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Business Observer Thursday, Sep. 28, 2006 15 years ago

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Health care costs grow: Employers are expected to feel even more pressure in 2007 as health care costs rise an estimated 6% per employee to $8,748, an increase that's about two-thirds higher than the Consumer Price Index, according to a Towers Perrin survey of 167 firms released Sept. 26. A CALL FOR TECH NOMINATIONS: Technology is the ultimate mixed blessing: Use it right and it can be the catalyst for explosive revenue growth and exhilarating new discovery. But harnessing the right technology can be maddening.USF climbs to No. 2, and going up: It appears to Coffee Talk that the University of South Florida is getting more and more respect.Sarasota EDC awards companies' excellence: A cabinetmaker, a digital printing company and an insurance firm were recognized by the Economic Development Corp. of Sarasota County for excellence in manufacturing, technology and service, respectively, at a Sept. 25 awards ceremony.Florikan, Madahcom win state awards: A pair of former Review Technology Innovation Award winners was given statewide awards by Gov. Jeb Bush recently as part of Business Appreciation Week.Technology hiring climbs: Hiring in the technology industry for the first half of 2006 had its strongest growth in five years, but overall, the industry can do better when it comes to filling technology jobs, a leading industry advocate group says. Appliance Depot not stepping back: It always raises an eyebrow when a small retailer an

Coffee Talk

+ Health care costs grow

Employers are expected to feel even more pressure in 2007 as health care costs rise an estimated 6% per employee to $8,748, an increase that's about two-thirds higher than the Consumer Price Index, according to a Towers Perrin survey of 167 firms released Sept. 26.

It's a problem that's only expected to worsen as Baby Boomers age and diseases, such as Type 2 Diabetes and obesity, proliferate, according to the consulting firm.

Employers are expected to subsidize 78% of the premium costs, with employees covering the remaining 22%, plus co-pays and deductibles.

The news that it's the fourth year in a row of slower increases doesn't seem to lessen the impact, especially since the cumulative effect of rising costs has produced record highs for employer-sponsored health plans.

How can an employer be happy costs only went up 6%? In all, costs have risen 60% over the past five years.

One trend that continues to grow is employers are sharing more health care costs with employees. Employees are paying an average of $72 a month, or $864 annually, for employee-only coverage and $242 a month, or $2,904 annually, for family coverage.

Because of the rising costs, more low-wage workers and retirees are choosing to do without coverage, which should be of concern to employers, according to Towers Perrin.

"Having uninsured employees is not a good thing for employers, and can lead to significant losses in productivity," says Dave Guilmette, managing director of the Towers Perrin Health and Welfare practice.

Smart companies support "the creation of a culture of health," he says. In addition, they make employees more aware of the costs of their health care decisions.

A CALL FOR TECH NOMINATIONS

Technology is the ultimate mixed blessing: Use it right and it can be the catalyst for explosive revenue growth and exhilarating new discovery. But harnessing the right technology can be maddening.

Either way, new technology is just cool. That's what makes the Review's annual Technology Innovation Award issue a blast. Now in its fifth year, the Review is again seeking nominations for the best innovations in technology. This is the first year the awards are being expanded to cover the Review's entire coverage area, from Tampa Bay to Naples.

We are looking for achievers who create or apply technology to a business or not-for-profit venture in a way that changes an industry, creates greater profits or efficiencies or improves quality of life in a meaningful way. It doesn't matter what industry. Past winners and runners-up include medical device manufacturers, a firm specializing in international security and even a fertilizer company.

Basically, if the technology meets the criteria, then the Review wants to know about it.

Nominations should include the particulars of the company and the technology, along with company contact information, including phone numbers and e-mail. Please send questions or nominations to Managing Editor Mark Gordon at [email protected].

+ USF climbs to No. 2, and going up

It appears to Coffee Talk that the University of South Florida is getting more and more respect.

The school has surpassed $300 million in externally funded research dollars for the first time in its nearly 50-year history. In USF's 2005-2006 fiscal year, it received grants and contracts of $310.2 million, about 8% more than the previous year.

Over the past five years, external research funding has increased $124 million or 67%.

"We have excellent faculty who have been very aggressive in their quest for funding," USF President Judy Genshaft says in a news release. "Through their efforts and successes, the university continues to rank second among Florida's state universities for externally funded awards. We clearly make a positive difference in the nation, state and region."

Genshaft predicts the college will soon be a "top 50 research institution." Coffee Talk hopes the president is right. The Tampa Bay area could only benefit from a rise in USF's stature.

+ Sarasota EDC awards companies' excellence

A cabinetmaker, a digital printing company and an insurance firm were recognized by the Economic Development Corp. of Sarasota County for excellence in manufacturing, technology and service, respectively, at a Sept. 25 awards ceremony. Venice-based plastic cup manufacturer Tervis Tumbler was named the EDC's 2006 Company of the Year.

