Here's a newspaper article that says Arthur "doesn't inspire investor confidence."
It also mentions the co. he was involved with was a favorite with short-sellers because of the background of the company's backers.
Sound familiar?
Maybe some things never change.
Here's the full story, with my emphasis added:
Times Publishing Company
St. Petersburg Times
February 18, 1990, Sunday, City Edition
SECTION: BUSINESS; Pg. 1I
LENGTH: 1833 words
HEADLINE: Had your tires buffed lately?Assix is on a roll with machine that
smooths out rough spots on tires
BYLINE: JAMES GREIFF
DATELINE: TAMPA
BODY:
The life of a car tire is anything but glamorous.
We kick them when they're new, curse them when they go flat and toss them
St. Petersburg Times, February 18, 1990
aside when they grow old and bald.
Well, it turns out that tires are actually sensitive souls, easily bent out
of shape by the beat-up wheels on which they are mounted.
And that's bad, according to the people who run Assix International Inc., a
Tampa company that wants every tire on the road to hum.
"As a tire rolls down the road, harmonic imbalances begin to occur," says
Assix consultant Charles Ross, an otherwise serious guy who gets vaguely
Zen-like once the subject turns to tires. All that commotion could cause the
tire to wear faster, putting more strain on the car's suspension and preventing
the car from riding smoothly.
Assix's angle on all this is a patented machine that the company claims
matches a tire to the wheel by buffing off any high or low spots. Assix calls
this technique "Tire Matching," and when the perfectly round tire is rolling
down the road it will deliver what Assix describes as "the new car ride."
There are some who believe that Assix is taking investors for a a different
kind of ride. And its stock, which closed Friday at $ 9.12 a share in
over-the-counter trading, has attracted a jungle of bearish investors known as
short sellers. Short sellers borrow shares from stock brokers and sell on the
open market, hoping to repurchase the shares in the future at a lower price.
They profit when share prices drop, and lose money when prices rise.
Checking out the resumes of some of those involved in Assix doesn't inspire
investor confidence. One of the company's financial advisors was fined and
suspended last year from the securities industry for insider trading.
A board member who once ran an investment firm was fined for regulatory
violations. In the early 1980s, several of the company's backers got mixed up
with one of the country's shakiest banks, Penn Square Bank of Oklahoma City,
which was one of the first oil patch banks to go kaput in a cloud of scandal.
It's not too surprising, then, that Assix finds itself pulled violently
between those who think its future prosperity is assured and those who think the
company is headed for the dogs.
If it all works out, Assix wants to convince consumers that tire matching is
an essential service, like wheel balancing. It doesn't want to steal a piece of
the $ 1.3-billion annual wheel-balancing business, it just wants to piggyback on
top of it.
St. Petersburg Times, February 18, 1990
Dealers should love it. Tire balancing is the single greatest source of
profits for tire retailers.
The company has important backers, including some of the biggest tire
retailers in the country, such as Sears, Roebuck & Co., Pep Boys Manny, Moe &
Jack Inc. and Western Auto Co.
"Our automotive executives were very impressed with the results of
demonstrations," said Richard Williford, a Sears spokesman. "They felt it was so
superior to just traditional tire balancing that they gave it the go-ahead."
Sears signed a contract last year to install Tire Matching machines in all 820
of its auto care centers.
Assix is actually a reincarnation of a company called Autodynamics Inc. that
tried the same thing 10 years ago. It burned up a lot of money with an
ill-conceived marketing plan and went nowhere.
The idea behind Tire Matching is this: Every tire that comes from the factory
is perfectly round. As part of the final preparation, any rough spots, bumps or
deviations are buffed off.
But the average wheel on the road has pounded over thousands of miles of
St. Petersburg Times, February 18, 1990
pavement, slammed into potholes and banged against curbs during parking. The
wheel may look round, but it has probably been knocked slightly out of kilter.
Put a brand new tire on this wheel and the tire doesn't stay exactly round.
The Assix machine, invented by 46-year-old company founder R. Park Newton
III, works just like similar machines at tire factories. It inflates the tire,
applies an 800-pound load, and rotates the wheel. A computer scanner picks up
the spots that are out of whack and buffs them off. The tire is then put on a
traditional balancing machine and weights are attached to the rim.
"We're not correcting a defect or problem with the tire," Ross said. "We're
putting the tire in harmony with the entire wheel assemblage."
Tire professionals say the procedure may have some merit. "No tire assembly
is ever round," said Bob Lee Jr., owner of Bob Lee's Inc., a St. Petersburg tire
dealer. "If it trimmed off the high and low spots it might help."
But Lee said that in most cases "I don't see any advantages. Maybe it would
help if you had a real out-of-round situation, but 99 percent of all tires will
ride fine without it," provided the wheel is balanced. "It sounds like more of
a marketing idea than anything else."
St. Petersburg Times, February 18, 1990
Still, Sears liked the idea so much that last May it signed a contract to
rent Assix machines for its auto centers. The company now has about 1,500
machines in place at major tire outlets around the country. To help it finance
its expansion, Assix recently secured $ 15-million in loans from a combination
of banks and insurance companies.
For each machine installed, Assix collects a $ 590 initial fee, monthly rent
of $ 295 and a user fee of 18 cents per tire.
