Firms find stock buybacks attractive in bear market. (Up Front).

With stock prices depressed and interest rates low, more and more companies are turning to stock repurchase programs to invest cash, boost earnings or both.

While not new -- stock repurchase programs have been in place at most public companies for years -- many firms have stepped up their buybacks, spending tens of millions of dollars and more in the most recent quarter alone as the bear market lumbers on.

The activity is not limited to a particular segment of the market or industry. In the greater San Fernando Valley, companies as varied as semiconductor maker Semtech Corp. and Health Net Inc. are finding their own stock shares among the best of investment options.

"We're seeing it with a lot of our companies," said Bryan Riley, who heads B. Riley & Co., a boutique investment firm. "One, a lot of companies raised a lot of money and they're sitting on it. And the stock has gotten beat up and it's a good place to put their cash."

Time was companies that found themselves with large amounts of cash would go out into the market to finance acquisitions to expand their businesses. These days, the asking price most companies are demanding is far higher than the company's value in stock shares. At the same time, companies that once financed acquisitions with stock shares are finding they need to give up a lot more stock for the purchase because their own share prices are so depressed.

In short, there are not a lot of good buys around.

"We're seeing it's more difficult today to get these public companies interested in acquisitions," said Ken Nofziger, managing director of Duff & Phelps LLC, an investment banking and financial advisory firm. "They turn around and look at their own stock price -- it might be down 20 percent or 40 percent from its high -- and using that as a currency, it's not as valuable."

By buying back their own shares, companies hope their assets will appreciate when the market turns around. At the same time, taking a significant number of shares off the market can boost earnings per share for stockholders.

"We did it because we think it's a very efficient way to return money and capital to our shareholders," said Lisa Haines, spokeswoman for Health Net, which instituted a stock repurchase program last May. "At this particular point there are not a lot of strategic opportunities in the market for us, and so the most efficient is to return it to shareholders."

During the third quarter of 2002, the Woodland Hills-based HMO repurchased nearly 2.2 million shares of common stock, bringing the total number of shares bought since the program began to nearly 3.2 million.

Most public companies institute stock repurchase programs as a matter of course. The thinking is that by pre-authorizing stock buybacks, companies have the option to execute the program should they need to. But most companies don't buy large numbers of shares or authorize additional purchases unless the economy turns sour.

"The thought is you're buying the stock on the cheap, and it will pay off when you're making money again," said Riley.

ValueClick Inc., an online advertising agency based in Westlake Village, has had a stock repurchase program in place since September 2000. The total amount the company is authorized to spend is $75 million, and ValueClick bought about $22 million worth of its stock in the last six months.

"The large part of the buyback of the program was really executed in the second and third quarter of this year," said Sam Paisley, CFO and chief operating officer of media at ValueClick.

The company made several acquisitions over the past few years and, by September, ValueClick had about $263 million worth of cash and marketable securities on its balance sheet. At the same time, the company's stock has been hard hit in Nasdaq's freefall, trading currently below the cash value of the company.

"Those market conditions allowed us to buy into those shares at a pretty significant discount to the company," Paisley said.

Semtech has had its buyback program in place since January 2001 and, since then, the company has bought back $167.6 million in stock and notes.

In the third quarter of this year alone, Semtech spent $61.1 million to buy back its stock shares, amidst a stock market performance that has seen its shares decline from the mid-$40 range a year ago to the mid-teen range currently.

"Our activity in the third quarter was heavier than it had ever been," said John Baumann, treasurer of the Camarillo-based firm.

Baumann deferred to the company's previously published comments rather than elaborate on the program. But in Semtech's most recent quarterly financial statements, CFO David Franz said, "Our strong cash flow and weakness in the financial markets allowed the company to accelerate its buyback of debentures and stock in the quarter."

One company that has reduced its stock buyback activity most recently is Superior Industries International Inc., oddly enough because its relatively strong stock price has been looking better to investors as the once hyper-high-yield stocks have faded.

"It wasn't that long ago when our stock was $23 going to $30, and the answer I would get is, 'So what?"' said R. Jeffrey Ornstein, vice president and CEO of the Van Nuys-based maker of wheels for the auto industry. With tech stocks returning 50 percent and more on the dollar, Ornstein said, "people ignored us."

Superior has repurchased about 15 percent of its stock since its program began in 1995, but its most active buybacks occurred several years ago.

"There's no question that why we bought less over the last year than the last five years is because the market has had a better reward," Omstein said.

Still, Superior and other companies continue to exercise their stock buyback options to some degree because right now, with interest rates low, buying shares is a better investment than putting excess cash in the bank.

Athletic shoemaker K-Swiss Inc., for example, has spent between $12 million and $19 million buying back its stock shares each year since 1999.

"Our business generates more cash than we need to operate," said Steven Nichols, chairman and president of the Westlake Village-based company. "We handle it very conservatively, which means that we make about 2 percent right now. There are not a lot of terrific options. if we were making 15 percent on our cash, we might not be doing this. It's really a question of interest rates and our feeling for the company going forward."