Smith & Wesson CFO says to expect more security activity

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Friday, July 31, 2009

SPRINGFIELD, Mass.—As part of a wide-ranging interview about Smith & Wesson’s plans for the security industry, company CFO Bill Spengler made it clear that the company is not just dipping its toe into security with its buy of USR, a perimeter security specialist S&W purchased earlier this month.

“S&W is a firearms company with a very long history,” Spengler said. In the last five years, he said, the company has broadened its offerings within the firearms industry, moving from being mainly pistol-focused to acquiring a company to get into long-gun making, moving from being primarily retail and consumer oriented to being more focused on professional markets, law enforcement and the military.

With that done, “we think it makes sense to broaden into other areas, and part of that is pure logic, not to be susceptible to one particular category, because the brand itself has a tremendous amount of strength when it comes to protection and security of all kinds.”

Further, “if you look at firearms, it generally tends to grow a bit ahead of inflation, but it’s not growing at an exponential pace, so we were looking for a strong secondary driver.”

Smith & Wesson thinks it has found that in commercial and industrial security, and USR is the platform on which the company will delve into it. “Really, USR, across the board, met every criteria we had established: It has a very defensible set of products, with a wide range of patents; it has a very interesting and unmatched business model; it has a very strong management team; and it has been undergoing a high growth rate and we saw no reason for that to end.”

Why security, though?

“I like the underlying dynamic of it,” Spengler said. “I don’t think the world is going to get substantially safer over the next decade, and as a consequence corporations and the government will continue to put money into the securing the homeland, and that’s the case with the UK, India, and many other countries. If you can provide a unique offering, you have the opportunity to grow very rapidly.”

So, how will S&W look to grow? Are more acquisitions in the offing?

“We’d clearly like to grow it organically,” he said, “and we’re not going to be shy with helping it along by combining its excellent access to branches of the military and governments with our own access to those kinds of things. But it’s an obvious place, now that there is an infrastructure in place, to provide some add-ons, assuming the right thing comes along.”