Exhibit 99.01
FOR IMMEDIATE RELEASE
DEL GLOBAL TECHNOLOGIES ANNOUNCES FISCAL 2003 OPERATING RESULTS
AND SUMMARY BALANCE SHEET DATA
VALHALLA, NY - November 3, 2003 -- Del Global Technologies Corp.
FY 2003 Highlights
- ------------------
o Total Net Sales of $98.6 Million Basically Unchanged from FY 2002
o FY 2003 Consolidated Gross Margin Improves to 21% from 19% in FY
2002
o FY 2003 and Q4 FY 2003 Operating Losses Narrow Significantly from
Prior Year Periods
o FY 2003 and Q4 FY 2003 Net Losses Increase Due Primarily to Write
Down of Deferred Tax Assets
o Company Receives $8.5 Million Order for R/F Imaging Systems from
Government of Mexico and $1.0 Million Order From Government of
Vietnam
DEL GLOBAL TECHNOLOGIES CORP. (DGTC) ("Del Global") today announced operating
results for its Fiscal 2003 fourth quarter and fiscal year ended August 2, 2003,
as well as summary balance sheet data as of August 2, 2003 (see attached
tables).
Walter F. Schneider, President and Chief Executive Officer of Del
Global, commented, "While annual sales were flat compared to last year, sales in
the fourth quarter of Fiscal 2003 rebounded when compared to the immediately
preceding third quarter. This sales recovery was evident in both the Medical
Systems business and RFI Corporation ("RFI"), and was partially offset by
decreases in the High Voltage business. Regarding the Medical Systems Group,
during Fiscal 2003 we entered new markets, expanded our product portfolio and
continued to integrate our worldwide business. On the Power Conversion side, we
continued to focus on high growth markets, and accelerated our design-to-market
cycle."
Thomas V. Gilboy, Chief Financial Officer, stated, "Each of the four
quarters in Fiscal 2003 also produced sequential increases in consolidated gross
margin percentages. This improvement is due, in part, to the positive impact of
our previously announced restructuring initiatives and increased efficiencies
resulting from more favorable materials costs."
FISCAL 2003 ANNUAL AND Q4 RESULTS
Consolidated net sales for Fiscal 2003 remained stable at $98.6
million versus $98.8 million last year. Medical Systems Group sales increased 2%
to $56.1 million from Fiscal 2002, due primarily to increased domestic sales and
favorable exchange rates on international sales made in Euros. Excluding the
approximately $5.2 million favorable exchange rate effect, sales at the Medical
Systems Group for Fiscal 2003 would have declined by approximately $4.1 million
if the Euro exchange rate had been similar to last year's rate. Sales at the
Power Conversion Group decreased 3% to $42.5 million from last year, with the
biggest declines caused by a previously announced shift to in-house production
by a large customer and a decline in sales to the semiconductor capital
equipment market. The decline in these customers and markets at the Power
Conversion Group was offset by an $8 million increase in high voltage EDS
("Explosive Detection Systems") sales. The discontinued business from that one
large customer had produced lower margins, and was not consistent with Del
Global's long-term strategy.
Sales in the fourth quarter of Fiscal 2003 declined to $23.7 million
from $27.6 million in the same period last year, due primarily to the
aforementioned shift by a large customer to in-house production and fewer
shipments of EDS units in this year's fourth quarter. Fiscal 2003 fourth quarter
sales increased 2.9% from the immediately preceding third quarter, reflecting a
recovery in sales at the Medical Systems Group and RFI, partially offset by
lower High Voltage sales.
Consolidated gross margin for Fiscal 2003 increased to 21% from 19%
last year. Margins at the Power Conversion Group increased to 21% from 16% last
year, due primarily to improved efficiencies resulting from more favorable
materials costs, and the shift in sales mix in connection with the discontinued
customer mentioned above. Gross margin at the Medical Systems Group remained
stable at 22%, despite higher sales, due to the higher realized margins in
Fiscal 2002 on sales of previously written-off product.
