Anthrax has been spotted in mail delivered by the U.S. Postal Service, primarily along the East Coast. Individuals, companies and government agencies everywhere feel threatened by the situation and are implementing precautions to avoid contact. Consequently, the San Fernando Valley Business Journal asks: Are you handling mail at your company differently since the beginning of the anthrax scare? Victor Gill Director of Public Affairs and Communications Burbank-Glendale-Pasadena Airport Burbank We have taken precautions to ensure that all staff members who come in contact with incoming mail are thoroughly briefed, both as to procedures they can follow in receiving mail and resources available if questionable items are observed. Mel Wilson General Manager Mel Wilson Re/Max Centre Woodland Hills At this juncture, the only changes made is to have my staff wear latex gloves when mail is being opened. Bob Grant Account Manager Network Appliance Woodland Hills I’ve been leery at looking through my mail. The whole ordeal is overwhelming. The air exposure is our company’s main concern. From this incident, I had to constantly wash my hands when I handle my mail. John Parker President Parker Brown, Inc. Canoga Park We are more cautious with our mail. The mail without return address is not opened. I believe we’re at a low risk, but we have taken every precaution to inform our employees. Steve Benoit Senior Account Executive Universal Mail Delivery Service Van Nuys The situation didn’t really affect us. We are not using any new approach internally. With our services to clients, we’re more careful and want our clients to be assured that their mail is safe. The best approach is to be alert. We’ve taken every possible precaution, such as surgical gloves provided to our drivers when handling mail to deliver to clients. Ron Yukelson Associate Administrator/Director, Business Development Encino-Tarzana Regional Medical Center Tarzana As a hospital, we are acutely sensitive to the anthrax scare and its potential ramifications on our community in general and our hospital specifically. In terms of mail, we are taking unprecedented precautions. We have briefed all of our management staff on the precautions that are necessary to convey to their employees and requested they conduct an in-service. Nancy Walsh Senior Account Executive Oakwood Worldwide Woodland Hills Our company is proactive with this situation. All suspicious mail is forwarded to security.

Guy Gniadek Title: President, Ahmanson Land Co. Age: 45 Education: Educated in architecture and planning at Indiana’s Purdue University and the Southern California Institute of Architecture Career turning point: Making the switch from architectural work to representing a large-scale project Personal: Married, two children Most admired people: Father Henry and sister Rita Guy Gniadek has been involved in getting Ahmanson Ranch off the ground since it was just a developer’s dream 15 years ago It’s been nearly 15 years since plans for 3,000-plus homes and a “mini-city” among the twisted oaks and rolling hills of Ahmanson Ranch were first introduced, nine years since the project was initially approved by Ventura County officials. Nevertheless, the first shovelful of dirt has yet to be dug. Throughout almost the entire history of the project, Guy Gniadek has been involved. Ahmanson Land Co. President Gniadek, a trained architect, lives in Woodland Hills. He first got involved in the project as a planner in 1986 while with the Los Angeles firm of A. C. Martin & Associates Environmentalists and West Valley residents opposed to the project have waged a bitter campaign against the developer, Ahmanson Land Co., a subsidiary of Washington Mutual. They say the project is certain to turn the already congested Ventura (101) Freeway and nearby city streets into a nightmare for commuters and residents, that it would suck up the last open space in the region and that it threatens to wipe out the habitats of endangered indigenous plants and animals. Fourteen lawsuits have been filed against Washington Mutual regarding Ahmanson Ranch since 1992. While none have succeeded in stopping the project, they have managed to stall development significantly. The original target date for breaking ground was 1997. The Los Angeles City Council is calling for a new environmental review of the project, saying the one submitted in 1992 is now outdated. The council also voted earlier this month to deny Ahmanson’s request to extend Victory Boulevard (which now dead-ends at the city’s border) to allow access for construction crews and ultimately the residents who will live there. Washington Mutual officials remain undaunted: They say forecasts of a 50-percent increase in population in Southern California by 2020 clearly support the need for more housing in the already jobs-rich area near “the Ranch,” as they like to call it. To appease opponents’ concerns about the environment, Ahmanson has transferred more than 10,000 acres of open space to an acquisitions unit of the Santa Monica Mountains Conservancy. A supplemental EIR has been completed since the discovery in 1999 of the red-legged frog and