Mace Security International, Inc. Business Information, Profile, and History

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History of Mace Security International, Inc.

Mace Security International, Inc. (MSI) first attracted attention during the early 1990s for its manufacture of the less-than-lethal defense spray Mace. Although most of the general public probably still identifies the company with its brand domination in the pepper spray industry, Mace is now a diversified company that has seen its recent growth in car washes. The company operates 55 car washes and five truck washes under several brand names. In addition to the car wash business--through which Mace has emerged as the first publicly traded car wash consolidator--the company operates retail security stores on a small scale.

1980s: Pepper Spray and Personal Safety

Mace Security International was formed in 1987. Its first product was Mace, which became so well known that it was used as the generic name for all pepper sprays. The company was founded by Jon E. Goodrich, who located its headquarters in Bennington, Vermont. Goodrich launched an entrepreneurial career after graduating from St. Lawrence University in 1967 and studying real estate law at Northwestern University. Among the firms he launched were Home Security Inc. and Smith & Wesson Chemical Company.

1990s: Going Public and Growing Secure

When the International Chiefs of Police met in St. Louis in 1993, officials identified rising fears about crime as one of the factors in the increase in the personal safety business. "Everyone is jumping on the band wagon," said Mace Training Director Tom Archmbault, according to the St. Louis Dispatch. "Violent crime is escalating everywhere. People want to feel safe. And it's impossible for the police to be everywhere."

This increased emphasis on safety created a good environment for Mace International's initial public offering in 1993. The first nine months of that year resulted in sales of $7 million. The fourth quarter of 1993, however, was disappointing for the company and resulted in a loss of $.03 per share. CEO Jon Goodrich attributed the loss to "internal expansion costs" and the added expenses of sales and marketing people, attending trade shows, and anticipating growth.

In 1994, Mace acquired the assets of the Federal Laboratories division of TransTechnology Corporation. Federal Laboratories was the nation's oldest producer of tear gas as well as grenades and projectiles for purchase by law enforcement and correctional facilities. Mace planned to bring Federal Laboratories back to profitability. "Under MSI's leadership, which is very familiar with Federal Laboratories and the tear gas industry, this company will again be prosperous in the near future. In addition, the synergy, primarily in the international sales and marketing area, will be very beneficial," said president and CEO Goodrich.

Kmart placed its first order for Mace pocket-sized pepper spray in 1994 and planned to carry the product in 1,300 Kmart stores nationwide. "This order is a turning point for Mace Security International because it marks the beginning of our program of selling to the country's largest mass merchandisers," said Goodrich.

Mace continued its expansion efforts in 1994 when it acquired Kindergard Corporation. Kindergard, a developer, manufacturer, and marketer of child safety products, provided another avenue for Mace's security and safety business. Kindergard's 18-item product line included cabinet latches, outlet plugs, and doorknob guards.

While Mace continued to focus on safety and security, the staple product, Mace pepper spray, occupied a lower percentage of the total sales of the company. In 1993, 90 percent of sales were attributed to the spray, but by the third quarter of 1994, only 52 percent of sales came from pepper sprays. Acquisitions and growth in other areas assisted Mace with diversification within the safety industry. The diversification led the way to record net sales in the third quarter of 1994 of more than $3.9 million, an increase of more than 100 percent over the same period in 1993.

1995-99: Growing Products and Distribution

In March 1995, Mace began distributing its products in Canada through distribution company Feelin' Secure Ltd. The first product to be distributed was Muzzle, a pepper spray dog repellent.

The American Civil Liberties Union (ACLU) questioned the use of pepper spray products in a case in southern California. The company, along with others in the defense spray industry, issued the following statement in response to the ACLU: "Pepper spray is a humane, nonlethal, and environmentally friendly alternative to lethal force and represents an effective defense for Americans and is an appropriate alternative for police officers. We believe ACLU's motives are in good faith but are based upon insufficient facts. We firmly hope the ACLU will withdraw from the position they have taken once they have become fully informed on this issue."

In October 1995, the board of directors of Mace delegated the responsibilities of CEO, which had been the position of founder Jon Goodrich, to a three-member committee: Goodrich, Robert Gould (a principal stockholder), and Robert D. Norman, the vice-chairman. While Goodrich remained in charge of daily operations, all other matters required the consent of the committee.

The legality of pepper spray in California ceased to be an issue on January 1, 1996, and Mace introduced Mace Brand Triple Action Pepper Spray in the state. The new law allowed "off the shelf" purchase of pepper spray to civilians in California.

Also in 1996, Goodrich officially resigned his positions as president and co-CEO. Robert D. Norman was named as his replacement. Goodrich remained as chairman and retained his stock in the company.

In the first quarter of 1996, the company announced three acquisitions to double Mace's annual revenues. The three companies, Howard Uniform Company, Balco Uniform Cap Corp., and Gould & Goodrich Leather, Inc., provided the law enforcement industry with uniforms and accessories.

Just nine months after resigning as CEO, Goodrich as well as Gould announced that they were jointly negotiating the sale of their stock (56.2 percent collectively) to a competitor. Mace avoided the threat of competitor takeover, and Goodrich emerged again as chief executive officer of the company.

