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Remington's bankruptcy could be the tip of the iceberg

Scorpio

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#1
Remington's bankruptcy could be the tip of the iceberg
1 / 31

Bloomberg
Eliza Ronalds-Hannon and Polly Mosendz 17 hrs ago

Firearms companies face declining sales, falling stock prices and tremendous debt. Gunmaker American Outdoor Brands Corp., formerly known as Smith & Wesson, has seen its stock plummet by almost half, compared with 2017. On Monday, Remington Outdoor Co., an iconic 200-year-old American firearms manufacturer, announced it’s planning to file for bankruptcy.

With Republicans in control of Washington, there’s little chance of firearms regulation, even in the face of Wednesday’s massacre in Florida. When Barack Obama was president or Democrats controlled Congress, gun sales would generally rise after a mass shooting for fear of more restrictive laws. The gun lobby pushed these worries despite a lack of significant legislative effort by the Obama administration. Now that Donald Trump is in the Oval Office, fear of new gun laws has receded, industry executives said. And so have sales, hurting both retailers and manufactures such as Remington.

In December, James Debney, chief executive officer of American Outdoor, said “fear-based” buying of firearms had stopped. According to data collected by the FBI’s National Instant Criminal Background Check System, a barometer for firearms sales, January 2018 was the slowest in gun purchases since 2012. Even on Thursday, after gunmaker stocks rose in pre-market trading, the shares headed back down by afternoon. (The assault rifle used in the Parkland high school attack was a Smith & Wesson AR-15, police said.)

Following gun stores and manufacturers, the next victim of the industry’s political success could be distributors. Because most are privately owned, earnings data is hard to come by. Still, company debt can offer a glimpse into their financial health. The declining performance of a $140 million loan to distributor United Sporting Cos., for example, suggests there may be a problem.

“When there are elections that go a certain way, there tends to be a slowdown in sales.”

United is a private equity-owned holding company whose subsidiaries include Ellett Brothers and Jerry’s Sports Center, two gun distributors who work with over 30,000 independent retailers across all 50 states (Sturm Ruger & Co. says 15 percent of its sales are to the two subsidiaries). They distribute hunting and shooting sports products, including handguns, ammunition, silencers and holsters. Jerry’s was named “distributor of the year” by Marlin Firearms, a company owned by Remington.

A $140 million loan extended to United fell to less than half of its face value last year, according to U.S. Securities and Exchange Commission filings by the loan’s holder, the business development company Prospect Capital Corp.


Since Prospect makes loans to private companies but has issued shares to the public, it’s required to disclose its financials, even when the companies on the hook for the loan are not. In Prospect’s annual report for 2017, the company said a fair value of its loan to United was almost $47 million—around 33 percent of its face value. That was down from 94 percent in its report for the quarter ended March 31, 2017.

Michael Grier Eliasek, a director of Prospect, said in the securities filing that United had been hit by a cyclical slowdown in gun sales, as well as by the bankruptcy of a major customer, sporting goods retailer Gander Mountain.

United and Prospect didn’t immediately respond to requests for comment.

“When there are elections that go a certain way, there tends to be a slowdown in sales to the firearms sector for the first six or nine months or so, and then there’s a more of a normalization thereafter,” Eliasek said in an August conference call when he was asked about the write-down, which at that time was 59 percent of face value.

https://www.msn.com/en-us/money/com...-the-tip-of-the-iceberg/ar-BBJcMXQ?li=BBnbfcN
 

Scorpio

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#2
Gun maker Remington files for bankruptcy
by Associated Press


MADISON, N.C. — Remington, the gun maker beset by falling sales and lawsuits tied to the Sandy Hook Elementary School massacre, has reached a financing deal that would allow it to continue operating as it seeks Chapter 11 bankruptcy protection.

The maker of the Bushmaster AR-15-style rifle used in the Connecticut shooting that left 20 first-graders and six educators dead in 2012, said Monday that the agreement with lenders will reduce its debt by about $700 million and add about $145 million in new capital.

The company was cleared of any wrongdoing in the shooting, but investors repulsed by the massacres distanced themselves from the company's owner, investment firm Cerberus Capital Management. Cerberus acquired the gun maker in 2007, just when gun sales began to skyrocket.

Firearm background checks, a reliable barometer of gun sales, had risen steadily for at least a decade.


Firearms training unit Detective Barbara J. Mattson, of the Connecticut State Police, holds up a Bushmaster AR-15 rifle, the same make and model of gun used by Adam Lanza in the Sandy Hook School shooting, during a hearing of a legislative subcommittee in Hartford, Connecticut on on Jan. 28, 2013. Jessica Hill / AP file
That changed last year with the election of President Donald Trump, and it has taken a toll on the gun industry.

Gun sales spike on the election of candidates who are perceived to be more likely to pursue more stringent gun control laws, whether or not there is any truth in that perception.

The opposite has occurred since Trump was elected. He became the first sitting president to address the National Rifle Association in three decades, telling members at their annual meeting last spring, "You have a true friend and champion in the White House."

Firearm background checks declined faster in 2017 than in any year since 1998, when the FBI first began compiling the data.

While Remington is not a publicly traded company, shares in rival Sturm, Ruger & Co. slid almost 3 percent Monday. It's shares have fallen almost 14 percent this year.

Remington Outdoor Co., the nation's oldest gun maker, will attempt to file a prepackaged reorganization plan with the U.S. Bankruptcy Court of Delaware under Chapter 11 of the bankruptcy code.

