Talk Business Arkansas May/June 2014 by Talk Business & Politics

May/June 2014

The Complete Arkansas Banking Landscape Mack McLarty A Bipartisan Energy Plan

The 2014 Political Primary Season Executive Q&A

EZ Mart CEO Sonja Yates Hubbard Medical Marijuana The Pros & Cons

MINING THE MIND OF ACXIOMâ&#x20AC;&#x2122;S

Scott Howe

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Little Rock

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Contents May/June 2014 5

Publisher’s Letter

Commentary Stephen Copley Let’s Raise The Minimum Wage

Amy Whitehead Analyzing The Arkansas Economy

Gary Jones Steps To Selling Your Business

Thomas F. “Mack” McLarty A More Productive Use Of Energy

Point Counterpoint Melissa Fults Jerry Cox The Medical Marijuana Debate

Profiles Gina Radke Aerospace Executive

Mary Michaels & David Humphrey The Faces Of Investor Relations

Subiaco Academy Up Close & Personal

Hometown, Arkansas Jonesboro Is On The Rise

Industry Manufacturing A Second Chance in Pine Bluff

Trucking A Capacity Crunch Is Coming

Trade Wal-Mart Readies On New Fronts

Agriculture Success On The Back Forty

Executive Q&A Sonja Yates Hubbard The Standout CEO

Insights The Compass Report Grades Regional Progress

Leadership Determination Matthew & Maria Hampton Never Stop

Balance High School Senior & Overwatch CEO Josh Moody

Decision-making Six Leaders Discuss What Guides Them

10 26

10 Cover Story: Acxiom CEO Scott Howe

Howe is leading the global marketer into a brave, new, Big Data world.

Features

30 Business: Banking On Improvement

Arkansas’ banks are in a healthier place than five years ago. What’s changed and where are they going?

44 Politics: Primary Preview 2014

The political battles this May will largely be fought in the Republican primaries.

COVER PHOTO: BOB OCKEN

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From the Publisher

15 Years and Counting

Talk Business Arkansas is owned by River Rock Communications and is published six times a year. For additional copies, to be included in our mailing list, or for information about advertising, contact Katherine Daniels at katherine@talkbusiness.net. May/June 2014 Publisher & Editor-in-Chief Roby Brock roby@talkbusiness.net Art Director Bryan Pistole DesignMatters LLC bryan@designmattersllc.com Editor Bill Paddack wbp17@comcast.net Contributing Writers Larry Brannan Steve Brawner Jeanni Brosius Kerri Jackson Case Michael Cook Ethan Nobles Casey Penn Ben Pollock Ryan Saylor Kim Souza Michael Tilley Jason Tolbert Photographers Bob Ocken bob@ockenphotography.com Trey Ashcraft treyark@yahoo.com Tim Rand pix@trand.com Vice President Operations Stephanie Baker stephanie@talkbusiness.net Vice President Sales & Marketing Katherine Daniels katherine@talkbusiness.net Printer John Parke Democrat Printing & Litho jparke@democratprinting.com River Rock Communications 8308 Cantrell Road Little Rock, AR 72227 501.529.1737

Fifteen years ago, I sat down for television interviews with Maverick Transportation CEO Steve Williams, Metropolitan National Bank CEO Lunsford Bridges, and U.S. Senator Blanche Lincoln to talk business and politics. Little did I know that a decade-and-a-half later (and more than 1,500 interviews later), I’d still be sitting down every week with newsmakers in the business and political arena. This year, Talk Business & Politics celebrates its 15th year on air and we’ve certainly grown from a fledgling half hour TV program to a multi-media enterprise that encompasses radio, newspaper, magazine, email, social media and, of course, a strong Internet presence. I’m very proud of our new TV partnership with news leader KATV Ch. 7 (Sundays 9 a.m.) and the NPR affiliates statewide. Our website TalkBusiness.net is a daily resource for breaking and trending business and political news. Our magazine (which you’re reading) continues to grow and has the largest statewide reach of any business publication in Arkansas. Despite this evolution, I’m proud to say that our philosophy of what we’ve tried to do from a news coverage perspective has not changed. For years, these points have been the driver of our news philosophy: Get beyond the headlines. Our goal has always been to ask newsmakers to explain their business and political decisions in an in-depth manner. For our viewers, listeners and readers, my aim is to make sure you have a level of knowledge far beyond the topline reasons given in a sound bite or quote. Looking forward. We’ve also made the effort in all of our interviews and news coverage to gain insight on what may happen next. Whether you agree or disagree with a person’s perspective, it’s always been my intention to provide you a leader’s opinion that may help determine whether you and your business should play offense or defense as you plan for the future. Deliver news in a personal manner. When we started our TV show, I never imagined that we would have expanded to the different platforms that we have. The Internet was in its infancy and social media didn’t exist. For our audience, we will continue to assess ways to provide you the news you want in a format that benefits your lifestyle. The main reason I think we’ve enjoyed the growth and success that we have is that you – our audience – have responded positively to our brand of news. Let me say thank you for helping us achieve this milestone. We couldn’t have done it without your following and without your financial support. For the next 15 years (and beyond), we will continue to experiment and expand in the way we provide you the most important business and political news of the day because the world is changing and so are your habits. But don’t look for us to compromise on the integrity of that reporting. That won’t change no matter what direction the world takes us. Sincerely,

Roby Brock Publisher & Editor-in-Chief www.talkbusiness.net

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Commentary

Let’s Raise The State Minimum Wage By Stephen Copley

Stephen Copley

support the ballot measure effort

pay the federal minimum wage of $7.25. If

teenagers do. In the same study, it noted

to increase the state minimum

the state minimum wage is ever higher than

that 142,043 people over the age of twenty,

wage in Arkansas.

the federal minimum wage, it is the state

or 12.4% of the total workforce, would be

The current state minimum wage is

minimum wage which is paid to employees.

affected.

$6.25 an hour. The popular name of the

The federal minimum wage was instituted

These figures show that most of the jobs

ballot measure is “An Act to Increase the

in 1938 as part of the Fair Labor Standards

that are being paid minimum wage at the

Arkansas Minimum Wage.” The measure

Act. In 1967, then-Governor Winthrop

state level are not being held by teenagers.

would amend the Arkansas Code in the

Rockefeller was able to get the first state

In fact, as a result of the last recession, we

following fashion if passed:

minimum wage passed through the state

see more adults who lost jobs working at the

legislature.

minimum wage level than since the Great

Why do we need an increase in the

Depression.

state minimum wage? There are people in

What about the criticism that the passage

Arkansas who are working hard, playing by

of this measure will cost jobs? We need only

the rules and cannot make ends meet. An

turn to the Costco experience to see that

individual who works on the state minimum

this is not the case. Costco’s president and

wage of $6.25 makes $13,000 annually. Let’s

CEO, Craig Jelinek, argues that the mini-

do some math. If that individual purchased

mum wage should be increased. He said,

$100 a week in groceries, that would be

“We know that it is a lot more profitable in

$5,200 annually. Then, if the individual

the long term to minimize employee turn-

spent $300 a month for housing, that

over and maximize employee productivity,

would be $3,600 annually. That means the

commitment and loyalty.”

individual has spent $8,800 of the $13,000

The measure requires over 62,000 valid

and we have not discussed an automobile,

signatures to be collected and delivered to

gasoline, money for medical bills, clothing,

the secretary of state by July 7. The measure

and the various insurances that are required.

has proven popular as many people are

People cannot work at the state minimum

signing the petitions. In fact, according to a

wage and make their budgets balance.

recent April Talk Business-Hendrix College

How many people would this affect if

Poll, 79% of Arkansans approve raising the

Beginning January 1, 2015, every employer shall pay each of his or her employees wages at the rate of not less than seven dollars and fifty cents ($7.50) per hour; beginning January 1, 2016, the rate of not less than eight dollars ($8.00) per hour and beginning January 1, 2017, the rate of not less than eight dollars and fifty cents ($8.50) per hour.

passed? According to a recent study by

state minimum wage. I believe it is time to

Who does this affect? All employers with

the Arkansas Advocates for Children and

raise the state minimum wage to allow those

four or more employees must pay at least

Families, the increase to $8.50 would affect

who work hard, play by the rules and share

$6.25 per hour. If the employer does less

directly and indirectly about 168,074 people

the American dream to be able to make

than $500,000 per year in business and does

or about 14.7% of the workforce. That is a

their budget balance.

not engage in interstate commerce, they

significant number of people in Arkansas

will pay the state minimum wage of $6.25.

who would have more money to spend

Rev. Stephen Copley is the chair of the Give

If they do more than $500,000 in business

in the Arkansas economy. Often critics

Arkansas a Raise Now Coalition, which is

and engage in interstate commerce, they will

maintain that these are basically jobs that

collecting signatures for the ballot initiative. www.talkbusiness.net

Commentary

Inside the Numbers Economic statistics show how key Arkansas cities are faring. By Amy Whitehead Director, University of Central Arkansas Center for Community and Economic Development Amy Whitehead

his edition of Inside the Numbers resumes its focus on economic data for 12 Arkansas cities, with a look at the last six months of 2013, and how those months compare to the same time frame in 2012. Analysis for the cities of Bentonville, Conway, Fayetteville, Fort Smith, Hot Springs, Jonesboro, Little Rock, North Little Rock, Pine Bluff, Rogers, Springdale and Texarkana is provided. To view the complete data for each of the 12 cities, visit www.talkbusiness.net/ insidethenumbers. UNEMPLOYMENT When all 12 cities are considered, the unemployment picture continues to look best in Northwest Arkansas, with Bentonville (4.9%), Springdale (4.92%), Fayetteville (5.2%) and Rogers (5.27%) posting the lowest unemployment rates. The labor force in this corner of the state continues to grow, and job creation and hiring appear to be keeping pace. Though their unemployment rates were slightly higher, the Central Arkansas cities of Little Rock (6.5%), North Little Rock (6.95%) and Conway (6.97%) remained below the national rate of 7% and state rate of 7.2%. Elsewhere in Arkansas, Fort Smith (7.42%), Texarkana (7.69%), Hot Springs (8.23%) and Pine Bluff (11.47%) rates came in higher than the state rate, with Jonesboro coming in slightly better at 6.28%. A 2012 to 2013 comparison shows that the unemployment situation in the state did not change drastically, with all cities seeing a change of less than 1%. Pine Bluff saw the largest increase, with an unemployment rate that grew 0.94%, even as its labor force shrank. On the other end of the spectrum, Rogers unemployment declined by 0.31%. What is somewhat more noteworthy is the

decline in the unemployment rate at the national level, which was 7.8% for the last half of 2012, but only 7% for the last half of 2013. HOUSING SECTOR Home sales in Arkansas and all 12 cities continued to move in a positive trajectory. Home sales, and the total value of the homes sold, increased across the board for the July through December 2013 period. Home sales are reported on the county, not city, level. The increase in homes sold was in the double digits for all 12 cities, with Hot Springs showing the smallest increase at 11.3%, and Texarkana the highest at 59.4%. The total value of the homes sold was also up by double digits for all but Hot Springs, with Conway, Jonesboro, Rogers, Bentonville, Fayetteville, Springdale and Texarkana values increasing by over 18%. While home sales activity was favorable, new residential permits and the total value of those permits offered a more nuanced story. For the period of July through December, all but three cities had a decline in the number of new residential permits issued. A decrease in permit activity was most notable in Fort Smith (-47.8%), North Little Rock (-29%), Conway (-28.7%), Little Rock (-27.8%) and Pine Bluff (-20%). Hot Springs permits increased by 4.5%, Texarkana by 5% and Fayetteville by 9.1%. Total residential permit values increased in Jonesboro, Conway, Little Rock, Fayetteville and Springdale. The remaining seven cities had a decrease in the total value of those permits, ranging from -6.4% in Rogers to -23% in Hot Springs. COMMERCIAL SECTOR Commercial development news appeared

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

to be more positive than negative for the 12 cities, with the number of commercial permits and the total value of those permits up in two thirds of the cities. A double-digit decline in new commercial permits for the July through December 2012 to 2013 comparison was noted in Conway (-73.2%), Texarkana (-54.5%) and North Little Rock (-15.8%). Springdale, Pine Bluff, Jonesboro, Fort Smith, Bentonville and Hot Springs all had an increase of 100% or more. While these increases may look significant, for some cities the increase may only represent two additional new permits, as seen in Pine Bluff. Hot Springs saw a growth of six additional permits, resulting in a 600% increase in activity. Therefore, the percentage change in the number of permits issued only gives a glimpse of the true commercial development activity for a particular location, as these activities may fluctuate from reporting period to reporting period. The year-on-year comparison for total commercial permit value ranged from an 85.4% decrease in Conway to 496.4% increase in Jonesboro. All communities except Conway, Texarkana, Rogers and Little Rock saw an increase in the value of the commercial permits issued during the July through December time frame. Again, the percentage changes are not the final word on the overall robustness of commercial activity for a community, but rather reflect the unpredictable swing in commercial investment that will naturally rise and fall from period to period. SALES TAX REVENUE Sales tax collections in nine of the 12 cities showed growth from 2012 to 2013, ranging from a meager 0.1% in Fort Smith

to 4.2% in Rogers. Bentonville, Texarkana and Pine Bluff all recorded a decline in collections at -3%, -2.6% and -1.1%, respectively. Modest growth in collections may not be surprising considering the tepid unemployment numbers.

From formal to business casual,

BANKRUPTCIES During the last half of the year, chapter 7, 11 and 13 bankruptcy filings dropped in seven of the 12 cities, which is an improvement over the last reporting period of January through June, in which all cities saw an increase in filings. Fayetteville boasted the largest decrease in filings, down 21.3%. Bankruptcy filings increased in Texarkana (52.8%), North Little Rock (18.7%), Bentonville PLEASE This ad is shown at actual size. Please print it out and make sure all text is readable before approving. (10.9%), Jonesboro (10%)NOTE: and Little Rock (2.2%).

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Amy Whitehead is the director of the Center for Community & Economic Development at the University of Central Arkansas. Data collection provided by the center’s Brett Roberts and Jeremy Chappell.

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Cover Story

Acxiom CEO Scott Howe

By Roby Brock

Disruption is a word that most use to describe their power being knocked out in a storm. For Acxiom CEO Scott Howe, disruption is just another day at the office. Howe, 46, has been dealing with disruption throughout his business career. Itâ&#x20AC;&#x2122;s a quality that has attracted him to many jobs, and it has him sitting in an ideal situation leading one of the largest tech firms in Arkansas and on the planet.

PHOTO: BOB OCKEN

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Cover Story PHOTO: BOB OCKEN

Acxiom headquarters in Little Rock

hrough layoffs as he works to restructure an aging business model to congressional inquiries on privacy and big data, Acxiom’s leader knows that he is sitting in the captain’s seat of a ship going through a sea change of digital transformation. “Technology creates disruption,” Howe said in a recent one-on-one Talk Business interview. “I’ve grown up in the most technologically disruptive decades in history.” SHAPING THE CEO It’s true. Howe grew up in Wisconsin, the son of a hospital administrator and a nurse. There wasn’t a “road to technology” that catapulted Howe into the tech industry, but kitchen table talks with his father in the evenings shaped a young man’s perceptions of the business world.

Regularly, Howe said they would talk about the evolution of health care. “Even going back to the ’70s, we’d talk about the disruption that technology was having on the traditional business in caregiving,” he said. “Through his eyes, I started to understand what were disruptive forces in business. How even the best businesses – if they didn’t change and evolve over time – would slowly wither and die.” After graduating magna cum laude with a degree in economics from Princeton and an MBA from Harvard, Howe contemplated his career path in adulthood. A five-year stint in international strategy consulting led to jobs in online advertising in the late 1990s through the mid-2000s. It was a burgeoning field, new terrain in a blooming digital world that was redefining marketing and consumer purchasing power in the Internet age against the stolid world of TV, radio and print.

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Microsoft Corp. eventually came calling with Howe serving for nearly three years as corporate vice president of advertiser and publisher solutions. He also has to his credit the title of co-founder of two online projects. Fast forward to March 2011 when Acxiom and then-CEO John Meyer cut ties. Three months later, Howe was selected as the replacement for Meyer, who had served a little over three years succeeding iconic Acxiom founder Charles Morgan. “There’s a saying in football: You don’t want to be the guy who replaces John Elway. You want to be the guy who comes in after Bubby Brister,” Howe said in reference to the successor to the legend. Howe and Morgan have a close relationship. At a March investor conference held by Delta Trust and Bank, the two men sat next to each other during lunch and ribbed one another before Howe’s presentation.

PHOTO: BOB OCKEN

“Central Arkansas and Little Rock are front and center in our future. It’s where our headquarters will continue to be.”

They meet regularly throughout the year to discuss the company, the industry and the world’s ever-changing technology landscape. COMING FULL CIRCLE Acxiom is a busy place. Consider these stats from the company’s corporate filings: • Acxiom maintains 15,000 databases for 7,000 global clients; • It executes more than 1 trillion global data transactions per week; • It can provide insight into 700 million consumers worldwide; and • Every year, Acxiom performs nearly 11 trillion consumer record updates. Late last year and early this year, Acxiom made a move to slice $20-$30 million from its bottom line after several struggling quarters and some company-defined “bad luck” with its core IT business. Acxiom lost some of the business to its clients pulling services in-house, while several contracts

were lost to competitors. “This is obviously not the result we worked for, nor is it acceptable,” Howe said in a July 2013 earnings call. By November, Acxiom announced it would streamline operations through altered workflows and management restructuring – corporate speak for layoffs – which filtered into the first quarter of 2014. The company severed an estimated 250-300 jobs with a sizeable portion of those workers coming from the Arkansas workforce. Acxiom still employs more than 6,000 worldwide. Howe said the layoffs have been the “single greatest disappointment” he’s had since joining Acxiom, but he argues that the moves had to be made to re-position the firm for the future. The money from the job cuts and reorganization is expected to be invested back into Acxiom for research and development.

