INDUSTRY NEWS: FEBRUARY 2003

By Robert M. Hausman

NICS Appeal Process Streamlined

The National Instant Criminal Background Check System (NICS) is updating its appeal process for those persons prevented from buying a firearm. Previously, to initiate an appeal, denied persons had to contact NICS by U.S. mail and lengthy delays resulted. NICS estimates 27% of appealed denials are overturned, allowing the sale to proceed.

It is expected that the decision to allow the use of e-mail to initiate the appeal will shorten the process by at least one week. To initiate an appeal under the new process, individuals send their name, address and the NICS Transaction Number (NTN) obtained from their dealer to: nicsappeal@leo.gov.

Handgun sales in Maryland dropped nearly 8% during 2002’s first six months, over the same period in 2001, according to the Maryland State Police. The declines comes after a surge in handgun sales following the Sept. 11th attacks that pushed total handgun sales last year to 31,060, down slightly from 31,174 in 2000. That compares with a recent high of 41,726 handgun sales in 1994. State officials said the state’s “ballistic fingerprint” law that went into effect in Oct. 2000, requiring a fired casing for every handgun sold in the state be filed with state police, contributed to the decline. Maryland has also had compulsory handgun registration for a number of years.

At a recent meeting of the Maryland Handgun Roster Board, the following handguns were approved for sale in the state:

• Aldo Uberti Russian in .44 Russian
• Bersa Firestorm in .22 LR, .32 ACP & .380 ACP
• Kimber Eclipse Target II in .45 ACP, .38 Super & 9mm
• Nowin MFG Thoroughbred Carry in 9mm, .45 ACP, .40 S&W & 9×23
• Para Ordnance Para Carry C6.45 LDA & Para Companion C7.45LDA in 9mm, .40 & .45 ACP
• Republic Arms SA RAP 401 in 9mm & .40 S&W
• Rock Island Armory Government, Commander and Officers Model in .45 ACP, .38 Super & 9mm.
• STI International Competitor in .38 Super and VIP in 9mm, .38 Super, .357 SIG and .40 S&W
• Springfield Armory XD-9 in 9mm
• Steyr S-9 in 9mm
• Walther P22 in .22 LR and P99-QA in 9mm & .40

The U. S. Marine Corps recently finished testing two arms – the M4 Carbine and the M16A4 rifle as a replacement for the current M16A2. The shorter M4, now standard issue for U.S. Army infantry troops, is considered the front-runner. Colt’s Manufacturing is a major supplier of the M4 to the U.S. military.

SIGARMS has announced a recall of all Blaser R93 rifles sold in the U.S. after discovering that incorrect pins were used in some trigger assemblies. While specs call for stainless steel pins, some non-stainless pins were inadvertently used in some rifles. If the non-stainless pins corrode from exposure to moisture, the rifle could accidentally discharge once the firing pin has been cocked (in the off-safe position).

SIGARMS, INC. has added two staff members to its law enforcement and military sales division. Al Barr, a former captain of the USMC and a 24-year FBI veteran, is named SIG’s regional manager for Texas, Arkansas, Louisiana and Oklahoma. Dana Owen, a 27-year veteran of the old Massachusetts Metropolitan Police and the Massachusetts State Police, is named inside sales manager for the Eastern U.S. and regional manager for all of Canada, Maine, New Hampshire and Vermont.

Missing Arms

Unable to account for the whereabouts of all firearms in its records, SIG Arms, Inc. has sent a letter to current and former employees, which offered amnesty, for the return of firearms “improperly removed” from its premises, according to The Manchester Union- Leader.

The letter, signed by company chairman and CEO, Herbert Rudolf, stated the amnesty was the result of an inventory audit. “Unfortunately, our investigation has revealed that a number of firearms have been improperly removed from the company’s facilities without proper documentation or the company’s authorization. If SIG Arms receives any firearm under this amnesty program, then the company’s investigation will cease as to that firearm,” he wrote. The letter does not state how many firearms are missing.

Robert Joyce, SIG Arms’ attorney, said part of the issue could be that serial numbers were put on firearm frames and recorded in the company’s records, but that the frames might have later been destroyed for quality control reasons, without a deletion made in the records. “And understanding human nature, there is always the possibility that some of the firearms were improperly taken from the premises,” Joyce added. “SIG Arms is investigating.”

