These 22 Largest Washington Corps generated Total Pretax Earnings which were up a very robust 71% over such amount two years ago in 2009. The dominant Microsoft had its Pretax Income increase very nicely by 42% in the most recent two years. And when I exclude the Giant Microsoft, the remaining 21 Largest Washington Corps had their total earnings increase by an off-the-charts 187% in the most two recent years.
Now I wanted to see if this spectacular earnings growth also applied to the even smaller Washington Corps, which file with the SEC.
Thus, I found 16 Washington 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 22 Largest Washington Corps. Thus, these 16 Smaller Washington 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.
How did they do? Well, these 16 Smaller Washington Corps generated total earnings growth in the most recent two years of a even more substantially off-the-charts 692%, or nearly 10 times the 71% total earnings growth of the 22 Largest Washington Corps. Whew!
Clearly, Washington citizens should be very proud of their superb Washington companies.
And yeah, the Obama Administration created a very robust US economic environment, which permitted Washington companies of all sizes to do just fantastically on the earnings front in the most recent two years.
But a second story here is the earnings results by year.
The 22 Largest Washington Corps generated Pretax Income growth of 16% in 2011 over 2010, and of a substantially higher 47% in 2010 over 2009.
The 16 Smaller Washington Corps generated Pretax Income growth of an off-the-charts 110% in 2011 over 2010, and of an even more substantially off-the-charts 277% in 2010 over 2009.
So why is it that these Washington 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.
However, the US House was under Very Conservative Republican control in 2011, but under Democratic control in 2010.
Also, the US Senate had a lower Democratic majority in 2011 than it did in 2010.
And the State Governors and State Legislatures, all across the country, were clearly more Very Conservative Republican in 2011 than they were in 2010.
So clearly, there was a substantial shift nationally from Moderate Democratic control in 2010 to Very Conservative Republican control in 2011.
How could this change in political control make such a huge difference in Washington State 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, and further with having more State Governors and State Legislatures in Moderate 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 Very Conservative 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 Very Conservative Republican control with the 2010 election, coupled with the US Senate Democratic majority rule being significantly reduced, and with many US States switching from Moderate Democratic Control to Very Conservative 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 Very Conservative 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 Very Conservative 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 Moderate 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 I have seen so many large Restructuring Charges, where significant job cuts always result, made by Corporations in their 1Q 2012 Earnings Statements, and 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 22 Largest Washington Corps and where they are Headquartered.
| Washington Largest Corps | Washington HQs |
| Alaska Air | Seattle |
| Amazon.com | Seattle |
| Boeing | Seattle |
| Clearwater Paper | Spokane |
| Clearwire Corp | Kirkland |
| Coinstar | Bellevue |
| Costco | Issaquah |
| Esterline Technologies | Bellevue |
| Expedia | Bellevue |
| Expeditors Intl | Seattle |
| F5 Networks | Seattle |
| HomeStreet | Seattle |
| Itron | Liberty Lake |
| Microsoft | Redmond |
| Nordstrom | Seattle |
| Paccar | Bellevue |
| Plum Creek Timber | Seattle |
| Starbucks | Seattle |
| Sterling Financial | Spokane |
| Symetra Financial | Bellevue |
| Washington Federal | Seattle |
| Weyerhaeuser | Federal Way |
And below here is the Pretax Income (PTI) or Pretax Loss of each of these 22 Largest Washington Corporations for each of the most recent three years, along with the related percentage changes in earnings.
| Move to | ||||||
| More | More | |||||
| Republican | Democratic | 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 | ||||
| Washington Largest Corps | ||||||
| The Dominant One | ||||||
| Microsoft | 28,071 | 25,013 | 19,821 | 12% | 26% | 42% |
| The Rest | ||||||
| Boeing | 5,393 | 4,507 | 1,731 | 20% | 160% | 212% |
| Costco | 2,383 | 2,054 | 1,727 | 16% | 19% | 38% |
| Starbucks | 1,811 | 1,437 | 560 | 26% | 157% | 223% |
| Paccar | 1,507 | 660 | 109 | 128% | 506% | 1283% |
| Nordstrom | 1,119 | 991 | 696 | 13% | 42% | 61% |
| Amazon.com | 934 | 1,497 | 1,161 | -38% | 29% | -20% |
| Expeditors Intl | 638 | 564 | 403 | 13% | 40% | 58% |
| Expedia | 402 | 426 | 320 | -6% | 33% | 26% |
| Alaska Air | 394 | 406 | 203 | -3% | 100% | 94% |
| F5 Networks | 361 | 238 | 132 | 52% | 80% | 173% |
| Symetra Financial | 279 | 289 | 181 | -3% | 60% | 54% |
| Plum Creek Timber | 192 | 203 | 205 | -5% | -1% | -6% |
| Coinstar | 185 | 109 | 69 | 70% | 58% | 168% |
| Esterline Technologies | 158 | 155 | 118 | 2% | 31% | 34% |
| Weyerhaeuser | 144 | 87 | (855) | 66% | 110% | 117% |
| Itron | 104 | 121 | (33) | -14% | 467% | 415% |
| Clearwater Paper | 71 | 76 | 105 | -7% | -28% | -32% |
| Sterling Financial | 39 | (224) | (583) | 117% | 62% | 107% |
| Washington Federal | 174 | 37 | 76 | 370% | -51% | 129% |
| HomeStreet | 16 | (34) | (157) | 147% | 78% | 110% |
| Clearwire Corp | (2,049) | (2,070) | (1,208) | -1% | -71% | -70% |
| Total all 21 Rest | 14,255 | 11,529 | 4,960 | 24% | 132% | 187% |
| Grand Total all 22 | 42,326 | 36,542 | 24,781 | 16% | 47% | 71% |
Now let me show each of the 16 Smaller Washington Corps, and where they are Headquartered.
