Del Global hits another pothole in road to corporate recovery

Firm's top exec believes worst may be over

Before the ink was dry on a $10 million line of credit that Del Global Technologies had hoped might mark a new beginning, the company stumbled again. The Securities and Exchange Commission notified Del in early November that it may recommend civil proceedings in connection with accounting problems in the company's recent past.

Despite these travails, Del executives are confident that the company's two-year walk through a corporate minefield is nearing an end. Revenues for radiography equipment rose sharply in fiscal 2002 over the previous year, and executives predict continued, even substantial, growth in 2003.

"We just finished this year's first fiscal quarter and, compared with the same period last year, we saw 30% growth," said Walter Schneider, president of Del's medical imaging division. He added that the company anticipates 20% growth in 2003--and no further negative surprises.

Del has resolved earlier difficulties with the SEC, reaching an agreement to settle claims in connection with the restatement of previously issued financial statements filed by the company's former management team. The settlement includes a substantial monetary penalty, which Del would not disclose.

Del has been in turmoil for much of the past two years. Prospects seemed to be improving this spring when the company, which also manufactures power subsystems, landed a $10 million line of credit (SCAN 4/17/02). Since then, however, things have taken a turn for the worse.

Schneider confirmed that the company has breached certain financial covenants contained in its loan and security document with Transamerica Business Capital. Del received a waiver of the defaults through Nov. 20 by agreeing to temporarily cut the amount of money available for borrowing from Transamerica by $1.5 million. Nonetheless, Schneider remains optimistic about the future.

"Our cash flow is good," he said. "I don't think we have to go for additional financing at this point."

The collapse of Trex Medical several years ago raised questions about the financial viability of firms selling only conventional radiography equipment. Del's medical imaging division claims to be the U.S. market leader among companies dedicated to general radiography sales, making it a bellwether for this issue.

Schneider said there is plenty of potential, much of it proven by Del. The company shipped 2200 systems last year, and this year should be much better, he said.

"Our real concentration is making our product line a better value, improving reliability, improving our manufacturing efficiencies, and going after market share," Schneider said.

The company is applying fundamental principles of business management, he said: making a good product, shipping on time, and satisfying customer needs.

"Del has come from the ashes to achieve a very strong position in the market," he said. "This company is squeaky clean and we will grow."