Leaders

For 3rd Yr., Hennepin Cty. Officials Return Portion of Pay

Employees and commissioners have helped the county save approximately $4.4 million in the past two years through voluntary unpaid leaves and returned pay.

The Hennepin County Board of Commissioners has, for the third consecutive year, approved measures to allow the county’s elected officials to voluntarily return a portion of their salaries, the county announced Wednesday.

The county has saved nearly $4.4 million in the past two years, mainly due to employees taking voluntary unpaid absences.

Since 2009, the county has encouraged its employees to voluntarily take leave without pay—an average of 20 hours per year—in order to address tight budgets. In 2011, participating employees helped the county save approximately $1.9 million by taking unpaid leaves; in 2010, that amount totaled nearly $2.5 million, the county said.

However, a Minnesota statute doesn’t allow the county’s elected officials, which include its commissioners, to take unpaid leaves. As a result, elected officials have, for the last two years, had the option to return the equivalent of 20 hours of their pay to the county.

On July 24, all six members of the board voted unanimously in favor of returning that same portion of their 2011 salaries.

Mike Opat, chair of the Hennepin County Board of Commissioners, told Twin Cities Business on Thursday that the commissioners’ returns have amounted to roughly $2,000 per year and thus represent a small portion of the total amount that employees have helped save in recent years.

“We recognize the value of staff taking leave without pay,” Opat said in a statement. “We arrived at this strategy—basically in the form of a gift to the county, which is permitted by statute—so that we could give back a portion of our salaries as well to address the deficit.”

Meanwhile, no commissioner or employee has received a raise since 2008. Opat said that Hennepin County is one of few entities in the state that have adopted such cost-saving measures.

—Nataleeya Boss
(nboss@tcbmag.com)

Pat Murray of Murray’s Steakhouse Dies at 72

Pat Murray, son of the restaurant’s founders, died Monday at his home in Lake Elmo.

Pat Murray, owner of iconic downtown steakhouse Murray’s Restaurant, has died.

“In this time of transition, we regret to inform that Pat Murray, beloved son of founders Marie and Art Murray, passed away yesterday,” the restaurant wrote Tuesday on its Facebook page. “He will be deeply missed.”

Murray, age 72, died at his home in Lake Elmo, according to a report by the Star Tribune. He was diagnosed with bladder cancer last year.

Murray’s parents opened the restaurant on Sixth Street in 1946, and he joined them in running the business in 1960. The restaurant is known to many for its turquoise façade with a giant image of the restaurant’s iconic “silver butter knife steak.”

The restaurant has attracted many members of Minnesota’s professional sports teams, politicians like Hubert Humphrey and Walter Mondale, and celebrities including Billy Joel and Harrison Ford, according to the Star Tribune.

Murray’s children, Tim, Jill, and James, now run the family-owned restaurant, which closed at the end of July to undergo significant renovations. It will reopen in September. (For in-depth details on the history of Murray’s and its upcoming renovation, watch for the September issue of Twin Cities Business, which will hit newsstands later this month.)

In addition to his role at the restaurant, Murray has served as chairman of Minneapolis’ convention and visitor’s association and on the board of directors of the city’s chamber of commerce, according to the restaurant’s website. In 2005, Murray was inducted into the Minnesota Restaurant Association Hall of Fame.

He also operated a second company, Woodbury-based Service Ideas, Inc., which supplies hotels and restaurants with service industry products.

“On behalf of the Murray family and Service Ideas team, with deep sadness, comforted by the memory of his incredible life, we share the passing of Pat Murray from this world into the rewards of eternity,” the company wrote on its website.

—Jake Anderson
(janderson@tcbmag.com)

PR Firm McFarland Cahill Closing; Co-owner Launches New Firm

Teresa McFarland’s new firm, McFarland Communications, will offer many of the same traditional PR services as McFarland Cahill Communications, but it will increase its focus on content creation for digital platforms.

Boutique PR firm McFarland Cahill Communications, which has been around for a decade, said Monday that it will close its doors in August as its owners pursue their individual passions.

