RoguePundit

Struggling Monaco Coach

Oregon's Monaco Coach Corporation is in big financial trouble.  The 40-year-old company, which began in Junction City and is now headquartered in Coburg, has become a penny stock.  It struggled earlier this month to secure a new revolving line of credit.  Starting with an excerpt from an April Forbes article... 

These are bad times for American recreational vehicle companies, but high-end maker Monaco Coach can take some cold comfort from knowing that the overall market is shrinking faster than it is.

Monaco Coach reported numbers that missed Wall Street’s estimates Wednesday. Chairman Kay Toolson attributed “plummeting consumer confidence,” which led many drivers to put off purchasing recreational vehicles, and “a difficult consumer lending environment.”

Monaco's problems reflect the United States' subprime mortgage meltdown and rising gas prices.

The recreational vehicle manufacturer followed up with some positive light. Toolson reported that Monaco Coach’s market share rose 8.5% in January and February in spite of the general motor home industry’s slide of 20.6%, according to market data provider Statistical Surveys.

...

Monaco suffered from double-digit decreases in all three of its sales segments led by 66.7% drop in motorhome resorts it runs in California and Nevada, 20.7% drop in motor homes and a 20.6% drop in towable RVs.

While gas prices have improved since then, the same certainly can't be said for the economy, consumer confidence, or the lending environment.  Monaco suspended its dividend in August, and had a net loss of $71.8 million last quarter on revenues of $166.3 million...as compared to a net income of $3.7 million on revenues of $322.4 million a year ago.  From that most recent link...

The Company reported motorized sales of $128.5 million in the third quarter of 2008, compared to $258.0 million in the third quarter of 2007. Wholesale demand, particularly for our diesel-motorized units, was a direct result of weak retail sales activity and dealers seeking to reduce their inventories.

As reported by Statistical Surveys, Inc., Class A motorhome retail sales year-to-date were down 40.1% for the industry through August. Monaco Coach Corporation experienced a 7.0% increase in Class A motorhome market share year-to-date through August 2008.

...

The Company reported towable sales of $37.1 million for the third quarter of 2008, compared to sales of $64.2 million for the third quarter of 2007. Statistical Surveys showed a year-to-date industry decrease of 20.2% for travel trailer and fifth-wheel retail registrations through August 2008. The Company reported a 14.1% decline in its towable retail segment market share for the same period.

...

Resort sales for the third quarter of 2008 were $657,000 up from $219,000 in the third quarter of 2007. Currently, 47 lots are available in Indio, California and Las Vegas, Nevada. The first phase of the Bay Harbor, Michigan resort has been completed and there are currently 73 lots available for sale. Operating loss for the segment was $1.4 million, compared to an operating loss of $1.2 million for the same period last year.

The company has been cutting size and costs to try to survive this downturn.  The latest took effect on Monday.

Monaco Coach Corp. has instituted a company-wide pay reduction for salaried employees, including a 20 to 40 percent drop in pay for its executives.

For executives, the pay cut comes in addition to an earlier salary cut announced in July in which executive salaries dropped between 15 and 50 percent.

According to a filing with the Securities & Exchange Commission Wednesday, CEO Kay Toolson’s base salary drops to $360,173 — just more than one-third of his 2007 base salary of $936,000.

...

The salary reductions took effect Monday, according to the SEC filing.

Many employees are simply giving thanks that they still have their jobs...and hope they can say the same thing come New Year's.

Sag in Lottery Revenues

The third leg of Oregon's four-legged tax stool is understandably being impacted by the weak economy. 

Money is still making its way out of billfolds, purses and ATMs and into Oregon’s 12,224 video lottery machines.

But citing a down economy and the effects of next year’s statewide smoking ban in bars and taverns, state economists Wednesday projected video lottery earnings over a four-year period to fall $133 million below what they had forecast one year earlier for the 2007-11 period. Those are dollars that otherwise would go to education, parks and other programs that receive a share of lottery proceeds.

Even with that slippage, though, the state-run lottery is still a huge earner for Oregon government, expected to pull in about $2.3 billion in that four-year period.

Mary Loftin, public affairs manager for the Oregon Lottery, said this is the first time since the lottery launched video gambling in 1992 that an economic downturn has driven down video lottery sales.

