled 27 cents a share, up 8% from the 15 cents reported a year ago. 

"We have continued to diversify our customer base in each division. One thing that we were not able to do, that we have done in the past, is take advantage of seasonal opportunities in the fourth quarter. This type of opportunity is generally a result of utilizing a large random freight fleet, and according to our own goals, we have reduced our random fleet in exchange for more driver friendly freight and routes,” Cushman notes.

He said the company’s random fleet is now right-sized for their immediate needs. The major use of the random fleet is to support the backhaul needs of other divisions as well as servicing the customer base that only has one-way freight. 

“We have also started to focus more efforts into our brokerage division which has seen considerable growth in the most recent 60 days and is gaining great momentum,” he added.

DRIVER CAPACITY
Cushman said driver capacity remains tight, which is the greatest concern among truckers according to logistics analysts John Larkin, of Stifel Nicolaus. Larkin said the shortage of drivers continues to worsen amid retirements and a better economy that leads younger people to take other jobs.

"We have increased driver pay by varying amounts in certain divisions and continue to invest in and grow our student driver solution. While the driver market remains very challenging, we feel we offer driving professionals a great opportunity to make a good living, experience some of the most driver friendly routes available, and drive a newer model truck,” Cushman said.

Few Wall Street analysts follow the thinly traded stock but shares have been trending higher in recent days ahead of Tuesday’s (Feb. 10) earnings’ release. 

P.A.M. shares (NASDAQ: PTSI) rose 1.65% to $57.19 in light trading on Tuesday afternoon, following the earnings release. The share price has ranged from a high of $63.70 to a $17.83 low during the past 52 weeks. The share price has risen 8% in 2015.

Timing is everything when it comes to hitting the curve balls that are the constantly changing trajectories of the retail sector. History is also a great coach, which is something Wal-Mart’s top executive teams know too well if you look at the retailer’s smaller format push. Wal-Mart’s small format push of today was an idea honed under former CEO David Glass’ tenure in the early 1980s, according to company historians.

One of those historians is retired Walmart executive Andy Wilson.

“Think back to the discount stores in the late 1970s that averaged about 40,000 square feet. I know I managed one of the first smaller 29,000 square feet stores in 1979 when Wal-Mart began expanding east of the Mississippi River,” Wilson said. “At that time Wal-Mart was testing various-sized formats learning then how to create successful models for staffing and managing profitability of operations and volume levels.”

Wilson said in the early 1980s he was on the management team that traveled to large urban areas like Atlanta and Chicago and there were 30 small urban formats on the board that far back. He said they were aware of how well the dollar stores were doing in urban areas more than 30 years ago. 

He said the only constant at Wal-Mart is change and more times than not, the store format innovations of the last few years were discussed and planned decades earlier. The only exception being the e-commerce pickup capabilities because the internet had not yet been conceived.

“David Glass had a vision for a small store format,” Wilson said. “We had been trying the Hypermarts and they were not profitable, but we knew there could be money made in grocery back then. Trying to find the right balance between food, fresh, deli and general merchandise was somewhat of a struggle,” Wilson said.

He said Sam Walton and David Glass spent a lot of time talking with the management teams about various format sizes, and eventually settled on the supercenter as the higher generator of profit among the various models tried. Wilson said the lull in small formats development, mainly neighborhood markets, resulted when the top management began to focus on international growth in later 1990s.

“In the past few years Wal-Mart began to take notice of the rapid expansion of Dollar General and management sought to reinvent itself once again,” Wilson said.

Wilson and analysts agree the Neighborhood Market formats are easier to get into towns than traditional supercenters that saturated the landscape over the past 15 years.

“Think of it this way: Wal-Mart focused on supercenters at a time when it resonated with consumers. Had Wal-Mart not built out its supercenter network of stores then perhaps K-Mart or Target Stores would have done so instead,” said Tom Coughlin, former Wal-Mart executive and now a retail and supplier consultant. “Today it makes more sense to build out the smaller formats.”

NEW VISION
Wal-Mart announced it was doubling the number of its Neighborhood Market stores in 2013 with 73 new openings. In 2014 there were 107 more added only to double again in 2015  with 233 new small stores opened. The retailer recently just opened its 500th Neighborhood Market and there are dozens more in the construction phase. By 2017, the grocery format will have 681 stores drawing an estimated revenue of $14 billion, according to Kantar Retail. Just two years ago this market was an estimated $6 billion in annual sales for the retail giant.

Analysts with Kantar have said this push toward smaller grocery formats makes sense for Wal-Mart given that more consumers of all ages want faster ways to do their grocery shopping. 

Two and sometimes three typical Neighborhood Markets will into the space of one supercenter, but the sales comps on the smaller grocery formats are trending higher than the supercenter stores, according to commentary from Walmart U.S. CEO Greg Foran during the last earnings call.

Wal-Mart has said its small format comps rose 5.5% in the recent quarter ending Oct. 31. This compared to 0.5% comps for the retailer’s U.S. stores at a whole.

SUPPLIER OPPORTUNITY
Carol Spieckerman CEO of newmarketbuilders in Bentonville, suppliers will need to evolve with Wal-Mart to gain opportunity in the format shift.

“The best way for suppliers to take advantage of the small format push is to acknowledge and address the inherent uniqueness of the model. Just as Sam’s Club suppliers can’t get away with simply super-sizing items that they sell to Wal-Mart, successful small format suppliers will evaluate every aspect of their offerings including logistics, packaging, displays and through a small format lens. Wal-Mart is continually parsing the commonalities and differences among its formats and suppliers should solicit these insights from Wal-Mart and act upon them,” Spieckerman said.

Spieckerman said it makes “incredible sense” for suppliers to participate in small market opportunities because even though there is less shelf space and few items stocked in the smaller format, they are also “the gateway to Wal-Mart and other retailer’s endless digital aisles.” 

“Walmart is particularly intent upon synergizing online offerings with its growing small format scale and leveraging its physical locations to facilitate online orders. For suppliers, that means that the shelf space and inventory in a given store in no way limits their volume potential,” she said.

PICKUP, ONLINE, OTHER OPTIONS
Wal-Mart recently tweaked the design of its Neighborhood Markets to move the Pickup and Services stations to the front of the store to save time for those wanting to access those service options. Foran made that announcement last year shortly after he was named to lead the U.S. division.

Spieckerman said small format creates a balancing act for Wal-Mart to calibrate which items work best in a physical sales environment, from a size, price, margin, and frequency perspective, and which are well-suited to online, site-to-store, site-to-home, etc. 

“Suppliers that can bring insights in these areas will be ahead of those who are waiting for orders,” she said.

Wal-Mart continues to openly court suppliers to bring their innovations and learnings to the table so customers may get the products they dream of as soon as possible.

Spieckerman there is an open-air mentality at Wal-Mart today that welcomes suppliers trying direct-to-consumer business because any lessons learned in the process are worth gaining. That has not always been the case. Spieckerman said there was a time when retailers punished suppliers that “dared to compete” in a direct way.
 
“While doing so can still create tension in some relationships, retailers’ tolerance for brand marketers that pursuing multi-channel expansion has greatly increased. Retailers have shifted to more of an ‘it’s all good’ mindset because as consumer attention continues to fragment, isolating a brand in a single channel, or even in an exclusive relationship, can be a ticket to obscurity,” Spieckerman said. “Brand marketers that operate direct-to-consumer businesses are also armed with insights that benefit their wholesale relationships.”

