A number of Valley companies whose stock is traded on Nasdaq are breathing easier since the tech-heavy exchange agreed Sept. 27 to suspend its minimum share price requirement for the next three months. Nasdaq said it’s waiving the rule requiring listed companies to maintain a closing price of least $1 a share after it became evident that some of the companies that make up its Nasdaq 100 index could face delisting. Among 101 Tech Corridor companies whose stock was trading below $1 last week were AML Communications Inc. and Accelerated Networks Inc. of Camarillo, Calabasas-based Right Start Inc., Franklin Telecommunications Inc. of Westlake Village, Vertel Corp. and Youbet.com Inc. of Woodland Hills and Iwerks Entertainment Inc. and Film Roman Inc., both based in Burbank. “It’s the right thing to do overall and, given the number of Nasdaq member firms that are in a similar position, it’s what they need to do,” said David Swoish, director of finance at AML Communications Inc. AML, which makes telecommunications amplifiers and components for wireless, defense-related microwave and fiber optic communications devices, was notified last week by Nasdaq that it met neither the minimum price requirement nor a requirement demanding that its net tangible assets be at least $2.5 million. The company, which would normally have 30 days to bring its stock price back to at least $1, will now have nearly three months to comply before the rule is invoked again on Jan. 2. AML’s stock closed Friday at 68 cents, with a 52-week high of $3.50 and 52-week low of 44 cents. David Weild, Nasdaq’s corporate client division director, said the exchange’s relaxing of regulations was motivated by both the recent economic slump and the Sept. 11 terrorist attacks. “We want to help companies get back to business and not have to worry about whether they’re meeting the requirement,” Weild said. PASW Inc. of Thousand Oaks ran into similar trouble a month too early. William E. Sliney, CEO of PASW Inc., which was delisted last week, said he wishes the rule change could have taken place much earlier. “We were in the process of delisting since August, so this rule change isn’t affecting us,” said Sliney, who is looking for a merger partner to recapitalize his company and eventually return to Nasdaq. “Everyone would prefer to stay in the national market, but these rules are very specific and unfortunately the rule change doesn’t do us any good,” he said. The company was cited by Nasdaq for failing to maintain a minimum $1 value on its stock for 30 consecutive trading days and for failing to have a minimum public float of $1 million over 30 consecutive trading days. The firm is now trading on the more obscure Nasdaq OTC Bulletin Board. PASW, formerly Pacific Softworks Inc., develops and licenses Web-based software and software development tools. Its stock closed Friday at 8 cents a share, with a 52-week high of $1.81 and a 52-week low of 4 cents. The news from Nasdaq was greeted with silence at online gaming company Youbet.com Inc., which was on the verge of being delisted from Nasdaq in July before rallying briefly. Its stock has again fallen below $1 in recent weeks. Officials there would not comment. Youbet closed Friday at 82 cents a share, with a 52-week high of $2 and a 52-week low of 30 cents. But Brent Zimmerman, vice president of investor relations for Westlake Village-based United Online Inc., formerly NetZero Inc., which also faced delisting for not meeting the requirement before the rule’s suspension, said Nasdaq’s action gives companies time to recover from a down economy. “It gives them a chance to start fresh,” he said. Netzero, which changed its name after its acquisition of Juno Online Services Inc. last month, was in the early stages of delisting when it took over Juno, a move that boosted its stock price from 90 cents a share to the current $3.03 a share. “The rule suspension doesn’t really impact us, but it means that our case is closed,” he said. Craig Shere, an equities analyst for Standard & Poor Inc., said the prospect of delisting strikes at the heart of a company’s future prospects and its finances. “Once you get delisted, the capital markets immediately dry up. There’s not going to be much financing that’s going to be available once you’re off the market,” Shere said. Besides the marquee value of being listed on the world’s second largest stock exchange, Shere said, in the past Nasdaq companies have basked in the reflected glory of some of its high fliers, such as Sun Microsystems Inc. and Microsoft Corp. A number of companies in the Nasdaq 100, including Metromedia Fiber Networks and At Home Corp., closed last week below the $1 minimum and were in danger of delisting. Mark Gunderson, a Nasdaq spokesman, said companies that are delisted then qualify for its Small Cap market or they may find themselves on the OTC Bulletin Board, which is generally not listed in most newspapers. Nasdaq is the only major stock market with a minimum stock price requirement. Tom Wyman, an analyst with J.P. Morgan Securities Inc., said delisted companies lose much of their credibility, status and even analyst coverage. Many large brokerage firms refuse to provide financing for delisted companies. But Wyman was unsure whether the rule suspension would merely prolong the inevitable or actually help companies bolster their stock value. Delisting is not immediate, but a rather long and protracted process that allows companies plenty of opportunity to avoid it, Gunderson said. Targeted companies are sent a so-called “deficiency notice,” sometimes giving them up to 90 days to comply with Nasdaq regulations. If a company still fails to meet minimum requirements, a hearing process could take as much as another 90 days, giving the company up to six months to boost its stock price above the $1 mark, Gunderson said. One tactic some have used to avoid delisting has been a reverse stock split, where the company asks shareholders to return their shares for fewer shares at a higher value, thus reducing the number of outstanding shares and boosting the stock price.