The FBI, INS and other federal agencies have recently reported some 775 missing or stolen guns, some of which were subsequently used in crimes, notes AP. Four hundred laptop computers are also missing, an audit by the Justice Dept.’s Office of Inspector General has found.

Most of the missing guns (750) had belonged to the FBI. Immigration and Naturalization Service (INS) agents lost 212 guns. “The FBI showed serious deficiencies in management in keeping track of weapons and laptops,” said Inspector General Glenn A. Fine. The Bureau of Prisons, Drug Enforcement Administration, and U.S. Marshals Service each had fewer than 16 guns missing.

Company Financials

Increased net sales and income for the second quarter are reported by Sturm, Ruger & Co. Second quarter net sales of $39.8 million were achieved compared to $37.7 million in the second quarter of 2001. Net income for the quarter ended June 30, 2002 totaled $2.9 million or 11 cents per share versus $1.8 million or 7 cents per share in the comparable quarter of 2001.

For 2002’s first six months, net sales were $88.2 million and net income $7.4 million, or 28 cents per share. For the same period in 2001, net sales were $81.5 million and net income was $5.9 million or 22 cents per share.

Chairman William B. Ruger, Jr. said, “Firearms shipments increased 17% in the second quarter, the fourth consecutive quarter of firearm sales growth.” Commenting on the investment castings business, Ruger remarked, “Our castings sales decreased 22% from the second quarter of 2001 and 25% from the first half of 2001. However, the 11% increase in castings sales from the first quarter of 2002 is one indication that progress is being made to revive this segment which is currently under-performing.”

The second quarter showed continued progress on the litigation front, noted Stephen L. Sanetti, vice chairman, senior executive vp and general counsel. Philadelphia did not attempt to further appeal the dismissal of its municipal lawsuit, which brought the matter to a long-awaited end. Several “absolute liability” individual plaintiffs’ cases were dismissed in New York, the highest court in Maryland rejected a request for rehearing its dismissal of the Halliday case, and the similar Price case was dismissed. Unfortunately, the dismissal of the Cincinnati municipal lawsuit, which had been sustained on appeal, was reversed by the Ohio Supreme Court on June 12, by a 4 – 3 vote on straight ideological lines and sent back to the trial court for more proceedings.

Erle G. Blanchard, vice chairman, president & COO, honored the memory of the company’s founder, William B. Ruger, “On July 6, 2002, the company, the industry and the country lost a passionate champion and visionary with the passing of Bill Ruger. Our employees are determined to continue the tradition of hard work and excellence that Ruger exemplified during his active life with the company. The continued success of this company, its products, and the preservation of the rights of law-abiding citizens to keep and bear arms will be his legacy.”

A spike in ammunition sales enabled Remington Arms Co. to triple its profit to $4.3 million in the second quarter, compared to a profit of $1.5 million in the second quarter of 2001. Second quarter 2002 sales were $95.3 million, versus $86.7 million last year. For 2002’s first six months, sales totaled $191.7 million, some $14.4 million more than the comparable period in 2001. Net earnings for 2002’s first half was $9.7 million, versus $5.1 million a year earlier.

Ammunition sales were the driving force behind the second quarter’s improved results as the sales of $34.5 million were about 18.2% higher than the $29.2 million recorded a year earlier. Ammo sales during 2002’s first half came to $67.1 million, a gain of $10.4 million over the same period a year earlier. While sales were strong in virtually all categories, center rifle cartridges and the new HeviShot line were especially so.

Firearms sales came to $48.6 million during the second quarter, up 3.6% from the year before. The $1.7 million increase was attributed to higher sales of shotguns and rimfire rifles, along with stronger pricing of center fire rifles. For the first six months, firearms sales totaled $100.5 million, a $3.7 million gain over the same period in 2001. Much of this increase was attributed to stronger sales of center fire rile models 700, 710 and the M24.

Sales of accessories, fishing line and other items, were up $1.6 million during the quarter, a gain of 15% over the comparable period a year earlier. During the first six months of 2002, these categories generated $24.1 million in sales, a rise of $300,000 from a year earlier. Gun parts, targets and gun safes led the gain.

