JUNE 11, 2019

Throughout May 2019, competitive shooters using Walther pistols have earned nearly $14,000 at various IDPA and USPSA matches across the United States.  Walther Contingency dollars are available to 1st and 2nd place winners at most USPSA and IDPA matches. 
Junior Trap action was intense during last week’s USA Shooting National Championships and competitors get to do it all over again this week as the 2019 National Junior Olympic Shooting Championships (NJOSC) for Shotgun takes place today and Wednesday.
The Civilian Marksmanship Program has announced the enhancement of numerous events scheduled during the National Pistol and Rifle Matches. The recent developments of the National Matches will provide guests with more opportunities to compete, improve and take part in the World Series of Shooting Sports that has inhabited the Lake Erie summer shore since 1907.

Breakthrough Clean Technologies is proud to announce that, in partnership with the USA Clay Target League, they will be exhibiting at the Minnesota Trap Shooting Championship.
Viridian Weapon Technologies is showcasing the FACT Duty Weapon-Mounted Camera at the annual National Sheriffs’ Association Conference and Exposition in Louisville, Ky. The conference will give law enforcement personnel an opportunity to experience the evidence-gathering camera and sign up for a no-cost testing & evaluation program.
Savage’s new MSR 10 Precision rifle is loaded with features and ready to compete. This extension of Savage’s MSR 10 lineup delivers match-winning accuracy with a stainless steel heavy barrel and 5R button rifling.

Primary Arms announces a new rifle giveaway for June: the company will be giving away a brand new 9mm pistol-caliber carbine. This build features Glock 17 magazine compatibility and many other features.
German Precision Optics USA has created an industry-leading Spectacular Lifetime Warranty.  GPO will take care of any of its products at no charge to the owner, ever. If the product is not functioning properly, GPO USA will repair or replace it with a product that is in perfect working condition. 
Smith & Wesson Corp. recently presented Honored American Veterans Afield with a donation of $20,000 to help fund HAVA-sanctioned hunting and shooting activities for disabled veterans and injured active military personnel.

Mossy Oak is proud to announce a strategic partnership with Outtech Inc., an alliance that will expand into hunting, fishing, shooting sports, outdoor lifestyle, and many other outdoor-related pursuits.
SIG SAUER Academy announced the addition of the Ballistic Data Xchange Optics System Course to the upcoming class schedule. BDX is a fully integrated rangefinder and riflescope system that utilizes Applied Ballistics Ultralight and Bluetooth using an Android or iOS device to calculate and illuminate the exact holdover dot for the perfect shot.
Galco is excited to announce additional fits for the Speed Master 2.0 Paddle/Belt Holster. New fits include the Kahr PM and MK series in 9mm and .40 S&W, and a variant for the Kahr P and CW series in 9mm and .40 S&W with Crimson Trace Laserguard.

MTM introduces the Shotshell Box Caddy, a 100 round shotshell carrier for trap, skeet and sporting clay enthusiasts. It grips four MTM shell stackers (included with purchase) or four 12 Ga. 2 ¾” cardboard shell boxes.
DeSantis Gunhide introduces the #137 Slim-Tuk holster for the SIG P365 with Lima365 or Foxtrot365 attached. The Slim-Tuk is a bilateral IWB with a tuckable clip for varied mounting options.
XTech Tactical announces the MAG47mil “Militia Special,” developed in response to a consumer torture test. The company also features the OEM47, an entry level magazine option.
Now through Sunday, June 16 save big on all Samson pistol accessories, including the Shield Pocket Comp, Shield Compact Magwell, and Shield Carry Contour Magazine Extension, as well as the M&P Contour Magazine Extension.
Looking for the perfect gift for Dad this year? Now streaming on, Sootch00’s Top 5 Father’s Day Gifts, Presented by TruGlo & Rival Arms.
Axeon Optics rail mount Second Zero optical prism devices are now available. Both the 4.3 and 11.5 MOA rail mount versions can be ordered direct from Axeon Optic’s website.
The National Shooting Sports Foundation and the Bureau of Justice Assistance unveiled a new public service announcement, “Protect the People You Love,” to encourage families to talk about gun safety — regardless of whether they have a gun in the home.
To celebrate Father’s Day, buy dad a Burris optic. Burris has great gift ideas for dad, including an archery accessory, spotting scope, or rifle scope.
Steiner comes to the rescue with a selection of Father’s Day gift ideas sure to make Dad happy. Sunlight adaptive binoculars, Marine binoculars and more great Steiner optics are special gifts he would enjoy.
Now through July 31, 2019, Beretta will be running a promotion in which you will be eligible to receive a $100 rebate when you buy any of these eligible Beretta APX striker-fired pistols: Full-Size, Combat, RDO, Centurion, and Compact (excludes the new Beretta APX Carry).
From the simple task of swapping out grips to the more refined process of tuning an extractor (and everything in between) the debut Special Edition issue of American Handgunner DIY Guns provides a down-to-earth guide for budding enthusiasts who want to hone their gunsmithing skills.
In the June/July issue of Ballistic, the first “Warrior of the Year” is named and it’s only fitting that Omar “Crispy” Avila take the honors. His story is both legendary and inspiring.
Butler Creek, maker of hunting and shooting accessories, is excited to announce the ASAP Electronic Magazine Loader is now available at retailers online and in stores.
Lone Wolf Distributors welcomes back Jason Matzinger – Into High Country TV.

