Top Ten Business News Stories of 2005

1. National Spotlight on Arkansas

Little Rock may not be "the new Santa Fe," but Arkansas and its capital city did seem to suddenly spring into the nation's consciousness in 2005.

The renewed interest was largely but not entirely due to the opening of the Clinton Presidential Library in late 2004. Other attention getters in 2005:

• The rediscovery in the Big Woods near Brinkley of the ivory-billed woodpecker that had long been believed extinct;

• Gov. Mike Huckabee's ascension to the chairmanship of the National Governors Association, along with his flirtation with presidential politics and the release of his book of weight-loss advice;

• North Little Rock boxer Jermain Taylor, who defeated Bernard Hopkins to become undisputed middleweight champion of the world — a title he defended in a rematch in December; and

• The cultural gems of the Alotian Club, financier Warren Stephens' private golf playground west of Little Rock, which was named the best new course by Golf Digest; Crystal Bridges, Wal-Mart heir Alice Walton's art museum to be built at Bentonville; and Disfarmer, the Heber Springs photographer whose original prints inspired a buying spree by New York art galleries.

The Clinton Library opened on Nov. 18, 2004, and immediately began to outpace attendance projections. By its first anniversary, the goal of 300,000 visitors — which many local observers thought overly optimistic — was a distant memory and 500,000 was in sight. The number of out-of-state motor coaches that visited the library in its first year topped 500, more than double a projection by the Little Rock Convention & Visitors Bureau.

Those visitors, from every state and many foreign countries, were a godsend to the hospitality industry. Through September, hotel room revenue in Little Rock was up 22 percent from the same period in 2004, and the number of room-nights sold was up 15 percent. Convention bookings were brisk in 2005 and are looking even better for 2006.

What drove the pilgrimages to Little Rock? Publicity. The LRCVB even published a tabloid-sized book of major Little Rock travel stories from the Chicago Tribune, Houston Chronicle, New York Times, Philadelphia Inquirer and more than a dozen other publications.

At least as exciting to the birding segment of America was the news, splashed on National Public Radio on April 28, that the ivory-billed woodpecker — believed extinct since the mid-1940s — had been seen multiple times in the Big Woods of Arkansas near Brinkley.

The bird — or birds — had been spotted by several witnesses in early 2004, and one of them, M. David Luneau Jr., an associate professor of electronics and computers at the University of Arkansas at Little Rock, managed to capture a glimpse of the giant bird on videotape.

Doubters quickly came forward, but their suspicions were laid to rest by new sound recordings of ivory-billed woodpeckers calling to one another.

Environmentalists who fought to preserve the Cache River pronounced the discovery evidence of the nobility of their purpose and promptly began citing the bird in an unsuccessful attempt to renew their legal battle against the Grand Prairie Demonstration Project, an ambitious irrigation plan that would channel water away from the White River.

Meanwhile, state boosters saw dollar signs in the inevitable interest by the nation's bird-watchers — a generally affluent, desirable segment of tourists.

Unlike the Clinton Library and the woodpecker, Jermain Taylor has thus far been a drain on the state's economy, with fight fans spending thousands to travel to Las Vegas for one or both of the hometown boy's championship matches with Hopkins. But a possible fight at the Alltel Arena could draw some of those dollars back into Arkansas, where Gov. Huckabee — looking nearly as fit as the champ — and his boxing-fan wife Janet would surely be at ringside.

The formerly rotund governor released in May a self-help book on weight loss and fitness, "Quit Digging Your Grave with a Knife and Fork." His promotional tour for the book began to run together with visits to early presidential primary states, and his name began showing up on lists of likely Republican contenders for 2008.

In December, prestigious Golf Digest magazine named Alotian as the best new golf course in the country, with Blessings, poultry magnate Johnny Tyson's private course at Johnson, also making the top 10.

Crystal Bridges, the $50 million Walton-backed museum, is also costing the state dollars. For one thing, it won from the state Legislature an unusual exemption from the state sales tax on paintings acquired for its collection. Alice Walton spent an estimated $35 million on just one of those paintings, Asher B. Durand's "Kindred Spirits." (It's also speculated that Walton was the winner of a Gilbert Stuart portrait of George Washington that sold at auction Nov. 30 for $8.1 million.)

