Tekelec Plans Move of Manufacturing Operations By SLAV KANDYBA Staff Reporter About 75 factory workers and management at Calabasas-based Tekelec face layoffs or relocation to North Carolina, as the telecommunications firm is moving all of its locally based manufacturing work there, a company official said. About 50 people will be laid of as soon as March or as late as December of this year, while 25 will be given an option to move, said Mike Attar, director of investor relations for Tekelec. The move comes as a part of a broader strategy at the company, which has plans “fully underway” to move its manufacturing to North Carolina and beyond, eventually. “All of the manufacturing (in Calabasas) is going to be either moved or outsourced,” Attar said. Tekelec makes devices deployed in traditional and wireless networks and contact centers worldwide, according to its Web site. The move to Carolina is expected to lower the costs of shipping products overseas, as the company expands globally, Attar said. It currently has a majority of its 1,100 employees in North Carolina, including the design and engineer team that creates signaling equipment, the company’s core product and wants engineers and factory workers under one roof, the business structure of Santera Systems, a Texas-based company it acquired last year. After the layoffs and move, Tekelec’s Calabasas headquarters will have about 75 employees, including top executives, he said. On the layoffs and outsourcing, Attar said: “Through the use of contract manufacturers, we don’t need the same number of personnel.” Local business experts said doing business in North Carolina will be cheaper for the company. “My guess is worker’s compensation would be cheaper in North Carolina,” said Daniel Blake, director of Cal State Northridge’s San Fernando Valley Economic Research Center. Dave Wood of AeA’s Los Angeles/Santa Barbara Council, a high-tech trade group, said: “It’s a matter of California public policy, the legislature that has gone through the last two years has continually driven companies out.” “I’ve got other companies that are suffering the same way.” But Gov. Schwarzenegger contends help is on the way. “Californians are acutely aware that our broken worker’s comp system is a job killer. That’s why Gov. Schwarzenegger has made reforming it his top priority for improving California’s business climate. The governor wants to make California competitive again, so we can stop companies from leaving and taking jobs with them,” said Vince Sollitto, the governor’s office spokesperson for worker’s compensation, business and growth issues.

ESOP Helps Family Keep Company in Familiar Hands By JACQUELINE FOX Staff Reporter Sheila Xitco and her husband, Mark made the decision roughly four years ago to retire, which meant selling their family owned business, Santa Clarita-based M W Sausse & Co., Inc. But the company, which manufactures vibration isolation equipment for industrial air conditioning units, was launched by Sheila’s parents in the 1960s. That meant emotional ties to the business ran deep and there were no other family members in line to take over. In addition, many of their 50 employees have invested 20 years or more at the company and selling off Sausse to an outsider, they felt, would almost certainly have come at the expense of jobs and quite possibly the death of the entire business. So instead of putting Sausse on the open market, the Xitcos, along with Sheila’s sister, Barbara Sausse, the company’s long-time controller, decided to offer the business to those they trusted most: their employees. In October of 2003 the three sold 100 percent of their share of the value of the company to five veteran employees through an Employee Stock Ownership Plan or ESOP. Xitco says the comfort of seeing her parent’s legacy shift into the hands of loyal and long-time employees as opposed to an outside interest, made the heartbreak of terminating the Sausse family ownership a little less painful. “This was a very difficult process for us to begin with” said Xitco, who served as general manager before the sale. “We needed to put together a plan for our retirement but we didn’t want outsiders to come in. So instead, we’ve turned the company over to a management team that has plans to expand the company, not shut it down. That, to us, represents a huge comfort. These are people we know and love and respect.” Setting up fund Here’s how it works: The sellers set up a tax-exempt ESOP trust fund, take out a loan and then put that money back into the fund, which the buyers will later use to purchase the business from the original owners. ESOP stocks are then allocated into tax-free accounts for each employee/shareholder based on payroll and subject to vesting and can be sold when an employee leaves or retires. In addition to keeping the company within known hands, the ESOP strategy also comes with other advantages. Because the Xitco’s and Sausse sold more than 30 percent of their stock in the company to their employees, they are allowed to defer paying taxes on the capital gains from the sale and can continue to defer those payments as long as they reinvest those proceeds in outside stocks or bonds or other approved funds. That’s not to say the process of setting up an ESOP is always cut and dry. In this case, the Xitcos established their ESOP three years ago and began contributing to it in order to self-finance most of the transaction because back in 2001 the economy was tanking, sales were down and getting a loan was proving next to impossible. “It’s very unusual