ADAC warns of lower Q2 results

April 28, 1999

Nuclear medicine developer ADAC Laboratories issued a warning to the financial markets on April 21, stating that the Milpitas, CA, company expects to post lower than anticipated profits and revenues for the second quarter (end-April). ADAC believes that revenues could be 2% to 8% lower than the $94.3 million it reported for the first quarter, while earnings per share will decline significantly. The news prompted Wall Street to pummel ADAC shares: The stock was trading at around $6.25 on April 22, down 50% from the day before.

ADAC said that a weakening of demand in nuclear medicine was one of the factors leading to the lower results. Orders for the second quarter declined 12% compared with the first quarter. ADAC also said that it has experienced delays in recognizing revenue under the new revenue recognition policy adopted by the company.

ADAC may also incur one-time charges in the second quarter, for both international accounts receivable and for shareholder class-action litigation related to its revenue restatement this year. Additionally, the company may take a charge in connection with the restructuring of its distribution and manufacturing operations.

It is unclear whether ADACs problems are limited to the company, or are a sign of a broader slowdown in the nuclear medicine market that could affect other firms. ADAC expects to post complete second-quarter results by the second half of May.