CEO dismisses questions about corporate financesOn the heels of several negative financial, operational, and legal disclosures, Del Global Technologies has signed a commitment letter for a $10 million line of credit. The agreement,
CEO dismisses questions about corporate finances
On the heels of several negative financial, operational, and legal disclosures, Del Global Technologies has signed a commitment letter for a $10 million line of credit. The agreement, which will help the Valhalla, NY, maker of x-ray and power conversion units meet its working capital needs during the next three years, was announced as Del reported a net loss of $8.5 million for the fiscal year ending July 28. Net sales for the period totaled nearly $93 million.
Company executives are looking ahead to a bright future with fewer financial distractions, thanks to the credit line, said president and CEO Samuel E. Park. The financial condition of the company and several legal issues, past and present, raise questions about the wisdom of a lender providing such a credit line. Park asserts, however, that the lender is not taking any extraordinary risks.
"We feel the worst is behind us," he said. "We expect to report revenues in the range of $97 million to $100 million in the fiscal period ending in 2002."
Even so, the company will face a $4 million to $7 million loss unless expenses can be cut. And financial performance is only one of the challenges facing the company. Del's new management team settled a shareholder class action suit in January, but it must still deal with an investigation by the Securities and Exchange Commission begun in December 2000 in connection with previously issued financial statements. (Nasdaq delisted Del Global's common stock in December 2000.) The company has also filed a lawsuit against its former CEO, alleging that he engaged in numerous acts of securities law violations, fraud, breaches of fiduciary responsibility, and corporate mismanagement. And the firm believes the U.S. Department of Defense has launched an investigation into quality control practices and record keeping at one of its subsidiaries, RFI. Despite all this, Park believes Del is on its way to a strong recovery.
"We've worked with several credit facilities, and they have sufficient confidence in us," he said. "That is a reflection of the level of confidence we have in our business."
Walter Schneider, president of Del's Medical Imaging Division, went a step further.
"I believe the banks have looked at this operation and the way Sam has driven it and determined we're an excellent business that knows how to handle assets," he said. "They've measured our assets, and people don't lend money unless they see a secure asset base."
Medical imaging is the key to Del's future. This segment of the business accounts for about half the company's revenue base.
"The medical imaging business is growing," Schneider said. "We've had some opportunities, with Picker/Marconi getting out of the general-purpose radiographic business and Hologic deciding to exit the radiographic business they had acquired from Trex. We are in the right position. Our bookings rate is substantially ahead of last year, as is our shipping rate."
The division, which supplies its products both as an OEM to major medical manufacturers and as a provider under its own labels, will aggressively pursue a yearly market for general purpose x-ray rooms, according to Schneider. The company hopes to increase sales from 1500 systems to about 2000 systems within 18 months by marketing to high-end orthopedic facilities, walk-in clinics, and hospitals. Schneider also hopes to see one-third of his business come from the international marketplace within two years.
"After getting through the past 14 or 15 months, we're ready to take on any competitor," Schneider said.