New Yorkers may regret the loss to Arkansas of "Kindred Spirits," which The Wall Street Journal called "a quintessentially New York picture." Arkansans didn't seem to mind so much the loss to New York of thousands of original prints by the eccentric Heber Springs portrait photographer who called himself Disfarmer. Locals were paid up to $800 for the postcard-sized prints, which two New York galleries were offering for sale this fall at prices up to $30,000.

2. Katrina and Her Aftermath

The history books will probably say Hurricane Katrina hit Louisiana, Mississippi, Alabama and the Florida panhandle.

But folks in Arkansas know it also had a major effect here.

The massive storm that landed on the central Gulf Coast on Aug. 29 was one of the strongest ever recorded and the most costly natural disaster of all time. Estimates of the damages run between $100 billion and $200 billion. Nearly 1,400 were killed.

More than a million people were left without homes over some 90,000 squares miles.

Challenger Gray & Christmas, the outplacement firm, said in a news release, "Katrina resulted in immediate unemployment for hundreds of thousands of Americans. An epic migration not seen since 'The Grapes of Wrath' forced many cities and states to absorb displaced workers into their economies."

Four months after the storm hit, some of the 5 million who were without power from the storm are still without it.

Arkansas stepped up to the task of finding places for evacuees to stay. At one point more than 60,000 who had fled Katrina were housed in the state at old military posts, church camps, hotels and private homes. Some are still here, given a reprieve to continue to stay in hotels; some have decided to remain in Arkansas.

One of the most immediate effects of the hurricane was an increase in the price of gasoline.

Although gas prices were already headed up because of the increasing demand during the summer, the storm forced the closure of several large refineries and disrupted supplies. At one point, gasoline rose to more than $3 a gallon for regular unleaded and some predicted it would reach $5 or even higher. There were suspicions of gouging, not helped by record oil company profits in the third quarter.

While Murphy Oil Corp. of El Dorado reported excellent profits, it also was a casualty of the hurricane. Its refinery at Meraux, southeast of New Orleans, was flooded out and is not expected to be up and running before April, which will have an impact on earnings for the final quarter of this year and the first quarter of 2006.

Even worse is that the storm caused a storage tank at the site to leak more than 1 million gallons of crude oil into the surrounding area. That forced a massive cleanup operation that is still going on, and it also resulted in a class-action lawsuit.

Although the company said it's difficult to predict the impact of the damages to Murphy, it believes it will weather the storm. In a filing with the Securities & Exchange Commission, Murphy said, "The company believes that insurance coverage exists for this release and the lawsuits, and the ultimate costs for cleanup of the site and resolution of the class-action lawsuits will not have a material adverse effect on its net income, financial condition or liquidity in a future period."

The parent company of the state's largest utility, Entergy Arkansas, has had its work cut out for it.

Entergy Corp., based in New Orleans before the storm hit and now operating out of Clinton, Miss., said the cost to repair damage from Katrina and Hurricane Rita, which also hit Entergy's operating area, is somewhere between $1.1 billion and $1.4 billion, the largest cost an investor-owned utility has ever faced.

One of its subsidiaries, Entergy New Orleans, has already filed for Chapter 11 bankruptcy protection. The company has asked Congress for $500 million to help restore power to the Gulf Coast.

The financial impact of the hurricanes on Entergy Arkansas isn't clear, but most expect it to be negligible.

All the rebuilding that has started and will continue for the next several years along the Gulf Coast has had a widespread effect on construction materials. Simple supply and demand economics made for a situation of higher cost and reduced supply.

Although the cost of some construction materials, such as concrete, drywall and lumber, has leveled off, the cost of transporting those materials still added to the price of new construction. With high diesel prices, transportation companies simply passed the costs along to customers by way of a fuel surcharge.

The storm also disrupted the agriculture economy that ships so much of its products down the Mississippi River through New Orleans. The use of the port there was restricted and the storm also aggravated an existing shortage of barges.

Jack Long, general manager of the Little Rock operations of Logistic Services Inc., said at one point that barge traffic dropped by two-thirds in Little Rock. Besides grain, shipments of steel from the Nucor plant in northeast Arkansas were disrupted.

Not all the news was bad. Along with large numbers of Arkansans who headed south to offer humanitarian help, there are others who will find work. Some Arkansas construction companies see potential profits in the rebuilding that will take place over the next few years.

(For more stories on Hurrican Katrina, click here.)

