On the same day that it formally disclosed a staggering net loss of nearly $10 million for 1986, ailing Care Enterprises said Wednesday that Boyd W. Hendrickson, its president and chief operating officer since 1985, will resign to form his own nursing home company.
Hendrickson said he will remain on the Laguna Hills-based nursing home operator's payroll until July 1 to assist in crucial negotiations aimed at refinancing Care's $36 million of bank debt, $14.2 million of which is due on June 30.
No immediate plans exist to replace Hendrickson, whose duties will be assumed by Lee R. Bangerter, Care's chairman and chief executive officer.
"That will certainly help cash flow," said Hendrickson, who earned $243,000 during 1986.
Separately, Care said in documents filed with the Securities and Exchange Commission Wednesday that it had a $9.97-million net loss for 1986. The yearly loss contrasts with the $3.6-million net profit that Care reported for 1985. Despite the loss, Care's revenues increased 11% to $264.7 million during 1986 from $238.5 million in 1985.
Care officials had said earlier this month that the litigation reserve and other costs would result in an annual loss of nearly $10 million.
In its SEC filing, Care said that it took a nearly $7.4-million reserve for possible litigation costs in a suit it filed against the owners of six Ohio nursing homes operated by Americare Inc., which Care acquired in 1985 for $25 million.
The dispute centers on Care's efforts to recover what it says are excess cash advances paid to the owners of the facilities. Care said in its SEC filing that the reserve represents potential lost advances and legal costs associated with the lawsuit, filed in Ohio last September.
The company also said in its filing that an additional $3.8 million of the 1986 loss stems from a debt-restructuring program begun last year.
Retired $14-Million Debt
So far, Care has retired $14 million in bond debt and paid off $4.9 million in other high-cost borrowings. It also successfully refinanced $21.3 million in mortgage and other long-term debt.
Because Care took the bulk of its non-operating losses during the fourth quarter, it reported a net loss of $9.2 million for the final three months of 1986. By contrast, it had $902,000 in net earnings a
year earlier. Fourth-quarter revenues were up slightly to $67.6 million from $66.7 million a year earlier.
"I can't help but believe that they are on the verge of Chapter 11," said Stephen Reid, an analyst with the Los Angeles brokerage of Wedbush Securities Inc.
News of Hendrickson's departure "is not a good sign at all," Reid said.
"This is not that negative a thing," Hendrickson insisted Wednesday. "Despite our current difficulties, I think Care has a profitable future. I believe that the worst is behind us."
Hendrickson said his new company, which is to be based in Orange County, has ample venture capital funding and should acquire up to 30 facilities within the next five years.
While he has not entered into any agreements specifically prohibiting competition against Care--the nation's fourth-largest publicly traded nursing home company--Hendrickson said he has agreed not to raid Care's staff after he leaves the company.
Hendrickson, who joined Care 11 years ago as director of operations, said his decision to leave has nothing to do either with the company's deteriorating financial condition or the bitter feud among members of the family that owns most of the company.
That battle pits Lee Bangerter, the company's chairman and chief executive officer, and his brother Dee R. Bangerter, a Care director, against their half-brother and company co-founder, Ted D. Nelson.
Nelson, who resigned as a director last year in protest against a Delaware reincorporation plan that he charged was unfair to minority shareholders, has enlisted the aid of Dee Bangerter's estranged wife in his campaign to regain his lost seat on the board.
Despite the internecine warfare raging about him, Hendrickson said Wednesday that he has managed to remain on friendly terms with all the combatants.
"I've been in an unusual position, because I'm friends with all of them. It's not been easy," Hendrickson said, adding that "Ted understands that when we see each other, that I work for Care."