Yesterday, the “other shoe dropped” in the matter of SportCo Holdings, the company that owns, among others, Ellett Brothers and United Sporting Co. After months of rumors concerning their overall fiscal health, the company filed for Chapter 11 bankruptcy, saying it planned to liquidate it’s holdings.

The company cited management’s impression that Hillary Clinton would win the White House in 2016 and it’s subsequent speculation into guns and ammunition based on that mistaken presumption as one major factor in their failure. Rather than booming sales and healthy margins, they were caught with inventory no one wanted.

Company CEO Bradley Johnson also cited other factors, including industry “disruption” caused by the Bass Pro Shop acquisition of Cabela’s, Gander Mountain’s bankruptcy and hurricanes that devastated much of the Southeast, including South Carolina.

But there’s more to this story than the long-term impact the failure will have on an already turgid business environment.

The top ten major unsecured creditors in the SportCo filing are (from #1 to #10) : Vista Outdoors ($3,299,326.61), Sturm Ruger ($3,196.842.10), Magpul Industries ($2,078,353.17), Savage Arms Rifles ($1,927,392.50), Bushnell Corp. ($1,879,795.66), Navico Company ($1,743,684.04), Henry RAC Holding Corp. ($1,467,618.00), Smith & Wesson Corp. ($1,386, 714.26), Garmin USA, Inc. ($1,150,579.41), and Fiocchi of America ($1,096, 632.70).

The filing’s listing of other unsecured creditors reads like a who’s who of the rest of the industry: FN America, Magtech, Remington Arms, Kel-Tec, Hornady, Leupold & Stevens, Heckler & Koch, Barrett Firearms, Browning Arms Company, Blaser USA, Armscor, Chiappa, Bond Arms, Truglo, and SCCY.

Keep in mind those are only the top 30 creditors. SportCo’s filing says there are anywhere from 200 to 999 companies and individuals.

With SportCo Holdings filing, the industry will be roiled for some time to come.

But another legal action, this time a civil suit filed in South Carolina nearly three weeks ago, by a New York financial group lays the groundwork for a story that will have even longer-lasting implications.

The first question will undoubtedly be whether the South Carolina suit puts the legality of the Delaware filing into question.

That’s because the two corporations listed as holding 10% or more of SportCo’s equity interest are Prospect Capital Corporation and Wellspring Capital Partners I.V. LP.

The opposing parties in the South Carolina suit.

Prospect Capital Corp., has filled their civil suit against “Wellspring Capital Management LLC; Wellspring Capital Partners IV, L.P.; WCM GenPar IV, L.P.; WCM GenPar IV GP, LLC; Alexander E. Carles; William F. Dawson, Jr.; John E. Morningstar; Bradley Johnson; F. Hewitt Grant; Charles E. Walker,Jr.; Todd Boehly; Bernard Ziomek; Andrew Kupchik; and John Does One through One Hundred.”

According to the filing, that listing of individuals, managers and entities were collectively loaned a total of $188,864,420.94, ostensible to build Ellett Brothers LLC and the various affiliated subsidiaries.

Instead, the suit alleges is the funds never used for their intended purpose. Instead the borrowers used them - along with proceeds of additional loans from other lenders- to enrich..themselves.

In fact, the lawsuit claims that $183,169,466.94 of more than $188-million went to Wellspring IV- the controlling and largest shareholder of the borrowers.

If that’s the case, this would unquestionably be the largest fraud case -ever- in the firearms industry.

The 32-page lawsuit paints a plain-language, less-than-flattering image of the group of investors Prospect Capital alleges took a company that as recently as 2015 was the fifth-largest privately held corporation in South Carolina and ran it into the ground. Along the way, they lined their own pockets with the loans and sales generated by the company.

