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Tuesday, January 31, 2012

Pep Boys Goes Private

First appeared in Wall Street Journal
Pep Boys—Manny Moe & Jack has agreed to be taken private by private-equity firm Gores Group in a deal that values the auto-repair company at roughly $800 million and puts an end to long-running speculation over its future.

Reports early last year suggested the retail auto-parts and service company was considering putting itself up for sale, although Pep Boys never commented on the speculation.

Pep Boys shares shot up 24% to $14.93 in Monday composite trading on the New York Stock Exchange, nearing the $15-a-share offer from Gores Group. The shares closed Friday at $12.08, giving Gores's offer a 24% premium over the Friday closing price. Pep Boys stock hasn't traded above the offer price since late 2007.

Pep Boys' board unanimously approved the agreement and recommended that its shareholders follow suit. The Philadelphia-based company, founded more than 90 years ago, said the enterprise value of the deal is roughly $1 billion. Gores is putting $489 million of equity into the deal.

"Our board firmly believes that this transaction is in the best interests of all of our stakeholders and delivers an ongoing commitment to excellence for our customers and employees," said Pep Boys Chief Executive Mike Odell.

Pep Boys' brand recognition as well as its moderate pricing appealed to Gores, said Lee Bird, managing director of operations and consumer practice leader at Gores.

The agreement allows for a 45-day "go shop" period in which Pep Boys can consider other offers. The company also said in light of the proposed transaction it won't host a conference call to discuss financial results for the 2011 fiscal year but intends to file its year-end results with the Securities and Exchange Commission.

The auto-parts company began in 1921 with Naval buddies and original Pep Boys Emanuel "Manny" Rosenfeld, Maurice "Moe" Strauss, Moe Radavitz and Graham "Jack" Jackson. Their first store opened in Philadelphia under the name Pep Auto Supplies, according to the company's website. Its name was changed around 1923 after Strauss noticed during a trip to California that many successful businesses there used first names.

Radavitz and Jackson both left the company early on. When Pep Boys went public in 1946, Rosenfeld served as its first corporate president.

Pep Boys, which has more than 700 stores, has faced competition from companies including AutoZone Inc., Advance Auto Parts Inc. and O'Reilly Automotive Inc.

Last month Pep Boys reported that its fiscal-third-quarter net income rose nearly 23% on stronger tire sales and improving service sales. At the time, Mr. Odell said the improved business was due in part to new marketing, lower gas prices and pent-up demand.

Auto-parts suppliers have done relatively well during the recession and prolonged economic downturn, as many consumers have held on to their cars longer and sought out repairs instead of purchasing new cars. The average age of a car or truck in the U.S. hit a record 10.8 years last year as job security and other economic worries weighed on consumers' minds.

Gores Group said it has fully committed financing for the buyout, which is expected to close in the second quarter. Once the acquisition is complete, Pep Boys stock will no longer trade on the New York Stock Exchange.

Monday, January 30, 2012

Floating Bases May Be a Game Changer for US

First appeared in Wall Street Journal
Within the president's defense-budget plan is funding for an intriguing new item: a floating drone base that also could be used as a launching pad for commandos.

The vessel—called an "afloat forward staging base"—would be a platform that could be configured to carry and refuel small patrol boats, helicopters or pilotless aircraft.

It would also give the U.S. military the ability to stage a small strike force offshore—without obtaining a permission slip from another country for access to a land base.

Details are still emerging, but the project offers insight into how the Obama administration envisions a military that in some ways is more lethal even as it contracts.

Plans for the specialized vessel fit neatly with the Obama administration's plans to grow special-operations forces, while slimming down conventional forces such as the Army and Marine Corps.

Senior officials want to provide military commanders with affordable sea-base options without necessarily sending a big-deck aircraft carrier and a full complement of escort ships.

A defense official said the floating staging base was more like a freighter that would be outfitted for different kinds of missions, from countering mines to launching remotely piloted aircraft. It also could be used as a platform for launching commando operations.

The official said one option for the ship is a version of the Mobile Landing Platform, a logistics ship that is being built by General Dynamics NASSCO, a San Diego-based shipyard owned by General Dynamics Corp. General Dynamics didn't respond immediately to requests for comment.

Earlier this week, a Navy SEAL team staged a dramatic rescue of hostages held in Somalia. The military hasn't disclosed where the SEALs launched their operation from, but the raid represented the kind of operation that the administration wants at the center of its counterterrorism strategy: one that requires a minimal involvement of conventional forces.

It isn't clear what kinds of drones might operate from the ship. Special-operations forces in the Middle East have used the Fire Scout, a robotic helicopter, for surveillance operations in the Middle East.

The Navy disclosed last year that two Fire Scouts had operated from a guided-missile frigate as part of an international task force fighting Somali pirates.

The unmanned craft also has operated in Afghanistan, and a Fire Scout drone crashed last year during a reconnaissance mission over Libya.

The sea base described in the Pentagon's budget rollout has some historical antecedents.

During U.S. military operations to protect Kuwaiti oil tankers from Iranian attacks in the late 1980s, the U.S. repurposed two oil platform construction barges, the Hercules and the Wimbrown VII, as bases for countering Tehran in the Persian Gulf.

James Jay Carafano, a national-security expert at the conservative Heritage Foundation, said the floating base "sounds like the same concept" as the converted barges.

"It's a small platform that you can use to launch quick operations from," he said. "So it's ideal for littoral operations where you want to do special operations or ISR [intelligence-surveillance-reconnaissance]."

Mr. Carafano added, however, that this kind of capability was "not a silver bullet," because such vessels would still have to be sustained and protected by conventional forces.

"It's a very limited capability," he said, adding: "Normally, when we do stuff like this, they wouldn't want to advertise it. It does seem to be a PR campaign for a smaller, leaner, more flexible military."

Friday, January 27, 2012

Southern Plants Find Home in North

First appeared in USA Today
Southern magnolias, lovers of sultry weather, braving the chillier Northeast?

Camellias, a New Orleans trademark, staking out in North Carolina and higher latitudes?

It's true, gardening experts say, and expect similar oddities to represent the new norm.

It is now safe to plant new species in many parts of the nation, according to a new government map released Wednesday showing new growing guidelines for the first time in decades. A gradual northward warming trend makes it possible to plant trees and other perennials that would have perished in colder zones. The "hardiness" zones, the gospel to the nation's 82 million gardeners that are printed on the back of seed packs and catalogs, are based on average minimum temperatures.

"It is a good thing the government has updated the map," says Woodrow Nelson, director of marketing communications for the Arbor Day Foundation. "Our members have been noticing these climate changes for years and have been successfully growing new kinds of trees in places they wouldn't grow before."

For example, Pennsylvania's growing zone was considered risky for southern magnolias, according to the old government map dating to 1990. But the new map, based on updated weather statistics from 1996 to 2005, puts Pennsylvania, like much of the Northeast, in a warmer growing zone.

