Nichols Institute Posts 1993 Loss of $4.4 Million : Earnings: The medical testing company blames decline on reorganization and cost-cutting in the wake of a series of acquisitions.
Blaming a major cost-cutting consolidation and restructuring, Nichols Institute posted a $4.4-million loss for 1993.
But Chief Executive George Bragg said that the San Juan Capistrano-based maker of medical test kits and provider of specialized laboratory services should be profitable again by midyear as the company emerges from last year’s difficult cost-reduction program.
“With the (health care) environment as it is right now, we had to pull as many costs and expenses out of our system as we can,” said Bragg, a former Western Digital executive who was hired by Nichols Institute in September to lead the financially troubled company back into the black.
“Hopefully, we should begin to see the benefits (soon) . . . and the balance of the year will see some significant improvements,” Bragg said.
Nichols Institute announced in November that it was restructuring its nationwide operations, consolidating many of its 12 regional laboratories in Texas, the Bay Area and the Midwest. That announcement came after a long series of strategic acquisitions that Nichols Institute officials hoped would secure the company’s position as the nation’s premier medical laboratory testing firm.
But the expansion strategy eventually went bust partly because Nichols Institute, which employs about 4,000 workers, failed to efficiently integrate the new operations.
The company was forced late last year to lay off about 150 workers--none of whom were in Orange County--and begin selling off obsolete and superfluous equipment it inherited during its buying spree.
For instance, the company reduced operations in Dallas by 75% and moved much of that workload to its El Paso facility. Operations at the firm’s Houston and San Antonio laboratories were also cut back, Bragg said.
The $4.4-million loss for 1993, equal to 28 cents a share, compares to a 1992 loss of $4.2 million, or 28 cents a share. The earlier loss was blamed on the uncertainties of the changing health care system.
Annual revenue of $279.6 million last year was down slightly from 1992 revenue of $284.2 million.
Much of 1993’s loss occurred in the fourth quarter, when the company took a restructuring charge of $16 million.
That charge resulted in a fourth-quarter loss of $10.2 million, or 61 cents a share, compared to a 1992 fourth-quarter profit of $1.8 million. Revenue for the fourth quarter was $68.3 million, compared to revenue of $70.5 million for the year earlier period.
Wall Street appeared to react to the news positively.
Nichols Institute stock rose to $5.375 a share on the American Stock Exchange, up 37.5 cents a share from Friday.
David Anast, publisher of Biomedical Market Newsletter based in Costa Mesa, said that the moves, although painful, are expected to turn the company around. Though it has been mired in corporate and administrative problems, Nichols’ business remains solid, Anast said.
“This proves the point I have been making for a long time that not all acquisitions are in the best interest of the acquirer,” Anast said. “Nine times out of 10 they involved large quantities of layoffs, huge management headaches and reversing momentum.”
By year’s end, Anast added, Nichols Institute should reflect the upswing that analysts expected when Bragg came to the company. Bragg was credited with the financial and management reorganization at Western Digital, the Irvine-based maker of computer components.
“If there is one person out there who can make a dramatic difference, he is certainly capable of it,” Anast said. “Anyone who knows him and his track record should concur without exception.”
Nichols Institute Incurs Loss
For the year ended Dec. 31, 1993, Nichols Institute reported a loss of $4.4 million as its revenues declined to $279.6 million. The company attributed the loss to a major corporate restructuring that resulted in layoffs and partial plant closures. Figures in thousands of dollars, except per-share data:
4th qtr 4th qtr 12 months 12 months 1992 1993 1992 1993 Revenue $70,532 $68,292 $284,198 $279,601 Net income (loss) 1,858 (10,200) (4,288) (4,411) Per share (loss) 0.11 (0.61) (0.28) (0.28)
Source: Nichols Institute ; Researched by JAMES M. GOMEZ / Los Angeles Times
