News Column

Heading Up in a Down Year

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By any measure, 2001 stands out as an unusual year for business. During this historic shift from peace dividend to war economy, from expansion to recession, the Hispanic Business® 500 continued its impressive course of double-digit growth. Revenues for the 500 largest Hispanic-owned companies in the nation increased 10.9 percent to $23.49 billion (see chart). In contrast, the national GDP grew 3.4 percent in 2001, down from 6.5 percent the previous year, and revenues for the Fortune 500 grew only 3 percent.

So how did the Hispanic Business 500 hold their own, and even prosper, during the downturn?

Part of the answer lies in the composition of the 500 itself. Economic contraction occurred mainly in business investment and the capital goods sector, while consumer-oriented sectors suffered less. Among the 500, wholesalers and retailers report the highest revenue percentage growth, at 33.6 and 17.4 percent, respectively. Construction, automotive, and transportation also show substantial growth. The business-heavy finance sector contracted by 25.3 percent (see table, “Sector Composition & Performance”). The service sector, which includes both business and personal services, averaged a 4.4 percent growth rate. Clearly, the consumer segments on the list helped counterbalance losses among B2B sectors.

According to the Bank One Economic Outlook Center at Arizona State University, automotive purchases ranked among the strongest categories of consumer spending during the slump. Seven of the top 20 companies on the Hispanic Business 500 sell cars, and these giant dealerships increased their sales by $544.62 million in 2001. Burt Automotive – the number 1 company on the directory, with revenues of $1.49 billion – accounts for more than half of the gains ($260 million). Average revenues for all auto dealers on the Hispanic Business 500 rose 23.5 percent last year (see table, “Average Company Revenue, by Sector”).

Hispanic geographical concentration also played well during this recession. Data from the Bank One Center show that the states that suffered least from the slowdown include New Mexico (ranked sixth among the 50 states), Florida (16), New Jersey (17), and California (23). On the Hispanic Business 500, perennial leader California again edged Florida for most companies on the list, while the Sunshine State won out for revenue share (see table, “Top 10 States”). Florida accounted for $8.1 billion, or 34.6 percent of all revenues for the Hispanic Business 500. The Florida companies averaged $68.9 million in sales – the highest per-state average in the country, with the exception of Colorado, which benefited from the presence of Burt Automotive.

In addition to the external factors driving their growth, the Hispanic Business 500 have the advantage of seasoned management teams. A difficult-to-quantify asset, management expertise comes to the fore in hard times. Our coverage of this year’s 500 highlights the value

of CEOs’ contributions by focusing on the functions of top management. The one-page profiles following the Hispanic Business 500 directory examine the “best practices” in seven areas: strategic planning, sales & marketing, finance, human resources, operations, communications, and technology. The lessons of successful Hispanic Business 500 CEOs apply to thousands of Hispanic firms struggling with the same challenges. Just as top Hispanic managers benchmark to improve company performance (see article, “Best of the Best”), the Hispanic Business 500 allows readers to compare managerial notes with the community’s entrepreneurial leaders.

Overall revenues for the largest Hispanic companies went up last year, but the recession still inflicted damage. The top 100 companies on the list accounted for 69 percent of the revenue growth, making it a decidedly slow-growth period for companies lower down on the list. The latter qualify as middle-market companies, between $5 and $50 million in size. Nine companies fell off the directory by going out of business, another 13 had revenues that fell below the $5.1 million minimum, and 20 more declined to provide financial data, most citing decreased revenues as the reason.

Companies that survived on the list saw their profit margins shrink. The number of Hispanic Business 500 firms reporting losses nearly tripled last year (see graph, “Profit Ranges”). An analysis of the 187 companies that appeared on the list for both years reveals that 36 moved down in profit margin category, 27 moved up, and 123 stayed the same. In general, corporate profits in the United States fell 12.5 percent in 2001, according to data from the Bureau of Economic Analysis.

Now, however, Hispanic companies look poised for another burst of growth. On the technology front, more Hispanic Business 500 companies have Web sites than ever before. Since 1999, the number of firms with Web sites has more than doubled; currently 415, or 83 percent, of the companies maintain an Internet presence (see chart).

More than half (57.2 percent) of CEOs said they plan to add people to their payroll this year. Last year, cumulative payroll for the Hispanic Business 500 jumped nearly 5 percent. When asked about the main barrier to revenue growth, 46 percent of CEOs – nearly double the percentage of the previous year – cited market conditions. Presumably, as market conditions improve in 2002, so will the fortunes of the Hispanic Business 500.

Introduction written by Senior Editor Joel Russell. Hispanic Business 500 directory research by Chief Economist Frank Chow, Research Supervisor J. Tabin Cosio, and Research Assistants Cynthia Marquez and Michael Caplinger.

Methodology of the Hispanic Business 500 Directory

Hispanic Business research staff gathered data for the 18th annual listing of the 500 largest Hispanic-owned companies in the United States from the Hispanic Business Company Profile form, which appeared in the magazine’s December 2001 issue. Also, Company Profile forms were mailed to more than 14,000 Hispanic-owned companies in the United States.

Companies included in the Hispanic Business 500® must show at least 51 percent ownership by Hispanic U.S. citizens and must have headquarters in one of the 50 states or Washington, D.C. Companies must submit revenue figures based on their report to the IRS on line 1c of the corporate/partnership tax return. The revenue figure must be submitted on a signed form verified by the CEO, CFO, or a CPA representing the company. Nonprofit organizations, advertising and public relations agencies, and companies based in Puerto Rico are not eligible.

While Hispanic Business makes every attempt to locate and include the largest Hispanic-owned companies in the country, we cannot list companies that do not submit the required information by our deadline.

To ensure that your company is considered for future Hispanic Business directories, please send your name, company name, mailing address, phone number, fax number, and e-mail address to our Research Department via fax at (805) 964-6139 or via e-mail at research@hbinc.com. Indicate that you would like to have a Company Profile form sent to you.

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