The two corporate giants that dominate the Indiana Corporate landscape are both Health Care companies…..Big Pharma Eli Lilly and Health Insurance Giant WellPoint. They both experienced Pretax Earnings declines of 9% in 2011. On the other hand, in 2010, Lilly registered a Pretax Earnings increase of 10%, and WellPoint generated a Pretax Earnings increase of 12%.
The positive aspect here with this marked earnings decrease in 2011 is that it shows that the Affordable HealthCare Act, parts of which started kicking in early in 2011, has really helped to rein in the country’s health care costs.
Included in the 35 remaining Indiana Corps is fast-growing SS&C Technologies, a Connecticut headquartered computer software company serving the financial industry, which has started to add, and will be adding many more, high-quality professional finance, accounting, and information services jobs in Evansville, where its CEO Bill Stone grew up.
These 35 remaining Indiana Corps, led by the very well run Cummins, generated Total Pretax Income in 2011 of $8.0 bil, for a very robust 34% increase over 2010, and an even more robust 193% increase over 2009.
In deriving Pretax Income, I start with Pretax Income under Generally Accepted Accounting Principles (GAAP), and then exclude several clearly unusual very large items relative to Pretax Income, such as Asset Impairments, Gains and Losses on both Debt Retirements and Asset Dispositions, and Special Litigation Charges and Gains.
Clearly, the Obama Administration has created an economic environment in the past two years that has permitted these Indiana Corporations to flat out flourish.
And Indiana members of the US Congress, both present and past,…..specifically Joe Donnelly, Andre Carson, Pete Visclosky, Baron Hill, and Brad Ellsworth…..have all especially been a great help in fostering the operating success of these fine Indiana companies.
With this off-the-charts 193% earnings growth for these remaining 35 Indiana companies in the past two years, there is no way that their very robust 33% total earnings growth in 2011 will continue in 2012.
And this earnings growth has substantially decelerated in the 1Q of 2012.
I think the only way these Indiana Corps’ total earnings growth for the remainder of 2012 will be at least 15%, and at the same time, also result in very robust US job creation, is for the US Congress to immediately pass the following economic initiatives:
- Extend the 100% first-year tax expensing of equipment and computer software investments made in the remainder of 2012. The CBO-scored cost should not be very significant.
- Substantially accelerate first-year tax depreciation on all new building and building remodeling investments made in the remainder of 2012, and rein in its CBO-scored cost, by lowering tax depreciation in years 2 through 10.
- Pass the Research and Experimentation Tax Credit for businesses for all 2012 expenditures, but substantially enhance it, especially for smaller businesses, and simplify it.
- Give small businesses, creating US jobs in 2012, a 10% tax credit.
- Give businesses a 20% income tax credit for the expenses of moving operations from overseas back to the US. And pay for this by removing income tax deductions businesses now get for moving their production from the US to overseas. This one's pretty cool, where the pay-for is also positive to the US job count.
- Permit US taxpayers, who have their mortgage loans financed by either Fannie Mae or Freddie Mac, to have their mortgages refinanced at the current lower prevailing market interest rates.
- Pass the substantial amount of school construction infrastructure fix ups for K-12 Schools and for Community Colleges, which is in the American Jobs Act (AJA). And all of these school investments should occur in 2012, and mostly from now through the end of the summer of 2012.
The above first two will result in explosive US economic stimulation, particularly when viewed in light of future business income tax reform, which should result in a much lower business income tax rate in 2013 and going forward.
Thus, businesses will get both the 100% first-year tax depreciation on equipment purchases and the substantially accelerated first-year tax deprecation on building investments in 2012 at a business income tax rate reduction which is much higher in 2012, and then the future earnings from these equipment and building investments will generate post 2012 earnings streams from these investments which are taxed at a much lower post tax reform business income tax rate. Wow, now that is bold economic stimulation.
This above bold economic stimulation effectively works like a back-door, stealth investment tax credit in 2012, due to the expected future reduction in business income tax rates starting in 2013 under any reasonable business tax reform.
