Industry News: August 1999

By Robert M. Hausman

Colt’s Denies Rumors It Plans To Drop Consumer Sales

Rumors have been circulating within the firearms industry that Colt’s Manufacturing is planning to drop sales of its products to the civilian, and possibly even the US law enforcement sectors, in favor of the military market. These reports are denied, however, by Colt’s CEO, Steve Sliwa.

The large backlog of orders from military contracts is reported as diverting Colt’s attention to the military side and away from consumer and police sales. “We are not planning to suspend shipments to law enforcement or the commercial sectors,” Sliwa explained. “If we ever decided to make a price change or cancel a product, in general, we would make a prospective announcement (well in advance) so people could stock up.

“We do have a very big backlog of orders for the US and foreign military segments for our rifles. We are increasing our capacity, but demand seems to be outstripping our ability to produce. There may be announcements later in the year as we seek to increase our capacity to keep up with the demand. This is probably causing the shortages in the market,” Sliwa said.

Indeed, prices for Colt’s Match Target and other AR-15 derivatives are reported as rising rapidly at the wholesale level. While Colt’s has not raised its prices, consumer demand, fueled by concerns over Y2K, the constant talk about the need for more gun control by politicians after the tragedy in Littleton, CO, and the rumors of forthcoming new gun and ammo import bans, are causing gun buyers to clamor for Colt rifles.

“We have no plans to suspend the manufacture of Colt Sporter or Match Target rifles for the civilian markets on a temporary or permanent basis,” Sliwa stated.

The rumors regarding Colt’s suspension of the sale of these products apparently stemmed from misinterpretation of an interview Colt’s company officials recently gave to a media representative.

“A reporter from outside the gun industry asked us if we would survive if the government banned such guns (Sporter and Match Target rifles),” Sliwa continued. “We said we would survive, but we are working behind the scenes to lobby to keep that from happening. Although we are working to keep these guns from being banned, we have built some ‘what-if’ scenarios in our strategic planning to handle all eventualities. Again, we would never spring a major change in philosophy with no warning.”

There was also a report that Colt’s has subcontracted with Bushmaster Firearms of Maine for Bushmaster to produce M-16/AR-15 rifles over the next 24 months to help Colt’s fulfill its military contracts. As a result of this deal, Colt’s was said to be planning to suspend sales of AR-15’s to distributors serving law enforcement accounts during the next 24 months. This rumor was also denied by Sliwa who said that although Bushmaster makes a fine product and is aggressive in the marketplace, Colt’s “has no contracts with Bushmaster.”

Elaborating further, Sliwa says Colt’s is the only US-based manufacturer with M-16 rifle contracts. Its main competitor, Fabrique National (FNMI) of South Carolina does not have any current M-16 contracts at present, according to Sliwa. FNMI can bid on fully-assembled guns and parts orders and there are several open parts contracts at present that FNMI hopes to win. Sliwa emphasizes Colt is the only firm permitted to build the M-4 carbine for the US government through the year 2011. In total, Colt’s backlog in military assault rifle orders for the US government is just under $40 million.

(SAR’s information from contacting FNMI is that FNMI is continuing to build M16A2 rifles under contract to the US Government. Shipments are 1500 per month and continue until the end of 2002. FNMI reportedly was not allowed to bid on the M4 due to Colt’s claim that they own the technical data rights.- editor)

The new Crossfire MK-1 is a unique rifle/shotgun concept that Colt’s is hoping will further boost its status in the military/law enforcement arena. Chambered for 12 gauge shells and .223 Remington rifle cartridges, the dual-barrelled Crossfire system can handle any type of shotgun shells available including less-than-lethal rubber pellets, bean bags, CS/CN tear gas, buckshot and rifled slugs. The rifle section is designed with a 1-9 twist barrel. The pump action actuated system is built to ISO-9001 quality control standards.

Other Crossfire features include optional Meprolight Tritium adjustable night sights, Invector-style choke tubes, single trigger, single fire control selector, Picatinny-style optical rail on the receiver and under the forearm, 4-round removable shotgun magazine, AR-15-type 5-round rifle magazine, composite stock and forearm, and a choice of black oxide or camo finishes. Length is 38-inches and weight is 8.6 pounds. The product will be offered to the general public.

The prototype concept for the new firearm is owned by Crossfire of Lagrange, GA. Saco Defense of Saco, ME (now owned by Colt’s) took the Crossfire concept into production after a redesign, Sliwa says. The first units are expected to roll off the assembly lines shortly. Crossfire, the company, is responsible for US commercial and law enforcement marketing and sales. Saco is responsible for US government and all international marketing and sales. The largest sales are expected to be made to the US law enforcement market.

ATF Note

The industry’s regulator, the Bureau of Alcohol, Tobacco & Firearms (ATF) advises that some firearms dealers have been confused about the provisions of the so-called Youth Handgun Safety Act. These dealers apparently think handguns may be transferred to person as young as 18, although federal law prescribes the minimum age for handgun purchase from a licensed dealer to be 21.

The confusion apparently stemmed from ATF’s recent mailing to dealers of publication I 5300.2 “Youth Handgun Safety Act Notice.” Federal regulations require dealers who deliver handguns to consumers to provide written notification to the gun buyer of this act, which places restrictions on the occasions when handguns may be possessed by those under the age of 18.

