Education And Training

Facebook Inc. might be the most anticipated and hyped initial public offering in years, but as a symbol of American industry, the social network’s virtual farms, family snapshots and “pokes” aren’t exactly Ford Motor Co.

Still, Americans and investors should take heart. Though the IPO market has been slow and buyers cool to new issues, there always will be some stock offerings that are better examples of Yankee ingenuity and dynamism than others.

Last year, while Zynga Inc., Groupon Inc. and LinkedIn Corp. grabbed the headlines, a number of lower-profile IPOs also made their way to the market as part of a total of 125 debuts in the U.S.

Unlike Facebook, these lesser-knowns don’t operate in a virtual world. They make real things, sell real things and make real profits.

For example, ServiceSource Corp., based in San Francisco, is a sort of grown-up that takes care of young technology companies. It provides tech start-ups with business acumen: revenue management, analytics and service contracts.

In other words, ServiceSoource does the business part of the tech business so the nerds can create the next Twitter or Angry Bird.

As an investment, ServiceSource has been a big winner. Its shares debuted in March and are up more than 70% from the company’s $10-a-share offering price. 

Another IPO success: Sagent Pharmaceuticals Inc. The stock is up 46% since April. What makes Sagent unique is its product line. Last year, the company got Food and Drug Administration approval for an antibiotic used to treat bacterial infections and another antibacterial injection system that avoids latex.

Sagent, based in Schaumburg, Ill., has more in the works. The company is in partnership with other firms to create medical devices and drugs aimed at improving delivery of medicine.

Diversified machinery maker Thermon Group Holdings Inc. developed high-tech “heat tracing” for big industry. In layman’s terms, Thermon basically improved the way pipes were heated to avoid freezing.

Thermon’s stock has been hot, too. Since pricing at $12 a share in May, the shares are up 55%. The company was owned by two private-equity companies before being sold to the public.

Other companies with everyday roots also had impressive IPOs. Spirit Airlines Inc. wowed investors with its low costs and high margins, and the air carrier’s share price is up 52% since it debuted at $12 a share in May.

Dunkin Brands, the parent of Dunkin’ Donuts, is up 51% from its $19 offering price.

Investors dazzled by all the social-networking hype might not have bothered to even look at those IPO opportunities, but they’ll have other chances before Facebook hits the stock market this spring.

Ceres, which sells seeds used to produce renewable bio-energy feedstocks, is expected to price this week. The 16-year-old company, based in Thousand Oaks, Calif., had $7 million in sales in the last year. 

Also expected to make its debut will be ChemoCentryx, based in Mountain View, Calif. The company is developing drugs to combat Crohn’s disease and rheumatoid arthritis in a partnership with GlaxoSmithKline PLC. Another promising bio-tech company, TVAX Biomedical, a developer of cancer-cell vaccinations and other treatments, is coming to market, too.

Does that mean investors should bet the farm on these companies? Of course not. Compared to Facebook, though, they rely far less on hype and hysteria.

It’s also a good reminder that the entrepreneurial spirit isn’t confined to ways people waste time on the Internet. 

These nascent public companies employ thousands of people, and they are likely to hire more as they put their IPO proceeds to work. The same firms are creating products. Some of the biotech and pharmaceutical companies might help our loved ones live longer.

Ceres is a true 21st-century enterprise that might just help cut energy costs and keep the world cooler.

Together, they are best and brightest signs of an economy that many people wrongly see as built on diversions: social networks, iPhones and iPads, and streaming movies. 

Not that those things are bad—or even bad investments. But there are some of us—and investors, too—who appreciate companies that improve our time rather than waste it.

Write to David Weidner at david.weidner@dowjones.com

By KAREN DAMATO

I am 78 and have been taking minimum distributions from my IRA. I use TurboTax and haven’t encountered a provision to separately account for the after-tax contributions I’ve made. As far as I can tell, I am paying full tax on my distributions.

According to one of your columns, calculating the amount of the distribution that isn’t subject to tax is possible. Is that still true?

KAY MICHAEL

Austin, Texas

The tax treatment of distributions from individual retirement accounts depends on the tax status of the dollars you contributed. If you deducted all your contributions upfront, you owe tax on every dollar you withdraw. But to the extent that you made some nondeductible contributions of money that had already been taxed, those dollars don’t get taxed a second time when you pull them out. In that case, part of each distribution is tax-free until you recover all your nondeductible contributions.

The rules are explained in Internal Revenue Service Publication 590 on Individual Retirement Arrangements. Look for the section titled “Are Distributions Taxable?”

