Remington, one of America’s oldest firearms makers, files for bankruptcy protection
Remington, one of the nation’s oldest gun manufacturers, filed for bankruptcy court protection late Sunday amid heavy debts, falling sales and the potential for adverse court rulings stemming from the 2012 Sandy Hook school massacre.
Remington Outdoor and its subsidiaries submitted a Chapter 11 petition to the federal bankruptcy court in Delaware, outlining a restructuring plan that would maintain the company’s operations, continue pay and benefits for employees and ultimately turn the operating control of the company to creditors.
The agreement would end the controlling financial interest of Cerberus Capital Management, the private equity company that acquired what was then known as Remington Arms, for $118 million in 2007. Cerberus unsuccessfully tried to sell the company before the decision to seek bankruptcy protection.
Madison, N.C.-based Remington, a maker of shotguns, rifles and handguns since 1816, listed liabilities between $100 million and $500 million, with an identical estimate of assets. Billed as “America’s Oldest Gunmaker,” the company’s brands include Remington, Bushmaster Firearms and DPMS/Panther Arms.
Remington initially announced the pre-agreed bankruptcy plan on Feb. 12. But the actual filing was delayed after the Feb. 14 mass shooting that killed 17 people at Marjory Stoneman Douglas High School in Parkland, Fla. The filing came hours after student-led rallies across the nation cited the massacre in calling for stricter gun control laws.
Remington will continue to operate while it pursues Chapter 11 bankruptcy protection, a procedure that gives financially ailing companies time to devise reorganization plans to stay afloat, shed debt, and at least partly repay creditors.
The deal announced in February said Remington would be able to write off $700 million of $950 million in estimated debt. The agreement would also provide $145 million of new capital for its operating subsidiaries and provide $100 million in creditor-funded money as a debtor-in-possession term loan, the company said at the time.
Stephen Jackson, Remington’s chief financial officer, said in a bankruptcy declaration that the company and its subsidiaries have held leading U.S. market positions in a variety of firearms and ammunition categories since 2008 — including sales to military and law enforcement agencies.
However, along with the company’s debts, he cited a series of financial setbacks over roughly the last one-year period.
Remington increased production rates during 2016, based on expected consumer demand in 2017, but that demand “ultimately did not materialize,” Jackson stated.
Simultaneously, the firearms and ammunition markets faced competitive market pricing pressure from higher inventory levels industry-wide, along with “accelerating reduction in demand,” he said.
Remington borrowed to ramp up production to meet expected sales that fell below expectations. Additionally, the company faced significant market pressure from competitors that engaged in “unusually heavy discounting and promotions to reduce their own excess inventory,” Jackson stated.
Although Remington negotiated for minor borrowing relief, “the overall business and industry environments continue to cause significant financial hardship,” added Jackson.
In interviews on Monday, some independent gun dealers said they were unsurprised by the bankruptcy filing. Although Remington’s rifles and shotguns are well regarded, the dealers said the company focused its attention on big-box stores, and then those retailers started pulling out of the market.
“Remington bet on the wrong horse,” said Justin Anderson, the marketing director for Hyatt Guns in Charlotte, which advertises itself as the nation’s single-largest gun store. “They turned their backs on shops like ours.”
There are no federal statistics on nationwide gun sales that might show industry slumps affecting Remington and other firearms makers.
However, statistics from the FBI’s National Instant Background Check System (NICS) show that the total of all types of background checks fell nearly 8.4%, to roughly 25.2 million, in 2017, the year of President Trump’s inauguration.
Firearms background checks increased steadily during much of President Obama’s two-term White House tenure, as well as during President George W. Bush’s second White House term, the data show.
A caveat with the data states that “a one-to-one correlation cannot be made between a firearm background check and a firearm sale.”
Separately, U.S. firearms manufacturing increased 43%, to more than 9.3 million weapons, from 2011 through 2015, according to data issued by the U.S. Department of Justice’s Bureau of Alcohol, Tobacco, Firearms and Explosives.
In all, 3.6 million rifles and 3.5 million handguns were manufactured in the U.S. in 2015 the data showed. Rifle manufacturing was up 9% from 2014, while the number of pistols manufactured was down roughly 2% during the same one-year period, the data showed.
Owners of some gun shops saw a rush of firearms purchases in the months leading up to the 2016 presidential election, when polls predicted that Democratic presidential nominee Hillary Clinton would likely win the White House.
Apart from industry sales trends, Remington’s reputation and financial outlook took a hit after law enforcement authorities confirmed that Adam Lanza used one of the company’s Bushmaster XM15-E2S guns in the Sandy Hook Elementary School massacre in Newtown, Conn. Lanza killed his mother and then fatally shot 26 children and educators.
Survivors and families of the victims subsequently sued Remington under legal liability theories that could enable the lawsuits to proceed despite federal legislation that blocks most such actions against gun manufacturers.
After litigation in federal court, the Sandy Hook plaintiffs recently made it to the Connecticut Supreme Court, where both sides in the case and the firearms industry await a ruling. “There’s no certainty that they would win, there’s also no certainty that they’re going to lose at this stage,” Heidi Li Feldman, a Georgetown University law professor, said of the plaintiffs during a Monday interview.
Article Originally appeared on USA Today
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