THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : THE BOTTOM LINE : 5 Firms That Went From Red Ink to Black : Top Turnaround Companies Form a Diverse Group
There’s nothing like a resurrection story to get an investor’s pulse jumping, and there were some doozies in 1993, led by the glitz of gold and the lure of dinosaur-generating computers.
High on the list of those that rose Lazarus-like in 1993 were several companies with operations that were anything but moribund but whose balance sheets were afflicted by huge non-recurring charges in 1992.
Even so, the swing from chump to champ is a pretty pleasant one, most companies would agree.
“We would like people to stand up and brag about us because they were kicking us pretty hard a few years ago,” said Homestake Mining spokeswoman Janet Bley.
Here are California’s top five turnaround companies, ranked according to their change from loss to profit in one year, as compiled by Star Services, a San Francisco business research firm.
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1. Homestake Mining of San Francisco, one of the world’s largest gold producers, reported net income of $51 million in 1993, contrasted with a loss of $175.8 million the year before.
The red ink of 1992 reflected $146.9 million in charges, including write-downs of assets from Homestake’s acquisition that year of International Corona Corp., as well as business combination and restructuring costs.
After the acquisition, Homestake combined offices, closed facilities and reduced corporate staff by 60%, Bley said.
The restructuring began to pay off in the reduced cost of production, she said, followed by the lucky coincidence of gold prices that rose $11 an ounce in 1993.
“We were assisted by gold prices, but that wasn’t the real fuel in the engine,” Bley said. “We worked very hard at it.”
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2. Silicon Graphics, a Mountain View-based computer maker whose machines helped create some of the most boffo special effects in the mega-hit movies “Jurassic Park” and “Terminator 2,” posted net income of $114.7 million last year, contrasted with a loss of $74.4 million in 1992.
Results in 1992 were hurt by Silicon Graphics’ purchase of troubled MIPS Computer Systems, its main supplier of computer chips.
“If we had not merged, we would have had a pretty good profit in ‘92,” Silicon Graphics spokeswoman Rosanne Siino said.
In 1993, Silicon Graphics rolled out a slew of new, cheaper products, which boosted market share, revenue and earnings. Earnings were also aided by controlled operating costs.
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3. LSI Logic Corp., a Milpitas-based maker of tailor-made chips called application-specific integrated circuits, or ASICs, reported 1993 income of $53.8 million, contrasted with a loss of $110.2 million in 1992. The company, plagued with too much idle factory space, restructured in 1992.
“It was pretty clear that the company would have to reinvent itself,” spokesman Tom Mahon said.
LSI closed a factory and eliminated more than 1,000 jobs, resulting in a $102-million charge against 1992 earnings. The moves created substantial savings in operating expenses, Mahon said.
The year 1993 brought an upswing in the cyclical semiconductor industry and aggressive product introductions from LSI.
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4. Chiron Corp., an Emeryville-based biotechnology company specializing in products to diagnose and fight diseases, posted income of $18.4 million in 1993, contrasted with a loss of $92.6 million in 1992.
The loss in 1992 included charges related to acquisitions, while results in 1993 benefited from increased demand for new Chiron products.
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5. Unilab Corp., a Tarzana-based provider of clinical laboratory testing services, reported income of $6.5 million in 1993, contrasted with a loss of $100.1 million in 1992.
Results for 1992 included $78 million in non-recurring charges from acquisitions and a colossal billing foul-up that cost the company $12 million.
“It was a real challenge for us to climb out of that hole we had fallen into,” Chief Financial Officer Richard A. Michaelson said. “But the size of the loss was really not representative of ongoing operations.”
Unilab reorganized in 1993, selling its non-California operations to Corning Inc., which assumed $70 million of the company’s $95-million debt and retained a 12% stake in Unilab. Corning handed over J.S. Pathology, a clinical laboratory in the United Kingdom. Unilab also worked to control expenses.
“To some extent, the company has had the benefit of starting over,” Michaelson said.
Results for 1993 included a pretax charge of $5.6 million from the settlement of government charges that a Unilab unit and another large clinical lab filed thousands of false Medicare claims for unnecessary blood tests.
Born Again
Companies ranked by absolute change from loss to profit in one year.
Change ’93 income ’92 income in income Rank Company ($ millions) ($ millions) ($ millions) 1 Homestake Mining 51.0 -175.8 226.8 2 Silicon Graphics Inc. 114.7 -74.4 189.1 3 LSI Logic Corp. 53.8 -110.2 164.0 4 Chiron Corp. 18.4 -92.6 111.0 5 Unilab Corp. 6.5 -100.1 106.6 6 Borland International 14.5 -81.2 95.7 7 ICN Biomedicals 1.1 -87.4 88.6 8 Consolidated Freightways 50.6 -3.7 54.2 9 Standard Brands Paint Co. 13.1 -38.3 51.4 10 Pyramid Technology 8.8 -40.7 49.5
Source: STAR Services.
