Smith & Wesson Holding Corporation Reports Record Second Quarter Fiscal 2013 Financial Results
Second Quarter Fiscal 2013 Financial Highlights
- Net sales from continuing operations for the second quarter were a record
$136.6 million , up 48.0% from the second quarter last year. The increase was led by continued strong sales across all of the company's firearm product lines, including M&P™ branded products, such as pistols, modern sporting rifles, and the recently launched Shield™ pistol designed for concealed carry and personal protection. - Gross profit for the second quarter was
$48.5 million , or 35.5% of net sales, compared with gross profit of$24.6 million , or 26.7% of net sales, for the comparable quarter last year. Increased sales volume of polymer pistols and modern sporting rifles positively impacted gross profit. In addition, gross margin last year reflected costs related to the consolidation of our Thompson/Center Arms business toSpringfield, Massachusetts . - Operating expenses for the second quarter were
$21.9 million , or 16.0% of net sales, compared with operating expense of$21.2 million , or 22.9% of net sales, for the second quarter last year. Increased profit sharing and incentive compensation expenses were almost entirely offset by savings resulting from an ongoing company-wide focus on cost reduction activities and the favorable impact in the current year of the Thompson/Center Arms consolidation that occurred in the prior year. - Operating income from continuing operations for the second quarter was
$26.6 million , or 19.5% percent of net sales, compared with operating income from continuing operations of$3.4 million , or 3.7% percent of net sales for the comparable quarter last year. - Net income from continuing operations for the second quarter was
$16.4 million , or$0.24 per diluted share, compared with net income from continuing operations of$948,000 , or$0.01 per diluted share, for the second quarter last year. - Non-GAAP Adjusted EBITDAS from continuing operations for the second quarter increased to
$32.0 million compared with$10.2 million for the second quarter last year. - At
October 31, 2012 , firearm backlog was$332.7 million , an increase of$182.8 million , or 122.0%, compared with the end of the second quarter last year, and a decrease of$59.7 million , or 15.2%, from the most recent sequential quarter. - Operating cash flow of
$4.5 million and net capital spending of$9.6 million for the second quarter resulted in free cash outflow of$5.1 million . The sequentially lower operating cash flow reflected hunting seasonality, in which some receivables are extended until after the hunting season, as well as$8.0 million in early employee profit sharing payments. Profit sharing payments historically occurred in the company's third quarter. Despite the free cash outflow, cash and cash equivalents increased to$61.3 million at the end of the second quarter, primarily as a result of proceeds from the exercise of options.
The company also today announced that its Board of Directors has approved a program to repurchase up to
Financial Outlook for Continuing Operations
The company expects net sales from continuing operations for the third quarter of fiscal 2013 to be between
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
