Agents and lenders across Northwest Arkansas said business could not have been better in August despite hot weather and threats of higher interest rates.

There were 763 homes sold last month in Benton and Washington counties, a 20% jump in activity from the prior-year period, according to MountData.com. Those transactions racked up $147.25 million in total sales volume, up 22% from August in 2012.

But the number of sales is just part of the reason local real estate professionals give 2013 a solid “B+” grade.

“Property values have been rising over the past year and we are finally now seeing them reflected in the appraisals. The sky is no longer falling and conversations around the water cooler are happening about higher property values, which builds consumer confidence,” said Austin Bivens, agent with ReMax Partners in Springdale.

Median sales prices rose 3.2% in August across the combined two counties, up 5.8% in Benton County and inching up less than 1% in Washington County, according to MountData.com.

SUPPLY & DEMAND
Bivens said prices have been rising this entire year as buyer demand has been strong and steady amid near record low inventory levels – a formula he said is a recipe for success.

Median sales prices rose to $155,000 through the first eights of this year in Benton County, up 8% from the same period in 2012. In Washington County median prices were $149,000 through August, rising 8.36% from the same period last year.

“There were 3,724 homes listed for sale at the end of August, about 50 more than in July, but inventory is down 4% from August 2012 and 48% lower than the all-time high (7,192) listings in August 2007,” said Paul Bynum, market analyst with MountData.com.

Agents have sold 4,978 homes in the two counties through the first eight months of the year, totaling $906.374 million. Bynum said sold market units rose 17% from the prior year, while total volume is up 25%, thanks to higher overall prices.

“I have five pending contracts right now, three of them came in over the weekend. Buyers are finding if they like a property they better submit an offer,” Bivens said.

Jim Long, an agent with Crye-Leike in Bentonville, said he has had recent three buyers lose out on deals because either the offer came in late or the seller got a higher offer.

Bynum said the demand is better at both ends of the buying spectrum this year. When more higher-end homes are sold as in this year, median and average prices will rise. He analyzed the number of sales by price category and found that nearly half (49.2%) of the total sales this year were priced below $150,000, which is pretty normal for the Northwest Arkansas market. He said 28% of the homes sold were priced between $150,000 and $250,000, which is more than one-quarter of the local market.

But agents also sold 826 homes priced between $251,000 and $499,000 this year, roughly 16% of the total market, which is better than in prior years.

Another 269 homes were sold between $500,000 and $999,000, which is 5.4% of this year’s market. Lastly, there were nine homes selling for more than $1 million, also helping to push median and average prices higher.

DRIVING FACTORS
Stephanie Hagan, senior mortgage loan officer at First Federal Bank in Rogers, said borrowers are more confident in the local economy. They are seeing a few foreclosures coming on the market, with many selling fast. They also have seen interest rates edge up and know they need to capture values why they can while prices are also trending higher. She said when prices and interest rates move in tandem that can squeeze a buyer’s purchasing power, which is enough incentive to get them looking and bidding.

“I believe buyers are more confident today, when they are riding my car I don’t hear them assessing every little economic worry. They seem to be focused on finding value in properties they really want to own, not just trying to get a better deal than their friend got,” Bivens said.

Hagan said there is still a fair amount of cash deals in the market, which is mostly spurred on from those moving into the region, having sold their property elsewhere.

“One thing I am seeing more of is local resale and repurchase deals, which is a healthy sign for the local market,” she said.

Bivens agreed. He said while outside relocation business is always a perk, the basic fundamentals are improved when local folks sell and repurchase and that only happens when prices are moving up.

Bynum said consumer confidence and sentiment remain at some of the highest levels in five years. On a national level consumer spending is growing at a 2.5% pace, a little slower than the 3% to 3.5% growth rate historically, according Jay Bryson, global economist with Wells Fargo Securities. He said consumers have been de-leveraging their personal balance sheets since the housing crisis more than five years ago. 

“If this were a baseball game I would say we are in the 7th inning of de-leveraging,” he said.

Byson said a bright spot in the economy continues to be the housing market along with stronger business balance sheets, which means they aren’t as likely to have layoffs, both of these are positive for consumer sentiment and spending.

BY THE NUMBERS
47: The days on market for homes selling in the past 90 days.
$87: The median price (per square foot) of homes selling this year.
873: The sales pending at the end of August in Benton and Washington counties.
7.2: The months of inventory in the local market based on sales this year.

Source: MountData.com

More than 280 workers began a new job or the same job in a new space on Monday (Sept. 16) as Health Management Associates opened its regional service center in part of a facility that less than four years ago Lance Beaty was hoping wouldn’t be an investment mistake.

Naples, Fla.-based Health Management Associates announced plans on April 4 to operate a regional service center in Fort Smith that will employ more than 500 with average annual salaries potentially exceeding $40,000.

HMA, a large U.S. hospital operator and the parent company of Sparks Health System in Fort Smith and Summit Medical Center in Van Buren, estimates the annual payroll will be $21.5 million at full employment within the next four years The company also is investing an estimated $4 million in furniture, fixtures and equipment for the new center.

The almost 90,000-square-foot facility is housed in what was once a portion of Phoenix Village Mall. Beaty, general manager of FSM Redevelopment, bought the crumbling former mall, with the simple plan of converting Arkansas’ first enclosed mall into warehouse space. The warehouse plans were scrapped early in the process, and FSM Redevelopment partners has instead invested about $15 million to build out office space, an exhibition center – removed to make way for HMA – and new retail space.

HOSPITAL, DOCTOR SUPPORT
Shannon White, an assistant vice president with HMA and manager of the center, is pleased that Beaty’s plans changed. She said by mid-October the center will provide a wide variety of support to 23 hospitals and 150 physicians within an eight-state area.

White said a substantial amount of the work to renovate the facility and the ongoing maintenance and other services was and is contracted locally.

“I’m very appreciative of what Health Management has done here, and what they have done to invest in this community,” White said.

She also praised the worker training programs supported through state incentives. Space for those programs were provided by the University of Arkansas at Fort Smith, the adult education center of the Fort Smith Public School District and Answer Fort Smith, a private company. The training was needed. Several months ago HMA advertised for 150 open positions at the center.

“We had more than 2,500 applications come in,” White said. “Our largest orientation class, which is going on today, has about 40 in it.”

AGGRESSIVE CONSTRUCTION SCHEDULE
White, who has worked with Sparks and HMA more than 22 years, said the construction aspect of preparing a new facility was a new challenge – especially with the aggressive schedule.

“Everyone really came together in the past four weeks to meet the targeted move-in date,” White said Monday morning as she and Beaty met to cover any issues on the first working day of occupancy.

“I had some doubts. ... I’m not from a construction background, so I’d call Lance about something, and Lance would say, ‘It’s going to be OK, Shannon.’ And it would be,” White laughed.

Beaty said even at times he had a few doubts.

“It’s been under construction, and I mean fast and furious, for the last 120 days or so,” Beaty said in an interview prior to Monday. “I will tell you that the city of Fort Smith has been crucial in helping us expedite the construction schedule.”

‘OUR LITTLE CORNER OF FORT SMITH’
Not only was Beaty managing the HMA work, but Sykes call center operation also was at the time adding a 16,000-square-foot addition to the about 40,000-square foot they already lease in the former Phoenix Village Mall property. Sykes, which employs more than 46,000 at more than 75 locations in 23 countries, opened the Fort Smith operation in early 2011.

The new Sykes space will support about 150 jobs, bringing total employment in Fort Smith by Sykes to around 600.

When HMA reaches full employment of 500, Beaty estimates that more than 1,200 people will work on the about 40-acre site he purchased in January 2009 during the chaos of a busted national real estate bubble.

“Our little corner of Fort Smith here is home to about a $31 million payroll, which is clearly a boon to a lot of other businesses in Fort Smith, especially for retail and restaurants,” Beaty said Monday after meeting with White.

But Beaty’s not finished. He has three vacant spaces in the retail strip center on Towson Avenue that FSM Redevelopment partners renovated shortly after acquiring the 40-acre parcel. Of greater potential is the about 170,000 square feet of old mall space between HMA and Sykes.

“We’re working on that. ... We’ve got some things brewing,” Beaty said with a coy grin when asked about potential tenants for the remaining space.

August proved to be another stellar month for home sales in the Fort Smith area, with the total value of home sold during the month increasing 32.73% over the same period last year.

Sebastian County saw the most improvement, with 140 homes sold during the month compared to only 114 sold in Aug. 2012. The total value of this year's home sales was $21.328 million, up 38.79% compared to $15.367 million during the same month last year.

Crawford County's numbers were also up, with 55 homes sold during the month compared to 44 during the same period last year. The value of last month's sales was $6.457 million, an increase of 16.01% from last August's $5.566 million month.

Owner/Broker Kevin Clifton of Kevin Clifton Real Estate in Van Buren said there were a lot of factors at play resulting in high numbers of sales in both counties.

"With the construction on (Interstate 540), it has affected home sales," he said. "Many of those (buyers who work in Fort Smith) have chosen to buy homes closer to work. It has been a problem with homes in Alma and northern Crawford County."

And while the numbers have not been as impressive in Crawford County, Clifton said recent sales in the county have been driven by two other factors - low interest rates and the possible elimination of rural development loans.

Regarding the latter, he said should Congress fail to act and not pass a farm bill by Sept. 30, home buyers in Van Buren and other towns who depend on the rural development loans will likely see a slump in home sales.

Clifton said rural development loans have made it possible for home buyers to enter the housing market with no money down and sometimes financing the closing costs into the final price of the home. Couple that with sweeteners sometimes offered by sellers eager to close a deal, such as covering closing costs if the buyer does not have those funds or chooses not to finance them, and a buyer in the market for a new home can find themselves able to buy without a down payment or closing costs, often saving them thousands.

"The interest rate is staying close to the same for all loans, so if a rate is the same for one that requires some down but another requires nothing down, most (buyers) will go for the zero down loan."

Should the rural development loan disappear, Clifton said he is still encouraged by certain signs he is seeing in his business, such as the fact that many of his buyers during the last month have been from out of state, moving to the Fort Smith area for work.

"The last three or four transactions have been out-of-state buyers," he said.

The fact that Clifton has been seeing an increase in out of state buyers should come as no surprise due to the expansion of the Sykes call center operation and the opening Monday (Sept. 16) of Health Management Associates' new regional service center, which have collectively added at least 850 jobs to the Fort Smith economy.

But while things continue to look up for regional home sales, year-to-date numbers still remain mixed as Sebastian County is up 18.81% for the first eight months of the year and Crawford County is down 16.5% for the same period.

Clifton said he and his colleagues would continue to push home sales ever higher in the Fort Smith area, including lobbying Congress to pass an extension of the Farm Bill.