MRV Communications Inc. has bought back all the stock of its onetime spin-off, Luminent Inc., and will return it to the corporate fold, giving at least one tech expert reason for optimism about MRV’s immediate future. Chatsworth-based fiber optics maker MRV has agreed to buy back 11.2 million shares of its smaller subsidiary, Luminent Inc. The deal is worth $21.2 million. Luminent, a Chatsworth-based former unit of MRV, went public in November at $12 a share. Its stock price has dropped to $1.86. “Obviously, they’re seeing longer-term prospects for recovery that suggest holding on to the company,” said Jonathan Kramer, an independent telecommunications consultant based in Los Angeles. Noam Lotan, president and CEO of MRV, said Luminent’s value will be enhanced by what he characterized as a merger, giving it a better chance at recovering its declining market share in a down tech economy. “The business of Luminent will be better served when integrated into MRV,” Lotan said. “By applying MRV’s system level know-how, we achieve a higher level of integration of optical components and optical subsystems… thereby better supporting existing customers while creating new market opportunities.” Lotan said that, through the acquisition, MRV will enhance its competitive position by consolidating its operations and removing duplicate activities and eliminating inefficiencies. Kramer, agreed, saying the merged firms will be leaner and trimmer and ready to take on competitors when the tech industry begins recovering. “Purchasing cycles are a lot longer now, so we probably won’t be seeing reports of recovery hitting (MRV’s) quarterlies for a few more months,” Kramer said. Last week, Luminent announced that it would likely not meet its targeted revenue figures for the third quarter which ended Sept. 30. The company said it expects to earn $20 million to $21 million, well below its target of between $26 million and $30 million announced on July 23. Luminent cited continued low demand for products due to high inventories throughout the industry. Kramer said the return of Luminent to MRV and its other related businesses gives MRV a solid base to compete in a tough tech market. “Two of their units are focused on wireless solutions and MRV’s five business units, including Luminent, fit nicely together to provide connectivity solutions,” Kramer said. Kramer, like other tech analysts, expects the tech sector to begin recovery by early next year, though he admitted U.S. military action in the Middle East could throw all prospects for recovery out the window. As part of the deal, Luminent President William R. Spivey resigned and was replaced by MRV’s Lotan, who also assumed the post of interim CEO. Last year, amid a declining tech sector, MRV reported a loss of $153 million on revenue of $319.4 million, compared to a year earlier when it lost $12.9 million on $288.5 million in revenue. In 2000, Luminent reported a $65 million loss on $124.2 million in revenue, while reporting a $4.2 million profit on $65.3 million in revenue in 1999.

Summary Business: Insurance Headquarters: Woodland Hills CEO: Stanley R. Zax Market Cap: $450 million Dividend Yield: 3.9% Total Liabilities: $1.162 billion P/E: 93.4 Long-Term Debt: $58.4 million The insurance industry was just beginning to see the light at the end of the tunnel following regulatory changes in the late 1990s that lifted minimum pricing requirements for workers’ compensation coverage, essentially creating new competition in the marketplace and setting off a price war. The lower insurance rates coupled with an emerging economic decline took a toll on the industry as a whole, and companies like Woodland Hills-based Zenith National Insurance Corp. took deep financial hits during most of 2000. Now industry analysts are predicting that insurers’ losses on both workers’ comp and property-casualty claims resulting from the Sept. 11 terrorist attacks will be more than $35 billion, once comprehensive reports on company exposures are fully calculated. Despite the expected losses, experts say the workers’ comp insurers are well financed and can expect a swift recovery. But primary insurers with reinsurance subsidiaries will carry a large percentage of the losses, and Zenith is no exception. Because workers’ compensation claims represent roughly 90 percent of Zenith’s business, and roughly 90 percent of that business is in California and Florida, Zenith’s losses will come primarily on the reinsurance side. Following the attacks, Zenith executives said they estimate losses on reinsurance claims of between $4.6 million and $9.8 million in connection with the attacks, or 26 cents to 56 cents a share. Zenith’s stock, trading at around $30 just before the attacks, dropped to $27 when the stock market reopened Sept. 17 and hovered in the $26 range most of the following two weeks. On Sept. 28, it traded at $24.35 But Zenith competitor Chicago-based CAN Financial’s stock went from a high of $40.24 in June to below $24 following the attacks, and PMA Capital of Philadelphia went from a pre-attack high of $18.94 to $15.19 afterward. “I think Zenith has done better than others percentage-wise,” said Gary Ransom, an analyst with Fox-Pitt, Kelton in New York. “Many other companies have had far worse plunges ranging from 30 to 40 percent, so in the grand scheme of things the losses for Zenith have been pretty mild.” And preliminary fourth-quarter revenues indicate, while the industry was reacting to a slowing economy before the attack by raising rates and overwriting policies, Zenith remained conservative in both areas. For the quarter ending June 1, Zenith’s earnings were $2.9 million on revenues of $154.5 million, compared to a loss in the same quarter of 2000 of $19.6 million on revenues of $110.8 million. Ransom said he is predicting modest increases in earnings for Zenith in the fourth quarter. “I think they are relatively less exposed and they have a pretty