The 2010 IW U.S. 500: Has Revenue Hit Rock Bottom?

Even Big Oil took a hit in 2009. The petroleum and coal products sector still occupies many of the top spots on the IW U.S. 500, but declining revenues by giants such as the perennial No. 1 Exxon Mobil Corp. contributed to an unprecedented drop in overall net sales since IndustryWeek began ranking the nation's top 500 publicly held manufacturers based on revenue in 2002.

On the plus side, many manufacturers improved profits or returned to profitability in 2009. Total net income for this year's IW U.S. 500 increased 6%, compared with a 30% profit drop IW U.S. 500 manufacturers in 2008. Much of the growth can be attributed to manufacturers cutting back expenses far beyond the necessary amount, says William Strauss, senior economist and economic adviser for the Federal Reserve Bank of Chicago. "They cut back inventories beyond what could be justified for the state of the business cycle, so costs were restrained far more than what probably should have been done, and hence, the bottom line was improved because costs were cut quite substantially," he says.

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Manufacturers are beginning to rebuild depleted inventories, boosting output and employment throughout the manufacturing sector, Strauss says. As an example, he cites the auto industry where sales dropped 21% in 2009, yet auto production declined by 34%. "I think in general manufacturers were buying into a much more dismal outlook than what actually materialized, so that caused them to be extremely cautious, especially in the early part of last year," Strauss says.

For the first time since 2006, total IW U.S. 500 revenue dipped below $5 trillion, reaching $4.55 trillion in 2009. That's a 21% decline from 2008. Mergers and bankruptcies impacted revenues with several prominent manufacturers, including General Motors Corp., dropping off the list. Last year's No. 5 manufacturer, GM became a private company in 2009 when it filed for Chapter 11 bankruptcy and became a majority-owned entity of the U.S Treasury Department. The company is expected to make an initial public offering in 2010.

Auto components manufacturer Delphi also is absent this year after it was acquired by private investors in 2009. Former top 100 manufacturers Wyeth, Schering-Plough, and Sun Microsystems also don't appear on the 2010 list because they were purchased by competitors.

The metals and oil sectors were hit particularly hard in 2009. Total revenue for IW U.S. 500 companies in the petroleum and coal products industry was $1.03 trillion, a 35% drop from last year. ConocoPhilips fell one spot to No. 4; Marathon Oil Corp. dropped four places to No. 15, and Valero Energy Corp. (No. 11) fell four notches and out of the top 10. San Antonio-based refiner Valero attributed its revenue decline and a loss of nearly $2 billion in 2009 to weak demand and low refining margins. The company responded by cutting jobs and shutting down a Delaware refinery that was losing money.

Similarly, total revenue for the primary metals industry plummeted 34% to $82.8 billion. Steel recycler Nucor Corp., one of the largest companies in this sector, fell 31 spots to No. 82 after its revenue dropped 51% in 2009. Overall revenue for the fabricated metals market fell 27% to $73.9 billion, including a 53% drop for United States Steel Corp.

But the story for health-care and renewable-energy related industries is much more encouraging. Life Technologies Corp. (No. 233) benefited from increased demand for its H1N1-related testing products and forensic DNA products. Life Technologies formed in 2008 when Invitrogen Corp. and Applied Biosystems Inc. merged. Excluding full-year 2008 Applied Biosystems' sales, Life Technologies' revenue rose 102% in 2009. Taking into account full-year 2008 Applied Biosystems' results, revenue rose 5% to $3.28 billion.

Diagnostic testing products manufacturer Inverness Medical Innovations Inc. realized a 15% revenue increase, which the company attributed to acquisitions and sales related to H1N1. The Waltham, Mass.-based company reported 2009 revenue of $1.92 billion and a $34.1 million profit after posting a $22 million loss in 2008. The revenue gain propelled the company 71 spots to No. 332 on the IW U.S. 500. On May 18, the company announced that it plans to change its name to Alere Inc.

The alternative-energy market continues to make significant gains, with First Solar Inc. and Woodward Governor Co. climbing up the rankings. Tempe, Ariz.-based First Solar touts itself as the largest manufacturer of thin-film solar modules. The company's profit grew 84% in 2009, and revenue increased 66% to $2.06 billion. First Solar expects global demand to grow annually 30% to 35% through 2012. Germany has been the company's largest market, accounting for 65% of 2009 net sales, according to the company's annual report.

Much of the growth in the renewables market can be attributed to the fact that it's a nascent industry coming off a low base, Strauss says. "You have to be careful how you evaluate these because in the auto industry we're seeing close to triple-digit gains in some months, but of course that's coming off ridiculously low levels of production," Strauss says. And many of these manufacturers are still working with a great deal of excess capacity, he says.

View the complete IW U.S. 500 list here. The list can be viewed alphabetically or by industry, ranking and financial performance.