According to the lottery’s weekly sales reports, video gambling sales since August have fallen below projections by an average of $1.2 million a week.

The article went on to quote an economic expert who claimed that the lottery was thought to be recession-proof.  But that's just daft...gambling in Las Vegas has long shown some economic sensitivity.  The lottery will likely take a further hit when the statewide smoking ban goes into effect next year.   

Bill Perry, lobbyist for the Oregon Restaurant Association, said experiences in other states and cities with such bans have made it clear that when customers can’t smoke while gambling, gambling profits shrink. They dropped by 30 percent in Corvallis when that city imposed the state’s first smoking ban. When Eugene followed suit, video lottery revenue in the city fell 24 percent and players took their business to Springfield, unincorporated Lane County, or elsewhere.

Obviously the statewide figures won't be as dramatic as those in Corvallis and Eugene.   

State economists have projected a 6 percent drop in video lottery sales for the first three months of the ban. For the rest of 2009, they expect the drop-off to be 3 percent. After that, they expect it to be nominal.

Whelan said the state is underestimating the impact on its lottery revenue. He thinks revenue could drop by 14 percent.

“It’s going to get clobbered — clobbered — by the smoking ban,” he said. “It could be a $100 million loss. I think they’re underestimating that.”

Whelan said studies have found that about 30 percent of gamblers are smokers, far more than the 16 to 18 percent rate in the general population.

The answer is probably somewhere in the middle.  But rather than accept the fact that fewer people will choose to waste their money gambling if they can't smoke...

Loftin, the lottery’s public affairs manager, said the 18-month lead time between the Legislature’s approval of the ban and its starting date provided time to try to minimize its effect on video gambling.

As part of that effort, the lottery will start next month to promote its video lottery in advertising — something it has never done before for fear of a backlash from gambling opponents.

“We are trying to prepare for the worst,” Loftin said.

For entertainment purposes only...

At least Oregon doesn't appear on the following top ten list, current deficit as a percentage of FY 2009 general revenue.

But of course it's never anything but a revenue problem. 

Random Nature #192

Lengthy Trends:  The Pacific Decadal Oscillation (PDO) recently transitioned to a cool phase (previous blog here).  That means we'll tend to have conditions that are more La Niña-like...for instance cooler, wetter winters in the Northwest and drier winters in most of California.  Overall, La Niñas are linked to cooler weather.  

The PDO and the Atlantic Multidecadal Oscillation (AMO) are related phenomena.  

The AMO is an ongoing series of long-duration changes in the sea surface temperature of the North Atlantic Ocean, with cool and warm phases that may last for 20-40 years at a time and a difference of about 1°F between extremes. These changes are natural and have been occurring for at least the last 1,000 years.

Here are charts of the AMO and PDO. 

The cycles are about the same length, but the AMO lags by roughly 17 years.  

Influence:  So how the relationship between the PDO and AMO work?  Scientists are still working on that.  It's easy to tell which direction the authors of this study are leaning.

One possible explanation is that the two basins are collectively involved in producing variability on a timescale of 60 years, with teleconnections acting in both directions, the AMO and the low frequency component of the PDO being two components in phase quadrature of the same oscillation cycle. On the other hand, the 60 year timescale of the AMO could arise as a consequence of the natural multidecadal variability of the thermohaline circulation in the Atlantic basin alone.  In this most plausible interpretation, the AMO-alone affects the global Northern hemisphere atmospheric circulation which subsequently triggers an adjustment of the Pacific Ocean circulation. 

Could be.  That's why some scientists produce maps and charts showing the AMO having a worldwide influence on climate.  For instance, the following shows--amongst other things--a fairly decent correlation between the AMO and the monsoon in India.

And the map at this link shows a correlation between the AMO and rainfall in parts of Alaska and Chile.  Unfortunately, research on this topic has been dragged into the politics of climate change.  For instance, the amount of bad science in this article...yeesh.  But, it's harder to convince people that global warming exists, much less is a crisis, when it's been getting cooler recently.  

Drought Frequency:  Until about two years ago, both the PDO and AMO had been positive--in warm phases--for the last several years.  Unless there's a radical change, we won't see that again for nearly half a century.  In the macro sense, how do the oscillations of the PDO and AMO impact rainfall in the U.S.?  From this link...