Catherine Woteki, an undersecretary of the Department of Agriculture, which issued the new guidelines, cautioned against reading too much into the changes. "We do not think the plant hardiness zone methodology is appropriate for making comments on climate change," she says.

Might gardeners be going out on a limb? Steve Carroll, director of public programs at the State Arboretum in Virginia, advises gardeners to check with their local nurseries or a university extension program for advice.

"There's definitely a changing climate," says Charlie Nardozzi, a gardening consultant in northern Vermont. "But that doesn't mean we won't have a harsh winter again that could kill all their plants."

Thursday, January 26, 2012

Romney Reconsiders Private Equity Benefits

First appeared in Wall Street Journal
If elected president, Mitt Romney might consider ending a tax break that helped the former Massachusetts governor accumulate his fortune, an aide suggested Tuesday.

The comments came as the Romney campaign made available more than 500 pages of tax-return data for 2010 and 2011 amid signs the issue was hurting him with some voters.

Later in the day, in a signal of how the tax issue is roiling the GOP campaign, the Romney camp tried to step back from the aide's remarks, underscoring that the former Massachusetts governor didn't want to raise anyone's taxes.

The back-and-forth Tuesday about Mr. Romney's approach to one particular tax break began when the candidate's policy director, indicated in a call with reporters the candidate might be willing to reconsider a tax break known as "carried interest" as part of a comprehensive tax overhaul. The break gives private-equity and venture-capital executives a relatively low 15% tax rate on much of their income. Some reference an UK Tax Advisor.

Carried interest is a share of profits from an investment fund or partnership given to managers as compensation. Mr. Romney was aided by the tax advantage as founder of private-equity firm Bain Capital.
The policy director noted Mr. Romney hasn't recently addressed retention of the carried-interest break. He spoke favorably of it in 2008. There are "a number of exemptions, deductions, credits, administrative treatment of income…that would be addressed in tax reform."

Most taxpayers receive compensation as ordinary wages subject to rates as high as 35%. Roughly half of households pay no federal income tax. The average income-tax rate for the middle slice of households—those making between $34,300 and $50,000—was 3.3% for 2007. The average income-tax rate was 14.4% for the top fifth, and 19% for the top 1%, before dropping slightly for the very highest earners who, like Mr. Romney, typically receive a large percentage of income from investments.

Democrats have criticized carried-interest rules, though they have failed when they have tried to repeal them.
Tuesday, Mr. Romney's campaign formally released detailed information on the candidate's 2010 tax return and a summary of his 2011 taxes, which aren't finished yet.

Tax experts said that by and large, the returns showed Mr. Romney and his advisers sought to minimize the family's tax burden, while generally avoiding aggressive positions.

The Romneys reported an effective tax rate of about 14% on their 2010 return, and just over 15% in their tentative calculations for 2011, on income that hovered around $20 million each year. They received about $7.4 million in income taxed under carried-interest rules in 2010 and $5.5 million in 2011, aides said.

An accountant with Crowe Horwath in New York, said, "This is the tax return of a man who knows he is running for political office and who has distanced himself from investment decisions. Most of the disclosures in these tax returns are fairly typical of investors with a global investment perspective."

The tax data revealed new details about Mr. Romney's wealth management, including his ownership of a now-closed Swiss bank account as well as investments in the Cayman Islands, Bermuda and other tax havens.

The Romney camp said the candidate properly reported income from those sources, paid appropriate taxes and in the case of the Swiss account, disclosed it to the IRS.

The 2010 tax return suggests the Romneys maintained a relationship with Bain Capital more than a decade after Mr. Romney left in 1999. According to documents, the Ann D. Romney Blind Trust received two investments subject to carried-interest rules in Bain funds in fall 2010.

The Romneys' trustee, signed two statements stating that "services" would be performed to maintain the investments, without stating who would offer such services. Such a statement ensures the earnings will qualify for capital-gains treatment, accountants say.

In a written statement, the campaign said The  Romneys' trustee’s wording was "boilerplate language" and that no services were provided in connection with receipt of the interests. The campaign declined further comment.

A prominent accountant in Atlanta, and other experts said such services are required in order for the income to qualify for favorable tax treatment.  An UK Tax Planning advocate has to do similar things.

The tax filings also provide details on a trust set up in 1995 for the Romneys' five sons, which appears to hold a hefty percentage of the family's wealth, estimated at more than $260 million. Such trusts generally are established to minimize future estate taxes.

In the 2010 tax filings released Tuesday, the Romneys reported the family trust had $7.7 million in capital gains in 2010, about 46% of the total capital gains reported that year, not counting a tax loss from a prior year. Capital gains were the Romneys' largest source of income. Much of the trust's income came from entities affiliated with Bain Capital, the tax filings show.

Wednesday, January 25, 2012

How the US Missed Out on the iPhone

 First appeared in NY Times
When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.

Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares.

“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.

“If it’s the pinnacle of capitalism, we should be worried.”

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.

But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.

“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”

Companies and other economists say that notion is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.

To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers — including G.M. and others — that have shrunk as nimble competitors have emerged.

Apple was provided with extensive summaries of The New York Times’s reporting for this article, but the company, which has a reputation for secrecy, declined to comment.

This article is based on interviews with more than three dozen current and former Apple employees and contractors — many of whom requested anonymity to protect their jobs — as well as economists, manufacturing experts, international trade specialists, technology analysts, academic researchers, employees at Apple’s suppliers, competitors and corporate partners, and government officials.

Privately, Apple executives say the world is now such a changed place that it is a mistake to measure a company’s contribution simply by tallying its employees — though they note that Apple employs more workers in the United States than ever before.

They say Apple’s success has benefited the economy by empowering entrepreneurs and creating jobs at companies like cellular providers and businesses shipping Apple products. And, ultimately, they say curing unemployment is not their job.

“We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

‘I Want a Glass Screen’

In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.

Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.

People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.”

After one executive left that meeting, he booked a flight to Shenzhen, China. If Mr. Jobs wanted perfect, there was nowhere else to go.

For over two years, the company had been working on a project — code-named Purple 2 — that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality — with an unscratchable screen, for instance — while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?

The answers, almost every time, were found outside the United States. Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.

In its early days, Apple usually didn’t look beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, for instance, Mr. Jobs bragged that it was “a machine that is made in America.” In 1990, while Mr. Jobs was running NeXT, which was eventually bought by Apple, the executive told a reporter that “I’m as proud of the factory as I am of the computer.” As late as 2002, top Apple executives occasionally drove two hours northeast of their headquarters to visit the company’s iMac plant in Elk Grove, Calif.

But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

The impact of such advantages became obvious as soon as Mr. Jobs demanded glass screens in 2007.
For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

The Chinese plant got the job.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

In Foxconn City

An eight-hour drive from that glass factory is a complex, known informally as Foxconn City, where the iPhone is assembled. To Apple executives, Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.

That’s because nothing like Foxconn City exists in the United States.

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.

Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.
Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world’s consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.

“They could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”

In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.

Foxconn, in statements, declined to speak about specific clients.

