Detractors paint gloomy picture for Standard Brands.

Managers put on griddle over losses, executive pay at heated annual meeting

Sharp tongues took a starring role at Standard Brands Paint Co.'s recent annual meeting, epitomizing the brawl that has been going on this year between company management, employees and shareholders.

Some of the pointed questions shareholders and union representatives asked Chairman and CEO Stuart Buchalter included: "How long can you continue to stay in business if you lose money quarter after quarter?" and "Isn't it time to look for new management?"

The grievances aren't unfounded. Torrance-based Standard Brands, which manufactures, distributes and retails paint, lost $857,000 on revenues of $73.1 million during second quarter 1991. This is the company's third consecutive quarterly loss. In addition, it lost $7 million on revenues of $294 million during fiscal 1990.

The company's stock price has dropped from a 52-week high of $10 a share to a low of $3.375 per share.

"We would avoid this equity," analyst Philip Kotik was quoted as saying in a recent report published by New York-based Value Line, a financial publishing company.

Further, the company is looking at a Dec. 15 deadline to get a cash infusion from an investor or else its credit line with Security Pacific, its main lender, may be suspended.

At the meeting, Buchalter attributed the company's poor financial performance to adverse economic conditions in California, increased competition in the home-improvement industry and an overall slump in the home-improvement business.

Some specific topics discussed -- or argued about -- at the annual meeting were ratification of a union contract, executive compensation, a possible equity infusion for the company and the company's standing with its creditors.

The union contract has been a bone of contention throughout the year.

The latest contract between Standard Brands' management and the United Food and Commercial Workers union, which represents half of the company's employees in California, expired in December 1990. Contract talks reached an impasse last winter. Thus, these employees have been without a union contract for almost a year.

Buchalter announced at the annual meeting the company has reached a successful contract agreement with the union, and the agreement is subject to approval by the union's 19 local chapters.

But Norm Bell, a spokesman for the Concerned Employee Ownership Committee, representing Standard Brands' employee shareholders, had a rebuttal to Buchalter's sanguine announcement.

"Have you been told that 18 of the 19 local unions aren't recommending the contract?" he asked Buchalter. Buchalter responded that he believed the contract would be ratified.

Another altercation has brewed over executive compensation. Union representatives argue that Standard Brands' top brass is enjoying lush bonuses while stockholders and employees suffer.

At the meeting, Bell stood up to read aloud his calculations of the compensation increases enjoyed by the executives from 1989-90. Among them, Buchalter's total compensation (salary plus bonuses) rose 10.4 percent, from $411,000 to $454,000, and President Eric Beck's total compensation grew by 28 percent, from $221,000 to $283,000.

The executives' salaries were essentially frozen, but the big increases came in the form of bonuses, explained Richard McCracken, an attorney representing the union.

Standard Brands spokesman Craig Walker said he could not explain the ??? compensation; but did say the chairman's base salary has been frozen since 1990 at $390,000 and will be frozen at least through 1992.

Beck, on the other hand, was promoted from executive vice president to president in 1989, and his substantial compensation increase can be attributed to this promotion, Walker said.

Salaries of all Standard Brands' management, from the vice president on up, were frozen in 1990, Walker added.

Standard Brands has been ruffling the feathers of its primary lender as well. The company has never missed a payment to Security Pacific Bank, but has breached some covenants of its loan agreement, such as maintaining certain minimum profits and earnings ratios.

As a result, Security Pacific has extended the time Standard Brands has to improve its situation three or four times, and its latest deadline is Dec. 15.

Buchalter announced at the meeting that the company has found an interested investor, Founders Equity Inc. in New York, but details of the negotiations have not yet been released.

Walker said Standard Brands needs the extra capital "so the company can grow."

One shareholder asked Buchalter what would happen if Standard Brands fails to meet its deadline with Security Pacific. "Your guess is as good as mine," Buchalter replied.

The question of Standard Brands' status with its vendors was also raised at the meeting. Buchalter said the company is on "cash on delivery" standing with some vendors.

Some shareholders who attended the meeting said they were upset about the recent goings-on at the company.

"There's no management here. The current management has brought this upon themselves," said Leo Diamond, a shareholder who was also one of the company's earliest suppliers.

Frank Randall, another shareholder, said, "I think it's a clear case of management trying to keep the company going while feathering their own nest," he said. "The real value of the company could be realized by liquidating the company or selling the assets."