So with conditions -PDO, +AMO, things should be pretty decent overall here in the Northwest.  However, we'll probably be hearing quite a bit about droughts and fires in other parts of the nation.  Of course if one considers drought every four years to be normal, the bar isn't set very high.  And I do have to question one thing...notice that Monterrey Bay is in the above-average drought frequency category on all four maps.  Maybe a few extremely wet years skew the calculations.

Mad Cow and Rendering Costs

Rendering is one of the oldest forms of recycling.  But, certain of the body parts that are recycled can be dangerous.  Case in point is mad cow disease, which is why many nations have banned using certain cattle parts in cattle feed.  But as I noted earlier this week, several of Canada's cases of mad cow disease were likely caused by cross-contamination.

...while Canada banned using certain ground up cattle parts in cattle feed back in 1997, it didn't ban using those cattle parts in feeds for a number of other animals until 2007.  Authorities figure--but can't conclusively prove--that on a couple of occasions, manufacturers of multiple types of feed suffered some cross-contamination, possibly through not thoroughly cleaning their equipment between batches.  The U.S. remains vulnerable to this problem.

But that will change next year, which has some folks concerned.   

At issue is a Food and Drug Administration rule, set to take effect in April, that will prohibit the use of the brains and spinal cords of older cattle as ingredients in livestock feed and pet food.

Some of the rendering plants that grind up carcasses for use in feed have already announced they will stop accepting dead cattle from farms because it would be too costly to remove the banned organs. Other renderers are likely to raise the prices they charge farmers.

As a result, many farmers--especially now, with the economy in crisis--may simply bury dead cattle on their property or let them rot in the open, industry officials and regulators say.

The current economic woes aren't what's been squeezing ranchers.  Until recently, they'd been suffering much higher costs due to the spike in commodity and fuel prices.  Meanwhile when the U.S. fully reopened its borders to Canadian cattle, the extra supply of beef made it really difficult for ranchers to pass along those higher costs.  Anyway...

"I think there will be some illegal disposal - animals that get dragged into the woods or into the back fields," said Gerald F. Smith Jr., president of Winchester, Va.-based Valley Proteins Inc., which operates 12 rendering plants in seven states but will no longer remove dead cattle from farms come February. He said the fee per animal would have to go from $85 to $200 to cover the additional expense, and "I don't think the farmers would be willing to pay."

Farmers already routinely bury, abandon or compost millions of cattle carcasses each year without serious environmental problems, according to the FDA.

But the fear is that the new rule could lead farmers to put hundreds of thousands more dead animals into the ground, especially on dairy farms, which tend to have many more older cows than cattle ranches do, and are often closer to populated areas, too.

According to the FDA's own environmental assessment of the new rule, abandoning dead cattle or improperly burying or composting them can cause foul odors; pollute soil, groundwater and streams; and attract insects and scavengers. Moreover, the infectious agent that carries mad cow disease may survive burial or composting, the agency said.

There are always going to be a few farmers that are sloppy or who cut corners.  But the infectious agents that cause mad cow disease--prions--can also survive the rendering process.  Thus, there can be cross-contamination at a feed plant or for instance on a farm where cattle can gain access to contaminated chicken feed.  Or if a pig eats contaminated feed and is then itself rendered, the resulting feed could conceivably infect cattle.  It's all risk management.

Mad cow takes several years to develop.  This is why the new reg will primarily impact the dairy industry...beef cattle are usually slaughtered young.  With our nation's first case of mad cow occurring in 2003, we're just entering the window where we'll see if the prions spread before they were detected. 

For decades, farmers have sent their dead cows to rendering plants to be turned into pet food, soaps, cosmetics, toothpaste, lubricants and other products. The carcasses are ground to a uniform particle size, heated under pressure to separate fat, protein and bone, and then refined.

...

Nearly 2 million head of beef and dairy cattle annually, or more than 40 percent of all those that die before they can be sent to slaughter, are rendered in the U.S., according to government and industry estimates. The remaining carcasses are mostly buried.

Regulators estimate the new feed ban will reduce the number of cattle handled by rendering plants by 500,000 to 800,000 annually.

Some farmers will be hamstrung by state or local regulations that limit burial or composting, in which the carcass is left to decay in a pile of clippings and other organic material. Iowa, for instance, limits the number of cattle carcasses that can be buried to seven per acre. California prohibits composting of dead livestock.