Howe contends that when he came on board the company was only spending threetenths of a percent of its revenue on new products and ideas. Companies like Apple and Google, he says, spend up to 8 percent of annual revenue on innovation. “Great companies see these megatrends occurring and over time they prepare for the technological disruption,” Howe said. “On the one hand, we’ve been aggressively hiring and on the other hand we’ve had to make some hard decisions. They’re the worst. Obviously, they have consequences for real people, real families, real communities.” In anticipation of the obvious next question, Howe said Acxiom will remain a fixture of Arkansas’ publicly traded landscape. “Central Arkansas and Little Rock are front and center in our future. It’s where our headquarters will continue to be,” he confides. www.talkbusiness.net

Cover Story What’s at work in the layoffs and restructuring? Howe explains that Acxiom is positioning itself more aggressively for the digital age. The technology firm that started in Conway as a direct-mail marketer four decades ago has seen seismic shifts in its core business. Now, the databases that drive the direct mail are also conducting more and more business online, and Acxiom requires workers with the skill sets to adapt to this brave, new marketing world. “In a sense, we’re coming full circle,” Howe said. “For 40 years, Acxiom has been the leader in database marketing, particularly applied to direct mail, but there’s a disruption happening all around us where most people don’t just read direct mail anymore.” Howe says consumers have richly diversified their media consumption habits and Acxiom must re-position itself to capitalize on the changes. “We see television ads; we listen to the radio; we surf the Web; we do Google

searches; we visit social media websites; we watch content over Netflix; we watch sporting events on ESPN.com. And each one of those activities creates amazing amounts of data,” he says. “The things that Acxiom has always been good at – utilizing data to create better targeted marketing campaigns – can now be applied to using data to create better experiences for people everywhere across any device. Not just at their mailbox.” BIG DATA, BIG PRIVACY Despite a tough inquisition from Congress and the national media, Howe says his company supports stronger privacy laws to protect consumer data. Acxiom has been one of several companies under scrutiny by U.S. Sen. Jay Rockefeller (D-West Virginia) through the Senate Commerce Committee. Rockefeller has been holding hearings for more than a year regarding the practices of the data broker community, targeting companies like Acxiom, Epsilon and Experian.

The Little Rock-based data firm was also mentioned in a recent “60 Minutes” news report that expressed concerns about the amount and detail of data that can be collected from the public through websites and other outlets. Howe is fighting back. He says that while a majority of consumers convey a “Big Brother” feeling from some data marketers, they’re also OK with it if they receive something of value in return. “[Consumers say] I will share my information with you if in fact I get money for it, if in fact I get better offers for it, if in fact I have better interactions with companies I love,” Howe said. Howe’s proof is the opt-out rate for the company’s initiative – AboutTheData.com, a website that allows consumers to view boatloads of information Acxiom has about them. Consumers can correct information in the Acxiom databases or choose to not have their information maintained. Howe expected a low double-digit percent opt-out rate, but says less than 2 percent

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of the half-million visitors to the site have chosen to be removed. He’s also told anyone who will listen that Acxiom supports privacy regulation of its industry if it addresses specific concerns not vague concepts. “In every interview I have done in the last year – when I talk to ‘60 Minutes,’ when I talk to CNN, when I talk to the New York Times, when I talk to the Wall Street Journal, when I talk to Sen. Rockefeller – I always say the same thing, which is: you might be surprised to learn that Acxiom is in favor of much stronger privacy regulation. And we are,” Howe said. In recent weeks, Howe has granted interviews to different advertising industry forums reinforcing his positions. He contends the drafts of privacy regulation laws that Rockefeller is pursuing would be worse than any of the negative consequences of federal health-care reform. “If you think about the worst part of the ACA, welcome to the data bills,” Howe told an Atlanta audience in late March. “It grants

the government the ability to create a centralized consumer data portal whereby all permissions are granted,” he told the crowd. The complications of building such a portal make the ACA “look like child’s play.” At the Little Rock Delta Trust presentation, he outlined five areas he said could result in meaningful reforms to weed out bad players in the data mining industry and ensure protections for consumers. Howe said consumers should have a “bill of rights” that includes: • Disclosure of the data being collected about them; • Limiting data use to marketing only; • Restricting use of sensitive data; • Enforcement of security and data breaches; and • Transparency and choice for consumers. Howe explains that the purpose of “big data” and what a marketer is trying to do with it involves improving customization for shoppers and other audiences. “They want to capture a bunch of

information so they can have a better conversation and deliver a better experience to you,” Howe said. “The goal of a global marketer, metaphorically, is to create the world’s largest spreadsheet. One that has a single row for every person on the planet – 7 billion rows. And it has hundreds of thousands of columns – one for every observable piece of data,” he noted. Howe said as the picture of data is completed, a user of the information can customize pitches to individuals to reach the right audience in a smarter, highly personalized way. “All we’re doing is the same stuff we’ve always been doing. We’ve always been good at the science of marketing. But what’s different is we’re applying it to a whole bunch of new channels and new touch points and new experiences such that the things we’ve always been good at have much broader applicability.” Just another disruptive day at the office.

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Galley Support Innovations CEO Gina Radke

Minding the Interior GSIâ&#x20AC;&#x2122;s CEO Leads and Serves From the Inside Out By Casey L. Penn

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Details can be pesky – last-minute chores that can stall out a project near its completion or that can make up the perfect complements that smoothly transform a vision into a dream come true. For Galley Support Innovations CEO Gina Radke, 35, details are a driving force, both on the job and in her personal life. She feels equally strongly about second chances, as demonstrated by her company’s policies and her personal affiliations. A Little Rock native, Radke has had a fierce independent streak all her life. After attending Mills High School, she earned a B.S. from Park University while simultaneously beginning a career in marketing and business development. Sheer nerve helped her become promotions director for then-local radio station KURB/B98.5. “They didn’t have the position at the time,” she recalled. “I made it up and said I would do it for minimum wage. I had the best co-workers and bosses there. Kevin Miller and Susan Andrews put up with a lot from a snot-nosed kid who thought she knew everything. Kevin inspired me to change my college major when he said, ‘You can be a DJ with any degree, but you can’t do anything else with a radio degree.’” At age 18, she met her husband-to-be, Wade Radke, through a mutual friend. “It was love at first sight, though we wouldn’t admit it until 10 years later,” Radke said. “We both have Type A personalities and people often wonder how we have stay married.” The two have stayed happily married – for 16 years – and they work together to not only raise two sons (Stephan, 16, and Noah, 10) but also to nurture the business they founded in 2005 after purchasing the rights to a product line that had been in Wade’s family for 50 years. ALL CUSTOM JOBS “GSI is changing the way the aerospace industry looks at interior hardware,” Radke says proudly of their Sherwood-based aerospace manufacturing firm. “Every aircraft must have locks, hinges, latches, etc., yet nobody thinks to make or buy them until the last minute. We took these detail products from a last thought to a designer product.” GSI is best known for its specialty custom latches designed to specification for

customers like Boeing, American Airlines and Gulfstream. “We’re not interested in selling everybody the exact same latch. That has been done for years,” Radke said. “Our business aviation customers spend millions designing the most luxurious aircraft in the world – with every bell and whistle you can imagine – and then are told to pick from three latches to place in every one of their highly visible cabinets. We changed that. Wade and his team sit down with aircraft designers to understand the design of the interior and help design a latch that has the same design as the rest of the interior.” While Gina heads the business side of GSI, Wade serves as lead product designer,

“I don’t try to be ‘one of the guys.’ I work hard, and I accomplish more by being straightforward with a smile than by being overly bossy.” – Gina Radke utilizing his degrees in computer science, industrial engineering and aviation management. Having served his country for more than eight years in the United States Air Force, he now dedicates himself to building the perfect design for each customer and building the perfect firm-to-customer relationship as well. “Long-term success depends upon solid relationships from top to bottom. From your number one customer to your third- and fourth-tier suppliers, relationships are the key,” he said. “GSI goes above and beyond to ensure that our customers, suppliers and employees feel valued and empowered at every level. Empowered to improve a

process, educated to make decisions and fearless to infuse new direction. With every new design, there is a new creation. Each creation requires relationships of its own, with a dedicated team to bring it to life.” A CHANGE OF ORDER Radke has been at the helm of GSI since 2008, when she stepped into the role through necessity. “Originally, I did sales and marketing and ran the office. When the economy slumped, Wade went to work for another company, so I became the CEO,” she explained. She was determined to do everything she could to keep the company afloat and keep workers employed, but the learning curve was high. “Here I was telling lifetime machinists how to work more efficiently,” she said. “I spent hours in online classes and used SCORE, AMS and every other manufacturing resource I could get my hands on. I learned to run every machine on the floor and have the scars to prove it!” After the company stabilized, Wade returned and briefly held the role of CEO. Just three months in, he decided that his wife was better suited for the position and asked her to take over once again. Being a female CEO can be difficult, Radke admits. “I have been called ‘the toughest thing in a skirt,’” she said, adding that in truth she’s joyful and even bubbly. “I don’t try to be ‘one of the guys.’ I work hard, and I accomplish more by being straightforward with a smile than by being overly bossy.” Radke’s work of late centers on maintaining GSI’s high standing in Arkansas’ aerospace industry. She’s just as passionate about improving conditions for the approximately 180 aviation and aerospace companies in the state, according to Robin Pelton, Aerospace Sector Manager for the Arkansas Economic Development Commission’s Aerospace Alliance. A colleague for the past seven years, Pelton has called on Radke to speak and co-coordinate events and describes her as a true advocate for the industry and a shining example of how to utilize resources available to local aerospace companies. “Gina is a great role model,” Pelton said. “She wants to see the industry grow as well as her company – not only for profit but www.talkbusiness.net

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Profiles: Radke for the good of those working in the industry.” According to the Arkansas Aerospace Alliance, the state’s aerospace industry employs more than 9,000 Arkansans. Under Radke’s leadership, GSI continues expansion that will add 7,200 square feet of manufacturing and finishing space and equip the firm to approve their own products for aviation use. “We are also focusing heavily on the commercial sector for the next few years, as well as increasing exporting,” she added. SUPPORTING THE TEAM With loftier goals than simply making a profit, GSI is also in the business of changing employees’ lives. Radke has learned from experience that there’s often more to someone’s story than can be seen on the surface. She makes it her business to look for the more hidden details that define the people around her. She also believes in second chances and has benefited from a few in her own life. “In my life, I was fired twice – from great jobs. I was too single-minded and competitive,” said Radke, who has learned that being her best means putting others first. “A team can do much more than one superstar.” Radke’s team has supported the company, too, through their loyalty and hard work in the hardest of times. Once, after roughly two years of low production and high development (the latter doesn’t get paid until production), the Radkes were to the point of being unable to make payroll. “We told employees on Friday that if they came to work on Monday we could not promise them they would get paid,” she recalled. “We went home early that Friday and prayed.” When Monday rolled around, every employee was present and it was a thankful moment. “That Friday our customer we had been working with brought us a check that covered the development, which got us through to when production could begin,” she said. “Our whole life is a second chance, so we want to extend the grace we have been given. The company creates an atmosphere where employees know their value and realize their work affects the entire team. The company offers free lunch once each

From industrial to luxury, we do it all. No job is too big or small. We make it happen! GSI is a designer and manufacturer of interior hardware for planes, trains, yachts and more. We are a family owned and operated business for over 50 years. We offer our core parts with thousands of variations in between. One of our specialties is providing original latches designed especially for your needs. With one hundred percent of our lots inspected, quality is placed in each and every piece. From original design to manufacture to print; our precision machine shop gets it done. We strive to provide a product that exceeds industry standards and we never settle for less. Minority – Veteran – Female Owned; ISO 9001:2008 and AS9100 Certified!

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Profiles: Radke week, a weekly Bible study, extra paid time off for counseling, child-care benefits and more. In a true display of putting your money where your mouth is, GSI reaches out to the struggling and the challenged. “We hire felons,” Radke said. “Wade went to work somewhere else in 2008, because we had two felons working for us, and he knew it would be much easier for him to find a job.” In fact, GSI’s Second Chance Ministry gives people from treatment and other programs opportunities to be hired, trained and have a productive lifestyle. Radke sometimes hires employees through the Union Rescue Mission, an organization she passionately began supporting after seeing the good it does. “I got a call late one night,” she said. “A young family member was on the way to the emergency room. That night I began researching addiction clinics and rehabs. The cost was outrageous. I called a friend who worked at the Union Rescue Mission. He told me that Dorcas House [a home for battered women and children] had started a women’s treatment program. We took her the next day.” Before long, Radke was asked to join its board of directors. She has been active since, and for two years has chaired “Night on the Street,” a fundraising camp-out event held on the streets of the River Market to raise money and awareness for the mission’s free recovery programs, homeless shelter and Dorcas House. During her first year chairing the event, Radke discovered that three of her employees were homeless. “It changed my view on the homeless population,” she said. “It’s not just the drunk guy on the corner. These were professional, educated people, who hit hard times or were recovering from long-term unemployment.” Radke is also passionate about empowering others to be servant leaders. She supports local adoption, and she energetically promotes Arkansas’ economic development. Her success in championing these causes – along with her other interests, business sense and hands-on leadership style – leaves no doubt that Gina Radke is in charge, right down to the final, most complementary detail.

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Commentary

Value Drivers in the Sale of a Business By Gary Jones Certified Business Intermediary Cornerstone Business Advisors

hen meeting with a business owner contemplating the future sale of his or her business, often times it is helpful for me to identify the aspects of their business that prospective buyers will most likely find appealing as well as those areas that are in need of improvement. Though each business is different from the next, I have found there are at least nine value drivers common to most any business. In no particular order, they are as follows: 1. A stable, motivated management team in place. Whether the management team consists of a single owner/operator or one that would fill a large conference table, it is critical that a buyer have some assurance the business will successfully continue long after the sale. A talented, properly incentivized management team can provided day-to-day stability to the business while a new owner settles in. According to a recent national survey conducted by The Sellability Score, business owners with some form of a management team in place are approximately 50% more likely to receive an acceptable offer than those who don’t. Even though sole proprietors may still receive competitive offers, many times those offers obligate the owner to a longer transition period than desired due to lack of management depth. 2. Solid, diversified customer base. Customer concentration is a very common obstacle for business owners to overcome. After all, many companies get their start by a handful of customers who are willing to give them a chance. Often times those initial customers continue to be significant over time, even if the company makes concentrated effort to grow its customer base. If a handful of customers represent

Gary Jones

a majority of the sales, the business owner should expect alternative proposed deal structures from the buyer, such as an earn-out or holdback provision. 3. Recurring revenue from existing customers. If a business has to “start over” with zero sales every year, a prospective buyer will most likely downgrade the quality of annual revenues when valuing the business. All things being equal, a company with recurring revenue is much more appealing and valuable to the market even though sales, gross margins, etc., are the same. 4. Good and improving cash flows. The business must generate enough cash flow for a prospective buyer to pay his salary, retire debt and realize a return on the original investment of purchasing the business. The lower the cash flow, the more difficult for the buyer to “justify” a strong purchase price. A good exercise for the seller is to ask the question, “Would I purchase this business under these terms, for this salary and this return on investment in view of the inherent risk of owning this business?” 5. Realistic growth strategy. A seller’s claim of double-digit sales growth potential must be supported by a plan showing how that growth will be achieved, and more importantly, that the growth will be profitable. If the potential growth rate is significantly greater than previous history, an astute buyer may request that part of the purchase price be tied to achieving that future growth in the form of an earn-out. 6. Clean financial records and effective financial controls. With recent accounting scandals and increased scrutiny of accounting methods, having audited financial statements is welcomed by a prospective buyer. On the contrary, not having audited statements will increase the

due diligence time and costs of the buyer. In any case, well organized company records will increase the buyer’s confidence in the numbers. 7. Systems that improve the sustainability of cash flows. If the present owner’s processes are found on yellow legal pads, chalkboards and sticky notes, a potential buyer will discount his valuation, if not walk away. Well-documented, transferrable and electronic processes are important to a buyer’s evaluation of future cash flows. 8. Facility appearance consistent with offering price. This one may be the hardest one for owners to understand and accept. Even if the facilities don’t drive business and produce sales, they do form an impression on prospective buyers – and on prospective customers as well. Poorly maintained facilities can negatively influence a prospective buyer’s perception of value. 9. Reasonable and supportable value of business. In a recent Market Pulse Survey jointly conducted by International Business Brokers Association (IBBA), M&A Source and Pepperdine Private Capital Markets Project, IBBA’s Chairman Steve Wain noted, “The largest mistake sellers make is unrealistic expectations, and that’s typically tied to valuations.” It is important for an experienced business intermediary to help set an owner’s expectations of how his or her business will be valued by the market. Gary Jones is a principal at Cornerstone Business Advisors, a Little Rock-based business transaction advisory firm that assists owners of small- to medium-sized businesses by providing comprehensive business disposition, acquisition and exit planning services. www.talkbusiness.net

Profiles Service PHOTOS: BOB OCKEN

Venerable Subiaco Tucked Away in the Logan County Countryside, This Abbey and Academy Are Known Around the World By Rex Nelson