"The State Association of Realtors, we're doing our part to let them know that the rural development loan is big for Crawford County buyers. And big for the sellers, as well."

Home Sales Data (January-August)
• Crawford County
Unit Sales
2013: 322
2012: 353

Total Sales Volume
2013: $35.085 million
2012: $42.018 million

Median Sales Price
2013: $106,000
2012: $110,000

• Sebastian County
Unit Sales
2013: 835
2012: 731

Total Sales Volume
2013: $117.562 million
2012: $98.947 million

Median Sales Price
2013: $116,250
2012: $115,000

It was just late last month that two barges went on a directionless journey down the Arkansas River in Little Rock, striking the Interstate 30 bridge and a pedestrian bridge near the Clinton Presidential Library after breaking free from a tugboat.

While five bridges were initially shut down, it was determined that damage was not severe enough to close the bridges beyond the night of Aug. 24, when the accident occurred.

But the runaway barges brought back memories of May 26, 2002, when a barge struck the Interstate 40 bridge near Webbers Falls, Okla., upstream from Fort Smith on the Arkansas River. The accident resulted in 14 deaths after a 580-foot span of the interstate plunged into the river below.

With that in mind, has anything been done to provide better collision protection along the river?

According to District 4 Engineer Chad Adams of the Arkansas State Highway and Transportation Department, many of the bridges along the Arkansas River already have "pre-protection" cells designed to prevent barge-bridge collisions from occurring.

From Ozark to Fort Smith, there are five bridges that span the Arkansas River and Adams said three of the bridges have the "pre-protection" cells. They include the Arkansas River Bridge in Ozark and the Midland and Garrison Avenue Bridges in Fort Smith.

Gene Higginbotham, executive director of the Arkansas Waterways Commission, said the cells are round and located in the river.

"It's a round cylinder filled with all sorts of material," he said. "Their sole purpose is to protect that bridge structure. It hits that and the current will take it down stream. But it protects that bridge structure."

Another bridge in the area that has a protection system is the Arkansas Highway 59 bridge over Lock and Dam 13 near Barling, Adams said.

"That comes up out of the water, on the upstream side," he said. "There is a large pointed piece of concrete that extends out into the river in advance (of the bridge), so if something were to flow down and hit it, that would take the impact."

As for when the barriers were installed, Adams said that was not so clear, adding that the best estimate of when some protection systems were installed was the late 1960s or early 1970s.

The only bridge not to have a protection system of some sort from Ozark to the Oklahoma border is the Interstate 540 bridge. As for why, Adams said it had to do with design.

"I-540 does not have the pier protection system. There's certain requirements, items that go into consideration as to whether it's needed," he said. "Some of the newer bridges are designed to withstand the impact."

Besides the 2002 collapse in Webbers Falls and the August accident in Little Rock, it is rare to have a runaway barge along the river, Adams said, adding that within the last nine years, he could only recall an incident from April 25, 2011, when flooding rains caused a barge to break loose near Fort Smith, resulting in a shutdown of the Garrison, Midland, I-540 and Barling bridges until a runaway barge could be secured.

Regarding concerns about the stability of bridges should an accident occur, whether it is known to the AHTD, Adams said all bridges are inspected every 24 months unless it is a bridge that has been singled out for increased scrutiny. In the case of last month's accident in Little Rock, initial inspections occurred following the accident prior to the numerous bridges along the river re-opening.

But Adams said residents should not anticipate a potential accident resulting in loss of life or catastrophic damage like what was seen 11 years ago, saying that the accident last month shows that Arkansas' bridges are ready for any sort of accident that may come.

In order to keep that safety record, Higgenbotham said his organization would continue to work with the state, as well as engineers and designers working on future bridge projects to ensure safety.

"We want our bridges to be safe and (and to have) good navigation channels so everyone travels safely over and under the bridges."

County officials on Wednesday (Sept. 18) were touting more than $1 million in improvements made at Ben Geren Regional Park over the last decade.

Much of the improvements come in the way of new lighting at the softball fields and tennis courts. Lighting improvements at the county's eight softball fields along ran over $700,000, with an additional $200,000 spent on a remodel of fencing and restroom facilities at the field and another $146,000 spent to remodel the county's tennis facility.

But one park area where the county is cutting back, which totals more than 1,300 acres and is among the largest regional parks in the nation, is the county's golf course facility.

According to Sebastian County Judge David Hudson, the golf course is expected to bring in about $700,000 in revenue this year. That number, he said, is expected to remain the same next year.

But even with that revenue stream, the golf course operates at a loss.

"Five years ago, we were closer to operating at our cash flow," Hudson said. "The golf course is a direct reflection of the economic times and the golf market's been flat, so we actually came closer to running it with our revenues several years ago and we haven't the last few. We're going to be at least $150,000 short of our expenses over our revenues this year and a lot of that remains to be seen – how we operate the rest of the year, what we spend and what kind of play we have."

Adding to the expenses is the fact that the golf course has full-time employees drawing county benefits, said Parks Administrator Shannon Toland.

"In the pro shop, we have three full time and two seasonal," he said. "Maintenance, we have six full-time, three seasonal."

In order to stem losses, Hudson has taken steps such as not hiring the recommended number of staff to man the golf course.

"If you look at standards and so on, it will show that we need more people. But typically the the county does not staff it at what national standards are," he said. "We're trying to staff more – I hate to even bring the jail up – but we're putting more staff there. We're trying to operate this as responsibly financially as we can. And that's including reductions we've made over the last five years."

Part of that reduction is not replacing the golf course's golf cart fleet this year, as has been done in year's past. Hudson said in a typical year, a forth of the golf carts at the course – or about 25 – are replaced. But this year, the county opted to wait a year before taking such action. According to Justice of the Peace Danny Aldridge, whose district includes Ben Geren Regional Park, the cost savings realized from that action saved the county about $100,000.

County officials considered a lease program, but Aldridge said it was not any more feasible than the long-established purchasing program.

"They looked at it and it didn't have any noticeable savings," he said. "The only difference was the vehicles would always be under warranty, where right now there is about a year that the golf carts are not under any such warrantee. So it could save on maintenance costs."

The county has also delayed the purchase of new equipment, such as a tractor and brush hogger, that Toland said are needed for upkeep. Not purchasing the new equipment has saved the county about $70,000, he said.

Hudson also started a volunteer program where members of the community give of their time to help maintain the grounds and act as marshals, collecting golf balls and doing other odd jobs to keep staff expenses down.

Even though the golf course is projected to post losses this year and next, Hudson said he is confident the dilemma facing the golf course will not also face the new Ben Geren Aquatics Center, which has been projected to post a loss as well.

The judge said losses projected at the aquatics center, which is expected to open Memorial Day 2015, were based on conservative estimates. The feasibility study was also based on low admittance fees and high labor costs.

"The feasibility study was done in conservative fashion and that's why it projected a loss. If you're planning on something, you're going to be very conservative in regard to what your revenues are going to be. And hopefully we are too conservative and reality is going to show it's closer to breaking even or making money," he said. "We won't know, but we're planning in our budgetary plan (a loss of) at least $30,000 a year and we also have a partner to share the loss with and that's the city of Fort Smith."

Hudson said when it comes to trying to break even or possibly turn a profit at the golf course, it is a frustration. Possibilities of attempting to lease the facility to a golf course operator have proved fruitless, he said, with the market still not rebounding enough for a golf course facility to be enticing to a private business interest.

He added adjusting green fees and other possibilities to right the golf course's revenues have been among his toughest challenges since becoming judge.

"Quite frankly, that's been an ongoing dilemma I've had since 1999," he said. "And how to deal with the costs, green fees, cart rentals, the annual memberships and the other aspects of running a golf course. It's been as challenging of a thing to deal with as I've had and that includes planning and building a courts building, working on expansion of the jail and all of the issues with it."

It may seem odd to hear of a shortage in manufacturing workers following a decade which saw a nearly 25% decline in the number of manufacturing jobs available in Arkansas, but that is exactly what is facing existing manufacturers in the state today.

To combat the shortage, businesses and Arkansas Manufacturing Solutions, a state agency that works with organizations to bring resources to Arkansas manufacturers, are partnering to host the state’s second Manufacturing Day event on Oct. 4.

Marketing Manager Andy Capel of AMS said highlighting the needs of Arkansas manufacturers was important if the state is to turn around the shortage of available skilled manufacturing workers.

“The goal is to plant the seed now for (students) as (they) are making decisions to find out what are some (career) options for them,” he said. “These guys are machinists, but they’re really just computer guys. They’re not really running drill presses like they used to be. It’s giving the youth the information they need to know.”

With the jobs now found in factories requiring a different skill set from the jobs held by this generation’s mothers and fathers, companies have had to take different approaches to filling positions.

Human Resources Partner Zoë Lambert of Cameron Valves in Little Rock said her company has had to take the extreme step of going out of state to fill some positions. But she is hoping that can change following the company’s involvement with Arkansas Manufacturing Day on Oct. 4. On that day, the plant will host not only a tour of the facility but also a demonstration for central Arkansas high school students and the public.

“We wanted young people to realize there is opportunity in manufacturing from engineering to the shop floor,” she said. “We want them to realize its impact.”

Cameron Valves has also taken the step of partnering with vocational programs in the Little Rock area to prepare potential workers for a career in manufacturing.

“You need certain skill sets for certain positions,” she said. “Machinists have to pass an exam to qualify to be an employee here. And assemblers need to pass a logic exam. You need the skill set, but we’re also looking for strong employees that are well-rounded.”

Capel said while young people may have misconceptions about what it is that manufacturing employees do, they also do not fully understand how good a manufacturing job with a basic vocational education can be financially.

“A machinist for Cameron Valve is looking at a $45,000 to $65,000 a year job. Many people have an old perception of a manufacturing job as hot, dirty and you don’t get paid well to do it. But as far as learning specific skills they need, that’s what we’re in need of.”

Lambert said in addition to “very competitive” wages, employees can also expect an excellent benefits package and tuition reimbursement should they choose to further their education while employed with the company.

In addition to Cameron Valves, other manufacturers taking part in Arkansas Manufacturing Day include Molex of Maumelle, Nice-Pak of Jonesboro and Rockline Industries of Springdale.

“Arkansas Manufacturing Day is our push to bring appreciation to the manufacturers of Arkansas for what they produce and a general awareness of it,” Capel said. “A lot of them just do their thing and keep going and are not even known to be out there.”

Capel said the Oct. 4 event, which coincides with the national Manufacturing Day event, is just the start of addressing the need for more manufacturing workers as more and more companies make the decision to bring manufacturing positions back to the United States. For decades, outsourcing to countries like China has resulted in manufacturing jobs in Arkansas totaling just 154,300 in June 2013 versus a sector high of 247,300 in Feb. 1995, according to the U.S. Bureau of Labor Statistics.

