Anaheim Firm, Former Customer Settle Legal Dispute

ANAHEIM —  Odetics Inc., the maker of high-tech video and data recorders, said Friday it has settled a legal dispute with a former customer that canceled a major order in 1994 and sent the company into a tailspin.

Odetics said it will receive $6.1 million as part of its settlement with the former customer, Dallas-based E-Systems Inc.

Anaheim-based Odetics posted its first annual loss ever--$4.7 million--after losing a contract in 1994 to supply E-Systems with computer tape libraries. Earlier that year, the Dallas company had acquired Odetics’ competitor in the business, Grau Automation.

Odetics, which had taken pride in its employee-friendly working environment, found itself forced to slash its work force by 25% and temporarily cut pay by 10%.

The company and E-Systems sued each other, each alleging breaches of contract.

Joel Slutsky, Odetics’ chairman and chief executive, expressed relief over the agreement. “We’re very pleased to get a fair settlement that’ll allow us to redirect the growth of our business,” he said.

The company said the dispute had been a drain on resources. In the last year alone, Odetics’ litigation expenses from the dispute totaled $1.3 million, or 13 cents per share.

But the company had already started to bounce back from the canceled order, posting a profit of $2.45 million as revenue climbed to $104.6 million from $87.7 million the previous year.

The company’s stock--which was trading around $5 a share last summer--has shot up again, too. It closed Friday at $19.75, up 87.5 cents, on the Nasdaq market.

Slutsky said the company will use the $6.1 million from the settlement mostly to pay off short-term debt, a step intended to strengthen its balance sheet so it can better support future growth.

Odetics received the $6.1 million as a royalty payment on library systems it sold to E-Systems. For its part, Odetics agreed to provide spare parts and other customer support services for library systems E-System had already installed.

The Anaheim company will also refurbish nine additional systems that it sold to E-Systems, sell them as used equipment and give E-Systems the profit from those sales.