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Jax Daily Record Monday, Nov. 14, 201612:00 PM EST

Smith & Wesson buying Jacksonville company

by: Mark Basch Contributing Writer

Iconic gun maker Smith & Wesson Holding Corp. is buying Jacksonville-based outdoor gear company Ultimate Survival Technologies Inc., or UST Brands, for $32.3 million in cash, as the company diversifies beyond the firearms market.

UST produces survival and camping equipment at its 100,625-square-foot facility on Philips Highway.

“UST Brands is our first acquisition that is entirely focused on the outdoor market, which is a key part of our vision to become the leading provider of quality products for the shooting, hunting and rugged outdoor enthusiast,” Smith & Wesson CEO James Debney said in a news release.

The acquisition comes as Smith & Wesson is changing its holding company name to American Outdoor Brands Corp. to reflect its broader reach. The company will still operate its firearms division under the Smith & Wesson name.

The company said UST has $24 million in annual sales and has been growing revenue by 49 percent a year over the last four years.

It said the purchase price is about 11 times UST’s earnings before interest, taxes, depreciation and amortization.

In addition to the $32.3 million, Smith & Wesson will pay up to $2 million more in the next two years, depending on UST’s financial performance.

UST is an 80-year-old family-owned company.

“We are excited about the many organic and inorganic opportunities that UST Brands will be able to pursue in this segment of the outdoor market with the strong support and financial backing of Smith & Wesson,” UST President Andrew Kaufmann said in the release.

Kaufmann did not respond to phone messages seeking additional information last week.

Canadian firm buys Team JAS

A Canadian company, Exchange Income Corp., announced last week it acquired Jacksonville-based Team JAS, which provides aircraft maintenance and repair services, for $10 million in cash and stock.

EIC invests in the aviation, aerospace and manufacturing sectors, and Team JAS will become part of a Miami-based company it owns called Regional One.

Team JAS, which specializes in support for Twin Otter aircraft, operates out of a 33,000-square-foot facility in Baymeadows. The company said in a news release on its website that it will remain in Jacksonville with no changes in management or operations.

“The only difference will be the added scale and support we will enjoy from becoming part of the Regional One team,” CEO Andy Sanfilippo said in the release.

CSX Corp. gets Trump bump

At an investor conference last week, CSX Corp. Executive Vice President and Chief Operating Officer Cindy Sanborn said the Jacksonville-based railroad company expects fourth-quarter earnings to be lower than last year, which is consistent with its previous forecast of flat to slightly lower earnings per share.

Sanborn also said earnings will be reduced by 8 cents a share because of costs associated with a debt refinancing, according to a CSX news release.

However, earnings will be lower even when that charge is excluded.

Despite that lower forecast Wednesday morning, CSX’s stock rose $1.81 to $33.88 Wednesday, a 5.6 percent gain that made it the best performer among Jacksonville-based companies that day.

CSX seemed to be one of the companies benefiting from Donald Trump’s election Tuesday.

That may reflect in part Trump’s support of the coal industry at a time when coal shipments by rail have been dropping. Although Sanborn talked about CSX transitioning away from coal, which used to be its biggest business, some investors may see a rebound coming in that segment.

Analysts said several other Trump trends will help transportation stocks.

After attending two industry conferences last week, Stifel Nicolaus transportation analysts said in a research report “it seemed that most attendees were ecstatic about the prospect of accelerating economic growth, tax reform, and a throttling of the onslaught of regulations which most expected would more than offset any concerns related to a potential slowdown in foreign trade.”

Although CSX shareholders saw an immediate benefit, BMO Capital Markets analyst Fadi Chamoun lowered his rating on the company Thursday from “outperform” to “market perform” because of the recent rise in the stock.

In his research note, Chamoun said he has a favorable medium-term outlook for CSX.

“We see volume growth being positive, pricing strong enough to offset cost inflation, significant productivity improvement opportunities, moderating capital intensity and rising ROIC (return on invested capital),” he said.