Rising ammunition sales also helped ATK record a 32% gain in sales during its first fiscal quarter. Sales totaled $520 million, up 32% from the $395 million recorded a year earlier. Revenues from the ammunition and other businesses bought last December from Blount International fueled the increase.

The ammunition group sales of $157 million were nearly double last year’s $79 million. The company won a $92 million contract to produce small arms ammunition for the U.S. Army during the quarter. Earnings before taxes, depreciation, interest and amortization for the first fiscal quarter were $84.2 million, versus $65.2 million a year earlier. Per share earnings were $2.14 in the quarter, compared to $1.96 in the same quarter last year.

The Winchester Ammunition division of Olin Corp. posted a strong second quarter, with sales of $65 million and operating income of $2.9 million. A year earlier, sales were $62.4 million and operating income $2.3 million.

For 2002’s first six months, Winchester had $126.8 million in sales, up $8.8 million from the $118 million it recorded a year ago. Operating income for 2002’s first half was $6.3 million, nearly quadruple the $1.6 million made last year.

Michaels of Oregon is consolidating all manufacturing operations into a new 100,000-sq.-ft. facility in Meridian, Idaho. The firm’s Boise, Idaho operation is also moving to Meridian as is the Butler Creek unit. The Hoppe’s division in Coatesville, Pennsylvania is relocating to Meridian as well.

Firearms Training Systems, Inc. says it has resumed trading its common stock securities on OTC under the symbol FATS. The firm has received an additional contract award from the Australian Defense Forces for two additional Weapons Training Simulation Systems. The contract’s value is $1.2 million (U.S.). CEO Ron Mohling commented, “This recent award shall bring to a total of 12 Weapons Training Simulation Systems facilities within ADF. A further twelve Indirect Forward Observer trainers used for artillery training are also in operation.

Davidson’s, the firearms distributor, has pledged a gift of $100,000 to establish the Davidson’s Law Enforcement Endowment of the NRA Foundation. The gift will be used to help permanently fund the NRA’s National Police Shooting Championships, conducted as part of NRA’s Law Enforcement Training Program for police agencies.

Federal Cartridge Co., an 800-employee firm, is 80-years old and since being acquired by Alliant Techsystems (ATK) in December 2001, the brand has enjoyed renewed vigor. “Having a successful parent company like ATK certainly helps in many aspects,” says Ron Petty, vp/ sales & marketing for the ATK Ammunition and Related Products group. “The acquisition has provided resources to go head-to-head against key competitors, and provided an opportunity to distinguish and leverage each of the Federal brands. Dealers and consumers will be seeing a lot more from Federal and the other brands this fall,” Petty promised.

Bushmaster Firearms raised $738 for the National Breast Cancer Foundation by running a DCM rifle raffle at the national matches at Camp Perry. Richard Dalton of Ohio held the winning ticket. The idea for the promotion came about from a call from Clariza Kern, a competitive high power rifle shooter who was recently diagnosed with metastic breast cancer. As a result of her condition, Kern found the hefty recoil of her .308 M1 rifle becoming unbearable. Kern felt that a .223 Bushmaster rifle, with its recoil absorbing gas operating system, would be the key to allow her to continue her competitive shooting. Bushmaster loaned her a rifle for use at the matches while raffle tickets for the rifle were sold during the event, with all proceeds donated to the National Breast Cancer Foundation.

The Newport, Kentucky Police Dept. has become the first to use Accu-Counter, a new technology that records the time, date and number of shots fired from an officer’s handgun. “When it comes down to a situation where an officer has to use his firearm in the line of duty, this documents how many rounds are fired and what time frame they’re fired in,” said police chief Tom Fromme. Accu-Counter operates via a microchip that provides an indestructible, tamper-proof record of the gun’s activity. Information is downloaded from the gun after use by sweeping a scanner across a screwhead-sized window on the gun’s grip. Currently, the only other reported user of Accu-Counter is the U.S. military.

The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. Visit www.FirearmsGroup.com. He may be reached at: FirearmsB@aol.com.