The charge to the customer is steep: $ 12.50 a tire at Sears compared with $
7 a tire for balancing. Ross, the Assix consultant, claims that 85 percent of
all tire customers agree to the Tire Matching procedure, compared with 91
percent who have their wheels balanced.
Each machine costs about $ 7,500, which includes the cost of training tire
dealers on selling Tire Matching to consumers. After two years of operation,
Assix claims it recovers its costs and starts making a profit.
Despite start-up costs, Assix has seen its profits grow smartly. Net income
for the fiscal year ended June 30 was $ 479,377, a 41 percent gain from a year
earlier.
St. Petersburg Times, February 18, 1990
For these reasons, Assix stock is a favorite among some investors. Within the
last year, Assix shares traded as low as $ 5.125 a share in over-the-counter
markets. Friday's close at $ 9.12 a share is near its 52-week high of $ 9.62 a
share.
There is plenty of downward pressure on Assix stock, however. Out of the
1.92-million shares that trade on OTC markets, 235,128 shares were sold short as
of Jan. 15. Short sellers say it is the history of Assix and its backers that
makes them doubt its long-term profitability.
The predecessor of Assix got its start in 1972. At the time, Newton owned an
Tampa auto service business.
In 1975, he began doing some tire research with the aid of General Motors
Corp. GM dropped out eventually, leaving the field open to Newton, who took out
patents on the technology. The main patent expires this year, leaving the way
open to competitors.
By 1980, Newton was ready to run with Tire Matching. He financed the
venture, which was called Autodynamics Inc., by selling limited partnership
shares that gave investors tax breaks that exceeded their initial investment. He
revved up a high-powered advertising campaign using 10- and 30-second
St. Petersburg Times, February 18, 1990
television commercials featuring comedian Arte Johnson, of Laugh-In fame.
"It didn't work," Ross conceded, adding that Newton "blew about $ 1-million"
in the first start-up effort. The lesson learned, Ross said, was that nobody
rushes out to get their wheels balanced simply to marginally improve the
performance of their tires. "We could have advertised on the Super Bowl till
the cows came home and people still wouldn't have gone out to get their wheels
balanced," he said. After the first aborted effort to get the business off
the ground, Newton tried his hand at real estate. He was only slightly more
successful.
Among his ventures was an investment in raw land in a Tampa office project
called Century Park. One Newton partner was John E. Kearney, former chairman of
Park Bank, the St. Petersburg bank that collapsed in February 1986 in the
biggest bank failure in Florida history. In late 1986, Newton and Kearney wound
up in foreclosure on the land deal to the tune of $ 7-million.
Ross acknowledged that Newton did poorly in real estate investing.
Other Assix backers had their own pratfalls.
In 1981, George Karpay and James J. Carlstedt, Assix directors, and S. Lee
St. Petersburg Times, February 18, 1990
Puckett, Assix's investor relations manager, joined in an Oklahoma
oil-exploration limited partnership. The partnership borrowed $ 2.6-million from
Michigan National Bank.
As collateral, each partner pledged a letter of credit drawn on one of the
loosest money shops around, Penn Square Bank of Oklahoma City. Penn Square
subsequently failed in one of the biggest banking fiascos in history, ultimately
pulling down Continental Illinois Corp., which had to be propped up by the
federal government in 1984. The letters of credit were withdrawn and the members
of the partnership were sued by Michigan National.
Meanwhile, Carlstedt was running an investment firm in Tampa, Carlstedt
Associates Inc., which disbanded in 1986. In 1982 and again in 1984, the firm
was fined by the National Association of Securities Dealers (NASD) for failure
to maintain proper capital levels.
And last year, an Assix financial consultant, Porcari Fearnow Advisors, of
Houston, and its two principals, Arthur J. Porcari and Michael T. Fearnow,
were fined $ 10,000 each and suspended from securities trading for three months
by NASD for insider trading violations committed in 1987.
Assix has heard the complaints, Ross said. All the company has to do to
St. Petersburg Times, February 18, 1990
send the doubters running is perform, which it has so far, he asserts.
The short-sellers "didn't think we would get the Sears contract and we did,"
Ross said. "Then they didn't think we would get the ($ 15-million) in loans, and
we did. We think there is no way to go but up."
A LOOK AT ASSIX INTERNATIONAL
Revenues
1987 1988 1989
$ 1,230,117 $ 1,695,467 $ 2,804,109
Net income
1987 1988 1989
$ 245,744 $ 351,908 $ 479,377
for fiscal years ended June 30.
Company
facts
Founded: in 1972 by R. Park Newton III.
Employees: 70
Headquarters: in Tampa.
Biggest customers: Sears, Roebuck & Co., Pep Boys Manny Moe & Jack Inc., Western
Auto Supply Co. and Grand Auto Inc.
St. Petersburg Times, February 18, 1990
GRAPHIC: COLOR PHOTO, DAVID MILLS; BLACK AND WHITE PHOTO, (2); Sears emplyoee
Paul Schraedler works on a "tire matching" machine as Jim Newman, from Assix
International Incorporated, looks on; R. PARK NEWTON III; JOHN KEARNEY
LANGUAGE: ENGLISH
LOAD-DATE: November 11, 1992 |