STORE LOCALIZATION, CANNIBALIZATION
Coughlin agreed that suppliers have plenty of new opportunities with the burst of small format grocery stores because Wal-Mart is reaching much deeper into many more neighborhoods and creating more opportunities for store localization of content.

He said there is no time to lament less shelf space and fewer product offerings which are also a reality of the smaller store footprint.

Experts interviewed for this piece negate the notion of cannibalization from the extensive expansion in small formats over the past two years. They believe the new Walmart grocery model will draw some shoppers away from other retailers creating new grocery sales that a supercenter might not have ever seen. They also say the Neighborhood Market does not prevent the need to visit a supercenter for things like oil changes, tires, stock-up trips, party items or other general merchandise.

The Arkansas State Chamber of Commerce is preparing a major campaign to call attention to the state’s workforce needs and opportunities. Meanwhile, legislators are preparing to consider a package of workforce-related bills.

State Chamber CEO Randy Zook said Monday that the Chamber is in the middle of raising money for a multi-year informational campaign beginning later this spring or in the early summer. He declined to say how much the Chamber would try to raise but did say it would be a multi-million dollar campaign.

“It’s going to be a major effort, and the reception for it has been nearly universal,” he said. “People get it when they realize we’ve got to do something, and people are stepping up to it.”

Zook said the effort will involve a media campaign, earned press coverage, social media promotion, and mobile activities such as a tractor-trailer that travels to schools and public events. The message, he said, will be that there are “a lot of roads to success in the U.S. economy.”

The Chamber already has been working to raise awareness of workforce deficiencies that are causing jobs to be unfilled, including hosting a Jobs Now workforce summit last year.

“We’ve got to address it because business is not seeing the candidates in quantity or quality that they need to meet their current workforce needs in many cases. … I think this is an awareness that’s growing and continues to gain strength and momentum,” he said.

Zook has been working with Sen. Jane English, R-North Little Rock, the chair of the Senate Education Committee who is expected to unveil a package of workforce-related bills soon. English, previously a private option opponent, agreed to vote for the program in the 2014 fiscal session in exchange for a commitment from then-Gov. Mike Beebe to revamp the state’s workforce eduction efforts. English spent much of the year meeting weekly with state education and economic development officials.

Zook said the package will be “nuts and bolts kind of things.”

“These steps that she’s proposing are going to be constructive and very doable and will encourage the longer range activity to make sure that we’re continuing to work on this,” Zook said.

A more than $230,000 difference between two bids for the city of Fort Smith’s auto and property insurance did not present an easy choice for members of the Fort Smith Board of Directors who on Tuesday (Feb. 10) reviewed the competing insurance plans.

Travelers Insurance bid was $785,106 and a bid from the Arkansas Municipal League(AML) was $554,269. The insurance would cover an estimated $240 million in city property, with $31.818 million of that being for the city’s fleet of 538 vehicles.

However, the two plans are tough to compare because of wide differences in deductibles, liability limits, replacement cost coverages, underinsured coverage options and other factors. Another issue is that Travelers is the second largest U.S. property and casualty insurance firm, and the AML program is self funded. The city staff on Tuesday did not know the asset depth of the program.

Also, Travelers has in past years provided risk management services as part of its contract with the city. If the city goes with AML, Fort Smith Purchasing Manager Allie Bahsoon said the city would need to hire a risk/safely manager. Bahsoon, who praised Travelers’ help in past years with risk and compliance issues, said that cost would be $120,000 in the first year and around $95,000 in the second year.

Bahsoon and City Administrator Ray Gosack said a new policy needs to be approved by March 1, putting pressure on the Board to make a decision.

“We don’t get renewal rates from the insurance companies until the 11th hour,” Gosack said in explaining the tight schedule.

The one point on which Board members did appear to agree was the need for the city to hire a risk and safety analysis and compliance director. Director Tracy Pennartz said she was “surprised that a city of our size did not have a person like that. Director’s Mike Lorenz and Kevin Settle agreed, with Settle saying such a person over time could lower insurance and other costs.

As to the insurance question at hand, Director Keith Lau said he had concerns that the AML plan would not provide the overall coverage the city needs. Bahsoon, who said he was neutral on the issue but favored Travelers in his comments, used the 2008 hail storm to note one key difference in the two policies. The 2008 storm caused $2.5 million in damage to the city fleet, which was covered by Travelers. However, if the city was on the AML plan, $650,000 of the $2.5 million would not have been covered because of fleet depreciation.

“It’s important to take that into account,” Bahsoon said to the Board.

Earlier, Bahsoon said the AML plan provides less “cushion” for the city.

But Pennartz said there are “pluses and minuses on both sides,” adding later in the discussion that the Board needed more information.

“It’s not an easy decision,” she said.

With the discussion continuing more than 45 minutes, Mayor Sandy Sanders asked Scott Clark, with Brown Hiller Clark (BHC), if Travelers would give the city another 30 days to decide. BHC has been the city’s insurance agent for the previous 24 years. Clark, who attended the meeting, said he could get an answer from Travelers by week’s end. If Travelers will grant an extension, the Board will have time to receive more detailed presentations from Travelers and AML. AML did not have a representative at the meeting.

Sanders also called for a straw poll of the Board as to how they would vote. Directors George Catsavis, André Good, Don Hutchings and Lau said they would go with Travelers, while Pennartz and Settle went with AML. Lorenz said he needed more information.

Link here for more detail on the insurance plan comparisons.

Arkansas voters may decide next year on a plan to select – versus elect – the state’s Supreme Court justices, if a constitutional amendment proposal is referred to the voters by the legislature.

Rep. Matthew Shepherd, R-El Dorado, who chairs the House Judiciary Committee, filed House Joint Resolution 1005 Tuesday afternoon at the Capitol. Justices on the Arkansas Supreme Court and other judges are elected on a non-partisan basis.

The proposed amendment would change state law by creating a selection process and retention system for members of the state’s highest court. A 15-member Judicial Nominating Commission would choose Supreme Court Justices through a merit selection system. The commission would have six members appointed by the governor, one member each by the House Speaker and Senate President Pro Tempore, six members of the Arkansas Bar Association and one member “selected by not less than eight members of the commission.”

Shepherd says the proposal would allow the commission to submit three names to the Governor for a Supreme Court justice position, with the Governor selecting one of the choices for an eight-year term on the high court. Once selected, Supreme Court judges could remain in office if voters retain them at the ballot.

“At the general election next before his or her term expires, a justice of the Supreme Court may seek retention in office by filing with the Secretary of State not less than 120 days before the date of the general election a declaration of candidacy to succeed himself or herself as a justice of the Supreme Court,” Shepherd’s proposed amendment states.

The retention system would involve having a “Yes” or “No” column on the ballot with the words, “Shall (Justice ?) be retained in office?”

“If the decision is yes, the justice …. Shall be retained in office for an eight-year term. If the decision is no or if no declaration of candidacy is filed, the office shall be vacant upon expiration of the term then being served,” the measure reads.

A justice not retained by voters would not be eligible for appointment and there would be unlimited terms on retention “except for retirement as may be provided by the General Assembly for a maximum retirement age,” according to the proposal.

If the resolution is referred to voters for the Nov. 2016 election and approved, it would take effect Jan. 1, 2017.

NEW AMENDMENT PROPOSALS
There were three other proposed constitutional amendments filed Tuesday, a day ahead of the deadline for filing proposals.
They include:
• House Joint Resolution 1004, sponsored by Rep. Nate Bell, R-Mena. The bill would “propose an amendment to the Arkansas Constitution providing that state funds expended in support of public education not exceed a certain percentage of overall state expenditures.

