Move Will Not Call for Layoffs, TriCare Says : Management: All operations will remain at the Irvine office and only two executives will be based in Atlanta, an official says.
TriCare Inc. said Wednesday that it will not lay off any workers in connection with the move of its headquarters to Atlanta. It also hopes that a strategy to diversify the company in the health care service industry will help bring it out of recent financial troubles.
TriCare, which operates six clinics that treat workers hurt on the job, announced the move on Tuesday. Chief Operating Officer Stephen F. Bullock emphasized Wednesday, however, that all operations, including billing, personnel and accounting, are to remain at the company’s Irvine office. In fact, he said, the only TriCare officials who will be in Atlanta are newly hired Chief Executive Officer Larry G. Gerdes and a yet-to-be-announced chief financial officer.
While maintaining that TriCare will continue to operate within the industrial medical-treatment industry, Bullock said added value will come to the company as it seeks to gain entry into general health care services, presumably clinics that do more than just evaluate and treat injured employees who have workers’ compensation claims.
Because of stricter state workers’ compensation laws, cuts in state reimbursements and an increase in delinquent insurance payments, the company has suffered recently, announcing that it will report a loss of as much as $13 million for its latest fiscal year, which ended May 31.
Much of that loss was related to goodwill write-offs and an overhaul of the company, including the closure of 38 offices, layoffs of hundreds of employees and closure of TriCare’s medical and legal evaluations business.
The company, which had revenue of $46.8 million for fiscal 1992, now has 153 workers in Irvine, Carson, Riverside, Ontario, Pomona and San Bernardino. The company has not yet released revenue figures for its latest fiscal year.
Gerdes, who was chosen Tuesday to lead the company, lives in Atlanta and is a partner there in the venture capital firm Gerdes Huff Investments. Gerdes has also been a TriCare director for the past eight years.
“We are going to be based in Atlanta because that is where the CEO lives,” said Bullock, whom Gerdes succeeds after a monthlong search.
Bullock also said the cross-country presence of the company will “reinforce the company’s commitment” to grow into a nationwide corporation. What exactly TriCare will look like in five years is still uncertain, Bullock said.
“We have always told people in the past that we are looking to expand outside California, and this move reinforces that strategy,” Bullock said.
The change was received favorably by Wall Street. TriCare stock, which sank to a 52-week low of $1.875 in Tuesday’s trading on the NASDAQ market, shot up 67 1/2 cents to close at $2.50 a share on Wednesday. The company’s stock had traded as high as $10.50 a share last year.
Analysts have estimated that the company is worth about $3 a share.
Bullock, when asked if having the head of a company 2,200 miles away from its operational base was practical, said: “It’s pretty easy to maintain control.” Bullock said that because he will be running the day-to-day operations, “we don’t need to be based in California.”
Paul Brown, an industry analyst for the brokerage Volpe, Welty & Co. in San Francisco, agreed.
Such a practice, though not common, is by no means unheard of, Brown said.
“I don’t think it’s that unusual,” he said. “It’s TriCare’s opportunity to find somebody who is a good executive and a good manager to run the company, and if he wants to live in Atlanta, I don’t think it will be that difficult.”
Brown also said that with $7 million in the bank and another $10 million expected from future collections of receivables and sales of assets, the company is far from insolvent. In fact, he said, that cash could conceivably be used to make acquisitions.
Bullock would not be specific about future acquisitions or what direction the company is likely to take, saying only that TriCare will be looking for opportunities--especially outside California.
Of the restructuring, Bullock said: “We said, ‘Let’s wind it down and get it down to where it will grow again.’ ”
TriCare at a Glance
Business: Treatment, evaluation and physical rehabilitation of people injured on the job
Headquarters: Moving from Irvine to Atlanta
1992 revenue: $46.8 million, up 28%
1992 profit: $3.8 million, up 58%
Employees: 153
CEO: Larry G. Gerdes
Sales (In millions of dollars): 1989: 17.9 1990: 20.9 1991: 36.6 1992: 46.8
Profit: 1989: 1.3 1990: 1.6 1991: 2.4 1992: 3.8
Source: TriCare
