Brass Eagle Inc.

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Brass Eagle Inc.

1201 S.E. 30th Street
Bentonville, Arkansas
U.S.A.
Telephone: (501) 464-8700
Fax: (501) 464-8701
Web site: http://www.brasseagle.com

Public Company
Incorporated: 1882 as Plymouth Iron Windmill Company
Employees: 230
Sales: $68.23 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: XTRM
NAIC: 33992 Sporting and Athletic Goods Manufacturing

Brass Eagle Inc. is recognized as the worldwide leader in the paintball industry, manufacturing paintball markers, paintballs, and accessories. Brass Eagle is the only company of its kind to manufacture a comprehensive list of paintball merchandise, including a variety of markers—ranging from inexpensive to expensive models—and protective equipment. The company is also the only paintball manufacturer to distribute its products to mass merchandisers. Wal-Mart and Kmart each accounted for more than ten percent of the company’s sales in 1999.

Origins

The Brass Eagle of the late 1990s began its corporate life in the 19th century as Plymouth Iron Windmill Company, a manufacturer of windmills based in Plymouth, Michigan. Although the connection between Brass Eagle and windmill operations in Michigan was a distant one, the evolution of Plymouth Iron in the 1880s and 1890s set a precedent that was followed a century later, leading to the modern manifestation of Brass Eagle.

Plymouth Iron started business in 1882, but before long company officials struggled to exist in the new era of industrialization. Their salvation came through the intervention of a local inventor named Clarence Hamilton, who approached the company in 1886 with a metal and wire contraption that used compressed air to fire a small lead ball. The president of Plymouth Iron fired Hamilton’s creation and, according to company lore, exclaimed, “Boy, that’s a daisy!” His enthusiastic reaction not only gave the company a new business to pursue but also provided the inspiration for the company’s new name.

Initially, before Plymouth Iron found it difficult to attract customers, the company gave Hamilton’s compressed-air gun to farmers as a gift when they purchased a windmill. The farmers’ positive response soon prompted Plymouth Iron management to begin manufacturing the guns exclusively. The name given to Hamilton’s invention was adopted as the company’s new name, ratified by the board of directors in 1895, when Daisy Manufacturing Company, Inc. officially was born. Daisy Manufacturing introduced generations of Americans to the BB gun, an air-powered rifle that carved a new industry niche populated by a host of competitors. In the decades to follow, Daisy Manufacturing threw itself into feeding the BB gun craze it had started, becoming in the process a fixture in 20th-century American industry.

The Invention of the Paintball Gun in 1970

Daisy Manufacturing existed in its original incarnation for a century before the same events that triggered its birth also triggered its transformation into another company. Like Hamilton’s metal and wire apparatus, the currents of change were sparked by invention, but unlike the forces that caused Daisy Manufacturing’s creation, the source of innovation came from within the company’s organization. In 1970, a Daisy Manufacturing engineer named James Hale invented and patented a device called the “Splotchmarker,” which propelled a projectile of encapsulated, oil-based paint. Hale’s Splotchmarker was marketed as a device to mark cattle and trees for later identification, an innovation that created a sidelight business for Daisy Manufacturing, at the time enjoying considerable success manufacturing various models of air-powered rifles. Daisy Manufacturing signed a contract to manufacture the paint markers for a company named Nelson Paint Company, which sold them commercially. The business relationship endured for years, as Hale’s invention took considerably longer than the nine years it took Hamilton’s invention to fundamentally alter the strategic focus of Daisy Manufacturing.

In the two decades following the invention of the Splotchmarker, a less utilitarian but more commercially viable use for Hale’s creation developed. People began to use the air-powered gun to mark each other with paint, conducting mock battles fought in open fields, forests, or wherever the new breed of paintball enthusiasts collected on the weekends. At first, and for quite some time, the new recreational activity was taken up by a group commonly referred to as survivalists: adult males, generally, who adopted many of the characteristics of a military lifestyle. For years, paintball existed as such, as a little-known activity practiced by those living on the fringe of society, but gradually the use of markers, as the paint guns were called, began to attract a much broader fan base. During the 1990s, a number of sports and recreational activities previously characterized as peripheral pursuits moved into the mainstream, gaining legitimacy and recognition amid widespread exposure. Paintball was one of those niche activities whose participation rate mushroomed in the 1990s, becoming a business worth hundreds of millions of dollars in revenue each year.

