6. Ceradyne Inc.
By SARAH TOLKOFF
Costa Mesa-based Ceradyne Inc. has made money doing things many consider priceless: protecting soldiers and fixing children’s smiles.
The maker of ceramics for body armor and dental braces placed among the top 10 on our fastest-growing companies list again this year, though it fell from No. 2 last year to sixth this time around.
For the 12 months through June 30, Ceradyne had sales of $435 million, up 562% from the same period in 2003.
In the second quarter, Ceradyne saw sales of $162 million, up 80% from a year earlier. Profit more than doubled from a year earlier, swelling to a quarterly record of $30 million.
The wars in Iraq and Afghanistan have been a big source of business for Ceradyne, which gets about three-fourths of its revenue from the Pentagon.
The company’s ceramics,made from chemicals, rather than natural materials,are used as armor to shatter bullets on impact and absorb the energy of a blast. Most are used in bulletproof vests for soldiers.
Ceradyne is looking to land the bulletproof ceramics in more trucks, tanks and aircraft.
The company, with a recent market value of $1.2 billion, made news this year when it created the first armored Mack truck cab for the Army.
Ceradyne, which employs some 1,284 people globally, has scored about $123.5 million in orders this year. The Army ordered more than $20 million in ceramic body armor in September alone.
Next year, Ceradyne could see sales of $665 million, executives said on a recent conference call with analysts. That would be up 11% from what’s expected for 2006.
“We are getting more and more comfortable with the volume of business next year,” Vice President David Reed said. “The Army has the funding. The Marines have the funding. The budget processing is very sound. We have been able to maintain our high percentage of that business based on our superior delivery and quality and lot testing.”
In July, the company said it won its largest contract yet, a five-year deal with the Army for ceramic armor inserts. The initial value is $60 million with a maximum of $612 million.
The order “indicates a continued demand for our lightweight ceramic body armor going out over a number of years,” Chief Executive Joel Moskowitz said.
Ceradyne plans to start construction by year’s end on a ceramics plant in Tianjin, China.
The company is set to build a 117,000- square-foot facility to supply ceramics for Chinese-made silicon solar energy cells. The plant should be up and running by early 2007, Moskowitz said.
“I believe that China, in a very short period of time, will become the No. 1 supplier of solar cells,” Moskowitz said in a conference call.
Meanwhile, Ceradyne continues to go after new markets.
The company struck a deal in July with Canada’s Alcan Inc. to make material for the storage of nuclear waste.
The company also bought an 86,000-square-foot plant in Quebec as part of its bid to go after nuclear storage business.
THE NUMBERS
Three-year growth: 562%
Yearly sales through June 30: $434.8 million
Yearly profit: $65.4 million
Market value: $1.2 billion
Employees: 1,284, 1,081 in OC
Company: ceramics for military, industrial use
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7. Impac Mortgage Holdings Inc.
By MARK MUELLER
Now comes the hard part for Impac Mortgage Holdings Inc.
Impac, a real estate investment trust that owns mortgages, benefited as much as any local company from the surging real estate market of recent years.
For the 12 months ended June 30, Newport Beach-based Impac had $1.6 billion in revenue, up from $194 million for the 12 months ended June 30, 2003, a 408% gain.
The company’s growth peaked in 2005, when Impac was No. 3 on the Business Journal’s list of the fastest growing companies with a 456% gain in three-year sales.
Since then, the housing market and the mortgage sector have slowed amid rising interest rates.
Impac still managed to grow revenue in the past year, with a 45% jump from a year earlier.
Profits also have grown. Net income for the latest 12-month period was $263.6 million, 17% higher than a year earlier.
The company’s No. 7 ranking on this year’s list is the highest of any of real estate company, many of which are wrestling with a slowdown.
“It’s been a big change this year, with the number of (mortgage) companies going out of business, consolidations and losses,” said Bill Ashmore, Impac president.
“Everyone is being affected” by the slowdown, he said.
Most notably, privately held Ameri-quest Mortgage, long the country’s largest lender to borrowers with imperfect credit, has undergone a major restructuring, including layoffs.
As a result, the Orange-based unit of ACC Capital Holdings Inc. has seen its loans cut by about 60% in the past year, the result of its dramatic shift in corporate strategy.
The biggest part of Impac’s business has seen its own slowdown.
For the first half of the year, Impac’s mortgage operations acquired or made $4.3 billion in mortgages. That’s down from $10.1 billion for the first six months of 2005.
“It became clear to us that we needed to make some changes amid the slowdown,” which could last a few more years, Ashmore said.
Among the changes: a consolidation of the company’s loan operations, a focus on getting sales executives and account representatives out on the street and cost cutting.