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

The complex rises suddenly and majestically from the surrounding countryside as you drive along Arkansas Highway 22 in Logan County. Subiaco – consisting of a Benedictine abbey and an adjoining school for boys – is an Arkansas landmark. Thousands of Arkansans have attended retreats at Subiaco through the years. Since the early 1960s, the Coury House has been the abbey’s retreat center. There are 36 overnight rooms, and the retreat center stays busy as people come to this pastoral setting near Paris to pray, reflect and learn. To truly understand Subiaco, though, you need to visit with some of the monks in addition to some of the men who once attended school here. The abbey’s historian, Father Hugh Assenmacher, is a good example of the people who devote their lives to this institution. He entered Subiaco Academy in the fall of 1947 as a ninth-grade student. The Billings, Mo., native graduated from high school in 1951, took one year of college courses at Subiaco, entered the abbey as a novice in the fall of 1952 and said his vows in September 1953. Through the years, he has taught religion, history, sociology and music. He was the abbey’s organist and was even the band director and choral master for a time. Like many of the monks, he has spent decades in the rural setting and served in multiple roles. Assenmacher, now in his 80s, is retired from teaching at the academy, but still takes visitors on walking tours of the grounds. He has spent more than his fair share of time through the years cutting grass, raking leaves and trimming shrubs. He points out that the monks even wash their own dishes. He generally takes his turn at lunch. The Benedictines believe in a life of “prayer, community and work.” A typical day for a Subiaco monk includes prayer at 5:45 a.m., mass at 6:35 a.m., breakfast at 7:15 a.m., noon prayer, lunch, readings at 5:30 p.m., supper at 6 p.m. and vespers at 7:05 p.m. Students from the academy are welcome to join the prayer services. Asked if any of the boys show up for the 5:45 a.m. prayers, the soft-spoken Assenmacher replies: “Not often.” There are almost 200 students at the

academy, which serves boys from the seventh through the 12th grades. More than 30 of them are international students. Not all of the students are residents. Some commute from nearby communities. The academy even runs a bus to Fort Smith each day. “Students who attend Subiaco Academy come from various backgrounds,” a school publication states. “Our young men become part of a family and make Subiaco home. Their ties to one another and to the monks remain long after graduation. Subiaco remains a permanent reminder of their formation throughout their life.” Subiaco graduates include Arkansas business leaders such as Matt Post (class of 1943) of Altus and Leo Anhalt (class of 1958) of Fort Smith. Post, who became president of Post Familie Winery in 1951, is a former Altus mayor and is well known by agriculture and tourism officials across the state. Anhalt is the co-founder of SSI Inc., a construction company that was formed in 1969. He helped start the National Craft Olympics and has long been active in civic affairs in the Fort Smith area. And then there’s former state Sen. Jay Bradford, who was the only non-Catholic graduate in the class of 1958. Bradford, who grew up at Paris, later founded First Arkansas Insurance at Pine Bluff. He went on to become one of the state’s most high-profile legislators, serving in both the House and Senate and playing a key role in the establishment of the state Ethics Commission. Bradford was appointed by Gov. Mike Beebe as the state insurance commissioner, a position he still holds. “It instills in its students a value of learning and a dedication to community life that follows them throughout their lives,” Bradford says of the academy. “Subiaco is a college preparatory school whose graduates have attended most of the major universities, including the military service academies. Subiaco graduates live all over the world. They’re loyal alumni who continue to support the abbey both spiritually and financially.” Bradford, who has always been outspoken, clearly is proud to be a Subiaco graduate. “I credit luck for any success I’ve had, and

one of the greatest strokes of luck I’ve ever had was being able to attend Subiaco Academy,” he says. “The values I was taught there have been a mainstay of my business career and my public service.” Lured by the advertising campaign of an Arkansas railroad, German-speaking immigrants made their way into western Arkansas in the 1870s, establishing St. Benedict’s Colony. Soon after the Civil War, the U.S. Congress had given the state of Arkansas 10 alternating sections of land on each side of a proposed railroad route to aid in the construction of what would become the Little Rock & Fort Smith Railroad. Legislation was passed allowing the issuance of state-backed bonds to finance railroad construction. That legislation allotted the land given by Congress to the railroad. In 1869, a freight yard and depot were built in Argenta, which now is known as North Little Rock. By August of that year, workers were laying track. The spot where the Little Rock & Fort Smith Railroad tracks crossed the Cairo & Fulton Railroad tracks became known as the Fort Smith Crossing. It’s now the site of the massive Union Pacific rail yard at North Little Rock. In 1870, workers laid 24 miles of track as they followed the north bank of the Arkansas River west toward Fort Smith. By 1871, 82 miles of track had been laid. “An influx of skilled German immigrants in Arkansas allowed the Little Rock & Fort Smith to push across the state,” Larry LeMasters writes for the online Encyclopedia of Arkansas History & Culture. “These immigrants worked for the railroad and settled on land grants given by the Little Rock & Fort Smith and in towns along the railway, eventually forming the basis for Arkansas’ wine industry near Altus.” The railroad reached Van Buren on Jan. 30, 1879. The railroad established a market for its services by selling land both north and south of the Arkansas River to immigrants. The Catholic Diocese of Little Rock acted as an agent for the railroad. Bishop Edward Fitzgerald, a native of Limerick on the west coast of Ireland, had come to this country at age 15 when his family left Ireland during the great potato famine. He entered a seminary at www.talkbusiness.net

Profiles: Subiaco Perryville, Mo., in 1849. Fitzgerald became a priest in 1857 at St. Patrick’s in Columbus, Ohio, and later became known across Ohio for having healed a schism between Irish and German immigrants. Pope Pius IX appointed Fitzgerald as the second bishop of Little Rock in 1866. Three years later, during the First Vatican Council, Fitzgerald was one of just two prelates to

PHOTO: BOB OCKEN

Students at Subiaco Academy

vote against papal infallibility. Fitzgerald served as bishop until 1907, watching the diocese go from having six priests to having almost 50. Fitzgerald played a leading role in encouraging immigration to Arkansas during the 1870s and 1880s. There weren’t many Irish immigrants, but Germans – both Catholic and Lutheran – poured into the state. The Catholics were fleeing the anti-Catholic policies of German Chancellor Otto Von Bismarck. In 1877, Abbot Martin Marty of St. Meinrad’s Abbey in southern Indiana decided to establish a Benedictine mission in western Arkansas. In December 1877, Father Isidor Hobi of St. Meinrad’s found

a site near Paris for St. Benedict’s Colony. Father Wolfgang Schlumpf, Brother Hilarin Bentz and Brother Casper Hildesheim rode in a mule-drawn wagon from the abbey in Indiana to Arkansas during the spring of 1878. They celebrated the first recorded mass in Logan County on March 19 of that year. About 30 German families already had arrived at the colony. By the end of 1878, more than 150 families had settled in the area. St. Meinrad’s was limited in the amount of financial support it could provide, but what had become known as St. Benedict’s Priory was helped by the Abbey MariaEinsiedeln in Switzerland. Swiss monks were sent to Logan County to ensure that the Benedictine mission there would survive. In 1887, St. Benedict’s College opened. It was the forerunner of what is now Subiaco Academy. In 1891, Pope Leo XIII raised the status of St. Benedict’s Priory to that of an abbey. It was renamed Subiaco Abbey, and Bishop Fitzgerald began sending seminarians from the Diocese of Little Rock to be trained there. The seminarians were trained at Subiaco from 1892 until 1911. The first monastery was destroyed by a massive fire in December 1901, but work already had begun on a new building on top of a hill. That hilltop remains the location of Subiaco Abbey and Academy, which began a high school for boys in 1902. By the 1920s, the German and Swiss influence on Subiaco was waning. English was spoken more often than German. Father Ignatius Conrad, a Swiss-German monk who had been elected the first Benedictine abbot in Arkansas in 1892, was replaced in 1925 by a native

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Arkansan, Father Edward Burgert. Parts of Subiaco burned again in 1927. The Great Depression began two years later, and the abbey struggled to recover. By the 1950s and 1960s, though, Subiaco again was thriving. The abbey church, which had been destroyed in 1927, was rebuilt between 1953 and 1959. The 182 stained glass windows in the church were designed by the Franz Mayer Co. of Germany. The columns for what’s known as the high altar are 18 feet high. A canopy and cross of carved wood are covered with gold leaf. There are 52 tons of marble in the sanctuary. The white marble came from Italy while the red marble was imported from Spain. The Coury House Retreat Center opened in 1963 and in the decades since has played host to visitors from across the country. On the extensive grounds surrounding the abbey, the monks have raised cattle, kept vineyards, grown produce and even operated a sawmill at one time or another through the years. They still make what’s known as Monk Sauce, a pepper sauce that’s a popular item in the Subiaco gift shop. The adjacent town of Subiaco, which had a population of 572 people in the 2010 census, has buildings along Conrad Street that were constructed by German immigrants from the same locally quarried stone that was used for the abbey. Eighty acres of abbey land was donated in the late 1800s to the Subiaco Development Co. for the town. Street names include Augustine, Pius, Meinrad and Boniface. Conrad Elksen built a rail depot and mercantile store in the new town. On June 30, 1909, Subiaco residents celebrated the arrival of the first passenger train to stop there. The monastery band played. The abbot, dressed in full vestments, blessed the train, greeted the passengers and helped drive the final spike. Passenger service ended in 1938. By 1949, the line had ceased operation entirely. The depot was torn down in 1961. But the town of Subiaco was not dependent on the railroad. Its fate was tied to the nearby abbey and academy, which continue to operate all these decades later, bringing boys from around the world to a remote place called Subiaco.

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Feature

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Growing New Deals Five years removed from the Great Recession, the Arkansas banking landscape is rapidly and fundamentally evolving. By Roby Brock

“I

t is not the strongest or the most intelligent who will survive, but those who can best manage change.” This quote from Charles Darwin, the 19th century evolutionary scientist, describes his theories on natural selection among animals and wildlife, but it could certainly apply to banking. In the five years since the financial collapse that triggered the Great Recession, Arkansas banks have shrunk from 134 to 120, a 10 percent decline between 2009 and 2013 according to FDIC statistics. Yet in that same time frame, fathom this: • Net income has nearly tripled for those 120 banks to $708 million; • Total assets and deposits have both experienced 19% growth; • Total return on equity has risen 36%; and • Bank employment in Arkansas has climbed by nearly 1,500 workers, up 8%. It has taken a “survival of the fittest” mentality to plow through the aftermath of the economic downturn and the banks that are still standing confide that the next five years may be even more dramatic than the last five. George Makris, the new CEO of Pine Bluff-based Simmons First National Bank Corp., just led his bank through two big buyouts – Little Rock-based Metropolitan National Bank and Delta Trust and Bank spending a whopping $119.6 million on the deals. Makris said market share is driving Simmons’ acquisition strategy these days. “In Central Arkansas, our share was obviously not where we wanted it to be.

PHOTO: BRYAN PISTOLE

George Makris, CEO, Simmons First National Bank

So as we take a look at acquisitions, it is to build our franchise in those growth markets,” he said. That includes out-of-state markets, such as Missouri and Kansas where Simmons previously conducted FDIC-assisted transactions. Makris said the bank is

“There are a lot of private banks that are just tired of what’s going on in the industry today.” – George Makris, CEO Simmons First National Bank

now positioned for organic growth and acquisition growth in the future with a host of new products. “We really would like to fill in our footprint in Missouri and Kansas. We have a strategy now for de novo growth. We’ve got some really good bankers in those markets,” he said. “We need a little more scale in those markets to be able to do some of the things that we really want to do.” Makris said for the private banking sector, especially small community banks, there are several factors likely to lead to more merger and acquisition (M&A) activity in the coming years. “There are a lot of private banks that are just tired of what’s going on in the industry today,” Makris said. “In many cases, we see private banks that have aging management and not a real good succession plan.” Those banks typically have boards of directors who must contribute money into a local bank’s capital in order to help in maintain sufficient margins. Of course, they’d prefer to be receiving dividend checks, Makris said. www.talkbusiness.net

Feature: Banking PHOTO: BRYAN PISTOLE

“The big picture is we’re in a very slow growth economy and we’re probably going to be in a very slow growth economy for a long time.” – George Gleason, CEO Bank of the Ozarks

George Gleason, CEO, Bank of the Ozarks

State Banking Performance Summary

2013 2012 2011 2010 2009

Aggregate Condition (millions) Net income Total assets Total loans Total deposits Other real estate owned Equity capital

708 695 587 412 244 62,058 61,289 58,500 58,206 55,487 37,798 36,903 35,317 36,677 36,932 51,124 50,336 47,873 47,483 44,358 573 769 798 793 510 7.262 7.006 6.625 6.413 5.938

Performance Ratios Net interest margin Return on assets Return on equity Percent of unprofitable banks

4.03% 4.02% 4.14% 3.96% 3.79% 1.21% 1.16% 1.02% 0.73% 0.45% 10.43% 10.12% 9.2% 6.64% 4.16% 5% 7.94% 11.81% 16.15% 18.66%

Condition Ratios Loans to assets Noncurrent loans to total loans

59.82% 58.99% 59.04% 62.03% 65.29% 2.09% 2.74% 3.56% 3.57% 2.74%

Core capital leverage ratio

10.43%

Number of banks Total employees

120 126 127 130 134 18,639 18,361 17,815 18,069 17,485

10.13%

9.99%

9.56%

Source: FDIC 12/31/2013 report

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

9.25%

He also said recent regulatory burdens stemming from the Dodd-Frank reform bill is also impacting community banks and forcing many of them to reconsider their long-term futures. “Management that may not have a great succession plan, boards who have changed their focus for their wealth, and regulatory fatigue are the three main drivers of a lot of the M&A activity we see today,” said Makris. One of Simmons’ biggest competitors, Bank of the Ozarks, has also been on an acquisition tear in recent years. Since 2009, the Little Rock-based publicly-traded financial holding company has purchased 10 different banking outfits. Most recently, it closed on a small bank buyout in Houston and $216 million acquisition of Arkadelphia-based Summit Bank. While expanding its footprint and beefing up its market share is important to Bank of the Ozarks CEO George Gleason, the bigger driver is return on equity. “Our foremost metric is we want to be able to generate a 20% return on equity with an 8% capital allocation. If the transaction can’t be structured in a way that meets that test, it’s probably not going to be something we’re interested in doing.” Gleason’s bank has done a number of FDIC-assisted transactions over the last several years, but many banks on the bubble have battled through the worst part of their challenges and now are faced with selling from a healthier position or carrying on. While Gleason doesn’t see the FDIC driving deals like it once did, he does think the sluggish economy is putting big-time pressure on many of his potential targets. “The big picture is we’re in a very slow growth economy and we’re probably going to be in a very slow growth economy for a long time,” he said. “There was a tremendous amount of banking capacity built from the mid-90’s through 2007. There’s simply more capacity out there than is needed in the economy that we’re in today. If you combine that excess capacity in the industry with a growing regulatory burden, you have an environment that is ripe for consolidation.” Gleason warns that two factors could change the current M&A environment – one government driven, one market driven.

Too much regulation or a decline in the economy could lead marginally healthy banks back into the FDIC’s purview, Gleason says – a development that could “chill” bank acquisitions as buyers wait to get deals for pennies on the dollar. Or, the market could return to the pre-recession days when it overpaid on bank acquisitions. “We could get back to an environment like we saw in 2006 where acquisitions were

being done at unreasonably high prices that didn’t make economic sense,” said Gleason. “We could possibly evolve into an environment where the buyers become so determined to make transactions that they overpay for them and that will end the game in a very unpleasant way.” Darwin spent his life observing what happens when animals and humans “end the game in a very unpleasant way.” Bankers could take a note or two.

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Feature: Banking

Tough Terrain

Smaller community banks – no matter where they’re located – are battling a jungle of obstacles. By Michael Tilley and Kim Souza In addition to the challenge of increased regulation, an interest rate environment that compresses margins, and ever-changing technology, Northwest Arkansas bankers Mary Beth Brooks and Rob Husong also are in the business of providing lawn care on property they’d rather not own. It’s been well documented that Northwest Arkansas was by far the hardest hit Arkansas metro area when it was learned around 2006 that the subprime emperor had no clothes or collateral. Benton and Washington County home sales in 2005 totaled 8,565, only to begin a tumble in 2006 that saw the combined sales reach a low of 5,292 – a face-slapping 38.2% drop – in 2008. Statewide, home sales in the four largest metro markets totaled 24,789 in 2005, before reaching a low in 2010 of 17,710 – a decline of 28.5%. Although the residential real estate market began to recover in 2012, the 2013 sales in Northwest Arkansas totaled 7,230, up 15.2% above 2012 but still more than

COURTESY OF THECITYWIRE.COM

15.5% below the 2005 pace. Several banks – ANB Financial and Metropolitan National Bank, for example – did not survive the residential real estate and commercial losses resulting from an almost 40% drop in the regional market. The ongoing residential recovery has reduced pressures on banks operating in Northwest Arkansas, but plenty of angst remains. ‘NOT FAST ENOUGH’ The City Wire in early 2013 reviewed 18 Northwest Arkansas community banks. The cumulative assets classified as “other real estate owned” – or OREO – totaled $444.24 million. A year before that the same 18 banks held $462.84 million in OREO on their books. The 4% decline compared to a more than 15% increase in area home sales during 2013 provides an example of the struggle to reduce OREO. “Not fast enough for me,” said Mary Beth Brooks, president of Bank of Fayetteville, when asked if non-performing assets were

What Is Dodd-Frank? The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 in response to the financial crisis that triggered the Great Recession. The expansive, comprehensive law is a compendium of federal guidelines, rules and changes aimed at banks and other financial institutions that is intended to lower risk in various parts of the U.S. financial system. It created new ratios for banks to adhere to, beefed up regulatory oversight of banking and securities, and altered practices for mortgage and commercial lending. Dodd-Frank also created the new Consumer Financial Protection Bureau (CFPB) to oversee many aspects of the law. Many regulations for the implementation of Dodd-Frank are still under consideration and review.

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

moving off the books faster than originally thought. “We have had good luck selling the few houses we have taken back and have had relative success at selling commercial properties. There has also been some good demand for residential lots. Raw land, on the other hand, has not turned over as well for us.” OREO held by Bank of Fayetteville fell from $8.948 million at the end of 2012 to $6.482 million at the end of 2013. The bank’s return on assets improved from 0.55% in 2012 to 0.70% in 2013. Rob Husong, Northwest Arkansas regional president for First National Bank Centerton-Lowell-Rogers, said a good sign in the market is that “desirable” lot inventory “dramatically decreased” in Benton County in recent years. What remains, however, are bank-owned lots that are less desirable because of location, lack of utilities and other factors. Overall, he’s pleased with the trends. “Yes, I believe they have been moving faster than originally thought,” Husong said. “Most banks have focused their marketing efforts on the pieces of OREO they feel they can move the fastest and recover a larger portion of their costs, while having certain OREO earmarked as longer term asset disposals in hopes the market improves over time to lessen the loss. ... But even these perceived longer term dispositions have started getting more interest from the marketplace, which I think is a positive sign for an improving real estate market.” As part of Fort Smith-based First Bank Corp., Husong’s region does not have a definitive OREO report. However, the FDIC report for First National Bank of Fort Smith – which includes Benton County operations – shows that OREO did see a big decline from $20.014 million in 2012 to $9.457

million at the end of 2013. The parent company’s return on assets improved from 1.29% in 2012 to 1.58% at the end of 2013. Brooks and Husong said they are eager to shed the ancillary costs of owning property. “Owning a subdivision and covering property taxes and mowing gets really expensive,” Brooks noted. “The regulators have been pretty understanding on the OREO front, however, and they realize that some properties will truly take many years to sell.” REGULATION GROWTH When they are not cutting grass, Brooks and Husong work to cut through a growing field of regulations brought about by new rules – primarily the Dodd-Frank law – intended to prevent anything approximating the near-financial collapse of the U.S. banking system in 2007-2008. The irony is that a bulk of the regulations are intended for banking operations with assets in excess of $10 billion, but just about any banking industry expert will testify that the rules could especially squeeze the community banks below $200 million in assets who may not be able to afford the time and people to feed the paperwork monster that has become Dodd-Frank. Regulators say they are trying to “minimize” the burden on community banks. Amy Friend, senior deputy comptroller and chief counsel for the federal Office of Comptroller of the Currency, testified April 8 before the Financial Services Committee of the U.S. House of Representatives. Republican committee members have pressured federal regulators to go easy on the rulemaking, especially with the smaller vulnerable banks. Friend noted that banks of all sizes “grapple with an evolving regulatory landscape and difficult business environment,” and admitted that such evolution carries a potential threat for smaller banks. “These changes can strain the more limited resources of community banks. As I will discuss next, the OCC is committed to addressing these concerns wherever possible. We have instituted a number of initiatives to do so and will continue to re-evaluate and look for additional ways to

minimize burdens on community banks,” Friend noted in written testimony to the committee. SQUEEZING OUT SMALLER BANKS Gaines Dittrich, a banking analyst and founder of Joplin, Mo.-based Dittrich & Associates, has said that closely-held banks – like First National and Bank of Fayetteville – are the most vulnerable to acquisition in what he predicts will be the next wave of consolidations. The consolidations will in large part be fueled by the increased compliance costs and potential community limitations resulting from Dodd-Frank and the international Basel III rules. Husong said Dittrich is on point with his prediction. “I think Gaines is correct with regard to the headwinds from regulatory pressure and the smaller banks ($250 million and less) will feel the burden to the point of looking for ways to exit, merge, or acquire in order to get enough critical mass to absorb the cost of additional oversight and still retain profitability goals,” Husong said. Brooks said said the smaller banks can survive if they “continue to invest in technology to stay relevant,” and double efforts to build and maintain community relationships. However, financial assumptions may have to change. “I think those (smaller community) banks can survive but the owner or shareholders

just have to adjust their expectations on returns,” Brooks said. A report – “Community Banks Remain Resilient Amid Industry Consolidation” – released April 9 by the FDIC suggested that community banks have survived past industry changes and “ they will continue to carry out these important functions for the foreseeable future.” The 11-page report only briefly mentions Dodd-Frank and Basel III, and in doing so suggests that the new rules could benefit the community bank sector of the financial industry. “To the extent that bank risk managers and bank supervisors are successful in creating a more stable banking environment in the years ahead, failures may contribute much less to consolidation than they have since 1985,” noted the FDIC report. A COMMUNITY FOCUS Husong, who in 2005 was one of the bank officers who launched Fayettevillebased Signature Bank, agreed that community relationships will be a key to bank success. “I keep going back to what community banks have traditionally been good at which is being relationship driven. In years past this typically meant having a customer’s checking accounts, loans, safe deposit box, etc., simply because a community bank had more flexibility to help customers with trusted professionals giving advice and

What Is Basel III?

