Irvine’s Helionetics Inc. Reports ’85 Loss of Record $22.4 Million
Less than two weeks after receiving a default notice from one of its principal lenders, Helionetics Inc. reported a $22.4-million loss for 1985, the largest ever in the rocky history of the small Irvine defense contractor.
As a result of the loss and the earlier debt default notice, the company’s auditors issued a qualified report on Helionetics’ financial health, pointing out that the company “may be unable to continue in existence.”
And in an unrelated development, the company said that Bernard B. Katz, a director and the company’s principal shareholder, has announced that he intends to end the trust currently holding his shares. Helionetics President and Chief Executive Michael Mann said that the move is associated with Katz’s recent divorce proceedings which require him to divest property purchased during the marriage.
Katz, who owns 832,307 shares, or about 12.9% of the outstanding shares, has said that he intends to sell the shares “to the maximum extent permitted under applicable securities laws.”
Massive Reorganization
The bulk of Helionetics’ losses came in the final quarter of the year, when the company posted $17.3-million worth of red ink to reflect the write-downs and write-offs of assets in connection with Helionetics’ massive reorganization and consolidation program last year.
Of the $22.4-million loss, $8.3 million came from write-offs of assets in the four operations closed by Helionetics last year. The remaining $14.1 million in losses came from write-offs, write-downs and operating losses from the company’s three remaining manufacturing groups--laser and electro-optics, aerospace manufacturing, and data acquisition and signal processing.
Although Helionetics had expected to report a large loss because of the consolidation, the actual losses were about $3 million more than originally projected. In 1984, the company had a profit of $586,500, and in the final quarter of that year, profits were $130,300.
Revenues declined 30% from 1984, even after accounting for the selling and closing of poor-performing operations.
Sales of $12.2 Million
For the year, sales were $12.2 million, a figure that does not include nearly $9 million generated by divisions that have been discontinued. Last year, the company had sales of $17.3 million, a figure that also had been adjusted to reflect the discontinued operations.
Despite the losses and the $4.5-million default notice from Downey Savings & Loan, Mann said that the company does not expect to be forced into seeking a bankruptcy reorganization.
Mann said that the company is conducting ongoing discussions with Downey, as well as with its other principal lender, Bank of America, to negotiate a new payment schedule. In addition, he said that Helionetics’ trade creditors have agreed to accept an indefinite moratorium on repayments to allow the company time to settle its financial problems.
However, Mann conceded that the company could face bankruptcy proceedings if its creditors drop their cooperation or refuse to accept a revised payment schedule.
