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High tech is out, frozen yogurt in
Northwest stocks generally took a beating, but there were a few reasons to smile
For investors with a stake in the region's publicly traded companies, 2002 was not a good year Ñ but it was a great year for frozen yogurt.
'It was another difficult year for anybody who owned equities,' said Rex Wardlaw, a senior vice president in the Portland office of U.S. Trust Co. 'The best decision in 2002 was to sell the blue chips and buy smaller value companies.'
'Our focus list of Northwest stocks was down about in line with the S&P 500, which fell about 21 or 22 percent in 2002,' said Bob Toomey, Seattle-based managing director of investment firm RBC Dain Rauscher Corp.
The high-tech sector continued to lose ground, but a few Northwest companiesÊregistered respectable gains: community banks such as Umpqua Holdings Corp., apparel companies led by Columbia Sportswear Co., and agile manufacturers like Schnitzer Steel Industries Inc. and Cascade Corp.
Among the biggest losers: InFocus Corp., Metro One Telecommunications Inc. and CenterSpan Communications Corp.
Doug Woodcock, managing director of capital markets for D.A. Davidson, summed up the year this way:
'Although this bear market feels like it's been interminable, what we've really done is scrubbed off the excesses of the technology bubble and returned to the long-term trend line.'
The standout performer by far among regional stocks was Portland-based YoCream International Inc.
The price of its shares soared a whopping 118 percent last year (from $3.50 on Dec. 31, 2001, to $7.64 on Dec. 31, 2002).
Its performance was proof that investors are sweet on the prospects for frozen yogurt, smoothies and other ice-cold delights even as they remain sour on dot-coms and telecoms.
YoCream sales of frozen products ÑÊwhich also include custards, sorbets and a new coffee latte freeze ÑÊincreased 25 percent to $6.3 million in its third quarter, which ended July 31, 2002, over the same quarter last year. It wasÊthe company's fifth consecutive quarter of sales and earnings growth.
The company completed a $2.8 million expansion of its Portland plant on Northeast 87th Avenue last year to accommodate increasing demand for its products.
Founded in 1977 by brothers John, David and James Hanna, YoCream supplies restaurants, hospitals, schools and other food-service institutions, as it captures a larger share of an ever-expanding niche.
Costco Wholesale Corp., which expects to add 40 stores next year to the 374 it already operates worldwide, serves YoCream's soft-serve yogurt.
YoCream's successful partnership with yogurt giant Dannon Co. Ñ which includes marketing frozen desserts under the Dannon/YoCream label Ñ has opened new markets, including the U.S. Army, which serves YoCream's frozen custard in its mess and recreational halls both in the United States and overseas.
On the other end of the scale, the biggest losers of the year were Hillsboro's CenterSpan Communications Corp. and Computerized Thermal Imaging, the Lake Oswego-based manufacturer of medical thermal imaging devices.
CenterSpan apparently fell victim to Oregon's overall economic blahs. CTI, however, could ultimately symbolize something much darker.
CenterSpan develops software that allows users to more easily obtain data-heavy digital audio, video and data files. The company's products are big with gamers who enjoy downloading online games. Its stock closed out the year near its 52-week low at $1.16 Ñ down nearly 88 percent Ñ as profits continued to elude it.
Computerized Thermal Imaging can partly blame its poor performance (it fell from $1.55 on Dec. 31, 2001, to 19 cents on Tuesday) to rejection of its breast cancer detection device, the BCS 2100, early last month by the U.S. Food and Drug Administration's radiological devices panel.
The plot thickened, however, when Richard Secord, a figure in the 1980s Iran-Contra scandal and now CTI's chief executive officer, sold nearly $127,000 worth of the company's stock hours before CTI announced the FDA decision. This echoed the circumstances surrounding the transaction that tarnished Martha Stewart's reputation last year.
Secord canceled the transaction after coming under fire for it.