3. Alltel Spins Off Wireline Operations

After more than $7 billion in acquisitions and the announced spinoff and merger of its local telephone business, Little Rock's Alltel Corp. will end 2005 in the same place it ended 2004: amid rumors it is going to be bought.

Many analysts believe a trimmed Alltel focused solely on its wireless business makes an even more attractive acquisition target than before its past year of wheeling and dealing.

Alltel began its yearlong shopping spree in January with a $48.3 million deal to buy Alabama and Georgia wireless assets from Public Service Cellular Inc. of Reynolds, Ga.

It would be the smallest of Alltel's 2005 acquisitions and was immediately shadowed by a much larger deal. Only days after the PSC deal, Alltel struck a $6.5 billion deal for Western Wireless Corp. of Bellevue, Wash.

The deal, which did not close until August, moved Alltel from sixth on the list of the country's largest wireless carriers to fifth and expanded its wireless operations into nine new states with an additional 1.4 million wireless customers.

Under the cash-and-stock deal, Alltel paid about $4.4 billion and picked up $2.1 billion of Western's debt. Alltel also assumed control of Western's international operations, which it never had any intention of running. Those assets, some of which have been sold or have deals pending, will reduce the cost of the Western deal by more than $2 billion.

Before Alltel made its next purchase, the company sold in April its stake in Fidelity National Financial Inc. of Jacksonville, Fla. The former Alltel unit, previously called Alltel Information Services, fetched about $350 million from Goldman Sachs.

Also in April, Alltel completed its $170 million purchase of Cingular Wireless assets, which were divested for Cingular's AT&T Wireless acquisition, in Oklahoma, Texas, Kentucky, Connecticut and Mississippi.

In September Alltel picked up two rural service area markets in Idaho along with $50 million from U.S. Cellular of Chicago in exchange for some Western assets Alltel was required to divest.

As it happens, U.S. Cellular plays the lead role in the latest round of Alltel acquisition rumors — rumors that picked up after Alltel announced on Dec. 9 the spinoff of its wireline operations with Valor Communications of Irving, Texas.

Alltel's plan to separate its wireline division from its growing wireless business was supposed to put the company in a better position to make more wireless acquisitions. But before a wireline deal was even struck, Alltel reached for its checkbook once again.

In November Alltel struck a $1.08 billion deal for rural wireless carrier Midwest Wireless, which has more than 400,000 customers in Minnesota, Iowa and Wisconsin in markets that are contiguous to current Alltel operations.

The deal is set to close in the first half of 2006 — around the same time Alltel could finalize the wireline deal, which was announced earlier this month.

The tax-free, $9.1 billion deal, which still needs regulatory and shareholder approval, would make Alltel a pure wireless company with 11 million customers. It also would create a new publicly traded wireline company headquartered in central Arkansas.

Under the deal, Alltel shareholders would own 85 percent of the still unnamed wireline company, which will have revenue of about $3.4 million, carry debt of about $5.4 billion and serve 3.4 million customers in 16 states.

The other company, the wireless Alltel that passed most of its debt onto the wireline unit, will now perhaps more than ever make the wish list of the country's four larger wireless carriers.

4. 'Any Willing Provider' Becomes Law

For 10 years Arkansas Blue Cross & Blue Shield fought the Patient Protection Act of 1995, the "any willing provider" law.

But the fight came to an end in June when the 8th U.S. Circuit Court of Appeals upheld most of the act, resulting in the shakeup of Arkansas' insurance industry. Under the law, providers that are willing to accept the same terms as contracted providers cannot be excluded from an insurance company's network.

Self-insured plans, though, were excluded from AWP and could continue using a restricted network.

When the injunction was lifted, ABCBS spokeswoman Max Heuer said, "Obviously we're disappointed. The whole reason we've been opposed to the concept is we believe it eliminates choices [among health plans] for consumers."

Since the court decision, insurance carriers statewide faced an onslaught of applications from willing providers. Hospitals and doctors that had been shut out of the ABCBS network have eagerly jumped on board, as ABCBS has traditionally paid higher rates than also-rans UnitedHealthcare and QCA Health Plan Inc. of Little Rock.

ABCBS, the state's dominant insurance carrier, received more than 1,900 new applications from providers that wanted to be in its network last year, the majority of which have been received since the June ruling. ABCBS implemented the law on Oct. 1.

