Law360 (July 28, 2020, 11:01 AM EDT) -- Firearm manufacturer Remington Outdoor Company Inc. filed for Chapter 11 protection in Alabama bankruptcy court, its second time since 2018, unable to cash in on a surge in gun sales spurred by the COVID-19 pandemic.
In initial case documents late Monday, Remington CEO Ken D'Arcy said the company was in the unique position over the last several months of having its products experience a surge in demand as gun purchases skyrocketed during the COVID-19 outbreak and periods of civil unrest. The debtor wasn't able to take advantage of this surge, however, because of cash constraints.
"The debtors, however, have been unable to meet such demand because of the need to suspend operations temporarily to respond to the pandemic, and insufficient liquidity to fund raw material purchases needed to scale up production," D'Arcy said in a first-day declaration. "As a result, the debtors' liquidity remains challenged."
D'arcy said that Remington was hoping to go through a quick bankruptcy sale process within the next 60 days.
Remington emerged from a Delaware bankruptcy case in May 2018 that saw it restructure its balance sheet and cut out more than $550 million of secured debt, but its operational and liquidity problems have continued over the last two years. According to the declaration, the company has seen negative earnings since emerging from its previous bankruptcy case and total sales numbers that have dropped by almost 50% since 2017.
According to the D'Arcy, the company enacted cost-saving measures beginning in 2019 and improved its efficiencies in the lead-up to the bankruptcy filing. He said, however, that those efforts weren't able to overcome Remington's liquidity situation which made it difficult to purchase the raw materials needed to meet the growing demand in recent months.
By the end of 2019, the debtor had garnered $437.5 million in net sales for the year with an adjusted earnings figure that showed $74 million in losses, the declaration said. By comparison, in 2016 Remington achieved $865.1 million in sales and brought in nearly $120 million in earnings that year.
The company comes to court with about $390 million in debt in the form of a $75.5 million priority term loan, a $55 million first-in, last-out term loan, a $110.7 million exit term loan, a $12.5 million promissory note owed to the City of Huntsville, Alabama, a $110 million intercompany note and $30 million in unsecured trade debt.
Remington's proposed bidding procedures call for a Sept. 1 bid deadline to be followed by an auction, if necessary, on Sept. 8 and a hearing for the court to approve the sale on Sept. 10.
The company has been manufacturing some of the world's most well-known firearms for over 200 years, providing its guns and ammunition to customers in the commercial, military and law enforcement industries. It makes its products at seven facilities in the U.S. with a total of 2.5 million square feet of space, but the bulk of its revenue is derived from two firearms facilities in Huntsville and Ilion, New York, and two ammunition plants in Lonoke, Arkansas, and Mona, Utah, according to D'Arcy's declaration.
The company has 2,100 employees as of the petition date and used temporary workers to fill needs during peak manufacturing periods, the declaration said.
Remington has been involved in a state court lawsuit in Connecticut for several years relating to the 2012 massacre of 26 children and teachers at Sandy Hook Elementary School, with survivors alleging the company's marketing of its Bushmaster AR-15 rifles was linked to the attack. The suit claims the rifle was designed for military use and advertising for the gun encouraged civilians to engage in military-style tactics against their enemies.
The Chapter 11 filing comes with an automatic stay of litigation that pauses most lawsuits involving the debtor.
Remington is represented by Derek F. Meek and Hanna Lahr of Burr & Forman LLP and Stephen H. Warren, Karen Rinehart and Jennifer Taylor of O'Melveny & Myers LLP.
The case is In re: Remington Outdoor Company Inc. et al., case number 20-81688, in the U.S. Bankruptcy Court for the Northern District of Alabama.
--Editing by Alyssa Miller.
Update: This story has been updated with more details from the company's filing.
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