Nu-Med Reports 49% Decline in Earnings : Hospital Chain Blames Remodeling Costs; Micom Also Faces Decline

Nu-Med, a fast-growing Encino-based hospital chain, on Monday reported a 49% decline in earnings for the third quarter ended Jan. 31 and predicted lower net income for the entire year because of remodeling costs for three of its hospitals.

Another major company, Simi Valley-based Micom Systems, forecast lower sales and earnings for its fourth quarter ended March 31 because of continued sluggishness in the computer industry. The company indicated it expects its net income to be down at least 26% from the same quarter last year. Micom’s stock, traded over-the counter, closed Monday at $16.75, down $1.75.

Nu-Med said its remodeling program disrupted operations at hospitals, including two newly acquired facilities that account for 604 of the company’s 2,000 beds.

The company “had some major interruptions,” said Nu-Med president William N. Hartauer.

Changes Seen in Fiscal 1987

The April 30 acquisition of Fort Lauderdale, Fla.-based U. S. Health Corp. raised Nu-Med’s revenue 66%, to $85.0 million for the quarter. Third-quarter earnings were $1.2 million, or 10 cents a share, against $2.4 million, or 24 cents a share, a year ago. Earnings per share were adjusted for a 25% stock dividend last April.

Hartauer said the company’s construction would continue until June or July, reducing fourth-quarter and year-end results. But, he said, the projects should help fill a higher percentage of beds and yield improved results in fiscal 1987, which begins May 1.

He said the benefits of a companywide cost-cutting campaign also should materialize then. Hartauer said Nu-Med is not planning any further acquisitions and wants instead to make better use of its current facilities.

Mostly through acquisitions of acute-care and psychiatric hospitals, the company grew from $10.5 million in annual sales for the year ended April 30, 1983, to $200.6 million in fiscal 1985. Annual profits rose from $586,000 to $7.5 million.

Hospital Industry Sluggish

Lately, however, Nu-Med’s stock has been mired in the same slump afflicting most of the hospital industry.

“The whole group’s been coming down,” said William Garland, a financial consultant with First Affiliated Securities in Encino.

In over-the-counter trading, Nu-Med closed Monday at $6.625, up 12.5 cents for the day but near its 52-week low of $6.375, roughly the company’s per share book value.

Nu-Med, which has 2,500 employees in Southern California and 5,500 overall, owns 15 acute-care hospitals with 1,592 beds and 11 medical office buildings in the United States. It also owns two acute-care facilities in Britain with 132 beds.

Nu-Med has three existing psychiatric hospitals, three more under construction and plans to build another three. The company also provides consulting, home health care and hospital management services.

For the nine months ended Jan. 31, it earned $4.0 million, or 34 cents a share, down 29% from $5.5 million, or 57 cents a share, a year ago. Revenue was up 52% to $225.4 million.

Micom Slump Continues

Micom’s anticipated fourth-quarter results would give the company lower sales and earnings for the fifth straight quarter on a year-to-year basis. Micom said its quarterly results also would fall below those for this year’s third quarter ended Dec. 31, when it earned $4.2 million, or 24 cents a share, on sales of $49.1 million.

That means Micom’s expected profit will be down at least 26% from the $5.7 million, or 33 cents a share, it earned on sales of $51.6 million during the fourth quarter ended last March 31.

Over the first nine months of Micom’s fiscal year, earnings were down 54%, to $9.2 million. Sales were up less than 1%, to $142.7 million.

Micom cited the computer industry slump and the possibility it will not be able to collect payments from an ailing distributor. As a result, it will take a charge of about 5 cents a share--which would amount to $865,000, based on the outstanding company stock as of Dec. 31--against fourth-quarter earnings.

Micom, whose products enable computers to share phone lines or to communicate with each other, wouldn’t name the distributor or say how much business is done through it. Micom said it terminated the agreement with the distributor.

The company has 2,000 workers, including 700 in Simi Valley and 300 at its Northridge factory.