Maureen Cahill will become executive director of Smile Network International, a Minneapolis-based nonprofit, humanitarian organization that provides reconstructive surgeries to children around the world. She’s been on the organization’s board for many years, and her new role will involve overseeing its day-to-day operations, missions, fundraising, and marketing and public relations.

Meanwhile, Teresa McFarland will launch a new public relations firm—McFarland Communications. While it will offer many of the same traditional PR services as McFarland Cahill, it will add a new specialty to its mix: content creation for digital platforms.

“PR has changed so much,” McFarland told Twin Cities Business, adding that she and others in her industry have had to “expand writing beyond press releases and the normal tools we’ve used over the years and be able to write to all digital platforms.”

Media relations will be another major focus of the new firm, and McFarland says that getting good coverage for clients is “always something we’ve done extremely well with McFarland Cahill.”

Unlike McFarland Cahill Communications, which is based in Prior Lake, McFarland Communications will be located in downtown Minneapolis. McFarland said one of the things she’s most excited about is that her new firm will share a building with Ciceron, a digital marketing firm that is “so amazing in what they do with their digital marketing campaigns.”

Although no formal arrangements between the two companies have been made, the seeds for collaboration have been planted. “We have been meeting and talking and brainstorming on clients already,” McFarland said, adding that she sees her firm’s communications expertise and Ciceron’s digital savvy as strong complements.

McFarland Cahill’s clients include Verizon Wireless; Anytime Fitness; Sophia; Bring Me The News; and Kaskaid Hospitality, which owns Crave, Figlio, and the new Urban Eatery, located in the Calhoun Beach Club. It has also worked with some major local events—including the Home and Garden Show, the Uptown Art Fair, and the Basilica Block Party. Although McFarland will take some clients with her (including Sophia, Bring Me The News, and Kaskaid Hospitality), the new firm will drop events from its focus area, McFarland said.

McFarland Cahill—one of the 25 largest PR firms in Minnesota based on net fee income—employs seven people, and McFarland Communications will start out with about five.

McFarland and Cahill first worked together in the 1990s, running the public relations department at the Mall of America. Before that, McFarland worked for several Minnesota politicians—including Governor Rudy Perpich and Congressman Tim Penny; she also ran Governor Jesse Ventura’s transition into office following his gubernatorial election.

—Christa Meland
(cmeland@tcbmag.com)

Fastenal’s Dan Florness One of 25 “Best CFOs”

Florness is known for his tight expense and inventory control measures, according to The Wall Street Journal.

Fastenal Company CFO Dan Florness is one of the 25 best chief financial officers in the country, according to The Wall Street Journal.

Florness, who has served as CFO at the Winona-based company since 1996, ranked ninth on the national newspaper’s “Best CFOs” list.

The Wall Street Journal compiled the list, its first, using both quantitative and qualitative measures, including the role the CFO plays in each company and how peers, competitors, and analysts regard the CFO’s work. The national newspaper said that it sought to identify executives who run finance operations that perform well and who, at the same time, take a lead role in setting strategy at their companies.

At Fastenal, Florness is known for his tight expense and inventory control measures, according to The Wall Street Journal. In 2007, he reportedly helped create the Pathway to Profit program—which focused on opening fewer new stores each year, but leveraging existing ones by adding more outside sales representatives and other “growth drivers.”

Meanwhile, the company—which sells industrial and construction supplies—has “amazing margins,” Brent Rakers, an analyst at Wunderlich Securities, told The Wall Street Journal.

Fastenal’s earnings growth reportedly surpasses its sales growth regularly; in 2011, the company achieved 35 percent earnings growth compared to 22 percent growth in sales.

The company has also reportedly been able to increase its pre-tax profitability from approximately 18 percent to 22 percent of sales over the last five years.

Florness is not the only Fastenal executive to be called out recently by a national publication. In April, Forbes included CEO Willard Oberton on a list of 10 public company CEOs in the country who are the “best bosses for the buck”—those who have delivered the highest returns to their companies’ shareholders relative to their total compensation.

