Cal Lutheran Negotiating to Buy Second Radio Station By CARLOS MARTINEZ Staff Reporter California Lutheran University in Thousand Oaks could soon own its own mini-chain of radio stations if its deal to acquire Santa Barbara-based KDB-FM is finalized in the next few weeks. “We’re very interested in acquiring the station from Pacific Broadcasting Co.,” said Mary Olson, general manager for Cal Lutheran’s campus radio station KCLU-FM, who is heading discussions with KDB-FM. Last year, UC Santa Barbara tried to acquire the Pacific Broadcasting station, but the deal fell through when the school was unable to come up with more than $3 million for the purchase. A three-month fundraising drive netted just $400,000 before the school called it quits on the effort. Roby Scott, Pacific Broadcasting president and KDB-FM general manager, confirmed he is in talks with Cal Lutheran and that the asking price for the station is $3.6 million. Cal Lutheran is a private university with an enrollment of 2,900 students. KDB-FM is Pacific Broadcasting’s only station. “The ball is in their court right now and they said they’ll respond to our proposal,” Scott said, which includes an understanding that Cal Lutheran would maintain the station’s current classical music format. The Federal Communications Commission prohibits sales contracts from requiring that a radio station maintain a particular format as a condition for its sale, but Scott said the request for the station to keep its classical format would not be a part of the formal contract. He said he is merely seeking a pledge from Cal Lutheran to keep the format. “They can do whatever they want, but we ask them to keep the classical music format simply because that’s something we’d like the people here to have,” Scott said. Olson said the school wants to keep the current format and use the station to give Cal Lutheran a higher profile in northern Ventura County and the Central Coast area, where the bulk of its students come from. The school’s current station, KCLU-FM, has 3,200 watts of power and reaches only as far north as Ventura. KDB-FM has 50,000 watts of power and can be heard as far north as San Luis Obispo and as far south as Thousand Oaks. More importantly, KCLU-FM’s deal with National Public Radio precludes it from carrying conventional advertising and from promoting the university to the extent it would like to. “We’re limited in what we can do, so we don’t have 60-second jingles to promote things,” Olson said. But with KDB-FM, the school could run its own programs or commercials touting the school, its activities and programs. “It would definitely open things up for us,” she said. Olson said that if the school acquires KDB-FM, it will continue to operate KCLU-FM as it currently does and has no plans to either sell or merge it with the larger station. Dave Barrett, former KIQQ Radio general manager and local radio watcher, said that, while many universities own radio stations (often with the intention of acting as a training ground for broadcasting students), it’s unusual for a university to own two. “You don’t see it very often, but it’s clearly to their advantage to be able to promote the university in a large affluent area,” he said. Scott wouldn’t reveal revenue figures for the station, but said the operation has been profitable “for years.” The station conducts and promotes a number of classical music programs that have been a mainstay of the Santa Barbara cultural scene for decades. Among them are the annual KDB-FM Messiah Singalong conducted every Christmas with local classical musicians and singers performing Handel’s “Messiah.” Another is the annual KDB-FM Grand Ball, featuring local musicians performing Strauss waltzes. “Before we came along, there was no Opera Santa Barbara, no Music Theater, no Camerata Pacifica or the Santa Barbara Master Chorale,” Scott said. Currently Santa Barbara County’s sole classical music station, KDB-FM’s roots date back to 1926 when Ventura businessman C.F. Richardson founded the station with the call letters KFCR. In 1929, George Barnes bought the station and changed the call letters to KDB after his wife Dorothy. After being bought and sold several times, the station was acquired by Pacific Broadcasting Co. in 1971, which switched its so-called “Easy Listening” format to its current classical music in 1982. KCLU-FM began broadcasting in 1994 as a National Public Radio affiliate with a jazz format. The station’s $404,000 annual budget is funded by both subsidies from the school and traditional public radio membership drives, Olson said.

Bankruptcies Hartley Construction, Inc. (business type n/a) 26500 Agoura Road, Suite 528, Calabasas 91302 Chapter: 7 Assets: N/A Debts: N/A Doc #SV02-13020-RR File Date: 04/03/02 Attorney: Michael Goergen 818-543-1683 Ora Electronics, Inc. (property lender, manufacturer, etc.) 9410 Owensmouth Ave., Chatsworth 91313 Chapter: 11 Assets: $6,055,179 Debts: $11,872,155 Doc #SV02-13432-KL File Date: 04/16/02 Attorney: Kenneth Cohen 818-227-2828 Optical Disc Media, Inc. (DVD/CD manufacture and sales) 27520 Ave. Mentry, Valencia 91355 Chapter: 11 Assets: $1,193,000 Debts: $4,503,931 Doc #SV02-13269-RR File Date: 04/10/02 Attorney: Stephen Biegenzahn 818-594-8822 Richard D. Phillips DBA: Interactive Entertainment (sale/design lighting & sound systems) 8530 Burnett Ave. #303, North Hills 91343 Chapter: 7 Assets: $27,650 Debts: $128,922 Doc #SV02-13234-GM File Date: 04/10/02 Attorney: Stephen Parry 818-895-2200 Mo’s Woodland Hills, LLC (business type n/a) 20969 Ventura Blvd., Woodland Hills 91364 Chapter: 11 Assets: $100,500 Debts: $150,671 Doc #SV02-13841-KL File Date: 04/26/02 Attorney: Robert Yaspan 818-774-9929 Horizon Pharmacies Reorganization Assoc. (business type n/a) 12840 Riverside Drive, North Hollywood 91607 Chapter: 11 Assets: N/A Debts: N/A Doc #SV02-13795-KL File Date: 04/25/02 Attorney: Joel Glaser 310-442-7700 Blue Sand, Inc. (business type n/a) 20720 Superior St., Chatsworth 91311 Chapter: 11 Assets: N/A Debts: N/A Doc #SV02-13814-GM File Date: 04/26/02 Attorney: Mark Goodfriend 818-783-8866 Stonewall Gourmet Coffee Company Inc. (retail coffee house) 6240 Whitsett Ave., Suite 102, North Hollywood 91606 Chapter: 7 Assets: $68,170 Debts: $1,641,358 Doc #SV02-13904-AG File Date: 04/30/02 Attorney: Shai Oved 818-992-6588 Database Development & Support International Inc. (consulting-technology management matters) 20300 Ventura Blvd, Suite 160, Woodland Hills 91364 Chapter: 7 Assets: $30,832 Debts: $560,862 Doc #SV02-13746-KL File Date: 04/24/02 Attorney: Henry Toles 310-479-1400 Mirjana Mihailovic DBA: Il Sogno (caf & #233;) 2813 S. Topanga Blvd., Malibu 90265 Chapter: 7 Assets: $54,665 Debts: $557,690 Doc #SV02-13889-AG File Date: 04/29/02 Attorney: Steven Bryson 310-477-4555 Carlos V. Guzman Carl’s Auto Wholesale (business type n/a) 16413 Victory Blvd., Van Nuys 91406 Chapter: 7 Assets: $194,900 Debts: $492,892 Doc #SV02-13805-AG File Date: 04/25/02 Attorney: Martin Shapero 818-710-1200 Pages of Ages Inc. (retail stationery stores) 19353 Soledad Cyn. Road, Canyon County 91351 Chapter: 7 Assets: $5,000 Debts: $237,699 Doc #SV02-13934-GM File Date: 04/30/02 Attorney: Heidi Hohler 818-716-6444

