INDUSTRY NEWS: OCTOBER 2005

By Robert M. Hausman

Colt Defense Plans Public Stock Offering

Colt Defense Inc., the heretofore private, closely-held defense contractor, plans to go public.

On June 3rd, the gunmaker filed a registration statement with the Securities and Exchange Commission related to a proposed initial public offering of its common stock. The shares are being offered by Colt Defense Inc.

Banc of America Securities LLC is acting as the sole book-running manager, SG Cowen & Co., LLC is acting as the joint lead manager for the offering and Friedman, Billings, Ramsey & Co., Inc. is acting as the senior co-manager.

Colt Defense Inc. is a leading designer, developer and manufacturer of small arms and weapons systems for the U.S. military, its allies and federal, state and local law enforcement agencies. Its products include military rifles, such as the M4 carbine/rifle and its predecessor, the M16 rifle, auxiliary weapon systems and rifles for law enforcement agencies around the world. Colt’s Manufacturing, a separate entity, manufactures commercial products for the consumer firearms enthusiast market.

While Colt has kept a somewhat low profile in the industry during the last several years, it has become quite active with several recent announcements of note.

On May 20th, the company announced the completion of its acquisition of the Logistics & Defense Division, Diemaco, from Heroux-Devtek, Inc. The Diemaco business will now be operated as Colt Canada Corporation, a wholly-owned subsidiary of Colt.

Colt Canada is that country’s sole contractor for the manufacture of C7 and C8 rifles and carbines under license from Colt. These arms are versions of M16 and M4 arms that use technical data owned by Colt. Weapons manufactured by Colt Canada supply military troops of NATO countries, as well as Canadian forces and the Royal Canadian Mounted Police.

Heroux-Devtek, Inc., a Canadian company, specializes in the design, development, manufacture and repair of aerospace and industrial products. The company’s head office is in Longueuil, Quebec. Heroux-Devtek operates eight business units grouped under three divisions: the Landing Gear; Aerostructure; Gas Turbine Components; and, the Logistics and Defense divisions. Some 75% of sales are made outside Canada, mainly in the U.S. Heroux-Devtek’s shares trade on the Toronto Stock Exchange under the symbol: HRX.

The “Greaseless Gun”

Colt Defense has also formed an alliance with UCT Coatings, Inc. of Stuart, Florida, resulting in the introduction of a revolutionary coating allowing small arms to operate lubrication-free. UCT’s patented nickel boron coatings have potential to change the way firearms are built and maintained. As part of this alliance, UCT has granted Colt a long-term, exclusive use license.

“UCT’s innovative thinking and applied technology will allow us to introduce a new generation of easily maintained weapons for all elements of the small arms market while reducing the maintenance required on existing arms as they are upgraded,” said Lt. Gen. (Ret.) William M. Keys, Colt’s president and CEO.

UCT Coatings, Inc. has developed and patented a family of performance coatings under the trade name of UltraChem that can be applied to most metal surfaces including lighter weight metals like aluminum and titanium. The technology is applicable to defense, aerospace, automotive, oil, gas and other industrial markets. UCT has received a patent for the use of modular nickel boron coatings as a permanent lubricant on firearms and has trademarked the term “Greaseless Gun.”

Though there has been a great deal of activity on the defense side, Colt’s commercial end of the business has not seen much new activity. Production of the Single Action Army revolver continues as well as a variety of 1911-style pistols, including a replica of the World War One U.S. service pistol.

Taser Gets Four Orders Worth $1 Million

Taser International Inc., the world’s largest maker of electric stun guns, has received four orders for the weapons valued at a total of about $1 million and said revenue this quarter will exceed the preceding period.

Orders for the company’s X26 models were placed by the police departments of Calgary, Honolulu and Houston as well as an unnamed law-enforcement agency, Taser said. These latest orders come on the heels of a $1.4 million order placed by the U.S. General Services Administration.

