Smith & Wesson Holding Corporation Reports Third Quarter Fiscal 2012 Financial Results
Third Quarter Fiscal 2012 Financial Highlights
- Net sales from continuing operations for the third quarter of
$98.1 million were up 23.8% from the third quarter last year. The increase was driven by strong sales of M&P™ handguns, M&P™ sporting rifles, and allSmith & Wesson personal protection and concealed carry pistols. - Gross profit for the third quarter was
$30.0 million , or 30.6% of net sales, compared with gross profit of$19.4 million , or 24.5% of net sales, for the same period last year. The improvement in gross profit was driven by increased sales volume and increased overhead absorption due to higher production levels; as well as cost-reduction initiatives across the organization, including the completion of the consolidation of the Thompson/Center Arms business toSpringfield, Massachusetts , which concluded inNovember 2011 . In addition, the same period last year included costs associated with the company's strategic price repositioning activities. That strategic repositioning also resulted in lower ongoing promotion costs. - Operating expense for the third quarter totaled
$19.7 million , or 20.1% of net sales, compared with operating expense of$21.3 million , or 26.9% of net sales, for the third quarter last year. The decrease in operating expense reflected cost-reduction initiatives across the organization as well as reduced legal fees related to the company's ongoing DOJ andSEC investigations. - Net income from continuing operations for the third quarter was
$5.4 million , or$0.08 per diluted share, compared with a net loss from continuing operations of$2.7 million , or$0.05 per diluted share, for the third quarter last year. Net income from continuing operations for the third quarter resulted from increased sales volumes and corresponding gross profit as well as reduced operating expenses. - Non-GAAP adjusted EBITDAS from continuing operations for the third quarter increased to
$14.8 million compared with$4.6 million for the same period last year. - At
January 31, 2012 , firearm backlog was$198.5 million , an increase of$124.7 million , or 168.9%, compared with the end of the third quarter last year, and an increase of$48.6 million , or 32.0%, from the most recent sequential quarter. - Operating cash flow of
$8.5 million and net capital spending of$3.5 million resulted in free cash flow of$5.0 million from continuing operations. - Debt was reduced by
$30.0 million through the repayment of outstanding convertible notes.
Financial Outlook for Continuing Operations
The company is raising its anticipated net sales outlook from continuing operations for fiscal 2012 to between
The company expects net sales from continuing operations for the fourth quarter of fiscal 2012 to be between
Conference Call and Webcast
The company will host a conference call and webcast today,
Reconciliation of U.S. GAAP to Non-GAAP Adjusted EBITDAS
In 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
About
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 the success of our plan to continue to work on expanding our firearm manufacturing capacity; the success of our Thompson/Center Arms consolidation in improving our efficiencies and enhancing gross margins; the success of our new products, including a new handgun that we expect to launch in
