EMRISE Corporation Completes Acquisition Of Advanced Control Components Inc.
RANCHO CUCAMONGA, Calif.--(BUSINESS WIRE)--EMRISE CORPORATION (NYSE Arca: ERI), a multinational manufacturer of proprietary electronic devices and communications equipment for aerospace, defense, industrial, and communications applications, today announced that it has completed the acquisition of Eatontown, NJ-based Advanced Control Components, Inc. (ACC). ACC is a supplier of high performance radio frequency (RF) and microwave devices and subsystems that for more than 26 years has been serving the military, aerospace, commercial and instrumentation markets.
Chairman, President and Chief Executive Officer Carmine T. Oliva called ACC the most important acquisition in the history of the company and a key strategic step in positioning EMRISE for rapid expansion of its business. ACC provides EMRISE with the geographic presence, resources and new products to grow domestically and internationally and to increase sales to United States military and other government and commercial organizations.
"In addition to strengthening our organic operations, this acquisition adds significantly to our optimism about the future success of EMRISE," Oliva said. "We believe the addition of ACC will substantially strengthen our future operating results and overall financial condition. In the 12 months following closing, we expect ACC to add $17 million to $18 million in revenues, increase overall gross margins and make a major contribution to consolidated net income and earnings per share. We expect ACC's profit contribution to begin with a small positive impact during the third quarter of 2008 and more material net income contributions beginning in the fourth quarter of 2008 and going forward."
Approximately 30 percent of the purchase price is contingent upon ACC achieving certain operating income objectives during the first 24 months after closing, Oliva noted. "We believe this will ensure that we and Charles Brand, the former majority owner and ongoing president of ACC, are strategically aligned to achieve maximum benefits for EMRISE and its shareholders. Additionally, with the federal net operating loss carry forwards that EMRISE has available, we expect to shelter a large portion of ACC's earnings from federal taxation for the foreseeable future. As a result, we expect the acquisition will help generate stronger overall cash flow and be highly accretive to earnings."
Under the terms of the stock purchase agreement, the all-cash purchase price for ACC of up to $18 million is subject to the achievement of certain operating income performance criteria and certain post-closing working capital and balance sheet adjustments, which could increase or decrease the total purchase price. The agreement provided for a $13 million cash payment at closing, a two-year, $2 million conditional note contingent on ACC achieving certain operating income objectives during the first 24 months after closing and a $3 million earn-out contingent upon ACC attaining additional operating income objectives during that same period.
Financing for the transaction was provided by Irvine, CA-based PEM Group as part of the more than $23 million debt financing EMRISE obtained in November 2007, which included a separate facility for acquisitions. EMRISE borrowed $13 million under its credit facility to finance the payment at closing. Susquehanna Financial Group, LLLP acted as financial advisor to EMRISE in connection with this transaction.
Additional details regarding the acquisition of ACC will be contained in EMRISE's Form 8-K and other related documents to be filed with the U.S. Securities and Exchange Commission.
About EMRISE Corporation
EMRISE designs, manufactures and markets electronic devices, sub-systems and equipment for aerospace, defense, industrial and communications markets. EMRISE products perform key functions such as power supply and power conversion; RF and microwave transmission; digital and rotary switching; network access and timing and synchronization of communications networks. Primary growth driver applications for EMRISE products include commercial avionic "In-Flight Entertainment and Communications" products and communications "Network Timing and Synchronization" equipment. EMRISE serves customers in North America, Europe and Asia through operations in the United States, England, France and Japan. The Company has built a worldwide base of customers including all of the Fortune 100 in the U.S. that do business in markets served by EMRISE and many similar-size companies in Europe and Asia. For more information go to www.emrise.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, the matters discussed in this press release, including without limitation EMRISE's ability for ACC to improve EMRISE's geographic presence, provide additional resources and new products to grow domestically and internationally and to increase sales to United States military and other government and commercial organizations, ability to predict the future success of EMRISE, ability for ACC to significantly strengthen and improve EMRISE's future results of operations and overall financial condition, ability for ACC to add $17 million to $18 million in revenues, ability to increase overall gross margins, ability to make a major contribution to our consolidated net income and earnings per share, the ability for ACC's profit contribution to begin with a small positive impact during the third quarter of 2008 and then to expect significant net income contributions from ACC beginning the 4th quarter of 2008 and going forward, the ability of ACC to achieve certain operating income objectives during the first 24 months after closing, the ability to ensure that EMRISE and Charles Brand, the former majority owner and ongoing President of ACC, are strategically aligned to achieve the maximum benefit during the two years following the transaction, the ability for EMRISE to shelter a significant portion of ACC's earnings from federal taxation for the foreseeable future, the ability for the acquisition to help generate stronger overall cash flow and to be highly accretive to earnings, the ability to predict the ultimate obligation on the two-year, $2 million conditional note contingent and/or the up to $3 million earnout contingent upon ACC attaining additional operating income objectives, are all forward-looking statements that involve a number of risks and uncertainties. The actual future results of EMRISE CORPORATION could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, ACC's ability to achieve expected sales, gross profit and net income results, EMRISE's ability to leverage ACC's existing customer base and relationships to expand its geographic presence, ACC's ability to provide resources and/or new products, EMRISE's ability to successfully benefit from ACC's resources and/or new products, ACC's ability to continue to sell existing products to existing customers at current levels, ACC's ability to successfully market and sell its existing or future products to United States military customers and/or to other government and commercial organizations, (current or future), EMRISE's ability to leverage such customer relationships, the ability to predict the combined working capital needs of EMRISE including those of ACC and what impact those needs may have on EMRISE's future financial condition, ability of ACC to ship existing backlog and/or to realize expected shipment levels in the next twelve months, ability of ACC to achieve gross margin levels in excess of EMRISE's existing gross margin levels, ability for ACC to provide any positive contribution to 3rd quarter 2008 EMRISE net income, ability for ACC to contribute positive net income in 4th quarter or in any future periods, ability of ACC to achieve the maximum benefit during the earn-out period in the 24 months after closing, uncertainties regarding EMRISE federal net operating losses as they apply to possibly sheltering future ACC profit, the impact of the $2 million conditional note contingent and/or the up to $3 million earn-out contingent as they may affect net income, cash flows and/or the overall impact on EMRISE's financial condition in ways not anticipated, and those factors contained in the "Risk Factors" Section of the Company's Form 10-K for the year ended December 31, 2007, and other Company filings.
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