After months of self-promotional announcements about its bright future, a small, publicly traded plastics company in Beachwood, Ohio, has seen its stock tumble after failing to live up to its optimistic projections.
Stock in Fix-Corp International Inc., currently traded on the over-the-counter electronic bulletin board, has lost nearly 75 percent of its value since late April. The decline has occurred as the plastic pallet maker has fallen well short of aggressive growth targets established by its founder, chairman and chief executive officer, Mark Fixler.
``There have been some off-the-board projections made [by Fix-Corp] that simply haven't been met. To me, that's a red flag and probably explains why the stock is doing so poorly,'' said an equities analyst who follows the firm but did not want to be identified.
A different view was offered by Barrey Davis, senior vice president of Coast Business Credit Inc., a commercial financer in Los Angeles that provided Fix-Corp with a five-year credit line and term loan earlier this year.
``With what's happening in the [stock] market, you could shoot an arrow through a lot of small-cap stocks,'' he said. ``But we believe in this company and we believe in its management team.''
Fix-Corp has issued a steady flow of news releases to the financial community since its founding in 1995. Many of those releases promoted the company's high-growth prospects and often contained optimistic projections from Fixler, a village councilman who ran a jewelry company before starting Fix-Corp.
One of Fixler's boldest forecasts was made last April, when he appeared on ``Inside Wall Street,'' a radio program aired on WEVD-AM in New York. He told host Michael Cardascia that Fix-Corp expected to post $200 million in sales within the next three to five years. Fix-Corp's sales in 1997 were $8.4 million.
Although it started off as a purchase-order financing company, Fix-Corp now manufactures resin and recycled plastic products at its factories in Heath, Ohio, and Miami Beach, Fla. The company's staple product is the Power Pal 2000, a 48-inch-by-40-inch plastic pallet that it touts as an environmentally friendly alternative to wooden pallets.
One of many companies trying to crack into the plastic pallet market, Fix-Corp has extolled its prospects, in part by highlighting a contract with Advanced Environmental Products LLC.
According to an April 20 Fix-Corp news release, Advanced Environmental agreed to buy 1.35 million pallets during the next three years for $27 million.
That release didn't detail Advanced Environmental's business, and Fixler seemed unsure of the firm's location in a Nov. 20 interview with Crain's Cleveland Business, a sister publication of Plastics News. Fixler said he believes Advanced Environmental has offices in Nevada, but isn't sure.
``I think it's somewhere out West,'' he said.
Telephone calls to a Nevada listing for Advanced Environmental went unanswered.
According to a former Fix-Corp employee familiar with the contract, Advanced Environmental isn't just failing to answer its phone — it also no longer is buying Fix-Corp's pallets.
Fixler and other Fix-Corp employees declined comment on the company's relationship with Advanced Environmental. But Fix-Corp said Nov. 16 in its third-quarter report it stopped selling pallets to one of its initial customers because of ``the uncertainty of this party's ability to perform under the terms of their contract.''
In that quarterly report, Fix-Corp said it incurred a special charge of $1 million during the third quarter to cover lost sales because of that customer. Fix-Corp posted a net loss of $1.5 million in the quarter, compared to a net loss of $220,032 a year ago.
``Of course it's painful,'' Fixler said of the lost business. ``What we've learned is that we'd rather spread out our buyers among many companies than become too dependent on one distributor.''
The company took a step toward expanding its sales base on Nov. 24, when it announced a joint sales and marketing agreement with 3M Corp.'s Eco-Efficient Packaging Department.
Fix-Corp appointed 3M as a nonexclusive representative to sell Power-Pal pallets made by Pallet Technology Inc. Additionally, St. Paul, Minn.-based 3M appointed Fix-Corp as a nonexclusive representative to sell various 3M products throughout North America.
3M established Eco-Efficient Packaging to provide reusable packaging for manufacturers.
But even if Fix-Corp had well-established buyers for its pallets, it isn't producing nearly as many as it predicted it would.
In a June 1 news release, Fixler said Fix-Corp's pallet-making business would achieve ``full productivity'' during the third quarter of this year. At full production, Fix-Corp would be capable of producing 2 million pallets in 12 months — potentially creating $40 million in sales, Fixler stated in the release.
Now Fix-Corp is amending those earlier targets. Production stalled at Fix-Corp's Florida plant because its plastics molding machine broke down during October, it reported.
As a result, Fix-Corp had to inform two customers that it could not fill their orders, which meant another $1 million in lost sales, Fixler said Nov. 18.
``Naturally, those customers are upset,'' Fixler said. ``But we're doing our best to make up for those lost sales.''
Fixler said Fix-Corp probably will not achieve full production until later this quarter or early 1999. At present, the company is operating at only 10-15 percent capacity, he said.
In a Jan. 20 news release, Fix-Corp had predicted that its Pallet Technology unit would generate $20 million in sales by year-end. But, through the first nine months of the year, actual pallet sales amounted to $3.1 million.
Natalie Jacobson, vice president with Gordon Bros. Capital LLC, a Boston-based finance company that provided a $3.5 million line of credit to Fix-Corp in July 1997, said she isn't worried about its sales difficulties.
Last month, David Swank, who had been chief financial officer at hand-held computer maker Telxon Corp. in Fairlawn, Ohio, was named chief executive officer of Fix-Corp. But Swank only lasted nine days on the job.
On Oct. 30, Swank filed a lawsuite in Cuyahoga County Court of Common Pleas claiming he was fired without cause and seeking $664,583 in damages from Fix-Corp. Swank said last week he reached a settlement with Fix-Corp within a week after he filed the suit. He said the settlement did not include any damage payments from Fix-Corp.
``It was just a matter of chemistry,'' Fixler said. ``He came from a big corporate environment and this is still a small, growing organization.''