“Any worker recruited by our firm is covered by a clear contract outlining terms and conditions and by Chinese government law that protects their rights,” the company wrote. Foxconn “takes our responsibility to our employees very seriously and we work hard to give our more than one million employees a safe and positive environment.”

The company disputed some details of the former Apple executive’s account, and wrote that a midnight shift, such as the one described, was impossible “because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift.” The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours’ notice of any schedule changes.

Foxconn employees, in interviews, have challenged those assertions.

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

In China, it took 15 days.

Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.

Some aspects of the iPhone are uniquely American. The device’s software, for instance, and its innovative marketing campaigns were largely created in the United States. Apple recently built a $500 million data center in North Carolina. Crucial semiconductors inside the iPhone 4 and 4S are manufactured in an Austin, Tex., factory by Samsung, of South Korea.

But even those facilities are not enormous sources of jobs. Apple’s North Carolina center, for instance, has only 100 full-time employees. The Samsung plant has an estimated 2,400 workers.

“If you scale up from selling one million phones to 30 million phones, you don’t really need more programmers,” said Jean-Louis Gassée, who oversaw product development and marketing for Apple until he left in 1990. “All these new companies — Facebook, Google, Twitter — benefit from this. They grow, but they don’t really need to hire much.”

It is hard to estimate how much more it would cost to build iPhones in the United States. However, various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.

But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.

Manufacturing glass for the iPhone revived a Corning factory in Kentucky, and today, much of the glass in iPhones is still made there. After the iPhone became a success, Corning received a flood of orders from other companies hoping to imitate Apple’s designs. Its strengthened glass sales have grown to more than $700 million a year, and it has hired or continued employing about 1,000 Americans to support the emerging market.

But as that market has expanded, the bulk of Corning’s strengthened glass manufacturing has occurred at plants in Japan and Taiwan.

“Our customers are in Taiwan, Korea, Japan and China,” said James B. Flaws, Corning’s vice chairman and chief financial officer. “We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that’s 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas.”

Corning was founded in America 161 years ago and its headquarters are still in upstate New York. Theoretically, the company could manufacture all its glass domestically. But it would “require a total overhaul in how the industry is structured,” Mr. Flaws said. “The consumer electronics business has become an Asian business. As an American, I worry about that, but there’s nothing I can do to stop it. Asia has become what the U.S. was for the last 40 years.”

Middle-Class Jobs Fade

The first time Eric Saragoza stepped into Apple’s manufacturing plant in Elk Grove, Calif., he felt as if he were entering an engineering wonderland.

It was 1995, and the facility near Sacramento employed more than 1,500 workers. It was a kaleidoscope of robotic arms, conveyor belts ferrying circuit boards and, eventually, candy-colored iMacs in various stages of assembly. Mr. Saragoza, an engineer, quickly moved up the plant’s ranks and joined an elite diagnostic team. His salary climbed to $50,000. He and his wife had three children. They bought a home with a pool.
“It felt like, finally, school was paying off,” he said. “I knew the world needed people who can build things.”

At the same time, however, the electronics industry was changing, and Apple — with products that were declining in popularity — was struggling to remake itself. One focus was improving manufacturing. A few years after Mr. Saragoza started his job, his bosses explained how the California plant stacked up against overseas factories: the cost, excluding the materials, of building a $1,500 computer in Elk Grove was $22 a machine. In Singapore, it was $6. In Taiwan, $4.85. Wages weren’t the major reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task.

“We were told we would have to do 12-hour days, and come in on Saturdays,” Mr. Saragoza said. “I had a family. I wanted to see my kids play soccer.”

Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.

But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today’s new jobs are disproportionately in service occupations — at restaurants or call centers, or as hospital attendants or temporary workers — that offer fewer opportunities for reaching the middle class.

Even Mr. Saragoza, with his college degree, was vulnerable to these trends. First, some of Elk Grove’s routine tasks were sent overseas. Mr. Saragoza didn’t mind. Then the robotics that made Apple a futuristic playground allowed executives to replace workers with machines. Some diagnostic engineering went to Singapore. Middle managers who oversaw the plant’s inventory were laid off because, suddenly, a few people with Internet connections were all that were needed.

Mr. Saragoza was too expensive for an unskilled position. He was also insufficiently credentialed for upper management. He was called into a small office in 2002 after a night shift, laid off and then escorted from the plant. He taught high school for a while, and then tried a return to technology. But Apple, which had helped anoint the region as “Silicon Valley North,” had by then converted much of the Elk Grove plant into an AppleCare call center, where new employees often earn $12 an hour.

There were employment prospects in Silicon Valley, but none of them panned out. “What they really want are 30-year-olds without children,” said Mr. Saragoza, who today is 48, and whose family now includes five of his own.

After a few months of looking for work, he started feeling desperate. Even teaching jobs had dried up. So he took a position with an electronics temp agency that had been hired by Apple to check returned iPhones and iPads before they were sent back to customers. Every day, Mr. Saragoza would drive to the building where he had once worked as an engineer, and for $10 an hour with no benefits, wipe thousands of glass screens and test audio ports by plugging in headphones.

Paydays for Apple

As Apple’s overseas operations and sales have expanded, its top employees have thrived. Last fiscal year, Apple’s revenue topped $108 billion, a sum larger than the combined state budgets of Michigan, New Jersey and Massachusetts. Since 2005, when the company’s stock split, share prices have risen from about $45 to more than $427.

Some of that wealth has gone to shareholders. Apple is among the most widely held stocks, and the rising share price has benefited millions of individual investors, 401(k)’s and pension plans. The bounty has also enriched Apple workers. Last fiscal year, in addition to their salaries, Apple’s employees and directors received stock worth $2 billion and exercised or vested stock and options worth an added $1.4 billion.

The biggest rewards, however, have often gone to Apple’s top employees. Mr. Cook, Apple’s chief, last year received stock grants — which vest over a 10-year period — that, at today’s share price, would be worth $427 million, and his salary was raised to $1.4 million. In 2010, Mr. Cook’s compensation package was valued at $59 million, according to Apple’s security filings.

A person close to Apple argued that the compensation received by Apple’s employees was fair, in part because the company had brought so much value to the nation and world. As the company has grown, it has expanded its domestic work force, including manufacturing jobs. Last year, Apple’s American work force grew by 8,000 people.

While other companies have sent call centers abroad, Apple has kept its centers in the United States. One source estimated that sales of Apple’s products have caused other companies to hire tens of thousands of Americans. FedEx and United Parcel Service, for instance, both say they have created American jobs because of the volume of Apple’s shipments, though neither would provide specific figures without permission from Apple, which the company declined to provide.

“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”

What’s more, Apple sources say the company has created plenty of good American jobs inside its retail stores and among entrepreneurs selling iPhone and iPad applications.