Meanwhile, IBM CFO Mark Loughridge topped The Wall Street Journal’s list, followed by Carol Tomé of Home Depot, Karen Hoguet of Macy’s, Intel’s Stacy Smith, and Paul Clancy of Biogen Idec.

Fastenal is among Minnesota’s 25-largest public companies based on revenue, which totaled approximately $2.8 billion in 2011.

—Nataleeya Boss
(nboss@tcbmag.com)

Jennifer Ford Reedy Appointed President of The Bush Foundation

Jennifer Ford Reedy, who currently serves as chief of staff and vice president of strategy for Minnesota Philanthropy Partners, will assume the new position on September 4.

JenniferReedy-TypepadThe Bush Foundation announced Monday that Jennifer Ford Reedy has been selected as the St. Paul-based organization’s next president.

Reedy currently serves as chief of staff and vice president of strategy for Minnesota Philanthropy Partners, which encompasses The Saint Paul Foundation, the Minnesota Community Foundation, the F.R. Bigelow Foundation, and the Mardag Foundation.

During her tenure at Minnesota Philanthropy Partners, Reedy developed the business plan for online fundraising website GiveMN.org and helped create the Minnesota Idea Open, which poses “challenges,” asks Minnesotans to submit solutions to important problems, and grants winning ideas a $15,000 prize.

Prior to joining Minnesota Philanthropy Partners, Reedy directed the Itasca Project, a conglomeration of Minnesota CEOs, public-sector officials, and leaders from area foundations who are focused on improving the Twin Cities economy and quality of life.

Reedy will assume her new role at The Bush Foundation on September 4. She told Twin Cities Business on Monday that Minnesota Philanthropy Partners’ leadership is “immediately dividing my operating responsibilities among the vice presidents on the management team and then will work on a long-term solution.”

Reedy will be the fourth president to lead the 59-year-old Bush Foundation. Peter Hutchinson, who had served as president of the foundation since 2008, stepped down in January, and former University of Minnesota President Robert Bruininks was subsequently named the foundation’s interim leader.

“Over the past several months we have had a very thorough and thoughtful national search process and have taken the time necessary to find the best possible candidate,” Bush Foundation Chair Jan Malcolm said in a statement. “My board colleagues and I were delighted to find in Jennifer Ford Reedy the experience, skills, and vision that we believe are just the right formula to lead the foundation.”

The Bush Foundation provides funding to many types of organizations, including units of government, for-profit companies, tribal nations, and nonprofits. It is the fourth-largest private foundation in Minnesota based on total grants paid in 2010, which totaled $23.1 million.

“The Bush Foundation has had tremendous impact in the communities it has served for nearly 60 years,” Reedy said in a statement. “I’m thrilled to join in that work and look forward to leading the foundation toward even more significant community impact in the coming years.”

—Jake Anderson
(janderson@tcbmag.com)

Report: T-Wolves Owner Taylor Selects Likely Successor

Glen Taylor has reportedly found a successor who could soon buy a stake in the Timberwolves and eventually become majority owner, although Taylor plans to maintain a stake in the team for several years.

Glen Taylor, longtime owner of the Minnesota Timberwolves, has reportedly found a likely buyer for the franchise.

Taylor is nearing a deal to sell a 25 percent stake in the team, according to a report by the Star Tribune. Under the terms of the deal, Taylor would maintain a stake for several years and work with the new owner, who would eventually acquire majority ownership, Taylor told the Minneapolis newspaper.

Taylor, who has owned the Timberwolves for 18 seasons and the Lynx women’s basketball team for 13, declined to identify the buyer until the deal is finalized.

The Star Tribune reported that the buyer is not from the Twin Cities, but has agreed to keep the team in Minnesota as part of the deal.

“Yes, I have [found a buyer], and we’re working on trying to put a deal together, and it would be a deal that would leave me involved for a number of years yet, but it would be a good transition,” Taylor told the Minneapolis newspaper.

Read the full Star Tribune story here.

Taylor told the Pioneer Press, however, that the agreement is thus far only a verbal one, and it “doesn't necessarily mean it’s going to get pulled off, but we’re proceeding.”

