SourceOne says it is on course for profitable 2003

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One year after Platinum Equity LLC created SourceOne Healthcare Technologies Inc., the U.S. imaging products distributor says it has turned the corner to profitability.

 Since November 2002, SourceOne has been working on integrating Platinum's acquisitions of Philips Medical Systems' Health Care Products (HCP) division and PSS World Medical Inc. subsidiary Diagnostic Imaging (DI) into one company. The goals included taking two underperforming companies and make them a profitable entity.

 To do so, SourceOne, among other initiatives, consolidated HCP and DI's 100 or so distribution centers to approximately 60 centers.

 "When we get done, we'll probably have closer to 40 distribution centers," adds SourceOne President and CEO Jerry Cirino, "and we will maintain the same service levels to our customers."

 SourceOne plans to reach the 40-center mark in 2004, as it continues to provide imaging equipment, radiographic supplies and services to more than 50,000 hospitals, clinics, imaging centers and physician and veterinarian offices. The company also claims market share of 42 percent and annual revenues of approximately $1.3 billion.

 "The underperformance part is gone," says Cirino. "We are profitable and are able to reinvest in the business."

 SourceOne in 2003 also moved into new headquarters in Mentor, Ohio, and maintains a facility in Jacksonville, Fla. The number of employees also will decline from approximately 2,500 in November 2002 to some 2,150 by the end of 2003.

2004 outlook

While Cirino would not project revenues for 2004, he did say that the company expects "the equipment side to improve over this year and we are looking at a couple of things that haven't come to fruition just yet that we think will have some nice impact next year." SourceOne expects that growth will help the company exceed $1.2 billion in revenues in 2004.

 SourceOne will explore product deals with suppliers and some imaging-related acquisitions as growth drivers. "We are actively on the prowl," Cirino says. "We are also examining opportunities outside of imaging."

 A "robust" picture archiving and communication systems (PACS) is one market segment drawing the company's interest, Cirino says.

 "What is motivating [the growth] is the requirements for greater efficiencies," Cirino says. "You are dealing with a triple shortage of radiation physicists, radiologists and technologists that we've had for years. That won't be solved with an influx of people in the short term."

 SourceOne would target what it says is the "underserved" segment of the PACS market - namely, mid- and lower-tier healthcare facilities in the 100- to 200-bed range and imaging centers.

 "We have identified in our strategic plan that going forward we must be a major PACS player," Cirino says. "We are in the process of identifying who the right PACS partners are."

 SourceOne currently partners with StorComm Inc. for its AccessNet PACS product line.

 Consumable and accessories contribute to the majority of the company's business, generating approximately $1 billion in annual revenues. The service business accounts for approximately $100 million, while the balance is in digital radiography, computed radiography, mammography, computer-aided detection and other digital technologies.