Cash Bank Deposits Reported To Irs

Making Arkansas history.

The Razorbacks’
Annus Horribilis

 

Optimism surrounding the
University of Arkansas

 football program
was high entering 2012.

#1 In two previous seasons the Razorbacks had tallied 21 victories.
Ticket sales and donations had hit record levels, enabling the UA to
push forward with construction a $40 million football
operations center

.

Quarterback Tyler Wilson and running back Knile Davis passed on the

NFL Draft

 and were recognized nationally as potential
Heisman Trophy

 candidates. Wilson and Davis were among 17 starters set to return for
the Razorbacks as they chased a Southeastern Conference championship and
national title.

Hopes weren’t high just locally. National pundits projected
2012 as the year Arkansas would win it all. There was no doubt as 2012
dawned that the year would be a memorable one for the Razorback football
program.

And it was.

Bobby Petrino

, the man regarded as the architect of the
Razorbacks’ success, was fired after four seasons for “a
pattern of misleading and manipulative behavior” after it was
revealed he had hired an
extramarital
  
adj.
Being in violation of marriage vows; adulterous:


Adjective
 girlfriend to a position on the
football staff. Jessica Dorrell, 25, was with Petrino during an April 1
motorcycle accident, and until a police report was released four days
after the crash, the coach had not acknowledged, not even to his bosses,
that she was with him.

Arkansas
Athletic Director

 
Jeff Long

 fired Petrino with cause.
Petrino, who made $3.56 million annually, lost his salary and forfeited
an $18 million contract buyout.

Even in the immediate aftermath of the firing, optimism was high
for Arkansas.
Las Vegas
 , city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States.
 oddsmakers still considered them a national
title favorite, keeping their odds to win it all at 15:1 even after the
hiring of John L. Smith as interim coach.

Hiring Smith, a former Razorback assistant under Petrino, was
supposed to provide much-needed stability. Players loved his
freewheeling attitude. All but one of the staff’s assistant coaches
were familiar with Smith.

Ultimately, though, the season wound up in the ditch right along
with Petrino’s motorcycle and his career.

Smith rarely seemed to be in control of the team as the Razorbacks
finished 4-8. His performances in press conferences were bizarre and
invited national ridicule.

Making matters worse for Arkansas was a $40 million bankruptcy
filing by Smith during the season. Failed real estate deals in Kentucky
caught up with the interim coach, who insisted the financial troubles
weren’t impacting the product on the field.

Long and the UA were left defending not only the decision to hire
Smith, but their willingness to defer more than 70 percent of his salary
until after he finished coaching the team. Creditors argued at a
bankruptcy hearing during the season that Smith was trying to hide money
that should be theirs.

Injuries, losses and unfavorable headlines piled up by the week.

There were few highlights to 2012 when it came to Razorback
football. Long did manage to lure
Bret Bielema

 from Wisconsin as head
coach. It was a hire that suggested the program might one day return to
the success enjoyed in Petrino’s final two seasons.

But that’s in the future.
In the meantime

, no
Razorback-watcher is going to forget 2012.

Health Care Industry in Transition

#2 As U.S. House Speaker John Boehner famously noted after the
re-election of President Barack Obama, “Obamacare is the law of the
land.” Now, a Republican-dominated Arkansas Legislature must deal
with that fact.

The president’s re-election coupled with the U.S. Supreme
Court’s June ruling that upheld most of the Patient Protection
& Affordable Care Act puts much of the burden of implementing the
new health care system on the state’s General Assembly.

Obamacare, approved in 2010, seeks to extend health insurance to
about 30 million Americans who don’t currently have coverage. Many
in the middle class are to get government subsidies to help them buy
private insurance. Low-income Americans would be added to Medicaid, but
the Supreme Court allows states to choose whether they want to expand
their Medicaid programs. That has been something Arkansas Republican
lawmakers have been reluctant to do, while Gov.
Mike Beebe

 and his
fellow Arkansas Democrats have supported expansion.

In January, it will be up to the Legislature to decide whether
Arkansas will expand Medicaid to about 250,000 additional low-income
Arkansans, which would bring an estimated $800 million more federal
dollars into the state every year.

