Freedom Group, Inc. disclosed that it will pay $6 million for its 75% stake in the outdoor apparel company Mountain Khakis, not including $1.6 million of debt the company assumed in the deal.


The company paid $3.3 million for its stake May 28 when it closed the purchase, an additional $1.0 million in June and expects to make subsequent cash contributions of $1.7 million over the next 12 months, according to a second quarter earnings report released by Freedom Group. 

 

Freedom Group ran the deal through its Remington subsidiary, which now holds its stake in Mountain Khakis through Mountain Khakis, LLC. Charlotte, N.C.-based Mountain Khakis, which makes an expanding line of outdoor lifestyle aparrel, retains 25% ownership. Freedom Group values the assets acquired, including $1.1 million in inventory, $2.6 million in accounts receivables and $5.6 million in goodwill, at $9.8 million.  

 

Freedom Group, which owns the Remington, Bushmaster, DPMS/Panther Arms, Marlin, EOTAC and Dakota firearms brands, reported consolidated sales for the quarter ended June 30th fell 23.8% to $179.2 million from $235.1 million a year ago.

Net loss for the quarter was $900,000, down from a net income of $31.4 million a year ago.


By segment, sales for the Firearms segment dropped more than 60.0% to $93.3 million from $149.3 million a year ago, while revenues for Ammunition were $80.0 million, down about 1.5% from sales of $81.3 last year.


EBITDA for the Firearms segment was $11.4 million, down from $35.2 a year ago, while EBITDA for Ammunition fell to $18.0 million from $27.2 million. Gross profit for the Firearms segment was $28.1 million, or 30.1% of sales, compared to sales of $47.8 million, or 32.0% of sales, a year ago. Management attributed the drop to lower sales volumes. 


Gross profit for Ammunition was $28.5 million, or 35.6% of sales, compared with a gross profit of $35.9 million, or 44.2% of sales, a year ago. The decline was attributed to unfavorable pricing of $2.5 million, unfavorable variances, as well as higher material and other costs, net of favorable hedging gains, of $4.4 million; and the impact of purchase accounting related to the Barnes Acquisition of $0.5 million.


For the Firearms segment, management said Centerfire rifle sales decreased by $48.4 million, or 44.6%, as compared to the prior-year period, primarily due to reduced sales demand for modern sporting products. Shotgun sales decreased by $7.2 million, or 24.0%, as compared to the prior-year period. Rimfire rifle sales decreased by $1.5 million, or 18.2%, as compared to the prior-year period.


For the Ammunition segment, management said the drop in sales is primarily due to decreased shotshell ammunition sales of $5.8 million, or 28.6%, offset in part due to the impact of the acquired Barnes operations as well as increased centerfire ammunition sales of $2.3 million, or 4.9%, as compared to the prior-year period.


The increase in Centerfire sales is attributable mainly to strong market demand for certain handgun ammunition. Rimfire ammunition sales increased by $0.3 million, or 3.8%, as compared to the prior-year period, primarily due to increased sales demand within these product categories.


In related news, the board of Directors for Freedome Group has appointed John Blystone as Chairman of the Board. The Board also appointed Walter McLallen, current Chairman of the Board, to serve as Vice-Chairman of the Board.