What would you do if you owned Colt's Manufacturing LLC?

[Old Fuff]

That will require some production innovation, or they'll die off.

I agree with this observation up to a point... But:

Colt's current tooling situation is much better then it was at times in the past. Obsolete tooling isn't a major concern at this time.

It is unlikely that Colt could come up with many (if any) production innovations that they're major competitors don't already have and use.

You're clearly not getting this... If a deal could be crafted today amongst everyone who owns or is owed money by Colt to sell its assets for a price that could largely be serviced by its current operating income (which would require a deep discount for all), the assets would sell very, very quickly.

Once it was a going concern again it could easily be flipped for a premium.

Oh I get it just fine. I worked in various capacities within the firearms industry for over a half-century, and personally knew some of the principals in this story. Among other things I did extensive market studies for various parties.

At the present time Colt has 3 product lines to offer: AR15 rifles, 1911 style pistols, and 1873 Single Action Army "cowboy" revolvers. All these are literally filled with competitors making similar products, with many out producing Colt at what should be their own game.

While at the same time they have absolutely nothing in areas such as polymer constructed/striker fired/high magazine capacity magazine pistols of various sizes.

Now I personally have no fondness for these, but the truth is that they sell in far greater quantity then anything Colt has to offer, at a much lower production cost on one side, and profit return on the retail side. They also dominate most of the law enforcement market, which is a substantial component within total handgun sales.

And while I dearly love hand-ejector revolvers, I clearly understand that with the exception of small-frame snubbies the overall revolver market is declining, with every indications this trend will continue.

So any serious future investor in the Colt operation will before they jump, take a careful look at the handgun market as it exists in 2015 and probable future, and what they can expect to get from Colt's current assets - with a careful assessment of how they fit current (not past) market conditions. And after doing so will likely become disinterested - unless they can be added to a successful ongoing and established business that wants to plug some holes.

 

[Vern Humphrey]

Where did "muti-billionaires" come from? One need not be a "multi-billionaire" to be wealthy.

To buy Colt, you must have several billion dollars.

To answer your question I know a good number of wealthy people who aren't exactly brilliant (although they would recognize the value of buying the assets of Colt at a price that could be serviced by its operating income) who got their money the old way -- through inheritance and interest.

There's an old saying, "If you're so smart, why aren't you rich?" I would keep that saying in mind before I accused someone who has made himself a multi-billionaire of being stupid.

 

[Officers'Wife]

I'm curious -- why would you cleave apart commercial and government sales like that? Colt just brought them back together. I don't see other gun makers cutting up their companies like that either -- although most have gov't sales/supply office.

Also, why the comment about "QC people?" Colt seems to be building very high quality products these days. Besides, high product quality comes from excellent designs, materials and workmanship -- and not inspection which is a terrible waste.

A number of reasons, the top two; anytime the .gov hands out contracts there are strings attached. Separating the two would insure the strings don't tie the hands of the citizen.

Second, the Colt mystic is that Mr Colt produced the "Equalizer." a tool for the common man. I believe the consumer would more likely equate a tool available to all citizens with the original "Peacemaker" than a line that a third of the products can only be obtained by the state.

As for QC, it's acknowledging the modern reality that pride in craft is a dying relic of another era but tool users expectations haven't changed. If I were to produce a tool, from an end wrench to a handgun, I would see every customer as my great grandfather that bought his Colt in Montana circa 1905 secure in the knowledge it would be used for generations. What would the reputation of a company be if a tool straight out of the factory needed to be "tuned" by a gunsmith to function dependably? I am a nice Catholic girl sir, I treasure my reputation and go to great lengths to protect it.

 

[Aragon]

To buy Colt, you must have several billion dollars.

You're simply wrong.

Ruger's entire market cap is $1.05B. S&W's is $829.04M. Each has some debt but not a ton. Colt current owes $353M plus limited additional debt. That $353M will be sharply discounted if a buyer emerges. The ultimate cost would even be less if it goes through bankruptcy.

