FROM THE NEW LONDON DAY.
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USA Video Executives Get Raises
But they are deferring the 'paper' transactions
By Robert A. Hamilton - More Articles
Published on 4/4/2001
Mystic — Pay for the top USA Video Interactive executives climbed sharply last year, due largely to paper gains from stock options that are now worth much less than at the time they were granted, according to the company's annual report.
USA Video Executive Vice President Anthony J. Castagno disclosed Tuesday, however, that the company's directors have been deferring any compensation since December.
“We know that things are tight and we're doing everything possible to conserve cash,” Castagno said. “We're trying to be responsible managers ... we're not walking away with any money — we're not even walking away with our salary.”
Compensation for the top two officers exceeded $600,000, nearly as much as the company's total revenues of $653,592 last year, according to the annual report. The company lost $4.7 million in 2000, according to the report.
Company president Edwin Molina saw his salary and benefits package increase from $120,999 to $128,361, while total compensation, including stock options, climbed 95 percent, from $321,664 in 1999 to $628,361 last year — and up 887 percent from 1998's total of $63,672.
Castagno said most of the compensation consisted of the difference between the stock's option price and the price it was trading at when they were redeemed, but all of those shares had to be retained for at least one year, which made a huge difference.
Some of the executives, for instance, bought some stock on option last fall at $1.50, on a day it was trading for $2.75, so it seemed that they were making $1.25 per share. But the stock has dropped considerably since then, and on Tuesday, it closed at 52 cents a share, down 9 cents, which more than erased any of those paper gains.
Castagno defended the compensation packages, which he said are reasonable by the standards of USA Video's peer companies.
“These amounts of money are low in terms of comparative compensation at other high-tech companies,” Castagno said. “And a very large portion of this money gets reinvested back into the company in private placements, which ties it up for at least another year.”
Clearly, Molina and Drescher are retaining most of the shares that they buy through the company options, according to reports filed with the U.S. Securities and Exchange Commission. In 1999 Molina owned just over 5 million shares, while a recent SEC filing put the number at just under 6 million; Drescher, who owned 5.3 million shares two years ago, now owns 6.8 million shares.
“All of the officers have been regular investors in the private placements,” Castagno said.
Molina said he has not sold any of the shares he obtained through the company's options or in private placements, even when it hit more than $8 a share, because he has confidence in the company's future.
“We never expected the Nasdaq to be so brutal,” Molina said, referring to the fact that the technology-heavy Nasdaq stock exchange has suffered the worst in the current economic downturn.
The annual report also shows that Chief Financial Officer Anton Drescher's salary climbed from $77,270 in 1998, to $120,000 in 1999, and the same last year. Total compensation, including his option gains, was up much more sharply: $620,000 last year, up 122 percent from $279,665 in 1999 and up 671 percent from $80,442 in 1998.
Castagno saw his base pay climb from $120,000 to $125,722, while other compensation dropped from $194,300 to $125,000. He was granted more options for 1 million shares of stock, up from 250,000 shares last year, but the value of those options will depend on how well USA Video does in the future.
Some other USA Video officers have made money off their options — SEC filings show several of the top executives bought shares as low as 11 cents in the last two years, and sold them for as much as $5.10 — but in general, the executives have been buying far more shares than they have been selling. In most cases, they did not even sell enough shares to finance the purchases. |