Consolidated gross margin in the Fiscal 2003 fourth quarter of 22%
was similar to the 22% reported in the immediately preceding third quarter of
Fiscal 2003. Margins at the Power Conversion Group in the fourth quarter of
Fiscal 2003 increased to 26% from 22% in the third quarter of Fiscal 2003,
reflecting favorable inventory adjustments and the reorganization cost savings.
Margins at the Medical Systems Group in the fourth quarter of Fiscal 2003
declined to 20% versus the third quarter's 22%. In the Medical Systems Group in
the fourth quarter, more favorable overhead absorption from higher sales was
offset by a decline in labor and overhead costs being capitalized in inventory,
because in our US operations we have been improving our inventory turns and
operating with lower inventory balances.
Fiscal 2003 selling, general and administrative ("S,G&A") expenses
included $1.9 million in unusually high legal and accounting fees, and
approximately $1 million of costs (including legal costs) associated with the
proxy contest. The majority of these proxy expenses were realized in the Fiscal
2003 fourth quarter. S,G & A expenses for Fiscal 2002 included approximately
$3.7 million in unusually high accounting fees. Excluding the unusually high
legal fees and costs incurred in Fiscal 2003, S,G &A expenses increased by
approximately $1.5 million from Fiscal 2002.
The operating loss for Fiscal 2003 decreased to $5.9 million from
$14.0 million last year. The Medical Systems Group reported an operating profit
of $1.0 million, while the Power Conversion Group reported an operating loss of
$2.5 million. The operating loss for Fiscal 2002 included $7.7 million in
litigation settlement costs versus $2.1 million of such costs in Fiscal 2003, as
well as higher facilities reorganization costs. The operating loss for the
fourth quarter of Fiscal 2003 narrowed significantly to $796,000 from $5.6
million in the same period last year. This is attributable to higher
consolidated gross margin in the Fiscal 2003 fourth quarter, $0 in litigation
settlement costs versus $735,000 in the prior year period and $1.2 million in
facilities reorganization costs in Fiscal 2002 fourth quarter versus just
$82,000 in the Fiscal 2003 period.
The net loss for Fiscal 2003 increased to $15 million, or $1.45 per
diluted share, versus a net loss of $12.0 million, or $1.38 per diluted share,
last year. The net loss for the fourth quarter of Fiscal 2003 decreased to $4.3
million, or $.41 per diluted share, versus a net loss of $5.1 million, or $.50
per diluted share, for the same period last year.
The net loss for the Fiscal 2003 year and fourth quarter included
income tax provisions of $8.2 million and $3.3 million, respectively, versus
income tax benefits of $3.2 million and $163,000 in the respective prior year
periods. This increase reflects the establishment in Fiscal 2003 of
approximately $8 million in deferred tax asset valuation allowances, which
included an additional allowance of $3.3 million established in the Fiscal 2003
fourth quarter.
MEXICO AND VIETNAM CONTRACT AWARDS
Del Global also announced that its Medical Systems Group received an
$8.5 million order from Instituto Mexicano del Seguro Social ("I.M.S.S.") for 22
"Mercury" remote controlled digital Radiographic / Fluoroscopic ("R/F") imaging
systems, and certain installation and training services. This $8.5 million order
is part of a $9.8 million systems integration and service contract that was
arranged by Del Global and its agent in Mexico, Suministro para uso Medico Y
Hospitalario S.A. de C.V. ("SMH"). This agreement is Del Global's largest
one-time award in Mexico.
I.M.S.S., part of the Government of Mexico, operates the majority of
the country's hospital system and provides a variety of health care services to
workers and their families, the sick, the invalid and elderly populations. This
contract is part of a broad upgrade of diagnostic capabilities throughout
Mexico's social security healthcare system.
The R/F systems will be manufactured in Milan at Del Global's
80%-owned subsidiary Villa Sistemi Medicali S.p.A. Del Global currently expects
to have these systems delivered and installed during Fiscal 2004. The Mercury
R/F imaging system allows users to perform a variety of radiological
examinations, including: tomography; chest radiography; gastroenterology;
gynecology; angiography; and fluoroscopy. The systems purchased under this
agreement will be installed by SMH in twenty facilities throughout Mexico.
