EECO Inc. Expects $10.3-Million Loss for ’89 Fiscal Year

EECO Inc., a financially strapped maker of computer components, said Monday that it expects to report a loss of $10.3 million on revenue of $63 million for its fiscal year ended Dec. 31, 1989.

The Santa Ana-based company attributed the anticipated deficit to a $6.7-million loss from continuing operations, a $2.2-million loss from its discontinued computer keyboard and hotel computer operations, and a $1.4-million loss from the cost of selling the units.

The expected loss in 1989 compares to a net loss of $13.2 million in 1988.

EECO also said that its financial report for 1989 has been delayed. The company’s accountant, Ernst & Young, cannot complete its annual audit until the outcome of negotiations to sell EECO’s keyboard division is determined.

The company announced in March that it planned to sell its ailing Maxi-Switch subsidiary, which makes computer keyboards in Arizona and Sonora, Mexico.

Scott Davis, EECO’s chief financial officer, said that the company has reached a preliminary agreement for sale of the Maxi-Switch division with an undisclosed buyer and that the sale is expected to be completed by mid-May.

But Davis said that the company’s primary lender, Sanwa Bank in Los Angeles, holds liens on the assets involved in the Maxi-Switch sale and that the bank must approve the sale before it can be completed.

EECO owes $10 million to Sanwa Bank and, although its credit extension with the bank expired on March 31, the loans have not yet been declared in default.

Davis said a default declaration by the bank would have a “material adverse affect on the company’s operations” and force it to seek other sources of funding. If the company is unable to secure other financing, a bankruptcy filing would be a possible option.