Sources: Financial Times, Investopedia, and the U.S. Federal Reserve Bank.

Basel III is also a response to the financial crisis of 2008. Global financial regulators have held a series of conferences for four years to develop guidelines and standards to strengthen the international financial system, which was broadly affected during the Great Recession. Basel III is intended to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage. It sets a new key capital ratio for banks of 4.5 percent, more than double the current 2 percent level, plus a new buffer of a further 2.5 percent. Banks whose capital falls within the buffer zone face restrictions on paying dividends and discretionary bonuses. The new rules are being phased in from January 2013 through January 2019. www.talkbusiness.net

Feature: Banking guidance when asked. Unfortunately, regulations have made it very hard to retain that flexibility.” Continuing, Husong said: “I believe community banks need to re-evaluate what it means to be relationship driven. Although I still believe it’s very important, if not imperative, to have brick-and-mortar and the best customer relationship employees, community banks need to make sure they offer the same product array of competitors as well as find new ways to be part of our customers lives.” The FDIC report included a section that mirrored Husong’s assessment, noting that community banks are managed by “relationship bankers” whereas large banks are managed by “transactional” bankers. “Because of this expertise, community banks tend to base credit decisions on local knowledge and non-standard data obtained through long-term relationships and are less likely to rely on the models-based underwriting used by larger banks,” noted the FDIC report.

Brooks said technology branding is one way Bank of Fayetteville is pushing its community connections in a way that reaches across several generations. “We are constantly working to reinforce our community focus. One of the ways we are doing this is to include local imagery on our website, iPad apps, and even on our instant issue debit cards. This use of local imagery works to reinforce the customer’s tie to the community,” Brooks said. “The growing emphasis on technology will force smaller banks to make sure they are doing all they can to equip the customer; however, in a market like Northwest Arkansas, the sense of community will ensure that even technology savvy Millennials rely on local banks.” And when Brooks and Husong get the grass cut and deal with the increased regulations, they then get a chance to face competition from non-regulated financial companies – like the world’s largest retailer based just up the road in Bentonville. “Between the regulatory burden and the

necessity to offer the latest greatest competitive products (which customers are demanding), smaller banks have a challenge ahead of them,” Husong said. “We continually see new non-bank competitors as well which just adds to the pressure. Between insurance companies, brokerage houses, large retailers, and online retailers, banks are constantly seeing the progression of traditional bank products being offered by non-regulated entities.”

What Is The Texas Ratio?

The Texas Ratio compares the amount of loans at risk and the amount of owned real estate with the amount a bank has on hand to cover any losses. The closer the Texas Ratio is to 100% and over, the less capital and reserves a bank has to absorb its loan losses. The higher the ratio the more troubled the bank. Based on most recent data, five institutions in Arkansas had a Texas ratio over 100% as of Dec. 31, 2013. These institutions were: Pinnacle Bank - 249.93% Allied Bank - 160.18% Decatur State Bank - 132.42% One Bank & Trust, National - 107.81% Chambers Bank - 107.41%

An elevated Texas Ratio above 50% indicates a bank on regulatory watch. Signature Bank - 67% First State Bank Lonoke - 54% Sources: SNL Financial and The City Wire

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Regulation Strangulation Three bankers, who are also state legislators, discuss the banking regulatory environment. By Talk Business Staff

t the Arkansas State Capitol, there are rarely big banking fights. Predatory lending, interest rate or usury questions and the occasional tax credit legislation may surface that requires attention to financial institution detail. Mostly, bankers in the state’s General Assembly are leaned on for their accounting acumen: Does a deal make sense? Is this budget sound? Could the state structure a bond issue a different way? There is little to nothing that a state representative or senator may do to impact the flood of regulatory burdens local banks say they are having to comply with. Those actions require federal intervention. Still, the three state lawmakers interviewed below know how to navigate the intersection of policy, politics and profits. They share their views on the regulatory environment that is impacting their real jobs away from the capitol dome.

and you do it anyway, then the presumption is the bank has done wrong to the consumer and they have cause to prove. It’s a legal issue. You’re going to be exposed to liability for making somebody a loan. Let’s take this example: you’ve got a doctor that’s out of medical school that gets on somewhere, making a nice salary. He wants to buy a house. He’s living in a small community. He comes and makes an application. Now he’s not going to meet that test. He’s got his student loan debt, he doesn’t have the history of his income. As a banker, you’re going to be faced with a situation. Are you gonna do this and draw a lot of attention to it from the regulatory standpoint? Or are you going to turn this customer down that you want to do business with for a long time that’s in your community? That’s a real-life type decision.

Q: Davy Carter Centennial Bank Regional President Speaker of the House (R-Cabot)

Bruce Maloch Farmers Bank & Trust COO and General Counsel State Senator (D-Magnolia)

Darrin Williams Southern Bancorp Inc. CEO State Representative (D-Little Rock)

What do you consider cumbersome, burdensome from a regulatory perspective? Carter: The first thing that comes to mind is mortgage lending. We’ve got new regulations that started the 10th of January this year. You have to hit a repayment test that’s set out by the federal government. It’s a seven-point test that you’ve got to get your mortgagee qualified. If you don’t meet these government tests

Last year, Richard Corde, the head of the Consumer Financial Protection Bureau (CFPB) came to Arkansas and met with several bankers, including you. Did he suggest he could make changes to Dodd-Frank or other regulations to help with unintended consequences? Carter: Not really. I don’t see any light at the end of the tunnel. Corde said pretty much directly that we [community banks] got caught up in this. The regulations were for the Wall Street banks, but I don’t see it changing. I don’t really think they’ve got the ability to change it, certainly in this political atmosphere. There seems to be more of a “gotcha-type” attitude than a helpfulsupportive attitude. Maloch: Since the passage of Dodd-Frank, we’re still trying to figure a lot of it out, all of the implications. www.talkbusiness.net

MIND YOUR BUSINESS.

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Feature: Banking Certainly there are compliance issues, mortgage-lending issues, retail-lending issues. The government has a lot more control over all of our pricing, over everything we do. And it takes more people to comply with all those rules and regs and costs us money.

Yet bank profits as a whole continue to be very strong in Arkansas. Your bank had a record year and you’re complaining about all of this regulation that doesn’t seem to be curtailing profits. Maloch: I think it’s a lag effect and there are two things. We have still maintained our interest rate margins. The further we go and particularly as interest rates begin to rise, that margin will be compressed. And that’s our largest profit generator. And there’s still, I think, some lag effect of the cost of compliance. We already have more personnel costs, there are restrictions on rates that we charge, and all of these things that take a little while for impact. It’s there, it’s real. I think just because of the market and where interest rates are, and us being able to maintain our margin, we’ve had that good year, but it’s going to be hard to maintain.

Darrin, you head a Community Development Financial Institution (CDFI) at Southern Bancorp. How is the regulatory environment impacting your operation? Williams: The cost of regulation to keep up with all of the things we have to comply with is becoming a burden on many of your small banks, even us. Fortunately for us, we’re one of the largest CDFIs. We have enough scale to be able to handle the regulatory requirements, but it is a burden, it does affect our bottom line. You’ve got employee costs, you’ve got to beef up your compliance department with people, and a lot more paper has to be touched. Although as a CDFI, we were able to lobby for some exemptions to some of the rules. The other way it impacts banks are the capital requirements. The pressures flow from top and bottom. The type of investment that we used to be able to count as Tier 1 capital, some of those preferred

type stock deals, we’re not able to count as Tier 1 capital anymore. The regulations are requiring us to have more common equity.

How does that play out in the rural communities your bank serves? Williams: Really what we see is there are just a number of small community banks throughout Arkansas that have no succession plan, they operate on small margins, and the cost of compliance really

takes them out of a profitable situation and into the red. That could be an opportunity for us to expand. But I can tell you it’s quickening the day for a lot of community banks that are really going to have to make some tough decisions to stay in business, sell, or just close down if they can’t find a purchaser. That will have a tremendous negative impact on rural America and how vibrant it can be.

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Feature: Banking

The Lending Environment

Four bankers active in their communities discuss what they’re seeing in the marketplace as it relates to commercial lending activity. By Talk Business Staff Paula Gean Arvest Bank, Little Rock Private banking advisor/ Commercial lending We are seeing very favorable conditions for commercial lending. While conditions in Arkansas over the past years were never as tight as they were nationally, commercial loan growth has been slower than normal – more from lower demand than from tightened credit standards. Now businesses seem to be more interested in seeking loans while, at the same time, the number of banks positioned to make intelligent loans has increased. And, with rates at historically low levels, it is hard to imagine a better environment for businesses to seek financing. At Arvest, we are seeing increased loan demand specifically for new commercial construction and renovations as well as singlefamily residential developments. With competition for good loans resulting in favorable terms, it’s a great time for businesses to work with their bank partners to finance growth. Overall, local lending continues to improve and gain traction along with national trends. Mark Roberts Malvern National Bank, Malvern CEO We are beginning to see a slight uptick in loan demand, but I would still categorize demand to be weak. Banks remain extremely liquid and attractive investment alternatives are hard to come by. Therefore, increasing loan balances generally requires that a loan be moved from another institution. This environment results in some extreme rate and term competition as banks compete for the available loans. It is a delicate balance to maintain satisfactory earnings without taking on excessive risk when rates start to rise. Being able to make a quick decision and provide great service to our customers is imperative given the current situation.

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Frank Scott First Security Bank, Little Rock Business Development/ Commercial Loan Officer In the face of a challenging regulatory environment, because of the overreaching Dodd-Frank Wall Street Reform and Consumer Protection Act, we’re experiencing a steady stream of commercial lending activity. This stream of deal flow represents a wide range of businesses and industries. First quarter 2014, presented commercial real estate and commercial financing opportunities consisting of multi-family developments, restaurants, grocery stores, owner-occupied projects, healthcare facilities, residential construction, condos and churches. All of these commercial projects are with Arkansans we know and see every day. They’re truly creating jobs and opportunities for their fellow Arkansans. Despite what one may hear the media report, banks are lending money. We stand ready to help Arkansas businesses grow. As we enter into the second quarter of this year, we’re looking forward to continuing to build relationships in the market and provide quality service and capital to our customers in our state’s growing marketplace. Deana Osment Centennial Bank, Jonesboro Division President, Northeast Arkansas Northeast Arkansas has always been a competitive area and the market is better than it has been a few years ago during the downturn. There is a real diversity of restaurant, manufacturing, agriculture, and certainly health care right now. It used to be tough to even find a deal, but I think that has broken wide open, especially late last year and this year. We have a lot of new banks coming into town and that’s created competition. Everybody has been cautiously optimistic in recent years that the overall economy would get better. It wasn’t as bad here in Jonesboro and Northeast Arkansas, but now that everything else is starting to level off and people are starting to gain a little faith, they’re going on with those projects that they had on hold that they were going to do any way.

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Industry Trade

Strong Manufacturing employees proudly display their finished product.

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

PHOTO BY TREY ASHCRAFT

A Strong Presence As a Pine Bluff manufacturing company celebrates 50 years, it’s giving prison inmates a second chance. By Jeanni Brosius When visitors enter the front door of Strong Manufacturing in Pine Bluff, they are greeted with two things: a cat named Cali and a warm smile from the receptionist with a warning not to pet the cat because she bites. “She keeps the mice and snakes at bay,” Annette Kline smiled and said about Cali. Kline and her husband, Mike, own the company her father, the late William Strong, started 50 years ago. With a passion to live the American dream, Strong took his construction business to Pine Bluff to help construct the International Paper Company Mill more than half century ago. He then began Strong Manufacturing, which makes mixers and pumps for the application of lightweight concrete products, composed of vermiculite and perlite, used in construction. Strong was an innovative industry leader who held 10 patents. He was the original developer of the first-floor underlayment and lightweight concrete mixing and pumping machines. In 1967, Strong Manufacturing moved to its current location, which was once Toney Field airport, a training field for fighter pilots during World War I. Kline said the family has no intention of selling its business to a larger company or moving it to another region. “When you’re family run, you have to know everything from cleaning toilets to getting a loan at the bank,” Kline says. “You’re helping other people, too.” The Kline’s son, Kris, will be the third generation to run Strong Manufacturing, but this family-owned business doesn’t rely on bloodlines to consider co-workers next of kin. “More than half of our employees are long term – some even over 30 years. Once we

get an employee, we like to keep them,” she said. A NON-VIOLENT SOLUTION A few of their 28 employees were hired through non-traditional means. About eight years ago when one employee was injured, Kline said she began looking for someone with experience running machines to fill in for the injured worker. That’s when she called Mark Taylor, who is the work-release supervisor for the Pine Bluff Unit of the Arkansas Department

said, and a percentage goes into a trust that they can withdraw when they are released from prison, and the rest goes to help cover their expenses at the prison and to their families. “Our program helps a lot more people,” Taylor said. “We require them to pay dependent care to their children … We don’t go in and try to take jobs away from the community. I try to suit jobs skills to what [employers] request.” Taylor added that this helps the prisoners’ families not to have to rely on welfare, and it PHOTO BY TREY ASHCRAFT

Mike and Annette Kline

“More than half of our employees are long term – some even over 30 years. Once we get an employee, we like to keep them.” – Annette Kline of Correction. The work-release program allows non-violent offenders to be eligible to hold jobs in the private sector during the last two years of their incarceration. “What’s best about work-release people is they’re here every day, on time, and drug and alcohol free,” Taylor said. “And they’re usually very happy to work.” The workers are paid a fair wage, Taylor

gives the inmates skills to use after they are released to help keep them out of the prison system. SECOND-CHANCE STORIES Nine years ago, a man we will simply call “David” began to turn his life around. After being incarcerated on drug charges, David joined the work-release program www.talkbusiness.net

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Industry: Manufacturing and started work at Strong Manufacturing. He said he spent two years on the workrelease program, but he chose to stay with the company. “It gave me something to look forward to, and I learned how to be responsible,” he said. After spending four years in prison, David said the work-release program gave him a new start on life. “Instead of a $100 bill and a bus ticket, you’ve got funds to help,” he said about the trust that a portion of his earnings went into. Another long-term employee of Strong is Derial Moseley. He is in his last year of parole, and he has been at the company for seven years. He was an iron worker for 20 years before being incarcerated on drug charges. Not only has his job given him a second chance at a productive future, he’s also now married. “I didn’t have to start at rock bottom,” he said as he guided large white plastic sheets through a roller. “I had enough money to get a ride and a home and enough money to live without starting over.” Moseley offered some advice to other non-violent inmates who may have an opportunity to get into the work-release program. “Take full advantage of it and learn what you can while you’re there,” Moseley said. Glen Ramey, 54, and David Hankins, 24, are also in the work-release program. Ramey, who has been working at Strong for 11 months, said he lost his family when he was “locked up,” and the opportunity to work has changed the course of his future. “I plan to stay here,” he said. “This is really good, and it keeps you out of prison.” Hankins has been with Strong for a short time, but he’s been in prison for six years. He agreed with Ramey about the program altering his future by giving him the skills to make a living. “I’ve gotten a lot of skills at this company, and I can make decent money to take care of myself,” he said. “I plan to combine welding and tattoos. I’d like to build custom motorcycles.” The newest work-release employee at

the company has been there for only a few weeks. Thirty-nine-year-old Lloyd Jensen PHOTO BY TREY ASHCRAFT

New Partners!

Mark Taylor

has completed about half of his prison sentence and is a licensed welder. “This place offers a lot more skills,” he said as he leaned in to file the edges of an auger pipe. “I’ll be more secure when I get out [of prison].” Jensen plans to continue working at Strong even after he’s released from prison. “It teaches us how to adapt back to society and to be responsible,” he said about the work-release program. “We take it very seriously. I’m able to save money. In 25 months, I’ll be able to save a lot, and now I can help support my wife. [The work-release program] teaches the inmates how to save money and to be financially responsible. I never had that before.” Another way Strong Manufacturing helps out its employees is by aiding them in purchasing the tools of the trade. “We have a program where they can buy their own tools through payroll deduction, so they have them when they’re out,” Kline said. She added that Pine Bluff offers a small pool of qualified workers for her company’s needs and the work-release program fills that void. “They are whole-heartedly dedicated,” Taylor said about the inmates. “They try to work overtime, and they go above and beyond.” Kline added, “It also helps first-time offenders most. They are the hardest workers, because they don’t want to go back to prison.”

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Industry Trade

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

PHOTO: SHUTTERSTOCK

Capacity Crunch As the economy improves, there aren’t enough trucks or drivers to carry all the goods, so rates will rise. By Steve Brawner Steve Williams, CEO of Maverick Transportation, has a problem: too much business. In fact, he said, “We are disappointing our good customers on a daily basis because of our inability to give them enough trucks as we speak.” Williams only a few years ago was forced to park 400 of his 1,500 trucks because of the Great Recession. Last year, revenues and profits both were the highest ever. He’s planning on adding about 100 trucks to the fleet this year. He could add 500, but he couldn’t find drivers to operate them. And that’s a problem not just for him, but also for the rest of the trucking industry. An improving economy, a driver shortage and a tight truck supply is leading to higher freight rates. Williams said Maverick already has raised rates steadily for several years. Bob Costello, the American Trucking Associations’ chief economist, believes a capacity crunch is probably on its way. Freight levels have been inconsistent week to week, but that will change if the economy continues to improve. The economy faced a number of challenges in 2013, including slowdowns in housing and factory output. But Costello expects a better 2014 – particularly in the dry van sector, which carries the kinds of consumer goods Americans buy as they become more confident in the economy. This will be the first year since 2007 that housing starts are expected to exceed a million units, and that will generate a lot of freight. NOT ENOUGH TRUCKS But there just aren’t enough trucks to

carry all the goods, so rates will rise, affecting the cost of goods at the checkout counter. Carriers are operating with 8% fewer trucks than in December 2007, and the number of truckload sector trucks at the end of 2013 was up only 0.2% from 2012. There are several reasons for the shortage.

