Acquisition expands optomechanical expertise

Axsys Technologies has acquired all of the stock of Telic Optics, a privately owned manufacturer of infra-red optics and optical assemblies.

Axsys Technologies has acquired all of the stock of Telic Optics, a privately owned manufacturer of infra-red optics and optical assemblies.

Based in North Billerica, Massachusetts and founded in 1986, Telic employs 32 people and sells its products to manufacturers of thermal imaging cameras, defence prime contractors and research laboratories who design systems used in long-range reconnaissance, surveillance and targeting applications for the defence and homeland security markets.

Axsys is a leading supplier of metal optics and optomechanical assemblies used in reconnaissance, surveillance and targeting applications, primarily for air- and space-based applications.

The acquisition of Telic provides Axsys with a number of key strategic benefits.

Telic's broad infra-red optics capabilities increase Axsys' product offerings and complement Axsys' strong position in metal mirrors.

Axsys estimates that the infra-red lens market is three times as large as the metal optics market.

Telic's products are typically used in ground- and sea-based programmes.

This complements Axsys' historical focus on air- and space-based programmes and expands Axsys' overall market and programme penetration.

The combination of Axsys' and Telic's optomechanical integration capabilities is expected to enable Axsys to increase its competitive advantage and technical offering to prime contractors who are seeking to outsource optics-based subassemblies.

The initial purchase price of this acquisition is $14.0 million with an additional $4.0 million earn-out over the next 36 months if certain revenue goals are achieved.

If all revenue goals are achieved, the total purchase price could reach $18.0 million.

Axsys funded the initial cash portion of the purchase price and associated transaction costs through a combination of existing cash balances and outside financing.

In connection with the transaction, Axsys has arranged a $10.0 million credit facility with Fleet National Bank, a portion of which was used to fund the acquisition.

Management expects the acquisition of Telic to increase Axsys' consolidated revenues by approximately $5.5 to $5.8 million and operating profit by approximately $1.5 to $1.7 million for the balance of fiscal 2004.

Previously Axsys had indicated guidance for 2004 operating results of 5 to 7% growth in revenue and 18% to 20% growth in operating income compared to 2003.

The addition of Telic's expected results for the last three quarters of 2004 necessitates the revision of previous guidance.

Revenue growth is now expected to be 11 to 14% with operating income growth of 48 to 54%.

Stephen W Bershad, Chairman and CEO of Axsys commented: "Over the past year, we have been looking for companies that possess complementary technologies with exceptional engineering skills that share our vision to become a premier supplier of optomechanical components and subsystems".

"Telic is strongly aligned with our objectives and will provide a meaningful contribution to Axsys' future growth opportunities".

James Howard, President and CEO of Telic added: "Over the past several years, Telic has done remarkably well at taking advantage of the increasing demand for infra-red imaging systems within the defence and homeland security markets".

"However, in order to further enhance our capabilities, we welcome the opportunity to partner with a company that has greater engineering, sales and financial resources".

"Axsys provides the right fit for Telic and we look forward to the opportunities that will be created as a result of the combination of the two companies".

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