that it took this long to complete their ESOP,” said Kyle Coltman, chief executive officer at San Francisco-based Menke & Associates Inc., which helped the company through the sale and will continue to administer the new company’s ESOP fund. “But obtaining an attractive loan package was an issue for them at the time and, although most ESOPs are financed through bank loans, this was not the most opportune time for them to do that so they had to piece the financing together in other ways.” ESOP checklist In most cases, says Coltman, an ESOP can be completed in less than three months. But before the wheels are set in motion, he says there’s a checklist he and most ESOP administrators prefer to run through in order to determine if the strategy is right for the business in question. “I typically look for three things,” Coltman said. “I want to know if they are profitable, because what good is a tax deferment (on the sale proceeds) if they aren’t? I also want to know if the seller has a realistic idea of what the company is worth and whether it’s worth enough to generate a profit after the sale. Finally, I ask about payroll, because the government allows the new ownership to take a tax deduction on employees’ contributions into an ESOP trust, but the key is that it’s limited to 25 percent of the payroll.” In addition, Coltman said he stresses the importance of fully evaluating the buyers’ qualifications, their long-term vision for the company and what, if any plans they have for carrying that vision forward, before approving an ESOP plan. “There’s no point in selling through an ESOP if you’re going to put the company into the hands of unqualified people,” said Coltman. Xitco’s buyout package calls for her to remain on the payroll as a salaried employee for possibly two more years. Mark will stay on another four to five years as an outside sales representative. Barbara is transitioning out of the business within the next few months. These long-term exit plans through ESOPs are common and can help sellers maximize their final buyout packages, said Coltman. But there are drawbacks, namely, making the transition from owner to employee and then working in that environment with limited authority to control the day-to-day operations. “I wouldn’t not do this again if it were to do all over again, I’m certain of that,” said Xitco. “But there are adjustments to be made every day and they aren’t easy. Having said that, this company is going to change and it’s going to have to grow, and perhaps more dynamically than Mark or my sister would ever have anticipated. But at least we know it’s not going to do so by getting rid of people or dissolving.” Employee Stock Ownership Plans Employee Stock Ownership Plans or ESOPs are one way to hand over a company in a comfortable way by keeping the firm in the hands of loyal and long-time employees, according to Kyle Coltman (photo), chief executive officer at Menke & Associates Inc. which helps companies through ESOPS. But there are some key points to consider before entering into this kind of a transaction. He recommends that before establishing an ESOP you should: -Have a realistic idea of your company’s value when you call an ESOP administrator and have all necessary documentation to back it up with. -Find out if your company can generate a profit after the sale. -Know who you are selling to and what the buyers’ (employees) long-term vision for the company is and if they are qualified to carry on with that vision once you let go. -Plan early if you think you may not have access to funding to repurchase your share of the company by setting up an ESOP trust and contributing to it regularly with profits and other resources. -Be prepared for the possibility of having to stay on the payroll for a while after the sale and adjusting to the transition from owner to employee.

VALLEY BRIEFS First State Merger Approved The merger of First State Bancorp with Boston Private Financial Holdings Inc. has received all the required regulatory approvals, the principals said. The transaction is expected to close later this month. First State, which operates two branches in Granada Hills and Burbank under the name First State Bank of California, will continue to operate those units under the same name and management. Boston Private operates six companies in New England and California, specializing in wealth management and private banking services. Big Increases at K-Swiss K-Swiss Inc. reported net income increased 81.4 percent for the fourth quarter ended Dec. 31 to $8.7 million or $0.23 per diluted share, on sales of $80.4 million. That compares with net income of $4.8 million on sales of $53.2 million for the fourth quarter of 2002. Westlake Village-based K-Swiss said domestic revenues increased 53.2 percent to $68.4 million in the quarter. For the full year, K-Swiss reported a 74.4 percent hike in net income to $50.1 million or $1.32 per diluted share on revenues of $429.2 million, compared with earnings of $289.6 million in 2002 revenues. The company said it expects revenues of $142 million to $150 million in the first quarter of 2004 and earnings per diluted share in the range of $0.50 to $0.55. For the full year, K-Swiss said it would earn about $1.50 to $1.65 per diluted share on sales of $490 million to $510 million. Third Quarter Hike for Sport Chalet Sport Chalet Inc. reported net income increased 18 percent for its third quarter ending Dec. 31 to $3.1 million or $0.44 per diluted share on sales of $79.7 million, compared to net income of $2.6 million or $0.38 per diluted