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May 2nd, 2018
Vista Outdoor Announces Strategic Business Transformation Plan
Big news. Vista Outdoor Inc. (NYSE: VSTO) may be selling off gun-makers Savage and Stevens, declaring it will “explore strategic options” for those brands. However, Vista Outdoor will retain its businesses that produce ammunition and reloading components: Alliant Powder, CCI, Federal Premium, and Speer. The sell-off of Savage and Stevens is not a sure thing yet, but Vista’s new CEO Chris Metz has been looking hard at the “bottom line” and he says that the gun-making brands have not been as profitable as expected. This is not just an exit from gun-making. Vista Outdoors executives have analyzed the company’s full portfolio of brands, and decision-makers have targeted other brands for sell-off. READ Vista Outdoor News Release.
The Wall Street Journal reported: “The company [Vista Outdoor, VSTO, -13.07% on 5/1/18] said Tuesday it would pare its brands to focus on business lines including ammunition and shooting accessories, water bottles and packs and outdoor cooking ware. It will explore the sale of several brands including Bell bike helmets, Giro snow goggles, Blackburn handlebar tape, Jimmy Styks paddle boards, and Savage and Stevens firearms[.]”
Notably, Vista Outdoor remains fully committed to the ammunition and components businesses. In an official news release, CEO Metz stated: “Vista Outdoor is excited about the potential of each of our core businesses, particularly ammunition, which is our largest core business. An increased focus on our heritage ammunition business will manifest itself in more innovative and breakthrough new products introduced over the next few years. We also anticipate that by prioritizing this business, we will be able to invest more capital to further enhance and expand our global leadership position.” Metz denied that the sell-of of Savage and Stevens was a response to a boycott by the REI outdoor retail chain. The CEO said that REI represents less than 1% of the company’s total sales.
CEO Metz acknowleged that revenues were down substantially for the past fiscal year (ending 3/31/18), and reduced gun sales were one reason: “Sales were $2.3 billion, down 9% from the prior year. The decline was caused by lower volume in Shooting Sports across all ammunition categories, lower pricing across the portfolio, and lower firearms sales as a result of decreased demand impacting the shooting sports industry. Additionally, Outdoor Products declines were caused by market conditions affecting shooting-related categories, including hunting and shooting accessories, optics, and tactical products.”
Vista Outdoor currently has a large portfolio of brands, including guns, gear, eyewear, ammunition, camping equipment, and much more. Top brands for guns and shooting, after Savage and Stevens, are: Alliant Powder, American Eagle, Blazer Ammunition, Bushnell, CCI, Federal Premium, RCBS, and Speer.
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April 30th, 2014
 Alliant Techsystems (ATK or Alliant) is merging its aerospace/defense operations with Virginia-based Orbital Sciences. At the same time, ATK plans to spin off its sporting arms, ammo, and outdoor gear operations into a separate, stand-alone business. ATK sells sporting products under numerous brands including Alliant Powder, Blackhawk, Bushnell, CCI, Champion, Federal Premium, RCBS, Savage Arms, Speer, and Weaver Optics. The new Alliant sporting business will operate from Utah, while the merged Orbital-ATK aerospace business will be managed from Virginia.
According to the Washington Post: “The separation of ATK’s core segments gives it the opportunity to focus on its sporting goods sector, which has grown to a $2.2 billion business through several mergers and acquisitions over the past decade. The company manufactures commercial sporting equipment for hunters, shooters and law enforcement agencies.”
 The announced merger of Alliant and Orbital, and the spin-off of the sporting business, should benefit Alliant shareholders. Alliant shares rose 8% yesterday. Alliant shareholders will own 53.8% of the new Orbital-ATK aerospace company, and Alliant shareholders will retain full ownership of the new spin-off sporting enterprise. Alliant’s current CEO and president, Mark DeYoung, will take over as chairman and CEO of the new sporting business.
Will the new Alliant Sporting operation continue to grow? Analysts believe that it will. Management has shown interest in building the company via more sporting industry acquisitions. Analysts believe the Alliant sporting division is poised for continued expansion. While Alliant’s aerospace operations have suffered in recent years from cuts in defense spending, the sporting division has seen impressive revenue growth.
According to StarTribune.com: “The sporting unit’s rocket-like growth has captured the attention of Wall Street analysts. Barclays Capital analyst Carter Copeland recently boosted his forecast on Alliant, noting that “over time … the sporting group has made a more significant portion of the total company’s sales and earnings. … The last seven quarters the business has posted average organic growth on a year-over-year basis of 23 percent.”