“The federal government is pushing hard for manufacturing and re-shoring with Walmart. And Walmart just had their big manufacturing summit in Florida to try to re-shore,” he said. “I think there is a big effort across the board and looking at Arkansas, manufacturing is one of the major employers in Arkansas and one of the backbones of income – agriculture and manufacturing being the big ones there. Manufacturing is a way to grow companies and have a more diverse workforce.”

Lambert said her company is trying to prepare for what is already a need and will only increase as more work is on-shored to the state.

“Building this partnership with the vo-tech schools will curb that (shortage). But I’m thinking when they finish their vo-tech school, they are going to be targeting that exact skill set we’re looking for. That will work really well focusing on exactly what (our needed) skill set will be,” she said. “There are also some great partnerships to recruit some great people here and we expect to start seeing an impact within about a year.”

Although Arkansas has a ban on gay marriage, many Arkansas employers must now manage certain retirement plans, health insurance plans and other workplace benefits to include same-sex couples legally married in a state or country that recognizes such marriages.

The U.S. Department of Labor announced Wednesday (Sept. 18) that a June 26 decision by the U.S. Supreme Court requires technical changes to the department's Employee Benefits Security Administration. The EBSA change apply to “plans, plan sponsors, fiduciaries, participants and beneficiaries on the decision's impact on the Employee Retirement Income Security Act of 1974,” noted the DOL statement.

One of Arkansas’ largest employers has already opened up benefits to same-sex couples. Wal-Mart recently announced an expansion of coverage eligibility for any spouse or domestic partner of a full-time employee which includes, medical, dental, a new vision option, critical illness and accident plans. Domestic partners will be eligible beginning in 2014, during the enrollment period starting Oct. 12.

Wal-Mart joins a long list of Fortune 500 companies including Costco, Ford, Home Depot and Best Buy to offer health care benefits to same-sex partners. The civil rights group, Human Rights Campaign, estimates 62% of Fortune 500 companies have already done so. HRC said inclusion efforts have increased from 34% in 2002.

RECENT LEGAL HISTORY
The U.S. Supreme Court decision in the Windsor v. U.S. case found the Defense of Marriage Act (DOMA) to be unconstitutional. The case involved two women from New York, Edith Windsor and Thea Spyer, who met in 1963 and were legally married in Canada in 2007. Spyer died in 2009. Windsor was legally blocked from claiming an estate tax exemption for surviving spouses because federal law (DOMA) did not recognize same-sex marriage as a qualifying exemption.

In a 5-4 vote, the Court overturned DOMA.

“DOMA's principal effect is to identify and make unequal a subset of state-sanctioned marriages,” noted a portion of the majority opinion. “It contrives to deprive some couples married under the laws of their State, but not others, of both rights and responsibilities, creating two contradictory marriage regimes within the same State.”

In his dissent, Justice Antonin Scalia said the issue should not have been before the Court.

“This case is about power in several respects. It is about the power of our people to govern themselves, and the power of this Court to pronounce the law. Today's opinion aggrandizes the latter, with the predictable consequence of diminishing the former.”

‘HISTORIC STEP’
According to the DOL, the changes will be applied to approximately 701,000 private sector retirement plans, 2.3 million health plans and other plans that provide benefits to more than 141 million Americans. Collectively, these plans hold more than $7.3 trillion in assets.

"This decision represents a historic step toward equality for all American families, and I have directed the department's agency heads to ensure that they are implementing the decision in a way that provides maximum protection for workers and their families," Secretary of Labor Thomas Perez said in the statement. "The department plans to issue additional guidance in the coming months as we continue to consult with the Department of Justice and other federal agencies to implement the decision."

Changes from the Court’s decision are expected to require changes to more than 1,000 federal laws regulating portions of the Internal Revenue Code, the Employee Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Health Insurance Portability and Accountability Act (HIPAA) and the Family Medical Leave Act (FMLA).

IRS INFORMATION
The Internal Revenue Service has issued new rules, and has also posted a FAQ page for same-sex couples.

“The IRS has a general rule recognizing a marriage of same-sex spouses that was validly entered into in a domestic or foreign jurisdiction whose laws authorize the marriage of two individuals of the same sex even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages,” notes a portion of the opening answer on the FAQ page.

According to the National Law Review, plan sponsors were to begin complying with the changes effective Sept. 16, 2013.

“As of September 16, 2013, employers must stop imputing income for health benefits for same-sex spouses. If applicable (assuming the existence of a cafeteria plan), employers must also switch from after-tax to pre-tax premiums for same-sex spouse health benefits,” noted the NLR guidance posted Wednesday.

ARKANSAS BAN
An ongoing effort to end Arkansas’ ban on gay marriage hit a roadblock on Tuesday (Sept. 17) when Arkansas Attorney General Dustin McDaniel rejected a proposed amendment – The Arkansas Marriage Equality Amendment – submitted by Little Rock resident Jennifer Pierce.

“Having analyzed your proposed amendment in light of the foregoing precepts, I conclude that I must reject your proposal due to deficiencies in the ballot title and in your proposal’s text,” noted McDaniel’s opinion. “The ballot title is also deficient because it makes no attempt to summarize for the voter what effect your proposal would have on existing law.”

Arkansas’ ban on gay marriage was enacted when 75% of voters supported Amendment 83 in the 2004 general election. Arkansas Gov. Mike Beebe, a Democrat, opposes same-sex marriage.

Wal-Mart service suppliers come in all shapes and sizes and one of the local organizations providing contract work for the retail giant is a non-profit, the Elizabeth Richardson Center.

This month is a particularly exciting one for the ERC, as they celebrate their 50th year of serving the needs of those with disabilities across Northwest Arkansas. 

Originally founded in September 1963 as a school for disabled and developmentally challenged children, the ERC now operates five Child Development Centers, provides vocational training programs for disabled teenagers, and offers skill development classes.

In addition, the ERC operates Richardson Industries, an adult development program that introduces disabled adults to the workforce through contract assignments for Wal-Mart and other local companies.

John Salina, the ERC’s sales and production manager, describes Richardson Industries as an integrated workshop that provides pre-vocational training and rehabilitation services to nearly 80 adults, ranging in age from 18 to 55.

The adults enrolled in this Medicaid-funded program are referred to as “clients” and are given a job performing contract labor for local businesses. Through Richardson Industries, clients are taught the mechanical and soft skills (punctuality, communication, problem solving) necessary to function in society – all while earning a paycheck.

When Salina joined the ERC in April 2012, Richardson Industries performed regular contract labor for only one local business. Now, clients at Richardson Industries execute jobs for ten consistent customers, including Wal-Mart, Marshalltown Tools, Omni Packaging, Ayrshire Electronics, and Central States Manufacturing. He said they do small and large jobs, from $12 million to $18 million a year for retail and manufacturing.

Salina is pleased with the workshop’s increased workload, to be sure, as it has garnered the non-profit an increase in operating revenue and has provided the clients with the opportunity to learn the broad range of skills associated with different jobs.

Clients specialize in a wide variety of tasks, including mechanical assembly, packaging, product refurbishing, labeling, and shipping, often performing most or all of these tasks throughout the course of one job. 

For Wal-Mart, Richardson Industries’ largest customer, clients sort the numbers used to display retail prices, count them into stacks of fifteen, package the numbers, and then load the boxes into a truck for shipping back to the company.   

It is a time-consuming and (at times) frustrating job, but one that provides clients with a comprehensive understanding of business processes.

There are several reasons why companies like Wal-Mart choose to contract with Richardson Industries. First, and what Salina considers to be Richardson Industries’ competitive advantage, is the flexibility that the organization provides to its customers. 

Clients are able to learn new tasks quickly and efficiently, meaning that the organization can have a job started within a couple days, saving many local businesses time and money. 

Richardson Industries’ commitment to quality also benefits their customers.

“We don’t want companies to give us work because we are a non-profit or because we helps disabled people, but because we do a good job,” said Salina.  “Honestly, we routinely do a better job than a company that employs so-called ‘normal’ individuals.”     

Richardson Industries is not the only non-profit in Northwest Arkansas to offer an adult development program or pre-vocational training for those with developmental disabilities, but they are the only organization that actively seeks to transition clients from their workshop to a job in the community.

Former clients at Richardson Industries have rehabilitated so successfully that they now hold jobs at Wal-Mart, Tyson Foods and McDonald’s. 

“Our goal is to rehabilitate individuals to a point where they can assimilate into society seamlessly,” said Salina. “But there are certainly challenges in doing so.” 

Salina cites the lack of workshop space as the largest limitation on the adult development program. 

Ideally, the ERC would like to expand the space over the next few years. A larger facility would allow the non-profit to provide additional services to clients, increase revenue through added contract labor, and most importantly, would allow the organization to accommodate those with developmental disabilities for many years to come.

Survival attributed to the work of good people, the rewards of good risks and the whims of good fortune was the theme that emerged during the Thursday event (Sept. 19) marking the 90th anniversary of Fort Smith-based Arkansas Best Corp.

Blanketed by blue skies and joined by several hundred employees, former employees, political leaders and well-wishers, officials with the transportation holding company and a trucking trade group spoke about the trucking industry and the company’s past and future.

Arkansas Best began as a small local freight hauler –  OK Transfer – in 1923 operating in the Fort Smith area. With a market cap of almost $700 million, the company now includes ABF Freight System, one of the nation’s largest less-than-truckload (LTL) carriers, and has grown organically and through acquisitions to provide global shipping and logistics services.

David Humphrey, vice president of investor relations for Arkansas Best, set the stage with opening remarks that noted the company had survived more than 30 acquisitions, a hostile takeover attempt and significant technological innovations.

Early owners and executives had to survive the dynamics of operating in a pre-1980 system heavily regulated by the federal government and the early chaos of a post-1980 unregulated marketplace. Roy Slagle, president and CEO of ABF Freight System, said 90 years for most businesses is great, but “it’s an incredible thing when a trucking company does it.”

Slagle said 1980 was a “watershed moment” for the trucking industry when the federal Motor Carrier Act deregulated the industry and greatly lowered the cost to enter the business. But Slagle proudly noted that of the top 50 carriers operating in 1965, ABF is the only one still operating under the same brand.

Considered to be a watershed moment for the company was when Fort Smith attorney Robert A. Young Jr., bought the company in 1951. The history page of the Arkansas Best website notes of Young: “The more than 20 acquisitions that followed illustrated the vision he instilled in the company. Every acquisition turned into a profitable operation within a year after it merged with ABF. Following the purchase of Best Motor Freight in 1957, the company's name was changed to Arkansas-Best Freight System, Inc., the name it operated under until the official name change to ABF Freight System, Inc. in 1980.”

