NEWS

Robert Klein, Managing Director (212) 213-2009
Todd Wilson, Principal (212) 213-2009
Brian Maney, Director, Corporate Communications (301) 951-6122

By Maureen Flanagan

Safemark Systems, L.P., headquartered in Orlando, Florida, is a leading supplier of in-room safes for hotels. Since 1983, the company's safes have been installed in more than 400,000 guestrooms in the US, Canada and the Caribbean. In 1990, Safemark launched its highly successful in-room safe security program, enabling hotels to improve guest security and generate additional revenue with no upfront cost. Through this program alone, Safemark has provided in-room security to more than 300 million hotel guests.

In a June 21, 2004 buyout, Safemark was acquired by American Capital Strategies, Ltd (Nasdaq: ACAS). American Capital provided a financing package of $31 million that included a revolving credit facility, senior term loan, subordinated debt, and preferred and common stock. American Capital purchased the company from Richards Capital Fund, L.P., an Atlanta-based private equity fund, and George Oelschig. Oelschig, the company's CEO, and Nancy Wright, the Company's VP of Sales, continue to hold a significant stake in the business.

"Safemark's Security Cash Flow (SCF) program enables a wide range of lodgings to cost-effectively meet the needs of travelers to safeguard their valuables. The company is expanding its security program to other properties while developing new products and pursuing opportunities to enter additional markets where property protection is needed," said Oelschig.

The company's safes come in different sizes, shapes, and designs that can be configured with a mechanical key, electronic keypad with personal code entry, and electronic keypad plus credit card (or room card) swipe. Safemark also provides employee training -- a key competitive advantage -- in addition to service and support for the safes.

The SCF program enables hotels to increase the cash flow of each room without an upfront capital investment. In addition, the program increases guest satisfaction by providing an additional amenity. For the company, the SCF program provides a significant base of recurring revenue with low ongoing costs. Once installed, safes require little maintenance and generate consistent monthly revenues.

Safemark also sells its safes directly to hotels, college students, timeshare property owners and homeowners. Typical direct sale customers in the hospitality industry include upper-tier hotels which provide in-room safes as a complementary amenity. Leasing options are also available.

Safemark markets its SCF program to limited service (no food and beverage) hotels in the economy and middle-tier segments since these hotels typically prefer to avoid capital expenditures and participate in the additional revenue stream provided by SCF safes. The company is the exclusive vendor to leading national hotel chains and franchises. These include brands such as Days Inn, Ramada, Super 8 and Howard Johnson (controlled by Cendant Corporation), and Comfort, Sleep, Quality, and Clarion Inn (controlled by Choice Hotels International). The company is the preferred vendor for U.S. Franchise Systems and Best Western International and is an approved vendor for Carlson Hotels.

In 2003, Safemark established a manufacturing relationship with a supplier in China. By sourcing from China, Safemark offers competitive prices and consistent quality for safes on a direct purchase basis or through third party fixed-leases. The company also sells safes wholesale to a leading manufacturer of electronic entry systems for the hotel industry.

"As the lodging industry pulls out of a slump, we anticipate the demand for Safemark's products and programs to be higher than ever," said Robert Klein, American Capital Managing Director.

Safemark joins American Capital's portfolio of nearly 100 companies in a wide range of industries, including several in the security-related sector. Since 1997, American Capital has invested more than $3 billion in the middle-market. For more information about American Capital's portfolio click here.

In the next several years, industry analysts predict improvement across all segments of the hotel industry, driven by strengthened business travel and continued increases in leisure travel. The mid-priced segment is expected to experience the greatest room growth, increasing 3.7% in 2004 versus 1.4% for the total industry. Occupancy rates are also expected to increase significantly within the upscale segments. Furthermore, the number of properties in the middle-tier and limited service segments targeted by SCF is projected to expand.

Historically, hotels have relied on safe deposit boxes accessed through the front desk to protect guests' valuables and comply with state innkeepers laws. This, however, has proved inconvenient and unsatisfactory to both travelers and hotels and has led to the development of in-room safes, which were first introduced in Europe in the 1970s and the United States in the 1980s. Today, in-room safes are estimated to be in approximately 20-25% of hotel rooms, significantly higher than the 11% in 2001 and 8% in 1998.

As middle-tier hotels compete for the growing travel market and laptop-sized safes are increasingly viewed as an expected amenity, the demand for in-room safes will continue to grow. Safemark anticipates meeting this increased growth with further penetration of middle-tier hotel brands with which it already has relationships.

Safemark is also targeting several key markets for expansion of its direct sales. These markets include upper-tier hotel properties and timeshare properties in addition to residential and college dorm markets. The company recently formed its RHS-Safemark and Blue Safe divisions to focus on the college student and homeowner segments respectively.

With a leading market position, committed management, and plentiful opportunities for expansion, Safemark is positioned for growth - and enabling hotel guests and others to rest easy about the safety of their valuables.