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Press release from PR Newswire

Smith & Wesson Holding Corporation Reports Record Fourth Quarter and Full Year Fiscal 2012 Financial Results

Thursday, June 28, 2012

Smith & Wesson Holding Corporation Reports Record Fourth Quarter and Full Year Fiscal 2012 Financial Results16:05 EDT Thursday, June 28, 2012- Record Fiscal Fourth Quarter 2012 Net Sales from Continuing Operations of $129.8 Million, Up 27.7% Year-Over-Year - Record Fiscal Fourth Quarter 2012 Income from Continuing Operations of $17.8 Million or $0.27 per diluted share - Record Annual Fiscal 2012 Income from Continuing Operations of $26.4 Million or $0.40 per diluted share - Record Annual Units Produced - Record Annual Cash Generated - Company Issues Fiscal 2013 Financial OutlookSPRINGFIELD, Mass., June 28, 2012 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced record financial results for the fourth quarter and fiscal year ended April 30, 2012.Fourth Quarter Fiscal 2012 Financial HighlightsNet sales from continuing operations for the fourth quarter were a record $129.8 million, up 27.7% from the fourth quarter last year.  The increase was driven by strong sales of M&P? polymer pistols and M&P modern sporting rifles.   Gross profit for the fourth quarter was $46.9 million, or 36.1% of net sales, compared with gross profit of $31.2 million, or 30.7% of net sales, for the comparable quarter last year.  Gross profit was positively impacted in the quarter by significant one-time benefits relating to reductions in inventory and legal reserves.  In addition, the higher production volume allowed for increased overhead absorption.  Higher sales volume, cost savings efforts, reduced promotion costs, and a favorable product mix also contributed to the improvement. Operating expense for the fourth quarter totaled $21.2 million, or 16.3% of net sales, compared with operating expense of $23.2 million, or 22.9% of net sales, for the fourth quarter last year.  The decrease in operating expense reflected cost-savings efforts, including reduced legal expenses, and the impact of the consolidation of the Thompson/Center Arms operations to Springfield, Massachusetts. Net income from continuing operations for the fourth quarter was $17.8 million, or $0.27 per diluted share, compared with net income from continuing operations of $4.4 million, or $0.07 per diluted share, for the fourth quarter last year. Non-GAAP Adjusted EBITDAS from continuing operations for the fourth quarter increased to $31.2 million compared with $14.9 million for the fourth quarter last year. At April 30, 2012, firearm backlog was $439.0 million, an increase of $252.3 million, or 135.1%, compared with the end of the fourth quarter last year, and an increase of $240.5 million, or 121.1%, from the most recent sequential quarter.   Operating cash flow of $29.6 million and net capital spending of $3.7 million resulted in free cash flow of $25.8 million from continuing operations. Cash at year end was $56.7 million.Full Year Fiscal 2012 Financial HighlightsNet sales from continuing operations for the full fiscal year were a record $412.0 million compared with $342.2 million for the prior fiscal year, an increase of 20.4%.  Gross profit was 31.1% compared with 30.6% for the prior fiscal year. Operating expenses were $83.1 million for fiscal 2012, or 20.2% of net sales, compared with operating expenses of $86.9 million, or 25.4% of net sales, for fiscal 2011. Income from continuing operations was a record $26.4 million, or $0.40 per diluted share, compared with income from continuing operations of $8.1 million, or $0.13 per diluted share, a year ago.  Non-GAAP Adjusted EBITDAS from continuing operations for the full fiscal year totaled $68.4 million compared with $42.1 million for fiscal 2011.James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, "Our objective in fiscal 2012 was to streamline the company and focus on our position as a leading, pure-play firearm company.  We are very pleased with our results, which include record annual and fourth quarter net sales and profits.  In the fourth quarter, we continued to deliver strong sales growth with our world-class products, including our M&P polymer pistols and our M&P modern sporting rifles.  