by Maureen Flanagan
The Crosman Corporation, the world's leading manufacturer of recreational airguns and accessories, has new opportunities in the increasingly popular shooting sports market. Crosman's products -- which include a full line of airguns, ammunition and other accessories sold under widely recognized brand names -- have been embraced for years by recreational airgun users throughout the world. The company has grown with new product lines and innovations to the point that it now has 55% of the domestic airgun market share and is the dominant manufacturer of CO2 cartridges for airguns. In October 1999, Crosman's management refinanced the business to provide additional liquidity and build a sound financial basis to invigorate sales and pursue new opportunities. In its refinancing, Crosman partnered with American Capital Strategies, Ltd. (NASDAQ = ACAS) and Stratford Capital Partners, LP, who each provided $4 million in senior subordinated debt financing.
"Our company has an American-made product with an appeal that has remained strong throughout many generations," said Crosman's President Leonard Pickett. "Our current growth is being driven by expansion in our core markets, and by individuals turning to airguns as regulatory and legal forces restrict the demand for firearms," Pickett said.
Crosman manufactures and markets about 50 different models of airgun rifle and pistols in the mid- to premium price range. It offers a full line of pneumatic, CO2 and spring air powered airguns which it sells under the Crosman, Benjamin, Sheridan and Copperhead brand names. The company also sells accessories, including ammunition (BBs and pellets), CO2 cartridges, Visible Impact targets, Sheridan paintball guns, and Copperhead slingshots and shooting dart games.
Based in East Bloomfield, NY, Crosman produced its first .22 caliber single-shot air rifle in 1923. The company's early growth was driven by national accounts such as Sears Roebuck and Montgomery Ward who sold Crosman products under their respective brand names. In 1971, the Coleman Company acquired Crosman and added accounts with retailing giants such as Kmart and Wal-Mart. In 1992, under the ownership of Pexco Holdings, Inc., Crosman acquired Benjamin Sheridan, the dominant U.S. manufacturer of high-end pneumatic and CO2-powered airguns and one of the foremost manufacturers of high-quality paint guns. Several years later, it entered the value-priced segment of the market with new spring air products under the Copperhead brand name.
In 1997, Pickett and other equity investors acquired Crosman and began to introduce several new products. Most recently, Crosman re-entered the paintball market as the industry began to attract a more mainstream audience. In addition to selling its products to mass merchandisers, Crosman also began to nurture relationships with distributors who service small chain stores and dealer accounts.
Building on its already solid base, the management decided to refinance the business to take advantage of new opportunities. To acquire the funds it needed, Crosman teamed with American Capital and Stratford Capital Partners, which together provided $8 million in senior subordinated debt financing with detachable warrants. Bank of America and IBJ Whitehall also participated by providing a new senior debt facility.
"American Capital recognized the strength of our position, and their speed and pricing helped us to restructure our balance sheet under more favorable terms," said Pickett. "We look forward to working with them as a long-term partner," he said.
American Capital, a buyout and specialty finance company, is an excellent source for middle market refinancing. With capital resources exceeding $460 million, American Capital is a one-stop resource, providing senior debt, subdebt and equity financing for companies in need of capital for growth, acquisitions, employee and management buyouts, liquidity and restructurings. American Capital offers a long-term partnership with its portfolio companies and supports their on-going financing requirements. American Capital invests in a wide range of industries; some recent investments include Caswell-Massey, producer and retailer of soaps and toiletries; TransCore, a manufacturer of transportation technology; The Inca Group, a manufacturer and processor of steel products; and the Aeriform Corporation, an employee-owned specialty gas producer in Texas.
"Crosman is an excellent addition to our portfolio," said American Capital Principal Darin Winn. "In addition to manufacturing a strong branded product with good customer recognition, Crosman is a socially responsible business that is dedicated to safety in the shooting sports. We look forward to working with the company and its talented management team."
Crosman competes on the quality of its products and unique product features. It is well positioned in all segments of the market and maintains excellent relationships with its mass merchandiser buyers, providing extensive marketing support and working closely to coordinate cooperative advertising programs and promotional events. The company's management projects that sales to these mass retailers will continue to increase even more in the coming years.
In addition to its historic line of products, Crosman has established itself as a major competitor in the booming paintball business, which analysts project to grow annually at 25% for the next three to five years. Initially, paintball was played by "week-end warriors" who competed with expensive, often customized gear costing as much as $2,000. The sport now appeals to an increasingly broader group of players that include corporate groups, youth leagues, church groups and other organizations. The sport has expanded into the mainstream market, fueled by more playing facilities and more affordable and readily available paintball equipment.
Overall, airguns and airgun ammunition is a $100 million market within the $2 billion shooting sports market. The sport has enjoyed increasing popularity, and in 1984 was recognized as an official Olympic event. The international market for airguns is also expanding, as developing countries embrace airguns as a less expensive alternative to firearms for hunting and recreational use.
Several factors will likely stimulate further market growth. Demographics, for one, work in Crosman's favor. Some 30% of the company's customers are part of the mini-baby boom of the early 1990s and are expected to drive up sales in the next decade. Increasingly, stringent gun control legislation is stimulating the growth of the high-end segments of the airgun market, which have the look and feel of actual handguns. Crosman, in fact, has seen sales increases in Canada and the U.K. where firearm and handgun restrictions have made ownership of firearms more difficult or illegal. Moreover, the company believes gun owners will continue to view airguns as a viable alternative to firearms.
The company maintains a high profile in airgun safety and proper handling. In 1997, Crosman changed the standard of airgun safety when it began including their CrosBlockT trigger block with every airgun they made. It also distributes a publication to more than 500,000 participants in hunter safety education programs. The company cultivates a positive public image by working with organizations dedicated to the preservation of and safety in the shooting sports, such as the National Shooting Sports Foundation, the Boy Scouts of American and 4-H, and promotes the safe use of airguns through a variety of media.
"Crosman has provided generations of Americans with safe airgun products. We are excited about the new opportunities ahead and are right on target for the next millennium," Pickett said.
