Chronimed says results were overstated; Nasdaq halts trading
Staff and wire service report
Friday, June 15, 2001
Chronimed Inc. said Thursday it will restate its revenue and earnings for fiscal 2000 and three quarters of this year because of an accounting error that caused it to
overstate its financial results.
Shares of Minnetonka-based Chronimed, which operates specialty pharmacies for chronic diseases such as AIDS, fell as low as $6.50 in pre-market trading Thursday.
Nasdaq halted regular trading in the stock before the market opened, and said Chronimed shares won't trade until the company satisfies the exchange's request for
additional information on the restatement.
Chronimed stock closed at $9.35 a share Wednesday, down 5 cents for the day on unusually high volume of 226,100 shares.
Four of the five analysts who cover Chronimed lowered their ratings on the company Thursday, all citing the restatement. In addition, Baltimore lawyer Charles Piven
said he has begun an investigation of Chronimed that could result in a securities fraud lawsuit against the firm.
Company officials did not return calls to the Star Tribune Thursday.
In a brief conference call with analysts after the stock market opened, CEO Henry Blissenbach said the company recently discovered that some prescriptions were counted
as revenue more than once by the computer accounting system at its StatScript subsidiary. As a result, StatScript's revenues, earnings and receivables were overstated.
The mistake, which the company still is working to quantify, appears to be limited to fiscal years 2000 and 2001, he said. The error was found when the company
compared cash receipts with customer accounts for 35 of its 37 stores. Blissenbach said the company doesn't think the error resulted in duplicate bills to payers or patients.
He said the mistake has been corrected and no adjustments will be made for the company's mail-order pharmacy operations, which use a different accounting system.
Blissenbach said the company won't give further guidance on earnings until it has completed its investigation. He didn't accept questions from analysts or investors on the
conference call.
In fiscal 2000 Chronimed reported revenue from continuing operations of $225.9 million. The company previously had estimated it would have revenue of $294 million to
$297 million in fiscal 2001, which ends this month.
"It's certainly a surprise because there was no indication on the outside that there were any issues about how their accounting system was working internally," said Ernest
Andberg, a Miller Johnson Steichen Kinnard analyst.
"Given that they were unable to make an estimate of the extent of the problem and also give any forward guidance, I'm not sure how the exchanges are going to handle
it," Andberg said.
© Copyright 2001 Star Tribune. All rights reserved. |
