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The top public companies of 2000
Sunday, March 25, 2001 The Pittsburgh Post-Gazette
TOLLGRADE COMMUNICATIONS
Tollgrade Communications Chairman Chris Allison's management style is a vitamin-rich goulash concocted from the teachings of Stephen R. Covey and his seven highly effective habits, legendary UCLA basketball coach John Wooden, motivational speaker Anthony Robbins and former Steelers coach Chuck Noll.
Profit Growth
1. Tollgrade Communications
159%
2. Universal Stainless
141%
3. AK Steel
86%
4. Mine Safety Appliances
54%
4. Equitable Resources
54%
6. NiSource
48%
7. Respironics
44%*
8. Alcoa
41%
9. Black Box
36%**
10. Verizon Communications
30%
*6 mos.
**9 mos.
"He expects us to be adults at full throttle," a Tollgrade executive once said of Allison, an English major who took over day-to-day operations from his father in 1992.
Unorthodox maybe, but it's hard to argue with Allison's results. Last year, the Cheswick-based telecommunications equipment company delivered a strong across-the-board performance that earned it the title of best-performing public company in Western Pennsylvania. Tollgrade finished first in profit growth, third in revenue growth and fifth in stock performance and return on equity.
Not bad for a company that started out digging ditches and laying pipeline for natural gas companies. Back then, the company was called UTEK and was headquartered in Erie. One of its early jobs was installing metering devices that transmitted information back to gas companies. That got Allison's father, R. Craig Allison, thinking about the telecommunications business. Eventually, the elder Allison and Rocco L. Flaminio, a former Bell of Pennsylvania engineer, developed a product that let telephone companies test copper as well as fiber-optic lines. Since then, Tollgrade has broadened its product line to include testing equipment to serve digital subscriber lines and other telecommunications services.
Tollgrade's revenue soared from $5.3 million in 1992 to $114.4 million last year, while profits jumped 159 percent last year to $27.5 million. Since going public in 1995, its shares have increased about 350 percent, better than doubling the performance of the S&P 500.
The company's meteoric growth earned recognition from Forbes magazine, which ranked Tollgrade 21st on its list of the country's best publicly owned small companies.
Given its reliance on the telecommunications industry, this star performer has taken it on the chin of late. Since mid-July, Tollgrade stock has lost nearly 90 percent of its value. Where shares routinely traded for more than 50 times earnings, their current P/E ratio is an unpretentious 8. Allison expects that first quarter sales and earnings growth will slow to a modest 10 percent.
FREEMARKETS
Dot..com darling FreeMarkets Inc. didn't totally escape the troubles that plagued high-tech companies last year.
Revenue Growth
1. FreeMarkets
337%
2. Adelphia Business Solutions
123%
3. Tollgrade Communications
87%
4. NiSource
84%
5. II-VI
77%*
6. Black Box
74%**
7. Dominion Resources
68%
8. Equitable Resources
59%
9. Allegheny Energy
43%
10. Alcoa
40%
*6 mos.
**9 mos.
The online auction business saw its net loss swell to $156.4 million from $21.8 million the prior year. And its stock price tumbled from $341.88 on Jan. 3, 2000 to $11.38 earlier this month.
But a strong demand for its services pushed FreeMarkets' revenue to $91.3 million, up from $20.9 million in 1999.
That 337 percent jump earned it the top spot in the category of revenue growth.
And it's poised for more. Last month, FreeMarkets announced it would acquire Adexa Inc., a California software company with $50 million in revenue and more than 370 employees.
Founded in 1996, Downtown-based FreeMarkets estimates is has conducted more than 9,000 online auctions in which customers bought and sold $10.5 billion worth of industrial goods and services.
VERIZON
Verizon, created last June by the merger of Bell Atlantic and GTE, led the category of market capitalization at $135.4 billion.
Market Capitalization
1. Verizon
$135.4 bil.
2. Sony
$ 63.0 bil.
