Back in May TFB reported on Heckler & Koch’s first quarterly financial report for 2019. We reported that the company was enjoying a large order intake for both military and law enforcement contracts, many of which we have covered here on TFB, but also noted the company’s problems with cash flow. We published Heckler & Koch’s statement on the quarterly report and endeavoured, as we always do here at TFB, to report the news in the most balanced manner possible.

It seems that our original report was picked up by other outlets and caused some concerns among affiliated dealers. On June 24th, Heckler & Koch wrote to their partners to explain the situation and have since kindly forwarded us their letter too. With their permission we have published this below:

Dear Valued Partner,

I find it disappointing, but necessary, that I need to clear up the disinformation circulating in the media following our latest financial report. This narrative is the result of a chain reaction of doom and gloom started by a Germain [sic] news source that has been historically antagonistic toward HK. That one article triggered an initial US report on The Firearm Blog that lacked critical context. From there it just got worse, with each subsequent article sounding more bleak than the last. This culminated in a report from the Military Times that only served to remind us that, while HK is still very much alive, American journalism continues to die a slow and painful death.

Rather that argue about the conclusions of the authors, I would like to simply point out some facts:

• Of the three US news stories, none contacted HK for comment for their reports.
• The first two US articles (The Firearm Blog, The Shooting Wire) used a foreign news story as their primary source without questioning their accuracy or motivation.
• A third US article (Military Times) used the first two US articles as its primary sources, creating a sensationalized third- or fourth-hand account.
• Of the three US articles, none referenced a single number from the HK financial report.

To be clear, HK still remains a leveraged company. This places a burden on the business that non-leveraged companies don’t have. However, we have met and continue to meet all covenants associated with this debt. The full story is easy to find in the financial data the news media neglected to report. Here are some key examples:

• From 2014 to the end of 2018, HK’s debt was reduced from 290 million Euros to 235 million and the interest rate on that debt was reduced substantially.
• Over the course of 2018 and thus far in 2019, HK reported positive EBITDA in every quarter.
• Over that same period, HK’s cash position doubled.
• Claims of “diminishing sales” and “difficulty securing new large-scale contracts” are patently false. In fact, the last six quarters for HK have shown record order-intake, including a substantial backlog of large-scale contracts.
• HK invested a combined 8.3 million Euros toward increased capacity and efficiency in both the Obendorf, Germany and Columbus, GA facilities in 2018.

The full financial report and other key data can be found at https://www.heckler-koch.com/en/ir/annual-accounts.html and https://www.heckler-koch.com/en/ir/key-figures.html.

At HK, we are committed to supplying and servicing our US partners for many profitable years to come. I can assure you that we are in it for the long haul.

Sincerely,

Michael Holley

CSO/COO – Heckler & Koch – USA