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Revenue drops 25 percent at Presbyterian Dallas, ER visits decline 50 percent after Ebola case

Workers outside Texas Health Presbyterian Dallas last week, as Nina Pham was being transported to Dallas Love Field for her flight to Maryland (G.J. McCarthy/Staff photographer)

Revenue declined by a quarter and emergency room visits dropped by half at Texas Health Presbyterian Hospital Dallas over the first 20 days of October, according to new financial disclosures.

Presbyterian Dallas admitted its first Ebola patient on Sept. 28 and, subsequently, two of the hospital’s nurses also contracted the disease.

In the disclosure, filed Wednesday, Texas Health Resources, the parent of Presbyterian Dallas, said revenue declined $8.1 million, or 25.6 percent, in the October period compared to business over the first nine months of year.

ER visits declined by 2,336, or 53.3 percent, and operating surgeries declined by about 165 cases, or 25 percent.

The daily census, the number of patients a day over a given period, declined by 21.1 percent, from 428 to 337.

THR said the negative financial impact at Presbyterian Dallas was primarily the because the emergency department was placed on diversionary status from Oct. 12 to Oct. 20. That means it didn’t take ambulance cases. Business also declined to a lesser degree because physicians transferred cases to other facilities.

Texas Health Resources “has not seen a decline in volumes/revenues at its other hospital facilities as a result” of the Ebola cases,  THR said.

The disclosure said that THR management  believed that the organization’s insurance coverage was adequate for any liabilities that might occur. “No legal claims have been filed to date,” THR said.

THR also said that it has “sufficient liquidity to cover any losses that might exceed coverage limits and declines in volume” at Presbyterian Dallas.

Half of Texas construction firms say they are losing workers to other industries

Dallas-Fort Worth's construction boom has put a pinch on building labor. (Steve Brown)

Almost half of Texas construction companies say they are losing workers to other, higher-paying industries.

And the shortage of construction industry labors is raising costs and increasing building times in the state, according to a new industry survey.

Eighty-three percent of construction companies surveyed by the Associated General Contractors of America said they are having a tough time filling worker positions including carpenters, equipment operators and laborers.

“As the survey results make clear, many construction firms across the country are having a hard time filling available positions,” Ken Simonson, chief economist for the Associated General Contractors, said in a statement. “Considering how much the nation’s educational focus has moved away from teaching students career and technical skills during the past few decades, it is easy to understand why the construction industry is facing such severe labor shortages.”

In Texas, more than 90 percent of construction companies reported challenges with finding workers.

The toughest jobs to fill were for roofers, ironworkers, bricklayers and plumbers, according to the new poll.

And 48 percent of construction firms reported that they had lost workers to other industries in the area. Thirty percent said some of their workers had left the area to work in jobs outside the construction business.

Rising demand for oilfield workers has lured many construction employees out of the business in the last few years.In Dallas-Fort Worth – where both commercial and residential building is booming – shortages of labor are increasing construction times and raising prices for buildings.

The building industry is calling for increased job training to attract young workers to the field.

“Considering how much the nation’s educational focus has moved away from teaching students career and technical skills during the past few decades, it is easy to understand why the construction industry is facing such severe labor shortages,” Simonson said.

Texas contractors report shortages of many types of workers. (Associated General Contractors)

Ratings agency warns verdict against Trinity Industries threatens liquidity

Joshua Harman of Virginia sued Dallas-based Trinity Industries, alleging that it made a quiet design change that transformed guardrail systems across the U.S. into potentially deadly hazards. On Monday, a jury agreed with Harman. Patrick G. Lee/Bloomberg

WASHINGTON — Dallas-based Trinity Industries is insisting that Monday’s jury verdict in the federal fraud trial will be set aside on appeal, but the company may be hard-pressed to avoid damage in the meantime.

Firth Ratings, one of the major credit-rating agencies in the U.S., issued guidance this afternoon warning that the company’s liquidity could be at stake, now that the jury decided the company was responsible for damages to the U.S. equal to $175 million. As a result, the ratings agency “could potentially” review the company’s long-standing debt rating with an eye toward lowering it. For now, though, the company’s long-term credit rating remains stable at BBB-, Fitch said.

“This depends on further clarification that would result from a final ruling by the U.S. district court with respect to the timing and amounts of payments assessed against (Trinity),” Fitch said in a guidance issued Wednesday.

The uncertainty lingering over the verdict for Trinity stems from the fact that the full amount it will owe is not known. The False Claims Act calls for the damages to be trebled, and other fees could push the total owed to $800 million or more. Fitch notes that it “assumes the reasonable worst case scenario as approximately $1 billion.”

