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ESCO Completes Sale of Defense Subsidiary; Announces It Will Exit Certain Businesses.



ST. LOUIS---ESCO Electronics Corporation today announced the completion of the previously announced sale of its Systems & Electronics Inc. (SEI) subsidiary to Engineered Support Systems, Inc. for $85 million in cash. Proceeds will be used for several purposes including debt repayment, stock repurchase, and commercial acquisitions.
ESCO also announced that it plans to take a number of actions to further sharpen the Company's focus on its primary served markets. ESCO is pursuing the sale of its microwave antenna business, which is operated as a part of ESCO's Rantec Microwave & Electronics, Inc. (Rantec) subsidiary. Other actions include abandoning the active pursuit of certain business areas and exiting non-core, underperforming businesses.
Specifically, the Company plans to discontinue its investment in High Pressure Reducing Quiet Manifolds for surface ships and Vehicle Location systems. As a result of these specific actions, ESCO's fourth quarter results will include a pre-tax charge in the range of $6-$8 million to exit these business areas.
ESCO's fourth quarter results will reflect several significant nonrecurring items. These items include a gain on the sale of SEI in the range of $40-$50 million, and the above noted charges of approximately $6-$8 million.
In addition, the Company's fourth quarter operating results will be negatively impacted by approximately $3-$5 million of charges incurred at Rantec due to operating inefficiencies.
ESCO expects fiscal year 1999 fully diluted earnings per share to be in the range of $1.75 to $2.25, after incorporating all the noted actions and nonrecurring items.
Dennis J. Moore, Chairman and Chief Executive Officer of ESCO, stated "The sale of SEI and all of the other actions being taken are consistent with our overall strategy to create long-term shareholder value. While we are now a smaller company, ESCO's business going forward will be 90 percent commercial, and substantially more focused than in the past. We expect that Fiscal 2000 earnings will be in the range of $0.80 to $1.00 per share. Earnings in the first half will be affected by anticipated costs incurred in exiting certain business areas, relocation costs, and anticipated expenses related to the sale of the Rantec microwave business.''
Mr. Moore continued "ESCO is starting Fiscal 2000 in a strong financial position. We will be debt-free, with shareholders' equity of approximately $250 million. The Company's tangible book value will be approximately $12 per share.''
Mr. Moore concluded "Given the value implied by ESCO's stronger financial position and our business outlook for Fiscal 2000 and beyond, the Company plans to resume its previously authorized open market stock repurchase program.''

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ESCO Completes Sale of Defense Subsidiary; Announces It Will Exit Certain Businesses.