IRT Discloses $4-Million Loss as CEO Quits
Citing “previously unidentified” costs and shipping delays from its newest product line, IRT Corp. on Friday said it expected to report at least $4 million in losses for the year ended March 31. Concurrently, the company announced that its chairman, chief executive and president, Robert L. Mertz, had abruptly resigned the posts he has held since 1974.
The loss would follow a record $959,000 in net earnings reported a year ago.
Mertz was replaced by Clifford V. Brokaw III, chairman and chief executive of Invail Capital Corp., a private, New York-based merchant banking firm. Brokaw has been an IRT director since 1973.
Mertz was unavailable for comment and Brokaw would not detail the reasons for the longtime executive’s unexpected departure.
Excessive Optimism
However, Brokaw acknowledged that IRT had been relying on overly optimistic development and production figures that subsequently forced delays in shipments of the new automated inspection line. That product inspects solders in electronic printed circuits.
“In the cold light of the morning after, it’s obvious that the management which had been in place was optimistic,” Brokaw said Friday. “It became apparent that IRT would be unable to complete the software needed to effect deliveries of a large number of machines in the time frame that we’d expected.”
Brokaw said the $4-million loss estimate, which was based on unaudited figures, might increase because of further, anticipated delays in product shipments.
Although industry analysts have credited IRT with developing a state-of-the-art product, Brokaw acknowledged that IRT had encountered “delivery and timing problems” that generated additional and unexpected costs.
Profits Anticipated
“I don’t think anyone questions their technology, but there has been some concern about the ability of their leadership to take the technology to market profitably,” said James Jeffs, a technology analyst with Los Angeles-based Seidler Amdec Securities. “But now the technology is there to drive orders and their base business is very attractive. I look forward to some ensuing profitable quarters.”
Jeffs suggested that IRT has developed “quite a lead in technology and I don’t think they’ll lose that lead . . . (because) they’ve got quite a depth of technical and marketing management in the company.”
Brokaw said that recently adopted accounting changes have magnified the delays in product shipments. “We don’t get the profit out until the product is shipped,” Brokaw said. “That sort of has a ripple effect.”
“They’re at the leading edge, and at the edge you sometimes run into glitches,” Jeffs said. “You have to correct course and move ahead. I think this company is now moving ahead.”
IRT has been searching for a chief operating officer for nearly three months, said Brokaw, who added that the search has produced several well-qualified candidates.
The company’s stock reacted to the loss announcement and Mertz’s resignation by falling 3/8 to 8.25.
