ADAC's preliminary Q2 numbersshow revenues down, backlog up

Firm expects decision in CHC buy this month

Gamma camera vendor ADAC Laboratories this month announced thatit expects to report preliminary financial results for the secondquarter (end-April) that show lower revenues and earnings pershare. On a positive note, the Milpitas, CA, company said ordersare up 16%, hinting at a possible return of purchasing growth.ADAC's stock was up slightly on the news.

ADAC said it expects to post second-quarter revenues of about$44.7 million, down 5% compared to $47.3 million in the secondquarter of fiscal 1994. Earnings per share are expected to beabout 17 cents, compared to 24 cents in the same period last year,as restated to reflect a tax rate of 35%.

The numbers demonstrate that the nuclear medicine market continuesto be flat, with managed care putting a damper on sales of newequipment, according to CEO David Lowe. ADAC expects more detailedinformation on the market's health with the publication of NationalElectrical Manufacturers Association data in the next severalweeks.

ADAC is seeing a phenomenon experienced by other vendors dealingwith the onset of managed care, according to Lowe. Health-carefacilities faced with the imposition of a managed-care systeminitially shut down equipment purchasing, but interest eventuallyreturns as buyers adjust to the new regime.

"In the areas where managed care first is introduced itseems like the procurement process is significantly delayed,"Lowe said. "After some period of exposure to managed care,we are seeing quite a bit of rebound in procurement intensity."

ADAC's bookings for the quarter grew 16% over last year, to$45.2 million, although that was due more to gains in market sharethan to an improvement in the market as a whole, Lowe said.

"Bookings were up because we have taken additional sharefrom our competition. I think we have between 34% to 36% of theU.S. nuclear medicine marketplace," Lowe said. "We arestarting to rebuild our growth, and that looks very positive tous."

ADAC's acquisition of radiology information systems vendorCommunity Health Computing awaits the confirmation of the bankruptcyjudge overseeing the Dallas company's Chapter 11 reorganization.That ruling should be delivered by the end of this month. In lateMarch the judge approved ADAC's debtor-in-possession financingagreement for the transaction.