Applied Circuit Lists Loss for Third Quarter : Figures Down Despite Diversification Move

Despite a diversification plan designed to relieve it from the cyclical nature of the electronics business, Applied Circuit Technology Inc. reported a net loss of $1.9 million for its fiscal third quarter, contrasted with net income of $505,485 for the comparable period a year earlier.

For the first nine months ended July 31, the company posted a net loss of $4.8 million, contrasted with year-earlier net income of $69,333.

The Anaheim-based company, a maker of computer test systems until it purchased a wholesale pharmaceuticals company and added generic medications to its sales brochures earlier this year, said most of its $1.6-million operating loss came from its computer operations.

The company makes test equipment for disk drives and floppy disks, the components which allow a computer to store information.

A $375,000 charge for computer equipment and inventory write-downs and costs associated with moving the company’s computer equipment unit from Fremont to Anaheim boosted the third quarter net loss to $1.9 million.

Trimmed Work Force

In moving the unit to Anaheim, eight of the facility’s 11 workers were dismissed, the company said. In May, the company trimmed its computer operations work force from 116 to 68.

And, since acquiring Gardena-based Whiteworth International Inc. five months ago, Applied Circuit has trimmed employment at the pharmaceutical unit to 130 from 178.

A company spokesman said the layoffs were not related to a sales decline in the pharmaceuticals unit but rather were aimed at eliminating jobs that were duplicated when the Applied Circuit and Whiteworth staffs were merged.

The losses for the quarter and first nine months came because “the market for (computer) test systems has been deteriorating for a year,” said J.V. Taylor, Applied Circuit’s chairman and chief executive.

Taylor said the company is “seeking additional ways to reduce expenses,” although he said no significant additional cuts in personnel are anticipated.

Results for the period reflect the first full-quarter operations of Whiteworth International, which Applied Circuit acquired in March for $2.15 million in cash and notes. In making the acquisition, Applied Circuit cited the rapid emergence of the generic drug industry.

Seek to Diversify

Applied Circuit’s strategy in purchasing Whiteworth was to diversify its product line and reduce its dependency on the volatile computer industry.

Revenue for the fiscal third quarter was $7.1 million, compared to revenue of $5.6 million for the same period a year earlier.

About two-thirds of the revenue for the most recent period came from pharmaceutical sales, Taylor said.

For the first nine months, Applied Circuit reported revenue of $13.4 million, down slightly from $13.5 million.

Although Taylor declined to project earnings for the fiscal fourth quarter, he said the company “will be back to being healthy again” next year. “It’s looking better,” he said.

In attributing the slump in Applied Circuit’s computer operations to a cyclical downturn in the industry, Taylor noted that the company still maintains its traditional market share.

And Applied Circuit isn’t getting out of the electronics business. Beside Whiteworth, Applied Circuit has acquired two other companies in the past two years: Irvine-based Dumont Magnetic Technology Co. and Fremont-based Certel Inc. Both are computer-related electronics firms.