Category Archives: Industry

Here’s a Different Retro AR-15

The first thing we’re going to say is: it’s pretty. It’s meant to be a stylish upgrade to the Vietnam-era rifle, but it diverges from that not just cosmetically (with the beautiful walnut furniture and decent Cerakote job), but mechanically (with a heavy barrel, late-style generic lower, and .223 Wylde chamber). It’s styled after the XM16E1/M16A1 style gun that was used by the ground combat services in 1965-67.

AR-15 retro wood 04

It’s a gun that’s meant to be fun to shoot and to give an impression of an early AR — or as the seller puts it, a “resto-mod.” If you’re unfamiliar with the term, it comes from the 1990s California classic car scene, where outfits like Mustangs Plus (whose Ron Bramlett, we believe, coined the term “restomod”) would do a cosmetic restoration on a classic car, while upgrading its systems to late 20th-Century standards of safety, convenience and performance with things like disc brakes, air conditioning, five- and six-speed transmissions, and fuel injection.

This is a “resto-mod” build using an authentic Vietnam era m-16 upper receiver, front sight assembly, and bayonet. The lower is a new Delaware Machine AR-15 mil-spec receiver.”

“Delaware Machinery” and “mil-spec” are only passingly acquainted. The DM lowers can be in tolerance, out of tols high, or out of tols low, and sometimes things that should be square are a few degrees off. Most of them do go together alright, and if they don’t, it’s usually just a matter of custom fitting. Still, that’s the other end of the pool from a prestige lower.

One good thing is that there are no large logos on the magwell with this firm’s lowers.

AR-15 retro wood 02

Everything on the Rifle has been Cerakoted except for springs, detents, and the buffer. The wood stock furniture is real American Black Walnut. The receivers, sight base, compensator, and bayonet grips are a blend of Cerakote Graphite Black and Burnt Bronze. The rest of the parts are Graphite Black. Having all parts Cerakoted dramatically reduces friction which means less oil, less fouling, and less cleaning. The rifle has been pre-broken-in and burnished with Sentry Solutions Smooth-Kote. The rifle comes with the bayonet, bayonet sheath, 3 magazines, and a padded soft rifle case.

It is a nice looking rifle. If you only want one sort-of-retro AR, and you don’t think $1,800 buy it now is too much (we don’t know where the reserve is on this auction), maybe it’s for you.

There are numerous departures from retro “restored,” notably the heavy barrel with it’s .750 diameter through the front sight base (instead of the period-correct .675)

One good thing about this build is that the seller (and presumed builder) is providing comprehensive information about the firearm.

Everything is new EXCEPT the UPPER RECIEVER, FRONT SIGHT BASE, SIGHTS, CHARGING HANDLE, BAYONET, and SCABBARD. These parts are deemed to be authentic Vietnam era parts due to their design and forging marks “C H” on the upper receiver. “C H” stands for Colt Harvey forging (Harvey being the forging company used by Colt for the early m16 rifle). It should be noted that all of the components came to me as a complete upper half, which was in pretty poor condition, at the time, requiring the need for an overhaul. As can be seen from the pictures, you can tell the upper has been through a lot; there are dings all over. All parts were thoroughly degreased, sharp raised edges filed down, blasted smooth, and then coated with Cerakote H series finish. Below are the details on individual parts which were used on this build.

AR-15 retro wood 03

RRA Parts Kit
RRA Carrier with Chromed bolt (Also Cerakoted)
RRA National Match 2-stage semi-auto trigger
Stainless Steel Firing pin and Cam Pin
JP Enterprises® 3.5 lb trigger spring kit
KNS Perma Pin
HBAR Match Grade Chromoly Barrel 20″ 1 in 8″ twist .223 Wylde chamber
Bushmaster® rifle length Buffer and spring
M1918 leather sling
Walnut stock set from Black Guns Wood

AR-15 retro wood 01

via Custom retro AR-15 Wood Stock rifle with bayonet : Semi Auto Rifles at GunBroker.com.

Again, only you know if this is right for you.

And Now for a Bit of Philosophy

The gun is well done; it’s not a Bubba job. But one wonders if some day we will regret these sort of restomods as much as we regret the amateurish and ugly hack jobs that generations of Bubbas have inflicted on Mausers and, now, Mosins. We’ve been meaning to write about this but Tam posted a link to McThag’s impassioned jeremiad (hmmm… was there ever a jeremiad that was not “impassioned”? Methinks we adjective too much) about hack jobs on, specifically, Mosins.

I am sick of seeing Bubba rape kiv/27’s. I am sick of seeing Remington and NEW [New England Westinghouse — rare WWI contract guns. -Ed.) receivers drilled and tapped. I am sick of seeing US marked M1915 stocks shortened and cut for Timney triggers.

Far too often, Bubba makes changes he can’t reverse. Regret comes 20 years later when the supply of old guns dries up and the crufflers start fighting over what’s left. The Mosin that’s $240 on Gunbroker now was $150 last year. It was $70 five years before that.

Already modded guns are listed on Gunbroker for less than $500, and there’s no bidders. In Econ 101, we call that a market indicator.

That made us look at this site, where a Bubba enabler suggests committing all kinds of crude butchery on unsuspecting Russian service rifles.

At one point, he suggests you put your Mosin in a cheap plastic imitation of a sniper chassis stock, because “the look is incredible” (of course) and to save weight. Except the stock he recommends weighs more than the typical birch stick Ivan used, back in the day.

Q: What’s the value of a $150 Mosin in a $140 stock with a $80 muzzle brake and a $30 saw-off-bolt-on 90º bolt handle?

A: About $50.

And that’s why we’re of two minds about the whole Retro Black Rifle Restomod thing. We do believe that well-done smithing has its value, but when collectors enter a market everything takes third place to originality and condition. Now, no gun built from a “parts kit” extracted from a rare Class III weapon is going to be truly original, and an original retro AR is, thanks to the market distortions introduced by a Jersey grifter named Hughes, priced out of the range of most who would like one. So the market is a chaotic mess from the jump.

And with that, we think we’ve argued ourselves around to a position. To wit: it’s everyone’s right to customize their own property any way that suits ’em. We would hope that these customizations were done professionally (like this one), and added real value (like the creator of this one thinks he has done, from the asking price); and that Bubba entertains himself hot-rodding lawn tractors or building a Hemi Gremlin or something. But we can’t stop you from doing whatever you want to do, and we wouldn’t want to live in a world where we could.

And with that, we reserve the right to continue to condemn the actions, abilities and ancestry of Bubba the Gunsmite and all his legions. Fair?

