Forty-percent of all firearms manufactured in America come from only three companies: Sturm, Ruger & Co, Remington, and Smith & Wesson. The three are ordered in terms of the number of guns produced (with Sturm being the largest).
The company’s history spans over two centuries, surviving the changing economic landscape all those years, but, unfortunately, the iconic company found themselves announcing that they’d be filing for bankruptcy protection today. According to Bloomberg,
The Chapter 11 bankruptcy filing will let Remington stay in business while it works out a plan to turn around the company and pay its creditors.
The bankruptcy is a blow to the private-equity mogul Stephen Feinberg, who has been a prominent supporter of President Donald Trump.
The Bloomberg article tries to make this ironic, attributing Remington’s bankruptcy to a general decline in gun sales after Trump took office (because nobody is afraid of gun control anymore). While it is true that gun sales are down, that hasn’t affected Remington’s two main competitors. Smith and Wesson (now officially called the “American Outdoor Brands Corporation”) netted $127 million on nearly a billion revenue last year. Unfortunately Sturm, Ruger, & Co. doesn’t report their 2017 financials until February 21st, so we don’t have an exact number in time for this article. However, the firm had positive earning-per-share the first three quarters of the year, so in absence of something catastrophic, the company was profitable.
So what’s wrong with Remington? A change in hands, and assumption of a massive amount of debt. The Remington of today is not the Remington of 1816. In fact, the Remington of today isn’t even the Remington of two decades ago, because the firm was acquired by the private equity group Cerberus Capital Management in 2007.
Cerberus purchased Remington for $370 million, which included $118 million in cash as well as the assumption of $252 million of debt. The company today, however, is saddled with over $1 billion in debt.
If there’s anyone to blame for this ironic manufacturer’s decline, it’s not the operating economics of the business itself, it’s those in the finance department.
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