Trex quarterly loss balloons to $100 million

The wheels have started coming off at Trex Medical. Sales of imaging equipment dived 28% in the third quarter (end July 1).

Revenue was $45 million compared to $63 million in the same quarter of 1999. Most spectacular was a net loss of $100 million compared with a loss of $14 million in the third quarter last year. Restructuring and related charges accounted for more than $95 million.

“Given the continued decline in Trex Medical’s performance and the planned sale of its individual operating units, during the quarter we wrote down the company’s principal businesses to their estimated disposal value through noncash restructuring charges,” said William J. Webb, Trex Medical’s CEO.

About $65 million of that write-down was attributed to “goodwill impairment.” Another $20 million in write-downs was assigned to inventory, $3 million to property, plant, and equipment, and about $7 million to deferred tax assessments. Another $1 million was recorded for restructuring.

“The reevaluation of assets establishes a basis that is more consistent with the probable net proceeds from the future sale of the company’s operating units,” Webb said.

He refused to elaborate further, citing legal concerns with the Securities and Exchange Commission related to the impending sale of the company.

Since early 2000, when parent ThermoElectron announced its intent to dispose of Trex Medical, executives at the company have been seeking a buyer.

None has yet been found. As a result, the three principal operating units within Trex Medical will be sold individually, according to Webb.

The buyers of these units will have their hands full trying to reverse the downward sales spiral. Webb attributed the nearly $20 million quarterly drop in sales to decreases in the sale of mammography systems and cardiac cath labs.

Uncertainty about the company’s future was the reason Webb cited for the drop in demand for Trex’s cardiac cath labs. This uncertainty was also partially responsible for reduced mammography sales.

Another contributor to the drop in mammography demand, he said, was a surge in sales the previous year to hospitals and clinics that were upgrading mammography systems to become compliant with the guidelines established by the Mammography Quality Standards Act.

“Though we are still experiencing losses, we are right-sizing the operation to volume expectations,” Webb said. “While Trex Medical has experienced more than its share of change over the last year, we will continue to take the appropriate management actions necessary to control costs and make every effort to align with potential buyers.”