The effects of the implementation of Obamacare, which includes
cost-containment and other measures designed to encourage efficiency,
trickle down into almost every aspect of health care in Arkansas. Health
care providers–from nursing homes to hospitals to individual
physicians–have been trying to figure out how best to deal with those
effects.

In many cases, the result has been consolidation in the health care
industry, and the announcements started early and came often in 2012.

In January,
St. Vincent Health

 System of Little Rock bought Heart
Clinic Arkansas, the state’s largest cardiology group with 29
doctors, and Baptist Health and Arkansas Cardiology partnered to form
Baptist Health Heart Institute. Arkansas Heart Hospital of Little Rock
said it would open a cardiology clinic on the campus of Saline Memorial
Hospital and provide the Benton hospital 24/7 coverage for emergency
heart care needs.

In April, Capella Healthcare of Franklin, Tenn., which owns
National Park Medical Center in Hot Springs, announced plans to buy
Mercy Hot Springs, formerly St. Joseph’s
Mercy Health System

.

And in late August, St. Vincent and the
University of Arkansas for
Medical Sciences

 announced that they were studying an
“affiliation” that would allow them “to deliver
collaborative and/or
integrated services

.”

Wal-Mart Hits 50 Years While Under Scrutiny

2012 should have been a banner year for Wal-Mart Stores Inc.

#3 At the beginning of the year, the Bentonville retail chain was
preparing to celebrate its 50th anniversary in business. It has grown
from a 35,000-SF store in Rogers to a retail empire that spans the globe
and generated $446.95 billion in revenue and $15.7 billion in income for
its fiscal year that ended Jan. 31.

But a bombshell report from The
New York
 Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 Times in April took some
of the shine off the company’s July milestone. The story alleged
that Wal-Mart’s Mexico division paid millions of dollars in bribes
to grease the skids for store openings. Making matters worse, the paper
reported, high-level executives knew about the allegations but took no
action to notify authorities.

Shareholders sued Wal-Mart’s board over the allegations that
the company had violated the U.S.
Foreign Corrupt Practices Act
 
.

Michael Duke, Wal-Mart’s president and
CEO

, addressed the
issue at the company’s shareholder meeting/anniversary celebration.

“We’ve all heard the recent allegations about the
company,” he said. “Let me be clear: Wal-Mart is committed to
compliance and integrity everywhere we operate. I want to personally
assure you, we’re doing everything we can to get to the bottom of
this matter.”

But the issue didn’t go away. In November, Wal-Mart announced
in a Securities & Exchange Commission filing that investigations
into alleged violations of the U.S. Foreign Corrupt Practices Act had
expanded to other foreign markets, including Brazil, China and India.
And Wal-Mart has already spent $99 million related to the investigation.
The final bill, though, could be much higher, it said in the filing.

Meanwhile, Wal-Mart faced worker unrest in the
United States
 officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world’s third largest country in population and the fourth largest country in area.
. The
union-backed OUR Walmart, or Organization United for Respect at Walmart,
which was formed in 2010 to promote better working conditions for the
1.3 million U.S. Wal-Mart employees, planned a number of walkouts on the
day after Thanksgiving, traditionally the busiest shopping day for
retailers. OUR Walmart said it wants more full-time positions with
routine schedules rather than unpredictable part-time positions.

Wal-Mart was concerned about the threat because about 90 workers
walked off the job in Dallas, Oakland, Calif., and Seattle in October
and others left their positions in early November.

Before
Black Friday
 Sept. 24, 1869, in U.S. history, day of financial panic. In 1869 a small group of American financial speculators, including Jay Gould and James Fisk, sought the support of federal officials of the Grant administration in a drive to corner the gold
, Wal-Mart filed with the National Labor
Relations Board an
unfair labor practice
 received little protection from the law.
 complaint against the United
Food & Commercial Workers International Union, saying the
demonstrations threatened to hurt the retailer’s business. In the
end, Wal-Mart said, there were only “a few dozen protests” on
the day after Thanksgiving.

“We had our best Black Friday ever and OUR Walmart was unable
to recruit more than a small number of associates to participate in
these made for TV events,” Wal-Mart said in a statement.