Mold-Your-Own Plastic Lower

Here’s something new, a kit to mold your own plastic AR-15 lower receiver, from AR15Mold.com.

freedom15_group_v3_ar15mold.com_102115_2910x1245_970_415__56758

Here’s what the kit looks like, with some cleaned-up receivers. It produces a 100%, ready to assemble receiver, as soon as it’s extracted from the mold and the mold flash is removed (The flash is visible in the purple and black receivers in the image above; mold flash should be familiar to anyone who built plastic models, a once-popular boyhood hobby). If you look closely, you can see that the toolmarks in the mold are replicated in every produced receiver. It’s unclear without examining one whether the mold is machined directly from plastic (perhaps nylon) or whether it is injection-molded itself.

ar15mold_kit_with_output

The parts you make with this kit are not injection-molded, they are cast. What’s the difference? Injection-molding is done with heat to melt a thermoplastic (or thermosetting) and pressure to force the plastic in and air out of the mold. (Sometimes it is done in vacuum). Casting is done at ambient or near-ambient pressure and temperature, using gravity to fill the mold. (Some casting is done with an assist from centrifugal force, but not in this case). AR15Mold.com does suggest heating its two-part resins to approximately 100ºF for pouring into the mold. Complete instructions come with the kit, which costs about $360 with enough resin for five lowers.

The lowers accept mil-spec uppers and internals, with some caveats. The buffer tower is longer along its X (longitudinal) axis for more strength, making a fixed, rifle stock impractical without an alternative buffer retaining pin retainer. The part is also molded at the top limit of milspec (right on the +.003 tolerance line) for a tight fit, which is okay if your upper’s mating surfaces are +0/-.003 (or minus even a little more, at the price of some rattle). If your upper’s mating dimensions are on the plus side of the tolerances, you’ll need to do some hand fitting.

The bare molds look like this, but something is missing:

ar15mold_kit_minus_small_parts

The element that is missing is the inserts. You see, a complex part like an AR lower can’t simply be molded using a two-sided mold. That’s because it has some areas that are “blind” to the sides of the mold, or “undercut” from the point of view of that side. These blind, undercut areas require inserts that, in effect, extend the mold into the “blind” area, but are removable to allow the molded part to be removed. This picture shows the “small parts” of the AR15Mold.com “Freedom 15” kit, including the “inserts” (which are white).

ar15mold_kit_small_parts

The white “inserts,” clockwise from top center, include the trigger pocket, the buffer tower (if you embiggen the picture, you can see it bears a negative impression of the threads required here), the bolt catch slot and pin, the magazine well, the mold plug, the bolt catch detent pocket, the two inserts for the two sides of the magazine release, etc., etc.

It is possible to break some of these inserts if one were to gorilla-grip them during demolding. It pays to watch all the videos before making a lower.

No mold release compound is used or required with this combination of materials, although some wax on the pins is helpful. The  casting approaches we have covered previously have used RTV cast molds, and using of mold release compound has been crucial.

For the novice at casting, the how-to videos located on the website’s video page and on the company’s YouTube channel walk you through every step. The one that is likely to be most useful to kit buyers is called “Tips and Best Practices.” Another one shows them gingerly inching an F-150 onto a bare receiver. You can see the temporary deformation of the magazine well, but the receiver survived with no lasting damage.

That inspired Angus McThag (whom we thank for discovering this firm and its kit) and his friend Marv to conduct their own torture test, with a Mazda pickup (a Ford Ranger that identifies as Japanese) at 30 miles per hour.

We are reminded of the statement made in the ARMold video that they’re not claiming their receiver is indestructible. Good thing they’re not; McThag would take it as a challenge.

The manufacturer has already demonstrated reinforcing a lower with a steel insert and fiberglass.

There is now no earthly excuse for not making your own AR-15 lower, if you want to try, and live in a jurisdiction where it’s legal, which includes most (but not all!) of the United States. The methods include (in descending order of antiquity):

  1. Manual or CNC Milling from a raw forging;
  2. Manual or CNC Milling from billet;
  3. Manual or CNC Milling to complete a partially finished alloy receiver blank (aka “80% lower”);
  4. 3D printing a plastic receiver of PLA, ABS or Nylon, among other materials;
  5. 3D printing a plastic pattern of PLA, and lost-PLA-casting the receiver;
  6. Manual or CNC Milling to complete a partially finished polymer receiver blank;
  7. CNC Milling to complete a partially finished alloy receiver with the GhostGunner micro mill;
  8. 3D printing parts of a plastic receiver and gluing them together;
  9. 3D printing parts of a plastic “bolt” receiver and bolting them together;
  10. Cold-resin casting a lower using a mold taken from another lower; and, now,
  11. Cold-resing casting a lower using this kit.

We note that the resin casting has been done before; indeed, we’ve reported on it before. What ARMold.com has done is to provide a practical and complete kit for doing this. They have submitted to Firearms Technology Branch of the ATF for a determination letter; this may take some time, but it’s highly probable the determination letter will be forthcoming, because, frankly, nothing they send you can be plausibly defined as “a firearm” within the specific language of the Gun Control Act of 1968 or the National Firearms Act of 1934, as amended.

We also note that the more recent methods, near the bottom require fewer resources and less skill than the old “take this orthotopic rectangular cuboid of alloy and mill off everything that doesn’t look like an AR lower” approach. In other words, the trendline is towards lowered cost and difficulty.

The “Maker” spirit so animates the hobby gunsmithing community now, that it probably can’t be overcome. You can’t stop the signal, Mal.

 

What Are the Most Cloned Firearms?

The champion clone host of all time has to be the AK

The champion clone host of all time has to be the AK

What firearms have been the most cloned, in numbers and in diversity of nations and styles, in all history?

The AK. The M1911. The AR series?

What about the good old M1898 Mauser, daddy of Springfields and Arisakas alike?

Here’s one that probably deserves a place on the list, even if it can’t compete with the wide dispersion of the above-named category-creating firearms: the CZ-75. (Shown: CZ-75B Retro).

New CZ 75 B Retro 3

In the course of some book research we ran across this laundry list of licensed and unlicensed copies of the Koucky brothers’ design on Wikipedia (yeah, we know):

The clones, copies and variants by other manufacturers include:

Chile FAMAE FN-750
China Norinco NZ-75
Czech Republic CZ-Strakonice CZ-TT
Italy Renato Gamba G90
Italy Tanfoglio TZ-75, T-90 and T-95
Israel IMI Jericho 941 and Magnum Research Baby Eagle
Israel BUL Cherokee
North Korea Baek Du San “백두산권총”
Philippines Armscor MAP1 and MAPP1
Sudan Military Industry Corporation Marra and Lado
Switzerland Sphinx Systems Sphinx 2000, Sphinx 3000 and Sphinx SDP
Switzerland ITM AT-84 AT-88
Turkey Sarsılmaz Kılınç 2000 & Armalite AR-24
Turkey Tristar C-100 & Canik 55 Piranha
United Kingdom JSL (Hereford) Ltd Spitfire (No longer in business since 1996)
United States Dornaus & Dixon Bren Ten
United States EAA Witness Elite Gold
United States Springfield P9
United States Vltor Bren Ten

Some of these are rare, some are common (Springfield P9, EAA, IMI Jericho), and some are vaporware (Vltor Bren Ten). One shipped mostly without magazines, can you guess which?

