ARA SEPTEMBER 1999 - NEWSLETTER

Tony Perrotta

Investors can't buy stock in Rockaway-based Party City on the open market right now - even if for some strange reason they might want to. Shares in the giant chain of party goods superstores were suspended from trading in May over concerns that its year-end audit had not been completed in a timely fashion. In July, with the results still not in, the company was delisted by the NASDAQ.

The stock, which traded under the symbol PCTY until May 5, had fallen from an all-time high of $34.25 in March last year to $3.84 per share when the trading suspension took effect. Since then, the firm's CFO, David Lauber, has resigned and founder and CEO Steve Mandell has stepped aside. the audit report, which has still not been issued, is now expected to cover 18 months, stretching back to January 1998 and is supposed to be completed on September 30.

The general reasoning behind the company's fall is that its aggressive expansion plans - from 36 to nearly 375 stores in two years - outpaced the accounting and management abilities. Party City has been named in a number of shareholder lawsuits alleging mismanagement and dumping of shares by insiders.

So why on earth would investors even want Party City taking up space in their long-term memories? There are a couple of reasons to consider keeping an eye on the company.

the first is that last week it announced a large restructuring effort and that it is on the receiving end of $30 million in bond financing from a group of investors led by Tennenbaum & Co. of Los Angeles. The investor group also adds two new board members to the company. Party City's bankers have agreed not to pursue claims against the company until June of next year, unless it defaults on its loan payments. Suppliers holding $30 million worth of Party City debt have agreed not to take any action until January 15, 2000 and have agreed to terms under which they will continue to sell goods to the company. (Party City's creditors, of course, have the added inducement of not wanting to lose the future business that would disappear if the market's largest retailer were to go belly-up).

The arrangement will allow the company to stock the needed inventory for upcoming holidays such as Halloween and Thanksgiving, which is necessary if it is to maintain its revenue stream.

The second reason is related to the first. the company has a new management team headed by erstwhile retiree Jack Futterman, the former CEO of Pathmark Stores, and supplemented by new CFO Thomas E. Larson. They negotiated the deal with creditors and have the track record necessary to inspire confidence in creditors.

Last and most compelling is the simple fact that a Party City store remains the prototypical "category killer" in its niche. Like the Home depot of the party supply business, it has the capacity to stifle competitors in most markets, and in spite of its internal trouble, its sales figures appear to have remained strong.

Analysts who follow the company have remarked that it appears "salvageable," and it seem to be more a matter of when the company's shares will be allowed to trade again rather than if they will. When that happens, shares in the major retailer selling at the deflated level of Party City's might be something the long term value investor would profit from examining.

From: Invest in New Jersey

YOUR ARA-NJ CALENDAR
September 15th - Regular ARA-NJ meeting at

A1 Tablecloth Company of Hackensack, expert on OSHA will be featured speaker.

(See page 5 for additional details).

October 20th - Board Meeting - Board members to be e-mailed details.

October 31st - November 3rd - ARA's (National) Regional Baltimore meeting

November 17th - Regular ARA-NJ meeting.

Members to be advised of location and program.

January 23rd - Social event currently in the works.

SEPTEMBER'S PROGRAM

"Everything You Ever Wanted to Know About OSHA " might be a good title for the program. Our featured speaker, Jim Lease, is an expert on OSHA. His business, H K Medical Services, Inc., specializes in OSHA-proofing his client's businesses from preparing for inspections to being present through the inspection process to insure their client's rights.

Knowing what to expect and how to deal with OSHA will dispel the terror rampant when OSHA is on the prowl. A little knowledge, in this case, can be helpful to relieve stress.

Also to be included at this meeting is the introduction of a new chair available for rental. We're told it has all the best qualities of plastic and wood but none of the disadvantages of either.

As technology takes us forward we sometimes lose track of the basics like "housekeeping, in the work place. Perhaps you didn't know that OSHA requires proper occupational house keeping for safety in the workplace. this is not an annoying obligation but rather a aguide to more efficient and effective operation of your business.

Proper housekeeping:

Prevents accidents
Prevents fires
Saves time
Increases the control and production
Reduces waste
Protects employees and equipment
Improves customer image

What's more it can be a source of pride for you and your employees. By keeping aisles and stairs clear, floors clean, tools and equipment properly stored, storing and handling flammable fuels, chemicals and lubricants safely, as well as disposing of waste products promptly and properly you can avoid many daily hazards at your rental business. One of them may be that unwanted trip you made yourself.