| Washington Smaller Corps | Washington HQs |
| Anchor Bancorp | Lacey |
| Banner Corp | Walla Walla |
| Blucora | Bellevue |
| Blue Nile | Seattle |
| Columbia Banking System | Tacoma |
| Concur Technologies | Redmond |
| First Financial Northwest | Renton |
| L&L Energy | Seattle |
| Northwest Pipe | Vancouver |
| Potlatch Corp | Spokane |
| Real Networks | Seattle |
| SeaBright Holdings | Seattle |
| Sealy Corp | Seattle |
| TrueBlue Inc | Tacoma |
| Washington Banking Co | Oak Harbor |
| Zumiez Inc | Everett |
And below here is the Pretax Income (PTI) or Pretax Loss of each of these 16 Smaller Washington Corporations for each of the most recent three years, along with the related percentage changes in earnings.
| Move to | ||||||
| More | More | |||||
| Republican | Democratic | 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 | ||||
| Washington Smaller Corps | ||||||
| Columbia Banking System | 66 | 23 | (13) | 187% | 277% | 608% |
| Zumiez Inc | 62 | 39 | 14 | 59% | 179% | 343% |
| L&L Energy | 50 | 43 | 19 | 16% | 126% | 163% |
| TrueBlue Inc | 49 | 29 | 14 | 69% | 107% | 250% |
| Potlatch Corp | 44 | 45 | 65 | -2% | -31% | -32% |
| Washington Banking Co | 23 | 17 | 9 | 35% | 89% | 156% |
| Northwest Pipe | 22 | (7) | (17) | 414% | 59% | 229% |
| Blucora | 20 | (1) | 12 | 2100% | -108% | 67% |
| Blue Nile | 17 | 22 | 20 | -23% | 10% | -15% |
| Concur Technologies | 9 | 33 | 40 | -73% | -18% | -78% |
| Banner Corp | 5 | (44) | (63) | 111% | 30% | -108% |
| First Financial Northwest | 4 | (50) | (39) | 108% | -28% | 110% |
| Sealy Corp | (4) | 44 | 43 | -109% | 2% | -109% |
| Anchor Bancorp | (9) | (3) | (23) | -200% | 87% | 61% |
| Real Networks | (24) | (38) | (59) | 37% | 36% | 59% |
| SeaBright Holdings | (25) | (5) | 17 | -400% | -129% | -247% |
| Total all 16 | 309 | 147 | 39 | 110% | 277% | 692% |
Clearly, with the massive earnings growth deceleration, which has occurred all throughout the country, the US economy desperately needs an economic jolt.
I do think US companies, the US economy, and US job creation would all be helped immensely if the recalcitrant, uncompromising, Very Conservative Republican part of the 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.
I think the key to bringing down dramatically and quickly the US unemployment and US underemployment rates, and which is sustainable in the long run, is for the US Government to give extremely explosive tax incentives to all US businesses, preferably a super-charged combination of the old, and a very substantial, investment tax credit and also substantially accelerated first-year tax depreciation, including 100% first-year tax depreciation on all equipment and computer software investments. And to really spur the US economy and also move the US job creation needle, I think that building and building remodeling investments should also be eligible for both the investment tax credit and substantially accelerated first-year tax depreciation. But the key to insure that explosive US job creation results from these very lucrative tax incentives to all US businesses, I think it is critical that these businesses be eligible for this investment tax credit and accelerated first-year tax depreciation only if they also add, and retain for reasonable number of years based on total US full-time payroll counts, a sufficient number of US full-time jobs.
As we unfortunately found out in the most recent two years, US businesses were quick to take the economic benefit of the lucrative tax incentives, but selfishly did very little in sharing these benefits with those trying to get to the US middle class by refusing to add much in the way of US full-time jobs. That's not playing fair. And it's also ineffective US Government legislation, which instead should be carefully crafted for the entire country to benefit from, not just the US business community.
And it's also clear that the US Government should not continue to rely on the anticipated US economic effects of proposed legislation provided by extremely bright, well-intentioned, abstract-thinking, academic economists with no real-world business experience. Relying on their assessments have cost the country dearly. Very lucrative tax incentives were granted to all US businesses, but it didn't trickle down to US job creation. Where have we heard that before?
And especially for the State of Washington's sake, a piece of this economic stimulus must be the ability for as many home owners as possible, including those underwater, to be able to quickly refinance their mortgages to the prevailing lower interest rates, and at little cost to refinance.
