By WADE DANIELS Staff Reporter Three and a half years after the Northridge earthquake, numerous Valley homeowners and building owners still await their day in court against their insurance companies. Around 10,000 of the roughly 390,000 claims resulting from the Northridge quake have not been settled, according to the California Department of Insurance. The resulting lawsuits primarily allege underpayment of claims, including allegations of fraud by insurers. “In most cases, a homeowner was either offered too little money to fix the damage or the damage wasn’t discovered until some time after the quake,” said attorney John Quisenberry, whose Century City firm, Quisenberry & Barbanel LLP, is handling about 40 suits against insurance companies, most of them filed by Valley property owners. “In some cases, the insurers have apparently acted in bad faith.” Such is the basis of a suit filed by an association of homeowners at the Park Northridge condominium complex against Farmers Insurance Group. The plaintiffs say that Farmers guaranteed a certain level of coverage when the 195-unit condo complex bought its policy, but received a lower level of payment after the quake. Farmers has paid the condo owners about $15 million in damage claims, but the suit is seeking about $5 million more, according to Quisenberry. The case, set for trial in Los Angeles Superior Court in October, alleges Farmers guaranteed to pay for damage to the foundations of the complex’s buildings, as well as to pay for re-stabilizing the dirt fill beneath, and then reneged. It also accuses the insurer of rejiggering the deductible level after the earthquake. Earlier, Farmers had refused to pay for damage to the interiors of the condos, said Quisenberry, who obtained a certified copy of the policy and pointed out that it stipulates that interior damages are covered. Farmers representatives did not return phone calls last week. The structural damage at the Park Northridge complex is mostly fixed, he said, but many of the homeowners are still living in damaged units and have taken out $3 million in loans to help pay for the repairs. Lawyers and representatives of homeowner associations say there are many instances where families are unable to live in their homes as they pursue litigation against insurers. Bill Sirola, a spokesman for State Farm Insurance Cos., said “99.9 percent” of the roughly 120,000 claims from the quake have been settled, but that the company reopens five to 10 claims cases per week from people who discovered that their property is more damaged that originally assessed. Of the 390,000 claims, insurers have paid out on about 260,000 cases, while the rest were deemed to have damages below the deductible. Several lawsuits allege that insurance adjusters concocted artificially low damage assessments. Teri Diamond says that happened to her when she filed a claim for damages to her Granada Hills home. Diamond said that about a week after the quake, an adjuster from 20th Century Insurance Co. came to the house and seemed to give it a thorough examination. A week later, another adjuster came to the house, told her that the previous inspector was no longer with the company, and spent very little time arriving at what she later thought was a woefully low settlement. The repairs, according to Diamond, involved removal of her home’s asbestos insulation, as well as structural damage. “We hired structure specialists and other experts who say that 20th Century owes about $230,000,” said Diamond. “They’ve paid about $70,000.” Diamond and her husband have filed a suit seeking what they believe to be full payment, as well as punitive damages. Rick Hill, a spokesman from 20th Century, would not comment on Diamond’s case, but noted that of the 46,400 claims filed from the Northridge quake, only 400 remain unsettled. As for the instances of policy holders discovering additional damages in the years after the quake, Hill said the company is skeptical about the veracity of such claims. “It’s funny that we had a much stronger earthquake in 1970, but every time somebody finds damage to their foundation it means it happened in 1994,” Hill said. Lawyers such as Debra Wegman concede that the majority of quake claims have been settled in good faith. But some of the cases considered “settled” by the insurers have not been resolved to the satisfaction of policy holders. “Some of the people who were told their damages were below the deductible eventually figure out that this wasn’t the case at all,” said Wegman, an attorney with Westwood-based Mazursky, Schwartz & Angelo. Whatever the current numbers of quake-related lawsuits pending, Wegman believes their numbers could soon grow in light of a few recent high-profile settlements. For example, in early August, a South Central Los Angeles couple was awarded $7.74 million in a jury judgment against Farmers Home Group, which is not affiliated with Farmers Insurance Group. The jury decided that the company acted in bad faith when it told Leon and Mittie Robbins that the damage to their home was below their deductible. The judgment included $7.6 million in punitive damages. Wegman said there are thousands of insurance policy holders who, upon hearing about such awards, may be “waking up” to the possibility that they were not dealt with fairly. She explained that insurers sometimes disagree with policy holders over the deadline for filing claims. While many insurers, including 20th Century, State Farm and others, say a claim must be filed within a year of the quake to be valid, some lawyers and policy holders contend the cutoff is a year from the time the damage is discovered. “We know of two to three thousand people who were told they filed claims after the time limitation passed,” Wegman said, “though they actually were not informed correctly about their rights.”