share on revenues of $72.3 million for the same period in 2002. Sport Chalet reported net income increased from $4.1 million or $0.59 per diluted share to $4.2 million or $0.6 per diluted share for the nine-month period, and attribute the increases to the opening of five new stores since November of 2002 and a boost in same-store sales of 2.9 percent for the period. Tax Help The Valley Economic Development Center (VEDC), in partnership with its Volunteer Income Tax Assistance Program (VITA), is offering free tax preparation assistance to those individuals who cannot afford to pay for the service, or simply choose not to. The VEDC’s VITA volunteers will help prepare basic tax returns on Saturdays through April 10 between 9 a.m. and noon at VITA’s two locations: the San Fernando Valley FDC at 12502 Van Nuys Blvd. Suite 119 in Pacoima and the Pacoima Workforce Development Initiative at 11243 Glenoaks Blvd., Suite 11, in Pacoima. The program also aims to serve taxpayers with special needs, non-English speaking individuals and the elderly. For more information, call the VEDC at: (818) 907-9977. Big Bucks for CSUN Despite a difficult climate for fundraising over the last couple of years, officials at California State University, Northridge have managed to set a new campus record for raising money for its programs and services, bringing in $18.8 million in private support during the 2002/2003 calendar year. According to CSUN’s annual fundraising report released during the recent California State University Board of Trustees meeting in Long Beach, the $18.8 million in charitable gifts rank the school at number five among the 23 Cal State campuses for the period for fundraising efforts. The funding was spurred by the donation of Chinese antiquities from Chinese-American and local business owner, Roland Tseng, a pledge valued at $38 million over the next four years and the largest gift ever given to the school or a Cal State campus. Other donations for the period include: – A $7 million gift in 2002 from The Eisner Foundation to establish a new teacher training program. – A $2 million gift from The Ridgestone Foundation for CSUN’s $6 million Abbott and Linda Brown Western Center for Adaptive Aquatic Therapy. – One of the world’s most comprehensive collections of materials on English novelist, Charles Dickens from retired professor Harry Stone. First California Net Soars First California Bank reported net income rose 37 percent to $2.2 million or $1.10 per share for the year ended Dec. 31. For the fourth quarter, First California saw net income rise to $610,000 or $0.30 per share, compared with $405,000 or $0.20 per share in the like period last year. During 2003, Camarillo-based First California opened a new branch in Thousand Oaks, bringing the number of full service branches to five including Camarillo, Oxnard, Ventura and Westlake Village.

City Hall Forms Panel to Help Small Business By JACQUELINE FOX Staff Reporter Mayor James Hahn and Los Angeles City Council members Wendy Greuel, Tony Cardenas and Eric Garcetti launched the Small and Local Business Committee Feb. 12, said to be a key component of Hahn’s ongoing efforts to reform the city’s contracting process and related services for small businesses. The formation of the new committee followed a January public hearing which is said to have drawn more than 300 small business owners and others who offered their comments and suggestions for new programs aimed at reshaping the process for perspective contractors. The committee is being modeled on a similar panel established five years ago to study potential changes to the city’s business tax system known as the Business Tax Advisory Committee or BTAC. BTAC is amidst the final stages of submitting a comprehensive report on business tax reforms and, once it disbands in June, will have completed a historic and complicated effort to resolve one of the biggest headaches for business across the Valley and citywide. The Small and Local Business Committee will now tackle similar issues connected to doing business and expanding. It will meet roughly every six weeks at various locations across the city and terminate in the spring of 2007, officials said. “This new committee aims to make it easier and more productive for our small businesses to obtain contracts and flourish economically,” said Mario Marin, director of the city’s Office of Small Business Services. Members of the committee are appointed by city council representatives, one for each district, as well as the mayor and city Controller, Laura Chick. Valley representatives on the committee include: -Bruce Spiegel, president of the Universal City/North Hollywood Chamber of Commerce -David Iwata, Economic Alliance of the San Fernando Valley -Michael Miller, State Farm Insurance -Candido Mares, Montrose Supply -C.K. Tseng, Northridge Travel Appointments by City Council President Alex Padilla and other city council members outside the Valley are pending, as are dates and locations for the committee’s future meetings. According to Marin, the committee’s goals are two pronged: one side will focus on the city’s contracting process and how to help smaller companies better compete for big contracts, and the other will focus on establishing new policies aimed at helping small businesses grow. The city has also established a new Web site where city contracts up for bid will be posted, as well as links to city departments and the new committee’s minutes and action items from its inaugural and all future meetings. The address for the new site is: www.labavn.org.

