A continued focus on the existing customer base to assure quality product deliveries is expected to result in lower growth rates in the fourth quarter of 2000 than were experienced in the fourth quarter of 1999. Instrument sales increased primarily due to strong international growth in all instrument types. Reagent revenue continued to advance due to a growing installed base, while service revenue also increased due to the expanding number of instruments coming off warranty. The increase results primarily from substantial development work on new products. Additionally, the Company will continue to review the utility of these assets and recognize any impairment should the Company determine such a condition exists.
Dispensers are a core component used to store and dispense reagents.
In the second quarter of 2000, the Company became aware of a potential problem by noticing a disruption in the customer base. Reports were received that some of the dispensers leaked during shipment to customers or were reported to be short of the standard number of tests per dispenser. The problem was traced to a single part procured from an outside supplier who was immediately advised, and working with the Company, resolved the problem. As a result of the above issues, charges were taken to write-off inventory and set up reserves to cover product replacements, returns, and warranty matters. New quality control procedures have been implemented in the Company's manufacturing processes and there is a high level of confidence that only high-quality dispensers are now being shipped to customers and have been since early June 2000 when the new quality control procedures were implemented.