Top 50 public companies: some Utah companies flourish despite economic hard times.

• Author: Hengesbaugh, Mark Gerard
• Position: On the Cover - Zions Bancorp. - Sonic Innovations Inc. - Utah Medical Products Inc. - Headwaters Inc. - Directory

UNLESS A UTAH PUBLIC COMPANY found itself in the right place at the right time in 2002, the lethargic economy made the year an uphill grind. And to date in 2003, this steep path has yet to top out.

Public companies throughout the country are suffering from three straight years of stock market declines. In addition to the pop of the high-tech bubble and the peripheral economic jolt of the 9-11 terrorist attacks, corporate malfeasance scandals left Average Joe Investor wondering if the stock market is rigged against those without Martha Stewart-type connections. The corporate misdeeds we've witnessed over the past year and a half have been shocking in their magnitude and tragic in their effect on investors' confidence in the market,' according to Harris Simmons, Zions Bancorporation chairman, president and CEO. By necessity, companies have trimmed expenses and inventory and deferred spending. Now, experts say, increased demand for products and services within the business community -- such as new computers and upgraded software -- is building.

Utah should benefit immediately, regardless of which sector experiences economic recovery first. Where the state once relied primarily on mining and the military, today's economy is diversified, technologically sophisticated and has a global component.

This is a difficult period but the following four major Utah public companies are among those prospering.

ZIONS BANCORPORATION

Bank On It

Once an unassuming Utah-based bank with $3.6 billion in assets, Zions has flourished with the Southwestern Sun Belt economy Today's Zions Bancorporation (ZION NASDAQ) is a financial services company with more than $26 billion in assets around the West and is substantial enough to be included in the bellwether S&P 500 Index.

Topping all Utah public companies on last year's list of the largest 100, Zions Bancorporation earned a dizzying $2 billion in revenues and $283 million in net income. This year's net of $256 million -- while a drop of nine percent -- is still a nifty profit by any Beehive State measure. Earnings per share decreased nine percent from a high of $3.07 in 2001 to $2.78 in 2002, but both were far higher than 2000's $1.86.

In 2002's third quarter, Zions incurred heavy charges, selling two underperforming e-commerce ventures, Phaos Technology Corp. and Digital Signature Trust Go. Another, Lexign Inc., was restructured. Zions cut losses during the year by closing nearly two-dozen bank branches in Colorado and Utah.

A strong performer in recent quarters has been Zions' $6.1 billion commercial real estate portfolio, according to Simmons. The holdings are diversified geographically, with 25 percent in southern California, 13 percent in Utah and 11 percent in Colorado. 'Among the nation's 25 largest bank holding companies, as measured by domestic commercial loans, Zions ranked number one in terms of the quality of this portfolio," says Simmons. Even" '100 Year Flood' levels of defaults and losses ... would amount to only about 5.1 percent of combined shareholders' equity and loss reserves."

The outlook for the West's economy -- which boomed through most of the 1990s -- now is mixed, say Zions' analysts. What's hurting is decline in demand for high-tech products, overcapacity in the telecommunications industry and reduced travel and tourism. Also, local government coffers are empty because tax revenues dried up. On the other hand, what is helping the Western economy is the housing market, fueled by low interest rates.

Although conditions will probably remain weak through 2003, the West still offers all the conditions for growth if world demand improves, according to Zions' prognosticators. Regional strengths are a sophisticated infrastructure, significant human capital and convenient access to the Pacific Rim.

As for the confidence of small investors shaken by corporate scandals: "We have reviewed and updated our Code of Business Conduct and Ethics... but rules and over-sight aplenty are of limited value unless a company's management establishes the right tone and a healthy culture," says Simmons. "I'm quite proud of the culture and tone we have in this company For example, we were early to move away from earnings guidance, and a lot of companies have followed that lead."

Considered boring during the dot-coin bubble, banks are now undervalued, says researchstock.com: "Bank stocks significantly outperformed the broader market indexes... despite the worst stock market since before WWII, banks have been a solid performer."

SONIC INNOVATIONS

Sound Prospects

Few long-term trends are as predictable as the looming increase in the percentage of elderly in the U.S. population. The leading edge of the Baby Boom generation, comprising an entire one-third of the total populace, is waltzing into their mid-50s today Because hearing loss often comes with age, digital hearing aid maker Sonic Innovations Vice President and CFO Stephen L. Wilson acknowledges the aging population is important to company prospects. "The average age of the first-time hearing aid wearer is 67, however, so it will be a while before most Boomers are in the appropriate age group for our product," he says.

Even with that colossal cohort of aging Boomers still on the horizon, Sonic (SNCI NASDAQ) does well today Number 22 on last year's top 100, Sonic outdid 2001's $57 million in net sales by 19 percent in 2002. Net income was up as well. As a whole, the hearing aid industry is doing poorly, posting its worst sales in three years according to president and CEO Andy Raguskus, but Sonic's first quarter 2003 net sales were up by 13 percent.

The Salt Lake City-based corporation believes it has the best hearing aid technology on the market today, and partial credit goes to insightful research that came our of local universities, says Wilson. "From BYU and University of Utah research we gained advanced understanding of such things as how the human cochlea, or inner ear, actually processes sound." Then, by wedding academic research with Silicon Valley technology, Sonic developed a patented digital signal processing system embedded on a microchip. Today they manufacture five lines of tiny, but powerful, hearing aids.

And, Sonic has gone global. "We think to be successful, a...