good market yield of about 3.9 percent, which is attractive in today’s market of low interest rates,” Ransom said. Charles Titterton, an analyst with Standard & Poor’s in New York, agreed. He added that, though the brunt of the losses will be borne by the reinsurance operators, Zenith will probably not take too deep of a hit because its reinsurance “treaties” are based on an “excess of loss” tier system, as opposed to a pro rata percentage of total losses. “They have assumed reinsurance from various carriers for more than 25 years,” said Titterton. “But, because they have a conservative policy limit and keep their policy numbers limited to a modest percentage of their surplus, they are able to give loss estimates at below the $15 million mark. For others, that number will be much, much higher. I think even after paying out this reinsurance they will be modestly profitable for the year.” According to Zenith’s financial reports, premiums written in 2000 totaled $308.1 million, an increase of 15 percent over the previous year. Underwriting losses were $87.9 million in 2000 and $122.5 million in 1999. But even with projected losses for Zenith at much lower levels than many of its competitors, the damage in New York is expected to have long-term implications for the industry, which means that it could be several years before insurers including Zenith can say how badly they’ve been hit.

Westlake Village-based data storage firm Medea Corp. has sued its former chief technical officer, claiming he violated secrecy agreements and is now working for a competitor, marketing technology he developed for Medea. Michael H. Anderson, the defendant in the lawsuit, has countersued, claiming Medea actually took the technology from him and his current employer, Marina del Rey-based Huge Systems Inc. “We regret that Medea has chosen to compete against us in the courts rather than in the marketplace,” he said “We categorically deny the irresponsible allegations made against us by Medea and intend to vigorously defend ourselves and pursue our own very substantial claims against Medea.” Anderson told the Business Journal the dispute is really over money he says Medea owes him after he left the company because of a disagreement over merger plans. Medea’s suit, filed on Aug. 31 in the Los Angeles Superior Court’s Central District in downtown Los Angeles, seeks a preliminary injunction against Anderson and Huge Systems, along with unspecified damages and compensation. The company would not say how much money it lost due to Anderson’s alleged misconduct. No court date has been set. Anderson was an officer, director and chief engineer for Medea from May 1997 until he left in January 2000 to join Marina Del Rey-based Huge Systems Inc., which also markets data storage equipment and is also named in the suit for misappropriating Medea’s trade secrets and for allegedly engaging in unfair competition. In the lawsuit, Medea accuses Anderson of breach of contract, breach of fiduciary duty, breach of confidence, breach of loyalty and unfair competition. Anderson has denied all of the allegations. Medea spokesman Curtis Chan said company officials would not comment on the litigation. “The suit pretty much says it all,” Chan said. In the lawsuit, Medea accuses Anderson of violating a 1997 agreement that barred him from using confidential company information for personal use. The suit claims Anderson had full access to company trade secrets and other confidential information and used that information to develop, manufacture and market data storage systems similar to those developed by Medea. Anderson, the suit alleges, was hired to design and develop data storage information products, but eventually withheld those products from the company so he could market them under Huge Systems in order to directly compete with Medea. The suit also claims that Anderson and Huge Systems used Medea’s internal sales and marketing information to target and attempt to sell products to Medea’s customers and its distributors. Anderson denies any wrongdoing and claims Medea is using codes and design concepts owned by him, Huge Systems and his own consulting firm Open Storage Architects Inc. or OSA Inc. Medea manufactures multiple disk drive arrays for storing digital video, audio and data, along with a proprietary controller device that allows stored files to be transferred from one computer to another or from one storage array to another. Anderson and his current employer, Huge Systems, have countered with their own lawsuit against Medea, filed on Sept. 18 in the same court as the earlier suit, seeking to end Medea’s right to use OSA’s and Huge’s code and design concepts which, Anderson claims, are incorporated into Medea’s VideoRAID RT, VideoRAID FC, AudioRAID and StreamRAID product lines. Anderson is seeking unspecified damages and payment of nearly $1.5 million representing what he claims is the value of the 1.7 million shares of stock he sold back to the company when it merged with Storage Concepts Inc. of Tustin on July 24. Both sides agree the market value of the Medea stock is about 85 cents per share. “On the day that I was supposed to get paid, I got a lawsuit. I don’t think that was a coincidence,” he said. In his countersuit, Anderson contends that Medea made false statements when it claimed Huge Systems was relying on Medea’s technology for its products. Anderson claims it is Medea that is using technology developed by Huge Systems and OSA. Medea officials would not comment on Anderson’s allegations. Medea was founded in 1996 by Stuart Mabon, former founder of Chatsworth-based Micropolis Corp. Medea, with estimated annual revenues of $25 million, has developed data storage products used by video editors, computer game developers and others to store and manipulate their large data files. Huge Systems was established in 2000 by venture capitalist Tina Bow. Revenue figures for that company were not disclosed.