• Senate Joint Resolution 1005, sponsored by Sen. Bryan King, R-Green Forest. The bill would extend the terms of all county officials from two to four years, allow quorum courts to refer to voters whether or not justices would serve two or four year terms and ban county officials from being elected or appointed to another civil office in the state.

• Senate Joint Resolution 6, sponsored by Sen. Alan Clark, R-Lonsdale. The bill would create an amendment in which lottery proceeds shall be used solely to pay “the operating expenses of lotteries, to fund or provide for scholarships and grants to citizens of this state enrolled in public or private non-profit two year or four year colleges.

Wednesday is the deadline for legislators to turn in proposed amendments to be considered for the 2016 general election.

WEDNESDAY SCHEDULE
The House State Agencies and Governmental Agencies committee is scheduled to take up House Bill 1113 at a 10 a.m. hearing Wednesday. The bill, sponsored by Rep. Nate Bell, R-Mena, would eliminate the dual status of a state holiday honoring Dr. Martin Luther King Jr. and Confederate general Robert E. Lee.

The bill failed in committee earlier this session and Bell said last week he and Rep. Fred Love, D-Little Rock, were working to get the “overall bill accomplished.”

The following is a list of committee meetings scheduled Wednesday in the Arkansas General Assembly:
• Joint Committees
9 a.m. – Joint Budget Committee, Room A, MAC

• House Committees
10 a.m. – Aging, Children and Youth, Legislative and Military Affairs, Room 130.
10 a.m. – Agriculture, Forestry and Economic Development, Room 138.
10 a.m. – City, County and Local Affairs, Room B, MAC.
10 a.m. – Insurance and Commerce, Room 149.
10 a.m. – State Agencies and Governmental Affairs, Room 151.
12 p.m. – Rules, Room B, MAC.

• Senate Committees
10 a.m. – Education, Room 207.
10 a.m. – Judiciary, Room 171.
10 a.m. – Public Health, Welfare and Labor, Room 272.
10 a.m. – Revenue and Taxation, OSC.
10 minutes after adjournment – Transportation, Technology and Legislative Affairs, Room 309.

The House and Senate will convene at 1:30 p.m. Wednesday.

If there is a comeback kid in the Arkansas corporate world, it would have to be Van Buren-based USA Truck. Officials with the long-haul trucking and logistics company announced 2014 net income of $6.033 million, a more than $15 million swing from the $9.11 million loss in 2014, and a gain that ended five consecutive years of losses.

The 2014 per share net income of 58 cents beat the 51 cents per share that was the average of estimates among analysts who cover the company. Full year revenue for the company was $602.477 million, up 8.55% compared to 2013.

Driving the solid annual gain was a healthy fourth quarter in which net income was $4.182 million, much better than the $4.636 million loss in the fourth quarter of 2013. However, the 2013 quarter saw the company, which has a self-funded insurance program, post a $5.97 million charge to boost its long-term claims reserve. The company also posted a $1.5 million charge in the 2013 quarter for expenses related to fighting a hostile takeover attempt by Phoenix-based Knight Transportation.

Knight’s takeover attempt also crimped 2014 earnings by $2.8 million.

The fourth quarter per share earnings of 40 cents blew past the consensus estimate of 18 cents. Revenue during the quarter was $150.07 million, up 6.1% compared to the same quarter in 2013.

“Our robust fourth quarter capped a transformative year for USA Truck,” President and CEO John Simone said in the earnings report released early Wednesday (Feb. 11). “As a result of our company-wide focus on operational execution, profitable growth and cost effectiveness, we delivered our ninth consecutive quarter of improved results, our third consecutive quarter of positive operating income, and the Company’s highest quarterly earnings per share in more than nine years.”

The publicly held trucking company has lost more than $48 million in the five years before 2014. The company posted a net loss of $9.11 million in 2013, a net loss of $17.671 million in 2012, a 2011 loss of $10.77 million, a 2010 loss of $3.308 million, and a $7.177 million loss in 2009.

Barring an acquisition, several more years of positive numbers will be needed for the company to dig out of debt.

“Our balance sheet strengthened and our increased cash flow generated from operations will allow us additional flexibility. Year over year, our debt was reduced by a total of $11.4 million to a total of $117.5 million,” USA Truck Chief Financial Officer Michael Borrows said in the earnings report.

Simone said the improved financial are a result of “strong process on the execution of our turnaround plan.” That plan was implemented shortly after Simone arrived at USA Truck in February 2013. During his first few weeks on the job Simone analyzed the operations and issued what he called a “100-day plan.” The plan included 27 “high-leverage activities” he believed could restore profits. The 27 activities included reducing insurance costs and claims expense, improving fuel efficiency, and lowering maintenance costs while also improving overall maintenance operations.

The company also was focused on diversifying the business model by growing their Strategic Capacity Solutions (SCS) – logistics and freight brokerage – division. The division generated 29.7% of total revenue – $178.982 million – for the company in 2014, up from 24.6% in 2014.

While it was a robust fourth quarter, key metrics for 2014 show that struggles remain on the trucking side. For example, the operating ratio for the full year was 101.1%, better than the 105.4%, but still reflecting a loss of 1.1 cents for every dollar of revenue. And potentially reflecting pressure from an industrywide driver shortage, the percentage of in-service tractors without a driver in 2014 was 7%, up from the 5.1% in 2013. The number of “deadhead” miles was 12.7% in 2014, up from 11.8% in 2013, and the total miles driven fell from 223,923 in 2013 to 215,479 in 2014.

The weak metrics in the key categories were primary culprits in the company posting a $3.532 million operating income loss in the trucking division. However, it was a big improvement over the $17.667 million operating loss in 2013.

Saving the day with respect to full-year figures was the SCS division, which posted operating income of $20.775 million, more than double the $9 million in 2013.

Company execs believe that improvements to the key metrics seen in the fourth quarter will continue into 2015. The operating ratio in the fourth quarter was 95.1% compared to 109.1% in the 2013 quarter. Operating income for the trucking division during the fourth quarter was $4.24 million, an almost $12 million improvement over the operating loss of $7.613 million in the fourth quarter of 2013.

“In 2015, we believe USA Truck is well positioned to deliver another year of growth and continued operating improvements,” Simone said in the statement. “We are sharpening our focus on enhancing the Company’s ability to provide capacity solutions by growing our dedicated business, growing our SCS footprint and our owner-operator fleet. In addition, we will continue to refine our Truckload network.”

Although thinly traded, investors have rewarded the company’s overall improved performance. USA Truck shares (NASDAQ: USAK) closed Tuesday at $27.67, up 25 cents. During the past 52 weeks the share price has ranged from a $13.29 low to a $30.51 high.

The number one internal lever Wal-Mart said it can pull this year is to grow comp store sales. Top executives note that they can’t do it alone, which is why the retail giant outlined its core strategies last week (Feb. 2 - 5) to suppliers in the annual “Year Beginning Meetings” held in Orlando. 

“Our core message this year is to make our stores better all over the world. ... Nothing will move the needle up like comp sales. We are investing to define the future of retail with our team out in San Bruno and around the world. ... We are listening to our teams out in the stores trying to create a better in-store experience, engaging our hourly associates is a priority for us,” CEO Doug McMillon said in his opening remarks at the annual YBM event.

Aside from improving store operations, McMillion was quick to tell suppliers the retailer is going back to what works and that is the “Everyday Low Prices” (EDLP) philosophy which begin with Everyday Low Costs (EDLC) of goods from suppliers.