When a Small Business Becomes an Affair of the Heart COMMENTARY: From The Newsroom by Michael Hart At the heart of this issue of the Business Journal, meant to focus on the Valley’s small businesses, is a dozen or so accounts of how now-successful companies handled that infamous, exhilarating, painful first year of operation. Even those of you who have gone through that experience but somehow managed to avoid having one of our reporters ask you to talk about it can identify. There are tales of long, long days; panic-ridden attempts to raise money that entrepreneurs hadn’t planned to need; and hours spent staring at a phone that won’t ring. But there are also accounts of tips on where the money was, chance encounters that led to real customers that while they seemed like gifts from heaven at the time came only after weeks and months of hard, thankless work. Of course, every story you read here about the “Year of Living Dangerously” was told by somebody who persevered and succeeded. In working on this issue, I have learned you can ask different arms of the U.S. Small Business Administration the same question how many new small businesses succeed and get different answers. Suffice it to say well over half don’t make it past their first five years; my gut tells me more than half don’t make it past the first year, but that’s just me. Truth be told, most small businesses end more or less unhappily for those involved. Of course, those are typically not the stories we tell in a publication like this. Big or small, we write about the companies that do well and the ones that flame out dramatically. In a sort of parallel universe, however, right next to the one the Business Journal tells you about and far removed from the ear of a reporter, is the one in which many people have lived for generations. Often the businesses did fail, but more frequently the people feel like they survived and flourished. Like many people, I grew up in the middle of the storm that small family-owned businesses most closely resemble. Many evenings, how much we took in that day was a more important topic than how school went for me. The next piece of used equipment we really, really needed was more vital than any of the adolescent dramas I felt I was going through. Our family’s business was like everybody else’s: as idiosyncratic as they come and exactly the same as all the rest. From the late ’50s through the mid-’70s my parents owned a small traveling carnival. They (and I, when school didn’t interfere) wandered through the Midwest and Upper Rocky Mountains every year from early spring to late fall, setting up every week at a different county fair the Ferris wheel, Flying Himalaya, cotton candy machines and the oh-so-lucrative “games of chance.” Every few weeks we would hook up with a number of similar shows to play bigger spots, state fairs, where the “nut” was bigger but the money was better. Looking this week at all the lists of “what small businesses need to do to be successful” and “why small businesses fail,” I can see my parents did absolutely everything right and everything wrong. Over a couple of decades, they tried everything at least once, and made every single mistake a few times. They had meticulously detailed business plans and made split-second decisions that almost instantly were revealed to be irrevocably wrong. There were years when they were “adequately capitalized,” with enough cash to feel like a rainout in a small town in Minnesota was a chance to take a break; and there were times when you could find half a dozen semis parked on the shoulder of some highway because somebody miscalculated how much gas it would take to get to the next town and how many days it would be before the next kid paid his 50 cents for a walk through the funhouse. There were weeks in places like Fargo, N.D. or Rawlings, Wyo. when my mother couldn’t find enough local kids to staff the concession stands. And there were weeks in other places where my mother and father spoke to each other harshly usually in the rain about how they were going to manage to pay the ride boys off on Sunday night. In the end, it’s hard for me to say whether they succeeded or failed. The very, very narrow niche of the entertainment industry called the traveling carnival pretty much disappeared by the mid-’70s. The Arab oil embargo made it too expensive to get over the road, and all the amusement-starved residents of the rural Midwest suddenly had enough cable TV, Pong and links to the outside world to make sinking a basketball for a stuffed bear not seem like that much fun. My parents didn’t sell out as much as sell off. One ride, one cotton candy wagon at a time, they liquidated until finally, one spring, it didn’t seem worth it to go out on the road again. Were they successful? They ended up comfortable, but not rich. I had an excellent (and, now I realize, expensive) education that has served me well in a post-carnival world. I think now about some of those nights stranded with a dead truck battery on some road between Heber, Utah and Rifle, Colo., nights that we all eventually survived, and feel like nothing about being a newspaper editor can ever be hard. For many years after she had officially retired and up almost to the day she died, my mother would see a ragtag carnival set up on some shopping center parking lot, stop to talk and feel like she was missing something she once had: a business that was her own. Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].