Next month, Impac is set to move to a new, high-profile office complex in Irvine, where it plans to bring together various operations.
Next year is likely to see more mortgage consolidation and a continued push from Wall Street players to grab a larger piece of Impac’s business.
This month, struggling Irvine mortgage lender ECC Capital Corp. said it was selling its subprime loan business to Bear Stearns Cos.
ECC, which has a market value of about $100 million, is selling its dominant unit for a mere $26 million.
“We’re not fearful of that (competition),” Ashmore said. “Some of these (Wall Street firms) will be more successful than others.”
THE NUMBERS
Three-year growth: 408%
Yearly sales through June 30: $1.6 billion
Yearly profit: $263.6 million
Market value: $750 million
Employees: 841, 705 in OC
Company: Mortgage real estate investment trust
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8. Smith Micro Software Inc.
By BRIAN WOMACK
Smith Micro Software Inc.’s recent growth catapulted the company to the top 10 of this year’s fastest-growing companies.
A year ago, Smith Micro was 49 out of 50 companies.
The Aliso Viejo company, which makes software that helps laptop computers get wireless Web access from cellular providers, turned in three-year growth of 380% with sales of $37.3 million for the 12 months ended June 30.
The company’s growth has spurred hiring. It now counts 85 Orange County workers, up 55% from a year earlier. Companywide, Smith Micro more than doubled to 130 people.
Founded in 1983 on fax software know-how, Smith Micro is seeing profits after years of red ink.
The reason: landing a contract in 2004 with New York-based Verizon Wireless, part of Verizon Communications Inc.
Smith Micro makes the software that gets laptops, digital assistants and wireless phones linked to the Internet on citywide networks.
Consumers and businesses have warmed up to the technology that allows them to log on to the Internet if they’re in a park, shopping center, gas station or anywhere else in many urban areas.
They no longer have to worry about finding local “hot spots” at a coffeehouse or airport.
Smith Micro has expanded sales to Verizon with software for its V-Cast music service. The offering is a sort of mobile iTunes, allowing users to buy songs that are beamed to their phones.
Smith Micro wasn’t always so lucky.
As with other tech companies, Smith Micro saw growth in the 1990s. That’s when its software helped old modems communicate with computers. Its biggest customer was U.S. Robotics Corp.
Sales grew with the Internet and PC sales.
But then Microsoft Corp. started offering its own modem software as part of Windows. Computer makers had no reason to go to a secondary source.
Smith Micro made some bad bets on the Internet economy. But by 2003 the company turned to wireless software.
It took its old modem software and reshaped some of it to help laptops, phones and other devices link with wireless networks.
Smith Micro has caught some heat from investors who would like to see the company get more of its sales from customers other than Verizon.
Verizon makes up about three-fourths of sales.
In the company’s July quarter, Smith Micro said revenue hit $12.6 million, up 277% from a year earlier.
Adjusted income hit a record at $3.2 million, up from $764,000 a year earlier.
Still, investors were unsatisfied with the results and drove the stock down 40% by mid-August.
Smith Micro has regained ground since.
A couple of analysts have helped buoy the stock this past month.
On Oct. 10, Chad Bennett of Miller Johnson Steichen Kinnard Inc. in Minneapolis said the company is expected to report robust results for the recently ended quarter due to the impressive demand for its music kit, according to NewRatings.com.
Also, Bennett said Smith Micro Software is poised to secure two carrier customers for another software music package by the end of the year.
Another key: the company recently filed for a $100 million shelf offering that is aimed at undertaking a large acquisition, Bennett said.
THE NUMBERS
Three-year growth: 380%
Yearly sales through June 30: $37.3 million
Yearly profit: $7 million
Market value: $160 million
Employees: 130, 85 in OC
Company: software for wireless Internet access
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9. California Coastal Communities Inc.
By MARK MUELLER
Irvine’s California Coastal Communities Inc., one of Orange County’s smaller housing developers and builders, has been able to report revenue growth that the bigger boys would be envious of.
The company had revenue growth of 337% for the three years ended June 30, going from $38 million to $167 million in the three-year period.
The company ranked No. 9 on this year’s list of the fastest-growing companies, down a notch from last year.
Profits for the company, which runs Signal Landmark and Hearthside Homes Inc., surged in the most recent year, largely due to a land sale.
As of June, the company’s 12-month net income was $27 million up 300% from $9 million posted a year earlier.
California Coastal finally is starting to make progress after years of delays at its biggest and most controversial project.
After getting approval last year, work is under way on 356 homes on 105 acres California Coastal owns on a mesa overlooking the Bolsa Chica wetlands in Huntington Beach.
