Included in these 36 Largest Virginia Corps was Mclean, VA-based Freddie Mac, which US taxpayers own a huge chunk of, which has generated huge losses since 2008. Freddie Mac's 2008 massive Pretax Loss of $44.6 bil, was reduced about in half to a Pretax Loss of $22.4 bil in 2009. And from there, Freddie Mac’s Pretax Loss was reduced further to $14.9 bil in 2010, and still further to $5.7 bil in 2011.
Thus, Freddie Mac’s Pretax Losses have been reduced by $38.9 bil in the past three years, and by $16.7 bil in the most recent two years.
And in a recent very favorable development, Freddie Mac reported a $563 mil of Pretax Income in the 1Q 2012. This profit was driven by much lower Credit Loss Provisions, which totaled only $1,825 mil in the 1Q 2012. And this Profit was generated despite an earnings charge of $1,056 mil for Derivative Losses in the 1Q 2012.
And in another amazingly positive development, DC-based Fannie Mae, which US taxpayers also own a huge chunk of, reported a 1Q 2012 Pretax Profit of $2,718 mil. And this was after Fannie Mae reporting the following annual Pretax Losses from 2008 to 2011:
2008.....$44.6 bil
2009.....$73.0 bil
2010.....$14.1 bil
2011.....$16.9 bil
This massive turnaround in profit in the 1Q 2012 by Fannie Mae was driven by substantially lower charges for Credit Loss Provisions of only $2,000 mil, and amazingly a Derivative Gain of $283 mil.
The US Government needs to investigate the reasons for this dramatic improvement in profits at Freddie Mac and Fannie Mae, but my hunch is that they are both doing a better job dealing with both their massive amount of troubled loans and with their hedging policies. And I also have a hunch that they are starting to listen more to both Fed Chairman Ben Bernanke and to the Obama Administration.
US taxpayers have to be very pleased with this 1Q 2012 development at both Freddie and Fannie.
Anyway, the remaining 35 Largest Virginia Corps generated Total Pretax Earnings in 2011 of $33.5 bil, which was up a very robust 56% over such amount two years ago in 2009.
Now I wanted to see if these strong earnings also applied to smaller Virginia Corps, which file with the SEC.
Thus, I found 37 Virginia headquartered Smaller Corps filing with the SEC, which had Pretax Income or Pretax Loss of $20 mil or more in any of the most recent three years, and which weren't included in the 36 Largest Virginia Corps. Thus, these 37 Smaller Virginia Corps also did not have Pretax Income or Pretax Loss of more than $100 mil in any of the most recent three years. I used a lower $20 mil Pretax Income and Pretax Loss threshold in order to make sure the number of companies here are of sufficient size to be able to reach a valid conclusion.
In the most recent two years, these 37 Smaller Virginia Corps did even better than the 35 Largest Virginia Corps Other Than Freddie Mac. The Total Pretax Income in 2011 of these 37 Smaller Virginia Corps was an even more robust 68% higher than such amount two years earlier in 2009.
And the strong total earnings growth of these Virginia Corps is particularly impressive, given the large number of US Defense Contractors, and also other US Government Contractors, located in Virginia, since there has been a very successful effort by the Obama Administration in reducing the US Deficit markedly by reducing some of the excessive profits of many of these US Government Contractors.
Yeah, the Obama Administration created a very robust US economic environment, which permitted Virginia companies of all sizes to do just great on the earnings front in the most recent two years.
But a second story here is the earnings results by year.
The 35 Largest Virginia Corps Other Than Freddie Mac generated Pretax Income growth of 9% in 2011 over 2010, and of a substantially higher 43% in 2010 over 2009.
The 37 Smaller Virginia Corps generated Pretax Income growth of only 1% in 2011 over 2010, and of a substantially higher 65% in 2010 over 2009.
So why is it that these Virginia Corps did so much better in 2010 than they did in 2011? I think you need to look at the political situation.
In both years, the President was the same.....a Moderate Democrat.
In both years, the US Senate had two Moderate Democrats from Virginia.
However, the US House was under Republican control in 2011, but under Democratic control in 2010.
And Virginia US House members numbered 6 of 11 in 2010, but only 3 of 11 in 2011.
And this reduction in earnings growth even continued in the most recent 1Q 2012. The 35 Largest Virginia Corps had their Total Pretax Income actually decrease by 9%, going from $8,444 mil in the 1Q 2011 to $7,655 mil in the 1Q 2012.
How could this change in US House control make such a huge difference in Virginia company earnings?