Taylor—founder, chairman, and CEO of Mankato-based Taylor Corporation—acquired the Timberwolves in 1994 when its former owners were looking to move the team out of the state. In 2010, he was named one of the “200 Minnesotans You Should Know” by Twin Cities Business, and he’s also a member of the Minnesota Business Hall of Fame.

—Jake Anderson
(janderson@tcbmag.com)

Supervalu CEO Craig Herkert Ousted, Replaced by Chairman

Following disappointing quarterly financial results and amid a review of “strategic alternatives,” including a possible sale, Supervalu has dismissed its CEO.

Struggling Supervalu, Inc., has dismissed Craig Herkert—its chief executive for the past three years—and replaced him with Chairman Wayne Sales.

Company spokesman Jeff Swanson told Twin Cities Business on Monday that Supervalu’s board made the decision to terminate Herkert’s employment and that his abrupt exit was not of his own choosing.

“After careful deliberation, the board decided that this change would be important to the company’s efforts to improve our sales and earnings trajectory and generate long-term shareholder value,” Swanson said.

Sales will serve as president and CEO, effective immediately, in addition to retaining his duties as chairman. Sales has been a Supervalu director since 2006 and has served as chairman of the board since 2010.

The board’s move to oust Herkert comes less than a week after it approved issuing non-qualified stock options and retention agreements to several Supervalu executives in order to encourage them to stay put. Herkert was awarded 346,875 shares with an exercise price of $2.28 per share, and the shares were set to vest in three equal installments over the next three years; however, he was not offered a retention agreement.

Supervalu announced earlier this month that it has begun reviewing “strategic alternatives” and is considering a sale. That announcement was made in conjunction with the company’s dismal first-quarter earnings results, which prompted it to suspend its quarterly dividend.

The Eden Prairie-based grocer earned $41 million, or 19 cents per share, for the quarter that ended June 16—a year-over-year drop of about 45 percent and significantly shy of the 38 cents per share that analysts were expecting. Revenue, meanwhile, totaled $10.6 billion, down 4.7 percent from the same period a year ago and less than the $10.8 billion that analysts expected.

“As we execute our business plan, the board will continue its review of strategic alternatives, and I am still leading that process,” Sales said Monday in a prepared statement.

Sales has held executive positions at retail companies for more than 35 years and most recently served as vice chairman of Canadian Tire Corporation. Prior to joining Canadian Tire in 1991, he served in several senior leadership positions with Kmart Corporation.

Sales said that in his new capacity, he will focus on “identifying factors that will drive meaningful improvements in our strategy execution and overall performance.” He added that the company will “take significant cost out of the business, and move with urgency in our retail food business to lower prices and create points of sustainable differentiation for our customers.”

Sales also vowed to work with Save-A-Lot licensees to try to grow the discount grocery chain, which has performed better than some of the company’s other chains, which include Cub Foods, Albertsons, Jewel-Osco, and Shaw’s.

The Supervalu board elected Philip Francis as its lead director, a position that the board is required to fill in cases when the chairman is not an independent director.

Supervalu is among Minnesota’s five largest public companies based on revenue. It has approximately 4,400 stores and employs roughly 130,000. The company reported a net loss of $1 billion on net sales of $36.1 billion in its most recently completed fiscal year.

Shares of the company's stock were trading up 9.5 percent at $2.18 per share mid-day on Monday.

—Nataleeya Boss
(nboss@tcbmag.com)

Major Hedge Fund Sells Best Buy Shares, Takes a Loss

Greenlight Capital told investors that Best Buy is “trying to come up with a strategy” following the departures of CEO Brian Dunn and Chairman Richard Schulze, which could lead to additional “business disruption.”

Hedge fund mogul David Einhorn’s Greenlight Capital has sold its minority stake in Best Buy Company, Inc.—and analysts are reportedly speculating that the move could spell good news for the electronics retailer’s founder and former Chairman Richard Schulze.