And in addition to all the clones, the Wikipedia article lists 35 variants produced by the original manufacturer, Česká Zbrojovka, Uherský Brod. CZ has produced well over a million of these pistols. To put that in perspective, FN has produced a similar number of Browning High-Powers over a 40-years-longer period; but Colt and other US contractors produced some 2.7 million M1911 series pistols, mostly in two wartime rushes from 1917-19 and 1940-45.

We bet you didn’t know the sturdy CZ was that popular worldwide.

Blast from the Past: “Gun Pro” Correspondence Course

(This is the latest in our promised occasional substitution of a book review for When Guns are Outlawed. Let us know if you want us to stick with this feature in the comments — Ed.).

The seller warned us that this set of booklets wasn’t in the greatest condition. But we bought it anyway, and in a week or so the 1970s-vintage Gun Pro Course from the North American School of Firearms arrived at Hog Manor. We found that the actual course volumes, each of which is a photo-reproduced, triple-punched 8½ x 11 inch booklet of anywhere from five to fifty pages, were in excellent shape; only the slipcase was really in the trashed state that the conscientious seller was so careful to describe.

Whether the course was worth the money… depends. We think the used course, once the property of one Ralph D. Davis, by his ink marks in a couple of volumes, was worth the $20 or so we paid (we don’t remember the exact amount), but in its heyday it cost a lot more. It probably wasn’t worth that.

gun_pro_ad_field_and_stream_1977It was one of a variety of correspondence courses sold out of the back pages of magazines. Both small display ads and even smaller text-only classified ads promoted these courses. An example of the display ad is seen to the right; it came from Page 90 of the July, 1977 issue of Field and Stream. Similar display ads promoted the North American School of Conservation (Page 18) which offered you “the Badge of the Future,” although we doubt anyone ever got hired as a conservation or game officer after taking this mail course, and the North American school of Animal Sciences, which asked you to “Be a Veterinary Assistant!” with a picture of a big-eyed spaniel. These ads all invited responses to the same address, which would get you an “Info Pack” or “Career Kit” — a come-on to buy the course. This would have been larded with the usual direct-mail bullshit: grandiose boasts, empty promises, probably bogus testimonials with no real names: “Bill W., Akron, Ohio.” If you bought the course, it came to you in dribbles.  We’re sure people who took this course got jobs, but we doubt anyone, ever, got hired because he or she took one of these courses.

The core promise: “Make Big Money on Guns — Be a Gun Pro!” of the ad? How can we say this politely? Manure. Yeah, we like that word. That promise was manure.

The North American Correspondence Schools had addresses in Newport Beach, California and Scranton, Pennsylvania and at some time before the Event Horizon of the Internet, they completely vanished. It is possible that they were absorbed into an existing correspondence course marketing mill, Penn-Foster. That outfit also calls Scranton home, we believe.

The general consensus online is that the course was not very good. Here’s a sample of comments:

  • On The High Road, 6 March 2010: “I took both the North American School of Firearms and NRI correspondence courses 20+ years ago. TOTAL CRAP.”
  • On HandgunForum.net, 16 May 2010: “I have taken 3 gunsmithing courses. The first one was in 1975. The school was the North American School of Firearms, Newport Beach, CA (correspondence course). This course was mentioned in the NRA Gunsmithing Guide – Updated. I found it to be geared more towards the shooter than the gunsmith. The school is no longer in existence. Last year I took a “quickie” course from Phoenix State Univ. I got what I paid for.”
  • On FirearmsTalk.com, 11 June 2010: “I’ve taken 3 correspondence/online gunsmithing courses. 1. North American School of Firearms, Newport Beach, CA (mentioned in NRA Gunsmithing Guide), Phoenix State University Gunsmith Certificate program and Ashworth College School of Gunsmithing, Norcross, GA. Best by far (in my opinion) is Ashworth College and North American School of Firearms is no longer in existence (took that course in 1975) but by far the best way to learn is thru an established shop or by going to one of the accredited schools.” (We’ll come back to that last thought in a bit. This does seem to be the same guy who left the comment above -Ed.)
  • On The Firing Line, 13 July 2011:  “I took the Penn course and the North American School of Firearms course (no longer in business). They are garbage.”

We didn’t think they were that bad. The materials are certainly biased towards the complete novice… towards Bubba the Gunsmite, if he could only read. There is an overview of the history of firearms, good enough up to 1970 or so. And some of the instruction for hands-on work is useful, at least in terms of reducing the odds you will acquire the nickname “Bubba” working on your own firearms.

For example, the booklets on repairing single- and double-action revolvers, hands-on repair of which pretty much terra incognita to us, gave a useful explanation of what the parts of a revolver mechanism do, and some explicit instructions, with illustrations, for how to replace internals to restore a revolver to a proper lock-up. It’s given us enough confidence to bid on some gunsmith specials — if they come to us broken already, we have nowhere to go but up.

Of course, the booklets are full of 1970s values: there are descriptions of how to sporterize a military rifle or customize an original Colt SAA that will make a collector from now, 40 years later, cringe. And there’s absolutely nothing about the modern sporting rifle — in 1975, your choices were Colt SP1, Ruger Mini-14, or if you hunted long and hard, maybe a Valmet M62S or an FN-FAL. Those weren’t just representative modern rifles available then — that was almost all the modern rifles available then. They were also considered a bit out there by the Fudd culture of most gun magazines — they’d get reviewed in the then-new publication Soldier of Fortune, not in Guns and Ammo or Shooting Times so much. (The American Rifleman, NRA’s only membership magazine then, and Guns magazine seemed to take more interest in military-style firearms than the other mainstream gun magazines). So this class comes from an era when a gunsmith worked predominantly on revolvers and on bolt and lever action rifles, and slide and double-barrel shotguns.

But the bottom line is this: gunsmithing is a craft, and as such you can’t learn it from books. Period, full stop. Your shelves can groan with gunsmithing volumes, but if you can’t drive a set of files like you’re the Lord of All Metals, they might as well be written in Sanskrit. You can’t learn it from DVDs, either — sorry about that, AGI. It astonishes us that people who dutifully took Driver’s Ed when they were 16 before getting their driver’s license think nothing of taking machine tools to their firearms based on some time logged on YouTube. You can do that — it’s a free country — but don’t expect professional results first time out.

Any craft can only be learned by doing, or by hands-on instruction from a master craftsman. Hands-on instruction takes a lot of the painful trial and error out of learning, but rare is the master craftsman who has the patience to instruct a novice.

