A Shaky Bottom Line : Valley Firms Tabulate Bite Earthquake Took From Profits

By PATRICE APODACA

March 3, 1994 12 AM PT

TIMES STAFF WRITER

Just as the physical force of the Northridge earthquake hopscotched around the San Fernando Valley, picking and choosing the victims of its worst punishment, some Valley companies are taking a hit to their bottom lines because of lost business.

The problems cited include damage to facilities and merchandise and lost sales in the days after the Jan. 17 quake. Some insurance companies face big payouts for claims. Financial institutions could suffer if homeowners walk away from their mortgages.

Datametrics Corp., a Chatsworth maker of computer printers and communications products, said Wednesday that it lost $242,000 on sales of $5.6 million in its fiscal first quarter ended Jan. 31, mainly because of earthquake-related setbacks. A year earlier, Datametrics earned $256,000--excluding a onetime accounting gain--on revenue of $5.3 million.

The company was shut down for four days after the quake because it had no electricity. Later, shipments of materials used in Datametrics products didn’t arrive. The delays were particularly damaging because they came at the end of the quarter and because the recession has forced companies such as Datametrics to time shipments tightly.

“It’s like the nail in the horse’s shoe that makes you lose the war,” Datametrics Chief Executive Sidney E. Wing said.

The company also suffered because workers needed time off to deal with personal problems, Wing said. And every time an aftershock rattled, “they wanted to get out of the building,” even though city inspectors have deemed the structure safe.

Beverly Hills Fan Co. in Woodland Hills estimated its earthquake damage, including merchandise destroyed by the temblor, at between $200,000 and $500,000. None of the products were earthquake-insured, and the company is still assessing its water damage.

“There will be an impact on quarterly earnings,” Controller Neil MacDonald said. Fortunately for Beverly Hills Fan, before the earthquake it had already rung up $1.6 million in sales, double that of the first quarter a year earlier. The company said that if it posts a profit this quarter, it will be a small one.

Art publisher and retailer Martin Lawrence Limited Editions Inc. in Van Nuys said its first-quarter sales will probably be “significantly” lower because of the earthquake and the severe cold in the Midwest and East Coast. The firm hopes to recover at least some quake-related losses from its insurer.

Martin Lawrence said quake damage has kept its galleries closed in the Northridge Fashion Center and Sherman Oaks Fashion Square shopping malls. Its headquarters was also shut down for two weeks after the temblor.

In the quarter ended March 31, Martin Lawrence lost $1.7 million on $4.7 million in revenue.

Among those companies likely to feel an earnings bite from the earthquake are property-casualty insurers.

20th Century Industries, the Woodland Hills parent of 20th Century Insurance Co. and 21st Century Casualty Co., estimated its quake claims at $160 million. After taxes and reinsurance, the total will drop to $62.9 million.

“The vast majority of that will be in the first quarter,” said Richard Dinon, senior vice president at 20th Century, the state’s sixth-largest carrier of earthquake insurance. In the first quarter of 1993, the company earned $23.9 million on $263.1 million in revenue.

However, at Amwest Insurance Group Inc., the earthquake “is going to be immaterial” to earnings, said Steven R. Kay, chief financial officer. That’s because the Woodland Hills company specializes in writing surety bonds guaranteeing construction and other projects. In fact, said Kay, Amwest might benefit if the earthquake spurs rebuilding. “That’s what you need surety bonds for. It could be an opportunity for us.”

Banks and savings and loans also stand to feel some pain from the quake. American Pacific State Bank in Sherman Oaks, one of the nation’s largest Small Business Administration lenders, cited the Northridge earthquake as one reason it added to its loan-loss reserves for 1993. As a result, its earnings declined 54% in its fourth quarter ended Dec. 31, to $197,899 from $430,556 a year earlier.

Great Western Financial Corp. said it does not expect a “material loss” from the quake. Two buildings at its large Chatsworth complex were badly damaged, but rebuilding costs should be covered by the savings and loan company’s insurance, spokesman Steve L. Hawkins said.

A bigger problem would occur if large numbers of homeowners who can’t afford to rebuild their quake-damaged houses walk away from their mortgages, Hawkins said. The company is optimistic that that scenario won’t come to pass because most borrowers who are taking advantage of Great Western’s offer to place a 90-day moratorium on mortgage payments do not have severe structural damage on their properties--and many have earthquake insurance.

Glendale Federal Bank estimated that it has $1.5 billion in real estate loans in earthquake-affected areas. But Judy Cunningham, a spokeswoman for the Glendale-based thrift, said the extent of any losses won’t be known for another week or two. She said Glendale Federal was calling all its borrowers and depositors and inspecting properties. “There are still so many variables.”

Other companies also said it is too soon to tell what impact, if any, the earthquake will have on profits.

Steven M. Besbeck, president of Creative Computer Applications Inc., a provider of information systems for laboratories and pharmacies, said his company didn’t resume full operations until a few weeks after the quake. Its Calabasas offices were drenched when sprinklers went off during the shaking.

Besbeck has hired specialists to determine whether the company’s electronic equipment is salvageable.

“It may have an effect on the quarter that ends Feb. 28,” he said, “but I’m not even sure about that yet.”