Bonuses

With the fourth quarter books closed, we are able to set annual bonuses according to target achievement levels. But first, a quick review as to how bonuses are calculated.

For most of you, those on the LPBP (little people bonus plan), your bonus is set at between 1% and 1.25% of your base annual wages, with a target level of 1.05%, which is achieved if the corporation attains 100% of target earnings per share (EPS). The bonus payout is scaled such that a 1% bonus is paid if the firm achieves 90% of its EPS goal, while the 1.25% payout level is paid upon achievement of 200% of the EPS goal.

For management on the IPBP (important people bonus plan), bonuses are set between 15% and 50% of annual wages, with the minimum bonus level achieved at 10% of EPS goal and the maximum bonus paid at 105% of EPS goal.

What this all means is that, because of the difficult year SBV has experienced, LPBP participants will receive 1% bonus if they were born on a Monday, Wednesday, or Saturday (and can substantiate that fact by producing a birth certificate and an original Word-A-Day calendar from the year of their birth). Likewise, IPBP participants will only be receiving a 35% bonus payout, unless they ask for more.

As well, our CEO and Chairman, the founder and majority shareholder of this company, will be receiving a special performance and retention award. While his leadership is, strictly speaking, priceless, the compensation committee of the board of directors determined that $3.5 million is a good number to start with, and so he will be receiving this amount in addition to his regular salary, options package, dividend income and pager allowance. He will, however, be foregoing his participation in the IPBP package.

We hope that your bonus payment, which should be distributed with your second paycheck following the vernal equinox, will be a constant reminder of the value of your contributions to the SBV team.

Happy MLK Day

Today we celebrate the life of a great American hero, Martin Luther King Jr. Our country owes a great debt to Dr. King and all he worked for to end slavery and bring equality to all people, no matter if they are black or another color.

Many have asked why ShortBus Ventures doesn't count MLK day as a regular holiday. The short answer is that because we are not a bank or a government office, we are not required to offer MLK day as a holiday. The Management Council, of which I am a member along with our CEO, COO, SVP of HR, EVP of Facilities, Chief Legal Officer, Chief Accounting Officer, EVP of Investment Policy, SVP of Government Relations, Chief Marketing Officer, SVP of Treasury, EVP of Auditing, SVP of Risk Management, SVP of Recruiting and Personnel Development, SVP of Manufacturing, and EVP of Euro-Mexi-Asian Operations, have all decided that the best way to honor Dr. King's legacy is to allow our minority employees to continue working for a fair wage on the day set aside to remember his tragic death.

As you know, we have a strong minority recruiting and retention policy at SBV. We actively seek out qualified candidates at all levels, from assembly line right up through entry-level management. We have worked with our Director of Minority Development, Tor Jorgensen, to establish a mentoring program in which minority employees are grouped together in common work locations so that they may effectively mentor each other and share their experiences. We think that by giving these valued employees a work experience that is both separate from that of their white co-workers, yet in every respect equal to theirs, we can best nurture them to fulfill their role in society.

By the way - I wish to apologize to all readers for what I now realize are several misspellings and typos in my previous posts. My admin explained that the red underlining signified wrongly spilled words in my entries, and not simply visual highlights. That should save me an embarrassment or too in the future!

Sacrifice

The management team has spent the last couple of days at an offsite meeting discussing how we will deal with the changing economy. During our meal, catered by Joel Roubichon, the discussion was all about belt tightening. It is quite possible that the economic conditions could harm our business greatly. We have decided that we must begin to sacrifice in advance of the possible downturn.

This will involve sacrifice from everyone, and we may have to give up some of the perks that we have become used to. I will lead in this as always. We are currently renovating my office to reflect a simpler and more modest future. I will be purchasing new furniture, and replacing the original artwork with limited edition artist signed editions. We will even change the hand carved door in the entry with a simpler solid oak model.

Some of the perks that will be going away include free coffee. Coffee will still be provided, but will be subsidized by a payroll deduction. We have visited some local coffee shops to assure that the daily deduction is at least 10% less than you might pay for a tall latte in the local area. Free parking will also be eliminated, and the deduction to pay for it will be 5% less than comparable parking options. Long distance phone calls will now need to be approved by a supervisor on a case by case basis. Employees who wear uniforms will need to launder them at home.

We are also working on a cleaning roster for all facilities. By sharing the cleaning responsiblity in an orderly fashon, we can elminate the cleaning staff and save over $150,000 in the first year alone.

I thank you in advance for your sacrifice during this trying time.

A word about financial markets

I wanted to add a bit more light to our CEO's post regarding financial markets from a more fundamental and academic perspective. In the pamphlet about financial markets that I read some time back, a book called "A Random Walk Through Wall Street" by Bart Malkoleelson was sited as proof that stock prices are random. In other words, thre is no way for anyone, whether a company, an investor, or a professor to do anything to make the stock price move up or down. Let me reiterate that point - nothing can be done about the stock price.

Thre is one thing that can be done about stocke price, however. There's a clever invention called a "reverse split" that instantaneously improves stock price. The math is fairly easy, too. If you reverse split to cut the number of shares by half, the price of the stock goes to twice its previous level, immediately doubling shareholder value. No one fully understands the mechanism behnd this effect, but it is real and has been demonstrated numberous times.

So why, you may ask, don't we keep reverse splitting our stock over and over? The simple answer is two fold. First, it's very expensive to do. For the current transaction we expect to incur costs of upwards of $30 million for varius services provided by investment banks and attorneys. Plus, we have to embark on what's called a "road show" to inform investors about the move, a costly affair involving much travel to locations like the Cayman Islands and Bermuda, as well as expensive dinners. There's no way to avoid it - it's just the price of doing business.