Firm at Work On Breakup Sales Pitch By JACQUELINE FOX Staff Reporter Quick: think of a catchy spin for a new car, a new breakfast cereal. Not so hard is it? Now come up with a strategy to push through legislation aimed at making the streets safer for schoolchildren. That’s easy. But how do you brand a campaign for a municipal divorce? How do you convince voters, many with long cultural, personal and professional links to Los Angeles, to toss out the Angeleno in themselves and accept a new geographic identity? These are some of the questions before the folks at Goddard Claussen Porter Novelli, the Los Angeles advertising and public relations firm hired by Valley VOTE to prepare a multi-million-dollar “yes” campaign for Valley secession, assuming a ballot initiative is approved, as expected, in just a few days. In fact, secessionists, Goddard representatives and even some who track political campaigns for a living say the business of branding Valley secession has already been accomplished. What the proponents of a split now need to focus on, they say, is convincing voters they will be better off afterward. “It’s really simple,” said Jack Feuer, Los Angeles-based national news editor for ADWEEK. “They are going to want to tackle this with a persuasive communications strategy, and self-interest has absolutely got to be at the core. They have to zero in on why this a good thing, why folks in the Valley would be happier and what the benefits for them will be.” Perhaps not since the U.S. Civil War has there been a push for a breakup of a geographic region as significant as the drive to form a new Valley city that, with roughly 1.4 million residents, would become the sixth largest city in the nation. So, can Goddard Claussen pull it off? “No question about it,” said Feuer. “These guys have taken on political and social issues many times over and they know the line they are going down here. They are high-profile, high-energy, heavy hitters.” Goddard Claussen claims to have won 95 percent of their campaign efforts. The tag line on its Web site reads “Get used to winning.” The firm has also been hired by Hollywood secessionists to help them with their campaign for cityhood. But Jeff Daar, co-chairman of the anti-secession group One Los Angeles, said the firm has no special advantage over the opponents’ campaign at this point. He said his group, which is primarily raising funds to educate voters on the issue of secession, has seen little evidence of a groundswell of public support for a breakup. “Clearly, the proponents have controlled dialogue on the issue so far,” said Daar. “But I believe that other than people being aware of the issue, most haven’t given much of any thought as to whether or not they want a breakup of the city. I think that is significant. All we have is six or so years of one side arguing in the press reasons why they think there should be secession and not much of a response from others until very recently.” In addition to high-profile issue management and initiative campaigns, Goddard Claussen has some experience with incorporation movements. Ben Goddard said he worked on the campaign to incorporate the city of Malibu in 1991 and a subsequent cityhood drive in Arizona. “The campaign for the Valley,” Goddard said, “will be very similar. We will focus on the benefits of a breakup. I think it’s a win-win for both Valley residents and those who will be in Los Angeles once the new city is formed. And that’s what we intend to center on.” Goddard doesn’t come cheap. The firm’s 1994 campaign to help the Health Insurance Association of America defeat President Bill Clinton’s health care proposal cost $28 million. Goddard would say only that the Valley campaign would “be a multi-million-dollar” effort. Feuer said Goddard Claussen’s campaign will have to bombard voters with messages that strike right at the heart of the secession mantra: Los Angeles has treated the Valley like a bastard stepchild for years, deprived it of its fair share of services and reneged on repeated promises to make things better. Details of a Valley secession campaign are still in the design stages but, Goddard said, it will include TV, print, radio and Internet advertising as well as an army of volunteers taking their cause door to door in the Valley and across the Westside and South Los Angeles. He said his staff has been meeting with residents throughout Los Angeles, asking for feedback on what it means to be an Angeleno and why breaking away from the city would improve their lives. “We are finding that there are a number of things that really resonate with them and we find the arguments for independence to be very compelling,” said Goddard. “We are listening to people’s perceptions of Los Angeles and of their lives here and the things they would like to see happen. The theme that sort of runs through all of it is that smaller is better.” Feuer said, “You get the feeling that there is a lot of sentiment for secession in the press already. “Meanwhile, the mayor’s side has been relatively soft. He’s (Mayor James Hahn) been distracted by budget issues and the controversy over whether to reappoint Police Chief Bernard Parks. So secessionists have had the field pretty much to themselves for quite a while.” “Obviously, that’s brilliant,” said former Assemblyman Richard Katz and co-chairman of the secession campaign, in response to Feuer’s remarks. “One of the reasons it’s gotten this far is the same as the reason we got here in the first place: people downtown didn’t take it or the Valley seriously.” Katz said he and Goddard, whose company was taken over by Porter Novelli two years ago, have been friends since the 1970s. He said Valley VOTE, the group leading the secession drive, chose Goddard because of its experience with issue management and political initiatives. With respect to business interests in the Valley, Goddard said the campaign will hit on key points of concern like business taxes and the permitting and licensing process. “The new city will be much more responsive to the needs of business owners,” said Goddard. “We intend to focus on those things, letting voters know that it will be easier to cut through the red tape with a smaller, more local form of government.” While the anti-secession campaign may very well lag behind proponents in terms of brand recognition at the moment, even Katz admitted the opposition still has very deep pockets it has yet to tap. Hahn vowed to raise $5 million to defeat the initiative. Katz said funding is an important part of the campaign process, but it will also hinge on the issues at stake and the support and interest already generated. “We are going to spend as much as we can raise,” said Katz. “But we don’t expect to raise the kind of money the mayor is going to raise. He has the labor unions and the downtown interest groups that are going to help him. I’ve even heard that there’s a Sacramento labor union ready to spend $1 million to defeat us. “But we have 14 council members and a race for mayor that will generate interest in the Valley, so there are more issues playing into it that are more important than just money.” “I think the hardest part of the campaign has already been put in motion for secessionists,” said Feuer. “The pro-secession movement got started a long time ago and has already made deep inroads. They’ve done a very good job of establishing secession as an important issue, while the opponents have taken a wait-and-see approach, which could very well come back to haunt them.”