"Several billion dollars" to buy Colt? No way.

 

[Aragon]

A number of reasons, the top two; anytime the .gov hands out contracts there are strings attached. Separating the two would insure the strings don't tie the hands of the citizen.

A government sales office/bureau would do the same thing and be far less costly and disruptive.

Second, the Colt mystic is that Mr Colt produced the "Equalizer." a tool for the common man. I believe the consumer would more likely equate a tool available to all citizens with the original "Peacemaker" than a line that a third of the products can only be obtained by the state.

As for QC, it's acknowledging the modern reality that pride in craft is a dying relic of another era but tool users expectations haven't changed. If I were to produce a tool, from an end wrench to a handgun, I would see every customer as my great grandfather that bought his Colt in Montana circa 1905 secure in the knowledge it would be used for generations. What would the reputation of a company be if a tool straight out of the factory needed to be "tuned" by a gunsmith to function dependably? I am a nice Catholic girl sir, I treasure my reputation and go to great lengths to protect it.

Interesting. Rather than instill/re-instill "pride in craft" (along with other measures) in those who actually design and build the guns, you would resort to adding inspection -- something which is costly, non-value added and proven not to work.

 

[Aragon]

Oh I get it just fine. I worked in various capacities within the firearms industry for over a half-century, and personally knew some of the principals in this story. Among other things I did extensive market studies for various parties.

At the present time Colt has 3 product lines to offer: AR15 rifles, 1911 style pistols, and 1873 Single Action Army "cowboy" revolvers. All these are literally filled with competitors making similar products, with many out producing Colt at what should be their own game.

While at the same time they have absolutely nothing in areas such as polymer constructed/striker fired/high magazine capacity magazine pistols of various sizes.

Now I personally have no fondness for these, but the truth is that they sell in far greater quantity then anything Colt has to offer, at a much lower production cost on one side, and profit return on the retail side. They also dominate most of the law enforcement market, which is a substantial component within total handgun sales.

And while I dearly love hand-ejector revolvers, I clearly understand that with the exception of small-frame snubbies the overall revolver market is declining, with every indications this trend will continue.

So any serious future investor in the Colt operation will before they jump, take a careful look at the handgun market as it exists in 2015 and probable future, and what they can expect to get from Colt's current assets - with a careful assessment of how they fit current (not past) market conditions. And after doing so will likely become disinterested - unless they can be added to a successful ongoing and established business that wants to plug some holes.

You're still avoiding the point. Once more: If all the assets of Colt's Manufacturing LLC could be purchased for a price that was serviceable by its current operating income (be it the interest on the money borrowed, or an acquiring company's acceptable IRR) then it would be a good deal. It would be quickly snapped-up by someone.

Those that own Colt and are owed by Colt don't want to take the giant hit that would make that a reality however.

 

[Vern Humphrey]

Just for information, Colt stock closed at $155 a share last week. There are 896 million shares outstanding. To boy a 51% interest in Colt would cost you more than $70 billion.

Of course, once you started buying at a scale that would give you controlling interest, that would drive Colt stock prices higher, and you'd have to have a good deal more than $70 billion to actually take control.

 

[Jackal]

I'd strip Colt down to the bare essential gun production, do those things WELL and build some capital. I'd also shift my AR production to a more BCM/PSA like structure, offering a more "build your rifle" approach. More of a custom shop attitude and less of a basic carbine mentality. I'm sorry, almost no one wants a fixed sight post anymore. Not when many FF tubes/iron sight combo's weigh the same or less as a A2 front end.

 

[Officers'Wife]

Just for information, Colt stock closed at $155 a share last week. There are 896 million shares outstanding. To boy a 51% interest in Colt would cost you more than $70 billion.

Of course, once you started buying at a scale that would give you controlling interest, that would drive Colt stock prices higher, and you'd have to have a good deal more than $70 billion to actually take control.