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, loss on the sale of discontinued operations, 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 ongoing company-wide focus on cost reduction activities; our expectation that some hunting receivables will be extended until after the hunting season; future repurchases of our common stock under our stock repurchase program, including the amount, time, and manner of repurchases, if any; the success of our strategic plan; increasing our full year fiscal 2013 financial guidance; our belief regarding our Board's and management team's confidence in our future and our ongoing commitment to enhancing stockholder value; and 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 third quarter of fiscal 2013 and the full 2013 fiscal year. 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
Contacts:
(413) 747-3304
lsharp@smith-wesson.com
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
||||||||||||
CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS) |
||||||||||||
(Unaudited) |
||||||||||||
For the Three Months Ended: |
For the Six Months Ended: |
|||||||||||
October 31, 2012 |
October 31, 2011 |
October 31, 2012 |
October 31, 2011 |
|||||||||
(In thousands, except per share data) |
||||||||||||
Net sales |
$ |
136,560 |
$ |
92,299 |
$ |
272,555 |
$ |
184,029 |
||||
Cost of sales |
88,037 |
67,693 |
172,739 |
132,907 |
||||||||
Gross profit |
48,523 |
24,606 |
99,816 |
51,122 |
||||||||
Operating expenses: |
||||||||||||
Research and development |
1,278 |
1,241 |
2,420 |
2,579 |
||||||||
Selling and marketing |
8,042 |
8,636 |
14,870 |
16,761 |
||||||||
General and administrative |
12,579 |
11,295 |
24,604 |
22,817 |
||||||||
Total operating expenses |
21,899 |
21,172 |
41,894 |
42,157 |
||||||||
Operating income from continuing operations |
26,624 |
3,434 |
57,922 |
8,965 |
||||||||
Other income/(expense): |
||||||||||||
Other income/(expense), net |
39 |
20 |
39 |
54 |
||||||||
Interest income |
335 |
399 |
703 |
802 |
||||||||
Interest expense |
(1,344) |
(2,477) |
(3,331) |
(4,416) |
||||||||
Total other income/(expense), net |
(970) |
(2,058) |
(2,589) |
(3,560) |
||||||||
Income from continuing operations before income taxes |
25,654 |
1,376 |
55,333 |
5,405 |
||||||||
Income tax expense |
9,253 |
428 |
20,061 |
2,182 |
||||||||
Income from continuing operations |
16,401 |
948 |
35,272 |
3,223 |
||||||||
Discontinued operations: |
||||||||||||
Loss from operations of discontinued security solutions division |
(867) |
(4,004) |
(2,550) |
(6,706) |
||||||||
Income tax benefit |
(5,651) |
(1,465) |
(6,249) |
(2,681) |
||||||||
Income/(loss) from discontinued operations |
4,784 |
(2,539) |
3,699 |
(4,025) |
||||||||
Net income/(loss)/comprehensive income/(loss) |
$ |
21,185 |
$ |
(1,591) |
$ |
38,971 |
$ |
(802) |
||||
Net income/(loss) per share: |
||||||||||||
Basic - continuing operations |
$ |
0.25 |
$ |
0.01 |
$ |
0.54 |
$ |
0.05 |
||||
Basic - net income/(loss) |
$ |
0.32 |
$ |
(0.02) |
$ |
0.59 |
$ |
(0.01) |
||||
Diluted - continuing operations |
$ |
0.24 |
$ |
0.01 |
$ |
0.53 |
$ |
0.05 |
||||
Diluted - net income/(loss) |
$ |
0.31 |
$ |
(0.02) |
$ |
0.58 |
$ |
(0.01) |
||||
Weighted average number of common shares outstanding: |
||||||||||||
Basic |
65,871 |
64,697 |
65,611 |
64,613 |
||||||||
Diluted |
67,274 |
65,110 |
66,914 |
65,130 |
||||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
|||||||||
As of: |
|||||||||
October 31, 2012 |
April 30, 2012 |
||||||||
(In thousands, except par value and share data) |
|||||||||
ASSETS |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents, including restricted cash of $3,340 on October 31, 2012 and $3,334 on April 30, 2012 |
$ |
61,295 |
$ |
56,717 |
|||||
Accounts receivable, net of allowance for doubtful accounts of $1,096 on October 31, 2012 and $1,058 on April 30, 2012 |
54,474 |
48,313 |
|||||||
Inventories |
65,335 |