San Fernando Valley spine flower, and the project now includes plans for a protective habitat. Ahmanson officials say the project will create about 1,700 permanent jobs and 500 construction jobs that would last throughout the planned 10-year build-out process. They also predict the project will generate more than $20 million in sales tax revenues for Los Angeles and Ventura counties and pump an additional $2 billion into the local economy over the next decade. Gnaidek spoke recently with Business Journal reporter Jacqueline Fox about the latest developments and how they impact plans to break ground in 2003. Question: Given the recent developments, is 2003 still a reasonable time frame for breaking ground? Answer: Yes, we are very confident that we are on track and ready to start this project sometime in mid-2003. Q: Ahmanson recently hired former U.S. Interior Secretary Bruce Babbitt to address opponents’ concerns. What kind of progress has he made so far? A: Mr. Babbitt has been extremely helpful to us by providing open dialogue with various environmental groups here in Los Angeles, like Heal the Bay, for example. He is helping to bridge gaps and identify the best way to explain the project and discuss it from the perspective of addressing complicated environmental concerns. Q: Critics have suggested Babbitt’s hiring was an indication that Ahmanson was starting to feel pressure from opponents. Has Ahmanson or WAMU ever considered backing out of the project? A: Absolutely not. Mr. Babbitt didn’t decide to come and help us because we called him up. He looked at the project very, very carefully and has helped us deal with some of the complicated issues involved, and we thought he could create a better form of dialogue for communicating those issues with the public. Q: Gov. Davis has authorized a statewide $2.6 billion parks bond vote. Would its passage take some heat off of Ahmanson Ranch regarding the objection environmentalists have to the potential loss of open space? A: I think it’s important to remember that the Ranch has appropriated 10,000 acres to a public trust, and that’s a design component offering the kind of space program we think is unprecedented. But we also think that the parks bond would address many concerns for open space programs in Los Angeles and areas adjacent to the ranch. Q: Is the estimated price tag for the project still around $1.2 billion, even with the number of mitigating projects Ahmanson has agreed to fund and the lawsuits it has had to defend? A: I would say yes. We are still pretty consistent with that figure. Many of the mitigating factors were plugged into the budget, so if the costs move a few million one way or another, they are already costs that are factored in. Q: Most of the more than a dozen lawsuits filed against Ahmanson since 1992 were unsuccessful in stopping development. How many are pending and how are they expected to impact development? A: There are no outstanding or pending lawsuits today. Q: A supplemental report dealing with the discovery of the spine flower and the red-legged frog will be released soon. You have said that another complete report is unnecessary. Why is that and what will the supplemental EIR show that the first one did not? A: (The supplemental) report, we believe, will address all of the new issues as they relate to the discovery of the spine flower and the red-legged frog. We don’t know exactly what is in the report because it is prepared for the city by Ventura County, so everybody sees it at the same time. And it’s Ventura County officials’ decision to decide what it will contain and what is needed to address any concerns that have come up since the original study was completed. And, the county has already determined that this report addresses any new environmental concerns. Q: This is being touted as a “model community,” with a variety of residential uses, including low-income housing. What makes Ahmanson Ranch a “model community”? A: What we have tried to do is design a project that encapsulates smart-growth principals. I think it is going to have a very strong identity for itself as a public place, but with all the components of a good mixed-use community. We have planned for some low-income housing and are trying to make it as collective and diverse an environment as possible. It has 23 different housing components ranging from apartments to one- to two-acre parcels, so we envision that it will be home to many diverse groups of workers and families. The lower-income units are actually at three pricing levels. At the bottom of the scale, a three-bedroom unit, which may be an apartment or a townhouse, would probably start at about $170,000. Q: What is the status of the dispute over opening up Victory Boulevard to allow access for construction crews in the near future and for residents down the road? A: I understand that there is a motion before the Los Angeles City Council to refer the issue back to the L.A. City Attorney’s Office for review of the legal boundaries, to give them an opportunity to understand all of the terms of Ahmanson’s rights to the easement. We are confident that those terms are going to hold.