In TurboTax, when you enter information about IRA distributions reported to you on Form 1099-R, the software asks if you ever made nondeductible contributions. If you missed that option, Bob Meighan, a vice president of Intuit Inc.’s TurboTax and a certified public accountant, says you should use the software to revisit that section for tax years 2008, 2009 and 2010—the three years for which you can still file amended returns. Then, you can use TurboTax to file those revised returns and get back any overpayment.

***

My wife, who is 58, has been collecting Social Security disability for several years. Before becoming ill, she had worked for 29 years. If she predeceases me, is there a survivor benefit for which I would be eligible? I am 57 and still working.

JOSEPH NOLAN

Rochester, N.Y.

If your wife predeceases you, you would indeed be eligible for a survivor benefit based on her work record. A widower, just like a widow, can collect that benefit as early as age 60. The monthly amount, though, would be reduced if he began collecting before his full retirement age, which is 66 for people born between 1943 and 1954. Part of the benefit would also be withheld if he were still working and his earnings exceeded certain thresholds.

There are valuable planning opportunities for individuals eligible for both a survivor benefit and a retirement benefit based on their own work record: They can start with one benefit and then switch to the other at a time they choose. That includes starting one benefit early, at a reduced amount, and then switching to the other at full retirement age without a similar reduction.

It might be most advantageous to stick with the survivor benefit past 66 before switching to an earned benefit. For each year a person delays collecting retirement benefits past full retirement age, up to age 70, he or she would get delayed-retirement credits that boost the eventual check by 8%.

***

I have considered opening Roth IRAs for grandchildren as they start to work. One is now working part time and in college. If I contribute to a Roth, would that IRA reduce support from colleges?

JIM NELSON

Naperville, Ill.

IRAs and other retirement plans don’t get reported as assets by students—or, for that matter, their parents—on the Free Application for Federal Student Aid, or Fafsa. So funding Roth IRAs for your grandchildren wouldn’t affect their financial-aid eligibility under federal rules.

IRAs are reported on the supplemental CSS/Financial Aid Profile form used by many private colleges in deciding their financial assistance to students. However, “the impact on aid of extra assets is relatively minimal,” says Mark Kantrowitz, publisher of the website FinAid.org. He says financial-aid concerns aren’t a significant reason to hold back if you are inclined to get your grandkids started on long-term savings.

That advice, though, assumes the Roth IRAs would indeed be used for distant expenses, and not for the grandkids’ college bills. Mr. Kantrowitz points out that if a student takes a Roth IRA distribution, that would be counted as income on the Fafsa, affecting the federal aid determination. A 529 plan would be a better choice for saving for college.

Next welcomes your questions at next@wsj.com. Ms. Damato is a Wall Street Journal news editor in South Brunswick, N.J.

By SIMONA COVEL

When it comes to cutting costs during tough economic times, many small businesses start out with a disadvantage: They don’t have all that many costs to cut. Even during good times, small businesses tend to keep expenses pretty tight.

The result is that small companies often have to get creative in their efforts to find waste in places where little exists.

Here’s a look at four companies that have cut their overhead expenses without sacrificing inventory, daily necessities or their employees:

Tracking the Trucks

Kenneth Bravmann, an operations consultant at Marjam Supply Co., knew the building-supply company was wasting money on gas and losing efficiency when drivers got lost. And he found out just how much after the company installed Global Positioning System equipment in most of its 165 flatbed trucks, which haul supplies to construction sites.

The Brooklyn, N.Y., company began installing the equipment about 18 months ago, and executives quickly realized wrong turns weren’t the only money wasters. “Now we know where our trucks are,” Mr. Bravmann says, “and we make sure [drivers] aren’t going out of route or stopping at home [or] at their girlfriend’s place.” In the early days, about 15% of the truck drivers had to be reprimanded for driving off route.

Drivers now are more efficient — and even more cautious since the system also transmits the trucks’ speed. A dispatcher monitors the trucks’ locations and time spent at each stop. And the GPS boxes transmit whether a truck is sitting idle, which wastes fuel and is illegal in some localities.

Some drivers griped. “They took it as Big Brother” watching, Mr. Bravmann says, but all the drivers appreciate having the system when they get lost.

Each GPS device costs $450 to $600, plus $100 for installation. The subscription fee is $26 per month per box.

Mr. Bravmann says it’s difficult to place a dollar value on the savings; drivers’ time is a big part of it. Altogether, he estimates, the company is saving about 10% of the cost of running the trucks.

