A paralyzing winter storm brought parts of Arkansas to a near week-long standstill at the end of the year – a perfect metaphor for the frozen business attitudes heading into 2013.
U.S. leaders were facing a “fiscal cliff” of tax hikes and service cuts that certainly were a cause for concern for business decision-makers and families approaching the new year.
However, 2012 had its ups and downs and there were a number of stories that stirred interest and made history as the state and nation entered its fifth year in the post-Great Recession world.
Here were the highlights and lowlights:
• A Partly Cloudy Economy
Home sales, unemployment numbers and sales taxes – the three-legged gauge for monitoring the economic trajectory of Arkansas – all saw improvement in 2012, but it was lackluster.
Home sales topped 2011’s anemic levels, which was a welcome relief, but the housing market came nowhere near regaining its footing seen in the run-up before the recession. Still, low interest rates and a healthy inventory led to single-digit gains and home prices rose for those sales, an indication of higher-end homes moving.
Tax collections in general indicated that income taxes from workers were the most reliable traction for the economy. Unemployment falling nearly a full percentage point supported this theory. However, sales taxes were less than robust. The signs suggest that while worker wages remain strong, consumers are holding on to their money not spending it abundantly, and economists don’t expect those patterns to deviate significantly in their short-term outlooks.
Arkansas may have made more strides, but a major drought impaired economic progress. Record high temperatures, no rain and unbearable heat took their toll on the state’s agricultural economy, which was already reeling from the previous year’s drought and early spring floods. Experts expected the eventual impact to be “billions of dollars.”
And the end-of-the-year harsh winter weather left many businesses with a battered attitude and cash register as the year closed.
• Wal-Mart Surges, Stumbles
Wal-Mart’s 50th anniversary year was certainly one to remember. The Bentonville-based retail giant has come a long way from its humble origins with one store in 1962. It is on track to post sales of more than $400 billion and profits nearing $15 billion. In 2012, the company saw its stock price soar to new heights as it appeared to have regained its footing with core, bargain-hunting customers.
The retail behemoth also expanded its growth plans for China and said it would broaden its sustainability efforts domestically and overseas.
By mid-summer, however, Wal-Mart became engulfed in a major scandal. It was revealed that its Mexican operations, once headed by top executive Eduardo Castro-Wright, were being investigated for violations of the Foreign Corruption Practices Act (FCPA). The controversy was rooted in accusations that Wal-Mart may have bribed local officials to gain permits and accelerate its business growth in Mexico.
By year’s end, the FCPA allegations had broadened to other international markets.
“Inquiries or investigations regarding allegations of potential Foreign Corrupt Practices Act (FCPA) violations have been commenced in a number of foreign markets where we operate, including but not limited to Brazil, China and India,” the company disclosed in its third quarter earnings report.
• Murphy Oil Splits
When Murphy Oil CEO David Wood stepped down from the company in mid-June, it was probably an early indicator that the El Dorado-based oil and gas firm was preparing for a change. Wood’s departure was quietly disclosed and several months later, a major announcement from Murphy made headlines.
The company revealed in October that it planned to spin off its downstream assets – primarily its refinery, marketing and retail operations – and become a stand-alone, pure-play exploration and production firm. In short, Murphy Oil would become two companies, Murphy Oil and Murphy USA. The deal is expected to finalize in 2013.
• Walgreens Acquires USA Drug Publicly-traded Walgreens, one of the largest pharmacy retailers in the country made a major Arkansas acquisition in July 2012 when it nabbed Pine Bluff-based USA Drug for $438 million.
The sale paid huge dividends for the family of Stephen LaFrance, owners of the drug store chain that started with a single store in Pine Bluff in the early 1970‘s.
As is standard practice in these type of acquisitions, Walgreens soon combined stores with its own, resulting in closure of nearly half of the USA Drug stores in a nine-state region.
• Manufacturing Ups and Downs
Arkansas’ manufacturing sector would make a great roller coaster ride. For every up, there seems to be a down. In 2012, there were marquis closures, punctuated by the long-anticipated shutdown of Whirlpool in Fort Smith.
The western Arkansas community was dealt a double-whammy when a $100 million Mitsubishi wind turbine plant was built, but mothballed. The company, which had been in a drawn-out legal battle over patent technology with GE, decided not to staff and open the factory after much hype.
But there were bright spots. Nucor Steel expanded its Blytheville operations with a $115 million production expansion. In Little Rock, Indian pipe maker Welspun Industries added 200 jobs in its $100 million expansion.