“What we need from you is EDLP and EDLC. We are still fighting this battle in some parts of our business. ... That’s because it’s just so tempting to put an item on sale. Putting items on sale and special promotions have never worked for us. When we get away from our pricing model out in the middle of the road we get run over,” McMillon said.

‘PLAYING OFFENSE’
He told suppliers that figuring out how they could move back toward a net invoice cost with Wal-Mart is going to be critical this year. McMillon said the retailer would lean upon the merchant leadership from its suppliers to get back to “playing offense with price to deliver EDLP and earn customer trust.” 

“We want to drive more business for you and us in a collaborative fashion. We are thinking about (how) dynamic pricing tools via the Internet can be applied and we don’t have it all figured it out just yet. But what I do know, is that our pricing objective is aimed at building customer trust,” he said.

With Wal-Mart’s capability to provide inventory in-store and online and the low cost pricing model, McMillon said he doesn’t want customers to doubt that Wal-Mart has the items they want at they price they want to pay.

Greg Foran, CEO of Walmart U.S., said at the meeting that the best of EDLC suppliers are already seeing benefits. He said one item retailed for $2.94 last year, but with supplier and buyer collaboration the price was taken down to $1.68 this year, with no reduction in quality. In response, Wal-Mart doubled its order to 13 million, up from 6 million last year.

Foran was not bashful telling suppliers that they should put their best and brightest talent on the Wal-Mart account. He said Wal-Mart wants to collaborate with suppliers’ best in order to get top results for both parties.

PRODUCT PUSH
McMillon said new items are crucial this year. He encouraged suppliers to innovate and then ramp up quickly so Wal-Mart can keep a fresh stream of new items in stores. He said the retailer is committed to ordering deeper and gambling somewhat on new items they think will resonate with the customer base. 

Other top Walmart executives said during the meeting that buyers may want to expand assortment and they always want Walmart to be first to market with some exclusivity. But the retailer also is eager for more candid conversations with suppliers about leaner supply chain costs and building brand awareness.

In the midst of the small store boom, with grocery leading the way. Mike Moore, president of Neighborhood Markets, said if this grocery chain stood alone it would rank in the top 50 grocers in the nation. After opening 100 new grocery formats in recent months, the Neighborhood Market banner now has 601 stores in the U.S.

Moore said there are opportunities in the smaller stores for suppliers as they work to create better product displays and product mixes that make sense. He said they are looking to suppliers for input on issues like seasonal items and other general merchandise items that could be regularly featured.

“We are eager to try and test new things with this format,” Moore said.

There is also the localization of content in the neighborhood stores. While there is no set policy by corporate execs, store managers have the ability to source local items. It is commonly done in produce and fresh foods, but it also applies to flavor preferences and even ethic food offerings. 

The retailer announced it will hold another open call for new products made in the U.S. on July 7 in Bentonville.

SUSTAINABLE SOLUTIONS
Underscored by Wal-Mart’s top management is the need for sustainable solutions from product innovations like LED lighting to zero waste packaging. Much of the low hanging fruit has already been gathered, the execs said, and Wal-Mart will continue to lean on suppliers to help with the sustainability initiative. 

Wal-Mart will hold its Sustainability Milestone meeting in San Bruno, Calif., on Feb. 24. 

Michelle Gloeckler, executive vice president and U.S. manufacturing lead, said at the YBM event that 1,400 suppliers are participating in the sustainability survey and their score is posted on their evaluations. She said participating is important because buyers look closely at sustainability during the purchasing process.

(For this story, The City Wire was able to listen to recorded sessions of the event.)

Hospitality tax collections in Fort Smith and Van Buren were up 4.2% and 1.4%, respectively, and collections of Arkansas’ 2% tourism tax has set a new annual record for collections during the first 11 months of 2014.

Hospitality tax collections in Van Buren for 2014 total $430,278, up 1.4% compared to the same period in 2013. The city collects a 1% tax on lodging and a 1% prepared food tax.

For the year, revenue from Van Buren’s prepared food tax was $370,445, up from the $363,607 in 2013. Full year revenue from hotel tax collections was $59,833, down from the $60,702 in 2013. An odd December caused the slip, with December hotel tax revenue of $3,491 being 22.5% below that of December 2013.

“There is one motel that changed ownership late in 2014 and their December taxes haven't been paid, however, all the other properties except one were significantly off from 2013,” said Maryl Koeth, executive director of the Van Buren Advertising & Promotion Commission .

Koeth said weather conditions in December 2013 may have forced travelers to stay in hotels longer than planned. According to Koeth, December 2013 was the 7th snowiest December on record.

“It also explains why prepared food totals are up over 5% from December 2013. Fewer people went out to eat in the bad weather of 2013,” she said.

Overall December receipts totaled $33,257, up 1.35% compared to December 2013.

Collections in Van Buren during 2013 totaled $423,221.83, remarkably close to the $423,222.91 during 2012. During 2012, Van Buren hospitality tax collections totaled $425,554, up 5.2% compared to the 2011 collections. Hospitality tax collections in Van Buren during 2011 totaled $429,561, up 2.34% compared to 2010. The 2011 collections ended a two-year skid in Van Buren.

FORT SMITH NUMBERS
The Fort Smith Convention & Visitors Bureau collected $761,826 in 2014, up 4.2% compared to 2013. The city collects a 3% tax on lodging.

December hospitality tax collections in Fort Smith totaled $50,145, down 4% compared to December 2013.

Claude Legris, executive director of the Fort Smith Convention & Visitors Bureau, said 2014 saw a one-year loss of the large conferences held by the Christian Congregation of Jehovah’s Witnesses (CCJW) at the Fort Smith Convention Center in recent years. The group is expected to return to Fort Smith in 2015.

“Citywide hotel occupancy for the year was +2.4% and average daily rate increased 3.3% which helped us to achieve the 3% growth we had anticipated with best results from the third and fourth quarters. In addition to these overall increases we were able to ‘recover’ some of the revenue by hosting a series of smaller CCJW meetings throughout the year,” Legris said.

He is also projecting $848,800 in hotel tax revenue in 2015, up 11% from 2014, with much of that growth based on the CCJW return.

“Although we expect some temporary decrease in inventory due to renovation projects (including the complete renovation and ‘reflagging’ of the Holiday Inn City Center property), we will also see the addition of 90 rooms with the completion and opening fo the ‘Home2’ project on Phoenix Avenue,” he said.

Collections in Fort Smith during 2013 totaled $731,057, down 2% compared to the same period in 2012. During 2012, Fort Smith hospitality tax collections totaled $746,182, up 5.37% compared to the 2011 period. The 2011 collections were up 4.3% compared to 2010.

Increases in Fort Smith and Van Buren hospitality tax numbers corresponds with job gains in the region’s tourism industry. According to the U.S. Bureau of Labor Statistics, the region’s leisure and hospitality sector employed an estimated 9,500 during December, down from 9,900 in November and above the 9,200 in December 2013. The sector reached an employment high of 9,900 in August, September and November.

ARKANSAS TOURISM TAX, JOB NUMBERS
Collections of Arkansas’ 2% tourism tax during the first 11 months of 2014 totaled $12.866 million, up 7.51% compared to the $11.967 million during the same period of 2013.

The 2% tourism tax set a record in 2013 by reaching $12.716 million, and the 2014 numbers are on track to reach more than $13.5 million in 2014.

The 2013 collections were up 2.5% compared to the $12.405 million in 2012, and well ahead of the $11.378 million slump in 2009 when national economic conditions proved tough on Arkansas’ tourism industry.