It is pretty clear to me that in 2010, a Moderate Democratic President, coupled most importantly with a US House in Democratic hands, but also having a US Senate in Democratic hands, did wonders for corporate earnings growth in 2010. With this political structure, economic stimulus, both much needed business income tax stimulus and wise, carefully-vetted investment spending, can occur on a robust scale. And this very strong economic stimulus was in full throttle starting in the 4Q 2009, and did Corporations ever reap the benefit of this by generating exceptionally strong profits.
The worse thing that can happen after a financial meltdown, and near depression, is a US government that just waits for the free markets to correct themselves.....a laissez-faire approach, so favored by so many Republicans. Fortunately for the country, the exact opposite to that wisely happened in 2009 and 2010.
But then in 2011 and the first half of 2012, the US government was unfortunately forced into a laissez-faire economic approach, due to an uncompromising US Congress stopping nearly every economic initiative of the Obama Administration. The focus of the US Congress was almost singularly on austerity, when the improving, but still clearly struggling, US economy was shouting out for more economic stimulus, wisely designed.
Thus, things stopped to a walk on the US economic front when the US House switched to Republican control with the 2010 election, coupled with the US Senate Democratic majority rule being significantly reduced, and with many US States switching from Democratic Control to Republican Control.
Case in point is Business Income Tax Reform, which the Obama Administration strongly supports, and which nearly all Republicans say they are behind. If the President's Framework for Business Income Tax Reform, presented more than three months ago, is strengthened by the US Congress and passed, I am pretty certain that all of the US economic problems, including US real GDP growth, US unemployment, US underemployment, and the US Deficit....would all be substantially improved, and on an ongoing sustainable basis over the long run.
However, the US House Ways and Means Committee must initiate the legislation on this critically needed Business Income Tax Reform. And what have they done so far? Absolutely nothing. I'm not kidding. On the other hand, if the US House was under Democratic control, I am pretty certain that this Business Income Tax Reform would have gotten out of the US House Ways and Means Committee by now and been placed on the US House Floor.
Instead, the Republicans in the US House are focused on attempting to pass an extension of the much lower Bush income tax rates on the wealthy, which increases the US Deficit by more than a trillion dollars over the next decade, and creates almost no US jobs. This continual off-focus approach to governing by the Republicans in the US House shows that they are clearly unfit to be reelected, due to either their gross incompetence on US economic issues, or to their only be interested in governing for the top 1% of the country.
On the other hand, when the President is a Democrat and the US House is in Democratic control, economic initiatives move forward, and they clearly did very robustly in 2009 and 2010.
While substantial US job creation doesn't necessarily result from substantially higher corporate earnings, I can clearly tell you one thing.....lower corporate earnings will undoubtedly result in a significant loss of US jobs. When corporate earnings absolutely tanked in late 2008 and in 2009, corporations were very quick to dramatically cut US full-time employees. And to give a recent illustration, when Hewlett Packard recently announced down earnings, it also announced it will be cutting 27,000 jobs, or 8% of its workforce. And Ohio-based Procter & Gamble, just recently taking a $452 mil Restructuring Charge, has to mean a significant loss of US jobs. And Michigan's Dow Chemical did likewise. And I have seen so many large Restructuring Charges made by Corporations in their 1Q 2012 Earnings Statements, made in the same quarter where their earnings growth has fallen off the cliff.
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, and Gains and Losses on both Debt Retirements and Asset Dispositions.
I use Pretax Income rather than After-tax Net Income, since so much of the change in effective income tax rates just happens due to financial engineering.
I excluded Corps in the Development Stage, and ones generating losses for many years.
Let me first show each of the 36 Largest Virginia Corps. Below here is the Headquarters location and the Sector of each of these companies.