55,296 |
|||||||
Prepaid expenses and other current assets |
6,176 |
4,139 |
|||||||
Assets held for sale |
1,150 |
13,490 |
|||||||
Deferred income taxes |
12,759 |
12,759 |
|||||||
Income tax receivable |
8,771 |
— |
|||||||
Total current assets |
209,960 |
190,714 |
|||||||
Property, plant and equipment, net |
68,954 |
60,528 |
|||||||
Intangibles, net |
4,225 |
4,532 |
|||||||
Other assets |
5,470 |
5,900 |
|||||||
$ |
288,609 |
$ |
261,674 |
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ |
24,654 |
$ |
28,618 |
|||||
Accrued expenses |
20,310 |
20,685 |
|||||||
Accrued payroll |
9,016 |
9,002 |
|||||||
Accrued income taxes |
— |
291 |
|||||||
Accrued taxes other than income |
4,767 |
4,270 |
|||||||
Accrued profit sharing |
4,754 |
8,040 |
|||||||
Accrued product/municipal liability |
1,365 |
1,397 |
|||||||
Accrued warranty |
5,047 |
5,349 |
|||||||
Liabilities held for sale |
— |
5,693 |
|||||||
Current portion of notes payable |
789 |
— |
|||||||
Total current liabilities |
70,702 |
83,345 |
|||||||
Deferred income taxes |
4,537 |
4,537 |
|||||||
Notes payable, net of current portion |
43,559 |
50,000 |
|||||||
Other non-current liabilities |
10,977 |
10,948 |
|||||||
Total liabilities |
129,775 |
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, 67,447,748 shares issued and 66,247,748 shares outstanding on October 31, 2012 and 66,512,097 shares issued and 65,312,097 shares outstanding on April 30, 2012 |
67 |
67 |
|||||||
Additional paid-in capital |
196,398 |
189,379 |
|||||||
Accumulated deficit |
(31,308) |
(70,279) |
|||||||
Accumulated other comprehensive income |
73 |
73 |
|||||||
Treasury stock, at cost (1,200,000 common shares) |
(6,396) |
(6,396) |
|||||||
Total stockholders' equity |
158,834 |
112,844 |
|||||||
$ |
288,609 |
$ |
261,674 |
||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||
(Unaudited) |
|||||||||
For the Six Months Ended: |
|||||||||
October 31, 2012 |
October 31, 2011 |
||||||||
(In thousands) |
|||||||||
Cash flows from operating activities: |
|||||||||
Net income/(loss) |
$ |
38,971 |
$ |
(802) |
|||||
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: |
|||||||||
Amortization and depreciation |
8,074 |
7,881 |
|||||||
Loss on sale of discontinued operations, including $45 of stock-based compensation expense |
798 |
— |
|||||||
Loss on sale/disposition of assets |
292 |
320 |
|||||||
Provision for/(recoveries of) losses on accounts receivable |
380 |
(636) |
|||||||
Change in disposal group assets and liabilities |
(1,232) |
5,005 |
|||||||
Stock-based compensation expense |
1,906 |
1,124 |
|||||||
Excess book deduction of stock-based compensation |
— |
(240) |
|||||||
Changes in operating assets and liabilities: |
|||||||||
Accounts receivable |
(6,541) |
7,828 |
|||||||
Inventories |
(10,039) |
(8,346) |
|||||||
Other current assets |
(1,213) |
(1,460) |
|||||||
Income tax receivable/payable |
(9,062) |
(1,417) |
|||||||
Accounts payable |
(3,964) |
(7,803) |
|||||||
Accrued payroll |
(591) |
1,297 |
|||||||
Accrued taxes other than income |
497 |
(8,181) |
|||||||
Accrued profit sharing |
(3,286) |
1,974 |
|||||||
Accrued other expenses |
(1,175) |
(1,349) |
|||||||
Accrued product/municipal liability |
(32) |
(309) |
|||||||
Accrued warranty |
(302) |
2,351 |
|||||||
Other assets |
(39) |
(79) |
|||||||
Other non-current liabilities |
329 |
306 |
|||||||
Net cash provided by/(used in) operating activities |
13,771 |
(2,536) |
|||||||
Cash flows from investing activities: |
|||||||||
Proceeds from sale of discontinued operations |
7,500 |
— |
|||||||
Receipts from note receivable |