After two months of testing iPads, Mr. Saragoza quit. The pay was so low that he was better off, he figured, spending those hours applying for other jobs. On a recent October evening, while Mr. Saragoza sat at his MacBook and submitted another round of résumés online, halfway around the world a woman arrived at her office. The worker, Lina Lin, is a project manager in Shenzhen, China, at PCH International, which contracts with Apple and other electronics companies to coordinate production of accessories, like the cases that protect the iPad’s glass screens. She is not an Apple employee. But Mrs. Lin is integral to Apple’s ability to deliver its products.

Mrs. Lin earns a bit less than what Mr. Saragoza was paid by Apple. She speaks fluent English, learned from watching television and in a Chinese university. She and her husband put a quarter of their salaries in the bank every month. They live in a 1,080-square-foot apartment, which they share with their in-laws and son.

“There are lots of jobs,” Mrs. Lin said. “Especially in Shenzhen.”

Innovation’s Losers

Toward the end of Mr. Obama’s dinner last year with Mr. Jobs and other Silicon Valley executives, as everyone stood to leave, a crowd of photo seekers formed around the president. A slightly smaller scrum gathered around Mr. Jobs. Rumors had spread that his illness had worsened, and some hoped for a photograph with him, perhaps for the last time.

Eventually, the orbits of the men overlapped. “I’m not worried about the country’s long-term future,” Mr. Jobs told Mr. Obama, according to one observer. “This country is insanely great. What I’m worried about is that we don’t talk enough about solutions.”

At dinner, for instance, the executives had suggested that the government should reform visa programs to help companies hire foreign engineers. Some had urged the president to give companies a “tax holiday” so they could bring back overseas profits which, they argued, would be used to create work. Mr. Jobs even suggested it might be possible, someday, to locate some of Apple’s skilled manufacturing in the United States if the government helped train more American engineers.

Economists debate the usefulness of those and other efforts, and note that a struggling economy is sometimes transformed by unexpected developments. The last time analysts wrung their hands about prolonged American unemployment, for instance, in the early 1980s, the Internet hardly existed. Few at the time would have guessed that a degree in graphic design was rapidly becoming a smart bet, while studying telephone repair a dead end.

What remains unknown, however, is whether the United States will be able to leverage tomorrow’s innovations into millions of jobs.

In the last decade, technological leaps in solar and wind energy, semiconductor fabrication and display technologies have created thousands of jobs. But while many of those industries started in America, much of the employment has occurred abroad. Companies have closed major facilities in the United States to reopen in China. By way of explanation, executives say they are competing with Apple for shareholders. If they cannot rival Apple’s growth and profit margins, they won’t survive.

“New middle-class jobs will eventually emerge,” said Lawrence Katz, a Harvard economist. “But will someone in his 40s have the skills for them? Or will he be bypassed for a new graduate and never find his way back into the middle class?”

The pace of innovation, say executives from a variety of industries, has been quickened by businessmen like Mr. Jobs. G.M. went as long as half a decade between major automobile redesigns. Apple, by comparison, has released five iPhones in four years, doubling the devices’ speed and memory while dropping the price that some consumers pay.

Before Mr. Obama and Mr. Jobs said goodbye, the Apple executive pulled an iPhone from his pocket to show off a new application — a driving game — with incredibly detailed graphics. The device reflected the soft glow of the room’s lights. The other executives, whose combined worth exceeded $69 billion, jostled for position to glance over his shoulder. The game, everyone agreed, was wonderful.

There wasn’t even a tiny scratch on the screen.

Tax Changes for 2012

First appeared in USA Today
As Americans receive their first paychecks of the new year, there are some tax provisions they can count on.

Individual tax rates will be the same for 2012 as they were in 2011, as will the 15% maximum tax rate on capital gains. People at higher incomes won't see their personal exemptions or deductions phased out. And credits for adopting a child and for college expenses continue.

But several deductions, credits and other provisions that existed for 2011 will no longer be in place.

The alternative minimum tax exemptions will drop to pre-2001 levels if Congress doesn't pass a patch and make it retroactive to cover the entire year. If history is any guide, however, Congress will do that.

Similarly, without congressional action people over 70½ will no longer be able to make tax-free withdrawals from their IRAs for a charitable contribution, and teachers won't be able to take a $250 deduction for classroom supplies bought with their own money.

"During the course of 2012, the IRS will be keeping a close eye on developments in Congress," agency spokesman Terry Lemons said. "There are a lot of open question marks."

The 2012 presidential elections, the partisan discord in Congress and the outcry over the size of the federal deficit all add to the uncertainty. If there's any doubt, just consider the battle over extending the 2 percentage point cut in Social Security payroll taxes. Agreement could only be reached on a two-month extension despite statements by the White House and both Republicans and Democrats in Congress calling for retaining the reduction for all of 2012. That battle will resume later this year.

Tax experts advise people to monitor other developments as well.

The IRS recommends reviewing your withholding sometime during the year to make sure it is in line with what your tax liability is likely to be. There's a withholding calculator on its website, http://www.irs.gov/. By having less withheld, people can get their money upfront, rather than waiting for a refund.

For most of us, checking our withholding and preparing tax returns are among the biggest financial tasks we face, Lemons said.

Some of the tax law provisions still in effect for 2012:

  • The Bush tax cuts, which set marginal income tax rates of 10%, 15%, 25%, 28%, 33% and 35%. These rates will increase beginning in 2013 unless they are renewed by Congress.
  • Capital gains tax rates of 0% and 15%. Capital gains generally are the increase in the value of an asset, such as stock or a home, from time of purchase until sale. Net long-term capital gains — those on assets held more than a year — are taxed at the 0% or 15% rate. Net gains on assets held less than a year — short-term gains — are taxed at the regular income tax rates.
  •  The child tax credit of $1,000 per child. The credit will drop to $500 in 2013 unless Congress acts.
  • The higher earned income tax credit for families with three or more children. After 2012, families with three or more children will be treated the same as those with two children if Congress doesn't pass an extension.
  • The credit for expenses associated with the adoption of a child. However, the adoption credit is no longer refundable and is limited to $12,650 in 2012. It phases out for people with higher incomes.
  • The American Opportunity Credit, which allows a maximum credit of $2,500 for tuition and other expenses for each of the first four years of higher education. The credit, which also phases out at higher incomes, is partially refundable.
  • Some of the provisions that expired at the end of 2011:
  • A patch for the alternative minimum tax. Absent congressional action, the exemption will drop to $45,000 for married couples filing jointly, $33,750 for single person or the head of a household, and $22,500 for married people filing separately.
  • The deduction for state and local sales taxes, in lieu of state and local income taxes.
  •  The deduction for qualified tuition and fees.

Monday, January 16, 2012

Apartment Complex Sold for Millions

First appeared in Times Union
CBRE Albany said Thursday that it assisted in the sale of the Wade Lupe Towers and Garden Apartment Complex, a 208-unit complex on Queens Boulevard in Schenectady.

The ten-building complex, which sits on nearly 11 acres and is next to the Stadium Golf Club, sold for $8.25 million to a Rockland County company, Wade Estates LLC.

