Smith & Wesson Corp. Business Information, Profile, and History

Company Perspectives:

Smith & Wesson is one of the world's most recognizable brands, and for good reason. Since we first opened our doors, we have focused on designing and manufacturing innovative solutions that are unparalleled in the field of personal safety and protection. Almost every major law enforcement and military agency in the world has used Smith & Wesson products, and to this day, most police departments in the United States depend on our firearms and accessories.

History of Smith & Wesson Corp.

Smith & Wesson Corp. is the leading manufacturer of handguns in the United States. Among the company's best known products over the years have been the .22 rimfire revolver (Model 1), which became a worldwide success in the mid-1800s; the .38 special revolver (Model 10), a 20th-century model used extensively by police forces; the .44 Magnum revolver made famous by Clint Eastwood in his Dirty Harry movies; and the line of .357 Magnums, which, according to the company, became the most popular line of revolvers of all time. Smith & Wesson also sells pistols, handcuffs, and bicycles designed for law enforcement use, as well as licensed products, including apparel, knives, coffee mugs, and watches, affixed with the company logo. Smith & Wesson Corp. is the main operating subsidiary of the publicly traded Smith & Wesson Holding Corporation.

Mid-19th-Century Origins

The history of Smith & Wesson begins in the 1850s with a partnership between Horace Smith and Daniel B. Wesson. Smith was born in 1808 in Cheshire, Massachusetts. His father, a carpenter, moved the family to Springfield, Massachusetts, four years later, taking a job in the U.S. Armory. After finishing his public school education at age 16, Smith joined his father at the Armory as a gunsmith's apprentice. He gained expertise in the manufacture of guns through the 18 years he spent at the Armory. In the 1840s Smith worked for a number of gun manufacturers and spent three years running his own gunmaking concern. In 1851 he patented an improvement on the breech-loading rifle. He next took a position at Allen, Brown & Luther, a rifle barrel manufacturer based in Worcester, Massachusetts. It was there that he met Wesson.

Born in 1825 in Worcester, Wesson worked on the family farm and attended school until the age of 18. He then apprenticed himself to his eldest brother, a gunsmith. After completing his apprenticeship in 1846, Wesson worked as a journeyman gunsmith before taking over his brother's business after his death in 1850. Soon thereafter, he joined Allen, Brown & Luther.

This was still the era of the muzzle loaders, firearms that had to be reloaded with loose powder, ball, and primer. Through their partnership, Smith and Wesson played a key role in the ending of the muzzle-loading era. They formed their first partnership, the Smith & Wesson Arms Company, in 1852, working to perfect a lever-action pistol with a metallic cartridge and a new repeating action, for which the partners received a patent in February 1854. According to Smith & Wesson historian Roy G. Jinks, "The fire power of this lever action pistol was so impressive, that in 1854 when the gun was reviewed by Scientific American, it was nicknamed the Volcanic since its rapid fire sequence had the force of an erupting volcano."

The repeating action of the pistol was not entirely successful and when the Norwich, Connecticut-based company encountered financial problems, Oliver Winchester stepped in as a new investor. The factory was moved to New Haven, Connecticut, and the company name was changed to Volcanic Arms Company. In 1855 Smith retired while Wesson accepted a position as superintendent of the company. Wesson soon departed as well. The company later adapted the 1854 patent to rifles, creating the Winchester repeating rifle, which became world famous. In 1866 this firm changed its name again, to the Winchester Repeating Arms Company.

Meanwhile, in 1856 Smith and Wesson joined in a new partnership and began manufacturing the first Smith & Wesson revolver ("Model 1") in Springfield, Massachusetts. This revolver was based on a patent the partners had received in August 1854 for a central-fire metallic cartridge, which contained not only powder but also a lubricant located within the case between the powder and the ball. The revolver included what was called a "rimfire" cartridge (later known as the .22 rimfire), featured repeating action and an open cylinder, and was manufactured with interchangeable parts. Its unique design helped make it an enormous success, including its adoption by U.S. military authorities. When demand exceeded the capacity of the firm's small, 25-person workshop, Smith & Wesson built a new factory in central Springfield on Stockbridge Street near the Armory, and expanded its workforce to 600. Improving on the original model, the company soon introduced the Model 2, which featured a .32-caliber cartridge.