“There’s been a shortage of truck drivers all my career, good truck drivers, and now it’s going to be that on steroids.” – Maverick Transportation CEO Steve Williams Many carriers did not buy trucks during the Great Recession. Financing purchases became more difficult. A series of EPA regulations have raised the price of a tractor significantly, and many motor carriers have been stretching out the lives of their equipment to avoid making the investment. Industrywide, the average age of a truck is six and a half years, but trucks are running fewer annual miles due to an increase in the number of distribution centers, regulations that limit drivers’

driving time, and demands by drivers to be home more often, Costello said. Truck sales are increasing, but Costello doesn’t expect a surge. Most purchases will replace aging vehicles, not add to the nation’s fleet. “For the first time maybe ever, we do not see trucking companies going out there and buying up trucks in anticipation of more freight,” he told The Steering Wheel magazine in January. “Now, is that on purpose? Maybe. Is it because they can’t find enough drivers? Maybe. I don’t know. It’s probably a combination thereof, but the reality is they’re not doing it, and that’s one of the reasons why I see a capacity crunch eventually hitting.” A POSITION OF POWER The crunch will put the motor carrier industry in an unusual position: one of power. Noël Perry, a partner with FTR Associates, a leading transportation data collector and forecaster, said the industry has seen significant rate increases only four years in its history: 2004, 2005, 2006 and 2010. Otherwise, it has raised profits by increasing efficiency. Shippers are accustomed to receiving discounts when they ask for them with the threat of using another carrier. But the competition likely will have a shortage of trucks as well, so rates will increase in 2014 and 2015. Perry said railroads won’t be able to relieve the excess. Today’s economic climate has led companies in other sectors to consolidate. While there has been some consolidation in trucking, it’s been at a much slower rate www.talkbusiness.net

Industry: Trucking than other sectors of the economy, and the industry remains fragmented. However, the aging fleet will play to the larger companies’ advantage. Big companies have the capacity to purchase new equipment every four years or so. Smaller companies are running less fuel-efficient, older trucks that will require more and more maintenance. Eventually, those smaller companies will be forced to replace their assets, which some may not be able to afford. The economy got a taste of what a capacity crunch will look like during the first quarter of this year. With winter weather backing up freight, shippers were forced to rely on the spot market. In an email on April 11, Costello said DAT Solutions’ spot market loads index was up 63 percent and 84 percent in January and February on a year-over-year basis, respectively. “Freight wasn’t up that much, but shippers

moved to the spot market to get loads moved as their contract carriers couldn’t,” he said. “That has subsided, although some backlog still exists, but it was a look into what will come if the economy takes off.”

“It’s not that easy to be a truck driver anymore. You’ve got to have a good clean driving record, and that’s easy to check now.” – Barry Busada

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TALK BUSINESS ARKANSAS | MAY/JUNE 2014

A DRIVER SHORTAGE In addition to the lack of trucks on the road, the trucking industry faces another important shortage: drivers. Across the country, there are about 30,000 unfilled truck driving jobs, according to a 2012 analysis by the American Trucking Associations, and that shortage is expected to worsen. As Maverick’s Williams described it, “There’s been a shortage of truck drivers all my career, good truck drivers, and now it’s going to be that on steroids.” The ATA believes the motor carrier industry must attract almost a million drivers over the next 10 years, but those drivers are becoming harder to find. The starting pay for a new driver at Maverick is about $50,000, and some drivers are making $80,000. But the improving economy means the driver labor force will have opportunities for jobs in other fields, such as construction, that don’t require living on the road. Seventy percent of fleets surveyed by the ATA said they had increased or were planning to increase driver pay in 2013. That would not be enough to end the shortage. “I’d go out and buy, easily go out and buy 500 trucks. ... I just can’t find 500 people to train to put in the trucks to do that,” Williams said. “It’s literally, they do not exist. Class sizes that maybe were 30 a week are half that right now.” The available driver pool is also shrinking because government regulations are making it harder for carriers to hire potentially unsafe drivers. Congress has mandated the creation of a drug and alcohol clearinghouse that stores positive test results. CSA, the Federal Motor Carrier Safety Administration’s new enforcement mechanism, uses data to rate carriers on their safety records. Shippers and insurance carriers are using those scores to make business decisions. The FMCSA’s new hours of service rules set stricter limits on when drivers can be on the road and when they must be resting.

The purpose of the hours of service rules is to ensure a more rested driver workforce. However, a recent survey by the American Transportation Research Institute, the ATA research arm, found half saying they needed more drivers to haul the same amount of freight. Barry Busada, senior vice president of Diesel Driving Academy, said his company has seen a decrease in student drivers. The company has five campuses, including one in Little Rock that trains about 250 students a year. During the recession, that number was about 350. “It’s not that easy to be a truck driver anymore,” he said. “You’ve got to have a good clean driving record, and that’s easy to check now.” The typical student is a male, 30, who is unemployed or underemployed working in an unskilled, low-paying job. In order to graduate with a commercial driver’s license, the student must complete a 20-week program that includes 600 hours of training and costs $10,400. That’s not cheap, but financial aid is available, and many carriers will reimburse the student when they are hired to drive. A job is virtually guaranteed. “They graduate on Friday, and they’re usually in orientation on Monday,” Busada said. “And they usually all have a job offer and many of them have three or four job offers.” Perry expects regulatory change to slow during the first half of 2014, but a number of issues remain to be settled. When new regulations are enacted, the economy will feel it. “If we indeed get this rush of regulation late next year, I think there’s going to be quite a crisis, and when that crisis occurs there will be goods that don’t make it to the shelf,” he told the Arkansas Trucking Report magazine last year. “And when that happens, customers will pay almost anything to get a truck.”

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It’s never easy to make the best even better. But new leadership will help us do just that. President-elect Bill Tsutsui comes to Hendrix from SMU in Dallas, where he was Dean of Dedman College of Humanities & Sciences. After earning degrees at Harvard, Oxford, and Princeton universities, Bill built a 20-year track record of innovation and success as a teacher, scholar, and administrator at the University of Kansas and at SMU. We’ve combined a great leader with a world-class faculty and outstanding students from all over the world. That’s a win/win/win for Arkansas.

www.talkbusiness.net

Craighead County courthouse veterans memorial

Hometown, Arkansas

Jonesboro at sunrise Arkansas State Red Wolves take the field

Arkansas State football game

Room to Grow

Jonesboroâ&#x20AC;&#x2122;s diversified economy, including Arkansas State University and a thriving industrial park, offers a positive business environment.

By Steve Brawner PHOTOS: TIM RAND AND CITY OF JONESBORO

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Mark Young, president and CEO of the Jonesboro Regional Chamber of Commerce, is driving through the 1,500-acre Craighead Technology Park. He passes a Unilever plant that employs 475 people making beauty products, a Butterball turkey plant that employs 298 producing deli meats and a Frito-Lay plant that employs 525 packaging snack foods. Those are just some of the employers in the industrial park, and there is room for dozens more. A rail spur reaches five miles from Burlington Northern’s main line through leased farmland that can quickly become new industrial sites. Two years ago, the line was extended to prepare for growth. Young points to a 50-acre site that’s ready for just about any employer who wants to locate there. “One of our competitive advantages in our community is that we have an infrastructure in place ready to go,” he said. “You don’t have to wait on it. And because this isn’t just an empty lot, all the water, all the wastewater, all the electrical capacity that you could want is already sitting right there. So again, we don’t have to make promises about what we can do in the future.” With an estimated 71,000 residents (up from 27,026 in 1970), Jonesboro is Arkansas’ fifth largest city, but in many ways, it’s also the capital of Northeast Arkansas and Southeast Missouri. Draw a triangle between Little Rock, Memphis and St. Louis, and Jonesboro is the largest community in between. It’s about an hour from Memphis and its international airport and distribution facilities. The Burlington Railroad and Union Pacific intermodal facilities at Marion are even closer. Jonesboro itself is served by both lines. The city is home to the area’s largest university, Arkansas State. It has two major medical facilities, St. Bernards Healthcare, the area’s largest employer, and the new $400 million NEA Baptist Memorial Hospital. It boasts one of the last enclosed malls constructed in the United States, the 731,000-square-foot Mall at Turtle Creek, which has been a catalyst for more development. Jonesboro’s metropolitan statistical area includes only Craighead and Poinsett counties and is home to 125,000 residents,

but its labor pool draws from nine other counties and its economic trade area includes half a million people. The growing city of Paragould’s city limits are only about 10 miles from Jonesboro’s. Meanwhile, Young chairs the Northeast Arkansas Economic Development Coalition, which includes Craighead, Greene, Randolph, Lawrence and Clay counties. Though the coalition hasn’t achieved the kind of regional cooperation seen in central and Northwest Arkansas, its members work together on issues of common concern. EXCELLENT JOB GROWTH Last year, Jonesboro’s metropolitan statistical area had the 11th best job growth in the country when measured as a monthly moving average comparing 2013 to 2012. That’s according to U.S. Bureau of Labor Statistics numbers aggregated by Arizona State University’s W.P. Carey School of Business. Jonesboro enjoyed job growth even during the Great Recession, in part because of the types of industry it has nurtured. In addition to the employers already cited, other major ones include the Hydrol Conveyor Company, which employs 750 making conveyor systems, and Nestle Prepared Foods Co., which employs 610 making frozen entrees. Many of its manufacturers produce basic food and consumer goods that don’t depend on boom times. As Young described it, “We’re sort of recession-resistant. ... Even in the most difficult times, people still eat, and so the food processors, again, may do well in certain times when others don’t.” Ed Way, Centennial Bank’s Jonesboro market president, has been participating in the community’s growth since he graduated from Arkansas State in the early 1970s. Way said a group of forward-thinking community leaders began looking at ways to plan for growth. Lacking the funds to solicit new industry, the chamber of commerce formed Jonesboro Unlimited and asked 100 chamber members for an additional $1,000. A consultant was hired who encouraged the city to focus on the food industry. Far-sighted annexation policies have made the city the second largest geographically in Arkansas, with room to grow in just about every direction. The city has three

school districts – Jonesboro, Nettleton and Valley View – completely contained within its boundaries. Two rural districts, Westside and Brookland, also educate Jonesboro students. Way said that the spirit of cooperation that led to Jonesboro Unlimited still exists today. “We’ve got 14 banks, and we fight every day for new business,” he said. “We fight each other for new business, but when there is a need of a new industry or whatever, we join forces to work together to recruit that industry.” Way also credits the community-owned City Water and Light, which hasn’t had a rate increase in many years and which is running at only about 50 percent capacity. The utility is prepared to immediately accommodate new manufacturers at the industrial park. He recalls a meeting with City Water and Light engineer Kevin Imboden along with an engineer with Nestle Foods when that company was a prospect. The Nestle engineer asked how long it would take the utility to handle the plant’s wastewater needs. “We already have it,” Way recalled Imboden saying. “We could take 10 Nestles right now.’” ASU ENRICHES COMMUNITY Key to the city’s growth, of course, has been ASU, which not only educates 13,552 students, but last year brought 250,000 people onto the campus for various events. The university is looking for new opportunities and new sources of revenue under the leadership of its entrepreneurial chancellor, Dr. Tim Hudson. Perhaps the school’s most high-profile expansion is occurring 1,450 miles beyond Jonesboro’s borders. Arkansas State will be the first American college to develop a comprehensive branch in Mexico when it opens its campus in Queretaro near Mexico City in 2015 with a goal of 1,000 students the first year and 5,000 students after year five. The school’s Mexican partner, the Association for the Advancement of Mexican Education, is investing $50-$60 million to build the physical facility. Hudson foresees a fluid exchange of faculty and students between ASU’s Jonesboro and Mexican locations. www.talkbusiness.net

Hometown: Jonesboro Meanwhile, the community of Jonesboro will benefit as well. “We believe there will be commercial relations that will spin off from this,” Hudson said. The university is opening an osteopathic medical school on campus, with the first classes scheduled to begin in August 2016. Osteopaths are holistically trained primary care physicians, and they are in high demand. The 120 graduates planned each year will hopefully fill a need in the physician-poor Delta. As with the Mexican venture, the effort relies heavily on public-private partnerships. The school will be a branch campus of the private New York Institute of Technology’s College of Osteopathic Medicine, the nation’s second largest osteopathic school. “We’re doing a lot of things here at Arkansas State on a very entrepreneurial basis,” Hudson said. “We believe heavily in public-private partnerships because we know we not only have to achieve our mission, [but] we have to do it with revenue that we might generate outside of the normal channels. So for us it was the right model and the right partnership.” Arkansas State’s presence increases the number of cultural amenities offered by the city. The Fowler Center on ASU’s campus offers a venue for concerts and theater shows. The Convocation Center seats up to 11,500 people for concerts and can host a variety of events. Jonesboro has become a retail destination for its trade area. The Mall at Turtle Creek includes more than 70 stores, including a Dillard’s, JCPenney and a Target. The mall’s construction has been a catalyst for other development in that part of town, including a slew of new restaurant chains. Jonesboro is home to two Wal-Mart Supercenters, and a Kroger Marketplace is rising from where the old Indian Mall once stood. Meanwhile, a vibrant downtown features businesses, restaurants, loft apartments, and The Foundation of Arts, a community-based nonprofit organization. QUALITY HEALTH CARE Jonesboro also is becoming a healthcare hub. The area’s largest employer is the St. Bernards Healthcare system, which employs

2,800 with an annual payroll of $200 million including benefits. The hospital has 276 physicians representing 44 specialties on staff and serves as a referral center for 23 counties in Northeast Arkansas and Southeast Missouri. St. Bernards Medical Center, a 438-bed acute care hospital, anchors the Matthews Medical Mile, a part of Matthews Avenue with approximately 50 clinics providing a variety of services. According to Chris Barber, president and CEO of St. Bernards Healthcare, “It’s a destination, so

Fowler Center

if individuals are looking for health-care services, kind of the top to bottom, they can go down this one-mile stretch.” Meanwhile, the $400 million, 800,000square-foot NEA Baptist Memorial Hospital, which is affiliated with the Baptist Memorial Hospital-Memphis system, Downtown Jonesboro

recently opened. The facility includes the NEA Baptist Clinic, a single multispecialty group with more than 100 physician partners. The hospital incorporates a closed model where all physicians are on staff. CEO and Administrator Brad Parsons says that model will improve care and reduce costs. Everything is under one

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

roof for patient convenience, and 90 percent of the equipment is brand new. Like Jonesboro, the hospital has room to grow from its current 181 beds to 300. Both hospital administrators are confident that the community will support two major health-care facilities and that the competition will make Jonesboro more of a health-care destination. “Jonesboro is a town of 70,000 that never feels like a town of 70,000 people,” Parsons said. Residents of the region can receive just about any type of medical care they need outside of organ transplants and various types of specialized treatments. That’s an important selling point for potential employers and a draw for residents of Jonesboro’s trade area. Between the hospitals, the mall and other amenities, Centennial Bank’s Way said, “We cut the road off to Memphis for health care and entertainment and retail.” What does the city need? A good start would be funding to turn U.S. 63 into Interstate 555. The road is interstate quality except for a two-mile stretch over the St. Francis River floodway, but that’s enough to keep it from that coveted interstate designation that would put Jonesboro on the map for more economic developers. Community leaders also are hoping to finish four-laning Highway 226 to create a four-lane route from Jonesboro to Little Rock. Naturally, a growing city has congestion problems. A major priority is a bypass along the eastern side of the city, and several railroad overpasses are needed. But managing growth is a much better problem to have than the opposite, and Jonesboro certainly has room to grow. Its industrial park’s infrastructure is ready to attract whatever industries have an interest. Its schools and university are successful and vibrant. Its retail and restaurant opportunities are growing by the day. And so, when talking to a potential employer, it’s not hard to convince them to give Jonesboro a serious look. “We don’t have to sell as hard as we used to,” Way said. “I think if we can get someone here, and here longer than a day, we can sell them. It doesn’t take much to sell Jonesboro as a great place.”

JONESBORO: LOCATED BETWEEN LOW COST OF LIVING AND HIGH QUALITY OF LIFE. Living in Jonesboro is as pleasant as it is affordable. Our cost of living is about 13% lower than the U.S. average, which is amazing considering our low unemployment rate, low crime rate and high overall standard of living. That may explain why many people who visit Jonesboro just once often stay for a lifetime. TO PLAN YOUR VISIT TO JONESBORO, VISIT JONESBOROCHAMBER.COM.

JONESBORO Just right.

