#26. THE ROUSE CO.

10275 Little Patuxent Pkwy. Columbia, Md. 21044 REVENUE: $246.7 million PROFITS: $9.7 million EARNINGS PER SHARE: 31 cents DIVIDEND: 54 cents ASSETS: $2.1 billion STOCKHOLDERS' EQUITY: $934.7 million RETURN ON EQUITY: 11.9 percent EXCHANGE: OTC EMPLOYES: 3,784 TOP EXECUTIVE: Mathias J. DeVito, chairman, president and chief executive officer. FOUNDED: 1939

DESCRIPTION: The Rouse Co. is one of the nation's leading real estate developers, best known for its role in developing Columbia, a planned urban communtiy between Baltimore and Washington, and for restoring Baltimore's Inner Harbor and New York's South Street Seaport. The company develops, owns and manages shopping malls and centers, office buildings and mixed-use retail/office/hotel properties. It has 100 such projects in 24 states, the District and Ontario, Canada.

DEVELOPMENTS: In September, The Rouse Co. bought Cigna Corp.'s 80 percent interest in The Howard Research and Development Corp., the developer of the city of Columbia, for $120 million. During 1985, three new downtown development projects were opened and an existing retail center was expanded. Last December, Military Circle, a large commercial complex including four department stores, three office buildings and a Sheraton Hotel, opened in Norfolk.

In April 1985, the Shops at National Place in downtown Washington opened, and in August the historic St. Louis Union Station in St. Louis was reopened. The final phase of the South Street Seaport in New York opened in September, and a San Antonio mall also expanded late last year. Also last fall, the Paine-Webber Building in downtown Columbia opened a 134,000-square-foot office tower. #27. ATLANTIC RESEARCH CORP.

5390 Cherokee Ave. Alexandria, Va. 22312 REVENUE: $234.3 million PROFITS: $15.2 million EARNINGS PER SHARE: $2.05 DIVIDEND: None ASSETS: $169.3 million STOCKHOLDERS' EQUITY: $73.9 million RETURN ON EQUITY: 21 percent EXCHANGE: OTC EMPLOYES: 2,855 TOP EXECUTIVES: Coleman Raphael, chairman; William H. Borten, president and chief executive officer. FOUNDED: 1949

DESCRIPTION: Atlantic Research, a diversified technology company, is best known as one of the country's largest manufacturers of solid propellant rockets for missile systems and other uses. Other operations include electromagnetic security systems, data communications and biotechnology. Government business accounted for 78 percent of ARC's sales last year.

DEVELOPMENTS: Atlantic Research saw both profits and revenue rise last year, based on growth in each of its main business segments. Net income increased 31 percent and sales increased 14 percent last year compared with the previous fiscal year.

The company's rocket division, which accounted for 56 percent of 1985 sales, won contracts with the Pentagon's Strategic Defense Initiative, or "Star Wars" program, to develop new technology for space booster components. ARC's rocket-motor array was used in the government's successful antisatellite test last year. The company purchased an option to buy more than 1,300 acres in Virginia for further expansion of the rocket division.

ARC moved to expand its electronic security business by acquiring Systematics General Corp. of Sterling, Va., for $24.1 million. Both companies are involved with "Tempest" technology, which protects computers from leaking information through radiowave emissions.

The company's research and technology division moved it into biotechnology by genetically engineering a microorganism to remove as much as 50 percent of the sulfur from coal. The process, if commercialized, may reduce the costs of cleaning coal before it is burned, and thus may help reduce environmental pollution.

Declining oil prices and the lack of demand for synthetic substitutes led the company to significantly reduce spending on its program to develop a coal-water-slurry fuel. #28. KAY JEWELERS INC.

320 King St. Alexandria, Va. 22314 REVENUE: $232 million PROFITS: $7.5 million EARNINGS PER SHARE: $1.20 DIVIDEND: 40 cents ASSETS: $189.6 million STOCKHOLDERS' EQUITY: $35.8 million RETURN ON EQUITY: 24 percent EXCHANGE: Amex EMPLOYES: 3,000 TOP EXECUTIVES: Anthonie C. van Ekris, chairman; Michael R. Lavington, president. FOUNDED: 1916

DESCRIPTION: Kay Jewelers is the nation's third-largest specialty jewelry chain, selling merchandise in Kay stores and the more upscale Black, Starr & Frost stores. Through its Marcus & Co. division, the company also sells merchandise in the jewelry departments of major department stores around the country.

DEVELOPMENTS: Long a part of the Alexandria-based commodity trading company Kay Corp., Kay Jewelers took the first step toward complete independence when Kay Corp. sold 19.6 percent of Kay Jewelers' stock to the public for the first time last May.

Company officials, saying that move represented the first step toward a complete spinoff, now are planning to divest the company entirely, possibly as soon as the end of this year. Pending a decision by the Internal Revenue Service on the tax implications, Kay Corp. -- which still owns about 80 percent of the jewelry chain -- wants to give its shareholders about one share of stock in Kay Jewelers for every stock of Kay Corp. held. This could only take place, however, if the IRS says this plan would not impose added tax liabilities on either the company or the stockholders.

