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Press release from PR Newswire

Smith & Wesson Holding Corporation Reports Record First Quarter Fiscal 2013 Financial Results

Thursday, September 06, 2012

Smith & Wesson Holding Corporation Reports Record First Quarter Fiscal 2013 Financial Results16:05 EDT Thursday, September 06, 2012- Record Fiscal First Quarter 2013 Net Sales from Continuing Operations of $136.0 Million, Up 48.3% Year-Over-Year - Record Fiscal First Quarter 2013 Income from Continuing Operations of $18.9 Million or $0.28 per diluted share - Record Non-GAAP Adjusted EBITDAS of $36.1 Million - Company Raising Full Year Fiscal 2013 Financial GuidanceSPRINGFIELD, Mass., Sept. 6, 2012 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced record financial results for the fiscal 2013 first quarter ended July 31, 2012.First Quarter Fiscal 2013 Financial HighlightsNet sales from continuing operations for the first quarter were a record $136.0 million, up 48.3% from the first quarter last year.  The increase was led by strong sales of the M&P? product platform.  Gross profit for the first quarter was $51.3 million, or 37.7% of net sales, compared with gross profit of $26.5 million, or 28.9% of net sales, for the comparable quarter last year.  Increased sales volume of polymer firearms positively impacted gross profit margin, resulting in an improvement in manufacturing absorption.  Operating expense for the first quarter declined to $20.0 million, or 14.7% of net sales, compared with operating expense of $21.0 million, or 22.9% of net sales, for the first quarter last year.  Increased profit sharing and incentive compensation expense was more than offset by a temporary reduction in selling and marketing expenses. Net income from continuing operations for the first quarter was a record $18.9 million, or $0.28 per diluted share, compared with net income from continuing operations of $2.3 million, or $0.04 per diluted share, for the first quarter last year. Non-GAAP Adjusted EBITDAS from continuing operations for the first quarter increased to a record $36.1 million compared with $12.2 million for the first quarter last year. At July 31, 2012, firearm backlog was $392.4 million, an increase of $243.6 million, or 163.7%, compared with the end of the first quarter last year, and a decrease of $46.6 million, or 10.6%, from the most recent sequential quarter. Operating cash flow of $9.3 million and net capital spending of $6.3 million for the first quarter resulted in free cash flow of $3.0 million from continuing operations. In addition, during the quarter the company received an initial payment of $5.5 million in cash relating to the sale of the company's discontinued operations.  Cash at the end of the first quarter was $60.5 million.  James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, "In the first quarter, we continued to deliver on our commitment to grow our company and improve profitability by focusing on our core firearm business.  Our results demonstrate that commitment, evidenced by record achievements in first quarter sales, net income, and earnings per share.  Internal capacity increases, enhanced supply chain integration capabilities, and strong execution by our operations team allowed us to exceed our revenue and earnings guidance by capturing incremental sales.  Strong sales growth was fueled by orders for our most popular products.  Our newest M&P pistol, the Shield?, continues to be highly favored and sought after by consumers."  Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer, stated, "Our strong fiscal first quarter financial performance reflects successful execution of our strategic plan.  Based on our stronger than anticipated first quarter, current consumer orders for our products, and our ability to pull forward certain capacity expansions, we are increasing our full year fiscal 2013 financial guidance. Also of note, in keeping with our focus on our core firearm business, during the quarter we successfully sold the assets of our discontinued operations for just under $10.0 million, including proceeds from a two-year licensing agreement." Financial Outlook for Continuing OperationsThe company expects net sales from continuing operations for the second quarter of fiscal 2013 to be between $130.0 million and $135.0 million, which would represent year-over-year growth from continuing operations in excess of 40.0%. The typical seasonal reduction in second quarter net sales is expected to be less pronounced than in prior years, reflecting the net result of fewer production days partially offset by increases in manufacturing capacity.  