2014: Business Year in Review

by Talk Business & Politics staff ([email protected]) 236 views 

Arkansas’ economy made progress in 2014 with fewer setbacks than in recent years. From public companies to public celebrations, there were more reasons to cheer than boo in business circles statewide.

Here are the top picks from Talk Business & Politics’ writers and editors:

Arkansas banks churned through another year of restored health and several trendsetters went on a tear with acquisitions.

The Federal Deposit Insurance Corp. (FDIC) reported that Arkansas’ banking segment grew its employment to 18,930 full-time workers in the third quarter, despite more bank consolidation. The state had 111 financial institutions as of Sept. 30, down from 120 reported at the end of 2013. Total assets in Arkansas-based banks grew to $64.94 billion as of Sept. 30, a gain of $2.89 billion or 4.6%. Assets rose 6% since 2012 and 11% since 2011.

Other aspects of banks’ balance sheets also improved leading to growth through acquisition for several publicly traded financial institutions. Little Rock-based Bank of the Ozarks nabbed Summit Bank of Arkadelphia in a $216 million deal. Ozarks would later acquire a Florida bank, Intervest Bancshares, in a $228.5 million purchase.

Simmons First continued its surprise streak of bank buyouts. While closing on the Metropolitan National Bank deal, Pine Bluff-based Simmons bought Little Rock’s Delta Trust & Bank for $66 million in March.  In May, Simmons added two more huge acquisitions to its portfolio, buying Community First Bancshares of Tennessee in a $243.4 million deal and Liberty Bancshares of Springfield, Mo., in a transaction valued at approximately $207 million.

Home Bancshares (parent company of Centennial Bank), which has grown its footprint in Arkansas and Florida through acquisitions, was a little more low-profile in 2014. Still, the Conway-based bank bought Broward Financial Holdings, Inc., a financial institution in Fort Lauderdale, Fla., in a $33 million transaction.

A fourth Arkansas bank that is publicly traded, Bear State Financial, sent a signal that it intends to be a player on the Arkansas banking scene. Formerly First Federal Bancshares, the name change for the Harrison-based financial institution also marked its intention to raise more capital for growth. With former Alltel Corp. executives Scott Ford and Rick Massey as shareholders and board members, expect to see activity in the near future.

Doug McMillon officially took over the duties as CEO of Wal-Mart Stores, Inc., on Feb. 1, 2014. The former stock boy for Wal-Mart had risen through the ranks and served in a variety of capacities, including head of the retail giant’s international division. The 48-year old CEO quickly began to reshuffle the C-suite at Wal-Mart headquarters, including putting David Cheesewright in charge of the company’s international operations and Greg Foran at the helm of U.S. stores.

McMillon also signaled a change for front-line employees. In an interview with CBS’ Charlie Rose, McMillon said he wanted to raise about 6,000 Wal-Mart workers’ pay above the federal minimum wage.

“We’re gonna make some changes in a few months that will create a situation where no Wal-Mart associate in the United States makes federal minimum wage. We’ll be ahead of that with our starting wage,” he said.

In a move to expand its prepared foods segment, Tyson Foods won a bidding war to acquire Hillshire Brands for $8.55 billion. Springdale-based Tyson was in a “food fight” with Pilgrim’s Pride for the coveted Hillshire food company.

The $63 per share cash offer was the largest in Tyson Foods’ history, but executives said the megadeal presented efficiencies to be gained from the combined operations, a more streamlined pipeline of raw products to finished products, and more shelf space in front of the American consumer.

“This is an exciting time as we integrate Hillshire Brands and Tyson Foods,” said CEO Donnie Smith of the Hillshire deal, “and I believe that when we look back on this merger years from now, we’ll see it as a watershed event.”

If the back half of 2014 is any indication, Smith may be right. Tyson Foods topped off 2014 with an $864 million full-year profit on revenue of $37.58 billion. Revenue and net income are poised for growth in 2015, along with the company’s solidly performing stock value.

The Arkansas economy celebrated three major 10-year anniversaries in 2014. In order of their financial impact, the Fayetteville Shale Play, the Clinton Library and the Fayetteville Tech Park all highlighted their contributions to the Arkansas economy during the last decade.

The Fayetteville Shale Play, a North-Central Arkansas major natural gas region, introduced a new layer into the state’s mining economy with fresh jobs and billions of dollars of investments. A two-year old study conducted by University of Arkansas economist Kathy Deck projected the economic activity from the gas shale play at $12.7 billion from 2008 to 2012. It has accounted for more than 16,000 new jobs – many of which came during the national recession, which kept Arkansas’ economy from cratering.

The shale play’s rise also sparked a jump in natural gas production in Arkansas, propelling the Natural State to become the fourth largest shale gas producer in the U.S. behind only Texas, Louisiana and Pennsylvania.

The William Jefferson Clinton Presidential Center also turned 10 in 2014. The 42nd president and Arkansas native has been a godsend to tourism and growth in the capital city. Since the Clinton Library was announced, investment in the downtown areas of Little Rock and North Little Rock has totaled $2.46 billion, with a total economic impact of construction at $3.3 billion. The economic impact of construction of the Clinton Center and ongoing operation of the various organizations housed there is more than $346 million.