Rendering plants in some areas--including in parts of Oregon--have been struggling to remain viable.  This new FDA rule won't help.  But, our recycling needs to be safer.

Chronic Wasting Disease Near Idaho

A moose with chronic wasting disease (CWD) was discovered last month near Bedford WY--about 40 miles south of Jackson Hole.  This was the first case of CWD found west of the continental divide in Wyoming...it was only 10-15 miles from the Idaho border.  Needless to say, officials in both states are rather concerned.

The discovery last month of a three-year-old female moose just over the border in western Wyoming that tested positive for chronic wasting disease has raised the stakes here in Idaho.

... 

So far, the 1,000 samples the Idaho Department of Fish and Game takes from big game herds each year have failed to detect the troubling disease.

Though it has been found in deer and elk in many parts of Wyoming and other states, chronic wasting disease is considered extremely rare in moose. According to Wyoming Game and Fish, only three other wild moose in North America have tested positive for the disease, all of them in Colorado.

The agency stated that the inflicted moose did not show any of the clinical signs of chronic wasting disease, except that it was unable stand up.

Actually, the moose couldn't stand because it was suffering from elaeophorosis--also known as arterial worm disease.  The parasite is asymptomatic in its most common hosts, mule and black-tailed deer.  However, it can sometimes kill moose and elk.  The testing for CWD was simply precautionary.      

In light of the discovery, Wyoming biologists will step up their testing efforts in the western half of the state, particularly in the Star Valley area. Officials have noted that the discovery suggests that other deer, elk or moose in the area may be infected, too.

"We will immediately begin to gear up our ... surveillance in the Star Valley," said Tim Fuchs, Wyoming Game and Fish wildlife supervisor for the Jackson Region.

...

In eastern Idaho, the discovery will likely mean an even greater emphasis on testing. Only dead animals can be tested for chronic wasting disease, said Randy Smith, wildlife manager for Idaho Department of Fish and Game's Magic Valley Region, which covers the Wood River Valley.

Smith said about 100 animals—mainly mule deer and elk—are tested for the disease each year in the Magic Valley Region. He said most of those are tested in the north half of the region, primarily near Fairfield and in the Wood River Valley.

Smith said that for the time being, eastern Idaho will remain Fish and Game's top priority due to its proximity to Wyoming and Utah, which has also seen positive tests for the disease in its wild big game herds.

The CWD Alliance has a map (here) which shows the locations where the disease has been found in North America...it hasn't been updated with this case yet. 

Now considering that CWD can be spread via saliva, wet or dry...

Many in the conservation community have suggested that the artificial feeding of big game animals—especially prevalent in Wyoming—may be leading to increased levels of chronic wasting disease.

"Diseases spread much more easily when animals are in closer contact," Smith said.

Still, he said that to his knowledge, no artificial feed sites have ever been closed due to the presence of the disease.

Nevertheless, he said the discovery of chronic wasting disease will put Idaho big game managers on a heightened alert in regards to artificial feeding. Locally, Fish and Game operates just one feeding area for elk midway up the Warm Springs Creek drainage in an area called the Bullwhacker feed site.

And note that the moose in question wasn't found that far south of the National Elk Refuge, where the following are fed through the winter.  

•  It is winter range for the largest bison herd (more than 1,000) in the National Wildlife Refuge System.

•  It is the world's largest wintering concentration of elk with national and international significance.

The Refuge is overpopulated with both species; little wonder it allows hunting.  CWD would certainly change the dynamics there.

Yreka Still Without a Dutch Bros.

It's been over a year, and the proposed Dutch Bros. in Yreka (previous blog here) still isn't up and running.  Obviously the economy has weakened, and Dutch Bros. recently increased prices (yes, I'm a regular customer).  But, management isn't talking on why there's a delay. 

In March of this year, Alan Harper, an attorney for Dutch Bros, stated that the planning process was completed and that the groundbreaking would take place, with construction to be completed in three months’ time.

Now, eight months later, the lot is still empty and some residents have been wondering why the chain has not followed through with the building.

Crews have removed the old building on the Main Street lot purchased by Dutch Bros., but no new construction has been started. Another espresso drive-though used to occupy the location.

