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THE TIMES 100 : The Best Performing Companies in California : THE BOTTOM LINE : Returns on the Top 100 Are Lower Than in 1990 : Profitability: A nasty recession took its toll on California's best-performing public companies.


As a group, California's most profitable companies during 1991 had something in common with everybody else: an off year.

The Times 100 list of California firms that return the best value to shareholders shows some healthy returns indeed. But reflecting hard times, the newest results pale next to the returns shown on the previous year's list.

The list ranks companies by two years' average return on equity. This year's winnner, Syntex Corp., clocked in at an admirable 46%. But last year's winner, Adobe Systems Inc., registered 56.7%.

Only eight companies this year had a two-year return on equity of 30% or more, versus 17 exceeding that figure in the previous year's list. And 19 of this year's Times 100 companies showed returns that wouldn't have made last year's list at all.

Overall, the latest median two-year return on equity was 17.7%. The two-year figure in 1990 was 20.8%. The year before, it was 21.8%. The trend is clear.

Who were the winners nonetheless? The companies topping The Times 100 were a diverse lot in 1991, with several new entrants displacing previous front-runners.

Many of the new companies are in the burgeoning high-tech computer and medical industries. Others are making repeat appearances and run the gamut from toy makers to drug companies, from retailing to investment concerns.

This year's No. 1 firm, Syntex, a Palo Alto pharmaceutical concern, "is a very well managed company, highly profitable with good margins," said Robert Hodgson, a pharmaceutical industry analyst with Cowen & Co. in Boston.

The company had a 19% increase in annual income in 1991 as calculated by MZ Group, the San Francisco business research firm that compiles The Times 100. Syntex's sales in 1991 were dominated by two anti-arthritis drugs, Naprosyn and Anaprox, which both saw sizable sales increases that year.

Patents for the two drugs expire in 1993. But the company is positioning itself to lessen the effects of that expiration, analysts say. The company is considering a conversion to over-the-counter formulations and supplying bulk chemicals to generic drug makers.

Several new drugs stand to supplement the anti-arthritis drugs. An oral form of Toradol, a non-narcotic pain killer that would compete with codeine, won approval in December from the Food and Drug Administration. Hodgson predicted that Toradol has the potential to generate $500,000 in sales by 1995. A second drug, Ticlid, used to treat strokes, won FDA approval last October.

To appear on The Times 100 list, companies must be based in California and have sales greater than $50 million. Their stock must have been traded publicly since December, 1990, on one of the major exchanges.

A company cannot be a real estate investment trust or a limited partnership. Further, a company's long-term debt-to-equity ratio must be less than 4 to 1, and a firm must not have reported a negative common shareholders' equity for either of the last two years.

The companies are ranked by two years' average return on equity, figured by dividing income by average common shareholders' equity. Our top ten companies appeared to resist the downward pull of the recession in 1991, with most reporting sales and income above 1990 levels.

The Top 10

1) Syntex has been in the top 10 of The Times 100 since 1988, last year at No. 3. Sales of its main anti-arthritis drugs continue to increase, and new drugs will soon come on the market. Other products include oral contraceptives.

2) Adobe Systems, Mountain View, was last year's No. 1 and continues to draw praise for good management, marketing and products. The dominant marketer of software that drives computer printers, Adobe last year took a further step in becoming the industry standard by striking a deal with Apple Computer to incorporate Adobe's type-font technology in the new Apple Macintosh system software. Royalties from Apple already account for about 23% of Adobe's revenue.

3) WD-40 Co., San Diego, has been a fixture atop The Times 100 since 1988 because of its popular primary product, an all-purpose household lubricant. Despite continuing strong competition from outsiders, WD-40 is managing to hold onto its market share, analysts say. Sales and income in fiscal 1991 fell slightly, as company officials had predicted. Even so, WD-40 moved up a notch on The Times 100 list.

4) Gap Inc., San Francisco, has won rave reviews for its innovative marketing of moderately priced, stylishly casual clothing in immaculate stores. While retailers nationwide reported falling sales during the height of the recession, Gap--which operates The Gap, GapKids and Banana Republic stores--reported consistent sales and income gains. That boosted the company to No. 4 from 13 in last year's Times 100. Gap plans further expansion in fiscal 1992, spending about $250 million to add 140 to 150 new stores, expand another 80 and make other improvements. The company is also reportedly mulling a new chain of specialty shoe stores.

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