People Interview: A Chamber Full of Dreams The San Fernando Valley Black Chamber of Commerce’s Zedar E. Broadous has more in mind than business mixers and networking opportunities. By SHELLY GARCIA Senior Reporter The offices of the San Fernando Valley Black Chamber of Commerce double as headquarters for the Valley chapter of the NAACP. Computers, file cabinets and desks are crammed into the tiny space just behind the First United Methodist Church in Pacoima. Ask Rev. Zedar E. Broadous, who heads both groups, about the chamber’s budget and he shakes his head as if to say, “You’ve got to be kidding.” The budget, it turns out, is the good will of its members, about 75 folks, mostly but not all black, who volunteer their time, skills, even their refreshments, to the six-year-old chamber. The Black Chamber may not have the resources of its more established counterparts, but Broadous is quick to point out that what its members need has little to do with the trappings of civic life. An associate minister at Calvary Baptist Church, a congregation in Pacoima started by his father, Broadous also runs a part-time printing business and, later this month, will re-launch the San Fernando Valley African-American Chronicle News, a community newspaper that has been out of circulation for nearly two years. While he looks forward to the day when the chamber’s budget allows the group to do things like gather research on the size and scope of the Valley’s black business community, the more fundamental job at hand is easing the way for more blacks to start and grow businesses. Much has changed, Broadous says, since he was born in Burbank, in a day when blacks were not allowed to walk the city’s streets after dark, and home ownership outside Pacoima was just a pipe dream. But some things remain the same. Question: Why did you decide to create the San Fernando Valley Black Chamber of Commerce? Answer: The biggest reason was, in the San Fernando Valley proper, there was really no business organization that spoke to the needs and concerns of the African-American community. There are a number of economic and business organizations on the other side of the hill, but if you’re working in the Valley on a daily basis and then at the end of business you have to drive, that was a little trying. Q: What are some of the needs within the black business community that a chamber can fill? A: We realized the biggest thing within the minority community, particularly the African-American community, was misconceptions of business. Part of it is really understanding business plans, for instance, what it takes to put a business plan together, what is a business plan. How do you look for capital to grow your business or even start a business. Q: Don’t people of all backgrounds have many of those same impressions? A: Yes, you’re right. It’s not only an African-American issue, however the African-American community has not had the education and the African-American community has not had the access to capital. Only in the last 10 or 15 years have they really, when it comes to business, had the type of access and even education to business. There’s still a lot of mistrust in the African-American community. Sometimes it’s better if the messenger is someone you know, someone you do trust, someone who has had the same pitfalls that you have so that you can hear the message clearer. Q: What other goals does the chamber have? A: We see a lot of young people who want to be sports stars. Why? Because they do see that. We see a lot of them want to be entertainers and comedians and rap stars. Why? Because they do see that. How do we get them to want to be in business? If they don’t see black folks in business, then how can they hope to be in business? So the perception is, “they won’t let us.” It’s a hangover from the days of segregation and the days of Jim Crow when they would not let us. However, we’re in a new day and time, but if you don’t see African-Americans in business, then the perception of “they don’t let us” persists. Q: Why create a separate chamber instead of joining existing groups? A: The San Fernando Valley Black Chamber is a member of VICA. The San Fernando Valley Black Chamber is a member of the United Chambers of Commerce. I was one of those at the initial meeting for the establishment of the Economic Alliance. Most times a person hears an organization is called by an ethnic name they tend to think they’re trying to be isolationists. We’re not trying to isolate ourselves. What we are doing is looking at a particular segment, a particular market that needs to be shored up, that needs to be expanded. Q: Is there any sort of profile that you’ve developed of the typical black business? A: At this point, no. Again, that is one of the reasons and the need for an African-American chamber to be able to begin to collect that data. All of those things take economic resources as well as people power resources, and those are some of the things we’re working toward. Those are some of the foundational kinds of questions that need to be answered to be able to grow and build African-American businesses and to be able to recycle African-American money in the African-American community and within African-American businesses. Q: So would one of your goals also be to build up the chamber’s membership, to beef up the budget? A: I think the reality is having substantial or solid programs, having solid benefits for those who search out the chamber, with that the membership rolls will grow. I’ve seen many organizations that have thousands of members, yet they’re not doing anything. We want to make sure the San Fernando Valley Black Chamber is doing something; has made the contacts so when a person calls we can say, “OK, you need to call this agency or you need to go to that agency or we’ll call these people for you or come in, let’s talk about the issue or the problem.” Q: Don’t you have to build membership in order to provide those services? A: Not membership in the sense that you have to pay to be a part of this. I think if we increase our visibility and if we increase what we have to offer, that, in and of itself, would have people say, that organization is really concerned about people and not just raising money for its own operations. Q: If you look at the coming year, what are the goals of the chamber? A: The major goal is to increase our visibility, increase our capacity to service businesses. To be able to bring in more experts and offer more workshops and seminars, even in some cases do a one-on-one. Q: What drives you to do what you do? A: All parents tell their children, if you want to succeed in life you have to be better than everybody else. And African-Americans have traditionally had to be 20 or 30 times better than everyone else. The same thing within the Latino community. I think that kind of concept is leveling off to a degree, however, you still have that. And if you don’t know where the resources are to make yourself better, you lose hope. Being able to see an African-American businessperson receive recognition, not only does it give other businesspeople a sense of hope, it gives young people a sense of hope. What drives me? I know people need hope. I need hope. And my hope is, and my prayer is, that through the chamber, through the people in our community that do care, we’ll do the things that make life better, not only for ourselves but particularly our children and our children’s children. SNAPSHOT: Rev. Zedar E. Broadous Age: 53 Title: Chairman and founder of the San Fernando Valley Black Chamber of Commerce; president, San Fernando Valley chapter of the NAACP Education: Bachelor’s degree from Golden Grain Bible College, Saticoy; Coursework, Cal State Northridge Personal: Married, six children, eight grandchildren Most admired person(s): Parents, Rev. Dr. Hillery T. Broadous and Mother Rosa Broadous

