CEO SUMMARY: Events are unfolding rapidly at Bostwick Laboratories, Inc., of Glen Allen, Virginia. In recent months, the company has listed its facilities in Arizona, Tennessee, New York, and Virginia for sale or lease. In July, it agreed to pay a civil fine of $129,000 to settle a consent judgement involving hazardous waste violations at its lab in Tempe, Arizona. Also in July, Bostwick Laboratories obtained a new line of credit that totals $43 million.
FROM ITS FOUNDING IN 1999, it was almost a full decade of high-flying growth for Bostwick Laboratories, Inc., based in Glen Allen, Virginia. By the end of 2007, the privately-held pathology lab company reported $102.7 million in annual sales. In early 2008, it filed documents for an initial public offering (IPO).
However, Bostwick Labs has had its share of business woes during the past 30 months. Last month, it was reported that Bostwick Labs paid a $129,000 civil penalty in connection with hazardous waste violations in Arizona.
Facilities Put on the Market
The previous month, in June, the Richmond BizSense, a newspaper in Richmond, Virginia, reported that the pathology lab company’s laboratory facilities in Tempe, Arizona; Uniondale, New York; and Nashville, Tennessee, were all on the market.
The newspaper also reported that Bostwick Laboratories was scheduled to vacate one of its two locations in Richmond in October 2011, and that the company’s 65,000 square foot corporate headquarters in Innsbrook, Virginia, was put on the market in June. The lease for this property ends on December 31, 2011.
If the company follows through with the closure of its facilities in Tempe, Uniondale, Nashville, and Richmond, as reported by local newspapers in these cities, then it would be a sign that Bostwick Laboratories is undergoing a significant corporate restructuring.
THE DARK REPORT contacted Bostwick Laboratories’ corporate office with requests for an interview. However, as of press time, no official from Bostwick Laboratories had responded.
On the money front, Bostwick Laboratories appears to be equally busy. It recently tapped a source of capital to help it in this next business phase. On July 7, 2011, Bostwick Laboratories issued a press release and disclosed that it had obtained a $43 million commitment from the Healthcare Finance Group, LLC, of New York. In the press release, Bostwick labs said these funds would be used to refinance existing capital, for term loans, and to fund an interest rate swap.
Of the total, Healthcare Finance Group (HFG) will make $20 million available in a revolving line of credit. Bostwick Laboratories will take the remaining $23 million in the form of senior secured term loans.
Putting Credit Line to Work
Gregory Geisz, Bostwick’s Vice President of Finance, said, “The continued growth of our company requires a lender that understands our current and future needs for capital, the healthcare regulatory environment, and the surrounding issues that accompany the growth we expect.”
The fact that Bostwick has borrowed this money and not accepted an equity investment could mean that David G. Bostwick, M.D., MBA, the company’s Founder and CEO, wants to maintain maximum control over his company.
It was in March, 2008, when Bostwick Laboratories filed the documents necessary to sell its stock to the public. However the company never followed through with its proposed IPO. (See TDR, March 24, 2008.)
Another growth strategy was to grab pathologists from the Armed Forces Institute of Pathology (AFIP) as this organization was reorganized as mandated by the Base Realignment and Closing Act (BRCA) of 2005. In the fall of 2009, Bostwick Labs hired as many as 25 former pathologists from AFIP and opened a new laboratory facility in Silver Spring, Maryland, and named it American International Pathology Laboratories (AIPL). (See TDR, August 31, 2009.)
Future Plans for Bostwick
It is unclear how Bostwick Laboratories plans to consolidate its laboratory testing activities, given the news reports that it has listed several facilities for sale or for lease. Armed with a substantial new line of credit, the pathology lab company is positioned to execute any of several different business strategies.
Bostwick Labs Pays Fine in Arizona
AS RESOLUTION TO CERTAIN ISSUES, on July 8, 2011, the Arizona Department of Environmental Quality (ADEQ) and Arizona Attorney General Tom Horne announced a settlement with Bostwick Laboratories.
Bostwick Labs agreed to pay a $129,900 civil penalty under a consent judgment for hazardous waste violations. In February 2010, ADEQ’s hazardous waste inspectors found a number of violations at the company’s lab in Tempe. ADEQ said the pathology lab company:
- Did not put decontamination equipment in one storage area.
- Had not made local police and fire officials and area hospitals familiar with its emergency procedures.
- Had incomplete inspection logs.
- Did not have contingency emergency plans or an emergency coordinator.
- Lacked training records for hazardous waste storage personnel.
- Did not mark “Hazardous Waste” on 5-gallon containers.
- Shipped hazardous waste without obtaining the required identification number from the U.S. Environmental Protection Agency.
- Did not register with ADEQ, pay annual registration or hazardous waste generation fees, or submit annual reports since beginning operations in 2006.
“This lack of management of hazardous waste put employees and the community at risk,” stated ADEQ Director Henry Darwin about the case. “Agreeing to pay this sizeable penalty is an acknowledgement of the severity of the situation.”
