Strong Performers: Even in a Cooler Regional Economy, Many of the Area's Top Companies Got Hot Last Year

In a year when the Washington region's economy slowed considerably, the area's Top 100 companies did not.

The 100 largest publicly traded companies in the region -- from No. 1 Mobil Corp. to No. 100, D.C. real estate firm Bresler & Reiner Inc.-- amassed $178 billion in revenue last year, a 9.5 percent increase over 1994.

Most Top 100 companies turned higher revenue into higher profits, with net income at the Top 100 companies rising 12.5 percent last year.

That was a particularly strong performance against the backdrop of a regional economy that cooled off significantly last year. The region's economy struggled to cope with federal downsizing and interruptions in federal contract awards that began with last November's government furlough. The housing market declined, holiday retail sales were tepid and the District's financial problems worsened, causing it to lose more jobs and residents to the suburbs.

But most of the Top 100 companies struggled to bolster their bottom lines by restructuring, cutting jobs, unleashing new technologies or fattening up on secure federal markets -- and most ended 1995 solidly in the black. Unlike tens of thousands of smaller firms scattered throughout the region that didn't fare as well, the successful Top 100 firms had competitive advantages and used them.

The companies' returns on equity -- the dollar of profit produced for each dollar of shareholder investment -- averaged 14 percent, unchanged from a year earlier.

All of this wasn't lost on investors, whose appetite for Washington area technology stocks in particular helped raise the 216-stock Washington Business Index by 43.8 percent last year, outpacing the Standard & Poor's 500-stock index.

While the Top 100 companies delivered for their shareholders, they did not do wonders for the region's job market, adding less than 2 percent to their employment in the Washington region.

And the Top 100 companies' financial results were just middling when viewed against some national benchmarks. As a group, the Top 100's revenue, profit and shareholder return closely matched averages for the Fortune 500 list of largest U.S. corporations last year, further evidence that the Washington region's economy still is running closer to the center of the nationwide pack of companies than the front.

Looking ahead, the diversity within the Top 100 list continues to provide insurance against a downturn. "It's a broader universe than it has been in years past. If one company falls down, another comes on," said Prabha Carpenter, manager of the Growth Fund of Washington, a mutual fund that makes most of its investments in Washington area companies. The fund had a "phenomenal" year, she said.

But economists do not expect the Washington region to improve its standings markedly in the national rankings of economic growth as long as the District's financial problems continue and the Maryland suburbs remain stuck in low gear.

"The Washington area will be kind of middle-of-the-road -- close to the national average [for growth] but below it" in 1996, said Russel C. Deemer, regional economist for Crestar Bank in Richmond.

Ross DuVal, director of regional services at the WEFA Group, a Philadelphia-based economic forecasting firm, agreed. "Overall, we expect growth in the Washington metro area to be weaker than the national average," he said.

To leaf through the Top 100 results is to find so much variety that generalizations about the companies' performance are ill-advised. In fact, it's more instructive to think of the Top 100 as a collection of special-purpose mutual funds.

To subdivide the Top 100, begin by separating those companies that have their headquarters, but not their main business focus, in the region from those truly local companies that do at least one-third of their business in a region stretching from Baltimore to Richmond.

The Blue Chips in the headquarters group, a handful of global and national firms, dominate the revenue and earnings figures for the Top 100.

The Big Six, for instance -- Mobil Corp. in Fairfax, Lockheed Martin Corp. in Bethesda, MCI Communications Corp. in the District, Marriott International Inc. in Bethesda, and USAir Group Inc. and the Gannett Co. in Arlington -- collectively had $134 billion of the entire $177 billion in 1995 revenue for the Top 100.

Their revenue growth was above average, but to keep investors happy, they trimmed their area payrolls by more than 4 percent on average, or nearly 1,600 workers. Most of those job cuts came from downsizing at Mobil and USAir Group.

While the Blue Chips' results don't indicate much about how the Washington area economy did last year, there are plenty of clues in the performance of companies whose businesses are heavily concentrated in the region. Atop that list are retailers Giant Food Inc. and Hechinger Co. in Landover; the Potomac Electric Power Co. and The Washington Post Co. in the District; Rockville's Mid Atlantic Medical Services Inc., the metro area's largest health maintenance organization; and NVR Inc. in McLean, the holding company for Ryan Homes and NVHomes, the region's largest home builder.