With earthquake insurance prices on the rise and a reported drop in policy purchases in the San Fernando Valley, fingers are being pointed at the California Earthquake Authority, which offer less coverage at higher prices. The authority was formed last December after private insurers demanded a rollback in their liability for earthquake damages following the 1994 Northridge quake. The Business Journal Forum asks: Do you think earthquake insurance is worth purchasing? Jack McGrath Owner GM Communications No. I think the chances of another quake coming are small, and I’d rather save the premium dollars now and be a little more of a gambler. I think quake insurance is outrageously expensive. David W. Fleming Chairman Economic Alliance of San Fernando Valley Well, I think it depends on the location of the property. I, for example, don’t have quake insurance in L.A., because we’re up in the mountains, but I do have it on my home in the desert. It depends where you’re located. Mike Garfinkel Vice President Asbury Communications Absolutely not. If there is a huge earthquake, all of the insurance companies will go out of business and no one will be paid. If there’s a small earthquake FEMA will cover some of it. It’s definitely a waste of money. Steve Weber Spot Shop Editorial I purchased it right after the earthquake, but I don’t have it anymore. I can’t afford it now. It wasn’t terribly expensive, but it’s a tough decision. If you have an extra thousand dollars, it’s worthwhile. In today’s market, when you’re putting kids through school insurance seems like a luxury. Randi Loeb Calabasas Homemaker I do. We had earthquake insurance in Van Nuys at the time of the Northridge quake. It was worth it. It certainly took care of the repairs that we needed to have done. Gordon Gibson Owner Gibson Construction I think it’s a question of how much equity you have into your house and then it’s a function of what the deductible is. If an earthquake destroys your house, it’s going to destroy the city. With a massive earthquake like that, it wouldn’t matter anyway. I don’t think insurance carriers could handle it, they’d all go broke.

As new office projects for the Tri-Cities hit the drawing board, the rumor mill has been spitting out names of prospective tenants. And one tenant on everyone’s tongues is Walt Disney Co. According to word on the street, the Burbank-based entertainment giant is reportedly leasing space in M. David Paul and Associates’ proposed 650,000-square-foot office campus in North Burbank and it’s also reportedly in deep discussion with the Maguire Partners development company to become a tenant in their proposed 1.1-million square foot Glendale Center project. Disney, for its part, has no comment on the speculation, according to a spokeswoman. Brokers, developers and lawyers who traditionally work with Disney aren’t talking, either. One Valley broker swore that Disney would “have my head on a platter, then serve it back to me” if he squealed. Disney already is spread throughout Glendale and Burbank, occupying 4.5 million square feet of leased and owned space in the Valley. Some skeptical observers think that even the ubiquitous mouse can’t occupy premium office space in the Tri-Cities. “They’re always the obvious candidate whenever there’s talk of a new project,” said William Birtell, who works at Beitler Commercial Realty Service’s Valley office. “But even Disney will eventually run out of people they can put places.”

PRODUCTION — PLEASE NOTE BULLETS MEL POTESHMAN According to recent statistics, the average employee will change jobs at least five times. Switching jobs, whether you’re leaving your job because you’ve found a new one or have been “downsized,” can have a significant impact on your current and future financial health. You should take the time to negotiate your leave-taking so that you can maximize any severance pay due you and carefully coordinate your benefits. -Make the most of your buyout package. A typical severance package gives you a week or two of pay for each year of service; but it’s possible to negotiate more. If you’re being offered severance, ask to see your company’s formal severance package; then find out what former co-workers in similar situations were offered. Knowing a company’s policy and how others have been treated in the past may help you obtain a better offer. Some companies give you a choice between taking your severance in a lump sum or spreading it over a period of weeks or months. Although cash is worth more up front, by receiving regular payments over time, you may be able to continue receiving full benefits, such as health insurance. -Protect your retirement funds. In most cases, when you leave your old job, you have three options of what to do with your 401(k) or other tax-sheltered retirement money. You can leave your money in your employer’s plan, transfer it to your new employer’s plan, or roll it over into an Individual Retirement Account (IRA). Whatever you decide, be sure to vest all of your retirement funds. Generally, if you withdraw any funds before you reach age 59 and a half, you’ll pay a 10-percent penalty plus income taxes on the amount withdrawn. Your former employer