Asian pressures are impacting finances and operations at Compass Plastics & Technologies Inc., and the company is taking corrective actions.
The problems are centered in Mexico.
The Gardena, Calif., custom injection molder built a Tijuana plant in 1997. CPTI expected offshore electronics firms to boost activity to meet 2001 product-content requirements under the North American Free Trade Agreement of 1994, but Asian economic woes have slowed the process.
Meanwhile, after five months of negotiations, CPTI's proposed acquisition of Asian-owned Gumsung Plastics USA in Mexicali was terminated in mid-January.
On March 9, the Nasdaq market halted trading on CPTI stock, citing the need for additional information about the company.
CPTI has held off completing a required report for the fiscal year ended Oct. 25.
``The company is experiencing delays in the collection and compilation of certain financial and other information required to be included in the Form 10-K,'' CPTI said in a Jan. 22 Securities and Exchange Commission filing.
In early February, lenders Manufacturers Bank in Los Angeles and California Bank & Trust in Huntington Beach, Calif., called for CPTI to immediately repay loans totaling about $16 million.
CPTI had failed to comply with some financial covenants. The lenders have allowed CPTI to maintain day-to-day operations while negotiating to restructure the debt.
A CPTI official said the bank-debt problem is near resolution.
``We expect to work out an agreement in the next few days,'' Paul J. Iacono, CPTI vice president of finance and chief financial officer, said by telephone.
Economic instability in Asia has changed Asian business practices.
``Some companies have taken a nationalistic view, including one of Compass' customers so far, and are relocating some production back home to offset unemployment and enjoy favorable export prices due to currency devaluation,'' according to the filing.
CPTI believes the situation is temporary.
On Aug. 6, CPTI had reached an agreement in principle to acquire Gumsung's assets and operations. Economic uncertainties led the companies to terminate the deal, Iacono said.
Gumsung is a contract manufacturer and assembler of injection molded television cabinets and computer monitors and a subsidiary of Gumsung Plastics Ltd. of Kumi, South Korea.
CPTI expects to report a $2.5 million loss on sales of $50 million for fiscal 1998 compared to a $2.1 million profit on sales of $44 million for the previous fiscal year.
The 1998 results will include a nonrecurring tax loss of $1.38 million on the sale of real estate that CPTI owned in Gardena and now leases.
Iacono said CPTI plans three corrective actions within a few months:
CPTI will sell assets, yet to be identified.
CPTI will concentrate its manufacturing of electronics-related parts in the Tijuana facility, moving some from the Gardena plant.
CPTI will build up its domestic business at the Gardena site with some consumer products from outside the electronic market.
Compass Plastics makes enclosures, components and subassemblies and provides secondary services for computer-monitor, personal-computer, printer, consumer-electronics and medical-device applications.