MarketStorm LLC Core business: Branding and product marketing Revenue in 1996: $98,000 Revenue in 2001: $650,000 Employees in 1996: 1 Employees in 2001: 2 Goal: To develop brand recognition for MarketStorm and clients Driving Force Entrepreneurs in the technology sector who don’t always understand how to identify markets for their products Company that specializes in marketing technology firms finds it sometimes must tell clients they need to go backward before going forward The niche Nelson Dodge and his marketing firm, MarketStorm LLC, had carved out for itself before this year sounds like it would be enough to make a living off of: Take a small tech company and shepherd it and its new products to market. “I have been working with these little technology companies long enough to know a particular process for selling high-tech products,” Dodge said. But selling isn’t all that’s required, particularly when engineers at high-tech start-ups don’t always understand the marketplace value of what they’re working on. “I’m an engineer, my people are engineers,” said Mike Moldovan, CEO of G3 Nova Technology Inc. of Westlake Village, one of MarketStorm’s clients. “You have this great stuff you’re trying to sell and you don’t know how to do it.” G3 Nova is working on a new network load testing system, its first product. “Getting what I have out in a lot of magazines itself is not very helpful,” Moldovan said. In fact, that’s all Moldovan and the CEOs of some other companies with next-generation technology say they typically get from marketing companies looking for their business. Realizing that technology companies in one way or another still in their infancy need something more than simple exposure in the media, Dodge took on a new partner, Randy Troast, this year and began offering services to clients that, according to Troast, “extend further back in the product cycle.” That’s what high-tech companies like G3 Nova, ProBar Inc., Medea Corp., Dolphin Interconnect LLC, Coyote Network Systems Inc. and, in an earlier manifestation of MarketStorm, Xircom have asked it to do. For instance, ProBar was ready to move from a custom service-based business model to a product-based model, something its CEO, Rob Hobman knew little about. “We have a system-level product (bar code technology), which is hard to market,” Hobman said. “Identifying a market and getting to it are two different things.” Dodge said Hobman “didn’t have a product marketing infrastructure in place.” MarketStorm helped develop a brand, including a change of name for its primary product. Which is something Dodge did for Xircom as well years earlier, only in a grander fashion. “These guys (at Xircom) had recently invented something new that was well timed,” Dodge said, but MarketStorm came on board just weeks before a major COMDEX convention where their first product would be introduced. Dodge changed the name of the company (“The previous name, GMH Datacom, was useless,” he said.), developed a strategy and charged into COMDEX. “They were really just three guys in a room,” Dodge said, “but they came out looking very composed and much bigger than they were.” Last year, Intel Inc. bought Xircom for $750 million. Dodge said MarketStorm’s clients “are typically run by engineers. Their perspective on the world tends to be ‘better engineering.'” While those engineers may be absorbed sometimes obsessed with the technology they can spend years developing, that long period of gestation in relative isolation often leaves them with little awareness of what is actually going on in the marketplace. Troast and Dodge call what they offer clients “productizing.” Before they ever talk to a client about how best to market what it has to offer, they will first deliver a “whole” product audit, assessing whether the market is ready for what the company has and the likelihood of success. Dodge started MarketStorm in 1996. He did just fine marketing the kinds of companies he has been around most of his career but, he said, he felt he could take them only so far “forward” when, in some cases, they needed to take a step or two “backward” first. Troast spent the previous couple of decades at mostly small companies, managing software product development and marketing and sales teams. “Then I decided to make a full-time commitment to this,” Troast said. In MarketStorm’s first year, 1996, revenues amounted to $98,000. This year, he and Troast expect $650,000, mostly in fees from clients. And they expect to do for themselves what they try to do for clients: “We want to grow both our clients and MarketStorm into recognizable brand names, not just Nelson and Randy,” Troast said.

