Smith & Wesson to Acquire Universal Safety Response
Springfield, Mass (USA) Smith & Wesson Holding Corporation (Nasdaq: SWHC), parent company of Smith & Wesson Corp., the legendary 157-year old company in the global business of safety, security, protection and sport, announces that it has entered into a definitive agreement to acquire Universal Safety Response, Inc. (USR), a privately held, full-service security systems solutions provider, for up to 9.7 million shares of common stock and up to USD26.2 million in cash.
The Company also announces certain preliminary, financial information from its fourth quarter of fiscal 2009, including year over year increases in revenue, gross margins, product backlog, and cash balances.
In the current year, which ends April 30, 2010, the acquisition will be immediately accretive excluding the purchase accounting impact on a per share basis and approximately breakeven per share on a US GAAP basis. The acquisition is expected to be accretive to EPS on a U.S. GAAP basis in future periods.
USR, founded in 1994 and headquartered in Franklin, Tennessee, is a full-service, uniquely positioned, fast-growing provider of integrated perimeter security solutions. USR is the original creator of the GRAB® vehicle safety barrier, which represents the fastest growing barrier technology in the world and is the only active barrier product that meets the Federal Highway Administration's TL-2 safety test, the Department of State's K12 L3 security test, and the Department of Defense ASTM M50 Shallow Mount security test. USR has leveraged the success of its GRAB® barrier systems to become a turnkey perimeter security provider, with a large portfolio of products and services. USR serves a variety of clients in the defense, transportation and petro-chemical industries, as well as airports, Fortune 500 companies and national laboratories.
The transaction provides Smith & Wesson entry into the rapidly growing perimeter security market, a move aligned with the company's growth and diversification strategy, and one that expands its revenue base into commercial, non-firearms categories.
Michael F. Golden, president and CEO of Smith & Wesson Holding Corporation, said, "We are excited about the opportunities that this acquisition creates for both Smith & Wesson and for USR. USR has built a solid reputation in the perimeter security market based on its differentiated GRAB® product and its unique ability to deliver integrated security systems solutions to an impressive list of government agencies and blue-chip customers. USR has assembled a strong group of professionals in the perimeter security industry. In addition, USR's broad product and service portfolio, combined with its management's expertise in perimeter security, gives us a strong platform for future growth. Growing demand for enhanced security measures at government, military and corporate facilities presents USR with numerous opportunities. In addition, there are opportunities in areas of transportation, railroad crossings, work zone safety, ballistics, law enforcement, energy producing facilities and international markets yet to be addressed."
In conjunction with the acquisition, USR founder, Matthew Gelfand, will continue to serve as President of USR. He will continue to lead the USR operation and will head Smith & Wesson's efforts to develop USR's security-related businesses. Gelfand said, "I am excited about USR becoming 'a Smith & Wesson company' and about becoming a stockholder of Smith & Wesson. These are two well-established and highly regarded brands in their respective industries, and the value proposition to customers on a combined basis is compelling. We believe that the Smith & Wesson brand name around the world will help open markets for USR's security systems solutions offerings. On a personal level, I am especially proud to become part of a company and a management team for which I have developed great respect. As the founder of USR, it is with careful consideration that I, along with our Board of Directors, have made the decision to sell the company, and it is the power of the Smith & Wesson brand, combined with the people inside the company that served as the deciding factors. I look forward to our combined future."
USR operates primarily in two facilities in Franklin, Tennessee, with an expanding workforce of approximately 110 employees. The organization consists of internal, senior level sales professionals headed by Executive Vice President of Sales and Marketing, Wesley Foss, as well as account managers that focus on client based solutions, including the latest and most innovative products and services. In addition, USR has a full complement of project managers and design and program engineers, focused on fully integrated total perimeter security solutions. The programming expertise involves a variety of technical disciplines, which enable multiple security systems to operate in conjunction with each other. In addition, the USR team includes professional construction site project managers to assure timely, high quality site build-outs. It is this combination of professionals that defines USR's unique business model of providing total system design, product selection and integration, and site installation and maintenance.
William F. Spengler, EVP and chief financial officer for Smith & Wesson, added, "The acquisition of USR is expected to close in late July 2009 and therefore it does not impact our financial results for fiscal 2009, which concluded on April 30, 2009. As noted above, on Monday, June 22, 2009, we will provide the full details of our fourth quarter and full fiscal 2009 financial performance via our normally scheduled press release and conference call. The focus of today's news is on our acquisition of USR; therefore at this point, we are providing only a limited number of highlights from our fourth quarter results.
"Revenue for the fourth quarter of fiscal 2009 was $99.5 million, which is USD16.4 million, or 20%, higher than revenue for the comparable quarter one year ago, and gross profit margins improved to 31.0%. Demand for our handguns and tactical rifles remained strong throughout the fourth quarter, as evidenced by our revenue as well as by our backlog balance, which grew to over $200.0 million as of April 30, 2009. We again improved our cash position, which increased to $39.8 million, a balance which does not include the approximately $35.0 million of net proceeds from a public offering that we concluded in May 2009."
"The purchase price of USR will include 5.6 million shares at closing and up to 4.1 million shares of our common stock depending on USR meeting certain targeted EBITDAS for calendar years 2009 and 2010, and, depending upon the average price of our common stock leading up to the closing date of the transaction, between approximately $8.8 and USD 26.2 million in cash. We will be including the results of operations for USR from the closing date forward, which is expected by late July, 2009. We currently anticipate the revenue contribution from USR for the period from the closing date to the end of our 2010 full fiscal year will be approximately USD 50.0 million. Looking forward, we expect the USR revenue contribution for fiscal year 2011 to be approximately USD100.0 million, and EBITDAS from USR in that period to exceed USD15.0 million. It should be noted that the acquisition agreement includes an earn-out provision whereby USR shareholders will earn the maximum number of shares only if a minimum EBITDAS target of USD15.0 million for calendar 2010 is successfully met. For accounting purposes, our share count for fully diluted earnings per share purposes will increase each fiscal year as the incremental 4.1 million shares are earned."
"In summary, our underlying business continues to perform extremely well and we believe that USR provides Smith & Wesson with a new and very strong growth driver for the future," concluded Spengler.