36 |
— |
|||||||
Payments to acquire patents and software |
(22) |
(64) |
|||||||
Proceeds from sale of property and equipment |
13 |
— |
|||||||
Payments to acquire property and equipment |
(15,836) |
(6,086) |
|||||||
Net cash used in investing activities |
(8,309) |
(6,150) |
|||||||
Cash flows from financing activities: |
|||||||||
Proceeds from loans and notes payable |
1,753 |
1,532 |
|||||||
Cash paid for debt issue costs |
— |
(1,887) |
|||||||
Proceeds from energy efficiency incentive programs |
— |
225 |
|||||||
Payments on capital lease obligation |
(300) |
— |
|||||||
Payments on loans and notes payable |
(7,405) |
(990) |
|||||||
Proceeds from exercise of options to acquire common stock, including employee stock purchase plan |
4,084 |
704 |
|||||||
Excess tax benefit of stock-based compensation |
984 |
— |
|||||||
Net cash used in financing activities |
(884) |
(416) |
|||||||
Net increase/(decrease) in cash and cash equivalents |
4,578 |
(9,102) |
|||||||
Cash and cash equivalents, beginning of period |
56,717 |
58,292 |
|||||||
Cash and cash equivalents, end of period |
$ |
61,295 |
$ |
49,190 |
|||||
Supplemental disclosure of cash flow information |
|||||||||
Cash paid for: |
|||||||||
Interest |
$ |
3,013 |
$ |
2,649 |
|||||
Income taxes |
22,204 |
1,129 |
|||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO ADJUSTED EBITDAS (Unaudited) |
|||||||||||||||||||||
For the Three Months Ended October 31, 2012: |
For the Three Months Ended October 31, 2011: |
||||||||||||||||||||
GAAP |
Adjustments |
Adjusted |
GAAP |
Adjustments |
Adjusted |
||||||||||||||||
Net sales |
$ |
136,560 |
— |
$ |
136,560 |
$ |
92,299 |
— |
$ |
92,299 |
|||||||||||
Cost of sales |
88,037 |
$ |
(3,428) |
(9) |
84,609 |
67,693 |
$ |
(3,659) |
(1) |
64,034 |
|||||||||||
Gross profit |
48,523 |
3,428 |
51,951 |
24,606 |
3,659 |
28,265 |
|||||||||||||||
Operating expenses: |
|||||||||||||||||||||
Research and development |
1,278 |
(29) |
(9) |
1,249 |
1,241 |
(45) |
(1) |
1,196 |
|||||||||||||
Selling and marketing |
8,042 |
(63) |
(9) |
7,979 |
8,636 |
(90) |
(1) |
8,546 |
|||||||||||||
General and administrative |
12,579 |
(1,797) |
(2) |
10,782 |
11,295 |
(2,871) |
(3) |
8,424 |
|||||||||||||
Total operating expenses |
21,899 |
(1,889) |
20,010 |
21,172 |
(3,006) |
18,166 |
|||||||||||||||
Operating income from continuing operations |
26,624 |
5,317 |
31,941 |
3,434 |
6,665 |
10,099 |
|||||||||||||||
Other income/(expense): |
|||||||||||||||||||||
Other income/(expense), net |
39 |
— |
(4) |
39 |
20 |
— |
(4) |
20 |
|||||||||||||
Interest income |
335 |
(291) |
(7) |
44 |
399 |
(361) |
(7) |
38 |
|||||||||||||
Interest expense |
(1,344) |
1,344 |
(5) |
— |
(2,477) |
2,477 |
(5) |
— |
|||||||||||||
Total other income/(expense), net |
(970) |
1,053 |
83 |
(2,058) |
2,116 |
58 |
|||||||||||||||
Income from continuing operations before income taxes |
25,654 |
6,370 |
32,024 |
1,376 |
8,781 |
10,157 |
|||||||||||||||
Income tax expense |
9,253 |
(9,253) |
(6) |
— |
428 |
(428) |
(6) |
— |
|||||||||||||
Income from continuing operations |
16,401 |
15,623 |
32,024 |
948 |
9,209 |
10,157 |
|||||||||||||||
Discontinued operations: |
|||||||||||||||||||||
Loss from operations of discontinued security solutions division |
(867) |
1,020 |
(8) |
153 |
(4,004) |
779 |
(8) |
(3,225) |
|||||||||||||
Income tax benefit |
(5,651) |
5,651 |
(6) |
— |
(1,465) |
1,465 |
(6) |
— |
|||||||||||||
Income/(loss) from discontinued operations |
4,784 |
(4,631) |
153 |
(2,539) |
(686) |
(3,225) |
|||||||||||||||
Net income/(loss)/comprehensive income/(loss) |
$ |
21,185 |
$ |