St. Vincent Health System leaped at the opportunity to join the ABCBS network as soon as AWP made it possible. Baptist Health of Little Rock, the state's largest hospital system and ABCBS's partner in the Health Advantage HMO, became an in-network provider for the more than 160,000 Arkansans insured by UnitedHealthcare. Baptist also has contracts with Cigna and Aetna.

But some doctors and hospitals found that ABCBS' method for complying with AWP wasn't what they expected.

In addition to a lower reimbursement rate for doctors, ABCBS told hospitals across the state that their reimbursement rates will depend on how many beds they have rather than their geographic regions. As a result, smaller hospitals — including some specialty hospitals — will receive lower payments than larger hospitals.

"We believe the law says there has to be one standard of reimbursement statewide," ABCBS spokeswoman Heuer said in August.

Heuer said ABCBS wasn't trying to avoid complying with AWP and providers are free to accept the terms of the contract or not.

AWP also caused some problems for other health insurance companies.

QCA has been trying to attract Baptist Health into its fold to compete with its larger rivals, such as ABCBS. But providers aren't required to join a network, and Baptist has little incentive to joint less lucrative networks when it already had access to most insured patients in the state.

So to land Baptist, QCA would have to pay better than ABCBS.

"We do not expect to get from someone who owns half of an HMO company better rates or even the same rates (as ABCBS)," Francis L. Browning, the CEO of QCA, said in December. "We just need to get close enough to be competitive. ... But my close and your close aren't exactly close."

5. Beverly Finds a Buyer

Beverly Enterprises Inc.'s rocky year ended with its announced sale for $1.59 billion to Fillmore Strategic Investors of San Francisco.

The Fort Smith nursing home chain started the year battling a hostile takeover by the investor group Formation Capital LLC of Alpharetta, Ga., which had offered to buy the company for $1.45 billion.

The takeover turned ugly when Beverly said the offer was not in the best interest of the company or its shareholders. Beverly then adopted a shareholder rights plan to guard against company takeovers.

Beverly CEO William Floyd also blasted Formation Capital for acting in bad faith in its attempt to take over the company.

"In short we believe your motives are to stampede us into some form of transaction that will enable your group to make a quick profit from your newly acquired stock," Floyd said in a letter to Formation in February. "We are not interested in playing a game that some would describe as 'green mail.'"

The fight reached a new level in March when the Long Term Care Resident Protection Act of 2005 was introduced in the Arkansas Legislature. The bill said its purpose was to protect the health and safety of residents in nursing homes. But Formation said the bill was an attempt to block the sale and sued the Arkansas Department of Human Services in an attempt to block the bill. Formation also said in the lawsuit that Beverly's board was wasting money lobbying for the bill that would be better spent on patients.

The bill was never passed and the lawsuit was dismissed. But Beverly responded to the hostile takeover attempt by putting itself on the auction block in March.

After more than 40 companies expressed interest in buying the company, Beverly announced that North American Senior Care Inc. of New York was the winner with a high bid of $13 a share. And Fort Smith economic boosters were thrilled too, because NASC promised to keep Beverly's headquarters in Fort Smith.

But legislators in Arkansas and other states where Beverly has nursing homes began grilling NASC over whether patients would receive the same quality of care as they did under Beverly.

In the end, it didn't matter. NASC couldn't come up with the funding.

In November, Beverly once again announced it had a new buyer. This time it was Fillmore Strategic Investors, which will pay $12.50 per share, or $1.59 billion.

Beverly had until Dec. 12 to change its mind if it found a better deal, but Beverly never did.

While the deal hasn't officially closed yet — that should happen by March — it already has Fort Smith economic boosters worried because Fillmore hasn't said it will keep Beverly's headquarters in Fort Smith. If Fillmore decides to leave town, it would be another body-blow to the local economy. Whirlpool Corp. of Benton Harbor, Mich., announced in December that it will lay off 730 of the 4,000 workers at its Fort Smith plant in October.

6. Fayetteville Shale in Play

Arkansas is still without an official lottery, but several thousand lucky mineral rights holders in the north-central part of the state did suddenly strike it rich this year.

In fact, the money was flowing so freely in certain Arkansas counties that White County Assessor Debra Lang said, "You'd think we were California and that this is the Gold Rush."

Forget about panhandling and precious metals; we're talking natural gas.