At $20 or $30 on the used markets, this is a good buy. More than that and you might want to let it go. And if you really want to be a gunsmith, start talking to the local guys… maybe someone will trade instruction for some help. Good old-fashioned apprenticeship is never out of style, when your objective is master craftsmanship.

Colt Bankruptcy Update 12 January 15

colt_bankruptcy_bannerAs we noted, Colt went back into bankruptcy court yesterday.

To explain what they were trying to do, here’s the Islamist wing of the news, al-Reuters:

11:30 a.m. – Colt Holding Co LLC will ask Judge Laurie Selber Silverstein of the Bankruptcy Court in Delaware to approve its amended reorganization plan. The plan was recently modified to reflect new terms for an investment by private equity owner Sciens Capital Management. The plan includes a five-year lease for the gunmaker’s Hartford, Connecticut, factory and an option for Colt to buy the facility, which has been a point of contention with bondholders during the company’s bankruptcy. For Colt: Mark Collins and Jason Madron of Richards Layton & Finger, and John Rapisardi, Peter Friedman and Joseph Zujkowski of O’Melveny & Myers.

All those lawyers were counting on a big payday — millions of dollars — but they, too, had to take a haircut when their deadbeat clients, Sciens Capital, stiffed everybody.

According to Peg Brickley in the Wall Street Journal, the deal was approved, and it immunizes the Sciens mismanagers from lawsuits, putting all prior misconduct above the law:

At a hearing Monday in the U.S. Bankruptcy Court in Wilmington, Del., Judge Laurie Selber Silverstein approved changes to the chapter 11 plan she confirmed last month. Approval came after the judge hesitated over endorsing provisions of the plan that shield Sciens from litigation over how it has handled Colt.

Creditors had criticized the private-equity firm for draining cash out of the company, leaving it without research and development funding to stay competitive. Sciens denied the allegations.

Then, they stiffed the court on their share of the equity contribution — getting essentially a 67% discount, and screwing the bondholders again. That’s the most interesting detail in the WSJ story: the deadbeats at Sciens stiffed the other entities not $5 million of their required $15 million, but $10 million — 2/3 of it.

Sciens missed a December deadline to fund $15 million of the cost of bailing its longtime portfolio company out of bankruptcy. Friday, Sciens came up with $5 million, and other creditors agreed to give the private-equity firm until early February to find the rest of the money.

Bondholders, you’ve given up your only leverage against these weasels.

Meanwhile, however, Colt wanted $50 million to implement its restructuring plan, money to pay lawyers and advisers and to get the troubled firearms manufacturer on its feet financially. Bondholders came through with an additional $10 million to make sure the company emerges on time.

There’s a term for this: throwing good money after bad. There’s a shorter term: stupid. And there’s a term for your entire investment in Colt to date, as long as the financial makers who have neither the skill nor the interest to operate a manufacturing company remain in charge: sunk cost.

Immunity from lawsuits is an important attraction for lenders and others that pitch in to a turnaround effort, earned by putting in cash or some other form of value. Sciens is seeking to hold on to the lawsuit shield that was justified by a $15 million funding pledge even though it has so far only come up with one-third of the amount.

Sciens contributed $5 million to the reorganization, but its lawyers stand to collect $2.6 million in fees, the judge noted at Monday’s hearing. Additionally, Sciens’s December failure to fund forced Colt to pay additional money to extend the maturity of its bankruptcy loan, the judge pointed out.

“I’ve got $3.1 (million) going out the door and $5 (million) coming in,” the judge calculated, questioning whether the gain for Colt justified letting Sciens off the hook for threatened lawsuits.

If she could see it was a rip-off, and she clearly could, then why did she approve the deal? Being a good Democrat, she valued the opportunity to kick the can down the road, to preserve the union jobs a while longer. But mainly because the creditors — the battered-wife bondholders — asked her to.

Why would they do that, when everybody knows there’s nothing in it for them but another beating?

Ultimately, she bowed to the arguments of Colt creditors, who said they backed the tweaked plan for “pragmatic reasons.” Steven Levine, lawyer for the consortium of bondholders that are funding Colt’s bankruptcy emergence, said the group decided “they could either have a viable company without litigation or have litigation without a viable company.”

Prediction: a year from now, Steve, we’ll see your creditors without both.

Bondholders decided to preserve Colt and grant the releases to Sciens despite its delay in providing funding for the bankruptcy exit, Mr. Levine said. Judge Silverstein cited the need to preserve Colt and the jobs of its workers in approving the changed chapter 11 plan.

Read the whole thing (and weep) at the Wall Street Journal or (if paywalled out) at Market Watch, or (if paywalled out both places) using this Google search.

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Industry News: Colt, STAG, Widener’s.

We’ve just gotten word of two changes in the industry, one that was expected, and one that came right out of the blue.

Colt Bankruptcy in Peril after Sciens Capital Welshes

colt_logo_mThey had one job. One job. The hedge-fund owners who ran Colt into the ground in the biggest bull market in firearms in recorded history, and somehow managed to convince a bankruptcy judge that they deserved to keep control of the company amid a curious Chapter 15 plan that prioritizes stockholders over putatively senior bonds, just had one little thing to do: deliver their share of the agreement’s capital injection, $15 million, by 28 December.

They didn’t do it, and were back in court early this week pleading for another month. Investors, hoping to recover something from the bad decision to buy bonds from these deadbeats, were willing to grant the reeling company until 31 January.

However, Colt managers waffled on whether the company could raise the $50 million at all; Friday afternoon, they were saying $45 to $50 million, indicating a probable $5 million shortfall on Sciens’s end.

Rather ominously, the managers’ (i.e., Sciens Capital’s) filings suggest that they don’t really plan to have the money then, either, and expect to just walk with the company, while having expropriated the bondholders, the union (UAW), and all of company’s creditors,  except of course for the LCC that owns the leased building, and acts as one more way to transfer the patrimony of Samuel Colt and company into the pockets of these Wall Street maklers.

At the close of the court and markets Friday (8 January), Sciens intimated that they had the money… but not right now, by 31 January.

Successful bankruptcy hinges on $50 million of new financing. Of that, $15 million was supposed to come from Sciens, $30 million in cash from the bondholders in addition to having their $250 million in bonds on which Sciens defaulted turned into minority equity in the new version of Colt, and up to $10 million as a “loan” from the State of Connecticut, the only people on the planet who consider Sciens creditworthy. The $10 million may go into the pockets of the Sciens managers to buy their building and end the lease. (Yes, the numbers don’t add up; they’re from this story at the Courant). The request to Connecticut came from the union, and would be the fourth time since the 1990s

It’s uncertain what happened to the company’s demand for $2.5 million in bonuses for top executives as a condition of exiting bankruptcy.