3. Alcoa
$ 28.0 bil.
4. Marconi
$ 28.0 bil.
5. Mellon
$ 24.0 bil.
6. PNC
$ 21.2 bil.
7. National City
$ 17.5 bil.
8. Heinz
$ 16.5 bil.
9. Dominion Resources
$ 16.1 bil.
10. FedEx
$ 12.3 bil.
The New York-based company, which has extensive operations in Western Pennsylvania, is the largest telecommunications provider in the country with 63 million access lines and the largest wireless provider with 27 million customers.
In a statement this month, Verizon President Ivan Seidenberg said the company expected to meet its financial targets this year -- its first full year of operation since the merger. He projected revenue growth of 8 percent to 10 percent. For the year ended Dec. 31, Verizon reported revenue of $64.7 billion, up 11 percent over 1999.
Shares in Verizon, after peaking in April at $66, have been hovering the last month around $48.
Seidenberg is relying on Verizon's track record to help it survive any future shakeout in the telecom industry. "We believe that growth opportunities outweigh competitive losses -- that innovation and open markets will expand the marketplace and the revenue opportunities for everybody."
FEDERATED INVESTORS
For the second year in a row, Federated Investors Inc. captured the No. 1 spot for highest return on equity, this time with a sizzling yield of 122 percent.
Return On Equity
1. Federated Investors
122.2%
2. Heinz
38.3%
3. Consol Energy
38.1%
4. Verizon Communications
31.1%
5. American Eagle
31.0%
6. Tollgrade Communications
30.5%
7. Wesco International
28.0%
8. Mellon Financial
25.3%
9. Ansys
24.0%
10. Matthews International
23.1%
That's tops among the roughly 80 local public companies surveyed and beats the mutual fund giant's winning performance of 115 percent in 1999.
Like revenue and profit growth, return on equity is a standard measure of a company's performance, giving shareholders an idea of how effectively management is using their money.
Still, for money managers such as Federated, ROE isn't as meaningful a barometer as it is for more capital-intensive businesses that generally have lots of money tied up in equipment.
Because Federated has a relatively small equity base, cranking out fat profits results in a relatively higher percentage return.
In any case, Federated shareholders don't have to search far for another reason to cheer.
The company's stock price also surged last year -- climbing 118 percent from around $13 a share to just over $29.
Only three stocks in the local list did better.
Now that's something shareholders can take to the bank.
RESPIRONICS
James W. Liken has Respironics shareholders breathing easier.
Stock Price Increase
1. Respironics
+258%
2. Consol Energy
+179%
3. Education Management
+155%
4. Federated Investors
+118%
5. Tollgrade Communications
+112%
6. Equitable Resources
+100%
7. Allegheny Energy
+ 79%
8. NiSource
+ 72%
9. PNC
+ 64%
10. Dominion Resources
+ 61%
Shares of the Forest Hills medical products company surged 258 percent last year, making Respironics the top-performing regional stock. Combined with a seventh-place finish in the profit growth category, Respironics finished fifth among the Post-Gazette's Fab Five.
Liken, a Churchill High grad, ran a medical supplies distribution business before being named Respironics' chief executive officer in August 1999. At the time, the company was having problems digesting acquisitions and under the gun from industry cost-cutting. Questions about health-care reimbursements raised doubts about demand for ventilators and other products Respironics makes. The devices are sold to distributors, customers with whom Liken could identify since he used to be one of them.
Plans to cut the work force by 10 percent were being implemented when Liken arrived. Those measures, along with a stronger focus on customer service, resulted in increased revenue, new products and better operating margins. Revenue in the first half of its fiscal year increased 14 percent to $196.6 million, generating earnings of $14.3 million vs. a loss of $890,000 in the year-ago period.
Revived, Respironics plans on returning to its roots after moving from Murrysville to Forest Hills in 1997. Late last year, the company announced plans for a new headquarters in Murrysville's Murry Ridge Corporate Center.
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