Neither the Secord situation nor the device's rejection surprised Ira Loss, executive vice president of Washington Analysis, which follows the FDA. 'There's a fairly well-documented history of less than first-rate research and behavior by (CTI's) current and previous management,' he said.
Still, the market was kind to some shrewd stock pickers, even if they shunned frozen yogurt makers. Investors in these four local companies did particularly well:
Schnitzer cleans up on recycling
The metals recycling business boosted Portland-based Schnitzer Steel last year. Its stock, which trades on Nasdaq, climbed from a low of $13.30 per share to $20.02 at year's end, a gain of nearly 47 percent.
Sales for the fiscal year that ended Aug. 31 were $350.6 million, a 9 percent increase over fiscal year 2001.
Schnitzer collects, processes and recycles ferrous metals from junk cars, locomotives, scrapped ships and a variety of other sources, selling most of it as scrap and remelting the remainder at its minimill in McMinnville.
The firm also owns several joint ventures, including one that operates self-service used auto parts yards and another that dismantles industrial plants, cleans up the site and then sells recovered machinery and metals.
Bill Whitlow, manager of the Safeco Northwest Fund in Seattle, said Schnitzer was one of the fund's best-performing stocks this year. 'If demand improves, you usually get a combination of better volume and better pricing,' he said. 'Add them together and you get a lot more revenue.'
Revived truck market lifts Cascade
Hydraulic valves and forklift components isn't a line of business that crackles with excitement. But the earnings that Portland's Cascade Corp. racked up in 2002, putting its stock among the region's top gainers, certainly piqued investor interest.
Its stock rose almost 33 percent last year, closing Tuesday at $15.95 per share.
Projections call for Cascade to increase earnings growth by 172 percent in its fourth quarter ending January 2003, far above the industry average of 48 percent. With its two Chinese factories, in Xiamen and Hebei, Cascade is in a position to capitalize on China's emergence as an economic and development powerhouse, analysts say.
The company's boost in sales and share value follows that of the entire lift-truck industry, which rebounded from last year's downturn, said Mark Gaskill, president of MKG Financial.
Cascade has increased net income to $4.4 million on revenues of $70 million, up 13 percent from last year. It has reinstated its quarterly dividend of 10 cents a share.
Columbia knows market in and out
There's been a sort of sameness to Columbia Sportswear's quarterly reports over the last few years. Sales keep growing, and the company's stock gained 33 percent in 2002.
Retailers overall have suffered from the slumping economy, and warm winter weather hasn't helped coat sales. But Carole Buyers, an analyst for RBC Capital Markets in Denver, calls Columbia Sportswear 'the pre-eminent value brand in the outdoor industry.' She estimates the market for Columbia's products at about $6 billion and thinks the company can sustain 15 percent earnings and sales growth over the next few years.
The 64-year-old Portland firm is headed by a homegrown management team that includes Chairwoman Gert Boyle and her son, Timothy, as president and chief executive officer. It primarily focused on outerwear until 1993. Since then, it has broadened its offerings to sportswear and rugged footwear, buying Canadian boot maker Sorel.
Analyst Buyers estimates that Columbia Sportswear's outerwear, which accounts for about half of the company's sales, holds a 33 percent market share in the industry. The clothing is designed in Portland, manufactured in the Far East, and distributed through the firm's high-tech warehouse in North Portland.
Umpqua Bank morphs into big fish
In 2002, Umpqua Holdings instigated a flurry of new partnerships, garnered national attention for its customer service plans and branch design schemes and saw its financials soar.
Its stock rose 35 percent (from $13.50 to $18.25) over the past year, and investors now are anxious to see whether Umpqua can continue making the broad transition from an inconspicuous Roseburg bank to a Portland-centered financial services mainstay.
Umpqua has been favored by investors because of its aggressive consolidation strategy. It merged with Centennial Bancorp to help create an enterprise that does $2.5 billion in business annually.
