Founded in 1968 by Utah digital graphics pioneers David C. Evans and Ivan Sutherland, the company said Wednesday it intends to sell its visual-training simulator business to the Iowa-based Rockwell Collins Inc. for $71.5 million.
Once the deal is completed by midyear, Evans & Sutherland no longer will produce graphic systems for simulators used to train miliary and commercial jet pilots and tank crews but instead will concentrate on delivering its digital and laser projection systems to planetariums, digital theatres and projection domes.
"Over the last five years, the defense and aerospace industries have evolved to favor large integrated companies that can offer a wide variety of products," said James R. Oyler, Evans & Sutherland's chief executive officer.
As a result, smaller suppliers are finding it increasingly difficult to compete, he said.
Rockwell Collins, which makes airplane cockpit instruments, said it is using the acquisition to beef up and expand its own commercial flight-simulator business. It entered that arena in 2003 when it bought flight-simulator maker NLX for $125 million and acquired huge simulator contracts with the U.S. military.
Yet in examining its NLX business, Rockwell Collins realized that there was one gap in its products - its optical systems needed improving. "So Evans & Sutherland systems are really a great fit for us," said Rockwell Collins spokeswoman Nancy Welsh.
About 200 Evans & Sutherland employees - 110 in in Salt Lake City, 60 in Orlando and 30 in England - will go to work for Rockwell Collins once the acquisition is completed. "And we intend to keep all of those locations," she said.
Although Evans & Sutherland is selling off operations that generate upward of 75 percent of its $70 million in annual revenue, Oyler said management believes the company's future lies in the digital theater business. To that end, he noted the company is acquiring the operations of the Pennsylvania-based Spitz Inc. for $3.4 million in cash and stock. He expects that deal to be completed by the end of March.
Spitz is a well-known supplier of planetarium systems and architectural domes. "We're primarily a supplier to small educational institutions - schools, colleges - and have well over 1,000 systems installed," said Scott Huggins, the company's director of marketing.
The Spitz acquisition will result in Evans & Sutherland eventually being able to provide a full-range of products and supplies to digital theaters and planetariums, Oyler said. And the addition of Spitz's 60 employees will bring Evans & Sutherland's payroll to about 130 people, not including those who will move over to Rockwell Collins.
"In a way, we are going back to our roots," Oyler said, noting that Evans & Sutherland's first product allowed the large computers of the late 1960s and early 1970s to produce graphic images. "And it was significant since many of those systems at the time were using punch cards."
Evans & Sutherland said it intends to use the proceeds from the sale of its simulator assets to retire its $18 million in long-term debt and for working capital. It also intends to explore issuing a special dividend to its stockholders or launching a stock buy-back program.
"We believe that by refocusing our business strategy and strengthening our balance sheet that we're enhancing the company's prospects," Oyler said, noting the company is just beginning to deliver its state-of-the-art laser projector, which delivers ultra-high resolution digital images.
Evans & Sutherland's shares, which are listed on Nasdaq, closed Wednesday at $5.56, up 68 cents.
steve@sltrib.com
