O.C. EARNINGS : Archive Posts $50.3-Million Loss in Quarter

Confirming its previous estimates about the severe effect of a computer industry slowdown and costs of an ongoing restructuring, Archive Corp. reported a loss of $50.3 million for the third quarter ended June 28.

The maker of backup storage systems for computers also announced that it has renegotiated its payments on $115 million in debt related to its acquisition last year of Cipher Data Products Inc. in San Diego.

The $3.83-a-share loss for the quarter contrasts with earnings of $2.2 million, or 16 cents a share, a year earlier. Revenues for the quarter fell 15% to $84.3 million from $99.2 million a year earlier.

The company notified Wall Street that it expected the large loss in June. Before the restructuring charges, Archive lost $5.3 million in the quarter, including a $4.3 million interest expense. The company’s stock closed at $4.38 a share, up 25 cents in over-the-counter trading Monday.

The restructuring charges include a $30.5-million writedown of goodwill associated with the Cipher acquisition, an additional $14.5 million in costs related to the layoff of 200 employees in June, the closing of a electronic board production line in Singapore, the relocation of a service office with 50 employees from Garden Grove to San Diego and excess inventory.

“Toward the end of May, it became apparent that (sales) orders for the quarter would be down,” said D. Howard Lewis, chief executive of Archive.

Lewis said manufacturers that buy Archive’s products cut their orders and distributors that sell Archive products to retailers also cut their orders because of the “lingering economic recession in the computer market.”

Although Archive’s sales had been affected by the recession, the company took an additional, unexpected hit as large computer makers such as IBM, Apple and Compaq reported big losses in the first half of 1990.

Lewis said he hopes the firm will return to profitability in the fourth quarter.

“There are a lot of soft spots in the data storage industry right now and Archive is in one of them,” said Robert Abraham, analyst at Freeman Associates management consulting in Santa Barbara.

“They were caught off guard and the Cipher acquisition isn’t working out as well as they expected.”

Abraham said that Archive remains the largest player in the tape drive market with about a 45% market share.

Barclays Bank of London agreed to let Archive reduce its principal debt payments in 1992 and 1993 from $37 million and $25 million to $15 million and $19 million, respectively, the company said. Lewis said the new terms give Archive operating flexibility.

Interest on a portion of the debt will increase slightly. In exchange for the reduced payments, Barclays will receive warrants for 700,000 shares of Archive common stock.

The warrants can be exercised in three years, and the company may buy the warrants back under certain circumstances.

For the nine months ended June 30, 1991, revenues totaled $263.8 million, an increase of 33 percent from revenues of $198.3 million recorded for the same period a year ago.

The company reported a nine-month loss of $48.4 million, or $3.72 per share, contrasted with earnings of $9.7 million, or 71 cents per share, for the first nine months of fiscal 1990.

Archive’s Performance In the third quarter ended June 28, Archive Corp. reported a loss of $50.3 million as its revenues fell 15% to $84.3 million. The company attributed the loss to a one-time $45-million restructuring charge and a computer industry slowdown. Figures are in thousands, except per-share data.

3rd Qtr 3rd Qtr 9 Months 9 Months 1991 1990 1991 1990 Revenue $84,254 $99,216 $263,760 $198,303 Net income (loss) (50,300) 2,205 (48,402) 9,713 Per share (loss) ($3.83) $0.16 ($3.72) $0.71

Source: Archive Corp.