For those in the shooting community, the spin-off of ATK’s sporting operations is probably a good thing. The new company can focus on guns, ammo, and outdoor accessories, rather than aerospace programs with long development cycles. Likewise the new company should be more responsive to consumers, as it can adjust production to current market demands, rather than fixed government defense contracts. ATK officials stated that “the company’s Sporting and Aerospace/Defense businesses operate in two fundamentally different markets with very different operating dynamics, compliance requirements, customer sets and growth opportunities. As standalone companies, they will be more focused businesses, with clear and distinct strategic visions and objectives, additional operational flexibility and the financial strength to make the most of their unique opportunities in their respective industries.”
Under the terms of the transaction agreement, ATK will distribute ownership of Sporting to ATK shareholders in a spin-off transaction, following which, ATK shareholders will own 100 percent of Sporting. The spin-off will be immediately followed by a merger of Orbital with a subsidiary of ATK, with Orbital surviving the merger and becoming a wholly owned subsidiary of ATK. In connection with the merger, Orbital shareholders will receive 0.449 shares of ATK common stock for each share of Orbital common stock that they hold. Upon the closing of the merger, ATK shareholders will own approximately 53.8 percent of the combined company on a fully diluted basis and Orbital shareholders will own the remaining approximately 46.2 percent of the combined company on a fully diluted basis.
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December 18th, 2012
 Cerberus Capital Management, LP (Cerberus), announced today that it would sell its stake in Freedom Group, Inc. (Freedom Group), a holding company that owns numerous firearms-industry businesses. The Freedom Group Family of Companies includes Remington, Bushmaster, Marlin, H&R, DPMS, Barnes Bullets, Eotac, and Dakota Arms. A Bushmaster AR15-type rifle was one of the weapons found at the scene of the Newtown, Connecticut shootings. Adam Lanza, the 20-year-old shooter, also carried Glock and Sig Sauer pistols.
In deciding to sell the Freedom Group, Cerberus was influenced by its large institutional investors. The California State Teachers’ Retirement System, which has over $700 million invested in Cerberus, stated that it was re-examining its Cerberus investment in light of recent events. Translation: After Newtown, this big pension fund was very uncomfortable with the fact that Cerberus was so heavily involved in the gun business (through its ownership of the Freedom Group and specifically Bushmaster).
Here is the text of the Press Release issued by Cerberus on December 18, 2012:
We were shocked and deeply saddened by the events that took place at the Sandy Hook Elementary School in Newtown, CT on December 14, 2012. We cannot comprehend the losses suffered by the families and friends of those killed by the unthinkable crimes committed that day. No words or actions can lessen the enormity of this event or make a dent in the pain that was inflicted on so many.
In 2006 affiliates of Cerberus Capital Management, L.P. made a financial investment in Freedom Group. Freedom Group does not sell weapons or ammunition directly to consumers, through gun shows or otherwise. Sales are made only to federally licensed firearms dealers and distributors in accordance with applicable laws and regulations. We do not believe that Freedom Group or any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition.
It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level. The debate essentially focuses on the balance between public safety and the scope of the Constitutional rights under the Second Amendment. As a Firm, we are investors, not statesmen or policy makers. Our role is to make investments on behalf of our clients who are comprised of the pension plans of firemen, teachers, policemen and other municipal workers and unions, endowments, and other institutions and individuals. It is not our role to take positions, or attempt to shape or influence the gun control policy debate. That is the job of our federal and state legislators.
There are, however, actions that we as a firm can take. Accordingly, we have determined to immediately engage in a formal process to sell our investment in Freedom Group. We will retain a financial advisor to design and execute a process to sell our interests in Freedom Group, and we will then return that capital to our investors. We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so.
Our thoughts and prayers are with the families and communities impacted by this tragic and devastating event.
Cerberus Capital Management, L.P.
About Cerberus Capital Management: A private equity firm established in 1992, Cerberus Capital Management, L.P. has more than US $20 billion under management invested in four primary strategies: distressed securities & assets; control and non-control private equity; commercial mid-market lending and real estate-related investments.
Read Related Chicago Tribune Article about Freedom Group Divestiture.
