ADAC Laboratories lays off 10% of staff, despite gains

Company sees hazy future for gamma camera sales

The month of April was a study in contrasts for gamma camera vendorADAC Laboratories. While the Mountain View, CA-based company reportedsharply higher revenues and earnings for the quarter, it was forcedto let go 10% of its work force due to uncertainty about the futureof nuclear medicine equipment sales.

ADAC's financial numbers surged strongly last year, based largelyon the performance of Genesys Vertex, its variable-angle dual-headgamma camera. ADAC quickly built up a backlog of the units followingthe camera's release.

The market for gamma cameras took a dive in the fourth quarterof 1994, however, and by all indications is still mired in a salesslump. ADAC announced in March that it expected its second-quarterresults to be below expectations (SCAN 4/6/94).

Despite the slump, ADAC's numbers are still impressive. Thecompany recorded $47.3 million in revenue for the second quarter(end-April), a 26% increase over the $37.6 million reported inthe second quarter of 1993. Net income climbed to $5.5 million,compared to $4.4 million in the second quarter a year ago -- anincrease of 25%.

Bookings for the quarter increased only 3% compared to lastyear, lower than what is required to maintain ADAC's revenue levelswithout depleting its backlog and reducing production efficiency,according to chairman and co-CEO Stanley D. Czerwinski.

"Because of this (low bookings level) and the currentview of the state of our core market, revenue and earnings inthe near future are expected to be lower than this past quarter,"Czerwinski said.

To prepare the company for an extended slowdown, ADAC reducedits work force by 10% in April. The reduction was made to "alignthe company with the new emphasis on lower costs resulting fromhealth-care reform," according to the company.

ADAC also noted that there has been no resolution regardinglitigation with competitor Elscint. Elscint filed a patent infringementsuit against ADAC last year, and has asked for a preliminary injunctionbarring ADAC from manufacturing gamma cameras until the suit isresolved (SCAN 3/2/94). ADAC filed a counter suit against Elscintin February, charging the Israeli vendor with infringing on nuclearmedicine patents ADAC acquired from Philips Medical Systems.