Not only has it done a lot for investment in downtown, it has been a boon for tourism. Travel expenditures in Pulaski County have increased 68% since the library opened. More than 3 million people have visited the Clinton Center in the last 10 years, with increases in annual visitors every year since 2007. Total tourism-related expenditures of visitors to the Clinton Center totaled $691 million since 2005. And, travel-generated revenue in Pulaski County has increased by 41% to more than $28 million in 2013, while revenue from the City of Little Rock Advertising and Promotion tax has increased 65% to $11.9 million in 2013.

The Fayetteville Tech Park has been no slouch. The Arkansas Research and Technology Park, a “town-and-gown” collaborative effort between the city of Fayetteville and University of Arkansas, helped boost the state’s economy by more than $523 million over the past 10 years.

The park has 38 public/private affiliate companies with 196 employees and contributes to about 385 jobs statewide. Based on expenditures by the tech park’s affiliates for fiscal 2014, which ended June 30, the research park generated $54.7 million in economic activity statewide and $1.8 million in state and local taxes.

There were more job announcements than layoffs in 2014, a sign that five years after the recession Arkansas is improving on the jobs front. Major announcements include an expansion at Dassault Falcon Jet in Little Rock, PECO Foods in Northeast Arkansas, and a new corporate headquarters and expanded workforce at ArcBest in Fort Smith.

The state’s first superproject, Big River Steel, moved forward despite litigation. BRS broke ground in September on the $1.3 billion steel mill that will employ 550 workers in the steel industry. Another 2,000 jobs are expected during the construction phase.  And, there are prospects for supplier companies to locate in Northeast Arkansas to support BRS. The city of Osceola is already courting prospects and looking to expand its infrastructure and airport facilities to accommodate.

Among the biggest layoffs of the year occurred in Northwest Arkansas. Superior Industries laid off 500 as it closed its Rogers aluminum wheel facility. It shifted some of its work to its Fayetteville plant and a factory in Mexico.

Acxiom and Windstream also went through rounds of layoffs in 2014 as both public companies headquartered in Arkansas attempted to cope with changing technology and telecommunications markets.

The overall numbers were better, but there were mixed signals in 2014 for the state’s jobless rate. By year’s end, the Arkansas unemployment rate had fallen to 5.8%, more than 1.5 points below its 7.4% level at the end of 2013.

Throughout the year, the state’s overall labor force and employment population continued to slide, leading economists to wonder where the workforce was disappearing. Was it baby boomers retiring? Long-term unemployed giving up looking for work? Or workers moving out of state to find employment elsewhere? Likely, it was a combination of all three, but no statistics could quantify the percentages.

Still, the declining unemployment rate was welcome news for an economy that had seen high numbers since the recession began.

Home sales ticked off another strong year – the third in a row – thanks to low interest rates, health inventories and stability in the job market. The improvements spelled good news for realtors, bankers and the home construction industry.

Through three quarters and some change in 2014, home sales were on track to rise more than 4% for the full year. The value of those home sales were up more than 3%, indicating solid pricing stability.

The year-to-date comparisons were up against what was a robust 2013 in terms of Arkansas home sales and sales values. For example, the 2014 year-to-date home sales are up 18.53% over the same period in 2012 and the value of home sales is up 20.12% compared to the same period in 2012.

Consumers headed into the holidays with extra money in their pockets, checkbooks and bank accounts and that spelled good news for nearly every industry, especially retailers and the tourism business.

Since summertime, gasoline prices have fallen across Arkansas and the U.S. by more than a dollar per gallon. Prior to Memorial Day, the price at the pumps was near $3.50 a gallon in parts of the Natural State. By Christmas, it was not hard to find regular unleaded in the $2 range.

Falling crude oil prices worldwide were driving the decrease in gas prices, and on the flip side, those low prices were fueling consumer and business confidence thanks to the cash flow it was generating.

The state was tipped off to a farming crisis in August when Speaker of the House Davy Carter, R-Cabot, sent a letter asking for lawmakers to look at breached commodity contracts.

“If this holds true, literally tens of millions of hard earned dollars that our farm families were expecting will have disappeared into the heavens,” Carter wrote.

The controversy centered on Turner Grain Merchandising, a commodities dealer located in Brinkley. Turner did not pay or delayed payments on crops to farmers that it was supposed to process, leaving many farmers to find alternative brokerage sources or walk away from their yields.

Butch Calhoun, Arkansas’ secretary of agriculture, in October estimated at $50 million the total losses by farmers allegedly cheated out of their crops. Individual losses ranged from $30,000 to more than $2 million. Turner Grain became embattled in legal action and the debacle likely will result in state legislation in 2015. Arkansas has no laws pertaining to grain dealers. It does have laws pertaining to warehouses, but warehouse owners can choose to be certified by state or federal authorities.

Acknowledging the widespread ripple effect the crisis could have on the farming community, AEDC director Grant Tennille said, “One thing the world ignores is that farmers bet their entire nest egg on a yearly basis. The whole debate is not unsolvable, but it shakes people to their core.”

Editor’s note: KATV’s Scott Inman and TB&P host Roby Brock discuss several of the top business stories of 2014 in the video below.