must allow you to keep your retirement money in the 401(k) plan you set up through the company, provided you have more than $3,500 in the account. You won’t be allowed to make any additional contributions, but your retirement funds will continue to grow tax-deferred. If your new employer offers a 401(k) plan, or if you’ve decided to manage your retirement funds on your own, you can open a “rollover” or “conduit” IRA. A rollover IRA gives you more investment options than most employer-sponsored plans (a good feature if you’re investment-savvy). Otherwise, you might fare better having your old or new companies manage your funds. An important caveat: When you choose to take your retirement funds out of your former employer’s plan, have your old employer transfer the funds directly to the new plan’s trustees. Should you request a check for the proceeds, your employer must withhold 20 percent for federal income taxes, even if you immediately deposit it in a new plan. What’s more, you are requested to replace the 20 percent from your own pocket within the 60 days allotted for a rollover. Otherwise, the amount withheld and not included in your rollover will be considered a withdrawal and this “withdrawal” will be subject to both taxes and penalties. -Bridge gaps in your health insurance. Don’t put your family at risk by going uninsured even for a few weeks. With the cost of health care today, an uninsured illness or surgery can result in financial ruin. If you worked for a company with 20 or more covered employees, you’ll most likely have the option under federal law (COBRA), to continue your present health insurance at your own expense. In most cases, you pay the same rate your company was paying, plus an administrative fee of up to 2 percent. COBRA insurance covers you for 18 months; after that, you’re on your own. As a worker who is not eligible for group insurance under COBRA, you may be able to pursue a short-term policy from a national insurer to fill the gap while you shop for a plan that meets your family’s needs. Even if you have a new job, don’t assume insurance coverage from day one. Some companies require a waiting period before health insurance becomes effective, and some plans exclude coverage for pre-existing conditions for up to 12 months. Finding out the facts about your health care and other benefits before you switch jobs will help you plan for a more secure financial future. Divorce can be taxing Obtaining the most equitable divorce settlement requires more than simply dividing your property in half. There are income tax ramifications to virtually every financial decision made in connection with the divorce. Understanding the tax impact of your decisions will help you obtain and/or assess a fair divorce settlement. Child support payments are not deductible for income tax purposes by the parent making the payments and, likewise, are not taxable income to the receiving parent. Accordingly, the payments not being deducted may have significant income tax implications if one parent is in a higher tax bracket than the other parent. Alimony payments are treated differently from child support. They are generally deductible by the payer and taxable to the recipient. To determine how much monthly support, if any, is due a spouse, courts consider the potential recipient’s needs and earning power as well as the payer’s income. If you expect to be the payer of alimony, keep in mind that alimony payments needn’t last your lifetime. Sometimes the amount and duration of alimony is dependent on the length of time a financially dependent spouse needs to become self-supporting. Such “rehabilitative alimony” may last only a few years. To be considered alimony, payments must be made by cash or check and, like child support, must be paid under a decree of divorce, legal separation agreement, or decree of support. Any additional payment provided voluntarily to your spouse or former spouse does not qualify as alimony for income tax purposes and cannot be deducted. In general, divorced or legally separated parties may not live in the same household, and the spouse’s liability to pay alimony must end on the death of the receiving spouse. The largest asset of most couples is their home. In general, married couples can defer taxes on the sale of their residence if they purchase a new residence within two years before or two years after the sale date of the old residence. If you both elected on a joint return to defer tax on a previous gain on the sale of your residence and then you divorce, the deferral rules apply separately to each spouse. Tax law allows each former spouse to take advantage of this tax deferral provided the new home costs at least as much as one spouse’s portion of the adjusted sales price of the old home. If you and your spouse are age 55 or over and the value of your home has appreciated, you may qualify for an even better tax break an exclusion of up to $125,000 of the gain from taxes. Mel Poteshman is a certified public accountant and president of Poteshman Consulting International & Co., a West Los Angeles-based business consulting firm providing general business, real estate and international trade advisory services.