Murphy Oil

 Shakes Up, Spins Off

#4 El Dorado’s Murphy Oil Corp. experienced a couple of
milestones in 2012, as the company changed its top leadership and
announced plans to spin off its highly lucrative retail arm.

The retail arm consists of Murphy Oil USA Inc., the widespread gas
stations and convenience kiosks traditionally attached to Wal-Mart
supercenters. The company had about 1,100 kiosks at Wal-Mart stores and
an additional 140 stand-alone units in 2012.

In January, then-CEO David Wood said the company was considering
spinning off Murphy USA to “unlock” its value, claiming that
it was “unrealized within the current corporate structure.”

At a May shareholder meeting, Wood said Murphy USA was a
“premium business” and was experiencing “tremendous
growth,” but left out any details of the spinoff.

A month later, Wood unexpectedly retired and was immediately
replaced by Steve Cosse, a director who previously was executive vice
president and general counsel. The company stayed quiet about the
spinoff for the next few months.

The issue returned in force in October when a New York
hedge fund
 in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds “hedge” by offsetting “short” positions (borrowing a security and then selling it at a higher price before repaying the lender) against “long”
,
Third Point
LLC

, gave Murphy a bit of an ultimatum. The $9.3 billion
hedge fund claimed it had a “significant stake” in Murphy Oil
and had sought approval to increase its position “should we so
desire.”

In its letter to Murphy investors, Third Point quoted lyrics to
songs by
Boyz II Men

 and rapper Tupac Shakur while simultaneously
recommending “four easy steps” Murphy needed to follow to
increase its share value from about $50 to about $90.

The hedge fund’s first major piece of advice was to spin off
Murphy USA.

Sure enough, later that month, Murphy Oil announced that the
spinoff was happening. The new company would be independent and
separately traded, similar to its 1996 spinoff of Deltic Timber Corp.
Murphy Oil said its board had authorized a special dividend of $2.50 per
share for a total dividend of about $500 million and a share buyback
program of up to $1 billion of the company’s shares of common
stock.

The spinoff was slated to be complete “by 2013,” company
officials said at the time. After the spinoff, Murphy USA would comprise
the gasoline kiosk network as well as seven product distribution
terminals and two ethanol production facilities in North Dakota and
Texas.

Murphy Oil Corp. will focus entirely on exploration and production
with activities focused in the U.S., Canada and Malaysia.

At the end of 2012, the company still had not announced who would
lead the new Murphy USA, and its stock value was hovering around $60 per
share.

USA Drug Sold

#5 The pharmacy chain owned by media-shy Stephen LaFrance Sr.,
mainly branded as USA Drug, made plenty of headlines in 2012, primarily
when it was sold to drugstore giant Walgreen Co, in September for $428
million.

The purchase of the 144-store chain and private label SAJ
Distributors from Stephen L. LaFrance Holdings Inc. deprived Arkansas of
one of its largest private companies. LaFrance had revenue of $825
million in 2011, Walgreen said at the time the acquisition was
announced.

The deal also prompted Walgreen to reduce redundancy by closing 76
drugstores across LaFrance’s seven-state footprint, including 27
USA Drug stores in Arkansas. But rather than limiting consumer choice,
the deal energized smaller operators who no longer had to compete with
two big chains.

“What you’re going to see in the next six months are some
independent pharmacies opening up,” said Terry Perkins, owner of
Oak Grove Pharmacy in North Little Rock. “The public will really
benefit from it.”

In November, Walgreen turned around and sold SAT Distributors to
L&R Distributors Inc. of Brooklyn, N.Y., for an undisclosed price.
L&R planned to operate the SAT Distribution Center and offices in
Pine Bluff under the SAJ name and retain “many existing SAJ staff
who work in customer service, accounting, purchasing and
operations.”

The sale of the USA Drug chain was announced days before a former
executive, Garret Sorensen, was sentenced to 33 months in federal
prison.

After maintaining his innocence for three years, Sorensen had
pleaded guilty in May to
money laundering

 and mail fraud in exchange for
the dismissal of all charges against his wife and her sister.