Contacts:
(413) 747-3304
lsharp@smith-wesson.com
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) |
|||||||||||||
(Unaudited) |
|||||||||||||
For the Three Months Ended January 31, |
For the Nine Months Ended January 31, |
||||||||||||
2012 |
2011 |
2012 |
2011 |
||||||||||
(In thousands, except per share data) |
|||||||||||||
Net sales |
$ |
98,125 |
$ |
79,238 |
$ |
282,154 |
$ |
240,566 |
|||||
Cost of sales |
68,121 |
59,847 |
201,028 |
167,118 |
|||||||||
Gross profit |
30,004 |
19,391 |
81,126 |
73,448 |
|||||||||
Operating expenses: |
|||||||||||||
Research and development |
992 |
1,207 |
3,571 |
3,099 |
|||||||||
Selling and marketing |
8,062 |
8,921 |
24,823 |
26,206 |
|||||||||
General and administrative |
10,666 |
11,203 |
33,483 |
34,344 |
|||||||||
Total operating expenses |
19,720 |
21,331 |
61,877 |
63,649 |
|||||||||
Operating income/(loss) from continuing operations |
10,284 |
(1,940) |
19,249 |
9,799 |
|||||||||
Other income/(expense): |
|||||||||||||
Other income/(expense), net |
8 |
(463) |
62 |
692 |
|||||||||
Interest income |
394 |
289 |
1,196 |
849 |
|||||||||
Interest expense |
(1,629) |
(1,453) |
(6,044) |
(3,659) |
|||||||||
Total other income/(expense), net |
(1,227) |
(1,627) |
(4,786) |
(2,118) |
|||||||||
Income/(loss) from continuing operations before income taxes |
9,057 |
(3,567) |
14,463 |
7,681 |
|||||||||
Income tax expense/(benefit) |
3,664 |
(852) |
5,845 |
3,994 |
|||||||||
Income/(loss) from continuing operations |
5,393 |
(2,715) |
8,618 |
3,687 |
|||||||||
Discontinued operations: |
|||||||||||||
Loss from operations of discontinued security solutions division |
(1,600) |
(53,908) |
(8,306) |
(93,143) |
|||||||||
Income tax benefit |
(645) |
(3,787) |
(3,326) |
(5,547) |
|||||||||
Loss on discontinued operations |
(955) |
(50,121) |
(4,980) |
(87,596) |
|||||||||
Net income/(loss)/comprehensive income/(loss) |
$ |
4,438 |
$ |
(52,836) |
$ |
3,638 |
$ |
(83,909) |
|||||
Net income/(loss) per share: |
|||||||||||||
Basic - continuing operations |
$ |
0.08 |
$ |
(0.05) |
$ |
0.13 |
$ |
0.06 |
|||||
Basic - net income/(loss)/comprehensive income/(loss) |
$ |
0.07 |
$ |
(0.88) |
$ |
0.06 |
$ |
(1.40) |
|||||
Diluted - continuing operations |
$ |
0.08 |
$ |
(0.05) |
$ |
0.13 |
$ |
0.06 |
|||||
Diluted - net income/(loss)/comprehensive income/(loss) |
$ |
0.07 |
$ |
(0.88) |
$ |
0.06 |
$ |
(1.33) |
|||||
Weighted average number of common shares outstanding: |
|||||||||||||
Basic |
64,874 |
60,248 |
64,700 |
60,086 |
|||||||||
Diluted |
66,582 |
60,248 |
65,154 |
63,201 |
|||||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
As of: |
|||||||||
January 31, 2012 (Unaudited) |
April 30, 2011 |
||||||||
(In thousands, except par value and share data) |
|||||||||
ASSETS |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents, including restricted cash of $3,331 on January 31, 2012 and $5,821 on April 30, 2011 |
$ |
25,745 |
$ |
58,292 |
|||||
Accounts receivable, net of allowance for doubtful accounts of $1,767 on January 31, 2012 and $2,147 on April 30, 2011 |
47,247 |
64,753 |
|||||||
Inventories |
60,159 |
51,720 |
|||||||
Other current assets |
8,269 |
10,212 |
|||||||
Assets held for sale |
2,517 |
— |
|||||||
Deferred income taxes |
14,334 |
14,073 |
|||||||
Income tax receivable |
3,274 |
4,513 |
|||||||
Total current assets |
161,545 |
203,563 |