By WADE DANIELS Staff Reporter Angered by higher prices for less coverage, many San Fernando Valley area homeowners are deciding not to buy earthquake insurance under the new California Earthquake Authority, according to insurers and others. Although state officials say they have no hard numbers on the number of Valley policies, individual brokers say there are selling far less quake insurance under the CEA than they did before its creation last year. Jan Hardee, an agent with Prudential Insurance Co.’s Tarzana office, said “nearly 100 percent” of his customers chose to add quake coverage to their home and fire coverage in recent years. But under the CEA, only about 65 percent are doing so, he said. Gabriel Kalenian, an agent with the Northridge Farmers Insurance Group office, said only about 50 percent of his clients are buying policies under the CEA. “A couple of years ago this was around 80 percent,” he said. Brokers and homeowner leaders speculate that the the decline is particularly acute in the Valley because insurance rates here are among the highest in the state. “I didn’t renew my policy this year, and a lot of people I’m talking to aren’t renewing theirs,” said Richard Close, president of the Sherman Oaks Homeowners Association. “With the CEA, my policy tripled in price and there was a substantial reduction of my coverage.” The CEA does not track the number of homeowners with policies now versus the number who had policies under the old system, said Mark Leonard, a CEA spokesman. However, Leonard said there has been a 4 percent drop in policy purchases since the CEA began selling policies last December. Statewide, there are currently 418,165 policies in California 10 percent below the number the state had projected last year, Leonard said. Currently, 141,970 policies exist in Los Angeles County, he said. The authority was formed by the state Legislature last year after private insurers demanded a rollback in their liability for earthquake damages in light of massive payouts they made in the aftermath of the 1994 Northridge earthquake. The quake buried the industry with $14.5 billion in claims, and many insurers simply abandoned the homeowners market, rather than assume the risk of another major earthquake. The policies are still sold through private company agents but are held by the authority. Kalenian said most of his new and renewal home insurance customers inquire about earthquake insurance but often refuse when they hear the terms. Essentially, he said, the state authority’s minimum levels of insurance provide far less coverage than what his customers received when Farmers sold its own policies, and they are more expensive. For example, the earthquake authority’s policies do not include coverage of a dwelling’s surrounding structures, such as fences and pools. Also, coverage for a dwelling’s contents is capped at $5,000, whereas pre-CEA minimum coverage commonly included a deductible of 10 percent for all damage to contents. With its proximity to known quake sources, Valley earthquake insurance rates are the most expensive in Los Angeles County, at between $3.90 and $5.10 per $1,000 of coverage, depending on location. In Northridge, the rate for a home built after 1960 would be $4.80 per $1,000 of coverage, according to Kalenian. Thus, $200,000 worth of coverage would cost about $960 annually. Leonard, the spokesman for the authority, said there is little room for movement since the broad terms of coverage were set by the Legislature. “People complain about our coverage, but agencies like Farmers and Allstate were already adopting them before the CEA was created,” Leonard said. “What we offer is very different from what used to be offered, but those days are gone. The Northridge quake changed everything.” The Valley may see a degree of relief from the insurance rates, as the authority’s chief Greg Butler in late July recommended an 8 percent average cut for the San Fernando Valley area. This is less than the average decrease of nine percent for the Los Angeles-Orange County metropolitan area and the state average of 11 percent. The cuts corresponded to adjustments to the quake risk model adopted by the authority. According to geologists, the model’s assessment of certain risks for the Bay Area were overstated in the model and the current amount of coverage is therefore unnecessarily high. Rate cuts are slated across the board because policy holders around the state subsidize the Bay Area.

By DANIEL TAUB Staff Reporter Just over a month after CareAmerica Health Plans signed a 10-year lease for a new San Fernando Valley headquarters, Blue Shield of California announced that it is buying the Woodland Hills-based HMO and CareAmerica Life Insurance Co. for $175 million. Under the terms of the agreement, which is subject to state and federal regulatory approval, CareAmerica Health Plans would be converted from a for-profit health maintenance organization to a not-for-profit. CareAmerica and Blue Shield officials said late last month that they did not yet know what layoffs might come from the acquisition, but that the areas most likely to be affected are administration, advertising and Medicare program management. “In general, our transition teams are not going to be looking only at positions but at best practices of both organizations,” said Alan Puzarne, Blue Shield’s regional chief executive for Southern California. CareAmerica Health Plans has about 700 employees in Southern California, with about 600 of them working in sales, marketing, customer service, finance or information services jobs at the company’s Woodland Hills headquarters. The company in June signed a 10-year, $35 million lease for 162,000 square feet of office space at West Hills Corporate Village, a $100 million office park being co-developed by Regent Properties Inc. and Shamrock Holdings Inc. That project has been slated to begin construction within the new few weeks, and CareAmerica is slated to move into its new headquarters space in October 1998. Regent and Shamrock officials were not immediately available to comment on the status of the project, and CareAmerica officials said they did not yet know what would become of their plans to relocate. “That lease is in place so, certainly, one of the issues that needs to come in during the integration discussions is what to do about that,” said Ross Goldberg, senior vice president with CareAmerica. Puzarne of Blue Shield said that the newly joined company would likely use the offices, since Blue Shield already was looking to locate employees in the San Fernando Valley. “I expect we will be using that facility,” Puzarne said. Blue Shield’s purchase of CareAmerica from its parent holding company Unihealth is expected to be finalized by the end of the year. In the meantime, CareAmerica will continue to operate independently.

