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Wahlco Environmental to Report Second-Quarter Loss : Industry: The Santa Ana company, which will close some of its facilities, will take a onetime restructuring charge of $56 million.

July 06, 1994|JOHN O'DELL | TIMES STAFF WRITER

SANTA ANA — In a major retrenchment, Wahlco Environmental Systems Inc. said Tuesday that it is closing some manufacturing facilities and will report a second-quarter loss.

The company also said it will take a onetime restructuring charge of $56 million for the three months ended June 30.

Because the company had said earlier that it had overestimated the market for its pollution control products, Tuesday's announcement was no surprise to Wall Street. The company's stock lost 12.5 cents a share to close at $2.625 in light trading on the New York Stock Exchange.

The onetime charge consists mainly of a $50.4-million write-down of goodwill--intangible items that can include such things as the value of a company's name, reputation and customer list, and the marketability of its products.

Wahlco, which is 80% owned by a unit of San Diego Gas & Electric Co., designs and manufactures air pollution control and power efficiency equipment and provides related services to electric utilities, refineries and industrial manufacturers worldwide.

The company had been growing until two years ago. Its 1991 revenue of $88.8 million was more than double the $40.6 million it reported for 1989.

Company officials said last year, however, that both earnings and sales were being hurt by a shrinking market. They blamed the slump in part on lack of compliance with the 1990 federal Clean Air Act amendments--rules that have been bitterly opposed by many businesses because of their complexity and the high costs of cleaning up industrial pollution.

After posting a profit of $11.6 million for 1991, Wahlco reported a loss of $12.8 million for 1992 and a loss of $10.9 million last year.

To help cope with the sluggish market, company officials said, Wahlco has trimmed its payroll by about 300 positions through layoffs and attrition in the past year. It now employs about 550. The company also is reducing total manufacturing square footage by half. That accounts for about $5 million of the second-quarter write-down.

Wahlco also said it is in escrow on the sale of its 36,380-square-foot manufacturing plant in Montreal, and is negotiating to lease its 68,000-square-foot building in Fairmont, W.Va., to another business.

The company, which is based in Santa Ana, said it wants to cut its sales, general and administrative costs by about $10 million a year beginning in the current quarter. Those costs totaled $26.3 million for 1993.

Company President Henry N. Huta said that orders for some of the company's products have begun increasing.

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