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EMRISE Corp., a multi-national manufacturer of defense and aerospace electronic devices and communications equipment, announced that it has sold the assets of its printed circuit board (PCB) business, EMRISE Circuit Division (ECD), in Monrovia, CA, to Sierra Circuits Inc., a provider of quick-turn printed circuit boards located in Sunnyvale, CA.
EMRISE president and chief executive officer Carmine T. Oliva said that the sale of ECD generated modest proceeds, but could produce meaningful cost savings over time for its Digitran division. In addition, this transaction will be followed by the implementation of EMRISE’s previously disclosed plan to assess other much higher value non-core businesses and product lines for possible sale. Depending on the outcome of those assessments, the sale of non-core assets could generate sufficient proceeds to pay off a majority of the debt incurred to finance the acquisition of Advanced Control Components Inc. (ACC). “If we’re successful in selling some or all of our non-core assets, we believe it will make EMRISE stronger financially and will allow us to better focus on our core strengths. And with less debt, our annual interest savings would be about equal to the annual income from those non-core assets.”
Under the terms of the ECD sale agreement, Sierra will pay EMRISE $160,000 over 18 months for the assets of ECD. In addition, Sierra has agreed to remove and dispose of substantially all of the manufacturing equipment at the Monrovia facility thus avoiding related expenses of $75,000 to $125,000, which EMRISE would have had to incur absent the sale of assets.
Sierra has also signed a long-term supplier agreement to sell PCBs to EMRISE’s Digitran division at a substantial discount to its previous in-house-manufactured cost. As a result, Digitran expects to realize annual savings in PCB costs of approximately $200,000. The combination of the savings from reduced PCB costs and the other savings expected over the next 12 months should result in total cost savings in excess of $400,000.
Under the agreement, EMRISE is responsible for shutting down the facility and closing the building in which ECD operated. EMRISE is currently determining final costs and works associated with this activity and anticipate completion by December 2008. Net of all actual and expected costs of final closure, EMRISE anticipates a small one-time gain associated with the sale of ECD will be recorded in third-quarter 2008. Other than the anticipated one-time gain and ongoing cost benefits from the long-term supplier agreement, EMRISE does not anticipate any material impact to its future financial results from this transaction.
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