Let me first address the Largest Ones.....the huge number of 68 with Pretax Income or Pretax Loss of $100 mil or more in any of the most recent three years.
Included in these 68 Largest Ohio Corps was the dominant Procter & Gamble (P&G), whose $14.4 bil of June 2012 FYE Pretax Income, comprised 29% of the Total Pretax Income of all 68 of these Largest Ohio Corps.
P&G's current fiscal year earnings were actually down 3% from that of two years earlier. But this trend is a bit misleading since P&G never had the huge earnings drop in the US Deep Recession as the overwhelming majority of US firms did.
To show how P&G hung so tough in the Deep Recession, let me show it's annual Pretax Income (PTI) in each of the most recent five fiscal years.
PTI for FYE June 30, 2012.....$14,361 mil*
PTI for FYE June 30, 2011.....$14,997 mil
PTI for FYE June 30, 2010.....$14,868 mil
PTI for FYE June 30, 2009.....$14,413 mil
PTI for FYE June 30, 2008.....$14,885 mil
* excludes Goodwill Impairment Charge
When you review the above earnings numbers, you have to wonder just where is P&G's Deep Recession?.....it's clearly not there.
But check out just how well the Remaining 67 Largest Ohio Corps, with Pretax Income or Loss of at least $100 mil, performed in the most recent two years. These Remaining 67 Largest Ohio Corps generated Total Pretax Income of $34.9 bil in 2011, which was up by an off-the-charts 213% over that of two years ago in 2009. Whoa, Ohio!
Now I want to focus on the Smaller Ohio Corps, filing with the SEC, and with Pretax Income or Loss of at least $10 mil.
How did they do? Well, these 60 Smaller Ohio Corps generated total earnings growth in the most recent two years of an even more off-the-charts 627%. Whoa, Whoa, Ohio!
Clearly, all Ohio citizens should be very proud of their many superb Ohio companies, of all sizes. And particularly, all employees, the extended families of all employees, and the stockholders of these fine Ohio companies should be feeling very good about what happened with their companies during the most recent two years.
And yeah, the Obama Administration created a very robust US economic environment, which permitted these outstanding Ohio companies of all sizes to do just fantastically on the earnings front in the most recent two years.
But a second story here are the earnings results by year.
It is just incredible how much better the total earnings growth of both the Largest and the Smaller Ohio Corps was in 2010 over 2009, when the US House was under Moderate Democratic control, than it was in 2011 over 2010, when the US House was under Very Conservative Republican control, with Vice Presidential Candidate Paul Ryan and Speaker John Boehner being two of the key drivers of this Uncompromising, Very Conservative Republican Movement, which has such an extremely low approval rating in the eyes of US citizens.
The Remaining 67 Largest Ohio Corps other than P&G generated Total Pretax Income growth of 132% in 2010 over 2009. Then in 2011, this total earnings growth dropped markedly to 35% growth. Yeah, the total earnings growth of 132% in 2010 over 2009, when the US House was under Democratic control, was 3.8 times higher than the 35% total earnings growth in 2011 over 2010, when the US House was under Republican control.
But this was nothing when compared to what happened with the 60 Smaller Ohio Corps.
The 60 Smaller Ohio Corps, with Pretax Income of at least $10 mil, generated Total Pretax Income growth of an incredible 453% in 2010 over 2009. Then in 2011, this total earnings growth dropped down to 31% growth. Yeah, the total earnings growth of 453% in 2010 over 2009, when the US House was under Democratic control, was 14.6 times higher than the 31% total earnings growth in 2011 over 2010, when the US House was under Republican control.
And in the first half of 2012, the total earnings growth of the Largest Ohio Corps actually substantially decelerated much further from the first half of 2011.
So why is it that these Ohio 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 Uncompromising, 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 Ohio 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, much needed targeted individual income tax cuts, very targeted business income tax stimulus and wise, carefully-vetted US Government 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, 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 Uncompromising, 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 about six 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? Pretty much nothing of substance. I'm not kidding. On the other hand, if the US House were 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 Uncompromising, Very Conservative Republicans in the US House, led by people like John Boehner, Paul Ryan and Eric Cantor, 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 roughly a trillion dollars over the next decade, and creates almost no US jobs. This continual off-focus approach to governing by the Uncompromising, 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.....and did US businesses ever profit from this. And so did the US stock market, which has doubled in the most recent three and a half years. Corporate earnings drive stock prices.
So, just who are the losers from this lack of action on drastically needed US economic initiatives by these Republicans in the US House? Well, it's not just the unemployed, the underemployed, the dwindling middle class, and the people trying to get into the middle class. US Businesses were also big losers, by having their earnings growth substantially decelerate in 2011, and even more dramatically so in the first half of 2012.
So, how does the country get out of this horrible economic pickle?
Well, in Ohio, the key is to not just reelect Barack Obama as President, but also to reelect very effective, hard-working Democratic US Senator Sherrod Brown, and to also completely reverse the 2010 election of all of these Uncompromising, Very Conservative Ohio Republican US House Members.....they were well intentioned, but they have really harmed the country economically.
With a Moderate Democratic President, and with both a US House and a US Senate under Moderate Democratic control, and with these Democrats going out of their way to work across the aisle, I think you will see both wisely-designed business income tax reform and wisely-designed US Government investments in much needed infrastructure, as well as wisely-designed US Government investments in basic research in the key areas including energy, technology, medicine, and advanced manufacturing.
And a good chunk of this much-needed bold legislation will pass very quickly. The rest should pass in a reasonable amount of time.
But this time, I think the tax stimulus and investment stimulus legislation will be designed so that its economic benefits are more fairly shared among all of the country, not just the very wealthy and the largest and somewhat large businesses.
