THE TIMES 100: THE BEST COMPANIES IN CALIFORNIA : THE BOTTOM LINE : BIG MARGINS : Argonaut Group Leads California’s Public Companies
Argonaut Group Inc. boasted the fattest profit margin of California’s publicly traded companies last year, bringing nearly one dollar of every three dollars in revenue down to the bottom line.
“But you’ll never see that again,” says Roy Little, vice president and treasurer of the Los Angeles-based holding company for a pair of property and casualty insurers. Insurers, he notes, must report capital gains on their investment portfolios, “and in 1987 we were incredibly smart--or lucky--investors.”
Argonaut’s net income of $170.8 million included $105.3 million in gains on the sale of investments. Even without the investment gains, Argonaut would have boasted a 15.4% profit margin, high enough to rank 17th among publicly traded companies. “That’s still pretty snazzy,” says Little.
Franklin Resources, whose two-year average return on equity of 80% put it on top of The Times 100, starred in this category, too. It posted the second-highest profit margin--28.5%. Charles B. Johnson, president and chief executive of the San Mateo mutual fund management concern, noted that high profit margins are common among companies that provide professional services.
Homestake Mining’s third-ranked 28.4% profit margin was artificially inflated by the $95-million profit the San Francisco-based company booked on the sale of a 20% stake of its Australian gold mining unit. Still, said Stephanie Kushner, manager of financial services, “absent Australia, our earnings from operations were about double.”
Many other industries were represented among the 25 publicly traded companies with the highest profit margins. The list included two computer software publishers--Autodesk and Ashton-Tate--and entertainment powerhouses Aaron Spelling Productions and Walt Disney Co.
In health care, Syntex, Community Psychiatric Centers, Alza and Genentech made the list, as did “boutique” semiconductor makers Chips & Technologies and Cypress Semiconductor. Chips & Technologies sells sets of chips that allow manufacturers to build machines compatible with IBM’s personal computers.
A utility also made the cut: Southern California Edison, with a 14.4% profit margin in the No. 20 spot.
In general, the profit margin leaders tended to be the smaller companies in The Times’ database. Not one of the biggest 25 companies in terms of sales were profitable enough to crack the list of the top 25 in profit margins. Of the top 50 in sales, only two--Disney and Southern California Edison--made the cut.
TOP 25/PROFIT MARGINS Ranks profits from continuing operations as a percent of sales.
% ’87 Rank Company return 1 Argonaut Group 32.2 2 Franklin Resources 28.5 3 Homestake Mining* 28.4 4 Intl. Lease Fin. Corp. 27.4 5 Autodesk 25.9 6 Farmers Group 25.6 7 Syntex Corp. 22.0 8 Commty. Psych. Ctrs. 21.0 9 Alza 19.7 10 Genentech Inc. 18.3 11 Hilton Hotels 17.2 12 Armor All Products 17.1 13 Chips & Technolgs. 16.1 14 Ashton-Tate 16.1 15 Acuson 15.9 16 Dionex 15.8 17 WD-40 15.5 18 Cypress Semicndtr. 14.9 19 Seagate Technology 14.6 20 So. Cal. Edison Co. 14.4 21 Aaron Spelling 14.3 22 Carolco Pictures 13.8 23 Walt Disney Co 13.6 24 SPI Pharmaceuticals 13.6 25 SJW Corp. 13.5
* Reflects $95-million gain from sale of 20% interest in Homestake, which was treated as income from continuing operations.