The Colt bankruptcy would make a great book; as early as 2014, National Defense, the magazine of the American Defense Preparedness Association, noted that the company had reacted slowly and ineptly to competition for US Army rifle and carbine contracts, and had failed to develop foreign markets.

As we’ve noted here many times before, Colt management was focused not on products or even on financial management of the going business, but on financial sleight-of-hand maneuvers that were designed to transfer as much of Colt’s earnings as possible to the owners. (For example, they dumped the historic Colt building in Hartford, and leased a building owned by insiders at over-market rates, a lease they did not try to break in bankruptcy).

Nothing new has been filed on their bankruptcy case site in the last couple of weeks. Maybe they stiffed their lawyers. (Unlikely. Bankruptcy lawyers take pains to get paid up front, for obvious reasons).

Hat tip, our good friend Nathaniel F at the ever-indispensable The Firearms Blog.

STAG Arms Sold to Investors; No Changes Right Away

stag_armsWe were expecting this, but we’ve been given to understand that in accordance with court agreements in the Great Lower Numbering Scandal of 2015, STAG Arms has been sold to a New York investment group unidentified at this time.

The Bristol, Connecticut manufacturer of budget-priced AR-15 variants, including interesting left-handed models, will continue to operate without significant changes. A new CEO will be named, and the present CEO continue as a paid consultant to the business.

Widener Reloading Sold to New Owners; Radical Changes & Teething

Founder Stan Widener has transferred Widener Reloading & Shooting Supply to new owners. The high-volume dealer has survived a variety of traumas in recent years, including nasty lawsuits, a storage fire and explosion in 2010, and being named in a scandal whereby a crooked middleman bought ammo and sold it to the US for use in Afghanistan at highly inflated prices (neither Stan, a respected jurist, nor the company were any part of the fraud).

The old Wideners was known for two things: a horrible, outdated website that seemed like it sprang onto the net direct from 1996; and very good, often industry-leading prices. Arfcom members are mourning the old company now, as it seems the new firm will reverse both of those things — there’s a slick new website, and for those products that are not discontinued, prices seem to have gone up by about 30% across the board, taking Wideners out of contention in the low-cost market.

Some discontinuations — like firearms — seem deliberate. Others may be due to website teething, of which there seems to be plenty.

Long-time Wideners customers have been disappointed to see the data from their previous orders did not make it across to the new website, although their accounts did. Also, the regular emails with bargains and offers seem to have stopped, but then, the bargains seem to have stopped, themselves.

 

 

2015 Set Records, Part II

Another record breaker: the Fairey Delta 2 of 1956, first measured record ober 1000 miles per hour. Just because it's pretty. From British artist Rod Kirkby.

Another record-setter: the Fairey Delta 2 of 1956, first measured record over 1000 miles per hour. Just because it’s pretty. From British artist Rod Kirkby.

In this post we’re going to introduce a new metric that we haven’t used before, for firearms sales. It is, like all others, an imperfect metric, because much confounding data is included here with he actual firearms sales. We’re referring, of course, to firearms manufacturer stocks, the prices of which rise and fall in a free market (and an open one, in the case of the three publicly held manufacturers).

The confounding factors include, among many others, the quality of management of the company, its debt load, the relative popularity of its products, and its ability to diversify in the face of market trends.

There are three gun and ammunition manufacturers traded in the United States: Smith & Wesson holding company (stock symbol SWHC), Sturm, Ruger and Company (RGR), and Vista Outdoor (VSTO). Other major firms, such as Remington, Glock, and Colt, are privately held. These companies have all benefited from the longest bull market in civilian firearms in American history. Their stockholders have not always been fitted proportionately, due to the many confounding factors mentioned above.

However, let’s have a look at the three stocks mentioned. We’ll copy charts from, and link to,  Yahoo Finance. Because that’s what we use. Disregard financial reporting that says these stocks hit new highs.

SWHC was up over 10% today, setting a record for the stock. This is its performance over 10 years. Over 10 years, it’s up 417%, but that can be in part an artifact of your start and end dates (remember, by definition we end on a high).

swhc_10_year

As you can see, it got taken to the cleaners in the Crash of 07, but has been on the rise since late 2011 — over 10 years, Ruger was up just under 7% today. It was up  yesterday in a market that was down. But here’s what it’s done over 10 years. Note that they took much less of a hit in the Crash of 07, but took a good hit last year. You also need to note those little blue diamonds — those are dividends. It looks like it’s paid some kind of a dividend every quarter since Q2 2009.

 

 

rgr_10_year

Gee, did something happen in Q1 2009 to change Ruger’s fortunes? What’s the word on the newcomer, Vista, which not only can’t do a 10 year chart, can’t do a one-year all the way out?

 

OK, so VSTO aside, what do these slopes look like? A little like this?

fbi_nics_annual_through_2015_final

Not very much, it seems. Maybe the best of the market is being captured by the privately helds, Remington, Glock, Colt and all those guys. Maybe there are problems converting prices into revenue. Maybe the markets are full of short players and Jittery Joes, who ride speculative bubbles until they’re cast into the abyss when the bubbles pop — sacrifices to what Keynes called the “animal spirits” of the market. You shouldn’t invest in any of these without looking at fundamentals, as well as your instincts. Read the analysts, understand the P/E ratios, see how they’re doing relative to analyst expectations.

(An odd thing about the market is that the analysts’ consensus sets the baseline for annual and quarterly earnings reports. If a company has higher revenue and earnings than expected, even if it’s losing money, the Street likes it, and it usually rises on the news; if it’s making money hand over fist but falls short of what the analysts predicted, it sinks. That makes report times a great place to unload turkeys if they beat the analysts, or pick up discounted gems if they disappointed the analysts but are still making coin and showing growth. But remember, we just told you not to time the market, especially not with the rent money — it’s a mug’s game).

However, we’ve been looking at the wrong charts. Because these charts just show you the stocks in isolation, and they actually sail upon the sea of the market in general. So we’d really like to see how they did against some baseline index. Two that are often used are the Dow Jones 30 industrials, a list of 30 huge firms that is what the radio reports when they tell you the stock market rose or fell, and the broader Standard and Poor’s 500 (which is 500 firms, not all of them as huge as the top 30). These indices run very close to one another. How do our gun stocks do relative to them? In a word, better. Here’s S&W:

swhc_vs_indices

Ruger:

rgr_vs_indices

Vista Outdoor (remember this is a shorter scale, corresponding to just the right 10% of the Smith and Ruger charts. That’s also why it looks more jagged — shorter span over same distance allows higher resolution):

vsto_vs_indices

There are several things to note about these stocks. Let’s discuss, first, the things that they all have in common. Apart from Vista, which only came into being when ATK spun off its commercial firearms business, they both show a long term rising trend. With some heart-stopping drops here and there.

