The Insider Looks At Insider Trading

posted on June 2, 2011
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Wall Street executives are scrutinized for their compensation packages, stock option plans and other bonuses. Personally, the Insider doesn’t have a problem with a free market exchange of services for compensation, especially when the paychecks are approved by a board of directors representing share holders.

However, we rarely get a glimpse into the stratosphere of executive pay in the gun business because, unlike publically traded companies, most gun companies are privately owned and thus are not required to divulge such information. The richest man in the gun business is Gaston Glock but we'll never know how much he makes because his company is private—very private.

Undeterred, the Insider, an inveterate busy-body, set about investigating the few players in the shooting industry that are publically owned. SEC regulations require that public companies report insider trading and (sometimes) other details of executives’ compensation.

Unfortunately, the salaries of our top dogs are “not available” but their insider trades are.

“Insider trading” is not a dirty word, even though the term is associated with such felonious misfits as Martha Stewart. “Insiders” are permitted to make stock trades provided certain SEC conditions are met and that the trades—usually the exercise of stock options as part of a compensation package—are properly reported.

Given that the salaries of the industry’s highest paid executives are not available, the best I can do is report on insider trading that involves the sale of stock options. I looked at the following public companies: Cabela’s (CAB), Sturm, Ruger & Co. (RGR), Smith & Wesson (SWHC) and Alliant Techsystems Inc. (ATK).

The CEO of Sturm, Ruger & Co. is 53-year-old Michael O. Fifer and his exercise of stock options ranks him first with $2.88 million so far in 2011 (as of May). Fifer presided over $262 million in sales in 2010 with a healthy 10.63 percent profit margin and an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)of $52.14 million for a whopping 62 percent of gross profit.

Coming in number two with $1.68 million in stock options so far in 2011 is the CEO of Cabela’s, who happens to be the former CEO of Remington, 56-year-old Thomas L. Milner. The nation’s largest hunting and fishing retailer had revenue totaling $2.7 billion in 2010 with a profit margin of 4.53 percent. The EBITDA came to $275 million on a gross profit of $1.09 billion, or 25 percent.

By far the biggest dog on the shooting industry’s porch is Alliant Techsystems (ATK) with annual sales of $4.8 billion yet its CEO ranks third in compensation from stock options. Its CEO is 52-year-old Mark W. DeYoung, an avid hunter and shooter who rose out of ATK’s Federal division to become the chief executive officer. He exercised options worth $96,836 so far in 2011. In addition to Federal ammunition, ATK runs the Lake City Arsenal and owns other shooting-related companies.

Coming in last with a big goose egg for stock option compensation in 2011 is the CEO of Smith & Wesson Holdings Co., 57-year-old Michael F. Golden who has not exercised any options in 2011, which is not surprising considering SWHC’s stock has tanked to $3.54 since a high of over $20 before the Crash in 2008. For the most recently reported quarter, operating income on Roosevelt Avenue is down $55 million following a decline of $36 million in the previous quarter.

None of these gentlemen are receiving what Fox News terms “obscene” compensation packages like Viacom’s Phillipe P. Dauman and his $84.5 million. I don’t know what I’d do if I “earned” $84.5 million in a year. Oh wait, yes I do… I’d buy Ruger stock.

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