The company, based in Madison, North Carolina, did not respond to attempts by The Associated Press to contact the company about the timing of bankruptcy procedures.

https://www.nbcnews.com/slideshow/westminster-dog-show-n848076
 

nickndfl

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#3
Remington was known for defective guns and low powered ammo that cause misfires. They should pray for a buyout if their facilities are worth anything. Maybe bring back original cowboy guns or another line to stimulate demand?

As far as stock prices of the other manufacturers go, they were a function of apprehension by the people who thought Obama and Clinton would take away as many guns as possible. So demand was brought forward at such a high rate. I even stocked up.

Now that Trump is in office there is no worry about a ban.
 

anywoundedduck

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#4
Remington was known for defective guns and low powered ammo that cause misfires.

/QUOTE]
Not particular about Remington or any ammo manufacture, However I have fired hundreds of thousands of Remington rounds without one dud. 22lr and 380.
 

oldgaranddad

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#5
Only proves that the best gun salesman is a Democrat. Firearm and ammo sales skyrocketed under both Mr Hillary "Bubba" and the Barry Oh! No matter how bad the quality.
 

oldgaranddad

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If ya haven't stocked up by now time's a wastin' The commies are comin'!
They're here and the idiots already elected many of them to positions of power.
 

searcher

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#9
Gun Makers Piling Up Losses

March 1, 2018 9:00am by Barry Ritholtz


Source; Dave Wilson, Bloomberg



Given the Parkland School shooting, we have had several clients inquire if we own gun stocks — which given our ownership of broadly diversified indices (Vanguard, DFA, Black Rock, Wisdom Tree, etc.), was probable. It turns out that a $1 million 70/30 portfolio owns about $300 worth of gun and ammo stocks.

The chart above, via Dave Wilson, could be a case of changing political climate with regards to guns. The stocks of gun and ammo makers seem to be reacting very differently over the past year or two than they have during the prior 8 years. Whether it is the lack of a focused anti-gun “villain” like Barrack Obama (?!) to scare more gun sales, something is different this time.

Consider the performance of these companies since November 2016 electoral victory for President Trump:

American Outdoor Brands — maker of Smith & Wesson guns — down 66 percent

Sturm Ruger & Co. down 24 percent

Vista Outdoor (VSTO) half its revenue comes from ammo sales down 53 percent

Other companies involved in the firearm industry. Olin Corp (OLN) who owns Winchester (ammunition), National Presto Industries (NPK) who owns Nation Defense Corp.

Dave Wilson points out over the same period, the Russell 2000 Index, which includes all three stocks, gained 30 percent.

http://ritholtz.com/2018/03/piling-up-losses/
 

gringott

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#10
The company was cleared of any wrongdoing in the shooting, but investors repulsed by the massacres distanced themselves from the company's owner, investment firm Cerberus Capital Management. Cerberus acquired the gun maker in 2007, just when gun sales began to skyrocket.
Isn't this the same vulture corp that looted Chrysler so bad that it literally had zero capital assets when the SHTF in 2008? I believe they have been instrumental in several other of this type of looting as well.

I still have trouble understanding why profitable companies end up with so much debt. The last thing I wanted when I had a company was debt. I kept enough on hand to pay salaries, expenses along with a "what if" cushion. Of course, I wasn't using my company's good name to borrow money I couldn't pay back in order to legally loot.
 

Usury

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#11
Isn't this the same vulture corp that looted Chrysler so bad that it literally had zero capital assets when the SHTF in 2008? I believe they have been instrumental in several other of this type of looting as well.

I still have trouble understanding why profitable companies end up with so much debt. The last thing I wanted when I had a company was debt. I kept enough on hand to pay salaries, expenses along with a "what if" cushion. Of course, I wasn't using my company's good name to borrow money I couldn't pay back in order to legally loot.
There is a lot of stock buy-backs going on out there. CEO’s and Boards borrowing money to buyback their stock and prop up the stock price. IMO such an action should be fraud and theft. If there is profit, then distribute it as dividends or reinvest in sales/infrastructure/R&D....NOT buybacks and sure as hell don’t borrow money to do it!!!!

These price jumps on buybacks are almost always temporary, but the debt not so.

FRAUD!!!!!!!

/rant off/
 
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arminius

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#12
Isn't this the same vulture corp that looted Chrysler so bad that it literally had zero capital assets when the SHTF in 2008? I believe they have been instrumental in several other of this type of looting as well.
Yup, Chistopher Bollyn wrote of how Cerberus looted GMC: THE ZIONISTS BEHIND THE DESTRUCTION OF GENERAL MOTORS
June 16, 2009. I just tried to look it up, couldn't find it on the net. Anyone?
 

gringott

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#13
2009 http://www.nytimes.com/2009/08/09/business/09cerb.html

They bought Chrysler for the finance arm and destroyed the car business. Almost the entire article is a white wash of Feinberg, but the numbers and facts speak for themselves. Feinburg calls himself a patriot, well, in my humble opinion, with patriots like him we don't need enemies.

Here's a bit from the end:

Cerberus now values its Chrysler stake at 19 cents on the dollar. It is a humbling and embarrassing figure for Mr. Feinberg. But it’s better than zero cents on the dollar, which is what his stake might have been worth had the government not bailed him out.

Mr. Feinberg and his colleagues at Cerberus maintain to this day that their time at Chrysler was, in part, a reflection of their patriotism — a view that some analysts find hard to swallow.

“It’s hard to believe that any of these firms — including Cerberus — will be viewed as patriots in 10 years,” said John Rogers, a private equity analyst at Moody’s Investors Service, “because I don’t think their impact on any of these companies will be seen as so positive for the overall economy.”
 

nickndfl

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#15
Would be a good idea for Remington to develop a K-Gun like Chrysler's K-cars. Every patriotic American should buy one.