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Calculating a CEO’s Earnings a Tough Exercise

While some people would argue that many are overpaid, figuring out just how much CEOs and other top executives of publicly traded companies earn can be a challenge in itself.

While compensation for a public company’s top officers is divulged in proxy reports that must be filed annually, the reports often are difficult to decipher. After the amounts for an executive’s basic salary, bonus and some expenses are disclosed, finding an executive’s retirement package and stock option valuations is a rarity.

But that’s about to change, thanks to the adoption of rule changes governing the disclosure of compensation packages and other perks recently approved by the Securities and Exchange Commission.

The changes approved by the SEC’s board still require a public comment period, but should be formally adopted by the end of this year.

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Among the key changes to how public companies must report their top officers’ pay are:

– Including a table that shows not only annual pay and bonuses, but current stock option valuations.

– Include a table reporting all stipends paid to directors.

– A table reporting future pension payments for each named executive.

– Include the chief financial officer as one of the named executives.

– Lower the threshold for reporting executive perks from $50,000 to $10,000.

Bruce Ellig, a compensation expert and author on the subject, said of the changes, the one expected to raise the most eyebrows is what companies are paying those executives who either retire or leave to “seek other opportunities.”

“This should include not only the retirement check, but other deferred benefits along with severance pay, including change-of-control amounts. In addition to the amounts, the description should specify the period of time such payments will continue,” Ellig said.

A look at what Jack in the Box Inc. paid Chairman and Chief Executive Officer Robert Nugent, who retired last year, shows he took an annual salary of $938,466 and a bonus of $1,242,000, along with other compensation such as a supplemental health insurance policy of $66,700.

What Nugent is paid in either his retirement pay or his supplemental benefits packages is difficult to figure.

A complex formula entails getting the average highest salary for five consecutive years, and then multiplying that amount by 1 percent, followed by several additional fractional multipliers.

A table provided to give some data on annual benefits doesn’t even have a column that would apply as Nugent put in 26 years at Jack’s, and the table only goes to 20 years.

Brian Luscomb, a spokesman for Jack in the Box, said the language in the proxy relating to Nugent’s retirement pay is “consistent with what other companies provide and is consistent with SEC regulations.”

If new regulations are adopted, then his firm will change the way the information is disclosed, Luscomb said.

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Delaware Doings:

ImageWare Systems Inc., a San Diego-based provider of biometric identity management software, changed its incorporation from California to Delaware effective Jan. 20, following approval by more than 88 percent of its shareholders at a Jan. 12 meeting.

“We had been advised by our legal counsel for quite a while that as a public company we would be better served by incorporating in Delaware,” said CFO Wayne Wetherell. “Delaware provides certain advantages in terms of corporate law and corporate governance that most other states don’t.”

Traded on the American Stock Exchange under the ticker IW, it closed at $1.92 on Jan. 17, giving the company a market capitalization of $26 million.

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More Guidance:

Overland Storage Inc., a San Diego-based provider of data storage equipment, said it obtained two new longer-term contracts with unidentified parties that should increase its 2007 fiscal year sales by a range from $280 million to $285 million, and its net income between 22 to 27 cents per share.

The company also boosted its forecast for the 2008 fiscal year between $320 million to $330 million and net income between 62 to 72 cents per share.

Traded under the ticker OVRL on Nasdaq, shares closed at $9.62 on Jan. 17 and ranged from $6.28 to $15.74 during the past 52 weeks.

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Consolidation:

Jmar Technologies Inc., a provider of laser equipment used in the making of semiconductors, consolidated three of its San Diego locations into its main Rancho Bernardo office recently.

The firm had its headquarters in Carlsbad, which housed eight employees; a facility in Sorrento Valley that had 15 employees; and an office in Escondido with 15 employees where it was developing a microorganism early warning system called Biosentry. That activity is growing rapidly and necessitated much larger space, the company said.

The three functions are now at Jmar’s 23,000-square-foot Rancho Bernardo office that houses 40 of its 70 employees. The others work at facilities in Sacramento and Vermont.

Jmar is leveraging about a decade of laser and photonics research into developing products in the fields of bioscience, nanotechnology and semiconductors. In the past year, the firm has been emphasizing its work with the Biosentry system.

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New Offering:

PriceSmart, Inc., a San Diego-based operator of club warehouse stores mainly in the Caribbean and Central America, said it may issue $75 million to $100 million in debt available to current stock investors on a pro-rata basis.

PriceSmart said the amount of debt it issues depends on the outcome of a stock offering that began in September and closes Jan. 31.

Possible uses for the money raised include funding expansion of the firm’s membership warehouse club business, repayment of other debt, possible acquisitions and other corporate purposes.

The company also reported its December sales increased 15.9 percent from the same month in 2004 to $81.5 million.

For the four months ended Dec. 31, sales increased 19 percent to $248 million, compared with the same period of the prior year.

PriceSmart, traded on Nasdaq under PSMT, closed at $8.41 and has ranged from $6.11 to $8.70 in the past 52 weeks.

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Buzz Around Town:

The new name for Carlsbad-based NTN Communications Inc. is NTN Buzztime Inc. as of Jan. 1, following a vote at a shareholders meeting in June. The new name reflects the company’s success in expanding the awareness of its Buzztime branded games on major consumer platforms, including cable and satellite TV, mobile phones, home electronic games and books, the company said.

NTN said this month that it ended 2005 with its programs available in 4,019 restaurants and sports bars in North America, the highest in the firm’s history.

The company plans to rename the platform, now called NTN iTV Network, as the Buzztime Network by the end of March.

NTN didn’t change its ticker, NTN, or exchange, AMEX, and closed Jan. 16 at $1.58, and ranged from $1.15 to $3.65 during the past 52 weeks.

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Purchase Is Final:

DJ Orthopedics Inc., a Vista-based maker of prosthetic devices, said it completed the acquisition Jan. 6 of Newmed SAS, a French manufacturer of orthopedic rehabilitation devices, for 13 million euros, or about $15.4 million.

The acquired business has some 150 employees, and operations in France, Spain and Tunisia.

The acquiring company said Newmed should add net sales of $12 million to its annual revenues and result in net profits of 4 cents per share.

For the nine months ended Sept. 30, DJ Orthopedics earned $21 million on revenues of $211 million, up from $8.7 million on $187.9 million in the previous year’s first nine months.

Traded on the New York Stock Exchange under DJO, the stock closed at $32.09 on Jan. 17 and has ranged from $22.80 to $33.44 during the past 52 weeks.


Send any news of local public companies to Mike Allen at mallen@sdbj.com. He can also be reached at (858) 277-6359.

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