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July 7th, 2012
 Smith & Wesson Holding Corp. (NASDAQ:SWHC) on Thursday reported record fourth-quarter and full-year financial results. Fourth-quarter sales were up 28 percent compared to the same period last year. Full fiscal year sales were up 20 percent compared to the previous year. Said James Debney, president and CEO, “Our objective in fiscal 2012 was to streamline the company and focus on our position as a leading, pure-play firearm company. We are very pleased with our results, which include record annual and fourth quarter net sales and profits.” On Friday, July 6th, Smith & Wesson (SWHC) traded at $8.80 per share, up from a 52-week low of $2.29. That $6.51 per share increase represents a whopping 284% net gain in one year! If you had invested in either S&W a year ago, you’d be sitting pretty right now.
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May 10th, 2012
 The good news continues for Sturm, Ruger & Co. (Ruger) which has seen huge gains in its stock price over that past couple of years. Ruger recently reported that first-quarter sales were up 49% compared to the same period in the previous year. That announcement has caused Ruger shares to rise over 6% just today! (Many of us now wish we’d bought some Ruger stock in 2010 — Ruger shares are trading today at 49.38, up from 16.93 two years ago.)
New products such as the Ruger 10/22 Takedown rifle, the Ruger SR22 pistol and the Ruger American Rifle are driving sales growth. Said CEO Michael Fifer, “New product introductions were a significant component of our sales growth as new product sales represented $40.8 million or 37% of sales in the first quarter of 2012.” Ruger’s results again beat Wall Street expectations. Ruger has beaten the Zacks Consensus Estimate in each of the last seven quarters.
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April 4th, 2012
The major American gun-makers are the darlings of Wall Street right now. Smith & Wesson (SWHC) recently traded at $8.60 per share, a 52-week high, up from a 52-week low of $2.29. That’s a whopping 376% increase in stock price in one year! (Current SWHC price is $8.32.) Sturm, Ruger & Co., Inc. (RGR) traded today as high as $51.87, up from a 52-week low of $18.65 per share. That represents a 278% gain since this time last year. If you had invested in either S&W or Ruger a year ago, you would be sitting pretty right now. Check out SWHC’s stock price trends for the past 52 weeks:
Election-Year Fears Drive Gun Sales
What is driving the rising prices of gun-maker equities? Experts say the main factor is fear — Americans are afraid that, if President Obama is re-elected, he will force through tough new gun laws. That, in turn, is driving increased gun sales, which is good for the gun makers. With increased gun sales, revenues are up and profits are up — and that’s what Wall Street likes to see. S&W got a boost recently when a Wedbush stock analyst Rommel Dionisio re-confirmed S&W’s “Outperform” stock rating, and raised the target price from $7.00 to $10.00. Mr. Dioniso explained that gun sales are starting to rise dramatically because Americans are worried that President Obama will tighten gun laws if he earns a second term.
Other Wall Street “experts” are singing the same tune. Writing on the Motley Fool website, Wall Street reporter Bobbie Johnson opined: “The sales of handguns and ammunition has been on the slow rise over the last few years but the last few months have shown much higher sales. Retailers say it’s due to the upcoming presidential election while others speculate that it is simply the massive uncertainty rippling across our country and others. The industry saw an uptick in sales in the months prior to President Obama’s election in 2008 which was based on the presumption of tougher gun regulations. The general consensus is that more regulations will come into play should the President be re-elected.”
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September 28th, 2011
Smith & Wesson is replacing its President/CEO. This comes after Smith & Wesson stock hit rock bottom last week, trading at $2.49 per share, a 52-week low. Smith & Wesson Holding Corporation (NASDAQ: SWHC) today announced that P. James Debney has been appointed President, Chief Executive Officer, and a member of the Board of Directors, effective immediately. The company said the executive reshuffling was done “in accordance with the company’s comprehensive management succession planning process.” Debney previously served as Vice President of Smith & Wesson Holding Corporation and President of the company’s firearm division. Debney will replace former President/CEO Michael F. Golden, who will continue as a member of S&W’s Board of Directors.
According to the Outdoor Wire: “The remaining term of former President and CEO Michael F. Golden’s employment contact has being bought out by the company, but Golden will continue as a member of the Board of Directors[.] Golden’s contract is expected to impact the company’s current quarter earnings per share by as much as two cents, with the gross numbers to be included in the quarterly 10-Q set to be released after the close of the stock markets today.” Smith & Wesson stock, as of the time of this Bulletin release, is trading at $2.58 per share, gaining back a bit from the $2.49 low on Sept. 23, 2011.
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October 20th, 2009
If you had purchased Ruger (RGR) or Smith & Wesson (SWHC) stock after the November election, you would have seen your investment grow almost three-fold. Ruger stock now trades at over $13.00 after hitting $4.52 last fall. If Remington, Bushmaster, Marlin and other Freedom Group companies “went public”, could they ride the coat-tails of Ruger and S&W, and succeed collectively as a publicly traded stock? Cerberus, a private holding company that controls the Freedom Group, apparently thinks so.