| Virginia Largest Corps | Virginia HQs | Sector |
| Freddie Mac | McLean | Government Sponsored Enterprises: Finance |
| General Dynamics | Falls Church | US Defense Contractor: Shipbuilding |
| Northrop Grumman | Falls Church | US Defense Contractor |
| Computer Sciences Corp | Falls Church | Technology: US Contractor |
| SAIC | McLean | Technology: US Contractor |
| Exelis | McLean | Communication Equipment: US Defense |
| Huntington Ingalls | Newport News | US Defense Contractor: Shipbuilding |
| CACI Intl | Arlington | Technology: US Contractor |
| ManTech Intl | Fairfax | Management Services: US Contractor |
| Booz Allen Hamilton | McLean | Management and Technology Consulting: US Contractor |
| Altria Group | Richmond | Cigarettes |
| Capital One Financial | McLean | Financial: Banking and Credit Cards |
| Norfolk Southern | Norfolk | Railroads |
| AES | Arlington | Cogeneration Power Producer |
| Dollar Tree | Chesapeake | Retail: Variety |
| Gannett | McLean | Newspaper Publishing |
| Smithfield Foods | Smithfield | Foods |
| Advance Auto Parts | Roanoke | Retail: Auto Parts |
| CarMax | Richmond | Retail: Auto Dealers |
| NII Holdings | Reston | Communication Services |
| MeadWestvaco | Richmond | Paper Mills |
| Genworth Financial | Richmond | Life Insurance |
| Amerigroup | Virginia Beach | Health Insurance |
| Alpha Natural Resources | Bristol | Coal Mining |
| Newmarket Corp | Richmond | Chemicals |
| Universal Corp | Richmond | Wholesale: Farm Products |
| NVR | Reston | Homebuilding |
| Neustar | Sterling | Communication Services |
| Verisign | Reston | Technology |
| Markel | Glen Allen | Property and Casualty Insurance |
| Owens & Minor | Mechanicsville | Wholesale: Health Care Equipment and Supplies |
| Strayer Education | Herndon | Education Services |
| Portfolio Recovery | Norfolk | Accounts Receivable Collection |
| AvalonBay Communities | Arlington | REIT |
| Brinks | Richmond | Transportation of Valuables |
| Maximus | Reston | Business Services |
And below here is the Pretax Income (PTI) or Pretax Loss of each of these 36 Largest Virginia Corporations for each of the most recent three years, along with the related percentage changes in earnings.
| Republican | Democratic | |||||
| US House | US House | Obama | ||||
| Control | Control | Bump | ||||
| PTI(L) | PTI(L) | Two Year | ||||
| % | % | % | ||||
| Change | Change | Change | ||||
| Total | Total | Total | 2011 | 2010 | 2011 | |
| PTI(L) | PTI(L) | PTI(L) | vs | vs | vs | |
| 2011 | 2010 | 2009 | 2010 | 2009 | 2009 | |
| mils $s | mils $s | mils $s | ||||
| Virginia Largest Corps | ||||||
| US Government Contractors | ||||||
| General Dynamics | 3,718 | 3,790 | 3,513 | -2% | 8% | 6% |
| Northrop Grumman | 3,083 | 2,595 | 2,070 | 19% | 25% | 49% |
| Computer Sciences Corp | 968 | 1,022 | 950 | -5% | 8% | 2% |
| SAIC | 747 | 872 | 768 | -14% | 14% | -3% |
| Exelis | 537 | 696 | 700 | -23% | -1% | -23% |
| Huntington Ingalls | 296 | 206 | 176 | 44% | 17% | 68% |
| CACI Intl | 228 | 168 | 153 | 36% | 10% | 49% |
| ManTech Intl | 216 | 202 | 179 | 7% | 13% | 21% |
| Booz Allen Hamilton | 128 | 49 | (515) | 161% | -110% | 125% |
| Total all 9 US Government Contractors | 9,921 | 9,600 | 7,994 | 3% | 20% | 24% |
| The 26 Rest | ||||||
| Altria Group | 6,072 | 5,723 | 4,877 | 6% | 17% | 25% |
| Capital One Financial | 4,587 | 4,330 | 1,336 | 6% | 224% | 243% |
| Norfolk Southern | 2,918 | 2,367 | 1,622 | 23% | 46% | 80% |
| AES | 2,461 | 2,394 | 1,921 | 3% | 25% | 28% |
| Dollar Tree | 780 | 630 | 508 | 24% | 24% | 54% |
| CarMax | 667 | 608 | 446 | 10% | 36% | 50% |
| Gannett | 653 | 846 | 570 | -23% | 48% | 15% |
| Smithfield Foods | 636 | (215) | (382) | 396% | 44% | 266% |
| Advance Auto Parts | 633 | 557 | 432 | 14% | 29% | 47% |
