Loss, key firings rile TVI's stockholders

May 09, 2007|By Allison Connolly | Allison Connolly,Sun reporter

Shareholders vented their frustration yesterday at TVI Corp. after the company linked two top executives who were asked to resign last month to $1.7 million in overpayments to suppliers.

The Glenn Dale manufacturer of decontamination systems and emergency shelters also posted a loss for the fiscal first quarter yesterday. The financial woes were exacerbated by the cost of investigating whistle-blower allegations that the two executives, former chief executive Richard V. Priddy and Executive Vice President Charles L. Sample, caused the company to overpay suppliers between 2003 and 2005.

"The transactions are questionable," General Counsel Sean R. Hunt told analysts and shareholders yesterday morning during a conference call. "It may be poor business judgment, it may be something more."

Hunt said neither Priddy nor Sample could provide "credible reasons" for the transactions, which he declined to describe. He added that it was one of several factors in seeking their resignations. Priddy came on board in 2002, while Sample joined TVI in 1995.

Priddy and Sample could not be reached yesterday.

TVI said it has notified authorities about its findings but Hunt declined to disclose which ones. He also refused to identify the whistleblower or say whether the person is a current employee.

The company said it conducted two investigations, which Hunt said were not related to each other.

Equipment sale

The first began in November and reviewed the sale of decontamination equipment two months earlier to Signature Special Event Services LLC, a Frederick company that rents tents for corporate and sporting events. TVI bought Signature in November.

The company opened a second investigation this year after a whistleblower pointed out a series of "questionable transactions" by the two executives.

During the conference call, shareholders were angry about being kept in the dark about the executives and asked for more transparency.

TVI's stock price has been on a precipitous decline in recent months, which has also frustrated shareholders.

George Schwartz of Schwartz Investment Counsel Inc. in Bloomfield Hills, Mich., called the company a "train wreck" and scolded executives and board members for owning too few TVI shares.

`Mismanagement'

"It's really the public shareholders who have suffered the financial losses associated with this mismanagement," said Schwartz, who estimates his company owns 2.2 million shares, or about 7 percent of TVI's outstanding shares.

He urged officials to buy shares to support the stock and not at the company discount price to which they are entitled.

Individual investor Robert Jones agreed.

"I would like [to] see some management step up and buy some stock or else just sell the company," he said. "It seems like the ship is really sinking."

Retired Air Force Lt. Gen. Harley A. Hughes, TVI's interim president and CEO, assured shareholders that the problems were temporary and "manageable."

"This is not the Titanic taking aboard water," Hughes said.

Officials dismissed the idea of bankruptcy or a possible sale of the company.

Hughes said the market for TVI products is strong. He said the company is in the process of crafting a new business plan and searching for a new CEO. However, he declined to set a timetable for the turnaround.

For the first quarter that ended March 31, revenue grew 54 percent to $14.3 million, from $9.3 million in the quarter last year, largely from Signature's rentals and TVI's personal protection products.

TVI posted a net loss of $2.6 million, or 8 cents per diluted share, compared with net income of $1.2 million or 4 cents a share for the first quarter last year.

Lower margins

The company blamed lower margins from Signature's rentals and less demand for TVI's decontamination shelters.

Excluding legal costs, the core operating business was not profitable, said acting Chief Financial Officer Sherri Voelkel.

TVI had cash and investments of $558,000 as of March 31, compared with $4.2 million a year earlier. The company used cash during the year to pay down debt.

A shareholders meeting is scheduled for May 24 at TVI's headquarters.

TVI stock closed down 10 cents yesterday at 78 cents per share.

allison.connolly@baltsun.com

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