THE TIMES 100 : The Best Performing Companies in California : REGIONAL PROFILES : Health-Care Firms Lead Orange County’s Best Performers

In hard times, people may put off buying a new house, but they are less likely to delay a trip to the doctor. That was reflected in the lists of Orange County’s best-performing companies in 1990.

Three of the four home builders that made last year’s survey of the county’s 15 most profitable firms tumbled from the list this year.

And seven Orange County companies that made The Times 100 list last year are absent this year. Covington Development Group and Emulex posted losses in their most recent fiscal years; Amplicon’s debt-to-equity ratio is too high, which disqualified it.

The other four companies--Armor All Products, Carl Karcher Enterprises, Safeguard Health Enterprises and Nichols Institute--posted 1990 earnings that dragged their two-year average return on equity below the 14.8% cutoff.

However, the health-care industry, a major economic force in the county, made another strong showing. Seven health-related companies were among the county’s top 15 in market value, up from five a year ago. And, measured by total return to investors, health-care companies made up seven of the 15 top stock performers.

That is the highest concentration of health care-related companies named to those lists in the four years The Times and MZ Group of San Francisco have compiled data for The Times 100.

“Most of the (health-care) industry is recession-proof,� said Daniel Jensen, an analyst with Cruttenden & Co., a Newport Beach investment firm. “You don’t say, ‘I don’t have any money now, I’m going to put off having my baby.’

“You’ve got an aging population, AIDS patients, medical supplies going overseas to the Persian Gulf and a lot of new techniques coming out,� he added. “It’s the hot market right now.�

Laguna Hills-based Community Psychiatric Centers, which operates a chain of psychiatric hospitals, was No. 41 on The Market Value 100 and second among Orange County firms ranked by market value, behind Fluor Corp. of Irvine. The engineering and construction giant was 20th statewide.

Medical product companies Allergan Inc. of Irvine and Beckman Instruments Inc. of Fullerton ranked 42nd and 86th statewide in market valuation. And FHP International Corp., the health maintenance organization based in Fountain Valley, placed 81st.

On lists specific to Orange County, three health-care companies leapfrogged over their ailing brethren in home building, retailing and banking to make the lists for the first time. Newport Pharmaceuticals International Inc. of Laguna Hills was fourth among top stock performers and third among revenue growth leaders.

Judy Archbold, Newport’s vice president and general counsel, credited the strong showing to the growing popularity of the company’s mail-order pharmacy business, which supplies prescription drugs to people with conditions requiring long-term care, such as hypertension, heart disease and high blood pressure. Newport concentrated on drug research until mid-1987, when it bought a mail-order drug business. The company did about $70 million in mail-order sales last year, Archbold said.

“Getting into that business has changed our focus considerably,� she said. “The market has been kind of slow to recognize that change.�

New strategies have similarly aided Tokos Medical Corp. of Santa Ana. The company’s stock price jumped more than 40% in June after it said it would acquire a small Atlanta company that had nearly cleared regulatory hurdles to market a device that helps prevent premature births. Tokos placed 19th on the statewide Highest-Priced Companies list, which ranks firms by market price as a percent of book value.

Nationwide Health Properties Inc., formerly known as Beverly Investment Properties Inc., was a third new name to this year’s Orange County lists. The real estate investment trust, which owns 94 nursing homes nationwide, moved from Pasadena to Newport Beach in July. After a restructuring last year, the company cleaned up its balance sheet by paying off major bank debt and raised $20 million for expansion.

HMO operators FHP and PacifiCare Health Systems Inc. of Cypress are also “sitting on tons of cash,� said analyst Larry Selwitz, president of Fin-Com, a financial advisory company in Newport Beach.

