If 2003 was a rebound year for Orange County’s largest public companies, then last year was the payoff.
The 50 largest publicly traded companies based here saw sales surge last year and turned their second profitable year in a row, according to this week’s Business Journal list.
The showing is a continuation of a comeback from the technology downturn and recession of a few years ago. Before 2003, the largest public companies here hadn’t recorded a profit since 1999.
The 50 companies saw collective 2004 sales of $97 billion, up 15% from a year earlier. Net income grew at an even faster pace, up nearly 150% from 2003, to $2.1 billion last year.
In 2004, the companies saw the cost cutting of prior years intersect with economic expansion, driving the heady profit gain.
The list ranks the largest public companies based here by sales for the most recent four quarters, most through Dec. 31.
No. 1 Santa Ana-based Ingram Micro Inc. is emblematic of the trends on the list. The technology products distributor saw 2004 revenue rise 13% to $25.5 billion. Ingram’s profit gain was even more dramatic, rising 47% to $220 million.
Ingram underwent a dramatic slimming down starting in 2001 when the bottom fell out of the technology sector. The company cut nearly 5,000 jobs in recent years and closed several warehouses.
No. 2 Cypress-based PacifiCare Health Systems Inc. also had a big 2004 after some reworking in prior years.
Revenue at the health plan operator rose 12% to $12.3 billion last year. Net income was up 25% to $303 million (see related story, page 1).
All but two of the top 10 companies saw higher sales and profits last year. The main holdout: No. 4 First American Corp. of Santa Ana. (No. 5 Irvine-based Gateway Inc. saw higher sales but posted a bigger loss.)
Title insurer First American did post higher revenue last year with an 8% gain to $6.7 billion. But the company’s profits took a 23% hit, coming in at $349 million. The falloff in mortgage refinancing took its toll on First American.
In all, 41 companies reported higher 2004 sales. Thirty-one reported higher net income or swung from a 2003 loss to a profit last year.
Two homebuilders, No. 6 Irvine-based Standard Pacific Corp. and No. 11 Newport Beach-based William Lyon Homes Inc., posted some of the most impressive gains, thanks to the still-hot housing market.
Standard Pacific’s 2004 revenue was up 42% to $3.4 billion. Net income was up 55% to $316 million.
William Lyon posted triple-digit gains on both counts: Sales were up 103% to $1.8 billion. Net income was up 138% to $172 million.
Another housing company, No. 12 Irvine-based New Century Financial Corp., also had a strong year. The company, which makes home loans to borrowers with imperfect credit, saw revenue rise 77% to $1.7 billion. Net income grew 53% to $376 million.
New Century and the homebuilders represent a counter trend to First American, which not only saw less profit last year but dramatically cut jobs in the past year.
So is First American a harbinger of shifting fortunes in real estate?
“Companies in the real estate sector have been driving much of the job growth in OC,” said Esmael Adibi, director and professor of economics at Chapman University in Orange. “As interest rates go up they won’t be hiring as many people.”
So far, the homebuilders and New Century are holding up, though they are showing some signs of slowing. All added jobs in the past year (though Standard Pacific was down by five people at its Irvine headquarters).
As for employment at the 50 companies, it was flat locally in the past year at 38,279 jobs but up 7% globally to 267,187 workers.
Big cuts at First American drove a loss of 127 jobs locally at the companies in the past year. Without First American in the mix, the 49 other companies actually added about 2,000 jobs for a 3% gain.
Companies that grew jobs here in the past year are in special areas, such as healthcare, mortgage lending or chip design.
The faster rate of job growth elsewhere at the companies isn’t surprising given OC’s high business costs. Acquisitions and expansion spurred the addition of nearly 17,000 jobs elsewhere.
Much of the gain came at No. 3 Fluor Corp., the Aliso Viejo engineering services company, which saw a 20% gain to nearly 35,000 workers. Most of the jobs are contract construction workers hired to work on projects Fluor’s overseeing, according to a spokesman.
In OC, Fluor cut its workforce by about 5% in the past year for a total of 1,379 people, a trend that’s played out locally for the company in the past few years.
The list includes a big debut: No. 5 Gateway. The computer maker moved from San Diego County to Irvine last year.
The move followed Gateway’s early 2004 buy of discount PC seller eMachines Inc. of Irvine. In a twist, former eMachines boss Wayne Inouye ended up running Gateway and is looking to turn around the company like he did eMachines.
Inouye’s shift away from company stores to big retailers helped spur a 7% gain in Gateway’s 2004 sales, which came in at $3.6 billion. But the company’s net loss worsened slightly, coming in at $568 million.
The headquarters relocation added local jobs for Gateway. The company went from about 150 people inherited from eMachines to 450 now after moving jobs from Poway.
The closure of Gateway stores and other cuts led to a massive drop in Gateway’s total workforce, which went from 7,300 workers a year ago to just less than 2,000 now.
The top four companies on the list all held their positions from last year. The latter half of the top 10 saw some jockeying.
Perhaps the most interesting: Irvine chipmaker Broadcom Corp. moved up a slot from last year to No. 9. The tech comeback and acquisitions helped boost Broadcom’s 2004 sales by 49% to $2.4 billion.
That helped Broadcom leapfrog Irvine drug maker Allergan Inc., which ranked No. 9 last year and now is No. 10. In the past, the two companies have battled for bragging rights as OC’s most valuable on Wall Street.
Last week, Broadcom had a market value of $9.9 billion, versus $9.3 billion for Allergan.
In another switch, Standard Pacific moved up a slot from last year, displacing No. 7 Western Digital Corp., the Lake Forest disk drive maker. Western Digital had a solid 12% sales gain to $3.3 billion but couldn’t keep pace with Standard’s torrid growth.
Ditto for a couple of surfwear companies. Anaheim-based Pacific Sunwear of California Inc. dropped three spots to No. 16, despite an 18% sales gain to $1.2 billion. The retailer sells surfwear and urban clothes at about a 1,000 stores nationwide.
PacSun couldn’t keep pace with one of its hottest suppliers: Huntington Beach-based Quiksilver Inc. The surfwear maker jumped passed PacSun to claim the No. 15 spot with a 30% sales gain to $1.4 billion.
A handful of companies from last year fell off this year’s list.
Health Care Property Investors Inc., the healthcare real estate investment trust company formerly based in Newport Beach, moved to Long Beach. Also moving was Calavo Growers Inc. The avocado grower and distributor formerly based in Santa Ana moved to Ventura County.
Exult Inc., the outsourced human resources services company formerly based in Irvine, was bought by Lincolnshire, Ill.-based Hewitt Associates Inc.
Newport Beach homebuilder Capital Pacific Holdings Inc. went private.
