Industry Slump Cited : Pacific Scientific Reports 3rd-Quarter Net Off 52%

Still grappling with depressed sales in the computer and semi-conductor industries, Pacific Scientific Co. on Monday reported a 52% drop in net income for its fiscal 1985 third quarter but said it is taking steps to bolster fiscal 1986 profits by restructuring its unprofitable divisions and acquiring a profitable high-technology company in Rancho Cucamonga.

The Anaheim manufacturer of precision instruments reported net income of $964,000 for the quarter ended Sept. 27, compared to net income of $2 million for the year-ago period. Revenues declined 12% over the same period, to $21 million from $24.3 million.

For the first nine months of its fiscal year, the company reported a 16% drop in profits, to $4.1 million from $4.9 million. During the same period, revenues fell about 1%, to $67.6 million from $68.2 million.

In a move to improve its profit picture, the company announced Monday that it is acquiring Ray-Mar Hydraulics Inc. of Rancho Cucamonga for about $3.7 million cash. Privately owned Ray-Mar does not report profits but has been profitable recently, said Peer Swan, treasurer at Pacific Scientific. The acquisition is a natural, Swan said, because “we sell to a lot of the same customers,” including the military.

Ray-Mar reported sales last year of about $3 million and has a current order backlog of $5 million from several large aerospace manufacturers. For the time being, the company’s 30 employees will be retained by Pacific Scientific, Swan said.

Since January, Pacific Scientific has laid off nearly 160 of its own employees--most of the layoffs coming since June, Swan said. The work force has fallen to about 940 from a high of 1,100 in January, he said. Those laid off included both managerial and assembly workers, but no further layoffs are expected in the near future, he said.

Edgar S. Brower, the former president of Allied Corp.’s electronics division who was named president of Pacific Scientific in June, said in a statement that his goal is to have all five of the company’s divisions show profits--or at least break even--by next January.

Three of the divisions have not performed well in the last year, but with a 27% increase in research and development expenditures in 1985, growth is expected in 1986, Brower said.

One stumbling block that could impact company profits in fiscal 1986 is a shareholder suit filed in May in Los Angeles federal court. The suit alleges that the company made false and misleading statements about its sales outlook in 1983 and 1984. Company officials contend that the suit is without merit. But Pacific Scientific’s legal costs have been “significant” and could cost shareholders “several cents per share” in fiscal 1986, Swan said.

Still, Swan said he foresees an improved corporate picture for 1986. The computer industry slowdown “may have reached the bottom of the trough,” he said. “I don’t see it getting any worse. I see growth next year.”