Gina Keough, a public relations spokeswoman for Dutch Bros, said the plans are not moving forward, but further information is not currently available.

I wonder what the point of the secrecy is.  There are still Dutch Bros. opening in other locations.

Sending Sewage to a Brookings Beach

Back when sewage and storm water all simply went the same direction--downhill, there was no need to separate their ditches or piping.  That began changing as communities built sewage treatment plants and tried to keep high inflows from storms and snowmelt from overwhelming the system.  That was the motivation behind Portland's East & West Side Big Pipes.  From an article five years ago...

Nearly every time it rains in Portland, stormwater quickly fills the city's combined sewers, which carry both sanitary sewage and runoff from streets, parking lots and rooftops. The high volumes back up the collection system, triggering overflow devices that are meant to keep the sewers from backing up into the streets and people's homes. The volumes--made up of approximately 80 percent rainwater and 20 percent sewage--then overflow into the Willamette River. These combined sewer overflows contain bacteria from untreated sewage and other pollutants in the stormwater.

In new construction, sewage and storm drainage systems are kept separate...or at least they're supposed to be.  But sometimes contractors screw up, and occasionally they simply take short cuts to save money.  Not sure what was behind the following.

For the last 40 years, when students flushed the toilets in two restrooms at Kalmiopsis Elementary School the raw sewage went directly into nearby Macklyn Creek, which flows through the middle of Brookings.

And it's all because a contractor connected the wrong pipes in 1967.

"We didn't have a clue," Brookings-Harbor School District Superintendent John Garner said Monday.

The discovery also might solve the years-long mystery of what has been causing the high fecal bacteria counts and subsequent closing of Mill Beach, where Macklyn Creek meets the ocean.

The sewage would still be flowing into the creek today if Brookings contractor Dave Hoover, who is developing property across from the school on Fern Avenue, hadn't smelled the telltale odor coming out of a storm water pipe. Up until recently, the end of the pipe had been covered with vegetation.

Obviously, there could be other cross-connections, faulty septic tanks, etc. that are contributing to the closures and warnings at Mill Beach.  It will be interesting to see if conditions there show significant improvement.  

After some research, Garner was unable to determine who made the mistake back in 1967, but he found the district's insurance company at that time is still in business.

"I've been told by our current insurance company that there is no statute of limitations on insurance coverage in cases like this," Garner said. "I'm going to let the two insurance companies figure out who's going to pay for this."

He added, "If the district gets fined by the Environmental Protection Agency, then I will pass that on to the insurance companies, too."

That might not be so simple.  For instance if the city or county inspected the work before it was hidden (buried), is an insurance company actually on the hook?  Who was responsible for identifying the sewage line that the contractor was supposed to tap into.  Et cetera.  Hope they've got a really detailed inspector's log.

Seeing Evil in Stimulating the Economy

Taiwan is going to do something that the U.S. has already done (once, so far) to stimulate its economy.  Yesterday...

Premier Liu Chao-shiuan announced that the government will soon distribute to Taiwan citizens NT$82.9 billion (US $2.55 billion) in consumption coupons to help stimulate the economy.

Liu said each Taiwan citizen, regardless of income level, will receive NT$3,600 (US $111) in coupons to purchase goods at local retail outlets.

Various local environmental groups are concerned that by encouraging consumption, this government initiative contributes to global warming.  Thus...

The civil groups, including the Green Party Taiwan, Youth Labor Union 95, Green Citizens' Action Alliance, and Taiwan Environmental Action Network, made the statements at a press conference held in front of the Taipei 101 skyscraper.

The activists, dressed in monkey costumes, covered their eyes, ears and mouths with their hands while urging the public "not to watch commercials, not to listen to sales promotion, and not to talk about buying this or that."

...

Green Party Taiwan Secretary-General Pan Han-sheng argued that while the business cycle is a natural pattern of capitalism, indulgence and excessive waste by humans is catastrophic to nature.

An economic recession can be an opportunity to give the Earth a rest, Pan argued.

The road to hell...  

More Green Taxes for California

Governors Kulongoski and Schwarzenegger have rather similar approaches to dealing with some of their political difficulties...they announce another environmental initiative.     

California utilities, already struggling to meet a law requiring more renewable energy, saw the bar raised even higher Monday.