'This year was noisier than most, so they naturally saw a big (stock price) jump,' said Jim Bradshaw, senior banking analyst for D.A. Davidson in Lake Oswego. 'They did have a terrific year, but people will be looking to see what their core rate of growth actually is.'
• • n
For every winner on the region's scoreboard, there was a passel of losers. Among them, these companies suffered the biggest drops in market value.
InFocus gets outfocused
InFocus Corp., a local leader in the once hot visual display market, was supposed to help lead Oregon out its economic doldrums.
Instead, it fell into the same abyss as its tech brethren. The company saw its stock fall 72 percent in 2002, closing Tuesday at $6.16.
It can blame its woes on continued reductions in business spending on information technology equipment. While it rolled out new home projector lines last spring, it apparently didn't anticipate that other electronics companies were marketing similar lines at lower prices.
'The market changed maybe quicker than people expected, moving to more of a low-price commodity, and that requires different distribution channels and different price points,' said Cherrie Prinz, who follows InFocus for D.A. Davidson. 'It's a very different game.'
Time ticks on Crown Pacific loans
There may be a housing boom, but Crown Pacific Partners LP, the lumber and mill company, isn't reaping the benefits. Its stock closed the year at $1.79 per share, down nearly 70 percent for the year.
The Portland-based company's revenues fell 19.4 percent to $377 million in the first nine months of 2002 and is under the gun to trim its $505 million in long-term debt and $11 million in quarterly interest payments, considered high even for the troubled lumber industry.
It shed two tree farms to pay down $180 million of the debt. And its creditors rewrote a half-dozen loan agreements to give the company more time to pay in the wake of weak timber and log sales.
Investors haven't seen any dividends since December 2000 and aren't likely to receive any when fourth-quarter results are announced Jan. 22.
'I don't think lumber prices are going to recover significantly,' said Steve Chercover, a research analyst at D.A. Davidson's. The tariff on Canadian timber imports 'backfired and had the consequence of pushing timber prices down. There's no sign of resolution and no reason to believe that lumber prices will recover.'
Gaskill of MKG Financial said it was not a question of poor management.
'A majority of what is going on is due to market conditions,' he said. 'They're looking at being at break-even in the fourth quarter. They can get it turned around. But the clock is ticking.'
Metro One dials for contracts
Even after suffering a precipitous fall from investors' good graces, Metro One Telecommunications Inc., the Beaverton directory-assistance specialist, has a convincing story to tell.
Dale Wahl, Metro One's chief financial officer, readily acknowledges that the loss of two huge directory assistance contracts, with Sprint PCS and Cingular, sent investors scurrying for other options.
Metro One lost nearly one-third of its revenues when Sprint turned it away in October. By year-end, its stock had fallen 78.6 percent to $6.16.
'Losing contracts like that is always a concern, but we've begun working on other initiatives and opportunities here that will provide some pretty good future press releases,' Wahl said.
Metro One is counting on a recovery in the wireless telecom sector over the next decade that could make it well again
'We're working to add business anywhere there's directory assistance calls,' Wahl said.
Online banking takes fall
Beaverton-based Corillian Corp., which develops online-banking software, saw its stock price tumble 81 percent last year, nose-diving from $4.98 on Dec. 31, 2001, to 91 cents at year-end.
Alex Frost, Corillian president and interim chief executive officer, says he doesn't take it personally. 'The whole sector's been hammered,' he said.
For Corillian, the problem is that banks and other financial institutions have been reluctant to invest in new technology in a rough economy. Still, Corillian is poised to make its first-ever profit in 2003, Frost said, with some current clients planning to broaden their online offerings.
Corillian's product 'is widely considered to be one of the best, and there hasn't been a reduction in demand for it,' said John Kraft, an analyst with D.A. Davidson. And it has an alliance with Microsoft that should help attract customers.
'It's just on the cusp of breaking even, cash-flow-wise,' Kraft said.