“A lot of major medical insurance firms are making it very difficult for employers, so that is creating an additional market for HMOs,� Selwitz said. “HMOs are going to continue to do very well.�

The future of home building in Orange County is also good--at least in contrast with the industry’s devastation in 1990. “The stocks were hit real hard,� said James Doti, an economist at Chapman College in Orange. “It’s not going to take much in the way of good news to bring a turnaround.�

County home builders weathered a bad year in 1990. J. M. Peters Co., for example, sold off homes in inventory and raw land at distress-sale prices to pay off nearly $100 million in overdue construction loans. The Newport Beach builder of luxury homes lost $6 million for the first nine months of its fiscal year. Analysts blamed last year’s slump in home sales on the recession and consumer skittishness about events in the Persian Gulf.

Peters and Chesapeake Industries Inc., a maker of wood doors and panels based in Newport Beach, placed eighth and sixth on last year’s list of the most profitable Orange County companies. This year they are gone from the list. So is Pacesetter Homes Inc. of Newport Beach, which builds low- and mid-priced single-family homes and was the second-rated stock leader last year.

Standard-Pacific L.P., a Costa Mesa limited partnership that builds medium-priced homes, was the only home builder mentioned on this year’s county lists, ranking 12th in market value.

But 1991 should be kinder to home builders, based on first-quarter figures, observers agreed.

“We’re seeing more homes under construction, greater numbers of home buyers and better qualified buyers,� said Thomas Fillmore, a project manager for Market Profiles, a Costa Mesa consulting firm.

Quiksilver Inc., the Costa Mesa surf wear manufacturer, led Orange County companies in terms of profitability by placing eighth on The Times 100 list, which ranks companies according to average return on equity over a two-year period. However, the company lost the top spot it held as an Orange County revenue-growth leader, dropping to seventh place behind five health-care companies and Varco International of Orange, a maker of oil drilling equipment.

Among the larger companies, Fluor ranked 77th on the statewide profitability list. It failed to make the list at all last year. Irvine-based Western Digital Corp. placed fourth on the statewide ranking of “Lowest-Priced Companies,� (lowest market price as a percent of book value), but it failed to make the profitability list.

Bridgford Foods Corp. of Anaheim, supplier to supermarkets, institutions and restaurants, ranked 23rd on The Times 100, up from 29th last year. Pharmaceutical and videotape wholesaler Bergen Brunswig Corp. of Orange moved into the 90th spot.

ORANGE COUNTY PROFIT LEADERS

Companies ranked by profit from continuing operations.

1990 Change income in income Rank Company ($ millions) ($ millions) 1 Fluor Corp.* 138.9 30.4 2 Community Psychiatric Cntrs.* 83.2 11.3 3 Allergan Inc. 81.4 24.1 4 Bergen Brunswig Corp.* 62.6 14.9 5 Downey Savings & Loan Assn. 42.0 39.3 6 Beckman Instruments Inc. 36.2 (5.7) 7 AST Research Inc.* 35.1 42.5 8 FHP International Corp.* 28.8 6.7 9 Western Digital Corp.* 24.2 (10.2) 10 Pacificare Health Systems* 17.6 6.8 11 SPI Pharmaceuticals Inc.* 14.9 2.0 12 Westcorp 11.7 2.4 13 Archive Corp.* 11.5 (3.8) 14 Advanced Logic Research Inc. 11.5 8.7 15 Furon Co.* 11.1 0.9

* See exceptions, page 55.

ORANGE COUNTY REVENUE LEADERS

Orange County-based companies ranked by overall revenue.

1990 revenue % change Rank Company ($ millions) from 1989 1 Fluor Corp.* 7,446.3 19 2 Bergen Brunswig Corp.* 4,442.3 13 3 Western Digital Corp.* 1,070.5 8 4 FHP International Corp.* 980.4 40 5 Pacificare Health Systems* 969.7 50 6 Allergan Inc. 883.9 10 7 Beckman Instruments Inc. 815.2 4 8 First Amer. Finl. Corp. Calif. 707.8 1 9 AST Research Inc.* 533.8 17 10 Carl Karcher Enterprises 519.7 2 11 Downey Savings & Loan Assn. 481.5 8 12 MAI Systems Corp. 389.5 -2 13 Standard-Pacific 383.1 -21 14 Community Psychiatric Cntrs.* 374.4 17 15 National Education Corp. 371.4 -7

* See exceptions, page 55.