Due to the economic crater of a near depression in 2008 and in early 2009, the US economy is still so very fragile, even after much improvement of the past three years. Thus, I think the key to making the US economy great again is to give extremely robust tax incentives that entice US businesses of all sizes to grow the US middle class out by creating a substantial number of good-paying US full-time jobs, which will be lasting ones.
Frankly, you can't grow the US middle class out by just giving tax breaks to the US middle class and to the ones trying to get into the middle class. You have to focus on not just where the tax benefits first go, but where this money eventually ends up. Just like the payroll tax holiday and the original Obama Economic Stimulus, much of that money eventually ended up as additional profits of large and somewhat large businesses, and mostly stuck on corporate balance sheets, where it does the US economy absolutely no good. Or large Corps use this money to buy back their own common stock, to pump up their reported EPS, which helps corporate stock prices and corporate executive compensation and financial wealth, but which again does the US economy absolutely no good.
In a capitalistic system, to truly grow out the US middle class effectively in the long run, US businesses must be highly incentivized to do so. And wisely-designed legislation would make it imperative that when businesses are given these lucrative tax incentives, these businesses must be held accountable for growing the US middle class out. And if they don't do it sufficiently, like unfortunately what happened in the most recent three years, they should get their lucrative tax benefits recaptured. That is only fair. That is also prudent, wisely-designed legislation on the front end.
In deriving Ongoing, Core 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 without significant enough Total Revenues.
Below here is the Ongoing, Core Pretax Income (PTI) and Pretax Loss (PTL) of these 68 Largest and 60 Smaller Ohio Corps for each of the most recent three years, along with the related percentage changes.
|mils $s||mils $s||mils $s||2010||2009||2009|
|Ohio Largest Corps|
|The Dominant One|
|Procter & Gamble||Cincinnati||14,361||14,997||14,868||-4%||1%||-3%|
|The Remaining 67 Largest Corps|
|Cliffs Natural Resources||Cleveland||2,242||1,303||297||72%||339%||655%|
|Fifth Third Bancorp||Cincinnati||1,831||940||(991)||95%||195%||285%|
|Scripps Networks Interactive||Cincinnati||915||777||574||18%||35%||59%|
|Goodyear Tire & Rubber||Akron||618||(65)||(357)||1051%||82%||273%|
|Health Care REIT||Toledo||226||156||170||45%||-8%||33%|
|The Wimble Company||Cincinnati||197||167||60||18%||178%||228%|
|Abercrombie & Fitch||New Albany||186||229||120||-19%||91%||55%|
|Huntington Preferred Capital||Columbus||179||190||(12)||-6%||1683%||1592%|
|Applied Industrial Technologies||Cleveland||167||153||105||9%||46%||59%|
|Thor Industries||Jackson Center||147||164||33||-10%||397%||345%|
|Momentive Specialty Chemicals||Columbus||135||103||(100)||31%||203%||235%|
|First Financial Bancorp||Cincinnati||105||100||11||5%||809%||855%|
|Hyster-Yale Materials Handling||Cleveland||102||34||(47)||200%||172%||317%|
|AK Steel||West Chester||14||(102)||(98)||114%||-4%||114%|
|State Auto Financial||Columbus||(124)||25||(13)||-596%||292%||-854%|
|Total 67 Remaining Largest Corps||34,942||25,910||11,162||35%||132%||213%|
|Ohio 60 Smaller Corps|
|Cedar Fair LP||Sandusky||87||72||32||21%||125%||172%|
|Air Transport Services||Wilmington||76||63||45||21%||40%||69%|
|Nexeo Solutions (Before Interest Expense)||Dublin||73||56||53||30%||6%||38%|
|Chart Industries||Garfield Heights||71||27||78||163%||-65%||-9%|
|Ferro Corp||Mayfield Heights||66||47||(44)||40%||207%||250%|
|National Interstate Corp||Richfield||51||45||60||13%||-25%||-15%|
|Performed Line Products||Cleveland||46||30||21||53%||43%||119%|
|Rex American Resources||Dayton||45||29||14||55%||107%||221%|
|Community Choice Financial||Dublin||40||53||38||-25%||39%||5%|
|Olympic Steel||Bedford Heights||40||4||(99)||900%||104%||140%|
|Park Ohio Holdings||Cleveland||32||15||(12)||113%||225%||367%|
|Multi Color Corp||Batavia||31||28||15||11%||87%||107%|
|Commercial Vehicle Group||New Albany||29||5||(46)||480%||111%||163%|
|Davey Tree Expert||Kent||26||24||24||8%||0%||8%|
|Diamond Hill Investment Group||Columbus||23||20||18||15%||11%||28%|
|Bravo Brio Restaurant Group||Columbus||22||0||10||NM||-100%||120%|
|First Defiance Financial||Defiance||22||11||10||100%||10%||120%|
|Core Molding Technologies||Columbus||16||5||2||220%||150%||700%|
|Farmers National Banc||Canfield||12||12||7||0%||71%||71%|
|R. G. Barry||Pickerington||12||15||11||-20%||36%||9%|
|Everflow Eastern Partners||Canfield||11||14||10||-21%||40%||10%|
|Farmers & Merchants Bancorp||Archbold||11||9||9||22%||0%||22%|
|United Community Financial||Youngstown||(4)||(39)||(23)||90%||-70%||83%|
|Oxford Resource Partners||Coshocton||(7)||5||26||-240%||-81%||-127%|
|Associated Estates||Richmond Heights||(10)||(9)||(11)||-11%||18%||9%|
|Forest City Enterprises||Cleveland||(18)||(33)||(30)||45%||-10%||40%|
|Associated Materials||Cuyahoga Falls||(47)||6||(6)||-883%||200%||-683%|
|Total all 60 Smaller Corps||1,243||946||171||31%||453%||627%|