Chuck Boppell Title: President and CEO, Worldwide Restaurant Concepts Inc. Age: 59 Education: B.A. in Economics from Whitworth College, Spokane, Wash. Career turning point: While he was in high school, his dad lost his clothing manufacturing business and Boppell turned to the restaurant industry to put himself through school. Personal: Married, three children, six grandchildren Most admired person: Andy Pearson, former president of PepsiCo. “He cut to the things that were important and didn’t deal with the things that weren’t important.” Chuck Boppell came out of retirement with a new recipe for Sizzler. He’s been stirring things up ever since Two years ago, Chuck Boppell cut his retirement short and returned to the restaurant business. He missed the pace, the people and the way that success and failure can be measured almost instantaneously by customer reactions and sales. So in 1999, Boppell took the reins of Sizzler International Inc. If it was a fast-paced, changing environment he was after, one might argue Boppell got more than he bargained for. In his first two years as president and CEO, Boppell has presided over the company’s return from a Chapter 11 reorganization completed in 1998; engineered an $11 million remodeling and repositioning effort for the company’s Sizzler restaurants; commandeered the acquisition of a new chain, Pat & Oscar’s; and seen the company through an E. coli outbreak that resulted in one death, many illnesses and a number of lawsuits. All the while he has been charged with boosting flagging sales, earnings and poor stock performance. In the first quarter of its 2002 fiscal year ended July 22, Sizzler’s net income dipped to $1.7 million, or $.06 per diluted share, on revenues of $61.3 million. That compares with net income of $2.9 million, or $.10 per diluted share, on revenues of $54.7 million in the same period last year. Shares have recently been trading around $1, down from more than $2 a year ago. Despite the lackluster results, Boppell, who formerly held positions as senior vice president of operations for Pizza Hut and president of Taco Bell before those companies were sold by PepsiCo Inc., believes the company is inching toward a turnaround. Sizzler now operates or franchises some 344 restaurants worldwide under the Sizzler brand and is the exclusive franchisee for 107 KFC restaurants in Queensland, Australia. Earlier this year, the company acquired San Diego-based Pat & Oscar’s, an upscale, casual dining chain. And the company is expanding its Sizzler chain internationally. In August, the company changed its name to Worldwide Restaurant Concepts Inc. to reflect its broadening business base. Even its headquarters is about to change, with a planned move from Culver City to the Sherman Oaks Galleria in November. Question: What does the name change reflect about the direction of the company? Answer: We felt (the name) Sizzler International didn’t give enough credence to the other divisions, and we expect Sizzler to be a strong division but not the predominant division over the long term. So by naming it Worldwide Restaurant Concepts, it more appropriately reflected our present position as well as our future growth. Q: Where will your future growth come from? A: Each division has its own growth strategy. We’ll probably add another four to (the KFC chain in Australia) this year. And we’re also growing the Sizzler chain in Asia. On the Pat & Oscar’s side, our growth strategy is to use (San Diego) as our base and push out from that so people know who we are before we get to the market. So we’ll probably fill out 90 percent of the San Diego market this year and then we’ll be more aggressively pushing up into Orange County where we now have three restaurants and then San Bernardino, Riverside and then into L.A. County. Q: Sizzler has been around for more than 30 years. How can you keep it fresh? A: This past year our emphasis has been on getting away from the volume feeding and getting into quality and value, so we’ve taken the idea of a buffet restaurant and gone to a grill concept that has a great salad bar. We significantly upgraded the quality of our beef and, by putting in charbroilers and different cooking techniques, we think we deliver as good a steak as you’ll find in any comparable restaurant. Q: What has impacted the financial performance? A: Eighty percent of our company-owned restaurants are in California. And California has been pretty hard hit with the increase in gas prices and utilities. When you look at our average guest (at Sizzler), we’re in the mid-scale some people might say more blue-collar neighborhoods, and when you add $100 to $200 a month to someone’s utility bill, it’s a significant hit. So yes, we’ve seen a deterioration from that. Q: Why did you acquire Pat & Oscar’s? A: With the aging of the Sizzler facilities you have more blue-collar neighborhoods that don’t have the traffic patterns they had when they were originally built. On the Pat & Oscar’s side we’re brand new and it’s in an upscale neighborhood, so it draws different people. I would say in general they’re younger, they’re more affluent, they tend to be more mobile. Pat & Oscar’s serves products that travel well. As much as 50 percent