Cerberus Plans IPO for Remington and Freedom Group
A surge in gun sales has pushed the stock prices of major firearms manufacturers upwards. Will that trend continue? We can’t say. However, the money men at Cerberus Capital Management, which owns Remington, Bushmaster, Marlin, and other Freedom Group companies, have decided that the time is ripe to “go public” and start selling stock. According to a 10/19 report in the Wall Street Journal Blog, Cerberus plans an initial public offering (IPO) for its Freedom Group companies. The Freedom Group is comprised of Advanced Armament Corp., Bushmaster, Dakota Arms, DPMS, Eotac, H&R, L.C. Smith, NEF, Parker Gun, Remington Arms Company. Advanced Armament Corp. (AAC) is the latest addition to the Freedom Group collection, having been acquired just this month and placed under the Remington Military Products Division.
In its report on the pending Freedom Group IPO, the Wall Street Journal Blog cited AccurateShooter.com. When Cerberus acquired riflemaker DPMS in 2007, we wrote: “One positive aspect to Cerberus’ involvement in the gun industry is that the huge political clout Cerberus commands as the ‘rescuer’ of Chrysler Corp. should undermine efforts to ban AR-platform rifles. Cerberus is big enough to make waves in Washington. Money talks in politics and Cerberus has lots of it.”
Is the timing right for a gun-company IPO? The stock-market continues to move upward, and gun and ammunition sales remain very strong. On the other hand, the panic buying of black rifles has tapered off and AR-platform gun prices are now dropping back to “pre-panic” levels. Morever, at the end of each calendar year there are usually major stock sell-offs. That could drive down prices of Ruger and Smith & Wesson, which could dampen enthusiasm for a Freedom Group IPO. On the other hand Remington is an historic brand with a strong customer base, and Remington/Bushmaster are poised to take an increasing share of lucrative military contracts. With its new ACR (Adaptive Combat Rifle), Remington could well win the contract for the AR15’s replacement. And, even if the US military sticks with Stoner’s 50-year-old AR design, Bushmaster can fill that need, though it has strong competition from Colt and FN Herstal.
A cynical observer might say that Cerberus is simply looking to grab easy profits by “flipping” arms companies it acquired at fire-sale prices. Given the huge run-up in Ruger and S&W stock prices over the past 12 months, Cerberus may figure that investors will be hungry for Freedom Group shares. Right now may be the best time to take the Freedom Group public while gunmakers are still considered a “hot property” on Wall Street. In six months that could change.
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August 29th, 2009
Over a two-year span (2006-08), Cerberus Capital Management, through its Freedom Group holding company, acquired Remington Arms, Bushmaster, and Marlin Firearms, along with other gun brands. Observers were concerned about the consolidation of so many legendary American gun-makers under one ownership group — too many eggs in one basket. If Cerberus suffers financial setbacks, it was feared, this could have a huge effect on the U.S. gun industry.
Cerberus Hedge Fund Investors Jump Ship
Now it appears that those fears may have been well-founded. According to the Wall Street Journal, “Cerberus Capital Management’s investors overwhelmingly want out of the firm’s core hedge funds, asking for the return of more than $5.5 billion, or almost 71% of the fund assets”. That’s bad news for Cerberus of course. However, the Hedge Fund represents only about 1/3 of Cerberus assets, so the overall picture isn’t completely bleak. The Private Equity (PE) Fund, for which Cerberus is most famous, is NOT directly affected by these Hedge Fund issues. Still, the PE Fund is not without its own problems. Cerberus’s investment in Chrysler proved disasterous. After Chrysler went into bankruptcy, most of its assets were turned over to Fiat and the UAW.
What’s ahead for Cerberus? We can’t predict. There’s no reason to believe, at this time, that Cerberus is seriously threatened. Likewise, there may be no immediate effect on the operations of Remington, Bushmaster, and Marlin. However, you can bet that the top Cerberus decision-makers will be taking a hard look at the “bottom line” of all the enterprises Cerberus controls. And that, in turn, could mean a financial squeeze for Freedom Group companies that are not performing up to expections.
Freedom Group Gun Companies:
Bushmaster, Dakota Arms, DPMS, Eotac, H&R, L.C. Smith, NEF, Parker Gun, Remington Arms Co.
CLICK HERE for further Discussion of Cerebus Hedge Fund issues.
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