University of tennessee at chattanooga
Smith & Wesson
Company Report and Analysis
Smith & Wesson Holding Corporation is the current market leader in firearms, and it has been for the last 160 years. The company manufactures revolvers, polymer pistols, metal pistols, bolt action rifles, black powder rifles, and modern sporting rifles, as well as fire-arm related products, ammunition, handcuffs, and similar accessories for both public and private sectors world-wide. While Smith & Wesson uses raw materials in manufacturing, e.g. steel, wood, lead, brass, and plastic. However, to meet demand response, the company also buys parts for the production of the fire arms. Their top two suppliers are Precision Castpart Corporation and Carpenter Technology Corporation. The top customer is Occidental Petroleum, an international oil and gas exploration and production company. Thompson/Center Arms, and Performance Center are all part of the Smith & Wesson family of brands. The President and CEO, P. James Debney, and chairman Barry Monheit, own 4.6% of the company’s shares of common stock, as of October 2012. Blackrock, the largest asset manager in the world, owns 5.2% of common stock. Vanguard Group Incorporated holds approximately 4.9 million shares, in the fourth quarter of 2012.
During 2012 89.1% of Smith & Wesson’s customers were U.S. domestic consumers, 6.9% were U.S. government at state and national levels, and 4.0% were sold to the international consumers. Large international orders come from Belgium, Australia, Canada, and Puerto Rico. The company’s receivables are typically collected within 30-90 days. However, payment collection periods can be extended due to various hunting seasons. Competitors
Smith & Wesson believe that their company is a strong competitor in the market. The primary competitors are Ruger and Taurus in the revolver market, and Beretta, Glock, Heckler & Koch, Ruger, Sig Sauer, and Springfield Armory in the pistol market. In the hunting rifle market the main competitors are Browning, Marlin, Remington, Ruger, Savage, Weathereby, CVA, Traditions, and Winchester. Smith & Wesson own 95% of the handcuff market in the United States. Smith & Wesson seeks to expand its market share by constantly improving quality, and introducing new innovative products. For the past three years Smith & Wesson has spent over 4 million per year on research and development of new products. U.S. equity holders own about 91% of outstanding shares. Risk Factors
Capacity Constraint: Increased demand for products by the military and law enforcement requires increased capacity. Also Smith & Wesson has been investing significant amounts into capital in order to increase capacity; they are not very successful in managing their inventory and production. Smith & Wesson is trying to implement a new Enterprise Resource Planning (ERP) by 2014, which if unsuccessful could disrupt operations. Since our business is seasonal and the demand for our products is volatile our capacity constraint interferes with manufacturing even more. In 2012 and 2011 company’s backlogs amounted to $439 million and $196.7 million respectively. Also due to the seasonality of the business the company is greatly influenced by the fluctuating prices of the commodities used in production.
Rising Employee and Insurance Costs: The average company employee age is 46 and 15% of the workforce are over 60. Therefor insurance expenses are increasing particularly due to the latest health care legislation. In 2012 the insurance costs were $5.3 million.
Market Risks: Due to intense competition in the market Smith & Wesson could lose market share because other firms may be able to implement better financial, technical marketing, distribution, and other resource strategies. By conducting business oversees the company is subject to the foreign exchange transaction risks. Smith and Wesson...
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