Robert Young III, was 10 years old when his father bought the company. Young said his father was a “gambler, a risk taker,” and knew the company had a future. His father “hocked his life insurance policies” and assumed other debt to bet on that future.

The corporate history notes that all acquisitions were ultimately profitable. But Young, who followed his father as president and CEO of Arkansas Best in 1973 and still serves as Board Chairman, said Thursday it was often “touch and go” in the process of buying a trucking company that was going broke before they bought it.

“After each acquisition, it was hell getting them turned around,” Young said.

But within a year, the deals would become profitable, and Young said can still remember the first month they had $1 million in sales.

“That was a big deal,” said Young, adding that now the company makes $1 million in the first hour of the first day of each month.

The company posted revenue of $2.065 billion in 2012, the first year above the $2 billion level. Operating revenue for the first half of the year is $1.097 billion, better than the $951.41 million during the same period of 2012.

Young said his father did not micromanage and was “amenable to change,” going so far as being willing to adopt good ideas from competitors.

“He told you what he wanted the end results to be” and then he let you make it happen, Young said of his father’s management style.

With some emotion in his voice, Young wished his father could see the 2013 version of the company he acquired in 1951.

“I would love to bring him back for just 15 minutes to see how far we’ve come.”

The industry and company have further to go, said Bill Graves, president and CEO of the American Trucking Associations’ and former Kansas governor. Graves also noted that 90 years in the trucking business is even more impressive when considering there was not a trucking industry prior to about 1910. Grave said that Arkansas Best has been successful on a path that “many, many other companies have attempted but failed.

Graves said changes in the economy have resulted in a “proliferation of warehouses and distribution services” that are forming an “LTL sweet spot” for companies like ABF with a regional network model.

Ralph Garcia, a frontline worker who still logs about 100,000 miles annually in an ABF truck, also spoke Thursday. Garcia has driven 35 years for ABF and recently received the Neill Darmstadter Professional Excellence Award at the American Trucking Associations’ 2013 National Truck Driving Championships. It’s the top honor for drivers in the industry.

Garcia said ABF “practices excellence and practices integrity” in such a way that many drivers want to work for the company.

“The reputation on the road is, ‘Get me on with ABF.’ ... That’s what drivers talk about out there,” Garcia said, adding later that “It’s no accident that we’e been in business for 90 years.”

About 7,500 drivers, dockworkers and other specialty workers work under a labor agreement through the International Brotherhood of Teamsters. ABF and the Teamsters are still working to get full ratification of a new five-year contract that was approved June 27. However, seven supplemental provisions of the contract were rejected, with a vote in late August seeing five of the seven gain approval. It could be the end of October before the contract is fully ratified.

Arkansas Best Corp. President and CEO Judy McReynolds said the keys to past success were good people, a good culture and a willingness to change and adapt. Moving forward, McReynolds said success will also require leveraging technology, “investing in great people,” and providing great customer service.

McReynolds reiterated the company’s revenue goal of $3 billion by 2015.

“We are more than able to accomplish this goal,” she said.

In a statement about the anniversary, Fort Smith Mayor Sandy Sanders thanked the company for its community support.

“Not only is ABF Freight System, Inc., an essential economic driver, the company has been an excellent community supporter for the past 90 years. The city’s performing arts space in the convention center bears the name of ABF's parent, Arkansas Best,” Sanders said. “We thank ABF and Arkansas Best for its commitment to Fort Smith, and we look forward to the next ninety years.”

What started May 23 as a simple ordinance to come before the Crawford County Quorum Court that would have allowed employees to donate accumulated vacation time to co-workers in need has gone nowhere 119 days later.

In that time, personnel committee meetings have been held. There have been public discussions involving members of the committee, the Quorum Court and county workers, some of which have been rather heated. There have been drafted ordinances and canceled votes. But not a single vote since that May 23 meeting.

So what has the hold up been?

According to Justice of the Peace Stanley Clark, who has been leading the charge to implement a policy dictating the donation of leave time for county workers, the proposal spearheaded between him and attorney Chuck Baker, who represents the county, has to be just right and not leave the county open to lawsuits before it can be voted on by the full Court.

The draft of the ordinance, which Stanley provided to The City Wire on Wednesday (Sept. 18), has nearly everything he said the Court has said they want in the ordinance with the exception of one item.

"It doesn't have the 30 day limit," he said. "The Judge (John Hall) wanted that. So Chuck is adding that tot he ordinance."

The 30-day limit would mean a county employee cannot use more than 30 days of donated leave time from a leave time bank that will be established upon passage of the ordinance.

Other items included in the latest draft of the ordinance include:
• The leave time may only be used for catastrophic illness or injury to the employee or an immediate family member requiring the employee to take off three days beyond any of the employee's personally accrued leave time;
• Employees who do not donate at least eight hours to the leave bank are not eligible to take part in the program;
• Unused hours in the leave bank will not be returned to donating employees, but instead will roll over to the following year; and
• Employees wanting to use donated hours to cover "elective" surgeries will be denied under all circumstances unless an unforeseen complication arises as a result of the operation that qualifies as catastrophic.

Also included in the plan is a catastrophic leave committee to determine whether or not to grant the donated leave time to a requesting employee. The committee will consist of one county-wide elected official, one full-time county employee and one citizen of Crawford County who does not either work for the county or hold an elected office with the county.

As for why the ordinance wasn't reviewed before Monday's (Sept. 16) meeting, corrected and brought before the Court at that time for a vote, Clark said it basically boils down to technical problems.

"Mainly just because of computers and we've kind of battened down the hatches on our systems to keep viruses off computers. And anyway, he wasn't able to get it to me and I never saw and by the time I realized what was going on, we just didn't get together."

That is a different story than the one told by Justice of the Peace James Lane, who chairs the personnel committee, on Monday night.

"I don't know. I haven't been talking to Stanley about he's been doing. But it should be obvious to even the most novice observer of political events or occasions or interactions that there's any passion for that policy," he said. "If there were a passion for it, it would have already passed in one of its other iterations. So I mean it's wandering around back there being supported by who knows who and it's going to crop up again."

The ordinance, which Clark said is likely to be voted on at the Oct. 21 meeting (152 days after it first came before the Court), should come back through the personnel committee, Lane said, before the rest of the Court has a voice in it.

"Whether it does or not, it never has before. You know?"

Consumers wanting more choices and Wal-Mart’s shop local agenda have helped to push total inventories 5.5% higher over the past year. But word on the street is that the retailer is culling inventory and canceling orders at the last minute in the third quarter to make room for all-important holiday rush.

The categories seeing the biggest cull rate include food, consumables, health and wellness and home. The aggressiveness with which Wal-Mart has cut inventory over the past 60 days has been greater than anything seen out of the retailer in recent years, according to analysts with Cleveland Research Company.

Wal-Mart did not return a request for comment on the inventory reduction efforts.

“We believe Wal-Mart has been more focused on driving profit so far in the third quarter as sales do not appear to have improved meaningfully versus the prior quarter. The most visible change has been a much more aggressive stance from Wal-Mart in managing down inventory levels by the start of the fourth quarter,” according to a Sept. 18 research note from Cleveland Research analysts.

The analysts said inventory growth has outpaced sales growth by a wide margin so far this year.

Inventory levels have risen for four quarters amid sluggish same-store sales, a formula that is not sustainable, according to Leon Nicholas, senior analyst at Kantar Retail.

At the end of June. Wal-Mart had $42.793 billion in unsold inventory, up 5.5% with negative same-store sales growth. Year-over-year inventory levels were 4.4% higher at the end of the first quarter, down from the 7.45% jump at the end of fiscal 2013, according to company filings with the Securities and Exchange Commission.

“I am also hearing Wal-Mart has been holding off on new promotional item orders, and instead using replenishment stocks to clear out more inventory. Suppliers tell me that orders have been canceled as Wal-Mart tries to clear out the excess products,” Nicholas said Thursday in a phone interview.

He said the danger in cutting back is the risk of higher out-of-stocks, especially if the inventory reduction control is not applied very carefully.

Cleveland analysts said they will continue to monitor sales trends through the balance of the quarter, which ends Oct. 31 as they also have some concern that aggressive inventory cuts could hurt sales due to higher out-of-stocks and fewer promotional displays. Cleveland said the inventory excess is partly linked to the retailer’s attempt to drive more sales through added promotions in past quarters, but consumers have been somewhat cautious and competitive pressure have been also be high.

Nicholas said as the retailer worked to provide a wider range of products the number of total SKUs (stock keeping units) has risen dramatically, which has also caused more out-of-stock headaches for the company, at the same time inventory levels are very high.

“It’s a paradox, but Wal-Mart knows it has to clear out space this quarter as the holiday season is quickly approaching,” he said.

Cleveland said research suggests that Wal-Mart does not plan to rotate holiday displays through the season as it has in the past, choosing instead to stick with the same items on display, which may simplify operations and ordering.

“Additionally, we believe one of the key issues leading to heavy inventory is the lack of labor in the stores to get the inventory out of the back rooms and onto the sales floor,” the Cleveland analysts noted.

The new SPARC initiative with suppliers should help some, but the impact is not likely to be felt for another quarter or two.

PRICING UP & DOWN
Research shows that Wal-Mart appears to selectively take prices up on certain items and categories in an effort to help drive higher third quarter sales. In a period of zero inflation, prices have risen modestly in food and consumables over the past two months, according to two different pricing studies, one by Cleveland and the other by Raymond James & Associates.

The food/consumables portion of the business, which is 55% of sales with slightly negative comps, appears to be experiencing offsetting trends. There is slight moderation in center-of-store food sales being offset by modest acceleration in consumables categories, according to Cleveland.

At the same time prices are edging up in food, analysts report Wal-Mart had to take big markdowns in August to move through all of the seasonal women’s apparel that it carried into the third quarter. The retailer took the markdowns in order to set up for the back-to-school season, analysts said.

Bill Simon CEO of Walmart U.S. said last week that the retailer is sticking with its low price strategy and he predicted stronger sales in the back half of this year. He said the retailer rolled back prices on beer and other adult beverages and not only saw improved sales, but also picked up market share in the process.

The retailer’s same-store sales guidance is between zero and 2% growth for the third quarter which ends Oct. 31.

One of Arkansas' largest locally-owned accounting firms marked a major milestone Thursday (Sept. 19) – a half-century in operation.

Beall Barclay & Company marked its 50th anniversary with a reception for employees at its offices in Fort Smith and Rogers. Barbara Hambrick, the firm's managing member, said while the company has always been an accounting firm, it has grown in services offered through decades of acquisitions and mergers.