BOB HOWARD Escrow is expected to close shortly on a sale that could bring a long-awaited solution for one of the San Fernando Valley’s most prominent problem properties, the Sherman Oaks Galleria. The Galleria, which includes 516,000 square feet of retail space and 388,000 square feet of office space at the corner of Sepulveda and Ventura boulevards, is a once-successful mall that has been losing tenants and shoppers steadily in recent years. A partnership of Prudential Real Estate Investors and Dai-Ichi Insurance Co. is expected to sell the Galleria to Beverly Hills-based Douglas Emmett Realty Advisors for about $55 million. Neither the owners nor the buyer would comment on the sale, but a source close to the deal said it could close by Aug. 1. Gerald Silver, president of Homeowners of Encino, said he met with Douglas Emmett representatives Dan Emmett and Josh Simms regarding plans for reviving the ailing mall. Silver said he felt “quite positive” about Douglas Emmett taking over, an important point because homeowner support is considered essential for any new development plans at the Galleria. Silver said that Douglas Emmett representatives told him they have no plans to seek permits to expand the mall any more than currently allowed under its entitlements with the City of Los Angeles. The Galleria under Prudential-Dai-Ichi ownership has been managed by LaSalle Partners Management Ltd., which would not comment on a potential sale, and referred calls to Douglas Emmett. Douglas Emmett also declined to comment on the project. Silver’s group and the Sherman Oaks Homeowners Association opposed an expansion proposal by the Prudential-Dai-Ichi partnership last year that would have required additional city entitlements because the Prudential-Dai-Ichi group wanted to add 3,600 more movie theater seats to the 1,000 existing seats at the mall, as well as 10 restaurants with full liquor licenses, and 60,000 square feet of space for virtual reality attractions. Following pressure from homeowners, the L.A. City Council granted only some of the requested additional entitlements. Sharon Mayer, an aide to Councilman Michael Feuer, said the entitlements now permit the new owners to add up to 3,000 more movie seats and eight restaurants, but no virtual reality space. Two of the restaurants would be limited to beer and wine licenses, but the six others would be permitted to have full liquor licenses, Mayer said. Silver said that homeowners don’t oppose development, per se, but would like to see “high-quality retail” and/or new office construction or “almost anything other than” the $30 million entertainment center that had been proposed. Allen Young, senior vice president at CB Commercial Real Estate Group Inc., who helped negotiate the original leases at the mall in 1980, said that the Galleria has faced competition from other Valley malls that have been renovated and remodeled to include more movie theaters, trendier restaurants and food courts, and a generally livelier environment. At the Promenade Mall in Woodland Hills, he pointed out, “sales have gone up substantially and there is a lot more foot traffic” since a Saks Fifth Avenue department store was razed and a 16-screen movie theater built in its place in March of 1996. Young is representing developer MEPC American Properties of Dallas at another Valley mall renovation, the Northridge Fashion Center, where construction is slated to begin this month on a project to raze a vacant Robinsons-May department store and replace it with a 10-screen theater complex. The mall also includes a vacant Broadway department store, which the developer hopes to remodel to include a large bookstore and entertainment-oriented attractions, Young said. According to Young, whose office is in the Galleria’s 270,000-square-foot, 15-story office tower, the Sherman Oaks center has suffered from not keeping up with shoppers’ changing tastes, competition from other malls and the consolidation of department stores. The Galleria formerly included a Robinsons and a May Co. store, but it now has two Robinsons-May stores since the chains merged. Although there are many vacant retail spaces at the Galleria, Young said the office tower he’s in is 90 percent leased and demand for office space is strong in the neighborhood. The center’s 118,000-square-foot lowrise office building, on the other hand, was allowed to go nearly vacant because the former owner was thinking of razing it under the now-defunct expansion proposal. Young believes the space could be filled if the new owner decides to keep it as office space. According to Young, the mall has good potential for both office and retail success because of its “tremendously prime” location. “It’s a prime location that needs a major facelift, but I think anything they do here will succeed. It’s just too well-located not to succeed if they get the right retail or office in here,” he said. Project Groundbreaking Beverly Hills-based West America Construction Corp. was slated to break ground July 30 on a $6 million project to build nearly 80,000 square feet of speculative industrial space at Freeway Business Park, a pre-existing development at Highway 118 and Route 23 in Moorpark. According to Bram White, executive vice president at the Camarillo office of Daum Commercial Real Estate Services, the five buildings West America will build for sale or lease at the site represent one of two speculative industrial projects the company has planned at the business park. The other is a $9 million project to include approximately 138,000 square feet in three buildings. Nick Brown, president of West America, said his company has built more than 50 industrial buildings totaling more than 900,000 square feet in Moorpark since the early 1980s. West America still owns and manages 100,000 square feet of that space and has sold the rest to owner-users over the years, Brown said. Brown said construction is expected to be finished by this fall on the $6 million project, but no dates have been set yet for the beginning or end of construction of the second project. White said the buildings at both projects have been designed to be smaller than the “big box” buildings being constructed at other sites because Ventura County is just starting to evolve as an industrial distribution and warehouse center. He said the buildings in the two projects will range from 18 to 24 feet in height, compared with typical 30-foot heights in modern L.A.