NoHo Project Could Be Model for Valley By SHELLY GARCIA Senior Reporter You can hardly hear anyone talking about the NoHo Commons without hearing the word “catalyst” follow close by catalyst for the city’s fledgling public transit system, catalyst for developing urban cores throughout Los Angeles, catalyst for a radical transformation in the way folks live. The redevelopment project, on 16 acres of land in North Hollywood, will bring about 716 new units of housing to the community, but the numbers hardly tell the story. Thought to be the largest urban residential redevelopment project ever attempted in Los Angeles, NoHo Commons will also be the first urban village built around mass transit and it will be among the first large-scale projects to bring together a diverse group of residents ranging from the working poor to affluent professionals. The mixed-use development, which will combine apartments and other rental housing with neighborhood retail shops like grocery stores, entertainment centers like movie theaters and offices, is so unusual, it’s difficult to imagine what NoHo Commons will look like when it’s completed. Think of almost any neighborhood in the San Fernando Valley. Then add groceries, movie theaters and shops in walking distance and imagine it all sprouting up at once, in a single cohesive whole. “We’re going to be a really comfortable place to call home,” said Bud Ovrom, chief executive officer of the Community Redevelopment Agency of the city of Los Angeles, which helped to deliver the project land. “We’re going to have our own movie theaters and restaurants and stores, and it’s going to be a nice place to live.” For decades, the knee jerk reaction to redevelopment was to build commercial properties high rises, civic centers, shopping complexes and North Hollywood was just a knee jerk away from the same fate, if not for J.H. Snyder Co. and Cliff Goldstein, a partner at the Los Angeles based development company. The CRA, which deemed the site a project area decades ago, had worked with several developers before Snyder came along. They built the Academy of Television Arts and Sciences and a local shopping center, and still the area remained blighted. The CRA hung out banners heralding the NoHo Arts District and sponsored theater groups and sidewalk fairs and still the area was more identifiable by its rows of dilapidated industrial buildings and empty storefronts. “When it wasn’t going to be these high-rise buildings, I don’t think anybody had a vision of what it was going to be,” Ovrom said. “I think Snyder changed that vision.” Using the Red Line Goldstein had watched for years as traffic worsened and the quality of life soured in his native Los Angeles. But he’d also spent time in Washington D.C. and San Francisco, where he grew accustomed to mass transit. He saw in the opening of the Red Line an opportunity to turn the tide. “The idea of what I wanted to build there really came to me as an evolution of my thinking on what the future of Los Angeles needed to be,” Goldstein said. The opening of the Metropolitan Transit Authority’s metro rail system has yet to turn Los Angeles into a city of strap hangers, but Goldstein figured a residential community built around the transit hub would help encourage just such a transformation. “Without the transit link, I don’t know how this site would have stood out above other sites,” Goldstein said. All eyes are on the $218 million development bordered by Lankershim Boulevard to the east, Weddington Street to the south and Cumpston Street to the north. If the city’s first large-scale transit village works here, it will surely be exported to other parts of L.A. “It’s one of the most significant things happening in the city,” said Jane Blumenfeld, principal city planner. “The whole North Hollywood NoHo area development is going to really show what that can be like in L.A.” Dense residential areas are important to the development of mass transit for several reasons. It takes concentrated population hubs to support a mass transit system, and by encouraging greater use of the system, focal points develop that, in turn, make the system more efficient as a way of moving people. “When everything is spread out everywhere, jobs and people, it is just a train wreck for congestion, and so it’s in all of our interests to fully develop a few locations like that, Warner Center and others so you can reduce congestion,” said Blumenfeld. Self-contained community Then too there is the prospect of an emerging new way of life spawned by NoHo Commons. It isn’t just those who will choose to live in NoHo Commons and ride the rails to work downtown or in Hollywood. The development will be laid out as a self-contained community where folks can walk to the local grocery store or a movie, even if they still drive their cars to work. Studies show that most families make eight to 10 car trips a day, and only two of those trips are made for work. Cutting down on even those non-work related trips can have a huge impact on congestion, smog and quality of life. Already, NoHo Commons is shaping up to become a kind of petrie dish for a new model for the city. Other developers have begun to build in close proximity to the Metro station and other investments are poised to begin. “The exciting thing about NoHo is not so much what I’m doing, but what is happening around me,” said Goldstein. “It has even surprised me how quickly it has spurred people to come into the NoHo area and start to invest. Finally, something you read in textbooks is happening.” Largest Industrial Sale Transaction: 29011 Commerce Center Drive, Valencia Buyer: Patrick Sammons Managing Member Bay West Equities LLC, San Francisco Brokers: Craig Peters, Executive Vice President CB Richard Ellis, Sherman Oaks Doug Sonderegger, Executive Vice President CB Richard Ellis, Sherman Oaks Patrick Scruggs, Vice President CB Richard Ellis, Newport Beach What brought a well-established private real estate investment trust into the greater San Fernando Valley for the first time? The same one-two-three punch that has fueled acquisitions of industrial real estate all year: strong, credit-worthy tenants, low interest rates and high barriers to entry. Bay West Equities LLC acquired a 164,188-square-foot facility at 29011 Commerce Center Drive in Valencia for $12.7 million in a deal that gave the company not only a choice property, only two years old, but also a strong tenant, Bertelsmann AG, which operates its fulfillment division in the building. Most of the company’s portfolio is located in Northern California and Hawaii. The purchase marks an emerging interest in the North Los Angeles County region. Shelly Garcia