The three had operated a side business that collected commissions
for advertising inserts that USA Drug placed in newspapers, and
prosecutors said the business was kept secret from the LaFrance family
while Sorensen’s defense team suggested that at least one of
Stephen LaFrance’s sons knew and approved of the arrangement.

Sorensen was originally scheduled to report to prison on Dec. 3,
but he was granted additional time–until Feb. 4–to complete some jobs
as a flooring contractor.

GOP Takes Control

#6 While Democrats retained the White House and made gains in the
U.S. House and Senate, the November 2012 General Election in Arkansas
was historic and
antithetical
   also an·ti·thet·ic
adj.
1. Of, relating to, or marked by antithesis.

2. Being in diametrical opposition. See Synonyms at opposite.
 to national trends. Most notably, Arkansas
Republicans won majorities in both the state House and Senate for the
first time in 138 years, and the election of Tom Cotton from the 4th
Congressional District gave the state a solidly Republican delegation in
the U.S. House.

It took a recount in House District 52 in northeast Arkansas to
confirm the GOP dominance. The 45-vote margin by which John K. Hutchison
defeated L.J. Bryant gave Republicans the slimmest of majorities in the
state house, 51 of 100 seats. Also in January, Republicans will serve in
21 of the state Senate’s 35 seats.

On Nov. 6, 11 Republicans won in a total of 18 Arkansas Senate
races, and 30 Republicans won in a total of 54 state House races.

As part of the transition to Republican leadership, during election
week, the Arkansas Senate elected Republican Sen. Michael Lamoureux as
its next president.

In addition, nine days after the election, Republican state Rep.
Davy Carter of Cabot was elected Speaker of the House. Carter’s win
was a surprise because Rep. Terry Rice, R-Waldron, was the presumed
speaker if Republicans took control of the chamber. But backing from
House Democrats and a handful of Republican defections changed the story
line.

Despite the Republican fervor across much of the state, Arkansans
didn’t blindly favor GOP members just because they were
Republicans. Democratic rivals defeated Republican candidates Rep. Loy
Mauch, Rep. Jon Hubbard and Charlie Fuqua in House races. All three men
had been criticized for making controversial statements. Mauch called
Abraham Lincoln a “war criminal.” Hubbard said slavery had
been a “blessing in disguise” for African-Americans. And Fuqua
suggested that American Muslims should be deported.

Dillard’s Continues Strong Showing

#7 In 2011, Dillard’s Inc. landed on Arkansas Business’
list of top 10 business stories for its dazzling performance. The Little
Rock retail chain didn’t slow down in 2012.

Its stock price opened at $45.81 on Jan. 3, 2012, and reached an
all-time high of $89.42 during the day on Nov. 29. It closed on Dec. 19
at $83.75, an increase of 82.8 percent since the beginning of the year.
As a comparison, the Standard & Poor’s 500 index rose only 12.5
percent during that period, and the S&P’s 500 Department Stores
Index as reported by Bloomberg.com noted a 1.4 percent uptick.

In 2012, Dillard’s made moves to expand its online reach by
investing $4 million in the e-ecommerce company Acumen Brands of
Fayetteville. Dillard’s also opened in September a 852,000-SF
Internet fulfillment center in Maumelle to support the growth of its
online sales, which Dillard’s doesn’t separate in its filings.
Dillard’s also operates a 285,000-SF center in Nashville, Tenn.

In the fall, Dillard’s announced it was building three stores.
The stores won’t open until the fall of 2014, but they will be the
first new stores for Dillard’s since early 2010.

“We’re just seeing more opportunities for construction
than we have in the past couple of years,” said Dillard’s
spokeswoman Julie Bull.

Dillard’s sales soared for the 39-week period that ended Oct.
27. Same-store sales, a key metric for retail analysts because they
measure sales at stores open at least a year, were up 4 percent during
that period.
Net sales

 for the three quarters that ended Oct. 27 were
$4.49 billion, up 4 percent from the same period in 2011. The
chain’s net income for the first three fiscal quarters dropped to
$174.5 million, down from $322.4 million a year earlier–a figure that
was plumped up by one-time items that included the sale of two former
retail locations and a tax benefit.