Divid Hinck

Safety Chairman

FROM THE "VEEP"

Now is the time to shop around for low-cost life insurance coverage. Term rates have dropped dramatically, and you can lock in your rate for 20 or 30 years.

Starting next year, the term insurance market is going to change in many states due to new regulations. Policies with long-term premium guarantees are probably going to cost you more.

You'll still have access to low cost term insurance, but the premium will probably be fixed only for 5 or 10 years. At the end of that period the insurer could decide to charge you more.

The reason for this change is that State regulators are concerned some insurers aren't holding enough cash in reserve, so they're changing the way insurers calculate the size of these reserves. The National Association of Insurance Commissioners approved the proposed regulation, known as Triple X, in March. One way for insurers to increase reserves is to raise premiums on policies with long-term guarantees.

Triple X still must be approved by individual states. So far, about 21 states appear to be on board, and New Jersey is one of them. The earliest this change could take effect would be January 1 but it's more likely to happen in the first or second quarter of 2000.

Under Triple X, term policies with rates guaranteed for 20 years and up could cost 10 percent to 40 percent more than now, but policies you've already purchased won't be affected. Term policies with 30-year premium guarantees may no longer be available.

We'll know more next year, but in the meantime if you're thinking of buying term insurance this is the year to do it.

MAD AS HELL - AND WE SHOULDN'T TAKE IT ANYMORE .....

Wood stock 1969 was all about drugs, sex and rock n' roll. Wood stock 1999 was all about rioting, banquet table bon fires, and tent tossing. While this may be an exaggeration by the press, as my 17 year old son stated, the fact is destruction of rental equipment took place. Tom Lade of All County Rentals in Morristown knows this first hand. He told his story after reading the members communication page on the ARA web site. He had a few small tents at the event which were rented from a customer to cover some ATM machines. When the tents did not come back he called the customer who told him how the tent stakes were used to break open his ATM machines and how the kids tried to burn the tops and did burn the ropes. The good news was he got the tops back, but the frames were mangled.

This is not the only incident of rental equipment destruction. I'm sure everyone has a story to tell about an event they have done where either the equipment was destroyed if not stolen. I know every year we cringe when it comes time to do a particular annual event. So why do we continue to do it? I don't know, probably for the same reason we started up a rental business to begin with!

As a member of this organization we are constantly talking about our rights, how to protect our selves, getting laws into place such as theft of services. Maybe it's time to ban together and voice our opinions about the lack of respect we are seeing in this country. Act instead of reacting to each situation. ARA-NJ's legislative committee should do it's members justice and form a task force. Maybe the message would spread to National who then could do a Nationwide campaign. We have organizations who support other issues like Aids, Cancer, Education, etc. Why not Respect. And why not an organization such as ARA whose members are being constantly tested on this issue.

Megan Jones

A-1's CEO Murray Vale says they've been "beating the prices off" competition for over ten years. Their line includes tablecloths, napkins, skirts, and chair covers/sashes and they custom sew to customers' own fabrics.

They carry a wide variety of colors and fabrics to choose from: from polyester, poly-cotton blend, to tissue lame and satin stripe. The newest addition to their line, Cott'n Eze, looks and feels like cotton (holds a fold, absorbs at 85% of the efficiency of cotton and has a good "hand," yet wears and washers like polyester (stain resistant and colorfast). If you think that's enough, you're wrong. they also carry sparkle organza and washable satin to use as great toppers. "And don't forget" Murray adds, "our 90" wide polyester Wellington Damask for beauty at a low price!" This allows A1 Tablecloth to offer up to 90" round or 90" x 90" with no seams.

A1 prides themselves on their quick turn-around. Most orders called in or faxed by noon or 1 PM are usually shipped the same day and never later than the next.

Murray's background includes banking, advertising and sales promotion and he's proud of his background in service oriented businesses. Obviously they're doing something right and, when we get there for the September meeting, you can bet we'll get a peek at how it's done.

Route 80 East to Exit 63B. Left at stop sign to next light. Right at 4th light. left onto First Street (Arena Diner will be on the left). Go 8/10 mile and make left onto Berry Street. A-1 is on left side at end of block.

Route 80 West (local lane) to exit 64B. Right at light onto Polifly Rd. Go about 1.8 miles (you will pass Hackensack High School,) and make left onto Berry Street. A-1 is on left side at the end of the block.