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Leadership PHOTO: BOB OCKEN

Josh Moody with his creation, overwatchapp.com

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

High School CEO Calculus, chemistry and serving as chief executive officer are all part of Josh Moody’s high school curriculum. By Ryan Saylor

eventeen years old and playing video games. It sounds pretty typical of any male high schooler. But how many 17-year-olds take their passion for video games and turn it into a career before even graduating from school? Meet Josh Moody, a senior at Little Rock Catholic High School. He’s the chief executive officer of Bentonville-based Overwatch. And yes, you read that right. Josh, all of 17 years old, is seriously the CEO of a well-funded company housed in WalMart’s backyard. Check out what he had to say when asked how he came up with the idea for the app: “I came up with the idea about two years ago and I was really just an avid gamer and I had just been introduced to airsoft [guns] and playing it for a couple of years. And I realized that there was a disconnect in the experience and the technology that gamers are used to seeing in combat video games as opposed to what is actually used in airsoft and paintball today, which are essentially real-life methods of recreating combat experiences exactly like those in combat video games.” Josh went on to say that there are all sorts of advanced features available in video games that have basically never seen the light of day in recreational combat, for lack of a better term. So he set out to change that. Initially, the idea was to program the app himself, though it proved far too complex of a task. Luckily for Josh, his father was connected to two Northwest Arkansas app developers

who his father thought could help make Josh’s dream of making a combat video game come to life. Joe Saumweber, who is now the chief strategy officer at Overwatch, was honest about what he was thinking when Josh’s father, David, called him up. He said that he didn’t have much hope when he went for his first meeting with Josh, which took place at the Moody family kitchen table. “Michael [Paladino, Overwatch’s chief technology officer] and I had been building digital products for a long time. When you’re in that industry, everyone has an idea. We were looking for a way to politely say ‘no.’” It was at that meeting that Josh laid out his idea — create a smartphone app that would allow players to integrate the features of games like “Call of Duty” into real-life situations with friends on a playing course using features like GPS for enemy and teammate tracking, Bluetooth for communicating with teammates, and game perks to give your team one up on the enemy. “Jam enemy radar, listen in on enemy communication lines or go stealth by activating perks” are just a few of the offerings listed on Overwatchapp.com. While Saumweber said he and Paladino were not expecting to be sold on any pitch they were to receive at the Moodys’ kitchen table, that changed as they listened to Josh explain his idea. “We knew we would be pushing the envelope a bit on the technology and that’s what appealed to us,” Saumweber said. “We do have a technology shop here in

Bentonville, and we like being on the fringe. Having a good concept like this that allows us to explore what’s possible with [GPS] technology is fun. Plus, it’s just a good idea.” With the app developers on board and without any money to pay them “as contractors,” Josh said the three waited for an opportunity to open up. “It just so happened that at that time, the ARK Challenge business accelerator was now in its second phase, its second run, and they were accepting applications for teams and companies,” he said. “And so we took this product idea, formed a business plan out of it and formed a company called Innovis Labs. And so we entered the ARK Challenge, just applied. We weren’t so confident we would get in, being that it was so early stage. But after applying and crossing our fingers, we were called back and had an interview and it turned out we were accepted as the company Innovis Labs to build this product that we call Overwatch.” With the acceptance, the men got $20,000 of initial investment. And after 12 weeks of hard work and product development, the company was one of only three teams to walk away with $150,000 in funding for their project, which Saumweber said was an “investment from several different organizations in Arkansas,” giving the ARK Challenge an equity stake in the Overwatch app. Having funding in place, development has been taking place at a breakneck pace – not only on the app itself, but also on hardware to connect a smartphone to airsoft and www.talkbusiness.net

Leadership: Moody PHOTO: BOB OCKEN

Josh demonstrates overwatchapp.com to classmates

paintball guns. The men have also been working on completing the app itself, which includes various ways to monetize – including purchasing those radar and communications jams – while also doing product testing, likely making Josh one of

the busiest high school seniors in the state as he works with all the free time he has when he is not in school. Overall, the app is about 95 percent complete on the iPhone and about 85 to 90 percent complete on the Android operating

F. John Deuschle, III Matthew R. Jones, JD, CFP® Jason D. Prather, JD, LLM

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

system, Saumweber said, adding that even after completion, the company still has plans to continue expanding and is currently in the middle of another round of funding. “We’ve done everything with that [$150,000] budget, which is fantastic,” he said. “But we are in the middle of a seed drop to raise an additional $300,000 on top of the $150,000. We’ll use that for marketing, building our team and continuing to iterate on the product, on the app,” he said. Josh said while it has been a whirlwind since he first developed the concept two years ago, he has been enjoying the development of Overwatch. And while a lot of high school seniors are fretting over where to go to college and who their roommates will be in the fall semester, Josh said he isn’t. “… I’ve found my passion here and I’m interested in learning everything there is to learn about business – whether it be formal or informal,” he said. “And much of what the ARK Challenge did was provide that basic, core level of information to help me run things from day to day. And the best opportunity for me right now is to run the business full-time and not worry about trying to deal with college and have all those other hours and responsibilities and really run the company to its full potential. So I’ll be going full-time on the company [after graduation] and if college becomes an opportunity later on, it’s a possibility. But right now it’s a backup plan.” And that’s something that excites Saumweber, who has nothing but praise for his CEO. “He’s fantastic. And he’s got … Josh represents a new crop of young professionals that are really, truly digital natives,” he said. “Kids like Josh, they’ve grown up with this [technology] and an expectation that technology works. He understands the hardware and software side of this. Josh is just the tip of the spear of this younger generation that will revolutionize the way we interact in the world. He’s already a really mature version of that that is already contributing, unlike most of his peers.” And Josh is just 17. Can’t wait to see what he does for his 18th birthday.

• • •

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Leadership

Sixth Sense:

Reaching a Decision Excellent decision-making is a key to management success. Talk Business Arkansas asked six leaders for advice and tips on selecting a course of action and being a good decision-maker. By Talk Business Staff

F.S. (Sandy) Stroope

Carla M. Martin, J.D.

Robin J. Carroll

The customer is (almost) always right. Much of our day-to-day decision-making process is based on the above statement. We work hard to see the customerâ&#x20AC;&#x2122;s point of view and needs when deciding issues pertaining to them. I have learned and adhere to the simple philosophy that it is always best to treat individuals who do business with us as I would want to be treated. Experience has taught me that the same philosophy applies to decisions I make concerning employees. Respect and loyalty are engendered more quickly in most employees by this type of treatment. In business, our decisions impact customers, employees, families, our community and, ultimately, the bottom line. I try to always remember that and to use past experience and this simple philosophy to guide me in making day-to-day business decisions.

I have learned that good decision-makers are made and not simply born. Good decision-makers take time to gather and review all pertinent information on the matter to be addressed: they are good listeners, they ask tough questions, they make a decision after analyzing the risk versus reward dichotomy, and they stand by their decision. They are willing to weigh in on situations and are tough enough to accept the consequences of their decisions, if there are any. They also learn from their decisions if it is revealed that there was a better decision to be made. Good decision-makers are also confident. Good decision-making comes from lessons learned when making decisions. Ultimately, people who are capable of making good decisions, especially tough decisions, are well-respected no matter the industry.

To make good decisions you must make sure you have chosen a career where you trust and can live with the decisions you will face. As prosecuting attorney, I had to know I could make the decision to seek the death penalty in a capital murder case. As circuit judge, I had to know that I could make the decision of which parent would receive custody of a child. The same holds true in the business world as decisions must be made to hire or fire, expand or cut back, pursue new opportunities or pass on a deal. Whatever the position, you have to make sure you can live with the decisions you make.

Owner Boat World, Inc. Harrison

Dean School of Business and Management University of Arkansas at Pine Bluff

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Circuit Judge Fourth Division El Dorado

Janet Jones

Bill Booker

Alex Martinez

Decision-making has always been a challenge for me, but I have developed a process that works. First, the gut-level intuitive decision that is quick and painless. It is clear-cut and involves my principles and ethics – what is clearly right and wrong. In his book, “Blink,” Malcolm Gladwell refers to this type of decision as the two-second rapid cognitive or snap judgment. Secondly, there is the quiet decision that takes deep thought and concentration. I sleep on this type of decision and awaken with the answer that has been presented to me by my subconscious mind. Thirdly is the decision for which I go through a lengthier process – garnering all the information, interviewing others, pondering all possibilities then living with the options until the answer is clear. My two best decisions have been to start my own company, The Janet Jones Company, and to marry my best friend, Bud Jones.

One of the most significant lessons I have learned in decision-making occurred when I transitioned from being a management team member to being the leader of the team. As a team member, I was very comfortable with offering possible suggestions or ideas at any time and team discussion would always continue, including critical evaluations or comments of my ideas. But as the team leader, I began to see that any idea or possible solution that I offered tended to be too readily accepted and to discourage any further discussion. It was as if being team leader had elevated my ideas or suggestions to a higher level than the same ideas might have had when I was a team member. As a result, I had to remind myself NOT to be the first to offer my personal ideas or suggestions, but rather to allow and encourage other members the opportunity to express their views.

Decision-making in everyday life is a balancing act. Many decisions are made by emotion, some are made logically and others are made by personal beliefs. In business, you must trust your instincts and stand firm as your decision made will impact your bottom line. Good decision-making is essential for effective business leaders. Clarity is needed to know where you want to be. That is the decision-making process.

President and Owner The Janet Jones Company Little Rock

President Roller Funeral Homes Little Rock

CEO Soltel Networks, LLC Bentonville

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TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Feature: Politics

Most of the action in this year’s primary contests pits Republicans vs. Republicans.

By Talk Business Staff On May 20, Arkansas may witness something it has never seen before in modern times: a larger voter turnout in the Republican primary than in the Democratic primary.

There is only one major contested primary race on the Democratic side – gubernatorial candidates Mike Ross and Lynette Bryant – while Republicans have five bruising primaries for statewide office and two tough primary battles in the Second and Fourth Congressional Districts. PHOTO: DOLLARPHOTOCLUB

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Feature: Politics “There is a real, credible opportunity that you will see more people, for the first time in the state’s history, vote in the Republican primary than in the Democratic primary,” GOP strategist Bill Vickery declared at an April Political Animals Club forum. “If that happens, that’s a thunderbolt.” If it occurs, it would add another chapter to the story of the last two election cycles on the evolution of the Republican Party in Arkansas. The GOP made historic gains at all levels in 2010 and built on those advances in 2012, adding a fifth federal officeholder and taking control of the Arkansas House and Senate for the first time since the Reconstruction period of the late 1800s. But would lack of primary participation necessarily indicate weakness for the Democrats in the fall of 2014? Robert McLarty, a Democratic strategist with Little Rock-based The Markham Group, said Democrats have rallied behind a slate of candidates that they feel give them the best chance for victory in the fall.

“While that may decrease turnout in the Democratic primaries, that does not signify a lack of excitement for our candidates, but rather a unified focus on victory in November,” he said. “I expect Republicans will debilitate their eventual nominees with intra-party skirmishes pushing each other to extreme positions on issues that are not the main concerns of Arkansas voters.” Technically, Republicans are still the “minority party” in Arkansas despite controlling the General Assembly and five of six congressional seats. State law defines the majority party as the party that has a majority of the state’s seven constitutional offices at the last election. It once was the party who held the governorship, but a Democratic legislature altered the law when Republican Winthrop Rockefeller ascended to the state’s top post in the 1960s. Why is “majority party” status important? Beyond bragging rights, the majority party constitutes two of the three election board members in each of Arkansas’ 75 counties. Those panels determine voting locations, rule on local election decisions such as

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recounts, and carry tremendous influence on Election Day mechanics. In 2010, Democrats won the races for governor, attorney general, treasurer and auditor giving them four of the seven constitutional offices, and thus, majority party status. Since that election, each party has lost one elected official – Democratic State Treasurer Martha Shoffner resigned amidst a bribery and extortion scandal, while Republican Lt. Gov. Mark Darr stepped down over ethics violations. If 2014 is going to redefine Arkansas’ political order, the outcome of these May primary races will certainly set the stage for November. GOVERNOR Asa Hutchinson hopes the fourth time might be a charm. The former Third District congressman has an impressive resume of public service. Beyond Congress, Hutchinson has served as a U.S. prosecuting attorney and Asa Hutchison a deputy director at the Department of Homeland Security in the post-911 era. He has run for and lost races for the U.S. Senate, attorney general and governor. Curtis Coleman Now in private law practice, Hutchinson has been the early frontrunner to get the Republican nomination again, and in several polls he has been deemed the favorite in November. “I joke that Asa hasn’t changed, but the state’s changed,” Hutchinson has said repeatedly on the campaign trail. Hutchinson faces a primary challenge from Curtis Coleman, a Tea Party conservative who ran for the U.S. Senate in 2010. Coleman, who leads a nonprofit group centered on teaching the Constitution, often hangs his hat on his near decade-long tenure as CEO of North Little Rock-based Safe Foods Corp. Coleman laments the hardships he endured navigating the federal regulatory process in getting Safe Foods off the ground. It is a significant part of his political DNA,

and he speaks often of his interest in getting government out of the way of free enterprise. But despite his opposition to government involvement in the private sector, Coleman’s company benefited from it significantly. Safe Foods’ technology evolved from research and a business incubator at UAMS. It also received nearly $8 million in guaranteed backing from the Arkansas Development Finance Authority during its early stages. “I think those are legitimate functions of state government and I’ve never objected to them at all,” Coleman said. “For my company and my investors, I’m obligated to make the very best decisions I can ... As governor, you assume a different fiduciary role.” Coleman and Hutchinson have squared off in several forums. They differ on their approach to tax cuts, the private option and economic development. Hutchinson has proposed $100 million in tax cuts for middle-income Arkansans. He sees the private option as a “pilot project” that could be unwound if it proves too costly. He says the state needs to encourage economic development at all levels – small business, company recruitment and major superprojects, like the Big River Steel Mill in Northeast Arkansas. Coleman wants deeper tax cuts, would do away with the private option and does not support superprojects like Big River Steel, claiming the money would be better spent sprinkled across small business efforts at the local level. On the Democratic side, former Fourth District Congressman Mike Ross gained a surprising challenge to his nomination when Lynette Bryant, a Little Rock doctor who has dabbled in local politics, filed unexpectedly. Bryant said she didn’t reveal her Mike Ross efforts to party leaders because she didn’t want them to try to talk her out of running. She also said that Ross’ departure from Congress in 2012 disappointed her Lynette Bryant because it allowed Tom

Cotton to enter politics more easily – a move she said eroded her respect for Ross as a politician. “I would have respected him more had he stayed in that office,” she said. Ross is a clear favorite for the nomination. He is also polling well for November against either Hutchinson or Coleman. In an April Talk Business-Hendrix College Poll, Ross had a 44-to-43 percent lead on Hutchinson – a virtual dead heat – and he outpaced Coleman easily if that matchup should occur. Ross served a decade in Congress, surviving the 2010 Republican tidal wave, and he also has the distinction of serving in the Arkansas Senate. He’s hitched his wagon to popular Democratic Gov. Mike Beebe, who has appeared in early advertising with Ross. For Democrats, the topsy-turvy nature of this gubernatorial candidate cycle seems to have smoothed out. Term-limited Attorney General Dustin McDaniel was the early frontrunner and Ross had stepped aside to avoid a bruising primary. When McDaniel’s dalliance with a Hot Springs attorney became public, he stepped aside and former Lt. Gov. Bill Halter entered the race. For months, it appeared Ross and Halter would duke it out, but Halter left the field after being bested by Ross in the fundraising race, an exit that assured Ross would have an easy path to the nomination. It allowed him to position his campaign for the general election as is evidenced by his frequent acknowledgment of his “independence.” The underfunded and little-known Bryant has made rounds at some political events, but she’s yet to lay out any major policy positions or highlight how she would differ from Ross on big issues. In April, she filed a complaint with the NAACP alleging discrimination by Democratic Party officials who she says slighted her at public appearances. Ross has made several high-profile policy statements. He is advocating for tax relief for manufacturers and an overhaul of the state’s income tax brackets. He also wants to provide more access to pre-K education and has been adamant in his support for the private option. Ross claims all of these

initiatives will be done on the back of a balanced budget, but his critics suggest he is over-promising and would under-deliver, if elected. “I think it’s very comparable to what Gov. Beebe proposed back in 2006 [with the grocery tax cut], and this debate is going a lot the same way,” Ross said in a recent interview. Ross’ health-care votes may become the centerpiece of the fall campaign. Republicans are licking their chops for the opportunity to define Ross as a crucial vote that allowed the “Obamacare” debate to continue at a critical juncture in the summer of 2009. He voted for a health-care reform bill in a key House committee that eventually died in Congress, but Ross voted against the bill that did become law as the Affordable Care Act. Expect plenty of partisan controversy on this issue after the May primary. ATTORNEY GENERAL It’s the stepping stone to the governor’s office if you play your cards right. Bill Clinton and Mike Beebe both parlayed the attorney general’s office into governorships. Jim Guy Tucker, Ray Thornton and Mark Pryor are political figures with household names who once served in the AG’s post. With youthful candidates, the next attorney general could also be viewed as an up-and-coming political Patricia Nation force. For now, the candidates are seen as novices. Republicans have a crowded field of three candidates vying for the party’s nomination. Leslie Rutledge Central Arkansas attorneys Patricia Nation, Leslie Rutledge and David Sterling are elbowing their way through the primary. Rutledge has the backing of former Gov. David Sterling Mike Huckabee. She and a possible runoff rival, www.talkbusiness.net

Feature: Politics Sterling, have received significant endorsements and have been known candidates for months. Nation was a latecomer to the race and conventional wisdom suggests she may force Rutledge and Sterling into a runoff unless something ignites a candidacy for one of the three. Who will lead the ticket is a question mark at this juncture. For now, the three GOP candidates have waded into debates on the electric chair,

pushing back against federal government overreach, and how liberal the Arkansas Bar Association may be. A conservative group known as the American Future Fund Nate Steel has run third-party ads in support of Sterling, which should boost his standing. Waiting in the fall is Democrat state Rep.

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Nate Steel, who has served two full terms in the Arkansas House. He’s not had to step out too far on any positions with an unopposed nomination, but he’s viewed as a formidable opponent owing to his conservative Democratic leanings and legislative voting record. LT. GOVERNOR, TREASURER & AUDITOR It’s hard to excite the masses about the down-ballot races, especially during primary season. Like the AG’s race, Democrats fielded one general election opponent in all of the remaining constitutional office positions – lieutenant governor, secretary of Tim Griffin state, auditor, treasurer and land commissioner – so there will be no Democratic primary action on this front in May. For Republicans, who Debra Hobbs have incumbents in the secretary of state’s and land commissioner’s offices, they’ll see primary battles for lieutenant governor, auditor and treasurer. For lieutenant Andy Mayberry governor, Second District Congressman Tim Griffin appears the heavy favorite. He has strong name identification, a robust campaign organization, and he can raise money. State Rep. Debra Hobbs Duncan Baird (R-Rogers) jumped from the governor’s race to the lieutenant governor’s primary a few days before the filing period closed. She’s spending a lot of her own money to win the Dennis Milligan nomination. State Rep. Andy Mayberry (R-Hensley) has taken a different tact: he’s running to abolish the office of lieutenant governor, claiming that its duties could be

re-assigned to other state officeholders and the elimination of the office could save taxpayers $400,000. Term-limited state Rep. Duncan Baird (R-Lowell) faces GOP Saline County Circuit Clerk Dennis Milligan in the Republican primary for state treasurer. The two had a bizarre episode earlier this year that included a clandestine meeting at a Krispy Kreme doughnut shop, secret audio tapes and video footage of late-night escapades at the state Capitol. In the state auditor’s race, newcomer Ken Yang, a lobbyist for the Arkansas Family Council, will square off against state Rep. Andrea Lea (R-Russellville), who chaired the House State Agencies Committee. Democratic candidates this fall include lieutenant governor nominee John Burkhalter, treasurer nominee Karen Garcia and auditor nominee Regina Stewart Hampton.