What could be sweeter than the sound of hammers and nails echoing through the corridors of neglected college campuses where trailers stand in for classrooms and just getting a parking space in the morning marks the start of a very good day? Well, the money to pay for those sweet sounds. And that’s exactly what all three of the Los Angeles Community College District’s Valley campuses are getting, thanks to overwhelming voter support in April of a $1.2 billion facilities modernization bond. In fact, all nine colleges in the district, the largest community college district in the country, are in line to receive Proposition A rehabilitation funding over the course of the next 10 years. And the money has already started trickling in. “The reality is this district has probably gone close to 40 years without any major upgrades,” said LACCD Chancellor Mark Drummond. “We’ve had bits and pieces here and there, but it’s a huge district, and many of the buildings are 50 years old or older. And when you haven’t invested in that kind of real estate in many, many years, you have to take drastic measures to bring it up to date.” Pierce College in Woodland Hills broke ground on a new $6 million student store and student services building earlier this month. That project is one of many planned for the campus. Pierce will get a total of $166 million of Prop. A funding to pay for classroom and library renovations, a new science/agriculture/nursing building, a new technology center building, a new parking lot, fences and the removal of trailers that have served as temporary sites for instruction and academic resource centers. Van Nuys-based Valley College will get $165 million to remodel its gymnasium to accommodate disabled students’ needs and pay for construction of a new library building, a media arts building and a new allied health sciences center. Mission College in Sylmar, the newest of the nine campuses, has already begun work on its new student services wing of the Instructional Building, one of several projects the campus plans to complete with its $111 million in Prop A funding. That project, expected to be completed by June of 2002, aims to double the amount of space available for student services including admissions, registration, counseling and financial aid. It will cost approximately $1.2 million. Future projects at Mission College include a new parking structure, media arts facility, child development center and a new police station and safety center. Mission College was originally established in 1975 and moved to Sylmar in 1991 after operating out of several temporary sites. The campus serves approximately 7,800 students a year. Its biggest struggle to date has been getting approval to expand on nearby property, some of which the district owns, some it does not. “That campus was never completed, so it’s sort of half a college,” said Drummond. “So most of the focus there has been on how to get enough land to build the facilities it needs. There are different ways to use the land we own, and some of it we will trade out. But one way or another, Mission has to have a larger footprint.” Misson College public relations director Eduardo Pardo said for now the campus is working on the assumption that all of the projects to be built with Prop A funds will go on the existing 22-acre site. “We are in the process of developing a master plan for all those projects to come, and it should be completed in about nine months,” he said. “It would be great to expand before these projects are completed, but it’s so iffy. The college has tried to acquire adjacent land in the past and those efforts haven’t gone very well.” The land is near a flood control project and partly owned by the Army Corps of Engineers. Drummond said the district intends to allocate approximately $446 million between now and 2004 to the nine campuses, and anticipates that a large percentage of the projects will actually be completed in less than the 10-year timeframe originally established. To ensure accountability, the district established an independent, 15-member District Citizens’ Oversight committee and separate Citizens’ Oversight Committees for each of the nine campuses. “None of this money is going to the administration or to the district,” said Drummond. “The language in the proposition completely isolates this money. There’s no way that anybody, including me, can get their hands on it.”

Largest Private Companies

Simi Valley-based electronics firm Celetron Inc. is getting a little bigger after it agreed to acquire the Camarillo-based EOS Corp. Terms of the deal were not disclosed. Celetron, which makes circuit boards and other components for electronic consumer and industrial devices, had raised $48 million in venture capital in May in an effort to expand its business. Celetron President Jay Tandon said the power supply manufacturer will be a good fit for his company. “This combination will allow EOS’s leading-edge products to be produced cost-effectively in Celetron’s world-class facility,” he said. EOS manufactures miniature power supplies that are used in communications, computing, medical and industrial markets, which Tandon said would complement his company’s electronic component production. TDK Mediactive Gets Financial Help Calabasas-based children’s computer game maker TDK Mediactive Inc. has hired the investment banking firm of Wedbush Morgan Securities