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Top Ten
1. Charles River Labs
2. TJX
3. Perini
4. Investors Fin. Svcs.
5. Gillette
6. Staples
7. OneSource
8. Reebok
9. Bright Horizons
10. State Street
2002 Globe 100

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  1. Clean Harbors
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The Boston Globe OnlineBoston.com The Best in Massachusetts Business
OVERALL PERFORMANCE

Profits hard to come by in 2001

For companies that made cut, flexibility was key to survival in chaotic year

By Scott Bernard Nelson, Globe Staff, 5/21/2002

    Top 10 Companies

1. Charles River Labs
2. TJX
3. Perini
4. Investors Fin. Svcs.
5. Gillette
6. Staples
7. OneSource
8. Reebok
9. Bright Horizons
10. State Street

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   The 2002 Globe 100
   All the charts

Last year was not a happy time in Massachusetts boardrooms. The biggest and best of the state's publicly traded companies struggled to stem the bleeding during a recession- plagued year made worse by the Sept. 11 terrorist attacks. The collapse of the semiconductor and other technology sectors clobbered the state's leading-edge firms, the recession left few buyers for others, economic troubles overseas crimped import-export companies, and a new emphasis on accounting rules led to the evaporation of phoney-baloney earnings at a handful more companies.

Of the 299 companies that met The Globe 100's minimum criteria for consideration this year -- traded on a major exchange, with at least $10 million in revenues, among other things -- six of every 10 finished in the red. The 176 money-losing firms erased a combined $17.6 billion worth of shareholder value during the year, nearly equivalent to the gross domestic product of Cuba.

For the first time in the 14-year history of The Globe 100, the number of companies that were both profitable and publicly traded in 2001 barely edged into triple figures. Since a basic requirement to make the list is two consecutive profitable years, many longtime highfliers are conspicuously absent this year.

Teradyne Inc. and EMC Corp., both two-time winners as the state's best-performing company are missing from the list, after losing hundreds of millions of dollars. Six of the 10 firms that have been crowned Globe 100 winners since 1989 don't appear in the rankings this year.

And the Woburn Internet services provider Genuity Inc., another former highflier, is nowhere to be seen, after posting a staggering loss of $3.9 billion in 2001.
STAYING AFLOAT Globe 100 Finding a formula for profitability amid a sea of losses was the key to success in 2001. (Illustation/Aude Van Ryn)

In short, the story of this year's listing of the state's best companies is as much about those that don't appear as it is about those that do. The defining characteristic of the companies that made the cut is that they managed to find a formula for profitability amid a sea of red ink.

"In the late 1990s, we had a capital spending boom that disproportionately advantaged Massachusetts, because of the nature of the companies here," said Wayne Ayers, chief economist at the biggest bank in the state, FleetBoston Financial Corp. "When you have a boom, you're almost certain to have a bust. Last year, we had the capital spending bust."

The wildly cyclical semiconductor industry is responsible for much -- though not all -- of the carnage. Last year, six of the top 10 companies in The Globe 100 either made semiconductors or sold products or services to chip makers, exploiting an explosion in demand for chips used in everything from cars to toasters. But after the technology bubble burst and the economy slowed down, companies simply stopped spending money, on virtually everything.

That included semiconductors.

Of the six in last year's top 10, only one remains in The Globe 100 a year later. That one, Analog Devices, fell from number 2 last year to number 81. The annual ranking of Massachusetts public companies is based on a composite score derived from financial results in calendar year 2001: return on equity, percent change in profit margin, revenue, and percent change in revenue.

Companies dependent on consumer spending rather than business budgeting, on the other hand, had a relatively good year in 2001. Economists widely credit the surprising resiliency of consumer spending for keeping the country out of a deeper recession, and some Massachusetts businesses clearly benefited from that trend. Six of the top 10 companies in The Globe 100 sell their wares to the public, if not through proprietary retail outlets then via consumer products manufacturing or consumer financial services.