The company anticipates GAAP earnings per diluted share from continuing operations of between $0.19 and $0.21 for the second quarter of fiscal 2013.Based on the strength of the company's fiscal 2013 first quarter financial performance and current outlook for the year, the company is raising its full year fiscal 2013 financial guidance. The company now anticipates net sales from continuing operations for fiscal 2013 of between $530.0 million and $540.0 million, which would represent year-over-year growth from continuing operations of approximately 30.0%. The company anticipates fiscal 2013 GAAP earnings per diluted share from continuing operations of between $0.85 and $0.90.Conference Call and WebcastThe company will host a conference call and webcast today, September 6, 2012, to discuss its first quarter fiscal 2013 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 857-350-1604 and reference conference code 97414745. 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, loss on the sale of discontinued operations, DOJ and SEC investigation costs, and certain other transactions.  See the attached "Reconciliation of GAAP Net Income 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 periods ended July 31, 2012 and July 31, 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 raising our full year fiscal 2013 financial guidance; our assessment that the Shield continues to be highly favored and sought after by consumers; our outlook for net sales from continuing operations, year-over-year growth from continuing operations, and GAAP earnings per diluted share from continuing operations for the second quarter of fiscal 2013 and the full 2013 fiscal year; and our belief that the typical seasonal reduction in second quarter net sales will be less pronounced than in prior years.  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 effects of the divestiture of our security solutions business 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.com SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(Unaudited)For the Three Months Ended,July 31, 2012July 31, 2011(In thousands, except per share data)Net sales$135,995$91,730Cost of sales84,70265,213Gross profit51,29326,517Operating expenses: Research and development1,1431,338 Selling and marketing6,8288,125 General and administrative12,02611,520 Total operating expenses19,99720,983Operating income from continuing operations31,2965,534Other income/(expense): Other income/(expense), net-34 Interest income368403 Interest expense(1,987)(1,941) Total other income/(expense), net(1,619)(1,504)Income from continuing operations before income taxes29,6774,030Income tax expense10,8071,753Income from continuing operations18,8702,277Discontinued operations:Loss from operations of discontinued security solutions division(1,682)(2,702)Income tax benefit(599)(1,216)Loss from discontinued operations(1,083)(1,486)Net income/comprehensive income$17,787$791Net income per share:Basic - continuing operations$0.29$0.04Basic - net income$0.27$0.01Diluted - continuing operations$0.28$0.04Diluted - net income$0.27$0.01Weighted average number of common shares outstanding:Basic 65,35264,529Diluted66,79864,942  SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (UNAUDITED)As of:July 31, 2012April 30, 2012(In thousands, except par value and share data) ASSETS Current assets:Cash and cash equivalents, including restricted cash of $3,336 on July 31, 2012 and $3,334 on April 30, 2012$60,543$56,717Accounts receivable, net of allowance for doubtful accounts of $1,174 on July 31, 2012 and $1,058 on April 30, 201253,28948,313Inventories62,82755,296Other current assets9,4104,139Assets held for sale1,04713,490Deferred income taxes12,75912,759 Total current assets199,875190,714 Property, plant and equipment, net63,19060,528 Intangibles, net4,3744,532 Other assets5,4965,900$272,935$261,674 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:Accounts payable$25,322$28,618Accrued expenses17,86520,685Accrued payroll8,0079,002Accrued income taxes8,148291Accrued taxes other than income4,0024,270Accrued profit sharing10,2158,040Accrued product/municipal liability1,4291,397Accrued warranty5,2185,349Liabilities held for sale?5,693Current portion of notes payable1,271? Total current liabilities81,47783,345 Deferred income taxes4,5374,537 Notes payable, net of current portion43,55650,000 Other non-current liabilities11,22110,948 Total liabilities140,791148,830 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, 66,608,175 shares issued and 65,408,175 shares outstanding on July 31, 2012 and 66,512,097 shares issued and 65,312,097 