The Column, No. 124:
Is This the End of Remington?
It likely is, at least of Remington Outdoor, formerly Freedom Group, as an organization.
The story began, not with Remington, but with Bushmaster. Cerberus Capital Management purchased Bushmaster in 2006 for the comparatively modest sum of $70 million dollars. It is modest in the grand scheme of things, for Cerberus controls some $30 billion in assets. However, there are certainly larger investment groups out there: Bain Capital has about $95 billion in assets, Berkshire Hathaway has $702 billion in assets (2017).
Cerberus moved briskly to create a $1 billion gun company. It ended up being structured with massive debt. In 2014 and 2015, Remington Outdoor Company paid over $58 million in interest on that debt, doing nothing to retire any of the principle. For the nine months ending October 1, 2017, Remington Outdoor paid $45.6 million in interest. How could anyone expect to make money in a competitive market with $15 million in interest paid every quarter?
The belated, Monday morning quarterback answer to this is that no one could. With the post-Trump election decline in the firearms market, the unsustainable in the long term became completely unsustainable in the short-term; hence, the current Chapter 11 restructuring.
None of this has anything to do with Remington employees, whether manufacturing staff, engineering, or whatever. It also has little to do with any notions of quality, for Remington's quality has been on the uptick for the last few years. Whether the recent 870s, 700s, the 700 Ultimate muzzleloader, or the V3 shotgun, Remington product in modern times has never been better. Even the 783 entry level bolt action rifle, while not a thing of beauty, is an excellent product at its price point. None of this is of much help when your parent company throws $15 million of your income, or more, at interest payments every quarter.
There is a great deal of speculation as to the next steps. Eventually, as the process continues, Cerberus will be out of the picture completely and the banks will own Remington. That means JP Morgan and Franklin Resources Group, in large measure. Do you think that they have a passion for the hunting and shooting sports, or do you think they just want to get as much money as possible for the property they will own? Most guess they will quickly sell what parts of Remington Outdoor they can, or all of it if they can find the right buyer.
To be sure, many companies would be quite delighted to have Remington cease operations. Beretta, Browning and Mossberg would hardly be upset if there were no Remington shotguns with which to compete. Savage, Ruger, Mossberg, Weatherby, Browning, everyone who makes a bolt action rifle would not be upset if the Model 700 disappeared. The best selling lever-action rifle for February 2018 was the Marlin Model 1895. Henry and FN-Winchester probably would not be broken-hearted to see Marlin production disrupted. Olin-Winchester, Hornady and Vista (Federal Ammunition) would not mind if they did not have to compete with Remington ammunition.
I am not suggesting there is anything nefarious going on, or that this is a new form of Russian collusion. Remington Outdoor is the largest manufacturer of rifles and shotguns, combined, in the United States. Those competing with Remington for market share would logically appreciate any disruption in Remington's ability to manufacture and supply their product.
In 1816, when Remington was founded, our flag had 18 stars and 18 stripes. In December of 1816, Indiana was admitted as the 19th state. It is with no small amount of irony that the states that were the cradle of the American firearms industry, such as Connecticut and New York, the states that have historically benefited the most from the firearms industry, have now largely declared war on the Second Amendment and the firearms industry. It is now difficult for any firearms company to operate in these states.
It is the end of Remington as we know it today, just by the process of elimination. The only scenario where this would not be the case is if one company decided to buy all of Remington Outdoors and their many affiliated companies and locations in one mega-acquisition. That is highly unlikely, for who would want all of it, as cobbled together by Cerberus? Once we get past the "want" stage, who has the money?
Surely, most would realize that Savage Arms does not need to learn how to make bolt-action rifles. Ruger, Smith & Wesson and Sig need no help with Armalite rifles and Mossberg is not in dire need of a line of pump shotguns.
However, Remington Outdoor has very strong components. Remington Firearms, Remington ammunition and Barnes bullets, for example, are well run, highly regarded and profitable. Marlin is an appealing line, particularly now that their lever-guns are actually made from blueprints.
Beyond that, it gets complicated in a hurry. Complicated in terms of geography, complicated in terms of branding and licensing, complicated in terms of commitments and military contracts.
It also gets complicated in terms of liability, which is generally the case, whether you make lawnmowers, step-ladders, or firearms. Suing has long been the American way. No one in their right mind would assume liability for product made years ago by someone else, product they had no hand whatsoever in manufacturing.
It seems that Remington Outdoor will have to be sold in parcels. Part of the issue is the sheer size and scope of Remington Outdoor, with over $1.2 billion in sales in 2013, $939 million in 2014, $808 million in 2015 and $865 million in 2016. (Thanks in large part to President Barack Hussein O'Bama, the greatest gun and ammunition salesman in history. -Editor.) Despite paying $59.9 million in interest in 2016, Remington still had a profit of $21.6 million.
There are scant few entities in the firearms industry that have sales approaching that of Remington. Ruger, for example, in 2016, had sales of $664 million vs. Remington's $865 million. After the lengthy, costly, labyrinth of our court system, there will be an emergence from Chapter 11. When this happens is an open question and who will own what is unknowable. It will not be the Remington of today.
Copyright 2018 by Randy Wakeman. All rights reserved.