The more immediate problem for Trinity will be if the court requires it to post a bond while it files its appeal, a chance that Fitch says it “believes is possible although the probability is low.”

“The required payment by TRN, including potential bonding requirements during any appeal process, could be material,” the statement said. “TRN’s liquidity would be pressured if cash collateral must be posted during the appeal process.”

If it must post a cash deposit, “a downgrade or Negative Rating Outlook is viewed as likely due to the immediacy of the required payment that would reduce TRN’s liquidity and potentially delay value added capital projects. However, Fitch considers a more likely scenario to involve a modest bonding requirement or the usage of surety bonds through the appeal process.”

The ratings agency said it believes Trinity’s free cash flow for 2014 is between $50 million and $100 million.

“Depending on the final ruling, Fitch believes TRN may be able to fund a sizable penalty between $400 million-600 million if liquidity remains strong and TRN’s financial strength is supported by stable economic conditions and a prudent capital deployment strategy. In the event of a penalty in excess of approximately $500 million, Fitch believes TRN’s credit profile would deteriorate below investment grade.”

The agency also notes that a final ruling against Trinity “could potentially lead to future personal injury and wrongful death lawsuits related to TRN’s guardrails. Such lawsuits are not unusual for a guardrail manufacturer, but increased scrutiny surrounding the safety standards of TRN’s ET-Plus guardrail product could lead to future adverse rulings. ”

About Trinity Industries

Headquarters: Dallas, Texas
Annual Revenue $4.4 billion, with about $2.1 billion from its rail car manufacturing group
Annual Profit $772 million
Sales of highway products (including guardrails) $336 million
Employees: 18,460, about evenly divided between U.S. and Mexico.
Source: Trinity Industries 2013 Annual Report
Stock price: Opened Wednesday at $34.26. It had been climbing all year, from just over $22, until Sept. 18, when it began from a high of $50.30.

Inflation remains stable, but you’re paying more to butter your toast, eat a nice steak or buy a new dress

While overall consumer prices remained stable in North Texas and nationwide as of September, it’s costing more to spread butter on your toast, eat a nice steak and rent an apartment.

Consumer prices in the Dallas-Fort Worth area dipped 0.1 percent in August and September, after showing no change in the previous two-month period, according to data released today by the U.S. Bureau of Labor Statistics.

The U.S. Consumer Price Index edged up 0.1 percent due largely to high food prices. The national information is more detailed by product category.

Longer term, prices have risen. The CPI rose 1.1 percent in D-FW and up 1.7 percent nationally over the last 12 months.

Let’s look at some of the major forces at play in consumer prices in the short term and long term.

Energy: The latest energy prices remained low. The D-FW energy index fell 3.8 percent, driven by a 7.6-percent decline in gasoline costs and a 7.4-percent drop in motor fuel. Electricity costs rose 1.1 percent. Nationally, the energy index fell 0.7 percent as prices for gasoline, electricity and fuel oil all fell.

Over the last 12 months, energy prices rose 1.9 percent in D-FW as prices for household natural gas climbed 15 percent and household electricity increased 6 percent (gasoline costs fell 2 percent). Nationally, energy prices fell 0.6 percent over the last 12 months, with declines in every category except for propane and kerosene, and energy services.

Last week, the average price of a gallon of regular unleaded gas in Texas was $2.99, or 10 cents less than a week ago, according to the AAA Texas. Nationally, the average price of gas also has dropped but Texans are paying 17 cents less than the national average of $3.16.

“The rule of thumb is that every penny dip in gasoline prices puts an extra $1 billion in the hands of U.S. consumers over the course of a year,” according to Robert A. Dye, chief economist for Dallas-based Comerica Bank. “Some of those pennies will go to saving, some to paying down debt, but the bulk of it will go to purchasing more stuff.”

Food: Food prices continued to rise. D-FW food prices rose 1.4 percent, with groceries up the most (+2.2 percent). Food prices away from home for restaurants and such rose 0.4 percent, the first price movement in the index since January. That was higher than the national 0.7 percent increase in food prices.

Over the last 12 months, D-FW food prices rose 2.7 percent, with grocery costs up 3.5 percent and prices at restaurants and bars up 1.5 percent. Nationally, U.S. meat prices have risen 13 percent in the last 12 months, with beef and veal prices up nearly 18 percent and pork prices up 11.4 percent. U.S. butter prices have risen nearly 24 percent in the last year.

Clothing: Clothing prices, especially for women, rose 7.2 percent in D-FW — the highest increase of any major category tracked by the BLS for the region. Nationally, clothing prices rose 3.7 percent.