Inc. as its financial adviser. CEO Vincent Bitetti said TDK is hoping Wedbush Morgan can help it return to the Nasdaq big board. After being de-listed because its stock price sank below the $1 level, the company currently is listed on the Nasdaq Over the Counter Bulletin Board. Last year, the company lost $3.3 million on $2.6 million in total revenue, compared to a $4 million loss on $4.6 million in revenue in 1999. ValueClick Acquires Mediaplex Westlake Village Internet advertising firm ValueClick Inc. has completed its acquisition of advertising software maker Mediaplex Inc. of San Francisco. The deal, worth $150 million in cash and stock, will give ValueClick access to Mediaplex’s Web-based applications that allow advertisers to create customized messages for online advertising campaigns. Mediaplex also provides media buying services, data capture and analysis, along with Web site visitor profiles. “The key to success from both a financial and technological standpoint is consolidation,” said Tom Vadnais, president and CEO of Mediaplex, who will keep his position and title once the deal is completed. Jim Farley, chairman and CEO of ValueClick, will head the combined companies. In 2000, Mediaplex lost $37.5 million on $63.6 million in revenue. ValueClick fared worse, losing $55.6 million on $56.7 million in revenue. Kutchaver Establishes Effects Firm Veteran visual effects expert Kevin Kutchaver, best known for his work on “Xena: The Warrior Princess,” has formed a new visual effects company, HimAni Productions in Burbank. Kutchaver, former president of Flat Earth Productions which created visual effects for “Xena,” “Hercules: The Legendary Journeys” and others, has partnered with veteran animator Kathy Zielinski to establish the firm. Zielinski, who will continue as animation supervisor for DreamWorks Feature Animation, will also specialize in designing and creating visual effects, Kutchaver said. Kutchaver recently completed work on the yet-to-be-released film “Tremors 3.” Among Kutchaver’s visual effects credits are “Star Wars: Return of the Jedi,” “Beetlejuice” and “Robocop.” Mickey Phones Japan Mickey Mouse wants to get Japan on the line sort of. He’ll be phoning Japan under a deal reached by the North Hollywood-based Walt Disney Internet Group and Japanese mobile telephone firm J-Phone Group, which will allow callers to receive downloadable images of Disney characters on J-Phone’s Internet-enabled cell phones. The agreement gives J-Phone customers access to downloadable logos, screensavers, e-cards and ring tones using recognizable phrases or words of Walt Disney characters like Mickey Mouse or Donald Duck. Mark Handler, executive vice president of Disney Internet Group, said the technology uses Disney characters to notify users of incoming calls or messages. Semtech Introduces Battery Life Extender Newbury Park-based Semtech Corp. has come out with a new component it says will reduce the battery drain on hand-held devices and portable laptops. The company says its new UR5HC703-700, which can also be used in keyboards and cell phones as well, saves power because it can power down when it is inactive, even between keystrokes. But when a key is pressed, the system powers up without losing any data previously recorded. Mike Alwais, Semtech’s director of Human Interface Devices, said the component, along with a similar device for infrared keyboards, will give product designers greater flexibility in future battery-powered devices. The patent on the proprietary protocol allowing the device to function is still pending. Digital Insight Introduces Loan Software Calabasas-based banking software maker Digital Insight Corp. has introduced new software designed to automate the loan application process at branches of financial institutions. “We’re bringing Internet technology into the branches,” said Robert Surridge, vice president of Digital Insight’s lending division. “Applying for a loan via the Internet has never been faster, easier or more personal.” DeskTop Lender permits loan officers at a branch to complete electronic loan applications via the Internet and then submit them to a so-called “decisioning” engine that evaluates the application against each financial institution’s loan policies. Surridge said most decisions can be made within 60 seconds. The AXIS DeskTopLender gives financial institutions the ability to increase their revenue by entering the consumer lending market without the costs of building and maintaining a mainframe computer to handle the loan process, Surridge said. Staff Reporter Carlos Martinez can by reached at (818) 676-1750 ext. 17 or by e-mail at [email protected]