Growth in tourism jobs has tracked with growth in statewide tourism tax collections, with employment recently hitting a new record for Arkansas’ travel and tourism industry. Arkansas’ tourism sector (leisure & hospitality) employed 109,400 during November, up from 109,200 during December, and above the 106,600 during November 2013. The November number, if it stands, marks a new record for employment in the sector.

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. Employment in the sector is up 23% in the past 10 years.

A bill that would eliminate the dual status of a state holiday honoring Dr. Martin Luther King, Jr. and Confederate general Robert E. Lee failed Wednesday for a second time in committee.

The House State Agencies and Governmental Affairs voted against House Bill 1113 during a committee meeting at the capitol in Little Rock. The bill, which also failed in committee Jan. 28, was amended the day before the meeting. The amendment would remove a state holiday honoring Confederate president Jefferson Davis on June 3 and would create a holiday honoring Lee and Confederate general Patrick Cleburne on Nov. 30.

Rep. Nate Bell, R-Mena, who sponsored the bill, said he has heard from people about the bill in recent weeks. Some of the comments were threatening and Bell played a telephone message he said he received from someone opposed to the bill. Bell called the threats “thinly veiled” and said he has received comments about why he – a white conservative Republican from Mena – was proposing the bill.

Bell said the holiday has become a “tool for racial division” with the issue becoming heated. However, people who spoke against the bill said the measure would have divided people even further.

Leon Davis, who spoke against the bill, referred to it as “bovine confluence.” Robert Edwards, who also spoke against the bill, noted that Mississippi – another state with the King-Lee holiday – has not been negatively impacted by the holiday. Edwards cited a Nissan plant in north Mississippi, with more than 6,000 employees, as an example.

Former Arkansas Economic Development Commission director Grant Tennille was asked about the issue by committee members. Tennille told the committee that a law setting the holiday for both King and Lee could have a negative impact on economic development. Earlier, Tennille said while there were no specifics on whether or not the state would lose business due to the holiday, the impression was there.

“I can’t say how many have been lost but the appearance sends the wrong message,” Tennille said.

Rep. Charlotte Douglas, R-Alma, suggested a compromise in which King would be honored on the 3rd Monday in January while Lee would be honored on the 4th Monday in January. Bell said he was open to the compromise and that the bill would honor both King and Lee.

“Lee abhorred slavery and seccessionism,” Bell said. “They deserve respect, not to be a tool of racial division.”

The nine-month gridlock between major West Coast port terminal operators and dockworkers which resulted in a weekend shutdown has raised concerns within the retail industry which has stayed fairly mute on the impact until now.

Research group Kurt Salmon estimates that congestion at West Coast ports could cost retailers as much as $7 billion this year. The analysis attributes those costs to a combination of the higher price of carrying goods and missed sales due to below optimal inventory levels.

The National Retail Federation warns that a shut down over the any prolonged (10-day period) hit the economy by $2.1 billion a day as half of the nation’s imports pass through the 29 West Coast ports.

THE LABOR PROBLEM
At issue are a few remaining contract issues between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association. The union represents about 20,000 dockworkers at 29 West Coast ports, and the PMA negotiates for the major port employers, including Denmark-based Maersk Line, China-based COSCO and Korean-based Hanjin Shipping.

The recent weekend closure was the result of the PMA stopping operations and not a strike by the union. The union, which has represented dockworkers in California, Oregon and Washington since 1934, has said it has dropped most of its demands with just a few remaining issues to be settled. The union also has accused the PMA of creating congestion and delays and then attempting to blame the problem on union workers.

“PMA is leaving ships at sea and claiming there’s no space on the docks, but there are acres of asphalt just waiting for the containers on those ships, and hundreds of longshore workers ready to unload them. The employers are deliberately worsening the existing congestion crisis to gain the upper hand at the bargaining table,” the union said in a statement. “The union remains focused on reaching a settlement as quickly as possible with employers. Talks to resolve the few remaining issues between the Longshore Union and Pacific Maritime Association are ongoing.”

However, the PMA said “ongoing and costly ILWU slowdowns” have forced weekend port closures. The association also said it recently made a generous contract offer.

“Last week, after nine months of contract talks, PMA last week made a comprehensive contract offer that would raise ILWU wages by 14 percent over five-years, on top of current average full-time wages of $147,000 per year. It would maintain fully employer-paid health care, worth $35,000 per year, and increase the ILWU pension to as much as $88,800 per year,” the association said in a statement.

No matter who is at fault, the result for retailers is not good.

WAL-MART RESPONSE
Retail behemoth Wal-Mart Stores told The City Wire that the West Coast ports congestion is a concern but it has not seen any material impact on its business thus far.

“We have a diverse import network that has helped us to mitigate some of the problems experienced with the West Coast ports. Our network includes Seattle, Houston, Savannah, Ga., and Norfolk, Va., in addition to Los Angeles and other West Coast ports,” said Aaron Mullins, corporate spokesman for Wal-Mart Stores.

Wal-Mart imports an estimated $20 billion in products annually from China. Perishable and seasonal items are most impacted by the delays because if they miss their narrow window of retail opportunity the product is often a total loss.

IMPORT SHIFT ATTEMPTS
Supply chain experts also said shifting imported goods to other ports (East Coast or Gulf of Mexico) increases land travel time and costs into the supply chain. Those added costs eat into profit margins unless the retailer is willing or able to pass them on to consumers. High-end retailer Ralph Lauren noted in a recent earnings call that it opted to airfreight more products during the recent quarter. By shifting some delivery to the East Coast the retailer said it added between 3 and 10 days of transit time, which still allowed it maintain service levels.

Kurt Salmon analysts warn that rerouting to East Coast ports or buying extra inventory in advance are only temporary fixes for what is a larger problem. They note that if conditions continue the retail sector could face $36.9 billion more in baseline costs in 2016 compared to 2014.

The NRF is not mincing words about the impact the port turmoil is having on the retail and supply chain industries.

“Temporarily suspending port operations is just another example of the International Longshore and Warehouse Union and Pacific Maritime Association shooting themselves in the collective bargaining foot. The increasing congestion at West Coast ports are bringing the fears of a port shutdown closer to a reality,” said Jonathon Gold in reaction to the temporary suspension at the West Coast ports this past weekend (Feb. 7-8).

Gold, the NRF vice president of supply chain, said the entire supply chain has been dealing with the lack of a West Coast port contract since May 2014.

"Enough is enough ... Stop holding the supply chain community hostage. Get back to the negotiating table, work with the federal mediator and agree on a new labor contract,” Gold noted in public statement on Feb. 6.

BROAD IMPACT
Concerns have rippled down the supply chain and causing manufacturers like Marshalltown Company, who makes tools in Fayetteville, keep considerably more inventory than they might otherwise carry. Jack Murders, operations manager in the Fayetteville plant, recently told The City Wire that they began shifting some of their shipments to the Seattle/Tacoma port months ago, but congestion is building there as more companies have had the same idea.

Import cargo volume at the nation’s major retail container ports is expected to rise 10.1% this month over the same time last year even as West Coast ports come closer to a possible shutdown, according to the monthly Global Port Tracker report released Wednesday (Feb. 11) by the National Retail Federation and Hackett Associates.

“With cargo volume growing as the economy continues to recover, the last thing we need is a port shutdown that would bring billions of dollars of economic activity to a halt,” Gold said. “

EXPORT CONCERNS
Springdale-based Tyson Foods is an exporter in addition to being a retail supplier who recently referenced the port issues and the impact it’s having on the meat business. 