-area projects. The tenants expected to occupy the West America projects are smaller firms that don’t require the higher ceilings, he said. “What we’re getting in the market up here are users and owner-users from the San Fernando Valley and eastern Ventura County who are moving up into slightly larger spaces from startup buildings of a couple thousand square feet,” White said. Chicken on Fire A fast-growing El Pollo Loco franchisee called Mi Pollo has signed a $1.1 million lease for a new restaurant in Agoura Hills that will be the eighth El Pollo location operated by Mi Pollo, according to President Joe Lopez of Van Nuys-based Westcord Commercial Real Estate Services, who has represented Mi Pollo on five of the eight leases. Lopez said the Mi Pollo franchisee since the first of this year has signed three leases. The combined value of the five leases is approximately $8 million, Lopez said. Of those eight restaurants, Lopez said, three are operating, two are under construction and the remaining three are in the planning stages. Lopez said the fast food category is “exploding,” in part because of what he called “a window (of opportunity) for drive-through windows.” He explained that fast food chains are worried about growing opposition to drive-through windows among city officials throughout Southern California, who are starting to view the windows as potential noise and traffic problems. As a result, any time a fast food restaurant can win a permit for a drive-through window, it builds the restaurant sooner than later to get it completed before city officials change their minds, he said. Plant Sale Crown, Cork & Seal has sold a 202,000-square-foot former canning and bottling plant on an 11.3-acre site at Woodley Avenue and Roscoe Boulevard in Van Nuys to the Van Nuys-based Dunn Family Trust for $8 million, according to Bennett Robinson, a vice president for CB Commercial. Robinson said Crown, Cork & Seal discontinued operations at the building after it was damaged extensively in the Northridge earthquake. Since then, the building has been repaired and is one of the more modern industrial spaces in the immediate area, he said. Dunn Family Trust officials could not be reached for comment on their plans for the building. Bob Howard covers real estate for the San Fernando Valley Business Journal.

BENJAMIN MARK COLE Senior Reporter Trikon Technologies Inc. is considered by some analysts to be a technological marvel because of its cutting-edge equipment for the manufacture of sophisticated semiconductor chips. But on Wall Street, it’s not technology but profits that are cheered and stock market investors have not tolerated Trikon’s sales woes well. Chatsworth-based Trikon went public in August 1995 at $14 a share, under the leadership of founder and Chief Executive Greg Campbell, a UCLA graduate in physics. The stock price rose briefly, but fell suddenly when Trikon then named Plasma & Materials Technology Inc. faced red ink in 1996. Company sales and profits have been uneven at best since, and as of last week, Trikon, which makes capital equipment for the semiconductor industry, traded in the $7 a share range. These have been especially tough times for Trikon. Last year, the company lost $94.5 million ($10.03 a share) occasioned by inventory losses, debt costs, and other losses associated with the 1996 buyout of a British manufacturing company, Electrotech Ltd. This year didn’t start off a whole lot better. For the three months ended March 31, the company reported a net loss of $11.6 million (81 cents a share), compared to net income of $1.3 million (14 cents) for the like period a year ago. “Not just for us, but for the entire industry, sales in the first quarter were way off,” said Trikon spokesman Fred Reynolds. “The second quarter looks better.” Perhaps to assuage investor concerns, Trikon in late June took the unusual step of pre-releasing second-quarter revenues, which they estimated would tally up to $19.5 million. Sales are Trikon’s major challenge, said Reynolds. “Essentially, we have a worldwide infrastructure in place, which costs about $25 million a quarter to maintain. We have made the decision not to cut off our legs, but to keep the infrastructure going until the sales start coming back. And they seem to be turning right now.” To keep the company going in the face of losses, the company privately placed $20 million in preferred convertible stock in June. Since 1992, Trikon sold equipment that uses plasma, or gas, to etch patterns into silicon wafers. Other companies, such as Dallas-based Texas Instruments Inc., use the equipment to make high-end semiconductor chips. Other customers include Armonk, N.Y.