L.A.’s Big Private Firms Post Slight Gains in Revenue
By ANDY FIXMER and NICOLE TAYLOR
Staff Reporters
Still suffering the effects of the recession, nearly than half of the largest private companies in Los Angeles County reported flat or declining year-over-year revenues in 2002, the weakest performance in at least six years.
Those that grew last year, 44 in all, did so largely through acquisitions. Fifteen firms did not report 2001 revenues.
All told, the 100 largest private firms in L.A. County generated an aggregate of $58.2 billion in revenues, a 5.2 percent increase over the year earlier, according to the annual Business Journal survey. (Without the inclusion of the top company on the list, Platinum Equity LLC at $4 billion in 2002 revenues, the results would have been essentially flat.)
With growing indications that the economy is largely on the mend, it’s likely that the 2003 numbers will be considerably stronger. Of the 30 companies that supplied revenues for the first six months of this year, two thirds appeared on track to beat last year’s numbers, if only modestly. At least eight companies are looking at potential double-digit growth from a year earlier.
The 2002 numbers illustrate just how soft the economy had become before the turnaround
even in Los Angeles County, which with its large numbers of small- and medium-sized businesses is generally considered more insulated than other large metropolitan areas.
Data for the private companies list were gathered primarily from the companies themselves, with supplemental information from various databases. To qualify, a company must be for-profit, headquartered in Los Angeles County and not be a division or subsidiary of another company. Ad agencies, banks and law firms are not included because they don’t report revenues in a conventional manner.
Platinum Equity, formed in 1996 by investor Tom Gores, posted 25 percent revenue growth in 2002 much of it from acquisitions. (Platinum, which did not submit information for inclusion in last year’s list, reported 2001 revenues of $3.2 billion, which would have tied it for the No. 2 spot.)
Last year, Platinum bought two radiology suppliers and merged them into a company called SourceOne Healthcare Technologies, which with $1.2 billion in 2002 sales took a 40 percent share of its market, according to the company.
Its position in the investment and financial services sector helped raise the profile of the seven-member group, which averaged 4.5 percent revenue growth in 2002. It trailed only the red-hot real estate and construction sector, whose 13 members averaged 12.4 percent revenue growth in the same period.
The strong showing on the so-called FIRE industries finance, insurance and real estate reflected national trends, according to the National Federation of Independent Business, an industry group with more than 6,000 members.
“As a rule of thumb, if you are in the service sector then you are doing well,” said William Dunkelberg, NFIB’s chief economist. “But if you are making goods and selling goods, then life has been tough for you.”
Bucking the trend
For most companies, the lackluster results reflected economic weakness that began in 2001 and has only recently shown signs of improving.
It was true for ECapital Corp., the biggest decliner in the financial services sector, with 22.6 percent lower year-over-year revenues.
“I would expect revenues to go back up,” said John Matise, vice president of ECapital, a private equity and investment firm whose 2002 revenues fell to $113 million. “We’ve already seen a change in that.”
Following Platinum Equity’s lead, the biggest revenue gainer by percentage was STA Travel Inc., which through acquisitions managed to post a 74.5 percent increase from the prior year.
While the travel business largely languished, the company’s revenues increased, at $268 million, was fed by the 2002 purchase of competitor Counsel Travel, according to STA President Nick Thomas.
“I think everybody in the travel industry has had to adjust but that doesn’t mean you can’t continue to grow and grab market share,” he said. “We have been able to grow through acquisition.”
The 31 companies that saw revenues slide in 2002 from year-earlier levels did manage to slow the rate of decline. The average among decliners this year was 10.4 percent, better than the 20 percent average drop in 2001.
Not surprisingly, those effects and the wider economic slowdown took their toll on the manufacturing sector, which managed just 1 percent revenue growth. The retail and food sector saw revenues fall on average by 0.3 percent.
California Dairies Inc., an Artesia-based cooperative whose farmers are responsible for 40 percent of the state’s dairy production, fell 16.5 percent, to $1.87 billion.
“The price of milk was down,” said J.P. Cativiela, president of Dairy Cares, an industry trade group. “What happened to CDI happened to everybody last year. But milk prices have started to come back up and things should be better this year.”
Lower milk prices did little to slow revenue growth at Trader Joes’s Co., a specialty food and beverage retailer based in Monrovia where 2002 revenues climbed nearly 12 percent to $2.1 billion.
L.A.’s consumer products companies posted a respectable 3.1 percent gain in revenues. Overall, apparel companies led the category in sales growth. John Paul Richard Inc., a women’s apparel manufacturer based in Calabasas, saw its revenues surge 20 percent to nearly $130 million with the success of its Fever Jean line.
And revenues at fast-growing Forever 21 Inc., a manufacturer of trendy women’s apparel, rose more than 33 percent to $400 million as the company opened 25 new stores bringing the total number of locations to 146, the majority of them in shopping malls and expanded many of its existing stores.
Low interest rates fed the brightest spot in L.A.’s private companies landscape, real estate and construction.
Engineering and construction management behemoth Parsons Corp. posted the greatest gains in the sector, its $2.4 billion in 2002 revenues besting the year-earlier figure by 60 percent. Southern California’s housing boom accounted for much of Santa Monica-based Morley Builders’ 10.1 percent increase in revenues, to $175 million, according to Charles Muttillo, the company’s vice president and general contracting manager.
Entertainment and recreation companies had the next highest revenue growth, with a 7.5 percent jump in earnings as a category. DreamWorks SKG’s revenues improved by 5.9 percent in 2002, to $2.4 billion.