• Bank Acquisitions and Moves
Arkansas’ banking landscape saw a number of moves highlight its year. Simmons First, Arvest Bank, Home Bancshares and Bank of the Ozarks all made multiple out-of-state bank acquisitions in states ranging from Missouri to Alabama to Florida and Georgia.
There was also an announcement of a notable retirement. Simmons First National Corporation Chairman and CEO J. Thomas May, the long-time leader of the Pine Bluff-based financial group, announced he would retire effective December 2013. May has had health issues, but has continued to lead the banking enterprise. George Makris, a longtime director, will succeed May as Chairman and CEO, and will assume the position of CEO-elect on January 1, 2013.
Also, federal regulators dropped their third directive on One Bank & Trust of Little Rock in September. The Office of Comptroller of the Currency (OCC) said it was reclassifying the bank’s capital category from “adequately capitalized” to “undercapitalized.” It also called for a forensic auditor to review bank documents, books and records dating back to January 1, 2009. In a rare and strong move, the OCC said the bank’s board “shall immediately dismiss” CEO and President Layton Stuart from his roles within the bank and ensure that he relinquishes all bank-owned or bank-issued property in his possession.
• Hospitals Shuffle
Banks in Arkansas weren’t the only sector making major moves. Changes within the state’s hospital scene became as hectic as a busy emergency room on a Friday night.
UAMS ended its 40-year relationship with CARTI after CARTI formed a partnership with a multi-specialty cancer group. UAMS later partnered with Arkansas Children’s Hospital to expand services in Jonesboro and it entered into an agreement with Little Rock-based St. Vincent’s Health System to explore “strategic opportunities.”
In Hot Springs, Capella Healthcare, parent of National Park Medical Center, and Mercy Health, parent of Mercy Hospital and Mercy Clinic in Hot Springs, signed an agreement for the two Hot Springs organizations to merge under Capella’s ownership. The move led to some consternation in Hot Springs with one high-profile board member resigning.
• Beebe’s Trade Trips
Gov. Mike Beebe isn’t big on traveling far from home, but in 2012 he made two overseas trips that took him halfway around the globe.
In late March, Beebe visited China meeting with foreign dignitaries and business leaders as well as Arkansas company officials doing business in the world’s most populous nation. Beebe said he hoped to lay a foundation for long-term economic prospects as the Chinese begin scouring the U.S. for locations to bring factories and new investments. The Governor also spent a portion of his trade mission attempting to resolve issues between Chinese government leaders and Arkansas companies, although no parties would disclose the nature of the talks.
In June, Beebe left on a week-long agricultural trade mission to France. During that trip, Beebe also visited with French companies with operations in Arkansas, including private corporate jet maker, Dassault Falcon.
• Fayetteville Shale Cools
Arkansas is heavily invested in the natural gas boom brought about by the Fayetteville Shale play. It has helped stabilize and diversify the state’s economy through the tough recession years.
However, for a second year in a row, low natural gas prices curtailed activity in the shale region, which has seen an economic slowdown not just from declining production, but also because much of the start-up infrastructure for the natural gas industry has been completed.
This summer’s drought also impacted shale operations. The largest investor in the play, Southwestern Energy, reported that triple-digit temperatures dogged drilling activity for weeks in Arkansas.
• The Coaching Carousel
Bobby Petrino’s spring motorcycle crash certainly symbolized his career and the damage it inflicted on the University of Arkansas football program. Petrino lied to UA Athletic Director Jeff Long about details of the accident, as well as the fact he had hired a woman with whom he had an extramarital affair, Jessica Dorrell, on his staff.
The controversy led to his dismissal, which brought back interim coach John L. Smith. A 4-8 season dictated a new coaching hire and by December, Wisconsin football coach Bret Bielema was the new head hog and hope among the Razorback faithful was at least restored for now.
As if the soap opera in Fayetteville wasn’t enough, Arkansas State University in Jonesboro added to the drama. It made a bold hire to bring former Auburn and Arkansas assistant Gus Malzahn to campus. He injected enthusiasm with the fan base and proclaimed he wanted to make ASU the “Boise State of the South” on the football map. Auburn dumped its head coach after a dismal season and the Gus bus was back in Auburn by year’s end as the head coach.
The sports saga was a frequent front-page story beyond the sports section and it generated more water cooler talk than any other subject matter in 2012.
Other notable business stories:
Winter Storms End Year On A Frigid Note
Entergy Arkansas Approved For MISO Move
Crystal Bridges Cements Its Status As A Tourism Jewel
Central, Northwest Arkansas Business Leaders Collaborate
Entrepreneurial Programs Emerge in Northwest Arkansas
Grant Tennille Officially Named AEDC Chief