Introducing reality to a pleasant hypothetical is roughly akin to having a group sitting down to feast on perfectly barbequed pork ribs then having the host mention the pig's name was "Oinky" and he had a black spot on his nose.

 

[Vern Humphrey]

Introducing reality to a pleasant hypothetical is roughly akin to having a group sitting down to feast on perfectly barbequed pork ribs then having the host mention the pig's name was "Oinky" and he had a black spot on his nose.

Oinky was delicious.

 

[Mike OTDP]

If I were taking over Colt, I'd be thinking along the following lines:

1. Move production to a cheaper location.
2. If I could do it for under $1500, revive Python production. Possibly by subscription (purchasers put up a deposit).
3. Get ahead of the Tactical Tupperware craze with a pistol that has a fully integrated red dot sight and light system. I'd seriously consider an electronic trigger on this gun if I could get it to work.
4. Concentrate on the high end 1911s and ARs.
5. Produce a quality .22 pistol. No potmetal plinkers.

 

[wojownik]

Introducing reality to a pleasant hypothetical is roughly akin to having a group sitting down to feast on perfectly barbequed pork ribs then having the host mention the pig's name was "Oinky" and he had a black spot on his nose.

Worse than mentioning the pig's name, is getting the wrong pig.

The "Colt" trading at $155 per share is Colt Group S.A. a multinational telecom and IT services services company headquartered in London, UK.

Colt Defense is not a publicly traded stock. Colt withdrew their IPO in June of 2005, and never went public. However, at the time, the IPO amount was $86.25 million (for a portion of the company).

 

[gulogulo1970]

Wanting to hold true to their traditions, I would give myself a enormous bonus and then leave the company.

I hope they will survive, all jokes aside. They are my favorite gun brand. I just think if they can get some sort of bankruptcy protection(if that's even possible) they need to take whats left and move down south and be a semi-custom gun maker. Make guns the likes which Ed Brown couldn't make much better. Make special guns with correspondingly special prices. If you cannot compete with S&W and Ruger then don't, make something special.

 

[RustyShackelford]

Colt and redevelopment .....

I'd take all of Colt and scale down all operations-manufacturing to public service(law enforcement) & military-defense only.
No custom stuff, no revolvers, no 1911s for the US public.
I'd consider relocation of the entire plant to a more 2A+/labor ideal location but after the big Florida scandal, I would not see any elected officials or cities being open to new sites/locations.

Colt in 2015/beyond should stick to ARs, 1911a1s, parts, military weapons-DoD stuff only.
DA revolvers and western firearms would be nice but in 2015, it's niche market that over time will get smaller & smaller.

 

[DeepSouth]

I'd hire Mike Fifer (Ruger CEO) and hope he could fix it.
.
.
.
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On second thought, I'd sell it to the high bidder and retire early, who needs the hassle.

 

[Aragon]

Just for information, Colt stock closed at $155 a share last week. There are 896 million shares outstanding. To boy a 51% interest in Colt would cost you more than $70 billion.

Of course, once you started buying at a scale that would give you controlling interest, that would drive Colt stock prices higher, and you'd have to have a good deal more than $70 billion to actually take control.

LOL!! What are you on?

Colt's Manufacturing LLC is not a publicly traded company. There are no shares outstanding. There are bonds and other debt as someone else pointed out:

$250M issue of 8.75% unsecured notes (the bonds)
$33M secured "rescue" loan
$70M secured "lifeline" loan (Morgan Stanley)

That's $353M that Colt's Manufacturing LLC owes. I'm sure it owes a bit more to some vendors and others. In any event, the price to buy Colt (once a deal was struck or out of bankruptcy) would be far, far less than $353M.

As a comparison, Ruger's market cap (total number of shares outstanding x current market price/share) is currently $1.05B. S&W's is $829.04M.

 

[Aragon]

I'd hire Mike Fifer (Ruger CEO) and hope he could fix it.