“We believe part of the recent decline in beef and pork prices experienced by the U.S. meat industry is due to the West Coast port slowdown, which (Tyson CEO) Donnie Smith noted last month. This could eventually affect livestock producers. Shipping alternatives for the industry are limited, but we’re actively seeking other channels,” Tyson Foods’ spokesman Gary Mickelson noted in an email.

Smith told analysts during the company’s recent earnings call that the company’s “primary concern about exports is coming from ongoing interruptions at West Coast ports, which is pressuring logistics that could eventually affect livestock producers if the situation isn't resolved soon.”

Roughly 25% of pork produced in the U.S. is exported. But if the pork isn’t shipped, then it fills up freezers, which will push domestic pork prices lower. This is positive for the consumer, but a negative for processors and swine farmers. Likewise some beef cuts that might ordinarily be exported for higher sales prices abroad are being ground into hamburger, which has led to a slight reduction in beef prices.

The U.S. meat and poultry industries estimate they are losing $40 million a week as products destined for export from West Coast ports continue to pile up in commercial freezers around the country as the port labor dispute continues. The North American Meat Institute reported this week that lost hides and skins export sales total $42 million per week. The trade group said it continues to work with other organizations pleading for government intervention sooner rather than later.

The House City, County and Local Affairs committee approved a bill Wednesday that supporters say would improve intrastate commerce, with opponents saying it creates discrimination and takes away local control.

The committee approved Senate Bill 202 during a hearing Wednesday at the capitol, and it will head to the full House for a final vote as the state Senate has already approved the measure.

The bill’s sponsor, Sen. Bart Hester, R-Cave Springs, said the bill would make sure “businesses, organizations and employers doing business in the state are subject to uniform nondiscrimination laws and obligations.” The measure bars local ordinances that would create “a protected classification or prohibit discrimination on a basis not contained in state law.”

However, opponents of the bill argue it would create an undue burden on cities and counties, take away local control, as well as open up possible concerns regarding discrimination.

They point to a recent controversial issue in Fayetteville, where the city council approved an ordinance designed to make it illegal to discriminate against an individual based on their sexual orientation. That ordinance was overturned by a vote of the people in a December special election.

In other action, the Senate voted 34-0 to approve a bill that would change the jurisdiction for the Arkansas lottery. Senate Bill 7, sponsored by Sen. Jimmy Hickey, R-Texarkana, would abolish the Arkansas Lottery Commission. From there, the bill would create the office of the Arkansas Lottery within the Arkansas Department of Finance and Administration.

A previous plan would have moved the lottery commission’s jurisdiction under the Arkansas Department of Higher Education, but Gov. Asa Hutchinson expressed concerns over the issue. The bill now heads to the House.

The Senate also approved a resolution setting an April 10 recess date for the legislative session. The resolution, House Concurrent Resolution 1004, would not only set the recess date but a May 8 adjournment date for this year’s session.

NEW HEALTHCARE BILLS
A pair of healthcare related bills were also filed on Wednesday.

Sen. Jim Hendren, R-Sulphur Springs, filed Senate Bill 343, which would prohibit the establishment through state law of a state-based health insurance exchange in Arkansas. The one-page bill was referred to the Senate Public Health, Welfare and Labor committee for their review.

Rep. Donnie Copeland, R-Little Rock, also filed House Bill 1363 Wednesday. The one-page bill would notify enrollees of the so-called Private Option at the “date of renewal or reassessment for enrollment” that the program will be ending Dec. 31, 2016. The bill, which was sent to the House Public Health, Welfare and Labor committee, would also notify people at the date of enrollment of the Dec. 31, 2016 deadline.

Less than two years ago Van Buren-based USA Truck was losing money faster than a fur coat sales booth at a PETA rally. Company shares, which historically traded between $10-$20 per share, had dipped below $3. By the end of 2013, the company would post five consecutive years of losses that totaled almost $48 million – wiping out the $45.76 million in net income earned between 2001 and 2008. The company likely would have been shot if it were a horse.

In late 2012 the USA Truck Board of Directors reached out to Harvard graduate Robert Peiser to chair the Board and get the company back in the black. Peiser, known in corporate circles as someone able to rescue a company for future growth or acquisition, hired John Simone in early 2013. He had a reputation in the trucking and logistics sector for tidying up troubled operations.

Peiser and Simone began making wholesale changes to USA Truck’s corporate philosophy, management and strategy. The effort was soon made more difficult when a hostile takeover attempt was made by Phoenix-based Knight Transportation. Knight eventually withdrew from the fight.

Even in the midst of the Knight action, Simone began implementing a broad 27-point plan focused on reducing expenses, broadening relationships with key customers, and, as Simone has said, returning to the basic “blocking and tackling” of a trucking company.

‘BETTER TRAJECTORY’
It’s working – thanks in no small part to an improving national economy and national freight sector dynamics that now favor the trucking industry. The company reported Wednesday (Feb. 11) that 2014 net income was $6.033 million, a more than $15 million swing from the $9.11 million loss in 2014. The swing ended five consecutive years of losses.

Investors are impressed. USA Truck shares (NASDAQ: USAK) on Wednesday hit a company record intraday trading high of $31.99 – well above a 52 week low of $13.32. The price would eventually close the day at $29.97.

Somewhat ironic is that the non-asset side of USA Truck was a big factor in the positive 2014 earnings report. The company’s Strategic Capacity Solutions (SCS) – logistics and freight brokerage – division posted operating income of $20.775 million, more than double the $9 million in 2013. The trucking division posted a $3.532 million operating income loss in 2014 – although it was a big improvement over the $17.66 million operating income loss in 2013.

SCS generated 29.7% of total revenue – $178.982 million – for the company in 2014, up from 24.6% in 2014. Simone said there is not set timeframe, but his goal for SCS is to deliver about 40% of annual revenue.

There was a measure of relief in Simone’s voice during a Wednesday interview, but he was far from celebratory. He said the “early surprises have settled down,” but the turnaround is “still in the early innings.” On the 27-point plan, the company has completed 13. Of the 14 remaining, Simone said there are five that account for about 80% of the “upside” for future growth and financial performance. Simone said the five items are reducing insurance and claims expenses, reducing maintenance operating expenses, reducing out-of-route and empty miles (non revenue miles), improving fuel economy and improving retention of experienced drivers.

Simone is confident the company will have a “better trajectory in 2015” because a massive, fleetwide upgrade to the company’s more than 2,000 trucks was completed in 2014. The effort resulted in higher expenses in 2014, and resulted in more non-revenue miles driven to get the trucks on a schedule that would get them in and out of maintenance shops. However, Simone expects margin improvements in 2015 with trucks that are more efficient and provide “more creature comforts” for drivers.

THE DRIVER SHORTAGE
Drivers will be a problem for the entire trucking industry in 2015. The American Trucking Associations estimates a shortage of about 35,000 drivers for the industry, with that number predicted to reach 200,000 by 2020. Part of the problem is a combination of experienced drivers approaching retirement age and fewer young people entering the profession.

The industry is responding by improving pay and benefits.

“Fleets are raising pay and offering generous benefit packages in order to attract and keep their drivers in the face of a growing driver shortage,” ATA Chief Economist Bob Costello noted in a December report.
 
His report showed that median pay for drivers ranged from a little more than $46,000 for national, irregular route truckload drivers to more than $73,000 for private fleet van drivers. In seven of the nine categories of drivers covered by the ATA survey, pay met or exceeded the U.S. median household income of more than $53,000.