The company is considering upgrading to a more sophisticated system that tracks how long a driver spends at certain types of stops, in order to track which drivers are the most efficient and who is lagging behind.

Filling the Store With Fakes

George Falzon, the owner of jewelry store G. Falzon & Co. in Holliston, Mass., has been hit by high metal prices and a tough economy — dual pressures that are weighing down small jewelers nationwide.

That left him with lots of pricey display bridal jewelry sitting around. So about four months ago, Mr. Falzon began stocking his store with different types of displays: faux pieces.

The new display engagement and wedding rings come from one of his usual vendors, a line called Authentix by wholesaler Overnight Mountings Inc. But the jewelry isn’t real gold or platinum. It’s crafted of plated silver, with cubic zirconium centers. He readily tells customers that the display pieces are replicas. Since most bridal jewelry is special-ordered anyway, customers generally don’t mind, he says. The real pieces take about a week to arrive.

Having lower-cost replicas serve as display pieces is saving Mr. Falzon about $75,000 in inventory at any given time. That means he can spend less than he did before and offer four times as many styles of engagement rings and wedding bands.

“This program puts me in the same league as a chain store with deep pockets” in terms of selection, he says.

Mr. Falzon does keep a few real gold and platinum settings in the store, he adds, “if the guy wants to get on his knee that night.”

Find the Little Things

Like banks across the country, Connecticut Community Bank N.A. has seen the value of real estate decline and nonperforming assets increase over the past few months. So the Westport, Conn., bank, which has nine branches across the state, went on the hunt for expenses that could be trimmed — and didn’t come in the form of salaries or benefits.

Working with Expense Reduction Analysts Inc., a consulting company in Carlsbad, Calif., that helps businesses cut expenses, the bank’s staff pored over the company’s office-supply and printing expenditures — a common culprit for wasteful spending, according to Expense Reduction Chief Executive Ken Hagerstrom.

Expense Reduction found that simply by ordering larger quantities of printed materials like forms and letterhead less frequently, the bank could take advantage of the printer’s bulk discount. Similarly, by using one vendor for office supplies rather than three, the company could place larger orders and pay less.

Altogether, says Bill Laudano, Connecticut Community Bank’s chief financial officer, the bank expects to trim 10% from its office-supply and printing budgets annually. ERA’s Mr. Hagerstrom estimates that will add up to about $40,000 a year.

Next up, the company plans to take a look at telecom expenses, evaluating its phone, fax and Internet services.

Losing the Office

Alliance Home Mortgage Inc. closes 15 to 20 transactions a month these days, down from as many as 60 a few years ago. And its staff is down to five people, from 15.

Paul Vitale, president of the Boca Raton, Fla., mortgage provider, has seen many of his competitors in the same predicament eventually close their doors forever. And he wanted to avoid that fate.

He considered putting personal money into the business. It was something he had seen a few of his contemporaries do — but some ended up going out of business anyway. So he decided it was time to make drastic cuts to the company’s overhead expenses.

And Mr. Vitale knew the big culprit was his $10,500 monthly rent.

At first, he looked into a lower-cost alternative, executive suites, which are small offices that house one or two desks and cost about $800 each per month. But he would have needed two or three to fit all of the company’s staff, an arrangement that wasn’t ideal.

Instead, Mr. Vitale decided to forgo office space altogether. He signed up with CES Virtual Offices, a company that offers clients a receptionist to answer calls, a corporate mailing address, and email and fax services — all while the staff works from home.

CES forwards calls and faxes. Voicemails are delivered to Mr. Vitale’s home phone and are also sent to his email inbox as sound files. Faxes are sent via email as PDFs. If Alliance Home Mortgage’s staffers want to meet clients in person, they can go online and book local conference-room space provided by CES.

Mr. Vitale spends about $500 per month altogether for the virtual-office setup. He doesn’t cover employees’ home-office expenses, but he does offer an extra 5% commission to his salespeople as compensation — which generally comes to between $1,000 and $2,000 per month. Because that expense is correlated with sales, it’s easier to manage than extra rent, he adds.

Mr. Vitale’s most potent fears — that email or fax forwarding wouldn’t work — have been unfounded, he says. He does miss the camaraderie of an office. “But when I think about the money I’m saving,” he says, “I don’t miss it quite as much.”

