From High-Tech to Retail Trade : SSI Banking on T-Shirts, Bumper Stickers
These days, T-shirts are in and TTDs are out at Specialized Systems Inc.
The long-suffering, often-controversial company--which started in 1977 making Telecommunications Devices for the Deaf (TTDs)--has transformed itself from a high-tech company going nowhere to a low-tech retail operation hopeful that cotton and polyester can weave some profits.
And profits have proved a relatively elusive pattern for the 9-year-old firm.
SSI’s latest deal, announced two weeks ago, calls for the Carlsbad-based company to furnish $100,000 to $200,000 worth of T-shirts and bumper stickers for the upcoming Miami International Jazz Festival.
Combined with an order from Glacier National Park, and a re-order from a previously announced two-year, $4-million contract with an undisclosed customer, SSI officials are predicting monthly T-shirt orders of about $400,000.
Repairing Equipment
SSI is still in the business, however barely, of marketing and repairing telecommunications devices for the deaf (TTDs), the high-tech products that launched the company into the publicly traded arena in 1977.
The emphasis is less on marketing TTDs than on repairing them, according to George Coleman, SSI’s chief operating officer.
Revenue from TTDs now makes up about 15% of total sales, he said.
How profitable SSI’s silkscreen T-shirt ventures are remains unknown, at least publicly.
Company officials maintain that SSI is now operating either at break even or at a slight profit. For the nine months ended Sept. 30--the latest available financial statements--SSI reported an operating loss of $265,200 on revenue of $393,000.
Net losses were lower--only $6,700--because of a gain on the sale of a discontinued division.
Year-end results for 1985 will be released soon, officials said. Projections call for sales in 1985 to total about $750,000.
The company earlier had asked the Securities and Exchange Commission for an extension to file its 1985 results.
Observers in Dark
The lack of up-to-date revenue and earnings figures has left some observers in the dark about judging SSI’s new direction.
“Is there follow-up business? Are there earnings on these T-shirts? Or are they doing it to spin wheels?” asked one analyst.
Cash flow problems do plague SSI, according to Chairman and Chief Executive Stephen J. Nemergut. “It’s tight, but we’ve been able to overcome it,” he said.
Nemergut said that he is “exploring” various methods to offset the cash flow problems, such as factoring the company’s accounts receivables or through a private placement of SSI stock.
The company’s cash flow snags will continue, according to one SSI source, “until they get a big enough revenue base.” The company’s problem, said the source, is waiting the 45 to 90 days to receive payment for the big orders.
Making T-shirts is a long way from where SSI was before Nemergut took over the company last year.
Nemergut, an SSI co-founder who owned a drug and grocery products marketing company in Van Nuys, last summer reorganized the company, selling off SSI’s unprofitable office communications product line and cutting marketing deals for the T-shirts.
Deals Fall Through
Since then, while some of his prospective deals have fallen through, the T-shirt marketing has accelerated.
“We’ll probably (generate) between $2 million and $2.5 million in sales for the first six months of the year,” he said.
Nemergut’s W.C. Fields Morning Magic, a hangover remedy marketed by his old firm, isn’t selling well, he acknowledged, and accounts for less than 2% of SSI’s sales.
Meanwhile, a deal calling for Tauren Industries to invest as much as $12 million into SSI over the next two years has been called off, Nemergut said. The deal, which would have been SSI’s entry into the Hong Kong business market, collapsed last month when Tauren failed to invest “a bunch of money,” Nemergut said.
Finally, a lawsuit between SSI and Raytronics, a San Diego-based electronics firm, was settled in January. After a binding arbitration hearing, Raytronics paid SSI $12,000.