Summary Business: Medical technology services Headquarters: Woodland Hills CEO: Robert Funari Market Cap: $758 million Dividend Yield: None* Total Liabilities: $299.4 million P/E: 25.0 Long-Term Debt: $230.9 million *Syncor does not pay dividends Slowdown? What slowdown? That could be the rhetorical question Wall Street is asking about Syncor International Corp. A third quarter that included three acquisitions also had a 25-percent increase in operating income (to $15.4 million) over the same period last year. For years, the Woodland Hills-based Syncor dominated the nuclear pharmacy services field. Then, four years ago it launched a diversification strategy that has focused on although has not been limited to the delivery of medical imaging services in both the U.S. and foreign markets. The results so far have included a growth in revenue, from sales of $381 million in 1997 to $629 million in 2000. Net income in the third quarter of this year was $7.8 million on $193.8 million in revenue, compared to a net income of $6.3 million on $155.5 million in revenue in the same quarter of 2000. Much of that revenue growth can be attributed to the acquisitions Syncor has steadily made over the last three years. In fact, two of those completed in the third quarter, InteCardia Inc. and Inovision Radiation Measurement, contributed $5.7 million in revenue in the same quarter to the pharmacy services side of the business. “Both acquisitions had positive profit contributions in the third quarter,” said CFO William Forster. The strategy that led to the acquisitions and corporate growth, of course, has included taking on more debt than the once small and relatively unambitious company was accustomed to in the past. Apparently, that has not been a problem for Syncor. “Their numbers are in line with what Wall Street is looking for,” said Mitra Ramgopal, an analyst with Sidoti & Co. LLC. “If you look at their balance sheet three years prior, their rate wasn’t as high. But with an acquisition story, to make those kinds of moves it has to incur debt.” In the quarter ended Sept. 30, Syncor had outstanding debt of $230.9 million, up from $128 million in the same quarter of 2000. At the end of fiscal year 1997, that figure was $17.3 million. Though Syncor’s acquisition strategy will continue into next year, it may do so more with available cash than by taking on debt. “I don’t think (debt balances) will go up significantly from what we have now,” Forster said. Syncor Executive Vice President David Ward said he did not anticipate any more acquisitions in the fourth quarter. Forster said the company will probably spend $40 million to $50 million on acquisitions in 2002 and about $50 million to $60 million on capital expansion. Ramgopal said, “I think you’re betting here on execution, that Syncor is going to make medical imaging a success.” Ramgopal and others seem to think it is a bet worth taking. Third-quarter earnings met analyst consensus estimates of 29 cents a share, up from 23 cents in the same quarter a year earlier. The consensus of First Call/Thompson Financial analysts calls for earnings of 32 cents a share in the fourth quarter, $1.40 for all of 2001 and $1.73 for 2002. Ramgopal said, “This has been a very strong management team that has consistently met or exceeded Wall Street’s expectations, at least as far as EPS is concerned.” Syncor’s stock closed on Friday at $28.84 a share. Its stock reached a 52-week high of $44.09 in April and a 52-week low of $24 last November. It closed on Sept. 10, the day before the attacks on the World Trade Center and the Pentagon, at $33.28 and maintained that level despite downturns in the stock market once it opened the following week.

Electronic Clearing House Inc. of Agoura Hills didn’t invent instant credit card approval and processing services, but it has developed software and electronics intended to make it more efficient. Even with machines to do most of the work, company CEO Jody Barry still relies heavily on the people who work at his six-year-old company. Nevertheless, at no time, he says, was he ready for the large turnover in his customer service department. It wasn’t simply an annoyance, the problem was clearly having an impact on the company’s bottom line, he said. It took his young daughter to help him come up with a solution he employs successfully to this day, Barry told Business Journal reporter Carlos Martinez. “We’re a service organization with a 24/7 customer service department and these are positions that are typically fielded by women, and we found that many of these women were single moms. Typically, from time to time, they’d have to go home and take care of family issues with their kids So we’d have this constant turnover. They’d realize that they couldn’t do their job and take care of their kids. “We didn’t realize what was happening at the time. I have a very outstanding daughter who was a very good soccer player and if she had a game, I went. So one day she said, ‘The only reason you’re here is because you’re the CEO,’ and it just hit me that, if it were somebody else, they’d have to beg their boss to get here. “We were forcing our people to choose between their jobs and their family obligations. So our whole focus had to change. We had to let the employees know that we supported them in their family life. We give up to four hours a month to go see their kid or go see them play basketball or whatever. Policies such as that make for a much happier family life and it makes people happier about going to work. “If people need additional time, they go to the HR department and they’re asked, ‘What’s going on in your life?’ We realize it’s unusual, but we’re very lenient and we try to help. If an employee says, ‘I have to go see my doctor,’ or ‘I have to go see my dad’ or your mother or son or daughter, it doesn’t matter. “During the summer, we hire the kids of single moms, between (the ages of) 13 and 18. They can work half the day and their moms don’t have to worry about them. They don’t have to run home because something happened. “These are things that are working for us and has helped keep a lot of our people.”