Still, Dillard’s announced in November that it would pay a
one-time cash dividend of $5 per share before the end of 2012, which
would allow investors to avoid higher taxes if “fiscal cliff”
tax hikes go into effect on Jan. 1, 2013. The fiscal cliff includes
automatic tax increases and cuts in government spending.

Dillard’s $5 dividend was the highest in the company’s
history. With 47.25 million shares outstanding as of Nov. 24, that comes
to $236.25 million for shareholders.

The special dividend will amount to more than $35 million for
members of the Dillard family, who own more than 7 million shares of the
company.

William Dillard II, the CEO of Dillard’s, told investors at
the annual shareholders’ meeting in May that the company was in
“good shape.”

“We have done a good job in the last 18 months,” he said.

Real Estate Fallout Continues

#8 The procession of real estate transactions driven by financial
travails remained in motion during 2012–four years after the bubble
burst. In many cases, a lender’s bad loan was transformed into
someone else’s bargain.

The most eye-catching was Joe Whisenhunt’s $19 million cash
deal for 375 acres of prime improved real estate in Benton County.

The Arkansas developer picked up land mostly in the famed
Billion-Dollar Mile along Interstate 540 in Rogers through a series of
transactions with affiliates of
Bank of America

Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world.
.

The property was associated with bad loans totaling $80 million to
three northwest Arkansas development groups led by Bill Schwyhart,
Charles Reaves and Gary Brandon.

The sell-off of Gene Cauley’s once extensive real estate
portfolio also continued. Among the 2012 highlights was the sale of four
Little Rock properties.

Two parts Of the Bowman Plaza office-warehouse project at 4700 Col.
Glenn Road, totaling 175,000 SF, were sold out of court-appointed
receivership for nearly $10.2 million to a local investment group.

Pavilion in the Park, an 82,000-SF office-retail project, was sold
for $4.2 million to a local investment group.

A 572,800-SF industrial facility at 7400 Scott Hamilton Drive was
sold for $2.4 million to Goodwill Industries of Arkansas Inc.

During 2012, Cauley was hit with an
IRS

 lien of $2.3 million for
outstanding taxes owed from 2007. It added to the $8.7 million Cauley
owes on court-ordered restitution to clients he bilked, a crime that
cost his law license and sent him to federal prison.

Developer Bruce Burrow of Jonesboro filed for Chapter 11 bankruptcy
protection, listing $17.27 million in debts and $14.1 million in assets.
The move followed a growing line of bankers seeking money on outstanding
real estate-related loans.

In
tangential
   also tan·gen·tal
adj.
1. Of, relating to, or moving along or in the direction of a tangent.

2. Merely touching or slightly connected.

3.
 matters, a $96 million deal was struck to sell The
Mall at Turtle Creek, a 760,000-SF retail center in Jonesboro. The buyer
to be is Rouse Properties Inc., a New York real estate investment trust.

The deal freed up cash for its owners, which included Burrow and
Belz Enterprises of Memphis.

Belz also put a deal in motion to free up yet more cash by selling
the 18-story Peabody Little Rock. The prospective buyer of the 418-room
and 22-suite hotel in downtown Little Rock is Fairwood Capital LLC of
Memphis.

Banks Make More Deals Out of State

#9 The stream of bank closings and attendant FDIC-assisted
acquisitions slowed considerably during 2012. Regulators closed 51
lenders across the nation through mid-December compared with 92 in 2011.

Arkansas financial concerns played the role of buyer in three of
those transactions as well as four conventional buys that were completed
or announced during the year.

Simmons First National Bank of Pine Bluff expanded its Missouri
holdings with FDIC-assisted purchases of Truman Bank of St. Louis in
September and Excel Bank of Sedalia, Mo., in October. The Truman
transaction closed at a $20.9 million discount for assets of $282
million, while the Excel deal was recorded at a $21 million discount for
assets of $201 million.

The deals represented the third and fourth FDIC-assisted buys for
Simmons since the conveyor belt of bank failures began moving in 2008.

In November, Centennial Bank of Conway bought Heritage Bank of
Florida, based in the northern Tampa suburb of Lutz. The bank’s
seventh FDIC-assisted deal included $194 million in assets plus a cash
settlement. Centennial Bank also took over performing loans of $158
million and deposits of $223 million.