Ken Yang

Andrea Lea

John Burkhalter

Karen Garcia

Regina Stewart Hampton

U.S. CONGRESS, DISTRICTS 2 & 4 Republicans have made some of their most visible gains in high-profile congressional races in the last two cycles. The historic 2010 victory in the First District by Republican Congressman Rick Crawford was a shocker to many, although polling showed the change was coming. During that same year, Republicans took back the Second District seat with Griffin’s win, but Ross held the Fourth for the Democrats. Fast forward to 2012 and Ross’ departure opened the door for Cotton to waltz into the office – the first Republican

to hold the Fourth District seat since Congressman Jay Dickey more than a decade ago. The GOP has two primary matchups this spring and tough Democratic opponents await the winners in the fall. In the Second District, state Rep. Ann Clemmer (R-Benton) is facing Little Rock banker French Hill and Colonel Conrad Reynolds of Conway. Hill is the undisputed fundraising champion. Ann Clemmer He served in D.C. during the George H.W. Bush administration as a treasury official. Hill is the former chairman of the Little Rock Regional Chamber of Commerce, and he brings an French Hill impressive resume of business acumen, political contacts and potential bipartisan support to the table. Clemmer is a political science professor at UALR Col. Conrad Reynolds and has distinguished herself in the state Legislature on education, ethics, and pro-life issues. A longtime party activist, Clemmer has criticized Hill’s limited Patrick Henry Hays contributions to a Democrat, disgraced former state Treasurer Martha Shoffner. Clemmer could benefit from a runoff as she is from Saline County, an important part of the Second District GOP voting bloc that is expected to have numerous June runoff elections for a spate of countywide offices. She is dealing with a finance reporting problem caused by her former campaign treasurer making thousands of dollars of “unauthorized disbursements” to himself. Reynolds is the wild card. Can he pull enough votes in the primary to force a runoff? If so, can he make the cut? Reynolds is a veteran who is playing up his military connections – so much that he

legally had his name changed to “Colonel” so that it would appear on the ballot that way. A former 2010 U.S. Senate challenger who finished fourth in the pack, Reynolds is a favorite with the Tea Party faction of the GOP, which will carry some sway in the primary. Former North Little Rock Mayor Patrick Henry Hays awaits the winner in November. In the Fourth District, House Majority Leader Bruce Westerman (R-Hot Bruce Westerman Springs) is hoping his conservative credentials and Garland County connections can spring him to victory on May 20. Westerman, an engineer and former Razorback football player, was often Tommy Moll opposite Republican House Speaker Davy Carter (R-Cabot), especially regarding the controversial private option. It gave the appearance of a deeply James Lee Witt divided GOP caucus and didn’t allow Westerman to use his leader’s status to full advantage. Still, he’s popular throughout the district and his opponent, Tommy Moll, is not well-known. Moll – who is related to Harvey Couch, the founder of Arkansas Power & Light (now Entergy) – has outraised Westerman in campaign money and he’s using that to his advantage with an early TV buy. But Moll didn’t live in the district for many years and his political activity has only surfaced with his run for office. An energy sector investor, Moll appears to be taking a page out of the Tom Cotton playbook: return to your home state, raise a lot of money and oppose all things Obama. For his part, Westerman has been a staunch opponent of President Obama’s policies, including health-care reform. Former FEMA Director James Lee Witt, who will capitalize on his Bill Clinton connections, will square off against the Republican winner this fall. www.talkbusiness.net

Point Counterpoint Let Our State’s Patients Have Access To Cannibas and Its Health Benefits By Melissa Fults

rkansans for Compassionate Care (ACC) began in April 2010 with an approved ballot initiative called Arkansas Medical Marijuana Act. In the 2012 election, it lost by a narrow margin of less than 2 percent. In January 2013, ACC went back to the table to try to make a better initiative than before, to add more patient protections and to ensure better wording. After several months of discussions and conferences with attorneys that specialize in medical marijuana reform, ACC submitted the Arkansas Medical Cannabis Act. Let’s take a look at some of the key points of the new initiative. First, the Arkansas Medical Cannabis Act is self-funding. All sales tax collected on cannabis sold will go to pay for the program first. Any surplus will be divided equally between the Arkansas Department of Human Services for drug education and the Arkansas Umbilical Bank, an excellent program where parents can donate their newborn’s umbilical cord to be used for research and also for creating stem cell injections. With the program being self-funded, we are able to put a maximum of $50 per year for patient registry identification cards. Without this maximum being set, patient registry identification cards could skyrocket and become unattainable by many patients. Designated caregivers will have a registry identification card to guarantee their protection from prosecution. Caregivers will be allowed to care for a maximum of five patients and will have the same protections as patients. Our affordability clause will guarantee that EVERY patient in the state can afford their medical cannabis. Low-income patients will be put on a sliding scale to

guarantee their medicine is affordable. Another important part of our plan is our hardship clause. Although there will be very few patients that will qualify for this program, we added it to ensure access to those patients living in sparsely populated areas that are unlikely to have a dispensary. If a patient lives too far for a dispensary to deliver (typically about 25 miles) and can show health or transportation issues that prevent them from getting to a dispensary, they will be allowed to grow three mature plants and three seedlings. These patients will be subject to inspection of their grow

This is not a party issue, it is not a conservative/liberal issue, it is not a religious issue. It is a MEDICAL issue. area at any time during regular business hours by the Arkansas Department of Health. This guarantees that no patients will be growing more than allowed. These key changes will allow for a much stronger law and more protections for patients. At this point ACC and its volunteers are working diligently to acquire the needed 62,507 signatures. The coming months will be critical in the effort to obtain these signatures. By the time you are reading this, we will have held statewide Compassion Days in April as a signing push. We set up booths throughout the state to make it easier for people to sign the petition and make their voice heard. This is not a party issue, it is not a conservative/liberal issue, it is not a religious issue. It is a MEDICAL issue. So much

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

research is surfacing, proving the medical qualities in cannabis. Whether a patient is suffering from cancer, amyotrophic lateral sclerosis (ALS, also known as Lou Gehrig’s disease), Crohn’s disease, Alzheimer’s disease, HIV/AIDS, posttraumatic stress disorder (PTSD), multiple sclerosis, seizures or other debilitating illnesses, studies are showing that cannabis can have a very positive effect on their treatment. Israel is leading the research in the amazing healing properties of cannabis, and it is time for the United States to allow research here. The laws are changing one state at a time and 2014 is Arkansas’ time. Patients across the state are suffering needlessly. Many families have already had to leave their homes and move where their loved ones can have access to cannabis legally, and many more will have to leave if our laws don’t change. How do you explain to a parent whose child suffers from at least 200 seizures a day that there is a potential medicine that can lower that number and, in many cases, stop them all together, but it is illegal to use? Instead they have to depend on strong, dangerous medication that does no good and actually can cause more harm. Arkansans for Compassionate Care came so close in 2012. The fight continues, and we hope that 2014 will be the victory that so many patients have waited for so long. For more information about ACC and its efforts, visit www.arcompassion.com. Melissa Fults is Arkansans for Compassionate Care’s campaign director of the Arkansas Medical Cannibas Act. She can be contacted at melissafults@arcompassion.com.

Point Counterpoint Arkansas Needs a Sensible Approach To Medical Marijuana, Not a New Law By Jerry Cox

he two Arkansas medical marijuana measures proposed for the ballot this November bypass all the normal safeguards established for other medicines. No prescription from a doctor will be necessary. No pharmacies will dispense it. The FDA will not regulate it, and the public will not know how much Tetrahydrocannabinol (THC – the ingredient that makes people high) is in it. Anyone claiming to suffer from chronic pain or nausea can smoke it. One proposal even allows people to grow marijuana at home. This does not sound like medicine, because it is not medicine. Ultimately this is about totally legalizing marijuana, as we have seen in Colorado and Washington. Arkansas needs a sensible approach for dealing with marijuana. Proponents often claim marijuana is no more dangerous than alcohol or tobacco. That is not very reassuring. The National Institute on Drug Abuse says tobacco and alcohol cost the U.S. economy nearly $400 billion a year in increased healthcare costs, crime and lost productivity. Remember when tobacco companies marketed cigarettes to kids, ignored lung cancer and made smoking look cool? Imagine what a heyday producers will have with legalized marijuana. In some states they are already marketing marijuanainfused candy and bottled drinks. In Denver there are more pot shops than McDonald’s and Starbucks combined. Not knowing the unintended consequences, the governor of Colorado has warned other states about jumping to follow his state’s example. But what about tax revenue? Could marijuana be regulated and taxed similarly to alcohol? According to the Urban and Brookings Institution, tobacco and alcohol cost the U.S. $10 for every one dollar they

produce in tax revenue. Even if the negative impact of marijuana was no worse than tobacco or alcohol, the social, health, and economic costs would be enormous. Assuming that any taxes on marijuana would fall at about the same level as those on alcohol and tobacco, the tax revenue would not come close to making up for the cost marijuana carries. Emerging science on the harmful effects of marijuana is chilling. Numerous studies show marijuana smoke has 50 to 70 percent more carcinogens than cigarette smoke. Despite claims you cannot overdose on marijuana, marijuana use causes death from cardiovascular events, stroke and fatal traffic accidents. According to the National Institute on Drug Abuse, one in six teens who try marijuana will become addicted. Today’s marijuana is six times stronger than the marijuana they smoked at Woodstock. Fetal brain development is permanently damaged when pregnant women smoke it. Teens who routinely use it see an irreversible six- to eight-point reduction in IQ. Studies published in the past two years link marijuana use to schizophrenia, psychosis and depression. Because marijuana does cause harm, the American Medical Association, the American Academy of Pediatrics and virtually every other credible medical organization in the nation oppose marijuana as medicine. When medical marijuana was on the ballot in Arkansas in 2012, the Arkansas Medical Society opposed it along with the Arkansas Pharmacists Association and more than a dozen other Arkansas organizations, including the Arkansas State Chamber of Commerce and Gov. Mike Beebe. But what about the people who say they need medical marijuana? There is a sensible

approach we can take. Federal and state governments need to pave the way for medical researchers to determine marijuana’s risks and benefits. Most scientists believe that any potential medical uses of marijuana will not be gained by smoking it, but by isolating and extracting certain compounds found in the plant – much as modern medicine derives morphine from the opium plant. Emerging marijuana-based drugs like Sativex, a mouth spray under consideration in the U.S. and already approved in Canada, may provide relief for people suffering from multiple sclerosis or pain due to cancer. Oils derived from the marijuana plant may help children and adults with seizures. The good news is that these drugs are not smoked and they have low amounts of THC, marijuana’s intoxicating compound. Cancer patients and others who need the THC in marijuana can already get it through a prescription for Marinol from pharmacies across the country. None of us wants sick people to suffer, but changing the law to make it legal for just about anyone to smoke marijuana is not the answer. If any part of the marijuana plant is going to be used as medicine, it should be thoroughly researched and approved by the FDA, prescribed by a doctor, and obtained through a pharmacy the same as other drugs. This is a sensible approach to marijuana. Most people would not think of letting someone grow and smoke their own opium just to get the benefits of morphine. Our citizens already have many roads to selfharm. We should not open another. Jerry Cox is executive director of the Family Council Action Committee, a conservative political organization based in Little Rock. He can be contacted at Jerry@FamilyCouncilActionCommittee.com. www.talkbusiness.net

Profiles Service PHOTO: SHUTTERSTOCK

Taking Stock Investor Relations Specialists Soothe and Sell Potential Shareholders By Ben S. Pollock

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

A friend, when asked what she knew

imparted to shareholders, whose input in

“We travel throughout the year to meet

about “investor relations,” smiled and said that’s who you contact at Wal-Mart

turn is provided to executives. The two-way also is more literal:

our larger investors, money managers,” she said. “There’s management getting out on

when you want a ticket for their annual shareholders meeting. A ticket, though,

Shareholders are invited to attend

the road, and I travel with them, sharing the story and the strategy.”

won’t quite get you through the doors of Bud Walton Arena at the University of

The firm takes the trips seriously, sending out its chief executive officer, chief financial

Arkansas come June. You have to be a shareholder, an owner of stock in Wal-Mart

officer and/or chief operating officer to meet with investors, Michaels said.

Stores Inc., to gain admission. Most annual meetings of publicly-held

She explained about half of Windstream’s major owners are retail or individual

companies don’t resemble Wal-Mart’s mix of pep rally with arena concert.

investors and the rest are institutional investors.

Corporations employ several departments – from investor relations to economic

“Retail” has a root definition, it’s not a storefront with inventory and a cash

analysis to communications – to event-plan those – along with creating what might be seen as the event’s “program,” the annual

shareholders report. Investor relations in most medium-sized

mutual funds, investment firms and the like,” Michaels said.

corporations can be pretty small. It’s not unusual for it to consist of one person plus

David Avery, Windstream’s vice president for corporate communications, noted the

an assistant, then for those two to have other responsibilities. But they are the

Mary Michaels

importance of having ongoing ties with retail and institutional investors. “If you

points of contact for potential and existing shareholders, selling them on the strengths

Windstream’s annual meeting – this year’s will be May 7 in Little Rock – which she

have those solid relationships, then they will have a better understanding,” he said.

of the company. There are other tasks besides the annual

calls “a great opportunity for us to summarize our year.” Michaels also leads other

When reports in the media focus on the stock market, there’s a “disconnect with

meeting and report. Each firm and its staff go about their duties a bit differently.

executives on about 20 trips annually.

the company, what it does,” Michaels said. Investor relations is there “to make sure they

With two Arkansas companies as examples, Windstream and Arkansas Best, the differences might also be attributed to differences in corporate-wide personalities. Mary Michaels is vice president of investor relations and capital markets for Windstream (Nasdaq: WIN) the Little Rock-based telecommunications company that until 2006 had been under the umbrella of Alltel Corp. Windstream is a provider of “advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, phone and digital TV services to consumers primarily in rural areas,” according to its website. “We provide two-way communications between our company and investors,” Michaels said, explaining that strategies are

“At the end of the day you have to do what is right with the shareholders who have entrusted their money to you.” – David Avery, Windstream vice president for corporate communications

understand the [firm’s] fundamental story, when you have all this other noise in the market.” Michaels, who has a master’s in business administration from Webster University in Little Rock, has a solid history with Windstream and Alltel, having been there 13 years, the first part in its treasury department, calling the move to investor relations “a natural shift.” She notes she has other responsibilities in the company to which she and her one assistant attend. Another duty for Michaels is writing the script for the quarterly earnings call. The trips to meet investors generally follow that report, at least three per quarter, she said. Sometimes in the business world, hard decisions are made – from layoffs to facility closings – and maximizing dividends for stockholders is cited. www.talkbusiness.net

Profiles: Investor Relations “It’s not that we’re blaming it on the shareholders, making the right decisions, but we’re investing a lot of capital in what we feel are growth opportunities. Some shareholders go, ‘whoa, whoa, wait, why are you spending this?’ ... They want to make sure we are spending their money wisely,” she said. Avery concurred: “At the end of the day you have to do what is right with the shareholders who have entrusted their money to you.” Fort Smith’s Arkansas Best Corp. similarly had been on the NYSE since 1972 then moved to the Nasdaq (ABFS) in 1992.

David Humphrey is Arkansas Best’s vice president for investor relations, holding those duties since 1998, though the title was different previously. He joined the trucking company in June 1983 in its economic analysis department. He graduated from the University of Arkansas with bachelor’s and master’s degrees in industrial engineering. Humphrey doesn’t talk like an engineer, whatever that might be like, but rather as a cheerful, old-fashioned salesman. “I’m a storyteller so to speak,” Humphrey said. “I’m a salesman. I’m a salesperson for our stock. To me people are not going to buy our stock if they don’t understand what

Arkansas Best, a holding company, is known for its main subsidiary, the less-than-

we do.” He can get homey about Arkansas Best.

truckload (LTL) carrier ABF Freight System, but it has a number of related wholly owned

“I get to tell people about our company all day long. We have such good people. You

divisions, chiefly FleetNet America Inc. and Data-Tronics Corp. FleetNet handles truck

have to have a confidence in what you are talking about, in the product that is being

maintenance and repair. Data-Tronics covers information technology services.

David Humphrey

public affairs | campaigns | event management markhamgroup.com

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

delivered, confidence in the management team.”

Humphrey is more than prepared to talk numbers with investors. Generally he works with representatives of institutional investors, although he gets calls from individuals, “Anybody that’s interested in investing in our company, I try to respond to all of them.” “What I talk about is the operations of the business, the trends of the business. You certainly get into conversations about financials. The institutional investors already have read those, and will have questions, but they already know,” he said. He has strong empathy with the managers at these large investors. The actual or potential shareholders treat their companies’ money as their own. “They take it very seriously. That is why they are digging. I talk to some for two years before they invest in our stock.” Why such a long waiting period? First, investors take in lots of research from a number of companies. But also, Humphrey

Helping Businesses Maintain a Critical Edge...

“I’m a salesman. I’m a salesperson for our stock. To me people are not going to buy our stock if they don’t understand what we do.” – David Humphrey, Arkansas Best vice president for investor relations

said, it comes down to when to buy: “It also is the timing. The time is not quite right, and then it is at some entry point.” Like Michaels at Windstream, Arkansas Best’s investor relations office is just two people, and they do work for other areas of the company. “We’ve always been small. I have an administrative assistant whom I share with people here in the finance area. [Yet] I do have several people in our finance area that I call on as needed,” he said. Humphrey similarly has responsibilities in building the quarterly and annual financial reports. Comparing them over the course of the “Great Recession” is informative, he said. It’s been a slow economic recovery, “two steps forward, one step back. ... you manage your costs, you reduce your resources. In some cases your customers went out of business. You adjust your resources to the available business level,” said Humphrey.

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Leadership PHOTO: BOB OCKEN

Matthew and Maria Hampton, leaders of Elevate Entrepreneurship Systems.

Dynamic Duo Matthew and Maria Hampton are working to change Arkansas and the world through youth entrepreneurship. By Bill Paddack

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

On a sunny, late-winter day in midtown Little Rock, Matthew and Maria Hampton are eager to strike up a conversation about entrepreneurship over coffee and tea at the Panera Bread location in the Park Avenue Shopping Center. Engaging, energetic and friendly, they readily admit they’re serial entrepreneurs. Simply put, that means they love to continuously generate innovative ideas and start new projects and businesses. As the founders of Elevate Entrepreneurship Systems six years ago, the Little Rock thirty-somethings and their team have been responsible for building youth entrepreneurship ecosystems in partnership with schools, chambers of commerce, economic developers and community colleges. This husband and wife – they’re both quick to point out that they work as a team – describe their shared zeal for encouraging and helping young people this way: “We know youth entrepreneurship because we have lived it.” From college campuses to Silicon Valley, the Hamptons are using their drive, ideas and passion to make a difference. That’s why we asked them to talk a little bit about what they do and why they do it.

Give our readers some background on the organization you started.

The Hamptons: Elevate has launched more than 30 youth enterprises throughout the southeastern region of the country. Our team just returned from the New Media Entrepreneurs Accelerator [in San Francisco], where we lived and worked with some of the country’s top tech companies in an effort to establish a new mobile app to expand youth entrepreneurship on a global basis. Our team recently received seed funding to launch the makePAPER mobile app (see www.makepaper.co).

Tell us a little bit about yourself and how you developed such a passion for entrepreneurship?