The EDC's panel of judges chose companies based on several factors, including community involvement, corporate responsibility and growth. Astute Coffee Talk readers will notice some of the winners have been previously recognized by the Review.

The Manufacturer of the Year was North Port-based Busy Bee Cabinets. The 83-employee company builds and installs cabinets for homebuilders and homeowners. EDC judges gave the firm high marks for its two layers of quality control - once when the product is loaded and again after installation. The manufacturer runner-up was Venice-based Sunset Mold & Prototype Inc.

Sarasota-based LexJet Corp., whose founders were 2004 nominees for the Review's Entrepreneur of the Year award, was named the Technology Company of the Year. Judges appreciated the firm's open environment, where employees are shown and taught about the company's financial results. Web site design firm GravityFree web design was named runner-up in the technology category.

The Service Company of the Year award went to FCCI Insurance Group. The Lakewood Ranch-based worker's comp carrier was recognized for its employee relations program and involvement in community programs. Engineering firm WilsonMiller - featured in this week's Review on page 6 - was named runner-up in this category.

Tervis Tumbler, which manufactures insulated cups from a 55,000-square-foot factory in Venice, was recognized as the Company of the Year for a variety of reasons, including 32% sales growth from 2005 to 2006 and employee benefits that include a 7.5% 401(k) match and scholarships for employee's children. Tervis Tumbler president Norbet Donelly, who was a 2006 Review Entrepreneur of the Year nominee, accepted the award for the company during the EDC luncheon, held at the Ritz-Carlton, Sarasota.

+ Florikan, Madahcom win state awards

A pair of former Review Technology Innovation Award winners was given statewide awards by Gov. Jeb Bush recently as part of Business Appreciation Week. Sarasota-based Florikan E.S.A. Corp. won the Business Expansion award in the major market category and Madahcom Inc. won the Entrepreneurship award in the Major Market category. Madahcom won the Review's Technology Innovation Award in 2005, while Florikan won it in 2004.

+ Technology hiring climbs

Hiring in the technology industry for the first half of 2006 had its strongest growth in five years, but overall, the industry can do better when it comes to filling technology jobs, a leading industry advocate group says.

The report, released by the American Electronics Association, shows the U.S. tech industry added more than 140,000 jobs between January and June of 2006, a 2.5% rise, for a total of 5.81 million jobs. That figure is nearly double the 78,900 tech jobs added in the first half of 2005 and the strongest job growth of any six-month period since 2001.  

AeA President and CEO William Archey says hiring rates could be even better if the U.S. were addressing its "competitiveness challenges," such as education in science and math and restrictions on hiring foreigners.

+ Appliance Depot not stepping back

It always raises an eyebrow when a small retailer announces it's selling off inventory to close two locations, but for Sarasota-based Appliance Depot & More, the closings look to be more along the lines of one step back, two steps forward.

While Appliance Depot officials have outlined major changes for its Sarasota Tamiami Trail and Venice stores, the changes don't have the earmarks of a company in trouble.

Asked about the closing of the Tamiami Trail location, Appliance Depot company partner Charles Palko expects the retailer will be back on trail soon.

'I can't talk about it yet, but we're moving to another Tamiami Trail location," Palko says. "That store was in an old, tired building; it was also one of our few leased stores. We're looking for an environment that will provide a better buying experience for our customers."

At the same time, Palko says Appliance Depot doesn't plan to shutter its Venice location; he describes it as more of a "format change."

"When we started the Englewood store we noticed it was really gobbling up marketshare from Venice so we don't feel like we will be losing much by not having that as an Appliance Depot. That building is ours though, so we are planning to do something else there."

Palko declined to specify the exact changes to the Venice store.

Palko, Jim Potts and Mark Pruett own the four-year-old Appliance Depot. The company continues to operate five unchanged locations in Sarasota, Englewood, Avon Park/Sebring, Bradenton and Port Charlotte.

"We've been doing great," Palko says. "Avon Park is doing wonderful, Bradenton is still doing very strong. With the building slowdown, we did lose some momentum. But so far this year, same store sales are ahead of last year.

Palko says the company is in a good position to weather the downturn.

"Because of the last couple very good years we are better positioned to handle the temporary slowdown than those of our competitors with higher overhead," he says.

+ Experience priceless, not necessarily profitable

Sarasota-based Finergy Development LLC certainly didn't make a monster profit on the Homewood Suites by Hilton on Fruitville Road. The Italian developer just sold the 100-room Sarasota hotel to Apple Hospitalities for $13.8 million, a paper profit of $12.4 million more than Finergy paid in July 2002. But in those four years, Finergy spent some $10 million converting a dilapidated, half-built assisted living facility into a new hotel property, leaving a four-year profit of about $2.4 million excluding any profit or shortfall from hotel operations.

