The San Francisco Examiner from San Francisco, California • 39

A Mttioti of the San Francisco Sunday Examiner and Chronicle Sunday, February 17, 1991 P-l Jranrigco feaminet While few question the Big Bang, many cosmolo-gists are doubting what they once believed happened after it. D14 I wi.ii.i i ji. ii.iLini.iii,,,,,,,., SUESS JOHN CRUDELE p-2 JAY KAPLAN r2 STOCKS r5 MUTUAL FUNDS p-9 "THOM CALANDRA MONEY TALKS 1 i ra- Paved paradise 'WE'RE RECESSION-PROOF' FISHERMAN'S WHARF'S busiest parking lot, across from the crab sellers and restaurants at Jefferson and Taylor streets, has cost the landlord Port of S.F. at least $200,000 a year in lost revenue since it started leasing the property to a small group of wharf restaurants in 1983, The Examiner has learned. The lot while the port receives a flat iHMhs Jf yx rrr a v.

w. iMifiCTS i Banks, insurers, funds shaken by Carter Hawley -Hale filing By Louis Trager OF THE EXAMINER STAFF FINANCIAL TREMORS from the Chapter 11 filing of retailer Carter Hawley Hale Stores Inc. rippled up the San Andreas Fault last week from the Los Angeles bankruptcy court to the Bay Area. The biggest known holders of" the company's junk bonds are high-paying, income-oriented mutual funds run by Franklin Resources Inc. of San Mateo.

The biggest outside shareholder in the retailer's stock is Mc-Cullough, Andrews Cappiello Inc. The San Francisco firm is listed as the investment manager for the Pacific Stock Exchange, the San Francisco City and County Employees' Retirement System and other institutions. Bank of America, Carter Hawley's main bank lender in recent years, holds a mortgage of up to $90 million. The Chapter 11 filing on Monday suspended Carter Hawley's debt obligations while it attempts to reorganize. The troubled parent of Emporium and Weinstocks department stores faced very slow consumer spending and what the company described as a sudden shutoff of credit by nervous suppliers in January.

All indications are that the big Bay Area firms involved with Carter Hawley will not be significantly discomforted, let alone severely shaken, by the act ion of the Los Angeles-based retailer. The amounts at stake are only a small percentage of their assets. Depending on their relationship to Carter Hawley, the jockeying over a reorganization plan and the company's ultimate success, the Bay Area firms can expect to realize varying amounts of their money. Those running the Franklin mutual funds even hope that the Carter Hawley junk bonds will materialize into highly lucrative investments as the company reorganizes, recuperates and succeeds. Franklin's Income Fund and its See JUNK, D-4 EXAMINERFRAN ORTIZ Cornnuts Inc.

Chairman and CEO Maurice Uulluway (center), whose father saiv the snack fund's potential during the (Ireul Depression, now runs the company with the help of Joseph Ueaney, its president (left), and Richard Hell, the vice president of marketing. Snack maker Cornnuts says 'nuts' to drought who lease other port lots pay a percentage of gross revenue, as high as 65 percent for the adjacent Franciscan i Restaurant wharf lot. 1- What's going on? This is a perfect example of the sweetheart leases that port Director Michael Huerta was hired two years ago to bust up. Huerta's cash-strapped public agency has begun an audit. "Yes, it's a nutty lease," Huerta says.

The restaurants say they're on the level. "None of us has pocketed a cent," says Timothy McDonnell, "co-owner of Tarantino's and head of the restaurant group that runs the lot. This story dates to 1983 when eight restaurants among them Alioto's Fish, Tarantino's, Fishermen's Grotto, Guardino's Seafood Market Gift Shop and Cresci Bros. took over the leased lot. The lease specified that profits be used to maintain the 316-car lot, reduce the cost of wharf parking (the price $1 per half-hour, has increased once since '83) and pay two hours free parking for customers of the eight businesses.

But contrary to the port lease, the businesses collectively called the Fisherman's Wharf Restaurant Association never gave quarterly statements to the port. According to figures obtained by The Examiner, the lot grossed $1.1 million in its fiscal year ended May 1990. The port and the restaurants confirm that figure, minus 20 percent for the S.F. parking tax. Yet the restaurants say profits from the lot are only $20,000 a year.

After rent and the tax, where does the remaining $648,000 go? Expenses, the Association claims. "They're making a fortune. The taxpayers are getting says Nick Leonoudakis, whose City Park managed the lot before the Association took it over. Leonoudakis says its profit margin ran 40 percent of the in 1981. He says the lot should earn $400,000 yearly after operating costs, insurance, parking taxes and the current $300,000 lease.

The port should lease it for a minimum 50 percent of the gross. That's $500,000 a year "for the port. The Association puts its profits into a fund earmarked 'jor repairs, a fund the port pegs at $250,000. "Our operating costs are high," says McDonnell. Costs include steam-cleaning of sidewalks, security, valet parkers and ads for the lot and restaurants on radio and in newspapers.

