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ATI Medical to Report 4th Quarter Loss

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ATI Medical Inc. said it would report an unexpected loss for its fiscal fourth quarter that ended July 31. The Glendale-based company made the announcement after its stock price had plummeted 40% over several trading sessions.

ATI, which rents medical equipment to hospitals and the film entertainment industry, did not specify the size of the loss. But it apparently will be about $300,000, because ATI did say it expects to report a $2.40-million profit for the full fiscal year on revenue of about $50 million. ATI already had earned a $2.73-million profit through the first nine months of the year.

In its previous fiscal year, ATI had a profit of $2.20 million on revenue of $39.1 million.

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In an interview, ATI Chairman Paul E. Stevenson blamed the setbacks on softer demand for the company’s products in the fourth quarter, and from $500,000 in one-time costs related to starting a subsidiary operation that will serve the home health-care market. He predicted that ATI would return to profitability in fiscal 1991.

ATI’s announcement in July came after its stock had plunged to $5.375 a share from $9.25 a share in the preceding days. Stevenson attributed part of the slide’s severity to margin calls by brokers.

When a stock is bought on margin, the investor borrows part of the stock’s cost from a broker. If the stock falls sharply, the broker will issue a “margin call” demanding more money from the investor. If the investor fails to put up the additional cash, the broker is free to sell the shares. That exacerbates the downward pressure on the stock’s price, which can push the stock even lower.

That pressure, however, apparently abated by week’s end as the stock stabilized, and ATI closed Monday at $5.50 a share in American Stock Exchange composite trading.

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