Action at the Fayetteville Shale Play, which is one of the country's largest known unconventional reserves of natural gas, was shoved into high gear this year by the combination of record-high gas prices and new technology for extracting gas from the enormous shale formations hidden 1,500-6,000 feet below the surface.

The Fayetteville Shale is said to be comparable to the Barnett Shale near Fort Worth, Texas, which produces about 2 percent of the country's daily output of gas.

Several big-money gas exploration companies have crowded into county assessors' offices in north-central Arkansas in search of mineral rights records.

"I've already had to replace a copy machine and put time limits on the computers. I mean, it was a mess," said Lang, who also had to enforce new traffic rules in the usually sleepy office.

Many have learned that owning the surface of the land doesn't necessarily translate into ownership of what lies beneath.

"When you buy land you either retain the minerals or you don't, or you might be buying land where somebody else already retained the minerals like 100 years ago," Lang said. "There's been a lot of joy and a lot of disappointment."

The spectrum of emotion is understandable considering that leases that once started at around $25 per acre have since soared as high as $400.

Bekki White, director of the Arkansas Geological Survey, said the leases are only the tip of the iceberg.

"The big money comes in royalties," she said.

Most of the gas exploration companies are also signing away 12-15 percent of the royalties on whatever gas is drilled on their property.

Once the Fayetteville Shale proved to be a producing formation, it didn't take long for the companies to move in and begin battling each other for leases.

The latest of the companies, Touchstone Resources USAZ Inc. of Houston, owns a 45 percent working interest in the joint operation with Bamco Gas LLC and Maverick Oil & Gas Inc. of Fort Lauderdale. The largest of the companies to invest so far is Southwestern Energy Corp. of Houston, which used to be headquartered in Fayetteville. Southwestern acquired about 645,000 acres and invested more than $20 million in the Fayetteville Shale Play during its first quarter.

Carlisle lawyer Jerry Kelly, who leased out 4,000 acres and still has 800 acres unleased, was as astonished by his run of luck as any other landowner.

"It just happened, man, just like the Lord blessed us," he said. "It's nothing short of a miracle."

7. Ballpark to Anchor North Little Rock

Sans the cornfield and ghostly voices, North Little Rock Mayor Patrick Hays saw his own personal field of dreams realized this year when the city's taxpayers agreed to help fund a shiny new riverfront baseball stadium for the Class AA Arkansas Travelers.

As it turns out, the ballpark could indeed end up being an economic driver for the once-fledgling north riverfront, as a slew of downtown development announcements quickly coincided with the decision to bring baseball to the north shore.

City officials announced plans for the ballpark in the summer of 2004 after Little Rock financier Warren Stephens donated 11 acres of land just east of the Broadway Bridge to use for the stadium.

Though excitement over the ballpark announcement was palpable, two things stood in the way of its realization: A commitment from the traditional, conservative Travs General Manager Bill Valentine and, of course, a way to pay for it.

Valentine told Arkansas Business in March he was committed to the idea of leaving broken-down, 74-year-old Ray Winder Field, and on Aug. 8, North Little Rock voters approved a two-year, 1 percent sales tax to fund the new stadium.

Valentine said the reality of the situation was that the old ballpark in midtown was not appealing to Major League Baseball and it could end up getting shunned by one of its franchises and left without a team to play there.

"There's no doubt we hate to say goodbye to the grand old ballpark," he said. "But there comes a time for everything when you have to make a decision to look to the future. It's now guaranteed that baseball will have a presence in central Arkansas for the next 50, 100 and hopefully more years."

Though the vote was closer than some had predicted, taxpayers agreed to bring the city's sales tax to 9 percent, one of the highest city taxes in the nation. It is expected to rake in about $32 million.

To sway voters, Hays promised that about $5 million of the tax would go toward improvements and additions to the city's popular senior citizens recreational and educational center, aptly named the Patrick Hays Senior Center, which opened in 2003.

The tax went into effect Oct. 1 and ends on Sept. 30, 2007.

Last month, Stephens joined city officials to break ground on the ballpark, to be named Dickey-Stephens Park. The name honors two pairs of baseball-loving brothers with strong ties to central Arkansas: businessmen Jack and Witt Stephens, founders of the Stephens family's many business ventures, and former Major Leaguers Bill and George Dickey, who worked with the Stephens brothers after their playing careers ended.

