Henley Group Inc. Posts $426-Million Loss for Full Year

For most companies, multimillion-dollar losses cause concern, even consternation on the part of management. Not at La Jolla-based Henley Group Inc., which Thursday reported a $354-million fourth-quarter loss and a $426-million net loss for the full year ended Dec. 31.

“Henley’s doing just fine and just as expected,” Chairman Michael Dingman said in a statement Thursday afternoon.

Henley’s losses came on fourth-quarter revenues of $825 million and full-year revenues of $3.2 billion. In an interview, Dingman said the losses were mainly caused by restructuring charges resulting from Henley’s reshuffling and revaluing of the assets that it inherited from Allied-Signal Inc. when Henley became an independent company in May, 1986.

Henley posted a $68-million operating loss for the fourth quarter and a $140-million operating loss for the full year. The balance of the full-year loss resulted from charges that included $110 million in amortization of good will, $102 million in asset and inventory revaluations and $74 million in reserves created for costs related to plant closures, a Henley spokesman said.

Dingman said Henley’s operations were “cash-positive” to the tune of $400 million in 1986, despite the net loss.

Dingman has portrayed Henley as an asset management company, not an earnings company. As such, Henley’s strategy is to “separate its assets out” by spinning them off as independent companies, thereby creating “realizable value” for Henley shareholders. The first such spinoff will be completed April 7 when Henley shareholders officially take possession of their Fisher Scientific Group Inc. stock dividends declared last month. Over-the-counter trading in Fisher stock will begin Thursday on a when-issued basis, Dingman said.

Henley will spin off a second collection of companies called Wheelabrator Technologies before the second quarter ends June 30, Dingman said.

Of the 35 cast-off companies that Allied-Signal Inc. bestowed on Henley last May, not all were of sterling quality. In fact, they were dubbed “Dingman’s Dogs” by scribes and stock analysts. Of $7.1 billion in total assets, Henley began life with a staggering $917 million in good will, the term for the cost of assets that is greater than their identifiable market value. Henley is in the process of writing off the good will as a cost of starting business, a non-cash expense that depresses earnings.

Dingman said the charges and net losses are likely to continue into 1987 but to a lesser degree than last year. Henley still has $467 million in good will to write off.