Ernst & Young Quits as Outside Auditor
For Premier Laser, Citing Disagreements
By RHONDA L. RUNDLE
Staff Reporter of THE WALL STREET JOURNAL
Ernst & Young LLP said it resigned as the independent auditor for
Premier Laser Systems Inc. because of "serious disagreements" with the
laser maker's accounting practices.
The announcement comes amid mounting questions about the Irvine,
Calif., company, spurred by a sales dispute that erupted last month
between it and Henry Schein Inc. The Melville, N.Y., distributor of dental
and other health-care products claimed it didn't order certain laser
products that Premier Laser apparently booked as sales.
Tuesday, Premier Laser Chairman and Chief Executive Officer Colette
Cozean said: "We are extremely disappointed with Ernst & Young's
decision, since it was made notwithstanding the fact that the company
formed, at Ernst & Young's recommendation, a special committee of
independent directors ... to review accounting issues and has taken steps
to address questions that were raised concerning the company's financial
statements for prior periods, including the disputed transaction with Henry
Schein."
An Ernst & Young spokesman said the New York-based firm acted
because "we had serious disagreements with the company, which led us to
conclude that we could not be effective in our role as auditor. We
specifically disagreed with the limited scope and breadth of their internal
investigation" into questions about financial statements for prior periods.
Premier Laser shares were halted to disseminate the news, and didn't
resume trading Tuesday on the Nasdaq Stock Market. They closed at
$4.1875 Friday.
Premier Laser selected Ernst & Young as its auditor on Feb. 21, 1997,
following a request for proposals from several firms. Price Waterhouse
LLP, Premier Laser's auditor the two preceding years, declined to stand
for reappointment. Premier Laser said in a U.S. Securities and Exchange
Commission filing at the time that there were no disagreements between it
and Price Waterhouse on any matter of accounting principles or practices.
However, it is unusual for a company to change auditors twice in 15
months.
Premier Laser drew widespread attention last May when its Centauri
system became the first dental laser approved by the U.S. Food and Drug
Administration for hard-tissue procedures such as removing decayed
tissue and filling cavities. Many dentists predicted that the Centauri system
would usher in a new era of painless dentistry. Premier's main office was
flooded with calls from dentists eager to learn more about the technology.
It is unclear how many dentists actually have purchased the systems,
priced last May at $39,000 each. Premier Laser "won't discuss that or
their inventory," said Owen Daley, a company spokesman. "They are
building their sales force and continuing to negotiate with Schein to resolve
their differences. There's no question that the product works; it's a
difference of opinion about who was to do what," under the distribution
agreement, he said.
Premier Laser has been hit with several shareholder lawsuits, charging it
with issuing misleading information about its laser sales to inflate its stock
price, among other things. On April 15, the shares fell 20% to $6.9688
after the company said it might have to restate third-quarter revenue
downward to $4.7 million from the reported revenue of $7.2 million, and
that it expected fourth-quarter revenue to be $4.5 million lower than
previous expectations, both because of the Schein dispute. |