We continued to increase our manufacturing capacity and outsourcing capabilities, and our rapid acceleration of those efforts, combined with outstanding execution by our operations team, allowed us to capture incremental sales.  Our M&P brand continues to be well accepted by consumers.  We added a new member to the M&P family in the quarter with the highly successful launch of our new M&P Shield?.  The M&P Shield offers consumers a polymer pistol with an easily concealed one-inch profile, combined with professional-grade features, simple operation, and reliable performance.  Acceptance of the M&P Shield in the market has been fantastic."   Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer, stated, "In fiscal 2012, our growing cash position allowed us to pay down $30.0 million of debt and increase our manufacturing capacity without accessing our line of credit. As we move into fiscal 2013, we will use the strength of our balance sheet to continue investing in our business.  Recently, and after the end of the fiscal year, our strong cash position provided us the opportunity to enter the bond market and begin to repurchase our senior notes.  Thus far, we have purchased $6.4 million of the notes.  Overall, our growth in fiscal 2012 helped lay a solid fiscal foundation for the further expected improvement that is reflected in our financial guidance for fiscal 2013." Financial Outlook for Continuing OperationsThe company expects net sales from continuing operations for the first quarter of fiscal 2013 to be between $125.0 million and $130.0 million, which would represent year-over-year growth from continuing operations of over 36.0%. The company anticipates GAAP earnings per share from continuing operations of between $0.16 and $0.19 for the first quarter of fiscal 2013.The company anticipates net sales from continuing operations for fiscal 2013 of between $485.0 million and $505.0 million, which would represent year-over-year growth from continuing operations of over 17.0%. The company anticipates GAAP earnings per share from continuing operations of between $0.60 and $0.65 for fiscal 2013.Conference Call and WebcastThe company will host a conference call and webcast today, June 28, 2012, to discuss its fourth quarter and full year fiscal 2012 financial and operational results. Speakers on the conference call will include James Debney, President and CEO, and Jeffrey D. Buchanan, Executive Vice President and CFO. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Those interested in listening to the call via telephone may call directly at 617-847-8709 and reference conference code 52713609. No RSVP is necessary.  The conference call audio webcast can also be accessed live and for replay on the company's website at www.smith-wesson.com, under the Investor Relations section. The company will maintain an audio replay of this conference call on its website for a period of time after the call. No other audio replay will be available.  Reconciliation of U.S. GAAP to Non-GAAP Adjusted EBITDASIn this press release, a non-GAAP financial measure known as "Adjusted EBITDAS" is presented.  From time-to-time, the company considers and uses Adjusted EBITDAS as a supplemental measure of operating performance in order to provide the reader with an improved understanding of underlying performance trends. Adjusted EBITDAS excludes the effects of interest expense, income taxes, depreciation of tangible fixed assets, amortization of intangible assets, stock-based employee compensation expense, impairment charge to goodwill and indefinite lived long-lived intangible assets related to the acquisition of Smith & Wesson Security Solutions? (SWSS), DOJ and SEC investigation costs, and certain other transactions.  See the attached "Reconciliation of GAAP Net Income/(Loss) to Non-GAAP Adjusted EBITDAS" for a detailed explanation of the amounts excluded from and included in net income to arrive at Adjusted EBITDAS for the three-month and twelve-month periods ended April 30, 2012 and April 30, 2011.  