Then there are things that set them apart. Our impression is that, overall, Ruger has much less volatility than Smith. The line is less jagged (at the same scale). It’s better, then, as a buy-and-hold play than as a try-to-time-the-market play (which is usually a fool’s errand. Millions of other investors are trying to do the same thing, and so are Goldman Sachs’s computers, with all of Goldman’s insider information from all the Goldman alumni salted like a fifth column through government and industry (to name just one).

Smith has also just (i.e., today) raised its sales and earning estimates for Q3 and Q4 2016, as well as for the whole year, which is an indicator of management confidence.

Right now both SWHC and RGR are getting a ton of attention, as they surge. People are betting on guns, not the President.

Much less attention has been lavished on VSTO, which owns Savage, Federal (ammunition), and a number of other brands you probably own in the firearms world: Uncle Mike’s, RCBS, Hoppe’s, Outers, CCI (ok, you probably don’t have any CCI, that’s the mythical unicorn, .22 ammo), Speer and Millett. They also have a number of non-firearms brands like Serengeti and Camelbak. Their stuff is in many niches in the market and at many price points.

Predictions:

  1. These three stocks close 2016 higher than they go in. If the Democrats do well in the fall elections, much higher because the year will end in a buying spree the likes of which we have not yet seen. But even if all gun ban crises pass, what remains is a market with more, younger shooters who shoot more often and who, in turn, attract (infect?) more new entrants.
  2. Any setback for any one of these stocks will spawn thumbsuckers at places like the New York Times and CNN concern-trolling the arrival of peak gun.
  3. Firms that make popular-priced self-defense handguns are well placed in this market and will do better than firms that do not.
  4. Vista Outdoor acquires one or more fireams lines that complement the only product they have right now, Savage rifles. Alternatively, they may move Savage into new lines.

2015 Set Records, Part I

New Year's Bang

Boom. That’s what happened to sales records in 2015.

tl;dr: NICS checks have set an all time record for 2015, one that’s 9.7% higher than the previous record, 10% higher than last year, which shaded off slightly from 2013’s record, and even 7% higher than our prediction of a new record, one month ago. This was thanks to an all time record month in December, with 3,314,594 checks recorded.

It was the first month to see over 3 million checks, and it blew past that number by over 10%. The previous record of 2.78 million was set in December, 2012; the new number is 19% higher.

Retailers tell us that this is not just panic buying (although there is a panic buying component, and manufacturers shoudn’t go overboard with capacity… yet). Still, we are seeing a structural realignment in the firearms market, with new users begetting new users, exponentially; most of them interested in self-defense and in practical shooting sports that the ATF argues are not sports because they were not yet common in the 1960s.

As we have noted before, there is no true measure of guns sold at retail in the United States, but there are several good proxies1 and their trendlines are all remarkably congruent. In addition, careful analysis of the three publicly traded firearms stocks and the SEC reporting of other regulated albeit privately held manufacturers and retailers can give a sense of the general health of the market.

We last discussed these statistics on 5th December 2015, and made a cautious prediction that 2015 could and probably would be a record year for these metrics. Do you remember this chart?

fbi_nics_annual_totals

The plateau at the end came from this data set. We had final data for November, but nothing for December yet. December is, experientially, the strongest firearms sales month. But what we did for December was to use not a projection of probable results — which we wrote, we expected to be well over two million NICS checks — but an average of the first eleven months of the year. These were the data if you want to try making the chart yourself:  FBI NICS 2015 with Dec 15 as average of Jan-Nov.xlsx

(Apart from the December projection, this is the same as the data on the FBI website but theirs is in a hard to copy .pdf., presumably to ensure it is not jiggered with).

Here is the current chart with final data from the FBI (.pdf):

fbi_nics_annual_through_2015_final

Per Ardua ad Astra, indeed. And here is the spreadsheet, should you like to play with the numbers yourself: FBI NICS monthly thru 2015 FINAL.xlsx

You can see from the first chart’s trace and data why we were cautious about predicting a record, and use a lot of  weasel words. Using that ultra-conservative projection, we would have just barely broken 2013’s total. But we thought a more realistic total might be well over two million, maybe two and a half.

Nope.

Three Million, Three Hundred Fourteen Thousand, Five Hundred Ninety Four.

NICS were at 1.5 million for December, 2008. Sure, as the Bureau warns somewhere on every NICSreadout:

These statistics represent the number of firearm background checks initiated through the NICS. They do not represent the number of firearms sold. Based on varying state laws and purchase scenarios, a one-to-one correlation cannot be made between a firearm background check and a firearm sale.

That’s true, as far as it goes. NICS include used guns, License To Carry checks, etc., but they also don’t account for multiple-firearms purchases (common in the collector community), and don’t account for firearms sales to LTC holders in those states that allow a current license to proxy for the NICS check (if an event that would cause NICS disqualification occurs, those states suspend or revoke the license).

December, then, was a record, and put us over the top (and how!) on an annual record. But December saw other, internal, records, also. The FBI also tracks peak NICS daily and weekly. December only saw one day in the top — 23 December made it on the bottom of the top ten (This year’s Black Friday was #1; the rest of the dates belong to 2012 and 2014). But three weeks in December made the top ten, along with two weeks from November, 2015.

Remember in the summer and in 2014 when all the journo hacks who went to Bloomberg’s propaganda camp were crowing about how we’d passed Peak Gun? What are they going to write about this?

Hell, they’re journalists. They’ll just make something up.

Note that this is labeled Part I. We’ll have a look at the NSSF Adjusted Data when we can get it (soon, we think it’s done already and they’re holding it for SHOT) and the ATF and Pitman-Robertson data when it trickles in.

 

 

 

Notes:

  1. Proxies for gun sales include FBI NICS checks, NSSF Adjusted NICS checks, ATF Manufacturing + Imports – Exports reporting, and Department of the Interior Pitman-Robertson firearms excise tax collections. Each of these is imperfect in some way, but considered together, they give a remarkably accurate picture of the market.

Stag Arms Guilty Plea and Fine — the Background

stag_armsRecently, the Stag Arms case has been resolved with guilty pleas by the firm and its founder, forfeiture of two Federal Firearms Licenses by the manufacturer, and a ban on FLL ownership for the founder. The company continues to operate while seeking new owners, and the founder only pled to a single misdemeanor.

Here is part of the US Attorney for the District of CT’s statement.

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Daniel J. Kumor, Special Agent in Charge of the ATF Boston Field Division, announced that STAG ARMS LLC, a firearms manufacturer in New Britain, pleaded guilty today in Hartford federal court to violating federal firearms laws.

“It is critically important for those who are responsible for manufacturing firearms, especially high-powered semiautomatic rifles, to diligently comply with federal firearms laws throughout the production and distribution process,” said U.S. Attorney Daly. “Stag’s misconduct has resulted in hundreds of these weapons being lost or untraceable. In addition, Stag’s possession of dozens of unregistered machine guns is particularly egregious. Federal firearms laws exist to ensure that all legal firearms are properly accounted for and don’t wind up on the street, and in the hands of those who shouldn’t possess them. Gun manufacturers who don’t follow the rules and violate federal law not only face license revocation, but criminal prosecution. I commend the ATF for expertly investigating this matter.”

