The 100 largest private companies in L.A. County, mirroring the national economic recovery, finished 2003 with modest revenue gains and lagging job growth. The pickup in revenues continued through the first six months of 2004, with 75 percent of those reporting sales on track to beat last year’s total.
The biggest private firms, a diverse group of service, manufacturing and retail businesses ranked by revenues, had aggregate sales of $61.9 billion, 6.4 percent higher than the tally of last year’s 11 largest, according to a Business Journal survey.
At the same time, employment at the 31 companies that reported payrolls both years rose less than half a percent, with 19 of the businesses showing lower figures.
“There is a trend of increasing revenues with fewer and fewer employees,” said Lindsey Alley, director of Houlihan Lokey Howard & Zukin’s mergers and acquisitions group. “In 2003, when we started to see the economy come back, companies maintained their employee numbers. We’re likely to see more hiring in 2004, and by 2005 and 2006 there will be a more linear relationship between revenues and employment.”
M & A; activity had a hand in shaping the list, with this year’s new No. 1, MDFC Holding Co., vaulting to the top of the list with $5.6 billion in revenues. The company was formed when billionaire David H. Murdock took Dole Food Co. private in a $2.5 billion deal in March 2003. MDFC is now the holding company for Dole, the world’s largest producer and marketer of fresh and frozen produce and packaged food; Castle & Cooke Inc., a real estate firm; and Flexi-Van Corp., a road and rail transportation equipment leasing operation.
MDFC supplanted last year’s top revenue generator, Platinum Equity LLC, a holding company started by Tom Gores in 1996 to acquire technology companies.
Platinum’s aggregate 2003 revenues were $4.5 billion, up 12.5 percent over the year earlier, although a string of acquisitions this year may propel Platinum back to the top of the 2005 list. The company is on pace to hit $8 billion in gross sales thanks to eight acquisitions in 2004, including the February purchase of Hays Logistics, a European transportation and logistics firm with 2003 revenues of $1.4 billion; the August acquisition of DyStar, a producer of textile dyes with 2003 revenues of $1 billion; and the October purchase of CompuCom, an information technology services provider with revenues of $1.4 billion.
“Lower interest rates have had a dramatic effect on mergers and acquisitions,” said Alley. “It provides lower-cost capital to companies and allows them to make acquisitions that are larger in size or do it more comfortably because they have a lower hurdle to make returns.”
Lure of IPOs
More changes are afoot, as the revival of the public markets has lured a number of companies into initial public offerings. Herbalife International Inc. (No. 20) has filed for an IPO and, if it is successful, will disappear from the list. And DreamWorks SKG (No. 13) has filed with the Securities and Exchange Commission to sell its animation division to the public. With $300 million in revenues last year, the loss of the animation group will crimp the parent’s ranking next year.
To qualify for the list, companies must be for-profit, have corporate headquarters in Los Angeles County, and cannot be a division or subsidiary of another company. The information was provided primarily by the companies themselves, though several companies declined to participate. In those cases, outside data sources were used to generate a best estimate of revenues and employment.
Of the firms that appeared on last year’s list, five grew by 50 percent or more, three of them in the real estate business.
Larwin Co., an Encino-based homebuilder and land developer, reported 2003 revenues of $171 million, more than twice the $81 million it generated the year earlier.
Denis Cullumber, the company’s president, attributed the gains to a push outside of L.A. into regions that allow higher volume sales of lower-priced homes.
“We see our growth as coming primarily from the Central Coast, where there’s very little competition from large homebuilders,” Cullumber said. “They’re discouraged there because of how long it takes for entitlement and it’s a no-growth area.”
Larwin has shifted its land acquisition and capital to the Antelope Valley in Los Angeles County, and Ventura, Santa Barbara and San Louis Obispo counties, Cullumber said.
Other big revenue gainers were general contractors Bernard Bros., up 71 percent over the year earlier, and Moorefield Construction Inc., up 59 percent. The five biggest gainers were rounded out by United Oil and Robinson Helicopter Co.
Overall, 65 of the 100 largest private companies had year-over-year revenue gains, 13 reported lower revenues than the year earlier and 15 remained essentially flat (nine did not provide year-over-year revenues).
Among those that saw revenues decline, sales at four were more than 25 percent below the year-earlier levels.
The group was led by Herbalife, which posted 2003 revenues of $744 million, 32 percent lower than the $1.09 billion it generated in 2002. Engineering firm Parsons, DreamWorks and big box retailer Super Center Concepts Inc. rounded out the list of those with the largest revenue declines.
The decline by Super Center Concepts, based in Santa Fe Springs, was a bit of an anomaly on this year’s list.
The food, beverage and grocery sector was the largest group on the list with 19 entrants. Of that group, the 14 that reported revenues in both 2002 and 2003 saw average gains of 7.4 percent.
Among the 48 companies that reported revenues through June 30, 2004, 36 were on pace to beat last year’s tally and eight were coming up short. The others were essentially unchanged.
