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Change Comes Quickly to Business Landscape

There’s been a lot of movement among San Diego’s private companies during the past five years. In comparing two San Diego Business Journal lists of Largest Private Companies, one ranked by 2005 revenue and the other ranked by 2010 revenue, it’s evident that none of the companies retained their rankings and few are on both the lists.

The top ranked companies of both lists experienced some dramatic change within the last five years.

The No. 1 ranked Science Applications International Corp. based on 2005 revenue of $7.18 billion has not only changed its name to SAIC Inc., it also became a publicly traded company, SAI on the New York Stock Exchange, in 2005 and transferred its headquarter operations from San Diego to McLean, Va., in September 2009, according to spokesman Vernon Guidry.

“More than 90 percent of our revenue comes from the federal government and we wanted our headquarters to be closer to our customers,” said Guidry of the roughly 40,000-employee company.

At the Top

This year’s No. 1 ranked company on the Largest Private Companies list, DJO Global Inc. with $966 million in revenue, was a no-show in the 2005 rankings because it wasn’t a large private company at that time.

Mark Francois, DJO’s director of investor relations, said the transformation came about when the private equity firm Blackstone Capital Partners approached DJO management with an offer to purchase DJO. The proposal was put on the table to merge one of Blackstone’s companies ReAble Therapeutics with DJO, a manufacturer and distributor of medical device products. Francois said ReAble was about the same size as DJO when the sale was completed in November 2007. Not only did the sale boost DJO’s size and revenue level, it also took the company private.

Revenue has grown steadily since then, according to Francois, who attributes a good portion of the growth to acquisitions.

“We’ve made a number of acquisitions in the international markets including in France and we’ve made a number of acquisitions in the U.S.,” said Francois, who estimates four acquisitions this year alone bring in $100 million in revenue on an annualized basis.

Other high achievers on this year’s Largest Private Companies list are new arrivals compared with five years ago. Ranked No. 2 this year is design-build general contractor Harper Construction Co. Inc., with $359.8 million in revenue in 2010, followed by the No. 3 ranked electrical materials, automation and utility company OneSource Distributors LLC with $335 million in revenue.

In contrast, the No. 2 ranked company of 2005 was Corky McMillin Cos., a real estate development and homebuilding firm with $880 million in revenue that year, followed by the No. 3 ranked La Mesa RV Center Inc. with $533 million in revenue.

Ranked No. 6 on the current Largest Private Companies list is Garden Fresh Restaurant Corp., parent company to the Souplantation and Sweet Tomatoes restaurants. Founded in San Diego in 1978, the chain of 120 salad buffet-style restaurants has established a presence across the West, South and East. Garden Fresh CEO Michael Mack says that because of economic conditions the company can’t grow in the same fashion that is has grown in the past.

Adding to the Mix

To boost sales, the company has started a line of products for Costco Wholesale Corp., including the surprisingly popular Joan’s Broccoli Madness salad, which is a mix of broccoli, bacon, raisins, cashews and salad dressing. The company also is creating smaller restaurants, about 5,000 square feet instead of 7,500. “This requires fewer guests to get the return we need, and it’s allowed us to continue to grow,” Mack said. “We took it as an opportunity to give our restaurants a new look.”

The look resembles a “contemporary farmers market.”

Among the seven companies whose revenues were reported on the Largest Private Companies lists for both 2005 and 2010 is auto dealership Drew Ford, whose ranking rose from No. 15 in 2005 to No. 13 this year. Revenues, however, declined from $162 million in 2005 to $117.4 million in 2010.

Another company that moved up the list from five years ago is CUSO Financial Services LP, ranked No. 27 based on 2005 revenues of $71 million versus a No. 17 ranking based on 2010 revenue of $90 million.

Growth at CUSO Financial Services, which provides brokerage services to financial institutions and whose market is credit unions, is tied to a shift toward conservative investing due to the economic downturn and volatility of the markets, according to its President and CEO Valorie Seyfert. Not only did investors’ changing risk tolerance lead them to a more conservative mix of products such as annuities and government-guaranteed products, they also sought out the services of experienced financial advisers.

“People were seeking services from providers they felt comfortable going to, and a credit union was one of those places,” Seyfert said.

During the past five years Seyfert says that the firm devoted a substantial amount of resources to being in compliance with regulations and fulfilling auditing and reporting requirements as well as improving technology to give clients easier and more frequent access to information about their accounts.

Other familiar companies that have moved up the Largest Private Companies list during the past five years are T.B. Penick & Sons Inc., which rose from No. 20 in 2005 with $85 million in revenue to No. 9 in 2010 with $185 million in revenue; Jazzercise Inc., which rose from No. 26 in 2005 with $71 million in revenue to No. 15 in 2010 with $96 million; and Barney & Barney LLC, which rose from No. 33 in 2005 with $44 million in revenue to No. 19 in 2010 with $77 million in revenue.

Large jumps were also made by the drug and device trials firm Synteract Inc., which moved up from No. 46 and $21 million in revenue in 2005 to No. 28 and $42.1 million in revenue in 2010; and by applied science and engineering, technology firm Sullivan International Group Inc., which moved up from No. 50 and $20 million in revenue in 2005 to No. 30 and $41.1 million in revenue in 2010.

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