The Medical Systems Group also received a $1.0 million order from
the government of Vietnam to supply various radiographic and remote R/F systems.
The systems are funded in part by the European Community Malaria project and are
scheduled for delivery during Fiscal 2004. These systems will also be
manufactured in Milan at the Villa Sistemi Medicali facility.
Mr. Schneider commented, "We believe that these agreements reflect
the quality and reputation of our products, as well as our continued focus on
increasing international sales. The scope of supply of these contracts is
similar to recent projects that we have undertaken in other parts of the world.
We believe that these agreements demonstrate the synergies that we are creating
within Del Global, as we were able to leverage Villa's product portfolio through
our global sales force."
LITIGATION UPDATE
The Company is continuing its discussions with the United States
Department of Defense ("DoD") regarding a global settlement of the DoD's
previously disclosed investigation into certain past business practices at RFI.
As previously announced, Del Global recorded a charge of approximately $2.3
million during the third quarter of Fiscal 2003, representing its estimate of
the low end of a range of potential fines and restitution, plus estimated legal
and professional fees. In October 2003, based on discussions with the U. S.
Government, the Company was advised that the U.S. Government is currently
seeking up to approximately $5 million in the fines and restitution portion of
any comprehensive settlement. The Company is continuing to negotiate with the
U.S. Government regarding a comprehensive settlement, including the amount of
such fines. There can be no assurance that such a settlement will be reached
and, even if reached, that the ultimate fines and outcome of any settlement will
not vary significantly from the Company's original estimate and expectations. In
addition, such a settlement, even on the most favorable terms, may have a
material adverse impact on the Company's financial condition, liquidity and
operations.
Del Global is also in ongoing discussions with the Enforcement
Division of the SEC to settle claims regarding an investigation commenced by the
SEC on December 11, 2000 in connection with the restatement of previously issued
financial statements filed by the Company's former management, specifically for
the Fiscal years 1997 through the third quarter of Fiscal 2000. As previously
announced, Del Global reached an agreement in principle with the SEC regarding
this matter. The terms of the settlement include a penalty of up to $400,000,
and an injunction against future violations of the antifraud, periodic
reporting, books and records and internal accounting control provisions of the
federal securities law. The settlement is subject to, amongst other things,
review by the Commission and court approval. Del Global recorded a charge of
$685,000 in the fourth quarter of its Fiscal 2002 year related to this matter,
which included associated legal costs. If we are not able to reach an acceptable
settlement with the SEC, we may incur substantial additional penalties and
fines.
BACKLOG
Consolidated backlog at August 2, 2003 was $26.3 million versus a
backlog of approximately $31.0 million at August 3, 2002. Backlog at the Power
Conversion Group declined to $17.7 million from $23.7 million, due to higher EDS
shipments from backlog in the beginning of Fiscal 2003. Backlog at the Medical
Systems Group increased to $8.6 million from $7.6 million at August 3, 2002.
FINANCIAL CONDITION
Del Global's balance sheet at August 2, 2003 reflected working
capital of $13.6 million, shareholders' equity of $23 million and a stated book
value of $2.22 per share. As of August 2, 2003, Del Global had approximately
$3.8 million of borrowing available under its U.S. revolving credit facility. As
of August 2, 2003, the Company was compliant with all of the covenants of this
facility except for the tangible net worth covenant of its U.S. credit facility.
In October 2003, Del Global obtained a waiver of non-compliance of this covenant
and amended certain other covenants for future periods.
INVESTOR CONFERENCE CALL
Suzanne M. Hopgood, Walter F. Schneider and Thomas V. Gilboy will
host a conference call on Wednesday, November 5, 2003 at 4:30 P.M. Eastern Time
to discuss this news release. The telephone number to join this conference call
is (973) 582-2783. A taped replay of the call will be available through 5:00
P.M. Eastern Time, Monday, November 10, 2003. Please dial (973) 341-3080 and
enter the number 4275805 to hear the taped replay. In addition, the conference
call will be broadcast live over the Internet via the Webcast section of Del
Global's web site at www.delglobal.com. To listen to the live call on the
Internet, go to the web site at least 15 minutes early to register, download and
install any necessary software. If you are unable to participate in the live
call, the conference call will be archived and can be accessed on Del Global's
website for approximately five business days.