Grant, Donation Aid Bid To Expand Family Center By JACQUELINE FOX Staff Reporter San Fernando-based Valley Family Center has received a $75,000 federal grant from Congressman Howard Berman that will be used to help pay for the center’s planned $2 million expansion plans. The center, established in 1987, provides mental health counseling and educational services to some 3,000 low-income residents and their family members each year. Demand for the center’s services over time has created a need for more space and, through a grant from the Rydell Automotive Group, its directors have managed to purchase an adjacent swath of property where they plan to build a new, two-story wing to accommodate an additional 2,000 clients each year. The new, 15,000-square foot addition will connect to the existing building by a connector bridge and will be used primarily to provide larger class and group meeting rooms. The center has also received a $100,000 grant from the William H. Hannon Foundation for its capital campaign. That, along with Berman’s contribution, center officials hope, will spur interest by and more donations from other business groups and local and state and federal officials. “The gift from Howard Berman means we will hopefully be able to solicit other funding to match it and we can dream into reality some of the things we’ve been talking about doing here for quite a while,” said the center’s top administrator and Learning Center Director, Sister Carmel Somers. The center has also acquired a small piece of property across the street that will be paved and turned into a new parking structure, the first step in the expansion plan because the new wing will eventually go where the center’s current parking structure now sits. Somers said she expects construction of the new parking structure will begin in about six months and that, funding provided, the entire expansion project could be completed in roughly two years. Valley Family Center’s services include marriage and family, individual and group counseling, child and spousal abuse prevention, and one of the Valley’s largest programs for court-ordered and volunteer domestic violence perpetrators, including anger management groups serving roughly 400 men and women each year. Clients pay on a sliding scale for most services. The Learning Center also provides tutoring and small group instruction for roughly 50-70 children grades 1-8, and caters to high school students who are struggling to pass courses in math, reading, science and composition. The center receives some government assistance for victims of crimes. All other courses and services are supported by grants and donations and through on-going fundraising efforts, Somers said.

NoHo Lofts to Bring East Coast Feel to Neighborhood By SHELLY GARCIA Senior Reporter In recent weeks, DT Ventures finally received the change of use permit it needs to proceed with its development project. But when you are transforming a former factory into loft space, the city’s red tape is only part of the battle. Before they are done, officials at DT Ventures will not only have to change the uses permitted on the site they are redeveloping, they will also have to change the mindset of the folks who make up the target market for the project. Beginning in March, work will begin at the site of the former Adolf’s meat tenderizer factory at 5355 Cartwright Ave. in North Hollywood to transform the space into 69 loft apartments ranging in size from about 600 square feet to about 1,400 square feet. While a number of such conversions have been successfully developed in downtown Los Angeles, and these lofts are found in large numbers in New York City, Noho Lofts will be the first living and working loft space in the San Fernando Valley (although a loft component included in Noho Commons will not be far behind.) The project will also be the first conversion of an industrial site into a residential complex. Work on the redevelopment actually began even before DT Ventures closed escrow on the property last June. “There was quite a bit of risk on the table with a lot of capital at risk, so we did a lot of grass roots contact to make sure our project would get approved,” said Daniel Markel, president and CEO of DT Ventures. The group has been working for several years to garner the support of community groups and city officials and to amass a group of investors in order to proceed with the project. DT Ventures did not have the deep pockets that other large development companies have to wait it out while the project wound its way through the approval process, so the company took steps to be certain that its property would generate income even before the development is completed. Since Adolf’s moved out of the factory a number of years ago, small production companies and other businesses have been renting space in the facility and DT nurtured those tenants to make sure they stayed around. “So we’ve been cash flow positive during the holding period,” said Markel, adding that many of those tenants have also become investors in the project. The first phase of the development will include 69 units in the original factory building, which will be gutted to accommodate the lofts. They will include architectural features like exposed brick walls, stained cement floors and open ceilings. A second