Gov. Arnold Schwarzenegger signed an executive order calling on utilities to provide one-third of their power from renewable resources by 2020.

"This will be the most aggressive target in the nation," he said.

Increased reliance on renewable energy conceivably could hike future rates, however, because of higher production costs and the need to upgrade transmission facilities.

Conceivably??  Even with subsidies, wind and solar aren't close to competitive with coal and natural gas.  Geothermal could prove affordable if it weren't for all the red tape and lawsuits involved in getting approval.  Et cetera.  Bottom line is that this initiative taxes consumers and businesses twice--through the higher cost of electricity and the subsidies that renewable energies siphon from the state and federal budgets.   

But, there is some method to Schwarzenegger's catastrophism.  First, the state's not going to meet the governor's goal of getting 20 percent of its power from renewable sources by 2010...last year, the state stood at 12 percent.  So rather than waiting to finish failing, Schwarzenegger is setting a more aggressive goal...that conveniently won't come due on his watch.  Second, renewable energy goals like these can be met through growth rather than just conservation, which is obviously more limiting.  And third...

In announcing the new goal, Gov. Schwarzenegger specifically targeted environmental opposition to new projects: “[W]e won’t meet that goal doing business as usual, where environmental regulations are holding up environmental progress in some cases. This executive order will clear the red tape for renewable projects and streamline the permitting and siting of new plants and transmission lines.”

Transmission is the biggest obstacle to boosting renewable energy in California and other states, as recent utility-sector reports show. The permitting process for new transmission lines is time-consuming, and cumbersome. The environmental impact statement for a single, 150-mile transmission project in southern California, for instance, runs to 11,000 pages.

With lower clean-energy targets, state regulators could mollify environmentalists. The California Public Utilities Commission, for instance, appears set to deny permission for that 150-mile transmission project—the “Sunrise Powerlink”—because utilities don’t need it to reach their 20% target, and the environmental impacts are too great.

Returning to the original link...

Incoming Senate President Pro Tem Darrell Steinberg, D-Sacramento, predicted that the incoming Legislature will pass such legislation within 90 days after returning in January.

"When we meet these standards, we will not only be creating our own energy independence, we will also be providing the pathway to high-wage jobs and economic growth for California," Steinberg said.

Expensive energy makes California less competitive, which is the pathway to less jobs.  Someday that electricity may prove to be a bargain compared to fossil fuels, but it won't be any time soon. 

And if renewable energy goals are going to make California more energy independent, why are so many wind energy plants that supply California being built here in Oregon?  It's probably similar to the NIMBYism that drove new coal plants into Arizona, Nevada, etc.  

I still wonder if Oregon hasn't ended up subsidizing some of California's renewable energy.  I'd love to get a hold of some of that math.

More Than 15

Yesterday, Canada announced yet another case of bovine spongiforme encephalopathy--mad cow disease. 

Since the country's first BSE case in 2003, Canada has tested more than 238,000 cattle and detected it in only 15 so far, Argue Said.  The CFIA is confident the disease's prevalence is low in the country.

Once again with the clever counting...  Remember that our first case of mad cow (Dec '03) was found in an animal imported from Canada.  Plus, Canada's first case of BSE wasn't in 2003, but in 1993 in an animal imported from the UK.  Thus, they should be saying 16 or 17 cases, not 15.

The cow was born in British Columbia years after Canada prohibited ruminant protein from being used in cattle feed in 1997. Such protein is considered the most common source of BSE infection in cattle.

However, Canada still allowed specified risk materials - organs and bones most likely to contain BSE--to be used in non-ruminant feed until 2007, when an enhanced feed ban went into effect, Argue said.

The dairy cow in British Columbia probably ate non-ruminant feed containing such materials while it was young and most susceptible to the disease, she said.

...

The U.S. will not prohibit specified risk materials from being used in non-ruminant feed until April 2009, so there's a chance that U.S. cattle will also be infected through feed cross-contamination...

In other words, while Canada banned using certain ground up cattle parts in cattle feed back in 1997, it didn't ban using those cattle parts in feeds for a number of other animals until 2007.  Authorities figure--but can't conclusively prove--that on a couple of occasions, manufacturers of multiple types of feed suffered some cross-contamination, possibly through not thoroughly cleaning their equipment between batches.  The U.S. remains vulnerable to this problem.