Smith & Wesson to Acquire Thompson/Center Arms
I received this press release this morning and thought it was pretty interesting news. It is a long press release, but includes a lot of information about the buyout and acquisition:
Smith & Wesson Holding Corporation to Acquire
Thompson/Center Arms, Inc.
Deal Expected to Add $70 Million of Net Sales
Provides Immediate Entry into Hunting Rifle Market
SPRINGFIELD, Mass., December 18, 2006 — Smith & Wesson Holding Corporation
(NASDAQ: SWHC), parent company of Smith & Wesson Corp., the legendary
154-year old company in the global business of safety, security, protection
and sport, today announced that it has entered into a definitive agreement
to acquire Thompson/Center Arms, Inc., a 40-year old, privately held, New
Hampshire-based designer, manufacturer and marketer of premium hunting
firearms, for $102 million in cash. The transaction is expected to close in
the beginning of January 2007.
Thompson/Center Arms, headquartered in Rochester, New Hampshire,
manufactures and distributes innovative firearms recognized by hunting
enthusiasts for their precision, performance, craftsmanship, and
reliability. Thompson/Center Arms occupies a leadership position within
each of its core product categories of black powder firearms (or
³muzzleloaders²), black powder accessories, and interchangeable firearm
systems, as well as a presence in precision rimfire rifles. The transaction
will combine two leading firearms companies with complementary products, to
yield a single provider of high-quality pistol, revolver, shotgun and rifle
products.
Michael F. Golden, President and CEO of Smith & Wesson Holding Corporation,
said, ³The acquisition of Thompson/Center Arms is an important step in our
diversification strategy. Thompson/Center Arms has consistently delivered
both profits and strong gross margins while building its position in the
hunting rifle market. This move will expand our presence in the $1.1
billion long gun market by providing immediate entry into the hunting rifle
and black powder segments, which represents approximately $600 million in
domestic sales. In addition to carving out a leadership role in black
powder and single shot hunting rifles, Thompson/Center Arms has developed
tremendous expertise in manufacturing long-gun barrels, a competency that
will be important to Smith & Wesson as we expand our capabilities even
further into the long gun market.²
The purchase price for Thompson/Center Arms includes the company¹s
Rochester, New Hampshire facility, which produces all of the company¹s
products and is situated geographically between Smith & Wesson¹s
manufacturing operations in Springfield, Massachusetts and Houlton, Maine.
The transaction will be financed with the proceeds from the sale of
convertible senior notes and an acquisition line of credit.
In conjunction with the acquisition, Gregg Ritz, President and CEO of
Thompson/Center Arms, will be named President of Smith & Wesson - Hunting.
He will continue to lead the Thompson/Center Arms operation and will head
Smith & Wesson¹s efforts to develop its hunting business. Ritz said, ³In
addition to bringing together two well-established and highly respected
brands in the firearms industry, this acquisition increases opportunities
for both Smith & Wesson and Thompson/Center Arms. Smith & Wesson¹s ability
to provide capital for growth and expertise in lean manufacturing processes
will provide critical support for our new product pipeline and our need for
increased capacity based on strong customer demand. In turn,
Thompson/Center Arms¹ array of barrel manufacturing expertise, hunting rifle
products, and accessories fits nicely into the Smith & Wesson portfolio of
pistols, revolvers, shotguns and future hunting rifles. There is absolutely
no overlap in our product lines, while there is tremendous similarity in our
dealer and distribution channels and our marketing vehicles.²
Outlook for Fiscal 2007
Following the closing of the acquisition in early January 2007, the Company
will include the results of operations for Thompson/Center Arms from that
date forward. The Company currently believes that the revenue contribution
from Thompson/Center Arms for the period from the closing date to the end of
the Company¹s 2007 full fiscal year, which is April 30, 2007, will be
approximately $18.6 million. Therefore, the Company now expects net product
sales for the full 2007 fiscal year to be approximately $218.6 million.
It should be noted that excluding the impact of certain non-cash purchase
accounting charges, the acquisition will be $0.01 accretive to the Company¹s
anticipated earnings per diluted share in fiscal 2007. It should also be
noted that the results for the January through April 2007 period are not
reflective of the results expected for Thompson/Center Arms on an annual
basis due to the seasonality of the hunting business, which is stronger in
the May through December timeframe.
In accordance with acquisition purchase accounting, the Company expects to
record non-cash charges of approximately $7.0 million on a pre-tax basis or
about $0.10 per share on an after-tax basis. Therefore, net income for
fiscal 2007 is now anticipated to be approximately $11.5 million, or $0.27
per diluted share, versus prior guidance of $15.0 million, or $0.36 per
share. It should be noted that the impact of purchase accounting will not
be fully known until after the transaction closes.
