Cerberus Capital is planning an initial public offering of stock in its Freedom Group, Inc. business, which manufactures and markets firearms under the Remington, Marlin, Bushmaster, DPMS, H&R, L.C. Smith, Parker, Dakota Arms, Miller Arms, and Nesika brand names.  The private equity firm, which is perhaps best known for its ill-fated acquisitions of Chrysler LLC and GMAC LLC, plans to raise as much as $200 million in the IPO. 


The company’s S-1 filing with the SEC gave no indication as to how many shares it will offer, the target price for those shares, or a suggested stock ticker symbol.


The company is clearly looking to capitalize on the meteoric growth of the firearms market over the last year, which many attribute to the election of Barack Obama and a Democratically-controlled Congress.  Growth in handguns, black guns and ammunition sales have been the leading indicator of this trend, but that growth has started to slow over the last few months, according to retail point-of-sale data compiled by SportScanInfo. 


FGI reported in the SEC filing that it sold approximately 1.1 million long guns and 2.0 billion rounds of ammunition during the twelve months ended June 30, 2009, producing pro forma net sales of $835.3 million and $150.8 million in EBITDA.  Firearms accounted for $508.3 million in net sales, or 60.9% of total net sales, over that period, while ammunition accounted for $307.4 million in net sales, or 36.8% of total net sales. All other businesses accounted for $19.6 million in net sales, or 2.3% of the total for the period. Licensing represented $3.4 million in other income during the same period.


For the second quarter ended June 30, overall FGI sales increased 43.1% to $235.1 million from $164.3 million in the year-ago period.  Gross margins rose 700 basis points to 36.3% of sales, compared to 29.3% of sales in the year-ago period.  Net income jumped over 500% to $19.7 million for the period, compared to $3.2 million in Q2 2008.
Firearms sales jumped 47.2% to $149.3 million for the second quarter. Centerfire rifle sales increased 50.6%, as compared to the prior-year period, primarily due to an increase of $30.9 million from higher sales volumes of Bushmaster and DPMS branded modern sporting rifles and an increase of $2.1 million due to sales of newly launched Remington branded modern sporting rifles. Shotgun sales increased 40.5% and Rimfire rifle sales increased 34.1% versus Q2 last year.


Ammunition sales for the second quarter were $81.3 million, an increase of 38.7% from the prior-year period.  Centerfire ammunition sales increased 42.9% from the year-ago quarter, which FGI attributed to strong market demand for rifle and pistol ammunition combined with volume growth across most other product categories. Rimfire ammunition sales increased 44.3% versus Q2 2008, primarily due to increased volume associated with additional production capacity within these product categories. Shotshell ammunition sales increased 25.5%, compared to the prior-year period, primarily due to an increased allocation of production capacity to higher margin products.


All other sales increased 4.7% for the second quarter, due primarily to sales increases in the company’s accessories business and the launch of the EOTAC apparel joint venture in late 2008.


Inventories were down 28.3% to $129.2 million at second quarter-end, compared to $180.3 million at the end of June 2008.  Cash and cash equivalents jumped ten-fold to $111.0 million at quarter-end.