The Freedom Group reported net income grew eight fold on a 36.1 percent increase in sales in 2013, as demand for its firearms and ammunition brands remained strong. Firearms sales increased 34.3 percent, Ammunition 31.6 percent and sales of the Mountain Khakis, 1816 and Dublin Dog apparel grew by $4.1 million from 2012.

“Our industry is continuing to experience strong demand for firearms and ammunition products,” the North Carolina company stated in its annual report. “In late 2013, we began to see sales returning to more normalized levels in some categories, although demand is still above historical levels. The year over year sales growth is not necessarily indicative of the increase in demand due to sales demand being greater than our current production capacity in many categories.”
 
The nation's largest manufacturer of firearms and ammuniction said consumer concern over more restrictive governmental regulation on the federal, state and local levels has contributed to the increase in demand, but that its believes other factors are also driving growth across its product line. 
 
“For instance, our industry is experiencing increased interest in recreational and shooting sports, an increasing number of female shooters and a greater focus on home and self-defense.”
 
Firearms
Net sales for the year ended Dec. 31, 2013 were $739.7 million, an increase of $188.8 million, or 34.3 percent, as compared to the year ended Dec. 31, 2012. All of the firearms categories have experienced sales increases led by a $124.1 million increase in centerfire rifle sales. In addition, shotgun sales increased $23.9 million, while handgun sales increased $19.6 million, and sales of other firearms products increased $21.2 million.
 
While concern about more restrictive government legislation contributed to some of the increased sales volumes, we continue to experience increases across all firearms platforms due to increased usage in recreational and shooting sports and home defense. We have focused   attention to try to meet the increased demand with the capacity improvements over the prior year.
 
Ammunition
Net sales for the year ended Dec. 31, 2013 were $436.5 million, an increase of $104.8 million, or 31.6 percent, as compared to the year ended Dec. 31, 2012. Sales of centerfire ammunition increased $42.7 million, while sales of shotshell ammunition increased $28.2 million. In addition, sales of rimfire ammunition increased $16.4 million, while sales in the other product lines increased $17.5 million.
 
The company sold approximately 3.1 billion and 2.1 billion rounds of ammunition during the years ended Dec. 31, 2013 and 2012, respectively, making us one of the largest manufacturers of commercial ammunition in the United States.

These increases were the result of increased market demand due to concern about more restrictive government legislation and increased usage in recreational and shooting sports and home defense, supported by improved factory production.

 
All Other
Net sales were $92.0 million in All Other businesses for the year ended Dec. 31, 2013, an increase of $42.7 million, or 86.6 percent, as compared to the prior-year period. Primary changes within the All Other businesses consisted of increased sales of $38.6 million in the various accessories businesses, due in part to recent acquisitions, as well as increased sales of $4.1 million in the apparel businesses. Accessories/Other includes the apparel brands of Mountain Khakis, 1816 and Dublin Dog as well as on- and off-gun accessories and firearm cleaning supplies through the AAC, TAPCO, Storm Lake and Ultimate Firearms brands.The company acquired certain assets of Storm Lake in August.

The table below compares cost of goods sold and gross profit by reporting segment for each of the periods presented: 

 

Years Ended December 31,


2013


Percentage of Net Sales


2012


Percentage of Net Sales


Increase (Decrease)


Percentage Change


(in millions except percentages)


Cost of Goods Sold


Firearms


$ 486.4


65.8%


$ 377.3


68.5%


$ 109.1


28.9%


Ammunition


289.7


66.4


227.4


68.6


62.3


27.4


All Other


51.5


56.0


28.4


57.6


23.1


81.3


Other Corporate Items


(3.6)


*


(14.9)


*


11.3


75.8


Total


$ 824.0


65.0%


$ 618.2


66.3%


$ 205.8


33.3%


Gross Profit


Firearms


$ 253.3


34.2%


$ 173.6


31.5%


$ 79.7


45.9%


Ammunition


146.8


33.6


104.3


31.4


42.5


40.7


All Other


40.5


44.0


20.9


42.4


19.6


93.8


Other Corporate Items


3.6


*


14.9


*


(11.3)


(75.8)


Total


$ 444.2


35.0%


$ 313.7


33.7%


$ 130.5


41.6%

 
 
Operating expenses consist of selling, general and administrative expenses, research and development expenses and other expenses.
 
The following table sets forth certain information regarding operating expenses for each of the periods presented:
 
 

The following table sets forth certain information regarding operating expenses for each of the periods presented: Years Ended December 31,


2013


Percentage of Net Sales


2012


Percentage of Net Sales


Increase (Decrease)


Percentage Change


(unaudited, in millions except percentages)


Selling, general, and administrative expenses


$ 230.2


18.2%


$ 182.4


19.6%


$ 47.8

26.2%


Research and development expenses


16.6


1.3


13.2


1.4


3.4


25.8


Impairment expense

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