Outlook for Fiscal 2008
Golden added, ³We are especially pleased with the fact that the strategic
acquisition of Thompson/Center Arms will provide us a full year of increased
net sales for fiscal 2008. We now expect net sales for the fiscal year
ending April 30, 2008 of approximately $320.0 million, an increase of $70
million from our previous guidance for fiscal 2008, and reflective of the
Thompson/Center Arms acquisition.²
We expect net income for the fiscal year ending April 30, 2008 of
approximately $27.0 million, or $0.60 per diluted share, which reflects an
increase from our previous guidance for 2008 earnings per diluted share of
$0.52, and a 122% increase from our anticipated 2007 earnings per diluted
share, and reflective of the Thompson/Center Arms acquisition.
Barry Monheit, Chairman of the Board of Smith & Wesson Holding Corporation,
said, ³The Board is extremely pleased with this acquisition. We are not
only acquiring a company of tremendous quality and reputation, but the
acquisition itself clearly demonstrates the commitment of Mike Golden and
his team to execute on the Company¹s strategy to gain a significant presence
in safety, security, protection and sport.²
Long-Term Outlook
Golden concluded, ³Over the course of fiscal 2006 and fiscal 2007, we have
consistently delivered on our commitment to grow our core handgun business
and diversify our company into new areas of safety, security, protection and
sport. The acquisition of Thompson/Center Arms, Inc. is a key milestone in
that strategy. It places us clearly and immediately into the hunting rifle
market and, excluding the impact of non-cash purchase accounting charges, is
immediately accretive to our earnings. We believe that, once we gain the
benefit of the various synergies we expect, our operating results, including
our margins and operating expenses, for periods after fiscal 2008 will
continue to be positively impacted by giving us a significant presence in
the long gun market.²
Forward-Looking Statements
This press release includes ³forward-looking statements² within the meaning
of federal securities laws. Forward-looking statements give the Company¹s
current expectations or forecasts of future events. These forward looking
statements include expectations regarding (i) the proposed acquisition, (ii)
the anticipated benefits of the acquisition, (iii) the timing of the
proposed acquisition, (iv) the expected financial effect of the acquisition,
(v) the accretive impact of Thompson Center/Arms earnings, (vi) the effect
of the acquisition on customer growth strategy, and (vii) the Company¹s
outlook for fiscal 2007 and 2008. The Company cautions that these
statements are qualified by important factors that could cause actual
results to differ materially from those reflected by such forward-looking
statements. Such factors include the demand for the Company¹s products, the
Company¹s growth opportunities, the ability of the Company to obtain
operational enhancements, the ability of the Company to increase its
production capacity, the ability of the Company to engage additional key
employees, the ability of the Company¹s management to integrate the acquired
business in a successful manner, and other risks detailed from time to time
in the Company¹s reports filed with the SEC, including its Form 10-K Report
for the fiscal year ended April 30, 2006.
The Company assumes no obligation to update publicly such forward-looking
statements, whether as a result of new information, future events or
otherwise.
Conference Call
The Company will host a conference call today, December 18, 2006, to discuss
the acquisition and its updated outlook for fiscal 2007 and fiscal 2008.
The conference call may include forward-looking statements. The conference
call will be Web cast and will begin at 8:30 a.m. Eastern Time (5:30 a.m.
Pacific). The live audio broadcast and replay of the conference call can be
accessed on Smith & Wesson¹s Web site at www.smith-wesson.com
(Windows Media is required). Those
interested in listening to the conference call via telephone may call
directly at 617.614.2703 and reference conference code #96836672. No RSVP
is necessary. The Company will maintain an audio replay of this conference
call on its website for a period of time after the call. No other audio
replay will be available.
About Smith & Wesson
Smith & Wesson Holding Corporation, through its subsidiary Smith & Wesson
Corp., is one of the world¹s largest manufacturers of quality handguns, law
enforcement products and firearm safety/security products. The Company also
licenses shooter protection, knives, apparel, and other accessory lines.
The Company is based in Springfield, Massachusetts, with manufacturing
facilities in Springfield and Houlton, Maine. The Smith & Wesson Academy is
America¹s longest-running firearms training facility for America¹s public
servants. For more information, call (800) 331-0852 or log on to
www.smith-wesson.com.
About Thompson/Center Arms, Inc.
Thompson/Center Arms, headquartered in Rochester, New Hampshire, is a
leading designer, manufacturer, and marketer of premium hunting firearms
under the Thompson/Center brand. For more information, log on to
www.tcarms.com.
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