Freedom Group, Inc., the parent company of the Remington, Bushmaster, DPMS/Panther Arms, Marlin, Mountain Khakis, EOTAC and Dakota Arms brands, among others, said sales slipped 11.9% for the third quarter ended Sept. 30 to $207.6 million from $235.7 million a year ago.
The company reported a net loss of $400,000, or 3 cents per diluted share, compared to net income of $15.0 million, or 56 cents per share, in the year ago period.
During the quarter, the company incurred an impairment charge of $600,000 to reduce the carrying value of it inoperative building and equipment in Gardner, MA.
Net sales of Firearms continued to anchor consolidated revenue results, plummeting 21.5% to $104.6 million versus $133.2 million a year ago. Centerfire rifle sales decreased 36.3% due to reduced sales demand for modern sporting products, while rimfires and shotguns fell 13.5% and 6.5%, respectively.
Gross margin for Firearms was 28.4% of sales, down 480 basis points from 33.2% of sales in the year-ago period, primarily due to reduced sales demand in the higher margin modern sporting products, as well as unfavorable pricing and the impact of the accrual for the ACR product safety recall notice. Adjusted EBITDA in the Firearms segment decreased 39.9% for the quarter, primarily due to the decline in centerfire rifles sales, primarily due to reduced sales demand for modern sporting products.
Total Ammunition sales were $95.3 million, down 2.5% from $97.7 million a year ago on decreased sales volumes of shot shells (-14.2%) and rimfire ammunition (-11.0%). The company said sales of sourced products and components also fell for the period. Management said decreased sales were partially offset by the newly-acquired (December 2009) Barnes Bullets operations as well as increased volumes of centerfire ammunition, which was boosted by increase demand for handgun-specific ammunition.
Gross margin for Ammunition was 29.6% of sales in Q3, down 760 basis points from 37.1% of sales in the year-ago period. The decrease in gross profit was primarily related to unfavorable pricing of $2.2 million; higher material and other costs, net of favorable hedging gains of $4.6 million; and unfavorable sales volumes of $1.3 million. Adjusted EBITDA in the ammunition segment decreased 29.1% for the quarter, primarily due to higher material and other costs.
Net sales in All Other businesses were $7.7 million for the quarter, an increase of 60.4% compared to the prior-year period. Primary changes within the All Other businesses consisted of an increase of $3.3 million in their various accessories businesses, an increase of $1.0 million in the apparel businesses, which includes Mountain Khakis, offset by a decrease of $1.1 million in the targets business, which FGI ceased operations in and sold in 2009. Adjusted EBITDA in the All Other businesses increased $2.3 million for the quarter primarily due to the favorable gross profit impact of $2.1 million, primarily due to increased sales in various accessories businesses.
In a filing with the SEC, the company said it will continue to focus on introducing new and innovative products and was committed to enhancing its core business by identifying and pursuing acquisitions or investments that can enhance its portfolio.
Management said growth of certain long guns, pistol/revolver ammunition and modern sporting rifles has subsided industry-wide.