Splitting Up Secession Questions Makes Sense to Some Politics by Jacqueline Fox “Breakup foes lose vote fight” That’s the headline in the May 9 issue of the Daily News. The day before, Jeff Daar, co-chairman of the anti-secession group One Los Angeles, asked the Local Agency Formation Commission to consider holding separate elections for secession and new Valley city council and mayoral races. Daar and his group want the election on secession to be held Nov. 5, provided an initiative on the issue is approved May 22, and, if it passes, hold council and mayoral elections in March to coincide with Los Angeles City Council races. LAFCO’s recommending the elections be held simultaneously. Daar says the “fight” is far from over and that he plans to give LAFCO numbers supplied by the city of Los Angeles that would show how much simultaneous elections would cost compared to separate ones. “It could be very, very significant,” Daar said. “I don’t have numbers for you now, but I’ve heard estimates and this is a serious fiscal issue for the city.” Daar’s concerned that, under LAFCO guidelines, the city of Los Angeles and the new Valley city would have to share election costs if secession passes and the council races are held at the same time. If it fails, the burden would lie squarely on the county’s shoulders. But why make the county pay for an election on an issue that, if rejected, would render the Valley council elections null and void, but cost taxpayers anyway? “We have not concluded that this is a dead issue by any means,” said Daar, an attorney with the Los Angeles firm Daar & Newman. “Whatever the costs are, they should be considered, particularly when the city and county may have to pay part of those costs.” LAFCO, says Daar, didn’t exactly “reject” his request, as intimated by the Daily News headline. It simply tabled it much in the same fashion it tables a lot of issues brought up by public speakers: with a round of head nodding, shoulder shrugging and then a move on to another topic. “There was no vote on this,” said Daar. “We are still going to lobby for LAFCO to conclude that they do have the discretion for themselves when to hold the elections.” Daar makes a strong case for separate elections. And if the city and Mayor James Hahn were listening carefully, they would get behind him faster than you can say “alimony.” Why? If voters approve the initiative Nov. 5, the city would only be required to pay for a portion of that election and be free and clear of other costs. The tab for council and mayoral races would be picked up by the new Valley city. Helllllooooooo? City officials, Mayor Hahn, if you’re listening now, wouldn’t these be some of those stranded costs you’ve been talking about for weeks now but can’t seem to get LAFCO to take seriously? It seems to Daar, and to this reporter, that, faced with a budget shortfall and waning popularity among voters on both sides of hill, Hahn would have had those figures in a gold binder ready for LAFCO months ago. “There’d be no obligation by the city of Los Angeles to cover races for a separate city,” said Daar. “That would save the city money and you’d think someone would care, but no one has ever checked the numbers out.” While he was at it, Daar also told LAFCO members that, in their draft resolution for a ballot initiative, it states that, if secession passes and LAFCO were to be challenged on it in court, the applicants (Valley VOTE) would foot the bill for the agency’s legal defense. “The new Valley city is never likely to comply with that obligation, but also, at a minimum LAFCO should require the applicants to demonstrate they can pay for it,” said Daar. “If they want the applicant to defend them, they need to make sure they are actually able to do so. Otherwise, it’s meaningless.” LAFCO’s response, according to Daar: “You know how they do things.” Katz Is Out, Cordaro’s In Remember James “Jamie” Cordaro? He’s the guy that managed to snag roughly 10 percent of the votes in the Dec. 11 Second District city council election, the one that forced Wendy Greuel and Tony Cardenas into a surprise March 5 runoff for the East Valley seat. Well, if you didn’t know him before, maybe now you will. Cordaro said he will be a candidate for what would be the new Valley city’s 10th district city council seat, should an initiative on secession be approved. “I fully intend to run,” said Cordaro, who owns All Phase Electrical Systems in Van Nuys. There you have it: the first Valley resident with the chutzpah to declare himself a candidate for a seat on a city council that doesn’t yet exist. And, for anyone who is still not convinced, those rumors about former Assemblyman Richard Katz running for mayor of the new Valley city are dead in the water. “I’m saying flat out that I have no intention of running,” Katz told the Business Journal recently. Next? Jacqueline Fox is politics reporter for the San Fernando Valley Business Journal. She can be reached at [email protected]. Lockheed Martin Fined Lockheed Martin Corp. was fined $1.38 million by the U.S. Environmental Protection Agency for improperly operating its water cleanup system in Burbank. Under the terms of a 1992 federal consent decree, Lockheed’s Burbank unit was ordered to pump 9,000 gallons per minute from the local aquifer to help purge water supplies of toxic solvents. EPA said Lockheed, based in Bethesda, Md., did not comply with the agreement because it failed to operate the plant at full capacity between June 2000 and July 2001. Lockheed’s former Burbank production complex has been identified by state and federal environmental officials as a major source of solvents that have polluted ground water in Burbank and forced the city to shut municipal water wells. The area was designated for cleanup in 1986 under the federal Superfund program, which requires those responsible for pollution to pay for the removal of toxic materials. Environmental officials say ground water in the Burbank area is contaminated with TCE and PCE, two types of toxic solvents from past aerospace manufacturing operations.

First Quarter Is a Plus for Some Local Firms By SHELLY GARCIA Senior Reporter The rest of the nation may be undergoing an on-again-off-again recovery, but you wouldn’t know it from the first-quarter results in the greater San Fernando Valley. While losses continued to mount at a number of local technology companies, most of the region’s largest public companies saw sizable increases in revenues and earnings for the period. Sales rose an average of 15 percent and earnings more than tripled year-to-year for a sampling of 25 of the region’s largest public companies. The Valley’s average performance for the quarter far eclipsed the S & P; 500, which, when reporting for all companies is completed, is expected to show an 11.6-percent decline over the same period last year, the fifth consecutive quarter of negative earnings, according to Thomson Financial/First Call. The best performers in the local economy were businesses related to home-buying, where sales have been white hot, but consumer goods companies, health care firms and entertainment also turned in strong quarterly financials. Those trends mirror the national economy, where analysts say low interest rates have affected not just home buying, but other areas of consumer goods as well. “There’s no question anything in home building and real estate has done really well,” said Ken Perkins, research analyst with First Call. “Low levels of interest rates have really been a boon, and with refinancing, that has put money into consumer’s pockets.” Among the brightest performers in the Valley: & #167; Earnings at Newhall Land and Farming Co. surged more than tenfold to $11.1 million and revenues more than doubled to $51.8 million. & #167; Mortgage banker Countrywide Credit Industries Inc. saw earnings jump 61 percent to $168 million on revenues of $915.4 million, up 65 percent from the comparable quarter in 2001. & #167; Video game maker THQ Inc. reported earnings increased 222 percent to $2.8 million on a sales increase of 34 percent to $79.7 million. & #167; Wellpoint Health Networks Inc. saw revenues increase 51 percent to $3.9 billion and earnings surge 46 