"There have obviously been people that have made that much money in a shorter period of time, but this was really about something that we can build on ... a learning experience," says Eric Collin, project manager for Finergy. "This helped us build important relationships, especially with the hotel franchises, so we can duplicate this success. This is a great example of that we can take to our future projects."

It was those projects that also motivated Finergy to sell now. The developer has four projects planned for the near future - including a new, 44,000-square-foot headquarters office building in downtown Sarasota, a 24-story, mixed-use hotel/condominium/commercial project in Tampa's Channelside District and hotel projects in Nokomis and near the Sarasota-Bradenton International Airport - and needs the cash flow from the Homewood Suites project.

+ Lee Memorial chief defends HCA purchase

Lee Memorial Health Systems' recent announcement to buy HCA's two hospitals in Lee County for $250 million has drawn fire from critics who complain it will stifle competition.

But at its annual strategy conference in Bonita Springs, Lee Memorial President Jim Nathan says the competition is not from other hospitals. Rather, it's from physicians who are nabbing a greater share of the profitable outpatient surgeries to their own facilities. What's more, payments from insurance companies and Medicare have not kept up with rising costs, forcing consolidation in the industry.

"Lending institutions were falling all over us to make this acquisition," says Nathan. Lee Memorial plans to borrow $250 million to finance the acquisition and the deal is scheduled to close by Oct. 31.

FLIPPERS ARE STILL PROFITING

Home flippers are still making money on Florida's Gulf Coast, according to data from California-based real-estate tracking firm Homesmartreports.com. Flippers are investors who buy homes with the intention of selling quickly at a profit.

Cape Coral-Fort Myers generated the biggest home-flipper profits in the second quarter of this year with a median gain of $39,650 per flip. It's also the area with the highest concentration of flippers; 7.2% of home sellers in Cape Coral-Fort Myers were flippers. The largest percentage of flippers who lost money were those in Naples, where a quarter of the home flippers lost a median ?$39,625. Here's how Gulf Coast areas compare:

% sellers flipping % sellers Median flipper % flippers who How much flippers

Metro area last five years flipping in 2Q2006 profit 2Q2006 lost money 2Q2006 lost 2Q2006 (median)

Cape Coral-Fort Myers 7.2% 7.4% $39,650 15.6% ?30,750

Naples-Marco Island 5.4% 3.9% $36,563 25.6% ?$39,625

Punta Gorda 4.8% 2.9% $33,150 22.6% ?$28,900

Sarasota-Bradenton-Venice 5.8% 4.5% $25,250 21.8% ?$31,250

Tampa-St. Petersburg-Clearwater 6.6% 7.8% $30,905 14.5% ?$15,750

Home resales show few bright spots

Sales of existing homes and condos from Tampa to Naples revealed an ongoing slump. With a few exceptions, the number of existing-home sales and median sale prices fell significantly in August compared to the same month last year, according to the Florida Association of Realtors (FAR).

Here's how sales and median prices broke down by each Gulf Coast area, according to FAR:

Single-family, existing homes

Area #Sales 8/05 #Sales 8/06 %Change Median price 8/05 Median price 8/06 %Change

Fort Myers-Cape Coral 968 691 ?29 $283,600 $264,100 ?7

Naples 472 259 ?45 $500,800 $469,100 ?6

Punta Gorda 365 256 ?30 $223,500 $210,300 ?6

Sarasota-Bradenton 1,062 765 ?28 $347,400 $309,700 ?11

Tampa-St. Petersburg-

Clearwater 4,788 2,785 ?42 $215,600 $237,800 10

Existing condominiums

Area #Sales 8/05 #Sales 8/06 %Change Median price 8/05 Median price 8/06 %Change

Fort Myers-Cape Coral 280 100 ?64 $278,100 $237,500 ?15

Naples 473 163 ?66 $332,800 $357,100 10

Punta Gorda 12 30 149 $332,500 $160,000 ?52

Sarasota-Bradenton 454 206 ?55 $280,800 $240,400 ?14

Tampa-St. Petersburg-

Clearwater 1,305 774 ?41 $164,500 $171,600 4

+ What's Ahead...

Oct. 3 - Sweetbay CEO and President Shelley Broader, who's charged with remaking Kash n' Karry, a grocery company with $1 billion in annual sales, is the guest speaker at the 11:30 a.m. luncheon of CREW (Commercial Real Estate Women) Tampa Bay Inc. For more information on the meeting at The Centre Club, 123 S. Westshore Blvd., 8th Floor, Tampa, visit www.crewtampabay.org or call (813) 205-2138.

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