Involved in the sale for CBRE Albany were John MacAffer, Dan Simpson and Ann MacAffer.

Zappos Was Hacked, 24 Million Customers Affected

First appeared in Forbes
Twenty-four million Zappos customers are getting an unpleasant Sunday-evening surprise.

The Amazon-owned e-commerce firm has revealed that it was the target of a cyber-attack that gained access to its internal network, including the accounts of 24 million of its users. Though the company says that no complete credit card numbers were revealed in the breach, the intruders may have accessed customers’ names, e-mail addresses, phone numbers, addresses, the last four digits of their credit card numbers, and encrypted passwords. Zappos says it’s taken the precaution of resetting the passwords of all its customers and directing them to set a new password upon visiting the site.

“We were recently the victim of a cyber-attack by a criminal who gained access to parts of our internal network and systems through one of our servers in Kentucky,” the chief executive wrote to Zappos employees in an email posted to the site, declining to offer more information about the breach. ”We are cooperating with law enforcement to undergo an exhaustive investigation.”

Even after choosing a new Zappos password, users should be careful to also change their passwords on any site where they’ve used a similar or identical password, in case Zappos’ intruders are able to decrypt the scrambled passwords they’ve stolen. Zappos is also warning affected customers to watch out for phishing emails that will use their stolen email addresses to spoof official Zappos emails and ask for account credentials or financial details.

The chief executive wrote in his all-hands email that every employee at Zappos’ Henderson, Nevada headquarters will be assisting in the customer response to the breach, and that the company will only be responding to emails rather than phone calls in its effort to answer the massive number of queries that it expects to receive.  ”We’ve spent over 12 years building our reputation, brand, and trust with our customers. It’s painful to see us take so many steps back due to a single incident,” he wrote in the email. “I suppose the one saving grace is that the database that stores our customers’ critical credit card and other payment data was not affected or accessed.”

Zappos customers can change their passwords.

In the Past?: the Post Office and Kodak

First appeared in Jewish World Review
The news that Eastman Kodak is preparing to file for bankruptcy, after being the leading photographic company in the world for more than a hundred years, truly marks the end of an era.

The skills required to use the cameras and chemicals required by the photography of the mid-19th century were far beyond those of most people — until a man named George Eastman created a company called Kodak, which made cameras that ordinary people could use.

It was Kodak's humble and affordable box Brownie that put photography on the map for millions of people, who just wanted to take simple pictures of family, friends and places they visited.

As the complicated photographic plates used by 19th century photographers gave way to film, Kodak became the leading film maker of the 20th century. But sales of film declined for the first time in 2000, and sales of digital cameras surpassed the sales of film cameras just 3 years later. Just as Kodak's technology made older modes of photography obsolete more than a hundred years ago, so the new technology of the digital age has left Kodak behind.

Great names of companies in other fields have likewise vanished as new technology brought new rivals to the forefront, or else made the whole product obsolete, as happened with typewriters, slide rules and other products now remembered only by an older generation. That is what happens in a market economy and we all benefit from it as consumers.

Unfortunately, that is not what happens in government. The post office is a classic example. Post offices were once even more important than Eastman Kodak, and for a longer time, as the mail provided vital communications linking people and organizations across thousands of miles. But, today, technology has moved even further beyond the post office than it has beyond Eastman Kodak.

The difference is that, although the Postal Service is technically a private business, its income doesn't cover all its costs — and taxpayers are on the hook for the difference.

Moreover, the government makes it illegal for anyone else to put anything into your mail box, even though you bought the mail box and it is your property. That means you don't have the option to have some other private company deliver your mail.

In India, when private companies like Federal Express and United Parcel Service were allowed to deliver mail, the amount of mail delivered by that country's post offices was cut in half between 2000 and 2005.
What should be the fate of the Postal Service in the United States? In a sense, no one really knows. Nor is there any reason why they should.

The real answer to the question whether the Postal Service is worth what it is costing can be found only when various indirect government subsidies stop and when the government stops forbidding others from carrying the mail — if that ever happens.

If FedEx, UPS or someone else can carry the mail cheaper or better than the Postal Service, there is no reason why the public should not get the benefit of having their mail delivered cheaper or better.

Politics is the reason why no such test is likely any time soon. Various special interests currently benefit from the way the post office is run — and especially by the way government backing keeps it afloat.

Junk mail, for example, does not have to cover all its costs. You might be happy to get less junk mail if it had to pay a postage rate that covered the full cost of delivering it. But people who send junk mail would lobby Congress to stay on the gravy train.

So would people who live in remote areas, where the cost of delivering all mail is higher. But if people who decide to live in remote areas don't pay the costs that their decision imposes on the Postal Service, electric utilities and others, why should other people be forced to pay those costs?

A society in which some people make decisions, and other people are forced to pay the costs created by those decisions, is a society where a lot of decisions can be made despite their costs being greater than their benefits.

That is why the post office should have to face competition in the market, instead of lobbying politicians for government help. We cannot preserve everything that was once useful.

Thursday, January 12, 2012

Mitt Romney May Be Forgiven

First appeared in the Boston Globe
At first glance, South Carolina seems like a place where attacks on Mitt Romney's experience at the helm of a venture capital firm that cut jobs would resonate in the GOP primary.

The state's unemployment rate hasn't been below 9 percent in three years and a third of its manufacturing jobs have disappeared in the last decade.

But from South Carolina's urban centers to its old mill villages, many workers still view their employers paternalistically, even when their bosses' decisions hurt them. And that may blunt the criticism that Romney is a greedy fat cat who squashes employees while lining his own pockets.

In South Carolina, people have little sympathy for the Occupy Wall Street movement. Low wages and lack of unions are the norm, so much so that economic developers refused to even recruit companies to the state in the 1960s and 1970s if they allowed unions. Less than 5 percent of the state's workers belong to a labor union, one of the lowest rates in the nation, and income per person is just over $33,000, about $7,000 below the national average.

"Once you get hired, the employer has done his part," Kenneth Dock, 59, said outside the unemployment office in Lexington County, a heavily Republican area on the outskirts of Columbia. He was filing for unemployment a few weeks after losing his job in the produce department at a nearby Walmart.

Dock plans to vote in the Jan. 21 GOP primary in South Carolina, but he hasn't decided which candidate to support. Romney is still a possibility.

"People get laid off. People lose their jobs," he said. "It's just a part of business."

Romney, fresh off back-to-back victories in Iowa and New Hampshire, hopes that mindset will have South Carolina Republicans dismissing attacks on his tenure at Bain Capital as he campaigns ahead of the state's primary.

Over the past few days, Romney has faced intense criticism by rivals Newt Gingrich and Rick Perry as they worked to undercut the central rationale of his candidacy -- that his experience in private business makes him the strongest Republican to challenge President Barack Obama on the economy.

Perry likened the private equity firm to "vultures" that ruin workers' lives. And Gingrich has demanded answers about how many jobs were lost under Romney.