percent to $141 million. The staggering threefold rise in earnings registered in the Valley was in part due to exceedingly low net levels reported by some companies in the comparable period last year The Walt Disney Co., for instance, lost $567 million in the first quarter of 2001, compared to a positive earnings flow of $259 million in the current quarter, skewing the average considerably but many local firms nevertheless saw dramatic earnings gains, albeit often on much more modest revenue increases. At The Ryland Group Inc., for example, earnings rose 61 percent to $26 million in the quarter on a 5-percent revenue increase. And Dole Food Company Inc. reported a 62-percent rise in net income to $56.3 million on flat sales. Jack Kyser, chief economist at the Los Angeles Economic Development Corp., said a number of factors probably contributed to the upbeat first quarter in the Valley. The region is relatively free of the Fortune 500 companies that have been restating and revising their accounting as a result of the Enron debacle. And there was less M & A; activity in the Valley, so companies were not taking the write-offs that strained earnings for many other businesses. At the same time, the Valley’s largest public companies include a number of sectors that have held up well in the downturn, including real estate, health care and consumer staples, a category that includes products and services ranging from computer games to entertainment and food and beverages. “Consumer staples earnings are up 4 percent,” said Perkins of the S & P; trends, noting that the category is one of only two sectors turning in positive earnings growth. “That’s one of the few sectors where there’s year-over-year improvement.” On the strength of the first quarter, a number of companies boosted guidance for the coming quarter and the full year. Bio-med firm Amgen raised projections for its product sales to the low 20-percent range for the year, over previous guidance that product sales would grow in the high teens. Amgen logged an 11.8-percent earnings increase in the first quarter of the year, seeing net income climb to $340.9 million on a 14-percent increase in revenues to $909 million. Likewise, K-Swiss Inc., makers of athletic footwear, raised its guidance to earnings per share in the $0.39 to $0.49 range on a diluted basis and revenues of $61 million to $64 million in the second quarter. The optimism reflected increased investments in its National Geographic and Royal Elastics brands and the expansion of its European operations, the company said. Westlake Village-based K-Swiss’s first-quarter net earnings increased 46.2 percent to $9.7 million and sales rose 17.7 percent to $80.3 million. THQ, which beat analysts’ projections for the first quarter of the year, also raised its guidance for the second quarter of 2002. Noting its sales successes with a number of games, THQ is projecting sales in the $80 million to $85 million range and earnings per share of $0.10 to $0.12 for the second quarter of 2002. In the comparable period in 2001, THQ recorded earnings of $0.04 per share on revenues of $59.3 million. And Guitar Center Inc. said that, based on its first-quarter results, the company was raising its full-year estimates to $0.97 to $1.03 per share from previous guidance of $0.91 to $0.97. Guitar Center turned in earnings of $3.4 million in the first quarter of the year and an 18-percent sales increase to $251.5 million for the first quarter of the year, beating the company’s earlier projections for the period. The improved outlook in the Valley is consistent with projections around the country. According to First Call, the ratio of companies giving negative guidance to those providing positive projections for the second quarter is one-to-one. Last year at this time it was 3-to-2. “So it’s a marked improvement from then and it’s actually a sequential improvement from the fourth quarter,” said Perkins. Also typical of the larger economy, Valley technology companies continued to report earnings declines and, in some cases, losses. While the sector was perhaps the weakest performer nationally, many of the Valley’s tech companies are privately held, and, if public, too small to appear in a top-25 list. Still, tech companies were among the weakest performers in the Valley as well. & #167; Power-One Inc., a telecommunications equipment supplier, registered a net loss of $7.2 million, compared to earnings of $16.4 million in the prior year, as sales inched up to $48.4 million in the current quarter. & #167; Electro Rent Corp. recorded a 76-percent decline in first-quarter earnings to $1.8 million on a 37-percent sales slide to $32 million. & #167; Ixia, an optical equipment testing company, saw earnings decline 74 percent to $2.3 million on a 45-percent revenue drop to $15.4 million. By and large, these companies noted that these results might have been even more severe if not for aggressive cost-cutting measures begun last year. At Power-One, for instance, operating and other expenses were shaved to $23.9 million in the quarter, compared to $35.2 million for the same period last year. And there is evidence that some of these companies are not out of the woods yet. At 3D Systems Corp., where the first-quarter earnings boost to $8.5 million was helped by an arbitration settlement of $18.5 million during the period, more cost cutting is planned. “We are not pleased with first-quarter results,” said Brian K. Service, president and CEO of 3D, a Valencia company that makes imaging products. Service said the company plans to cut about 10 percent of the company’s worldwide workforce.

Small Biz Takes Cue From Big Firms By SHELLY GARCIA Senior Reporter For years people scrimped and saved to buy a business, then burned the midnight oil to build it. Today, many trade with shell companies, finance with equity partners, merge and acquire, even hire consultants. Not just the lexicon, but the customs and methods of small business are changing. Now more than a rugged individual with a dream, small business has evolved into an enterprise that mirrors corporate America with business plans, market analysis, financial projections and reports and management strategies. You might say small business is becoming big business. It just has fewer zeros. “People are becoming much more sophisticated in the way they are coming together with different companies and partnering with different industries to make the best use of the supply chain,” said Helen Han, senior program manager for the Management Development Program for Entrepreneurs at the Harold Price Center for Entrepreneurial Studies, part of the John E. Anderson Graduate School of Management at UCLA. “People are not just looking at the actual operation anymore. They’re looking at the need and fit and (how) to be much more flexible to succeed in a very competitive environment.” To be sure, the restaurant chef longing for her name on the door, the enterprising trader with product sources abroad, the mechanical whiz or seamstress with a passion to design still make up a large portion of small business owners. But even these more traditional entrepreneurs are often finding that, as the market becomes more complex and competition grows more fierce, they need business tools that are up to the task. “I recently had a case where the customer spent about $15,000 on a consultant to help him,” said Oscar Monteagudo, assistant vice president and business development officer in the Woodland Hills branch of Wells Fargo. “Lately I’ve seen more and more people going out and hiring consultants to do their business plans.” Some say the changes are the result of differences in today’s entrepreneurs more likely to be MBAs, or at least college grads, disillusioned by the lack of corporate job security than to have come up from the streets with healthy servings of common sense and ambition. Others point to the changing marketplace and, in particular, the advent of technology, which now plays a pivotal role in most business, high tech or not. Take the