The investment tax credit was used first by President Jack Kennedy in the early 1960s to get the US out of a deep recession. And President Lyndon Johnson also used it after he took over. The end result was US real GDP growth which averaged 4.85% from 1960 to 1968. And the US unemployment rate dropped substantially while this investment tax credit was in effect during the 1960s.
This kind of very robust US real GDP growth, markedly north of 4%, and for an extended period of time, is precisely what the US economy now needs. And this very strong GDP growth is by far the best way to substantially reduce the massive US Deficit.
This above bold economic stimulation effectively works like a back-door, stealth investment tax credit in 2012, due to the expected future reduction in business income tax rates starting in 2013 under any reasonable business tax reform.
The investment tax credit was used first by President Jack Kennedy in the early 1960s to get the US out of a deep recession. And President Lyndon Johnson also used it after he took over. The end result was US real GDP growth which averaged 4.85% from 1960 to 1968. And the US unemployment rate dropped substantially while this investment tax credit was in effect during the 1960s.
This kind of very robust US real GDP growth, markedly north of 4%, and for an extended period of time, is precisely what the US economy now needs. And this very strong GDP growth is by far the best way to substantially reduce the massive US Deficit.
But these explosive economic benefits to US businesses from this accelerated first-year tax depreciation does not necessarily mean that there will be resultant substantial US job creation from it.
Thus, I would make sure that the largest of the US Corps…..say the top 50 or so…..would get these first-year accelerated tax depreciation benefits in 2012 only if they add a sufficient number of US full-time workers in 2012.
And similar economic benefits will result from the Research and Experimentation Expenditures. Not only will businesses get higher Research Tax Credits in 2012 for making investments in 2012, but they will also get 2012 tax deductions from these Research investments made in 2012 at the higher business income tax rate in 2012, and then subsequently get the future earnings stream from these Research investments taxed at the lower post tax reform business income tax rate that will be applicable starting in 2013 and going forward.
Below here is the Indiana headquarters location of each of these 37 Indiana Corporations.
| Indiana Corporation | Indiana HQs | Sector |
| Eli Lilly | Indianapolis | Health Care: Pharmaceuticals |
| WellPoint | Indianapolis | Health Insurance |
| Cummins | Columbus | Manufacturing: Engines and Turbines |
| Zimmer Holdings | Warsaw | Health Care: Orthopedic, Prosthetic and Surgical Appliances |
| Simon Property Group | Indianapolis | Real Estate Investment Trust |
| Mead Johnson Nutrition | Evansville | Foods |
| ITT Educational | Carmel | Educational Services |
| Steel Dynamics | Fort Wayne | Manufacturing: Steel |
| CNO Financial | Carmel | Health and Life Insurance |
| Allison Transmission | Indianapolis | Manufacturing: Motor Vehicle Parts |
| Hill-Rom Holdings | Batesville | Health Care: Surgical and Medical Instruments |
| Hillenbrand | Batesville | Manufacturing: Miscellaneous |
| KAR Auction Svcs | Carmel | Vehicle Auction Services |
| Finish Line | Indianapolis | Retail: Shoes |
| Old National Bancorp | Evansville | Banking |
| Remy Intl | Pendleton | Manufacturing: Motor Vehicle Parts |
| Vera Bradley | Fort Wayne | Leather Products |
| Franklin Electric | Bluffton | Manufacturing: Motors and Generators |
| SS&C Technologies | Evansville | Technology: Software |
| HHGregg | Indianapolis | Retail: TV and Consumer Electronics |
| 1st Source | South Bend | Banking |
| CalumetSpecProductsPartners | Indianapolis | Petroleum Refining |
| Brightpoint | Indianapolis | Wholesale: Electronic Parts and Equipment |
| First Financial Corp | Terre Haute | Banking |
| Haynes Intl | Kokomo | Manufacturing: Steel |
| Lakeland Financial | Warsaw | Banking |
| Shoe Carnival | Evansville | Retail: Shoes |
| Wabash National | Lafayette | Manufacturing: Truck Trailers |
| Angie's List | Indianapolis | Technology: Advertising |
| Accuride | Evansville | Manufacturing: Motor Vehicle Parts |
| Republic Airways | Indianapolis | Air Transportation |
| Duke Realty | Indianapolis | Real Estate Investment Trust |
| Biomet | Warsaw | Health Care: Orthopedic, Prosthetic and Surgical Appliances |
| Springleaf Finance | Evansville | Personal Credit Institution |
| Late Additions | ||
| First Merchants | Muncie | Banking |
| Berry Plastics | Evansville | Manufacturing: Plastics |
| Baldwin & Lyons | Indianapolis | Property & Casualty Insurance |
And below here is the Pretax Income (PTI) and Pretax Loss (PTL) of these 37 Indiana Corps for each of the most recent three years, with the most recent fiscal year ends ranging from May 2011 to March 2012.