phase, which will be constructed on about one third of an acre of land, will follow with about 30 loft units. DT Ventures did not have much of a track record with this particular type of redevelopment, but what it does have is a history of transforming underutilized properties into cash cows. Within its portfolio are a number of apartment complexes in Studio City, Sylmar and other areas of Los Angeles that the company has purchased, renovated and sold yielding returns ranging from 60 percent to as much as 200 percent over a period that averages three to four years. But DT and its investors are putting their faith in more than just a financial track record. First they are betting on a lifestyle never before available in the Valley. They are also betting on the North Hollywood area, which they say, is ripe for a renaissance. “We’re pretty confident that this type of housing is going to be really desired in North Hollywood,” Markel said when the DT Ventures acquired the property. “It’s on the edge of an up and coming neighborhood.” Although it is too soon to tell, there is evidence that the loft concept will find more than a fair share of takers. In downtown Los Angeles, where properties have been converted into living and working lofts for a number of years now, these units, among the priciest in the city, are enjoying full occupancy. Some that have been converted to condominium units are selling briskly at prices as high as $900,000. More recently, North Hollywood, with its arts district and the availability of public transportation, has become something of a magnet for developers who see the area as an ideal neighborhood for urban professionals, and Noho Lofts will soon be joined by other residential projects targeted at an affluent market. Markel and the rest of the DT Ventures team saw the potential even before these other projects got underway. “We interviewed countless residents (of the downtown lofts) and investors in the entertainment community,” Markel said of the company’s research even before the sale closed. “I’m confident that the demand is going to be extraordinary.” Most Creative Infill Development Project: NoHo Lofts Developer: DT Ventures, North Hollywood Daniel Markel, President, CEO Dave de Csepel, CFO Tom Gallop, COO Jim Markel, EVP, Acquisitions

Superior Hitting Roadblocks on Several Fronts By SHELLY GARCIA Senior Reporter Price cutting, increased competition and automotive design changes are creating a very bumpy environment for Superior Industries International Inc. Net income for the fourth quarter ended Dec. 31 rose by just 2.8 percent to $23.1 million, and for the full year Superior Industries’ earnings dropped to $73.7 million, or $2.73 per diluted share, nearly 6 percent below 2002 levels. What’s more, the bottom line pressure is not expected to let up anytime soon. And despite several dramatic steps Superior has taken to reduce costs and upgrade manufacturing capacity, officials at the Van Nuys-based company nonetheless were downright glum about prospects for the first quarter of 2004, saying they anticipated earnings of $0.50 per diluted share for the period. That would be down from $0.83 for the same period in 2003. “In 2003 we continued to see customer trends toward larger wheel styles, more product offerings and increased pricing pressure,” Superior’s CFO R. Jeffrey Ornstein told investors and analysts in a conference call to discuss the most recent financial report. “These business realities have had an impact on our operational cost structure and this will continue in ’04.” Superior, a maker of automotive wheels, has been hit by a one-two punch as its auto maker customers have cut prices. Superior is not only contending with demands by its customers to provide wheels at lower prices, it is also having to accommodate a heightened demand for larger wheels, sizes and designs that only some of the company’s manufacturing plants are readily equipped to supply. Jon Rogers, director of equity research and an equity analyst with Wachovia Capital Markets LLC in New York, said Superior is facing what he called a “paradigm shift in pricing. “Our underperform rating reflects high valuation relative to operating expectations, a fundamental shift in the pricing environment of aluminum wheels, uncertainty with respect to management’s outlook beyond Q1 2004 and a negative bias toward expected light vehicle production of the company’s key customers ” Rogers wrote in a report downgrading the stock following the conference call. Not only does Superior have to retool some of its production to accommodate the new designs, it has to find ways to reduce overall production costs at the same time. “Without corresponding cost reductions, we’ll be facing significantly lower margins per wheel on larger volumes,” said Ornstein. “These wheels are larger and more complex and they have challenges.” At its Van Nuys plant, Ornstein said production of 17-inch wheels has increased by over 50 percent. As the company has retooled to accommodate the new production needs, it has encountered a series of operating problems that cannot be easily solved. “This is not a black and white issue,” Ornstein said. “Casting is a black art. When we put in a fix, it seems to take for a while, and then something else crops up.” The company has earmarked some $55 million to $60 million in capital expenditures to both expand its capabilities and automate a number of its manufacturing processes. One aspect of the plan calls for the automation of a complete manufacturing process that would virtually eliminate the need for workers on that step, but officials could not provide specifics on the number of workers that might be affected at this time. Superior officials have also been exploring the possibility of manufacturing in Asia through a partnership and building a third plant in Mexico. “I spent a few days in Mexico meeting with government officials and looking at plants all over the country where we can locate,” said Superior President