I would likely hire Chris Killoy or Tom Sullivan from Ruger, depending on whether Colt was more in need of a marketeer or an operations executive.

 

[Aragon]

Wanting to hold true to their traditions, I would give myself a enormous bonus and then leave the company.

I hope they will survive, all jokes aside. They are my favorite gun brand. I just think if they can get some sort of bankruptcy protection(if that's even possible) they need to take whats left and move down south and be a semi-custom gun maker. Make guns the likes which Ed Brown couldn't make much better. Make special guns with correspondingly special prices. If you cannot compete with S&W and Ruger then don't, make something special.

LOL! So true! If you were shrewd enough to cut a great deal, the next thing to do using the "Colt Way" would be to take out the biggest loan you could against the company and then find a tax-free way to transfer the $$$ to yourself.

 

[Aragon]

Worse than mentioning the pig's name, is getting the wrong pig.

The "Colt" trading at $155 per share is Colt Group S.A. a multinational telecom and IT services services company headquartered in London, UK.

Colt Defense is not a publicly traded stock. Colt withdrew their IPO in June of 2005, and never went public. However, at the time, the IPO amount was $86.25 million (for a portion of the company).

Aha! That explains it! I was fearing that the ODD valuations of Colt were due to drug and/or alcohol abuse or possibly the ravages of old age. Thanks for clearing this up.

[NB: Is not the whole Colt shebang (including the assets of Colt Defense) now "Colt's Manufacturing, LLC"?]

 

[Vern Humphrey]

LOL!! What are you on?

Colt's Manufacturing LLC is not a publicly traded company. There are no shares outstanding. There are bonds and other debt as someone else pointed out:

From: http://www.gurufocus.com/term/Shares Outstanding/LSE:COLT/Shares+Outstanding/COLT+Group+SA

Colt Group SA (LSE:COLT)

Shares Outstanding

896 Mil (As of Dec. 2014)

Shares outstanding are shares that have been authorized, issued, and purchased by investors and are held by them. Colt Group SA's shares outstanding for the quarter that ended in Dec. 2014 was 896 Mil.

Colt Group SA's quarterly shares outstanding declined from Jun. 2014 (900 Mil) to Dec. 2014 (896 Mil). It means Colt Group SA bought back shares from Jun. 2014 to Dec. 2014 .

Colt Group SA's annual shares outstanding stayed the same from Dec. 2013 (898 Mil) to Dec. 2014 (898 Mil).

Colt Group is the parent company, the owner of Colt Defense LLC

 

[Aragon]

From: http://www.gurufocus.com/term/Shares Outstanding/LSE:COLT/Shares+Outstanding/COLT+Group+SA


Colt Group is the parent company, the owner of Colt Defense LLC

Sorry but no sale. Colt's Manufacturing and Colt Defense have once again been combined (as Colt's Manufacturing, LLC) and they are not part of "Colt Group S.A." (a multinational telecom and IT services services company headquartered in London, UK as someone else pointed out.) If they were, they wouldn't be on the ropes right now fighting for their life.

You need to start doing your homework.

 

[RustyShackelford]

Fwiw ....

I'm no firearms expert or read Jane's Defense Weekly but I think part of Colt's current woes include the fact that many of the senior staff or craftsmen who created the classic Colt DA revolvers are either retired or on the way out.
New hires and improved machinery aren't going to change that.

 

[Aragon]

Introducing reality to a pleasant hypothetical is roughly akin to having a group sitting down to feast on perfectly barbequed pork ribs then having the host mention the pig's name was "Oinky" and he had a black spot on his nose.

There goes your reputation (for accuracy.)

 

[Elkins45]

Aragon, here's some friendly advice: you probably would be happier if you spent less time thinking about Colt.

 

[Aragon]

Aragon, here's some friendly advice: you probably would be happier if you spent less time thinking about Colt.

Why? Maybe I'll buy it...