Simone said USA Truck has “a number of initiatives in place,” including driver wage increases and more “home time” for drivers. The pay increases were not broad. The company used a “scientific approach” to identify excessive turnover demographics and then respond with financial and other incentives within that set of drivers. Simone said the company in 2014 and early 2015 had to spend more than planned on driver pay and benefits “because the market dynamics as it related to drivers, changed pretty dramatically” – especially in the early weeks of the first quarter of 2015.

The company has also flipped its mix of drivers. Just a few years ago the mix was about 35% experienced drivers and 65% new students. That is now about 75% experienced and 25% students. Simone said the company will maintain that ratio because it is important to recruit young people into the profession. He also said addressing the driver issue requires constant assessment.

“We continuously monitor why drivers come, why drivers leave and why drivers stay,” Simone said.

BETTER RATE STRUCTURE, EXPECTATIONS
Efforts to improve the company and maintain equipment so that service was “more consistent and reliable” has helped USA Truck raise rates, Simone said. Prior to 2014 the company’s rate structure was below market averages, but improved customer service levels have allowed USA Truck to achieve overall rate increases close to 10% in 2014.

Simone said there is “some room for uppricing” in 2015, but estimated that rate increases will moderate back to a 3% to 6% range.

What is not likely to moderate are Simone’s expectations and his effort to check off the other 14 points of the turnaround plan. Simone said the “rallying cry” for the company in 2015 is “USA Truck – even better.”

He’s not the only optimist. Brad Delco, the transportation industry analyst with Little Rock-based Stephens Inc., said in a Feb. 12 investor note that the company’s truckload segment “contributed to bottom-line results meaningfully for the first time since 2007. Looking ahead, we expect continued progress on variable expense reductions and pricing to drive margin improvement into FY'15.” He said USA Truck’s 2014 results were a “big earnings surprise.” (Stephens owns shares of USA Truck, and provides investment banking services for the company.)

Delco raised his fiscal year 2015 earnings per share target from $1 to $1.25, with “greater momentum” on higher rates for truckload services as a key factor in driving more revenue. He also said the company’s efforts to improve fleet fuel economy combined with lower diesel fuel prices helped boost the bottom line. He said an about 10% improvement in fourth quarter miles per gallon “suggests to us that the improvement in this line item is more sustainable that what some might think.”

SIMONE’S FUTURE
Because of Simone’s corporate history, his tenure in Van Buren has been in doubt. Even Simone has said in a previous interview with The City Wire that his DNA is more of a builder than a sustainer. So is John Simone a transient? Does he spend 3-5 years with USA Truck and then move on to the next challenge?

“I’m not transient. This is a great company. This is not a stopping point for me, this is a finishing point for me,” Simone said.

He said when the turnaround plan is complete, there will continue to be areas on which the company can build.

“My initial goal was to improve our operating performance and restore shareholder value,” Simone said, adding later in the interview that “there is still so much opportunity left in this company. ... We’re going to continue to reinvent ourself and move this company forward.”

Inventory issues continue to plague the nation’s larger retailer with some Wal-Mart stores carrying too much product while shelves are empty in other regions. The retailer has acknowledged its out-of-stocks as a $3 billion problem, but more recently top management vowed to address inventory overages.

“Inventory is an obvious problem in our stores. It’s growing too quickly. It’s like you’ve fit 4 pounds of sugar in a 2-pound bag when you walk our stores,” Walmart U.S. CEO Greg Foran told suppliers at the retailer’s recent Year Beginning Meeting held in Orlando (Feb 5-7).

Foran, who is new to the job and the U.S., said he doesn’t profess to know the landscape or cultural differences of various geographical regions, but he does know there is plenty of work to do in what he considers a long journey to right the course of Walmart’s biggest sector.

“I have visited about 70 stores over the past four months. Inventory is an issue, shrinkage has created challenges and we are leaning into this in a meaningful way. We can’t fix it all in five minutes. It’s going to take time but Judith (McKenna, chief operating officer for Walmart U.S.) and the team are working on it,” Foran said during the meeting.

Foran said in October that the company’s inventory has been growing at twice the rate of sales, and in some cases stores may only have room for 80 types of products and they are sent 120.

“More stock is coming in than what is going out. We are over-SKU’d in some cases,” Foran said. “Simplifying the inventory management process actions were started this year but it has continued to grow. I have a cross-functional team working on it.” 

A backroom manager in mid-Tennessee told The City Wire in June 2014 that his store was continually over-shipped on every thing from fishing pools to school supplies. He said the problem was growing worse in each of the past three years and negatively impacting that store’s profitability. Foran said these are the kinds of issues he has witnessed as he’s sprinted through dozens of stores across the country.

FORECASTING HITCHES
Supplier consultants with VendorMasters said some of the inventory problems are a result of problems with forecasting demand. They add that the new Retail Link 2.0 version now being tested does not fix the problem. Under the Informa system of Retail Link 1.0 there were ways to adjust quantities down to the store level. The new system uses historical sales data as its guide to replenishment, but for new products that have no historical sales data, that’s a problem.

The new system also seeks to serve 40 stores out of one distribution center, sending the same number of items to each of the stores, when some of the stores will sell more than others. Consultants say this leaves shelves empty in one store yet overstocked across town. Wal-Mart has not disclosed the number of suppliers now using the 2.0 Retail Link version, but they did say larger suppliers began testing it first.

In one case, a large food company with offices in Northwest Arkansas, had to place one of their replenishment managers inside Wal-Mart for six months to work out the kinks, which has caused some concern for smaller suppliers without those resources. Wal-Mart has been quiet with the media on the rollout of Retail Link 2.0 only to say it will be released slowly in clusters throughout this year.  

VenderMasters said suppliers are also concerned by new fines related to stricter “Must Arrive By Dates” imposed once a version to Retail Link 2.0 happens. Scott Crossett, a corporate recruiter with Cameron Smith & Associates, seconded that concern by suppliers noting that the added pressure has meant more turnover in replenishment manager jobs in the supplier community. He said that is now the job in most demand among the 80 to 90 openings his company sees daily.

FRESH FIX
Growing comp-store sales is the number one priority according to Wal-Mart Stores CEO Doug McMillion, but Foran said that starts with “fixing the shopping experience,” something on which he has told his managers to focus. He said that includes all aspects that go into a shopping experience.

Foran believes too many shoppers are not enticed to spend more time shopping in the fresh foods (produce) area, and he’s intent on fixing that part of grocery sales.

“It looks like we might be getting somewhat cluttered in ‘fresh.’ There is great opportunity here, but the last thing a shopper wants to do is trip over two pallets of Coca Cola or a display of Halloween candy in order to get to the fresh apples,” Foran said in October. “We have done a pretty good job with fruit, but we need to work on our vegetables. ... I think we may be carrying one, two or three days too much product in produce.” 

He also wants the stores to provide better meat and deli offerings. Wal-Mart said it’s most loyal customer only spends 40% of a fresh grocery budget with Walmart, and they want to capture more of that budget. Foran is working with David Cheesewright, CEO of Walmart International, on the best shared practices that could perhaps speed up the time it takes to “fix the shopping experience.”

All eyes are watching as Wal-Mart Stores will release its fourth quarter and fiscal 2015 earnings before the equity markets open on Thursday (Feb. 19.)

Sen. Jane English, R-North Little Rock, will present a package of workforce education bills that will reorganize the state’s career education programs under the Department of Career Education, create a $10 million Office of Skills Development, and do away with the service territories that restrict recruitment efforts by the state’s two-year colleges.

Legislation addressing the workforce changes is expected to be introduced late Thursday or on Friday. The bills will beef up the Department of Career Education and place many of the state’s career education efforts under the department. That department will coordinate what she said is a fragmented, disorganized system that doesn’t do a good job accounting for millions of dollars in state and federal funds.

