ADAC to restate three years of revenues

Shareholders of nuclear medicine vendor ADAC Laboratories received a shock late last month when the company announced that it will restate its financial results for the last three years. The news prompted a major selloff in ADAC shares and triggered a flood of shareholder lawsuits filed against the Milpitas, CA, company.

ADAC has been a model of consistent revenue and earnings growth over the past four years, and its stock has risen accordingly. Some of those numbers, however, may have represented sales that were recognized inappropriately in the years 1996, 1997, and 1998, according to a review by ADAC's auditor, PricewaterhouseCoopers.

The decision to restate revenues came after ADAC's earnings report in November. Questions were raised regarding the company's accounting policies and practices, particularly with respect to one-time charges and expense and revenue recognition practices. The company plans to adjust the timing of some sales over the three-year period, moving revenues forward into adjacent future periods.

ADAC stressed that the restatement has nothing to do with the health of the company's business. ADAC has had record customer order volumes over the past two years, and the vendor believes that its competitive position will improve due to recently introduced new products, such as its Forte and V60 gamma cameras (SCAN 12/16/98).

That opinion didn't assuage Wall Street, however. On the day the news was announced, ADAC shares fell from $27.13 to $21.88, a drop of 19%. On Jan. 6, they were trading at $20.13. Smelling blood, at least seven law firms filed class-action shareholder suits against the company.

In other ADAC news, the company named Gary Burbach president of ADAC Medical Systems, where he will manage the company's nuclear medicine and CT refurbishing business. Burbach previously was general manager of the company's radiation therapy products unit.