Taser’s first-quarter sales fell 22 percent to $10.2 million after the U.S. Securities and Exchange Commission said in January it was conducting an informal inquiry into claims on Taser units’ safety, and the timing of an order from wholesaler Davidson’s, Inc. at the end of last year. Taser is seeing a “stabilization in revenue” and second-quarter sales will be “slightly higher” than the first quarter, the firm believes.

Bill Would Clarify ATF’s MG Determinations

Of interest to those firms importing/selling machine gun parts kits or those involved in the process of destroying machine guns for their parts, a bill was recently introduced in the U.S. Congress that would clarify the process by which ATF determines whether a deactivated arm is readily restorable into a machine gun.

The legislation, H.R. 1603 introduced by Rep. Phil Gingrey (R-GA), would require ATF’s Firearms Technology Branch to videotape all testing of firearms it conducts when making a determination of whether or not the firearm in question falls under the purview of the National Firearms Act.

In addition, the proposed legislation would prohibit ATF from entering into evidence (at a criminal trial) any item that has been determined to be a firearm (meaning one controlled by the NFA i.e. a machine gun) unless the documentary evidence of the determination (the videotape) is provided at trial as well.

Gingrey’s bill was introduced in response to complaints that ATF’s determinations in this area in the past have been arbitrary or unverifiable when attempts were made to reenact ATF’s method of testing.

The legislation seems to stand a better than average chance for passage due to the unique way it has been presented.

Taking a cue from other bills seeking a variety of objectives, under the guise of “homeland security,” Gingrey’s legislation has been cloaked as a tool for the U.S. government to use in securing convictions against terrorists by supposedly strengthening the prosecution’s case with verifiable evidence. While it is true that the bill, if signed into law, would work favorably for government in the prosecution of such cases, it would also bring a measure of relief to those firearms firms dealing in the part kits arena, as it would force ATF to prove something is really what it says it is.

House Rejects .50 Cal. Export Ban

The U.S. House of Representatives, in mid-June, overwhelmingly rejected an amendment to a spending bill that would have banned the export of .50-caliber rifles.

The amendment, by Rep. James Moran (D-VA), would have blocked export of the rifles to “non-governmental entities” (meaning consumers). The vote was 278-149.

New Marketing Consortium Formed

A group of marketing professionals have formed a unique product marketing consortium to oversee product launches and the revamp of existing campaigns for outdoor firms both in the American and European markets.

The persons involved are said to have proven track records in the industry and are able to assist not only American firms desiring to take advantage of the present currency exchange rates in exporting to Europe, but can help European companies in establishing a presence and increasing market share in the U.S. The new consortium has retained a roster of outside consultants with expertise in specific areas that can be accessed. More information is available by calling: (802) 249-3880.

FNH Stocking Dealer Program

FNH USA’s “Stock 6 FN Firearms, Get the 7th FREE” (being the FN Five-Seven USG) offer, launched at the 2005 SHOT Show ran until August 31st and received a very good response, according to the company.

“In 2005, we are witnessing a tremendous increase in dealer response through our distributors,” says Rick DeMilt, director of sales and marketing. “With the strength of the FN brand in military, law enforcement and commercial markets, a unique and diverse product offering and an aggressive stocking program, dealers are responding to the best kept secret in the firearms business,” DeMilt added.

Retailers qualified for the program by purchasing one FN SPR (Special Police Rifle), one FN PBR (Patrol Bolt Rifle), one FN Tactical Police Shotgun, plus any other three FN firearms between January 1, 2005 and Aug. 31, 2005. All dealer purchases must have been made through an authorized FNH USA distributor. Qualifying dealers then took advantage of the promotional gun by forwarding copies of their distributor invoices and an FFL to the FNH USA sales office in McLean, Virginia. Once received, an FN Five-Seven USG model was shipped from FNH USA, Inc. inventory to the dealer.

FNH USA, Inc. of McLean, Virginia, is a sales and marketing arm of FN Herstal, S.A., Belgium whose corporate mission is to become a global leader in the areas of defense, law enforcement and associated commercial markets.

Bushmaster Summer Dealer Promotion Successful

Brought back by popular demand, Bushmaster’s Dealer Appreciation promotion once again this past summer offered a fresh, two-pound Maine lobster for every Bushmaster rifle sold by FFL dealers between July 18th and August 15, 2005.

