COHR reverses divestiture course; ISO decides to rebuild company

New management team plans to get back in the black

In a strategy switch that reflects the latest tumult in a year of setbacks, the board of independent service organization COHR has turned its efforts from divestiture to rebuilding. After announcing its intention to divest earlier this year, the company last month changed direction by hiring a new management team of turnaround specialists who will work to strengthen COHR as an independent entity, as well as to extend its existing array of products and services.

COHR made the turnaround because few of the acquisition offers it received were deemed worthy of consideration, according to Rusty Page, spokesperson for the Chatsworth, CA, firm. COHR’s board is now concentrating on getting the firm back into the black.

“The board wants to return the company to profitability, and expects to do it by the fourth quarter of this year,” Page said. “(COHR) would not be averse to an offer if it came, but in the absence of an appropriate offer, the emphasis will be on rebuilding. If someone wants to buy the entire company, or a part of it, the board would consider that.”

COHR’s new corporate agenda follows the hiring last month of Raymond List as president and CEO, and Peter Socha as executive vice president. Departing COHR are Sandy Morford, long-time COO, and Haresh Satiani, senior vice president of COHR’s Maintenance MasterPlan program (SCAN 6/10/98). In April, Morford came under fire in a highly critical Barron’s article that alleged that COHR and Morford were responsible for accounting irregularities in the firm’s MasterPlan program.

MasterPlan offers member hospitals equipment maintenance at a fixed price, with guaranteed rebates if the hospital’s spending comes under budget. The Barron’s article claimed that COHR absorbed excess money instead of rebating it. The company denied the allegations, but it has been hit with shareholder lawsuits in the wake of the claims.

In the midst of public scrutiny, COHR continues to struggle financially. Last month, the company released results for the fourth quarter (end-March), in which it posted revenues of $26.9 million and a net loss of $15.9 million. The loss included $7.3 million in special charges: a $4.6 million goodwill write-off, one-time costs to close unprofitable MasterPlan locations, and legal and accounting costs arising from a special review of company operations.

For fiscal 1998, COHR reported revenues of $102.1 million, an increase of 18% compared with $86.2 million in fiscal 1997. For the most recent year, COHR had a net loss of $27.3 million, which included special charges of $11.4 million. In 1997, COHR posted a $2.3 million profit.