Georgia's Top 100 Public Companies
Making Sense Of The Numbers
By the numbers, Georgia’s largest public companies showed a definite im-provement in the most recent fiscal year, but there was little cheering among corporate chief executives and stockholders.
Georgia Trend’s listing of the state’s top 100 public companies, by revenues for fiscal 2010, was prepared by Comp-ustat, a Standard & Poor’s business, www.compustat.com.
The list shows that the biggest recession in 70 years was still a drag on consumer and corporate spending. Even the government’s monumental rescue effort failed to produce enough new jobs, bolster the sagging housing industry or restore public confidence.
While two-thirds of the 100 largest public companies headquartered in Georgia posted revenue gains in 2010 – almost exactly the reverse of 2009 when that many suffered declining sales – company leaders and budget planners were still guarded in their mid-year 2011 outlooks.
Unlike in past recessions, Georgia’s economy was no longer shielded by the historic diversity of the state’s industry groups. The collapse of its growth-oriented real estate and construction markets and the related distress in the financial sector caused widespread damage among other industry groups. And the outlook remained cloudy.
According to Rajeev Dhawan, director of the Georgia State University Economic Forecasting Center at Georgia State University’s Robinson College of Business, “a moribund banking sector impairing small business hiring and a crippled construction industry will cause our prime driver of growth — residential and commercial building — to languish in the coming years.”
Georgia led the nation in bank failures as a result of excessive, and often questionable, real estate lending. The government took over at least 67 banks since the recession started in mid-2007, most of them small, community banks that were not widely traded.
But revenue declined among larger Georgia 100 banks by as much as 17.5 percent (United Community Banks), 15 percent (Synovus Financial), 11 percent (Ameris Bancorp) and 3.3 percent (SunTrust Banks).
Despite the seeming doom and gloom, however, business executives, stockholders and analysts could still heave a sigh of relief when looking back over the most recent fiscal year: it was, after all, a recovery year.
As a group, the Georgia 100 companies posted total revenue of almost $345 billion in fiscal 2010, an advance of 2.4 percent from fiscal 2009, when total revenue for these same companies declined roughly 4 percent.
Atlanta-based Home Depot, the world’s largest retailer of home improvement products, topped the list with total sales of almost $68 billion, up almost 3 percent year-over-year.
Eight companies posted revenue totals of better than $10 billion, most with significantly better totals than the previous year.
Better still, the bottom lines of Georgia’s companies improved dramatically in 2010. While 25 companies recorded losses totaling $1.6 billion, 38 firms had posted losses of almost $7 billion in 2009.
Indeed, three-fourths of the Georgia 100 were profitable in 2010, topped by Coca-Cola’s $11.81 billion – a whopping jump of 73 percent for the company with the world’s most famous brand name. Five companies posted net incomes of better than $2 billion each, and 26 had profits above $100 million.
Chief executives certainly had reason to be pleased with 2010. According to company proxy statements, total compensation for the CEOs of Georgia’s 25 biggest companies totaled $233 million, an average increase of 29 percent.
The largest compensation package went to Coca-Cola Chairman and CEO Muhtar Kent, up 32 percent to $24.8 million (Kent’s pay declined 16 percent in 2009).
But it was the individual investors in Georgia’s public companies who probably had the best reason to be pleased with 2010, thanks to a roaring bull market on Wall Street that continued with ups and downs in 2011.
In an economy that grew 2.9 percent in 2010, the Dow Jones Industrial Average surged 11 percent – a 77 percent rally from the index’s 12-year low on March 9, 2009. The Dow is still well below its record pre-recession high of 14,164.53 on Oct. 9, 2007, however.
Some analysts were even beginning to worry that another stock market “bubble” might be in the offing.
Share Price Gains
About two-thirds of the shares of Georgia-based companies moved up in calendar 2010, most of them with double-digit share price gains. A petroleum exploration company, RPC, enjoyed the biggest advance of 161.3 percent.
Unfortunately for shareholders, the market gave back some of its year-earlier advance in 2011 amidst persistent concern about sluggish economic growth, political wrangling in Washington and outright fears of a double-digit recession. Fewer than half the Georgia 100 companies experienced share price gains in the first half of 2011, and the price advances were substantially smaller.
Nevertheless, money managers who believe in the wisdom of investing “in your own backyard” argue that Georgia is an especially good state to explore for investment opportunities.
Finance, including insurance and financial services, is one of the largest of nearly 30 industry groups, with technology and software, healthcare, food service and retailing important growth sectors. Less well-known is the industrial, or manufacturing group, which includes apparel, chemicals, farm equipment and carpeting.
For the most part, Georgia 100 companies tend to be small relative to the companies on Fortune magazine’s annual list of America’s 500 biggest public corporations.
The median market value (share price times shares outstanding) of Fortune 500 companies at the close of 2010 was $11.104 billion. Only seven Georgia 100 companies had market caps that big. And in terms of employment, the median Fortune 500 employee total was 24,550. Only 10 Georgia companies employ 20,000 or more, records show.
Nevertheless, Georgia is home to some of the world’s biggest and best-known companies, 13 of which are on the latest Fortune 500. And in a sense, these outsized companies are also a microcosm of the state’s investment diversity.
There’s retailing (Home Depot and Newell Rubbermaid), beverages (Coca-Cola and Coca-Cola Enterprises), package delivery (United Parcel Service), passenger air travel (Delta Air Lines), insurance (Aflac), electric power (Southern Company), banking (SunTrust Banks), manufacturing (AGCO for farm equipment and Mohawk Industries for carpeting), auto replacement parts (Genuine Parts) and computer hardware (NCR).
Total revenue of Georgia’s Fortune companies peaked in 2008 with a year-over-year gain of almost 20 percent, only to plunge 21 percent in 2009 before rebounding a modest 2 percent in 2010 – a trend that tracked the broader market.
Looking ahead, analysts cautioned at midyear that the 2011 economy still lacked the kind of accelerated recovery that typically follows a downturn. Job growth remained slow and unemployment by any measure was still high as the important housing market struggled to recover, despite a surplus of profits and cash on the sidelines.
These conditions dampened consumer sentiment and restrained the level of consumer spending needed to shake loose business investment and spending.
According to Georgia State’s Dha-wan, “Georgia’s economy faces a moderate growth climate for the remainder of this year and into 2012” due to global and domestic headwinds.
Chief among the “global headwinds” is the elevated price of oil, which Dhawan said is “the primary reason for iffy growth this year.”
In this environment, corporate executives had no choice but to revise and adjust operations and forecasts for 2011 and 2012.
Atlanta-based Newell Rubbermaid, for example, stated in a spring an-nouncement that “disappointing economic conditions and weak consumer spending trends” were reasons to adopt a more conservative 2011 sales and profit outlook, although the global marketer of consumer and commercial products still expects “solid core growth” from 2010.
If necessary, companies sold assets, made acquisitions or otherwise made adjustments with an eye toward the longer-range future.
A case in point is Calhoun-based Mohawk Industries, a leading manufacturer of carpeting whose outlook is intimately connected to trends in real estate. Here’s how Chairman and CEO Jeffrey Lorberbaum put conditions in perspective in a message to shareholders: “We have managed through a challenging period and significantly re-designed our businesses to maximize our long-term results.”
Meanwhile, the Georgia 100 companies will keep the champagne on ice at least one more year.