Route 4 West to Hackensack Avenue South (Hackensack business district about 5 miles from GW Bridge). Follow Hackensack Avenue about 1.2 miles to Passaic Street. Right onto Passaic (McDonald's on right,) 1/2 mile over RR tracks. Left onto Second Street - 2 blocks to Berry Street. A-1 is on the left.

Route 3 West to Route 17 North to Polifly Road exit. Past Arena Diner (on left,) Polifly turns into First street. Go approximately 1.8 miles (you will pass Hackensack High School,) and make left onto Berry Street. A-1 is on left side at end of block.

Exit 160 Rochelle Park and Passaic Street (1st exit after toll). Take Passaic Street East about 2.5 miles. Right onto Second Street (2 blocks past Amoco gas station). Go 2 blocks to Berry Street. A-1 is on left.

To route 80 West (local lane) to Exit 64B. Right at light onto Polifly Road. Go about 1.8 miles (you will pass Hackensack High School,) and make left onto Berry Street. A-1 in on left side at end of block.

North on Green St. Left onto Lodi Street to top of hill. Right at first light (first Street,) about 1 mile. Left onto Berry Street. A-1 is at corner on left.

A few weeks ago this topic same up at an ARA of NJ Board Meeting. I would like to take some time to discuss this issue. Many of you probably remember about 6 month ago when it came up concerning police on the NJ Turnpike using "profiling" to pull over motorist that were suspected for carrying drugs and narcotics. Well, to make a long story short, the Reverend Al Sharpten and others made a big stink, cried racism and that was the end of profiling. I believe A few heads rolled and promises were made to discontinue this practice.

Respectfully, Steve Kohn

* I have no knowledge of what the police did to suspects after they pulled them over, but I suspect they probably made many peoples lives unnecessarily difficult.

HAVE YOU BEEN STIFFED?

It seems everybody has similar problems in the rental business and getting robbed in one way or another is a BIG problem we all have faced (or can expect to).

Brian Higgins of Inter/National Insurance has a new cellular phone number: 973/493-3445
He can also be reached via e-mail at:  Bhiggins@rentalins.com

FREE - FREE- FREE
It's Web Site Promotion Month!

WEB SITE FREE!

Call Steve Kohn

Miller's Rental & Sales
732-985-3050

Share it with fellow members of ARA-New Jersey even if it's a gripe. Fax or e-mail Carl: FAX: 201-236-8934e-mail: poppicarl@msn.com

By Sana Siwolop

It was just over a year ago that investors were engaged in an industrial-sized obsession with the stocks of equipment rental companies - businesses that rent out everything from bulldozers to 100-foot long telescopic boom lifts to generators and hand tools. At the end of July 1998, the industry's bellwether stock - Untied Rentals of Greenwich, Conn. - was trading at a lofty price over $48, or 48 times analysts' estimates of earnings per share for the year.

Since then, however, the romance has faded: United Rentals fell to less than $11 by fall and closed on Friday [8/20] at $26.6875, still 44.5% below the July 1998 high. Rivals have more or less followed it down.

Despite that rough ride, analysts see much to recommend the sector.

John Moiner, a managing director at Brown Brothers Harriman & Company, sees two reasons for optimism about this $20 billion industry. First it continues to benefit from a national trend - in which companies are contracting for use of equipment they once might have owned. Second, the biggest of the rental concerns are now large enough to set up lucrative accounts with national customers.

Another positive sign for these stock is the fragmentation in the industry, which makes it ripe for consolidation. Despite a recent acquisition frenzy - United Rentals has already bought more than 60 companies this year - analysts say there are still 20,000 smaller, mostly family-owned concerns across the country.

Last year's selloff in the stocks can be attributed, in part, to the perception that the rental business is cyclical. Such businesses were thought to be vulnerable to a downturn as investors fretted over economic problems in Asia and Russia.

"We think that people have looked at this as a cyclical industry," said Stefan Mykytiuk, an analyst at Baron Capital Group, a money management firm in New York. But Baron, he said, sees a "very strong" long-term change toward renting rather than owning equipment.

Generally analysts expect the industry to grow 15 to 20 percent a year over the next three to five years.

This year, even with a renaissance in cyclical stocks, the equipment rental issues have generally remained grounded, in part because of concern about rising interest rates.