and COO Steve Borick said at the investors’ conference. “We’re moving forward on the operating potential of building a new plant in Mexico.” The company is also planning to bring on several new senior level managers to assist in its efforts. “We are going to move strongly forward with capital expenditures, particularly in the area of automation,” Borick said. “We need to be working on every which way to continue to be the price leader. We’re going to continue to take on more business, bring our costs down and bring our profitability back to where we’re used to it.” Years-long effort But it will likely take several years before many of these changes can be fully implemented. “Unfortunately, global pricing pressure is here today, and the implementation of our programs will take time,” Ornstein said. “However once these cost benefits are realized they are cumulative in nature.” In spite of the difficult environment, including in one case a customer plant that was shuttered for the entire month of January, Superior has managed to eke out considerable sales volume increases. Thanks to new contracts won, revenues increased 17.3 percent for the fourth quarter to $230.7 million and unit wheel shipments rose 12.4 percent. Superior has also increased production capacity by 25 percent since 2000. But faced with what appears to be unrelenting price pressure that company officials called “bloody” in some markets, and continuing operating problems as the company adjusts to the new wheel sizes and designs, officials said the outlook for the coming year is murky at best. “Jeff and I discussed whether to give (full) year guidance,” said Borick. “I’m not ready yet. There are so many things going on that are going to take a little time.” Analysts listening to the presentation were clearly concerned by the prospect of declining margins and squeezed profits continuing indefinitely. It didn’t take long for the street to register its discontent. While cutting the stock’s performance rating, Wachovia also lowered earnings estimates to $2.23 per share for the fiscal year 2004 from a previous estimate of $3.41. David Leiker, an analyst at Robert W. Baird & Co. Inc. downgraded the stock to “neutral” following the conference call. Meanwhile the company’s share price fell nearly 10 percent to close at $36.33 on the next business day after the call, from $40.21 per share on the day prior to the call. As of Thursday, Feb. 12, shares in Superior were trading at XXX.

BTAC Takes Look At Entertainment Industry Effects By JACQUELINE FOX Staff Reporter Representatives from the Business Tax Advisory Committee (BTAC), which is overseeing efforts to overhaul the city’s gross receipts tax, were scheduled to begin the first “tweaking” session Feb. 13 of a comprehensive and complicated draft report of recommendations for changes, released in January. BTAC’s top agenda item called for approval of a motion to make several changes to the way the city currently taxes entertainment firms, namely small production houses, as well as entertainment sub-contractors. The sector was not broken out by the company which compiled the draft report, Fresno-based MBIA MuniServices Co. As such, there have been several questions raised about how proposed recommendations by MBIA for a tax on square footage, coupled with a tax based on revenues that would vary for different business sectors would work for entertainment firms, particularly because of the industry’s vast number of business categories, such as pre- and post-production houses, caterers, set designers and prop houses, for example. BTAC was also expected to vote on a motion to modify the MBIA draft report to recommend that the city’s business tax be reduced for entertainment sub-contractors or eliminated all together, as well as other changes. In addition, BTAC will likely recommend going forward that the city’s existing revenue caps for production companies be increased to approximately $20 million and that the tax table under that cap be expanded to provide relief for small- and medium-sized production companies. Finally, BTAC will also likely be pushing for a change in the definition of production activities for companies subject to the caps to include new companies specializing in newer technologies, including digital entertainment services and products, and will also consider a new structure for taxing companies which earn revenues through product licensing agreements and other intellectual property avenues. According to Marvin Selter, BTAC co-chairman, the recommended changes to the report for the entertainment sector could provide a framework for other sectors to follow as the process of evaluating the draft report moves forward, which will include a series of several public outreach meetings across the Valley and citywide. Dates for those meetings have yet to be determined but should be scheduled later this week. At BTAC’s meeting Feb. 2 there were several questions raised about a particularly troubling proposal for commercial property owners. Within the discussion it was determined that a square-footage tax would apply to all commercial buildings, even those that are vacant, provided the building is either listed for sale or intended to be put on the market some time down the line. Finally, BTAC has approved a motion calling for an additional $90,000, which will be used to cover additional consulting services by MBIA staff. BTAC anticipates it will make its final recommendations to the city’s ad hoc committee on business tax reform by April 29. Submit Your Questions The Business Journal is seeking feedback from readers concerning proposed changes in the city’s business tax system. In upcoming editions, Marvin Selter, Valley businessman and Business Tax Advisory committee member, will answer questions readers may have about efforts to change the system and how they may affect certain industries. Please submit them to Business Journal Editor Jason Schaff by e-mail at [email protected] or fax to (818) 676-1747.