Over the last 12 months, clothing prices were relatively flat in North Texas and nationally.

Other: Higher prices also were seen in D-FW for apartment rental rates, and education and communication. D-FW transportation costs fell 2.7 percent and the cost of household furnishings and operations dropped 2.2 percent.

Over the last 12 months, the D-FW area saw higher prices apartment rental rates (4.7 percent) and medical care (+1.9 percent). The cost of household furnishings and operations fell 4.3 percent and the cost of transportation was down 2.8 percent.

Nationally, consumers paid more for all types of services — from hotels and home insurance to lawn care and medical care — in the last 12 months. Some of the biggest price increases were for women’s outerwear (+11 percent), children’s footwear (+7.8 percent), lodgings away from home (+5 percent) and prescription drugs (+3.8 percent). Some of the biggest price declines were for televisions (-4 percent), toys (-6 percent), personal computers (-8 percent), and laundry appliances (-6.8 percent).

So, what does all this mean for the economy?

The U.S. inflation rate, which is based on the CPI, was 1.7 percent as of September — below the Federal Reserve’s target rate of 2 percent.

That has rekindled “worries of deflation,” Wells Fargo economists Sam Bullard and Sarah Watt House wrote today in a research note.

Inflation — as well as job growth, the unemployment rate and other economic indicators — will factor into the Fed’s policy setting committee meeting next week.

Some economists today noted that softer inflation makes it less likely the Fed will start increasing interest rates before June 2015. Comerica’s Dye still expects the Fed next week to announce the planned ending of its asset purchase program.

Texas Securities Board approved rules for crowdfunding

Texas has become the latest state to allow small businesses and startups to raise money within its borders from mom-and-pop investors.

The Texas Securities Board on Wednesday approved rules that govern intrastate crowdfunding that eliminate wealth and income requirements for investors.

The vote was confirmed by Texas Securities Board spokesman Bob Elder, who said the rules will probably be in effect in November.

The number of people who can now invest some of their savings in new Texas businesses has just ballooned to include the 20 million adult residents in Texas. Not everyone believes this is a good thing. Some critics said fees associated with raising funds may be high. Others worry that investors won’t do their homework.

The process will still be monitored by the Texas Securities Board. It will be done online through crowdfunding portals. Texas companies raising money will be required to disclose financial information to their investors and abide by other regulations. There are also caps on how much money a company can raise.

Texas is by far the biggest state to open up this new source of funding for startups and small businesses.

Other states that have adopted crowdfunding rules are Alabama, Georgia, Idaho, Indiana, Kansas, Maine, Maryland, Michigan, Nebraska, Tennessee, Washington and Wisconsin.

Any adult Texas resident will be able to invest up to $5,000 in a Texas business, regardless of the individual’s income.

Federal accredited investor standards require $1 million in assets, not including their home, and an annual income of more than $200,000.

Atlanta developer planning second Dallas apartment tower

The development site is between Turtle Creek and Oak Lawn Avenue on Cedar Springs Road. (HFF)

An Atlanta-based developer that’s just finishing up an apartment tower in Dallas’ Victory Park project is working on a second residential high-rise.

Novare Group is planning a building on a more than 1-acre site near the southwest corner of Cedar Springs Road and Oak Lawn Avenue.

Novare Group is about to open the SkyHouse Dallas tower in Victory Park. (Novare)

The vacant property is next door to the Oak Lawn United Methodist Church, which owns the tract and uses part of it for parking. The development site has been for sale for several months.

HFF has been marketing the 1.4-acre tract, which is near Turtle Creek.

Novare has requested information from the Federal Aviation Administration about how tall a building it could construct on the property. The height limit is 235 feet.

The property is in the flight path for Love Field.

The Centrum tower across the street at Cedar Springs and Oak Lawn is about 20 stories tall.

Officials with the development company said they couldn’t comment on the project at this time.

Developer Novare Group’s 24-story SkyHouse Dallas building opens next month on Woodall Rodgers Freeway just north of downtown in Victory Park.

The high-rise has 336 units.

It’s one of a handful of similar projects Novare has across the country.

 

Report: Dallas-based Wingstop ‘plotting’ stock market entrance

Is Wingstop, the Dallas-based chicken chain, planning an initial public offering?

A short item in the Wall Street Journal says the company is “plotting” an IPO and quotes “people familiar with the matter.”

The official word from the newly selected media relations firm for Wingstop Restaurants Inc. — New York-based ICR — is that the company does not comment on “market rumours.”

