Valley Companies Sag as Stock Market Drags

As the stock market collapsed over the past month, TransTechnology chairman Arch C. Scurlock saw shares of his company’s stock plunge 45%.

Reacting to the rapid price drop, Scurlock on Wednesday linked directors of the Sherman Oaks-based aerospace company by telephone for a meeting. The directors decided the stock was so cheap that the company might as well buy back up to 300,000 shares and, hopefully, shore up the price. But despite their efforts, the stock continued to slide, sinking $1.75 Monday to $16.25 a share, down from nearly $30 a share just three weeks ago.

The drop in TransTechnology’s stock price has concerned Scurlock not just as a company executive, but as a personal investor as well. He owns about 1.1 million shares, primarily through a Virginia investment company in which he owns a 95% stake, that have dropped in value by about $15 million within the past month alone.

“It’s not just on paper. This stock pays dividends and it has collateral value. It’s money because you can convert it into money,” Scurlock said.

Plunge Takes Toll

The stock market plunge this month has taken its toll on San Fernando Valley-area companies like TransTechnology to the tune of hundreds of millions of dollars, in some cases deflating the net worth of some of its top executives by millions.

Chairman Lew Wasserman’s stock in entertainment conglomerate MCA, for example, has fallen $129 million in value, while Walt Disney Vice Chairman Roy E. Disney has seen his stake in Disney plunge by $42 million.

Valley companies that were once considered hot have sagged in price. Disney, the Burbank entertainment company and one of Wall Street’s favorite stocks the past three years, has dropped more than 40% since the start of the month to $46 a share. Micropolis, a Chatsworth maker of disk-drive memory devices for computers, which has been one of the hottest high-technology stocks this year, has dropped 60% this month to $14 a share.

(Stock prices in this story and in accompanying charts are based on composite closing prices and may differ from the Valley Stocks chart on page 9B that lists closing prices on the primary exchanges on which the stocks trade.)

And the slide continues. On Monday, the Dow Jones industrial average fell another 156.83 points, or 8%, to 1,793.93. The loss comes on top of a drop in the Dow of nearly 300 points last week and a 953-point drop, including a 508-point tumble on Oct. 19, since the widely followed index reached an all-time high of 2746.65 on Aug. 25.

Surprisingly, some area executives most affected seem almost indifferent to how the market’s collapse has hurt their own fortunes. They note that because they don’t plan to sell their stock soon, they only consider what they have as paper wealth.

Price Pfister chairman Peter S. Gold’s 3.4 million shares had a market value of $51 million when the Pacoima faucet maker first sold stock publicly in July at $15 a share. As of the end of last week, Gold’s stock had dropped $18 million in value to $33 million.

For someone who has lost so much, albeit all on paper, Gold said he’s unfazed.

“When we made the decision to go public, I decided not to pay attention to what my stock is doing on a daily basis,” he said. “I’m not a seller and I’m not a buyer.”

Redken President John Meehan said he is more concerned about the effect on employees who own stock than with the $8 million on paper he and his wife--Paula Kent Meehan, the company’s chief executive--have lost during October. His wife currently owns about 1.2 million shares in the Canoga Park hair-care company, Meehan said, while he has about 170,000.

“When a stock drops $3 a share, that’s $3.5 million that you had yesterday that you don’t have today. But I’ve seen it happen 30 times in the last 15 years, so I don’t give it a second thought,” Meehan said.

Executives Become Buyers

And some executives became buyers last week. Executives of Cherokee Group, a North Hollywood shoe and clothing company, said chairman James Argyropoulos bought 12,000 shares. He owned or controlled about $30 million in Cherokee stock at the beginning of the month that is worth less than half that amount now.

Like TransTechnology, some major local companies reacted to the falling prices by announcing plans to buy back their stock, as did more than 100 major companies nationwide. Among the local companies announcing stock purchases last week were Lockheed, Walt Disney, MCA, Syncor, Redken, Zenith National Insurance, Dataproducts, Cherokee Group, TransTechnology and AME.

In some cases, however, the buybacks were nothing new. Charles Junkunc, Dataproducts’ vice president of finance, said the Woodland Hills computer-printer manufacturer regularly buys back its stock. And Redken said its plan to buy back up to 600,000 shares of its stock had been decided at a Sept. 25 directors’ meeting.

Most companies announcing buybacks, however, said the move was caused by the stock market collapse.

Executives said the purchases should not affect capital expenditures because they have excess cash and unused credit with lenders. Cherokee, for example, which said it may buy up to 1 million shares of its own stock, has some $27 million in cash and short-term notes, and another $30 million line of credit it can use, said Terrance Smith, chief financial officer. What may be affected is the ability of some companies to raise money by selling stock.

Offering Reconsidered

Amwest, a Woodland Hills company specializing in writing surety bonds for bail bondsmen and contractors, had been considering a public offering of stock to raise money, but probably won’t because of the market downturn, said Robert C. Goodell, the company’s chief financial officer.

“You can’t go surfing when there aren’t any waves,” he said.

United Education & Software, an Encino chain of trade schools whose stock had nearly tripled this year, earlier this month said it was planning to sell 1 million additional shares at a maximum offering price of $15.63. But the stock has since dropped to $9.50.

Treasurer David W. Munro said the company would like to wait until the market calms down before deciding whether to proceed with its offering.

Although insurance companies are often big investors in stocks, the largest ones in the Valley--Republic American, Zenith National, Twentieth Century Industries and Amwest--said their portfolios were relatively unaffected by the market drop because bonds make up a far larger portion of their investments than common stocks do.

Invest in Bonds

Executives said they invest by far more in bonds because of conservative investment philosophies and because state regulations require some companies, such as workers’ compensation firms, to maintain large amounts of money in high-grade bonds to protect those making claims.

Republic American, an Encino workers’ compensation insurance holding company controlled by Cincinnati financier Carl Lindner, has the largest portfolio in the stock market with $44 million invested at the end of September.

Dion Riley, the company’s chief financial officer, notes that half of that amount is invested in units of Buckeye Partners L.P., a limited partnership based in Emmaus, Pa., that owns natural gas pipelines and provides the company with steady income and tax deductions.

Twentieth Century Industries, a Woodland Hills automobile insurer, maintains only $1.7 million of its $556.4 million in invested money in stocks. The largest chunk, $536.2 million, is in bonds, primarily tax-exempt municipals.

VALLEY STOCK LOSERS

On Tuesday, Oct. 6, the Dow Jones industrial average plunged nearly 92 points. The loss marked the start of three weeks of frantic trading that shattered previous records, culminating in a staggering 508-point loss on Monday, Oct. 18. Here is a look at how 10 Valley area stocks performed through Monday.

Company Mon. Oct. 5* Monday, Oct. 26* % change Amgen $37.25 $16.25 -56% Cherokee Group 16.63 7.00 -58 Walt Disney 78.38 46.00 -41 Lockheed 56.13 35.13 -37 MCA 58.00 33.13 -43 Micropolis 33.75 14.00 -59 Redken Labs 28.50 20.50 -28 TransTechnology 29.88 16.25 -46 20th Century Inds 28.63 20.75 -28 Zenith National 21.88 13.63 -38 Dow Jones Industrial Average 2,640.18 1,793.93 -32

* closing price per share of common stock