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

SPRINGFIELD, 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 Highlights

  • Net 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 Operations

The 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 Webcast

The 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 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, 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 & Wesson

Smith & 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) 747-3304
lsharp@smith-wesson.com

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)



For the Three Months Ended,



July 31, 2012


July 31, 2011



(In thousands, except per share data)








Net sales

$

135,995


$

91,730

Cost of sales


84,702



65,213

Gross profit


51,293



26,517

Operating expenses:







 Research and development


1,143



1,338


 Selling and marketing


6,828



8,125


 General and administrative


12,026



11,520


 Total operating expenses


19,997



20,983

Operating income from continuing operations


31,296



5,534

Other income/(expense):







 Other income/(expense), net


-



34


 Interest income


368



403


 Interest expense


(1,987)



(1,941)


 Total other income/(expense), net


(1,619)



(1,504)

Income from continuing operations before income taxes


29,677



4,030

Income tax expense


10,807



1,753


Income from continuing operations


18,870



2,277

Discontinued 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


$

791















Net income per share:







Basic - continuing operations

$

0.29


$

0.04









Basic - net income

$

0.27


$

0.01









Diluted - continuing operations

$

0.28


$

0.04









Diluted - net income

$

0.27


$

0.01








Weighted average number of common shares outstanding:














Basic 


65,352



64,529









Diluted


66,798



64,942

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of:










July 31, 2012


April 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


$

56,717



Accounts receivable, net of allowance for doubtful accounts of $1,174 on July 31, 2012 and $1,058 on April 30, 2012


53,289



48,313



Inventories


62,827



55,296



Other current assets


9,410



4,139



Assets held for sale


1,047



13,490



Deferred income taxes


12,759



12,759




 Total current assets


199,875



190,714

 Property, plant and equipment, net


63,190



60,528

 Intangibles, net


4,374



4,532

 Other assets


5,496



5,900


$

272,935


$

261,674
















 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:








Accounts payable

$

25,322


$

28,618



Accrued expenses


17,865



20,685



Accrued payroll


8,007



9,002



Accrued income taxes


8,148



291



Accrued taxes other than income


4,002



4,270



Accrued profit sharing


10,215



8,040



Accrued product/municipal liability


1,429



1,397



Accrued warranty


5,218



5,349



Liabilities held for sale




5,693



Current portion of notes payable


1,271






 Total current liabilities


81,477



83,345

 Deferred income taxes


4,537



4,537

 Notes payable, net of current portion


43,556



50,000

 Other non-current liabilities


11,221



10,948




 Total liabilities


140,791



148,830

 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, 2012


67



67


Additional paid-in capital


190,892



189,379


Accumulated deficit 


(52,492)



(70,279)


Accumulated other comprehensive income


73



73


Treasury stock, at cost (1,200,000 common shares)


(6,396)



(6,396)




 Total stockholders' equity


132,144



112,844


$

272,935


$

261,674

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





For the Three Months Ended


July 31, 2012


July 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 depreciation


3,985



3,629



 Loss on sale of discontinued operations, including $45 of stock-based compensation expense


798





 (Gain)/loss on sale of assets


(14)



199



 Provision for/(recoveries of) losses on accounts receivable


75



(360)



 Change in disposal group assets and liabilities


(1,112)



(29)



 Stock-based compensation expense


853



587



 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/payable


7,857



387



 Accounts payable


(3,296)



(6,335)



 Accrued payroll


(1,600)



1,195



 Accrued taxes other than income


(268)



(1,056)



 Accrued profit sharing


2,175



1,244



 Accrued other expenses


(3,430)



(2,493)



 Accrued product/municipal liability


32



(174)



 Accrued warranty


(131)



52



 Other assets


174



(23)



 Other non-current liabilities


423



192




 Net cash provided by/(used in) operating activities


9,279



(15,556)

 Cash flows from investing activities:







Proceeds from sale of discontinued operations


5,500




Receipts from note receivable


18




Payments to acquire patents and software




(4)


Proceeds from sale of property and equipment


14



1


Payments 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 payable


1,753



1,532


Cash paid for debt issue costs




(1,837)


Proceeds from energy efficiency incentive programs




225


Payments on capital lease obligation 


(150)




Payments on loans and notes payable


(6,925)



(421)


Proceeds from exercise of options to acquire common stock


527



180


Excess tax benefit of stock-based compensation


88






 Net cash used in financing activities


(4,707)



(321)

 Net increase/(decrease) in cash and cash equivalents


3,826



(20,610)

 Cash and cash equivalents, beginning of period


56,717



58,292

 Cash and cash equivalents, end of period

$

60,543


$

37,682

Supplemental disclosure of cash flow information







Cash paid for:








Interest

$

2,974


$

4,109



Income taxes


2,397



398

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION 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:

























GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted

Net sales

$

135,995


$



$

135,995



$

91,730


$



$

91,730

Cost of sales


84,702



(3,369)

(1)



81,333




65,213



(3,971)

(9)



61,242

Gross profit


51,293



3,369




54,662




26,517



3,971




30,488























Operating expenses:






















 Research and development


1,143



(28)

(1)



1,115




1,338



(59)

(9)



1,279


 Selling and marketing


6,828



(62)

(1)



6,766




8,125



(84)

(9)



8,041


 General and administrative


12,026



(1,339)

(2)



10,687




11,520



(2,477)

(3)



9,043


 Total operating expenses


19,997



(1,429)




18,568




20,983



(2,620)




18,363

Operating income from continuing
operations


31,296



4,798




36,094




5,534



6,591




12,125






















Other income/(expense):






















 Other income/(expense), net










34






34


 Interest income


368



(317)

(6)



51




403



(320)

(6)



83


 Interest expense


(1,987)



1,987

(4)






(1,941)



1,941

(4)




 Total other income/(expense), net


(1,619)



1,670




51




(1,504)



1,621




117






















Income from continuing operations
before income taxes


29,677



6,468




36,145




4,030



8,212




12,242

Income tax expense


10,807



(10,807)

(5)






1,753



(1,753)

(5)



Income from continuing operations


18,870



17,275




36,145




2,277



9,965




12,242

Discontinued 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

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