Late 19th-Century Growth

During the Civil War, demand for Smith & Wesson revolvers increased further and helped establish the company as one of the top gunmakers in the United States. Following the war, however, sales fell to just a few guns per month as the ensuing depression hit Smith & Wesson hard. To drum up new sales, the partners established sales agencies in England, France, and Germany. They also exhibited their wares at the international exhibition in Paris in 1867, resulting in large contracts with several European and South American countries, as well as Japan and China. The Russian government alone placed an order for 200,000 revolvers. With a larger international market secured, the company proceeded to introduce its first large caliber gun, a .44-caliber revolver, the Model 3. This gun proved popular around the world and in the American West.

In addition to making improved models based on their own inventions, Smith and Wesson also purchased patents from other inventors. One of the most important of these was a design by William C. Dodge that automatically emptied shells from a gun--a patent Smith & Wesson bought in 1869. In July 1873 Smith sold his interest in the company to Wesson and retired. He died 20 years later, leaving no direct descendants. Wesson carried on as the sole principal for ten years before bringing his two sons on board as partners in 1883. Four years later, Wesson patented a safety revolver designed to prevent accidental firing. Smith & Wesson in 1899 introduced its most famous revolver, the .38 Military & Police, also known as the Model 10--a gun popular with law enforcement officials for nearly the entire 20th century. After Wesson died in 1906, the company he cofounded continued to be owned and managed by members of the Wesson family well into the 20th century.

New Models and War Contributions in the First Half of the 20th Century

The early decades of the 20th century were marked by the introduction of the N frame line of revolvers. This line featured a new larger frame, and first appeared in 1908 with a .44-caliber S&W Special cartridge. The N frame revolver received international notice during World War I, when Smith & Wesson supplied 75,000 N frame revolvers to the British government. For one year during the war, the U.S. government took over Smith & Wesson, operating it as part of the Springfield Armory.

The 1930s saw the debut of the K-22 Outdoorsman, a model designed for the competitive shooter, and the .357 Magnum, a more powerful handgun designed for law enforcement officers. The .357, introduced in 1935, marked the debut of the Magnum line, which became famous later in the century. Like most companies, Smith & Wesson was hit hard by the Great Depression. At one point, its workforce was reduced to just 24 employees, and the firm pursued diversification, making other products such as a toilet flush valve. In the end, it was Smith & Wesson's growing popularity with law enforcement officials--particularly after the introduction of the .357 Magnum--coupled with rising crime rates, that saved the company.

During World War II, Smith & Wesson supplied arms to the United States and its allies; by 1941 the company was entirely dedicated to war production. By war's end, the company had supplied more than 1.1 million .38 Military & Police revolvers.

In 1946 C.R. Hellstrom was named president of Smith & Wesson, becoming the first person outside the Wesson family to run the company. Three years later Smith & Wesson completed construction of a new and much larger factory in Springfield. Among the first new models to roll off the assembly lines were Model 39, the first U.S.-made 9mm double-action pistol, and Model 29, the legendary .44 Magnum, which debuted in 1955.

Bangor Punta/Lear Siegler Era, 1965-87

By the mid-1960s Smith & Wesson reigned as a leading maker of handguns, with an emphasis on revolvers used in law enforcement, and had also begun to sell handcuffs. It was still largely in the hands of the Wesson family, with some stock selling over the counter. For the year ending in June 1965, the company posted earnings of $1.5 million on sales of $10.4 million. During 1965 Smith & Wesson introduced Model 60, the first all stainless steel revolver. Late that year, the firm's era of independence came to an end with its acquisition by Bangor Punta Alegre Sugar Corp., a conglomerate based in Bangor, Maine, with operations in railroads, textiles, foundry equipment, sewage disposal systems, yacht manufacturing, commercial finance, grain elevators, and other areas. Bangor Punta paid about $22.6 million to gain control of Smith & Wesson.