In late 2005, the company sold a separate chunk of Bolsa Chica land for $65 million, which drove revenue and profits in the most recent year.
Model homes at Brightwater are set to start going up in the quarter with sales expected next year. The project should finish by 2009.
Homes are expected to sell for $1 million and up.
About 37 acres of the coastal land the company owns is set to become open space under a pact with the California Coastal Commission.
A 30-year fight over the wetlands pushed the company into bankruptcy more than a decade ago. It emerged in 1997. Despite progress at Bolsa Chica, the company still faces issues.
Two shareholders own 20% of California Coastal. In June, they urged a sale of the company or the Bolsa Chica land.
The investors believe the Bolsa Chica land would be more valuable if California Coastal sold the development rights to a bigger developer.
Management disputes their claims.
Despite revenue growth, the company has not been immune to the slow sales and order cancellations that have plagued other homebuilders in Southern California.
In August, Coastal California lowered sales expectations for the rest of 2006.
It now plans to finish 150 to 175 homes in Southern California this year, compared to previous projections of more than 200 homes. It completed 113 homes in 2005.
A slowdown in the market isn’t expected to have any effect on the Brightwater project, due to the site’s prime location and a lack of competition from other homebuilders in the area, Chief Executive Raymond Pacini said.
The company is also building in Riverside and San Bernardino counties, in Lancaster in northern Los Angeles County, and in San Diego County’s Rancho Santa Fe.
The average price of the company’s homes finished in the second quarter stood at $671,000, down from $775,000 a year ago.
THE NUMBERS
Three-year growth: 337%
Yearly sales through June 30: $166.6 million
Yearly profit: $26.8 million
Market value: $185 million
Employees: 61, 29 in OC
Company: housing developer
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10. New Century Financial Corp.
By MARK MUELLER
Revenue growth continues for Irvine-based mortgage lender New Century Financial Corp., though the subprime lending sector it focuses on is well off its peak of a couple of years ago.
New Century reported revenue growth of 267% for the three years through June 30, going from $750 million in 2003 to $2.7 billion in the most recent period.
That puts New Century at No. 10 on the list of fastest-growing companies.
But the company’s entry is down from the No. 4 spot last year, and the heady No. 2 ranking it garnered just two years ago.
Blame it on the slowing mortgage market and faster growth at other companies at the top of the list.
For the third quarter, New Century did $15.8 billion in loans, down 2% from the second quarter and 5% lower than a year earlier.
The bulk of New Century’s loans go to borrowers with imperfect credit, known as subprime mortgages.
The company has made a point to go after borrowers with more solid credit, though suprime loans were 95% of New Century’s total in the third quarter.
Subprime lenders are feeling the squeeze of competition, higher interest rates and the prospect of riskier loans going bad.
New Century has held up better than others.
Profits have grown, hitting $446 million for the 12 months ended June 30, up 110% from $212 million three years earlier. Profits were up 22% from a year ago.
The company has tried to increase the mortgage rates it charges borrowers and has cut commissions to brokers who steer loans its way.
The average New Century subprime loan was at 8.5% for the third quarter, according to Chief Executive Brad Morrice.
That’s up from 8.4% in the second quarter.
New Century has emerged as the top subprime lender in OC, which is home to several of the top players.
The company took the top spot locally after a pullback by Ameriquest Mortgage, part of Orange-based ACC Capital Holdings Inc.
New Century and Ameriquest were ranked as the top subprime lenders nationally at the onset of 2006, though Wells Fargo Home Mortgage since has passed both.
Ameriquest’s loans are off an estimated 60% in the past year, the direct result of a dramatic shift in corporate strategy.
New Century, on the other hand, has tried to grow through the sector’s downturn, grabbing some business Ameriquest has left on the table and going after more conventional mortgages.
Wall Street Worries
How much longer New Century can continue its growth is a source of debate on Wall Street.
A UBS analyst last month singled out New Century and fellow subprime lender Impac Mortgage Holdings Inc. of Newport Beach, No. 7 on our fastest-growing companies list, for downgrades.
UBS cited the likely impacts of rising interest rates, an inverted yield curve that makes short-term debt more attractive than mortgages, a slowing economy and more loan defaults in subprime loans in the next few quarters.
Next year, New Century is set to take up in an office building going up in Irvine near John Wayne Airport.
Los Angeles-based Maguire Properties Inc. has topped out the 530,000-square-foot tower at the Park Place office complex.
THE NUMBERS
Three-year growth: 267%
Yearly sales through June 30: $2.8 billion
Yearly profit: $446 million
Market value: $2.3 billion
Employees: 7,100, 2,025 in OC
Company: Mortgage lender
