(FORTUNE Magazine) – You might say that the FORTUNE Service 500 had an okay year in 1992, with profits up 9%, to $73 billion. But put those numbers in context, and they suddenly look a lot better. The gain was the second in a row despite the most lukewarm economic recovery on record. And if you exclude an accounting change, profits were up a thumping 22%, to $85 billion. The accounting rule, called SFAS 106, requires companies to recognize the cumulative liabilities they have assumed to date for retiree health benefits. While these write-offs ate up a good chunk of the Service 500's profits, the damage wasn't anywhere near what SFAS 106 wreaked on the Industrial 500 -- fully $71 billion, or almost all their profits. Reason: Only 55 of the service crowd took significant hits in 1992, vs. 144 of the industrials. Is this a bloodbath postponed? For some, probably; the rule allows companies to wait till next year. And more service than industrial companies may beamortizing the charges over 20 years -- the most liberal option -- rather than taking the hit all at once. But at the end of the day, service companies are likely to get off easier than industrials. In general, according to Goldman Sachs, they don't face as big a future burden as industrials: Their work forces are younger, with fewer union members accumulating heavy benefits, and turnover is greater, so the retirement goodies don't pile up as high. What's the source of the profit gains? Higher productivity accounted for part (FORTUNE, May 3). After growing mightily during the Eighties, employment in the Service 500 peaked at 11,444,976 in 1990; last year it totaled 11,383,351. An outsize share of Service 500 profits came from just a few industries. Commercial banking was the star: Profits jumped 141% for this 100-company ! list, kicking some $20.5 billion into the pot, thanks to a reduction in commercial real estate write-offs and lush interest rate spreads. (By contrast, the real estate albatross knocked profits of the 50 life insurers down 38%, to $4.6 billion.) Solid old utilities, their returns set by regulators, showed no growth but contributed a total of $18.4 billion. Though savings institutions brought just $1.6 billion to the party, they had lost $686.6 million back in 1991. Credit the trends that helped commercial banks; also, many of the frailest have been interred. Among the diversified financials ($11.8 billion), strong earnings from brokerage houses were offset by dismal returns from property and casualty companies cut down by Hurricane Andrew. The group fell 26% from last year's record profits. The 100 diversified service companies suffered few ill winds; profits were up 52%, or $13.3 billion. Software titan Microsoft excelled over the widest range of performance yardsticks: With a dizzy 49% increase in sales and a 53% increase in profits, it weighed in first in return on common equity and placed on five other top-performance lists as well. A year when consumers mostly stayed home did about what you'd expect to the 50 retailers. Their profits were off 57% from 1991, to $4 billion. Wal-Mart, however, continued to show its muscle, remaining the second most profitable company of the 500. In the doghouse for the second straight year, transportation subtracted from the list's luster, losing just over $1 billion as a group. Blame the airlines, which still can't get it right: Their losses totaled $4.7 billion. But it was a fine year for railroads, which added back $2 billion. Southern Pacific Transportation led the 500 in profit increases -- 7,204.4% -- and two others, Norfolk Southern and Union Pacific, were among the top six. Health care continues to offer rich pickings. Surging demand brought three newcomers to the diversified service list -- United HealthCare, HealthTrust, and Caremark International. Four of the 15 companies with the biggest increases in sales or revenues made their money ministering to malaise. Will they be able to keep it up after health care reform? Well, all that money set aside under SFAS 106 has to be spent somewhere.

BOX:

To count the many other ways Microsoft excelled, turn to the Performance pages.

Want to call or write one of the Service 500? You'll find the info in the States listings.

One of these companies -- no newcomer either -- leaped 20 places on this year's list. Which one?

Which company lost a bundle, had negative stockholders' equity -- and left investors smiling?

Does it pay to shrink? Look at the assets of the bank that performed best for shareholders.

What do the three banks with the biggest profit decreases have in common?

Most of this company's numbers were horrible, yet investors did fine. Can you find it?

Not including special credits, which newcomer to the list brought the most profits with it?

What do the three newcomers to this year's list have in common that's mutually exclusive?

Which veteran company moved furthest up the list? Which fell the furthest?

What do the three companies with the biggest increases in profits have in common?

It's in a tough city for laying power lines, but this utility rewards investors year after year. Find it.

BOX: THE SERVICE 500's STANDOUTS

HIGHEST PROFITS AT&T $3.8 billion

HIGHEST RETURNS ON COMMON EQUITY MICROSOFT 309.7%

HIGHEST 1-YEAR RETURN TO INVESTORS MIDLANTIC CORP. 341.7%

HIGHEST 10-YEAR RETURN TO INVESTORS CIRCUIT CITY STORES 50.5% annual growth

HIGHEST MARKET VALUE AT&T $80.4 billion

MOST EMPLOYEES WAL-MART STORES 425,000

BIGGEST LOSS SEARS ROEBUCK $3.9 billion

CHART: NOT AVAILABLE CREDIT: DESIGN AND GRAPHICS BY JEAN HELD CAPTION: FORTUNE'S SERVICE 500 HOW THEIR PROFITS HAVE FARED HOW THE 500s COMPARE

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: FORTUNE'S SERVICE 500 THE 100 LARGEST DIVERSIFIED SERVICE COMPANIES THE 100 LARGEST COMMERICAL BANKING COMPANIES THE 50 LARGEST DIVERSIFIED FINANCIAL COMPANIES THE 50 LARGEST SAVINGS INSTITUTIONS THE 50 LARGEST LIFE INSURANCE COMPANIES THE 50 LARGEST RETAILING COMPANIES THE 50 LARGEST TRANSPORTATION COMPANIES THE 50 LARGEST UTILITIES

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: FORTUNE'S SERVICE 500 HIGHLIGHTS ARRIVALS AND DEPARTURES THE MONEY LOSERS