Experts are bracing for a rash of small business bankruptcy filings as the effects of the Sept. 11 disaster reverberate through the economy. In the San Fernando Valley, companies supplying airlines and those connected with tourism have already begun to feel the economic aftereffects of terrorism. But many say the problems are likely to extend beyond those industries as the economy continues its tailspin. Many of these businesses were struggling prior to Sept. 11. The horrific disaster and subsequent anthrax incidents may be enough to push many over the edge. Though the numbers do not yet show a significant rise in filings, bankruptcy attorneys say they’ve begun to notice longer lines at the U.S. Bankruptcy Court in Woodland Hills and they are getting more calls from clients asking, “what if?” “I think we’re just seeing the tip of the iceberg,” said Stephen L. Burton, whose Sherman Oaks law office specializes in bankruptcies. “Watch out a year from now.” Concerned that small businesses are especially vulnerable in a disaster, the Small Business Administration in recent weeks instituted a September 11 Economic Injury Disaster Loan Program, making loans of up to $1.5 million available to companies nationwide who were affected by the attacks. Just days after the program was announced, the agency’s western region offices in Sacramento had already received hundreds of inquiries from businesses seeking assistance. Closer to home, the Valley Economic Development Corp. has placed calls to many of its borrowers and begun trying to restructure loans to reduce the payments required. The agency has also requested that the federal government allow it to use money allocated to a Northridge Earthquake relief program for the current crisis. “Right now it is a little scary,” said Roberto Barragan, president of the VEDC. “Any business involved in retail, transportation or tourism is particularly scared.” Many small business owners finance their operations through credit cards. Even when business slows, they continue to borrow against their credit lines, and such borrowing had escalated well before Sept. 11, bankruptcy attorneys say. “The problem is things were not good before 9/11,” said Richard A. Brownstein, a partner at Tarzana-based law firm Wasserman, Comden & Casselman. “I have a sense that we haven’t seen the worst of it.” Through September of this year, Chapter 7 filings in the San Fernando Valley totaled 7,583, a .075 percent increase from the same period in 2000, according to figures compiled by the U.S. Bankruptcy Court. Chapter 11 filings are down to 53 from 71 last year. And Chapter 13 filings also declined to 1,624 from 1,729 last year. The pattern is pretty much the same throughout the Central District. Bankruptcy attorneys explain that the current numbers don’t tell the whole story. Many small businesses continue to borrow until their creditors cut them off, and they don’t seek assistance until these creditors begin legal proceedings. “If they’ve run out of credit, the (credit card company) calls start to come in for about four months,” said Burton. “By six months, it’s charged off and it goes to collection. Things go out to legal at about the one-year mark.” Some companies, especially those doing business with airlines, have already begun to seek assistance. A local company that services airlines found its payments cut off completely in the immediate aftermath of the attacks, according to the VEDC, which holds the company’s loan. The agency restructured the loan to reduce payments and the airlines have since resumed paying their bills, thanks to the federal bailout money they received, but Barragan points out that other businesses may not be so lucky. “This borrower has sales of about $20 million a year and handles a component that’s important to the industry,” said Barragan, who declined to name the company. “But any business with sales of under $100,000 could still be waiting for their check right now.” The pecking order of who gets paid first a larger company with a critical product or service is in a far better position than a smaller business with a product that’s not essential is not exclusive to the airline industry. That leaves small businesses least likely to be paid by customers caught in a downturn. Added to that, these companies often don’t carry insurance to carry them through hard times, they are typically undercapitalized to begin with and, unlike their larger counterparts who may have many options for trimming costs, they may have no wiggle room to make significant reductions in overhead. “Many small businesses are operating month to month,” said Rick Jenkins, a spokesman for the SBA’s disaster office in Sacramento. “They’re able to pay all their obligations, but it becomes tougher and tougher to put away for catastrophic events, and what took years to put together can be wiped out in a couple of seconds.” As a rule, a business surviving from hand to mouth can’t withstand more than 90 days if money stops coming in. And many of the companies that are now most vulnerable were already hurting before Sept. 11. “I had a few businesses that I was helping reorganize prior to 9/11 and they were in bad financial shape,” said Laurence Merritt, a Woodland Hills attorney who has handled bankruptcies for more than 25 years. “But if creditors had cooperated and given them some accommodation, we probably would have been able to turn them around. After 9/11 a bad situation became even worse, so a number of those clients have now filed Chapter 11.” Healthy businesses are not immune either. Hoping to capitalize on what seemed like a strong economy only a short while ago, one VEDC client pumped profits back into an expansion, only to find business dry up in the past month. “I spent all my money this summer to open a cappuccino bar,” said Shahram Kerameddian, the owner of Sean’s Caf & #233; in Venice Beach. “I bought a cappuccino machine, a grinder, I upgraded the electrical system and the business was good.” But sales from the new addition at Sean’s Caf & #233; dropped from about $100 to $150 a day to about $20 a day after the terrorist attack. Kerameddian, who had been able to pay his rent from cappuccino bar revenues alone this summer, has now fired three of his four employees, and he has stopped ordering his supplies wholesale. “I don’t order any big food anymore,” he said. “I get vegetables from the market and I go to Costco to buy burgers. If I order through companies, they bring boxes. If you have customers, it’s no problem. If you don’t, you have to throw it away.” Kerameddian is also working with the VEDC to get an SBA disaster loan to tide him over until Christmas, when he hopes the tourists will return to Venice Beach. Bankruptcy attorneys and others familiar with small business operations say that the strong economic climate of recent years convinced many companies to expand, and, now that the downturn is becoming worse, they are carrying more debt than ever. “Companies that are heavily leveraged are the ones that are most vulnerable,” said Merritt. “I’m sure there’s business being hurt (because of the sector they’re in) but the larger question to me is who is highly leveraged. You can have in the same industry one company with low overhead and the same business across the street with high rent and a lot of debt and the (low overhead) business should be able to get through.”