"It's always been a public accounting firm, so Bill Beall joined two other men in 1963 and started an accounting firm," she said. "Over the years, there have been several mergers and in 1997, we merged with Dick Barclay's firm in Northwest Arkansas to firm the firm that is now Beall Barclay and Company … We do pretty much anything that clients need as far as financial services, so we do individual work and we do large corporations. We really like family-owned small businesses but we also have several very large regional clients. We have a few clients that have international ties."

As far as the specific type of work, Hambrick said it can range from audits to tax returns to business evaluations to certified fraud examination.

"You name it. As far as financial services go, we take care of it."

Beall, one of the co-founders of the company along with Roy Vail and Charles Coleman, was at the celebration in Fort Smith and said he was amazed to see what the company has become since its humble beginnings in 1963. He said the early key to the company's success was technological innovation, using computers in accounting, even in the 60s and 70s.

"Charles realized that computers were going to be the future of accounting, they're the future of everything now, but we got into computers in the beginning in '63. We used a data processing services out of Lansing, Mich. We sent our information up there and it came back and everybody else was still writing up books with pen and ink. You spend half your time getting the thing balanced and we could turn out a financial statement in ten days, two weeks for somebody and the nobody else even ever got a financial statement. Small businesses couldn't get on because it was just too labor intensive, so that's how we prospered - by doing that."

Many of the early clients for Beall's company were contractors, who needed to be able to figure job costs.

"In 1963, they didn't know what their costs were until they got through with the job. And we had contractors who wanted job cost reports every week and we could do it with computers, and so that just gave us a huge up on everybody else. It's like driving a race – everybody else in a Volkswagen Beatle and we were driving a Corvette."

While the company has continued to grow and prosper since its 1963 founding, it has not been without struggles. The biggest struggle has been making it through the tough conditions that have plagued the nation's economy during the last five years, Hambrick said. But even in spite of a tough economy, she said the company has not let one employee go, even when others have.

"I think one of our strengths has been that we haven't cut back on staff. The people that we have in our firm are very important to us and we've cut back on some of the extras that they might have gotten in the past, but we have not laid off people or gotten rid of people because of the economy," she said. "The hardest thing that the economy has done as far as the firm as a whole is for us watching our clients struggle through the hard economic times. A lot of our clients have had to cut back, you know they've had to close locations, they've had to lay off employees. And they've really pulled back on plans that they had for the future to wait and see what happens. And that's been the toughest thing, for me, is to watch the clients be unsure and concerned about what's going to happen with their business."

Speaking about employees of the company through the years, Beall said he was proud of how Beall Barclay & Company never really had a "glass ceiling to break through."

"Since all the early partners had daughters and no sons, we never had a glass ceiling for women. If women could do the job, we promoted them. So early on, we had female accounting staff and female partners and we have a female running the business now."

As for what the future holds for Beall Barclay & Company, Hambrick said she and her partners would focus on continuing to be based in Fort Smith and serving their clients from the Missouri border to Mena and Muskogee, Okla., to Russellville. She said serving those needs would likely to lead to growth, including the possibility of opening a third branch office or even more mergers.

"Our mission statement says, 'We want to be the dominate provider of financial services in that area,' so anywhere in that diamond is where we want to have a strong presence."

A myriad of factors are converging upon and within Arkansas’ banking sector and it is spurring renewed interests in mergers and acquisitions on the heels of a lengthy economic recovery and heightened regulatory oversight.

“The bigger banks are growing larger, swallowing up smaller institutions and there are several factors at play here,” said Gaines Dittrich, a banking consultant and CEO of Joplin, Mo.-based Dittrich & Associates. “Compressed margins and higher operating costs have some banks stretching into new markets in hopes of growing overall sales, while finding some synergies that help to reduce overall cost of operations.”

He said there are also a number of veteran bank owners who are ready to exit the business, and mergers and acquisitions make that possible. Analysts said that has been the case in Arkansas, with four high-profile mergers announced in the previous six months.

Garland Binns, banking attorney with Dover Dixon and Horne, said most of the bank acquisitions in Arkansas are a result of the pursuer wanting to increase market share in an existing community or to expand into new markets. By spreading their wings, acquiring banks can disperse their operating cost and overhead expenses over a wider area, while also finding savings in areas like compliance personnel and information technology.

Binns and Dittrich said recent consolidation activity in Arkansas and the U.S. has been “strategic” with the expanding banks targeting specific markets where they want to operate and often paying slight premiums in those deals. Dittrich said this is a departure from the FDIC-assisted takeovers in recent years that came with shared-loss agreements when the main targets were failing banks – mostly out of state.

Bank consolidation is nothing new, according to John Dominick, consultant and banking professor at the University of Arkansas. He said in the 1970s with the relaxing of regulation it became easy to obtain a charter and start a new bank. A plethora of institutions popped up across the country. The trend since 2000 has been consolidation, although much of the acquisition activity in 2010 and 2011 was related to bank closures.

He said community banks are starting to show profits and most have weathered the worst of the financial storm and that makes them more attractive to buyers and raises the selling price for the owners.

All three analysts expect to see more bank mergers in the next few years as the cost of doing business rises amid looming regulatory oversight.

THE DEALS
• June 2013: Home Bancshares acquires Liberty Bank, a deal valued at $280 million that creates the second largest bank in Arkansas with assets of $7.1 billion in assets.

The Home Bancshares-Liberty deal is seen by Dittrich as a “brilliant play” by Home Bancshares Chairman Johnny Allison and his Centennial Bank brand. He said the purchase was “textbook ideal” in that it gives Centennial Bank a broader footprint across the state – a market Allison knows very well. The pro forma bank will have 92 branches in Arkansas, more than double that of Centennial Bank prior to the merger, with almost no branch overlap.

“This deal creates a lot of value in Home Bancshares and at the same time provides an exit strategy for the closely-held Liberty Bank,” Dittrich said.

Wallace Fowler, Liberty Chairman and CEO, will walk away with roughly 1.2 million shares of Home Bancshares with a street value of roughly $35.7 million when the deal is done. Liberty Bank also announced cash severance of $1.88 million paid to each of three departing executives, Lloyd McCracken, Mark Fowler and John Freeman.

Binns said when a publicly traded company buys out a private owner in shares, in lieu of cash, there can be favorable tax advantages as the transaction is deemed a tax-free exchange. Those shares can then be redeemed in the open market at the owner’s discretion or passed through to an estate.

• July 2013: First Federal Bancshares acquires First National Security Co. in a deal valued at $124 million.

First Federal Bancshares’ recent buying spree included two institutions, First National Bank in Hot Springs and Heritage Bank of Jonesboro for a total cost of $124 million, slightly over book value, analysts said. Harrison-based First Federal said the banks would retain separate charters and the combined assets for the holding company would be roughly $1.4 billion, nearly three times higher than pre-merger. Like the Home Bancshares deal, First Federal’s expansion gave the thrift a much broader footprint into two of the state’s growing markets, Hot Springs and Jonesboro.

First Federal is not only buying, but also selling some of its branches as it continues to rationalize its branch network. The bank recently sold its branch in Farmington to First Security Bank. The Farmington branch opened in 1997, and is located just four miles west of Fayetteville, and grew assets to $10.7 million.

Chris Wewers, president and CEO of First Federal Bank, recently said after careful evaluation of the branch, the firm felt it best to sell the asset. He said First Federal likes to obtain a critical mass and deposits of $20 million in a branch to justify its existence. First Security, on the other hand uses $15 million as its minimum threshold for branch deposits.

September 2013: Simmons First National acquires Metropolitan National Bank with a bid of $53.6 million paid to the federal court for the ongoing bankruptcy proceedings of Rogers Bancshares, the holding company for Little Rock-based Metropolitan National Bank.

The recent Simmons First National bid to purchase Metropolitan National Bank, was a little different, as Metropolitan was deemed a “troubled institution” – out of compliance with its regulatory enforcement actions. But, the $53.6 million purchase price for Metropolitan Bank, was seen as a “good deal” by analysts given the marketshare gains for Simmons First in Little Rock.

“Simmons First National has always catered to farm communities, being headquartered in Pine Bluff. Even some of the branches in Northwest Arkansas, like in Lincoln and Siloam Springs, cater to farmers. This deal gives Simmons a substantial marketshare gain in Little Rock, that’s great for diversity and puts them in the most populated area of the state,” Dominick said.

Simmons CEO George Makris said he does expect “significant branch consolidations to occur” once the deal is completed. Analysts predict much of that consolidation will take place in Northwest Arkansas where Metropolitan is heavily invested in underperforming branches (under $15 million in assets). There is considerable overlap in branch locations in Little Rock as well for the two banks.

Makris said this deal was financially attractive on several levels. Bank officials expect 25% earnings per share accretion in fiscal 2014 and 35% by 2015 after the first full year of conversion. The internal rate of return for this deal is a projected 27% with a three-year payback.

Simmons projects a cost savings of $15 million when the merger is completed. Makris said FDIC insurance cost savings will be roughly $1.6 million, while reduced legal fees and IT expenses will save $2.4 million. Those savings will be phased in at 60% the first year and 100% thereafter. He expects Simmons will see the full benefit in the third quarter of 2014.

• October 2013: Arvest Bank acquired Little Rock-based National Bank of Arkansas for an undisclosed amount.

Arvest, the state’s largest bank, just got a little bigger adding key marketshare in the Little Rock metro area with the pending purchase of National Bank of Arkansas.

“This acquisition of NBA will certainly help improve our marketshare in central Arkansas. We are looking forward to getting acquainted with NBA’s associates and customers. We like their locations in North Little Rock, west Little Rock and Conway, particularly,” said John Womack, chairman and CEO of Arvest Bank in Little Rock.

Bob Osborne, National Bank of Arkansas’ majority shareholder and chairman, recently said the time to sell the bank was “now” and after careful consideration bank ownership believed Arvest was the right fit. NBA has assets of $187 million, and posted net losses of $44,000 through the first half of this year, pocketing just $8,000 in all of 2012, according to the FDIC reports.

With the combined deposits of Arvest and NBA, the pro forma bank will command 7.64% of the Little Rock marketshare, leaping over the pro-forma Simmons-Metropolitan bank market share of 7.13%, based on the June 30, deposit report by the FDIC.

Phil Knight, a banking consultant in Rogers, said on the surface the deal looks like a good play for Arvest in terms of buying deposit market share, but without knowing how much was paid it’s hard to know how good. He said with NBA’s book value somewhere around $15.5 million, this deal is likely quite a bit cheaper than the $56 million offer Simmons made for the larger Metropolitan National Bank.

Banks have been selling somewhere around 1.5 times book value, if the bank is not under stress, according to Knight.

SMALL BANK CONCERNS
Three of the four mergers previously mentioned involved closely-held banks, with long-term family ties, a characteristic that roughly half of the nation’s community banks share.

