Earnings Won’t Meet Projections, Nichols Institute Announces

Nichols Institute, blaming problems with a recent business acquisition, said Friday that its earnings for the third quarter and year will be about 10% below most analysts’ top projections.

Jim Witmer, chief financial officer of the San Juan Capistrano-based chain of medical laboratories, said the company now expects earnings of $2 million for the third quarter, which ends Sept. 30, and $8.2 million for the year.

Securities analysts for several brokerage firms, including William Blair & Co. in Chicago, had estimated that Nichols would earn as much as $2.4 million in the third quarter and $9.2 million for the year.

Following Nichols’ statement Friday, the company’s stock fell 12% to close at $12.75 a share, down $1.75.

Witmer attributed the more pessimistic earnings forecast to problems associated with Nichols’ acquisition last January of a Portland, Ore., laboratory called Physicians Reference Lab. The acquired laboratory was merged with another Nichols facility in Portland called Med Lab.

After the merger, Witmer said, service to Med Lab customers deteriorated and business declined. He said that while there was no problem with the accuracy of test results, clients complained about how the results were presented, among other things. As a result, he said, the $24-million-a year Portland operation is only marginally profitable and has not grown as fast as Nichols had hoped.