St. Paul Pioneer Press (MN) March 7, 2004 Section: BUSINESS Edition: City Page: D4 Column:BUSINESS BEAT Memo:Pioneer Press 100: A Special Report. See related stories: 1D, 8D. PICKS OF THE LIST DAVE BEAL SAYS THE PP 100 OFFERS A DEEP POOL FROM WHICH TO CHOOSE HIS 10 FAVORITES. DAVE BEAL My editors had a suggestion for my annual Pioneer Press 100 column. "Dave," they said, "why don't you just pick your 10 favorites from the list and write about them?" Initially, I resisted. Like many columnists, I sometimes think my ideas are better than those of my bosses. But their suggestion was a good one. I've long believed that Minnesota has one of the largest and highest-quality concentrations of publicly held headquarters companies to be found anywhere. Year after year, our roster of the 100 largest of these companies proves that. This bunch is one of the treasures of Minnesota. It offers a deep pool of choices. The challenge is not finding 10, but excluding so many of the other 90. It's also worth mentioning that scores of privately held enterprises, which can't qualify for this list, would also make good selections. Financial performance or prospects aren't the only measures I used to select my favorites. Mostly, I based my choices on a "gut feel" about the company. What's special about the enterprise? Why should we care about it? What does it bring to Minnesota? My picks also reflect a bias. Most of them make a tangible product. That's still an old-fashioned notion these days. Too many consultants remained locked in an embrace with the "knowledge economy," whatever that is. Some of these companies, listed here in alphabetical order along with their ranking, would never pop up on their radar screens. FASTENAL (15) Bob Kierlin, the principal founder of 37-year-old Fastenal, made this company famous. Now his legacy seems assured. Kierlin became known far and wide for the paltry pay he took to run the company, for his disdain of corporate bureaucracy and for his frugality. He helped lead Fastenal to shower immense philanthropy on its hometown of Winona. Kierlin remains as chairman, but he has given up his CEO position. The house that he and his four co-founders built soldiers on. Fastenal supplies fasteners, nuts and bolts, welding suppliers -- everything a manufacturer could want -- through 1,222 stores in all 50 states. The company first appeared on our list in 1988, when it ranked 64th with a market value of $49.4 million. Now investors say Fastenal is worth $3.68 billion. HUTCHINSON TECHNOLOGY (43) Prices of your product keep falling. Changing technology reduces the demand for it. Most of your industry moves to Asia. Yet somehow, your company lives through it all to become the proverbial last one standing in the domestic manufacture of suspension assemblies for disk drives. That's the situation at Hutchinson Technology, which emerged from the industry's latest shakeout to post a record profit of $64 million on sales of $499 million for the year ended last Sept. 28. The survival hasn't been without pain. The Hutchinson-based company's payroll plunged to 3,300 from nearly 7,800. It lost piles of money and its sales sank. Its stock tanked. But the company continues to be one of the Upper Midwest's leading exporters, with shipments abroad accounting for 98 percent of its revenue last year. And now, Hutchinson Technology is hiring once again. MTS SYSTEMS (48) When it comes to building test equipment for large manufacturers of big-ticket items, MTS Systems is the gold standard. And under Chip Emery, now wrapping up his sixth year as CEO, the company has enhanced its already-strong reputation. Emery has emphasized cost-cutting, trimming MTS plants to three from 10 in 2000. MTS is still steeped in engineering talent, and it remains a global player with roughly half of its sales coming from abroad. Today it has $143 million in cash, up from $18 million or so when Emery arrived, and no short-term debt. During the dot-com era, investors viewed Eden Prairie-based MTS as an also-ran. "The phone never rang," says Emery. "Nobody was interested. You couldn't hustle MTS stock to anybody." No more. Since 2000, MTS' valuation has more than tripled to $568 million and the company has rocketed into 48th place from 86th on our list. MEDTRONIC (2) Medtronic has been a dream come true for Minnesota. It's the leader in the medical devices field, which is a growth industry. It's a socially aware enterprise, noted for its high ethical standards. It continues to generate good jobs here. And the Fridley-based company has been a huge generator of wealth, thanks to its soaring stock price. Now the stock has cooled, after a spectacular run. Maybe it was too much to expect a reprise of the 1990s, when the stock was such a standout. Perhaps the time is right to note the best thing about Medtronic. It's a company that's in it for the long haul, not just the next quarter. That continues to distinguish it from so much of corporate America. NVE (72) Want to tune in to one of the most exciting dramas unfolding in the high-tech community here? Then dial up the buzz being created by tiny NVE and its MRAM chip. Last spring, NVE's stock began soaring after it had languished in the $5 to $10 range since becoming public in 2000. In January, the stock scraped $70 before receding to $36. Then it rose again to nearly $43, enough to earn NVE a place in the Pioneer Press 100. The Eden Prairie company, working with licensees Cypress Semiconductor and Motorola, is commercializing a new memory chip that combines the speed of random access memory with the durability of hard-drive storage. Speculation about when it will reach the market has heightened the frenzy over the stock. Chief technology officer James Daughton started NVE in 1989, after running Honeywell's semiconductor center here. He figured out how to commercialize "spintronics" -- the spin of electrons to store and transmit information more productively. In 