Dittrich said the smaller, closely-held banks are the most vulnerable to acquisition in what he predicts will be the next wave of consolidations. He said smaller, family-owned banks face major headwinds with heightened regulatory costs related to Dodd-Frank legislation and Basal III capital requirements, which raise the cost of operations and compress bank earnings in an effort to decrease the potential instability resulting from large national and global financial companies that are highly leveraged.

“Banks with less than $200 million assets are going to have a hard time generating profits in light of the regulatory costs that are coming over the next three years, Dittrich said.

There are 147 banks doing business in Arkansas, conducting business in 1,442 branches, as of June 30. There were 96 banks chartered in Arkansas, and 63 of these had less than $200 million in assets. There were 30 banks in Arkansas operating with federal charters, 13 of these reported less than $200 million in assets as of June 30.

“Many small banks in Arkansas write a large number of commercial real estate loans, which carry a higher capital requirement under the new Basal III rules. Banks have maintained 100% risk weight for most CRE loans, but the new regulation creates a 150% risk weight for commercial real estate. That means banks will have to raise capital or make fewer loans,” he said.

The latter is the most likely scenario, Dittrich said, given that capital is hard to come by for many community banks still carrying a hefty pile of real estate on their balance sheets from the 2008 recession and the subsequent real estate bust. He said Basal III also creates a 150% risk weight for almost all past due exposures (excluding residential mortgages).

Dominick agreed that Basal III and Dodd-Frank regulation will sting small banks harder than their larger competitors. He said there are two things likely keeping small community bankers up at night.

First, he said the overhang of real estate on the books is a concern, particularly for banks that invested in Northwest Arkansas during the building boom. Next, he said the compliance issues they face with Basal III and Dodd-Frank, which are still being written. These weigh heavy on their minds because of the impact the new rules will have on bank capital, which is still very hard to raise for many banks, especially those with $500 million in assets and less, he said.

Concerns raised earlier this year by members of the Sebastian County Quorum Court that the planned Ben Geren Aquatics Center could come in over budget have been realized after County Judge David Hudson revealed at Tuesday’s (Nov. 12) Quorum Court meeting that designers have estimated the water park to cost almost $11 million should all features requested in public meetings be in included in the design.

The issue of cost estimates was brought up by Justice of the Peace Shawn Looper during a Quorum Court Study Session dealing with the 2014 budget.

"I asked a question - if we had any numbers on the water park," he said. "The only thing we got was the verbal that the preliminary came back at $11 million. He said he would send something (in writing) today, but I haven't seen anything yet."

Fort Smith Deputy City Administrator Jeff Dingman confirmed the figure, as well.

"As I understand it, that's the number. It's not quite $11 million, but it's close enough that it might as well be."

During an interview Monday (Nov. 11), Hudson would not confirm figures to The City Wire.

"I don't know exactly what to tell you on that without these numbers being verified and we should know this week," he said. "I've not given anybody that number in the decision-making role and I would prefer to do that in that fashion rather than release any numbers through the media."

An attempt to contact Hudson Wednesday (Nov. 13) was unsuccessful, though Hudson and Fort Smith City Administrator Ray Gosack did provide requested documentation regarding the aquatics center from the previous month.

A Nov. 1 e-mail from Andy Smith of Larkin Aquatics details changes that would bring the pool back to an original budget between $8 million and $8.8 million, the latter of which would require additional funds be approved by the county. The city's Board of Directors approved the additional funding in March.

"As requested, we modified the pool concept to bring the construction cost in the $8.0 to $8.8M range. We consider the attached plan adequate for cost estimating, but if we choose to move forward this particular concept, there are still some details to be worked out with the pools. We have discussed with Flintco and concluded this concept should fall within the desired budget."

In a memo to Gosack dated today, Hudson himself detailed the reductions included in the revised concept Smith submitted to Gosack, Stubblefield and Fort Smith Parks and Recreation Director Mike Alsup. They include:

• The filtration systems have been reduced from three to two. The slide area has been combined with the lazy river and activity pool;
• The lazy river has been shortened from 600 feet to 400 feet;
• The activity pool is approximately 40% smaller with fewer features; 
• Water slides have been revised with the deletion of the raft slide to include all body slides, two speed slides, one open slide and one enclosed body slide;
• The toddler pool area is smaller by 20%, the main structure is smaller, reduced by two structures to one, designed as a modular component that could be installed in phases;
• There is no dive well; and 
• Bath house redesign is in process that could save approximately $300,000.

Final revisions should be ready within two weeks, Hudson noted.

A Nov. 4 e-mail responding to a preliminary summary of the now-confirmed revised concept included a request from Gosack for a joint meeting of the Fort Smith Board of Directors and the Sebastian County Quorum Court.

"It seems like we’ll need fundamental design decisions made by next month if we hope to begin construction in spring 2014," he writes.

As for what will happen with the project, there is a lot of uncertainty. Hudson said in his memo to Gosack that both bodies could either allocate additional funding or could build the smaller facility.

Looper, who has never been a proponent of the project, said he feels it is time to pull the plug on the aquatics center.

"I think they need to pull out if they can't do the project right. (Hudson's) statement (Tuesday night) was they instructed the construction manager to tell them what they can build for $8 million," he said, adding that he asked about the project last night because it was a major financial obligation yet Hudson was not being forthcoming with numbers.

"I don't know how you get from the $8 million to $11 million. I don't know where we'd get that money. Delaying (the opening) to 2015 is what's allowing us to get that $4 million. You'd have to delay the project (again) to get the sales tax proceeds to pay for that (additional amount). That's why I initially brought it up. If you have a larger figure out there, we need to know it because it affects the 2014 budget," Looper said. "If you reduce the project back down and you build a smaller water park, how does that affect the users? It affects the (attendance) projections. It's complicated and it needs to be included in the 2014 budget."

Looper said he was also upset that the cost overruns have been known by Hudson and others for nearly two weeks before being brought to light on Tuesday.

"I'm always upset that we don't get timely information," he said. "It's important that we get timely information. The more you know, the better information you have. …That bothers me (that Hudson did not disclose the cost overrun earlier). To me, that should have been presented with the budget. I see nothing gained by holding it. …Yeah, I didn't know he got it two weeks ago. Yeah, that bothers me."

As for how the city is reacting to the projected higher budget, Dingman said it was a disappointment.

"There's a lot of disappointment on the part of both the city and the county," he said. "We have a finite amount of dollars. The concepts that were shown and talked about and the amenities that people thought they would get for that (when Fort Smith voters approved a sales tax paying for the park) – it simply won't be enough to get everything that we want."

No date has yet been set for a joint meeting of the Board of Directors and the Quorum Court.

Having a female name on the door of the Arkansas Governor’s office in the State Capitol is just a matter of finding the right candidate, says Gov. Mike Beebe. But two women who watch Arkansas politics say women face culture obstacles and a “pipeline problem” with respect to being elected to the state’s top office.

Arkansas is one of 24 states to have never had a female serve as governor. Unless Rep. Debra Hobbs, R-Rogers, pulls off THE upset in Arkansas’ political history, the 2014 election cycle is not likely to change that fact. Hobbs is one of three candidates seeking the GOP gubernatorial nomination.

Momentum nationwide is moving in the favor of women elected to a state’s top office. Debbie Walsh, director of the Center for American Women in Politics at Rutgers University, has said there is “real potential” for the 2014 election cycle to be a year in which more women are elected governor.

There are now five women governors – Gov. Jan Brewer (R), Arizona; Gov. Mary Fallin (R), Oklahoma; Gov. Maggie Hassan (D), New Hampshire; Gov. Susan Martinez (R), New Mexico; and Gov. Nikki Haley (R), South Carolina.

Also, 10 states – Alabama, Connecticut, Iowa, Illinois, Indiana, Minnesota, New Jersey, Ohio, Rhode Island and Wisconsin – have a female Lt. Gov., with six of those being Republicans and four Democrats.

A recent Politico report suggests the possibility of nine states with female governors following the 2014 election.

WHAT ABOUT ARKANSAS?
“The right candidate and the right time,” Beebe quickly responded during a recent interview when asked what it will take for a female to be elected Arkansas governor. “I think Arkansans are at a point that they are going to vote for the best person regardless of their gender.”

In New Mexico and Oklahoma, Govs. Martinez and Fallin, respectively, won the spot in a general election race against another woman. Beebe does not think that’s what it will take for a female gubernatorial win in Arkansas. He says a woman can beat a man, especially among Arkansas’ historically independent electorate.

“It all goes back to the quality of the candidate in just about any race, particularly in Arkansas where Arkansans are so independent when it comes to their voting patterns,” Beebe explained. “I think the quality of the candidate trumps just about any other factor, including party.”

Based on what a sampling of Arkansas voters believed in a 2001 survey, the state is overdue for a female governor. In the 2001 The Arkansas Poll conducted by the University of Arkansas, 43% of respondents said a woman would be elected Arkansas governor in the next 10 years, with 36% saying it would be 25 years. The poll also found that 41% of respondents believed a woman would be elected president in the next 25 years. It could be that a female is elected president before Arkansas elects a female governor.

Megan Tollett, executive director of the Republican Party of Arkansas, said more women need to get in the system.

“We have come a long way in the last few decades and I am proud that we now have many women holding powerful positions in both business and politics, but the unfortunate fact that you are asking this question is proof that we still have more work to do. I believe that will be accomplished by continuing to encourage more women to run for public office,” Tollett said.

THE PIPELINE
Janine Parry, director of The Arkansas Poll and a political science professor at the University of Arkansas, noted that Arkansas has twice come close to electing a female governor.

"In 1968, Democrats almost nominated a woman, Virginia Johnson. The conventional wisdom of the people was that a lost ballot box or two is what shifted it in (former House Speaker Marion) Crank's direction,” Parry explained. “She often gets overlooked. It was a real campaign and she almost got the nomination. It goes back to '68 with having a credible female candidate. ... In that climate, she would have very likely lost to Rockefeller. Almost any Democrat would have lost to Rockefeller in '68."

And in 2002, former State Treasurer Jimmie Lou Fisher (D) challenged Gov. Mike Huckabee (R) as he sought a second term. Huckabee bested Fisher with 53% of the vote, but it was a closer election than expected.

More women engaged in politics at all levels will improve the chances of electing a female governor, Parry said.

"Most of the research attributes it to a pipeline problem. If you have a small number of candidates and winners in down ballot races, you're less likely to see candidates with enough experience and support to make a statewide bid. You have to have enough people down ballot getting experience in order to see some of those people matriculate to the top of the ballot. Arkansas doesn't have a robust history at any level of government with female candidates or winners,” Parry said.

According to the Center for American Women in Politics at Rutgers University, the percentage of women in Arkansas’ Legislature is 17%, which ranks the state at 41st. The best ranking the state received was in 2010 and 2009 when the state ranked 28th with women holding 23% of the legislative seats. Also, Arkansas has elected only six women to Congress, and has had only seven women elected to Arkansas’ Constitutional offices.

