When we read financial documents addressing business failures, we tend to read the backup filling information the same way we read the rankings of virtually anything- according to size. We look at the potential “big” losers and generally ignore the smaller companies.
When you’re talking a bankruptcy of the magnitude SportCo - you’re talking a lot of impact. It’s easy to think Ellett Brothers (because it’s been the longest-rumored problem) and forget the filing includes: Bonitz Brothers, Ellett Brothers, Evans Sports, Inc., Jerry’s Sports, Outdoor Sports Headquarters, Inc., Quality Boxes, Inc., Simmons Gun Specialties, and United Sporting Companies.
That’s quite a list of long established businesses that are currently in Chapter 11, but given virtually no chance of emerging. According to industry executives with direct knowledge of the situation, the advancement from Chapter 11 reorganization to Chapter 7 liquidation is nothing more than a matter of time. After all, they’ve pointed out, even the officers and directors of the company have admitted the value of the company - according to their sworn documents - is essentially, zero. It’s hard to believe the land the businesses are on is worthless, but it may well be the land is a separate situation.
The same ranking tendency happens when we’re talking about the companies suffering the biggest “hits” in a filing of this magnitude.
But that might not be the most realistic way to look at it. Large companies, like Ruger or Vista as examples, have more safeguards in place to protect themselves from bad debt than small businesses.
So the question in my mind isn’t “wow, what about the hits that Ruger, Vista (which also includes Bushnell and Savage) took in this filing” -the question most concerning is the one I face as a small business: “could my business survive a $100,000 hit?” A $3.2 million dollar loss isn’t a concern-it’s simply too-big to be a factor. But $100,000 dollars could be enough to put smaller companies over the edge.
The SportCo bankruptcy only lists the top 30 unsecured creditors. The smallest loss of that group is $267,360- and the filing says there are as many as 200 unsecured creditors. That’s a lot of trickle down impact.
While many of the companies are well-known, have good reputations and are pretty solid performers, the fact of the matter is simple: a $280,000 “hit” -even for a solid small company -is significant.
Often we lose sight of that. It was a lesson I saw first-hand when U-K owned Reed Expositions took the “no AR-style rifles” position regarding their Great American Outdoor Show in Harrisburg, Pennsylvania.
In the furor over the ill-considered decision, companies and individuals boycotted the show- to the point Reed eventually killed it. In reporting the story, my focus was on the big picture. Until I got an email from one of the smaller vendors at that show. In that communication, he said that he was “pretty certain” that the show not happening would put his one-man Virginia knife making shop out of business because it was more than three-quarters of his annual revenue. “But,” he told me, “I’m willing to let that happen because I know we can’t let Reed start saying one type of gun is bad or we all suffer.”
That brought the entire picture into focus. It’s not just the “biggies” involved in a story that will undoubtedly spend most of its time focused on the nearly 190-million bucks that somehow evaporated, along with the jobs and hopes of all the people who counted on these now-failing companies for their futures.
Fortunately in the Great American Outdoor Show situation, one of the “biggies” in the industry read my story on the knifemaker who was more than willing to let his business fail for the good of everyone else and intervened. If you’re one of the media or industry people who wondered why a company with their own branded line of knives gave away a bunch of knives made by someone else several years ago, as Paul Harvey would have said “well, now you know the rest of the story.” A whale jumped in to save a minnow.
In this instance, there doesn’t seem to be much -at least at this writing- that anyone can do to help everyone negatively impacted by this colossal failure.
We’re nowhere close to knowing the true impact, but I promise we’ll keep you posted.
--Jim Shepherd