Agoura Hills Planner Has Delicate Balancing Act By SLAV KANDYBA Staff Reporter The city of Agoura Hills, nestled in mountains west of Calabasas, is developing a commercial core to meet residents’ needs. In that regard, it’s not unlike any other city. But, with Lady Face Mountain as its backdrop, it’s up to city planner Mike Kamino to delicately balance that commercial development with the city’s penchant for preserving its natural beauty and rural feel. After a series of workshops, the city has designated an area near the 101 Freeway to put up Agoura Village, a center that will serve as a downtown commercial core and, just as important, give Agoura Hills a sense of place. Question: What is the status of the Village project? Answer: We are in the process of doing an environmental report on the Agoura Village, and are continuing to meet with developers. We have three applications submitted since May, all mixed-use projects. There is one that is for 100,000 square feet with some units above commercial property. Another project would have artist lofts and studios above retail. The whole idea is to create a village, with people living among commercially used property. It’s more in line with a traditional downtown. We’re not trying to develop a shopping center. It’s a combination of restaurants and retail, which will attract people here in the area, plus bike shops and other places like that. We want something that embodies the spirit of a true village where you don’t have to get into your car and drive to another place. Q: Can you discuss the mixed-use concept in further detail? A: This whole trend of mixed uses and creating a new village is a new concept being renewed. It’s called “new urbanism” and is a term coined three years ago with roots in Europe and some older communities less dependent on the automobile. It was out of necessity there, but now we’re finding it’s creating more of a livable environment where people don’t have to drive to get groceries, for example. Q: How do you balance the commercial needs of the city and residential quality of life? A: This is a very important gateway to our community and instead of it developing conventionally there has to be some proactive planning in order to make the decisions the community wanted a reality. The people of the city have articulated a vision of the community and the Agoura Village plan a place to go to shop and gather. Q: What is your vision for Agoura Hills? A: My vision is that we retain the high quality of life we have here and achieve balanced growth and preserve the natural resources and open space. I get up in the morning, and that’s what I think about all day. Q: What is your background? A: I have worked for a number of cities, including the city of Ventura and the city of Bellflower. I went to University of California Santa Barbara, where I received a bachelor’s degree, then a Master’s of Public Administration from Cal State University, Long Beach. Q: What is a typical day like for you? A: I try to stress providing good customer service and professional advice and recommendation to city council members and planning commissioners so they can make sound decisions. A lot of time is spent preparing reports for commission and city council meetings. My department has seven people and all are responsible for different things. Most Innovative City Planner Mike Kamino Director of Planning and Community Development City of Agoura Hills Newcomer of the Year By SHELLY GARCIA, Senior Reporter It didn’t take long for Zaya S. Younan to become a major player on the San Fernando Valley real estate investment scene. Since opening its doors two years ago, Younan Properties Inc. has acquired 22 office buildings totaling 2.5 million square feet. Last year the company delivered to investors a portfolio of seven properties totaling 962,000 square feet, some $85.8 million in acquisitions. Younan, a former engineer who helped turn around companies that were caught in the tech bubble some years ago, said he uses many of the same strategies in real estate. The company focuses on buying distressed properties that can be renovated to increase their value, leased up and sold. Last year, for example, Younan sold Lankershim Media Center, a 73,000 square foot office building in Studio City, for $14 million, realizing a 105 percent return on investment in less than 12 months. Another Studio City building, the 27,000 square foot Promark building on Cahuenga Boulevard, was sold for $4 million, a 65 percent return on investment in less than nine months, Younan said. Although Younan Properties began by focusing on the San Fernando Valley, the company has since branched out to other areas of Los Angeles, Southern California and even to Texas. One of Younan’s most recent acquisitions is the 172,000 square foot Sepulveda Center, which the company purchased for $28 million. One of the quickest turnaround for Younan came last year when the company acquired the 210,000 square foot Hitachi Plaza building in Brisbane for $23 million and sold it five days later for $25 million. As the company has grown it has added staff and upgraded its headquarters. Younan Properties recently relocated its offices to Woodland Hills, following the acquisition of Warnerview, a 62,000 square foot building at 5959 Topanga Canyon Boulevard. Purchase price? $9.8 million.