The Times 100 : The Best Performing Companies in California : THE BOTTOM LINE : Tech, Service, Retail Outfits in a Rebound

Companies taking comeback of the year honors include a diverse group of concerns representing California’s defense, high-technology and biotechnology, manufacturing, retail and service industries. Meanwhile, the state’s financial services industry dominated the list of nose dives of the year. Several companies--insurance concerns, banks and savings and loans--plunged spectacularly from profitability into red ink.

Atop the Born Again list this year is Titan Corp., a high-technology defense contractor that took a $14.3-million loss in 1988 to restructure and divest operations that did not fit its long-term strategy. It reported a modest $2.2-million profit resulting from the restructuring that included reducing overhead cost and discontinuing an unprofitable line of business.

Amgen Inc., a Thousand Oaks biotech firm, made the second-best comeback of the year, reporting a $3.8-million profit, contrasted with an $8.2-million loss in 1988. Amgen, which had invested heavily in research, began fully marketing its first commercial drug only last year. It won Food and Drug Administration approval to sell erythropoietin, or EPO, a gene-spliced version of a naturally occurring protein in the kidney that triggers the production of red blood cells. The drug was approved to treat anemia, particularly for patients undergoing kidney dialysis.

Other notable comebacks included Coherent Inc., the world’s largest maker of scientific lasers and laser systems used in industry, science and medicine. The Palo Alto company’s bottom line benefited from greater efficiencies in manufacturing, a $2-million licensing payment and a gain of $1 million from the sale of a foreign subsidiary.

Coherent was followed on the list by Masstor Systems Corp., a data storage concern; Wavetek Corp., which makes measuring equipment, and Beeba’s Creations Inc., a maker of women’s, infants’ and children’s clothing and accessories.

California’s financial services industry took a beating in 1989, which was reflected in the ranking of the biggest Nose Dives of the year. The falling junk bond market was a major issue underlying the trend.

First Executive Corp., a Los Angeles life insurance holding company, distinguished itself as the biggest Nose Dive of the year by far, reporting a loss of $831.4 million, contrasted with a $204.5-million profit in 1988. It was forced to take an $859-million writedown on its portfolio because of the deteriorating value of junk bonds. In the heady days of the 1980s, First Executive grew by offering high returns to buyers of life insurance and annuity products.

Columbia Savings & Loan of Beverly Hills didn’t take quite as spectacular a plunge, but the company’s $591.1-million loss after a $65-million profit in 1988 was serious enough to cast doubt on its survival as an independent firm or its chances of escaping a governmental takeover. Like First Executive, Columbia rose to prominence in the 1980s by investing heavily in high-yield, high-risk bonds sold by Drexel Burnham Lambert. It wasn’t the only thrift that invested in junk bonds after deregulation of the industry, but it had the largest holdings last year.

Banks and thrifts accounted for three other notable Nose Dives of the year, but junk bonds were not the only reason for their woes.

Great American Bank of San Diego, which lost $263.4 million, suffered after its poor forecast of the future of Arizona’s real estate market. Great American acquired Home Federal Savings & Loan of Tucson in 1986, only to be stuck with bad loans in 1989, resulting mostly from that state’s overbuilt and deflating real estate market.

Imperial Corp. of America filed for Chapter 11 protection earlier this year after regulators seized its ailing Imperial Savings subsidiary. The San Diego-based thrift, which was not affected by the Chapter 11 filing, had a deteriorating junk bond portfolio, but it also had acquired a portfolio of bad automobile loans.

First Interstate Bancorp recovered from a huge loss in 1987--reflecting provisions for loan losses in developing countries--to make the 1988 comeback list, but the Los Angeles-based bank holding company plunged into the red again in 1989. Its latest problems relate to Arizona’s real estate bust and the sagging Texas economy, said Dan Williams, an analyst with Sutro & Co. in San Francisco.

After First Interstate failed to acquire BankAmerica, it was “hell bent for further expansion,” Williams said. It bought Allied Bancshares in 1988. Allied was not as troubled as other Texas banks that were stuck with bad commercial and real estate loans when the state’s oil boom went bust, Williams said. But that meant that First Interstate also did not get the financial protections that other bank holding companies received when they acquired troubled banks that were distressed enough to have been taken over by federal regulators, he said.

BORN AGAIN

Companies ranked by absolute dollar change from loss to profit in one year.

Change 1989 income 1988 loss in income Rank Company ($ millions) ($ millions) ($ millions) 1 Titan 2.2 (14.3) 16.5 2 Amgen* 3.8 (8.2) 11.9 3 Coherent 8.6 (1.3) 9.9 4 Masstor Systems 1.6 (7.4) 9.0 5 Wavetek 0.9 (7.6) 8.5 6 Beeba’s Creations 4.1 (4.1) 8.2 7 Pacific Scientific 3.4 (4.7) 8.0 8 Herbalife International 0.7 (6.3) 7.0 9 Pacesetter Homes 2.6 (0.7) 3.3 10 Clothestime 0.5 (2.8) 3.3

* See exceptions, page 46.

Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.

NOSE DIVES

Companies ranked by absolute dollar change from profit to loss in one year.

1989 1988 loss income Rank Company ($ millions) ($ millions) 1 First Executive *** (831.4) 204.5 2 Columbia Savings & Loan (591.1) 65.0 3 Great American Bank (263.4) 50.3 4 First Interstate Bancorp** (151.9) 102.4 5 Imperial Corp. of America (164.2) 10.7 6 Daisy Systems* ** (140.1) 5.3 7 Coast Savings Financial (74.2) 47.8 8 American Medical Intl.* (12.8) 98.5 9 ICN Pharmaceuticals (86.7) 4.1 10 Ashton-Tate** (28.6) 47.8

Change in income Rank ($ millions) 1 (1,036.0) 2 (656.1) 3 (313.7) 4 (254.3) 5 (174.9) 6 (145.4) 7 (122.0) 8 (111.3) 9 (90.7) 10 (76.4)

* See exceptions, page 46.

** See company notes, page 45.

*** 1988 income is shown as historically reported. In 1989, company restated ’88 income as $174.5 million.

Source: MZ Group. Certain historical data is from Standard & Poor’s Compustat Inc.