In a Monday letter to investors, New York-based Greenlight Capital said that it sold its stake. A May filing with the U.S. Securities and Exchange Commission revealed that Greenlight owned 7.7 million shares, which equates to about 2.27 percent of Best Buy’s stock.

Greenlight said in its letter that its investment in Richfield-based Best Buy was “particularly irksome,” and it outlined some “unexpected problems” that ultimately prompted it to sell its shares. Among them: the departures of CEO Brian Dunn and Schulze.

Dunn abruptly resigned in April. Then in May, Best Buy released the results of an independent investigation, which found that he violated company policy by engaging in “an extremely close personal relationship with a female employee that negatively impacted the work environment.” The investigation also determined that Schulze “acted inappropriately” when he failed to notify Best Buy’s audit committee after learning in December about allegations of such a relationship—and Schulze subsequently resigned from the company’s board and announced plans to explore options for his 20.1 percent ownership stake. (Entities that he controls own another 1.1 percent.)

“As a result, the company has an interim CEO and is trying to come up with a strategy,” Greenlight said in its letter to investors. “We worried that this could lead to additional business disruption so we exited with a loss.”

Greenlight didn’t disclose its exact loss, but the Star Tribune reported that its own analysis of the hedge fund’s stock purchases suggests that the sum could approach $100 million.

Citing analysts, the newspaper also reported that Einhorn’s move may help Schulze. Unnamed sources with knowledge of Best Buy’s situation told the Star Tribune last month that the options Schulze is considering include trying to take Best Buy private or replace the board of directors.

A prominent and well-respected hedge fund manager dumping his shares and taking a loss is “not a vote of confidence” in the company, longtime Wall Street analyst Jeremy Brunelli, who has closely followed Best Buy, told the Star Tribune.

However, on the flip side, Einhorn could have sold because he doesn’t think Schulze will make a serious offer to buy the company, Brunelli reportedly said; if Einhorn did anticipate such an offer, it seems logical that he would have waited to find out what it was before selling his stake and taking a loss.

Best Buy, which is expected to release a long-term growth plan by the end of the summer, is Minnesota’s third-largest public company based on revenue, which totaled $50.7 billion for the fiscal year that ended on March 3.

—Christa Meland
(cmeland@tcbmag.com)

Top Supervalu Execs Get Extra Pay, Stock Options to Stay

The supermarket chain’s board of directors has approved issuing non-qualified stock options and retention agreements to CEO Craig Herkert, Chief Financial Officer Sherry Smith, and Executive Vice Presidents Janel Haugarth and Andrew Herring; the options and retention payments vest over time.

A week after struggling Supervalu, Inc., announced that it had begun reviewing “strategic alternatives” and is considering a sale, the Eden Prairie-based company’s board of directors has approved issuing non-qualified stock options and retention agreements to key executives in order to encourage them to stay put.

In a filing with the U.S. Securities and Exchange Commission, the supermarket chain revealed that CEO Craig Herkert, Chief Financial Officer Sherry Smith, and Executive Vice Presidents Janel Haugarth and Andrew Herring have received non-qualified stock options that were given out as part of a “broad-based employee incentive initiative designed to retain and motivate key employees across the company” as it pursues its “business transformation strategy.”

The options have an exercise price of $2.28 per share and vest in three equal installments over the next three years—beginning July 17, 2013, according to the filing. Herkert was awarded 346,875 shares, while Haugarth received 156,250, Smith was given 150,000, and Herring got 125,000. (Haugarth oversees merchandising and logistics at Supervalu, and Herring is in charge of real estate, market development, and legal.)

Meanwhile, Supervalu’s board approved retention agreements for three of the same executives, saying in the filing that they possess skills that are critical to the company as it explores its options. (The board did not strike a retention agreement with Herkert.)

The maximum payments are $750,000 for Smith and Haugarth and $500,000 for Herring. The payments vest over time, and the agreements call for the full sum to be distributed if each executive remains with the company for the next two years. According to the filing, 10 percent of each sum will be paid on January 16, 2013. Another 20 percent will be paid on July 16, 2013, 30 percent on January 16, 2014, and the final 40 percent on July 16, 2014.