Having read many lawsuits over the years, this plainly-worded filing pulls no punches, characterizing the intent of both the owners and managers of Ellett Brothers and its subsidiaries as less than honorable.

Citing record industry sales in 2016, the lawsuit notes that as Ellett’s sales increased, its profits decreased “lagging significantly behind its competitors.”

“Despite those recent periods of elevated sales, it continues, “the D&O defendants completely ruined Ellett, which is now on the brink of extinction. Ellett survived the Great Depression, serious recessions in the 1970s, 1990s, and 2000s, and legislation banning certain of its products. But Ellett could not survive the disastrous tenure of the D&O defendants, which caused Ellett to make the Fraudulent Conveyances and whose reckless and grossly negligent mismanagement of Ellett and bad faith dereliction of their duties led to the dissipation of substantially all of Ellett’s assets during some of the most historically profitable times for companies in the firearms industry.”

That is not typical legalese. One criminal attorney I asked to review the suit characterized it as “anything but a typical civil filing.” In fact, he said it reads like a “pre-charging document prepared by any decent prosecutor looking to go to a grand jury for an indictment.”

The suit is filed in South Carolina- Ellett’s HQ, and specifically references South Carolina’s “Statute of Elizabeth” - the litmus test for fraudulent conveyances.

Under that law, “every gift, grant alienation, bargain, transfer, and conveyance of lands… for any intent or purpose to delay, hinder, or defraud creditors and others of their just and lawful actions, suits, debts, accounts, damages, penalties, and forfeitures must be deemed and taken… to be clearly and utterly void…”

There are also these “badges of fraud”:

- insolvency or indebtedness of of transferor

- a lack of consideration for the conveyance

- a relationship between the transferor and transferee

- pending or threatened litigation

- secrecy of concealment

- departure from usual methods of business

- transfer or debtor’s entire estate

- reservation of benefit to the transferor

- retention by the debtor of possession of the property

In making the case for the actions of Ellett management meeting one-or several- of those “badges of fraud” the suit references transfers of millions of dollars received via loans to the trustees and the transfers of most -if not all- of those funds (and others) on the same day (my emphasis) to one or more of the parties listed as defendants in the suit.

This isn’t a simple case, and the filing by Prospect Capital certainly only represents one side in the story. But it clearly defines the battlefield across which a major industry story will be fought.

With nearly 190-million dollars in play, there will be some big guns involved in the civil suit. The implications for criminal actions also can’t be discounted.

Unfortunately, it seems things are tough worldwide for the firearms companies.

Late last week, I was forwarded a German business media report regarding Heckler & Koch.

It began with this (translated) headline: “The Gun Manufacturer Hecker & Koch Is Facing the End”.

It wasn’t a question; it was a straightforward, declarative sentence.

The story went on to report that H&K was losing a financial battle due to lagging sales, In fact, the report said, 2018’s losses were so significant that financial issues were only cushioned by “two bridging loans from an unnamed major shareholder.”

So severe was the situation that KPMG inserted a warning in their 2018 audit. The passage reads: “the lack of liquidity endangers the continued existence of Heckler & Koch. To ensure continued existence, significantly more revenue would have to be generated in the current year than the previous year.”

Indications are that the necessary revenue generation hasn’t happened yet. Last month, H & K’s German workers approved a wage waiver, agreed to increase weekly working hours from 37 to 37.5 hours with no overtime, and cancelled a planned one-time payment of 400 Euros per worker.

Earlier this year, H&K was forced to pay a multi-million fine over illegal arms exports to Mexico.

H&K, meanwhile, remains in the competition for the new assault rifle for the Bundeswehr - which currently carries the company’s G36.

But an issue outside rifle performance stipulated in the Ministry of Defense specs - is causing concern that H&K may be disqualified.

The issue? The overall fiscal health of companies being considered. H&K has asked for a change in the fiscal requirements, but the German report quotes politicians as saying any lessening of the fiscal requirements would be a very “political decision” -and not likely.

Currently H&K supplies the armies of France, Norway and Lithuania with combat rifles in addition to the German Bundeswehr.

Is H&K is “facing the end” or simply suffering the same lagging sales pressuring other manufacturers?

No one knows at this point, but I do know that U.S. manufactures are considering almost any option- from “rightsizing” production staff to outsourcing virtually everything except the actual manufacturing of product - to survive what has turned out to be a very long dry spell.

As always, we’ll keep you posted.

—Jim Shepherd

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