Reorganization, cost-cutting and new blood in its leadership ranks appear to be doing a world of good for the health of First Consulting Group Inc., whose share price has risen 73 percent in the past year.

The 26-year-old Long Beach-based company, which provides information technology and other professional services to hospitals, insurers, pharmaceutical companies and other health care organizations, reported lower revenues in the first quarter compared to a year ago, in large part due to the loss of its largest client as of the beginning of the year.

But it could have been worse.

In fact, the two Wall Street analysts who most closely watch the com-pany were pleasantly surprised by the company’s performance. That reaction has been reflected in its stock price, which closed at $8.96 on June 28, after having dropped below $5 over the last 52 weeks.

First Consulting “reported results well above our expectations,” said Justin Cable, an analyst at the Los Angeles office of B. Riley & Co., who notes that the company has good cash flow and no long-term debt. “Going forward we anticipate the company will continue to focus on growth and profitability.”

In the latest move to put the First Consulting on more stable financial footing, a new chief executive, Larry Ferguson, came on board last week.

Ferguson, a 25-year veteran of the information technology industry, was president of First Data Health Systems Corp. until it was acquired in 1995. Since then he has run his own private equity investment and consulting firm specializing in health care information technology and served on several corporate boards.

“We see this as another step in the right direction as Mr. Ferguson should bring continued client focus to First Consulting,” said Sean Jackson, an analyst at Nashville-based Avondale Partners LLC, in a note to investors. “Our checks indicate that Ferguson has a strong reputation in the industry for being very client-focused.”

Ferguson replaces chief Luther Nussbaum, who resigned in November at the board’s request after having led the company since 1998. Steven Heck, the company’s president, took over as interim chief executive and worked with the board to craft a cost-reduction plan aimed at returning the company to profitability in 2006.

Two losses


Jackson said Nussbaum likely concluded it would be better for someone else to lead the company and revitalize the workforce during the company’s next phase.

The restructuring came in the wake of the loss of two large contracts. The company last July announced that New York and Presbyterian Hospital was not renewing its $30 million annual services contract, which had contributed 10.6 percent of First Consulting’s net revenues. In October the company announced the mutually agreed termination of its outsourcing agreement with UMass Memorial Health Care.

In addition, First Consulting announced this April that it would delay filing its 2005 annual report with regulators because its auditor was still reviewing its provision for income taxes in 2002 through 2004. The company later announced it would reduce its tax expense for 2002 through 2004 by $1.3 million, and increased its tax expense in 2005 by $1.3 million. The company subsequently reported an $18.6 million loss for fiscal 2005, compared to $4.1 million net income in 2004.

First Consulting in December announced it would be cutting jobs, including management positions, and closing offices as part of a restructuring and cost-reduction program to improve profits in 2006. The company employed about 2,435 workers in 2004, but that was down to 2,394 at the end of the first quarter, including significant overseas offices in India and Vietnam.

Offsetting the lost business was the announcement last August of two smaller multi-year contracts whose combined annual revenues would total $29 million.

The company also is focusing on building its IT outsourcing business among hospitals, Cable noted, since those institutions are looking for ways to cut administrative costs due to rising health care costs and lower reimbursement rates. The latest example is a 67-month IT outsourcing agreement estimated at $6.1 million signed in May with Montrose Memorial Hospital in Colorado.