Lab’s Slowdown Is Blamed in Nichols’ 50% Drop in Profits

Unrealistic expectations for a jointly owned Dallas laboratory hampered profits for Nichols Institute, which Tuesday reported that its 1991 earnings dropped by half to $3.4 million, equal to 23 cents per share, from $6.9 million, or 49 cents per share, the previous year.

The medical testing company also reported a loss of $2.1 million, or 14 cents per share, in its 1991 fourth quarter. The year before, Nichols earned $1.3 million, or 9 cents per share. The company said the final results were in line with preliminary estimates that it made last month.

The final quarter reflects $3.8 million spent to restructure a joint-venture clinical laboratory in Dallas. The company--which owned a 25% stake in the lab--is in the process of buying out three other partners, said James W. Whitmer, chief financial officer. The company lost $2.2 million on the lab in 1991 alone, he said.

“(The Dallas lab) has been a very difficult thing to get off the ground,” Whitmer said. “ . . . In general, the laboratory was conceived to handle a substantially higher amount of business that has not materialized.”

Whitmer said the company plans to integrate its Dallas operations with Nichols-owned labs in Houston, El Paso and San Antonio. This restructuring would reduce the overlap of testing services and make its operations more efficient, he said.

Nichols Institute also paid $870,000 to consolidate a reference laboratory, which was housed in several facilities in San Juan Capistrano, to a single site on Ortega Highway near Ronald W. Caspers Wilderness Park.

Company revenues for 1991 were $236.3 million, up 35% from $174.8 million the year before. Fourth-quarter revenues were $64.6 million, up 42% from $45.5 million in the same period the year before.

Demand for medical testing remains high, and, unlike other industries, the company is not affected by the recession, Whitmer said. Revenue and earnings grew steadily in the company’s other operations, such as regional laboratories in the Midwest and the San Juan Capistrano reference laboratory, he said.

Nichols Institute

Despite a 42% increase in fourth-quarter revenue to $64.6 million, Nichols Institute had a $2.1-million quarterly loss, which the company attributed to a $3.8-million restructuring charge and $870,000 to relocate facilities.

Figures are in thousands, except per-share data.

4th Qtr 4th Qtr 12 Months 12 Months 1991 1990 1991 1990 Revenue $64,573 $45,481 $236,293 $174,801 Net income (loss) (2,073) 1,261 3,403 6,881 Per share (loss) (0.14) 0.09 0.23 0.49

Source: Nichols Institute