“What occurred in this case is absolutely unacceptable and will not be tolerated,” said ATF Special Agent in Charge Kumor.

Yeah, right. What Kumor really opposes is the manufacture and private ownership of firearms, period. He’s a Party member, and that makes him a square peg in a square hole in ATF management.

“ATF relies on individuals and corporations who are licensed to manufacture firearms to mark them in accordance with the law, keep thorough records of the manufacture and disposition of all firearms and maintain their inventory in secure facilities to prevent their theft or loss. When firearms licensees fail to comply with these federal regulations and laws they open the door for untraceable firearms to wind up on the street in the hands of traffickers and criminals. Today’s guilty plea and the license revocations demonstrate our commitment to hold firearms licensees accountable when they place public safety at risk.”

The whole statement is here at ATF. Be aware that these statements are often argumentative in nature, and contain claims that the USA and the LE officials never took to court — they’re spin, basically. Remember that Daly, Kumor and the AUSA who handled the case, S. Dave Vatti, are all anti-gun political partisans committed to an aggressive gun control agenda. They all supported the ATF’s Gunwalker program that provided at least two to three thousand firearms directly to Mexican cartels, so their outrage about Stag’s record keeping is a bit… selective. The statement also contains some claims that are definitely not true.

Here is Stag’s statement; it’s very brief.

A STATEMENT FROM STAG ARMS, LLC

NEW BRITAIN – Tuesday, December 22, 2015 – Stag Arms, LLC today announced that the company and its founder, Mark Malkowski, have reached a resolution with government officials stemming from an investigation that began last year relating primarily to the timing of recordkeeping during the manufacturing process and compliance with federal firearms manufacturing and registration requirements. Both Stag Arms and Mr. Malkowski cooperated fully with the government throughout the investigation. While both Stag Arms and Mr. Malkowski believe that public safety was never compromised, they have agreed to enter guilty pleas and to pay significant fines, because doing so is in the best interests of the company and its employees. Mr. Malkowski has also agreed to transition the business to new ownership and is in advanced talks with a potential buyer. Mr. Malkowski will continue as a marketing consultant to the business and the industry for a period of time following the sale. Stag Arms takes its obligations to comply with all laws and regulations very seriously and has made comprehensive changes to ensure that similar problems cannot happen again and that best compliance practices are maintained in all of its operations.

In response to a question, a Stag spokesman confirmed that the company is up and operating.

The federal government has agreed to allow Stag Arms to continue operating with an effective firearms license during the transition to new ownership and the plan moving forward is for business as usual during the transition and beyond.

Stag is noted for reasonably priced, entry-level AR-15s. Its most unique products are probably its near-mirror-image left-hand models.

Stag Model 1L (left-handed).

Stag Model 1L (left-handed).

Lefty Stag Receiver

The dust cover, inverted so the same spring can be used on both sides, is the only give-away that this is not a flipped picture rather than an image of a mostly-flipped firearm.

ATF has its marching orders, which are to destroy FFLs, especially manufacturers. It gets froggy about this when its own party controls the executive, and eases up when its preferred politicians are out. But today, the mission is, “Get licensees!”

This is why they’re not taking MG cases that state investigators or other Feds develop, unless (1) the case is a slam dunk that the AUSAs won’t whine about, (2) the guy is a licensee, or (3) manufacturing without a license or (4) can be leveraged to inform on a manufacturer or dealer. That’s also why they’re not prosecuting straw buyers, instead running them as paid CIs against one dealer after another, trying to get one to agree to break the law.

Back in May we wrote this about this case, in a roundup of industry bad news:

Stag Arms is in a Legal Jam

Once again we’ll go to Guns.com for the tale of the tape, as it were.

Federal agents seized thousands of gun parts and documents from New Britain gun maker Stag Arms LLC today.

According to court documents, an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives revealed that Stag failed to comply with the National Firearms Act when agents found 3,000 unserialized machine gun lower receivers, and that the company failed to maintain documents for 136 unserialized receivers.

Stag’s owner, Mark Malkowski, was named as the claimant in the civil suit filed in Connecticut federal court on May 6.

ATF inspectors discovered the alleged violations last July and August during a routine check of Stag’s facilities and the inspector subsequently informed the company.

Tadeusz Malkowski, the federal firearms licensee for the Stag facility where the unserialized parts were found, told ATF inspectors that the receivers had been on the premises between seven and 30 days because the employee who serialized the receivers was on vacation, according to the filing.

This sounds pretty bad, but so far there have been no criminal charges. What is really happening here is that Stag’s Industry Operations Inspector seems to have gone wild on the firm.

The IOI reneged on a verbal OK previous IOIs had given the company about keeping spare receivers on hand to retro-serialize to replace damaged receivers for warranty or other repairs. If you do this, expect ATF to target you (not that they’re consistent at all from one office to another). If you want to keep receivers to be serialized as replacements, keep those receivers in an incomplete state, which ATF has generally interpreted to mean no milling or drilling of the fire control pocket (partially finishing the pivot and takedown pin recesses, broaching or EDM’ing the magwell, finishing the mag release and bolt release recesses, and partially finishing the buffer tower (drill and tap for receiver extension), have all been ruled OK in the past). Go beyond that without a serial number and maker name, city and state on the receiver and they will violate you.

ATF Managers and US Attorneys, including the ones involved in this case, have been given marching orders to destroy firearms companies, and especially, makers of Modern Sporting Rifles, by any means necessary.

Here’s the .pdf of one forfeiture complaint. As is customary with forefeiture proceedings, the “defendants” are the seized guns and they are guilty until Stag proves them innocent. The file is courtesy of Guns.com.

ATF_Stag_forfeiture_complaint.pdf

The forfeiture complaint makes little sense to us, as they charge that these receivers were unserialized, but they list them by serial number. There are also many fewer receivers listed in this complaint than the 3,000-plus that the ATF supposedly seized. Three thousand receivers are a staggering number but as Stag produces about 150,000 a year, it’s really only a week’s production.

The anti-gun reporters at the Hartford Business Journal breathlessly reported that, “a large cache of gun parts” was found — at the gun factory. Layers and layers of editors!

In court filings and to the Hartford Business Journal, ATF agents charged that Stag is “suspected of ongoing illegal activity” and “unauthorized trafficking of guns.” They have also called all the receivers the company had on hand “machine guns,” and have obtained an opinion from the ever-flexible Firearms Technology Branch supporting that position.