The criticism is certain to make its way into hard-hitting TV advertisements in the coming days, with outside groups aligned with the candidates -- called super PACs -- doing most of the dirty work. One supporting Gingrich plans to spend $3.4 million to run ads on this subject as well as air part of a documentary about Bain called "When Mitt Romney Came to Town." In the film, former employees of four companies bought by Romney's firm talk about how they lost their homes, their livelihoods and their dreams as jobs were cut.
Romney's opponents also have the story of a South Carolina company to use against him.

A photo frame factory in Gaffney in what used to be the manufacturing center of the state was owned by a company Bain controlled. It closed in 1992 just four years after it opened. A hundred workers lost their jobs, while the move helped the Bain subsidiary go from a $12.4 million loss to a $3 million after-tax profit the year after the closing.

Rivals also are seizing on a couple of missteps Romney made in the closing days of the New Hampshire campaign.

At one point, Romney said, "There were a couple of times when I was worried I was going to get pink-slipped." Neither he nor his aides provided specifics.

And at another, he said, "I like being able to fire people who provide services to me." The former Massachusetts governor later emphasized he was talking about health insurance and how people should have choices with their health care.

For all the criticism, there's been a collective shrug in South Carolina so far, perhaps because of the way many workers view employers in the state.

It's only about a generation removed from a time when companies essentially created villages by building the houses, schools, ball fields, dance halls and churches their employees used. Wages were low and these companies provided almost everything, creating a society where even surviving outside of an employer's benevolence may have seemed impossible.

Malissa Burnette has seen such bonds between employers and workers in her 35 years as a labor attorney who has represented workers suing their employers in the state.

"When employees come to me, I see a lot of shock and disillusionment and disappointment in their employers because they did have the belief that employers were there to treat them well, look after them, to have their best interest at heart," Burnette says.

Further evidence of how the people in South Carolina view businesses can be found on the Facebook page of Gov. Nikki Haley, who endorsed Romney last month. She spent her first year in office fighting unions and encouraging businesses find to come to the state.

"South Carolina continues to be one of the lowest union participation states in the country," Haley wrote on Facebook in November. "The reason is that our companies understand that they have to take care of those that take care of them. Our employees appreciate the direct honest relationship that they have with their employers. It will continue to be a winning combination."

To be sure, there are voters in South Carolina who are angry with the way businesses operate these days. Just ask Wayne Ott, 64, who was applying for unemployment for the first time in his life after being laid off after 40 years as a truck driver.

"I believe in capitalism. I just don't think we've been doing it right," Ott said. He is deciding between Gingrich and former Pennsylvania Sen. Rick Santorum because he thinks Romney is part of a greater problem of people who get rich without earning it.

Others are taking a more pragmatic approach.

Angela Frost, 41, lost her job as an insurance underwriter in September. She blames Obama for the stagnant economy and has decided to support Romney because she thinks he has the best chance of winning back the White House.

"Cutting jobs and closing businesses are a part of the system," Frost said. "The system has failed a lot of people. You can't blame one person for the system."

Dwindling Middle Class

First appeared in CNN Money
Nearly one third of Americans who were raised in the middle class dropped down the economic ladder as adults -- and that's before the Great Recession hit.

"Being raised in the middle class is not a guarantee that you'll have that same status as an adult," said Erin Currier, project manager at Pew's Economic Mobility Project. "With all the economic turmoil in the past four years, there's good reason to think that downward mobility is more severe."

Pew looked at children born in the early- to mid-1960s and assessed their economic status roughly 40 years later.

Being middle class in the parents' generation meant a household income of roughly $33,000 to $64,000 in 1979. But their children had to earn between $54,000 and $111,000 to maintain their relative standing in society in the mid-2000s. (These figures are adjusted for inflation.)

The middle class is defined as those between the 30th and 70th income percentile.

Marital status and educational attainment had a great bearing on whether people were able to remain in the middle class, Pew found. Race and gender were also factors.

Those who are divorced, widowed or separated are more likely to fall out of the middle class, particularly if they are women. And Americans who don't attend college are also more likely to slip.

One's foothold on the middle class is more secure if you are a white man. Thirty percent of white women and 38% of black men drop out of the middle class, while only 21% of white men do.

Why I still believe in the American Dream

Things have only gotten worse in recent years. The Great Recession has likely made it harder for many people to remain in the middle class, experts said.

Long-term unemployment has devastated the ranks of the middle class, with many people losing their homes and forced to turn to food banks and government aid after they run through their savings. It takes nearly 41 weeks, on average, for the jobless to find new work. Also, the steep decline in home values has hurt many in the middle class.

Recovering from a huge drop in income is not easy, a separate Pew study found. Half of people who lost more than 25% of their income in 1994 had not recovered four years later. And a third did not regain their economic footing after 10 years.

While it remains to be seen how quickly Americans will recover from the current economic downturn, Currier suspects it could take even longer.

Young adults may find it particularly difficult to hold onto their parents' middle class status. That's because they are having a much harder time landing jobs, particularly well-paying positions in their field. The unemployment rate for 20- to 24-year-olds was 14.4% in December, compared to the national 8.5% rate.

This could hurt their earning potential for decades to come, which has earned them the nickname "The Lost Generation."

"Entering your career in a down economy has lifelong ramifications," said Scott Winship, economic studies fellow at Brookings Institution.

Novo Alternative Introduced to Trade Shows

First appeared in Market Wire
E&E Exhibit Solutions is proud to announce the launch of its new trade show display product line Novo Displays, a versatile exhibit system designed for today's trade show exhibitor. Novo Displays are lightweight, scalable and customizable solutions that offer exhibitors an alternative choice to custom-built displays. Novo Displays custom modular displays are available exclusively from E&E for purchase or as a cost-saving exhibit rental.

"Novo Displays are modular without limitations and designed to function in the way our clients exhibit. Today's exhibitor needs lightweight, easy-to-assemble and versatile displays to fit a variety of booth sizes. We can scale Novo Displays from table tops to linear and island display configurations without the added cost of retrofit kits," said Daniel Chaddock, president of E&E Exhibit Solutions. "We put our name behind Novo Displays because they are market relevant, cost affordable and fit into our product niche of custom modular display solutions."

Novo Displays feature a sturdy, yet lightweight aluminum framework with scalable components, which allow exhibitors to fit their custom modular displays to any size booth -- from table tops, to 10x10s, to 10x20s, to 20x20 Novo Displays islands and even double deck exhibits. The modern designs are centered around dynamic selling environments and are customizable with conference rooms, kiosk displays, storage counters, trade show graphics, custom lighting and more. Veteran and first-time exhibitors will also appreciate the finer details engineered into the system such as one-tool, no-hassle assembly and the exclusive wire management door, which hides cords and cables but provides easy access when needed in a hurry. All Novo Displays custom modular displays pack into virtually indestructible rotomolded cases and come with a lifetime warranty.

