THE TIMES 100 : The Best Performing Companies in California : A GUIDE TO THE GUIDE : How We Did It, How to Use It: The Times 100

This fifth edition of The Times 100, our annual inquiry into the performance of companies headquartered in California, was produced using data collected and analyzed by MZ Group, a business research and publishing firm in San Francisco.

MZ Group gathered information on 696 California-based companies whose stock is publicly traded, relying on databases, corporate and government reports, a mail survey and phone calls to companies. Certain historical and other data is provided by Standard & Poor’s Compustat Inc., Warner Computer Systems and IDD Information Services.

The tables generated by MZ were closely reviewed by Times editors and reporters. Criteria for the rankings were developed by The Times and MZ Group jointly.

MZ Group used financial data as reported at a company’s fiscal year-end for years 1990 and, if available, 1991. If 1991 fiscal year-end data had not been reported to the Securities and Exchange Commission, the most recently reported four quarters were used. (Page 54 lists these exceptions.) For those companies with a year end between January and September, the most recently reported four quarters were used. Data for previous periods was recomputed to be comparable.

Financial data from 1990 has not been restated for acquisitions and/or discontinued operations. This allows readers to see actual historical growth for the company, whether from internal growth or through acquisitions.

A few companies have majority owned subsidiaries that are traded as separate entities. The financial results for these subsidiaries are presented independently as well as on a consolidated basis in the accounts of the parent companies. This applies to Unocal (parent) and Union Exploration Partners; and to ICN Pharmaceuticals (parent) and SPI Pharmaceuticals.

One California-based company included in the analysis, Union Bank, is 80% owned by Bank of Tokyo but is traded as a separate entity.

General Criteria

All companies must be publicly traded on one of the major exchanges--New York, American or NASDAQ/OTC--and be headquartered in California.

Income is defined as after-tax income from continuing operations and excludes extraordinary items, and gains or losses from discontinued operations.

Sales exclude excise taxes, extraordinary income, revenue from discontinued operations, and other income, such as interest. For banks and savings and loan associations, revenue equals the sum of interest and non-interest income. For insurance firms, revenue equals the sum of earned premiums, realized gains or losses from investments, and net investment income. For all charts except the stock market performance charts, companies must have had at least $50 million in 1991 sales.

Section Notes

The Bottom Line--Return on equity measures the profit a company earns for every dollar common stockholders have invested in the firm. Return on equity is defined as income available to common shareholders divided by the average common shareholder’s equity. Income available to common shareholders is calculated by subtracting preferred dividends (if any) from income from continuing operations. The Times 100 table ranks companies by the average return on common equity for the past two years.

For The Times 100 table, companies must have met these criteria: publicly traded since December, 1988; sales in 1991 greater than $50 million; a profit from continuing operations in 1991 and 1990; no negative common equity for each of the past three fiscal years, and not more than twice as much long-term debt as total shareholders’ equity.

Companies in the Top 25 and Bottom 25 in Absolute Profits must have been publicly traded in 1990. Just as the Top 25 in Absolute Profits ranks companies by dollar amount of profits from continuing operations, the Bottom 25 ranks companies by dollar amount of loss. The Top 25 Banks and S&Ls; table shows return on assets, which measures the percentage profit for every dollar in assets. Companies must have been publicly traded in 1990 with total assets exceeding $1 billion. Return on asset in The Times’ list may differ from what is disclosed by the institutions themselves because MZ divides income by the average of assets for the same reporting period. The figure thus reflects profit earned on a constantly growing asset base.

The Top 25 in Profit Margins measures the percentage profit for every dollar in sales. Companies must have been publicly traded in 1991 with total sales exceeding $50 million.

The Born Again table shows companies that have had the greatest turnaround from a loss in 1990 to a profit in 1991.

The Nose Dives table shows companies that have suffered the greatest decrease in earnings from a profit in 1990 to a loss in 1991.

As with the other charts shown in the study, results for previous years have not been restated.

Real Estate Investment Trusts and Limited Partnerships were not eligible for inclusion in this section, because income for these companies, which is not taxed at the company level, is not comparable to after-tax income for corporations.

The Giants--The Sales 100 ranks companies by net revenue. For banks and savings and loan associations, revenue equals the sum of interest and non-interest income.

The Biggest Service companies ranks service firms by net revenues. Service companies include entertainment, leisure, media, retail, utility, transportation, wholesale, business and personal-service, investment, real estate and insurance companies.

View From the Street--To be included, a company’s stock must be available for trading on the New York or American stock exchanges, NASDAQ or over the counter among the major listings, and must have been available for trading on April 10, 1992.

Market value is the company’s stock price times the number of outstanding shares and generally reflects the esteem in which investors hold a company’s stock and the confidence they have in its future success. Book value is total stockholders’ equity (assets minus liabilities). Book value is shown as of the latest fiscal year-end, or if not available, the most recently reported quarter.

Companies on the Favorites and Forlorn tables must have had 1991 sales of at least $10 million.

For the Charging Ahead and Falling Behind tables, a company’s stock price on April 12, 1991, must have exceeded $2. Stock prices as of April 12, 1991, have been adjusted to reflect stock splits and stock dividends.

For the Lowest Priced and Highest Priced lists, a firm’s market value on April 10, 1992, must have exceeded $100 million.

The Divvying It Up list of dividend yields ranks companies on the ratio of their current indicated annual dividend to their stock price as of April 10, 1992. In most cases this figure is the latest quarterly dividend multiplied by four. There is no guarantee that the same amount of cash dividend will be declared for subsequent quarters this fiscal year or that a dividend will be declared every quarter. The list excludes real estate investment trusts and master limited partnerships because their dividends often include a return of capital.

The table of Top Performing Initial Public Offerings ranks companies that had their initial public common stock offering in 1991 by the stock price appreciation between the initial offering date and April 10, 1992.

Rising Fortunes--For the Growth 100, sales growth can come either by generating new business or acquiring other firms. A company must have been publicly traded since 1990, with 1990 sales exceeding $30 million.

Companies eligible for the Fastest Profit Growth table must have been publicly traded and shown a profit from continuing operations for the past two years. Income in 1990 from continuing operations must have been at least $10 million.

The Human Factor--California headquartered companies are ranked by the number of full- and part-time employees worldwide at year-end excluding consultants and contractors. Employment figures are estimates provided by the company. If year-end results were not available, employee estimates are from the latest completed quarter. The table excludes companies that are large employers in the state but are headquartered elsewhere.

The Most Productive Employees list ranks only the top companies in each sector by revenue per employee (worldwide), but the group average is computed from figures on all the companies in the industry that were surveyed.

Hiring trends were obtained from the companies, which used the following guideline when responding to the question: “What is your hiring outlook for the upcoming 12 months?”: Increasing (up more than 5%), neutral (between 5% up or down), reducing (down more than 5%).

The Regions--Same criteria used for the main tables.

Stock Exchange Abbreviations

Stock exchange symbols are as follows: NYSE/New York Stock Exchange, Amex/American Stock Exchange, NAS/National Assn. Securities Dealers Automated Quotation System and OTC/over the counter.

The company stock symbol refers to its stock ticker symbol and is not necessarily the way the company is listed in stock tables in this newspaper.