Their results vary widely, but collectively, these six managed only a 3.3 percent gain in revenue last year while their combined profits fell sharply because of Hechinger's continuing competitive struggles and Pepco's decision to get out of an aircraft leasing sideline. Their return on equity was at the average for the entire Top 100.

In a hopeful sign for the future, two-thirds of the Top 100 firms said they planned to increase employment in the Washington area this year. Many did so in 1995. The jobs expansion came from all sorts of firms -- burgeoning communications firms like America Online Inc. in Vienna, the on-line computer information provider; government contractors that bagged new business; and successful retail and service firms that are running in front of the competition, like Giant Food and Mid Atlantic Medical.

If the Top 100 were carved up into separate mutual funds, investors' favorite would clearly be the 17 private-sector technology companies that split genes, navigate the Internet and bounce signals off satellites.

Leading this technology "fund" are Comsat Corp., the Bethesda satellite transmission company; America Online; Sterling-based rocket maker Orbital Sciences Corp.; Life Technologies Inc., a Gaithersburg supplier of life science products; long-distance telecommunications company LSI International Inc. in McLean; and Genicom Corp. in Chantilly, which makes computer printers and other technology products.

These companies carry much of the Washington region's hopes of establishing itself as a recognized technology power, in the company of California's Silicon Valley, Boston and Austin.

There is no question of the potential. Of the entire Top 100 list, 57 companies produced better-than-average revenue last year and one-fourth of this group were technology companies. The leaders in revenue growth included America Online; two Internet access providers, UUNet Technologies Inc. in Fairfax and PSINet Inc. in Herndon; and LCI, the nation's fastest-growing major long-distance carrier.

But some of the region's most dynamic technology companies lie along a fault line created by fast-changing technologies and marketplace demands -- and consequently, their long-term prospects are uncertain.

As a group, AOL, UUNet and PSINet tripled their revenues last year, but the growth came at the expense of earnings -- the three had combined losses of $104 million.

Netrix Corp., a Herndon-based manufacturer of switching equipment for computer networks, was hit with a $3.8 million loss last year in part resulting from a sharp drop in overseas orders. And Orbital last year suffered the damaging loss of two new model rockets used to put satellites into orbit.

A second group of high-tech companies is unique to the Washington region -- Beltway contractors with the alphabet soup names who furnish federal and state governments with information technology services, specialized software and systems management expertise. BDM International Inc. in McLean, American Management Systems Inc. (AMS) in Fairfax, CACI International Inc. in Arlington, Rockville's Computer Data Systems Inc. and two Vienna neighbors, GRC International Inc. and BTG Inc., top this list.

This group shrugged off the first year of the Clinton administration's federal downsizing to rack up an 18 percent gain in revenue in 1995 -- although several have been subsequently hurt by federal furloughs this winter that interrupted some contracts.

Not all prospered. A slowdown in government computer purchases helped slice off $90 million in revenue from Government Technology Services Inc. in Chantilly, a leading reseller of computer equipment.

The final group -- the financial companies -- looks very different from the way it did several years ago.

A decade of mergers and a devastating recession in 1990-1991 left most of the region's banking business in the hands of Charlotte and Richmond-based institutions.

Only First Virginia Banks Inc. of Falls Church, Mercantile Bankshares Corp. of Baltimore and Riggs National Corp. of the District are still standing among the locally-owned banking companies.

Just as Mobil, Lockheed Martin and MCI overshadow most of the other Top 100 companies, the list of Washington area financial companies is dominated by the family of government-backed institutions, Fannie, Freddie and Sally.

Together, Fannie Mae, the Federal Home Loan Mortgage Corp. and the Student Loan Marketing Association ended the year with $563 billion in assets from their mortgage financing and student loan activities, up more than 15 percent from a year earlier.

New to this list is Capital One Financial of Falls Church, a spinoff of Signet Banking Corp. that issues MasterCard and Visa credit cards through a subsidiary. Capital One's marketing knack spurred its rapid growth in signing up new credit card customers, producing a 25 percent jump in earnings, to $126.5 million.

The double-digit gains in revenue and earnings achieved by well over half of the Top 100 last year will be harder to duplicate this year, Carpenter said. "You'll find companies doing 10 percent -- it may seem like nothing compared to last year -- but it will look good in 1996."