of the volume in any restaurant is outside that restaurant in the form of delivery, pickup, catering luncheon meetings for businesses. Primarily, their menu features pizza, chicken, ribs, and so we’re running exceptionally good numbers out of small spaces. Q: What are the expansion plans for Pat & Oscars? A: When we bought it, it was eight (restaurants). It’s now, as of this week, 12 restaurants. By the end of our fiscal year which is May, it will be 15 to 16 restaurants. Our plan is to open 30 to 50 percent of the base each year, so we would be adding five to six restaurants a year in the near term. Q: How did the E. coli outbreak at Sizzler in the Midwest last year impact the company’s performance? A: It influenced our sales, there’s no question, because there was publicity and people are fearful. I guess the good news would be that we were insured, that it won’t financially impact us long term, but it does affect your sales trends until people become comfortable that you’re a safe place to eat. And we’ve taken the steps to correct that as far as safety and food handling. Q: What were some of the things involved in making the decision to move to the Valley? A: We wanted to stick close enough to this location that we wouldn’t lose valued employees, but at the same time we wanted to have enough flexibility that we could find the best deal for our shareholders. It was a combination of the facility out there being new and the support services around it that made it attractive, along with the number of employees that worked here that were driving over Sepulveda Pass. Our expectation was that if we did it correctly we would lose a relative small percent of our staff. So we’ve done things like flexible work hours, flexible workdays, a van pool with multiple pickup points. Q: What is it that you find so appealing about the restaurant business? A: The best thing about the restaurant business is you see almost immediate results either in the faces of your guests or in your sales. This is capitalism at its best. Every day people tell you whether you’re competitive or not.

THE BOSS’ MANAGEMENT STRATEGY Entrepreneur Larry Sherman sold the third successful company he had founded in 1997 and quickly got started on his fourth, Encino-based Nations Capital Group, to factor receivables for health care providers. That seems a far cry from the first business Sherman started shortly after finishing business school at the University of Illinois: the Sherman Corp., which handled voice verification for telephone transactions at the Chicago Stock Exchange. With that experience, he founded Audio Magnetics, which manufactured similar equipment for police and fire departments. An acquaintance with that technology led to Advanced Radiology, which eventually became Statewide Radiology with a network of 150 MRI. With the opening of the first Nations Surgery Center in Encino in March, Sherman’s company has moved into the business of providing outpatient surgical services, mostly to workers’ compensation clients. With each company he has started, Sherman said, obstacles he never anticipated have surfaced. His most recent experience is no different, as he told Business Journal editor Michael Hart. “One of the greatest challenges I’ve had is the risk of building state-of-the-art surgical facilities in the face of declining reimbursement and in the face of potential legislation that may reduce reimbursement in the future. You’re putting millions into technology not knowing what your reimbursement will be. “To justify the risk, I hired a lobbyist. There was pending legislation that would have reduced outpatient fees tremendously. Our lobbyist was successful. Once legislators understood that this is a great benefit to California, I was able to fend of fee schedule cuts and, in fact, increase the fee schedules. “Once we knew pending legislation was off for a few years, we could go ahead and build. 1999 is when I started and we opened our first center in March 2001. What I needed to do was catch the ear of the people trying to consider certain types of legislation. “It costs a lot of money to build state-of-the-art technology and every year you’ve got to upgrade it. We have to continue to make speeches and get the word out to businesses that want to reduce the cost of health care, to make sure the legislature does not implement fee schedules that would make centers like ours unfeasible. “So far, we’ve been successful.” Have a Story To Tell? Please write to Editor, The Briefing 21300 Victory Blvd., Suite 205 Woodland Hills, CA 91367 (818) 676-1747 (Fax) Or e-mail us at [email protected]