shares outstanding on April 30, 20126767Additional paid-in capital190,892189,379Accumulated deficit (52,492)(70,279)Accumulated other comprehensive income7373Treasury stock, at cost (1,200,000 common shares)(6,396)(6,396) Total stockholders' equity132,144112,844$272,935$261,674  SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)For the Three Months EndedJuly 31, 2012July 31, 2011(In thousands) Cash flows from operating activities: Net income$17,787$791 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Amortization and depreciation3,9853,629 Loss on sale of discontinued operations, including $45 of stock-based compensation expense798? (Gain)/loss on sale of assets(14)199 Provision for/(recoveries of) losses on accounts receivable75(360) Change in disposal group assets and liabilities(1,112)(29) Stock-based compensation expense853587 Excess book deduction of stock-based compensation?(249) Changes in operating assets and liabilities:Accounts receivable(5,051)(5,991) Inventories(7,531)(5,887) Other current assets(2,447)(1,235) Income tax receivable/payable7,857387 Accounts payable(3,296)(6,335) Accrued payroll(1,600)1,195 Accrued taxes other than income(268)(1,056) Accrued profit sharing2,1751,244 Accrued other expenses(3,430)(2,493) Accrued product/municipal liability32(174) Accrued warranty(131)52 Other assets174(23) Other non-current liabilities423192 Net cash provided by/(used in) operating activities9,279(15,556) Cash flows from investing activities:Proceeds from sale of discontinued operations5,500?Receipts from note receivable18?Payments to acquire patents and software?(4)Proceeds from sale of property and equipment141Payments to acquire property and equipment(6,278)(4,730) Net cash used in investing activities(746)(4,733) Cash flows from financing activities:Proceeds from loans and notes payable1,7531,532Cash paid for debt issue costs?(1,837)Proceeds from energy efficiency incentive programs?225Payments on capital lease obligation (150)?Payments on loans and notes payable(6,925)(421)Proceeds from exercise of options to acquire common stock527180Excess tax benefit of stock-based compensation88? Net cash used in financing activities(4,707)(321) Net increase/(decrease) in cash and cash equivalents3,826(20,610) Cash and cash equivalents, beginning of period56,71758,292 Cash and cash equivalents, end of period$60,543$37,682Supplemental disclosure of cash flow informationCash paid for:Interest$2,974$4,109Income taxes2,397398  SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDAS (Unaudited)For the Three Months Ended July 31, 2012:For the Three Months Ended July 31, 2011:GAAPAdjustmentsAdjustedGAAPAdjustmentsAdjustedNet sales$135,995$?$135,995$91,730$?$91,730Cost of sales84,702(3,369)(1)81,33365,213(3,971)(9)61,242Gross profit51,2933,36954,66226,5173,97130,488Operating expenses: Research and development1,143(28)(1)1,1151,338(59)(9)1,279 Selling and marketing6,828(62)(1)6,7668,125(84)(9)8,041 General and administrative12,026(1,339)(2)10,68711,520(2,477)(3)9,043 Total operating expenses19,997(1,429)18,56820,983(2,620)18,363Operating income from continuingoperations31,2964,79836,0945,5346,59112,125Other income/(expense): Other income/(expense), net???34?34 Interest income368(317)(6)51403(320)(6)83 Interest expense(1,987)1,987(4)?(1,941)1,941(4)? Total other income/(expense), net(1,619)1,67051(1,504)1,621117Income from continuing operationsbefore income taxes29,6776,46836,1454,0308,21212,242Income tax expense10,807(10,807)(5)?1,753(1,753)(5)?Income from continuing operations18,87017,27536,1452,2779,96512,242Discontinued operations:Loss from operations of discontinued security solutions division(1,682)1,161(7)(521)(2,702)723(8)(1,979)Income tax benefit(599)599(5)?(1,216)1,216(5)?Loss on discontinued operations(1,083)562(521)(1,486)(493)(1,979)Net income/comprehensive income$17,787$17,837$35,624$791$9,472$10,263 (1)To exclude depreciation and amortization.(2)To exclude depreciation, amortization, stock-based compensation expense, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.(3)To exclude depreciation, amortization, stock-based compensation expense, plant consolidation costs, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.(4)To exclude interest expense.(5)To exclude income tax expense.(6)To exclude intercompany interest income.(7)To exclude loss on sale of discontinued operations, interest expense, and stock-based compensation expense.(8)To exclude depreciation, amortization, interest expense, and stock-based compensation expense.(9)To exclude depreciation, amortization, and plant consolidation costs.SOURCE Smith & Wesson Holding Corporation