| NII Holdings | 542 | 598 | 586 | -9% | 2% | -8% |
| MeadWestvaco | 422 | 320 | 17 | 32% | 1782% | 2382% |
| Alpha Natural Resources | 325 | 127 | 93 | 156% | 37% | 249% |
| Genworth Financial | 314 | 76 | (792) | 313% | 110% | 140% |
| Amerigroup | 310 | 437 | 201 | -29% | 117% | 54% |
| Newmarket Corp | 265 | 260 | 239 | 2% | 9% | 11% |
| Universal Corp | 243 | 257 | 197 | -5% | 30% | 23% |
| NVR | 208 | 322 | 298 | -35% | 8% | -30% |
| Neustar | 205 | 206 | 192 | 0% | 7% | 7% |
| Verisign | 194 | 95 | 125 | 104% | -24% | 55% |
| Markel | 190 | 296 | 199 | -36% | 49% | -5% |
| Owens & Minor | 190 | 182 | 188 | 4% | -3% | 1% |
| Strayer Education | 176 | 217 | 174 | -19% | 25% | 1% |
| Portfolio Recovery | 167 | 121 | 73 | 38% | 66% | 129% |
| AvalonBay Communities | 166 | 104 | 125 | 60% | -17% | 33% |
| Brinks | 156 | 140 | 166 | 11% | -16% | -6% |
| Maximus | 126 | 108 | 89 | 17% | 21% | 42% |
| Total all 26 Rest | 23,606 | 21,106 | 13,500 | 12% | 56% | 75% |
| Total all 35 but Freddie Mac | 33,527 | 30,706 | 21,494 | 9% | 43% | 56% |
| Freddie Mac | (5,666) | (14,882) | (22,384) | 62% | 34% | 75% |
| Grand Total all 36 | 27,861 | 15,824 | (890) | 76% | 1878% | 3230% |
Now let me show each of the 37 Smaller Virginia Corps. Below here is the Headquarters location and the SEC Standard Industrial Classification of each of these companies.
| Virginia Smaller Corps | Virginia HQs | Sector |
| Allbritton | Arlington | TV Broadcasting Stations |
| Apple REIT Nine | Richmond | REITs |
| Apple REIT Seven | Richmond | REITs |
| Apple REIT Six | Richmond | REITs |
| Arlington Asset Investment | Arlington | Investors |
| Cardinal Financial | McLean | National Commercial Bank |
| Community Bankers Trust | Glen Allen | State Commercial Bank |
| Corporate Executive Board | Arlington | Management Consulting Services |
| Deltek | Herndon | Computer Programming Services |
| Dynex Capital | Glen Allen | REITs |
| ePlus | Herndon | Wholesale: Comuputer, Peripheral Equpment and Software |
| First Community Bancshares | Bluefield | State Commercial Bank |
| GeoEye | Herndon | Communication Services |
| ICF Intl | Fairfax | Management Consulting Services |
| Intersections | Chantilly | Computer Programming & Data Processing |
| Iridium Communications | McLean | Communication Equipment |
| James River Coal | Richmond | Coal Mining |
| JTH Holding | Virginia Beach | Services: Personal Services |
| K12 | Herndon | Educational Services |
| Lumber Liquidators | Toano | Retail: Lumber & Other Building Materials Dealers |
| Lumos Networks | Waynesboro | Telephone Communications |
| Measurement Specialities | Hampton | Measuring & Controlling Devices |
| MicroStrategy | Tysons Corner | Prepacked Software |
| National Bankshares | Blacksburg | National Commercial Bank |
| NCI | Reston | Computer Integrated Systems Design |
| Ntelos Holdings | Waynesboro | Telephone Communications |
| Orbital Sciences | Dulles | Radio & TV Broadcasting & Communication Equipment |
| Rosetta Stone | Arlington | Prepacked Software |
| Shenandoah Telecommunications | Edinburgh | Telephone Communications |
| Stellar One | Charlottesville | State Commercial Bank |
| Sunrise Senior Living | McLean | Sevices: Nursing & Personal Care Facilities |
| TNS | Reston | Services: Business Services |
| Tredegar | Richmond | Rolling, Drawing & Extruding of NonFerrous Metals |
| Union First Market Bankshares | Richmond | State Commercial Bank |
| USA Mobility | Springfield | Radio & Telephone Communications |
| Virginia Commercial Bancorp | Arlington | State Commercial Bank |
| VSE | Alexandria | Engineering Services |
And below here is the Pretax Income (PTI) or Pretax Loss of each of these 37 Smaller Virginia Corporations for each of the most recent three years, along with the related percentage changes in earnings.