Most San Fernando Valley-based hotel operators say they are holding off on slashing room rates and implementing layoffs, but concede the attacks of Sept. 11 seriously sunk room occupancy levels, particularly in corporate travel categories. The hotel industry was already feeling the effects of a sluggish economy and declining tourism industry, but was preparing for its typically robust fall corporate convention season to help boost occupancy rate levels when the attacks occurred. Kathy Sheppard, vice president of corporate communications for the Beverly Hills-based Hilton Hotel Corp., said the company doesn’t publish occupancy rates, so she couldn’t quantify the drop for either the Burbank Hilton Hotel or the Hilton Universal City Hotel. Sheppard did say the Burbank and Universal hotels have received significant numbers of cancellations from guests planning to attend conventions, but most of those were for events planned in the latter half of the fourth quarter. “We’ve seen a lot of cancellations among individual business travelers for the short term,” said Sheppard. “But we don’t know what is going to happen in the long term because typically transient customers make their reservations between 24 and 72 hours of their stay. “So we think we are going to have a few crummy weeks and are looking at bouncing back again in about eight to 10 weeks; and that’s system-wide.” Sheppard said there will be staff furloughs at most, if not all, Hilton Hotels over the next few weeks, but until the company ascertains where the deepest declines in occupancy rates are, she couldn’t say where layoffs may hit. Hilton President Stephen F. Bollenbach said last week the publicly traded company would not meet Wall Street earnings forecasts for the fourth quarter, which had been put at 16 cents a share. He also said Hilton was putting on hold two new projects, one in Las Vegas and the other in Orlando, but would continue its planned $235 million renovation and expansion program for company-owned hotels. Sheppard said neither of the two Valley-based Hiltons were offering any special promotions or planning to slash room rates to attract more business. Occupancy levels at the Holiday Inn Warner Center for the month of September dipped by 8 percent over the same month last year, according to hotel general manager Shelley Buster. Those declines, said Buster, are mostly corporate cancellations and came primarily from international clients. “We have one operator that we work with that every year books a large corporate group for us here from Tel Aviv,” said Buster. “That group has cancelled, but for the most part those reservations we already had on the books are holding. So, while the drops aren’t expected to effect us long-term, we are being cautious because, remember, we had already seen a decline in our business travel sectors because of the economy.” Room rates remain unchanged and, so far, no layoffs are on the table, said Buster. John Duel, manager of media relations for the Los Angeles Convention & Visitors Bureau, said his agency would release a report later this week that will break out a region-by-region snapshot of the damage done to hotel occupancy rates over the last three weeks. Duel said occupancy levels for the month of September in 2000 were at 79 percent at most hotels in the San Fernando Valley. He said this year’s occupancy levels were already averaging about 4 percent below last year’s rates due to the economy. Analysts have predicted the attacks are likely to knock those figures into the 20- to 25-percent range. Wolf Walther, general manager of the Sheraton Universal Hotel, said occupancy levels fell to 30 percent the week of the attacks but are now climbing up toward the 50 percent levels. He said he met last week with Universal Studios executives to discuss promotions and special packages to generate business. “We had been a hotel that was very positive in relation to what was going on with the economy,” said Walther. “But this was very damaging to our occupancies, although they are very slowly improving and we haven’t really had any major cancellations.” New York-based Starwood Hotels & Resorts, which owns the Sheraton hotel chains, launched the first of 10,000 layoffs last week after reporting occupancy rates of as low as 30 percent following the attacks. The general aviation industry is still taking a beating because of on-going FAA restrictions on flying for non-instrument-trained pilots. But the new security measures at LAX and other commercial airports are helping to prop up the charter flight industry in and out of Van Nuys Airport, considered the world’s largest general aviation airport. That alone has helped bring occupancy rates at the Airtel Plaza Hotel at Van Nuys Airport back to near-normal levels after dipping to between 50 and 60 percent of normal the week of the attacks, according to the hotel’s owner, Jim Dunn. Dunn added that his hotel has remained relatively isolated from the damage being done to other hotels because his is not a large corporate convention facility, and the hotels that are likely to take the deepest hits are closer to downtown Los Angeles and Valley-based theme parks and tourist destinations. “Interestingly enough, the charter business is up because corporations see the benefits when you take into consideration all that is going on at commercial airports,” said Dunn. “So, as a result, room occupancy levels for our hotel are almost back to normal, or, let’s say, they are back up to acceptable levels now. There has been some shrinkage because we had some substantial numbers of Asian and European tours cancel reservations, but they are recovering.” Dunn did say the Airtel Hotel is laying off three workers, but that was planned before the attacks. He is not offering any special room rates nor is he planning any further cutbacks.

