Oak Industries Chairman E.L. McNeely has spent the past three years exorcising the ghost of Everitt A. Carter, his free-spending predecessor, from the Rancho Bernardo-based electronics company.
Oak's anticipated return to profitability later this year would help McNeely bury that ghost and what the 68-year-old chairman has described as the "most distressing" period in Oak's 55-year history.
But even if Oak escapes the sea of red ink that nearly swamped the Rancho Bernardo-based electronics company, McNeely still faces daily reminders of Carter's reign.
There's the lavish--but totally unnecessary--Spanish-style corporate headquarters building in Rancho Bernardo that Oak is trying to sell for $10 million--about $5 million less than it was asking two years ago.
During Carter's tenure, the 78,000-square-foot building, elaborately decorated and surrounded by plush vegetation, housed a 250-person corporate staff. A still-lean Oak now has about 50 corporate employees.
McNeely, the former chairman of Wickes Cos., who became Oak's "interim" chairman in November, 1984, has overseen the company's recovery from a beautiful corner office that is filled with beautiful artwork and furniture.
The luxurious building boasts wooden ceiling beams, balconies that overlook a park-like courtyard, an auditorium with wrought-iron chandeliers and an elaborate executive board room.
However, McNeely last week repeated to shareholders the same progress report he had delivered at two previous annual meetings:There have been offers for the building, but none which merit consideration.
At the annual meeting, McNeely told shareholders that the company is free from the complicated web of civil lawsuits and the Securities and Exchange Commission investigation generated by Carter's stewardship. Attorneys for the plaintiffs in those various class action suits are disbursing about $33 million to shareholders.
Industry analysts who stopped following the one-time high-flying media conglomerate prior to its crash in the early 1980s, are only now beginning to take a second look. One analyst, stock market forecaster Joe Granville, has been promoting Oak as an undervalued stock that is destined to make money.
The stock closed Monday unchanged at 1 3/4.
Finally, there's the building dedication plaque that was unveiled in 1980. Sitting atop Carter's signature, the plaque outside of Oak's conference room promises "a commitment to superior performance."
Observers credit McNeely with a superior performance that kept Oak from going under.
Analysts who are familiar with Oak's return from the near-dead agree with McNeely's prediction that the company could report an operating profit some time this year.
That would be no mean feat for the company that, since 1981, has accumulated more than $300 million in net losses. At the end of 1985, the company had a negative $69.9 million net worth, a condition which by the end of 1986 improved to a positive $65 million by virtue of Oak's sale of stock and a division to Allied-Signal Inc.
"Oak used to be a dog," said Fred Greenwald, an industry analyst with Woodmere Securities in Hulett, N.Y. "It was a terrible company that was terribly run but they've straightened the company out. While I don't think they'll break even this quarter, I do think they'll be darned close to breaking even during the third and fourth quarters."
Greenwald's optimistic outlook is tempered, however, with "disappointment" that Oak "has paid so much" for two acquisitions announced earlier this year.
Oak has declined to discuss figures, but the company earlier this year acquired the Quartz Crystal Components Group of New York-based Electronic Technologies, and bought the Railway Maintenance Equipment Co. from Rexnord Co. Oak subsequently sold off Quartz's Toronto-based Croven Crystals Ltd. business.
"They used up a lot of cash, and although I'm not against the (acquisitions)they've made, I really thought they'd go after a larger acquisition," Greenwald said.
Oak's remaining business--a blend of mid-tech electronic components and the railway bed maintenance company--are fairly well insulated from the effects of a recession, according to McNeely.
Additionally, Oak's cable television encoder and decoder business stands to benefit if the company wins a string of lawsuits that charge General Instruments, Zenith, M/A-Com Linkabit and some other cable television products manufacturers with infringing upon Oak patents.
The M/A-Com suit, filed last summer in Virginia, was transferred to San Diego earlier this year.
That suit, which mirrors the others, seeks "a reasonable royalty" from M/A-Com, according to James G. Hunter an attorney with Latham and Watkins in Chicago.
Hunter declined to speculate on what Oak would collect if the company prevailed in the suits.
"There are no numbers because it's awfully hard to predict the future," Hunter said.