Early Briefing: Not-So-Small Businesses
*U.S. government agencies made at least $5 billion in mistakes in their recent reports of contracts awarded to small businesses, with many claiming credit for awards to companies that long ago outgrew the designation or never qualified in the first place, a Washington Post analysis shows.
In the data, federal agencies counted Lockheed Martin and its subsidiaries as "small" by federal agencies on 207 contracts worth $143 million. The Navy claimed that $60 million in work it gave to Digital System Resources, a division of General Dynamics, went to a small firm -- a year after agencies were warned that DSR did not qualify. The Veterans Affairs Department said a computer glitch caused it to claim a $29 million payment to defense security giant CACI as a small-business award.
*When Treasury's bank program was announced last week, some bank executives said they didn't need the money and resented the federal intrusion. But in a number of earnings calls and interviews in recent days, several bank executives were more receptive.
Virginia Commerce Bank, which has 26 branches and $2.2 billion in deposits, said it is looking to add $25 million to its capital base by the end of the year. In the past, the company said it was considering issuing stock to raise that capital, but the bank said yesterday it may apply to the Treasury's program.
"Quite frankly, it is a very attractively priced alternative," Peter A. Converse, chief executive, told analysts.
In reporting third quarter earnings, Virginia Commence disclosed Tuesday that profit fell 60.9 percent in the third quarter to $2.7 million (10 cents per share). The bank said it had to put vast more money away to cover losses on its loans--especially land development and construction loans. Its provision was $8.3 million, compared to $910,000 a year ago.
Eagle Bank, a Bethesda-based firm with 15 branches and $1.5 billion in deposits, said it was leaning toward applying to the Treasury program even though executives said the bank was in strong financial shape. Cardinal Bank, a Tysons Corner-based bank with 25 branches and $1.73 billion in assets, similarly said it doesn't need the government's help. But chief executive Bernard Clineburg said his bank may still ask for it. "It'll be more of a political need than the need for capital," he said . "Is there going to be a perceived government stamp of approval?"
*Analysts said Lockheed Martin's space program could be affected as the Pentagon is expected to announce today that it is shelving a competition between the Bethesda company and Boeing to build a roughly $6 billion satellite communications system known as TSAT, the Transformational Satellite Communications System. The satellite system is a crucial part of some of the Pentagon's biggest future weapons programs, including the Army's Future Combat Systems, a new generation of weapons, combat vehicles, robots and sensors whose systems can communicate with one another through a wireless network.
*Managed-care company Coventry Health Care of Bethesda said Tuesday third-quarter profit fell by nearly half, to $85.5 million (58 cents a share) from $168.7 million ($1.08), and cut guidance, sending its shares down nearly 30 percent in after-hours trading. Revenue rose 18 percent, to $2.98 billion.
"Our results for 2008 are unacceptable, and a great disappointment to me and the entire company," Dale B. Wolf, chief executive, said in a statement.
The company cut its guidance for 2008 to a range with a midpoint of $2.55 per share from a range with a midpoint of $3.70 per share.
The steep drop in profit and guidance cut is due to higher-than-expected commercial medical costs and costs related to Medicare. The company also had lower-than-expected business volumes and higher-than-expected expenses. The company said it raised prices to offset the higher costs but the effect won't be felt until the fourth quarter and will be increasingly felt in 2009 and fully reflected in 2010. The company's results include $36.2 million in investment impairments and losses on investments, related to holdings in bankrupt Lehman Bros., as well as financial sector bonds and other investments.
Coventry also said it will delay 2009 guidance until mid-January due to the weak economy and 2008 guidance cut.
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