Nothing in this seems to be changed by the case’s resolution, except that Mark Malkowski was charged with one or more felonies, did enter into a plea bargain to plead to a single misdemeanor, and did enter into a consent agreement not to apply for an FFL. He is not barred from working in the industry, working for an FFL, or owning personal guns.

To recap, the problem was caused by the receivers being processed in two separate locations — separately licensed as 07 FFL manufacturers — with the serial numbers added only after completion. This meant that at any given time there was work in process that was literally not legal because it consisted of complete, unserialized receivers. This process had been approved verbally by previous IOIs, but even a written opinion from ATF is not considered binding or precedential by ATF, when they want to get you; a verbal opinion is not worth the paper it isn’t written on.

It looks in the end like it was an expensive, near-death experience for Stag. The large fines paid will be put to work to further persecute industry firms and lobby for more gun control. As a GEICO ad might say, if you’re the ATF, that’s what you do.

Moral of story, bend over backwards to be in compliance with the letter of the law, and put no faith in any variances from untrustworthy people at an untrustworthy agency. Then maybe they’ll make someone else the example. Like they did to Malkowski and STAG.

They left themselves open to this difficult case by their efficient, but literally illegal handling of AR receivers. They were probably singled out due to Malkowski’s high profile on 2nd Amendment issues, and opposition to the Governor of Connecticut’s anti-gun platform.

Colt to Emerge from Bankruptcy

colt_logo_mIt looks like Colt is on its way out of bankruptcy by year’s end, the manager-owners having got what they wanted, retention of control and ownership of the company. The lenders get new debt worth, on paper, a fraction of the bad debt the owners ran up as they mismanaged Colt to the poorhouse amid the largest sustained boom in firearms manufacturing and sales since V-J Day.

The court has signed off, but an initial read of the documents (you can find them here) makes it look questionable for the survival of the firm in the long term — in other words, the can has been kicked down the road a piece.

If you could hook some wires and brushes up to old Sam’l now, you could probably power the plant off his spinning.

Overview

Colt seems to have haircut its lenders, mostly, without significantly lightening its management or cost burdens. They still have the New York hedge fund managers who have little interest, it seems, in product and simply run the thing as a personal piggy bank. They still have the sweetheart lease deal which means that even if the owners were somehow bought out, the company is stuck paying them .They still have the UAW with the cost, flexibility and quality problems that put three UAW-free and dog-dependable Toyotas in our garage here after decades of making excuses for Detroit. (Just got stuck with a rental Malibu that confirmed that Government Motors still makes all crap, all the time. But we digress). They still are mired in the hostile state of Connecticut, having bungled an attempt to move some production to FL and burned that bridge thoroughly, and are stuck with among the nation’s highest costs for taxes, energy, and regulation.

The lease on the plant was the deadline that made the hedgies move at all. Absent action, it was up in January, 2016, and so if the case was still in court at the time they were at risk of losing this very rich income stream.

But There May Be Some Good News

Apart from the financial games, the worst result of hedge fund management has been Colt’s lack of competitive new products — and there, the filings offer a glimmer of light on the horizon.

First, let’s consider how Colt it got into the gym that it’s in. Lack of product development plays a role. Let’s consider market segment by market segment. Colt does make an excellent AR and has great name recognition, but it’s beset by lower-cost competitors, and has to sell its rifles for a premium price.

Both pars of this lash-up were made by Colt. But that was then....

Both pars of this lash-up were made by Colt. But that was then….

Colt needs to depend on the civilian market. Military budget growth is declining even as other manufacturers muscle in on Colt’s once-monopolistic position.

Apart from the AR-15, Colt has always been known as a handgun maker. It provided the United States its martial sidearms from 1847 to 1983. It was one of the two most trusted purveyors of revolvers to the police in the 19th and 20th centuries. It parlayed a long relationship with John M. Browning into a series of both service and pocket pistols that are iconic collectors’ items today; indeed, Colt’s adoption of Browning’s automatic pistols when it was on top of the world with its revolvers offers an extremely rare example of a market-dominant firm embracing a disruptive technology.

It took nerve to futz with things like this while your revolvers were in highest demand.

It took nerve to futz with things like this while your revolvers were in highest demand. A Colt “sight safety” Model 1900, product of the prolific genius of John Browning, and ancestor of the 1911..

Colt All American 2000. Like many flops (Edsel? Anthony dollar? R51?) it's ugly as a mud wallow. The polymer frame version is uglier yet.

Colt All American 2000. Like many flops (Edsel? Anthony dollar? R51?) it’s ugly as a mud wallow. The polymer frame version is uglier yet.

But after falling out with Browning, Colt struggled to develop next generation guns. They never developed an effective double-stack service pistol, and the attempts range from feeble to tragic (consider the All American 2000). They never developed a decent double-action automatic, either. And their entry into the booming market for pocket pistols is… a plastic-framed single-action designed to look and work like the 1911, and thus feeling just about a century out of date.

So Colt needs some new products. And in the latest Amended Exhibit C and D, they open the kimono just a tad, to hint that, yes, new products are on the way. First, some assumptions:

Commercial/ Law Enforcement Assumptions

  1. The commercial channel is Colt’s largest long-term growth opportunity given Colt’s low market share and high level of brand recognition. These products offer attractive gross margins and will be a key focus for management to drive overall profitability.
  2. The Company plans to expand its production capacity and efficiency to support growth in market share in the commercial segment.
  3. Based on current demand, revenue from existing rifle and hand gun products is projected to achieve a compounded annual growth rate of 2.6% from 2015- 2019.

Item (a) indicates that they’re not delusional about their prospects. Item (b) pretty much says new products are coming, and (c) makes us wonder where they picked the number from… except that all the projections in these schedules are 2.5 or 2.6%, which they also tell us is what projected inflation is. But if we continue on, we get more direct confirmation.

d. New product lines developed by the Company are projected to generate approximately $265mm in sales over 2016-2019. The table below highlights the required investment and estimated sales for 2016 to 2019, for the commercial new product offerings:

New Products Summary ($000’s)

2016-2019

Product

Projected Investment

Estimated Sales

New Product A

$0

$74,749

New Product B

3,150

60,000

New Product C

1,100

52,500

New Product D

4,250

55,000

New Product E

5,600

22,500

New Product F

6,500

0

Grand Total

$20,600

$264,749

We can make some assumptions about these products. New Product A requires no investment, so it must be something they’ve already worked up. New Product F, on the other hand, is introduced so late on the schedule (2016-2019) that its investment has not yet begun to be returned by period’s end.

The sort of bank they’re expecting to make here — $75 million for New Product A, for instance — suggests that they’r expecting some really large unit sales numbers. We’re thinking that some of these products will be cosmetically altered existing production products, but that some of them will have to be brand new, and one of those — perhaps E or F given the large investment required — will be the new pocket pistol.

It will be interesting to watch, that’s for sure. Colt has certainly had its ups and downs over the years, but it’s never been dull.