EECO to Sell Divisions in Consolidation Move
Moving to shed two unprofitable divisions and become exclusively a manufacturer of electronic switches and keyboards, EECO Inc. of Santa Ana said Friday that it has agreed to sell its video-editing division and is negotiating the sale of its hotel-computer subsidiary.
The company also said it is negotiating the sale of its 18-acre headquarters for about $12.6 million. The company will then lease back the property.
Proceeds from the property sale will be used to pay down the company’s $30-million debt and finance a new facility in Tucson, Ariz., to house the company’s computer keyboard manufacturing unit. The company will continue to make electromechanical switches in Santa Ana.
EECO said it agreed to sell the video-editing business to Paltex Editing & Production Systems Ltd., a British company with offices in Tustin.
The company did not disclose the purchase price but said it would take a $7.7-million pretax loss from the sale. EECO said it will receive $375,000 in cash and the remainder of the purchase price in a note.
After the divestitures, the company said, it will concentrate on manufacturing electromechanical switches, computer keyboards, membrane keyboards and avionics products, which generate 78% of its total sales revenue.
Robert C. Milo, EECO’s president and chief executive officer, said he believes the divestitures will make the company easier to manage, give it a clearer image to investors and improve its profitability.
“We are a small company and we are too diversified,” Milo said.
EECO’s sales increased 19% to $65.5 million in the first nine months of 1988, compared to $55 million in the same period last year. But earnings declined by 65% to $286,000 from $809,000 in the same period a year ago.
Milo acknowledged that EECO’s profit margins have been “squeezed” in 1988.
“It has a little bit to do with the lack of profitability in the video division,” he said. The company invested heavily over the past 15 years in developing new patents in video-editing technology, he said, but a demand for the patents never materialized.
The company’s business of manufacturing computer systems for hotels also slid into the red in 1988 because of “extreme competition” and changes in the federal tax laws that have caused a slowdown of hotel development. He said that for 20 years EECO has been making computers that manage the operations of hotels.
Milo said he hopes to sell that business in the first quarter of 1989. He declined to identify the potential buyer.
EECO INC. AT A GLANCE
EECO makes electronic switches and keyboards, hotel computer systems, airline passenger-entertainment systems and videotape-editing systems. The company’s headquarters and hotel-system operations are in Santa Ana, employing 400 people. EECO has other operations in Arizona, South Dakota, Mexico and Great Britain.
(in millions) 1987 1986 1985 1984 1983 Revenue $77.7 $62.6 $54.3 $46.4 $35.3 Net income $1.5 $2.4 $1.6 $1.2 $1.1
Assets $69.3 million Number of employees 2,000 Shares outstanding 4.0 million 52-week price range $8.50-$5.75 Friday’s closing price (Amex) $6.50 Chief executive Robert C. Milo