|||||||
Property, plant and equipment, net |
62,251 |
62,390 |
|||||||
Intangibles, net |
8,045 |
8,692 |
|||||||
Other assets |
5,952 |
6,804 |
|||||||
$ |
237,793 |
$ |
281,449 |
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ |
26,397 |
$ |
40,119 |
|||||
Accrued expenses |
20,093 |
25,356 |
|||||||
Accrued payroll |
8,094 |
5,309 |
|||||||
Accrued taxes other than income |
3,421 |
11,421 |
|||||||
Accrued profit sharing |
3,622 |
4,081 |
|||||||
Accrued product/municipal liability |
2,435 |
2,584 |
|||||||
Accrued warranty |
5,112 |
3,424 |
|||||||
Current portion of notes payable |
— |
30,000 |
|||||||
Total current liabilities |
69,174 |
122,294 |
|||||||
Deferred income taxes |
5,319 |
5,309 |
|||||||
Notes payable, net of current portion |
50,000 |
50,000 |
|||||||
Other non-current liabilities |
12,331 |
8,763 |
|||||||
Total liabilities |
136,824 |
186,366 |
|||||||
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, 66,080,283 shares issued and 64,880,283 shares outstanding on January 31, 2012 and 65,710,531 shares issued and 64,510,531 shares outstanding on April 30, 2011 |
66 |
66 |
|||||||
Additional paid-in capital |
188,050 |
185,802 |
|||||||
Accumulated deficit |
(80,824) |
(84,462) |
|||||||
Accumulated other comprehensive income |
73 |
73 |
|||||||
Treasury stock, at cost (1,200,000 common shares) |
(6,396) |
(6,396) |
|||||||
Total stockholders’ equity |
100,969 |
95,083 |
|||||||
$ |
237,793 |
$ |
281,449 |
||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||
(Unaudited) |
|||||||||
For the Nine Months Ended |
|||||||||
January 31, 2012 |
January 31, 2011 |
||||||||
(In thousands) |
|||||||||
Cash flows from operating activities: |
|||||||||
Net income/(loss) |
$ |
3,638 |
$ |
(83,909) |
|||||
Adjustments to reconcile net income/(loss) to net cash (used in)/provided by operating activities: |
|||||||||
Amortization and depreciation |
12,238 |
10,781 |
|||||||
Loss on sale of business |
241 |
— |
|||||||
Loss on sale of assets |
282 |
64 |
|||||||
(Recoveries of)/provision for losses on accounts receivable |
(297) |
287 |
|||||||
Impairment of long-lived assets |
— |
90,503 |
|||||||
Deferred income taxes |
— |
(1,504) |
|||||||
Stock-based compensation expense |
1,797 |
976 |
|||||||
Change in contingent consideration |
— |
(3,060) |
|||||||
Excess book deduction of stock-based compensation |
(266) |
(245) |
|||||||
Changes in operating assets and liabilities: |
|||||||||
Accounts receivable |
17,803 |
11,290 |
|||||||
Inventories |
(9,006) |
(5,466) |
|||||||
Other current assets |
2,017 |
(2,150) |
|||||||
Income tax receivable/payable |
1,239 |
(1,004) |
|||||||
Accounts payable |
(13,722) |
(8,135) |
|||||||
Accrued payroll |
2,785 |
(4,071) |
|||||||
Accrued taxes other than income |
(8,000) |
453 |
|||||||
Accrued profit sharing |
(459) |
(4,919) |
|||||||
Accrued other expenses |
(5,942) |
990 |
|||||||
Accrued product/municipal liability |
(149) |
(93) |
|||||||
Accrued warranty |
1,688 |
(485) |
|||||||
Other assets |
1,772 |
(974) |
|||||||
Other non-current liabilities |
599 |
849 |
|||||||
Net cash provided by operating activities |
8,258 |
178 |
|||||||
Cash flows from investing activities: |
|||||||||
Proceeds from sale of business |
500 |
— |
|||||||
Payments to acquire patents and software |
(193) |
(472) |
|||||||
Proceeds from sale of property and equipment |