EurOrient’s CEO Is Looking Closely at What It Will Take to Conduct Business on a Global Basis Now Life used to be easy for Ron Nechemia, at least as easy as it can be when you run a global company involved in financing $10 million to $1 billion transactions all over the world. To be sure, EurOrient Financial Group, a company that helps businesses and governments secure debt and equity financing for infrastructure projects like power plants and roadways in emerging countries, deals with a complex network of governments, corporations and ventures. But from where Nechemia, the company’s co-founder, chairman and CEO, sits, the world was relatively predictable. That changed on September 11, 2001. The catastrophic attack on the World Trade Center that day raised questions and issues about multinational businesses that even Nechemia, used to working in the global arena, had not considered before. It will take months, if not years, to answer many of them, Nechemia believes. “This is a new era of world terrorism,” Nechemia said in an interview at EurOrient’s Encino headquarters. “I don’t think we can see precedent for this type of event.” In the near term, EurOrient has already moved to make some operations more secure for its employees. Travel arrangements now must go through the company’s security department, an effort designed both to keep better track of a staff that operates from locations as far flung as China or Bolivia, and keep workers out of harm’s way. The company is taking a closer look at the way it backs up computer data, reviewing its health insurance coverage outside the U.S., revising its liability coverage and giving thought to carrying insurance against kidnapping. But even these steps don’t begin to address the issues businesses are likely to grapple with in coming months and even years. “There have been, for time immemorial, obstacles to international investment,” said Mehran Kamrava, associate professor of political science at Cal State Northridge. “The business environment, the government environment, problems of cross-cultural communication, and this adds another element. I don’t think we’ve seen the full consequences by any means.” Will the attack hasten a recession that many think was already underway? Will investors back away from projects in emerging countries fearful not only of the financial risks but the potential danger to employees charged with overseeing the projects? “I think it’s going to be very hard to funnel new money to exotic places, and I think (investors) are going to spend more time watching the money they have out there, seeing if it’s safe and seeing if they can get some of it out,” said Jonathan Aronson, professor of international relations and communications at the University of Southern California. Ironically, many of the obstacles to globalization were just beginning to clear for investors and companies like EurOrient in recent years. When the firm was founded in 1988, few governments in emerging nations were willing to accept private investments from foreign companies. But by the mid-1990s, many of these governments, facing staggering debt, began to embrace privatization. “After 1997 the company got a huge volume of work,” said Nechemia. “Emerging companies found out their debt to equity was so high they were insolvent, so they came to us and asked us to bail them out.” EurOrient’s debt financing projects, once numbering a handful a year, grew dramatically as a result, and in 2000, EurOrient launched its first private equity fund. Today, the company’s financial transactions involve infrastructure projects totaling more than $15 billion. In addition to power plants and roadways, the company is involved in oil and gas, telecommunications and mining and minerals in 50 countries spanning Asia, Latin America, Central and Eastern Europe and Africa. Nechemia and some 115 financial professionals around the globe have learned to navigate the political, cultural, economic and bureaucratic idiosyncrasies of each of the countries in which they are involved, often establishing close relationships with the governments and becoming intimately familiar with danger zones. Shortly after the murder of the Nepalese King Birendra and other members of the Royal Family, high cabinet officials were on the phone directly to Nechemia. ” ‘Don’t worry, everything will be OK,’ they told me,” Nechemia recalled of the events this summer. When EurOrient employees travel to the Philippines, they are not permitted to take taxis from the airport because of the risk of kidnappers and their intelligence-gathering expertise. “They know how much is in your bank accounts,” said Nechemia of the kidnappers. “If you tell them you have no money, they will laugh at you.” But the events of Sept. 11 have tested even his expertise. “We were of the belief that these terrorists could not go to the Western world and live as part of the society because (their beliefs) would deteriorate,” said Nechemia. “In the West Bank, blowing yourself up is holy. But if they lived among us and became an educated part of society (we thought) it would be different. They have education and they still can do it.” Some wonder whether the enthusiasm for global investments will be dampened now that terrorism has moved from being a local threat to the international stage. The Mideast, which has been slow to integrate into the world economy, has never accounted for a great deal of foreign investment – $5 billion in comparison to $64 billion in a segment of Asia and the Pacific according to Kamrava. But even areas like China could see a slowdown. “So much of the world economy does depend on the U.S. economy, and it’s looking like there is a recession, so that is causing hesitation,” said John Odell, professor of international relations at USC. “But I don’t know. I think it’s a temporary problem because of the uncertainty.” Nechemia insists that global investment will continue unabated, even in countries like China which are still grappling with political problems, in part because the opportunities there are too great to overlook. Other emerging nations with rich mineral reserves like Africa with its petroleum fields will also prove an opportunity too lucrative to pass up, Nechemia said. “Petroleum fields, to the best of my knowledge, are not in Beverly Hills,” Nechemia said. “Petroleum can take you to places not very desirable, but people will go there.” But even if global terrorism does not deter investment, it will make investors, and companies like EurOrient who assist them, more vigilant, Nechemia said. EurOrient employees had not, in past years, been permitted to fly single-engine airplanes or local airlines because the company believed they were not safe. Now, all flight arrangements are being routed through the security department, so that risks can be evaluated on a case-by-case basis, taking into account not only the conditions in the country in question but also the passport under which the employee is traveling. The company has gone back to the drawing board to consider new ways to back up computer data in the event that a server is wiped out. And perhaps most daunting, Nechemia wonders about how to protect the company’s human resources. As many as 100 people may have perished at Fiduciary Trust Limited, a company located at the World Trade Center with which EurOrient does business. “Do you know what it’s like to recruit 100 people? I don’t even want to think about recruiting a VP,” said Nechemia. “We’re talking about such a huge amount of people serving the backbone of the U.S. economy. To me, I can say that’s the biggest loss of all.” Although many companies have established single, flagship offices to promote operating efficiencies along with the firm’s image, Nechemia has resolved never to do so. “I’m not comfortable having all our employees in one giant building,” he said.