The intent of the ATF brochure was to inform firearm consumers that they cannot transfer (as opposed to selling) a handgun to anyone under the age of 18, but some dealers apparently misread the brochure and thought they could sell handguns to persons 18 and over. ATF emphasizes that is not the case.

In other handgun news, Sports Authority, a full-line sporting goods retailer with some 200 locations across the country, has decided to discontinue the sale of handguns. Chief executive Marty Hanaka said the move was not political, but rather was prompted by a decline in handgun sales to less than one-half of one percent of total sales.

“With any line of business, if the category does not play a strategic role with our core customer, or cannot be made profitable, we will rationalize the category accordingly,” Hanaka said. The company will continue to stock rifles and shotguns.

Financial News

In line with most firms in the firearms industry who have been experiencing a rise in sales since the first of the year, Sturm, Ruger & Co., inc. reports first quarter 1999 net sales of $62.9 million, compared to $58.5 million in the first quarter of 1998.

Ruger’s net income for the first three months of the year came to $8.4 million, or 31 cents per share, compared to $7.2 million or 27 cents per share in the first quarter of 1998. Ruger is the nation’s largest overall producer of firearms and is a significant manufacturer of titanium, steel, and aluminum precision investment castings.

Commenting on the quarter, chairman William B. Ruger noted, “The increase in sales, net income, and margins for the first quarter were due to significant improvements in shipments within the firearms segment, a trend which started late in the third quarter of 1998. While it is too early to accurately forecast the level of improvements in firearms sales for the remainder of 1999, our overall order backlog still reflects increases over 1998.”

The company experienced a decrease in casting sales for the quarter, but the profitability of the casting segment has improved over the levels achieved during the latter half of 1998.

Firearm sales totaled $47,438,000, or 75.4% of sales during 1999’s first quarter, compared to $37,013,000 or 63.2% of sales during the same three months of last year. Casting sales came to $15,453,000 or 24.6% of sales during the first three months of 1999, versus $21,508,000 or 36.8% of total sales during 1998’s first quarter.

Ruger’s gross profit rose to $18,274,000 during the first quarter of this year, compared to $16,324,000 during the same period last year. Operating income also rose during this year’s first quarter to $13,405,000, in comparison to $11,281,000 last year.

Leading firearms wholesaler, Ellett Brothers, saw a 50% increase in its net income during 1999’s first quarter. The company earned $678,000 on $38.9 million in sales during the quarter, a 50.3% increase over the $451,000 it earned on sales of $34 million during 1998’s first quarter. Per share income rose to 16 cents from 9 cents, in part due to a lessening of the number of shares outstanding to 4.3 million from 5.1 million a year earlier.

Ellett’s overall sales were up 14% during the first quarter of this year, the largest increase the firm has experienced since 1994. Gun related sales were up 12.8%. The company attributed its strong firearm sales to consumer concerns over the Y2K computer problem.

Blount International, Inc.’s division engaged in manufacturing and marketing shooting accessories generated a record $70.3 million in sales during the first quarter of 1999, a 15% jump from the $61.3 million it achieved during the same period last year. Operating income came to $5.5 million, a 35% increase over 1998’s first quarter total of $4.1 million. The company said the high performance was due to increased market share, higher consumer demand and the consolidation of some brands which resulted in improved margins. Blount recently announced a planned $1.35 billion merger agreement with Lehman Brothers Merchant Banking Partners II LP.

In an attempt to make the general news media more knowledgeable about firearms in the hope that more accurate reporting will result, the Sporting Arms & Ammunition Manufacturer’s Institute (SAAMI), the organization that sets manufacturing standards for firearms and ammunition, has published the Non-fiction Writer’s Guide, a media reference to firearms and ammunition. The guide was created to help the mainstream media avoid inaccuracies and misnomers when writing and reporting about firearms and related issues. The guide contains at-a-glance fact sheets, a glossary of terms, illustrations, and other helpful tools so reporters can keep their firearms writing in the “non-fiction” category.

In other news, Speer of Lewiston, Idaho has published an authoritative new reloader’s reference, the Speer Reloading Manual No. 13, to reflect the latest technical information and reloading trends. Written for both the newcomer and the expert, the manual features 13 new data sections for cartridges not included in earlier editions. There are new test sections covering exterior ballistics and ballistics software.

New England Firearms of Gardner, Massachusetts has joined with the National Trappers Association (NTA) in the production of a .223 Remington chambered Handi-RifleTM to commemorate NTA’s 40th anniversary. A portion of the proceeds of the sale of each rifle will be donated to the NTA. The gun is fitted with a heavy 24-inch barrel factory-fitted with a Weaver-style scope base, a black and gray laminate stock with hand cut checkering, and a 40th anniversary NTA medallion inlet in the stock. While intended primarily as a sporting field gun, the rifle may have applications in the long range tactical sniping realm when fitted with a proper scope.

Nikon, Inc. has introduced a compact, high-magnification laser rangefinder. The new Laser800TM provides a monocular-type range finder with high quality optics to allow accurate targeting out to a maximum range of 800 yards. The unit has four modes of operation: Rain (for use in rainy conditions); Reflective (for use on highly reflective surfaces such as bodies of water); Under 150 (to rule out readings under 150 yards, of particular use when ranging a target in an opening, from cover); and, Normal. In use, a bold readout of the distance to the target (in yards) is displayed in the viewing field. With a 4.5 degree real angle of view and a 236-foot field-of-view at 1,000 yards, the Laser800 allows users to survey large areas quickly.