Under Bangor Punta ownership, Smith & Wesson expanded its product line into areas related to handguns and handcuffs in the 1970s. For the law enforcement market, Smith & Wesson began selling riot control equipment, night vision apparatus, breath-testing instruments, police car lights, and sirens. Another new law enforcement product was the Identi-Kit software program, which helped investigations create facial composite drawings of suspects. In the sporting market, Smith & Wesson began offering its dealers a full line of products, including ammunition, holsters, and long guns. By the late 1970s about 25 percent of the company's sales were for nongun products.

The 1970s was a period of slow or no growth for the U.S. firearms industry, which faced a host of problems, concisely summarized in a 1978 Business Week article: "skyrocketing product liability costs, highly restricted export markets, burgeoning labor and materials costs, an aging plant and skilled labor force, foreign gunrunning scandals, the recurring threat of federal gun controls, diminishing hunting grounds and shorter hunting seasons, stiff competition from imports, and, recently, competition from foreign companies manufacturing firearms in the U.S." While Smith & Wesson was not immune to these problems, it was, according to Business Week, "the envy of the industry" because of its grip on the law enforcement market and its efficient, modern plants. The company was also highly profitable, posting operating profits of $18.4 million on sales of $84 million for the year ending in September 1977.

In the early 1980s Smith & Wesson began making 9mm semiautomatic pistols for the U.S. military and for law enforcement agencies seeking more powerful weapons to do battle with heavily armed criminals. In January 1984 Santa Monica, California-based Lear Siegler Corporation acquired Bangor Punta, giving Smith & Wesson a new parent. Under the direction of Lear Siegler, whose primary holdings were in the manufacture of aerospace and automotive parts and systems, Smith & Wesson divested numerous noncore areas in order to concentrate on its main areas of strength: making and selling handguns, handcuffs, and police Identi-Kits.

In spite of the divestments, Smith & Wesson was a company on the decline in the early to mid-1980s. Its entry into the semiautomatic handgun market was the move of a follower, not a market leader. The U.S. units of two foreign gunmakers, Austria's Glock GmbH and Italy's Beretta S.p.A., had led the introduction of semiautomatic weapons into the U.S. market. With overall sales of guns remaining flat, the new competition not only ate away at Smith & Wesson's market share, they also cut into its sales. It was also becoming clear, as summarized by Charles E. Petty writing in American Rifleman, that the quality of Smith & Wesson guns was on the decline. Although sales had surpassed the $100 million mark by the early 1980s, growth slowed by the mid-1980s and profits were down. For the fiscal year ending in June 1986, the gunmaker reported operating profits of $14.1 million on sales of $116.1 million. The profits figure represented a decline of 41 percent from the level in 1982.

The Tomkins Era of the Late 1980s and 1990s

It was in this troubled state that Smith & Wesson would once again see its ownership change hands. In December 1986 leveraged buyout (LBO) specialist Forstmann Little & Co. led a group that took Lear Siegler private in a $2.1 billion LBO, with a new holding company created called Lear Siegler Holdings Corporation. As was typical of 1980s LBOs, the new holding company quickly sought to sell off noncore assets to pay down the debt incurred in the buyout. Smith & Wesson was one of the companies identified as noncore, as Lear Siegler Holdings intended to concentrate on its aerospace and automotive operations. Among the firms bidding to acquire Smith & Wesson was fellow firearms maker Sturm, Ruger & Company, Inc. Prevailing in the end, however, was U.K. conglomerate F.H. Tomkins PLC (later simply Tomkins PLC), which paid $112.5 million in June 1997 to purchase Smith & Wesson, marking its first foray into the United States.