Adjusted or non-GAAP financial measures provide investors and the company with supplemental measures of operating performance and trends that facilitate comparisons between periods before, during, and after certain items that would not otherwise be apparent on a GAAP basis. Adjusted financial measures are not, and should not be viewed as, a substitute for GAAP results. The company's definition of these adjusted financial measures may differ from similarly named measures used by others.About Smith & WessonSmith & Wesson Holding Corporation (NASDAQ Global Select: SWHC) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality firearms, related products, and training to the global military, law enforcement, and consumer markets. The company's brands include Smith & Wesson®, M&P? and Thompson/Center Arms. Smith & Wesson facilities are located in Massachusetts and Maine. For more information on Smith & Wesson, call (800) 331-0852 or log on to www.smith-wesson.com.Safe Harbor Statement                     Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby.  Such forward-looking statements include our continued strong sales growth with our world-class products, including our M&P polymer pistols and our M&P modern sporting rifles; our continued increase in manufacturing capacity and outsourcing capabilities; our belief that our M&P brand continues to be well accepted by consumers; our belief regarding what our M&P Shield offers consumers and the market acceptance of the M&P Shield; our expectation that we will use the strength of our balance sheet to continue investing in our business in fiscal 2013; our expectation that we may repurchase some of our bonds; our belief that we have a solid fiscal foundation for the further expected improvement, which is reflected in our financial guidance for fiscal 2013; and our outlook for net sales from continuing operations, year-over-year growth from continuing operations, and GAAP earnings per share from continuing operations for fiscal 2013 and the first quarter of fiscal 2013.  We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by such forward-looking statements.  Such factors include the demand for our products; the costs and ultimate conclusion of certain legal matters, including the DOJ and SEC matters; the state of the U.S. economy; general economic conditions, and consumer spending patterns; the potential for increased gun control; speculation surrounding fears of terrorism and crime; our growth opportunities; our anticipated growth; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; the position of our hunting products in the consumer discretionary marketplace and distribution channel; our penetration rates in new and existing markets; our strategies; our ability to introduce new products; the success of new products; our ability to expand our markets; the potential for cancellation of orders from our backlog; the success of the divestiture of our security solutions business and its effects on our core firearm business; and other risks detailed from time to time in our reports filed with the SEC, including our Form 10-K Report for the fiscal year ended April 30, 2012.Contacts:Liz Sharp, VP Investor Relations Smith & Wesson Holding Corp.(413) 747-3304lsharp@smith-wesson.comSMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)For the Three Months Ended April 30,For the Years Ended April 30,2012 (unaudited)2011 (unaudited)20122011(In thousands, except per share data)Net sales$129,843$101,667$411,997$342,233Cost of sales82,98070,427284,008237,545Gross profit46,86331,240127,989104,688Operating expenses: Research and development9731,2644,5434,363 Selling and marketing6,4958,37431,31734,580 General and administrative13,72913,60947,21347,954 Total operating expenses21,19723,24783,07386,897Operating income from continuing operations25,6667,99344,91617,791Other income/(expense): Other income/(expense), net16(464)78228 Interest income3093481,5051,198 Interest expense(1,439)(2,024)(7,484)(5,683) Total other income/(expense), net(1,114)(2,140)(5,901)(4,257)Income from continuing operations before income taxes24,5525,85339,01513,534Income tax expense6,7351,46012,5825,454Income from continuing operations17,8174,39326,4338,080Discontinued operations:Loss from operations of discontinued security solutions division(7,639)(2,912)(15,945)(96,055)Income tax expense/(benefit)(2,290)341(5,617)(5,206)Loss from discontinued operations(5,349)(3,253)(10,328)(90,849)Net income/(loss)/comprehensive