| Republican | Democratic | |||||
| US House | US House | Obama | ||||
| Control | Control | Bump | ||||
| PTI(L) | PTI(L) | Two Year | ||||
| % | % | % | ||||
| Change | Change | Change | ||||
| Total | Total | Total | 2011 | 2010 | 2011 | |
| PTI(L) | PTI(L) | PTI(L) | vs | vs | vs | |
| 2011 | 2010 | 2009 | 2010 | 2009 | 2009 | |
| mils $s | mils $s | mils $s | ||||
| Virginia Smaller Corps | ||||||
| Corporate Executive Board | 96 | 86 | 80 | 12% | 8% | 20% |
| GeoEye | 93 | 75 | 41 | 24% | 83% | 127% |
| Orbital Sciences | 88 | 65 | 48 | 35% | 35% | 83% |
| Iridium Communications | 65 | 36 | (6) | 81% | 700% | 1183% |
| USA Mobility | 58 | 58 | 58 | 0% | 0% | 0% |
| ICF Intl | 57 | 44 | 35 | 30% | 26% | 63% |
| Apple REIT Nine | 56 | 16 | 8 | 250% | 100% | 600% |
| Dynex Capital | 48 | 29 | 18 | 66% | 61% | 167% |
| Apple REIT Six | 44 | 38 | 33 | 16% | 15% | 33% |
| Lumber Liquidators | 43 | 43 | 44 | 0% | -2% | -2% |
| Cardinal Financial | 42 | 29 | 15 | 45% | 93% | 180% |
| Union First Market Bankshares | 42 | 32 | 9 | 31% | 256% | 367% |
| Tredegar | 42 | 42 | 51 | 0% | -18% | -18% |
| ePlus | 41 | 25 | 27 | 64% | -7% | 52% |
| Ntelos Holdings | 43 | 59 | 73 | -27% | -19% | -41% |
| Virginia Commercial Bancorp | 40 | 31 | (52) | 29% | 160% | 177% |
| Lumos Networks | 38 | 35 | 39 | 9% | -10% | -3% |
| Measurement Specialities | 33 | 6 | 9 | 450% | -33% | 267% |
| VSE | 33 | 38 | 39 | -13% | -3% | -15% |
| Intersections | 32 | 24 | 2 | 33% | 1100% | 1500% |
| First Community Bancshares | 30 | 30 | (67) | 0% | 145% | 145% |
| JTH Holding | 27 | 22 | 21 | 23% | 5% | 29% |
| Allbritton | 26 | 40 | 25 | -35% | 60% | 4% |
| Apple REIT Seven | 25 | 25 | 21 | 0% | 19% | 19% |
| Shenandoah Telecommunications | 24 | 28 | 43 | -14% | -35% | -44% |
| K12 | 23 | 34 | 21 | -32% | 62% | 10% |
| National Bankshares | 23 | 20 | 18 | 15% | 11% | 28% |
| NCI | 22 | 39 | 35 | -44% | 11% | -37% |
| TNS | 22 | 24 | (9) | -8% | 367% | 344% |
| Stellar One | 20 | 11 | (16) | 82% | 169% | 225% |
| MicroStrategy | 16 | 55 | 86 | -71% | -36% | -81% |
| Arlington Asset Investment | 17 | 27 | (20) | -37% | 235% | 185% |
| Community Bankers Trust | 2 | (24) | (17) | 108% | -41% | 112% |
| Deltek | (7) | 2 | 32 | -450% | -94% | -122% |
| James River Coal | (16) | 55 | 55 | -129% | 0% | -129% |
| Sunrise Senior Living | (18) | 12 | (79) | -250% | 115% | 77% |
| Rosetta Stone | (28) | 13 | 20 | -315% | -35% | -240% |
| Total all 37 | 1,242 | 1,224 | 740 | 1% | 65% | 68% |
When Virginia's 35 Largest Corps have their total earnings growth go off a cliff as follows: +43% in 2010, +9% in 2011, and -9% in the 1Q 2012, then the US Government clearly must boldly stimulate the US economy.
I do think US companies, the US economy, and US job creation would all be helped immensely if the recalcitrant US Congress would start working with the Obama Administration on much needed, bold, targeted like a laser, quick-hitting, highly effective, short-term economic stimulus, which is also wisely designed to get the maximum bang for the buck.
And in Virginia's case, as a starting point, I think 100% first-year tax expensing for equipment and computer software purchases in the remainder of 2012, and substantially accelerated first-year tax depreciation on all new building and building improvements made in the remainder of 2012, are both needed. Also, research and experimentation tax credits should be extended for all 2012 such investments, and this tax credit should be expanded and simplified for the smaller companies. And the K12 and Community College Construction fixups in the American Jobs Act should be enacted, and even enhanced in amount. Likewise with US Infrastructure Investments in the American Jobs Act. And some form of foreign earnings repatriation tax incentives should be enacted which is targeted at the smaller US multinational corps.
