Audiotronics is not quite the hottest company in the San Fernando Valley. The North Hollywood maker of audio-visual products for classrooms has turned a profit in only two of its past five fiscal years--in 1982 and 1984.
Last April, the firm did sell an unprofitable video division. But even without the unit, for the six months ended Dec. 31, Audiotronics showed a profit of only $7,799 on $3 million in sales.
Into this bleak picture strides Joseph Mazin, president and chief executive of Flamemaster Corp., which makes flame-retardant coatings for cables and sealants for aircraft fuel tanks. Mazin says he sees things in Audiotronics' balance sheet that the stock market has ignored.
On Feb. 24, Mazin disclosed in a 13-D filing to the Securities and Exchange Commission, that Sun Valley-based Flamemaster Corp., along with an investment group, owns 5.2% of Audiotronics' stock.
Asked if this was the first step leading to a takeover attempt, Mazin said, "We've got bigger designs than buying for an investment, but I just can't say now."
The SEC filing revealed that Flamemaster may try to gain a controlling interest in Audiotronics.
Calls Not Returned
Audiotronics' executives did not return telephone calls from The Times.
Nor have they been returning Mazin's. As corporate raiders are wont to do, Mazin blames Audiotronics' executives of bad management.
"They just shouldn't be running that company as if they alone own it," Mazin said. "They are notoriously closed-mouthed. They don't talk to brokers, and that's their bread and butter. Why do you think the stock is so depressed?"
Audiotronics' stock has been moving in the wrong direction for quite some time. It closed Monday at $2.75. In 1980 the company's stock traded at a high of $11.50. By 1985 its high was $5.25, and in 1986, another strong year for the stock market, Audiotronics' high was only $3.25.
Mazin, however, contends the stock is underpriced. What shows up on Audiotronics' balance sheet as $1.4 million in long-term debt is not real debt, he says, because the company in effect owes much of the money to itself in the form of an Employee Stock Ownership Trust, a benefit plan.
"I'm looking at the company entirely differently from other investors," said Mazin.
Because of a large receivable due Audiotronics soon, Mazin figures the company's book value is about $1 a share higher than its current stock price. Moreover, Mazin said, he expects the company to turn a profit in this fiscal year's second half as it finally recovers after divesting its unprofitable operations.
According to Audiotronics' annual report, the video products division that it sold made closed-circuit television monitors and computer screens at a Taiwan factory. But the weak dollar forced Audiotronics to raise prices and it ended up taking a beating from competitors.
The company's remaining business sells Audiotronics-label record players, cassette recorders and related devices to schools. The products are made by subcontractors in the United States, Mexico and the Far East. Audiotronics employs 54, down from 220 a year earlier.
But if Mazin does take a run at Audiotronics, he admits its business won't "fit together" neatly with Flamemaster's, which has a well-defined niche in the flame-retardant materials market.
Flamemaster also owns a 59% interest of Los Angeles-based Altius Corp., which specializes in making steel cabinets used to store flammable liquids. Mazin is also chairman and president of Altius.
Mazin has tried diversifying before, without much success. In 1985, Flamemaster bought a 20% interest in privately held Sun Valley Cosmetics, a maker of beauty products sold under its own name and to bigger companies, including Max Factor and Redken.
"It never took off," Mazin said, explaining that the company had difficulties getting into the retail end of the business. Flamemaster has begun selling off its stake in Sun Valley Cosmetics.
Nevertheless, Flamemaster, which has only 23 employees, has been a consistent money-maker under Mazin's leadership.
Mazin, 40, says he has been a "good-luck charm" for Flamemaster since joining the firm in 1982. When the former financial planner came to the company, sales had been relatively stable, hovering just under the $3 million mark.
For the fiscal year ended last Sept. 30, Flamemaster reported net income of $311,020, or 22 cents per share, on sales of $4.7 million.
FLAMEMASTER AT A GLANCE
Sun Valley-based Flamemaster is a leading maker of flame-retardant coatings for electrical cables. Through its subsidiary, Altius Corp., the company also makes steel cabinets used to store flammable liquids. Flamemaster has 23 employees and 2.1 million shares of common stock outstanding.
AUDIOTRONICS AT A GLANCE
Audiotronics, based in North Hollywood, makes audio-visual equipment primarily for use in classrooms. It has 54 employees and 1.2 million shares of common stock outstanding.