Net sales for the three months ended September 30, 2013 increased approximately $11.9 million or 50.7% compared to the corresponding period in 2012.
Non-Dealer sales were approximately $21.5 million in the three months ended September 30, 2013 compared to $12.6 million for the same period in 2012 representing an increase of $8.9 million or 71.2%. Dealer sales totaled approximately $13.7 million in the three months ended September 30, 2013 compared to $10.8 million in the same period in 2012, representing an increase of $2.9 million or 26.9%.
Liberty Safe’s products are sold through an independent dealer network (“Dealer sales”) in addition to various sporting goods, farm & fleet, and home improvement retail outlets (“Non-Dealer Sales”).
The increase in Non-Dealer sales is due in large part to increased sales to Liberty’s two largest Non-Dealer accounts in connection with their expansion of new stores. Liberty is the sole provider of safes to these two accounts.
In addition, the significant increase in net sales at both the Dealer and Non-Dealer level during the three months ended September 30, 2013 is also the result of (i) strong demand for Liberty branded product by many gun owners due to increased gun and ammunition sales resulting from expected challenges by Federal and state government to the second amendment, (ii) increased availability of import safes and safes manufactured in-house, on Liberty’s new production line and (iii) Non-Dealer price increases.
Cost of sales for the three months ended September 30, 2013 increased approximately $9.4 million compared to the same period in 2012. This increase is primarily due to the increase in net sales. Gross profit as a percentage of net sales was approximately 24.8% and 26.8% of net sales for the quarters ended September 30, 2013 and September 30, 2012, respectively. The decrease in gross profit as a percentage of sales during the three-months ended September 30, 2013 compared to the same period in 2012 is principally attributable to unfavorable manufacturing labor and overhead spending variances experienced during the current quarter resulting from pressure to keep pace with demand, offset in part by Non-Dealer price increases.
Selling, general and administrative expense for the quarter ended September 30, 2013, increased approximately $0.6 million compared to the same period in 2012. This increase is principally the result of increases in the following costs: (i) commission related to the increase in sales, and compensation expense ($0.4 million), and (ii) co-op advertising and national advertising ($0.2 million).
Income from operations increased $2.2 million during the three-months ended September 30, 2013 compared to the same period in 2012, due principally to the increase in net sales and other factors, as described above.
The table below summarizes the results of operations for Liberty Safe for the three and nine months ended September 30, 2013 and the three and nine months ended September 30, 2012.
Three months ended September 30, 2013 compared to the three months ended September 30, 2012.
Three months ended Nine months ended
(in thousands) September 30,
2013 September 30,
2012 September 30,
2013 September 30,
2012
Net sales $ 35,242 $ 23,385 $ 96,828 $ 67,000
Cost of sales 26,496 17,109 72,590 49,921
Gross profit 8,746 6,276 24,238 17,079
Selling, general and administrative expense 3,442 2,870 10,323 8,682
Fees to manager 125 125 375 375
Amortization of intangibles 955 1,230 3,141 3,754
Income from operations $ 4,224 $ 2,051 $ 10,400 $ 4,268
Based in Payson, Utah Liberty Safe produces a wide range of home and gun safe models in a broad assortment of sizes, features and styles. Products are marketed under the Liberty brand, as well as a portfolio of licensed and private label brands.