The stadium is expected to be finished in time for the Travs' April 5, 2007, season opener against the Springfield Cardinals.

Joining the new ballpark on the north shore will be a Maritime Museum that will be anchored by the USS Razorback submarine that is already situated on the riverfront. Also planned is a 22-acre complex that includes the ballpark and several new retail and residential developments.

Just down the street will be the $20 million, 260-unit apartment project called The Enclave at the Riverfront, which will stand at 201 Riverfront Drive where the Jackson Cookie factory once stood.

A condominium project called the Marina North will feature two nine-story buildings with a mix of retail and office space on the lower floors, while a 100-slip marina could also be in the works.

The Rye Fine Furniture building at Broadway and Maple sold for $1.95 million to make way for more revitalization.

8. Paper Industry in Flux

On paper, it hasn't been the best of times for the paper industry. The large paper companies have been restructuring to find the most profitable niches in a diverse industry.

Most had grown so large and diversified that they were being forced to refocus on their core business in a continuation of an ongoing process to strengthen shareholder value amid a glut of supply.

All year long there have been paper mills that were shuttered or mills put up for sale.

International Paper Co., seeing a more profitable future by moving more production overseas, announced in July that it was putting up for sale its 1,200-employee Pine Bluff mill. A buyer has yet to be found, so visions of selling it by the end of the first quarter of 2006 sound optimistic.

IP also said it wants to sell all or part of its 6.8 million acres of timberland, including about 700,000 acres in Arkansas. IP also wants to shed itself of its wood products business, which includes a sawmill at Leola that employs about 200.

In November, Koch Industries sent shockwaves throughout south Arkansas when it announced it was buying Georgia-Pacific Corp., the state's largest forest industry employer with some 4,000 workers in the state, for $21 billion. The month before, G-P said it would cut 1,100 jobs and idle four paper machines, though no plants in Arkansas were affected.

Also in November, Smurfit-Stone Container Corp. of Chicago, which employs about 670 at five Arkansas plants, said it would close some of its plants and possibly sell its consumer packaging business as part of a plan to reduce annual costs by $600 million by 2008. The company did not say which plants it might close or if any were in Arkansas.

Domtar Inc. of Montreal, whose paper mill at Ashdown employs nearly 1,200, said in November that it would cut 1,800 jobs and close or sell paper mills in Canada. None of cuts were in Arkansas, but the mill left 50 positions unfilled this year and another 30 or so will go unfilled in 2006.

In December, Weyerhaeuser Co. and Hood Packaging Corp. announced plans to close or sell plants in Arkansas and other locations.

Weyerhaeuser's plan includes closing the corrugated packaging plant at Little Rock and putting up for sale of its corrugated sheet plant at Little Rock. Together, the plants employ 175 workers. In November, Weyerhaeuser said it would sell its composite panels business, including its plant at Malvern.

Hood will close its multiwall paper bag plant at Pine Bluff in February. That plant employs about 100 workers.

The paper industry couldn't even get a break from the Arkansas Legislature in 2005. Despite the numerous industry woes, the Legislature turned down a bill that would have gradually eliminated the sales tax that pulp, paper and wood products companies pay on energy used in manufacturing their products.

The industry argued that the 6 percent sales tax on electricity, natural gas, bark and other fuels puts plants at a disadvantage with competitors in neighboring states like Texas, Oklahoma and Missouri, which pay no sales tax on the energy they use for manufacturing.

9. State Has Money to Spend... on Schools

Thanks to conservative projections and austere budgeting, Arkansas' state government is flush with money. The surplus of revenue compared with budget projections was more than $120 million by the end of November, just five months into the current fiscal year, and that followed a surplus of almost $150 million when FY 2004 ended on June 30.

Arkansas' glut of money is similar to the fortunes of other states and a 180-degree turnaround from 2003, when Arkansas and most other states had to make draconian budget cuts. As always when the government has more money in hand than expected, there have been calls for a rebate to taxpayers or an actual cut in tax rates.

But that kind of talk got a swift kick in the chops on Dec. 15, when the Arkansas Supreme Court once again declared that the state's funding of public education was inadequate to the point of being unconstitutional.

The ruling came after the court reopened the landmark Lake View school funding case at the request of school districts dismayed by the General Assembly's failure to allocate any additional per-pupil funding during the regular legislative session.