In 1997, Mace purchased MSP, Inc. to further diversify itself in the personal safety industry. MSP, Inc., based in Aurora, Colorado, marketed consumer safety products under the names of Global Security, Safetynet, and Safeguard. "The acquisition of MSP, Inc. begins to implement the future course, focus, and expansion of Mace Security International," said Goodrich. "It is the intention of Mace Security International to directly and aggressively pursue the potential available in the consumer safety and security markets." MSP operated as a subsidiary of Mace, and former principal stockholder Howard Edelman was selected to lead the subsidiary.

Despite continued acquisitions, the company announced a loss in the first quarter of 1998 and reported that continuing operations for the quarter declined 1.9 percent. The company reported a net loss of $240,341 compared with a net loss of $8,573 for the previous year in the same period. The loss information excluded reports from the company's Law Enforcement division, which was scheduled to be sold in the second quarter to Armor Holdings. The proceeds from the eventual transaction amounted to approximately $5.2 million.

The company hoped to raise profits by franchising the retail division--Mace Security Centers. "I am confident that the residual businesses of MSI are avenues of potential future growth," said Goodrich. "We have received numerous responses from individuals indicating their substantial interest to franchise Mace Security Centers. These leads currently are being qualified."

1999: A Year of Changes

The end of the first quarter of 1999 brought big changes to Mace Security International. The board reported that they had been reviewing the company's options to maximize profits. Opportunity came in the form of Louis D. Paolino, Jr., and his car wash company, American Wash Services Inc. The two companies merged, and Paolino was named as chairman and chief executive officer of the company. With the merger, Mace became the first publicly traded national car wash chain. The company's headquarters moved from Bennington, Vermont, to Mt. Laurel, New Jersey. Former CEO Jon Goodrich retained the presidency of the Mace consumer division and that portion of operations remained in Vermont.

The stock market responded favorably to the company's change in direction. Trading as low as $1.12 per share before the announcement, the stock shot up to nearly $6 per share after the merger was announced. The share price continued to rise through the year, and revenues exceeded $38 million, compared with $9.2 million in 1998. "The year 1999 was a monumental year for Mace Security International, Inc.," stated CEO and Chairman Louis Paolino in the annual report. "Mace trans- formed itself from a leading manufacturer of self-defense devices to an operator of one of the largest car wash chains in the United States."

In 1999 alone, the company acquired four car wash companies: Millennia, Colonial, Eager Beaver Car Wash, and Hanna Car Wash. The acquisitions were part of the company strategy to dominate the industry. The company ended the fourth quarter of 1999 as the leader in the car wash acquisition race and still the only publicly traded player.

2000s: The Future

In March 2000, Mace announced the acquisition of Red Baron Truck Wash and Planet Truck Wash. Together the companies offered truck-washing facilities in Arizona, Indiana, Ohio, and Texas and generated more than $4 million annually. Other acquisitions in 2000 included: Beneva Car Wash in Sarasota, Florida; Blue Planet Car Wash in Dallas, Texas; and Superstar Kyrene in Phoenix, Arizona. The company considered a merger with Wash Depot Holdings, but the board of directors decided against it.

In 2000, revenues reached $48 million. That year also marked further separation of Mace from its security roots. The company entered into an agreement with Goodrich and his company Mark Sport, whereby Goodrich would pay $20,000 per month to Mace. In exchange, Mark Sport would assume operations for all of the security products division, both risks and profits.

As Mace forged ahead in the car wash industry, it selected Super Bright Car Wash as the new brand name for the chain nationally. The transition to the new brand was slow, however, as acquired car wash businesses retained their existing names for some time.

Aggressive acquisitions and losses in 2000 led to the stock price for Mace dropping to less than a dollar in the first quarter of 2001. Because of the drop, the company was in danger of being delisted by NASDAQ. The company avoided being delisted by meeting the NASDAQ requirement of maintaining a bid price of more than one dollar for ten consecutive days.

The company started fiscal 2001 favorably, reporting increased revenue. Mace's car wash facilities were in Arizona, Delaware, Florida, New Jersey, Pennsylvania, and Texas, with truck washes located in Arizona, Indiana, Ohio, and Texas. Although by 2003 its number of car washes, as well as its revenues, had essentially remained constant, it continued to explore potential acquisitions, merger, and strategic alliances. In addition, it had returned, as of May 2002, to the direct sale of chemical defense sprays, following the expiration of the marketing agreement with Jon Goodrich, still a member of the board of directors.

Principal Subsidiaries: Global Security Products.

Principal Competitors: Armor Holdings, Inc.; Oasis Car Wash; Precision Auto.

Chronology

• Key Dates:
• 1987: Mace Security International is founded; its first product, Mace, becomes the world's best known defense spray.
• 1993: Company joins NASDAQ with initial public offering.
• 1994: Mace acquires Federal Laboratories and Kindergard Corporation.
• 1995: Mace expands with security products in Canada.
• 1996: Founder Jon E. Goodrich resigns as president and CEO; Robert D. Norman is named as replacement.
• 1997: Mace acquires MSP, Inc. and its diversified line of consumer safety products.
• 1998: Law enforcement chemical product line is sold to Armor Holdings.
• 1999: Mace begins diversification into car wash industry with the purchase of American Wash Services; Louis D. Paolino, Jr., founder of American Wash Services, is named president, CEO, and chairman of Mace; Mace acquires four additional car wash companies.
• 2000: Mace enters into licensing and marketing agreement with Goodrich, who begins selling the company's defense sprays through his venture Mark Sport.
• 2002: Agreement with Goodrich expires and Mace once again begins selling chemical defense sprays, in addition to operating car washes.