Del Global Technologies Corp. is primarily engaged in the design,
manufacture and marketing of cost-effective medical imaging and diagnostic
systems consisting of stationary and portable x-ray systems,
radiographic/fluoroscopic systems, dental imaging systems and proprietary
high-voltage power conversion subsystems for medical and other critical
industrial applications. Industrial applications for which Del Global supplies
power subsystems include airport explosives detection, analytical
instrumentation, semiconductor capital equipment and energy exploration.
Statements about future results made in this release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. Del Global cautions that
these statements are not guarantees of future performance. They involve a number
of risks and uncertainties that are difficult to predict including, but not
limited to, the ability of Del Global to implement its business plan, retention
of management, changing industry and competitive conditions, obtaining
anticipated operating efficiencies, securing necessary capital facilities,
favorable determinations in various legal and regulatory matters, including a
settlement of the Department of Defense investigation on terms that Del Global
can afford and that does not include a debarment from doing business with the US
Government, and favorable general economic conditions. Actual results could
differ materially from those expressed or implied in the forward-looking
statements. Important assumptions and other important factors that could cause
actual results to differ materially from those in the forward-looking statements
are specified in the Company's filings with the Securities and Exchange
Commission.
CONTACT: INVESTOR RELATIONS:
Del Global Technologies Corp. The Equity Group Inc.
Walter F. Schneider, President & Chief Executive Officer Devin Sullivan (212) 836-9608
Thomas V. Gilboy, Chief Financial Officer Adam Prior (212) 836-9606
(914) 686-3600
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
---- ---- ---- ----
NET SALES $ 23,712 $ 27,564 $ 98,619 $ 98,784
COST OF SALES 18,481 24,470 77,496 79,648
--------- --------- --------- --------
GROSS MARGIN 5,231 3,094 21,123 19,136
Selling, general and administrative 5,475 5,780 21,933 21,254
Research and development 470 933 2,218 2,919
Litigation settlement costs - 735 2,126 7,713
Facilities reorganization costs 82 1,215 788 1,292
--------- --------- --------- --------
Total operating expenses 6,027 8,663 27,065 33,178
--------- --------- --------- --------
OPERATING LOSS (796) (5,570) (5,942) (14,042)
--------- --------- --------- --------
Interest (expense) income, net (360) 140 (1,388) (1,198)
Other income 196 78 633 183
--------- --------- --------- --------
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST (960) (5,352) (6,697) (15,057)
--------- --------- --------- --------
INCOME TAX PROVISION (BENEFIT) 3,289 (163) 8,233 (3,242)
--------- --------- --------- --------
LOSS BEFORE MINORITY INTEREST (4,249) (5,189) (14,930) (11,815)
--------- --------- --------- --------
MINORITY INTEREST 9 35 115 197
--------- --------- --------- --------
NET LOSS $ (4,258) $ (5,154) $ (15,045) $(12,012)
========= ========= ========= ========
NET LOSS PER BASIC AND
DILUTED SHARES $ (.41) $ (.50) $ (1.45) $ (1.38)
========= ========= ========= ========
Weighted average number of common shares
outstanding, basic and diluted 10,333 10,348 10,341 8,681
========= ========= ========= ========
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
August 2, 2003 August 3, 2002
Current Assets $ 40,213 $ 49,374
Total Assets $ 60,492 $ 77,697
Current Liabilities $ 26,615 $ 30,726
Total Liabilities $ 36,260 $ 39,608
Minority Interest $ 1,253 $ 948
Shareholders' Equity $ 22,979 $ 37,141
Common Shares Outstanding End of Period 10,333 10,348
Book Value Per Share $ 2.22 $ 3.59