The Hamptons: Entrepreneurship has been a form of human development that has transformed both of our lives. Entrepreneurship has allowed us to solve problems, build lives, create jobs and live within our passion. We wake up and do what we love

every day. Matt: Maria is a native of Grady. Through some unfortunate circumstances, she found herself using entrepreneurship at the age of 13 to survive. It was the experience of having to find money to eat and pay bills that forced her to launch a number of enterprises as a rural teenager. Maria still uses that experience as a source of strength and as the foundation for her ability to create, learn, build mobile applications and interact with technology. Maria: Matt is a serial entrepreneur who was heavily supported as a teenager when establishing Teen Connection, a youth employment contracting firm. Matt worked with local government leaders, youth organizations, local entrepreneurs and even the White House to build Teen Connection. He has continued his entrepreneurial career and has launched a number of businesses over the past 25 years.

I understand that you work with a number of educational organizations. What are your thoughts on blending entrepreneurship with education?

The Hamptons: It is absolutely critical that we understand how to leverage the marriage between applied entrepreneurship education and our current educational system. We must engage students in entrepreneurial learning that is real at all levels of our educational system. We have seen its ability to transform outcomes for students who are not performing. The problem is that most of our educational organizations don’t know how to embrace entrepreneurs, how to truly teach entrepreneurship and, therefore, the benefits of entrepreneurship have not been fully realized. We are working hard to show educational

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organizations how to transform educational outcomes using real entrepreneurial learning.

What needs to change in Arkansas to foster more entrepreneurship?

The Hamptons: Five points. Include the misfits (nerds, the poor, those who don’t fit in the box). Get around the issue of race and truly expand minority entrepreneurship. Engage ex-offenders in the entrepreneurial ecosystem – they have the skills and won’t quit, because they don’t have other employment options. Stop faking it. We have way too many programs that are using entrepreneurship as a marketing tool, as a way to just expose youth to the idea of business ownership. The youth of Arkansas are the ones who can truly take our community into the future and establish new businesses. Let the private sector drive this movement. Too much of this movement is driven by the public sector, the school systems and the nonprofit world – we must fully engage our private sector leaders in this effort to expand entrepreneurship.

What career advice have you received that you would share with others?

Matt: Bob East [chairman of commercial construction company East-Harding, Inc.] told me when I was 17 and complaining about being treated unfairly, “If it were easy, everyone would be doing it.” To me that meant that if business and entrepreneurship were easy, everyone would do it, so I had to just toughen up and make it happen. I have been knocked down far more often that I have been built up, and with God’s power, we have continued to rise and do it.

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TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Commentary

Time Is Right to Reset A Bipartisan Energy Policy By Thomas F.“Mack” McLarty Mack McLarty

s someone with long experience in the energy business, including running a natural gas company in the pre-boom 1980s, I can remember a time when a debate about how to exercise America’s energy muscle on the world stage would have been unthinkable. Instead, we would have been worried about shortages and our energy vulnerability. That all changed with the surge in domestic production of oil and gas over the last decade. With the crisis in Ukraine, smart minds are now urging the United States to see energy as a new power tool of American foreign policy, a counterweight to resource-rich Russia and a key source of leverage for U.S. and allied interests around the globe. Finding ways to export the U.S. energy revolution is an important goal. But there is perhaps an even bigger prize if we can use the moment to launch a broad-based and bipartisan discussion about America’s energy priorities and policies for the next generation. Such an effort would enlist leaders of both parties, environmentalists, private enterprise and the public. Its agenda would include expanding the economic benefits of the energy boom, including the creation of millions of jobs; promoting investment to protect the environment; and exploring how to turn energy security at home, including increased North American energy integration, into new options for American leadership abroad. So far, dramatic domestic energy growth has outpaced changes in our politics and policy. U.S. crude oil production grew by

60 percent between 2008 and 2013. The Department of Energy forecasts continued growth for a decade more. The U.S. passed Russia in 2012 as the top producer of natural gas and last year became the world’s overall leader in oil and gas production. The country could be self-sufficient in natural gas by 2020. The momentous change also has brought uncertainties about the future U.S. role in the Middle East, Asia and elsewhere. As Adm. Dennis C. Blair, the former director of national intelligence, testified before Congress recently, while domestic economic advantages are clear, the “national security, foreign policy and geopolitical impacts of U.S. oil abundance are more complicated and less understood.” In response to Russia’s action in Crimea, members of both parties have called for expedited approval to build liquid natural gas export terminals so the United States might compete with Russia as a supplier to Europe. This is an important, if partial, step. More broadly, U.S. companies have the capacity to export innovation and knowhow, including hydraulic fracturing techniques, to reduce dependency on Russia. For their part, U.S. officials can work with our allies to diversify energy supply chains, help make their markets more efficient and seek ways to consume less and become more self-sufficient. And the administration can continue to push for a major free-trade pact with our European allies. This is precisely what President Barack Obama did during his recent visit to Europe. Carlos Pascual, U.S. special envoy on energy, has delivered a similar message in Ukraine and Brussels.

Why do I think that a shifting paradigm on energy can lead to constructive engagement at home? As Ukraine has shown, there are incentives for both parties to come to the table on energy. Jobs, investment, more competitive U.S. manufacturing, less dependence on foreign oil — all have powerful bipartisan appeal. And so should environmental stewardship. No consensus about future energy policy can, or should, be reached without tackling tough questions about emissions, alternative fuels and renewables. We should move deliberately toward cleaner sources of energy that can be economically viable. The stakes of our energy future are big enough to compel Democrats and Republicans to overcome the politics of inaction and build from areas of agreement. During my career in the gas industry, I was appointed by President George H.W. Bush to serve on the National Council on Environmental Quality, a forum that brought together leaders of the energy sector and environmentalists in a spirit of tough but open dialogue. A bounty of home-grown energy that we never expected to have is giving us an opportunity we cannot afford to miss. We should seize it. Mack McLarty was White House chief of staff to President Bill Clinton and previously chairman of Arkla Gas. He is chairman of McLarty Associates and McLarty Companies. This guest commentary first appeared in the April 7, 2014, edition of The Dallas Morning News and is republished with permission from Mr. McLarty. www.talkbusiness.net

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TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Compass Report: Rapid Pace Of Growth Continues For NWA Economy By Michael Tilley

COURTESY OF THECITYWIRE.COM

Continued gains in employment and sales tax collections helped the Northwest Arkansas economy finish 2013 with a strong fourth quarter, according to The Compass Report. The fourth quarter 2013 grade of B+ was unchanged compared to the third quarter and was an improvement over the fourth quarter of 2012. The quarterly Compass Report for Northwest Arkansas is managed by The City Wire. The report is the only independent analysis of economic conditions in the metro area. Economist Jeff Collins, who conducts the data collection and analysis for The Compass Report, said the regional economy “continues to grow at a rapid pace,” and he sees no reason it will slow in the near term. “Despite [Northwest Arkansas] being roughly two-thirds the size of the Central Arkansas economy, nonfarm employment grew at at four times the rate of the state’s largest MSA,” Collins noted. Continuing, he wrote: “The unemploy-

ment rate in Northwest Arkansas was the lowest in the state amongst all MSAs in December (4.9%). It was more than a full percentage point lower than that for the Little Rock/North Little Rock/Conway MSA (6.2%). The highest rate in the state was the Pine Bluff MSA at 9.8%. To add perspective, of the 372 MSAs in the country, only 22 posted rates above 10% in December and only 78 had rates below 5%.” METRO COMPARISONS, IMPACT   The 2013 fourth quarter economy in the Central Arkansas area received a grade of Cmeaning that economic conditions declined slightly compared to the fourth quarter of 2012, and were unchanged compared to the third quarter of 2013. The Compass Report for the fourth quarter of 2013 shows that small but broadbased gains in key metrics has resulted in the Fort Smith regional economy finishing out 2013 with two consecutive positive quarters. A fourth quarter 2013 grade of C+ was unchanged compared to the third

quarter and better than the C grade in the fourth quarter of 2012. Collins said the relative poor performance of the Central Arkansas economy is not a positive indicator of the overall Arkansas economy. “The Central Arkansas regional economy is the most diverse in the state and arguably the representative of overall statewide economic performance. Given this relationship, recent data indicates the statewide economic outlook remains subdued,” Collins said. He also said the three metro areas – especially Northwest Arkansas – continue to be key job generators for the state. “To underscore the impact of the three largest metro areas, for December of this year the unemployment rate for the rest of the state was 8.5%, up 0.3% from December 2012 to December 2013. The statewide unemployment rate with the three largest metros added back in was 7.2%, up 0.1% December-on-December,” Collins said.

UNDERSTANDING THE COMPASS REPORT A key factor in understanding The Compass Report is in understanding the “grading” approach used to measure the current and leading economic indicators. The strategy is to place the most recent data in historical context. Average values for the percent change over the referenced time period were calculated, as were standard deviations for each measure. The more similar current values are to historic averages the more likely the indicator grade is to be a “C.” The farther away the observed value, as measured by the standard deviation of the data, the more divergent the grade from “C.” In other words, “C” reflects no change in economic activity. The grades “B” or “A” indicate improvement above the historical average, and “D” and “F” indicate a decline in economic activity compared to the historical average.

Northwest Arkansas

Continued economic gains compared to the fourth quarter of 2012.

Central Arkansas

Small decline in economic conditions compared to the fourth quarter of 2012.

Fort Smith Metro

Slight gains in economic conditions compared to the fourth quarter of 2012.

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Industry Trade

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

PHOTO: WALMART.COM

Wal-Mart Execs ‘Maniacal’ About Pushing Sales, Inventory Control By Kim Souza

COURTESY OF THECITYWIRE.COM

Notes from the recent Year Beginning Meetings held by Wal-Mart Stores Inc. reveal bold aspirations from the top down. CEO Doug McMillion is not letting any grass grow under his feet, issuing edicts like being “maniacal about growth.” He said growing comp sales “is a must” and expects to accomplish that with excellence in merchandising, creative displays and “retailtainment.” In other words, he wants to see more excitement and energy displayed inside the retailer’s physical stores. Reading between the lines, there could be more celebrity visits surrounding new product launches or more “try and buy” opportunities for suppliers. SHARP EXECUTION  McMillon’s expectations also raise the bar on in-stocks. Last year Gisel Ruiz, chief operating officer for Walmart U.S., said the retailer made a conscious effort to improve in-stock averages to 96%. At the YBM event, Duncan Mac Naughton, chief merchandising officer, reiterated the need for improvement in what he calls a $3 billion opportunity — the sales Wal-Mart losses annually when products are out-of-stock. Mac Naughton said the retailer’s goal is to grow inventory at half the rate of sales, a disciplined approach, while also embracing more localization. His main objective is to grow top line sales, leveraging every tool at his disposal — individualized pricing perks with “Savings Catcher,” more price rollbacks billed as “Amazing Finds,” which are three to

four items featured in weekly tabs. He said the retailer expects to see production innovation from its suppliers and Wal-Mart is eager to partner where it can to assist in the process. “Wal-Mart’s recent communication clearly signals a ‘take no prisoners’ approach to growing their topline and comp sales. You can hear it in their voices. They’re back on offense and ready to take it to the competition,” said Jason Long, CEO of Shift Marketing Group.

“Wal-Mart gets that it doesn’t have to be perfect. They are testing A and B simultaneously, like never before.” – Carol Spieckerman, CEO of NewMarketBuilders MORE TESTING  Wal-Mart has proven to be a nimble giant willing to test multiple initiatives and then roll out the learnings much more quickly than the brick and mortar retail industry as a whole. Carol Spieckerman, CEO of NewMarketBuilders, said this agility is linked to the @WalmartLabs “brain trusts” and all the digital talent the retailer has acquired over the past 18 months. “Wal-Mart gets that it doesn’t have to be perfect. They are testing A and B

simultaneously, like never before.” Spieckerman said. Mac Naughton said this year Walmart U.S. will expand “pick up today,” now being tested in Denver. Consumers can order groceries online and pick up free at the nearest store. Bill Simon, CEO of Walmart U.S., recently said the retailer is planning to build pick-up depots that will allow shoppers to drive through and get their grocery order that was placed online earlier in the day. The “Walmart to Go” grocery delivery test market will also be expanded this year. It is already available in Denver, San Jose, Northern Virginia, Philadelphia and Minneapolis. Wal-Mart also plans to ship products from 50 more of its supercenter locations this year. This effort to tether supercenters to smaller formats and e-commerce fulfillment is key to Wal-Mart being able to better compete for Amazon Prime customers. “The new Wal-Mart programs and tests will likely take some time to bear fruit, but they have so many irons in the fire that dividends should start to accrue sooner rather than later,” Long said. In the near-term, Long said Wal-Mart’s biggest opportunity continues to be picking off unhappy Target customers. “A recent report had upper-income customer satisfaction dropping to 70% at Target, down 9 percentage points. Wal-Mart is better positioned than most to pick up this cross-over business and it’s likely incremental as this shopper probably isn’t shopping their stores today,” Long said. www.talkbusiness.net

Industry Trade

PHOTO COURTESY OF ARKANSAS FARM BRUEAU

Cotton acres are expected to increase.

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

Arkansas Row Crop Farmers Poised For Record Year By Talk Business Staff Agricultural experts said a record number of plantings for Arkansas’ major crops is likely in 2014 – a trend that could lead to another stellar year for farming production in the state. The National Agricultural Statistics Service issued its “Prospective Plantings” report on March 31. The report indicated that in Arkansas: • Cotton acres are expected to increase to 340,000 acres; • Soybean acres are expected to rise to 3.35 million acres; • Rice acres are expected to increase to 1.52 million acres; • Peanut plantings are expected to stay the same; and • Corn plantings will decline to an estimated 600,000 acres “Today’s report confirms what we were gathering all winter at our county meetings” with Arkansas crop producers, said Scott Stiles, extension economist with the University of Arkansas System Division of Agriculture. Lower corn prices are driving the drop-off in plantings, say agri experts, but that will only lead to a likely shift in crop planting and production. Tom Barber, a former cotton specialist with the agriculture division, said lower prices for corn may be sending some acres back to cotton. “The new crop prices are still around 80 cents,” Barber said. “I think the difference will be in the corn prices – what it is now versus what it was. A lot of these corn acres are going back to cotton.” Soybeans, a longtime crop leader for Arkansas agriculture, is likely to remain king in 2014. In 2013, Arkansas soybean producers planted 3.26 million acres. Estimates for 2014 are that planted soybean acreage will be between 3.3 and 3.4 million acres.

“From discussion with many growers during the winter meeting season, many indicated that they would increase soybean and rice acreage, and decrease corn acreage,” said Jeremy Ross, a soybean specialist with the UA Division of Agriculture. “However, this is all depending on the weather conditions in the next four weeks. If we see a wet weather pattern, and corn planting is delayed, we may see a few more soybean acres.” Rice will also benefit from the decline in corn plantings and if weather conditions remain favorable, the report and experts suggested. Last year, farmers saw record yields in most major crops in Arkansas.

According to the National Agricultural Statistics Service, the final production estimates for Arkansas’ state average yields in 2013 showed: • Corn at 187 bushels per acre, a new record; • Sorghum at 102 bushels per acre, a new record; • Rice at 168 bushels per acre, a new record; • Soybeans at 43.5 bushels an acre, a new record; and • Cotton at 1,149 pounds per acre, also a new record. For Arkansas, 2013 was the second straight year for record state average yields in corn, rice and soybeans.

Promoting a pro-business, freeenterprise agenda; contesting anti-business legislation, regulations and rules.

1200 West Capitol Avenue (72201) P.O. Box 3645 Little Rock, Arkansas 72203-3645 Telephone: 501-372-2222 Facsimile: 501-372-2722 Website: www.arkansasstatechamber.com

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Profiles Service

Standing Out With CEO Sonja Yates Hubbard By Kerri Jackson Case Sonja Yates Hubbard is the Chief Executive Officer of E-Z Mart Stores, Inc. The first E-Z Mart opened in 1970 in Nashville, Ark., by Hubbard’s parents. She took over as CEO in 1998 after her father’s death. E-Z Mart now owns approximately 300 stores in Arkansas, Louisiana, Texas and Oklahoma. In her tenure, she’s made diversity a top priority for the company. In March, she was a keynote speaker at the inaugural Women Can! conference in Little Rock. She told the crowd of more than 500 professional women, “Diversity of thought leads to better decisions.” Hubbard spoke about being a woman in the male-dominated field of convenience store owners. She told the story of being asked to join a national board for a trade organization because “they needed a woman. So I told them if that’s the only reason you want me, then no.” The board was startled by her answer, then went on to enumerate the professional reasons they wanted her voice. She accepted. What’s the best part and worst part of being a woman in your industry? The best part is that I stand out. I get noticed. When I speak up, people listen. The worst part is that I stand out. I get noticed. And there are still some stereotypical ideas of what a woman’s place is. I’m still told I’m too pretty to be in my position. It is intended as a compliment, but implies that intelligence and attractiveness are mutually exclusive traits. Really? And does that just apply to women or men too? Best business advice you’ve ever received? My dad told me, “Make your words your bond. If you say you’re going to do something, do it. It doesn’t matter what’s written on paper. You always do everything you said you would.”

TALK BUSINESS ARKANSAS | MAY/JUNE 2014

What do you see happening in the economy presently, especially as it relates to your convenience store business? It’s a really competitive business. We are constantly evaluating where the growth is and making adjustments to keep on top of our game. Certainly the stagnant economic conditions impact our business and all businesses, especially as it relates to higher unemployment levels. When consumers don’t have dollars to spend, all retailers are impacted. Can you draw any conclusions about consumer behavior? Customers vote with their dollars. They are usually a lot less worried about fat and salt in their diet than policy makers. Is there one or two specific changes that you’d like to see that could jump start the economy or strengthen it? Encouragement to create jobs is needed to get the economy going and improve the quality of life for our country’s citizens. Instead, we’re seeing waves of regulation that increase overall costs so much that businesses instead are looking at options to reduce employment. That isn’t good for anyone in the long run. Additionally, there’s a lot of regulatory pressure that is especially onerous for small, rural businesses. There are many policy changes meant to protect consumers, but don’t take into account the unintended consequences. For instance, we had to fight back a bill related to food stamps or SNAP benefits that would not allow people to use those at convenience stores. Some of our more rural stores are the only source of fresh milk and produce for miles around. Our whole check-out process is computerized, so there’s no way to spend those dollars for anything other than what they’re intended. We have to always be on alert for something that has good intentions, but limits access.

You’re not like everyone else.

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You get up a little earlier. Work harder. See further ahead. You’re the bold of Arkansas, men and women with an entrepreneurial spirit that never quits. We need more like you. If you know someone who’d like to change the world, or a company already on its way, please share ArkansasFavorsTheBold.com.

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