The group also donates money to charity, he says. The lease makes no allowances for charities and advertising. "This seems to be a lot where revenues are out of balance with income," Huerta says. Why did the port sign a flat-fee lease in the first place? 'Officially, a better-managed lot with two hours of free parking for customers was supposed to boost the port's rent payments from restaurants, port documents show. There is no hard evidence this happened.

(In most of its restaurant leases, the more business an establishment does, the more rent money the port receives. The port relies on restaurants and other commercial tenants for 60 '-percent of its income.) In fact, even though the lot increased its business by 5 1 percent during a trial period in -'82-'83, the port says that now only 20 percent of the lot's users frequent the restaurants that operate the lot. "We will know more when the audit is finished," says Huerta, who came to S.F. after a three-year stint managing New York City's port property. The 34-year-old waterfront executive earned his stripes by cleaning up the retail leases for the Big Apple's port authority.

The Fisherman's Wharf audit will be among the first leases Huerta reviews here. grosses $1 million a year $300,000 a year in rent. Those ajw' hybrid corn, which has ears that are Main business: Growers, producers and marketers of Cornnuts, toasted corn snack food in five varieties Headquarters: Oakland Founded: 1936, by Albert Hollo-way of Oakland Ownership: Privately owned by the Holloway family Chairman, CEO: Maurice Hollo-way, son of Albert Holloway Employees: 250 Revenue: $40 million Quote: "We're family-owned, but we like to think we can exist in an industry of giants and we think there's room for growth. We've made it through two generations (of Holloways) and there's the possibility of more." By Carla Marinucci OF THE EXAMINER STAFF HE COMPANY survived in fact, thrived in the Great Depression. It survived World War II, and grew even bigger.

But will it survive the Big Drought of 1991? If the second-generation owners of Oakland-based Cornnuts Inc. have anything to say about it and if the crunchy snack's resilient history is any indication the company will indeed survive. Cornnuts, a 55-year-old family-owned firm, is known among consumers chiefly for its toasted corn snack food. But a major focus of the firm one perhaps less visible to consumers is its intense in-house efforts to develop, breed and grow 15,000 tons of specially developed corn annually to produce its product. "We're recession-proof, because even in tough times, like the '30s, people don't deny themselves their favorite snack," says Maurice Hol-loway, chairman and chief execu- dramatically larger than normal, and kernels nearly as big as grapes.

Cornnuts has a thriving hybrid seed business, testing more than 1,000 hybrids a year and employing a full-time staff of breeders since the mid-1960s, says President Joseph Heaney. The firm also contracts with 50 farmers most of them in the Imperial Valley, Stockton and Salinas, but also in the Midwest to produce its corn, developed from a special variety which grows only in the Andes near Cuzco, Peru. While corn doesn't require as much water as some other crops, the drought is still a concern. That's because many California farmers have lost most, if not all, of their government water deliveries for the year. Cornnuts' growers, however, are still making good on their deliveries to their Oakland customer.

"We're spread around geographically and that helps," says Heaney. "A lot of growers we're dealing with have their own wells." Besides harvesting, storing and drying corn, Cornnuts also controls processing, packing and marketing at high-tech facilities in Fresno and Urbana, Ohio. In its colorful history, Cornnuts has managed to survive drought and a number of other hurdles which might have put less resilient companies under. The product was developed in 1936 as an enterprising way to beat the Depression: a snack invention called Brown Jug Toasted Corn, perfect for hungry bar-hoppers celebrating the end of Prohibition. An Oakland man, Albert Holloway, helped sell the product in bars.

But then bar snacks were outlawed by the government out of fear that they would encourage excess drinking. The enterprising Holloway bought out his partner and turned to the general consumer market where Cornnuts thrived, particularly during World War II, when makers of chocolate" and candy snacks couldn't get sugar and ot her key ingredients. His corn products See CORNNUTS, 1 1 Reliant on Japan? No way By T.J. Rodgers SPECIAL TO THE EXAMINER I'D LIKE to set the record straight: The American semiconductor industry is dominant in supplying critical electronics components to U.S. military systems manufacturers.

The notion that he United States depends on Japan for our defense elect ronics explored in an article published here last week is off target. With or wit hout Japanese semiconductors, the F-15 still would be able to fly on the deck at midnight, the Tomahawk missile still would follow terrain maps to its target, and he Pat riot missile st ill would successfully intercept Scud missiles. The "smart weapons we have witnessed on television are computer-controlled systems that are See RODGERS, D-12) T.J. Rodgers is president and chief executive officer of Cypress Semiconductor a $250 million Silicon Valley company with 1 7 percent of its sales to military systems companies. In addition to the Patriot, Cypress chips are in F-11, F-15, F-16, FA-18, F-4G, B-52G, i i ml(f A-10 aircraft.

1 I i EXAMINER GRAPHICS tive officer of Cornnuts. "But we're not drought-proof. So it is a nervous time." The firm has dedicated decades to developing its own giant hybrid corn with huge ears that are EXAMINER FRAN ORIIZ mm fcsasT3a i Commits snacks are made from giant dramatically larger than normal and kernels nearly as big as grapes..