“However, near-term pressures from an over-supplied trucking market remain elevated, economic tailwinds are expected to remain moderate and the pace of cost savings is likely to decelerate versus 2016 levels,” he said.

Landstar System also bumps up

Another Jacksonville-based company rising Wednesday, as part of the transportation rally, was trucking company Landstar System Inc., which rose $2.85 to $77.70.

However, the big winner among companies with operations in Jacksonville was Alabama-based Vulcan Materials Co., which jumped $11.82 to $131.55.

The construction materials company would likely see big demand if infrastructure spending increases as anticipated in a Trump presidency and, yes, some analysts even suggested Vulcan could benefit from construction of a wall along the Mexican border.

Among other companies with operations in Northeast Florida, Northrop Grumman Corp. rose $12.43 to $242.30 on speculation that Trump will be good for defense spending and Ameris Bancorp rose $2.05 to $38.90 (along with other bank stocks) on sentiment that banking regulation could ease up.

On the other side, Smith & Wesson (which will soon have operations in Jacksonville) was one of the big losers in the market, dropping $4.33 to $24.12.

Trump’s election reduced concerns about future restrictions on gun sales, which had been prompting a recent spike in sales for firearms companies.

Convergys falls after election

Convergys Corp. was the big loser among companies currently with Jacksonville operations, dropping $2.40 to $25.98 Wednesday after releasing its earnings late Tuesday afternoon, several hours before the election results came in.

Convergys, which provides outsourced customer service for businesses, reported adjusted third-quarter earnings of 46 cents a share, a penny higher than last year and in line with analysts’ forecasts.

However, revenue of $741 million, basically unchanged from the previous year, was about 3 percent lower than forecasts and the company lowered its revenue forecast for the full year by 2 percent, Robert W. Baird analyst David Koning said in a research note.

Writing before the election results were known, Koning said he expected Convergys’ stock to drop by 6 percent to 10 percent Wednesday after the earnings report.

In another note Wednesday about the election’s impact on the stocks he follows, Koning said customer care companies like Convergys “could be weaker than average given these companies’ reliance on offshore labor.”

PHH Corp. still evaluating options

Struggling mortgage banking company PHH Corp. last week reported a third-quarter adjusted net loss of $19 million, or 35 cents a share, as the company continues to evaluate potential strategic options.

During the company’s conference call with analysts, CEO Glen Messina said PHH has not received an “actionable” proposal to buy the whole company.

“We have not identified any actionable, attractive merger partners or acquisition targets at this time,” he said.

As part of its strategic review, PHH is continuing to take steps to restructure the company, including exiting its private label solutions (PLS) business, which provides end-to-end mortgage origination services for financial institution clients.

The New Jersey-based company, which employs about 450 people in its Jacksonville operations center, said the exit of the PLS business will impact the Jacksonville office, but it cannot say yet what the impact will be.

PHH spokesman Dico Akseraylian said by email the company is in discussions with several mortgage outsourcing providers who may take on some PHH facilities and employees as the company exits the business.

PHH does not expect to complete its exit from the PLS business until the first quarter of 2018.

Messina said he expects the company’s strategic review to be complete by the end of January.

Analyst downgrades rating

After increasing his rating to “buy” early this year when Group Inc. acquired digital marketing company Yodle, SunTrust Robinson Humphrey analyst Matthew Thornton downgraded the stock back to “hold” after’s third-quarter earnings report.

In his research note, Thornton said he expected the Yodle deal to grow value-added services (VAS) revenue for, which provides website development services for businesses.

However, since the acquisition, the company’s domain registration and do-it-yourself services businesses “have weakened per competition (no reason to expect recovery, in our view), while Yodle integration has proven more challenging with limited visibility into recovery in VAS growth,” he said.

“We downgrade to ‘hold’ believing there’s time to revisit if/when VAS makes the turn,” Thornton said.

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