Nichols Resigns as CEO of O.C. Firm He Founded

In an unexpected move, Dr. Albert L. Nichols, founder of Nichols Institute, resigned Monday from his position as chief executive officer and president.

The San Juan Capistrano company said that Nichols, a 57-year-old endocrinologist, will remain as chairman of the board and, in that capacity, will concentrate on “long-range planning in anticipation of significant changes in the health-care industry in the United States.”

“Everybody is trying to guess where health care as an industry is going,” said Chief Financial Officer Paul Bellamy, who was appointed interim president and CEO. Nichols, he said, “is trying to focus on that.”

The resignation of Nichols, who founded the medical testing company 21 years ago, came as the company struggles to regain credibility on Wall Street and recover from a year of flagging profits. At least one analyst suggested that Nichols’ resignation was tied to those problems.

“My guess is that it may have been something forced on him by the board” of directors, said Steven F. Bouck of First Analysis Corp., a Chicago research firm. But he noted that details of the resignation were scant. “This company has been extremely uncommunicative on the street.”

Bouck said that he was “somewhat surprised” by the announcement, for Nichols is a “powerful force in the company.” But the company, he said, “has been performing terribly. There were some big write-offs this year. They have had a lot of problems.”

Specifically, the company was forced to write off $13 million in the second quarter because of financial problems with a partnership. That association with three competing Texas hospital chains has been criticized in the past by analysts who said that the company had overextended itself.

Bellamy said that the company has been negotiating with a buyer for at least a portion of its stake in that Dallas partnership. He would not comment further.

Because of the write-off, the company reported a loss of $7.7 million for the second quarter. Even without that one-time charge, however, profit would have been weak. Third-quarter earnings were $440,000, down 63% from $1.2 million for the same period a year earlier.

Also, the company’s stock, valued at $15.25 a share in January, had sunk to a low of $4.75 a share in late October. In Monday’s trading on the American Stock Exchange, it closed at $6.125 a share, up 12.5 cents.

As a result of those difficulties, the institute’s top management was recently reshuffled. Monday’s resignation is the latest in a series of shifts.

In November, the company announced that it had hired three new executives and that James Witmer, formerly chief financial officer, would become head of the mergers and acquisitions department. Bellamy was appointed at that time to be Witmer’s successor.

While acknowledging that the company needs to realign its business operations, Bellamy said that Nichols’ resignation was not forced.

“This is an event on its own,” he said. “It is not tied to any one thing.”

Bellamy, who said he is not interested in remaining as CEO, will concentrate on day-to-day duties, he said, until a new “top-notch” executive can be found. He plans to return to his duties as chief financial officer, he said.

Though the company is well regarded for its medical and technical expertise, Bellamy said, “we have to get more talent into the company from a business perspective to meet the challenge of the future. We want the cream of the crop.”