Paintball’s rapid rise in popularity was not entirely an organic phenomenon. The marketing and promotional efforts of corporations contributed mightily to the sport’s growth, perhaps none more than those undertaken by a Canadian company named Brass Eagle. Based in Mississauga, Ontario, Brass Eagle crossed paths with Daisy in 1993, when Daisy terminated its agreement with Nelson Paint Company and signed a royalty agreement with Brass Eagle to manufacture, market, and distribute paintball products for the Canadian company. The relationship forged with Brass Eagle in 1993 marked the beginning of a concerted and serious effort to take the business of paintball to a new level, an objective management planned to achieve by developing a plan with several important initiatives.

The primary concern was to shed the perception of paintball as the exclusive domain of eccentric survivalists and replace it with an image that would appeal to a much larger audience. To accomplish such a task, management comprehensively changed the way paintball products were distributed, marketed, and merchandised, implementing a multi-pronged strategic plan that distinguished the Daisy-Brass Eagle partnership from all competitors. The rapid growth of paintball as a new sport for the 1990s was the result.

Before the intervention of Daisy-Brass Eagle management, the characteristics of the paintball market were consistent with the sport’s existence on the periphery of society. The few products that were available—generally limited to markers and paintballs—were sold either by catalogue distributors or in a small number of hard-to-find specialty stores, where they were retailed as high-precision instruments with hefty price tags attached. Daisy-Brass Eagle executives realized substantial revenues could not be gained from marketing a small number of high-priced markers. Instead, they knew they had to market to the masses, which, if done right, would also promote the growth of the sport. Consequently, they developed a full line of markers distinguished by price and performance, giving nearly every potential paintball customer a model he or she could afford. Further, the products marketed under the Brass Eagle name represented a host of accessories, including face masks, protective eyewear, and other items. Equally as important as fleshing out their product line, the officials in charge radically altered their distribution methods by concentrating on mass merchandisers, such as Kmart and Wal-Mart, and major sporting goods retailers.

1990s Transformation of Daisy Manufacturing into Brass Eagle

Implementing the changes that created a foundation capable of supporting broadly based growth did not occur overnight. The Daisy-Brass Eagle partnership gradually made the necessary changes, and as their efforts matured, so did the market for paintball equipment. By the mid-1990s, great strides had been achieved, prompting Daisy management to up its ante in what for years had been a sidelight business. In October 1995, Daisy purchased the Brass Eagle name, trademarks, patents, and other assets, including tools, dies, jigs, and molds, from Brass Eagle.

The Brass Eagle purchase occurred exactly a century after the board of directors of Plymouth Iron ratified the transformation into Daisy Manufacturing. The precedence took on fuller meaning less than two years later when Daisy Manufacturing management demonstrated its willingness to completely alter its business direction. In September 1997, Daisy Manufacturing changed its corporate title to Brass Eagle Inc., a profound decision for a company whose legacy as a firearms manufacturer was deeply woven into the fabric of American society. More fundamental changes followed a month later when the company initiated a sweeping corporate reorganization. In November 1997, the company transferred all its non-paintball related assets, operations, and liabilities to a newly created subsidiary, Daisy Manufacturing Company, which was spun off as a separate, private company. Concurrently, Brass Eagle converted to public ownership.

By the time Brass Eagle completed its IPO, the company’s commitment to paintball had realized encouraging results. In 1993, when the company began a serious effort to promote and capitalize on paintball, annual revenues from the sport amounted to less than $5 million. By the end of 1996—the first year Brass Eagle introduced a full line of paintball accessories—revenues had climbed to $13.8 million and then soared to $36.1 million shortly after the completion of the IPO. Company officials were after far more, however, targeting a lion’s share of what was estimated to be a $250 million market annually.

Company Perspectives:

With Brass Eagle’s leadership paintball has become one of the fastest growing outdoor recreational sports in America. As more and more people experience the fun and excitement of paintball, the game’s following continues to grow at double digit rates. The emotional appeal and fast paced action of this high-octane competition places the game squarely at the leading edge of today’s exploding category of “Extreme Sports.”

