Del Global Technologies Corp. (Del Global), a diagnostic imaging company, has reported consolidated net sales of $17.1 million for the third quarter of fiscal 2009, down 30%, compared with consolidated net sales of $24.4 million in the year-ago quarter. It also reported net loss of $0.8 million, or $0.04 loss per share, for the third quarter of fiscal 2009, compared with the net loss of $1.6 million, or $0.07 loss per share, in the year-ago quarter.
The medical systems group’s third quarter fiscal 2009 sales of $14.4 million were $6.5 million or 31.1% less than the prior year’s third quarter primarily due to decreased international sales volume associated with the global economic slowdown and reductions in capital expenditures and credit availability for customers. Sales at the Power Conversion Group during the third quarter of fiscal 2009 were $2.7 million, around $0.8 million or 23.3% less than previous year’s third quarter sales, due to delays driven by customer rescheduling activity in the current period.
The company’s consolidated gross margin as a percent of sales was 17.3% for the third quarter of fiscal 2009, compared to 23.4% in the third quarter of fiscal 2008. The Medical Systems Group, third quarter of fiscal 2009 gross margin of 15.3% was lower than the gross margin of 20.5% in the third quarter of fiscal 2008 due primarily to lower sales volumes and plants operating with excess capacity. The Power Conversion Group’s gross margin for the third quarter of fiscal 2009 was 28.2%, versus 40.3% in the prior year third quarter, attributable to decreased sales volume.
Operating expenses for the third quarter of fiscal 2009 decreased to 21.7% of net sales from 28.3% of net sales in the same period one year ago. This reduction was the result of a $1.9 million one-time, non cash goodwill impairment charge related to the Medical Systems Group’s US medical business in the third quarter of 2008, as well as a decrease of $1.1 million in selling, general and administrative expenses, primarily in the areas of litigation, general administration and marketing expenses. In addition, research and development expenses in the third quarter of fiscal 2009 of $0.4 million were $0.2 million lower than the third quarter of fiscal 2008, primarily due to the effect of favorable currency translation rates.
The operating loss for the third quarter of fiscal 2009 was $0.7 million compared to an operating loss of $1.2 million in the comparable prior year period. The operating loss at the Medical Systems Group for the third quarter of fiscal 2009 was $0.9 million compared to $2.0 million for the same period in the prior year, due to the goodwill impairment of $1.9 million recorded during the third quarter of fiscal 2008. The Power Conversion Group’s operating income in the third quarter of fiscal 2009 decreased by $0.7 million to $0.1 compared to $0.8 in the third quarter of fiscal 2008 due primarily to the decrease in sales noted above.
For the third quarter of fiscal 2009, there were around 22.7 million weighted average common shares diluted outstanding (“shares outstanding”) compared to 24.2 million shares diluted outstanding in the third quarter of fiscal 2008. The decrease in diluted shares outstanding was due to the impact of warrants that expired March 28, 2009 and common shares purchased pursuant to the company’s common stock repurchase program, which the company’s Board of Directors suspended in January 2009.
Increased size of the board of directors
The company announced on March 31, 2009 that it has increased the number of board members from four members to five when the Board nominated Scott Avila, a Partner with CRG Partners. The company views this as an opportunity to add expertise relative to business development, executive leadership, raising capital and financial oversight to its board.
Equipment Lease Program
The Ccmpany announced on May 7, 2009 that it has partnered with Beacon Funding Corporation to provide the Del Medical leasing program that is currently being rolled out to Del Medical dealers nationwide. The program provides a lease-to-own option that allows Del dealers to facilitate sales and provide more diversity for financing at a time when customers are trying to manage working capital more efficiently.
After a search of suitable relocation alternatives, the company found an ideal location in Roselle, Illinois. The company was specifically looking for a facility that could support its business operations and corporate headquarters. The company’s Del Medical operations and corporate headquarters were previously located in Frankin Park, Illinois. The move to the new facility will result in an annual cost saving of around $0.3 million.
Consolidated backlog at May 2, 2009 was $14.9 million compared to a backlog at August 2, 2008 of approximately $22.7 million. The company’s Medical System segment experienced a decrease in third quarter fiscal 2009 backlog of $9.3 million from August 2, 2008, due to a weak global economy. The backlog in the Power Conversion Group of $5.6 million reflects an increase of $0.2 million from levels at the beginning of the fiscal year. Substantially all of the backlog should result in shipments within the next 12 to 15 months.
Del Global’s balance sheet at May 2, 2009 reflected working capital of $22.1 million, which included $4.0 million of cash and cash equivalents. As of May 2, 2009, Del Global had outstanding borrowings of $2.6 million under its US and Italian revolving credit facilities. In the aggregate, Del Global had approximately $18.0 million of borrowing availability under its domestic and Italian revolving credit facilities.
James A. Risher, Del Global’s president and chief executive officer, commented, “Our results during the fiscal 2009 third quarter were disappointing but reflect the impact of a worldwide economic downturn and major capital spending reductions for radiographic products. We are continuing to implement aggressive sales and marketing programs to encourage customers to meet their imaging needs. New digital products offerings in our Medical Systems Group aimed at giving existing customers affordable and easy upgrade paths from their older systems are gaining acceptance. We are continuing to implement cost reduction actions to better match our revenues and costs. Our product and market position leaves us optimistic that through continuous new product introductions and strategic agreements we can continue to stimulate demand in our existing customer base while penetrating new profitable markets both in the U.S. and overseas.”