income/(loss)$12,468$1,140$16,105$(82,769)Net income/(loss) per share:Basic - continuing operations$0.27$0.07$0.41$0.13Basic - net income/(loss)$0.19$0.02$0.25$(1.37)Diluted - continuing operations$0.27$0.07$0.40$0.13Diluted - net income/(loss)$0.19$0.02$0.25$(1.30)Weighted average number of common shares outstanding:Basic 65,05762,28564,78860,622Diluted66,41867,76267,27763,621SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAs of:April 30, 2012April 30, 2011(In thousands, except par value and share data) ASSETS Current assets:Cash and cash equivalents, including restricted cash of $3,334 on April 30, 2012 and $5,821 on April 30, 2011$56,717$58,292Accounts receivable, net of allowance for doubtful accounts of $1,058 on April 30, 2012 and $2,147 on April 30, 201148,31364,753Inventories55,29651,720Other current assets4,13910,212Assets held for sale13,490?Deferred income taxes12,75914,121Income tax receivable?4,513 Total current assets190,714203,611 Property, plant and equipment, net60,52862,390 Intangibles, net4,5328,692 Other assets5,9006,804$261,674$281,497 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:Accounts payable$28,618$40,119Accrued expenses20,68525,356Accrued payroll9,0025,309Accrued income taxes291?Accrued taxes other than income4,27011,421Accrued profit sharing8,0404,081Accrued product/municipal liability1,3972,584Accrued warranty5,3493,424Liabilities held for sale5,693?Current portion of notes payable?30,000 Total current liabilities83,345122,294 Deferred income taxes4,5377,708 Notes payable, net of current portion50,00050,000 Other non-current liabilities10,9488,763 Total liabilities148,830188,765 Commitments and contingencies Stockholders' equity:Preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding??Common stock, $.001 par value, 100,000,000 shares authorized, 66,512,097 shares issued and 65,312,097 shares outstanding on April 30, 2012 and 65,710,531 sharesissued and 64,510,531 shares outstanding on April 30, 20116766Additional paid-in capital189,379185,373Accumulated deficit (70,279)(86,384)Accumulated other comprehensive income7373Treasury stock, at cost (1,200,000 common shares)(6,396)(6,396) Total stockholders' equity112,84492,732$261,674$281,497SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended April 30,20122011(In thousands) Cash flows from operating activities: Net income/(loss)$16,105$(82,769) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Amortization and depreciation16,72914,935 Loss on sale of business, including loss on sale of discontinued operations5,688? Loss on sale of assets324234 (Recoveries of)/provision for losses on accounts receivable(439)1,379Impairment of long-lived assets?90,503Deferred income taxes(1,558)(480) Stock-based compensation expense2,4841,680 Change in contingent consideration?(3,060) Excess book deduction of stock-based compensation(144)(739) Changes in operating assets and liabilities:Accounts receivable7,8037,327 Inventories(7,927)(995) Other current assets1,200(1,717) Income tax receivable/payable4,804657 Accounts payable(8,521)10,861 Accrued payroll3,693(4,031) Accrued taxes other than income(7,151)8,892 Accrued profit sharing3,959(3,118) Accrued other expenses(2,554)1,510 Accrued product/municipal liability(1,187)(193) Accrued warranty2,181(341) Other assets1,647(1,453) Other non-current liabilities714206 Net cash provided by operating activities37,85039,288 Cash flows from investing activities:Proceeds from sale of business500?Receipts from note receivable19?Payments to acquire patents and software(193)(562)Proceeds from sale of property and equipment19953Payments to acquire property and equipment(14,392)(20,353) Net cash used in investing activities(13,867)(20,862) Cash flows from financing activities:Proceeds from loans and notes payable1,53251,365Cash paid for debt issue costs(1,850)(1,145)Cash paid for redemption of convertible notes(30,000)?Payments on loans and notes payable(1,532)(51,365)Proceeds from Economic Development Incentive Program4,400?Proceeds from energy efficiency incentive programs225?Proceeds from exercise of options to acquire common stock including employee stock purchase plan1,6671,206Taxes paid related to restricted stock issuance?