Centennial’s parent company, Home BancShares Inc., completed a
semi-conventional purchase of Premier Bank, with total assets of $282
million and six locations in Tallahassee and one in Quincy, Fla.

The $1.4 million cash deal, completed this month, was struck as
Premier Bank declared bankruptcy one step ahead of a regulatory
takeover.

In February, Home BancShares completed the $27.9 million purchase
of 17 Vision Bank locations in southern Alabama and the Florida
Panhandle from Park National Corp. The conventional transaction was part
of a deal that included $354 million in loans on $520 million in
deposits.

In October, Little Rock’s Bank of the Ozarks Inc. struck a
conventional $27.3 million stock/cash combo deal to buy Genala Banc Inc.

GBI

 owns the $170 million-asset Citizens Bank, a single-location
operation in
Geneva
 , Fr. Genève, canton (1990 pop. 373,019), 109 sq mi (282 sq km), SW Switzerland, surrounding the southwest tip of the Lake of Geneva.
, Ala., on the Florida border about 80 miles north of
Panama City, Fla.

In June, Arvest Bank of Fayetteville completed the purchase of the
financially challenged Union Bank of Kansas City, Mo. The $456
million-asset lender recorded losses of $15.6 million in 2011, $23.5
million in 2010, $20.8 million in 2009 and $4.1 million in 2008. Arvest
also announced the purchase 29 bank branches in four states (including
nine in Arkansas) from Bank of America Corp.

Manufacturing: Up, Down and All Around

#10 The state’s manufacturing sector experienced changes both
sour and sweet this year, with heavy job losses and a few replacements.

On the sweet side, Schulze & Burch Biscuit Co. of Chicago
announced in January that it would resurrect Yarnell’s Ice Cream
Co. of Searcy. The venerable
ice cream maker

 closed suddenly in June
2011. The company cited a difficult dessert industry as the main reason
for its sudden closure. Yarnell’s assets, including its recipes and
its factory in Searcy, were auctioned off.

Schulze & Burch, which already had a factory in Searcy, bought
Yarnell’s assets at auction in December 2011 for $1.3 million. By
April 2012, the factory was operational, some lost jobs were restored
and Yarnell’s ice cream was back in Arkansas grocery store
freezers.

On the
sour side

, the shut-down of Fort Smith’s Whirlpool
Corp. plant cost west Arkansas more than 900 jobs. The Benton Harbor,
Mich., appliance company announced the plant’s closure in October
2011–part of a companywide layoff of about 5,000 workers–and the 1.2
million-SF facility finally shut its doors in June 2012.

City officials remained optimistic after the closure. Whirlpool
reported in September 2012 that Infinity Asset Solutions Inc. of Canada
had made an unspecified offer on the shuttered plant. Unfortunately, in
late November, officials revealed that the deal was dead for unclear
reasons. At the end of the year, a replacement for the huge plant had
still not been found.

However, Walther Arms Inc., a firearm manufacturer, announced in
November that it would locate its U.S. headquarters to Fort Smith’s
Chafee Crossing. The company will hold a joint facility with Umarex USA,
which makes sporting and replica air guns. Both companies said they
expected to create 70 to 120 new jobs during the next five years.

In October, Florida-based NextLife Enterprises LLC announced that
it would hire 350 workers at the new headquarters for its NextLife Asset
Recovery Services subsidiary in Rogers. NextLife makes plastic resins
from recycled materials for a wide variety of applications, including
consumer and commercial products.

More bad manufacturing news came when Hawker Beechcraft Corp. of
Wichita, Kan., announced in November it was closing its Hawker
Beechcraft Services facility in Little Rock.

The closure was related to the company’s post-Chapter 11
bankruptcy assessment. About 240 workers among Little Rock, Mesa, Ariz.,
and San Antonio lost their jobs as a result of the closure. Another 170
were also laid off at the Little Rock Completions Center and the
company’s headquarters in Wichita.

The closure occurred after a $1.79 billion Superior Aviation
Beijing Co. Ltd. takeover of Hawker was scrapped.

By Arkansas Business Staff

GMoritz@
ABPG

ABPG Advanced Base Proving Ground
.com