-based IBM Corp., Cincinnati-based Lsi Logic Corp. and South Korean-based manufacturers Hyundai Corp. and LG Semicon Corp. (formerly known as Lucky Goldstar Semicon Inc.). Last year, Trikon acquired Electrotech in an effort to increase the range of product offered to the big buyers of capital equipment, said Reynolds. Thanks to the acquisition of the British manufacturer, Trikon is the world’s sole proprietor of something known as “flowfill” technology. In the minute world of semiconductors, aluminum is used to fill channels in the chips and conduct electricity. But chip manufacturers face a problem: Even when molten, aluminum doesn’t “flow” well into the smallest nooks and crannies on the chip. So for really tiny channels, the better-flowing tungsten is used instead. Tungsten’s conductivity is less than that of aluminum’s, so overall chip performance is compromised, said semiconductor analyst Tejinder Singh of brokerage house Unterberg Harris. “It’s like having a small wooden bridge connecting freeways. The tungsten is a bottleneck.” Buying Electrotech brought Trikon the ability to make machinery that can manufacture chips using only aluminum, called “forcefill” chips.”The chips are much higher quality,” Singh said. Singh champions Trikon’s technologies, and expects the company to do well. “They have very bright prospects. When the industry cycle turns, they are positioned to do well.” But getting the sales will take some doing, concedes Singh. “The big buyers have billions riding on these purchases. They are not just going to leap in.” Trikon faces competition from several larger manufacturers, including Santa Clara-based Applied Materials Inc. Because big buyers like to work with big vendors, Trikon has its work cut out in making sales, both Reynolds and Singh concede. Wall Street is waiting for Trikon’s customer orders to pour in before accepting the stock, said Singh. He believes a Trikon sales effort is warranted. “They are sitting on gems right now. They just need to show everybody what they have, and for the customers to start ordering,” he said. Reynolds said the company is in talks with seven major customers, and only two have to buy for Trikon to turn the corner to healthy profits. “If just two of the seven buy, that would generate $30 million a quarter in sales, on top of our other business,” said Reynolds. “Anything on top of that would be gravy.”

By JOE BEL BRUNO Staff Reporter There is one thing that drives many of the San Fernando Valley’s fastest growing public companies: technology. The Valley is proving itself not just to be a center for entertainment, but a growing region for high-tech firms. Ten of the 25 fastest growers are in that arena, producing everything from digital cameras to high-bandwidth switch systems. Leading the pack is Xylan Corp., No. 1 on the List, which latched onto the demand for computer networking to become one of 1996’s hottest initial public offerings. The Calabasas-based company, which opened for business in 1993, makes switches that move data over computer networks. Among its competitors are heavy hitters like Cisco Systems Inc. and 3Com Corp. “There is a lot of competition in what we do,” said Kevin Walsh, Xylan’s vice president of marketing. “But our growth comes from the fact that we are packing more and more technology into one single device. For being new, and a smaller company, we’ve been able to move quicker and stay just ahead of the competition.” Xylan’s sales grew 333 percent to $128 million in 1996. Besides being the Valley’s fastest growing public company, it ranks No. 12 on the Business Journal’s List of 100 fastest growing public companies in L.A. County. Earlier this year, Xylan was caught in an industrywide glut of data networking stocks and at one point dropped to as low as $12.38. The stock recently recovered to about $20 on Nasdaq but still is far from the $76 upon first going public in 1996. Despite its stock tumble, Xylan revenues for the six months ended June 30 were $93.1 million, compared with $51.6 million for the like period a year ago. Xylan has kept up its revenues in part through a strategy of signing a relatively small number of very large deals, instead of multiple smaller deals, Walsh said. For example, it recently signed a three-year, $2 million agreement with First National Bank of Maryland to upgrade bank teller machines. Another company booming last year was Chatsworth-based MRV Communications, which secured the No. 2 spot on the List. It posted a 126.6 percent increase in revenues last year, coming in at $88.8 million. However, the best of the 5-year-old company lost $9.6 million. MRV designs high-speed network switching systems, similar to Xylan. Most of its growth has come from sales agreements with several leading computer companies, including Intel Corp., Fujitsu Corp. and Digital Equipment Corp. MRV wasn’t the only company on the List to experience strong revenue growth, yet lose money. Others include Cinema Ride Inc. at No. 13, Film Roman Inc. at No. 14, Jerry’s Famous Deli Inc. at No. 15, Dycam Inc. at No. 16 and Children’s Wonderland at No. 25. But by far the biggest difference between revenues and profits was at Trikon Technologies Inc. The Chatsworth-based company, No. 3 on the List, saw revenues grow by 98.3 percent over 1995 to $42.2 million. However, the company lost $94.5 million. The company was previously called Plasma & Material Technologies, but changed its name in March after making the $150 million acquisition of United Kingdom-based ElectroTech Group. “It was a big one-time purchase that’s why our profits are so low,” said Trikon spokesman Frederick Reynolds. “Our customers want fewer vendors with more solutions. So, to be a player, we made the acquisition and changed our name to expand our products and broaden our markets.”