E&E's Novo Display solutions are ideal for any company exhibiting at one event per year or marketers with a busy schedule of trade shows and other events. Exhibitors can also use a Novo Displays exhibit rental at a fraction of the cost of purchasing a new trade show booth. Because of this new exhibit system's lightweight framework, unlimited design capability, scalability and no-hassle installation, Novo Displays have the potential to save exhibitors thousands of dollars in production, shipping, drayage and labor.

About E&E Exhibit Solutions

Founded in 1995, E&E Exhibit Solutions is a trade show display company specializing in custom modular displays, custom portable exhibits, trade show graphics and booth rentals. E&E Exhibit Solutions has a long-standing record of success serving more than 1,850 clients in 45 U.S. states and 15 countries and is recognized as a four-time Inc. 5000 honoree. As expert trade show professionals, our award-winning solutions include custom displays, exhibit rentals, trade show graphics, shipping, installation and exhibit storage.

Wednesday, January 11, 2012

Chapter 11 Won’t Stop Twinkies

First appeared on CNN Money
Rest easy, Twinkie lovers: Hostess Brands, the storied American manufacturer of snack cakes, filed for Chapter 11 bankruptcy Wednesday, but said it will continue to churn out Ho Hos, Ding Dongs and other iconic products. Many Bankruptcy Lawyer professionals can help companies like this.

"Throughout the proceeding, we're going to operate business as normal," said Hostess spokesman Erik Halvorson. "They'll keep making Twinkies."

The company, based in Irving, Texas, filed for Chapter 11 protection in U.S. Bankruptcy Court in New York. But Halvorson said the company does not plan to lay off any of its employees or close any plants. So the CupCakes and Sno Balls will keep on coming due to the hard work of a Bankruptcy Lawyer.

The company has about 19,000 full-time and part-time employees, including 10,413 hourly workers and 8,436 salaried workers, according to a court filing. About 83% of the employees are union members.

The company said that it pays about $63.2 million to its employees per pay period, and that it currently owes them $21 million for services rendered.

In its bankruptcy filing, the privately held company said that it owes more than $1 billion to creditors. The debt is spread out among a vast number of creditors -- between 50,000 and 100,000, the company said.

Whoopie pies - a sweet new gig

Pension funds feature prominently in the list of creditors.

The Bakery & Confectionary Union & Industry International Pension Fund has the largest claim, of $994 million.

The next largest claim, of about $12 million, is from Central States, Southeast and Southwest Areas Pension Plan.

Companies with claims include Cereal Food Processors, with a claim of $8.5 million, and Cargill, with about $2 million. Also among the creditors: temporary employment agency Manpower (MAN, Fortune 500), which is owed $754,000, and Goodyear Tire & Rubber (GT, Fortune 500), owed $552,000.

Hostess was founded in 1930, at the beginning of the Great Depression, which the company managed to survive. Many of its products eventually became iconic brands, cementing themselves in American culture. The Twinkie was even used as a metaphor for paranormal activity in the 1984 hit movie "Ghostbusters."
But more recently, Hostess' ability to compete was crippled by its "unsustainable cost structure," said Halvorson.

Hostess has been competing with snack cake makers including Flowers Foods (FLO), which makes Tastykake.

Published reports indicated that Hostess sought potential buyers, including Oreo-cookie maker Kraft Foods (KFT, Fortune 500) and Campbell Soup (CPB, Fortune 500)'s Pepperidge Farm. Many Bankruptcy Lawyer professionals can help with those buyouts.

Hostess has its own plethora of subsidiaries. These include Interstate Brands Corp., the producer of Drake's Ring Dings and Yodels, and Dolly Madison Bakery, producer of Zingers. Hostess also owns bread bakers such as Wonder and Nature's Pride.

Interstate Brands was formerly known as Interstate Bakeries. That subsidiary filed for bankruptcy in 2005, emerging from Chapter 11 in 2009. Layoffs occurred during that time and even since 2009, said Halvorson.

The job reductions took a toll on company morale, according to bankruptcy documents filed by Hostess on Wednesday. A Bankruptcy Lawyer is helpful during these times.

"The employees have been witness to the closing or sale of several operations within the debtors' business as well as company-wide layoffs or reductions in force," the document said. "The increased pressures on the employees, together with layoffs and general concern about the welfare of the debtors, have led to a decline in employee morale."

CEOs Making Money

First appeared on CNN Money
If you could bluff your way into an S&P 500 CEO job, how many days would you have to rough it to earn your current annual pay?

You'd rack up $24,473 per day 365 days a year if you were just middle of the pack, according to a recent GMI study of S&P 500 CEO pay in 2010. Your annual earnings on a weekly basis would be more than $171,000; for 60 days, that'd be a cool $1.5 million.

Of course, if you were a top negotiator, maybe you'd take home what McKesson (MCK) CEO John Hammergren did in 2010. His daily haul, based on his annual pay, was around $398,000, with a weekly total of $2.8 million and a 60-day payout of nearly $24 million.

Could you put up with the rigors given those rates?

Working the one job 24/7

Maybe you're concerned that if you took a job like that, it might engulf your life 24/7. There'd be no time for extracurricular activities.

Not to worry. You'd have the opportunity to work a part-time job too, earning some pocket change on the side. For example, take Hammergren, who took home the biggest bucks in 2010 ($145 million in total compensation), according to GMI. Beyond serving as CEO of McKesson, he has been a board member at HP (HPQ), which paid him around $387,000 last year. As a member of the board's compensation committee, Hammergren has been busy with CEO pay negotiations in recent years.

In 2010, when HP showed former CEO Mark Hurd the door following an investigation into his behavior, Hurd was given $12 million cash plus vesting of some stock. Based on Hammergren's own 2010 wages, $12 million would translate to just 30 days severance. Is that so unreasonable? Under the original agreement, Hurd was also entitled to stock valued $15 million or more. He gave that up, though, in the kerfuffle related to his decision to join Oracle (ORCL) as its co-president.

Hammergren also reportedly volunteered to be on the search committee that identified Hurd's successor, former HP CEO Leo Apotheker. With less than one year of service, Apotheker was ousted last year and walked away with around $25 million. Sound like a lot?  That would only amount to slightly more than 60 days severance based on Hammergren's 2010 pay.

In any event, this one example should ease your mind somewhat. Being a CEO of a major S&P 500 firm does not mean you have to work the one job 24/7.

Cranky investors? Not quite.

What about investor expectations? With large CEO paydays, aren't investors bound to be snarky?

Maybe, but they don't really expect that much, when you consider what they're used to getting in the way of returns. The S&P 500 is down nearly 9% from where it was five years ago. Just working to move the dial a bit forward (rather than backward) will make you a hero. In Hammergren's case, McKesson stock has considerably outperformed the index.

The GMI study notes that some parts of McKesson's executive compensation practices raise eyebrows, like a half a billion dollars Hammergren would be owed if the company were acquired. Still, the board believes his pay is warranted given the company's strong returns, and investors approved his compensation plan last year.

Board oversight, in more ways than one

But what about other boards -- do you need to be concerned that bonus bonanzas could meet their demise, especially since the S&P 500 is now sitting at levels that had already been achieved in the 90s? Isn't pay for performance a major concern of boards today?