After reappointing special masters to investigate the status of statewide school funding and receiving their report, the court agreed with most of their unflattering findings.

"To argue that inaction under Act 57 may equate to adequacy, as the State seems to maintain, does not thread the needle of either logic or reason," Associate Justice Robert L. Brown wrote in the majority opinion.

The court specifically condemned the Legislature's inattention to its order that school facilities across the state be brought up to modern standards — a project that was "grossly underfunded," according to the court. A controversial statewide assessment that followed the original Lake View ruling in 2002 indicated that necessary upgrades to school facilities could cost more than $4 billion.

The justices ordered lawmakers to cure funding deficiencies by Dec. 1, 2006 — a back-door way of ordering a special legislative session, since the next regular session is scheduled for January 2007.

School administrators thrilled at the prospects of more court-ordered funding were less enthusiastic when they heard Gov. Mike Huckabee's first ideas for complying with the court order: putting school superintendents on a state salary schedule, controlling the amount of money spent on coaches' salaries and athletics, and consolidating the administrations of school districts with fewer than 500 students.

10. Acxiom Fights Hostile Takeover

A hostile takeover threat still looms over Little Rock's Acxiom Corp., which has since June publicly drawn the interest and ire of its largest investor.

ValueAct Capital Partners of San Francisco, which now owns 12 percent of Acxiom's stock, began hinting in June it was willing to buy all outstanding shares of the data management company that it did not already own.

ValueAct has a history of buying undervalued companies and retooling management to improve results. But Acxiom's management has remained steadfastly opposed to a ValueAct takeover and will not even acquiesce to giving the hedge fund representation on its board of directors.

In fact, denying ValueAct a board seat is what prompted the takeover attempt, according to Jeffrey W. Ubben, ValueAct managing partner.

In May, Acxiom's directors refused Ubben an open seat with a new policy excluding large shareholders from the board.

Ubben said, "To a certain extent there's no other choice than to make a controlled bid to effect the management change because the board's not going to do it for themselves."

ValueAct did not make its $23-per-share offer official until July, immediately following Acxiom's announcement of abysmal first-quarter earnings and the layoff of 250 employees, including about 100 in Arkansas.

The layoffs, along with other cost-cutting measures, will eventually save the company $70 million annually, Acxiom said.

Acxiom's board rejected ValueAct's offer — but not before all nine members were named in a class-action lawsuit filed by an Indiana pension fund that alleges they failed to act in the shareholders' best interest by not considering the takeover bid.

Then in October ValueAct increased its offer for Acxiom, this time to $25 per share, or $2 billion. At the time, it represented a 25 percent premium on Acxiom's most recent closing price.

And once again, in December, Acxiom said no.

Throughout the ordeal a war of words has ensued between the two concerns, with ValueAct accusing Acxiom's management of making misleading financial statements and running the company into the ground.

Charles Morgan, Acxiom's company leader and chairman, has said a ValueAct deal would not be in the best interests of Acxiom's clients, shareholders or employees and described his company as "under attack."

Though ValueAct has indicated it is willing to go even higher on the offer, Ubben concedes a deal appears unlikely; however, ValueAct reps are seeking three seats on Acxiom's board next year with hopes of changing management that way

Meanwhile, Acxiom spent a fair share of time in the courtroom this year.

In August, a federal jury found Florida spammer Scott Levine guilty of 123 counts relating to the theft of 1.6 billion Acxiom data records in 2002 and 2003.

Levine, who could receive more than a decade of jail time, is scheduled to be sentenced in February.

Also, a former Acxiom sales executive, Gary Parisi, was the key figure in a legal battle between Acxiom and data industry rival Experian of Costa Mesa, Calif.

Acxiom accused Parisi of taking confidential information to his new employer, Experian, when he left Acxiom three years ago. And Experian said Acxiom also had confidential information on its business.

A Pulaski County Circuit Court jury found that both companies had attempted to use stolen documents and that Parisi violated his confidentiality agreement with the Acxiom. But because there were no actual damages, neither party owed the other any money.

Also this year, Acxiom made a few acquisitions. In January the company bought Nashville, Tenn., direct marketing and information management company SmartDM for $20 million. In March Acxiom paid $107 million for the San Mateo, Calif., digital marketing company Digital Impact Inc. And in August Acxiom bought fraud prevention and identity verification services company InsightAmerica of Broomfield, Colo., for $35 million.