Del Global comeback hits snag with CEO resignation, SEC order

Feb 27, 2001

Del Global Technologies was hit hard when the Nasdaq suspended trading in its shares in November on the heels of a stockholder class lawsuit. In January, however, a new president was appointed for the Medical Systems Group and record orders seemed to indicate the company was picking itself up off the mat.

This week, though, the turmoil resumed as Del announced that president, CEO, and chairman Leonard Trugman "has agreed to resign to pursue other opportunities." The Valhalla, NY-based firm announced simultaneously that the Securities and Exchange Commission had issued a formal order to investigate "the activities of certain unnamed persons and the company" relating to matters such as the firm’s financial statements, financial condition, accounting entries and practices, and trading in its common stock.

The board has named Samuel Park acting president and CEO. Thomas Gilboy has been appointed CFO, while Carole Murphy will become corporate controller. Roger Winston was elected chairman of the board. George Solomon resigned from the board in an unrelated move.

None of the new officers could be reached for comment on the SEC probe or Trugman’s departure. A Del spokesperson declined to elaborate on the February 27 statement, saying, "It stands on its own."

Trugman’s departure follows the firing in January of Del Medical president David Engel and chief financial officer Michael Taber in the aftermath of a class action lawsuit filed against the vendor. The lawsuit was triggered by Del’s postponement of its quarterly 10-K filings with the SEC, and alleged that the company had disseminated false financial information.

The class action suit filed against Del specifically named Trugman and Taber as defendants, accusing them of "... making false and misleading statements, and participating in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Del Global stock ...."

The timing last fall of the bad financial news was particularly unfortunate. Del had hoped for a boost with the showing of its RadView x-ray products at November’s RSNA meeting, but the stigma of financial problems hovered over Del in Chicago. Del took over the RadView line last year when Marconi Medical Systems pulled out of that modality. The products are designed for high-throughput hospital and imaging center use.

As the corporate drama unfolds, Del executives point to the projection of record revenues for fiscal 2001 (end-July 28) as proof that business remains robust. The vendor had record orders from August 2000 to December 2000, and January sales also set a record, according to Walter Schneider, the new president of Del Medical Systems. Schneider was promoted in January from his previous post as senior vice president for operations.

"The order input that has been so strong has been general purpose radiographic, and that’s our strength, along with a growing presence in R/F (radiographic and fluoroscopic) and a minor mammography presence in the U.S," Schneider said.

Schneider said Del Global has been the beneficiary of a void created not only by Marconi’s decision to exit x-ray, but also because Fischer Imaging is moving away from general radiography, and Trex - which had the largest share of the market - no longer exists. That company was purchased by Hologic, which is concentrating on the Lorad mammography systems that were formerly under the Trex umbrella.

Del Medical is also strong in dental and mobile x-ray units, Schneider said.

"We are in the number one position in general purpose radiography in number of units shipped, with the potential to grow dramatically with the void I discussed," he said. "Our strategic focus is to capture a larger share of the general purpose radiographic market, and to review requirements for the future market, which will include digital receptors."

"We are going to be prepared to enter that (digital) marketplace when system pricing and the market allow," Schneider said. "Now, only major universities are making those purchases. They sell for around $300,000 (compared to) $60,000 for general purpose radiography."

Del Medical will wait until the price of digital comes down, and Schneider said the company won’t be developing its own digital detectors.

"We will integrate receptors built by others into unique patient positioning devices made by us," he said.

Schneider said the financial reporting problems were the result of carelessness.

"From my involvement in the audit and the whole cleanup process, the problems I (saw) were sloppy business practices and sloppy management and incapability," Schneider said. "There was nothing illegal, nothing purposeful. Good common sense would have avoided these problems."

Del Medical Systems Group represents about 50% of Del Global Technologies’ business, while most of its remaining business is under the Del Power Conversion Group, which makes electronics subsystems for medical and non-medical applications.

Del acquired Acoma Medical Imaging and X-Ray Technologies in 1998. Those companies have been folded into Del, which has integrated Acoma’s overhead collimator into its hospital radiographic suite, Schneider said. Acoma also brought experience in R/F, and X-Ray Technologies contributed a veterinary table tube stand with a small footprint and controls in the table.

Now that Del Global Technologies owns 80% of Milan, Italy-based x-ray manufacturer Villa Sistemi Medicali, it has gained a distribution foothold in Eastern European countries.

"In order to grab the diagnostic imaging business, you have to address the world," Schnieder said. (Villa’s) presence in Italy and the world gives us the ability to tie our products into their distribution network."

Del Global also has clearance to market Villa Sistemi’s Vision tilting table for radiographic and fluoroscopic examinations in the U.S.

By Robert Bruce
AuntMinnie.com contributing writer
February 28, 2001

Del fires president, CFO of medical imaging group, January 31, 2001

Nasdaq delists x-ray vendor Del, December 20, 2000

Momentum slowly building in digital x-ray market, November 16, 2000

Del delays fiscal 2000 statement, anticipates loss, November 7, 2000