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

ORANGE COUNTY REVENUE GROWTH LEADERS

Companies ranked by two-year average annual sales growth rate.

2-year avg. 1990 annual sales revenue Rank Company growth % ($ millions) 1 ICN Biomedicals Inc.* 61.3 131.3 2 Pacificare Health Systems* 51.1 969.7 3 FHP International Corp.* 39.5 980.4 4 Newport Pharmaceuticals 39.4 60.4 5 Nichols Institute 38.8 174.8 6 Varco International 38.8 130.9 7 Quiksilver Inc.* 37.4 91.2 8 Unicare Financial Corp. 34.2 97.2 9 Amplicon Inc.* 28.5 158.3 10 ICN Pharmaceuticals Inc.* 27.9 272.0 11 Filenet Corp. 27.6 102.9 12 Westcorp 22.0 346.2 13 Fluor Corp.* 20.5 7,446.3 14 Bridgford Foods Corp.* 18.4 84.3 15 Western Digital Corp.* 18.0 1,070.5

1990 income (loss) Rank ($ millions) 1 8.802 2 17.638 3 28.757 4 (5.426) 5 6.881 6 8.735 7 9.517 8 8.897 9 5.644 10 (26.675) 11 3.759 12 11.686 13 138.881 14 3.917 15 24.165

*See exceptions, page 55.

ORANGE COUNTY MARKET VALUE LEADERS

Companies ranked by stock market valuation.

4/12/91 market value Book value Rank Company ($ millions) ($ millions) 1 Fluor Corp.* 3,638.6 864.0 2 Community Psychiatric Cntrs.* 1,710.4 460.5 3 Allergan Inc. 1,676.6 523.9 4 Bergen Brunswig Corp.* 1,301.8 445.9 5 AST Research Inc.* 968.1 193.3 6 FHP International Corp.* 681.7 141.8 7 Beckman Instruments Inc. 540.1 325.6 8 Pacificare Health Systems* 304.8 74.6 9 Varco International 302.6 94.3 10 Nationwide Health Sys. Inc. 290.3 189.1 11 Tokos Medical Corp. 282.4 39.9 12 Standard-Pacific 274.5 252.8 13 Staples Inc. 258.9 68.8 14 Downey Savings & Loan Assn. 246.4 256.9 15 Armor All Products Corp. 246.1 94.7

Market as Rank % of book 1 421 2 371 3 320 4 292 5 501 6 481 7 166 8 409 9 321 10 153 11 708 12 109 13 377 14 96 15 260

*See exceptions, page 55.

ORANGE COUNTY STOCK LEADERS

Companies ranked by percent gain in stock price.

% change 4/12/91 4/12/90 stock stock stock Rank Company price price price 1 AST Research Inc.* 216.5 32.25 10.19 2 SPI Pharmaceuticals* 127.1 16.00 7.05 3 Emulex Corp. 112.5 10.63 5.00 4 Newport Pharmaceuticals Intl. 90.5 5.00 2.63 5 FHP International Corp.* 75.0 26.25 15.00 6 Comarco Inc. 72.0 5.38 3.13 7 Allergan Inc. 67.2 24.88 14.88 8 Amplicon Inc.* 66.7 15.00 9.00 9 Ropak Corp. 65.0 8.25 5.00 10 Unicare Financial Corp. 61.5 19.38 12.00 11 ICN Pharmaceuticals Inc.* 57.1 5.50 3.50 12 Community Psychiatric Cntrs.* 56.1 36.50 23.38 13 Pacificare Health Systems* 51.0 27.00 17.88 14 Tokos Medical Corp. 47.7 19.75 13.38 15 Odetics Inc. 44.7 6.88 4.75