Industry News: ATF Cuts to Affect Operations
By Robert M. Hausman

The cash-strapped Bureau of ATF expects its impending staffing cuts will slow down its criminal investigations and processing of firearm license applications. The cuts to about 5% of ATF’s 5,100-person workforce, would affect about 250 to 275 employees.

There will likely be fewer people processing license applications, which will slow down that process.

The Senate Appropriations Committee approved $1.1 billion for ATF in mid-September - $22 million less than the 2011 level and $57 million below its budget request.

ATF may see as many as 400 employees take early retirement. It expects to save between $15 and $20 million by reducing its ranks.

ATF Inspection Findings

Following is a review of the inspection findings by ATF as presented by Harry L. McCabe, ATF Deputy Assistant Director of Field Operations at SHOT Show 2011.

As of January 2011, there were 47,444 Type 01 (dealer) licensees, 6,941 Type 02 (pawnbroker), 57,393 (collector) Type 03, 1,789 Type 06 (manufacturer of ammunition), 4,487 Type 07 (manufacturer of firearms), 774 Type 08 (importer), 40 Type 09 (destructive device dealer), 242 Type 10 (destructive device manufacturer), and 146 Type 11 (destructive device importer) licensees.

Some 10,538 inspections were completed during fiscal year 2010.

Of the compliance inspections performed during fiscal year 2010, 5,293 had no report of violation or 50.23%; violations were found in 1,366 inspections or 12.96%.

A warning letter was issued in 1,408 cases or 13.36% of violations; a warning conference was held in 820 cases or 7.78%; and a revoke/deny renewal was held in 67 or 0.64% of cases.

The FFL was surrendered in 33 cases or 0.31%; some 1,373 FFLs went out of business or 13.03%; and 178 cases or 1.69% of inspections were resolved by other means.

The total number of FFL inspections climbed from the years 2005 through 2009, going from about 5,000 in 2005 to close to 12,000 in 2009, but dropped in 2010 to 10,538.

The number of FFL’s with no violations grew from about 38% in 2005 to about 53% in 2009 but then began to decline slightly.

The revoked/denied renewal of FFL rate declined from about 2.5% in 2005 to about 0.6% in 2010.

Most Frequent Violations

The most frequent violation found was failure to timely or accurately record entries in the bound record (occurring in 2,380 cases in FY 2010, 2,194 cases in FY 2009, and 2,893 cases in FY 2010).

The second most frequent violation found was that the transferee did not complete Section A of the Form 4473. This occurred in 1,938 cases in FY2010; 1,707 cases in FY2009; and 2,158 cases in FY 2008.

A failure to complete forms as indicated in instructions was the third most frequent violation. This occurred in 1,785 cases in FY 2010; 1,578 cases in FY2009: and 1,846 cases in FY 2008.

The fourth most frequent violation was that the licensee did not record on Form 4473 the date on which NICS was contacted. This occurred in 1,540 cases in FY 2010; 1,385 cases in FY 2009; and 1,818 cases in FY 2008.

The fifth most frequent violation found was that the licensee failed to obtain and/or document the purchaser’s identification. This occurred in 1,425 cases in FY 2010; 1,206 cases in FY 2009; and 1,627 cases in FY 2008.

The sixth most frequent violation was that the licensee failed to report multiple handgun sales. This occurred in 1,166 cases in FY 2010; 928 cases in FY 2009; and 1,159 cases in FY 2008.

Finally, the seventh most frequent violation was that the licensee did not sign and date the Form 4473. This was found to occur in 1,152 cases in FY 2010; 993 cases in 2009; and 1,279 cases in FY 2008.

Other more frequent violations were: licensee failed to properly identify the firearm; licensee failed to require proper evidence of residency for a lawful alien; and, licensee disposed of firearm to a person he/she had reasonable cause to believe was prohibited.

A total of 22,270 firearms were found to be missing from FFL’s inventories in FY 2008; 18,323 in FY 2009 and, 21,041 in FY 2010. The foregoing totals do not include those guns that were later ‘found’ after initially seeming ‘lost’.

For FY 2011, ATF expects to have 624 Industry Operations Investigators or “inspectors.” The total number of IOI’s has remained constant from 2005 through 2010 at about 600.

The total number of FFL Application Inspections has been growing since 2007 from about 5,100 to about 7,500 in FY 2010.

The number of FFL applications denied, abandoned or withdrawn has remained constant over the last five years at about 1,000.

NRA Plans Appeal in Federal Age Limit Case

A federal judge in the Northern District of Texas ruled in late-September that the federal ban on dealer sales of handguns to those within the ages of 18 to 20 does not violate the Second Amendment. The National Rifle Association plans to file a prompt appeal of the court’s ruling to the U.S. Fifth Circuit Court of Appeals.

“We strongly disagree with this ruling,” Chris Cox, executive director of the NRA Institute for Legislative Action said. “As we said when we filed this case, adults 18 and up have fought and died for American freedom throughout our country’s history. They are adults for virtually every legal purpose under federal and state law, and that should include the ability to buy handguns from licensed dealers. Our fellow plaintiffs in this case are law-abiding and responsible young adults. We plan to defend their rights to the end.”

The case is Jennings V. Bureau of ATF. A related case challenging Texas’ ban on issuing concealed carry licenses to young adults in the same age group is still pending in the same court.

Smith & Wesson 1st Quarter Fiscal 2012 Financials

Total company net revenue for the first quarter was $99.2 million, up 4.5% from the year-ago quarter. Firearm division revenue was $91.7 million, an 18% increase over the first quarter last year, and was strong across nearly all product lines, particularly in Smith & Wesson brand handguns, which recorded a 26.6% year-over-year revenue increase for the quarter. Security solutions division revenue was $7.5 million for the first quarter, down 56.4% from the year-ago quarter.

Gross profit was $28.1 million, or 28.4% of revenue, compared with gross profit of $32.2 million, or 34% of revenue, for the year-ago quarter, and included the impact of direct costs associated with the consolidation of the Thompson/Center Arms business to Springfield, Massachusetts. Excluding those direct costs, first quarter gross profit margin would have been 29.6%.

Golden Out at S&W

Michael Golden is out as Smith & Wesson’s president and CEO, in a sudden announcement.

In response, the Board has appointed P. James Debney in his place as President and CEO. Debney previously served as Vice President of the company and president of the firearms division.

The change is effective immediately. Golden will continue as Co-vice Chairman of the Board.

Debney, 44, has been president of S&W’s firearms division since November 2009. Prior to that, he was President of Presto Products Company, a $500 million plastic products business.

ATK Relocating HQ to N. Virginia

ATK is relocating its corporate headquarters on October 1st to Arlington, Virginia where the company will expand its office space.

The company will continue to maintain a presence in Minnesota with approximately 210 employees.

Beretta Wins U.S. Army Contract

The U.S. Army has announced that Beretta U.S.A. has been awarded a purchase order for 15,778 Beretta 92FS pistols and cleaning kits.

Delivery of the pistols will begin in early December or January and will proceed at the rate of 6,000 per month.

The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. Visit www.FirearmsGroup.com. He may be reached at: FirearmsB@aol.com.

This article first appeared in Small Arms Review V15N4 (January 2012)
and was posted online on February 10, 2012


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