Second-ranked TJX Cos., for example, operates seven chains of discount retailers, including T.J. Maxx and Marshalls. Similarly, sixth-ranked Staples Inc. runs a series of retail outlets, while number five Gillette Co. and number eight Reebok International Ltd. peddle consumer products through someone else's stores. All gained as consumers shrugged off the recession and kept buying.

Other top finishers in this year's rankings, such as Investors Financial Services Corp. at number four, and State Street Corp., at number 10, benefited from the country's propensity to keep spending on investments, too. Both provide behind-the-scenes services for financial services companies that deal directly with the public.

And in a sign that consumers were still spending at a rapid clip on new homes, the Lexington-based realty company DeWolfe leaped from number 48 in last year's rankings to number 11.

There were even some success stories among high-technology companies. Westborough-based Ascential Software Corp., for example, posted the best one-year turnaround by turning a 2000 loss of $98.5 million into a 2001 profit of $625 million.

Companies tied to the semiconductor industry weren't the only casualties. Manufacturers in the medical field were also prominent among Globe 100 companies for 2000, only to drop precipitously this time around. Companies such as PolyMedica Corp. and Boston Scientific Corp. fell out of the rankings entirely, while others dropped farther down the list.

Reinforcing Boston's growing reputation as a major center for biotechnology research -- thanks in large measure to the area's concentration of universities and hospitals -- Charles River Laboratories International surfaced atop The Globe 100 this year for the first time. The Wilmington company, which breeds laboratory animals and supplies other services to support biomedical research, posted both profit and revenue gains of about 50 percent during 2001.

Framingham-based Perini Corp. should probably get the consistency award, ranking third this year and 11th a year ago. The general contracting and construction management company increased revenues 40.5 percent, to $1.55 billion, in 2001. Perini got out of the real estate business in 1997 to concentrate on construction, both buildings and civil infrastructure. The company is heavily involved in hotels, casinos, and sports complexes and is completing the last phase of a $900 million expansion of Mohegan Sun in Connecticut.

The biggest development of 2001 was undoubtedly the rise of the consumer retailers and manufacturers. Four of this year's top 10 fall into that category, now that the technology highfliers of recent years have been grounded.

Second-ranked TJX Cos., the Framingham-based operator of T.J. Maxx, Marshalls, A.J. Wright, and HomeGoods, saw its sales rise 12 percent. Its off-price stores turned out to be especially popular with consumers nervous about the creeping recession.

Fifth and sixth on the list, Gillette Co. and Staples Inc. exhibited surprisingly similar turnarounds in 2001. Both made management changes at the top, both are sharpening their business focus, and both posted eye-popping improvements to net income.

Hurt by its Duracell battery unit and by currency exchange issues, Gillette crammed much of its bad news into 2000 -- so 2001 looked good by comparison. Early in the year, James M. Kilts was hired to turn the company around. The turnaround remains a work in progress, but net income did rise by 132 percent last year.

Staples also announced changes at the top. Cofounder Thomas Stemberg remains an active chairman, but he gave the chief executive's title to Ron Sargent in February. Staples said it's now focused on a back-to-basics approach, and profits surged 342 percent in 2001.

Under chairman Paul B. Fireman, eighth-ranked Reebok brought in a lot of new blood and continued to make solid progress on its turnaround. Notably, it kicked off big marketing campaigns to infuse its sneakers with more hip-hop fashion cachet.

Ayers, of FleetBoston Financial, said which companies -- and how many companies -- post the big numbers in 2002 depends on how the recovering but still-shaky economy responds through the end of the year. It will take a couple of more quarters before corporate purchasing managers start buying again in large quantities, and consumer spending can't increase quickly from its already strong base.

"The rest of the year will depend on three things," Ayers said. "The ongoing geopolitical situation around the world, the whole Enron-itis scare that has called earnings into question, and the strength of the economic fundamentals are all uncertain. Who will benefit? Only time will tell."

Scott Bernard Nelson can be reached at nelson@globe.com.

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