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Premier Laser Records $5-Million Charge Over Ongoing Dispute

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TIMES STAFF WRITER

Premier Laser Systems Inc., under fire over its accounting practices with its largest customer, said it will record a $5-million inventory charge in the fiscal fourth quarter against the value of dental lasers built for distributor Henry Schein Inc.

The Irvine maker of dental and medical lasers also announced the resignations of three top executives--chief financial officer Michael Hiebert, marketing and sales executive J. Randy Alexander and dental products director Bradley Bockhorst.

Premier said it will record the charge because Schein paid for only a portion of the lasers and disclaimed any rights to the inventory. For the fourth quarter ended March 31, 1997, Premier Laser reported a loss of $2.9 million, or 41 cents a share, on sales of $1.6 million.

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Premier Laser said its dispute with Schein caused a “significant” amount of damage.

Premier drew national attention last year when one of its dental lasers received federal regulatory clearance to be used to treat tooth decay in place of some painful drilling procedures.

But the company has been on a downward slide since April, after disclosing its outside auditors discovered the company had been logging revenue for dental lasers that had been moved to an Irvine warehouse but not yet been sold.

The auditor, Ernst & Young, later resigned, contending the company ignored recommendations for a broader investigation of Premier’s finances. The Nasdaq market suspended trading in Premier’s stock in May.

The company has hired another firm, Haskell & White LLP, to re-audit financial reports for the fiscal years 1997 and 1998--an important step toward resumption of trading.

Premier said despite several months of negotiating, it has received only a partial payment for products shipped to Schein. Later orders were rejected, Premier said.

Schein denied the claims, saying the company did not order the products and was not billed for them. “We are quite perplexed by these recent events,” said Stanley Bergman, Schein’s chairman. “[We] have never had this kind of dispute with any of our other suppliers.”

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In a prepared statement, Premier’s Chairwoman Colette Cozean said her company has been “hobbled” by presumptions that her company “must have acted improperly” in the dispute because Schein is well-recognized in the industry.

“Obviously,” she said, “the collapse of our relationship with Schein has been a disappointment for us.”

She said Premier is considering other options for distributing its products. The company hopes to relaunch its laser marketing and sales programs in the fall, “although at this point there can be no guarantees that any increase in sales will occur.”

On Friday, Premier said it named Charles J. Olson as chief financial officer and vice president of finance to succeed Hiebert. Since 1996, Olson had held a similar position in The Quikset Organization, a subsidiary of For Better Living Inc.

Daniel Caruso, Premier Laser’s former executive vice president, has been reassigned as director of corporate marketing and development.

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