Kay Corp. says the divestiture is needed to increase interest in the jewelry chain among the investment and financial communities. Kay's other business -- involving speculative and risky commodities operations -- has deterred the public from investing in the company, said Murray Ackerman, Kay Corp. vice president. Ackerman also noted that banks, concerned about the volatility and instability of the commodities business, have been reluctant to lend money to Kay Jewelers at what the chain believes is a reasonable rate. Divestiture would solve these two problems, Kay officials believe.

For 1985, sales at Kay Jewelers were up 11.5 percent to $232 million from $208.1 million a year earlier. Profits were up nearly 39 percent to $7.5 million ($1.20) from $5.4 million (89 cents). #29. W. BELL & CO. INC.

12401 Twinbrook Pkwy. Rockville, Md. 20852 REVENUE: $148.2 million PROFITS: $1.5 million EARNINGS PER SHARE: 50 cents DIVIDEND: 10 cents ASSETS: $58.8 million STOCKHOLDERS' EQUITY: $28.6 million RETURN ON EQUITY: 5.6 percent EXCHANGE: OTC EMPLOYES: 1,200 TOP EXECUTIVES: Walter Bell, president; Frederic Bell, senior vice president. FOUNDED: 1950

DESCRIPTION: W. Bell sells jewelry and gifts in 21 catalogue showrooms in the Washington, Baltimore, Houston and Chicago metropolitan areas.

DEVELOPMENTS: Sluggish consumer spending and increased competition produced disappointing results for Bell during its last year, ended June 30, 1985. Although sales increased by 7 percent, from $138.1 million to $148.2 million, profits dropped more than 42 percent to $1.5 million from $2.7 million. The company attributed the profit decline to increased promotions that reduced the company's margins and stepped-up advertising campaigns that increased the company's costs.

Results for the first six months of the current fiscal year have been even more discouraging, with sales themselves dropping during Christmas, which traditionally is a retailer's most important season financially. Sales for the six months ended Dec. 31 totaled $82.4 million, down more than 5 percent from the same six months a year earlier, when sales tallied $87.3 million. Profits were down 26 percent, to $1.7 million (56 cents a share) from $2.3 million (75 cents).

Company officials, however, say that results have begun to improve since January, and they hope to see sales increases for the rest of the year.

In light of the increased competition, Bell has decided to change its catalogue and not carry the full line of goods year-round as it has in the past. However, the company will supplement its slimmer catalogue with more frequent fliers and sales material to promote seasonal merchandise, such as fireplace equipment in the fall and barbecue goods in the summer.

The company plans to enlarge its presence in Chicago, where it has three showrooms, by adding two more this summer. No other expansion plans have been announced. #30. FLOW GENERAL INC.

7655 Old Springhouse Rd. McLean, Va. 22102 REVENUE: $143.9 million LOSS: $1.4 million LOSS PER SHARE: 16 cents DIVIDEND: None ASSETS: $108.6 million STOCKHOLDERS' EQUITY: $41.7 million RETURN ON EQUITY: NA EXCHANGE: NYSE EMPLOYES: 1,962 TOP EXECUTIVE: Robert E. Wengler, president and chief executive officer. FOUNDED: 1961

DESCRIPTION: Flow General is a scientific firm divided into two divisions. Its Biomedical Group produces supplies for medical and biological research and clinical laboratories. The Applied Sciences Group supplies electronic and software products, as well as doing research and analysis for government agencies, mostly in the defense area.

DEVELOPMENTS: Flow General continued to rebuild this year.

Revenue improved 5.3 percent over the course of the year, while the loss for fiscal 1985 was only one-tenth the loss of $14.4 million in 1984. The company also returned to slight profitability in the the second half of the fiscal year, which ended June 30, reporting net income of $250,000 in the third quarter and $950,000 in the fourth.

While the company slipped back into the red at the beginning of fiscal 1986, the figures still showed improvement over 1985. The company reported net losses of $974,000 (11 cents a share) for the six months ended Dec. 31, compared with losses of $2.6 million (29 cents) for the same period a year ago. Flow General executives predicted the company would show a profit for the entire 1986 fiscal year.

The most successful part of the company was the Applied Sciences Group, which ran an operating profit of $5.5 million on sales of $84.6 million. One of the group's subsidiaries, General Research Corp., recorded record revenue of $48.6 million. The company said GRC won a number of important new contracts, including ones associated with the Reagan administration's Strategic Defense Initiative research project. Meanwhile, Flow General reported that the sale of commercial software also increased 25 percent, led by the Flow Gemini occupational and environmental informational systems.

The situation at the Biomedical Group was more of a mixed bag. Operations improved, but still showed a slight loss of $500,000 on revenue of $59.3 million. The company said it refurbished its domestic-product production facilities during 1985.