According to Andrew W. Jeffrey, an analyst at BancBoston Robertson Stevenson, United Rentals is now trading at just 12.1 times his 2000 earnings estimate of $2,20 a share.

Another big company, National Equipment Services of Evanston, Ill., closed on Friday at $8.5625, just 7.5 times analysts' estimated earning per share for next year and 33.5 percent below its 52 week high of $12.875, on June 30. Mr. Molner said National has carved out a sizable business by renting specialty equipment, like pumps used in oil refineries; rental rates for such equipment are not particularly vulnerable to economic down turns. he thinks its stock is worth $17 a share.

In July, Mr. Jeffrey started following Nationsrent, based in Fort Lauderdale, Fla. He likes the company's efforts to build strong brand name as well as its wide selection of equipment. He predicts that its earnings will rise 20 percent annually over the next three to five years.

As for United Rentals, Mr. Jeffrey thinks it should trade 20 times his forecast for 2000 earnings, which would give it a price of $44 a share.

Mr. Mykytiuk also likes United Rentals. "We think that they are the one best positions to capitalize on this growth," he said.

Modern technology is not always the panacea we believe it to be. It can create problems where none existed before. Today's automobiles, for example, are programmed to do everything but steer and brake, yet even these labor intensive actions are "assisted."

In our new van - actually it's not that new and it's more of an overgrown station wagon than a van - automation has taken over many of the driver's duties. At the push of a button the doors unlock and once you start the engine they lock again. They unlock instantly once more when the engine is turned off. To be locked when the engine is running is for safety - providing no one needs to leave the car hastily. Unfortunately, that surely would be when you won't find where the lock override switches are because you've never used them. I won't give an example of a situation when this might occur because any scenarios I can think of is unpleasant - in fact they're downright scary.

Even our van's side doors open and close at the touch of a button on a remote and the rear windows do the same. A chime also sounds if the turn signals stay on too long. This is a boon since I've been known to drive from here to Columbus, Ohio signaling for a left turn all the way.

Another handy-dandy feature of our car/van is automatic headlights. Even during the day, running lights go on by themselves as soon as you start up, then, when twilight comes upon you, they switch to full headlight mode automatically. I haven't had to think to turn the headlights on or off since we've had this vehicle. This creates a problem when we use our old car, a car that believes the only thing it's required to do is get you from here to there. At night, when in the old bus, I'll complain about how dark the roads are and the wife says, "They'd be brighter if you turned on the headlights."

There are other disadvantages to automatic headlights. Disadvantages I realized only recently when we had occasion to be part of a funeral procession. It began uneventfully enough when, after saying our good-byes to the departed, we lined up in our cars and the drivers were instructed to turn on their headlights. This was meant to keep the funeral procession together as it processed to the church. It worked very well. The whole procession got through stoplights and stop signs without being cut up into segments by unrelated cars.

I didn't realize there might be a problem until we left the church and headed for the cemetery. It might not have been so bad if the cemetery was not a long way off, but it was. Soon after our line of mourners entered the Garden State Parkway we were in trouble. There were hundreds of cars zooming by us and it seemed most of them had their automatic headlights on that bright morning.

Some of our drivers contributed to the problem by not staying close in the procession thus allowing commuters to join our line. At one point two police cars danced in and out of our procession. That wasn't the worst of it though, once off the parkway and onto the interstate a couple of eighteen wheelers became a part of the funeral entourage. That we arrived at the cemetery together was a miracle.

"There has to be a better way," I thought, but the only idea I could come up with was to hire an Atlantic City express bus to deliver all mourners to the cemetery as a unit. An added advantage would be that each mourner could receive a $15.00 roll of quarters upon assembling at the burial plot.

It could work, of course, but, also of course, it wouldn't be cost effective. I wondered how funerals traveled before automatic headlights and I remembered the little flags they used to attach to the left front fender of each car in a funeral procession. The flags stood above the hoods of the participating cars and, unlike headlights, left no question that these folks were meant to stay together as part of a funeral procession.

You know what was nice about those flags, too? As your procession drove through town, men would doff their hats in respect and woman would pause to offer a prayer. A nicety that has disappeared with automatic head lights.

So much for modern technology.

Carl Sparacio

THIS AND THAT

Congratulations are in order for Joe and Lori Mihalko - Do It Yourself in Whippany - they produced a 5 lb. 13 oz. bouncing baby boy who stands a full 19" tall.