To further its position of leadership, Brass Eagle has taken steps to expand its level of service and support to the retail industry as we move into the new millennium.

To achieve substantial revenue growth, Brass Eagle further developed its self-assumed role as the ambassador of paintball, championing its growth by escorting it into the mainstream market and increasing the number of playing facilities. Historically, paintball had been played in secluded, rural areas, yet another characteristic of the sport that Brass Eagle officials realized they needed to alter to promote widespread growth. Accordingly, in the months following the IPO, the company began promoting a modular paintball field concept suitable for play in relatively small, self-contained areas. Before the end of the decade, the company began marketing a version of the concept called Pursuit Park, which was designed to be incorporated into existing family amusement centers, including miniature golf courses, baseball batting cages, and go-cart tracks. Along this same vein, Brass Eagle joined forces with other partners and began developing Challenge Park Xtreme, located on 154 acres on the Des Plaines River in Joliet, Illinois. The facility, which was expected to open in September 2000, was designed as a combination sports and entertainment complex, featuring several paintball fields, skateboarding ramps, climbing walls, mountain biking trails, a BMX track, and an inline skating rink.

As Brass Eagle’s influence over the development of paintball widened, its leadership role translated into ever increasing financial figures and national recognition. In 1998, when sales leaped to $75.1 million, the company was coming off a three-year period of prolific growth, registering a 137 percent rate in annual revenue growth and a more than 300 percent rate in annual earnings growth. The financial gains did not go unnoticed, as the business press paid tribute to a company regarded as the worldwide leader in the manufacturing and distribution of makers, paintballs, and numerous accessories. In 1998, Business Week magazine heralded Brass Eagle as one of its “Hot Growth” companies, selecting the company as 39th in a list of 100 fast-growth companies. Industry Week also praised Brass Eagle, naming it as one of the top 25 small manufacturers in the country for its ability to effectively coordinate growth, innovation, and profits.

By the end of the 1990s, Brass Eagle management had forged a powerful manufacturing, distributing, and marketing force. In October 1998, the company launched its first national television advertising campaign, debuting on networks such as MTV, ESPN, and ESPN2. The commercials, featuring a recurring character named Francis, were expected to reach a target audience of 30 million viewers during their first month on the air. Another series of commercials was slated for broadcast in 1999. In January 1999, Brass Eagle acquired CM Support, Inc., a leading manufacturer of paintball accessories that previously had been a major supplier of products to Brass Eagle. Concurrent with the $5 million CM Support acquisition, the company announced an agreement with The Outdoor Research Group Inc. for the Los Angeles-based company to manufacture 13 paintball products for Brass Eagle, including knee pads, gear bags, and ball haulers.

As Brass Eagle entered the 21st century, the paintball market it helped to create was growing at an estimated 25 percent annual rate. As the only company to offer a full line of merchandise and the only company to distribute its products to mass merchandisers, Brass Eagle occupied a singular and dominant position in its industry, enabling it to assume an aggressive posture toward future growth. Looking ahead, the company anticipated further acquisitions to bolster its capabilities. In March 2000, Brass Eagle signed an agreement to acquire JT USA, LP, a leading manufacturer of protective accessories and apparel for the paintball industry. Expansion into Europe and South America also factored into the company’s plans.

Principal Competitors

R.P. Scherer Corporation; eCom eCom.com, Inc.

Key Dates:

1882:: Plymouth Iron Windmill Company is launched in Plymouth, Michigan.
1895:: The windmill manufacturer transforms itself into Daisy Manufacturing Company, Inc. in honor of Daisy line of compressed-air guns.
1970:: An engineer for Daisy Manufacturing invents the Splotchmarker, the first paintball gun.
1993:: Daisy Manufacturing signs a royalty agreement with Brass Eagle.
1995:: Daisy Manufacturing acquires Brass Eagle.
1997:: Daisy Manufacturing sells all non-paintball assets and changes its name to Brass Eagle.
1999:: Brass Eagle acquires CM Support, Inc.