GENDER ROLES
In separate interviews, Parry and Tollett also suggested that women have succeeded in Arkansas when elected to “more feminine” offices.

“Arkansas has never elected a female to hold a Constitutional office that the office is not considered a traditional female role, such as Attorney General or Lieutenant Governor,”  Tollett said. “Such an office could vault them into the office of Governor during a non-incumbent year. Such was the case in Texas, Oklahoma and Louisiana.”

Parry was more blunt in her assessment.

"We have fewer examples (of women in state-level executive positions). We see them concentrated in Secretary of State or Treasurer. We see them more concentrated in more feminine, or less masculine, type of offices. Those offices are less conducive, we know those are less conducive to making a bid for a position at the top,” she said.

Continuing, Parry noted: “A lot of it has to do with gendered expectations. The public have gendered expectations. We tend to think of presidents and governors as our daddies. We think of legislators as our mommies. We tend to think of them caring for our family – it's a more nurturing type of position to which our culture is more comfortable."

Parry also suggested that a female Republican may have an advantage over a female Democrat in capturing the governors office. Parry said a female Republican “overcomes a lot of those stereotypes” associated with gender.

"Republican women in some ways are advantaged as not being seen as touchy-feely as Democratic candidates which can make them more advantaged in seeking an executive role which I think is super interesting,” she said.

Part of the gender issue also plays out in the career timeline differences between men and women.

"Men usually start their political careers in their 30s. Women usually start theirs in their 50s. Slowly all that's changing in Arkansas and elsewhere, but the pace has been pretty glacial,” Parry said.

ADVICE TO THE FEMALE CANDIDATE
Gov. Martinez of New Mexico said during an interview with The City Wire that “sometimes” women do have to work harder than men to prove themselves. However, she said that reality is diminishing, at least in New Mexico.

She said “it didn’t really matter” in her race for two reasons – she had already proved herself by being elected as the first female District Attorney in New Mexico, and her Democratic opponent also was a female.

Martinez did say she should not have been the first female New Mexico governor.

“We should have been electing women a long time ago. And we need to have more role models elected, so that little girls can see that they can do exactly what that governor is doing or more as an executive. ... 2010 should not have been the first time that New Mexico had a female governor,” Martinez explained. “We should elect qualified women to these positions (around the U.S.), and there are plenty. But being a first is tough, and lots of eyes are on you.”

Martinez said most of the pressure on her was because she never held a legislative or statewide office, not because she was a female.

“I was not an insider,” she explained.

But there have been times in the office in which the gender focus was present and patronizing.

“I had people who would call me ‘Little Lady,’ and you know, those kinds of names. But sometimes they don’t mean it ugly and I’m not going to take it personal,” Martinez said.

Her advice for a female candidate focused on messaging and campaigning hard.

“Number one, show up in every place in the state. Don’t write off a single county in the state,” Martinez said when asked her advice for a female considering a run for Arkansas governor. “Number two, be sincere with your communications, and remember what you’re promising people you’re going to do. Don’t change your message depending on where you are, and make sure that your campaign becomes part of your governing, that you actually do what you said you were going to do.”

There were 546 households in the Natural State facing possible foreclosure last month, but new filings declined in Northwest Arkansas and remained flat in the Fort Smith market, according to Calif.-based RealtyTrac.

The Arkansas tally was up 4.5%, with the U.S. rate down 28%. Nationally, the marketing firm reported 133,919 properties, or one in 978 households, were seriously delinquent on their mortgages in October. Some states like Maryland, Delaware and New York saw triple digit increases in the number of judicial foreclosures filed last month.

Arkansas is a non-judicial state meaning that the foreclosure process does not require a court hearing or judges signature to complete.

In Northwest Arkansas there were 84 new filings in October - 59 of those were in Benton County where there were 31 properties slated for auction and 28 already making their back to the lender. The total filings in Benton County were down 37% from a year ago.

RealtyTrac reported 25 new filings in Washington County, and 21 of those were slated for auction as four properties were recovered by lenders. Total filings are down 34% from a year ago.

In the Fort Smith market there were 12 new filings last month, compared to 11 a year ago. This market had 4 properties listed for auction and 8 going back to lenders.

Crawford County reported 13 filings, down from 17 in October 2012. In Crawford County the all 13 of the new filings were for properties slated for auction.

The backlog of homes that clogged up the pipeline in recent years is thinning out in Arkansas, but defaults among amended mortgages from two and three years ago have started to escalate, according to local notices published in recent weeks.

It has taken two and three years to move some properties through the pipeline, but lenders are seeing better demand from institutional investors seeking rental properties and pushing these deals through at a faster pace today, according to Daren Blomquist, vice president of RealtyTrac.

Prudential Alliance Realty in Tulsa notes that banks have let homeowners stay in the defaulted homes as renters as long as prices were moving downward. But now that prices are moving up again and there is investor demand lenders are starting the foreclosure process.

There are 368 foreclosed home listed for sale at this time in the local multiple listing service with includes all four counties in this report, according to Jim Long, agent with Crye-Leike Real Estate in Benton County.

The number of foreclosure listings rose from 354 last month and are down from 373 in August.

Foreclosure listings peaked at 393 in July, rising from 222 in March of this year. The listings have slowed a bit, according to Long, who adds the clean, well-kept properties are still selling fast, as more investors are back in the market.

Wal-Mart Stores Inc. execs have decked the halls in hopes of ample holiday cheer, despite negative comp sales in the U.S. for the 13-week period ending Oct. 25.

The mass merchant discounter reported steady net income of $3.738 billion in the third quarter, up 2.8% from a year ago. On a per-share basis that’s $1.14, up 6.5% from last year and one penny better than analysts expected.

That said, Wal-Mart missed guidance for top line revenue with consolidated net sales of $114.9 billion, up 1.6%. Wall Street analysts expected $116.8 billion, but the retailer said with currency fluctuations and acquisitions aside, its total net sales were $116.2 billion in the quarter.

Wal-Mart shares slid backward in early trading on Thursday (Nov. 14) following the announcement. But by mid-morning, when analysts had digested all the numbers, the shares turned positive — trading around $79, up 10 cents at the noon hour.

Mike Duke, CEO of Wal-Mart Stores Inc., considered the quarterly performance “solid” based on operating income across all segments, as the retailer was able to curtail its expenses to help offset sluggish sales, weaker traffic and lack of grocery inflation.

"Our most important priority is growing top line sales, including comp sales," Duke noted in the statement. "The retail environment, both in stores and online, remains competitive. Wal-Mart has aggressive plans to help our customers enjoy the holiday season, and there is no doubt that we plan to win for our customers and shareholders throughout the holidays."

U.S. COMPETITION

Duke said consumers remain wary about the economic outlook and concerned about their job. Wal-Mart results are typically seen a barometer for the overall national economy given the retailer’s size and geographic reach across the U.S.

But analysts have said the caution that Wal-Mart touts quarter to quarter is not exactly what other retailers are reporting at this time.


Wal-Mart comp stores sales in the U.S. – a closely watched metric – were down 0.3% in the quarter. Neighborhood Market, Wal-Mart’s smaller grocery format, saw comp sales rise 3.4%. Sam’s Club reported comp sales of 1.1% without fuel.

CNBC contributor Jim Cramer said that perhaps Wal-Mart is getting squeezed by other discounters like Costco, who just reported same-store comps of 6% in the same economy.

“When Costco reported 6% comp store sales last week, the street paused, but you can’t tell me that Wal-Mart wouldn’t kill for 6% comps,” Cramer said.

U.S. net sales grew to $67.7 billion, up 2.4% in the quarter damped by a 0.4% decline in store traffic. Operating income increased 5.8% to over $5.1 billion as the retailer did a better job of managing expenses.

Despite negative same-store comp sales, Wal-Mart said its investment in price is helping to drive market share gain in numerous categories such as food and consumables, health & wellness, produce, home, apparel and wireless.

Walmart U.S. CEO Bill Simon said overall the quarter started slower than they would have liked.

“Sales began to pick up in September and October as we featured ‘stock up and save’ and ‘October rollbacks,’" Simon said during a media call. “We have robust plans for the holiday season, some 2 million layaway transactions have been recorded as of last week.”

The entertainment category has been challenging, but Simon said as the quarter progressed and exclusive offers for gaming devices were offered through layaway, he expects to see better results in this lackluster category during the fourth quarter.

He said inventory is up 5.1%, partly due to aggressive holiday buys. This is down from the 6.9% increase at the end of the second quarter.

Wal-Mart said it’s too early to know any impact they may feel from the SNAP reductions that took place Nov. 1 and while they can’t say for sure the 16-day government shutdown hurt their business, they can’t imagine that it helped.

Simon said traffic in stores did pick up following the resolution to the government shutdown.

FCPA COMPLIANCE
Wal-Mart said it spent $69 million in the recent quarter on compliance issues regarding the Foreign Corrupt Practice Act, which was below its $78 million estimate.

About $43 million went to expenses incurred for the ongoing inquiries and investigations in Mexico, China, Brazil and India. Roughly $26 million is related to Wal-Mart’s internal global compliance program.

Core corporate expenses rose 15.1% year over year. The company said roughly 5% of that increase is related to the FCPA matter. The rest has to do with the timing of charitable giving.

This year Wal-Mart has spent $224 million on its compliance issues, more than half of that related to FCPA investigations ongoing for the past 18 months.

SAM’S CLUB
Sam’s Club posted net sales, including fuel of $14.1 billion, up 1.1% over last year. Fuel prices decreased 7.7% and gallons sold were up 2%, creating a burden to overall sales of 1%.

Operating income increased 9.2% to $474 million in the quarter.

Sam’s Club generated a comp of 1.1%, without fuel, for the 13-week retail sales period. Comp traffic grew 2.4% and comp ticket declined by 1.3%, driven by softness in tobacco business.

Both Business and Savings members posted positive traffic this quarter, with growth primarily coming from Savings members.

Membership income grew 8.1%, up from 4% last quarter, as the benefit of the fee increase implemented earlier this year accelerates. The benefit will continue to be a tailwind in the upcoming quarter and throughout the next fiscal year.

In Q3, members received one Instant Savings book, valid from Aug. 28 through Sept. 22, that included more than $4,500 in savings. These savings are automatically loaded onto every member’s card. The books are bringing members into categories previously not shopped, and some of these members have continued shopping these categories after the event.

“Inventory, including fuel, grew 6.3% during the third quarter, significantly less than this time last year. New club growth, strategic builds for our Instant Savings events, and holiday merchandise inflated our inventory position, while sell-through of summer inventory was in line with expectations,” said Rosalind Brewer, CEO of Sam’s Club.