case of BizInk, a Woodland Hills online printing company formed from a partnership with a technology consulting firm. BizInk founder Scot Feinberg was running a small printing company when he realized that he could not compete with the large chains offering such services. Feinberg figured that if he could offer his services online, BizInk would have a competitive advantage, so he approached technology consultants eCybersuite, another small business, to computerize the operation. Feinberg planned only on buying eCybersuite’s expertise but ultimately struck up a deal under which eCybersuite’s founder became a full equity partner in BizInk. “I think what changed his mind was that the technology is not simple,” said Tom Pelino, owner of eCybersuite and president of BizInk. “If you don’t know what you’re doing you can really waste a lot of money, and that could be devastating to a small business.” Pelino sees further potential to expand his consulting business with other companies down the road as a result of the technical expertise eCybersuite can bring to the table. “I think 10 years ago, if you had an idea, you jumped out there on your own and did what you had to do to make it happen,” he said. “Today there’s more of trying to find someone to partner with or trying to find that synergistic partner who can bring more value to the table.” Financing small business too is changing. While many still use personal credit cards for startup capital, there are a growing number of entrepreneurs adopting far more sophisticated strategies. Three years ago, Clinton J. Sallee, president and CEO of Sitestar Corp., an ISP holding company based in Encino, wanted to get in on the technology boom but had neither the technical background nor the cash to do it. So Sallee acquired a failing publicly traded company in a reverse merger, sold the assets back to the company and used the stock shares in the shell company to start buying up businesses. “I was a former investment banker with zero operating experience,” said Sallee. “I’d never managed anyone. I didn’t have an MBA. And I didn’t have technology experience. The only way to go about it on any scale was to pursue the approach that we pursued.” To date Sitestar has acquired four Internet service providers in the mid-Atlantic and Southeast regions. Sallee oversees finance, operations and administration while the former managers of the acquired businesses continue to run the day-to-day operations. Now Sallee says he wants to diversify. “What we’re doing now is we’re trying to focus our efforts a little closer to home,” said Sallee. “We’re looking for companies that are not Internet-related, in manufacturing or distribution located here in Southern California, that we can acquire and continue to build,” he said. With its stock price down to the $.04-cent range from the mid-$3 range when Sitestar launched, Sallee is the first to concede he’ll likely have to pay cash for future acquisitions, a step the company, with positive cash flow of $1.2 million, is prepared to take. Those who don’t have the benefit of training in finance and M & A; used to avail themselves of the free advice and services provided through government programs like those sponsored by the Small Business Administration. But as new and alternative financing for these firms becomes available, entrepreneurs are increasingly seeking out the services of paid professionals to assist them. “I have a client who’s going to acquire more than one company,” said Ray Mendoza, who just launched his own consultancy, Cambria Capital Partners, to provide financial advisory services to small businesses. “We’ve been asked to advise on an interest rate hedging policy. Small business can’t afford a full-time chief financial officer that can focus on these issues, but they can afford someone one day a week.” Many more too are enrolling in educational programs like those offered by UCLA’s Price Center. Some have run small businesses for years, and now find they need new skills. Others are relatively new entrepreneurs. But where entrepreneurial talent was once enough to carry a small business owner for many years, companies now are likely to need professional management expertise far earlier in the cycle, said Price Center manager Han. “It’s not like the engineer who has come up with a product. It has to be a total concept,” said Han. “It has to be a whole myriad of talents now, and I think in a way they reach that threshold much more quickly because of the competitiveness of the market.”

Warner Center Office Buildings Are Hot Properties Real Estate by Shelly Garcia Rents may be falling, vacancies may be rising and real estate may be in the doldrums, but none of that, it seems, is dissuading buyers from Warner Center office properties. As Douglas, Emmett & Co. and Kearny Realty Group continue to negotiate for the 2.3-million-square-foot Warner Center Properties complex of buildings, two more office properties in the business hub have sold. American Realty Advisors acquired an 89,393-square-foot office building at 21900 Burbank Blvd. for $14.5 million, or $162 a square foot. The building is the headquarters of Unova Corp., which will continue to lease the property. It is currently about 94-percent leased. An Arden Realty Inc. property at 6800 Owensmouth Ave. was acquired by Westlake Village investors for $8.4 million. The 80,000-square-foot building is about 85-percent leased by tenants that include Hughes Credit Union and Kinney Shoes. Several things seem to be driving the demand for Warner Center properties. One is the scant supply of Class A office buildings in the L.A. area in general. Another relates to the specifics of the Warner Center sub-market. With the exception of additional square footage under construction at LNR Warner Center (a drop in the bucket), the area is built out, limiting supply well into the future. And most of the tenants currently in the area are blue chip names in for the long haul. In other words, it will take an act of God to put a serious dent in occupancy rates. Indeed, there were 25 offers on the Burbank property, according to Mark Perry, first vice president at CB Richard Ellis, who represented both buyer and seller in the deal along with Bonnie McRae, Bill Inglis and Bob Shafer. As Stanley Iezman, president and CEO of American Realty, which acquired the Burbank property for a pension fund client, said, “We are pleased to be part of the supply-constrained Warner Center office community where our research confirms the sub-market’s long-term growth potential.” But if the healthy long-term prospects for Warner Center are spurring demand, so too is the short-term weakness. Ask a broker and he or she will tell you the properties commanded a “fair” price, but the fact is these buildings sold for a darn good one. Despite the long-term outlook, financing available for these sales is based on current rental trends, and with vacancies up and rental rates down, capital markets are limiting the amount of money they are willing to shell out to finance these acquisitions. That is putting a cap on purchase prices. Then why sell now? Brokers say there’s no real consistent trend indicating why these buildings have all gone on the block in so short a time frame. Many, like the Owensmouth property just sold by Arden, are institutionally owned, and institutions have distinct time frames for holding onto properties. Unova, which has owned the building for just a few years, has been laboring under significant earnings losses, but it’s believed that the reason for the sale has less to do with its financial situation than it does with its own internal administrative issues. Owning real estate just isn’t in its business plan. Last year’s deals, including the Trillium towers, the 21st Century Plaza and Warner Center Corporate Center, also seemed to have been influenced by separate and disparate factors, everything from exit strategies implemented by the developer of the building to portfolio sales by real estate companies. Oddly enough, perhaps the only lesson to take away is that real estate is decidedly a cyclical business, not only for the highs and lows of the market but also for the spurts of selling activity. And with the largest of these deals, Warner Center Properties, still to close, along with a few other buildings expected to change hands sooner rather than later, this cycle isn’t over yet. AvalonBay Digs into Glendale AvalonBay Communities Inc. has broken ground on a $50 million apartment complex at 11347 N. Central Ave. in Glendale. The development, the first since Alexandria, Va.