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The Times 100: The Best Companies In California : The Bottom Line : Is Bigger Better?

April 24, 1988|DOUGLAS FRANTZ | Times Staff Writer

When it comes to counting total profits, big companies almost always fare better. But The Times 100 list turned up some surprises among the 25 California companies with the largest bottom lines in 1987.

For instance, Chevron had the largest revenue of any company in the state, with $26 billion. But its $1-billion profit left the San Francisco-based oil giant second behind an oil company not much more than half its size, Atlantic Richfield in Los Angeles.

Arco's profit of $1.22 billion on revenue of $16.3 billion was more than 20% higher than Chevron's net earnings, though its revenue was about 38% less than Chevron. Arco's profit was a whopping 6 1/2 times greater than Occidental Petroleum, the second-biggest revenue producer but only 19th on the profits list.

Arco is reaping the benefits of a streamlining that began three years ago with the shedding of marginal businesses and squeezing more profit out of its gas stations. The changes now seem uncannily prescient, and Arco is viewed as one of the industry's best-managed companies.

"We transformed the company into one that could compete very well in the world in which we find ourselves today, with oil at $18 to $20 a barrel," said Robert E. Wycoff, Arco's president and chief operating officer.

Arco seems likely to keep the pressure on Chevron in 1988, with first-quarter earnings topping those of the same period in 1987.

A fourth oil company, Unocal, made the list in 20th spot, along with four huge insurance companies--Firemans Fund, Farmers Group, First Executive and Argonaut Group.

Utilities posted hefty profits in 1987, earning a surprising four spots on the list, including Nos. 3, 4 and 5. A fifth firm on the list, Pacific Enterprises, includes a major utility, Southern California Gas.

Pacific Telesis Group, the parent of Pacific Bell and Nevada Bell, ranked third despite a 12% drop in net earnings. In the next spots were Southern California Edison and Pacific Gas & Electric; PG&E's income fell 36% in 1987 because of accounting changes affectings its Diablo Canyon nuclear power plant. The fourth utility on the list, San Diego Gas & Electric, ranked 21st.

Regulators try to ensure that utilities are profitable enough to attract capital from investors, but Sylvia M. Siegel, executive director of a ratepayers advocacy group, complained that 1987 was a bit too strong.

"All of these utilities in California are making off like bandits," she said.

Not every company that turned up on the profits list was a megacorporation. Walt Disney ranked only 33rd in revenue but soared to No. 8 on the profits ranking, with earnings of $392 million.

Two words summarize Disney's transformation into a cash machine: new management. The aggressive team brought in in 1984 by the new chairman and CEO, Michael D. Eisner, has exploited under-used assets, turned out box-office hits and increased revenue from the theme parks.

Apple, one of three high-tech firms on the list, also is not one of the 25 largest firms; it was 36th in revenue yet 16th in profits. Similarly, Times Mirror, parent of the Los Angeles Times, ranked 30th in revenue and 13th in profits.

Just as bigness was not a prerequisite for a spot the list, neither did it assure one. Looking at the performance of the state's big banks proves the point.

BankAmerica, the state's largest banking company, ranked fifth in terms of revenue in 1987 but lost $955 million, more than any other California company. Security Pacific, ninth in revenue and the second-largest bank, missed the profits list because the Third World debt crisis pounded its profit to a thin $15.7 million. Security Pacific would have reported earnings of $518 million without its reserves for foreign debt; that would have been good enough for seventh on the profits list.

Savings and loan holding companies are not burdened by foreign loans, and three showed up on the list--Great Western Financial, H. F. Ahmanson and CalFed.

TOP 25 ABSOLUTE PROFITS

'87 income Rank Company ($ millions) 1 Atlantic Richfield 1,224.0 2 Chevron Corp. 1,007.0 3 Pacific Telesis 950.0 4 So. Cal. Edison Co. 788.6 5 Pacific Gas & Elec. 688.5 6 Hewlett-Packard 644.0 7 Lockheed Corp. 436.0 8 Walt Disney Co. 392.3 9 Teledyne 377.2 10 Transamerica 351.2 11 Firemans Fund 300.7 12 Farmers Group 290.0 13 Times Mirror 266.5 14 Syntex Corp. 248.8 15 Pacific Enterprs. 224.6 16 Apple Computer 217.5 17 Great Western Fin. 210.1 18 H.F. Ahmanson 200.0 19 Occidental Petro. 184.0 20 Unocal 181.0 21 SD Gas & Electric 179.1 22 First Executive 177.8 23 Intel 175.5 24 Argonaut Group 170.8 25 CalFed 166.9

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