Write to Simona Covel at simona.covel@wsj.com

Printed in The Wall Street Journal, page B5

By CHUN HAN WONG

SINGAPORE—CapitaLand Ltd.’s fourth-quarter net profit fell 20% from a year earlier, but the property developer is still optimistic about weathering an uncertain global economy and government intervention in China and Singapore’s real-estate markets.

Declines in development income and gains on its portfolio weighed on the result. CapitaLand is Southeast Asia’s biggest property developer by market capitalization.

Despite slower growth forecasts globally and softer property demand in Singapore and China following government efforts to rein in prices increase, CapitaLand remains “confident in the long-term prospects of these two markets,” the group said in a statement Tuesday.

Residential sales in Singapore are likely to fall in the short term after government moves in December to curb demand for investment properties, the company said, but added that “a significant price correction appears unlikely due to the ample liquidity and favorable interest-rate environment.”

Net profit for the quarter was 476.6 million Singapore dollars (US$379.6 million), down from a restated S$596 million a year earlier. Excluding revaluations and impairments, the company had a profit of S$221.9 million in the fourth quarter.

A survey of five analysts by Dow Jones Newswires yielded an average net-profit forecast of S$193 million. The analysts had expected lower revaluation gains and greater impairment losses.

CapitaLand restated its 2010 results after adopting financial-reporting standards last year that require overseas and selected Singapore projects to be recognized only upon full completion. It had originally reported a fourth-quarter 2010 net profit of S$522.1 million.

Revenue for the three months ended Dec. 31 was S$1.06 billion, up 17% from a restated S$903 billion a year earlier, the company said. It announced a total dividend of 8 Singapore cents per share for 2011.

For 2011, net profit was S$1.06 billion, down 26% from a restated S$1.43 billion.

Write to Chun Han Wong at chunhan.wong@dowjones.com

Next year, you’ll likely pay more for your workplace health benefits, but you may have to read the fine print to figure out where the bite will come.

As companies head into open-enrollment season, when they let employees pick their plans for next year, many firms say they are reluctant to boost health-care premiums too sharply at a time when wages are stagnant. Instead, workers can expect to pay significantly more for such out-of-pocket items as deductibles, co-payments and other fees.

Employees’ charges next year are expected to jump 10.1% from 2008, to an average of $1,880, according to a recent projection by Hewitt Associates, a benefits consulting firm. By contrast, health-care premiums are expected to rise 7.8%, after posting double-digit percentage gains in four of the last five years. In 2008, out-of-pocket costs also increased 10.1%.

Workers are generally on the hook for various fees whenever they visit a doctor, fill a prescription or go to a hospital. These costs can vary depending on the type of health plan they choose. Hewitt says the average employee spends only about five to 15 minutes on open enrollment, and nearly two-thirds of workers select the same option they picked the previous year. So many people may not notice any new charges, which often aren’t as obvious as changes in premiums. Of course, they’ll probably figure it out once they start getting bills.

Lauralee Schiraga, a nurse from Brewster, Mass., says she was surprised when she was billed $250 last month for a breast biopsy that had been done to check on a suspicious mass. Around the same time, she got another $250 charge, this time for an endoscopy ordered by her doctor after she had digestive problems. She called her health insurer and was told the bills were her co-payments for the out-patient procedures.

“It never occurred to me for one second they would charge me $250 for an outpatient procedure,” says Ms. Schiraga, who says she could only afford to send $50 initially to each hospital. “I was beside myself.” Afterward, when she closely reviewed the benefits information from her employer, she found the co-payment listed in the middle of a page full of small text. Next year she plans to set aside money for such expenses.

Employers say another reason they are raising fees at a faster pace than premiums is fairness: Higher fees place a greater cost burden on workers with the highest expenses. Forcing employees to pay charges out-of-pocket also makes them more aware of how expensive medical services really are, some employers say.

“Folks don’t know how much things cost,” says Robert Meyer, vice president and co-owner of Johnstone Supply of Atlanta, a wholesaler of heating and cooling equipment. “Health care is one of the few things your average consumer doesn’t shop for.”

Starting last month, Johnstone sharply increased the maximum employees are required to pay out-of-pocket for self-injectable drugs, such as the rheumatoid arthritis treatment Enbrel. It raised co-payments only slightly, and didn’t boost employee premiums. Johnstone also began for the first time requiring all of its workers to pay a deductible, which will be $2,500 for an individual. The company plans to offset the cost of deductibles through health-reimbursement arrangements, which are tax-advantaged accounts that allow employers to set aside money for workers’ health expenses.

