David: I have been following this stock since I heard of laser's potential for improved results in prostrate surgury, where there could be a big market for the product. It does not seem that the prostate product has made a big inroad over conventional scalpel techniques yet though.
I copied this from the 10Q filed in August:
Revenues from the sales of laser systems increased during the quarter and six month periods ended June 30, 1997 relative to the same periods in 1996 primarily due to higher unit shipments of the Company's Aura office lasers and to a lesser extent, sales of lasers acquired in the acquisitions of HSI and NWL. Average unit prices decreased during these periods as a combined result of the greater shipments of lower priced Aura office laser units as well as increased shipments
to independent international distributors. The Company believes that the continuing trend toward reduced health care costs in the United States is still a factor which continues to impact negatively capital equipment procurement by its hospital customers in the United States. As a result, the Company expects that its revenue mix trends for laser equipment in the U.S. market will continue to shift toward its lower priced Aura office laser.
. . .
The increase in revenues from the sales of instrumentation and disposable supplies during the quarter and six months ended June 30, 1997 compared to the corresponding periods in 1996 is principally attributable to increased shipments of scanning devices sold as accessories to the Aura office laser system, partially offset by lower shipments of side-firing devices which the Company sells for use in prostate surgeries. The increase in revenues from the sales of instrumentation and disposable supplies during the quarter and six months ended June 30, 1997 compared to the corresponding periods in 1996 is principally attributable to increased shipments
of scanning devices sold as accessories to the Aura office laser system, partially offset by lower shipments of side-firing devices which the Company sells for use in prostate surgeries. The decreases in percentage of net revenues were primarily the result of revenues from the sales of lasers and AMS equipment increasing at a faster rate than revenues from the sales of instrumentation and disposable supplies. [end]
SO, as to the basic financials you mentioned, yes the numbers now look good, but there was a tremendous write-off with the recent acquisition last year. Amortize that acquisition cost over a few years, another reasonable way of accounting (although for tax purposes it makes sense to take all your write-offs ASAP), and the numbers look less promising. I have not pencilled out those numbers though, because the more important issue, which is an intangible, is how does this company's management handle growth? It is a severe test of management to remain profitable in a high growth/acquisition environment. A look at long term stock price is not an endorsement of management.
Still, the company intriques me. The PSR ratio is good, and if they can grow their sales and establish good margins, at some point down the road with a few good quarters, this stock would take off. It would not take much more for me to put a small bet on the company. I'll certainly be interested in the next quarterly report.
Geoff Wren
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