Entex Records Big Loss; Service Revenue Up 9 Percent

Entex Information Services Inc. reported 9 percent growth in service revenue for its third quarter, but recorded a $47.3 million loss due to the sale of its product division.

The integrator's service revenue was $121.5 million for the period ended March 28, up from $111.2 million for the three-month period ended March 29 last year.

The Rye Brook-based integrator's loss of $47.3 million compared with income of $4.9 million last year. During the quarter, the company lost $26.4 million on the disposal of its Technology Acquisition Services Division (TASD), which it sold to CompuCom Systems Inc. last week. The results marked the first time that Entex reported results only for its service division.

"While we are disappointed in the results of this quarter, the sale of the TAS Division will give Entex the opportunity to take advantage of higher margin and growth dynamics as a service-only company," said John McKenna, Entex's chief executive.

Service margins dropped, but so did selling, general and administrative expenses as a percentage of revenue.

The loss was $1.46 per share, compared with a profit of 15 cents last year.

In a statement, Entex said it would use the $137.4 million in proceeds from the sale of the TASD, together with funds received from the payment of accounts receivable from the TASD which were not included in the sale, to pay down debt and deleverage the company. As a result of charges associated with the sale of the TASD, the company was in default of its tangible net worth covenant, but has received a waiver from its primary working capital lender, IBM Capital Corp.