1991, a plan to move to Texas was aborted after financing for the move collapsed. NVE remains a big secret to many in the Twin Cities. Despite the stock's surge, it still has no analyst coverage. Says CEO Dan Baker: "I just couldn't believe there was a company with this much going for it was that unknown." PATTERSON DENTAL (12) Since this company went public in 1992, it has vaulted into the upper echelons of our list. When Mendota Heights-based Patterson Dental first appeared on the PP 100 in 1993, it ranked 46th with a value of $242 million. This year, it's worth 19 times that amount -- $4.6 billion. Patterson is the Microsoft of the dental-supply business. Chances are good that just about everything you saw the last time you visited your dentist -- the needle that shot Novocain into your jaw, the drills and the X-rays, the chair you sat in -- got there courtesy of this company. The firm claims that it leads the field with a 30 percent market share vs. 26 percent for runner-up Henry Schein Inc. That's a flip-flop from 1998, when Schein led with 32 percent to Patterson's 22 percent. Over the last five years, Patterson has posted compounded annual growth rates of 23 percent for earnings per share and 17 percent for sales. Acquisitions accounted for a fifth of the sales growth. A couple of recent deals took Patterson into the distribution of veterinary supplies and rehabilitation equipment. PIPER JAFFRAY (35) So many chickens came home to roost at Piper Jaffray in recent years that critics were starting to call the place a poultry farm. Minneapolis-based Piper has been the target of numerous investigations, lawsuits, fines and cease-and-desist orders. It has limped through three years of unforgiving bear markets. Yet the 109-year-old company remains one of the grand old names of Minnesota business. Now it has returned to our list as a freestanding entity, thanks to being spun off of U.S. Bancorp. And, surprising to some, Piper's stock has done well since it resumed trading at the start of the year. The company has a market value of $994 million, 36 percent more than the $730 million U.S. Bancorp paid for it in 1998. Over the past decade, the Twin Cities area has almost been cleaned out of locally based broker dealers. It feels good to get one back. TECHNE (32) Relatively few people in the Twin Cities have ever heard of Techne, and that's probably just fine with this company's low-profile CEO, Thomas Oland. But biotechnology scientists all over the world know and respect Minneapolis-based Techne. So do shareholders, who reaped handsome gains in the 1990s when their stock was one of Minnesota's best performers. Last year was deja vu; the stock resumed its upward march. Techne first appeared on our list in 1991 when it ranked 82nd with a valuation of $40 million. This year, the company's value rose 88 percent to a record $1.66 billion. Most notably, Techne makes proteins and sells them to government, clinical and corporate researchers around the world. Recently, the company has taken stakes in two other biotech companies. It has a 39 percent share in Discovery Genomics, which is nested at Techne's headquarters in Northeast Minneapolis, and 26 percent of ChemoCentryx, a California drug developer. Now there's even a restaurant on Techne's home campus. It's called TGF Beta, named after the company's first protein. TENNANT (56) Tennant, one of Minnesota's oldest companies, is a visionary, rock-solid enterprise. George Tennant founded the company in Minneapolis in 1869 to make wood flooring, rain gutters and downspouts. He and his descendants led it to 1999. Then, directors named attorney and Tennant veteran Janet Dolan as CEO. Today, she continues the company's long tradition of community engagement as chair of the Minnesota Business Partnership. Tennant makes nonresidential sweepers, buffers and other floor-cleaning and coating equipment. It became one of the state's earliest exporters in the late 1940s, when it rang up its first foreign sale, to the Swiss railway system. Today, international sales account for about a fourth of its business. Like so many manufacturers, Tennant came through a rough patch recently. Sales have been flat since 1999, but now they're growing again and profits have picked up nicely. And in an era when dividends are back in style, Tennant's record of boosting its dividend for 32 consecutive years looks better than ever. 3M (1) 3M, which led the Pioneer Press 100 from its inception in 1982 until being dislodged by Medtronic, is back on top. Much of the credit must go to chief executive James McNerney, the former General Electric executive recruited to rejuvenate the Maplewood-based company. Still, there's reason to be nervous about some of McNerney's moves. He has been fine-tuning the company's treasured culture of innovation, a delicate process. And he brought with him GE's controversial performance review system, wherein managers must rank 20 percent of their employees as top performers, 70 percent in the middle and 10 percent at the bottom. Critics warn that the system can have adverse side effects. But all things considered, 3M's resilience speaks well of the company. It's also great news for the St. Paul area, which counts on a strong 3M as part of its recipe for success in the years ahead. Dave Beal can be reached at dbeal@pioneerpress.com or 651-228-5429. 2 PHOTOS 1)NATHAN BERNDT/PIONEER PRESS Tom Bittner, a systems integration engineer at MTS in Eden Prairie, demonstrates how a prosthetic limb is tested for fatigue analysis. MTS, based in Eden Prairie, earned $340 million in revenue for 2003, which also makes it one of Minnesota's largest companies. 2)Chris Polydoroff/Pioneer Press Chief executive Janet Dolan is continuing Tennant's emphasis on community involvement, as chairwoman of the Minnesota Business Partnership. She's shown with Charlie Weaver, the partnership's director. Copyright 2004 Saint Paul Pioneer Press