To qualify, the FFL dealer must have sold a Bushmaster rifle, including the .308 rifles and carbines and the Carbon 15 rifles and pistols, to a retail customer from July 18 to Aug. 15. Bushmaster must have received the warranty card for that product by September 12, 2005.

Designed as a “taste of Maine” (the location of Bushmaster’s headquarters) pull-through program to support both dealers and distributors, this promotion has proved so popular in past years that Bushmaster repeated it once again. The program is Bushmaster’s way of showing appreciation directly to all the dealers who support and promote Bushmaster’s products. In 2004, the gunmaker shipped almost 1,000 lobsters to dealers across the country who participated in the promotion.

Smith & Wesson Opens Company Museum

Smith & Wesson opened a company history museum at its Springfield, MA, headquarters in mid-June. The museum houses a variety of artifacts and photographs gathered from collections owned by the company and on loan from the Connecticut Valley Historical Museum, a unit of the Springfield Museums; Cinema Weaponry; private collectors; and former and current employees. Several items belong to the Smith & Wesson Historic Preservation Charitable Trust, which was created by S&W to insure the preservation of its collection.

“The creation of the Trust and the establishment of the museum will preserve our heritage for our employees, our Club 1852 members and the public,” said S&W president and CEO, Michael Golden. “It will also serve as an important account of the company’s history and its contributions to our community and our country.” Highlights from the museum collection include:

• Rifles manufactured by D.B. Wesson prior to the company’s creation.
• A collection of Smith & Wesson’s first firearms.
• Several historic, prototype firearms, designed in the mid-to-late 1800’s.
• Revolvers engraved by Tiffany & Co. for global exhibitions circa 1893-1900.
• A series of “top-break” firearms developed prior to the Civil War.
• A variety of S&W revolvers from World Wars I and II.
• The .44 Magnum used by actor Clint Eastwood in the famed “Dirty Harry” films.
• A step-by-step model showing construction of the company’s new Model 500 Magnum revolver.

The museum is available for group tours scheduled in advance, by appointment only. For more information, call: (800) 331-0852, Ext. 259

S&W Long Guns Planned

Smith & Wesson recently hired a long gun product manager, indicating the company intends to offer a long gun product line in the near future. Some years ago, the company had offered a shotgun line which has since been discontinued. No information was available at press-time regarding what type of long guns will be offered in the future.

SHOT Show Trademark Action Settled

The National Shooting Sports Foundation and Canadian exhibition organizer Mountain Expo have reached a settlement agreement regarding unauthorized use of NSSF’s “SHOT Show” name and trademark.

On May 11, NSSF filed a trademark infringement complaint in Canadian Federal Court to halt Mountain Expo’s unauthorized use of the SHOT Show name and trademark in promoting its own “Shot Show Canada” exhibition and other international fairs.

“Mountain Expo’s use of the well-known name and mark creates significant confusion among the public – particularly our exhibitors and attendees who have been solicited by Mountain Expo,” said Doug Painter, NSSF president. “During the past 25-plus years, the SHOT Show has grown to become the world’s premier shooting, hunting and outdoor tradeshow. To protect the show’s image and reputation, NSSF will aggressively pursue anyone who infringes upon the SHOT Show’s good name. NSSF’s trademarks are valuable assets that will be protected vigorously.”

Ammo Load, Inc. Under New Ownership

Ammo Load, Inc., a pistol reloading machine producing company has been purchased by Howell Machine, Inc. The new company, now known as Ammo Load Worldwide, Inc., moved the assets from Santa Ana, California to Lewiston, Idaho. Parts and accessories to the ammo load equipment were being manufactured in Lewiston by Howell Machine.

The author publishes two of the small arms industry’s most widely read trade newsletters, The International Firearms Trade which covers the world firearms scene, and The New Firearms Business which covers the domestic market. He also offers FFL-mailing lists to firms interested in direct marketing efforts to the industry. He may be reached at: FirearmsB@aol.com.