Second, we don't want the price to get too far out of whack with what a normal trading range should be. As our CEO said, we want to be priced in range with our competition. Firms like Google, Washington Post, Apple and something called SPDR 500 all trade right where we want to be - more than $100, but (for now) less than $1,000. We're hoping that the random walk I talked about will take us naturally into Berkshire Hathaway territory, but if not, we're prepared to take on another reverse split to further increase value to our shareholders.

Stock Price

I am certain that most of you are concerned about our recent stock price decline. It is not news to anyone that we have fallen from 35 per share to under 15 in recent trading. No one feels the effects of these declines more than me, so I have decided to take a drastic action.

At ShortBus we feel that we are truly one of the elite companies in the world. Even if the whims of the stock market away from conglomerates such as ours has pushed down our value, it doesn't change our strategy or opinion of our self worth. We have very little control over the stock price. It just goes where it goes.

No more will we allow ourselves to be compared with other companies trading in the "teens". I will be enacting a reverse stock split ASAP with a ratio of 35:1. This will put our stock on par to one of the leading companies in the market, Google. I have no doubt this will raise the price of our shares and allow us to be compared more directly with a company that we consider to be a peer.

When this strategy is successfully executed, we will investigate a similar move to get the share price in the range of Berkshire Hathaway.

Lines of Business

I wanted to communicate a bit on our recent decision to maintain some of our historical lines of business, despite declining sales and increasing raw material costs. ShortBus is committed to maintaining diversified lines of business that fit with our core philosophies.

As many of you know, SBV was founded over 150 years ago to produce straight razors for the denizens of Arkansas. As the western bearded look went away, the demand for our product grew for decades. We were able to expand quickly to regional distribution, and use the profits to invest in other needed businesses. We have a proud tradition of finding value in businesses the critics malign. Our buggy whip plant has had a resurgence, particularly from clubs that order several at a time. I believe that they are called Buggy Driving Society Men, often abbreviated BDSM. We successfully migrated our Beta VCR plant to VHS 10 years ago, and it continues to operate at at least 10% capacity. Vertical integration into tapes has proven to be a robust model for us, as we have been able to increase the size of our VHS value packages with out any additional cost to the consumer. It seems clear to us that the eventually the declining demand in these and other segments will flatten and we will be uniquely positioned to take advantage in these markets. The same goes for the ZipDisk technology we recently purchased, our CRT production line, newspaper properties, and corded telephone handsets. Some one has to make these otherwise orphaned products, and as your CEO, I am here to tell you that ShortBus Ventures will be there to lead.

Gillette recognized the threat from us, leaving them with only an option to sell to Proctor and Gamble. Norelco also sold to Phillips. Straight razors are here to stay people, and it is clear that our competitors see the trends. Electricity and/or 5 blades just can't do better than a half an hour with a trained barber, a hot towel and one of our elite razors. And most certainly, no one actually needs to shave everywhere.

A word about finance

As I am sure everyone at ShortBus is aware, Webster's defines finance as "the practice of eliminating expense from corporate budgets in order to dirve EBITDA. As your CFO, it is my duty to see to it that as many of the precious dollars brought to Short Bus by our many subsidiary companies are converted into dividends for our shareholdrs, principal of which is our CEO. During the past year, we were successful in cutting expenses by over 10%, offsetting to some extet the 18% dip in revenues. Only through an aggressive share repurchase plan were we able to achieve our target 12% improvement in earnings per share. In other words, your bonoses are secure!

For the coming year, though we don't really have any way of knowing, we're gusessing that sales will be flat with 2007. We're currently working our way through a tough market, espticially in our core automotive component and taco meat businesses. Though no one can say for certain when we will reach bottom, we can be sure that we will, more than ever, need to be diligent about controlling expenses at all levels.

An exampre of the type of expense control I'm talking about comes straight from the exeucutive suite. As you may be aware, when my predescessor entered into the lease on our current corporate headquarters during better times, he built the executive offices to be a true showblace befitting a prosperous company. Now that economic conditiosn have worsened, we feel that it is no longer appropriate to inhabit such expensive surroundings, and so your executive team is presently having the entire floor remodeled with more modest finishes, showing the shared sacrifice that we must all be prepared to make.

I hope you will all be likewise prepared as we review your 2008 plan submissions to accept simillar expense reductions in turn. Together we can help ShortBus cut its way to real EBITDA growth.

2008 Strategy

Many have wondered about our strategy for 2008. Keep in mind that this information is highly confidential and should not be shared with others outside of the company. You shouldn't talk about this in a public place. You shouldn't dream about it at night. Don't tell your spouse, your lover, your hairdresser, or your best friend. To let this information out to our competitors would be disastrous.

Our strategy is:

Sell More

Spend Less

In addition, as always, we will be looking to partner with companies that can help us achieve one of these two key strategies. We may even invest in them, but it is never our goal to own these companies.

Executing on these two strategies can only lead to success for our powerful company.

First Post

Hello and welcome from your leader. As part of our annual employee survey it was determined that our executive team needs to communicate more with our employees. I have taken the step of creating this private blog to inform you of some of the things that our executive team is doing to create value for the company.

Since I understand that morale isn't the greatest right now, I have comments turned off. My Mercedes S65 is still in the shop from where some hooligan scratched "YOU SUCK" in to its otherwise pristine paint job. When such juvenile acts acts cease, I'll experiment with allowing the troops to comment.

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