S&P: Remington Arms on negative watch

Standard & Poor's said it has placed its B+ corporate credit rating on firearms and ammunition manufacturer Remington Arms Co. Inc. on CreditWatch with negative implications, based on poor firearms sales and concerns that the soft selling trend will continue.

For the nine months ended Sept. 30, Remington Arms' revenue declined 8.8% from the year-earlier period. The company's three product segments all recorded lower sales. Firearm sales declined 8.8% because of lower sales volume of higher-priced shotguns and centerfire rifles. Ammunition sales decreased 8.1%, as target and promotional shotshell and various centerfire and rimfire rifle ammunition products experienced lower volume. Sales for the company's third segment, which includes fishing products, accessories, targets, and powder metal products, also declined 11.8%.

Without a pickup in demand, margins are not likely to strengthen, S&P said.

For the 12 months ended Sept. 30, the EBITDA margin declined to 10.7% from 14.8% at the end of 2002. Lease-adjusted EBITDA coverage of interest for the 12 months ended Sept. 30 was 1.86x, compared with 2.14x, pro forma for the debt issuance in January 2003, at year-end December 2002.

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