10,992 |
$ |
32,177 |
$ |
(1,591) |
$ |
8,523 |
$ |
6,932 |
|||||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited) |
|||||||||||||||||||||
For the Six Months Ended October 31, 2012: |
For the Six Months Ended October 31, 2011: |
||||||||||||||||||||
GAAP |
Adjustments |
Adjusted |
GAAP |
Adjustments |
Adjusted |
||||||||||||||||
Net sales |
$ |
272,555 |
— |
$ |
272,555 |
$ |
184,029 |
— |
$ |
184,029 |
|||||||||||
Cost of sales |
172,739 |
$ |
(6,796) |
(9) |
165,943 |
132,907 |
$ |
(7,630) |
(1) |
125,277 |
|||||||||||
Gross profit |
99,816 |
6,796 |
106,612 |
51,122 |
7,630 |
58,752 |
|||||||||||||||
Operating expenses: |
|||||||||||||||||||||
Research and development |
2,420 |
(57) |
(9) |
2,363 |
2,579 |
(103) |
(1) |
2,476 |
|||||||||||||
Selling and marketing |
14,870 |
(125) |
(9) |
14,745 |
16,761 |
(174) |
(1) |
16,587 |
|||||||||||||
General and administrative |
24,604 |
(3,135) |
(2) |
21,469 |
22,817 |
(5,350) |
(3) |
17,467 |
|||||||||||||
Total operating expenses |
41,894 |
(3,317) |
38,577 |
42,157 |
(5,627) |
36,530 |
|||||||||||||||
Operating income from continuing operations |
57,922 |
10,113 |
68,035 |
8,965 |
13,257 |
22,222 |
|||||||||||||||
Other income/(expense): |
|||||||||||||||||||||
Other income/(expense), net |
39 |
— |
(4) |
39 |
54 |
— |
(4) |
54 |
|||||||||||||
Interest income |
703 |
(608) |
(7) |
95 |
802 |
(681) |
(7) |
121 |
|||||||||||||
Interest expense |
(3,331) |
3,331 |
(5) |
— |
(4,416) |
4,416 |
(5) |
— |
|||||||||||||
Total other income/(expense), net |
(2,589) |
2,723 |
134 |
(3,560) |
3,735 |
175 |
|||||||||||||||
Income from continuing operations before income taxes |
55,333 |
12,836 |
68,169 |
5,405 |
16,992 |
22,397 |
|||||||||||||||
Income tax expense |
20,061 |
(20,061) |
(6) |
— |
2,182 |
(2,182) |
(6) |
— |
|||||||||||||
Income from continuing operations |
35,272 |
32,897 |
68,169 |
3,223 |
19,174 |
22,397 |
|||||||||||||||
Discontinued operations: |
|||||||||||||||||||||
Loss from operations of discontinued security solutions division |
(2,550) |
1,383 |
(8) |
(1,167) |
(6,706) |
1,501 |
(8) |
(5,205) |
|||||||||||||
Income tax benefit |
(6,249) |
6,249 |
(6) |
— |
(2,681) |
2,681 |
(6) |
— |
|||||||||||||
Income/(loss) from discontinued operations |
3,699 |
(4,866) |
(1,167) |
(4,025) |
(1,180) |
(5,205) |
|||||||||||||||
Net income/(loss)/comprehensive income/(loss) |
$ |
38,971 |
$ |
28,031 |
$ |
67,002 |
$ |
(802) |
$ |
17,994 |
$ |
17,192 |
(1) |
To eliminate depreciation, amortization, and plant consolidation costs. |
|||||||||||||||||||||
(2) |
To eliminate depreciation, amortization, stock-based compensation expense, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC. |
|||||||||||||||||||||
(3) |
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. |
|||||||||||||||||||||
(4) |
To eliminate unrealized mark-to-market adjustments on foreign exchange contracts. We did not have any foreign exchange contracts that required mark-to-market adjustments for all periods presented. |
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(5) |
To eliminate interest expense. |
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(6) |
To eliminate income tax expense. |
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(7) |
To eliminate intercompany interest income. |
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(8) |
To eliminate depreciation, amortization, interest expense, and stock-based compensation expense. |
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(9) |
To eliminate depreciation and amortization. |
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SOURCE