Urohealth Posts $89-Million Loss for Year

NEWPORT BEACH â€”  After several delays, Urohealth Systems Inc. disclosed Tuesday that it lost $89 million in its last fiscal year and surprised investors once again with disappointing sales projections for its first quarter this year.

The stock, which was under siege last week on a variety of concerns over the company’s finances, on Tuesday fell 98 cents a share, or more than 16%, to $5, a two-year low, in Nasdaq trading. The stock has lost more than 37% of its value since June 23 when it closed at $8 a share.

In a conference call with analysts Tuesday, the medical products manufacturer said that, on the advice of auditors, it deferred $18 million in revenue for products that were shipped to distributors last year but not sold before the fiscal year ended March 31.

Officials said that auditors advised the company to postpone booking shipments to certain distributors until it determined how well those distributors sell to the final customers--hospitals and doctors, said analysts who participated in the conference call.

However, the company also disclosed that revenue for its fiscal first quarter, which ended Monday, could fall short of analysts’ expectations as well, largely because of sluggish orders in the company’s surgical products division.

The company said first-quarter revenue could reach about $26 million at most. Analysts were expecting revenue in the $30-million vicinity.

Thomas Gunderson, an analyst at Piper Jaffray in Minneapolis, said the company’s weaker-than-expected June quarter may have caused some investors to bail out of the stock Tuesday.

The company said it lost $89.2 million, or $4.59 a share, last year, compared with a loss of $30.2 million, or $2.03 a share, the previous year. The loss for the most recent fiscal year included $73.7 million in acquisition and restructuring charges, among others.

Revenue increased 60.2% to $90.7 million last year from $56.6 million, but the gains failed to satisfy analysts and investors.

Analysts said the company now faces pressure to sustain its image as a growth stock among investors.

They noted that the stock’s low price could hamper Urohealth Chief Executive Charles Laverty’s strategy of building the company by using its stock to purchase smaller biomedical companies offering a variety of medical and surgical products.

“When people buy stocks in emerging growth companies, they expect certain sequential increases in revenue,� said analyst Jeffrey Barnes at Robertson Stephens, San Francisco.

Barnes noted that Urohealth investors are concerned about the failure of revenue to meet expectations last year and the uncertainty about customer demand for Urohealth products.

Despite the company’s disappointing sales prospects for the first quarter, officials said Monday that the company aims to post total sales of $170 million to $200 million for its current year ending March 31, 1998, analysts said.

After the conference, analysts said Urohealth can expect to face tough scrutiny by the investment community.

Michael Petusky, an analyst at Branch, Cabell & Co. in Richmond, Va., said that Urohealth will be “under a microscope,� and that it’s especially important for the company to “keep investors informed of both good and bad developments.�

Neither company officials nor representatives of Morgen-Walke Associates, the outside agency handling its media and investor relations, returned calls Tuesday.

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More Urohealth Struggles

Urohealth Systems is taking a beating on Wall Street for its lower-than-expected fiscal 1997 sales and $89-million loss. Its stock price dropped to a two-year low of $5 on Tuesday when the delayed results were announced, along with disappointing sales projections for the current quarter. Fiscal quarter sales and net income, in millions:

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Sales Net income 1996 1st qtr. $12.7 -$3.0 2nd qtr. 13.5 -3.3 3rd qtr. 11.6 -15.2 1997 1st qtr. $16.9 -1.7 2nd qtr. 21.4 -27.7 3rd qtr. 29.7 2.7 4th qtr. 22.7 -62.5

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Note: Fourth-quarter 1996 data unavailable

Source: Bloomberg News