The parent company of x-ray manufacturer Del Medical said today it plans to sell off the division and either find a buyer for the business or shut it down entirely, if a white knight can't be found. The move would bring to a close one of the most venerable names in the U.S. radiology market.
Del Global Technologies of Roselle, IL, made the announcement in reporting financial results for its 2009 fiscal year. The company said it was examining options for the Del Medical business that included selling the entire operation, selling assets and product lines, or a full shutdown. Del Global is currently in discussions with prospective buyers for the business.
The announcement does not apply to its Villa subsidiary, which markets radiography systems for the European market, according to Del.
The firm expects to take a write-down of $6 million to $6.5 million in its first-quarter 2010 financial results in connection with the move.
The company said it was making the move because of economic uncertainty in the U.S. medical imaging industry due to the economic slowdown, and plans to focus on more lucrative international markets with its Villa subsidiary and the power supply business through its RFI subsidiary.
The firm's fourth-quarter financial results reflected its difficulties: sales dropped 40.2% to $16.3 million in the most recent period, from $27.2 million in the same period of fiscal 2008. Sales in the Del Medical division fell 43.4% to $12.9 million, compared with $22.8 million in the prior year's fourth quarter. The company posted a net loss for the quarter of $900,000, compared with net income of $2.1 million in the fourth quarter of 2008,
For the year, Del Medical's sales were $68.4 million, a decline of 28% compared with fiscal 2008 sales of $95 million, primarily due to decreased sales volume in the U.S. and international markets. Del Global had sales of $80.4 million for fiscal 2009, down 25.8% compared with $108.3 million in fiscal 2008, and the company posted a net loss of $4.1 million for fiscal 2009, compared with net income of $3 million in the full year of 2008.
"We are as frustrated with the fiscal 2009 performance as anyone," said Del president and CEO John Quicke in a conference call with investors this morning. "But again, with the Del Medical Imaging business behind us, we are confident in our ability to build a strong and growing company again."
The company was also affected by legal settlements of $3.7 million dating to claims made in 2002-2003. The lawsuits were related to litigation with a former CEO and with a former Del Medical Imaging employee. The cases had been dormant for a number of years but became active in 2009, and the company decided to make payments to both parties to settle them, Quicke said in today's conference call.
Del has operated in the U.S. radiography market for the past eight decades, but it has been struggling for the past several years as a small independent firm competing in a slowing economy against large multinational firms. Two years ago, the company began cutting costs by eliminating in-house manufacturing and parts in favor of outsourcing to local suppliers.
The company also began recruiting third-party manufacturers to source products, in an effort to standardize its digital product line with the same software, interface, platform, and detector, even as it downsized its U.S. corporate headquarters to reflect the changes.
Del was banking on growth in the digital x-ray market as hospitals replaced older conventional radiography equipment with new digital radiography (DR) technology. It also hoped that the economic slowdown might help sales of DR systems, which cost less than MRI or CT scanners.
By Brian Casey
AuntMinnie.com staff writer
November 12, 2009
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