The issue is important to boards, according to a recent survey by the National Association of Corporate Directors and compensation firm Pearl Meyer and Partners. But there is no need for alarm. According to the survey, "More than 80% [of board members] …stated they are 'confident' or 'very confident' about how well their current [compensation] programs address the broader challenge of aligning CEO pay with performance."

Populist outrage: Long on anger, short on attention span

What about public outcry -- could that influence high pay? Again, prospective CEOs can put their fears to rest.

The U.S. retail investing public is generally indifferent and does not even monitor the pay votes of mutual fund managers, much less hold them accountable for those made on their behalf. And the Occupy movement (or a successor) would have to significantly expand its reach to truly take CEO pay practices to task.

There is some trouble brewing across the pond. UK Prime Minister David Cameron has called for a binding investor vote on pay (one that would require a response from a company) and some members of Parliament want board compensation committees to have employee representation. There's no immediate threat, though. It took eight years for the U.S. to adopt an advisory say on pay, following in the UK's footsteps.

All in all, it's a rosy picture. So what are you going to do? Any reason you wouldn't aspire to be an S&P 500 CEO?

Monday, January 9, 2012

Is the SAT Necessary?

First appeared in News Observer
Across North Carolina and the nation, high school seniors are sweating their college applications and fretting about one number: their SAT score.  Many students look to Educational Services Centers for help.

But not students aiming for Wake Forest University, which no longer requires students to submit the standardized test score. Wake Forest was the first highly ranked research university to announce the move away from the SAT in 2008. Are other schools like Ferris State University and Marygrove College thinking about doing the same thing?

Since then, the university in Winston-Salem has become more racially and socio-economically diverse. Pell Grant recipients almost doubled. Students of color increased from 18 percent to nearly 23 percent.

Along the way, the university also noticed an uptick in the number of students with an exemplary high school track record, which, research shows, is the best predictor of college success. The percentage of Wake Forest first-year students who graduated in the top 10 percent of their high school classes grew from 65 percent in 2008 to 83 percent last fall.

"We feel like we have attracted students that have achieved a great deal in the classroom, who are very talented, who are very bright, who are very hard working students but who had one thing going against them and that was the SAT," said Martha Allman, admissions dean at Wake Forest.

"When we became test-optional, we started seeing these wonderful students that perhaps we would not have seen in our applicant pool before. We don't have any regrets at all."

The university's results are reported in a new book, "SAT Wars," edited by Joseph Soares, a sociology professor at Wake Forest. The book debunks the notion that standardized tests are a good indicator of future academic achievement.  This is in contradiction to Educational Services Centers that see the importance in testing students.

It is published as North Carolina embarks on a new era of testing. Starting in March, the state will require high school juniors to take the ACT, the other major college entrance exam used in the United States. The state does not require the SAT, but it is the most commonly administered entrance exam among college-bound students in North Carolina.  Several other states do the same thing, including ones feeding into Ferris State University and Marygrove College.

The effort will cost the state $5.5 million, which includes three types of tests - a diagnostic test for high school sophomores, a standardized test to assess workplace readiness, and the ACT.
Soares has been an outspoken critic of college entrance exams, which he describes as having built-in biases and a discriminatory effect. He said North Carolina's plan makes no sense.
"It's money being flushed down the toilet," he said. "This is a terrible idea."

Focus on content

June Atkinson, the state superintendent, said the ACT will be one useful component in evaluating performance of students and schools.

"What we want to gain from administering ACT - which is more content-based than SAT - is that we want to have an indication of whether students have the content necessary for them to be college-ready," she said.

At least a half dozen other states require the ACT, including Michigan, Illinois and Kentucky. The ACT, which generally has not been used as a college entrance exam in North Carolina, was chosen because it includes a section on science, Atkinson said.

Because most colleges still require the ACT or SAT, all North Carolina high school students will have one test under their belt - paid for by the state. They can then use that score to seek college admission.
And, Atkinson said, the ACT can help the state identify weaknesses in academic content areas. So for example, if North Carolina scored below par in science, the state could pursue professional development for teachers, curriculum changes or even better lab equipment for public school classrooms.
"So it will give us feedback about where we need to make improvements," Atkinson said.
The debate about the value of college entrance exams has raged for years. Some 850 four-year colleges no longer require applicants to submit SAT or ACT scores, according to FairTest, a national organization that tracks testing issues.
Bob Schaeffer of FairTest said Wake Forest had provided useful research and "a very powerful example for their peers."
Schaeffer estimated there are a half dozen nationally competitive universities currently re-evaluating their policies, though the majority of the nation's colleges still require applicants to submit an entrance exam score.
There is too much blind faith in the SAT, which has become a gold standard but lacks any real evidence behind it to show that it improves educational quality or outcomes, Schaeffer said. "The entire high stakes testing venture is based on ideology and belief, not data," he said.
Wake Forest attracted national attention when it went test-optional. In 2009, the university hosted a conference titled "Rethinking Admissions," about the role of standardized testing. It drew admissions officers from around the country.
Increase in applications
That first year, applications at Wake Forest jumped 16 percent, including an increase of 46 percent from students of color overall and 70 percent from African-Americans. North Carolina applicants increased 52 percent and came from all 100 counties - for the first time in university history.
The response was more than Wake Forest expected.
The university revamped its admissions process to stress personal interviews with prospective students and an application supplement with short-answer questions to reveal writing quality and intellectual curiosity. Students were asked questions such as "What outrages you?" "Argue a position you don't support." Or "Define cool."
The Wake Forest staff conducted some 4,000 interviews with applicants, and eventually had to add employees to cope with the crush. The admissions office has a new building designed for the process, with small conversation nooks and interview rooms.
Emily English, 20, a junior psychology major, earned all A's in high school. She desperately wanted to go to Wake Forest, but she wasn't happy with her SAT score, which she described as average.  Many Educational Services Centers are hoping to help students improve test scores.
"I know that my scores on the SAT were not indicative at all of how I would do, and am doing, in college now," she said. "It's four hours of your life that you're taking this test, and it's not a good indicator compared to your four years of high school."
English has performed well at Wake Forest, earning a grade point average of 3.9 in a recent semester. She is on track to graduate a semester early and plans to go to graduate school to prepare for a career in counseling.
Allman, the Wake Forest admissions dean, said about 70 percent to 75 percent of applicants still submit their test scores.
But not requiring the score has led the university to evaluate students more holistically, she said.
Many schools, including Ferris State University and Marygrove College are looking for diverse ways to assess students for admissions.
"Our student body has actually gotten stronger. We have not seen different attrition rates among these students," she said. "But I think it's going to be very hard to move the needle because test scores are very entrenched in our culture."
Soares said he hopes more universities follow Wake Forest.
"A high-stakes test produces high anxiety. That is dysfunctional," Soares said. "Score high or score low, it doesn't capture your intelligence, your work ethic or your ability to succeed at college or later in life."