185 |
3 |
|||||||
Payments to acquire property and equipment |
(10,648) |
(6,822) |
|||||||
Net cash used in investing activities |
(10,156) |
(7,291) |
|||||||
Cash flows from financing activities: |
|||||||||
Proceeds from loans and notes payable |
1,532 |
24,520 |
|||||||
Cash paid for debt issue costs |
(1,859) |
(1,052) |
|||||||
Cash paid for redemption of convertible notes |
(30,000) |
— |
|||||||
Proceeds from energy efficiency incentive programs |
225 |
— |
|||||||
Proceeds from exercise of options to acquire common stock including employee stock purchase plan |
717 |
679 |
|||||||
Taxes paid related to restricted stock issuance |
— |
(50) |
|||||||
Payments on loans and notes payable |
(1,264) |
(24,245) |
|||||||
Net cash used in financing activities |
(30,649) |
(148) |
|||||||
Net decrease in cash and cash equivalents |
(32,547) |
(7,261) |
|||||||
Cash and cash equivalents, beginning of period |
58,292 |
39,855 |
|||||||
Cash and cash equivalents, end of period |
$ |
25,745 |
$ |
32,594 |
|||||
Supplemental disclosure of cash flow information |
|||||||||
Cash paid for: |
|||||||||
Interest |
$ |
5,745 |
$ |
3,481 |
|||||
Income taxes |
1,524 |
1,884 |
|||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
||||||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited) |
||||||||||||||||||||||
For the Three Months Ended January 31, 2012: |
For the Three Months Ended January 31, 2011: |
|||||||||||||||||||||
GAAP |
Adjustments |
Adjusted |
GAAP |
Adjustments |
Adjusted |
|||||||||||||||||
Net sales |
$ |
98,125 |
$ |
98,125 |
$ |
79,238 |
$ |
79,238 |
||||||||||||||
Cost of sales |
68,121 |
$ |
(3,185) |
(1) |
64,936 |
59,847 |
$ |
(3,161) |
(1) |
56,686 |
||||||||||||
Gross profit |
30,004 |
3,185 |
33,189 |
19,391 |
3,161 |
22,552 |
||||||||||||||||
Operating expenses: |
||||||||||||||||||||||
Research and development |
992 |
(42) |
(1) |
950 |
1,207 |
(54) |
(1) |
1,153 |
||||||||||||||
Selling and marketing |
8,062 |
(51) |
(1) |
8,011 |
8,921 |
(77) |
(1) |
8,844 |
||||||||||||||
General and administrative |
10,666 |
(1,228) |
(3) |
9,438 |
11,203 |
(3,167) |
(3) |
8,036 |
||||||||||||||
Total operating expenses |
19,720 |
(1,321) |
18,399 |
21,331 |
(3,298) |
18,033 |
||||||||||||||||
Operating income/(loss) from continuing operations |
10,284 |
4,506 |
14,790 |
(1,940) |
6,459 |
4,519 |
||||||||||||||||
Other income/(expense): |
||||||||||||||||||||||
Other income/(expense), net |
8 |
— |
8 |
(463) |
498 |
(4) |
35 |
|||||||||||||||
Interest income |
394 |
(361) |
(8) |
33 |
289 |
(239) |
(8) |
— |
||||||||||||||
Interest expense |
(1,629) |
1,629 |
(5) |
— |
(1,453) |
1,453 |
(5) |
— |
||||||||||||||
Total other income/(expense), net |
(1,227) |
1,268 |
41 |
(1,627) |
1,712 |
35 |
||||||||||||||||
Income/(loss) from continuing operations before income taxes |
9,057 |
5,774 |
14,831 |
(3,567) |
8,171 |
4,604 |
||||||||||||||||
Income tax expense/(benefit) |
3,664 |
(3,664) |
(6) |
— |
(852) |
852 |
(6) |
— |
||||||||||||||
Income/(loss) from continuing operations |
5,393 |
9,438 |
14,831 |
(2,715) |
7,319 |
4,604 |
||||||||||||||||
Discontinued operations: |
||||||||||||||||||||||
Loss from operations of discontinued security solutions division |
(1,600) |
759 |
(7) |
(841) |
(53,908) |
51,722 |
(9) |
(2,186) |
||||||||||||||
Income tax benefit |
(645) |
645 |
(6) |
— |
(3,787) |
3,787 |