English, the chair of the Senate Education Committee, met weekly during much of 2014 with state education and economic development officials after switching her vote from no to yes on the private option during last year’s fiscal session.

“We identified probably $150 million worth of training programs going on out there that nobody has any idea what ever happens,” she said.

She said when Whirlpool closed its last offices in Fort Smith, the U.S. Department of Labor spent more than $2 million that can’t now be accounted for.

“We have no idea what ever happened – who got trained, why, where they are, did they get a better job, did they find a job? Well, we have millions of dollars like that,” she said.

The Office of Skills Development will be funded with about $10 million cobbled together by Gov. Mike Beebe after she switched her vote on the private option, she said. It will set up an incumbent worker training program where current smaller employers can apply for competitive 50-50 grants. English said it will help smaller companies without adequate resources to upgrade employee skills.

Another part of the legislation would do away with the service territories limiting community colleges from recruiting outside their own geographic regions.

“It’s called competition, and if you’ve got the best HVAC program or the best whatever program, you ought to be able to go out and recruit people to come to it,” English said.

English spent her career in economic development and has made workforce development her legislative priority. Those efforts dovetail with a push by the Arkansas State Chamber of Commerce to emphasize the issue. Earlier this week, Chamber CEO Randy Zook told Talk Business & Politics that the Chamber plans a multi-million campaign to raise awareness about the issue.

English said many of the needed changes require more of a change in mindset than a change in legislation. K-12 public education and higher ed are a significant part of the state budget, but she said they don’t coordinate well, and there’a large student population in the middle that doesn’t fit into either.

“My goal is to get everybody to start talking together,” she said.

She also said business leaders need to play a bigger role as a component of continuing career education. English is proposing a board of 10 private industry sector representatives who will give guidance to state officials on what industry needs are throughout the state.

“We need to be responding to their needs,” English said.

She also emphasized that Arkansas has to send a signal of confidence to new companies it’s recruiting that the state will help them with workforce training in the beginning and throughout their growth in state.

“We need to tell industry that not only are we interested in them coming here, but we want to be able to tell them we want to help them grow their businesses, and we have to help grow the businesses we’ve already got,” she said.

Parrot Island Waterpark, USA Truck money and the debate on how to insure Fort Smith’s estimated $240 million in assets are topics of this week’s video collaboration between The City Wire and Things To Do In Fort Smith.

This week’s report appears to be safe for viewing at work, and we have ordered a pair of pants for TV anchor Dawson Meadows.

Enjoy.

The annual Home Show presented by the Greater Fort Smith Association of Homebuilders will run from Friday, Feb. 20, through Sunday, Feb. 22, and this year, the community can expect a more active schedule to go along with increased building activities.

Stephanie Stipins, executive director for the association, said one of the biggest changes in store for 2015 is a name change to greater reflect the purpose of the three-day event. Instead of “Home Show,” it’s now “Home and Living Show,” because the association is “trying to get the community as involved as we can, and in addition to promoting residential construction, we’re trying to promote life in Fort Smith.”

The organization has picked a good year for the added emphasis as homebuilding activities have been up significantly over the same period last year. According to The City Wire’s latest building permit report, Fort Smith issued 129 residential construction permits in January valued at $6.344 million, up 37% compared to the $4.63 million in January 2013. For all of 2014, the city issued $40.73 million in permits for residential construction.

Stipins said factors like lower gas prices and an improving economy have people more comfortable with the commitment of owning a home.

“I feel like I can spend a little more money not putting so much in my gas tank, but I think people are feeling more comfortable being able to invest in a large purchase like a home, and many factors play into that,” she said. “It’s a plan — it’s a long-term plan — and I think that it’s indication that people are feeling more comfortable making a plan right now.”

Another indication that “people are ready to buy,” Stipins said, can be seen in the association’s annual Showcase Home, which is unveiled in the fall of each year.

“This house in 2014 was sold before it was finished,” Stipins explained. “Historically they sell within the first six months. This one sold before we even started telling anyone it was available. It sold in August, and it wasn’t open to the public until October, but the agreement with the buyer was they had to allow the public to view it as if it was never sold. So that is another good indication that people are looking to buy.”

The association plans to begin promoting 2015’s Showcase Home at this year’s Home and Living Show.

“It’s going to be located at the Burrows at Middleton at Howard Hill,” Stipins said of the next Showcase Home. “It will be our 27th home. We have a different builder every year. We go within our membership and request proposals from our members to be the one to provide us with that because it is a big deal. Other members provide product either at a discounted rate or comped, and so they begin promoting those products and in doing so they promote that house.”

Vendors are an important part of making the Showcase Home and the Home and Living Show successful, Stipins noted, adding that this year’s Home and Living will feature more than in year’s past with 145 booths, up from 117 in 2014, and 96 in 2013. “Less than 10” of these vendors will be banks or mortgage companies, in keeping with the theme of promoting life in Fort Smith as well as new home construction, she said.

Some of the activities at the Home and Living Show will include the following:
• LEGO contest for three age groups: 8 and under, 9-12, and 13-18;
• Find the Flamingo contest for gift cards to Pink Flamingo BBQ;
• Lowe’s Kids Build;
• Fingerprinting and carseat checks by the Fort Smith Police Department; and
• Educational seminars.

The full schedule of events as well as a listing of seminar topics and presenters for the Home and Living Show are available at this link.

All of Arkansas could be covered in ice and snow beginning Sunday night (Feb. 15) and into Monday, according to a report from AccuWeather.

Overall, AccuWeather meteorologist Alex Sosnowski reports that cold weather in the South and Northeast could “blast” dangerous cold weather over 100 million people over the Valentine’s Day weekend and into early next week.

As frigid air holds in the East, a new storm will spread an area of snow, ice and travel disruptions across the interior South late this weekend into early next week. Much of the South has avoided wintry travel thus far this winter. However, as a storm develops and tracks eastward, a swath of snow and ice will grow on its cold northern flank with rain and thunder close to the Gulf coast Sunday into Monday.

The storm has the potential to bring slippery roads, disruptions to daily activities and perhaps airline delays and cancellations.

An area of snow will generally develop in eastern Kansas to central and southern Missouri on Sunday with an area of ice or a wintry mix from central Oklahoma to much of Arkansas and neighboring parts of Texas and Louisiana.

Travel along the Interstate 40 and I-70 corridors could become slippery and dangerous during Sunday into Sunday night. Cities likely to be impact by wintry precipitation during at least part of the day on Sunday include Oklahoma City, Kansas City, Missouri, and Little Rock, Ark.

Spanning Sunday night into Monday night, snow will spread across the Southeastern states along the I-40 and I-64 corridors. Cities from St. Louis to Nashville; London, Kentucky; Roanoke, Virginia, and Charlotte and Winston-Salem, North Carolina could receive some accumulating snow. The snow will spread from areas west of the Appalachians on Sunday night, to areas east of the Appalachians by Monday night.

Ice or a wintry mix will push eastward along the zone from I-20 to I-40 Sunday night into Monday night. Cities from Memphis and Chattanooga, Tenn., to Tupelo, Miss.; Birmingham and Huntsville, Ala.; Atlanta; Greenville and Columbia, S.C., and Fayetteville, N.C., could be on the receiving end of some sleet and freezing rain.

From Monday night through midweek, the path of the storm, its strength and the intensity of the precipitation are uncertain at this early stage.

Whether the storm turns toward the coastal Northeast will depend on how quickly additional arctic air spills southward and how much the storm strengthens while moving across the South.