Shakeup at Smith & Wesson and Lawsuits in Omaha

Sep 28, 2011
Yesterday afternoon, in a move that took the industry largely by surprise, Smith and Wesson Holding Corp (SWHC) named firearm-segment head P. James Debney to replace President and Chief Executive Officer Michael F. Golden>
After seven years, Michael F. Golden (above) is gone "effective immediately" as President and CEO. He will remain as Co-Vice Chairman of the S&W Board. Meanwhile, after two years in the firearms division, James Debney (below) assumes the President and CEO position.>
Golden, head of the company for the past seven years, stepped down "effective immediately".

Golden, who has headed the Springfield, Massachusetts firearms manufacturer for the past seven years, will remain on as Co-Vice Chairman of the Smith & Wesson Board.

In a conference call late yesterday afternoon, Chief Financial Officer Jeffrey D. Buchanan announced that the remainder of Golden's existing employment contract was being bought out, with an impact of 1-2 cents in earnings per share, which would be reflected reflected in the current (Q2) quarter.

When questioned, Buchanan declined to elaborate on the exact costs and term of the contract being bought out, telling call attendees the contract gross and other information would be reflected in the company's newest 10-K statement.

That statement is scheduled to be filed after the stock markets close today.

According to a Company statement, Debney's sudden promotion is part of what the company calls a "comprehensive succession plan". During the conference call, however, Buchanan said the decision to make the move immediately was reached at a Monday meeting of the company's board of directors.

In a statement, Golden wrote "I would like to congratulate James on this well deserved promotion. During his tenure, our firearms division delivered growth, product innovation, and the expansion of our company's brand in the firearms industry with consumers and professionals alike."

Debney, (44), has been President of Smith & Wesson's firearm division since November 2009. Prior to that, he was President of Presto Products Company, a $500 million plastic products business unit formerly of Alcoa Consumer Products.

In that same conference call, Debney said that he would not "backfill his previous position" and would continue to oversee the firearms division from his top slot while setting his sights on growth, cost control and additional efficiencies, and the protection of shareholder value.

Smith & Wesson shares (SWHC) closed up seven cents at $2.72 yesterday, but Debney may find the goal of protecting shareholder value something more easily sought than attained.

Smith & Wesson stock is down more than twenty-seven percent (27%) for the year.

With Debney's ascension, the company has once again effectively changed top management. In December, the company named Jeffrey D. Buchanan to the Chief Financial Officer's slot, replacing William Spengler who left last October.

In other news, the Nebraska Firearms Owners Association (NFOA) and the Second Amendment Foundation have filed a federal lawsuit that challenges the City of Omaha's longstanding ordinance prohibiting legal resident aliens from registering handguns with the Omaha Police Department.

That registration is required by the city to legally possess a handgun for home self-defense.

The NFOA and SAF join Armando Pliego Gonzalez, a Mexican citizen who legally resides in the city, in the lawsuit which lists Omaha Mayor Jim Suttle and Omaha Police Department Chief Alex Hayes as defendants.

The lawsuit alleges that Mr. Gonzalez of North Omaha - a legal resident alien who has lived in Omaha for over ten years - can legally purchase a handgun, but has been specifically denied the ability to register a handgun with the Omaha Police Department, effectively denying his legal ownership of a handgun for self-defense in his home.

Possession of a handgun not registered with the Omaha Police Department results in confiscation of the firearm and a misdemeanor charge including possible fine and jail time.

According to the lawsuit, Mr. Gonzalez bought a gun after a break-in and robbery at his home in 2010. When he tried to register the gun with the Omaha PD -as was required by local law- he was denied a registration permit because he was not a U.S. citizen.

"At issue here is long-settled law," said NFOA President Andy Allen. "The City of Omaha cannot, under the equal protection clause of the Fourteenth Amendment to the U.S. Constitution, deny a legal Permanent Resident Alien his fundamental Second Amendment rights."

"This includes prohibiting Mr. Gonzalez, who can legally purchase a handgun by Nebraska State laws, from owning a handgun in his home for self defense," Allen says, "For years, the NFOA has attempted to discuss with the City a number of issues in Omaha's onerous firearms laws, but has been met by a complete refusal to even open a dialogue. This case addresses the first of those issues and we hope the City considers taking measures to remove the burdensome restrictions on the fundamental rights of its law-abiding population."

The law barring handgun permits for non-U.S. citizens has been on the books since 1988, and is, according to Allen, unique in Nebraska. The lawsuit seeks to have Nebraska's U.S. District Court declare the citizenship requirement unconstitutional.

As of our deadline last evening, there had been no comment on the lawsuit from Omaha city officials.

As always, we'll keep you posted.

--Jim Shepherd