American Medical Slashes Guidance

It cites inventory issues.
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American Medical Systems (AMMD) dropped 14% late Tuesday after the company slashed first-quarter and full-year guidance, citing supply chain problems.

The Minneapolis-based maker of urinary health products expects to make 5 to 7 cents a share for the first quarter on revenue of $108 million. Analysts surveyed by Thomson Financial were looking for a 14-cent profit on sales of $116 million.

"In our drive to increase inventory turns over the past three years, we have worked towards reducing safety stock levels," said CEO Martin Emerson. "This quarter, vendor quality issues, combined with performance shortfalls in our internal manufacturing and demand planning efforts, resulted in an inability to consistently meet demand for several key product lines."

American Medical said the men's health business was hindered by product availability issues across several product lines, including erectile restoration, TherMatrx and HPS fibers. In addition, customer demand in the male continence business was hit by physicians deferring surgery as they wait for preliminary clinical data and training classes for AdVance, the company's new treatment for male incontinence.

"The performance of our supply chain in the first quarter was disappointing as it masked strong market demand across the majority of our products," said Emerson. "Although we anticipate resolving our specific supply problems within the second quarter, our new guidance reflects the recovery time required in the marketplace from this type of disruptive event. We remain highly confident that we are well positioned in a dynamic, growing market and in our ability to successfully perform to our long range goals."

For the year, the company expects to make 63 cents to 70 cents a share on sales of $475 million to $500 million. It had forecast earnings of 76 cents to 81 cents a share on sales of $490 million to $515 million.

Shares fell $3.13 to $18.30.