Tomkins saw in Smith & Wesson "a company with a good name and market position with a strong potential for growth through management achievement," according to Robert Muddimer, as quoted in American Rifleman. Muddimer, who was installed as interim president of the gunmaker, said that Tomkins' initial goal was "to enhance quality, and to service the market in terms of quality and accuracy with a blend of new technology and traditional gunsmithing arts." In recognition of the company's problems with the quality of its products, Tomkins set out to make improvements by modernizing the design and manufacturing process through the addition of computer-aided design equipment and a host of high-tech manufacturing apparatus. Tomkins also instituted a much more rigorous testing process. Already by mid-1989 the new equipment and programs had helped significantly lower the rate at which guns were being returned for warranty repair. For automatic pistols, the return rate had fallen from 6.3 percent to a record low of 1.2 percent, while only 2 percent of Smith & Wesson revolvers were being returned for service, halving the previous rate of 4 percent.

Although Tomkins was clearly aware of the declining quality of Smith & Wesson guns prior to its purchase of the company, the British firm came to believe that Forstmann Little had misled it about a jamming problem in a line of L-frame .357 Magnum revolvers. In 1994 Tomkins sued Forstmann Little for damages and indemnification.

Meanwhile, the Tomkins-led Smith & Wesson was showing a renewed vigor in the area of product development. In 1988 the company launched an improved, third-generation line of semiautomatic pistols. With interest in gun ownership increasing among women, Smith & Wesson introduced the LadySmith line of handguns in 1989. Under the leadership of Ed Shultz, who became president in 1992, Smith & Wesson introduced the Sigma Series of pistols. Debuting in March 1994, the Sigma Series was the company's first line to feature plastic frames. Glock sued Smith & Wesson over the design of the Sigma, alleging patent infringement and other charges, leading to a 1997 settlement whereby Smith & Wesson agreed to make a multimillion-dollar payment to Glock and to slightly modify the Sigma pistols. Another light-weight line, the AirLite Ti titanium revolvers, was introduced in 1999.

In January 1998 Smith & Wesson began selling bicycles designed specifically for police work. During the late 1990s the company also opened up eight retail stores around the United States, selling apparel and a variety of other nongun products affixed with the company logo. This latest diversification away from guns came at a time when gun sales remained stagnant. Americans already owned approximately 230 million guns, which last for a long time, dampening demand. Other reasons given for the sales stagnation included a decreasing interest in hunting and falling crime rates, the latter of which might have been resulting in decreased demand for self-protection weapons. At the same time, the gun industry was under an increasing legal assault, with more and more municipalities suing gun manufacturers alleging negligence in the manufacturing, marketing, and distribution of guns. These suits were somewhat similar to the largely successful suits brought against the tobacco industry in the late 1990s. The potential for large liability judgments, along with increasing calls for stiffer federal gun control measures, gave added impetus to Smith & Wesson's and other gunmakers' moves to diversify. For its part, Smith & Wesson aimed to increase its sales of nongun products to 50 percent of overall sales, which would be a substantial increase over the 18 percent level of the late 1990s.

Early 2000s: Beset by Troubles, Returning to American Ownership

By early 2000 more than two dozen cities and counties had filed lawsuits against gun manufacturers. Early legal decisions represented a mixed bag, although there were several clear victories for the gunmakers. Nevertheless, Smith & Wesson, still led by Shultz, broke ranks with others in the gun industry by entering into an agreement with the Clinton administration in March 2000. Among other provisions, the firm agreed to demand background checks on buyers at gun shows, install safety locks on all its guns, and work on a high-tech gun that could be fired only by its owner. In return, many local governments dropped Smith & Wesson from their lawsuits, and the Clinton administration agreed not to name the company in any future suit it might file against the industry.

