Battered by a billion-dollar deficit in the auto industry, a pronounced slump in housing activity, and sluggish retail sales, American business found little to celebrate when the books closed on 1981. The nation's 1,000 largest corporations staggered into 1982 with sales running only 4% ahead of inflation and aftertax profits barely matching it.

There is a bright side to the economy of the past year, however, and it can be found in the 1982 INC. 100 -- the fourth annual ranking of the fastest-growing publicly held smaller corporations in the United States. While the giants posted a 1981 sales gain of about 12%, the INC. 100 companies chalked up a vigorous 77% increase. Similarly, while the nation's 1,000 largest companies mustered a 7% to 8% gain in aftertax earnings, the INC. 100 closed 1981 with a 107% surge in profits.

Spectacular as the INC. 100's 1981 performance was, it represents only the most recent installment in a five-year period best described as explosive. From 1977 to 1981, sales of the 100 companies soared by 1,247%, or at an average compound annual rate of 92%. All but two companies that qualified for this year's ranking registered at least a sevenfold increase in sales during the 1977-81 base period.

Led by California's Apple Computer and anchored by New Jersey's Matrix, maker of diagnostic imaging systems, the 100 companies are ranked according to their percentage increase in sales or revenues, based on 1977 and 1981 fiscal year results. Five years ago, the 100 firms averaged $3.7 million in sales, with the majority generating less than $2 million. Only 11 topped $10 million, and none had more than $22.3 million in revenues. Today, the INC. 100's average volume is $49.5 million, with 54 companies surpassing the $25-million mark.

Sporting nameplates ranging from the exotic, such as HemoTec and Healthdyne, to the simple, such as Liz Claiborne and Taco Charley, the ranking represents a diverse range of manufacturing, mining, and service industries. It includes 24 computer and business equipment makers, 11 oil and gas producers, 9 manufacturers in the medical field, 3 restaurant chains, and 2 airlines. The elite group is headquartered in 28 states: California is the front-runner with 17 companies, followed by New York and Texas with 15 each, and Minnesota with 7.

Diverse as they are in industry and location, the INC. 100 share four qualities: youth, innovation, high productivity, and a healthy bottom line. Fifty-six have incorporated since 1972; 89 have incorporated since 1962. On average, the INC. 100 firms have been in business less than 12 years.

Start-ups not long ago, they are now the upstarts on the frontier of high technology and creative services. The list includes pioneers in computer leasing, seismic data processing, technological training, and oil-field services, as well as nuclear medicine, laser scanners, ferro-fluidic technology, and video games.

Products of the free enterprise system, the INC. 100 have accelerated competition and outpaced giant counterparts in the country's fastest-growing fields (see "Born to Grow," page 59). Among the 15 INC. 100 companies in the computer industry, for example, the five-year compound average growth rates range from 67% (Compucorp) to 356% (Apple). The INC. 100 contingent in the medical equipment field has pulsed with compound rates of 62% (Matrix) to 226% (Electro-Biology), while the 11 energy producers are not far behind with a range of 74% (Seneca Oil) to 148% (Gulf Energy). Overall, while total sales posted by the nation's 500 largest corporations rose 70% between 1977 and 1981, the INC. 100's sales skyrocketed to a gain of 1,247%.

Using sales per employee as a yardstick, the smaller growth companies generate greater volume per worker than most of their giant counterparts. Last year, for example, Tomlinson Oil and Sterling Pipe & Supply rang up more sales per employee -- $2.0 million and $1.5 million, respectively -- than any firm on the Fortune 500. Other industry standouts include Apple Computer and Cado Systems, which each generated more than $137,000 per worker, compared with IBM's $83,000. On average, the INC. 100 generated $79,152 per employee last year.

More important than employee sales statistics, however, is the growth in the number of employees among the INC. 100. In the past five years, the overall size of the group's work force has soared by 607% -- a significant figure compared with the meager 2% increase registered by the top 500 industrials. As a group, the 100 companies have created an estimated 54,000 net new jobs since 1977. Among the 55 companies whose growth has been generated internally and not by acquisition, the increase in number of employees is 620%. In short, their payrolls have expanded more than sevenfold, an achievement that translates into 18,500 new jobs in the past five years.

While the majority of the INC. 100 companies expanded internally during the 1977-81 period, acquisitions have played a role in the growth of 45 firms. Leading the list of acquirers is Chemical Investors, an Indianapolis-based chemical conglomerate that has undergone a dramatic shift from distribution to manufacturing in the past five years. Jumping from a zero base in 1976 to sales of $5.2 million in 1979, Chemical Investors then concocted a leveraged buyout that resulted in the 1980 acquisition of Borden's $32-million Mystik Tape Division. Following two more acquisitions in 1981, the company celebrated the beginning of 1982 with the purchase of $25-million Arno Adhesive Tape.

As their P&L statements testify, the INC. 100 firms are as profitable as they are innovative and productive. From 1977 through 1981, total net income for the 100 companies soared by 3,846%. Though 26 companies closed 1977 in the red, only 8 were wrestling with deficits at the end of 1981. More important, 86 posted gains in earnings last year, with net profits at 8.9% of sales, up from 2.8% five years ago. Not surprisingly, among the hardest hit in the loss column last year were Air Florida and Tomlinson Oil, both of whom saw black ink evaporate into losses exceeding $5 million.

Pegging the INC. 100's return on equity is difficult, if not impossible. Small growth companies in general are highly leveraged, and the companies that make up the INC. 100 are no exception. Substantial changes in equity due to new stock issues, coupled with the idio-syncracies of calculating return ratios, frequently distort the figures. By INC. estimates, however, the 1981 return on equity among the 100 firms averaged a highly enviable 34.7%.

As with any ranking of elite companies, the INC. 100 raises curiosity about the firms that finished as runners-up and those that were disqualified. At press time, Infotron Systems, a Cherry Hill, N.J., maker of multiplexers and modems with 1981 sales of $22 million and a five-year gain of 583%, emerged as No. 101. Among other runners-up are more than 100 companies that have at least quadrupled or quintupled their sales in the past five years. They include 21 members of last year's INC. 100 (see "Where's the Class of '81?", page 65) and such fast-track performers as Empire Oil & Gas (up 582%), TIE/Communications (581%), and Sykes Datatronics (569%).

Among the companies disqualified, the most noteworthy this year are those that were eliminated because they have yet to establish a five-year sales history or because their 1977 sales were less than $100,000. These newcomers testify to the meteoric growth of emerging companies. Among celebrated companies with limited histories are Pizza Time Theatre, Magnuson Computer, and Kloss Video, none of which were generating sales five years ago. Since 1978, however, Pizza Time Theatre's sales have soared by 10,308% and Magnuson's by 8,473%. Kloss Video, which began developing revenues in 1979, has registered a 1,736% gain in three short years.

The challengers also include at least five notable examples of companies that began their takeoffs in 1977 but had not reached the $100,000 level by year-end. With sales that have since rocketed by amounts ranging from 36,000% to more than 296,000%, the explosive quintet includes Biochem International (up 296,270%, with '81 sales of $4.3 million); Movie Systems (188,002% with sales of $7.8 million); Genentech (81,750%, $21.3-million sales); Petro-Silver (65,027%, $9.8-million sales); and St. Jude Medical (36,061%, $13.2-million sales). Barring an unexpected stall in 1982, all will be among the top new-comers in next year's INC. 100.