Supervalu is working with financial advisors at Goldman Sachs and Greenhill & Company to explore a buyout and review its other options. Citing unnamed “people familiar with the matter,” The Wall Street Journal reported last week that the company was expected to soon begin sending financial information to prospective buyers.

Supervalu isn’t the only Minnesota company that’s paying its executives to stick around. In late June, Richfield-based Best Buy Company, Inc., doled out $2 million in cash, and stock awards valued at roughly $8 million, to four executives. The electronics retailer, which has seen a recent exodus of key leaders and is now searching for a permanent CEO, said in a regulatory filing that the awards are “necessary to enable a stable CEO transition and appropriate continuity of leadership.”

Supervalu’s announcement last week about reviewing strategic alternatives was made in conjunction with the company’s first-quarter sales and earnings results, which were dismal and prompted it to suspend its quarterly dividend. The company earned $41 million, or 19 cents per share, for the quarter that ended June 16—a year-over-year drop of about 45 percent and well shy of the 38 cents per share that analysts polled by Thomson Reuters were expecting. Revenue, meanwhile, totaled $10.6 billion, down 4.7 percent from the same period a year ago and less than the $10.8 billion that analysts expected.

Supervalu is among Minnesota’s five largest public companies based on revenue. It serves customers through a network of approximately 4,400 stores and has about 130,000 employees. The company reported a net loss of $1 billion on net sales of $36.1 billion in its most recently completed fiscal year.

—Christa Meland
(cmeland@tcbmag.com)

Business Optimism Dips in Minnesota

Reversing a trend seen in the past three quarters, business leaders from across Minnesota expressed a drop in overall optimism about business conditions in the state, according to Twin Cities Business’ quarterly economic indicator survey.

Fewer business leaders are optimistic about the economy today compared to three months ago, according to Twin Cities Business’ most recent quarterly economic indicator survey.

Of the 490 business leaders who participated in the June survey, 33 percent said that they believe business conditions in Minnesota will improve during the third quarter (July through September)—down from 50 percent of respondents who entered the second quarter anticipating better times ahead.

The change in outlook follows three consecutive quarters in which there was an increase in optimism, and the dip in confidence appears to be primarily due to factors beyond Minnesota, including the European debt crisis.

One respondent wrote: “We thought this would be a good year financially, but with the euro crisis, things are not looking that good.”

Only 25 percent of the respondents said that they believe the national and global economies will improve during the third quarter—a 50 percent drop compared to respondents who were optimistic as they entered the second quarter.

While confidence in the Minnesota economy is down compared with the last quarter, it is still stronger than one year ago: Only 25 percent had expressed optimism for last years third quarter, and the percentage of those who believe business conditions will worsen this summer (15 percent) is down from 32 percent who voiced such pessimism a year ago.

Meanwhile, a smaller percentage of Minnesota businesses plan to increase their spending compared to investments during the prior quarter: 32 percent of businesses plan to increase capital expenditures compared to 38 percent in the second quarter, and only 20 percent plan to spend more on research and development, compared to 28 percent last quarter. Fifty-seven percent of the respondents expect to maintain the same levels of capital expenditure as the second quarter, and 72 percent will spend the same on research and development as they did in the second quarter.

Finding qualified employees remains a concern, with 29 percent of respondents expecting it to become more difficult in the months ahead—the same percentage of leaders who reported this concern heading into the second quarter. Only 6 percent of respondents believe finding qualified talent will be easier during the third quarter.

Meanwhile, Twin Cities Business’ last four quarterly surveys found that an average of 35 percent of respondents plan to increase their work force in the months ahead, and an average of 60 percent forecast increased profitability.

Additional information from the survey—including charts detailing which Minnesota industries are expecting to most actively hire, increase revenues, and increase investments in infrastructure this quarter—can be found in the August issue of Twin Cities Business, available online here and in print at select newsstands.

Twin Cities Business conducts this survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. Of the respondents to the most recent survey, 87 percent represented privately held companies and 13 percent represented public companies.