(50) Net cash (used in)/provided by financing activities(25,558)11 Net (decrease)/increase in cash and cash equivalents(1,575)18,437 Cash and cash equivalents, beginning of period58,29239,855 Cash and cash equivalents, end of period$56,717$58,292Supplemental disclosure of cash flow informationCash paid for:Interest$5,865$3,820Income taxes3,9632,146SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited)For the Three Months Ended April 30, 2012:For the Three Months Ended April 30, 2011:GAAPAdjustmentsAdjustedGAAPAdjustmentsAdjustedNet sales$129,843$?$129,843$101,667$?$101,667Cost of sales82,980(3,735)(1)79,24570,427(4,095)(1)66,332Gross profit46,8633,73550,59831,2404,09535,335Operating expenses: Research and development973(13)(1)9601,264(107)(1)1,157 Selling and marketing6,495(56)(1)6,4398,374(87)(1)8,287 General and administrative13,729(1,668)(3)12,06113,609(2,562)(3)11,047 Total operating expenses21,197(1,737)19,46023,247(2,756)20,491Operating income from continuing operations25,6665,47231,1387,9936,85114,844Other income/(expense): Other income/(expense), net16?16(464)433(4)(31) Interest income309(300)(7)9348(229)(7)119 Interest expense(1,439)1,439(5)?(2,024)2,024(5)? Total other income/(expense), net(1,114)1,13925(2,140)2,22888Income from continuing operations before income taxes24,5526,61131,1635,8539,07914,932Income tax expense6,735(6,735)(6)?1,460(1,460)(6)?Income from continuing operations17,81713,34631,1634,39310,53914,932Discontinued operations:Loss from operations of discontinued security solutions division(7,639)6,060(8)(1,579)(2,912)715(9)(2,197)Income tax benefit(2,290)2,290(6)?341(341)(6)?Loss on discontinued operations(5,349)3,770(1,579)(3,253)1,056(2,197)Net income/(loss)/comprehensive income/(loss)$12,468$17,116$29,584$1,140$11,595$12,735SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited)For the Year Ended April 30, 2012:For the Year Ended April 30, 2011:GAAPAdjustmentsAdjustedGAAPAdjustmentsAdjustedNet sales$411,997$?$411,997$342,233$?$342,233Cost of sales284,008(14,554)(1)269,454237,545(11,848)(1)225,697Gross profit127,98914,554142,543104,68811,848116,536Operating expenses: Research and development4,543(157)(1)4,3864,363(213)(1)4,150 Selling and marketing31,317(277)(1)31,04034,580(271)(1)34,309 General and administrative47,213(8,246)(2)38,96747,954(11,615)(3)36,339 Total operating expenses83,073(8,680)74,39386,897(12,099)74,798Operating income from continuing operations44,91623,23468,15017,79123,94741,738Other income/(expense): Other income/(expense), net78?78228(186)(4)42 Interest income1,505(1,343)(7)1621,198(882)(7)316 Interest expense(7,484)7,484(5)?(5,683)5,683(5)? Total other income/(expense), net(5,901)6,141240(4,257)4,615358Income from continuing operations before income taxes39,01529,37568,39013,53428,56242,096Income tax expense12,582(12,582)(6)?5,454(5,454)(6)?Income from continuing operations26,43341,95768,3908,08034,01642,096Discontinued operations:Loss from operations of discontinued security solutions division(15,945)8,321(8)(7,624)(96,055)90,428(10)(5,627)Income tax benefit(5,617)5,617(6)?(5,206)5,206(6)?Loss on discontinued operations(10,328)2,704(7,624)(90,849)85,222(5,627)Net income/(loss)/comprehensive income/(loss)$16,105$44,661$60,766$(82,769)$119,238$36,469(1)To eliminate depreciation, amortization, and plant consolidation costs.(2)To eliminate depreciation, amortization, stock-based compensation expense, plant consolidation costs, severance benefits for our former President and CEO, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.(3)To eliminate depreciation, amortization, stock-based compensation expense, plant consolidation costs, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.(4)To eliminate unrealized mark-to-market adjustments on foreign exchange contracts.(5)To eliminate interest expense.(6)To eliminate income tax expense.(7)To eliminate intercompany interest income.(8)To eliminate depreciation, amortization, loss on sale of discontinued operations, interest expense, and stock-based compensation expense.(9)To eliminate depreciation, amoritzation, interest expense, and stock-based compensation expense.(10)To eliminate depreciation, amortization, impairment of long-lived assets, interest expense,  fair value of contingent consideration liability, and stock-based compensation expense. SOURCE Smith & Wesson Holding Corporation