Norland to restate financial results

Shares of bone densitometry manufacturer Norland Medical Systems plummeted 31% on March 16 after the White Plains, NY, company said it would be restating its revenues downward for four recent financial quarters. The company said the restatement is due to mistakes in the way the company booked revenue for certain transactions, particularly through dealers.

Norland said it would restate revenues for the fourth quarter of 1996 and the first, second, and third quarters of 1997. The company estimated that fourth-quarter 1996 revenues will be reduced by about $950,000 and the three quarters of 1997 by a total amount of $4.7 million. Pre-tax income for 1996 will fall by about $400,000 as a result of the restatement, and for 1997 by $1.9 million.

The restatement comes after a review of the periods in question found that some transactions for which Norland recognized revenues should have been treated as bill-and-hold arrangements. The company did not have the documentation required to book these revenues, however, and the revenue recognition therefore should have been deferred. The company said it is considering new procedures to make sure that its accounting practices are in compliance with revenue recognition requirements.

Norland's stock fell from $7.06 a share to $4.88 the day the news was announced, and continued falling for several days afterward. It was trading at around $3.31 on March 25.