The future of the Remington Outdoor Company?

[SanctusBells]

I was reading this interesting story Selling stakes in Remington about Cerebus Capital and one of their holdings, the Remington Outdoor Company (formerly The Freedom Group.)

It made me wonder why Cerebus is having so much trouble selling Remington? The following come to mind. I would love to hear your ideas:

* Fear of increased future regulation of firearms.

* A general, industry-wide slowing down of gun sales.

* Tougher and tougher competition.

* Difficulty in financing a gun company deal.

* Debt load of company.

* Very limited handgun offerings which is a huge/lucrative market.

* Remington Model 700 safety liability.

* Potential clean-up costs at Remington's ancient plant in Ilion, NY.

* Potential clean-up costs of Remington's former ammunition plant in Bridgeport, CT -- if Remington is still responsible for the facility?

* Damage done to the Marlin brand in terms of product quality.

* Loss of H&R brand.

I wonder how many other things impact this company and prevent it from being sold? Thanks for any input.

[Tom Servo]

There's more explanation here. Cerberus has been unable to find a buyer for Remington, so they're allowing investors to move their assets to a different area.

It's interesting that the pundits are jumping all over the political angle, blaming Remington for the Sandy Hook shooting.

That said, Remington is a mess right now. You hit the nail on the head on a few factors. They have to deal with a perceived (or real) downturn in quality and a massive recall on one of their central products (the 700). Even in a good market, that would hurt.

[thallub]

Few larger corporations are interested in acquiring a firearms maker: It's bad for their bottom line. Bankers are reluctant to finance the acquisition of firearms makers.

Unable to sell Remington; Cerebus will allow its investors to cash out of Remington. Remington will become a separate entity.

And Remington’s financial performance dissuaded many private equity firms from offering a bid acceptable to Cerberus.

“Market pressures and operational difficulties, which began to significantly impact the performance of the company late in 2013, have impeded both further efforts to sell the company and our ability to provide options for our investors,” the firm wrote in its letter.”

[carguychris]

Originally Posted by Tom Servo

[Remington has] to deal with a perceived (or real) downturn in quality and a massive recall on one of their central products (the 700).

Don't forget the R51 fiasco; several months have passed since the voluntary recall and there's still no definite resolution in sight.

Sadly, this ties into a point I would suggest adding to the OP's list:

* Complacent over-reliance on core "legacy" products / lack of innovation

IMHO Remington has relied too long on spin-offs of the 700, 870, 1100, and 11-87 plus a small and relatively static market for niche products like the 7600 and pricey but limited-volume military sniper rifles. I don't think their "Me-Too" forays into the AR and 1911 markets have made much of an impression on the shooting public, and those market segments are in danger of saturation.

Unfortunately, their most recent major effort to address this shortcoming – the R51 – has backfired on them.

[CowTowner]

Leave us not to forget they are also about to re-release the Pocket Hammerless.
(Read 1903). Same configuration. no added engineering for safety or anything for that matter.

[jmr40]

Remington has been circling the drain for a very long time. They have been sued over 100 times just on the 700 series triggers in the last 50-60 years or so. Most people think this is a recent development, but has been a common problem since at least the 1960's. They lost a multi-million dollar ( $30,000,000 IIRC ) class action lawsuit over 870 and 11-87 barrels exploding back in the 90's and have been sued multiple times for defective shotgun triggers as well. Paying for lawyers and court settlements with money that should have gone into R&D or upgrading quality has hurt.

This has created a domino effect. The lack of funding has led to no real advancements and too many corners being cut. Which led to a bad rep and decreased sales which led to even less money for development. The massive panic buying combined with blind brand loyalty over the last 8-10 years is probably the only reason they are still afloat.

The internet has hurt them too. For years their problems were kept fairly quiet with only a handful being aware. The internet has spread the word.

[SanctusBells]

It's simply not true to suggest that "Remington has been circling the drain for a very long time." Prior to its purchase by Cerebus, Remington was arguably the most prestigious and certainly the largest and lost lucrative arms maker in the US.

Remington has made its share of missteps -- just like every other gun maker out there with some age to their name. Their acquisition by Cerebus into a mixed bag of other companies hasn't done the one proud name any good.

[peggysue]

Marlin was making fantastic rifles when they were in CONN before they were bought out and moved a couple times by Remington. Now their quality is bad.
Cerebus picked apart a lot of manufactures.

[thallub]

Marlin quality tanked years before that company was purchased by Remington.

[Lurch37]

Leave us not to forget they are also about to re-release the Pocket Hammerless.
(Read 1903). Same configuration. no added engineering for safety or anything for that matter.

Unless I'm mistaken, I believe it's COLT that is releasing a newer version of the Model 1903 Pocket Hammerless.

[bandaid1]

Remington has had lots of blunders in the past and currently, the recalls of the 700's their flagship. The R51's, which in my opinion, they should have went with the original look, and make them function.

The ARC which had reliability issues and targeted the Military/Police market. Not to mention the PSR/MSR rifles that run $22,000-$30,000 each. Yea, I bet they'll sell a boat load of those.

Remington is a great name in firearms, but they need new leadership.

[g.willikers]

Nothing lasts forever.
Studebaker, Packard, Pontiac, Desoto, BSA, Norton, Vincent, and on and on.
Guess Remington isn't too big to fail.

[SanctusBells]

Remington hasn't failed. Not by a long shot. The Remington Outdoor Company is profitable despite its hideous management.

It's Colt that is pretty much failing -- but it's not going anywhere either. There will always be a Colt firearms company.

[Tom Servo]

The Remington Outdoor Company is profitable despite its hideous management.

They lost $68 million in 2014 (pdf file, page 64), and we haven't seen the numbers for 2015 yet.

[Doyle]

Actually, that $68 million dollar loss was only Cerberus' share. The EBIT was a $105.6 million loss.

I took a look at their annual report and a couple of glaring things stuck out:
1. Annual sales to Walmart are disproportionally high. That puts them at significant financial risk should Walmart choose to buy elsewhere (or stop selling guns at all). Additionally, knowing that Walmart forces suppliers to sell at rock bottom prices those sales probably aren't adding much to the bottom line.
2. They are actually bragging about their R1 in spite of it having huge issues.
3. In 2014, their COGS rose disproportionally to gross sales. They disclosed an accounting change to supplementary inventory supplies but they don't say whether or not this accounting change was the sole reason for the COGS increase (if so it would be a one-time increase) or if there were other factors (like a permanent increase in materials cost that needs to result in higher sales prices down the road to compensate).


So, that $105.6 million loss could have been principally due to a one-time accounting change in COGS. Or, it could be indicative of other problems.

[KyJim]

Doyle --

Most of us are not accountants or financial planners. For those who are not:

EBIT -- Earnings Before Interest and Tax

COGS -- Cost of Goods Sold

[Sprocket]

Like all insurance costs skyrocketing, I would think product liability insurance premiums would be astronomical for gun makers.

[g.willikers]

Any chance of them having a garage sale soon?

[Aguila Blanca]

Originally Posted by g.willikers

Any chance of them having a garage sale soon?

They already had it. They sold off a LOT of Para USA parts when the Para brand was retired. You can buy para frames, slides, and unfinished frames and slides from Sarco at bargain prices.