WALMART INTERNATIONAL
The international divisional had a 0.2% increase in net sales, achieving $33.1 billion.

On a constant currency basis, net sales were $34.4 billion, up 4.1%, according to Walmart International CEO Doug McMillion.

“Currency negatively impacted sales by approximately $1.6 billion, and our Yihaodian acquisition in China added $314 million in sales,” he added.

The international division is in the midst of major changes as the retailer recently abandoned its venture with Bharti in India, sold the VIPS restaurant chain in Mexico, plans to close 50 underperforming stores in Brazil and China and plans to increase its ownership of Walmart Chile to 97%. Outside of challenging economic metrics in Japan and Mexico, McMillion said most of the other markets are growing market share and total sales ever so slightly.

He said the fourth quarter is well under way for our markets. The slow- growth macroeconomic environment is persisting through the first month of this quarter, and the markets continue to be competitive.

“We will manage our cost dollars well and stay focused on growing sales to give ourselves the opportunity to leverage. We also remain committed to growing our e-commerce business aggressively,” McMillion said.

LOWER GUIDANCE
Even with the aggressive plans, the company is not confident that consumers will spend more during the holidays. Wal-Mart has lowered its fourth quarter earnings per share guidance to between $1.50 and $1.60. The actual earnings may be 10 cents per share higher.

The company reported a 10 cents per share cost is likely during the fourth quarter in a move to close 50 underperforming stores in Brazil and China (6 cents), and the ending of a franchise agreement in India (4 cents).

Full year guidance was lowered to range between $5.11 and $5.21. The previous guidance was a range between $5.10 and $5.30. Wal-Mart guidance earlier in the fiscal year had per share earnings in the $5.20-$5.40 range.

Wal-Mart has posted net income of $11.591 billion for the first three fiscal quarters of the year, up 1.7% compared to the same period in 2012. Total revenue for the first three fiscal quarters is $346.588 billion, also up 1.7% compared to the 2012 period.

One candidate for Arkansas governor is getting attention for an unusual giveaway on his campaign website.

Republican Curtis Coleman is giving away an AR-15 rifle. The weapon was donated by Don's Weaponry in North Little Rock.

"Now’s your chance to win an AR-15 rifle! Don of Don’s Weaponry in North Little Rock has donated a brand-new Palmetto PA-15 and one lucky Coleman supporter will become its proud owner," the web site reads.

The rules of the giveaway state that anyone entering to win the weapon must be an Arkansas resident with a mailing address in the state and be 18 years old or older. Additionally, the winner of the gun must be able to pass a background check.

"If for some reason the first winner doesn’t pass, another name will be drawn," the website said.

Social media lit up with word that Coleman's campaign was giving away a weapon, with Democrats immediately attacking Coleman.

"@curtiscoleman this is horrific. Same assault weapon used in #Sandyhook,"Aaron Gibson tweeted. Gibson is the president of the University of Arkansas Young Democrats.

Caleb Conrad, president of the Henderson State University Young Democrats, also tweeted his disgust.

"@curtiscoleman is giving away an AR-15 rifle on his website. Reckless, irresponsible, and disgusting."

Coleman deflected much of the criticism being leveled on social media, tweeting his response to those who challenged his campaign's giveaway.

"Giving away a rifle to a law-abiding Arkansan who has passed a background check is 'reckless, irresponsible, and disgusting'?"

Josh Mesker, communications director for the Coleman campaign, said there was nothing wrong with what the campaign was offering as a giveaway item.

"There's nothing controversial about giving away a standard rifle, a type of firearm that is owned by millions of Americans and thousands of Arkansans, to a law abiding citizen who has passed a background check."

Mesker said giving the AR-15 away was not intended to create controversy but instead was meant to show Arkansans that Coleman stands in support of the Second Amendment while also building the campaign's base of supporters.

And Mesker had a response for Gibson and other groups that may try to call out the campaign for the gun giveaway.

"What I would say is really liberal groups such as the University of Arkansas Young Democrats are playing politics with an unspeakable tragedy and should be called out on it. They should place blame on criminals where it belongs and leave the rest of us alone," he said. "I think this is simply another attempt to criticize Second Amendment rights under a false pretense."

It will cost a little extra to ship that package to the family during the holidays next year if the United States Postal Service gets its way.

The USPS announced Thursday (Nov. 14) that it would increase prices on Postal Service Shipping Services by 2.4% effective Jan. 26, 2014, should the Postal Regulatory Commission (PRC) approve the rate hike.

Some of the new prices for shipping are as follows:
• $19.99 for retail flat rate, padded flat rate and legal flat rate envelopes priority express;
• $44.95 for flat rate boxes priority express; and
• Prices starting at $5.60 for domestic priority flat rate products.

Postal Service customers will also have a new choice for shipping domestic Priority Mail Express next year, according to a press release from the USPS.

"The new delivery service option will allow customers to send domestic Priority Mail Express packages to most locations in the U.S. by 10:30 a.m. for an extra $5.00 feet," it said. "Domestic Priority Mail Express is a fast, reliable service which offers day-specific delivery information, up to $100 free insurance and free package tracking."

The impact will not only be felt by individuals using the Postal Service, but also business owners.

Jerry Walrod, owner of Walrod's Hardware in Fort Smith, said he does not expect a large impact though he has to compensate for any increases for getting merchandise into the store and on the shelves.

"Yes, it does affect the price that I put on the merchandise. And yes, I have raised it over the years," he said. "But not necessarily enough (to compensate for the higher freight costs)."

Walrod said he often uses UPS for his shipping needs or uses True Value Hardware's private trucking line to receive merchandise as a way to save on costs instead of using the Postal Service. Using True Value's line, he is charged a 6.93% up charge on merchandise.

And even though many shoppers think hardware stores are overpriced, he said he always tries to keep his prices low and not always pass on the full cost of freight to his customers.

"I'm not going to gouge my customers," he said. "But when things get tight, I do know that some of my competitors (will raise) their prices big time."

Even with the impacts his business could feel should he have to rely on the Postal Service for any shipping next he, he said customers should not expect any increases on Jan. 26.

"I don't raise my price until I have to re-buy it," he said, adding that he would still be unlikely to raise the prices to compensate for the full amount he his family-owned business is set back due to the rise in shipping prices.

Nagisa Manabe, chief marketing and sales officer at the Postal Service, said even with the increase USPS has proposed, she believes the Postal Service is one of the lowest priced shippers in the nation.

"The Postal Service remains the best in value in the shipping business," she said. "We continue to offer excellent domestic Flat Rate shipping with a price that doesn't vary by destination."

The Postal Service last proposed a price increase in September, asking that the cost of first-class stamps rise to 49 cents in 2014. The planned increase announced in September and this month are an attempt by the Postal Service to plug a $20 billion budget gap, the service said at the time.

The Fort Smith Board of Directors got their first in-depth look at the proposed fiscal year 2014 budget Thursday night (Nov. 14) and it did not take long for questions to arise about how long it would be before the city runs into a deficit situation.

At issue for Director Keith Lau was the budget comparison summary in the general fund.

The line item showing either an excess or a deficiency in revenues over expenditures from FY13 through FY15 projects out to slightly more than a $10 million deficit in FY15. That would bring the end of year fund balance in FY15 to a negative $6.664 million.

Not only are the FY15 figures running at a deficit, Lau said, but taking any unspent funds from the current fiscal year and using those to help balance the budget for FY14 shows that the budget really is not balanced.

"I understand the governmental accounting method of saying (you have) a balanced budget, but it's really not a balanced budget because you're spending money out of that end of year fund balance," he said. "And I'm concerned because of this collision course I think we're on."

City Administrator Ray Gosack pointed Lau to the budgeting process from last year, saying that the same could have been said of FY14.

"We're usually in the same position every year. The staff, we will never give you a budget that's not balanced. So even though you look at 2015 and it shows some concerning numbers, if you look back at last year's budget, you would have seen the same thing for 2014 yet we have not given you a 2014 budget that is not balanced. We've given you a 2014 budget that has a fund balance of 7.5% (remaining at the end of FY14). And we think that's the absolute minimum we need for cash flow, that we can still meet our cash flow requirements with that 7.5% balance."

Gosack also said during the last several budget cycles that the end of year balance has been presented with a 7.5% balance.

Lau asked Gosack for a plan on how to address the collision course he described, saying that while he understands Gosack's points on the year of end balances, it does not address the concern over the end of year fund balances steadily declining each year, detailed on page 64 of the proposed budget for FY14:
• FY13 (estimated): $7.343 million
• FY14 (proposed): $5.629 million
• FY15 (projected): $3.426 million

Gosack said the city had done everything within its power to save money, especially this year with actual revenue coming in below estimates which forced 4% across the board cuts to all city department budgets.

"But here's the long term solution to strengthening the financial position of the general fund, if that's where you're going. There's two choices – you either cut expenses or you increase revenues. It's really that simple. Some combination of those two. We have cut expenses significantly. I think if we have to make more significant cuts to expenses in the general fund, those cuts are either going to be to positions or employee benefits because there is simply nothing left in these operating budgets to go after. There's very little capitol in there. We've cut training and travel budgets. Some departments are very concerned about their employees' work skills not getting adequate training because we've been cutting those budgets for the last few years to get to a balanced budget."

Finance Director Kara Bushkuhl explained in her presentation that proposed FY14 expenditures were $20,000 less than last year's 2013 estimate and personnel authorizations (hiring) for next year shows a decrease of 0.6 full-time employees, essentially ensuring that the overall general fund payroll will not increase. Additionally, employees are not receiving cost of living raises and the city had to absorb an increase in health care expenses of $1.4 million, she said.

Following the meeting, Lau said regardless of what changes the city has already made to its budgets in previous years and this year, even with cost cutting that has been in place, he still expects that more will need to be done.

"If you follow the trend line of the general fund budget (going into the negative), that's where somewhere at the end of the road we're going to have to reconcile that by raising revenues or cutting expenses. And where is that? I don't know where it it."

Lau said his concerns are out of a responsibility to the citizens of Fort Smith.

"Where I'm concerned is being a responsible city director," he said, sounding the same call he made during last year's budget meetings and saying that even though the city came out with a balanced budget this year, he was not comfortable with following the same methods year after year when projected deficits are coming.

"I don't like faith-based budgeting. I don't like that."

In addition to the presentation of the budget overview Thursday, department heads answered questions about their individual budgets. An additional meeting will be held on Monday night (Nov. 18) with the city's remaining departments before the Board of Directors starts making cuts and changes, a process Lau said could last through February.

"I think this is going to be sort of an evolutionary process with this information that comes in and then the directors hopefully will have an overview at the end of Monday night meeting and then we can say, 'Hey, what are we going to do?' and then we can come back and (possibly make changes)."