After two years of lackluster performance and a stock price that is 80 percent below what it was in the mid-1990s with little chance of recovering, Jerry’s Famous Deli is buying back its stock with plans to return to being a privately controlled company. “We always felt that the value of our shares was much lower than what we felt was the actual value of the company,” said Jerry’s CFO Christine Sterling. The company is nearing the end of a buyback program begun in September that, by this point, has left only 86,000 of its shares in the hands of public investors. Since September, the company has purchased 719,325 of 4.7 million outstanding shares for $5.30 a share at a total cost of $3.8 million. Nearly 4 million shares were already owned by founder Isaac Starkman and his family. Earlier this month, Nasdaq informed the firm that it would be delisted for failing to maintain the minimum $2.5 million public float, which is the value of shares owned by people who don’t have a significant stake in the company. Sterling would not say when the company would buy the remaining 86,000 shares, but said going private would give the company a chance to enhance its overall value. Sterling said Jerry’s is more likely to attract capital investment if it removes itself from a sometimes volatile stock market. Jerry’s stock has remained in the range of $5 for several months. Before it was delisted on Oct. 10, Jerry’s stock was trading at $5.10 per share, with a 52-week high of $5.34 and a 52-week low of $1.16. Doug Christopher, an analyst with Crowell, Weedon & Co., said the company’s move is in response to the slowing economy and its own struggle to maintain market share in a competitive restaurant market. “They probably feel that they’ll have better control of the company and possibly enhance its value. But it’s more a reflection of the overall bad economy,” he said. Sterling admitted business has been slow in recent months for the company. “Things are a little slow now, but we expect it to get better as we near December,” she said. Several former Jerry’s investors contacted by the Business Journal would not comment on the record. While the company’s initial public offering in 1995 allowed it to expand and increase revenues by nearly 70 percent in two years, its stock price has been dismal in recent years and has attracted little interest, Christopher said. Moreover, despite a slight jump in revenue in 1999 $70.8 million compared to $66.6 million in 1998 figures for this year are flat and only slightly ahead of last year, he added. In the company’s most recent quarter ending June 30, it reported $242,147 in net income on revenue of $16.6 million, compared to $79,706 net income on revenue of $16.3 million for the same period last year. For 2000, the company reported $1.4 million in net income on revenue of $69.6 million, compared to $910,000 in net income on revenue of $70.7 million in 1999. The company’s growth has slowed since the period immediately following its IPO when revenue jumped from $40 million in 1996 to $66.6 million in 1998. Christopher said the company’s flat numbers underscore the crowded and competitive restaurant business where much bigger chains have the advantage. Comparing Jerry’s to chains like Blimpie and Subway, which he considers its competition, he said, “A lot of people are not going to spend 10 bucks on a sandwich anymore, and that’s what it comes down to.” Christopher said Jerry’s stock never lived up to expectations, hovering in the $3 to $5 range since mid-1998, never returning to the $20 to $25 range of 1997. “I think they expected more from the stock than what it did,” he said. Analyst Robert Robotti of Robotti & Co. said Jerry’s net income and revenue remained steady in recent years despite a declining economy and the costs related to the company’s acquisition of Solley’s Restaurant in Sherman Oaks and the remodeling of its two Florida restaurants. Sterling said the company has been hurt by the stock market’s volatility in the past year, further depressing the value of the company’s stock. “So with this tender offer, we are maximizing the value of our company and in turn strengthening our company,” she said, referring to the $5.30-per-share offer to its public stockholders. Jerry’s Famous Deli was founded in Studio City in 1978 by Starkman and Jerry Seidman. Starkman purchased Seidman’s interest in 1984. In October of 1995, when the company had grown to five restaurants, Jerry’s went public with a $6-per-share IPO. Now a 10-restaurant chain with most stores in the Los Angeles area, the company has slowed its expansion by putting off plans to build a New York City restaurant and another in Las Vegas. One restaurant is under construction in the South Beach area of Miami Beach, but it is not scheduled to open until sometime next year, officials said.