Getty Images

Linda Hoffman and her granddaughter, Riley Bulnes, 4, pick up prescriptions from a Publix Supermarket in Miami, Florida.

Higher costs can prompt some people to forgo care that may be needed. A forthcoming survey by human-resources consultant Watson Wyatt Worldwide, which tallied 2,487 American workers this spring, found that cost concerns had driven 17% of them to skip a recommended doctor visit. The same percentage had failed to fill a prescription or had skipped doses.

If you are choosing your workplace health plan soon, here are some things to watch.

Paying Your Share

For services such as doctor visits, hospital stays, outpatient procedures and imaging scans, keep an eye out for higher co-payments. These can kick in whether you are in a traditional preferred provider organization plan, which offers more coverage for care provided by preferred doctors, or a health-maintenance organization plan, which traditionally requires participants to use approved physicians for nearly all services.

Also be alert for shifts from flat co-pays to co-insurance charges, which typically require you to pay a percentage of the total cost of a service and often take far more out of your wallet.

Briggs & Stratton Corp., a Milwaukee-based maker of small engines and lawn mowers, has done away with most co-payments in its main plans — a standard preferred-provider organization and a high-deductible option. In the standard PPO, workers pay 20% for all medical services with providers in the plan’s network, including doctor visits. That comes with an in-network, out-of-pocket annual maximum of $5,500 for an individual and $11,000 for a family. “There’s a much better case for shopping around” among medical providers if employees are paying a percentage of the cost of care, rather than a flat co-pay, says R. Craig Reynolds, the corporate director of employee benefits.

Fees can be structured in different, and sometimes confusing, ways. Some employers’ plans may demand a co-payment for each day you’re in the hospital, while other plans levy a fee for each stay. Ken Goulet, president of WellPoint Inc.’s commercial business unit, warns that in certain employer plans, a hospital admission may require a co-payment, and then separate co-insurance charges for services during the hospital stay. “Don’t just think, ‘Wow, a $200 co-pay, this is great,’” he says. “It may not just be a co-pay.”

Some employers also are raising the maximum workers are responsible for paying in out-of-pocket costs each year. One tricky twist is for the annual deductible not to count toward that cap, sharply increasing the total you could spend.

Taking Your Medicine

Keep a close eye on your medications. Most employees by now are accustomed to paying less for generics than for brand-name drugs. But if your employer tweaks the design of the drug benefit, the changes may have a substantial impact on your costs, or even knock your drug off the approved list altogether. In a recent employer survey by the Kaiser Family Foundation and the Health Research & Educational Trust, 41% of those offering health benefits said they were very or somewhat likely to increase workers’ drug expenses in the next year.

Drugs injected in a doctor’s office, which are often high-priced medications for such diseases as cancer, are one area to watch. Some plans that have lumped these in with the co-pay for physician visits may now charge separately for the medicine.

Eric Smith, a middle-school technology teacher in Dalton, Ga., who gets his health benefits through a state agency, has to pick a new HMO this fall because his plan will no longer be offered next year. He expects his premiums to go up by about $12 a month. But his drug costs will rise much more sharply, by more than $50 a month, mainly because of two brand-name medicines he takes that aren’t on the state’s preferred list; he says cheaper alternatives didn’t work as well. “That just negated my raise this year,” he says.

Filling Your Needs

Check for coverage of any care you know you will need; don’t assume it is included. Some employers looking to limit costs may trim certain benefits, though this isn’t expected to be widespread. Consultants say they’ve seen some clients cut back in areas including physical therapy and speech therapy. You should watch for limits on equipment such as hearing aids and prosthetics.

Once you’ve done your due diligence on the coverage options, decide what’s best for you. You may opt for a plan with more out-of-pocket charges and a lower premium. At the most extreme, there are high-deductible plans paired with health-savings accounts, a model being pushed by many employers but slow to catch on with workers. The key is to understand the real costs and coverage you get with each of the plan options.

McDonald’s Corp., for instance, offers its 18,000 eligible U.S. employees three different PPOs. The most popular is the one with the highest premiums, but no deductible and a flat co-pay for doctor visits. The plan with the lowest premium comes with a $1,000 deductible for a single employee and a company-funded health-reimbursement arrangement. In the middle is a plan with a $250 deductible and a 20% co-insurance charge for in-network doctor visits. McDonald’s offers online tools to help employees choose. Says Bob Wittcoff, the company’s senior director of global benefits: “One size does not fit all.”

Write to Anna Wilde Mathews at anna.mathews@wsj.com

Printed in The Wall Street Journal, page D1