Birtcher Medical Systems Inc., a medical device manufacturer buffeted by two years of losses, has hired a corporate trouble-shooter as its new chief executive.
Kenneth C. Cleveland, president of Kenneth Cleveland Associates Inc., an Irvine-based management consulting firm, became Birtcher's CEO and president on Monday, the company said. He will remain as president of the consulting company.
At Birtcher, he succeeds William E. Maya, who becomes vice chairman, a newly created position, and will be responsible for seeking candidates to buy either the whole company or some of its assets--including its money-losing Solos endoscopic products division.
Birtcher, which makes advanced surgical products, decided to seek a buyer after posting a loss of $1.9 million, or 22 cents a share, for its latest fiscal year, which ended June 30. That followed a fiscal 1992 loss of $1.2 million.
Birtcher has not been able to recover. For the first nine months of the current fiscal year, the company posted a blistering $18.9-million loss, contrasted with a profit of $150,000 for the same period a year earlier.
Revenue also declined. For the first nine months, the company reported revenue of $26.9 million, down 18% from $32.9 million a year earlier.
Devising a strategy for returning Birtcher to profitability will be complicated, Cleveland said. On the up side, he said, Birtcher is a "well-established company with a good core product line and a good customer base. The company has worked hard to achieve that."
On the other hand, he said, the company in the past has not responded adequately to a national trend of cost reductions in the health-care field. Across the United States, cost-conscious hospitals, squeezed by declining insurance reimbursement, are shying away from spending money on new surgical equipment.
"What has been wrong about the company is that they have been too optimistic in their business forecasts and have structured the company to break even at a higher level than they have been able to achieve," he said.
Health-care analysts agreed. Many of them have all but stopped following the company after expressing frustration that management seemed to be making poor decisions.
One of those moves was the 1991 acquisition of Solos Endoscopy Inc., a Georgia-based maker of video surgical devices. The market for that product has since been in a slump, and the competition has grown. Solos has been the leading reason for Birtcher's financial losses, analysts said, forcing many of them to recommend that investors sell the company's stock.
Jeffrey L. Holmes, a health-care analyst with Hamilton Investments, a Chicago brokerage, said that when he issued his sell order a year ago, the stock was selling at about $3 a share. Several years ago, however, it sold for as much as $18.
"At the time, I thought . . . 'How much lower could it go?' " Holmes said Tuesday.
But it has continued its slump, closing at $1.75 a share, down 12.5 cents, in Tuesday's Nasdaq trading. That price was still 25 cents a share higher than its 52-week low of $1.50 a share, reached May 10.
Though Cleveland acknowledged that he is inexperienced at running a medical company, he said he has a long record of successful turnarounds.
Local companies he has helped turn profitable include Cardis Corp. of Buena Park, a distributor of automobile replacement parts and automotive tools. Another is Tylan Corp. of Torrance, a maker of semiconductor products such as circuit boards.
At Birtcher, Cleveland said, he will stick to fundamentals: improving customer satisfaction, re-engineering marketing plans and trimming costs further--though he maintained that no layoffs among the company's 140 employees are in the offing.
He said he is not worried about his lack of medical expertise.
"You learn the industry, you learn the buzzwords," Cleveland said. "We have people here who know the business. I am bringing to this company economic and marketing discipline."
Birtcher Medical Systems
For its third fiscal quarter, which ended March 31, Birtcher Medical Systems reported a loss of $17.6 million on revenue of $6.8 million. The company attributed the loss to a onetime charge of $14.8 million. Figures in millions of dollars except data per share:
3rd qtr. 3rd qtr. 9 months 9 months 1993 1994 1993 1994 Revenue $9.7 $6.8 $33.0 $27.0 Net income (loss) (0.947) (17.6) 0.150 (18.9) Per share (loss) (0.10) (1.93) 0.02 (2.08)
Source: Birtcher Medical Systems; Researched by JANICE L. JONES / Los Angeles Times