Hailed as a landmark deal at the time, the agreement was the precipitating factor in a crisis that soon engulfed the firm. Other gun manufacturers quickly denounced the company for making the deal, and many gun enthusiasts--feeling that the lawsuits were part of a larger attempt to limit gun rights--began boycotting the company, some vowing never to buy a Smith & Wesson gun again. Sales plunged. Adding to the turmoil at the company was Tomkins' announcement in July 2000 that it intended to sell Smith & Wesson as part of a streamlining aimed at shedding noncore units. This same divestiture plan led to Shultz's departure in October. He had been serving simultaneously as president of another Tomkins' unit, Murray Inc., maker of lawn mowers, go-carts, and bicycles. When Tomkins sold Murray, Shultz resigned from Smith & Wesson in order to remain president of Murray. George Colclough, vice-president of administration, succeeded Shultz. Meanwhile, the steep sales decline mainly attributable to the consumer boycott led Smith & Wesson to announce, also in October, the layoff of 15 percent of its workforce--125 employees.

In a seeming case of a minnow swallowing a whale, Tomkins ended up selling Smith & Wesson to Saf-T-Hammer Corporation in May 2001. The purchase price, apparently reflecting the firm's troubled nature, was only $15 million, although Saf-T-Hammer also agreed to assume $53 million in debt. Based in Scottsdale, Arizona, Saf-T-Hammer was a manufacturer of gun locks that had been founded in 1998 and had begun selling its products in late 2000. The company's president, Robert Scott, had spent ten years as a Smith & Wesson vice-president before joining Saf-T-Hammer in 1999. He was named the new president of Smith & Wesson Corp., now American-owned again and still headquartered in Springfield, Massachusetts.

The precipitous decline in sales not only cost Smith & Wesson its place as the leading U.S. maker of handguns to Sturm, Ruger, it also led to a $14 million loss for the fiscal year ending in April 2001. Scott moved quickly to turn the company's fortunes around, particularly by mending fences within the gun industry. Buyers slowly began returning, and sales grew from $70.7 million in the fiscal year ending in April 2001 to $79.3 million the following, before jumping to $98.5 million the year after that. After suffering a net loss of $10.8 million in the fiscal year ending in April 2002, Smith & Wesson returned to profitability one year later, $15.7 million in the black. Aiding this turnaround were a number of other Scott initiatives, including improving the production process and turning out new gun products, although the firm's efforts to aggressively license the company's name for myriad items--such as fine art prints, watches, body armor, safes, footwear, and golf clubs--yielded little in the way of profits. During this same period, the legal threat that had been hanging over the gun industry more or less evaporated. A growing number of the lawsuits were dismissed, and the newly installed, pro-gun Bush administration backed away from the "landmark" deal between the government and Smith & Wesson.

In early 2002, meanwhile, Saf-T-Hammer renamed itself Smith & Wesson Holding Corporation. In January of the following year, Scott was named chairman and CEO of Smith & Wesson Corp. (the operating subsidiary). Taking over as president was Roy C. Cuny, a former president of Peerless Manufacturing Co., a maker of air filtering equipment. Cuny had joined Smith & Wesson in November 2002 as vice-president for operations. As president, he oversaw the launch of nine new handguns in early 2003. These guns garnered strong interest at national and international trade shows held in February and March. Among them was the Model 500, a .50-caliber revolver weighing 4.5 pounds, which was the largest, most powerful handgun ever made, and the .45-caliber Model 1911 pistol, which was a modernized replica of the military sidearm that the U.S. Army used for most of the first half of the 20th century.

Although Smith & Wesson was seemingly on the road to recovery, it was soon engulfed in a new round of controversy, mainly revolving around machinations at the parent holding company. In December 2003 Smith & Wesson Holding filed its annual report five months after the deadline because it needed to restate its results for 2002 owing to a series of mistakes in the way it had accounted for its acquisition of the gunmaker. That same month, Chairman and CEO Mitchell A. Saltz and President Colton R. Melby of the parent company stepped down from their posts while retaining spots on the board of directors. Saltz and Melby were the firm's two largest shareholders. Cuny was named chairman, president, and CEO of Smith & Wesson Holding, but just one month later a new chairman was appointed, James J. Minder, a management consultant and member of the board of directors since 2001. Also in January 2004 the holding company announced that it would close its Scottsdale headquarters and move its functions to the subsidiary's Springfield offices. Then in February 2004 came more embarrassment when Minder resigned the chairman's post while maintaining a seat on the board after it was revealed that he was a felon who in the 1950s and 1960s had served 15 years in Michigan prisons for dozens of armed robberies, including a bank heist, and an attempted escape from jail. Taking over as chairman was another member of the board, G. Dennis Bingham.