-based AvalonBay opened a regional office in Southern California in 1997, will include 223 one-, two- and three-bedroom units. Components of the luxury development will be connected through paseos and will include a community center, pool and fitness center, among other amenities. Rents will range from $1,700 to $2,900 per month. Since it opened in Southern California, AvalonBay has purchased and renovated 18 apartment communities in San Diego, Orange and Los Angeles counties. The company’s plan is to develop 700 to 1,000 apartments in Southern California annually. Encino Sale First Financial Plaza, a 217,491-square-foot office building at 16830 Ventura Blvd. in Encino, was acquired by Glenborough Realty Trust for $47.3 million, or $217 per square foot. Tom Bollinger, Sean Sullivan, Mark Perry and Madeline Schwartz, brokers with CB Richard Ellis, represented the buyer and seller, Cornerstone Suburban Office LP in the deal. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

Digital Insight Delays Planned Public Stock Offering Media & Technology by Carlos Martinez Online banking software maker Digital Insight Corp. has pulled out of a proposed public stock offering, citing market conditions. On Feb. 25, the Calabasas-based firm announced that it would offer an additional 4 million shares of its common stock valued at the time at more than $100 million. The cash, the company said, would be used to acquire unspecified competitors to garner a larger market share in the online banking business. But the company’s stock suffered a sharp drop after it released its first-quarter results, showing better than expected numbers but warning that its second-quarter revenue would be lower than current consensus estimates. Digital Insight estimated revenues of between $32 million and $32.5 million for the second quarter, while consensus estimates ranged between $35 million and $37 million. The stock price dropped from $24.17 on April 25, when company figures were released, to $18.26 on April 26, when 3.7 million shares were traded. The stock closed at $16.20 on May 10. The stock drop likely contributed to the company’s decision to cancel the offering, said analyst Jeffery B. Baker of U.S. Bancorp Piper Jaffray. Digital Insight reported a $34.7 million loss on revenues of $30.1 million for the first quarter, compared to a $17.6 million loss on revenues of $20.4 million for the same quarter a year earlier. Baker said the company has been hurt by its rapid expansion, but has now embarked on a restructuring effort to streamline its operations following the acquisition of rival Virtual Financial Services Inc. and others. Company CEO John Dorman said last month that the restructuring will mean the addition of an unspecified number of new employees. Dorman said the company plans to eliminate redundant operations and business functions brought about by recent acquisitions. Cost savings will not materialize until the fourth quarter, he said. Already, the company says it will take a $2.5 million charge in restructuring costs for the quarter. The company, founded in 1996, has yet to post a profit. Planned Layoffs Studio City-based independent production company Carsey-Werner-Mandabach LLC said it will lay off about 35 of its 130-person staff over the next few weeks. According to a memo sent to staffers last week, company president Dirk van de Bunt and COO Bob Dubelko said the cuts would take place in the company’s production and distribution units. “We’ve come out with a number of cost-cutting measures this year. But it is clear that we have to go further,” the memo read. “We’re working with department heads to look at every process and function to see where we can lower costs and still maintain quality.” Neither van de Bunt nor Dubelko would comment, but a spokeswoman there confirmed the layoff plans. This comes as the production company that once had a slew of high-rated television shows in production all at once faces what could be a dismal year where its revenues are concerned. So far, the company’s “That 70s Show,” which airs on the Fox network, is its only series scheduled to return to the fall lineup. Two other programs, “That 80s Show” and “Grounded for Life,” both also airing on Fox, have not been renewed for another season. The company is developing a series pilot for ABC’s fall schedule. Carsey-Werner-Mandabach is known for producing “The Cosby Show,” “Roseanne,” “Third Rock From the Sun” and “A Different World.” Two Firms Get Defense Contracts Thousand Oaks-based Rockwell Scientific Co. and Litton Systems Inc.’s Guidance and Control Division in Woodland Hills have been awarded new defense contracts recently. Rockwell, a privately owned unit of Rockwell Automation Inc., received a $2.3 million contract from the U.S. Air Force to develop goggles that would protect aircrews from laser beams. Rockwell said lasers are used to affect the vision of aircrews during combat. The goggles, to be developed under the Aircrew Laser Eye Protection/Systems Development and Demonstration Program, will provide aircrews with protection against several kinds of laser devices meant to damage their eyes. Bill Gunning, executive director of Rockwell’s Optics Division, said the goggles will allow aircrews to see without distortion both day and night. Meanwhile, Litton’s Guidance and Control Division has received an $11.9 million contract from the U.S. Navy for aircraft navigation equipment. The equipment will be used on the Navy’s single-seat F/A-18 Hornet attack fighter; the E-2C Hawkeye, an aircraft carrier-based radar plane; and the AV-8B aircraft, better known as the Harrier which takes off and lands vertically. The contract includes about $2 million for work on aircraft belonging to the governments of Egypt and Japan. The work will be done in Salt Lake City and Woodland Hills, with completion scheduled for June 2004. Diodes Expects Growth in China Discrete semiconductor maker Diodes Inc. in Westlake Village expects to see its market share in China grow next year. Company CEO C.H. Chen said last week that the company hopes to ramp up operations in China where it opened a sales office in March and already operates two manufacturing plants. “We see the Asian market as bigger than the European Market or North America,” said Chen, who expects double-digit growth in that market during 2003. The Asian market accounted for 47 percent of the company’s sales during the quarter ending March 31, compared to 39 percent for the same period last year. Joe Blankenship, an analyst with the investment firm Peacock, Hislop, Staley & Given Inc., said the company is poised to take advantage of the fast-growing Asian market. With the completion of a state-of-the-art wafer manufacturing plant earlier this year in China, Diodes is ahead of most of its competitors, said Blankenship, who sees the company taking full advantage of the demand for low-cost semiconductors in China. Earlier this month, Diodes released its first-quarter numbers, showing its first profit in three quarters. Until last June, the company had experienced 45 consecutive profitable quarters, before posting losses during the third and fourth quarters last year. For the quarter ended March 31, the company reported $208,000 in net income on revenue of $26.9 million, compared to $521,000 in net income on revenue of $25.7 million during the same period last year. Business Journal reporter Carlos Martinez may be reached at (818) 676-1750 ext. 17 or by e-mail at [email protected].