Our revenues are derived primarily from sales of firearms and ammunition products. Firearms and ammunition accounted for approximately 94% of our sales in 2003 and 93% of our sales in each of 2002 and 2001. We are the only domestic manufacturer of both firearms and ammunition. Our other product lines include firearm-related accessories, clay targets and powdered metal parts. Our sales are seasonal due to the need to meet customer requirements for hunting/shooting sports products during the primary hunting season. Sales in the third quarter are generally higher than sales in other quarters.

Recent Developments and Highlights

In February 2004, we sold specified assets related to our fishline business, including fixed assets, inventories, and intellectual property for $44.0 million in cash, $1.0 million of which has been placed into escrow as security for certain post-closing obligations. As a result of the sale, the results of those operations have been included in discontinued operations and prior periods have been reclassified to conform to the current year presentation. Management believes that the Stren transaction provides Remington with additional flexibility to pursue various strategic alternatives.

A private offering of $200.0 million principal amount of 10½% Senior Notes due 2011 of the Company (the “Notes”), was completed in January 2003. In the event of a change in control, the Notes may be tendered at the option of the holders for the principal amount plus applicable interest and premium at that date.

The refinancing by Remington of substantially all of its existing indebtedness through (i) the repayment of all amounts outstanding under the Old Credit Agreement concurrently with the termination of all commitments thereunder, and (ii) the redemption of all of the Refinanced Notes at a redemption price equal to 100% of the aggregate principal amount of Refinanced Notes then outstanding of $86.9 million, plus accrued and unpaid interest and (iii) the closing by Remington of a new Credit Facility, under which up to $125.0 million of revolving credit commitments are available, subject to borrowing base and other limitations. The refinancing occurred in January 2003.

On February 12, 2003, we completed transactions related to the recapitalization of Holding, including the issuance and sale by Holding, for consideration of $30.8 million, of 140,044 shares of common stock of Holding to Bruckmann, Rosser, Sherrill & Co. II, L.P. (the “BRS Fund”) and others. As part of the re-capitalization of Holding, 15,970 deferred shares of Holding were distributed as 15,970 shares of common stock of Holding, 722,981 of the outstanding shares of common stock of Holding were repurchased and 64,144 options were accelerated and cancelled in respect of common stock of Holding, in an aggregate amount of approximately $163.7 million, consisting of $130.8 million in cash and $32.9 million aggregate principal amount of senior notes of Holding, or (the “Holding Notes”). The Clayton & Dubilier Private Equity Fund IV Limited Partnership holds (“C&D Fund IV”) all of the Holding Notes.

Seasonality

We produce and market a broad range of firearms and ammunition products used in various shooting sports. Several models of our shotguns and several types of ammunition are intended for target shooting that generally occurs in the “off season.” The majority of our firearms and ammunition products, however, are manufactured for hunting use. As a result, sales of our products are seasonal and concentrated toward the fall and winter hunting seasons. We follow the industry practice of selling firearms pursuant to a “dating” plan allowing the customer to buy the products commencing at the beginning of the our dating plan periods and pay for them on extended terms. As a competitive measure, we also offer extended payment terms on select ammunition categories. Discounts for firearms and ammunition amounting to $5.5 million, $6.3 million, and $7.0 million were given in 2003, 2002, and 2001, respectively. We believe that these dating plans have partially offset the seasonality of the Company’s business.

As a result of the seasonal nature of our sales and the extended payment terms under our dating plan billing practices, our working capital financing needs generally have significantly exceeded cash provided by operations during the middle of a year, until our extended accounts receivable were collected in the third quarter. As a result, our working capital financing needs tend to be greatest during the late winter and early summer months, decreasing during the fall and reaching their lowest point during the early winter.

Outlook

Management believes that the demand for firearms and ammunition products depends on a number of factors, including the general state of the economy, which in turn may be impacted by geopolitical or other world events. The volatile nature of the current economic and geopolitical environment makes it difficult to forecast whether this trend will continue. Management currently does not expect any significant improvement in general conditions in the markets in which we operate, and believes that the softness in demand for our products that we experienced beginning in the fourth quarter of 2002 and throughout 2003 may continue into 20041.

In your own words, describe the industry and its outlook; then summarize the company’s future plans based on your research (cite at least two sources) and on reading the annual report.

Answer rating: 100% (QA)

The firearms and ammunition industry is a highly competitive market It is comprised of a variety of players including domestic and international manuf... View the full answer