Smith & Wesson Corp. attempted to put all these distractions behind it by refocusing on its core gun line during 2004. The firm shut down a nascent and ill-conceived venture into home decor cataloging and divested other businesses as well, including its Identi-Kit software program. Millions were spent to improve and expand production at the Springfield plant. During the year, Smith & Wesson regained its position as the top maker of handguns in the United States. This positive note, however, was followed by the announcement in November 2004 that Cuny had left the company with no indication of the reason for the sudden departure. Bingham resigned as well around this same time and was replaced as chairman by Barry M. Monheit, a management consultant and independent board member. In December 2004 Michael F. Golden was brought onboard as the company's fifth leader in as many years. The new president and CEO had previously held management positions with three leading U.S. manufacturing firms: Kohler Company, Black & Decker Corporation, and Stanley Works.

Several other changes in the top management were made around this same time as Smith & Wesson attempted to assemble a more marketing-savvy leadership team. Early in 2005 the parent company completed a refinancing that reduced its total debt by $21.3 million and offered $1.5 million in savings on interest expense for the fiscal year ending in April 2006. The Golden-led team also began working on a plan to broaden the firm's focus to include "safety, security, protection, and sport." After more than 150 years in the handgun market, Smith & Wesson was considering moving into the production of shotguns or rifles and was also looking into licensing its name for such products as ammunition, nonlethal weapons, and home security systems. The company was also stepping up efforts to bolster sales to law enforcement agencies and the military, both areas in which Smith & Wesson once dominated but had been lagging for some time. Perhaps most important was Golden's intention to bolster marketing and to turn what he called "a quiet company" into a much more visible one.

Principal Competitors: Sturm, Ruger & Company, Inc.; Taurus International Manufacturing, Inc.; Glock GmbH; SIGARMS, Inc.; Fabbrica D'Armi Pietro Beretta S.p.A.; Peerless Handcuff Company.

Chronology

• Key Dates:
• 1852: Horace Smith and Daniel B. Wesson form a partnership, Smith & Wesson Arms Company, to build a repeating, lever-action pistol.
• 1854: Partners sell the company to Oliver Winchester, who later bases his famous Winchester repeating rifle on some of the pistol's features.
• 1856: Smith and Wesson create new partnership, Smith & Wesson, Inc., to begin manufacturing the first Smith & Wesson revolver, in Springfield, Massachusetts.
• 1865: Surging demand during the Civil War years helps establish Smith & Wesson as one of the top U.S. gunmakers.
• 1873: Smith sells his interest in the company to Wesson.
• 1899: Company introduces the .38 Military & Police.
• 1906: Wesson dies; the company continues to be owned and managed by members of the Wesson family.
• 1908: The N frame line of revolvers debuts.
• 1935: The .357 Magnum is introduced.
• 1946: C.R. Hellstrom becomes the first person outside the Wesson family to run the company.
• 1955: Smith & Wesson introduces the legendary .44 Magnum.
• 1965: Smith & Wesson introduces Model 60, the first all-stainless steel revolver; Wesson family sells the company to Bangor Punta Alegre Sugar Corp.
• 1984: Lear Siegler Corporation acquires Bangor Punta.
• 1987: F.H. Tomkins PLC (later Tomkins PLC) acquires Smith & Wesson.
• 1989: The LadySmith line of handguns designed for women debuts.
• 1994: The Sigma Series is the first Smith & Wesson line to feature plastic frames.
• 2000: In agreement with Clinton administration, company agrees to restrictions on the way it makes, sells, and distributes handguns; a backlash against the company causes sales to plunge.
• 2001: Tomkins sells Smith & Wesson to Saf-T-Hammer Corporation.
• 2002: Saf-T-Hammer renames itself Smith & Wesson Holding Corporation.