ICR, which handles both corporate communications and investor relations, is new to the Wingstop team, having just replaced long-time, and local, media company BizCom Associates.

Also last month Wingstop named Michael Mravle chief financial officer, effective immediately.  Mravle has  “nearly 15 years of finance, strategy, and accounting experience … including an extensive background in the restaurant industry,” a news release said.

He joins the company from Bloomin’ Brands,  the publicly traded company that owns Outback Steakhouse and Carrabba’s Italian Grill.

According to the Journal, Wingstop has met with underwriting banks in recent weeks to discuss a potential IPO that could raise around $100 million, and could value the company at roughly $500 million, some of the people said, adding the size and timing of any offering isn’t settled.

If the rumours prove true, Wingstop would join newly public players Dave & Buster’s and Zoe’s Kitchen, both based in North Texas.

Dave & Buster’s, which returned to the public markets earlier this month, was trading at $18.81 midday Wednesday, just a hair above the top end of its initial pricing range.

Zoe’s shares shot up more than 60 percent in that company’s market debut in April and are now trading at about $35, more than double the initial price of $15.

Dallas’ Lincoln Retail working on $6 billion nationwide shopping center play

One of ARC-Retail Centers holdings is the Liberty Crossing shopping center in Rowlett. (ARC-Retail Centers)

Lincoln Property Co. is gearing up for a big wave if shopping center buying.

Lincoln’s Dallas-based retail division is teaming up with American Realty Capital – Retail Centers of America Inc. to acquire a major portfolio of retail properties.

The shopping centers all over the country would be owned by a non-traded real estate investment trust ARC-Retail Centers is preparing.

ARC-Retail Centers will handle the $1.5 billion offering and set up the REIT and Lincoln Retail REIT Services LLC is charged with finding the properties and providing services.

The partners have already done one REIT that owns about eight properties acquired for more than $250 million.

But the next REIT will be much larger.

“We will be buying $6 billion of retail over the next 36 months,” said Lincoln executive vice president Robert Dozier.

Lincoln Retail’s parent company is a 45-year-old firm with operations in 32 states. The company is best known locally for its apartment, retail and office development.

Its local retail holdings include Turtle Creek Village, Village on the Parkway in Addison and Arboretum Village and Lakewood shopping center in East Dallas.

2015 forecast: D-FW will be among top real estate markets

Houston, Austin and D-FW are all forecast to be top real estate markets next year. (DMN files)

The Dallas-Fort Worth area is forecast to be one of the top commercial real estate markets in the country in 2015, according to a respected industry forecast.

Three Texas cities made it onto the annual list of best markets in the Emerging Trends in Real Estate report released Wednesday by the Urban Land Institute and PriceWaterhouse Coopers.

Houston, Austin, San Francisco, Denver and D-FW were singled out for their strong real estate fundamentals, according to a poll of more than 1,000 property market leaders. The cities are singled out as the best place to build and invest in real estate.

“Interviewees raise the possibility that despite being ranked lower than Houston, the economic diversity could make the current growth rate more sustainable in Dallas-Fort Worth,” the report says. “The market continues to be attractive to real estate investors because of its strong job growth, which benefits from the low cost of living and doing business.

“The comparative strength of the local Dallas/Fort Worth market seems like it can be attributed to the strength of the local economy that is supported by an active and viable local development community,” the forecast continues. “Investor demand remains high and there are no concerns about the  availability of capital for 2015.”

The forecast predicts continued increases in the real estate business in the coming year.

“Unlike previous reports and previous cycles, we are seeing sustained growth,” said PwC’s Mitch Roschelle.

Top 10 commercial real estate markets for 2015. Numbers in parentheses are rankings for, in order, investment, development, and homebuilding. (ULI, PwC)

 

Third quarter stock compensation costs at Six Flags jump 10-fold

A 10-fold increase in stock compensation helped reduce third-quarter profit at Six Flags’ parent company, the theme park operator said after the market closed Tuesday.

Revenue for Grand Prairie-based Six Flags Entertainment Corporation, in the quarter that ended Sept. 30, grew to a record $541.8 million, a 7 percent gain over the year-ago period.

Operating expenses grew 7 percent, fueled in part by a line item for stock-based compensation that grew from $7.08 million a year ago to $78.17 million in the just-ended quarter.

Six Flag’s profit for the quarter was $105.03 million, or $1.08 a diluted share, down from $120.4 million or $1.22 a share a year ago.

The company’s stock was trading near $43 a share earlier in the year. It gained nearly 4 percent to close Tuesday at $34.50 and was up nearly 10 percent in after-hours trading.