Royal Laser Corp.
TSX : RLC

Royal Laser Corp.

November 08, 2005 08:30 ET

Royal Laser Corp.-Announces Agreement to Acquire Smokey Manufacturing Inc. and Thunder Tool & Mfg. Limited

TORONTO, ONTARIO--(CCNMatthews - Nov. 8, 2005) - Royal Laser Corp. (TSX:RLC)(the "Corporation") is pleased to announce that it has entered into a Share Purchase Agreement (the "SPA") dated November 7, 2005 with the principals of Smokey Manufacturing Inc.("Smokey") and its affiliate Thunder Tool & Mfg. Limited ("Thunder") for the acquisition of 100% of the issued and outstanding shares of Thunder and Smokey (the "Proposed Acquisition"). The consideration for the Proposed Acquisition will be $12,000,000, payable as to $10,000,000 cash, and $2,000,000, in a non-interest bearing promissory note due January 1, 2007. This consideration is reduced for every dollar that current assets, less current and long-term liabilities (excluding deferred taxes), on a combined basis for the Smokey and Thunder as of September 30, 2005 is less than $2,500,000. In addition, upon completion, Smokey is to enter into a 5 year capital lease for a manufacturing press with a company controlled by the vendor. The lease has a principal balance of $2,000,000, and is repayable in monthly lease payments, incurring interest at an annualized rate of 6.4%.

The Corporation has also agreed to pay a management fee payable in common shares of the Corporation in the amount of $150,000 to a principal of Smokey and Thunder. A finder's fee of $180,000 plus GST relating to the transaction is payable to an arms length consultant in common shares of the Corporation.

Completion of the Proposed Acquisition is scheduled for November 30, 2005, however, is subject to receipt of regulatory approvals and the Corporation having completed a financing on terms satisfactory to the Corporation, in its sole discretion.

The Corporation intends to fund the cash portion of the consideration for the proposed acquisition through a combination of already existing cash resources as well as long-term debt. The Corporation has received several commitment letters and term sheets from various providers of term debt and capital equipment financing and intends to have the appropriate financing in place prior to completion.

Smokey Manufacturing Inc. & Thunder Tool & Mfg.

Smokey and Thunder are affiliated Toronto-based metal stamping companies founded in 1983 and 1966 respectively, operating as Tier 2 automotive and industrial products manufacturers with facilities spanning approximately 143,000 square feet over two production facilities and one assembly/distribution facility. The assets of the companies include a state of the art 1200 metric tonne press and in excess of 30 presses ranging from 40 to 1200 tons, with an estimated fair market value of between $8,000,000 and $10,000,000. Both companies and all facilities are QS 9001and ISO/TS 16949 certified and employ approximately 160 employees.

The following is a summary of the unaudited combined financial statements of Smokey and Thunder for the 6 month period ended March 31, 2005 and 12 month period ended September 30, 2005:



Income Statement March 31, 2005 September 30, 2004
(6 months, unaudited) (12 months, unaudited)

Revenues $24,518,290 $49,256,077
Cost of Goods Sold $21,356,913 $41,772,013
--------------------------------------------------
Gross Profit $3,161,377 $7,484,064

Total SG&A Expenses $1,835,100 $3,769,196
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EBT (1) $1,326,277 $3,714,868
--------------------------------------------------
--------------------------------------------------

EBITDA (2) $1,823,186 $4,698,555
--------------------------------------------------
--------------------------------------------------

Balance Sheet As at March 31, 2005 As at September 30, 2004
(unaudited) (unaudited)

Current Assets $12,701,635 $15,350,309
Capital Assets $3,505,867 $3,849,906
--------------------------------------------------
Total Assets $16,207,502 $19,200,215
--------------------------------------------------
--------------------------------------------------

Current Liabilities $10,195,508 $15,013,003
Long Term Liabilities $1,107,680 $609,180
Future Income Taxes $241,512 $241,512
--------------------------------------------------
Total Liabilities $11,544,700 $15,863,695

Retained Earnings $4,661,202 $3,334,920
Share Capital $1,600 $1,600
--------------------------------------------------
Total Shareholders' Equity $4,662,802 $3,336,520

--------------------------------------------------
Total Liabilities and
Shareholders' Equity $16,207,502 $19,200,215
--------------------------------------------------
--------------------------------------------------

(1) EBT refers to earnings before taxes, normalized for management
fees.
(2) EBITDA refers to earnings before interest, taxes, depreciation
and amortization, normalized for management fees.


Commenting on the acquisition, Bill Iannaci, CEO of Royal Laser, stated: "This acquisition provides us with an even stronger foundation from which to continue our growth plans, and provides Royal Laser with greater critical mass. These companies have excess capacity that we are keen to utilize. From this broader platform, we are able to target a broader base of customers - especially those who require metal stamping, laser-cutting and fabrication. Thunder and Smokey are both well managed, have a strong reputation in the marketplace, have the quality, control and procedural systems in place and whose integration will allow us to realize a number of operational synergies within the now more expansive Royal Laser."

Royal Laser Corp., through its wholly owned operating subsidiaries Royal Laser Mfg Inc. and WAM Industries Ltd., manufactures custom wood and metal products and targets the multi-billion dollar high-end retail in-store development industry as well as the OEM industrial products and construction industries, in Canada, the United States and increasingly, overseas. Royal Laser and WAM employ state-of-the-art industrial technology to fabricate custom and standardized wood and metal products, including robotic wood finishing lines and advanced laser-based computer-integrated manufacturing systems. In addition to contract manufacturing services, Royal Laser and WAM provide value-added engineering and design services.

This press release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. When used herein, words such as "intend" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions by and information available to the Corporation. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include risks and factors as are detailed from time to time in the Corporation's periodic reports filed with the Ontario Securities Commission and other regulatory authorities. Actual results may differ materially from those currently anticipated. The Corporation has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressed qualified by this cautionary statement.

For further information on the Corporation, please visit SEDAR at www.sedar.com.

The TSX does not accept responsibility for the adequacy or accuracy of this release.

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