The L.A. New Times was one of the few weekly publications around that did not drop everything it was preparing on Sept. 11 to make way for coverage of the attacks in New York and Washington D.C. The New Times has an earlier deadline than many weeklies but, more importantly, editor Rick Barrs said, “We just figured, ‘What can we say that wasn’t going to be said?'” To a certain degree that makes sense, although it was a contrarian view. Most newspapers, regardless of their coverage area, rushed to get something into print. Some did better than others. In the first few hours of Sept. 11, I felt the same way Barrs did. It was not clear to me just how significant events were, after years of seeing one news story sweep into our consciousness only to be quickly replaced by another. I wondered how much it would mean six days later, when most of you would receive the next issue of our paper. Naturally, we did drop our original plans for the last issue and moved on to other things once reality began to sink in. But I wonder now if it makes any difference? The truth is that business and business journalism, in three quick weeks, has changed drastically and I’m still not sure any of us – neither those of us who report the news nor those of us who read it – really understand that. A few weeks ago it was enough for us to write about plans for a big box store to move into Fallbrook Mall or to empathize with those who might have bought shares of Homestore.com or NetZero at the top of the market. In this space, I was often lured into writing some version of the things-look-grim-now-but-wait-’til-the-first-quarter-of-next-year! pep talk. All of that seems a little foolish now. Indeed, life goes on, and I hope that is reflected in our pages. This week, for instance, along with a package of stories about the impact the attack is having on the local travel industry you will find one about plans for AMC Entertainment to build a new 16-screen theater in Burbank. There is a story about how an Encino-based company that finances major infrastructure projects in emerging countries expects the way it does business to be changed forever, but there is also a story about a fellow who has made a career out of selling surplus film stock in Hollywood. And as the weeks go by, I expect you will see more stories from us about the immediate local impact of the attacks, their repercussions and whatever form a war to combat terrorism takes. But what about after that? Given that more than 6,000 people died in one morning in an attack on the United States, how important, for instance, is it if people who live in Tarzana or Arleta wind up citizens of Los Angeles or some other city? There is an impulse to make sure we keep things in perspective. And there is the impulse to make a concerted effort to return to something we call normal life. These days, the two don’t necessarily coincide. So what will papers like the San Fernando Valley Business Journal write about in the months to come? I think there is probably a short-term answer for that, and a very different long-term one. In the short term, the news will be bad. In past weeks, you have read here and elsewhere that the two pillars propping up the economy were residential real estate and consumer spending. Both of those have taken a nosedive in the past couple of weeks. (And why shouldn’t they? Despite the misguided attempts by political leaders to make us believe that spending money now is a form of patriotism, a shopping spree in this atmosphere feels as wrong as using your Visa card to buy groceries does.) Real people will lose their jobs. Companies will restate their earnings projections downward. Projects and business plans in the works will be halted. In the long term, the news will be good – but different. My guess is everything that has been “fun” about the business world will be over for a while. In the last 20 or so years, stories about individuals who had ideas, worked hard to put them into action and then profited enormously as a result have become part of a new folklore. So have the cautionary tales of individuals who got too far ahead of themselves and ended up in inglorious heaps. We will have new stories to tell, new myths to cling to. If it is true (and this is not a foregone conclusion) that we are, as a nation, preparing to go to war with somebody in a way we have not since World War II, a time before some of us were even alive, many of the things we have cared about will no longer matter. My whole life, it seems, my parents have told me about what life was like during World War II. Boys (always boys) went off to war. Girls and families stayed at home and collected scrap metal for the war effort, ate rationed meat, worked in defense plants, put off plans they had “before” with confidence they would resume “after” the war. They describe those as “great times,” but much different from the “great times” we have had more recently. If that experience really is any indication of what is ahead, business in the next few years will focus less on individual accomplishments and more on collective contributions to a national goal – something that does not sound all that farfetched to those of a certain age. But it is a foreign concept to those of us who have lived and worked in the so-called New Economy most of our lives, so foreign it is hard to believe it’s all really happening. Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].

Largest Hospitals