Diabetes testing supply company

Here is a good artical about Liberty Medical - the mail order diabetes supply company.

PolyMedica's main business is providing diabetes testing supplies -- namely test strips and lancets -- directly to the consumer. A smaller but rapidly growing pharmacy segment markets and sells prescription medications to diabetes patients. This segment is anticipating explosive growth from sales related to Part D of the Medicare Modernization Act, which gives Medicare beneficiaries access to prescription drug benefits.

Sounds great, right? But here's the trouble with PolyMedica. First, it's not exactly making a lot of money, although it would like you to believe that it is. One of its largest expenses is what is known as direct-response advertising (DRA). Accounting provisions allow specific expenses spent for the purposes of long-term customer attraction and retention to be capitalized and expensed over a longer time frame. For example, in the fiscal year ended this March, the company spent $59.5 million on DRA but only recognized an expense of $42.4 million, an amortized amount representing small chunks of DRA expenditures from years prior. The result? Pre-tax profit gets a $17.1 million boost. It's an acceptable, but aggressive, form of accounting.