(6) |
— |
||||||||||||||
Loss on discontinued operations |
(955) |
114 |
(841) |
(50,121) |
47,935 |
(2,186) |
||||||||||||||||
Net income/(loss)/comprehensive income/(loss) |
$ |
4,438 |
$ |
9,552 |
$ |
13,990 |
$ |
(52,836) |
$ |
55,254 |
$ |
2,418 |
||||||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
||||||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited) |
||||||||||||||||||||||
For the Nine Months Ended January 31, 2012: |
For the Nine Months Ended January 31, 2011: |
|||||||||||||||||||||
GAAP |
Adjustments |
Adjusted |
GAAP |
Adjustments |
Adjusted |
|||||||||||||||||
Net sales |
$ |
282,154 |
$ |
282,154 |
$ |
240,566 |
$ |
240,566 |
||||||||||||||
Cost of sales |
201,028 |
$ |
(10,815) |
(1) |
190,213 |
167,118 |
$ |
(7,768) |
(1) |
159,350 |
||||||||||||
Gross profit |
81,126 |
10,815 |
91,941 |
73,448 |
7,768 |
81,216 |
||||||||||||||||
Operating expenses: |
||||||||||||||||||||||
Research and development |
3,571 |
(145) |
(1) |
3,426 |
3,099 |
(107) |
(1) |
2,992 |
||||||||||||||
Selling and marketing |
24,823 |
(225) |
(1) |
24,598 |
26,206 |
(184) |
(1) |
26,022 |
||||||||||||||
General and administrative |
33,483 |
(6,578) |
(2) |
26,905 |
34,344 |
(9,029) |
(3) |
25,315 |
||||||||||||||
Total operating expenses |
61,877 |
(6,948) |
54,929 |
63,649 |
(9,320) |
54,329 |
||||||||||||||||
Operating income from continuing operations |
19,249 |
17,763 |
37,012 |
9,799 |
17,088 |
26,887 |
||||||||||||||||
Other income/(expense): |
||||||||||||||||||||||
Other income/(expense), net |
62 |
— |
62 |
692 |
(619) |
(4) |
73 |
|||||||||||||||
Interest income |
1,196 |
(1,043) |
(8) |
153 |
849 |
(653) |
(8) |
196 |
||||||||||||||
Interest expense |
(6,044) |
6,044 |
(5) |
— |
(3,659) |
3,659 |
(5) |
— |
||||||||||||||
Total other income/(expense), net |
(4,786) |
5,001 |
215 |
(2,118) |
2,387 |
269 |
||||||||||||||||
Income from continuing operations before income taxes |
14,463 |
22,764 |
37,227 |
7,681 |
19,475 |
27,156 |
||||||||||||||||
Income tax expense |
5,845 |
(5,845) |
(6) |
— |
3,994 |
(3,994) |
(6) |
— |
||||||||||||||
Income from continuing operations |
8,618 |
28,609 |
37,227 |
3,687 |
23,469 |
27,156 |
||||||||||||||||
Discontinued operations: |
||||||||||||||||||||||
Loss from operations of discontinued security solutions division |
(8,306) |
2,261 |
(7) |
(6,045) |
(93,143) |
89,714 |
(10) |
(3,429) |
||||||||||||||
Income tax benefit |
(3,326) |
3,326 |
(6) |
— |
(5,547) |
5,547 |
(6) |
— |
||||||||||||||
Loss on discontinued operations |
(4,980) |
(1,065) |
(6,045) |
(87,596) |
84,167 |
(3,429) |
||||||||||||||||
Net income/(loss)/comprehensive income/(loss) |
$ |
3,638 |
$ |
27,544 |
$ |
31,182 |
$ |
(83,909) |
$ |
107,636 |
$ |
23,727 |
||||||||||
(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 depreciation, amortization, interest expense, and stock-based compensation expense. |
||||||||||||||||||||||
(8) To eliminate intercompany interest income. |
||||||||||||||||||||||
(9) To eliminate depreciation, amortization, impairment of long-lived assets, interest expense, and stock-based compensation expense. |
||||||||||||||||||||||
(10) To eliminate depreciation, amortization, impairment of long-lived assets, interest expense, fair value contingent consideration liability, and stock-based compensation expense. |
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SOURCE