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Arkansas' public companies stashing cash.

IN ARKANSAS AND AROUND the country, some publicly traded companies have been squirreling away cash, which is good for their books but might not be for the economy.

"What will help spur recovery is [when] corporations begin to hire again, begin to expand their production, begin to invest in new projects," said Lee Pinkowitz, an associate professor at the McDonough School of Business at Georgetown University. "The longer they sit on [the cash], it might be beneficial for that particular company, but in aggregate, it could actually delay sort of an economic recovery."

Companies in the S&P 500, not including financial, transportation or utility firms, had $837 billion in cash and cash equivalents as of March 31, which was up 36 percent from March 31, 2008, according to a June 24 news release by Howard Silverblatt, senior index analyst at Standard & Poor's Indices.

"We've had six consecutive quarters ... that [companies] have increased and set a new record of the amount of cash they have had on their books," Silverblatt said.

The consecutive streak of piling cash might end at the second quarter, he said. With numbers in for 75 percent of the S&P companies, their cash is down 1.1 percent from the previous quarter, Silverblatt said.

Still, the companies have an average of 68 weeks of net operating income in the bank, "which gives them the ability to do anything they want basically," he said.

In Arkansas, the picture was slightly different. Of 13 non-financial publicly traded companies, seven had more cash on their books this year than they did in 2008.

Dillard's Inc. of Little Rock's cash pile increased 263.3 percent to $305.3 million between May 2008 and May of this year. Cash at P.A.M. Transportation Services of Tontitown jumped to $13.7 million on June 30--nearly 24 times the amount it had in June 2008.

And Tyson Foods' cash holdings rose from $55 million on June 28, 2008, to $834 million on July 3.

"They're not spending it on capital expenditures," Silverblatt said.

Some companies are holding cash as a precaution, Pinkowitz said.

"For the same reasons that individuals would hold cash in a savings account maybe for a rainy day, corporations may be holding cash in the event that they can't get credit," Pinkowitz said.

Since June 30, 2008, Acxiom Corp.'s cash holdings jumped 322 percent to $218.5 million on June 30.

"This liquidity is part of our strategy for investing in Acxiom while dealing with an unsettled economy," Jonathan Portis, an Acxiom spokesman, said in an e-mail statement to Arkansas Business last week. "It allows us the flexibility to consider acquisitions and other options for growing our company."

Hoarding cash is a good thing, said Marc Gerstein, a research consultant for Portfolio 123 in Chicago.

"You don't go broke," he said. And it gives the company the option to pay cash for capital expenditures, investments or dividends to shareholders.

"Dividends, of course, are paying out cash, but it's flexibility in being able to choose what you want to do instead of being up against the wall," Gerstein said.

And holding onto cash is always better than making an investment in something that fails, he said.

How much cash as a percentage of assets a company should hold onto varies, said Pinkowitz, the Georgetown professor.

"I believe it's good for certain companies and not good for others," he said. "Companies with good growth opportunities, investments opportunities, growing businesses, should be holding cash," he said, "because those are the companies that you want to continue to be able to invest."

Silverblatt said companies weren't going to spend money on manufacturing and hiring if they weren't sure if they could sell the product.

"And unfortunately, consumers are not going to spend that much more until they feel a bit more secure about their position, which includes jobs, so the cycle needs to be broken," he said.

Windstream Corp. of Little Rock has used its cash pile mainly to buy other companies. On Dec. 31, the communications company had $1,062 billion in cash, which was 11.6 percent of its assets in cash. Historically, companies held 12 to 14 percent of their assets in cash, Pinkowitz said.

At the end of 2008, Windstream "probably held more cash than normal because the markets were vulnerable," said Rob Clancy, Windstream's senior vice president and treasurer.

In addition to saving cash, Wind-stream borrowed more than $1 billion to help pay for two acquisitions. In February, it completed its $647 million acquisition of NuVox Inc. of Greenville, S.C. In June, Windstream completed its acquisition of Iowa Telecommunications Services Inc. The transaction was valued at about $1.2 billion.

Last week, Windstream announced it had an agreement to buy Q-Comm Corp. of Overland Park, Kan., in a transaction valued at $782 million.

