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Some Small Outfits Pay Big Bucks : Salaries: Several executives lead the list because they cashed in their formerly private company's shares.

May 23, 1993|TED JOHNSON and DAVID TOBENKIN | SPECIAL TO THE TIMES

Orange County's handful of Fortune 500 companies continue to pay their senior executives some of the area's highest salaries and bonuses. But not all leading corporate moneymakers came from such well-established, mega-companies.

In fact, several business leaders lead the Orange County compensation list for the first time in 1992 because they cashed in a sizable number of their formerly private company's shares.

Eight of the 25 executives who recorded the largest gains from options exercised in 1992 were employed at companies that have conducted initial public offerings in recent years, including Quantum Health Resources, Tokos Medical Corp., Homedco Group Inc., Day Runner Inc. and Plaza Home Mortgage Corp.

Douglas H. Stickney, chairman of Quantum, a therapy provider in Orange that went public in April, 1991, reaped $6.86 million last year by exercising options, which made him the highest paid corporate executive in Orange County. If you don't consider the options, his salary doesn't even rank him among the county's top 100 executives. Stickney just missed being in the Top 25 executives of 1991 with a salary of about $793,000.

Executives who make such large windfalls are quick to defend their pay based on their company's performance, especially when compared to the days when it was privately held. Quantum, for example, has grown from $1.4 million in annual sales in 1988 to $118.3 million in 1992.

As at Quantum, the chief of Tokos Medical in Santa Ana--which became a public company in 1990--cashed in stock options to catapult him ahead of the chief executives of much larger corporations. Chairman Robert F. Byrnes exercised options to acquire company stock, thereby giving himself a gain, at least on paper, of $4.4 million and total compensation of $6.3 million, to rank him just behind Stickney.

Tokos, which provides services to help doctors detect and prevent premature labor during pregnancy, reported steadily increasing revenue and earnings through 1992. Net revenue more than tripled from $48.8 million in 1988 to $159.9 million in 1992. The company reversed a $1.2-million annual loss in 1988 to create $6.5 million in earnings last year.

However, like many other health technology companies, Tokos' stock price has not matched that performance. Since trading publicly, Tokos stock has fallen from a peak of $40 per share to $8.25 on Friday.

"There is concern about the effectiveness of the (Tokos method of) treatment, and while the initial health care providers warmly embraced their products, they are now running into more conservative buyers less willing to give it a try," said Mark Matheson, an analyst at the Crowell, Weedon & Co. brokerage in Los Angeles.

Nonetheless, Matheson said he thinks Byrnes' compensation level is fair.

"I would be worried if they were giving him a big bonus in leaner times, but they are not," Matheson said. Byrnes, whose 1992 salary was $264,000, received a $280,663 bonus in 1991 but none in 1992.

Byrnes was, however, given an option to acquire more company stock with an estimated value of $1.64 million at the time it was granted. But he hasn't sold any of those shares and has watched their value decline to about $1 million--although he said he paid $1.8 million in taxes based on the higher value when he received it.

"I'm $800,000 in the hole," said Byrnes, adding that he is unconcerned because he is confident in the long-term value of the company's stock.

Another health care executive, Jeremy Jones of Homedco Group Inc. in Fountain Valley, had total compensation last year of nearly $2.5 million, but his salary only represented $389,306 worth of the total.

Homedco's 1992 profit was up 67.7% to $17.6 million on revenue of $303.4 million, a 36.6% increase. The company, which went public in May, 1991, provides home health care services.

Day Runner's chief executive and chairman, Mark A. Vidovich, used options to his advantage and cashed in $1.8 million worth. That was in addition to a $200,000 salary and a $106,138 bonus.

Large sales of a company's stock by its officers and principal shareholders, particularly when it follows closely after an initial public offering, are a source of concern to many stock analysts.

"You have to look at who's selling the shares," said Craig Dickson, with Interstate/Johnson Lane, a stock brokerage in Charlotte, N.C. "If it's a 90-year-old chairman who just wants some liquidity, no problem. But if it's the president and chief executive unbundling shares, it's like you're selling stock and yet you're expecting the public to buy it."

One female executive has joined the list of Orange County's millionaire corporate executives: Brenda Lynn, executive vice president of loan production for Santa Ana-based Plaza Home Mortgage Corp. Her windfall had nothing to do with options, but with a very healthy bonus. Lynn earned $150,000 in salary and $876,000 in bonuses in 1992.

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