| Obama | |||||
| Bump | |||||
| PTI(L) | PTI(L) | ||||
| 1 Year | 2 Year | ||||
| PTI(L) | PTI(L) | PTI(L) | % | % | |
| 2011 | 2010 | 2009 | Change | Change | |
| mils $s | mils $s | mils $s | |||
| Indiana | |||||
| The Dominant Health Care Two | |||||
| Eli Lilly | 6,139 | 6,767 | 6,141 | -9% | 0% |
| WellPoint | 3,958 | 4,354 | 3,874 | -9% | 2% |
| Total Dominant Two | 10,097 | 11,121 | 10,015 | -9% | 1% |
| The Rest | |||||
| Cummins | 2,671 | 1,617 | 640 | 65% | 317% |
| Zimmer Holdings | 1,141 | 1,154 | 1,099 | -1% | 4% |
| Simon Property Group | 951 | 717 | 612 | 33% | 55% |
| Mead Johnson Nutrition | 722 | 634 | 587 | 14% | 23% |
| ITT Educational | 508 | 614 | 491 | -17% | 3% |
| Steel Dynamics | 424 | 213 | (18) | 99% | 2456% |
| CNO Financial | 379 | 294 | 174 | 29% | 118% |
| Allison Transmission | 208 | 83 | (93) | 151% | 324% |
| Hill-Rom Holdings | 207 | 162 | 94 | 28% | 120% |
| Hillenbrand | 158 | 146 | 161 | 8% | -2% |
| KAR Auction Services | 144 | 130 | 34 | 11% | 324% |
| Finish Line | 135 | 110 | 72 | 23% | 88% |
| Old National Bancorp | 100 | 43 | (7) | 133% | 1529% |
| Remy Intl | 96 | 59 | 14 | 63% | 586% |
| Vera Bradley | 95 | 52 | 44 | 83% | 116% |
| Franklin Electric | 87 | 55 | 35 | 58% | 149% |
| SS&C Technologies | 79 | 49 | 29 | 61% | 172% |
| HHGregg | 68 | 81 | 64 | -16% | 6% |
| 1st Source | 74 | 60 | 32 | 23% | 131% |
| Calumet Specialty Products | 79 | 41 | 34 | 93% | 132% |
| Brightpoint | 57 | 52 | 27 | 10% | 111% |
| First Financial Corp | 52 | 40 | 25 | 30% | 108% |
| Haynes Intl | 49 | 16 | (17) | 206% | 388% |
| Lakeland Financial | 45 | 37 | 28 | 22% | 61% |
| Shoe Carnival | 42 | 42 | 25 | 0% | 68% |
| Wabash National | 15 | (20) | (72) | 175% | 121% |
| Accuride | (7) | (56) | (97) | 88% | 93% |
| Angie's List | (49) | (27) | (12) | -81% | -308% |
| Republic Airways | 10 | 55 | 57 | -82% | -82% |
| Duke Realty | (60) | (32) | (5) | -88% | -1100% |
| Biomet | (124) | (142) | (369) | 13% | 66% |
| Springleaf Finance | (323) | (253) | (889) | -28% | 64% |
| Total 32 Rest | 8,033 | 6,026 | 2,799 | 33% | 187% |
| Late Additions | |||||
| First Merchants | 34 | 3 | (69) | 1033% | 149% |
| Berry Plastics | 24 | (75) | (46) | 132% | 152% |
| Baldwin & Lyons | (45) | 35 | 64 | -229% | -170% |
| Total 35 Rest | 8,046 | 5,989 | 2,748 | 34% | 193% |