Windstream projects its annual cash flow to be about $800 million, Clancy said. And after the company pays dividends, it has about $300 million in cash left.
Arkansas' Public Companies' Cash Holdings
(Dollar figures in thousands)

 Period Ending Period Ending Period Ending

Acxiom Corp., Little June 30, 2010 June 30, 2009 June 30, 2008
Rock

Cash and Cash $218,457 $167,670 $51,799
Equivalents

Total Assets $1,364,027 $1,357,352 $1,435,406

Cash as a Percentage 16.02% 12.35% 3.61%
of Assets

America's Car-Mart April 30, 2010 April 30, 2009 April 30, 2008
Inc., Bentonville.
Cash and Cash $268 $168 $153
Equivalents

Total Assets $251,272 $219,624 $200,589

Cash as a Percentage 0.11% 0.08% 0.08%
of Assets

Arkansas Best Corp., June 30, 2010 June 30, 2009 June 30, 2008
Fort Smith

Cash and Cash $80,457 $62,318 $205,900
Equivalents

Total Assets $851,833 $948,429 $1,019,948
Cash as a Percentage 9.45% 6.57% 20.19%
of Assets

Baldor Electric Co., July 3, 2010 July 4, 2009 June 28, 2008
Fort Smith

Cash and Cash $16,360 $13,724 $26,622
Equivalents

Total Assets $2,663,334 $2,751,685 $2,844,109

Cash as a Percentage 0.61% 0.50% 0.94%
of Assets

Celtic Timber Corp., June 30, 2010 June 30, 2009 June 30, 2008
EI Dorado

Cash and Cash $4,803 $3,390 $6,918
Equivalents

Total Assets $350,203 $334,808 $331,282

Cash as a Percentage 1.37% 1.01% 2.09%
of Assets

Dillard's Inc., May 1,2010 May 2, 2009 May 3, 2008
Little Rock

Cash and Cash $305,296 $102,731 $84,043
Equivalents

Total Assets $4,647,043 $4,933,092 $5,556,783

Cash as a Percentage 6.57% 2,08% 1.51%
of Assets

J.B. Hunt Transport June 30, 2010 June 30, 2009 June 30, 2008
Services Inc.,
Lowell

Cash and Cash $7,714 $3,570 $1,260
Equivalents

Total Assets $1,900,941 $1,820,886 $1,859,815

Cash as a Percentage 0.41% 0.20% 0.07%
of Assets

Murphy Oil Corp., EI June 30, 2010 June 30, 2009 June 30, 2008
Dorado

Cash and Cash $398,820 $507,083 $1,116,505
Equivalents

Total Assets $13,547,316 $12,109,268 $12,231,196
Cash as a Percentage 2.94% 4.19% 9.13%
of Assets

P.A.M. Transportation June 30, 2010 June 30, 2009 June 30, 2008
Services, Tontitown

Cash and Cash $13,746 $1,545 $579
Equivalents

Total Assets $272,160 $267,456 $323,221

Cash as a Percentage 5.05% 0.58% 0.18%
of Assets

Tyson Foods, July 3, 2010 June 27, 2009 June 28, 2008
Springdale

Cash and Cash $834,000 $845,000 $55,000
Equivalents

Total Assets $10,467,000 $10,887,000 $10,648,000

Cash as a Percentage 7.97% 7.76% 0.52%
of Assets

USA Truck Inc., Van June 30, 2010 June 30, 2009 June 30, 2008
Buren

Cash and Cash $3,021 $2,398 $4,294
Equivalents

Total Assets $338,917 $323,858 $361,960

Cash as a Percentage 0.89% 0.74% 1.19%
of Assets

Wal-Mart Stores Inc., April 30, 2010 April 30, 2009 April 30, 2008
Bentonville

Cash and Cash $8,516,000 $6,578,000 $8,072,000
Equivalents

Total Assets $174,371,000 $162,090,000 $167,483,000

Cash as a Percentage 4.88% 4.06% 4.82%
of Assets

Windstream Corp., June 30, 2010 June 30, 2009 June 30, 2008
Little Rock

Cash and Cash $53,500 $245,400 $59,600
Equivalents

Total Assets $10,087,200 $7,789,500 $8,040,500

Cash as a Percentage 5.30% 31.50% 7.41%
of Assets

Sources: Securities & Exchange Commission filings


The company's strategy for using the money has been to buy other businesses or repurchase its stock, Clancy said. "We want to put our cash to work in a way that helps us grow the free cash flow per share of the business," he said.

Clancy said the company was comfortable with the cash flows that Windstream was generating.

"It's not as if we're in the position of, oh boy, we're expecting some real big swings in the cash flow, so therefore we better hoard more cash," he said. "We'd like to put our cash to work in a way that helps improve total returns."

By Mark Friedman

MFriedman@ABPG.com
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Author:Friedman, Mark
Publication:Arkansas Business
Date:Aug 23, 2010
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