By JEANNETTE DeSANTIS Contributing Reporter A MASH unit in Calabasas? Disaster Medical Assistance Corp. is offering a whole new perspective on Mobile Army Surgical Hospitals one without the likes of Hawkeye Pierce. DMAC provides trailer-like containers filled with emergency medical supplies and other equipment. They are placed in strategic locations, such as fire station parking lots, and can be turned into small field hospitals in the event of a major disaster. “In Calabasas, we have only four roads that lead in and out of the city,” said Dr. Arnold Bresky, a co-founder of DMAC who actually worked in a MASH unit during the Vietnam War. “If the Northridge Earthquake had hit just 12 hours later (in the middle of the day), we would have been in serious trouble,” he said. Most local governments don’t have the money to stockpile medical equipment that might sit idle for a decade or more. So Disaster Medical provides the storage lockers for free and makes its money by selling advertising on the lockers. It’s somewhat like bus shelters, which are typically provided free to cities by companies that make their money by selling ad space. The company charges advertisers $45,000 for the first year and $9,000 a year afterward, according to DMAC President Fred Sayles. The fee covers the cost of maintaining the equipment stored in the locker. One company, Rhino Linings USA, has sponsored three containers. The San Diego-based company makes protective liners for truck beds. “The main reason we did it was to help promote goodwill in the community,” said spokeswoman Diane Kahler. “But also we are going for the name recognition it will provide the company.” Rhino Linings sponsors containers in Palm Springs as well as Florida and Louisiana. Company officials have yet to notice whether there has been any impact on business, Kahler said. The privately held DMAC has generated $700,000 in revenues since it started selling in May, and projects up to $5 million in revenues this year, Sayles said. California and the hurricane-prone areas of Florida, Louisiana and Texas are expected to be big markets. Sayles said two of the of the self-contained facilities are in place in Florida, with one apiece in Palm Springs and Louisiana. The company is also seeking approval from the L.A. County Board of Supervisors to place facilities at a variety of locations, including Los Angeles County Fire Station 70 in Malibu, County Fire Station 119 in Walnut and County Fire Station 73 in Newhall. DMAC also wants to place trailers at the Los Angeles County/USC Medical Center and the Martin Luther King/Drew Medical Center to be used as backup emergency centers if the hospitals are destroyed in a major quake or other disaster. Locally, the city of Calabasas purchased four prototype facilities for between $12,000 and $20,000, said Tim Steenson, director of Building and Safety for the city. The mini-emergency facilities are strategically placed at highly populated areas of the city, including Calabasas High School, A.E. Wright Middle School and the Calabasas Tennis & Swim Center. A fourth is currently being assembled and will be placed at the Calabasas Country Club. Unlike the other trailers the company is marketing, the Calabasas facilities do not contain advertising. The difference is that in Calabasas, the program began more as a community service than a business. After the Northridge quake, Bresky decided to place storage lockers throughout the Calabasas area that would provide a full complement of the emergency medical equipment that would be needed in the event of a major disaster. “When people heard about it, they thought it was a wonderful idea,” Bresky said. “These containers come in all different sizes and could be placed in areas where there is someone with medical training and the equipment is available to them within the first 24 hours.” Bresky enlisted Fred Sayles, an associate from a previous business venture, to help launch the company. The containers come in different sizes and resemble truck trailers without the trucks. They are built to withstand forces of major disasters such as earthquakes and hurricanes and are stocked with satellite communication systems, surgical instruments, electrical power generators and a plethora of medical and emergency supplies like bandages, cots, flashlights, water, blankets, fans and portable radios. It is up to the cities where the containers are placed to assign and train medical personnel in the area to set up and run the DMAC packages as civilian MASH-type units, and to treat victims during the first 48 to 72 hours of a disaster, Sayles said. The containers can be medically customized to fit the needs of each municipality. For instance, in Palm Springs, city officials requested a defibrillator a heart attack treatment device to be included in their package because of the city’s large elderly population.